§ Who is protected, and how

• The bona fide purchaser for value. A person who acquired the property for value, in good faith, without notice of its tainted origin, has a legitimate interest the Act respects. He must prove value paid, good faith, and absence of notice.

• The innocent third-party owner. A person whose own property is attached, for example as 'value', may show that it is not proceeds of crime and that he had no involvement.

• The hearing. Under the proviso to Section 8(1) and Section 8(2), a person claiming the property, or on whose behalf it is held, is given notice and heard before confirmation.

• Property purchased before the scheduled offence. It is not proceeds in the direct sense and can be reached only as equivalent value where the conditions are met; a bona fide third-party interest in it weighs heavily.

Mortgage created before the criminal activity

The bank's bona fide prior interest is strong; attachment of such property, usually as 'value', must reckon with it

Mortgage created after the proceeds were generated

The property may itself be proceeds; the bank's claim depends on its good faith and diligence, and is weaker

SARFAESI proceedings against attached property

Courts have been divided on priority; they weigh the non-obstante clauses, the timing of the security, and good faith, and increasingly steer claims to the PMLA's adjudication and restoration process

Auction purchaser

A bona fide purchaser at a SARFAESI or court auction before attachment has a strong claim; a purchase after attachment is subject to it

📖 Deputy Director, Directorate of Enforcement v. Axis Bank, Delhi High Court, 2019

The High Court examined the conflict between PMLA attachment and the rights of secured creditors. It held that the PMLA's attachment power may extend to property acquired before the criminal activity as property of equivalent value, but that the interest of a bona fide secured creditor, particularly one whose security predates the criminal activity, deserves protection and must be weighed; and that the enforcement authorities and the Adjudicating Authority should address such claims rather than disregard them.

§ Section 8(8)

The power. Where property is confiscated, the Special Court may direct the Central Government to restore it, or part of it, to a claimant with a legitimate interest who has suffered a quantifiable loss as a result of the laundering.

During trial. Since the 2018 amendment, the Special Court may consider such claims even during the trial, so that victims, including lending banks, need not wait for its end.

In practice. In several large bank-fraud cases, attached assets have been released or restored to consortia of lending banks with the Special Court's permission.

No benefit to the accused. Restoration goes to victims and legitimate claimants, never back to the launderer.