Secured creditor priority overrides later attachment where a prior mortgage exists and SARFAESI recovery rights have already been invoked.

A prior and subsisting security interest in mortgaged property was treated as having statutory priority over a later provisional attachment under the Prevention of Money Laundering Act, 2002. The Tribunal applied the 2016 amendments introducing Section 31B of the Recovery of Debts and Bankruptcy Act, 1993 and Section 26E of the SARFAESI Act, and held that secured creditors retain priority in recovery over inconsistent claims. Because the bank had already initiated SARFAESI measures as a secured creditor, the attachment and confirming order were unsustainable against the bank, and the property was to be released from attachment.

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Issues: Whether the provisional attachment of the mortgaged property under the Prevention of Money Laundering Act, 2002 could be sustained despite the appellant bank's prior security interest and action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

Analysis: The property had been purchased before the alleged scheduled offence and was subsequently mortgaged to the bank. The bank had already initiated measures under the SARFAESI Act and had taken steps for recovery as a secured creditor. The Tribunal applied its earlier view that, after the 2016 amendments inserting Section 31B in the Recovery of Debts and Bankruptcy Act, 1993 and Section 26E in the SARFAESI Act, secured creditors have statutory priority over other claims. On that basis, the Tribunal held that the later special enactment with a non-obstante clause prevailed in favour of the secured creditor, and the attachment could not stand against the bank's prior mortgage and recovery rights.

Conclusion: The provisional attachment and the confirming order were unsustainable as against the appellant bank, and the bank was entitled to treat the property as its secured asset.

Final Conclusion: The appeal succeeded on the priority of the secured creditor's rights under the SARFAESI regime, and the attached property was directed to be released from attachment.

Ratio Decidendi: Where a secured creditor has a prior and subsisting security interest in property, the amended SARFAESI framework giving priority to secured creditors prevails over inconsistent attachment under the Prevention of Money Laundering Act, 2002.

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