Directorate of Enforcement Vs Asadhullah Khan (Karnataka High Court)
Bank’s Secured Assets Cannot Be Attached by ED – SARFAESI Rights Prevail Over PMLA Proceedings -Karnataka HC
Background
The Directorate of Enforcement (ED) filed these four appeals under Section 42 of the PMLA, 2002 challenging the Appellate Tribunal’s order dated 18.09.2017 which had set aside the provisional attachment of certain properties belonging to Asadhullah Khan & his family members, all mortgaged to Syndicate Bank, Mandya Branch.
The case originated from a CBI FIR (15.04.2009) against the then Branch Manager H.M. Swamy, Asadhullah Khan, & others for sanctioning fraudulent Jai Kisan loans & overdrafts causing a loss of ₹12.63 crore to the bank.
Facts & Proceedings
The Adjudicating Authority (ED) had earlier confirmed Provisional Attachment Order No. 02/2012, attaching seven mortgaged properties worth over ₹2 crore under Section 5(5) read with Section 8(4) PMLA.
The Appellate Tribunal (PMLA) later quashed the attachment, holding that these properties were collateral securities mortgaged to a nationalized bank & not “proceeds of crime.”
The ED appealed to the High Court.
Court’s Key Observations
Bank Not Heard: The Syndicate Bank, being the secured creditor, was not issued notice by the Adjudicating Authority, violating Section 8(1) & (2) provisos of PMLA.
