Prior secured creditor protection under PMLA prevails where the property is not shown to be proceeds of crime.

A bona fide prior secured creditor can resist later attachment under PMLA where the security interest was created before the alleged criminal activity and before attachment proceedings, and where the property is not shown to be proceeds of crime. The text also states that confirmation of provisional attachment is unsustainable when the record does not establish lack of bona fides, absence of due diligence, or any attempt by the creditor to defeat the law. The operative point is that a prior lawful security interest is protected against later attachment unless the property is properly shown to be attachable under PMLA.

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Issues: (i) Whether the appellant bank, as a prior secured creditor and bona fide third-party claimant, could resist attachment of the subject property under the Prevention of Money Laundering Act, 2002. (ii) Whether the Adjudicating Authority's confirmation of provisional attachment was sustainable on the facts and in law.

Issue (i): Whether the appellant bank, as a prior secured creditor and bona fide third-party claimant, could resist attachment of the subject property under the Prevention of Money Laundering Act, 2002.

Analysis: The security interest over the property was created before the alleged criminal activity and before the later attachment proceedings. The property was found not to have been shown as acquired from proceeds of crime, and there was no material to show that the bank's interest was created to defeat the law or that the bank was privy to money-laundering. Applying the principles governing third-party claims and secured creditors, a bona fide prior interest cannot be displaced merely because attachment proceedings under PMLA are initiated later.

Conclusion: The appellant bank's prior secured interest was entitled to protection, and the attachment could not defeat its lawful claim.

Issue (ii): Whether the Adjudicating Authority's confirmation of provisional attachment was sustainable on the facts and in law.

Analysis: The record did not establish that the attached property was proceeds of crime or that the bank's transaction lacked bona fides or due diligence. The chronology showed that the bank's security and recovery steps pre-dated the PMLA attachment, while the material before the Authority was insufficient to justify treating the property as attachable in a manner overriding the bank's interest. The confirmation order therefore could not stand.

Conclusion: The confirmation of provisional attachment was unsustainable and liable to be set aside.

Final Conclusion: The appellant's lawful secured interest was held to prevail over the impugned attachment, and the attachment order was quashed, restoring the property-related rights of the appellant bank subject to the governing law.

Ratio Decidendi: A bona fide secured creditor with a prior lawful interest in property, acquired before the alleged criminal activity and not shown to be created to defeat PMLA, cannot be deprived of that interest by a later attachment unless the property is shown to be proceeds of crime or the creditor's claim lacks bona fides or due diligence.

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