Federal Bank's Petition to Quash Property Attachment Under PMLA Dismissed; Advised to Approach Special Court
In a significant decision, the Kerala High Court, presided over by Justice P. V. Balakrishnan, has dismissed a writ petition filed by Federal Bank Limited. The bank sought to quash an attachment order on a property under the Prevention of Money Laundering Act, 2002 (PMLA), which was hindering the sale of a secured asset under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).
The case revolves around a housing loan sanctioned by Federal Bank to an individual, Saji Basheer, amounting to Rs. 22 lakhs. The loan was secured against an immovable property mortgaged to the bank. Following a default by the borrower, the bank initiated proceedings under the SARFAESI Act and took possession of the property in December 2023. However, upon attempting to sell the property, the bank discovered it was subject to a provisional attachment order by the Directorate of Enforcement, which was later confirmed by the Adjudicating Authority.
Federal Bank argued that the attachment order prevented them from executing the sale of the property to recover the defaulted loan amount. Consequently, the bank filed a writ petition seeking to have the attachment order quashed.
During the hearing, the counsel for the Directorate of Enforcement contended that since the attachment had been confirmed, the appropriate recourse for the bank was to approach the Special Court for PMLA cases under Section 8(7) of the PMLA, which allows for the lifting of attachments. Justice Balakrishnan, upon reviewing the submissions and materials presented, found merit in the respondent's argument and noted that the trial under the PMLA was ongoing in the Special Court, Ernakulam.
In his judgment, Justice Balakrishnan concluded that the bank's petition did not hold under the current jurisdiction and directed them to seek relief from the Special Court designated for PMLA cases. The court dismissed the writ petition, clarifying that the dismissal does not prejudice the bank's right to pursue the matter further before the Special Court.
This ruling underscores the procedural routes available under the PMLA for parties affected by attachment orders and highlights the jurisdictional boundaries between different judicial forums dealing with financial and enforcement laws.
Bottom line:-
A banking company, which is aggrieved by the attachment of a property under the Prevention of Money Laundering Act (PMLA), must seek remedy before the Special Court for PMLA cases under Section 8(7) of the Act.
Statutory provision(s):
Prevention of Money Laundering Act, 2002, Sections 8(3), 8(7); Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.
