PMLA overrides recovery statutes; no priority for secured creditors over attached proceeds of crime; bona fide claimants may seek Special Court restoration under section 8(8) post-attachment or confiscation.

JUDGMENT :

M. S. Jawalkar, J.

Heard.

2. Admit. Heard finally with the consent of the learned counsel for the parties.

3. These appeals are filed under section 42 of the Prevention of Money Laundering Act, 2022 (For the sake of brevity hereinafter referred to as “PMLA”) before this Court. The present appeal bearing First Appeal No.1413 of 2017 is preferred for challenging the order dated 28/08/2017 passed by the Appellate Tribunal under the PMLA in Appeal No.FPA-PMLA-1368/GOA/ 2016. By the said order, the learned Tribunal allowed the appeal filed by the respondent-HDFC Bank under section 26 of the PMLA. By the said order, the Tribunal set aside confirmation of provisional attachment order dated 30/05/2016, insofar as it affected the mortgaged properties. The Tribunal further held that secured creditors are entitled to priority in view of section 31-B of the Recovery of Debts and Bankruptcy Act, 1993 (For the sake of convenience hereinafter referred to as “RDB Act”) and section 26-E of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (For the sake of convenience hereinafter referred to as “SARFAESI Act”). The respondent-Bank was permitted to proceed with enforcement of its security interest. The main points involved in the present matters are as under:-

(i) Whether the secured creditors would have priority of interest over the assets attached under the provisions of PMLA by virtue of provisions of the SARFAESI Act and RDB Act?

(ii) Whether the properties of the judgment debtors attached under the provisions of PMLA would be available for the execution of the decrees against the judgment debtors in view of the provisions of SARFAESI Act and RBD Act?

(iii) Whether property provisionally attached and confirmed under PMLA as “Proceeds of Crime” can be released in favour of a secured creditors claiming statutory priority?

4. As similar issues involved in both these appeals, they are taken up together for its disposal and First Appeal No.1413 of 2017 is taken as a lead appeal.

5. Facts in brief are as under:

The Central Bureau of Investigation (CBI) registered FIR No.RC-219/2012/E/0013 alleging irregularities in coal block allocation involving Grace Industries Ltd. and associated entities. It was alleged that on account of irregular coal block allocation, the company derived wrongful financial gains amounting to Rs.24,92,49,850/-, which the appellant-Enforcement Directorate treated as “proceeds of crime” under section 2(1)(u) of the PMLA. The appellant initiated proceedings under the provisions of PMLA on the basis that the said gains constituted “proceeds of crime” under section 2(1)(u) of PMLA. On 08/12/2015, the provisional attachment order was issued under section 5 of the PMLA attaching certain immovable properties belonging to the accused entities. The said attachment was confirmed by the Adjudicating Authority on 30/05/2016 under section 8(3) of the PMLA. The attached properties had been mortgaged to the respondent-HDFC Bank as security for credit facilities extended prior to attachment. The respondent-Bank has classified the loan account as ‘NPA’ and initiated the proceedings under the provisions of SARFAESI Act before final confiscation under the PMLA. The respondent-Bank approached