Money-laundering liability and retrospective criminalisation bar prosecution of a successor company without pleaded knowing involvement.

A successor company could not be proceeded against for alleged money-laundering acts attributed to the former management where the record showed the company lacked knowledge or active involvement and was treated as a victim of the fraud rather than the perpetrator. Liability under the money-laundering framework requires direct or indirect involvement in the handling and projection of proceeds of crime, which was not established on the complaint. The later-added IPC provisions and corresponding schedule entries also could not be applied to conduct alleged to have occurred before their insertion, as criminal liability cannot be created retrospectively. The complaint and cognizance against the petitioner company were therefore unsustainable.

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Issues: (i) Whether the successor company could be proceeded against for the alleged money-laundering acts of the former management of the transferor company. (ii) Whether the amended IPC provisions and the corresponding schedule entries under the money-laundering law could be invoked for acts allegedly committed before their insertion.

Issue (i): Whether the successor company could be proceeded against for the alleged money-laundering acts of the former management of the transferor company.

Analysis: The charge was founded on the allegation that funds of the transferor company were infused through front companies and treated as proceeds of crime. The governing scheme of the money-laundering law requires a person to be directly or indirectly involved in a process connected with proceeds of crime and to project them as untainted property. The material showed that the relevant transactions were carried out by the former management without the knowledge of the company, and the record treated the company as a victim of the fraud rather than the perpetrator. Corporate liability under the statute could not be fastened merely because the company was later revived and amalgamated, especially when the complaint did not establish the company's knowledge or active involvement in the alleged laundering activity.

Conclusion: The successor company could not be prosecuted on the facts alleged, and the proceeding against it was unsustainable.

Issue (ii): Whether the amended IPC provisions and the corresponding schedule entries under the money-laundering law could be invoked for acts allegedly committed before their insertion.

Analysis: The alleged conduct took place before June 2009, whereas the IPC provisions relied on by the Enforcement Directorate were brought into the schedule only by later amendment, except for forgery under Section 467. Criminal liability cannot be created retrospectively, and the statutory scheme did not permit prosecution for an act that was not a scheduled offence when it was allegedly committed. Since the complaint did not make out forgery by the company itself, the sole pre-existing entry in the schedule was not enough to sustain the prosecution. In these circumstances, the invocation of the later-added penal provisions offended the prohibition against retrospective criminalisation.

Conclusion: The amended provisions could not be applied retrospectively to the petitioner company.

Final Conclusion: The complaint and the cognizance taken against the petitioner company were liable to be set aside, while the observations were confined to the petitioner and would not affect proceedings against the other accused.

Ratio Decidendi: A company cannot be prosecuted for money laundering unless the complaint alleges and supports its knowing involvement in the process connected with proceeds of crime, and penal provisions cannot be applied retrospectively to acts committed before the relevant offence was brought within the statutory schedule.

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