Equivalent value attachment under money-laundering law survives prior security interest where tainted funds are no longer traceable.

Provisional attachment of property as equivalent value of proceeds of crime was upheld where the original tainted funds were no longer traceable. The Tribunal held that the Prevention of Money Laundering Act permits attachment of equivalent value property when proceeds of crime have been dissipated, provided reasons to believe are recorded on material showing diversion of funds and risk to confiscation proceedings. It also construed the money-laundering law and the securitisation law harmoniously, finding that a prior security interest does not by itself defeat attachment under the anti-money-laundering framework, though the secured creditor may pursue its statutory remedies separately.

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Issues: Whether the provisional attachment of the secured assets as property of equivalent value under the Prevention of Money Laundering Act, 2002 was valid, and whether the appellant bank's prior security interest under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 displaced the attachment.

Analysis: The attachment was upheld on the footing that the definition of proceeds of crime includes not only property derived from scheduled criminal activity but also the value of such property. The Tribunal held that where the tainted funds had been dissipated, attachment of equivalent value property was legally permissible. It further found that the Deputy Director had recorded reasons to believe on the basis of material showing diversion of loan funds, non-traceability of the original proceeds, and risk of frustration of confiscation proceedings. The Tribunal also applied the principle that the Prevention of Money Laundering Act, 2002 and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 must be construed in harmony, and that a prior security interest does not by itself invalidate attachment under the money-laundering law, though the secured creditor may pursue its claim in accordance with the Act.

Conclusion: The attachment order was valid and the appellant bank's priority claim did not defeat the attachment.

Final Conclusion: The appeal failed because the impugned property could be attached as equivalent value of proceeds of crime, while the bank was left to work out its remedy under the statutory framework.

Ratio Decidendi: Where proceeds of crime are not available, property of equivalent value may be provisionally attached under the money-laundering law, and a prior secured interest does not automatically bar such attachment if the statutory safeguards and harmonious operation of the relevant enactments are satisfied.

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