Bona fide secured creditor priority prevails over PMLA attachment where mortgaged assets lack nexus to criminal proceeds.

Properties acquired before the alleged laundering activity and mortgaged to a bank in the ordinary course of lending were not shown to have any nexus with the scheduled offence, so they could not be treated as proceeds of crime under PMLA. The Tribunal also applied the amended secured debt recovery framework and harmonious construction to hold that a bona fide secured creditor's prior security interest under SARFAESI and the debt recovery law prevails over PMLA attachment on these facts. As a result, the provisional attachment and its confirmation could not be sustained against the bank's mortgaged assets.

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Issues: (i) Whether mortgaged properties already in existence prior to the loan transaction and acquired without nexus to the alleged criminal activity could be treated as proceeds of crime under the Prevention of Money Laundering Act, 2002. (ii) Whether the secured creditor's rights under the SARFAESI Act, 2002 and the Recovery of Debts and Bankruptcy Act, 1993 had priority over attachment under the Prevention of Money Laundering Act, 2002 in the facts of the case.

Issue (i): Whether mortgaged properties already in existence prior to the loan transaction and acquired without nexus to the alleged criminal activity could be treated as proceeds of crime under the Prevention of Money Laundering Act, 2002.

Analysis: The properties attached were found to have been acquired before the alleged money-laundering activity and were mortgaged with the bank as security for facilities granted in the ordinary course of banking. The Tribunal held that, on the material before it, there was no demonstrated nexus between the properties and the criminal activity alleged in the scheduled offence. It also treated the bank as a bona fide and innocent secured creditor whose security could not be equated with proceeds of crime merely because the borrower had defaulted or later became involved in criminal proceedings.

Conclusion: The attached mortgaged properties were not liable to be treated as proceeds of crime against the appellant bank.

Issue (ii): Whether the secured creditor's rights under the SARFAESI Act, 2002 and the Recovery of Debts and Bankruptcy Act, 1993 had priority over attachment under the Prevention of Money Laundering Act, 2002 in the facts of the case.

Analysis: The Tribunal relied on the later statutory amendments conferring priority on secured creditors and giving overriding effect to the secured debt recovery regime. It held that the appellant bank, having created and held security interest before the alleged laundering activity, could not be deprived of its prior enforcement rights by an attachment under the PMLA. The Tribunal applied the principle of harmonious construction and treated the amended debt recovery provisions as governing the secured creditor's priority in the given facts.

Conclusion: The secured creditor's right to recover against the mortgaged assets prevailed over the PMLA attachment in this case.

Final Conclusion: The provisional attachment and its confirmation could not be sustained against the appellant bank's prior security interest, and the appellant was entitled to relief in respect of the attached mortgaged properties.

Ratio Decidendi: A bona fide secured creditor's prior mortgage over properties not shown to be derived from criminal activity cannot be displaced by PMLA attachment where the statutory scheme and later debt-recovery amendments confer priority on secured creditors.

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