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Issues: (i) Whether the attachment could be sustained without issuing notice to the secured creditor bank under the adjudication provisions of the PMLA; (ii) Whether properties acquired before the alleged offence and already mortgaged to the bank could be treated as proceeds of crime and attached under the PMLA.
Issue (i): Whether the attachment could be sustained without issuing notice to the secured creditor bank under the adjudication provisions of the PMLA.
Analysis: The statutory scheme under Section 8 requires the Adjudicating Authority to issue notice and hear the person whose interest in the property is directly affected before confirming attachment. Where the bank had prior mortgage interest and had placed relevant material before the enforcement authorities, omission to serve notice deprived it of an opportunity to establish that the properties were not involved in money laundering. The mandatory hearing requirement is integral to valid adjudication.
Conclusion: The attachment could not be sustained for want of notice and hearing to the bank.
Issue (ii): Whether properties acquired before the alleged offence and already mortgaged to the bank could be treated as proceeds of crime and attached under the PMLA.
Analysis: The properties were shown to have been acquired prior to the alleged criminal activity and thereafter mortgaged to the bank against loans. The materials indicated that the bank was a victim and secured creditor, while the loan funds themselves were public monies advanced by the bank and not tainted assets. In the absence of a demonstrated nexus between the specific properties and criminal activity relating to a scheduled offence, the statutory definition of proceeds of crime was not satisfied. A bona fide secured creditor and genuine acquisition could not be overridden on mere suspicion.
Conclusion: The mortgaged properties could not be treated as proceeds of crime and were not liable to attachment.
Final Conclusion: The provisional attachment was set aside and the appeals succeeded, with the challenge to attachment of the mortgaged properties failing on both mandatory notice and merits.
Ratio Decidendi: For confirmation of attachment under the PMLA, the Adjudicating Authority must hear all persons whose proprietary interest is affected, and property cannot be treated as proceeds of crime unless a real nexus with criminal activity relating to a scheduled offence is established; bona fide secured interests and pre-existing acquisitions are not liable to confiscation absent such nexus.
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