Money laundering property attachment and third-party encumbrance: Appellate forum versus special court jurisdiction limits clarified

Money laundering attachment of properties: where a bona fide third party (a bank) held a prior legitimate interest, the attachment must yield to enforcement of that pre-existing claim and only the residual value, if any, is available for proceeds under PMLA. The appellate forum may exercise jurisdiction to confirm, modify or set aside attachment orders and entertain claims by such third parties, but this jurisdiction is co-ordinate with the remedy of restoration during trial; once an attachment confirmation becomes final, confiscation is ordered, or trial under the PMLA has commenced, adjudication of the third partys claim is to be undertaken by the trial forum.

---

---

Issues: (i) Whether a bank, as a bona fide third party with a prior interest in immovable property attached under the PMLA, can enforce its security interest notwithstanding the attachment; (ii) Whether the Appellate Tribunal is the appropriate forum for adjudication of a bona fide third party's claim to restoration or enforcement of rights in attached property, or whether the Special Court under the PMLA is the proper forum.

Issue (i): Whether a bona fide third party secured creditor with a prior interest can enforce its claim against attached property despite attachment under the PMLA.

Analysis: The legal framework includes the provisions of the PMLA regarding provisional attachment and confirmation by the Adjudicating Authority, and the principle that third party interests acquired prior to the scheduled offence cannot be defeated unless created to defeat the law. The prior decision of the Delhi High Court in the same matter is binding and establishes that where a third party's interest predates the criminal activity and is bona fide, the attachment remains valid but is restricted so that the secured creditor may enforce its charge; the PMLA entitlement applies only to the remainder of the property's value exceeding the third party's claim.

Conclusion: A bona fide third party secured creditor with a prior interest may enforce its security interest against the attached property and the attachment is restricted to the value in excess of that claim.

Issue (ii): Whether the Appellate Tribunal is the appropriate forum for adjudicating the third party's claim, or whether the Special Court under the PMLA is the proper forum.

Analysis: The statutory scheme and the binding pronouncement of the Delhi High Court recognize both the Appellate Tribunal's jurisdiction to confirm, modify or set aside orders of the Adjudicating Authority and the Special Court's jurisdiction to adjudicate third party claims during trial. The High Court clarified that where confirmation of attachment has attained finality, confiscation order passed, or trial under Section 4 PMLA has commenced, claims asserting bona fide prior interest must be inquired into and adjudicated only by the Special Court. The present appeals concern attachments where parallel criminal proceedings and adjudications are in place, and the High Court's decision binds the Tribunal on forum competence.

Conclusion: The Appellate Tribunal is not the appropriate forum to adjudicate the bank's claim in the circumstances; the appropriate remedy is to approach the Special Court under the PMLA for enforcement of rights.

Final Conclusion: The bank's appeals before the Appellate Tribunal are dismissed as the tribunal must defer to the jurisdictional Special Court for adjudication of bona fide third party claims where the attachment confirmation or criminal trial situations set out by the High Court obtain; the bank remains entitled to pursue its rights before the Special Court and the attachment remains subject to the limited effect described above.

Ratio Decidendi: Where a bona fide third party acquired a prior interest in property before the scheduled offence, that interest is protected such that PMLA attachment is operative only to the extent the property's value exceeds the third party's secured claim, and where attachment confirmation is final or trial under Section 4 has commenced, adjudication of the third party's claim lies with the Special Court under the PMLA rather than the Appellate Tribunal.

---