Bombay High Court Upholds PMLA Supremacy Over Debt Recovery Laws

The Bombay High Court ruled that the Prevention of Money Laundering Act (PMLA) prevails over debt recovery laws like SARFAESI and RDB Acts regarding the attachment of 'proceeds of crime'. The decision followed a case involving attached properties from Grace Industries Ltd linked to coal block allocation irregularities.

The Bombay High Court has emphasized the supremacy of the Prevention of Money Laundering Act (PMLA) over debt recovery laws such as SARFAESI and RDB Acts. This decision, delivered by the Nagpur bench of Justices M S Jawalkar and Nandesh Deshpande, nullifies previous Tribunal orders favoring banks' debt recovery rights on attached properties.

The court's ruling stems from a case tied to a CBI probe into Grace Industries Ltd, revealing irregular coal block allocations. The Enforcement Directorate identified approximately Rs 24.92 crore as 'proceeds of crime', leading to property attachments. HDFC Bank, holding these properties as mortgage security, contested this action but found its priority claims overridden by PMLA's intent.

The Court acknowledged the prosecutorial nature of PMLA, distinct from debt recovery laws. It confirmed that secured creditors' precedence in other acts does not nullify PMLA's authority. The judgment affords the bank an option to seek property release through PMLA's Special Court, underlining the legal delineation between civil and penal objectives.

(With inputs from agencies.)