PMLA attachment orders must yield to Article 142 restitution schemes for PACL assets to prioritize investor recovery.

The Petitioners challenged provisional attachment orders issued by the Directorate of Enforcement (ED) in 2022.

These assets were allegedly linked to a fraud involving PACL Ltd.

Previously, the Supreme Court, exercising powers under Article 142, had appointed the Justice R.M. Lodha Committee to sell PACL-related assets and restitute investors.

While the High Court had initially stayed the ED's attachment orders, the ED filed applications seeking to dispose of the writ petitions by offering to restore the attached properties to the Lodha Committee under the restitution scheme of Section 8(8) of the PMLA.

The Petitioners agreed to the relegation but argued the attachment orders should be set aside first.

1. Whether the statutory powers of attachment under the PMLA should yield to the special mechanism created by the Supreme Court under Article 142 for the restitution of PACL investors

2. Whether the ED can invoke Section 8(8) of the PMLA to restore property to a Committee when the property was attached without prior consultation with said Committee

The court primarily considered the interaction between the Prevention of Money-Laundering Act, 2002 (PMLA)—specifically Section 5 (attachment), Section 8(8) (restitution), and Rule 3A of the Confiscation Rules, 2016—and the Supreme Court's directions under Article 142 of the Constitution.

It relied on the precedent of Subrata Bhattacharya v. SEBI, which established that functions discharged in the interest of investors under Article 142 entrustment take priority over independent statutory functions to prevent overreaching the Court's jurisdiction.

The Court reasoned that while statutory powers are generally not curtailed by courts, the "special scheme" for PACL mandates a modified application of the PMLA.

It noted a "stark contrast" between the PMLA's goal (vesting property in the Central Government) and the Supreme Court's goal (restitution to investors).

The Court found that the ED’s attempt to use Section 8(8) was misplaced because that section is an exception requiring Special Court satisfaction post-charge sheet, whereas the Lodha Committee operates under a separate constitutional mandate.

Furthermore, the ED’s own prior conduct—where it previously fed investigative findings to the Lodha Committee rather than invoking PMLA—showed an acknowledgment that the Committee was the proper venue.

Since the attachment orders had served their preservative purpose and the petitioners provided undertakings not to alienate assets, the Court found that maintaining the PMLA proceedings would hinder rather than help the investors.

It held that the matter must be relegated to the Justice R.M. Lodha Committee to be decided in accordance with the Supreme Court-mandated scheme.

The Petitioners were directed not to dissipate, alienate, or create any encumbrance on the subject properties until the Lodha Committee completes its final adjudication.

The writ petitions were disposed of accordingly.