Secured creditor priority prevails over money-laundering attachment where prior mortgage and hypothecation predate enforcement action.

A secured creditor with a prior mortgage and hypothecation was held entitled to priority over a provisional attachment under the money-laundering law where the property had been validly secured before enforcement action and possession had been taken under the SARFAESI framework. The Tribunal applied the priority given to secured creditors under the amended recovery statutes and the principle that, where competing special statutes contain non obstante clauses, the later enactment prevails. It further noted that the property was not shown to be derived from proceeds of crime, so continued attachment could not be sustained against the bank's secured interest, and the attachment was set aside to that extent.

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Issues: Whether a secured creditor bank having prior mortgage and hypothecation over the attached property was entitled to priority over the provisional attachment under the Prevention of Money Laundering Act, 2002, and whether the confirmation of the provisional attachment order could be sustained.

Analysis: The property in question had been created as security in favour of the bank before the enforcement attachment, and the bank had already initiated recovery proceedings and taken possession under the SARFAESI framework. The amended priority provisions under Section 26E of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and Section 31B of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 give a secured creditor priority over all other debts and government dues. The Tribunal applied the settled principle that where two special statutes contain non obstante clauses, the later enactment prevails, and held that the bank's secured interest could not be displaced by attachment under the Prevention of Money Laundering Act, 2002. It also held that the attached property was not shown to be property derived or obtained from proceeds of crime so as to justify continued attachment against the bank's secured interest.

Conclusion: The secured creditor bank was entitled to priority, and the provisional attachment and its confirmation could not be sustained against the mortgaged and hypothecated property.

Final Conclusion: The appeal succeeded and the attachment was set aside insofar as it affected the appellant bank's secured property.

Ratio Decidendi: A later special statute conferring priority on secured creditors prevails over an earlier conflicting non obstante provision, and property validly mortgaged to a secured creditor cannot be continued under attachment under the money-laundering law absent a legally sustainable basis connecting it to proceeds of crime.

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