SAFEMA Tribunal rules ED’s PMLA attachment prevails over mortgage by Indian bank, affirming primacy of proceeds of crime recovery.
Indian Bank Mortgage Fails to Defeat PMLA Attachment: SAFEMA Tribunal
A SAFEMA Tribunal has ruled that a secured mortgage created in favour of an Indian public sector bank cannot override a valid attachment under the Prevention of Money Laundering Act, 2002, where the property is established as tainted proceeds of crime.
The bank had claimed priority as a secured creditor under SARFAESI, but the Tribunal held that PMLA creates a unique statutory regime where any property derived from criminal activity vests in the state upon attachment under Section 5(1). The Tribunal cited State Bank of India v. Union of India (2021) to affirm that SARFAESI rights are subordinate to PMLA proceedings.
This decision strengthens the ED’s position in asset recovery and affects lending due diligence. Banks financing parties under investigation must now assess PMLA exposure even for existing security interests.
Citations
- State Bank of India v. Union of India (2021) SCC Online SC 101
- PMLA, 2002, Section 5(1)
