Wednesday, April 14, 2021

India: Money laundering law prevails over Bankruptcy Act, insolvency code, says Delhi High Court


The Delhi High Court has held that the money laundering law, PMLA, prevails over the Bankruptcy Act and insolvency code when it comes to attachment of properties obtained as “proceeds of crime”. The court said the Prevention of Money Laundering Act (PMLA), Recovery of Debt and Bankruptcy Act (RDBA), Securitisation 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 judgement.

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.

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