Dismissed

FPA-PMLA-1998/HYD/2017 of Icici Bank v. Joint Director, Directorate of Enforcement, Hyderabad & Ors.

ATFP9 Jul 2025FPA-PMLA-1998/HYD/2017

Case brief

AI extract

What is this about?

Appellate Tribunal dismissed an appeal by ICICI Bank against the confirmation of an Attachment Property Order. Thecourt held that property purchased where a portion of funds came from proceeds of crime is attachable and PMLA objectives override SARFAESI claims in such contexts.

What did the court decide?

Appeal dismissed. Confirmation of the Attachment Property Order maintained. Appellant directed to approach Special Court under Section 8(8) for restoration claims.

FPA-PMLA-1998/HYD/2017 of Icici Bank Vs. Joint Director… — Money Laundering | ATFP (2025)

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APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI

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FPA-PMLA-1998/HYD/2017

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ICICI Bank ….Appellant

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Versus

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Joint Director, Directorate of Enforcement, Hyderabad & Ors. ……Respondents

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Advocates/Authorized Representatives who appeared

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For the Appellant : Shri Vignaraj Pasayat, Advocate For the Respondent No.1 : Shri N.K Matta, Advocate For the Respondent No.2 & 3 : Shri Mehak Joshi, Advocate

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CORAM

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JUSTICE MUNISHWAR NATH BHANDARI : CHAIRMAN SH. V. ANANDARAJAN : MEMBER

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The present appeal is preferred by the Appellant under Section 26 of the Prevention of Money Laundering Act, 2002 (in short `PMLA, 2002) against the order dt. 12.08.2010 passed by the Ld. Adjudicating Authority (‘AA’) by which the Ld. AA confirmed the PAO No. 02/2010 dated 31.03.2010 w.r.t 14 immovable properties, however the Appellant in the present Appeal is only aggrieved of the attachment of the following property (hereinafter referred to as the First property):

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“334.88 sq.yards plot at Survey No.T.Sy.No.3(P),4(P),5(P),6,7(P) Plot No. 20, Nandagiri Hills Layout, Ward No. 9, Block-D, Shaikpet Village, Jubilee Hills, Hyderabad registered vide Document No. 3605/06 by Sub-Registrar,Hyderbad(South) having a value of

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Rs.1,66,10,048/- (Rupees One crore Sixty Six Lakhs Ten Thousand Forty Eight Only)”

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Brief facts of the case:

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The brief facts of the case are that after the confession made by Sh. B. Ramalinga Raju, ex-Chairman of M/s SCSL, share price of M/s SCSL dipped to the lowest and many investors suffered losses. Leena Mangat (one of the investors) made a complaint to the police and Andhra Pradesh State Crime Investigation Department registered FIR No.2/2009 on 9.1.2009 under section 120-B read with sec.406,420,467,471,477A of IPC. Thereafter, the Government transferred the investigation to the CBI and the CBI Anti-corruption Branch, Hyderabad registered FIR in RC 4(S)/2009, Shri B.Ramalinga Raju, B.Rama Raju, V. Srinivas (Respondent No.2 herein) and other accused persons were arrested and later enlarged on bail. The CBI, after completion of investigation filed the charge sheet before the competent court under section 120B,420,419,467,468,471,477A and 201 of IPC. The designated court, after considering the charge sheet had taken cognizance of the case and the trial of the case was completed. The designated court convicted Sh. V. Srinivas and imposed rigorous imprisonment of 7 years on him, by the order dated 9.04.2015.

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After registration of the case by CB-CID and transfer of the case to CBI, complaint was registered under PMLA,2002 against Sh. B. Ramalinga Raju & others, including Sh. V. Srinivas since they were involved in commission of scheduled offence i.e Sec.467.

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The investigation under PMLA revealed that Sh. B. Ramalinga Raju & Sh. V. Srinivas, Chief Financial Officer of M/s SCSL, during the period 2001-2008, in furtherance to conspiracy, published falsified books of accounts including artificially inflating the balance sheets and Annual Financial Statements of M/s SCSL. V. Srinivas got monthly bank statements of various banks forged, got issued bank balance confirmation letters and financial statements of the company thereby projecting a very rosy picture of financial status of the company for keeping the share price of M/S SCSL overvalued. Also, he got the shares of M/s SCSL, allotted to him offloaded at opportune times and thereby made wrongful gains.

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The investigations also revealed that during the board meetings of M/s SCSL and in the audit committee meetings Sh. V. Srinivas through his projections deceptively projected a very rosy picture of the company to the Board of Directors and Audit committee members knowing fully the real financial position of the company. Sh. V.Srinivas ,as CFO had a clear knowledge about the funds arranged by Sh. B. Ramalinga Raju and Sh. B.Rama Raju through the various group companies floated by them did not get these liabilities reflected in the Annual Financial Statements and thereby Sh. V. Srinivas along with Sh.B.Ramalinga Raju and Sh. B. Rama Raju worked against the interest of the company and shareholders.

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The investigation revealed that V. Srinivas offloaded 2,08,742 shares of SCSL from 1.07.2005 to 10.12.2008 dishonestly & fraudulently as part of conspiracy theory thereby generating funds to the tune of Rs.13,18,38,209/-. Further, he got shares under

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ASOP(Associate Stock Option Plan) in 2 instalments- 1,33,000 in March 2007 & 93,500 in September 2008.

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In order to avail the above mentioned ASOP scheme, V. Srinivas entered into an agreement-cum-pledge with M/s IL & FS Securities Services and obtained loans of Rs. 2,33,38,020/- in march 2007 and Rs.2,18,60,245/- in December 2008.Out of the total pledged ASOP shares of 2,30,500, M/s IL & FS sold away 1,67,358 shares during the year 2007-2008, by invoking the pledge. After adjusting the loan amount, interest & other charges M/s IL & FS returned amounts of Rs. 1,29,74,704 in June 2007 and Rs.1,36,81,279 in September 2008 to V. Srinivas. The remaining 63,142 shares of M/s SCSL were released to Sh. V. Srinivas which were later sold to him through M/s DSP Merrill Lynch. The sale proceeds of these shares were included in the total amount of Rs.13,18,38,209. Hence, an amount of Rs. 15,84,94,191/- ( Rs. 13,18,38,209 + Rs. 2,66,55,982 ) has been derived Sh. V. Srinivas out of inflated shares of M/s SCSL.

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Further, V.Srinivas received 13,600 bonus shares in the year 2006 from M/s SCSL and also sold 10,780 American Depository receipts (ADRs) of M/s SCSL for a consideration of Rs. 1,92,33,860/during the year 2006. Such value derived by them is attributed to the criminal conduct relating to scheduled offence within the meaning of Section 2(1)(u) of the PMLA and therefore, such proceeds correspond to proceeds of crime.

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The proceeds of crime generated by pledge / sale of the shares of SCSL have been invested in purchase of large number of immovable properties.

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Arguments of the Appellant:

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It was submitted for the Appellant Bank that Adjudicating Authority failed to take into consideration that Section 8 of the PMLA mandates an opportunity of hearing to the person holding a property. Since, the property was mortgaged with the Appellant, it ought to have been afforded an opportunity before the Adjudicating Authority. However, no notice or intimation was served upon the Appellant and it was not even made a party to the said attachment proceedings, despite the Respondent Department aware of the fact that some property was bought from the loan amount advanced by the Appellant, as is evident from Impugned order and PAO. Since, the Appellant was not afforded an opportunity the present appeal should be allowed on this ground alone.

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It was further submitted that Adjudicating Authority in the impugned order recorded that Sh. V. Srinivas in his statement under section 50(2) & (3) stated that “the source of acquisition of the above plots being sale of stock options and a loan of Rs. 1.5 Cr. taken from ICICI bank”. The Adjudicating Authority did not give the Appellant an opportunity of being heard.

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It was also submitted that the Adjudicating Authority failed to take into consideration that the pre-requisite for attachment of any property is that the property sought to be attached must be proceeds of crime defined u/s 2(1)(u) of PMLA, 2002. In the instant case, the property in question was not a “Proceeds of crime” as it has admittedly been bought from the loan advanced by the Appellant.

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It was also submitted that the Ld. AA failed to take into consideration that the property was mortgaged with the Appellant by Respondent No.1 and that the Appellant had the first charge over the property.

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It was further submitted that the Ld. AA failed to appreciate that the statements recorded u/s 50 of PMLA do not in any manner state that the Appellant was involved in the commission of the offence and therefore, the property in question cannot be proceeds of crime. On the contrary, the said statements prove the case of the Appellant.

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It was also submitted that the Ld. AA erred in confirming the PAO which erringly held “ Investigations into some properties have revealed that the proceeds of crime have mingled with the funds from legitimate sources but the bifurcation is not possible ” since it is an admitted position from the documents and statements that Rs.1,56,06,000/- was an amount from the loan obtained from the Appellant. Therefore, the bifurcation of the sources of the property is glaringly explicit. Appellant has relied on State Bank of India vs. The Deputy Director, Directorate of Enforcement, Lucknow &

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Ors., reported in MANU/ML/0013/2017.

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It was also submitted that the money was advanced in the course of a regular banking transaction and thus the property purchased from such money cannot be said to be purchased from proceeds of crime.

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It was also submitted that by confirming the PAO, the Appellant would suffer a loss on account of the alleged illegal acts of V.Srinivas

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and V.Lalita Parameswary and no fault of its own. As, of today, V.Srinivas and V.Lalita Parameswary owe the Appellant Rs. 4,06,14,498.46/-.

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It was further submitted that the impugned order is liable to be set aside because the pre-requisite for passing an order u/s 8(1) of PMLA is that there must be “reason to believe” that any person has committed n offence u/s 3 of the Act or is in possession of proceeds of crime. The Appellant was not the perpetrator of the crime but its victim and by confirming the PAO, the Adjudicating Authority has punished the Appellant for no fault of its own.

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It was also submitted that an order of attachment u/s 5 can only be passed if there is reason to believe, on the basis of the material in possession of any proceeds of crime and such proceeds are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime.

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It was also submitted that the reason to believe used in 8(1) of PMLA cast a very onerous duty on the Ld. AA , while deciding to act under the said Section. The Hon’ble SC and various Hon’s HCs have time and again held that “reason to believe” is not the same as suspicion or doubt and merely seeing also cannot be equated to believing.

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It was also submitted that the Hon’ble Debt recovery tribunal vide order dated 12.07.2017 has allowed the Appellant to proceeds against the property, which has been mortgaged with it, towards

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realisation of the debt due and as such the impugned order prevents the Appellant from giving effect to the said Order of the Debts Recovery Tribunal.

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It is prayed on behalf of the Appellant that the impugned order be set aside.

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Arguments on behalf of R-1(ED):

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The counsel on behalf of the Respondent department submitted that the trail of cash establishes the fact that the proceeds of crime of Sh. Vadlamani Srinivas are the source of funds for acquiring these properties. The investigation with regard to some properties has revealed that the proceeds of crime have mingled with the funds from other sources and bifurcation is not possible as the properties are immovable properties. In this regard section 23 of the PMLA gives presumption for interconnected transaction and in view of the clear mandate given in the Act, it is presumable that the entire funds paid for acquisition of such property are proceeds of crime. The arguments of the ICICI are that in some of the properties the source of money is from bank loans. The purchase of the properties from interconnected transactions is created intentionally and deliberately for the purpose of layering so that the actual source is lost and the property appears to have been purchased from a legitimate source. The present case is a perfect example of money laundering.

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It was also submitted that the present case is a classic example of collusion between bank and Sh. V. Srinivas as the Respondent registered case under PMLA in 2009 and issued PAO on 31.03.2010,

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filed complaint under 5(5) before AA on 16.04.2010 and the AA confirmed the same on 12.08.2010. The bank after coming to know of attachment and confirmation in conspiracy with Sh. V. Srinivas issued notice under SARFAESI 31.08.2010 though stated came to know from Sh. V. Srinivas in response to bank notice.

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Notwithstanding the same, the property in dispute has admittedly been purchased for Rs.1,66,10,048/- by obtaining a bank loan of Rs. 1,56,06,000/-. Thus, the difference amount of Rs. 10,04,048/- has flowed from proceeds of crime.

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It was also submitted that the said property of Plot no.20 is owned by Sh. V. Srinivas and he has to repay the loan. The definition of proceeds of crime covers within its ambit” the value of any such property”. Therefore, it clearly fits into the scope of proceeds of crime even if it is to be argued that there are no direct proceeds of crime in acquiring the property.

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It was further submitted that the averment of ICICI bank that the said property was purchased from the loan taken from the bank and such property cannot be called proceeds of crime is not sustainable. Moreover, as per Sec.71 of PMLA,2002, the provisions of PMLA shall have overriding effect not-withstanding anything inconsistent therewith contained in any other law for the time being in force. The PMLA is aimed at preventing money laundering and to provide confiscation of property derived from or involved in money laundering and for matters concerned therewith and incidental thereto. The definition of money laundering read with preamble of the Act is wide enough to bring within its ambit, not just property derived

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in an illegal manner directly or indirectly, but also the value of such property.

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It was also submitted that during the investigation, neither Sh. V.Srinivas nor his family members revealed that the said immovable properties is under hypothecation /mortgaged to any bank. Hence, the averment that AA ignored the Appellant while confirming PAO is not true. For the averment made by the Appellant vide their letter dated 07.04.2016 regarding their request to lift the PAO, it is submitted that the Respondent is not empowered to alter the orders of the AA. By virtue of section 26 of PMLA,2002, the power to alter the orders passed by the AA is vested in Appellate Tribunal, PMLA, New Delhi.

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It was further submitted that in view of the above facts and evidences the Appellant has not approached this Tribunal with clean hands, rather all attempts are made to help the accused person Sh. V. Srinivas by invoking SARFAESI Act and obtaining orders much after all action by the Respondent were completed.

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It was prayed on behalf of the Respondent department that the present appeal of the Appellant Bank be dismissed.

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Arguments on behalf of R-2 (V.Srinivas) & R-3 (V.Lalita Parameswary):

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It was submitted that they have no objection for setting aside the impugned order as prayed by the Appellant and lifting the attachment of the first property.

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It was also submitted that the Appellant has not mentioned the properties which are adjacent to the said first property, together on which the superstructure stands.

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It was also submitted that the properties namely Plot No.19 and Plot No.21,Ward No.9,Nandagiri Hills Layout, Block D, SY.No. 3(P),4(P),5(P),6,7(P), Shaikpet Village, Jubilee Hills, Hyderabad500016 (Adjacent properties).Hence, the first property and the Adjacent properties are intermediate and inextricable to each other.

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It was also submitted that Sh.V.Srinivas and V.Lalita Parameswary are the lawful owners of both the first property and the adjacent properties and therefore, they have constructed a superstructure of a house spreading across the three plots. Accordingly, the superstructure is stretching to all the three plots.

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It was further submitted that the Appellant has concealed that the superstructure of the house is built on the property. Therefore, the plea of the Appellant in the said Appeal is beyond possibility until and unless the property is released by the Respondent No.1.

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It was further submitted that the Respondent department has only attached the land and not the superstructure built on the land. Hence, the Appellant cannot plead for release of first property without considering the superstructure built on the property.

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It was also submitted that releasing the adjacent properties along with the first property would be beneficial for all the parties involved as this will enable Sh.V.Srinivas and Smt. V.Lalita Parameswary to sell all the properties jointly along with the

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superstructure thereon. Such an arrangement will yield a better price and the Appellant can accordingly realise their outstanding amount.

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It was prayed on behalf of Sh. V. Srinivas & Smt. V.Lalita Parameswary that the Adjacent Properties should also be released from the attachment along with the first property.

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Finding of the Tribunal:

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Arguments on behalf of the Appellant and the Respondents were heard. The issue at hand is with regard to only one property, i.e, 334.88 sq.yards plot at Survey No.T.Sy.No.3(P),4(P),5(P),6,7(P) Plot No. 20, Nandagiri Hills Layout, Ward No. 9, Block-D, Shaikpet Village, Jubilee Hills, Hyderabad ( hereinafter referred to as the first property).

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The said property was registered jointly in the name of Sh. V. Srinivas(R-2) and Smt. V. Lalita Parameswary(R-3), w/o Sh.V.Srinivas, in the year 2006.

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The market value/purchase consideration of the first property was Rs.1,66,10,048/- (Rupees One crore Sixty Six Lakhs Ten Thousand Forty Eight Only).

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Sh. V. Srinivas was the CFO of M/s SCSL(Satyam computers Services Ltd.) at the relevant time. He was aware about the true financial position of M/s SCSL. Sh. V. Srinivas portrayed a wrong picture of the financial health of M/s SCSL and offloaded his shares of M/s SCSL and ADR’s of M/s SCSL at opportune time and therefore, gained illegally. He followed the same modus operandi as followed by Sh. B. Rama Raju(Former Managing Director of M/s

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SCSL) and B. Ramalinga Raju (former chairman of M/s SCSL). Sh.V. Srinivas was actually working in connivance with B. Ramalinga Raju & B. Rama Raju and was involved in commission of scheduled offence , i.e, Sec.467.Therefore, the gains arising out of such act is proceeds of crime under section 2(1)(u) of PMLA,2002.

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We find that the following sums were acquired as a result of committing a criminal act relating to a scheduled offence:

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(i) Rs.15,84,94,191/- was acquired by sale of M/s SCSL shares by Sh. V. Srinivas.

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(ii) Rs.6,10,842/- was acquired by way of dividends on M/s SCSL shares.

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(iii) Rs.1,92,33,860/- acquired by sale of M/s SCSL ADRs by Sh. V. Srinivas.

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A part of the said amount totalling to Rs. 17,83,38,893/- has been invested by Sh. V. Srinivas knowingly in purchasing immovable properties in the state of Andhra Pradesh with the active assistance of his wife(R-3).

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Out of the numerous properties, 14 properties having purchase value of Rs. 7,62,07,600/- have been identified in the name of 1 company and 3 individuals which are found to be purchased out of the proceeds of crime.

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Records reveal that V.Srinivas also received 13,600 bonus shares of M/s SCSL. Sh.V. Srinivas also acquired a company -M/s Akash Ganga Greenfields Pvt. Ltd., which was used to purchase 9 immovable properties. These properties were purchased in the name of the company while 5 other immovable properties were purchased in the name of three individuals out of such proceeds of crime. So,

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total 14 such properties were acquired by Sh.V.Srinivas. Sh.V.Srinivas and V.Lalita Parameswary were also the directors of M/s Akash Ganga Greenfields Pvt. Ltd. at the relevant time. The source of all these properties was the proceeds of crime which has been derived from the M/s SCSL by way of hyping the share value and then offloading the same at an opportune time. M/s Akash Ganga Greenfields had no independent source of funds except the proceeds of crime. Hence, the proceeds of crime was used to purchase such properties in the name of Sh.V.Srinivas, Smt.V.Lalita Parameswary, Sh.V.Vijay(son of V.Srinivas and V.Lalita Parameswary) and in the name of the company(M/s Akash Ganga). The Appellant has contended that the Bank is a victim of illegal acts of Sh.V.Srinivas and Smt. V.Lalita Parameswary.The Appellant has relied on Standard Chartered Bank vs. Deputy Director, ED passed in FPA-PMLA-1604/MUM/2017 to state that “ The mortgaged properties are not derived or obtained, directly or indirectly from the criminal activity or the proceeds of crime. The Appellant Bank has the right to recover the loan amount against the mortgaged properties under law.”

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47 The above stated trail of money shows that Sh. V. Srinivas and Sh. V.Lalita Parameswary were in possession of proceeds of crime.

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The appellant has relied on J Sekar vs Union of India (2018 SCC OnLine Del 6523) to argue that “reason to believe has to be explicit and there is no sufficient reason in this case to believe that the property is proceeds of crime.” The standard of preponderance of probability is used to assess the evidence in proceedings related to

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money laundering. There is clear distinction between the reasons to believe as given in Section 5 and Section 8 of PMLA,2002. It is explicitly mentioned in Section 5 of PMLA,2002 that the reason to believe should be recorded in writing but no such condition is imposed on the Ld. Adjudicating Authority while issuing notice to the defendants. The reason to believe standard under PMLA has a lower threshold as compared to criminal standards. Therefore, in light of the money trail as described above, it shows that there was sufficient reason so as to believe that the proceeds of crime flowed to the first property.

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Having perused the records of the case and considered the facts of the case which have been discussed at length. We are of the view that reasons to believe are apparent on the face of record. Accordingly, we do not find merit in this contention of the Appellant. On the issue that the Appellant was not made a noticee, it is evident from the records that Sh. V.Srinivas was given ample opportunity by the Ld. AA to indicate his source of income, earnings, assets out of which the first property was acquired but Sh. V.Srinivas did not appear before the Ld. AA to inform about the status of the appellant. Furthermore, adequate opportunity has been given to the appellant by this Tribunal, thereby satisfying the requirement of principle of natural justice.

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The Appellant Bank has relied on PNB housing Finance vs. Deputy Director, FPA-PMLA-1388/JL/2016 and SBI vs Deputy Director, Directorate of Enforcement, Mumbai, FPA-PMLA2538/MUM/2018 - to put forward the argument that “ legitimate loan

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advanced by the Appellant was the source of monies used to purchase the first property and it was public money which should come to the bank ”

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Based on the investigation, part of the purchase consideration amounting to Rs.41,52,512/- for the above said property was paid from the account No.422070000202 of Sh.V.Srinivas maintained with HDFC Bank ,Begumpet, Hyderabad. The source for the above money was traced to the proceeds derived out of sale of inflated shares of M/s SCSL by Sh.V.Srinivas to M/s DSP Merrill Lynch. Further, it is not clear whether the loan taken by Sh.V.Srinivas was entirely used by the Applicant for acquiring the said immovable property. Sh.V.Srinivas has admitted, in his statement that the loan taken from the ICICI bank is only a part of the said purchase consideration. Thus, the averment that only the payment made beyond the loan amount would be proceeds of crime, would not be correct. In furtherance of this view, it would be pertinent to quote the case of- Enforcement Directorate v. Axis Bank, 2019 SCC OnLine Del 7854:

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“107 . In contrast, the second and third kinds of properties mentioned above would ordinarily be "untainted property" that may have been acquired by the suspect legitimately without any connection with criminal activity or its result. The same, however, are intended to fall in the net because their owner is involved in the proscribed criminality and the tainted assets held by him are not traceable, or cannot be reached, or those found are not sufficient to fully account for the pecuniary advantage thereby gained. This is why for such untainted properties (held in India or abroad) to be taken away, the rider put by law insists on equivalence in value. From this perspective, it is essential that, before the order of attachment is confirmed, there must be some assessment (even if tentative one) as to the value of wrongful gain made by the specified criminal

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activity unless it be not possible to do so by such stage, given the peculiar features or complexities of the case. The confiscation to be eventually ordered, however, must be restricted to the value of illicit gains from the crime. For the sake of convenience, the properties covered by the second and third categories may be referred to as "the alternative attachable property" or "deemed tainted property.”

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Also, In Vijay Madanlal Choudhary and Ors. vs. Union of India (UOI) and Ors. (27.07.2022 - SC) : MANU/SC/0924/2022

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“68 . It was also urged before us that the attachment of property must be equivalent in value of the proceeds of crime only if the proceeds of crime are situated outside India. This argument, in our opinion, is tenuous. For, the definition of "proceeds of crime" is wide enough to not only refer to the property derived or obtained as a result of criminal activity relating to a scheduled offence, but also of the value of any such property. If the property is taken or held outside the country, even in such a case, the property equivalent in value held within the country or abroad can be proceeded with. The definition of "property" as in Section 2(1)(v) is equally wide enough to encompass the value of the property of proceeds of crime. Such interpretation would further the legislative intent in recovery of the proceeds of crime and vesting it in the Central Government for effective prevention of moneylaundering.

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69 . We find force in the stand taken by the Union of India that the objective of enacting the 2002 Act was the attachment and confiscation of proceeds of crime, which is the quintessence, to combat the evil of money laundering. The second proviso, therefore, addresses the broad objective of the 2002 Act to reach the proceeds of crime, in whosoever’s name they are kept or by whosoever they are held. To buttress this argument, reliance has been placed on the dictum in Attorney General for India v. Amratlal Prajivandas and Raman Tech. and Process Engg. Co. v. Solanki Traders....”

¶105

In view of the legal position emerging from above case laws, the contention of the Appellant is unsustainable. Considering the wide interpretation given to the term “value of any such property” mentioned in Sec. 2(1)(u). Proceeds of crime would also include property equivalent in value to the property derived from the criminal

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activity relating to the scheduled offence, even though acquired through legitimate and known sources of income. Similar view has been taken by this Tribunal in the case of Ayush Kejriwal vs. Dy. Director, ED in FPA-PMLA-4358/KOL/2021 , order dated 1-5-2024.

¶108

The Appellant has relied on Assistant Commissioner, Commercial Tax vs. The Indian Overseas Bank, Madras in WP No.2675 of 2011 to contend that “it has the first charge over the property and the right to secure debts by proceeding against the property and its right will have precedence over any debts or dues, including that of state, centre or local governments”. We are not going into the question of claim w.r.t the first property. The right of the Appellant Bank is still secured but the PMLA,2002 provides for a definitive procedure and adequate safeguards by way of Section 8 (8) of PMLA,2002.

¶109

In furtherance of this view, It would be pertinent to quote the relevant case of this Tribunal - JM Financial Asset Reconstruction Company Ltd. vs. The Deputy Director, Directorate of Enforcement, Mumbai & Anr., passed in FPA-PMLA-3223/MUM/2019) . The Appellate tribunal held as below :

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11. It is otherwise a fact that property is attached to protect the interest and to settle it at the end of the trial in favour of those who are entitled for it. The attachment does not affect the title or the ownership of the property rather it can be when it is confiscated. The Special Court and the Central Government are having power to settle the interest of the claimant and accordingly to release the property in favour of those who are entitled for it. Thus, financial institution would not be affected and if the property is released at the initial stage and ultimately someone else also make a claim of the same property, it would remain unaddressed. Therefore, proper safeguards

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for the properties attached under the Act of 2002 have been given.

¶113

The Hon’ble Debt Recovery Tribunal vide order dated 12^th July,2017, had categorically stated that the Appellant Bank is entitled to proceed against the person and properties of the defendants towards realization of the debt due. The said claim of the Appellant Bank remains intact. The Appellant Bank is at liberty to approach the Ld. Special Court u/s 8(8). The same can only to be disposed in order to recover the amount due once the Special Court and central government will pass the appropriate orders.

¶114

It would be pertinent to mention to relevant provision of PMLASection8(8). Sec.8(8) of PMLA,2002 as on the current date, stands as follows –

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S.8(8). Where a property stands confiscated to the Central Government under sub-section (5), the Special Court, in such manner as may be prescribed, may also direct the Central Government to restore such confiscated property or part thereof of a claimant with a legitimate interest in the property, who may have suffered a quantifiable loss as a result of the offence of money laundering:

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Provided that the Special Court shall not consider such claim unless it is satisfied that the claimant has acted in good faith and has suffered the loss despite having taken all reasonable precautions and is not involved in the offence of money laundering:]

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Provided further that the Special Court may, if it thinks fit, consider the claim of the claimant for the purposes of restoration of such properties during the trial of the case in such manner as may be prescribed.

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he Appellant has relied on the case of SBI vs. The Deputy,

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Director, Directorate of Enforcement, Lucknow & Ors. reported in

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MANU/ML/0013/2017 for the proposition that SARFAESI Act has an overriding over PMLA,2002.

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The law in this regard has since evolved. In furtherance of this view, it would be pertinent to mention the case of Deputy Director, Directorate of Enforcement vs. Axis Bank 2019 SCC Online 7854, wherein it was held that:

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147. To sum up on the issue, the objective of the legislation in PMLA being distinct from the purposes of the three other enactments viz. RDBA, SARFAESI Act and Insolvency Code, the latter cannot prevail over the former. There is no inconsistency. The purpose, the text and context are different. This court thus rejects the argument of prevalence of the said laws over PMLA .

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Therefore, the objective of the PMLA is distinct from the purpose of SARFAESI Act. In this case, SARFAESI and PMLA deal with different aspects of the same transaction. Therefore, the view that SARFAESI has an overriding effect over PMLA is hereby rejected.

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