PMLA attachment of mortgaged property requires notice to secured creditors and proper consideration of objections before confirmation.

Provisional attachment under the Prevention of Money Laundering Act could not be sustained where the attached properties had been acquired before the alleged loan transactions and were already mortgaged, yet the authorities did not meaningfully consider the appellant's reply and supporting documents. The order was also vitiated because mortgagee banks, as secured creditors with a direct interest in the properties, were not served notice or given a hearing before confirmation of attachment. Sections 5(1), 8(1), and 8(2) required proper material, notice to interested persons, and consideration of their objections; failure to follow that procedure rendered the attachment unsustainable and required fresh adjudication.

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Issues: (i) Whether the provisional attachment of mortgaged properties acquired before the alleged loan transactions could be sustained without proper consideration of the appellant's reply and supporting materials; (ii) Whether the mortgagee banks, being persons interested in the attached properties, were required to be served notice and given an opportunity of hearing before confirmation of attachment.

Issue (i): Whether the provisional attachment of mortgaged properties acquired before the alleged loan transactions could be sustained without proper consideration of the appellant's reply and supporting materials.

Analysis: The properties attached had been acquired before the sanction and disbursement of the agri-loans. They were already subject to mortgages and recovery steps by banks under the SARFAESI regime. The record showed that the enforcement authorities were aware of these facts, yet the impugned order did not meaningfully deal with the appellant's reply or the documentary material showing prior acquisition and existing encumbrances. In proceedings under section 5(1) of the Prevention of Money Laundering Act, 2002, attachment must rest on material showing possession of proceeds of crime and a likelihood of concealment, transfer, or dealing so as to frustrate confiscation proceedings.

Conclusion: The attachment could not be sustained on the existing consideration and materials and was liable to be set aside.

Issue (ii): Whether the mortgagee banks, being persons interested in the attached properties, were required to be served notice and given an opportunity of hearing before confirmation of attachment.

Analysis: Section 8(1) of the Prevention of Money Laundering Act, 2002 requires notice to persons holding property on behalf of others, and section 8(2) requires consideration of replies and hearing of the aggrieved person and other interested claimants. Since the banks were mortgagees and secured creditors with a direct interest in the properties, and since the authorities were aware of the mortgages before attachment, omission to issue notice and hear them was contrary to the statutory procedure and the principles of natural justice.

Conclusion: Notice to the banks and opportunity of hearing were mandatory, and their omission vitiated the confirmation order.

Final Conclusion: The appeal succeeded, the impugned order was set aside, and the matter was sent back for fresh adjudication after notice to all concerned banks and consideration of their as well as the appellant's replies.

Ratio Decidendi: Where attached property is already mortgaged and third-party secured creditors have a direct claim over it, the adjudicating process under the Prevention of Money Laundering Act, 2002 must include notice and hearing to such persons, and failure to follow that procedure renders the attachment order unsustainable.

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