HC: Banks can’t claim priority over properties attached under PMLA The Nagpur bench of the Bombay High Court recently delivered a landmark judgment with significant implications for financial institutions and the Enforcement Directorate (ED). The court ruled that the Prevention of Money Laundering Act (PMLA) takes precedence over laws governing debt recovery by banks, such as the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI) and the Recovery of Debts and Bankruptcy (RDB) Act. This decision reaffirmed the state’s sovereign authority to confiscate assets linked to criminal activities, even when those assets are mortgaged to banks. The case centered on a dispute between the ED and two major banks—HDFC Bank and Punjab National Bank—over the ownership of properties attached as “proceeds of crime.” The ED had seized properties worth nearly Rs24.92 crore, which were allegedly linked to financial gains from irregularities in coal block allocations. These properties had previously been mortgaged to the banks, which had initiated recovery proceedings after the accounts became non-performing. The ED, however, argued that the properties were part of a money laundering scheme and should not be subject to the banks’ secured claims. A division bench comprising Justices Mukulika Jawalkar and Nandesh Deshpande overturned the appellate tribunal’s earlier ruling that allowed the banks to enforce their claims. The court criticized the tribunal’s assumption that SARFAESI and RDB Acts could override PMLA, calling it “unsustainable” and contrary to established legal principles. The justices emphasized that the objectives of PMLA—confiscating illicit assets to combat money laundering—are fundamentally distinct from the goals of debt recovery statutes.#hdfc_bank #bombay_high_court #enforcement_directorate #pune_bank #pmla
