Secured creditor rights yield to proceeds-of-crime attachment when mortgaged property is linked to fraud and confiscation proceedings.

A mortgaged property traced to proceeds of crime was not released merely because a finance company held a housing loan security over it. The tribunal found that the property had been acquired in the name of the borrower using funds linked to the underlying fraud, and that the borrower's statement supported the conclusion that he had only lent his name while the main accused controlled the asset and related cash. In these circumstances, the provisional attachment was sustained, and the lender was directed to pursue its secured claim before the competent Special Court in the appropriate proceedings.

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Issues: Whether the provisional attachment of the mortgaged property was liable to be set aside on the ground that the appellant finance company had sanctioned and disbursed a housing loan against the property and was entitled to realise its dues from the secured asset.

Analysis: The property was found to have been purchased by the main accused in the name of the borrower, with payments and EMI servicing traced to the proceeds of crime generated from the underlying fraud. The borrower's statement recorded under the Act supported the conclusion that the property and related cash belonged to the main accused and that the borrower had only lent his name. In these circumstances, the mere existence of a mortgage and a housing loan did not justify release of the attached property from proceedings under the money-laundering law. The appropriate course for the finance company was to pursue its claim before the Special Court at the appropriate stage.

Conclusion: The attachment was not liable to be interfered with and the appeal was rightly dismissed.

Final Conclusion: The confirmed attachment of the property was sustained, while the finance company was left to assert its secured claim before the competent PMLA court in accordance with law.

Ratio Decidendi: A mortgaged property traced to proceeds of crime is not released merely because a lender holds security over it, and the secured creditor must work out its claim before the competent court in confiscation proceedings.

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