Madras High Court: TANPID Act Attachment Takes Precedence Over PMLA in Depositor Protection

The Madras High Court has ruled that attachment of properties under the Tamil Nadu Protection of Interests of Depositors (In Financial Establishments) Act, 1997 (TANPID Act) will take precedence over attachment of the same properties under the Prevention of Money Laundering Act, 2002 (PMLA). The decision provides relief to thousands of depositors who were duped by fraudulent financial institutions.

A Division Bench of Justices G.R. Swaminathan and V. Lakshminarayanan held that attachments made by the Directorate of Enforcement (ED) under the PMLA cannot prevail over attachments ordered by a District Revenue Officer under the TANPID Act merely because the PMLA is a central legislation while the TANPID Act is a state law. The court emphasised that the TANPID Act contains a non-obstante clause that gives it overriding effect over other laws.

The verdict came while disposing of a petition seeking expeditious sale of five properties belonging to Viswapriya (India) Limited, a company founded by R. Subramanian of the now-defunct Subhiksha retail chain. The judges noted that 34 of the 1,240 depositors of Viswapriya had died, most of them senior citizens who had invested their retirement benefits.

The ED had objected to the sale, stating that it had also attached the same properties. However, the court pointed out that the Supreme Court had stayed PMLA proceedings against Subramanian on April 12, 2019. Therefore, the central agency's action was currently on hold. Even otherwise, the court held, the attachment under TANPID Act would prevail.

Justice Swaminathan explained that Section 14 of the TANPID Act categorically states that the Act shall have effect notwithstanding anything inconsistent contained in any other law. He also noted that the Supreme Court had upheld the validity of the Act in 2011, recognising that it was enacted to protect depositors who had fallen prey to fraudulent financial establishments promising high interest rates.

The Bench further cited a 2025 Supreme Court ruling which held that central legislations like the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act and the Recovery of Debts and Bankruptcy Act could not prevail over the Maharashtra Protection of Interest of Depositors (in Financial Establishments) Act. The top court had said that allowing central laws to override state legislation would offend the federal structure under Article 246 of the Constitution.

Highlighting the legislative intent, Justice Swaminathan observed that Section 3 of the TANPID Act, dealing with attachment of properties, begins with the non-obstante clause 'Notwithstanding anything contained in any other law for the time being in force'. In contrast, Section 5 of the PMLA, which deals with attachment of properties, does not contain such a clause, although other provisions of the central law do.

“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... An attachment passed under TNPID Act has the shield of non-obstante clause, whereas the attachment provision under PMLA is lacking in such armoury,” the judge wrote.

The court ordered liquidation of the properties attached under the TANPID Act, expressing hope that “within the next few months, the poor depositors are able to see the colour of the coin.” This judgment reinforces the protective intent of state laws aimed at safeguarding small depositors, while also respecting the federal balance of legislative powers.