Mortgaged Assets Validly Attached as Proceeds of Crime | SAFEMA

Case Details: State Bank of India vs. Deputy Director - [2026] 184 taxmann.com 8 (SAFEMA-New Delhi)

Judiciary and Counsel Details

• Balesh Kumar & Rajesh Malhotra, Member
• Kunal Tandon, Ms Niti Jain & Nitai Agarwal, Advs. for the Appellant.
• Abhimanyu Kaul, Adv. for the Respondent.

Facts of the Case

In the instant case, the appellant bank was a secured creditor of SSL, holding a mortgage created by deposit of title deeds and a first pari passu charge under a consortium. The appellant issued a demand notice under the SARFAESI Act for about Rs. 257.29 crores and thereafter filed a recovery application before the DRT.

Separately, on a complaint by OBC alleging cheating by SSL in a farmers’ loan scheme, a scheduled offence FIR was registered and an ECIR was recorded. Investigations noted that a farmers’ loan of about Rs. 148.60 crores for 5,762 farmers was diverted to the company’s other accounts and that the KYC of beneficiary farmers was not properly done.

A Provisional Attachment Order (PAO) was issued under Section 5(1) of the PMLA recording reasons to believe that company’s assets were likely to be transferred or dealt with, frustrating confiscation, and that bankruptcy/liquidation could prejudice recovery; since original proceeds were dissipated, attachment of ‘value thereof’ under Section 2(1)(u) of the Act, was invoked.

The PAO attached the company’s Distillery Unit (valued at about Rs. 180.41 crores) to the extent of about Rs. 109.80 crores as the equivalent value of proceeds of crime. By the Impugned Order, the Adjudicating Authority confirmed the PAO, noting that in the absence of availability of the loan amount, the Directorate had attached ‘value thereof’ under Section 2(1)(u) of the PMLA, and recorded that the appellant–bank could stake its claim to attached property under Section 8(8) PMLA before the Special Court.

It was noted that there was a well-established link or nexus between belief formed and material available, and, therefore, the submission that a reasonable belief formed by the Deputy Director under Section 5(1) of the Act was baseless or ill-founded was not sustainable.

Appellate Tribunal Held

The Appellate Tribunal held that the formation of a belief by the Deputy Director that there existed proceeds of crime was well-founded on the material. The tendency toward laundering the proceeds of crime was indicated, which necessitated the passage of PAO. Therefore, in the absence of the loan amount being available, the respondent Directorate had no option but to attach the value thereof as proceeds of crime. Thus, the instant appeal was to be dismissed.

List of Cases Referred to

• J. Sekar v. Union of India [2018] 89 taxmann.com 159 (Delhi)/[2018] 145 SCL 637 (Delhi) (para 4)
• Deputy Director Directorate of Enforcement, Delhi v. Axis Bank [2019] 104 taxmann.com 49 (Delhi) (para 4)
• Pavana Dibbur v. Directorate of Enforcement [2023] 157 taxmann.com 10 (SC)/[2024] 182 SCL 198 (SC) (para 5)
• Sadananda Nayak v. Deputy Director, Directorate of Enforcement [Appeal No. FPA-PMLA-5612/BBS/2023, dated 14.10.2024] (para 13)
• Sri Jeyaram Educational Trust v. A.G. Syed Mohideen MANU/SC/0053/2010 (para 14)
• Hardeep Singh v. State of Punjab MANU/SC/0025/2014 (para 15).