2019 (4) TMI 1986 - HC - Money Laundering

Appellate court overturns conviction and confiscation order for non-compliance with money laundering law, emphasizing procedural requirements.

The appellate court set aside the conviction and confiscation order under the Prevention of Money-Laundering Act due to procedural non-compliance. The ... Profiteering - proceeds of crime - scheduled offences - terrine to the prosecution unless and until culminated in conviction or not - principles of evidence - burden to prove - HELD THAT:- As the concept of basic law contemplating upon the principle of evidence act is found trembling on account of introduction of Section 24 whereunder, mere assertion of prosecution with regard to property being proceed of scheduled offence casts an obligation over opposite party to explain, otherwise, not only confiscation by the court in terms of Section 8(5) of the Act is permissible side by side liable to be convicted and sentenced as per section 4 of the Act and the obligation so thrust upon opposite party under Section 24 is to be seen in the background of presumption having under Section 22 of the Act relating thereto. Apart from constitution of the special court, there also happens to be presence of another forum but only with regard to confiscation of propriety a proceed of the schedule offence the adjudicating authority (A.A.) Be it a judicial proceeding or proceeding before adjudicating authority the sole motto happens to be to confiscate the property by way of identifying the same to be proceed of the ill-gotten money not of scheduled offence in order to snatch out the proceed from the possession of the offenders, and acquisition through aforesaid means has been found punishable, being in contravention of law, under Section 4 of the Act. The proper forum to proceed and adjudicate coupled with requirement thereof, has to be seen. As per Section 43 of the Act, there is constitution of special court properly identifiable to be the court of Sessions having entrusted with the power of cognizance under Section 44(b) of the Act and as per sub-section (d) of section 44 the procedure so prescribed for the court of Sessions under the Cr.P.C. is to be followed. Sub-section 2 Section 43 not only empowers the special Court to proceed with the prosecution under P.M.L.A. rather indicates the trial of scheduled offence, conjointly. The situation is found furthermore clarified after going through Section 44 whereunder (1)(a), (1)(c), (1)(d), whereunder, the lower court, where the matter relating to scheduled offence remains still pending, has to commit the case, so that trial be taken up by the Special Court and, the procedure to be followed during course thereof has also been properly laid down. It is evident that the learned lower court had not considered the aspects, more particularly with regard to non following of the mandate of law, more particularly Section 43(2) of the Act - it is manifest that the trial of scheduled offence, having against the accused has to be conducted by the same court. It has got a purpose. Unless and until, there happens to be proper finding relating thereto, that means to say, the conviction or acquittal has bearing over the fate of whole exercise relating to confiscation, the aim and object of the Act, whereupon, the Act did not allow to run in isonatran the trial. Matter is remitted back to the learned lower court to proceed afresh - Appeal allowed by way of remand. Issues Involved:1. Legality of the conviction under Section 4 of the Prevention of Money-Laundering Act (PMLA).2. Validity of the confiscation of property under Section 8(5) of the PMLA.3. Procedural adherence to the PMLA and related legal provisions.Detailed Analysis:1. Legality of the Conviction under Section 4 of the PMLA:The appellant was found guilty under Section 4 of the PMLA and sentenced to five years of rigorous imprisonment along with a fine of five lakhs. The prosecution's case, substantiated by nine witnesses, was that the appellant acquired properties using proceeds from criminal activities, which are categorized as scheduled offences under the PMLA. The defence, however, argued complete denial, claiming victimization and asserting that the properties were acquired through known sources, supported by seven defence witnesses and several documents.The court scrutinized the definitions and provisions under Section 2 and Section 3 of the PMLA, which define 'money-laundering' and 'proceeds of crime.' The court noted that the prosecution must provide conclusive evidence that the property was acquired from the proceeds of the scheduled offence. The defence argued that mere non-payment of income tax does not constitute money laundering under Section 3 of the PMLA.2. Validity of the Confiscation of Property under Section 8(5) of the PMLA:The property in question was ordered to be confiscated under Section 8(5) of the PMLA. The appellant challenged this, arguing that the prosecution failed to prove that the property was acquired from the proceeds of crime. The court examined the procedural requirements under Section 17 (Search and Seizure) and Section 22 (Presumption as to records or property) of the PMLA. The court emphasized that the burden of proof lies on the accused to rebut the presumption of the property being proceeds of crime under Section 24 of the PMLA.3. Procedural Adherence to the PMLA and Related Legal Provisions:The court noted that the trial did not adhere to the procedural mandates, particularly Section 43(2) of the PMLA, which requires the trial of the scheduled offence and the money laundering offence to be conducted by the same court. The court highlighted the importance of a conclusive finding on the scheduled offence, as it has a direct bearing on the confiscation proceedings. The court referenced the J. Sekar vs. Union of India case to underline the legislative intent and procedural requirements of the PMLA.Conclusion:The court concluded that the lower court failed to consider the procedural mandates and the necessity of a conclusive finding on the scheduled offence. Therefore, the judgment of conviction and the order of confiscation were set aside. The matter was remitted back to the lower court for a fresh trial in light of the observations made, ensuring adherence to the procedural requirements under the PMLA. The appeal was allowed, and the case was directed to be re-evaluated with proper consideration of the legal provisions and procedural mandates.