2019 (10) TMI 1236 - HC - Money Laundering

Court emphasizes ongoing money laundering case despite closure of related criminal offence by CBI

VGN Developers P. Ltd. and Ors. Versus The Deputy Director, Directorate of Enforcement

The court dismissed the Criminal Original Petition, emphasizing that the closure of the predicated offence by the CBI does not terminate proceedings under ... Money Laundering - public auction - the allegations are to the effect that the lands, which would fetch higher value in the public auction, were purchased by the petitioners in connivance with the other accused resulting in a huge loss - burden to prove - HELD THAT:- There are adequate materials available including examination of witnesses and documents. Therefore, this Court cannot invoke Section 482 of the Criminal Procedure Code to quash the proceedings at this stage. Exercise of power under Section 482 of the Criminal Procedure Code is not to be done by a Court by drop of the hat but only when a situation warrants. We are not inclined to hold that the trial, if conducted, would be an empty formality. It is well open to the respondent to investigate and proceed further when an offence is made out under the provisions of Prevention of Money Laundering Act, 2002. Section 24 of the Act places the burden of proof on a person charged with an offence of money laundering under Section 3 of the Act. Resultantly, either an Authority or a Court shall presume that such proceeds of crime are involved in money laundering until the contrary is proved. Therefore, the burden of proof by discharging the presumption lies upon the persons charged. Hence, investigation by the Central Bureau of Investigation and the respondent are totally distinct and different. Petition dismissed. Issues Involved:1. Quashing of Proceedings under Section 45(1) of the Prevention of Money-Laundering Act, 2002.2. Allegations of Criminal Conspiracy and Scheduled Offences.3. Distinction between Predicate Offence and Money Laundering Offence.4. Applicability of Section 24 and Burden of Proof.5. Relevance of Previous Judgments and Legal Precedents.Detailed Analysis:1. Quashing of Proceedings under Section 45(1) of the Prevention of Money-Laundering Act, 2002:The petitioners, a Private Limited Company and its Managing Director, sought to quash proceedings in C.C. No. 56 of 2018 under Section 45(1) of the Prevention of Money-Laundering Act, 2002. The petitioners argued that the predicated offence was closed by the Central Bureau of Investigation (CBI), and thus, the proceedings under the Prevention of Money Laundering Act (PMLA) should also be quashed. However, the court held that the PMLA is a special statute with a distinct scope and rationale, and the closure of the predicated offence by the CBI does not necessarily terminate proceedings under the PMLA.2. Allegations of Criminal Conspiracy and Scheduled Offences:The complaint alleged that the petitioners conspired with bank officials to acquire property at a value lower than the guideline value, resulting in a significant loss. The property was later sold at a higher price. The CBI had registered a complaint for offences under Sections 120(B) and 420 IPC and Sections 13(2) and 13(1)(d) of the Prevention of Corruption Act. Despite the CBI's recommendation to close the case due to lack of prosecutable evidence, the Enforcement Directorate proceeded with the investigation under the PMLA. The court found adequate material, including witness statements and documents, to support the allegations, thus justifying the continuation of the proceedings.3. Distinction between Predicate Offence and Money Laundering Offence:The court emphasized that the offence of money laundering under Section 3 of the PMLA is an independent offence. The PMLA proceedings are distinct and can continue even if the predicated offence is closed. The definition of 'proceeds of crime' under Section 2(u) of the PMLA is broad and includes any property derived from criminal activity related to a scheduled offence. The court cited multiple judgments reinforcing that the PMLA proceedings are self-contained and independent of the outcome of the predicated offence.4. Applicability of Section 24 and Burden of Proof:Section 24 of the PMLA places the burden of proof on the person charged with money laundering. The court must presume that the proceeds of crime are involved in money laundering until proven otherwise. This presumption necessitates that the accused must disprove the allegations. The court highlighted that both the CBI and the Enforcement Directorate's investigations are distinct, and the burden of proof under the PMLA remains on the accused.5. Relevance of Previous Judgments and Legal Precedents:The court referred to several judgments to substantiate its decision. It noted that the offence of money laundering is a standalone offence and can be prosecuted independently of the scheduled offence. The court dismissed the petitioners' reliance on previous Delhi High Court decisions, stating that those findings are not conclusive and binding precedents. The court also clarified that the recent amendments to Section 44(1) of the PMLA are clarificatory and do not affect the ongoing proceedings.Conclusion:The court dismissed the Criminal Original Petition, stating that the Principal Sessions Judge, City Civil Court, Chennai, should not be influenced by the observations made in this order while disposing of C.C. No. 56 of 2018. The court directed the Principal Sessions Judge to expedite the trial and dispose of the case within nine months. Consequently, the connected criminal miscellaneous petition was also dismissed.