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严立新
复旦大学经济学院、金融研究院副教授,中国反洗钱研究中心执行主...
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陈浩然
复旦大学法学院教授、博士生导师;复旦大学国际刑法研究中心主任。...
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何 萍
华东政法大学刑法学教授,复旦大学中国反洗钱研究中心特聘研究员,荷...
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李 刚
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高增安
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复旦大学中国反洗钱研究中心特聘研究员;现任快钱支付清算信息有限...
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Money laundering law prevails over Bankruptcy Act, insolvency code:Delhi High Court


https://economictimes.indiatimes.com/news/politics-and-nation/money-laundering-law-prevails-over-bankruptcy-act-insolvency-code-delhi-high-court/articleshow/68874458.cms

 

The court said the Prevention of Money Laundering Act (PMLA), Recovery of Debt and Bankruptcy Act (RDBA), Securitization and Reconstruction of Financial Assets and Enforcement of Securities Interest Act (SARFAESI Act) and Insolvency and Bankruptcy Code (IBC) must co-exist and be enforced in harmony with the PMLA.

 

"... (these laws) or such other laws must co-exist, each to be construed and enforced in harmony, without one being in derogation of the other with regard to the assets respecting which there is material available to show the same to have been 'derived or obtained' as a result of 'criminal activity relating to a scheduled offence' and consequently being 'proceeds of crime', within the mischief of PMLA," Justice R K Gauba said in a 105-page judgment.

 

The court passed the verdict on a batch of appeals by the Enforcement Directorate (ED) against the orders of PMLA appellate tribunal on the pleas of various banks.

 

The ED, through central government standing counsel Amit Mahajan, had challenged the tribunal's orders on the issue of third party rights over a property attached by the agency.

 

The tribunal had held that third parties, banks in this case, which have legitimately created rights such as a charge, lien or other encumbrances, have a superior claim over such properties.

 

The high court set aside the appellate tribunal's order and held that the objective of PMLA being distinct from the purpose of RDBA, SARFAESI Act and IBC, the latter three legislations do not prevail over the former.

 

It remanded the matters to the appellate tribunal for further consideration. "An order of attachment under PMLA is not illegal only because a secured creditor has a prior secured interest (charge) in the property, within the meaning of the expressions used in RDBA and SARFAESI Act.

 

"Similarly, mere issuance of an order of attachment under PMLA does not ipso facto render illegal a prior charge or encumbrance of a secured creditor, the claim of the latter for release (or restoration) from PMLA attachment being dependent on its bonafides," it said.

 

The court also said that by virtue of Section 71, the PMLA has the overriding effect over other existing laws in the matter of dealing with "money-laundering" and "proceeds of crime".

 

The ED had argued that if the contentions of the banks were to be upheld and the view taken by the appellate tribunal endorsed, the law under PMLA would stand defeated because the sovereign authority to take away the property of the money-launderer "free from all encumbrances" would stand frustrated.

 

And the wrong-doer (the borrower who has indulged in money-laundering) would derive illegitimate pecuniary advantage by getting a discharge for the debt by using an asset the right to hold which had been forfeited, it had said.

 

The banks had argued that the legislative intent and command is that the RDBA, SARFAESI Act and the Insolvency Code must prevail over PMLA, the authority of enforcement agency taking a back-seat.

 

They had also urged that a harmonious construction of PMLA and the legislations (RDBA and SARFAESI Act) under which the banks seek remedy has to be achieved such that the objective of each is sub-served and none defeated.

 

The high court said the empowered enforcement officer has the authority of law in PMLA to attach not only a "tainted property" which is acquired or obtained directly or indirectly from proceeds of criminal activity, but also any other asset or property of equivalent value of the offender of money laundering.

 

The other asset should not bear any taint but being alternative attachable property on account of its link or nexus with the offence or offender of money laundering, it said.

 

The banks had argued that the legislative intent and command is that the RDBA, SARFAESI Act and the Insolvency Code must prevail over PMLA, the authority of enforcement agency taking a back-seat.

 

They had also urged that a harmonious construction of PMLA and the legislations (RDBA and SARFAESI Act) under which the banks seek remedy has to be achieved such that the objective of each is sub-served and none defeated.

 

The high court said the empowered enforcement officer has the authority of law in PMLA to attach not only a "tainted property" which is acquired or obtained directly or indirectly from proceeds of criminal activity, but also any other asset or property of equivalent value of the offender of money laundering.

 

The other asset should not bear any taint but being alternative attachable property on account of its link or nexus with the offence or offender of money laundering, it said.

 

The court added that if the offender objects to the attachment on the ground that the property attached was not acquired or obtained from criminal activity, the burden of proving facts in support of such claim is to be discharged by him.