Attachment under the Prevention of Money Laundering Act permits secured creditors to apply to the Special Judge to realise mortgaged property with an undertaking to deposit excess proceeds.

Secured creditors whose security is subject to statutory attachment may apply to the Special Judge to stake claim and seek auction or realisation of mortgaged property; the application must include an affidavit/undertaking to deposit any excess realisation as directed (by way of fixed deposit receipt) with the enforcement agency. The Special Judge is to invite objections, adjudicate claims under the statute and, after trial or adjudication, dispose of any excess funds among competing claimants in accordance with law. This preserves secured creditors' remedy subject to statutory attachment procedures.

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Issues: (i) Whether appellants secured by mortgage of the attached properties are entitled to be permitted to realise their dues by auction or otherwise, despite attachment by Enforcement Directorate under the Prevention of Money Laundering Act, 2002?

Analysis: The appeals challenge confirmation of attachment of properties mortgaged to secured creditors. The legal framework includes the Prevention of Money Laundering Act, 2002 which permits attachment and confers precedence as a special Act; and the procedure for claim and disposal of attached property including applications under the Act. The Tribunal examined competing contentions: that secured creditors may enforce SARFAESI remedies and realise securities, and that PMLA proceedings and attachment may limit or regulate such enforcement. The Tribunal sanctioned a route for secured creditors to stake claim before the Special Judge under the PMLA by filing an application under the Act, subject to an affidavit/undertaking regarding deposit of any excess realisation and allowing the Special Judge to invite objections and dispose of any excess funds as per law after trial.

Conclusion: Permission is granted to the secured creditors to move an application before the Special Judge under the Prevention of Money Laundering Act, 2002 to stake their claim and seek auction of the mortgaged properties; such application must be accompanied by an affidavit/undertaking to deposit any excess realisation (by way of fixed deposit receipt) with the Enforcement Directorate, and the Special Judge may invite objections and dispose of excess funds among claimants as per law.

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