2022 (1) TMI 1340 - HC - Money Laundering

Money Laundering - proceeds of crime - provisional attachment order - rights of a secured creditor under SARFAESI Act would prevail over an order of attachment under the PMLA Act, or not - security created in favour of a bonafide lender who has exercised due diligence can be adversely impacted by an order of attachment under the PMLA Act - HELD THAT - Prima facie, considering the appeal memo and interim application, it does appear that properties of additional respondent no.1 and additional respondent no.2, have been charged / mortgaged to appellant. It is possible that additional respondent nos.1 and 2 may argue that action by respondents under the provisions of PMLA was incorrect or malafide but that is a separate issue and that cannot deny the fact that the property has been secured to appellant. These are issues which requires consideration. But until these issues are considered, if the property which has been attached under the provisions of PMLA, which are also secured to appellant are not disposed, the property may get wasted or encroached upon and the value would also get eroded. It would be to nobody's benefit. Therefore, purely by way of an interim adhoc arrangement, we pass the following order (a) The properties which are mortgaged / charged to appellant may be sold by appellant under the provisions of SARAFESI Act. The sale proceeds shall be deposited with the Registrar, Appellate Side, Bombay, of this court within one week of receiving the sale proceeds to be disbursed in accordance with any final order this court may pass in the appeal. (b) As and when appellant deposits the money with the Registrar, the registrar shall invest the amount in a fixed deposit with a nationalised bank for a minimum period of 13 months to be renewed for the same period until the disposal of the appeal unless otherwise ordered. (c) Since this is only an adhoc arrangement, we clarify that we have not expressed any opinion on appellant s case that they rank higher in priority as compared to respondent. Interim Application disposed.

Summary

Issues:
1. Appellant challenging order confirming provisional attachment under PMLA.
2. Interpretation of rights of secured creditor under SARFAESI Act vis-a-vis PMLA.
3. Consideration of various legal questions raised in the appeal.
4. Interim application filed for appointment of Court Receiver and sale of properties.

Analysis:
1. The appeal challenges an order confirming provisional attachment under PMLA against properties charged to the appellant. The appellant claims priority as a secure creditor under SARFAESI Act over the respondent under PMLA. The Tribunal's decision is disputed, arguing that the appellant's rights were not duly considered.

2. The substantial legal questions raised include the precedence of a secured creditor's rights under SARFAESI Act over PMLA attachments, impact on security created for a bona fide lender, and the procedure for stay of proceedings under SARFAESI Act due to actions under PMLA. The judgment delves into the legality of passing provisional attachment orders without specific allegations against the appellant.

3. The respondent argues that PMLA is a self-contained code with overriding effect over other laws, emphasizing the objective to prevent money laundering and confiscate proceeds of crime. Reference is made to specific provisions and recent amendments granting powers to the Directorate for attachment and confiscation of properties involved in money laundering.

4. An interim application is filed seeking the appointment of a Court Receiver for properties and their subsequent sale, with proceeds to be deposited pending final orders. The judgment provides an ad hoc arrangement allowing the appellant to sell charged properties under SARFAESI Act, with the sale proceeds to be deposited with the court.

5. The court acknowledges the need for further examination of the issues raised, particularly regarding the properties charged to the appellant and potential disputes by additional respondents. An interim order is passed to prevent waste or erosion of property value, pending a final decision on the priority of rights between the appellant and the respondent.

6. The judgment concludes by noting the service of the interim application on additional respondents and their non-appearance, leading to the disposal of the interim application. The detailed analysis highlights the complex legal considerations and the court's interim measures to address the conflicting claims and interests involved in the case.