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2024 (8) TMI 100 - DELHI HIGH COURT Money Laundering

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Regular bail denied in money laundering case under Section 45(1) PMLA for cattle smuggling proceeds
The Delhi HC dismissed a regular bail application in a money laundering case under PMLA. The court found prima facie sufficient material showing the applicant's involvement in laundering proceeds from cattle smuggling through various transactions and shell companies. Despite acknowledging Article 21 guarantees personal liberty, the court held the applicant failed to satisfy twin conditions under Section 45(1) PMLA - reasonable grounds for believing innocence and likelihood of not committing offences while on bail. The court applied statutory presumption under Section 24 PMLA regarding proceeds of crime. Medical grounds for bail were rejected as the applicant failed to demonstrate inadequate treatment facilities in custody.

Twin conditions under Section 45 of PMLA - prima facie satisfaction for grant of bail - statutory presumption under Section 24 of PMLA - admissibility and probative value of statements under Section 50 of PMLA - presumption as to business records and diary under Section 22 of PMLA - offence of money laundering under Section 3 of PMLA - Proviso to Section 45 - bail on medical groundsTwin conditions under Section 45 of PMLA - prima facie satisfaction for grant of bail - statutory presumption under Section 24 of PMLA - offence of money laundering under Section 3 of PMLA - Applicant failed to satisfy the twin conditions in Section 45(1) of PMLA for grant of bail. - HELD THAT: - The Court examined whether there are reasonable grounds to believe that the applicant is not guilty of the alleged offence under Section 3 of PMLA and is not likely to commit an offence while on bail. Applying the statutory scheme, including the presumption under Section 24 that proceeds of crime are involved unless contrary is proved, the Court held that prima facie material in the complaint, charge sheets, supplementary charge sheets and accompanying material (diary entries, cash deposit slips, CFSL verification and statements under Section 50) collectively furnish sufficient material linking the transactions to the predicate offence. On the basis of broad probabilities required at the bail stage under Vijay Madanlal and related authorities, the applicant has not discharged the onus to cross the threshold in Section 45(1). Accordingly, the Court was not satisfied that there are reasonable grounds for believing that the applicant is not guilty or that he would not commit an offence if released on bail. [Paras 47, 49, 50, 51, 54]Bail under Section 45(1) of PMLA refused as applicant failed to meet the twin conditions.Presumption as to business records and diary under Section 22 of PMLA - admissibility and probative value of statements under Section 50 of PMLA - Diary entries, corroborated cash deposit slips and statements under Section 50 of PMLA were held admissible and of probative value at the bail stage to form part of the prima facie material. - HELD THAT: - The Court found that the diary was maintained in the ordinary course and recovered from its possessor and therefore falls within the statutory presumption under Section 22 that it belongs to him and is in his handwriting; CFSL examination corroborated signatures on deposit slips. Further, the Court followed binding precedents holding that statements recorded under Section 50 are admissible and may be considered at the bail stage. Consequently, these materials were treated as forming a prima facie link between the alleged proceeds and the applicant, and were not to be rejected as inadmissible at the threshold bail inquiry. [Paras 56, 57, 58]Diary, CFSL-verified deposit slips and Section 50 statements may be relied upon at the bail stage and contribute to the prima facie case against the applicant.Proviso to Section 45 - bail on medical grounds - Applicant is not entitled to bail under the proviso to Section 45 of PMLA on the basis of the medical ailments asserted. - HELD THAT: - The Court considered the medical material placed before it and observed that the applicant did not demonstrate that his ailments are of such a nature that they cannot be adequately treated in the jail hospital or by referral hospitals. Relying on established authorities, the Court held that mere assertion of medical conditions is insufficient; the sickness must be of a kind requiring treatment outside prison custody. No such material was shown, and therefore the proviso to Section 45 does not apply. [Paras 62, 63, 64]No bail under the medical proviso to Section 45; the asserted ailments do not warrant release.Effect of filing charge sheet in predicate offence on PMLA bail - Filing of a charge sheet in the predicate offence or grant of bail in the predicate case does not automatically entitle the accused to bail under PMLA. - HELD THAT: - The Court reiterated that investigation by ED under PMLA is distinct from investigation of the predicate offence; therefore, mere filing of charge sheets in the predicate cases or grant of bail therein cannot be treated as decisive for grant of bail under PMLA. The twin conditions of Section 45 must still be satisfied, and ongoing ED investigation may preclude bail despite charge sheeting in predicate proceedings. [Paras 59, 60, 61]Previous charge sheeting or bail in predicate proceedings is not a ground by itself for bail under PMLA; Section 45 conditions govern.Final Conclusion: On a prima facie appraisal of the charge, documentary material and statements admissible at the bail stage, the Court concluded that the applicant has not crossed the statutory threshold under Section 45(1) of PMLA; the diary entries, corroborative deposit slips and Section 50 statements form sufficient material to link the monies to the predicate offence, the medical proviso is not attracted, and the bail petition is therefore dismissed.

2024 (7) TMI 1593 - DELHI HIGH COURT Money Laundering

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Bail in spurious anti-cancer medicine case granted where documentary evidence was secured and witness interference risk was minimal.
Bail was granted in a prosecution concerning alleged supply and distribution of spurious anti-cancer medicines because the petitioner had remained in custody since 13.03.2024, the charge-sheet had been filed, and the principal material against the petitioner was documentary and already in police custody. On that basis, the Court found the risk of tampering with evidence to be remote. It also treated the apprehension of witness influence as minimal because most witnesses were official witnesses. Applying settled bail parameters, the Court held that continued custodial detention was not warranted and released the petitioner on conditions.

2024 (8) TMI 21 - CHHATTISGARH HIGH COURT Money Laundering

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PMLA bail under twin conditions denied where investigation showed a prima facie nexus with laundering of proceeds of crime.
Under Section 45 of the Prevention of Money Laundering Act, 2002, regular bail can be granted only if there are reasonable grounds to believe the is not guilty and is unlikely to commit an offence on bail. The Court assessed the material collected during investigation on broad probabilities, not as a trial, and found prima facie evidence that the applicant allegedly received and routed hawala funds linked to proceeds of crime, with knowledge of the persons involved. Treating money laundering as a serious economic offence, the Court held that the twin bail conditions were not satisfied and declined bail.

Money-laundering - proceeds of crime - Hawala transactions - mens rea - prima facie satisfaction for bail under Section 45 of the PMLA - admissibility and evidentiary value of statements under Section 50 of the PMLA - economic offences and bail considerationsPrima facie satisfaction for bail under Section 45 of the PMLA - money-laundering - mens rea - economic offences and bail considerations - Whether the applicant is entitled to grant of regular bail under Section 45 of the PMLA - HELD THAT: - The Court applied the two-pronged test under Section 45 of the PMLA - whether there are reasonable grounds for believing the accused is not guilty and whether he is not likely to commit an offence while on bail. Having regard to the material on record, the Court found sufficient prima facie evidence that the applicant participated in Hawala operations connected to the proceeds of the Mahadev online betting network and was aware of the persons to/from whom the amounts were delivered. The complaint and statements disclose that the applicant and his brother received and routed large-scale Hawala funds, that promoters frequented the applicant's jewellery shop, and that properties connected to the applicant are alleged to be traceable to proceeds of crime. The Court held that economic offences of this nature warrant serious treatment in bail considerations and that the available material establishes, on broad probabilities, the requisite mens rea and involvement in layering/concealment of proceeds. On that basis the Court was not satisfied to grant bail. [Paras 10, 11, 13, 17, 18]Bail application rejected as the Court is satisfied, on prima facie material, that the applicant was involved in money laundering and therefore grant of bail is not warranted under Section 45 of the PMLA.Admissibility and evidentiary value of statements under Section 50 of the PMLA - Hawala transactions - Whether statements recorded under Section 50 of the PMLA can be relied upon at the stage of bail - HELD THAT: - The Court observed that while the evidentiary weight of statements recorded under Section 50 is ultimately to be tested at trial, those statements are admissible as evidence and may be considered for the limited purpose of forming a prima facie view at the bail stage. The Court noted that officers of the Enforcement Directorate exercise powers akin to civil courts for the purpose of the PMLA and that safeguards available under the Cr.P.C. to accused witnesses in police investigation are not identically applicable to ED proceedings. Accordingly, the Court treated the statements recorded under Section 50 as material in assessing the existence of a genuine case against the applicant for the purposes of Section 45. [Paras 10, 16, 17]Statements under Section 50 of the PMLA are admissible and may be considered at the bail stage for forming a prima facie view, though their ultimate evidentiary value is for the trial court to determine.Final Conclusion: The High Court, applying the prima facie standard under Section 45 of the PMLA and having regard to admissible statements and other material indicating the applicant's involvement in Hawala movement of proceeds of the Mahadev betting operations, refused to grant bail and dismissed the bail application.

2024 (7) TMI 1751 - BOMBAY HIGH COURT Money Laundering

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Issues: (i) Whether the continuation of money-laundering proceedings could be sustained after acceptance of the C-Summary in the original predicate offence, in the face of subsequently registered FIRs arising from the same bank scam; (ii) whether setting aside of the test audit report undermined the prosecution case; and (iii) whether the applicant satisfied the statutory conditions for bail under the PMLA.

Issue (i): Whether the continuation of money-laundering proceedings could be sustained after acceptance of the C-Summary in the original predicate offence, in the face of subsequently registered FIRs arising from the same bank scam.

Analysis: The offence under Section 3 of the PMLA is dependent on the existence of proceeds of crime derived from criminal activity relating to a scheduled offence, but it remains an independent offence. Once the scheduled offence ends in discharge, acquittal, quashing, or a comparable judicial closure, money-laundering cannot survive in relation to that crime. At the same time, where later FIRs disclose the same underlying criminal activity and were registered before the predicate case came to an end, the existence of proceeds of crime may still be made out prima facie. On the facts, the later FIRs registered in 2021, based on the test audit report and relating to the same loan fraud, were treated as sufficiently linked to the alleged criminal activity to justify continuation of the ED investigation notwithstanding acceptance of the C-Summary in FIR No.163 of 2018.

Conclusion: The money-laundering proceedings were not held to be extinguished on the ground of acceptance of the C-Summary in the original FIR.

Issue (ii): Whether setting aside of the test audit report undermined the prosecution case.

Analysis: The test audit report was not treated as the sole basis of the prosecution. The later order setting it aside only questioned the audit methodology and directed fresh audit consideration. Independent material, including the loan transactions, money trail, and allegations of siphoning of bank funds, remained available to support the prosecution version at the bail stage.

Conclusion: The setting aside of the test audit report did not demolish the prosecution case at the bail stage.

Issue (iii): Whether the applicant satisfied the statutory conditions for bail under the PMLA.

Analysis: While Section 45 of the PMLA imposes a stringent twin-condition framework, the Court found that the material prima facie did not sufficiently establish that the applicant had generated, acquired, layered, or used proceeds of crime to the alleged extent of Rs.60.67 crores. The money trail substantially connected him only with limited transactions, a significant part of the loan amount had already been repaid, no antecedents were shown, and prolonged custody made early conclusion of trial unlikely. The Court also clarified that release of co-accused on bonds under Section 88 of the Code did not amount to bail, so parity was not decisive.

Conclusion: The applicant was found entitled to bail.

Final Conclusion: The bail application was allowed, and the applicant was directed to be released subject to conditions, while the observations were confined to the bail decision and were not to influence the trial.

Ratio Decidendi: Money-laundering is dependent on the existence of proceeds of crime arising from a scheduled offence, but later linked FIRs and independent material may sustain the prosecution at the prima facie stage; for bail under the PMLA, the Court must assess the statutory restrictions on the basis of objective material and not require a final finding of innocence.

PMLA bail and predicate-offence linkage: later FIRs and independent material can sustain prosecution, with bail granted on prima facie assessment.
PMLA proceedings may continue where later FIRs linked to the same alleged loan fraud support the existence of proceeds of crime, despite acceptance of a C-Summary in the original FIR. Setting aside a test audit report does not by itself dismantle the prosecution case when other material, including loan transactions and the money trail, remains available. For bail under the PMLA, the Court applied the twin-condition framework, found only limited prima facie linkage to the alleged proceeds, noted the absence of antecedents and prolonged custody, and granted bail with conditions.

Offence of money laundering as an independent and standalone offence - proceeds of crime as a condition precedent for PMLA action - existence of a predicate offence for sustaining PMLA proceedings - effect of acceptance of a 'C' Summary on PMLA investigation - sub summation of subsequent FIRs in an ECIR where genesis is common - limitations on grant of bail under Section 45(1)(ii) of the PMLA - proviso to Section 44(1)(b) and Explanation (ii) - scope for taking on record further investigationExistence of a predicate offence for sustaining PMLA proceedings - proceeds of crime as a condition precedent for PMLA action - effect of acceptance of a 'C' Summary on PMLA investigation - Whether acceptance of the 'C' Summary in the earlier FIR (C.R. No.163 of 2018) extinguished the predicate offence so as to render ECIR/MBZO-II/10/2021 non est and terminate the Enforcement Directorate's investigation. - HELD THAT: - The Court applied the principle that an offence of money laundering depends on the existence of 'proceeds of crime' derived from a scheduled (predicate) offence and that, if the predicate offence is finally extinguished (discharge, acquittal or quashing), money laundering proceedings based on that predicate cannot survive. However, on the facts it was found that before the acceptance of the 'C' Summary in C.R. No.163/2018, three further FIRs (Nos.525, 526 and 527 of 2021) had been registered on the basis of the Test Audit Report and that those FIRs prima facie disclosed generation/derivation of proceeds of crime. Because the subsequent FIRs were registered prior to the judicial acceptance of the 'C' Summary, the predicate basis for investigation into money laundering in respect of the larger Bank scam existed independently of the closure in C.R. No.163/2018. The Court therefore rejected the submission that the accepted 'C' Summary in the earlier FIR automatically obliterated the ECIR in respect of the matters covered by the subsequently registered FIRs.Acceptance of the 'C' Summary in C.R. No.163/2018 did not, on the facts, render the ECIR non est because FIRs 525/2021, 526/2021 and 527/2021-registered before that acceptance-prima facie disclosed proceeds of crime and sufficed to sustain the money laundering investigation.Sub summation of subsequent FIRs in an ECIR where genesis is common - proviso to Section 44(1)(b) and Explanation (ii) - scope for taking on record further investigation - Whether the Enforcement Directorate was procedurally justified in subsuming the subsequently registered FIRs into the pending ECIR and continuing investigation on that basis. - HELD THAT: - The Court examined the scope of Explanation (ii) to Section 44(1) and the proviso to clause (b) of Section 44(1) and construed clause (ii) as an enabling provision permitting the authorised agency to take on record material discovered on further investigation or to bring further evidence in an already filed complaint. The Court held that where subsequent FIRs arise from the same genesis or transaction as an earlier FIR, and those subsequent FIRs disclose processes or activities connected with proceeds of crime, it is permissible to take notice of those FIRs in the course of money laundering investigation. On the facts, the judge found prima facie material indicating a common genesis in the fraudulent disbursal/availing of loans and thus concluded subsumption and continuation of investigation were permissible.Subsumation of the subsequent FIRs into the ECIR and continuation of the money laundering investigation was permissible where the subsequent FIRs shared a common genesis and prima facie disclosed processes connected with proceeds of crime.Limitations on grant of bail under Section 45(1)(ii) of the PMLA - offence of money laundering as an independent and standalone offence - Whether, in the facts of this case, the applicant was entitled to be released on bail despite the statutory restrictions under Section 45(1)(ii) of the PMLA. - HELD THAT: - Applying the settled approach to the statutory restriction (requiring court satisfaction that there are reasonable grounds for believing the accused is not guilty and not likely to commit an offence if released), the Court took a prima facie view of the prosecution material. The matrix of evidence showed that the bulk of alleged diversion and default related to loans taken in the name of the applicant's wife and her proprietary concerns, with only limited direct money trail to the applicant (notably a credit of Rs.10 lakhs and withdrawal of cash from his car loan). The Court found the prosecution's case that the applicant generated/acquired/used proceeds to the tune alleged to be prima facie tenuous and that there was material to suggest substantial repayment/recovery by the Bank. There were no antecedents on record and nothing to indicate a likelihood of re offending or of tampering with evidence that would justify continued custody. Balancing the statutory restriction with the material on record, the Court concluded that the statutory threshold for denial of bail was not satisfied.The applicant was entitled to bail; the Court directed release on conditions (PR bond, sureties, regular reporting, surrender of passport, non tampering undertakings and attendance at trial), while emphasising observations were confined to the bail context and not determinative of guilt.Final Conclusion: The bail application was allowed. The High Court took a prima facie view that the ECIR could properly continue by reference to subsequent FIRs registered before acceptance of the earlier 'C' Summary, and, on the facts, concluded that the statutory threshold for refusal of bail under Section 45(1)(ii) PMLA was not satisfied; the applicant was released on bail subject to specified conditions, with the Court's observations confined to bail proceedings and not expressing any opinion on ultimate guilt.

2024 (7) TMI 1609 - RAJASTHAN HIGH COURT Money Laundering

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ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

Whether the petitioners can withdraw the monitoring petitions challenging the cognizance order issued by the trial court under the Prevention of Money Laundering Act, 2002.
Whether the execution of the arrest warrants issued against the petitioners can be stayed to allow them to surrender voluntarily before the trial court.
Whether the petitioners retain the liberty to raise the grounds and points from the monitoring petitions during the trial court proceedings.

ISSUE-WISE DETAILED ANALYSIS

1. Withdrawal of Monitoring Petitions

Relevant Legal Framework and Precedents: The legal framework involves the procedural rights of petitioners to withdraw petitions and the discretion of the court to allow such withdrawal. A judicial precedent from the Supreme Court in Criminal Appeal No. 2608/2024, Tarsem Lal vs Directorate of Enforcement, was cited in support.
Court's Interpretation and Reasoning: The Court considered the petitioners' request to withdraw the monitoring petitions with the liberty to raise the same issues later at the trial court level. The Court acknowledged the petitioners' right to withdraw their petitions.
Key Evidence and Findings: The petitioners' counsel argued for withdrawal, citing a Supreme Court judgment that supports procedural flexibility in similar contexts.
Application of Law to Facts: The Court applied the precedent and procedural norms, allowing the withdrawal while preserving the petitioners' rights to later raise their arguments at the trial court.
Treatment of Competing Arguments: There were no competing arguments presented in the judgment text regarding this issue.
Conclusions: The Court permitted the withdrawal of the monitoring petitions, ensuring that the petitioners could still present their arguments at the trial court.

2. Stay of Arrest Warrants

Relevant Legal Framework and Precedents: The issuance and stay of arrest warrants are governed by procedural laws, allowing courts to stay execution under specific circumstances.
Court's Interpretation and Reasoning: The Court considered the petitioners' willingness to surrender voluntarily and found it reasonable to stay the execution of the arrest warrants for one month.
Key Evidence and Findings: The petitioners expressed readiness to surrender, which was a significant factor in the Court's decision to grant a stay.
Application of Law to Facts: The Court applied procedural discretion, balancing the enforcement of warrants with the petitioners' willingness to comply voluntarily.
Treatment of Competing Arguments: The judgment does not indicate any opposition to the stay request.
Conclusions: The Court stayed the execution of the arrest warrants for one month, allowing the petitioners time to surrender.

3. Liberty to Raise Grounds in Trial Court

Relevant Legal Framework and Precedents: The procedural right to raise previously presented arguments at subsequent stages of litigation is recognized in legal practice.
Court's Interpretation and Reasoning: The Court granted the petitioners the liberty to raise the grounds and points from the withdrawn petitions during the trial court proceedings.
Key Evidence and Findings: The petitioners' counsel emphasized their intention to argue these points at the trial court level.
Application of Law to Facts: The Court ensured procedural fairness by allowing the petitioners to preserve their arguments for the trial court.
Treatment of Competing Arguments: There were no competing arguments against granting this liberty.
Conclusions: The petitioners were granted the liberty to present their arguments during the trial court proceedings.

SIGNIFICANT HOLDINGS

Verbatim Quotes of Crucial Legal Reasoning: The judgment did not include verbatim quotes but emphasized procedural fairness and the petitioners' rights.
Core Principles Established: The judgment reinforced the principles of procedural discretion, the right to withdraw petitions, and the preservation of arguments for future proceedings.
Final Determinations on Each Issue: The Court allowed the withdrawal of the monitoring petitions, stayed the execution of arrest warrants for one month, and granted the petitioners the liberty to raise their arguments at the trial court.

Petitioners allowed to withdraw monitoring petitions challenging PMLA cognizance order with conditions for trial appearance
The Rajasthan HC allowed petitioners to withdraw monitoring petitions challenging cognizance order under PMLA. The court dismissed the petitions due to withdrawal by qualified counsel and directed petitioners to appear before the trial court within one month. Execution of arrest warrants against petitioners was suspended during this period. The court warned that failure to appear would result in presumption of avoiding court orders, allowing the trial court to issue fresh arrest warrants. Associated stay applications were also disposed of.

2024 (7) TMI 1552 - UTTARAKHAND HIGH COURT Money Laundering

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Issues:
Bail application based on health grounds.

Analysis:
The judgment involves a bail application made by the applicant who is in judicial custody under Sections 3/4 of the Prevention of Money Laundering Act, 2002. The applicant, in her second bail application, claimed to be unwell with psychological problems and sought release on bail due to health reasons. The applicant's first bail application had already been rejected earlier. The applicant's counsel argued that she had been referred to a higher center by the Department of Clinical and Rehabilitation Psychology due to her health condition. On the other hand, the Directorate of Enforcement, through its counsel, contended that a panel of doctors from Government Doon Medical College had examined the applicant and found no behavioral disturbance or need for hospitalization or pharmacotherapy based on their assessment.

The court, after hearing both parties and examining the reports, found discrepancies in the interpretation of the medical reports provided by the doctors. Consequently, the court requested the Head of the Department of Psychiatry at Government Doon Medical College, along with another doctor from the panel, to assist in clarifying the reports. Subsequently, both doctors joined the proceedings through video conferencing. Dr. Jaya Nawani clarified that the applicant had been assessed by a panel of psychiatrists and no active psychopathology or symptoms of depression were observed. The report indicated inconclusive psychometric analysis and no behavioral disturbances as per the jail authority's report.

Dr. Jaya Nawani confirmed that the applicant did not require hospitalization or medication for psychiatric issues. The panel had referred the applicant to other departments for her complaints of hypothyroidism, dizziness, and chest pain. Dr. Nawani emphasized that there was no need for the applicant to be referred to a higher center for psychological problems and no medication had been prescribed for psychiatric issues. Based on the comprehensive examination and reports, the court concluded that the applicant did not exhibit signs of psychopathology or depression, and therefore, there was no justification for granting bail on health grounds. Consequently, the court rejected the applicant's second bail application based on the medical findings and recommendations provided by the panel of doctors from Government Doon Medical College.

Bail Denied: Court Rejects Health Grounds in Money Laundering Case Due to Lack of Medical Evidence.
The applicant's second bail application, citing health grounds under the Prevention of Money Laundering Act, 2002, was denied by the court. Despite claims of psychological issues, a panel from Government Doon Medical College found no psychopathology or need for psychiatric treatment. Consequently, the court concluded that there was no basis for bail on health grounds.

Bail on medical and psychiatric grounds - Judicial custody - Expert medical opinion - Psychiatric assessment and need for higher centre - Referral for medical subspecialty opinion (ENT/Medicine) - Charges under the Prevention of Money Laundering Act, 2002Bail on medical and psychiatric grounds - Expert medical opinion - Psychiatric assessment and need for higher centre - Application for bail on grounds of ill-health and alleged psychiatric disorder refused - HELD THAT: - The applicant, held in judicial custody in proceedings under the Prevention of Money Laundering Act, 2002, sought bail primarily on health and psychological grounds. The Court considered medical records and heard two treating psychiatrists (members of the examining panel) by video conferencing. The panel's preliminary assessment at Government Doon Medical College recorded no active psychopathology requiring hospitalization or pharmacotherapy. A detailed psychometric analysis conducted at the referred centre was described as inconclusive. The panel specifically noted absence of behavioural disturbance in the behavioural report submitted by jail authorities and indicated follow-up could be managed on OPD basis. The examining psychiatrists expressly stated there was no clinical indication to refer the applicant to a higher psychiatric centre and no psychiatric medication was necessary; referrals made were to ENT and Medicine for somatic complaints. In view of the expert medical findings that there was no psychopathology, no depression symptoms, and no requirement of inpatient treatment or psychiatric medication, the Court concluded that medical considerations did not justify release from custody and therefore bail could not be granted on these grounds.Second bail application rejected.Final Conclusion: The second bail petition filed on medical and psychiatric grounds was dismissed after the Court, on consideration of the examining panel's reports and oral assistance from the treating psychiatrists, found no clinical necessity for inpatient treatment, higher-centre referral, or psychiatric medication that would warrant release from judicial custody.

2024 (8) TMI 99 - MADRAS HIGH COURT Money Laundering

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Issues: (i) Whether the attachment and seizure of the petitioners' movable and immovable properties under the Prevention of Money Laundering Act could be continued after the predicate offence had been closed and the ECIR proceedings had been quashed. (ii) Whether the provisional attachment had lapsed for want of subsisting confirmation proceedings and expiry of the statutory period.

Issue (i): Whether the attachment and seizure of the petitioners' movable and immovable properties under the Prevention of Money Laundering Act could be continued after the predicate offence had been closed and the ECIR proceedings had been quashed.

Analysis: The attachment proceedings were founded on the scheduled offences in the FIR. The predicate complaint had been withdrawn, the closure report had been accepted, and the ECIR proceedings had already been quashed by the Court. Once the foundational criminal case no longer survived, the basis for treating the properties as involved in money laundering and as proceeds of crime ceased to exist. A mere stated intention to challenge the earlier order could not justify retention of the attached properties.

Conclusion: The continuation of attachment and seizure was unsustainable and the petitioners were entitled to release of the properties.

Issue (ii): Whether the provisional attachment had lapsed for want of subsisting confirmation proceedings and expiry of the statutory period.

Analysis: The provisional attachment was issued under the statutory scheme governing provisional attachment, which is time-bound. The record showed that the complaint filed for confirmation of the provisional attachment had been dropped. In the absence of confirmation and in view of the statutory limitation on the life of a provisional attachment, the attachment could not survive. The Court treated the attachment as having ceased to operate.

Conclusion: The provisional attachment had lapsed and no attachment subsisted over the subject properties.

Final Conclusion: The enforcement action could not be maintained once the predicate offence proceedings had ended and the attachment had lapsed in law, so the properties were directed to be released.

Ratio Decidendi: Where the foundation of money-laundering proceedings disappears and the provisional attachment is not sustained within the statutory framework, the attached properties cannot be retained.

PMLA attachment cannot survive when predicate offence proceedings end and provisional confirmation lapses in law.
Attachment of movable and immovable properties under PMLA could not be continued once the predicate offence complaint had been withdrawn, the closure report accepted, and the ECIR proceedings quashed, because the foundation for treating the assets as proceeds of crime had ceased. The Court also treated the provisional attachment as having lapsed, since the confirmation complaint had been dropped and the scheme governing provisional attachment is time-bound. On those facts, no subsisting attachment survived in law, and the properties were directed to be released.

Provisional attachment under PMLA - cessation/lapse of provisional attachment after 180 days - confirmation of provisional attachment before Adjudicating Authority - effect of closure/quashing of predicate offence on proceedings under PMLA - absence of "proceeds of crime" when predicate offence is closed - retention of property pending appeal does not justify continued attachmentProvisional attachment under PMLA - cessation/lapse of provisional attachment after 180 days - confirmation of provisional attachment before Adjudicating Authority - Validity and effect of the provisional attachment issued under PMLA when the application for confirmation before the Adjudicating Authority is dropped and the statutory 180 day period has expired. - HELD THAT: - The Court examined the operation of the provisional attachment regime under Section 5 of the PMLA and noted that a provisional attachment is statutorily limited to 180 days. Where the Directorate had issued a Provisional Attachment Order and thereafter sought confirmation before the Adjudicating Authority but the complaint for confirmation was dropped, the provisional attachment cannot continue beyond the statutory period. The Court therefore held that once the period provided under Section 5(1) and (3) has elapsed and the confirmation proceedings have been discontinued, the provisional attachment ceases to have effect and there is no subsisting attachment over the properties. The Court directed revocation and release of the attached movable and immovable properties within two weeks. [Paras 11, 12, 15]Provisional attachment lapsed and attachment must be revoked and properties released when confirmation proceedings were dropped and the statutory 180 day period under Section 5 had run its course.Effect of closure/quashing of predicate offence on proceedings under PMLA - absence of "proceeds of crime" when predicate offence is closed - Consequences for PMLA proceedings and attached properties where the predicate offence has been closed/quashed by the criminal court. - HELD THAT: - The Court held that PMLA proceedings arising from a scheduled (predicate) offence are contingent upon the existence of that scheduled offence. In the instant case the Investigation Officer filed a closure report in the criminal proceedings and the jurisdictional Magistrate accepted it, and a Division Bench of this Court had quashed the ECIR summons in respect of the same ECIR. The Court concluded that when the predicate offence is dropped/closed, the essential ingredient of "proceeds of crime" attaching to the impugned properties is absent, and consequently the consequential action under the PMLA which emanated from registration of the scheduled offences would automatically lapse. The Court therefore directed release of the properties. [Paras 5, 6, 13, 14, 15]Closure/quashing of the predicate offence removes the basis for PMLA proceedings; attached properties must be released as the "proceeds of crime" ingredient is absent.Retention of property pending appeal does not justify continued attachment - Whether the Directorate's intention to appeal the quashing order justifies continued retention of the attached properties. - HELD THAT: - The Court observed that the Directorate's mere contemplation or process of challenging the Division Bench order before the Supreme Court does not by itself justify continued retention of attached properties once the attachment has ceased to subsist. The Court rejected the contention that pending or contemplated appeal can serve as a ground to prolong attachment where the statutory attachment has lapsed and the predicate offence has been closed/quashed. On this basis the Court directed immediate revocation and release. [Paras 9, 14, 15]Pending or contemplated appeal by the Directorate does not justify retaining property after the attachment has lapsed and the predicate offence proceedings have been closed/quashed.Final Conclusion: The petitions were allowed: the Enforcement Directorate was directed to revoke and release the provisional attachment and seizure of the petitioners' movable and immovable properties under ECIR/CEZO I/63/2022 within two weeks, because the confirmation proceedings were dropped, the statutory 180 day period for provisional attachment had lapsed, and the predicate offence underpinning the PMLA action had been closed/quashed; mere intention to appeal does not justify continued attachment.

2024 (7) TMI 1171 - DELHI HIGH COURT Money Laundering

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Issues: (i) Whether Section 50(2) of the Prevention of Money Laundering Act, 2002 was unconstitutional or inapplicable to persons earlier shown as witnesses in the complaint. (ii) Whether the petitioners' summoning, arrest, and later change of status from witness to accused in the money-laundering investigation were illegal.

Issue (i): Whether Section 50(2) of the Prevention of Money Laundering Act, 2002 was unconstitutional or inapplicable to persons earlier shown as witnesses in the complaint.

Analysis: Section 50 empowers the authorised officers to summon any person during investigation or proceedings under the Act and to require truthful statements and production of records. The challenge based on Articles 20(3) and 21 and Section 132 of the Evidence Act was rejected in light of the binding interpretation that testimonial compulsion arises only when a person is an accused and is compelled to incriminate himself. A person summoned during investigation is not protected merely because he was earlier cited as a witness in a related complaint. The Court also noted that money-laundering proceedings are distinct from the scheduled offence proceedings.

Conclusion: Section 50(2) was upheld in its application to the petitioners, and the constitutional challenge failed.

Issue (ii): Whether the petitioners' summoning, arrest, and later change of status from witness to accused in the money-laundering investigation were illegal.

Analysis: The material collected during investigation, including BBM messages, records, and the petitioners' own statements, indicated involvement in transactions connected with proceeds of crime. The Court held that a person who may initially be treated as a witness in one set of proceedings can later be proceeded against as an accused under PMLA if subsequent investigation reveals prima facie involvement in the offence of money-laundering. It was further held that continuing investigation may uncover new facts and that the authorities were justified in issuing summons to trace the money trail.

Conclusion: The summoning, arrest, and change of status from witness to accused were held to be lawful.

Final Conclusion: The petitions were found to be devoid of merit, and the impugned investigative steps under PMLA were upheld.

Ratio Decidendi: Section 50 of the PMLA authorises summons and recording of statements during investigation or proceedings, and a person initially cited as a witness may still be proceeded against as an accused if subsequent material shows prima facie involvement in money-laundering.

PMLA summons and witness-to-accused shift upheld where later material showed prima facie involvement in money-laundering.
Section 50 of the Prevention of Money Laundering Act authorises summons, truthful statements, and production of records during investigation, and its use is not barred merely because a person was earlier shown as a witness in a related complaint. The constitutional challenge based on Articles 20(3) and 21 and the Evidence Act was rejected because testimonial compulsion arises only where an accused is compelled to incriminate himself. The Court also held that money-laundering proceedings are distinct from the scheduled offence proceedings, and that subsequent material such as communications, records, and statements may justify proceeding against a witness as an accused if prima facie involvement emerges. The investigative steps, including summoning, arrest, and change of status, were upheld.

Validity of Section 50(2) of the Prevention of Money Laundering Act - Protection against self incrimination under Article 20(3) of the Constitution - Right to life and personal liberty under Article 21 of the Constitution - Effect of statements recorded under Section 50 PMLA vis a vis Section 132 of the Indian Evidence Act - Power to summon and change status from witness to accused during ongoing investigation - Concept of proceeds of crime and offence of money laundering under Section 3 PMLAValidity of Section 50(2) of the Prevention of Money Laundering Act - Protection against self incrimination under Article 20(3) of the Constitution - Effect of statements recorded under Section 50 PMLA vis a vis Section 132 of the Indian Evidence Act - Constitutional challenge to Section 50(2) PMLA and its compatibility with Articles 14, 20(3), 21 and Section 132 IEA - HELD THAT: - The Court applied the ratio of the Supreme Court in Vijay Madanlal Choudhary and held that Section 50(2) is a valid investigatory provision which empowers authorised PMLA officers to summon persons for evidence or production of records during investigation or proceedings under the Act. Article 20(3) and Section 132 of the Evidence Act are triggered only when a person is an accused and is being compelled to be a witness against himself; mere recording of statements pursuant to summons under Section 50 does not, by itself, offend Article 20(3). The Court observed that Section 50 operates as an aid to investigation and that sub sections (3) and (4) bring such proceedings within the scope of judicial proceedings for certain penal consequences but do not render the provision unconstitutional. The petitioners' contention that statements under Section 50 attain such finality as to preclude any subsequent investigative step was rejected in view of the statutory scheme and the Supreme Court's authoritative exposition. [Paras 84, 85, 86]Section 50(2) PMLA is constitutionally valid and not ultravires Section 132 IEA or Articles 14, 20(3) and 21.Power to summon and change status from witness to accused during ongoing investigation - Investigative powers and summoning under PMLA as aid to investigation - Whether a person once arrayed as a witness pursuant to statements under Section 50 PMLA can subsequently be summoned/treated as an accused during the same investigation - HELD THAT: - The Court found that proceedings under scheduled offences and under the PMLA are distinct and that investigative agencies may continue inquiry to trace the money trail. A person who was earlier cited as a witness may, on emergence of subsequent facts or material during continuing investigation, be liable to be re characterised as an accused. The Court relied on the statutory scheme of PMLA and the Supreme Court's observations that material revealed during interrogation may implicate the witness in money laundering, permitting change of role pending investigation. The Court noted factual findings (extracted BBM, admissions in Section 50 statements, and inconsistent statements) which prima facie implicated the petitioners in offences under Section 3 PMLA and justified further coercive steps including arrest under Section 19 where reasons to believe are formed. [Paras 73, 80, 83, 85]Change of status from witness to accused during ongoing investigation is permissible where subsequent material emerges; the summonses and actions impugned were not illegal on this ground.Proceeds of crime and offence of money laundering under Section 3 PMLA - Continuance of investigation to trace proceeds of crime - Whether the ongoing investigation, including further summonses and arrests to trace proceeds of crime, was justified and whether the petitions seeking quashing of proceedings should be allowed - HELD THAT: - On the material placed before the Court - BBM messages, forensic extraction reports and admissions in Section 50 statements - the Court concluded that there was prima facie involvement of the petitioners in transactions constituting proceeds of crime and acts amounting to money laundering. The Court observed that the quantification of proceeds had increased during investigation, indicating emergence of further facts and the need to continue investigation to identify and attach the money trail. The submissions urging quashing of the FIRs or permanent relief on account of alleged delay or prior witness status were found not to carry merit in the factual and legal matrix. [Paras 76, 81, 82, 89]Proceedings under PMLA and allied investigation were justified; petitions seeking quashing of summons/FIR are dismissed.Final Conclusion: The constitutional challenge to Section 50(2) PMLA and related pleas were rejected. The Court held that statements under Section 50 are investigatory in nature, do not ipso facto attract Article 20(3)/Section 132 IEA, and that a witness may be re characterised as an accused if subsequent material emerges during continuing investigation. The petitions are dismissed; interim protection previously granted is continued for two weeks.

2024 (7) TMI 1594 - BOMBAY HIGH COURT Money Laundering

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Issues: (i) Whether the petitioner's arrest was illegal for failure to furnish the grounds of arrest in writing in terms of Article 22(1) of the Constitution of India and Section 50 of the Code of Criminal Procedure, 1973. (ii) Whether the remand order dated 23/02/2024 and the subsequent remand orders could be sustained when the arrest was not in conformity with the constitutional and statutory mandate.

Issue (i): Whether the petitioner's arrest was illegal for failure to furnish the grounds of arrest in writing in terms of Article 22(1) of the Constitution of India and Section 50 of the Code of Criminal Procedure, 1973.

Analysis: The right under Article 22(1) requires that an arrested person be informed, as soon as may be, of the grounds of arrest. The Court applied the law declared by the Supreme Court that this communication must be meaningful and, after the later clarification, the grounds of arrest must be furnished in writing. The arrest form and station diary showed only an oral intimation of the reasons for arrest, with no written communication of grounds. That omission amounted to non-compliance with the constitutional and statutory safeguard.

Conclusion: The arrest was illegal and in violation of Article 22(1) of the Constitution of India and Section 50 of the Code of Criminal Procedure, 1973.

Issue (ii): Whether the remand order dated 23/02/2024 and the subsequent remand orders could be sustained when the arrest was not in conformity with the constitutional and statutory mandate.

Analysis: Once the arrest was found to be unconstitutional and contrary to the mandatory procedure, the initial remand and the later remand orders founded on that arrest could not survive. The filing of the charge-sheet did not cure the illegality committed at the stage of arrest and remand.

Conclusion: The remand order dated 23/02/2024 and the subsequent remand orders were unsustainable and were set aside.

Final Conclusion: The petition succeeded, the arrest was declared illegal, the remand orders were quashed, and the petitioner was directed to be released on bail and bonds to the satisfaction of the trial court.

Ratio Decidendi: After the law declared by the Supreme Court, the grounds of arrest must be furnished in writing expeditiously as part of the mandatory safeguard under Article 22(1), and non-compliance vitiates the arrest and all consequential remand orders.

Written grounds of arrest are mandatory; failure to supply them vitiates arrest and all consequential remand orders.
The court held that arrest is vitiated when the grounds of arrest are not furnished in writing as required by Article 22(1) and Section 50 CrPC. Oral intimation alone was held insufficient, so the arrest was illegal. Because the arrest itself was unconstitutional and procedurally defective, the initial remand order and all subsequent remand orders could not be sustained, and the later filing of the charge-sheet did not cure the defect. The petitioner was therefore directed to be released on bail on terms to the trial court's satisfaction.

Legality of arrest of the Petitioner - non-compliance with Article 22(1) of the Constitution of India and Section 50 of the Code of Criminal Procedure, 1973 - whether the subsequent remand orders were null and void due to this alleged illegality? - HELD THAT:- The amendment was effected in the Code of Criminal Procedure, with the very object of zealously safeguarding the inherent fundamental right available to every citizen and it’s protection at every stage, with a corresponding obligation to be discharged by every civilised State. Infraction of these fundamental rights have always been frowned upon by the Constitutional Courts and wherever necessary, for breach of the fundamental right,, compensation has been granted under public law, in addition to the private law remedy available to a person for tortious action and punishments have been imposed on the wrong doer. The Apex Court considered the argument in light of the three-Judge Bench decision in Vijay Madanlal Choudhary [2022 (7) TMI 1316 - SUPREME COURT (LB)], holding that Section 65 of the Act of 2002 predicates that the provision of Code of 1973 shall apply insofar as they are not inconsistent with the provisions in respect of arrest, search and seizure, attachment, confiscation, investigation, prosecution and all other proceedings thereunder. Taking note of Section 19 of the Act of 2022 which prescribes the manner of arrest of a person involved in money laundering, with the inbuilt safeguards to be adhered to, by the authorised officers, such as recording of reasons for belief regarding involvement of the person in the offence of money laundering and, that the reasons shall be recorded in writing and while effecting arrest, the grounds of arrest are to be informed to that person. Reliance was also placed on the decision of the Division Bench of the Bombay High Court in Chhagan Chandrakant Bhujbal Vs. Union of India & Ors. [2016 (12) TMI 1014 - BOMBAY HIGH COURT], where it was held that the grounds of arrest are to be informed to the person arrested and that would mean that they should be communicated at the earliest, but there is no statutory requirement of the grounds of arrest being communicated in writing. Reiterating that right to life and personal liberty is the most sacrosanct fundamental right guaranteed under Articles 20, 21 and 22 of the Constitution of India and any attempt to encroach upon the same would be looked at with all seriousness and to be dealt with strictly, it is specifically held that the right to be informed about the grounds of arrest flows from Article 22(1) of the Constitution of India and any infringement of this fundamental right would vitiate the process of arrest and remand. It is also clarified that mere fact that the charge-sheet has been filed in the matter, would not validate the illegality and its unconstitutionality, committed at the time of arrest of the accused and the grant of initial police custody remand to the accused. Conclusion - The grounds of arrest must be communicated in writing, as a matter of course and without exception, to uphold the fundamental rights of the accused. The Petitioner's arrest is declared illegal and the remand orders set aside. The Petitioner was ordered to be released on bail, subject to furnishing bail bonds to the satisfaction of the trial judge. The Petitioner is entitled for his release and, since, the charge-sheet has been filed against him, his release from custody is directed on furnishing bail and bonds to the satisfaction of the trial Judge - petition disposed off.

2024 (7) TMI 1044 - MADRAS HIGH COURT Money Laundering

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Provisional Attachment Orders under PMLA quashed for lack of scheduled offence registration and investigation
Madras HC quashed Provisional Attachment Orders under PMLA in money laundering case involving illegal sand mining proceeds. Court held respondents lacked jurisdiction as no scheduled offence was registered or investigated by any agency, and proceeds of crime were not determined. Despite evidence of illegal sand mining generating proceeds, attachment cannot proceed without prior registration and investigation of scheduled offence. Court emphasized attachment has serious consequences and cannot be based on assumptions. Respondents failed to specify exact scheduled offence or connect petitioners to any FIRs. Properties cannot be attached merely on premise of ill-gotten gains without established scheduled offence generating proceeds of crime.

Proceeds of crime - provisional attachment - requirement of a registered scheduled offence / FIR - reason to believe - urgent measures exception for provisional attachment - ECIR as an internal document - communication under Section 66(2) - jurisdiction to proceed under PMLARequirement of a registered scheduled offence / FIR - proceeds of crime - jurisdiction to proceed under PMLA - ECIR as an internal document - Whether the respondents could initiate and continue proceedings under the PMLA against the petitioners in the absence of a registered scheduled offence and a determination that the properties are proceeds of crime - HELD THAT: - The Court applied the principles laid down by the Hon'ble Supreme Court in Vijay Madhanlal Choudhary to hold that authorities under the PMLA can act only if there is material to show (i) a scheduled offence has been committed and is registered with the jurisdictional police or pending enquiry/complaint before a competent forum, and (ii) the property in question qualifies strictly as "proceeds of crime"-i.e., derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence. An ECIR is an internal document and does not substitute for a registered FIR or other competent forum determination. While the PMLA permits provisional attachment even in the absence of a preregistered criminal case in exceptional situations requiring urgent measures, that power is not to be exercised routinely or on mere assumption. On the facts, the Court found that the FIRs relied upon were not connected to the petitioners, the respondents had not ascertained or demonstrated the proceeds of crime attributable to the petitioners, and the delayed communication under Section 66(2) indicated lack of any genuine urgency. Consequently, the respondents lacked jurisdiction to continue PMLA action against the petitioners until the statutory prerequisites were satisfied. [Paras 12, 18, 26, 27]Proceedings under the PMLA insofar as they relate to the petitioners cannot continue until a scheduled offence is registered or is pending in a competent forum and the properties are shown to be proceeds of crime; the ECIR alone is insufficient to found jurisdiction.Provisional attachment - reason to believe - urgent measures exception for provisional attachment - communication under Section 66(2) - Whether the Provisional Attachment Orders and the Original Applications for confirmation of attachment against the petitioners were validly passed - HELD THAT: - Applying the legal constraints on exercise of attachment powers under the PMLA, the Court found that the Provisional Attachment Orders were issued without establishing the necessary causal link between the petitioners' properties and proceeds of a scheduled offence, and without any contemporaneous justification of urgency that would permit attachment before registration of a scheduled offence. The respondents had not informed the jurisdictional police of any specific scheduled offence by the petitioners prior to attachment, and the belated letter said to be under Section 66(2) did not demonstrate that urgent measures were required. Given that attachment affects fundamental rights and property, it cannot rest on assumptions or on an ECIR unsupported by requisite statutory foundations. On this basis the Court held the provisional attachments and the attendant original applications for confirmation to be without jurisdiction. [Paras 20, 21, 22, 28]The Provisional Attachment Orders and the Original Applications seeking confirmation of those attachments in respect of the petitioners are quashed.Final Conclusion: The Court quashed the impugned actions: it restrained the respondents from continuing PMLA proceedings against the petitioners until the statutory prerequisites (registration/pending of a scheduled offence and determination of proceeds of crime) are satisfied; the provisional attachment orders and the original applications for confirmation, insofar as they concern the petitioners, are quashed; the writ petitions are allowed and connected miscellaneous petitions closed.

2024 (7) TMI 1170 - MADRAS HIGH COURT Money Laundering

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Provisional attachment order set aside for lack of prior notice to lawful property owner under Section 5
The Madras HC set aside a provisional attachment order where the petitioner, who was the lawful owner of property, was not given prior notice before the attachment was confirmed under Section 5 of the Act. The court held that when records clearly established the petitioner's lawful ownership, the Adjudicating Authority had a duty to issue notice before confirming the provisional attachment. The failure to serve the provisional attachment order under Section 5 and show cause notice under Section 8(1), along with violation of natural justice principles, rendered the attachment legally unsustainable. The petition was allowed.

Provisional attachment under the Prevention of Money-Laundering Act, 2002 - service of notice / show-cause notice under Section 8(1) of the Act - mandatory endorsement of provisional attachment order under Rule 3(2) of the Rules - confirmation of attachment by the Adjudicating Authority - reading 'may' as 'shall' in statutory construction - principles of natural justice guiding the Adjudicating AuthorityProvisional attachment under the Prevention of Money-Laundering Act, 2002 - service of notice / show-cause notice under Section 8(1) of the Act - confirmation of attachment by the Adjudicating Authority - principles of natural justice - Validity of the provisional attachment and its confirmation insofar as the petitioner's property where the petitioner purchased the property prior to attachment and was not served with the provisional order or show-cause notice. - HELD THAT: - The Court found on the materials - registered sale deed dated 28.11.2018, revenue records including patta in the petitioner's name and encumbrance certificate - that the petitioner was the lawful owner prior to the provisional attachment order dated 29.05.2019. The provisional attachment under Section 5(1) and its confirmation by the Adjudicating Authority were effected without service of the provisional attachment order on the petitioner and without issuing the statutory show-cause notice under Section 8(1). Rule 3(2) of the Rules mandates endorsement of a copy of the provisional attachment order to all concerned, including persons in possession. The Court held that failure to give the petitioner the mandatory procedural opportunity, when the records showed ownership, violated the statutory procedure and the principles of natural justice. In the circumstances, the attachment and its confirmation could not be sustained; the petitioner was entitled to restoration of possession free from encumbrances created under the Act. The Court observed that the Directorate remains free to attach other properties belonging to the accused in accordance with the Act if warranted. [Paras 5, 6, 9, 11, 12]The provisional attachment order dated 29.05.2019 and its confirmation insofar as the petitioner's property are quashed and the respondent is directed to hand over possession of the property to the petitioner within one week.Mandatory endorsement of provisional attachment order under Rule 3(2) of the Rules - service of notice / show-cause notice under Section 8(1) of the Act - reading 'may' as 'shall' in statutory construction - principles of natural justice guiding the Adjudicating Authority - Interpretation of the procedural mandate in Section 8(1) read with its provisos and Rules - whether the Adjudicating Authority's service obligation is discretionary or mandatory. - HELD THAT: - The Court examined Section 8(1) and its provisos together with Rules 3(2) and 4 of the Rules and concluded that the procedural obligations to serve notice and to endorse provisional attachment orders are mandatory. Although Section 8(1) uses the word "may", the Court held that when read conjunctively with the provisos (which employ the word "shall") and the Rules (which use "shall"), prudence and statutory coherence require construing the procedural discretion as a mandatory duty. The Court further relied on the requirement that the Adjudicating Authority be guided by principles of natural justice in discharging its functions, and endorsed the approach of a Division Bench of the Bombay High Court to similar effect. Consequently, the absence of service of the statutory notices vitiated the attachment proceedings. [Paras 7, 8, 9]The term 'may' in Section 8(1), when read with its provisos and the Rules, must be construed so as to require service of the statutory notice; the procedural duty to serve the notice is mandatory and non-compliance vitiates the attachment.Final Conclusion: The High Court quashed the provisional attachment dated 29.05.2019 and its confirmation insofar as the petitioner's property, directing the respondent to hand over possession to the petitioner within one week; the writ petition is allowed.

2024 (7) TMI 866 - DELHI HIGH COURT Money Laundering

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Retention and sale of seized movable property under PMLA is permitted where upkeep is disproportionate and safeguards are maintained.
Seized movable property under the Prevention of Money-Laundering Act, 2002 may be retained after confirmation by the Adjudicating Authority, and possession is then to be taken under the prescribed rules. Rule 4(2) of the 2013 Rules allows sale of movable property that is liable to speedy decay or where upkeep is likely to exceed its value, with the sale proceeds to be kept in an interest-bearing fixed deposit. Section 8(6) does not bar this mechanism, because it governs final release after trial rather than interim statutory sale. If the owner does not furnish a fixed deposit receipt for equivalent value under the proviso, sale may proceed with competent approval.

Search and seizure under PMLA and retention under Section 17 - adjudication and confirmation of retention under Section 8 of PMLA - disposal of movable property liable to speedy and natural decay under Rule 4(2) of PMLA Rules 2013 - relationship between Section 8(6) (release on acquittal) and Rule 4(2) procedureSearch and seizure under PMLA and retention under Section 17 - adjudication and confirmation of retention under Section 8 of PMLA - Lawfulness of the procedure followed by the Directorate of Enforcement for seizure, confirmation of retention by the Adjudicating Authority and seeking possession/disposal of the seized vehicles. - HELD THAT: - The Directorate of Enforcement conducted searches under the authority of Section 17 of PMLA and, within the statutory scheme, filed applications under Section 17(4) which were adjudicated by the Adjudicating Authority under Section 8. The Adjudicating Authority granted retention of the vehicles and those orders were not challenged by the petitioner. Once retention was confirmed, the format and manner for taking possession and dealing with the movable properties is governed by Rules framed under Section 73, namely the PMLA (Taking Possession of Attached or Frozen Properties Confirmed by Adjudicating Authority) Rules, 2013. The authorised officer therefore acted in accordance with the statutory scheme by moving the trial court under Rule 4(2) for leave to deal with movable properties liable to decay. No infirmity in the process or validity of the relevant rules has been pointed out by the petitioner. Consequently, the proceedings carried out by the Directorate of Enforcement for possession and disposal of the vehicles conform to the PMLA and the Rules of 2013. [Paras 35, 36, 38, 39, 59]The procedure followed by the Directorate of Enforcement in relation to seizure, confirmation of retention and seeking disposal of the vehicles was lawful and in accordance with PMLA and the Rules of 2013.Disposal of movable property liable to speedy and natural decay under Rule 4(2) of PMLA Rules 2013 - principle of conversion of decaying movable property into fixed deposit to preserve value - Whether the seized luxury vehicles are subject to speedy or natural decay such that Rule 4(2) authorises their sale with leave of the court. - HELD THAT: - Rule 4(2) authorises sale of attached movable property where it is liable to speedy or natural decay or where maintenance expense is likely to exceed its value. The court accepted that vehicles inherently depreciate and, when stored long-term (particularly high-end vehicles in container warehouses), are susceptible to rust, mechanical deterioration and expensive upkeep, thereby leading to loss of value. The coordinate bench authority cited in the judgment supports speedy disposal of vehicles to prevent deterioration. Rule 4(2)'s mechanism of depositing sale proceeds in fixed deposit preserves the monetary value for the accused if later entitled to it. The petitioner did not contest that vehicles are subject to decay nor invoke the proviso to Rule 4(2) by tendering a fixed deposit receipt as security to prevent sale. [Paras 46, 48, 49, 50, 51]The vehicles are subject to natural decay or maintenance burdens within the meaning of Rule 4(2), and the learned ASJ correctly permitted disposal under that rule.Relationship between Section 8(6) (release on acquittal) and Rule 4(2) procedure - protection of accused's monetary interest where property is sold pending adjudication - Whether sale of the vehicles while prosecution/adjudication is pending is inconsistent with Section 8(6) of PMLA which contemplates return of property on acquittal. - HELD THAT: - Section 8(6) provides for release of property if the Special Court finds money laundering has not taken place on conclusion of trial. That provision must be read in the context of Section 8(4) which mandates that possession be taken in the manner prescribed by rules. Rule 4(2) permits sale of movables liable to decay and requires deposit of sale proceeds in a government repository or fixed deposit. Accordingly, sale under Rule 4(2) does not negate the entitlement under Section 8(6); if accused are later found entitled to the property, they receive the sale proceeds (kept in fixed deposit) rather than deteriorated goods. The petitioner did not invoke the proviso to Rule 4(2) by offering a fixed deposit receipt to avoid sale. The court therefore found no conflict between Rule 4(2) disposal and Section 8(6). [Paras 46, 48, 50, 51]Sale of the vehicles under Rule 4(2), with proceeds to be preserved, is not contrary to Section 8(6); on acquittal the accused would be entitled to the monetary proceeds deposited as required by the Rules.Final Conclusion: Writ petition dismissed; the Court found the seizure, retention and sale procedure complied with PMLA and the Rules of 2013, the vehicles were liable to decay permitting disposal under Rule 4(2), and sale is not inconsistent with Section 8(6) provided sale proceeds are preserved; the Directorate of Enforcement directed to deposit the entire proceeds in an interest-bearing fixed deposit.

2024 (10) TMI 1071 - TELANGANA HIGH COURT Money Laundering

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Issues:
Petition seeking to set aside orders confirming provisional attachment of property under PML Act, challenge to the adjudicating authority's competence, availability of alternative remedy under PML Act.

Analysis:
The petitioner, a Non-Resident Indian, challenged the provisional attachment of his property under the Prevention of Money Laundering Act, 2002 (PML Act). The petitioner was not named as an accused in the FIRs related to money laundering offenses, yet his property was attached. The petitioner contended that the adjudicating authority lacked the necessary legal expertise to issue the attachment order. The respondent argued that the petitioner should have pursued the statutory appeal provided under Section 26 of the PML Act instead of filing a writ petition.

The court examined Section 8 of the PML Act, which outlines the adjudication process. It was noted that the Adjudicating Authority confirmed the provisional attachment order based on a complaint filed under the PML Act. The court highlighted that an appeal lies under Section 26 of the PML Act against such orders. Citing legal precedents, the court emphasized the importance of exhausting alternative remedies before seeking relief through writ petitions. The court referred to cases such as United Bank of India v. Satyawati Tondon and Commissioner of Income Tax v. Chhabil Dass Agarwal to underscore the principle of exhausting statutory remedies before approaching the court.

Considering the complexity of the issues involved and the availability of a statutory appeal under the PML Act, the court held that the petitioner should pursue the remedy of filing an appeal before the Appellate Tribunal. The court disposed of the writ petition, directing the petitioner to avail the statutory appeal process under Section 26 of the PML Act. The court emphasized the need to adhere to the legal principle of exhausting alternative remedies before seeking judicial intervention. The judgment underscored the significance of following established legal procedures and mechanisms for redressal of grievances under the relevant statutes.

Writ petition dismissed as statutory appeal under Section 26 PMLA available for challenging provisional attachment order
The Telangana HC disposed of a writ petition challenging a money laundering order confirming provisional attachment of immovable property. The court held that since an effective alternative remedy of statutory appeal under Section 26 of the Prevention of Money Laundering Act was available before the Appellate Tribunal, the writ petition was not maintainable. Following Supreme Court precedents in United Bank of India v. Satyawati Tondon and PHR Invent Educational Society vs. UCO Bank, the HC relegated the petitioner to pursue the statutory appeal mechanism, noting the complex evidentiary issues involved required determination by the appropriate appellate forum.

2024 (7) TMI 1617 - HIMACHAL PRADESH HIGH COURT Money Laundering

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Humanitarian interim bail allowed for attendance at last rites, where temporary release was sought for a limited period.
Interim bail may be justified on humanitarian grounds where the applicant seeks temporary release to attend the last rites and post-cremation rites of a deceased close relative. The Court treated the death of the applicant's uncle and the limited duration of the request as exceptional circumstances, and noted the applicant's willingness to comply with conditions. On that basis, temporary release was allowed subject to terms imposed by the Court.

2024 (7) TMI 1577 - KERALA HIGH COURT Money Laundering

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Predicate offence closure can justify quashing an ECIR and related money-laundering proceedings.
Closure of the predicate offence by acceptance of the final report by the Magistrate was treated as removing the foundation for continuation of money-laundering proceedings based on alleged proceeds of crime. On that reasoning, an ECIR cannot be sustained where the scheduled offence no longer survives, and the inherent power under Section 482 of the Code of Criminal Procedure may be invoked to prevent abuse of process and give effect to the closure order. The text states that, in such circumstances, the aggrieved party may seek quashing of the ECIR and consequential proceedings, and that the ECIR and all proceedings pursuant to it were liable to be quashed.

Inherent powers under Section 482 Cr.P.C - quashing of ECIR - predicate offence requirement for PMLA investigation - closure of ECIR upon final report/acceptance by Magistrate - abuse of process and securing ends of justicePredicate offence requirement for PMLA investigation - closure of ECIR upon final report/acceptance by Magistrate - Continuation of Enforcement Directorate investigation after the predicate offence investigation ended in a final report accepted by the Magistrate - HELD THAT: - The Court found that an offence under the Prevention of Money Laundering Act can arise only if a scheduled (predicate) offence exists; where the predicate offence investigation has ended in a final report referring the matter as civil and that final report has been accepted by the Magistrate, the predicate offence ceases to exist (paras 5-6). Because ED's investigation under the PML Act depends on the existence of a predicate offence, the ED cannot validly continue investigation into proceeds of crime allegedly linked to a predicate offence that has been closed. The final report accepted by the Chief Judicial Magistrate is an order under the Cr.P.C and, in consequence, the ED ought to have closed the ECIR when the predicate proceeding terminated (paras 6, 11). The Court considered and rejected the contention that an ECIR is immune from challenge under Section 482 Cr.P.C in such circumstances (paras 7, 10). Precedents were noted to support the proposition that where the predicate offence is quashed or the accused is acquitted/discharged, money-laundering proceedings predicated on that offence cannot subsist (para 5), and an ECIR may be quashed where necessary to give effect to the Cr.P.C order (paras 11-12). [Paras 5, 6, 10, 11, 12]Since the predicate offence ceased to exist upon acceptance of the final report by the Magistrate, ED could not continue its investigation and the ECIR had to be closed.Inherent powers under Section 482 Cr.P.C - quashing of ECIR - abuse of process and securing ends of justice - Power of the High Court under Section 482 Cr.P.C to quash an ECIR and related proceedings to give effect to a Cr.P.C order - HELD THAT: - The Court held that Section 482 Cr.P.C confers broad inherent jurisdiction on the High Court to make orders necessary to give effect to any Cr.P.C order, to prevent abuse of process, or to secure ends of justice (para 8). An ECIR, though an internal administrative document, can be quashed by the High Court in exercise of Section 482 where its continued existence would contravene or frustrate an order under the Cr.P.C-for example, where the predicate offence has been finally closed and the ED refuses to close the ECIR (paras 8, 10-11). The Court relied on established categories in which inherent power should be exercised to quash proceedings (para 9) and referred to precedent where ECIR was quashed following acquittal in the predicate offence (para 12). The Court therefore concluded that it was entitled to quash the ECIR and ancillary proceedings to give full effect to the Magistrate's order accepting the final report. [Paras 8, 9, 10, 11, 12]The High Court may, under its inherent powers under Section 482 Cr.P.C, quash an ECIR and proceedings thereunder where necessary to give effect to a Cr.P.C order and to prevent abuse of process; accordingly the ECIR could be quashed in the present case.Final Conclusion: ECIR/KCZO/05/2019 and all proceedings pursuant thereto are quashed because the predicate offence terminated on acceptance of the final report by the Chief Judicial Magistrate and the Enforcement Directorate could not lawfully continue investigation; Crl.M.C is allowed.

2024 (7) TMI 1525 - MADHYA PRADESH HIGH COURT Money Laundering

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Issues: Whether the applicant was entitled to regular bail in a prosecution under the Prevention of Money-Laundering Act, 2002 where the arresting authority had not clearly recorded the reasons to believe under Section 19 and the effect of such non-compliance on the rigour of Section 45.

Analysis: The application arose from allegations of laundering proceeds of crime generated from the predicate offences. The decisive question was whether the arrest complied with the statutory mandate under Section 19 of the Prevention of Money-Laundering Act, 2002, which requires the authorised officer to have material in possession and to record in writing the reasons to believe that the person is guilty of the offence. The arrest order did not disclose the basis on which such belief was formed, and the accompanying grounds relied largely on material gathered in the predicate case and on alleged non-cooperation. The Court relied on the settled position that non-compliance with Section 19 is mandatory in character and that such non-compliance benefits the arrested person. It further treated the statutory safeguards under Section 19 as closely linked with the bail restrictions under Section 45, and held that where the arrest itself is vitiated for failure to comply with Section 19, the accused cannot be denied bail merely by invoking the twin conditions in Section 45.

Conclusion: The applicant was held entitled to bail because the arrest under Section 19 was not shown to be supported by the required recorded reasons to believe.

Final Conclusion: Regular bail was granted on the footing that the mandatory arrest safeguards under the money-laundering law had not been complied with, and the Court treated that defect as sufficient to justify release on bail.

Ratio Decidendi: Non-compliance with the mandatory requirements of Section 19 of the Prevention of Money-Laundering Act, 2002, particularly the absence of recorded reasons to believe based on material in possession, enures to the benefit of the arrested person and bears directly on the grant of bail despite the restrictions under Section 45.

Mandatory reasons to believe under money-laundering law shape arrest validity and bail relief despite twin-condition restrictions.
Section 19 of the Prevention of Money-Laundering Act requires the authorised officer to have material in possession and record written reasons to believe before arrest. Where the arrest order does not disclose that basis and relies mainly on predicate-case material or alleged non-cooperation, the arrest is treated as non-compliant with the mandatory safeguard. That defect benefits the arrested person and affects the bail analysis: the Section 45 twin conditions cannot be used to deny relief when the arrest itself is vitiated for failure to comply with Section 19. The document therefore explains that recorded reasons to believe are a mandatory precondition to lawful arrest under the money-laundering regime.

Validity of arrest under Section 19 of the Prevention of Money Laundering Act, 2002 - Mandatory requirement of recording reasons for arrest and material basis for belief - Consequences of non compliance of Section 19 on entitlement to bail under Section 45 of PMLA - Applicability of the twin conditions for grant of bail under Section 45 of PMLA - Benefit to accused from breach of statutory arrest formalities and invocation of Section 62Validity of arrest under Section 19 of the Prevention of Money Laundering Act, 2002 - Mandatory requirement of recording reasons for arrest and material basis for belief - Benefit to accused from breach of statutory arrest formalities - Arrest under Section 19 of PMLA, 2002 was vitiated for failure to record reasons and the material basis for the belief of guilt. - HELD THAT: - The arrest order dated 13.01.2024 did not specify the material on which the authorized officer formed the requisite reason to believe that the applicant was guilty under the PMLA. Many grounds relied upon post date or material gathered by CBI, and the arrest order did not independently set out reasons in writing as mandated by Section 19. The Court held that exercise of the discretionary power to arrest under Section 19 must be preceded by recording of reasons based on material which justify the belief of guilt; mere non cooperation or reliance solely on predicate investigation is insufficient. In absence of stated material and reasons, the arrest was held to be vitiated and the statutory non compliance enured to the benefit of the arrested person. [Paras 9]Arrest is vitiated for non compliance with Section 19 of the PMLA, 2002.Consequences of non compliance of Section 19 on entitlement to bail under Section 45 of PMLA - Applicability of the twin conditions for grant of bail under Section 45 of PMLA - Judicial scrutiny of material and satisfaction of twin conditions - Non compliance of Section 19 affects the rigour of consideration under Section 45 and entitled the applicant to be released on bail in the facts of the case. - HELD THAT: - The Court explained the inter linkage between Section 19 and Section 45: the authorised officer must record reasons to believe guilt which then informs the Court's satisfaction under the twin conditions of Section 45. Where Article 19 formalities are not complied with, the stringent bail bar under Section 45 cannot be mechanically applied. The Court observed that there was no material placed to show necessity of custodial interrogation, assets had been seized, no application for further custodial interrogation was made, and no basis was shown to apprehend commission of further offences if bail were granted. The Court also relied on the principle that non compliance with Section 19 enures to the benefit of the arrested person as explained in higher authority. On these facts, the Court held that the rigour of Section 45 did not bar grant of bail. [Paras 10, 11, 12]Because Section 19 was not complied with and no material justified continued custody, the applicant was entitled to bail despite the provisions of Section 45.Final Conclusion: Bail application allowed. Applicant directed to be released on furnishing bail bond and sureties and subject to usual conditions prescribed by law and the Court.

2024 (7) TMI 1523 - KARNATAKA HIGH COURT Money Laundering

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Petitioner discharged from money laundering case lacking evidence of knowledge that transferred funds were crime proceeds under PMLA Section 3
Karnataka HC allowed petition for discharge in money laundering case involving siphoning of KSAMB funds through forged documents and bank transfers. Court held that petitioner, not accused in scheduled offence, cannot be prosecuted under PMLA Section 3 without evidence of knowledge that transferred funds were crime proceeds. Citing SC precedent, court found no prima facie evidence of petitioner knowingly assisting in concealing proceeds or facilitating their use. Prosecution failed to establish petitioner's active involvement in laundering process. Continuing proceedings would constitute abuse of process. Discharge granted.

Offence of money laundering (knowledge or knowingly assisted in concealment, possession, acquisition, use, or projecting as untainted property) - presumption of possession under Section 24 of the PMLA - continuing offence doctrine under the PMLA - prima facie material to sustain prosecution/charge - abuse of process - quashing of criminal proceedings for want of prima facie caseOffence of money laundering (knowledge or knowingly assisted in concealment, possession, acquisition, use, or projecting as untainted property) - prima facie material to sustain prosecution/charge - Existence of prima facie evidence that the petitioner knowingly assisted in concealing or utilising proceeds of crime so as to constitute the offence of money laundering. - HELD THAT: - The Court examined the complaint, the flowchart attributing roles to other accused, and the petitioner's statement recorded under the Act. It found that the prosecution did not adduce any prima facie evidence that the petitioner had knowledge that the funds credited to his account were proceeds of a scheduled offence, nor that he knowingly assisted accused No.5 in concealing or transferring those proceeds to project them as untainted property. The petitioner's statement that receipts were without his knowledge and that transfers were made on instructions of accused No.5, together with the absence of specific allegations linking the petitioner to the scheduled offence, led the Court to conclude there was insufficient material to connect him to the laundering activity. Applying established principles that a charge must rest on some prima facie material connecting the accused with the alleged crime, the Court held that continuation of proceedings in the absence of such material would be an abuse of process. [Paras 19, 20, 25]No prima facie evidence existed to show the petitioner knowingly assisted in concealment or utilisation of proceeds of crime; the allegation of money laundering against him was unsustainable.Presumption of possession under Section 24 of the PMLA - abuse of process - quashing of criminal proceedings for want of prima facie case - Whether the petitioner, not shown to be involved in the scheduled offence, must rebut the statutory presumption and whether proceedings should be permitted to continue in the absence of sufficient allegations. - HELD THAT: - The Court noted that the statutory presumption under Section 24 requires the accused to rebut it only when there is sufficient evidence or specific allegation indicating that the accused knowingly assisted in concealing proceeds of crime. In the present case, since the prosecution failed to produce prima facie material of knowledge or knowing assistance, there was no occasion to require the petitioner to discharge that presumption. Reliance on precedents was considered: while possession or transfers may give rise to investigation, the decision to prosecute must be preceded by prima facie material connecting the accused to the offence. Where such material is lacking, permitting the trial to proceed would amount to an abuse of the court's process, and the appropriate remedy is quashing the proceedings at the pre-trial stage. [Paras 24, 25, 26]In the absence of sufficient evidence to invoke the presumption, the petitioner was not obliged to rebut it; continuation of proceedings would be an abuse of process and therefore the complaint/charges were liable to be quashed.Final Conclusion: The petition succeeds. The High Court quashed Spl.C.C.No.731/2023 against the petitioner, concluding that the prosecution has not produced prima facie material to show he knowingly assisted in concealing or utilising proceeds of crime, and that continuation of the proceedings would be an abuse of the judicial process.

2024 (8) TMI 156 - MADRAS HIGH COURT Money Laundering

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Money-laundering proceedings fail when the scheduled offence is quashed, removing the foundation for the ECIR.
Money-laundering proceedings under the Prevention of Money Laundering Act, 2002 cannot survive where the predicate scheduled offence has been quashed by a court of competent jurisdiction. The governing principle applied is that the offence under Section 3 is dependent on the existence of a live scheduled offence, so once the underlying criminal case no longer survives, the foundation for the ECIR and related prosecution is removed. On that basis, the Madras HC held that the ECIR proceedings against the petitioner could not be sustained and quashed them.

Dependency of PMLA prosecution on predicate offence - Quashing of predicate offence bars money laundering proceedings - Finality of Supreme Court quash order - Standalone nature of PMLA offence (contention)Dependency of PMLA prosecution on predicate offence - Quashing of predicate offence bars money laundering proceedings - Finality of Supreme Court quash order - Validity of ECIR/PMLA proceedings against the petitioner after quash of the predicate criminal proceedings by the Supreme Court - HELD THAT: - The Court examined whether proceedings under the Prevention of Money Laundering Act, 2002 could be sustained against the petitioner when the predicate criminal proceedings (C.C. No.14 of 2019) were quashed by the Hon'ble Supreme Court by order dated 23.04.2024. The respondent relied on the contention that PMLA is a standalone offence and prosecution under it can proceed irrespective of the accused's status in the predicate offence. The Court, however, followed the binding principle in Vijay Madanlal Choudhary v. Union of India to hold that an offence under Section 3 of the PMLA is dependent on illegal gain of property resulting from a scheduled offence and that authorities cannot prosecute on a notional basis without a registered scheduled offence pending enquiry/trial. Where the criminal case constituting the scheduled offence is quashed by a competent court, there can be no offence of money laundering against the person in respect of that property. Applying that principle to the present facts, and having regard to the Supreme Court's quash order which specifically quashed the proceedings against the petitioner, the Court concluded that the ECIR proceedings recorded in ECIR No.CEZO I/35/2020 could not be sustained insofar as the petitioner is concerned. [Paras 7, 8]ECIR No.CEZO I/35/2020 dated 22.06.2020 quashed insofar as the petitioner is concerned.Final Conclusion: The petition is allowed and the Enforcement Directorate proceedings recorded in ECIR No.CEZO I/35/2020 dated 22.06.2020 are quashed in respect of the petitioner, in view of the Supreme Court's quash of the predicate criminal proceedings and the principle that PMLA prosecution cannot survive after quashing of the scheduled offence.

2024 (7) TMI 189 - DELHI HIGH COURT Money Laundering

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PMLA bail and twin conditions: prima facie laundering material justified refusal of regular bail.
Regular bail under the Prevention of Money Laundering Act depends on satisfaction of the twin conditions in Section 45: reasonable grounds to believe the accused is not guilty and is not likely to commit any offence while on bail. At the bail stage, seized diary entries, sale agreements, bank statements, and Section 50 statements were treated as sufficient prima facie material linking the applicants to laundering through immovable properties, including acquisition, concealment, and projection of proceeds of crime as untainted. The applicant's conduct in relation to interim bail was also viewed as doubtful, and the risk of misuse of liberty, tampering with evidence, and influencing witnesses was considered relevant to refusal of bail.

Twin conditions under Section 45 of the Prevention of Money Laundering Act - reasonable grounds for believing accused is not guilty and not likely to commit offence while on bail - admissibility and evidentiary value of statements under Section 50 of PMLA at bail stage - prima facie satisfaction for denial of bail in money laundering cases - proceeds of crime and concealment through benami/false agreements - reliance on seized documentary and electronic material (diary, bank statements, sale agreements) for prima facie caseTwin conditions under Section 45 of the Prevention of Money Laundering Act - reasonable grounds for believing accused is not guilty and not likely to commit offence while on bail - prima facie satisfaction for denial of bail in money laundering cases - Whether the applicants satisfied the twin conditions of Section 45 PMLA entitling them to regular bail - HELD THAT: - The Court applied Section 45 PMLA and the guiding principles from higher courts that the twin conditions require the Court to be satisfied on reasonable grounds that the accused is not guilty and not likely to commit an offence while on bail. The Court examined the material collected during investigation - including seized diaries, bank statements, sale agreements and statements recorded under Section 50 - and formed a prima facie view that the material indicates involvement of the applicants in acquisition/concealment/projection of alleged proceeds of crime. Having regard to the nature and volume of the material placed on record and the statutory presumption under the Act, the Court concluded that the twin conditions are not fulfilled in favour of the applicants and therefore the bar under Section 45 operates to refuse bail in the present case. [Paras 23, 31, 33, 34, 36]The applications for regular bail are dismissed as the Court is not satisfied, on the material before it, that the twin conditions under Section 45 PMLA are met.Admissibility and evidentiary value of statements under Section 50 of PMLA at bail stage - reliance on seized documentary and electronic material (diary, bank statements, sale agreements) for prima facie case - Whether statements recorded under Section 50 PMLA and seized documentary/electronic material can be considered for forming a prima facie view at the bail stage - HELD THAT: - The Court held that statements under Section 50 PMLA are admissible and may be relied upon at the bail stage to assess whether a prima facie case exists. The Court noted binding and persuasive precedents recognising the admissibility of Section 50 statements and observed that such statements, together with other corroborating material (seized diary, bank statements, sale agreements, digital evidence), can form the basis of a prima facie satisfaction required under Section 45. The Court rejected the contention that Section 50 statements and the diary could not be considered at the stage of deciding bail. [Paras 31, 32, 33]Statements under Section 50 PMLA and corroborating documentary/electronic material can be considered to form a prima facie view for the purposes of Section 45 and were relied upon by the Court.Misleading the court on interim bail grounds - likelihood of tampering with evidence or influencing witnesses as bail consideration - Whether the conduct of applicant Daud Nasir in securing interim bail on medical grounds (and the later revealed facts) adversely affects his entitlement to regular bail - HELD THAT: - The Court examined material concerning the interim bail granted to the applicant for his wife's alleged major surgery at Fortis Hospital and subsequent correspondence and records which showed the surgery was not conducted as represented and that a different, minor surgery was later performed at a different hospital. The Court found that the applicant had misled the Court in obtaining interim bail and that this conduct cast doubt on his credibility and increased the risk of misuse of liberty, including potential tampering with evidence or influencing witnesses. This finding weighed against granting regular bail to that applicant. [Paras 15, 35]The Court found that Daud Nasir misled the Court regarding interim bail grounds, and such conduct militates against granting regular bail.Proceeds of crime and concealment through benami/false agreements - reliance on seized documentary and electronic material (diary, bank statements, sale agreements) for prima facie case - Whether the material seized (white diary, sale agreements, bank statements) prima facie indicates that the properties were purchased by the applicants using alleged proceeds of crime concealed via alternate sale agreements - HELD THAT: - The Court reviewed the seizure of a white diary, two differing sale agreements for the same properties (one showing a larger consideration alleged to be genuine and another showing a lower sum alleged to be fabricated), and bank statements of sellers and purchasers. On a prima facie assessment, the Court found that entries in the diary, corroborative bank transactions, and the recovery of the higher value sale agreement support the prosecution's case that the larger transaction (alleged Rs. 36 crore) reflects the actual consideration and that the lesser agreement was used to conceal the cash component allegedly constituting proceeds of crime. The Court held that this material, at the stage of bail, supplies reasonable grounds against the applicants. [Paras 26, 29, 30, 33, 34]On the material before it, the Court found prima facie evidence suggesting the properties were acquired with amounts that may constitute proceeds of crime and that false/alternate agreements were used to conceal the true transactions, which weighs against bail.Final Conclusion: On the material placed before it the High Court formed a prima facie view that the twin conditions of Section 45 PMLA were not satisfied in favour of the applicants; statements under Section 50 PMLA and corroborative documentary/electronic evidence were held admissible and relied upon at the bail stage; additionally, the conduct of one applicant in relation to interim bail undermined his credibility. Accordingly, the applications for regular bail were dismissed.

2024 (7) TMI 115 - DELHI HIGH COURT Money Laundering

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Issues: (i) whether the proceedings under the Prevention of Money Laundering Act, 2002 should be stayed pending the petitioner's appeal against conviction in the predicate offence; (ii) whether the challenge based on absence of proceeds of crime could justify staying the trial; (iii) whether the PMLA could be said to apply retrospectively to the scheduled offence in the facts of the case; and (iv) whether prosecution under the PMLA would amount to double jeopardy or otherwise be ultra vires because of overlap with the predicate offence.

Issue (i): whether the proceedings under the Prevention of Money Laundering Act, 2002 should be stayed pending the petitioner's appeal against conviction in the predicate offence.

Analysis: The conviction in the predicate offence had already been recorded by the trial court and had not been stayed. The pendency of the appeal, by itself, did not erase the existing finding of conviction. Since the predicate offence stood established for the present purpose, the continuation of the PMLA trial could not be halted merely because the appeal against conviction was still pending.

Conclusion: The request to stay the PMLA proceedings was rejected on this ground.

Issue (ii): whether the challenge based on absence of proceeds of crime could justify staying the trial.

Analysis: The existence of proceeds of crime and the applicability of Section 3 of the Prevention of Money Laundering Act, 2002 were treated as matters for trial to be determined by the Special Court on evidence. The complaint and charge order had already proceeded on the basis of an independent PMLA investigation and provisional attachment, and the Court declined to treat the absence of proceeds of crime as a ground for stay at that stage.

Conclusion: The request to stay the PMLA proceedings was rejected on this ground as well.

Issue (iii): whether the PMLA could be said to apply retrospectively to the scheduled offence in the facts of the case.

Analysis: The Court relied on the principle that money laundering is a continuing offence and is not dependent on the date of the predicate offence. The relevant date is when the person engages in the process or activity connected with proceeds of crime. The later inclusion of the scheduled offence in the PMLA schedule did not, by itself, bar prosecution where the alleged dealing with proceeds of crime continued after the offence became a scheduled offence.

Conclusion: The objection based on retrospective applicability was rejected.

Issue (iv): whether prosecution under the PMLA would amount to double jeopardy or otherwise be ultra vires because of overlap with the predicate offence.

Analysis: The Court treated money laundering as an independent offence concerned with the process or activity connected with proceeds of crime. The offence under the PMLA is distinct from the scheduled offence, and the inclusion of the predicate offence in the schedule did not render the statute unconstitutional or offend the protection against double jeopardy on the facts presented.

Conclusion: The double jeopardy and ultra vires challenge was rejected.

Final Conclusion: The Court found no basis to interdict the pending PMLA trial and upheld the continuation of the proceedings before the Special Court.

Ratio Decidendi: Money laundering is a continuing and independent offence centered on the process or activity connected with proceeds of crime, so the pendency of an appeal in the predicate offence or the timing of that offence does not, by itself, warrant a stay of PMLA proceedings.

Money laundering remains an independent continuing offence; pending appeal in the predicate case does not justify a PMLA stay.
Money laundering under the PMLA is treated as a continuing and independent offence centred on the process or activity connected with proceeds of crime. Pending appeal against conviction in the predicate offence does not, by itself, justify staying PMLA proceedings where the conviction has not been stayed. Questions about the existence of proceeds of crime and the applicability of Section 3 are matters for trial before the Special Court on evidence. The later inclusion of the scheduled offence in the PMLA schedule does not bar prosecution if the alleged dealings with proceeds of crime continued after it became a scheduled offence. Overlap with the predicate offence does not, on these facts, create double jeopardy or invalidate the prosecution.

Stay of criminal proceedings - predicate offence - proceeds of crime - continuing offence - retrospective application of penal statute - independence of money-laundering offence - double jeopardyStay of criminal proceedings - predicate offence - Whether the trial under PMLA must be stayed pending disposal of the appeal against conviction in the predicate offence. - HELD THAT: - The Court held that the petitioner's argument that the PMLA trial must be stayed because his appeal against conviction in the predicate offence is pending is without merit. The trial court conviction dated 27.09.2016 remains operative and has not been stayed; therefore, the commission of the predicate offence stands established for the purposes of the PMLA proceedings. Consequently, the pendency of the appeal does not justify a stay of the PMLA trial, and the Special Court proceedings cannot be stayed on this ground. [Paras 20]Stay of the PMLA trial was not warranted merely because the appeal against conviction in the predicate offence is pending.Proceeds of crime - Whether absence of an identified 'proceeds of crime' invalidates the PMLA prosecution at the stage when cognizance and framing of charges have already occurred. - HELD THAT: - The Court observed that determination of whether any property constitutes 'proceeds of crime' under the PMLA is a matter to be decided at trial. The learned Special Court had taken cognizance and framed charges after noting that independent investigation under PMLA revealed acquisition of properties projected as untainted money and that provisional attachment had been made. Given that cognizance and framing of charges stand and no stay was granted earlier, the Court declined to stay the trial on the ground that proceeds of crime are not identified. [Paras 21]The question whether particular property constitutes 'proceeds of crime' is for trial; it does not justify staying the PMLA proceedings at this stage.Continuing offence - retrospective application of penal statute - Whether PMLA can be applied where the predicate offence predates its inclusion as a scheduled offence and whether money laundering is a continuing offence permitting prosecution. - HELD THAT: - Relying on the ratio of the Hon'ble Apex Court, the Court held that money laundering can constitute a continuing offence and is not dependent on the date of commission of the scheduled offence; the relevant date is when a person indulges in processes or activities connected with proceeds of crime. The Court noted that a review against the Apex Court's decision had been filed but no stay or direction had been issued, so the binding precedent stands. Accordingly, the argument that PMLA is inapplicable because the check period predates inclusion of Section 13 PC Act in the schedule was rejected for the purpose of resisting continuation of trial. [Paras 23, 24]PMLA prosecution is maintainable in respect of continuing dealings with proceeds of crime even if the predicate offence was committed prior to its inclusion in the schedule; this does not warrant a stay.Double jeopardy - independence of money-laundering offence - Whether prosecuting the petitioner under PMLA after conviction under the PC Act would amount to double jeopardy or violate Article 20(2). - HELD THAT: - The Court applied the Apex Court's teaching that the offence of money laundering is independent and addresses the process or activity connected with proceeds of crime and is distinct from the scheduled offence itself. Section 13 PC Act being a scheduled offence and not being declared unconstitutional, prosecution under PMLA does not amount to double jeopardy merely because the predicate offence has been prosecuted; the distinct elements and independent aim of Section 3 of PMLA mean both prosecutions can validly proceed. [Paras 25, 26, 27]Continuation of PMLA proceedings does not amount to double jeopardy and is not barred by Article 20(2) in the circumstances of this case.Final Conclusion: The applications for stay of the PMLA trial were dismissed: conviction in the predicate offence remains operative and does not mandate a stay; whether property amounts to 'proceeds of crime' is a trial issue; money laundering is a continuing and independent offence permitting prosecution despite the temporal gap with the predicate offence; and invoking PMLA in addition to the PC Act does not constitute double jeopardy.

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