Judgements of the SC for conditions under which provisions of a specific legislation

(state or Central) meant specifically to protect interests of investors/depositors would

take precedence over provisions of PML Act.
Prepared by Naman Jain

PMLA and Recourse available with the Investors and depositors before 2016
amendment.
Before, 2016 the situation was such that the Hon’ble Supreme Court in the mater of Solidaire
India Ltd. Vs. Fairgrowth Financial Services Ltd. and Ors. 1 and United Bank of India vs.
Satyavati Tandon2; decision of a learned single Judge of this court in Sanjay Bhandari Vs.
CBI3; three decisions of the Madras High Court, they being V.M. Ganesan vs. Joint Director,
Directorate of Enforcement4; C. Chellamuthu vs. Deputy Director, Prevention of Money
Laundering Act5; and Assistant Commissioner vs. Indian Overseas Bank 6. The decision of the
appellate tribunal shows that it has treated the other enactments like SARFAESI Act and
RDDBFI Act to be prevailing over the PMLA on account of amendments brought into the
former two legislations by the Enforcement of Security Interest and Recovery of Debts Laws
and Miscellaneous Provisions (Amendment) Act, 2016 (Act no.44 of 2016). By the said
amendment of 2016, Section 26-E was inserted in SARFAESI Act with similar provision
contained in Section 31-B being added to RDBA, both declaring the claim of "secured
creditors" to have priority over certain other claims as specified by the law

The amendment in 2016 reversed the judgments and changes the position of law by 180
degrees.

And then came an amendment in 2019 in IBC, where section 32A has been inserted which
says that no proceedings can be continued in any law if the offence has been committed
before the approval of the adjudicating authority.
And it was confirmed by the divisional bench of supreme Court in the matter of Ebix
Singapore Pvt ltd. V. Committee of creditors Educomp on 13th September 2021 7 that if a

1
(2001) 3 SCC 71
2
(2010) 8 SCC 110
3
2015 SCC Online Del 10079
4
2014 SCC Online Mad 10702
5
Manu/TN/4087/2015, decided on 14.10.2015
6
AIR 2017 Mad 67 (FB); 2016 SCC Online Mad 10030
7
MANU/SC/0628/2021
corporate is prosecuted under PMLA or any other law and that corporate goes under
Insolvency afterwards, then PMLA proceedings will stop and IBC will continue.

Situation as to the State law.

In state laws case settled by the Hon’ble Supreme Court of India in the matter 63moon tech ltd v. UOI
in 2019 it was held that Maharashtra Protection of interest of depositors act 1999 will override
PMLA. As it is stated in section 14 of the act. This decision was passed by the divisional bench of
Supreme Court.
Situation as to the Central law.
Among central laws Hon’ble Supreme Court has settled the position between PMLA and IBC
in 2021 in the matter of Jaypee Kensington Boulevard Apartments Welfare Association and
Ors. v. NBCC, 20218 the supreme court in its 3judge bench decided that IBC overrides the
PMLA.
Another matter related to the conjunction of the SARFAESI and PMLA is pending in
Supreme Court in the matter of State Bank of India vs Enforcement Directorate9
RDDBFI Act has not been come upto the supreme court for consideration hence, here the
situation has been changed by 180 degree after 2016 judgment.

Conclusion
It can be concluded that among state laws and central laws there has been sufficient relief
available with the investor if the investment or the deposit has been misappropriately utilised
by the company or the person taking such money as IBC is the central law and which can be
used as a sword by the investors for the debtor.

8
[2021]166SCL678(SC)
9
SLP(Crl) 4835/2021