Prior secured creditor rights under PMLA attachment remain protected, but claim adjudication shifts to the Special Court after finality or trial commencement.

A bona fide third-party secured creditor with a prior charge over attached property is not deprived of its enforcement rights by attachment under the Prevention of Money-laundering Act, 2002; the attachment operates only subject to that earlier lawful interest, and may continue only against any surplus value after satisfaction of the prior security. Once the attachment order has attained finality, or the criminal trial has commenced, the creditor's claim to the attached property must be adjudicated by the Special Court rather than the Appellate Tribunal. The Tribunal therefore declined substantive relief and directed the creditor to pursue its remedy before the Special Court.

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Issues: (i) Whether a bona fide third-party secured creditor having a prior interest in attached properties can enforce its security despite attachment under the Prevention of Money-laundering Act, 2002. (ii) Whether the proper forum for adjudication of the bank's claim was the Appellate Tribunal or the Special Court.

Issue (i): Whether a bona fide third-party secured creditor having a prior interest in attached properties can enforce its security despite attachment under the Prevention of Money-laundering Act, 2002.

Analysis: The attachment of properties under the Prevention of Money-laundering Act, 2002 does not defeat a lawful, bona fide third-party interest created for adequate consideration prior to the scheduled offence. Where the secured creditor's claim is prior in time and bona fide, the attachment may continue only to the extent of any value remaining after satisfaction of that prior charge. The secured creditor's enforcement right is not to be frustrated by the attachment.

Conclusion: The bank's prior secured interest was protected, and the attachment could not override its right to enforce security in accordance with law.

Issue (ii): Whether the proper forum for adjudication of the bank's claim was the Appellate Tribunal or the Special Court.

Analysis: Once the attachment order has attained finality, or where the criminal trial under the Prevention of Money-laundering Act, 2002 has commenced, the claim of a person asserting a bona fide prior interest is to be inquired into and adjudicated by the Special Court. In that situation, the Appellate Tribunal is not the appropriate forum for granting substantive relief on the claim to the attached property.

Conclusion: The bank was required to approach the Special Court, and the Appellate Tribunal declined to grant relief.

Final Conclusion: The appeals were not maintainable for substantive relief before the Appellate Tribunal in the prevailing stage of proceedings, and the bank was left to work out its remedies before the Special Court.

Ratio Decidendi: A bona fide third-party secured creditor with a prior interest is not deprived of its enforcement rights by PMLA attachment, but once the attachment has attained finality or the trial has commenced, adjudication of such claim lies with the Special Court rather than the Appellate Tribunal.

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