Retrospective PMLA liability barred where no surviving scheduled offence exists and predicate proceedings have been closed.

Money-laundering proceedings under the PMLA require proceeds of crime arising from a scheduled offence, and the penal regime cannot operate retrospectively. The Delhi High Court noted that the alleged transactions pre-dated the inclusion of the relevant offences in the PMLA schedule, so Article 20(1) barred ex post facto liability and the proceedings could not rest on that basis. It further noted that the predicate FIR had been closed or quashed qua the petitioner, leaving no surviving scheduled offence on the existing record. On that footing, the ECIR and consequential proceedings were quashed qua the petitioner, while liberty was preserved for fresh action if future lawful investigation establishes money-laundering.

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Issues: (i) Whether proceedings under the Prevention of Money Laundering Act, 2002 could continue when the alleged predicate offences were stated to have occurred before the relevant offences were brought within the PMLA schedule; (ii) Whether the ECIR and consequential proceedings could survive after the predicate criminal proceedings were closed or quashed qua the petitioner.

Issue (i): Whether proceedings under the Prevention of Money Laundering Act, 2002 could continue when the alleged predicate offences were stated to have occurred before the relevant offences were brought within the PMLA schedule.

Analysis: The offence of money-laundering under Section 3 of the Prevention of Money Laundering Act, 2002 is linked to proceeds of crime derived from a scheduled offence. The Court noted that the alleged transactions related to the period November 2005 to December 2006, whereas the offences invoked as scheduled offences were inserted in the PMLA schedule only with effect from 01.06.2009. It held that criminal liability cannot be applied retrospectively and that Article 20(1) bars ex post facto penal consequences.

Conclusion: The PMLA proceedings could not be sustained on the basis of alleged conduct occurring before the relevant offences became scheduled offences.

Issue (ii): Whether the ECIR and consequential proceedings could survive after the predicate criminal proceedings were closed or quashed qua the petitioner.

Analysis: The Court noted that the CBI closure report had been accepted, the proceedings arising from the predicate FIR had been quashed qua the petitioner by the High Court of Uttarakhand, and the material on record did not establish a surviving predicate offence against the petitioner on the facts then available. Since money-laundering proceedings depend upon proceeds of crime arising from a scheduled offence, the continuation of the ECIR against the petitioner lacked foundation on the existing record. At the same time, the Court preserved liberty for fresh action if a future investigation lawfully established money-laundering.

Conclusion: The ECIR and consequential proceedings were quashed qua the petitioner.

Final Conclusion: The decision gives primacy to the absence of a valid scheduled offence on the relevant facts and to the prohibition against retrospective criminal liability, while leaving open the possibility of fresh proceedings if future lawful investigation so warrants.

Ratio Decidendi: Proceedings for money-laundering cannot be maintained unless they are founded on proceeds of crime arising from a scheduled offence, and the penal regime cannot be applied retrospectively to conduct predating the relevant statutory inclusion.

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