Prior mortgage does not defeat PMLA attachment, but secured creditor may still seek relief before the Special Court.
A prior mortgage does not, by itself, displace attachment of property under the Prevention of Money Laundering Act, 2002; a secured creditor's earlier charge was held not to override the money-laundering attachment. The attachment was therefore sustained. At the same time, the secured creditor was not barred from seeking appropriate relief before the jurisdictional Special Court under Section 8(7) or Section 8(8), and the statutory route for release or other relief remained available under the Act.
Issues: (i) Whether a secured creditor with a prior mortgage has priority over property attached under the Prevention of Money Laundering Act, 2002. (ii) Whether the appellant bank may be permitted to seek release of the attached property before the Special Court under Section 8(7) or Section 8(8) of the Prevention of Money Laundering Act, 2002.
Issue (i): Whether a secured creditor with a prior mortgage has priority over property attached under the Prevention of Money Laundering Act, 2002.
Analysis: The property stood mortgaged to the bank before attachment, but the governing legal position was considered in the light of the Supreme Court's ruling that secured creditors do not obtain priority over assets attached under the Prevention of Money Laundering Act, 2002 by virtue of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 or the Recovery of Debts and Bankruptcy Act, 1993. The attachment under the money-laundering regime was therefore not displaced merely because the bank's charge predated the attachment.
Conclusion: The prior mortgage did not confer priority over the attached property, and the challenge to attachment failed.
Issue (ii): Whether the appellant bank may be permitted to seek release of the attached property before the Special Court under Section 8(7) or Section 8(8) of the Prevention of Money Laundering Act, 2002.
Analysis: The statutory scheme was treated as preserving a route for a claimant to approach the jurisdictional Special Court for appropriate relief concerning the property at the relevant stage, and this course was held to be consistent with the framework of the Act. The bank was therefore not barred from invoking the remedy available under Section 8 before the Special Court.
Conclusion: The bank was held entitled to pursue appropriate relief before the Special Court under Section 8(7) or Section 8(8).
Final Conclusion: The attachment order was sustained, while the appellant was left free to seek such relief as may be available before the jurisdictional Special Court under the Act.
Ratio Decidendi: A prior mortgage does not, by itself, override attachment of property under the Prevention of Money Laundering Act, 2002, but the secured creditor may still seek relief through the statutory mechanism before the Special Court.
TaxTMI 
AI Drafter ✕
TaxTMI 
