Armed with Non-Obstante Clause: Madras High Court Holds Attachment Under TNPID Act Prevails Over PMLA Attachment
|The Court held that Section 3 of TNPID Act overrides Section 5 of PMLA to protect depositors’ interests.
The Madras High Court has held that property attachments made under the Tamil Nadu Protection of Interests of Depositors (In Financial Establishments) Act, 1997 (TNPID Act) take precedence over attachment orders issued under Section 5 of the Prevention of Money Laundering Act, 2002 (PMLA). The Court emphasized that a State law specifically designed to protect defrauded depositors cannot be rendered redundant by central enforcement actions when the statutory attachment provision under the PMLA lacks a non-obstante clause.
The Court further noted that while overriding provisions like Section 71 of the PMLA and Section 14 of the TNPID Act cancel each other out, Section 3 of the TNPID Act explicitly contains a non-obstante clause, whereas Section 5 of the PMLA does not. Consequently, the comparative potency of the provisions tilts in favor of the TNPID Act, allowing liquidation processes aimed at compensating victimized depositors to move forward without hindrance from PMLA attachments.
A Division Bench comprising Justice G.R. Swaminathan and Justice V. Lakshminarayanan observed, “…In National Spot Exchange Case, the question was the interplay or repugnancy between MPID Act which is a State legislation and SARFAESI Act/RDB Act which are central legislations. Both SARFAESI Act/RDB Act have overriding provisions just like Section 71 of PMLA, 2002. Adopting the very same reasoning set out in National Spot Exchange Limited, we hold that the attachment made under TNPID Act will prevail over the attachment made under PMLA”.
“Though it might appear as if two special enactments are locked in combat on account of incorporation of overriding clauses in both, the face-off is only between particular provisions occurring in them. What would tilt the scales would be their comparative potency and power. Viewed in this perspective, Section 3 of the TNPID Act being armed with a non-obstante clause would prevail over Section 5 of PMLA which is bereft of it”, it noted further.
Advocate M. Ramamoorthi appeared for the petitioner and Advocate N. Ramesh appeared for the respondent.
In the matter, Viswapriya (India) Ltd., promoted by R. Subramanian, collected substantial deposits from around 1,240 individuals, mostly senior citizens. Upon defaulting on repayments, Crime No. 5 of 2013 was registered by the Economic Offences Wing, leading to a conviction. Subsequently, five properties were attached under Section 3 of the TNPID Act vide G.O.Ms. No. 741. However, process under Section 4 before the Special Court stalled due to concurrent provisional attachment orders issued by the Enforcement Directorate (ED) under the PMLA.
A writ petition was filed by a depositor seeking directions for the expeditious sale of the five attached immovable properties. The ED opposed the petition via a counter-affidavit, arguing that properties identified as proceeds of crime under the PMLA must be disposed of strictly in accordance with federal anti-money laundering law. It was also noted that PMLA proceedings against the promoter had been stayed by the Supreme Court on April 12, 2019.
Relying on Supreme Court precedents including K.K. Baskaran v. State (2011) 3 SCC 793) and National Spot Exchange Ltd. v. Union of India (2025) 8 SCC 393, the Court rejected the ED’s contention that central legislation automatically overrides state law.
The Court noted that overriding state statutes enacted under List II to protect depositors do not lose priority simply because Parliament enacted the PMLA. Analyzing the statutory scheme, the Bench observed that while Parliament included explicit non-obstante clauses in Sections 44, 45, and 57 of the PMLA, it deliberately omitted one in Section 5.
“Having incorporated the non-obstante clauses in specific provisions, the omission to do so in the case of attachments appears to be deliberate and significant. The overriding provisions ie., Section 71 of PMLA and Section 14 of TNPID Act can be taken to have cancelled out each other. An attachment passed under TNPID Act has the shield of non-obstante clause. The attachment order under PMLA is lacking in such armoury. Therefore, the attachment orders passed under PMLA in respect of the subject properties shall not come in the way of the court from proceeding further”, the Bench noted.
Recognizing that the financial establishment is under liquidation and subject to Section 446(1) of the Companies Act, 1956, the Court requested the Company Court to liquidate the attached assets.
Cause Title: V. Lakshmi v. The Competent Authority & District Revenue Officer, Chennai District & Others W.P.(Crl.)NO.1221 OF 2026
Appearances:
Petitioner: M. Ramamoorthi, Advocate.
Respondents: N. Ramesh, Bayyapu Reddy Chaitanya (R-3/Official Liquidator), R. Subramanian, H. Karthik Seshadri, Advocates.