Bona fide secured creditor priority defeats later provisional attachment where the property interest predates the alleged offence

The Tribunal's appellate jurisdiction extends to examining the legality of provisional attachment and its confirmation under the PMLA, while third-party claims may be addressed at the appropriate later stage. It also recognised that a bona fide secured creditor who acquired mortgage and assignment interests in the ordinary course of business before the alleged scheduled offence has a lawful interest that cannot be displaced by later attachment, absent valid recorded reasons linking the properties to proceeds of crime. On that basis, the provisional attachment was set aside insofar as it covered the mortgaged properties, and the secured creditor's interest was protected.

---

---

Issues: (i) Whether the Appellate Tribunal had jurisdiction to examine the challenge to provisional attachment and its confirmation. (ii) Whether the attachment of mortgaged properties could be sustained against a bona fide secured creditor whose interest was acquired prior to the alleged scheduled offence.

Issue (i): Whether the Appellate Tribunal had jurisdiction to examine the challenge to provisional attachment and its confirmation.

Analysis: The appeal against confirmation of provisional attachment was maintainable before the Tribunal under the statutory appellate scheme. The Tribunal was competent to test the legality of the provisional attachment order and the confirmation order, while the Special Court could consider third-party claims at the appropriate stage after finality of attachment proceedings.

Conclusion: The Tribunal had jurisdiction to decide the appellant's challenge.

Issue (ii): Whether the attachment of mortgaged properties could be sustained against a bona fide secured creditor whose interest was acquired prior to the alleged scheduled offence.

Analysis: The appellant had acquired the loan accounts and underlying security interests through assignment transactions in the ordinary course of business, before the FIRs and before the alleged commission of scheduled offences in relation to most of the properties. The record showed absence of allegations of impropriety against the appellant, and the attachment order did not disclose valid reasons to believe for most of the properties. Applying the principle that a bona fide third party interest created before the criminal activity cannot be defeated by later attachment, the secured creditor's lawful interest was held to prevail to the extent of the mortgaged properties.

Conclusion: The attachment could not be sustained against the appellant's mortgaged properties.

Final Conclusion: The provisional attachment was set aside insofar as it covered the properties mortgaged in favour of the appellant, and the appellant's secured interest was protected against the impugned attachment.

Ratio Decidendi: A bona fide third party secured creditor who acquires an interest in property before the commission of the alleged scheduled offence cannot have that prior lawful interest defeated by provisional attachment under the PMLA unless the attachment is supported by valid, recorded reasons linking the property to proceeds of crime.

---