State’s power to confiscate proceeds of crime prevails over secured creditors’ claims.

PMLA Overrides Bank Recovery Laws, Rules Bombay High Court.

In a landmark ruling, the Nagpur bench of the Bombay High Court has held that banks cannot claim priority over properties attached under the Prevention of Money Laundering Act (PMLA). The court ruled that recovery laws such as SARFAESI and the RDB Act do not override the PMLA, which empowers the state to confiscate proceeds of crime. Setting aside an appellate tribunal order, the bench of Justices Mukulika Jawalkar and Nandesh Deshpande restored attachments made by the Enforcement Directorate (ED) in a coal block-linked money laundering case involving assets worth ₹24.92 crore. The tribunal had earlier allowed banks, including HDFC Bank and Punjab National Bank, to enforce secured interests over the attached properties. The High Court clarified that the state acts in a sovereign capacity under PMLA, not as a creditor. However, it noted that bona fide banks may seek restoration before the Special Court by proving good faith and lack of involvement in the offence.