Criminal Defense•5 min read•By Vikramaditya Roy

PMLA Proceedings: Attachment of Bona Fide Third-Party Assets Overturned

Forum / Bench: Delhi High Court | Matter: State Bank of India v. Directorate of Enforcement

Analyzing the landmark ruling safeguarding banks and secured creditors from unwarranted provisional attachments by the Enforcement Directorate under Section 5 of PMLA.

## Overview of the Issue The interplay between the Prevention of Money Laundering Act (PMLA), 2002 and the rights of secured creditors under the SARFAESI Act and Insolvency & Bankruptcy Code has been a fertile ground for judicial deliberation. ## Crucial Findings The High Court held that: - Assets mortgaged to banks prior to the commission of the alleged scheduled offense cannot be classified as 'proceeds of crime' merely because the borrower subsequently defaulted or engaged in financial irregularities. - The statutory rights of bona fide lenders take precedence over provisional attachment orders under Section 5 of PMLA. - Public interest requires that the integrity of the banking system and recovery mechanisms remain untrammeled by arbitrary attachments. ## Strategic Takeaways Secured lenders and resolution professionals have now gained greater clarity and legal ammunition to challenge provisional attachment orders before the Appellate Tribunal for SAFEMA/PMLA.

Filed under:#PMLA#Enforcement Directorate#Banking#White Collar Crime