Proceeds of crime under PMLA require evidence of unlawful gain; salary-linked assets were treated as legitimate income.

Allegations that an FLCI accountant had made false entries and that salary, bonus and other perquisites constituted proceeds of crime were found unsupported by the materials referred to in the complaint. The court noted that the diverted loan amounts were shown to have benefited other individuals and entities, while Sivaramakrishnan's property and his wife Ratha's fixed deposits were traceable to his legitimate earnings. Although selective prosecution was argued, the prosecution was not quashed on discrimination grounds alone. On the facts pleaded, the complaint was treated as misconceived under the PMLA and the proceedings against Sivaramakrishnan and Ratha were quashed.

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Issues: Whether the prosecution under the Prevention of Money Laundering Act, 2002 could be sustained against the petitioners on the basis that salaries, bonus and perquisites received in employment constituted proceeds of crime and tainted property.

Analysis: The complaint alleged that the first petitioner, while employed as Chief Financial Officer, had fabricated accounts and that the emoluments received by him, together with amounts deposited in fixed deposits and property purchased out of savings, represented proceeds of crime. The materials, however, showed that the alleged diversion of bank funds had taken place after the loans were sanctioned, and the complaint did not disclose that the first petitioner had personally acquired proceeds of crime apart from employment-related remuneration. The alleged property purchase was also not shown to be funded by criminal proceeds. The presumption under Section 24 of the Prevention of Money Laundering Act, 2002 could not be invoked in the absence of foundational material showing acquisition or projection of proceeds of crime by the petitioners.

Conclusion: The prosecution was held to be misconceived and was quashed.

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