- within Government and Public Sector topic(s)
- with readers working within the Law Firm industries
- within Government, Public Sector, Real Estate and Construction and Technology topic(s)
- with Senior Company Executives and HR
The High Court of Karnataka, through its judgment dated 17.10.2025 in Deputy Director, Directorate of Enforcement v. Asadullah Khan & Ors.1, held that properties mortgaged to a bank as security for loans cannot be attached under the Prevention of Money Laundering Act, 2002 ("PMLA"), where such assets are not derived from or involved in any proceeds of crime.
The issue before the High Court was whether mortgaged properties could be attached under the PMLA when the bank, as a secured creditor, was not a party to the alleged criminal activity and had initiated recovery proceedings under the SARFAESI Act.
The High Court held that assets mortgaged to banks represent public funds and cannot be treated as proceeds of crime within the meaning of Section 2(u) of the PMLA. It further observed that the Adjudicating Authority erred by not issuing notice to the bank as required under Sections 8(1) and 8(2) of the PMLA. Upholding the Appellate Tribunal's findings, the High Court affirmed that banks are entitled to enforce their security interest over mortgaged assets and that parallel proceedings by the Enforcement Directorate would not be in the interest of justice.
Footnote
1 MSA No. 78 of 2020 and Connected Matters.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
