Secured creditor priority prevails over PMLA attachment where bona fide mortgaged property is not proceeds of crime.

A secured creditor bank's prior security interest in mortgaged properties, created before PMLA attachment, was treated as prevailing over later attachment where the bank had no role in the scheduled offence and was only enforcing secured debt. The analysis applied the statutory priority given to secured creditors under Section 26E of SARFAESI and Section 31B of the RDDB Act, together with the principle that a later special enactment with a non-obstante clause prevails over earlier inconsistent law. Bona fide mortgaged property could not be treated as proceeds of crime against the bank, and the attachment and confirmation were unsustainable to that extent.

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Issues: Whether the mortgaged properties of an innocent secured creditor bank could be provisionally attached and the attachment confirmed under the Prevention of Money Laundering Act, 2002 when the bank had no role in the scheduled offence and claimed priority under the SARFAESI Act, 2002 and the Recovery of Debts Due to Banks and Financial Institutions Act, 1993.

Analysis: The Bank had created security interest over the properties prior to the attachment and was only seeking enforcement of its secured debt. The later statutory provisions in 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 confer priority on secured creditors over other debts and government dues. The Court relied on the settled principle that where two special statutes contain non-obstante clauses, the later enactment prevails. It further held that property acquired or held bona fide by a secured creditor cannot be treated as proceeds of crime, and that the Adjudicating Authority had failed to properly consider the bank's objection.

Conclusion: The provisional attachment could not be sustained against the Bank, and the confirmation order was unsustainable.

Final Conclusion: The attachment was set aside to the extent it covered the Bank's mortgaged properties, while the proceedings against the borrowers were left to continue in accordance with law.

Ratio Decidendi: A secured creditor's prior security interest and statutory priority under later special enactments prevail over attachment under PMLA, and innocent mortgaged property not constituting proceeds of crime cannot be confirmed for attachment against the bank.

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