State Bank of India vs The Deputy Director Directorate of Enforcement Lucknow

Headnote:(A) Prevention of Money Laundering Act, 2002 (PMLA) - Sections 8(7), 8(8), and 71 - Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDB & FI Act) - Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) - PMLA has overriding effect over other laws - Attachment of proceeds of crime under PMLA is not illegal merely because a secured creditor has a prior charge - Various statutes must be construed harmoniously - Secured creditor’s claim is subject to PMLA attachment, but creditor may approach the Special Court under Sections 8(7) and 8(8) to stake its claim - Reliance placed on Deputy Director, Directorate of Enforcement v. Axis Bank & Ors. (2019 SCC OnLine Del 7854) and National Spot Exchange Ltd. v. Union of India (2025). (Paras 10, 11, 12)

(B) Appeal - Scope - Appellate Tribunal under PMLA dismissed earlier appeals by other defendants upholding the impugned attachment order - Bank’s appeal disposed of with liberty to approach the Special Court for release of attached properties. (Paras 9, 12)

Facts of the case:
The appellant bank had extended overdraft facilities to an individual and his entities, who allegedly siphoned off funds constituting proceeds of crime. The Directorate of Enforcement attached certain properties under PMLA, which were confirmed by the Adjudicating Authority. The bank had also initiated recovery proceedings before the Debts Recovery Tribunal (DRT) under RDDB & FI Act and SARFAESI Act. The DRT, while allowing the bank to auction the properties, directed that the sale proceeds equivalent to the value of the attached properties be kept in fixed deposit and released to the Enforcement Directorate upon vesting. The bank appealed against the PMLA attachment, claiming priority as a secured creditor.

Findings of Court:
The Tribunal held that the PMLA has overriding effect and that attachment of proceeds of crime prevails over claims of secured creditors. However, the bank is at liberty to approach the Special Court under Sections 8(7) and 8(8) of PMLA to stake its claim for release of the attached properties. The DRT orders and the Axis Bank judgment support harmonious construction of the statutes, protecting the bank’s interest subject to PMLA attachment.

Issues: 1. Whether the PMLA attachment of properties, which were also mortgaged to the bank and subject to DRT recovery proceedings, is valid. 2. Whether the bank, as a secured creditor, has priority over the proceeds of crime attached under PMLA. 3. The appropriate forum and procedure for the bank to assert its claim.

Ratio Decidendi: The PMLA, by virtue of Section 71, overrides other laws regarding money laundering and proceeds of crime. The attachment under PMLA is valid even if a secured creditor has a prior charge. However, the secured creditor may approach the Special Court at the appropriate stage to seek release or satisfaction of its interest, as the attachment is operative subject to the creditor’s bona fide claim.

Result: Appeal disposed of with observations that the appellant bank is at liberty to approach the appropriate Special Court under Sections 8(7) and 8(8) of PMLA. Pending applications, if any, also disposed of. (Para 12)

Legal Category Hierarchy

1. Appeal against confirmation of provisional attachment under PMLA — Priority of secured creditor over proceeds of crime. (Para 1 , 2 )

2. Bank claimed first charge under RDDB and SARFAESI Acts; Enforcement Directorate argued PMLA attachment valid and overriding. (Para 3 , 4 , 5 , 6 , 7 , 8 )

3. Appeal disposed of; bank granted liberty to approach Special Court under PMLA for release. (Para 11 , 12 )

4. What is the priority between a secured creditor's claim and a PMLA attachment over proceeds of crime?

The PMLA has overriding effect; secured creditors cannot claim priority but may approach the Special Court under sections 8(7) and 8(8) to stake their claim. (Para 9 , 10 , 11 , 12 )

5. Does a prior charge under RDBA or SARFAESI Acts defeat a PMLA attachment?

No, PMLA prevails; however, attachment is subject to satisfaction of a bona fide secured creditor's charge acquired anterior to the criminal activity. (Para 10 )

6. What remedy does a secured creditor have when its property is attached under PMLA?

The secured creditor may approach the Special Court under PMLA sections 8(7) and 8(8) to seek release, even during trial. (Para 11 , 12 )

7. How should PMLA and other recovery statutes be construed in relation to proceeds of crime?

They must co-exist in harmony; each enforced without derogation of the other regarding assets derived from criminal activity. (Para 10 )

FINAL ORDER

24.09.2025

This Order disposes of the Appeal No. FPA-PMLA-537/LKW/2013 filed by the State Bank of India against the Order dated 26.09.2013 (Impugned Order) passed by the Ld. Adjudicating Authority (AA) under the Prevention of the Money Laundering Act, 2002 (PMLA) in Original Complaint (OC) No. 194/2013. The Impugned Order has confirmed the Provisional Attachment Order (PAO) No. 01/LKZO dated 13.03.2013.

2. While confirming the PAO, following observations have been made in the Impugned Order:

“20. To arrive at a fair and justifiable prima facie conclusion, the Investigating Officer had collected the following documents and materials and scrutinized them: -

(i) FIR No. RC.BD1/2009/E/0014 dt. 20.08.2009 and the Final Report dated 25.03.2011 of CBI, (ii) Investigation Report of SBI, (iii) Statement(s) of accounts in respect of Sh. Hinish Ramchandani and others with State Bank of India, Main Branch, Kanpur, (iv) Statement(s) of account of M/s SRS Investment Company & others with Union Bank of India, Swaroop Nagar, Kanpur, (v) Statement(s) of account of M/s SRS Investment Company & others with the Indus Ind Bank, Kanpur, (vi) Statement(s) of account of Sh. Hinish Ramchandani, Smt. Nandani Ramchandani, Smt. Pushpa Ramchandani, Smt. Preeti Sewani and others with ICICI Bank, IDBI Bank, Dena Bank, Kotak Mahindra Bank Ltd., Indus Ind Bank, Development Co-operative Bank Ltd.. HDFC Bank etc. (vii) Statement(s) of account of M/S SRS Laminators, M/s Rajiv Filling Station Pvt. Ltd., M/s Rajiv Motors and M/s Tejal Agencies with SBI, ICICI Bank Ltd., Indus Ind Bank. Bank, IDBI Bank, Dena Bank, Kotak Mahindra Bank Ltd., Indus Ind Bank, Development Co-operative Bank Ltd., HDFC Bank, Bank of Baroda, Axis Bank etc. (ix) documents seized from the residence and office premises of Sh. Hinish Ramchandani on 15.10.2012 as a result as search action u/s 70 of PMLA, (x) replies received from M/s SRS Investment Co., M/s SRS Developers, M/s SRS Laminators, M/s Tejal Agencies, M/s Rajiv Filling Station Pvt. Ltd. of Kanpur and other defendants.

20.2. Based on the above materials and the investigations carried out by him under the Act, spread over a period of two years he has come to the prima facie conclusion that Defendant 1 Sh. Hinish Ramchandani had generated "proceeds of crime" to the tune of Rs.12.14 crores and ploughed them into movable / immovable properties and other investments that include in the business concerns. In this PAO, properties worth Rs. 9.44 crores have been provisionally attached.

XXX

21. Order

From the analysis of above-mentioned facts and circumstances, on perusal of documents, statements of Defendants, the oral and Written Submissions made/furnished, I am prima facie convinced that the properties provisionally attached are involved in "money laundering" and therefore confirm the Provisional Attachment Order No. 01/LKZO/2013 dtd. 30.03.2013 in ECIR/01/PMLA/LZO/2009/AD (NKD)/EO(SK) and order as detailed below: -

properties-

1. Confirm the attachment properties at Sl.1 i.e. Plot / House No. 762, Q-Block, Scheme No. 1. Kakadev, Kanpur and Sl. No. 2 i.e. ground floor of Premises No. 122/497, Shastri Nagar, Kanpur. Offer of the Defendants to tender FDRs in lieu of the proceeds of crime against these properties is turned down on the grounds detailed above.

2. Confirm the attachment of property at S. No. 3 i.e. a) Premises No. 187. 'Q' Block Sharda Nagar, Kanpur, and b) Premises No. 117/Q/337, Indrapuri, Sharda Nagar, Kanpur to the extent of investment of Rs. 6 lakhs, to be paid by Defendants No. 8, 9 and 10. with whom the proceeds of crime are lying with, failing which the properties stood attached.

3. Confirm the attachment of property at Sl. No. 4 i.e. FDR for Rs.2.02 Crores with Bank of India, Noida Branch, as detailed below: -

a. FDR bearing account No. 7114437110000114 for Rs.1.01 crores dated 11.02.2011, and

b. FDR bearing account No. 7114437110000115 for Rs.1.01 crores dated 11.02.2011.

4. Confirm the attachment of property at Sl. No. 5

Click Here to Read the rest of this document

2025 Supreme(Online)(ATFP) 13348

APPELLATE TRIBUNAL FOR FORFEITED PROPERTY
Balesh Kumar, Member
State Bank of India – Appellant
Versus
The Deputy Director Directorate of Enforcement Lucknow – Respondent
FPA PMLA 537 LKW 2013

Under PMLA, attachment of proceeds of crime prevails over claims of secured creditors, but such creditors may approach the Special Court for release or satisfaction of their interest.

Legal Category Hierarchy

Table of Contents

4. What is the priority between a secured creditor's claim and a PMLA attachment over proceeds of crime?

5. Does a prior charge under RDBA or SARFAESI Acts defeat a PMLA attachment?

6. What remedy does a secured creditor have when its property is attached under PMLA?

7. How should PMLA and other recovery statutes be construed in relation to proceeds of crime?

2025 Supreme(Online)(ATFP) 13348

APPELLATE TRIBUNAL FOR FORFEITED PROPERTYBalesh Kumar, MemberState Bank of India – AppellantVersusThe Deputy Director Directorate of Enforcement Lucknow – RespondentFPA PMLA 537 LKW 2013

Under PMLA, attachment of proceeds of crime prevails over claims of secured creditors, but such creditors may approach the Special Court for release or satisfaction of their interest.

Legal Category Hierarchy

Table of Contents

4. What is the priority between a secured creditor's claim and a PMLA attachment over proceeds of crime?

5. Does a prior charge under RDBA or SARFAESI Acts defeat a PMLA attachment?

6. What remedy does a secured creditor have when its property is attached under PMLA?

7. How should PMLA and other recovery statutes be construed in relation to proceeds of crime?

APPELLATE TRIBUNAL FOR FORFEITED PROPERTY
Balesh Kumar, Member
State Bank of India – Appellant
Versus
The Deputy Director Directorate of Enforcement Lucknow – Respondent
FPA PMLA 537 LKW 2013