In The Deputy Director Directorate of Enforcement Delhi v. Axis Bank & Others (decided on April 2, 2019), a division bench of the Delhi High Court held that the provisions of the Recovery of Debts and Bankruptcy Act, 1993 ("RDBA"), the Securitization and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 ("SRFA"), and the Prevention of Money Laundering Act, 2002 ("PMLA") supersede the provisions of the PMLA. Banks and other financial institutions provided loan facilities in five different instances in exchange for a charge or hypothecation over certain assets. In each of these instances, the asset owner was charged in accordance with specific PMLA provisions, and orders were made for the attachment of properties charged to banks and financial institutions, impairing those institutions' vested rights under other statutes like the RDBA, SARFAESI, and IBC. These attachments were invalidated by the Appellate Tribunal for a number of reasons. The Delhi High Court heard a case challenging the Appellate Tribunal's rulings.
In the instant case titled The Deputy Director Directorate of Enforcement Delhi v. Axis Bank & Others the issue raised for clarification before the Delhi High Court was:
Whether the RDBA, SARFAESI, and IBC clauses supersede the PMLA?
With regard to this issue, Because the RDBA, SARFAESI, and IBC have different goals from the PMLA's, the latter three laws do not take precedence over the former. By virtue of Section 71, the PMLA supersedes all other laws in relation to "money-laundering" and the "proceeds of crime" that go along with it. Each must be interpreted and implemented in harmony in order for the PMLA, RDBA, SARFAESI, and IBC to coexist with regard to assets for which there is evidence that they were "derived or obtained" as a result of "criminal activity relating to a scheduled offence" and are, therefore "proceeds of crime," under the purview of the PMLA. A secured creditor's prior secured interest in the property, as defined by the terms used in RDBA and SARFAESI, does not make an order of attachment under PMLA invalid. A secured creditor's earlier charge is not rendered illegal by the simple issuing of an order of attachment under the PMLA, and this creditor's claim to be released from PMLA attachment is based on its bona fides.
The directions of such attachment under PMLA shall be valid and operative subject to satisfaction of the charge of a such third party and restricted to that portion of the value of the property that is in excess of the claim of the said third party in the event that a secured creditor seeks enforcement of a "security interest" in the property sought to be attached under PMLA and such secured creditor has initiated action for enforcement prior to the order of attachment under PMLA. The claim of a party asserting to have acted in good faith or have a legitimate interest in the nature mentioned above will only be investigated and decided upon by the special court if the order confirming the attachment has become final, the order of confiscation has been made, or the trial of a case under Section 4 of the PMLA has begun.