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of <h1>Provisional attachment and auction of mortgaged properties under PMLA allowed with SARFAESI auction conditions and excess deposit.</h1> Provisional attachment under anti-money laundering law can extend to properties in possession of accused, relatives, associates or employees as value of ... Provisional attachment - letters of credit through fraudulent transactions and by furnishing fake invoices - Attachment of properties as value thereof under PMLA - Permission to auction mortgaged properties prior to conclusion of trial - Rights of secured creditor u/s 26E of the SARFAESI Act - Priority of PMLA proceedings and Section 71 of the PMLA - Appellate jurisdiction u/s 26 of the PMLA - Vijay Madanlal Chaudhary v. Union of India [2022 (7) TMI 1316 - SUPREME COURT (LB)] - HELD THAT:- We are of the considered view that in absence of direct proceeds of crime, any property in possession of the accused persons, their relatives, associates & employees can be attached as value thereof, seeing their role for helping in layering/ siphoning of the proceeds of crime. We fortify our view in this regard in the light of judgment of Hon’ble Supreme Court of India in case Vijay Madanlal Chaudhary v. Union of India [2022 (7) TMI 1316 - SUPREME COURT (LB)] However, we cannot ignore the fact that in case of mortgaged properties, no useful purpose will be served by directing the bank to wait for conclusion of the trial and thereafter, obtain permission from the trial court for auction of the said properties. There is no bar that this Appellate Tribunal cannot exercise the said power to grant permission to the Appellant Bank even prior to the conclusion of the trial, otherwise, this may result in financial constraint to the Appellant Bank. Accordingly, seeing the fact that the said four properties are attached as value thereof, the present Appeal needs to be allowed, subject to the condition that the Appellant Bank will auction the said property as per the procedure laid down in SARFAESI Act, and after the discharge of its outstanding liabilities, it will deposit the excess amount with the Respondent Directorate by way of FDR. Before proceeding for auction sale, appellant bank will also give prior notice to the co-mortgagee, Syndicate Bank (now merged with Canara Bank). The present Appeal is hereby disposed of with direction as mentioned in the preceding para qua the property at serial no. 1 to 4. It is made clear that nothing reflected herein will affect the merits of the trial in any manner. Appeal disposed of with Direction. Issues: Whether mortgaged properties attached under the Prevention of Money Laundering Act, 2002 as 'value thereof' can be released to the secured creditor (appellant bank) for auction under the SARFAESI Act, 2002 prior to conclusion of criminal trial; and whether the provisions of Section 26E of the SARFAESI Act are ousted by Section 71 of the PMLA.Analysis: The Tribunal examined the effect of provisional attachment under PMLA where properties mortgaged to the bank were attached as value. The Tribunal considered the legal position that properties not constituting direct proceeds of crime may be attached as value under PMLA and noted the competing statutory regime under SARFAESI including the rights of secured creditors created by Section 26E of the SARFAESI Act. The Tribunal recognised that PMLA is a special enactment but held that, in cases of mortgaged properties attached as value, permitting the secured creditor to exercise SARFAESI remedies prior to trial serves a practical purpose and does not preclude judicial scrutiny at trial; safeguards were considered necessary to protect the interests of the Directorate and other claimants.Conclusion: Appeal allowed in favour of the Appellant; the Appellate Tribunal directed that the Appellant Bank is permitted to auction the mortgaged properties under the procedure laid down in the SARFAESI Act, and after discharge of its outstanding liabilities shall deposit any excess amount with the Directorate of Enforcement by way of FDR, subject to giving prior notice to the co-mortgagee.Ratio Decidendi: Where properties mortgaged to a secured creditor are attached under PMLA as 'value thereof', an appellate authority may permit the secured creditor to proceed with auction under SARFAESI prior to conclusion of trial provided adequate safeguards are imposed to protect the interests of other claimants and to preserve excess sale proceeds for the enforcement authority.
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