Secured creditor priority overrides money-laundering attachment where the asset is bona fide lien-backed and unconnected to proceeds of crime.

A bona fide secured creditor's right to realise secured debt under the amended SARFAESI and RDDBFI enactments, effective from 16.08.2016, was treated as prevailing over inconsistent attachment claims under the PMLA because the later special statutes contained overriding non obstante clauses. The Tribunal also found that a fixed deposit under valid lien in favour of the bank was a secured asset with no nexus to criminal activity, so it could not be characterised as proceeds of crime or continue under provisional attachment. The attachment against the secured asset was lifted, while proceedings against the borrower were allowed to continue.

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Issues: (i) Whether the secured creditor's rights under the amended SARFAESI and RDDBFI enactments had priority over attachment under the Prevention of Money Laundering Act, 2002; (ii) Whether the fixed deposit kept under lien with the appellant bank could be treated as proceeds of crime and be continued under provisional attachment.

Issue (i): Whether the secured creditor's rights under the amended SARFAESI and RDDBFI enactments had priority over attachment under the Prevention of Money Laundering Act, 2002.

Analysis: The amended provisions conferring priority on secured creditors were in force from 16.08.2016. The Tribunal applied the principle that where two special statutes contain non obstante clauses, the later enactment prevails. The secured creditor's right to realise the secured debt was therefore treated as having priority over competing claims, including governmental dues and other attachments.

Conclusion: The secured creditor's priority prevailed over the attachment proceedings.

Issue (ii): Whether the fixed deposit kept under lien with the appellant bank could be treated as proceeds of crime and be continued under provisional attachment.

Analysis: The fixed deposit was held under a valid lien created in favour of the bank against advances made by the bank, and the bank was treated as a bona fide secured creditor. The record showed no nexus between the secured asset and any criminal activity so as to bring it within the expression proceeds of crime. On that basis, the attachment of the bank's secured asset could not be sustained.

Conclusion: The fixed deposit under lien was not liable to be continued under provisional attachment.

Final Conclusion: The appeal succeeded to the extent that the attachment against the appellant's secured asset was lifted, while the proceedings against the borrower were left to continue on their own merits.

Ratio Decidendi: A bona fide secured creditor's rights under later special statutes granting priority override inconsistent earlier attachment claims, and property genuinely subjected to security interest without a nexus to proceeds of crime cannot be continued under money-laundering attachment.

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