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of <h1>Money laundering case quashed after acquittal in underlying scheduled offence under PMLA Section 3</h1> Delhi HC quashed money laundering proceedings under PMLA Section 3 against petitioners following acquittal/discharge in predicate offence. Court held that ... Money Laundering - predicate offence - Continuation of prosecution - if in case an accused is acquitted/discharged in a predicate offence, in that eventuality, whether the prosecution initiated by the respondent/ED can be allowed to be continued or is liable to be quashed? - HELD THAT:- The issue was considered by the Supreme Court in case of Vijay Madanlal Choudhary [2022 (7) TMI 1316 - SUPREME COURT] and it was observed that The offence under Section 3 of the 2002 Act is dependent on illegal gain of property as a result of criminal activity relating to a scheduled offence. It is concerning the process or activity connected with such property, which constitutes the offence of money-laundering. The Authorities under the 2002 Act cannot prosecute any person on notional basis or on the assumption that a scheduled offence has been committed, unless it is so registered with the jurisdictional police and/or pending enquiry/trial including by way of criminal complaint before the competent forum. A Coordinate Bench of this Court in case of Nayati Healthcare [2023 (10) TMI 822 - DELHI HIGH COURT] has also considered the issue whether the prosecution initiated by the respondent/ED can be continued in a case where the accused has already been acquitted/discharged for the predicate offence and it was held that the present complaint filed by the ED and the proceedings arising therefrom cannot survive. Considering that the FIR has been quashed by this court and that it has not been challenged till date, there can be no offence of money laundering under section 3 of the PMLA against the petitioners. The complaint filed by the respondent/ED and the consequential proceedings cannot survive. Considering that the co-accused Dr. Jeevan Kumar has been acquitted by the trial court vide judgment dated 22.03.2013 and that the said judgment has not been challenged till date, there can be no offence of money laundering under section 3 of PMLA against the petitioner. Accordingly, the ECIR bearing no. ECIR/7/DZ/2008 is quashed along with all consequential proceedings arising therefrom stated to be pending before the concerned court. Petition disposed off. 1. ISSUES PRESENTED AND CONSIDERED 1. Whether prosecution under Section 3 of the Prevention of Money Laundering Act, 2002 ('PMLA') can be sustained where the accused has been finally discharged or acquitted in the predicate/scheduled offence that forms the substratum of the money-laundering prosecution. 2. Whether a court should adjourn or withhold decision on a PMLA challenge pending the outcome of an interlocutory or supervisory petition in the Supreme Court contesting the ratio of a leading decision on the survival of PMLA proceedings after acquittal in the predicate offence. 3. Whether, having regard to the finality of an acquittal in the predicate offence, the investigational actions and consequential proceedings (including issuance of lookout circulars or registration of ECIRs/complaints under PMLA) are liable to be quashed and whether liberty to revive proceedings should be preserved. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Sustainment of PMLA prosecution after acquittal/discharge in predicate offence Legal framework: Section 3 of PMLA criminalises dealing with proceeds of crime arising from criminal activity relating to a scheduled offence; the offence is parasitic upon the existence of illegal gain traceable to a scheduled offence. PMLA proceedings require a subsisting registered scheduled offence (by FIR/registration with jurisdictional police or a pending inquiry/complaint before competent forum) as the factual and legal substratum for the money-laundering charge. Precedent treatment: The Court relied on the ratio of a leading Supreme Court decision which held that Section 3 of PMLA is dependent on the existence of a scheduled offence and that if the person is finally discharged/acquitted or the criminal case quashed by a competent court, there can be no offence of money-laundering against that person or anyone claiming property through him. High Court precedents of coordinate benches have followed this principle and quashed PMLA complaints where the scheduled offence had been quashed or the accused acquitted; in several instances, Supreme Court leave petitions filed by the enforcement agency challenging such High Court orders were dismissed or disposed of, leaving the principle intact in those contexts. Interpretation and reasoning: The Court construed Section 3 as inherently contingent upon the prior or subsisting determination that the relevant scheduled offence exists and that illegal gains have been derived therefrom. The authorities under PMLA cannot proceed on a notional basis or mere suspicion that a scheduled offence has been committed. Where the trial court has rendered a final, unchallenged acquittal in the scheduled offence, the factual and legal foundation for alleging proceeds of crime ceases to exist. Therefore, continuing or sustaining PMLA prosecution in such circumstances would be legally untenable because the essential element - proceeds of a proven scheduled offence - is missing. Ratio vs. Obiter: The holding that PMLA prosecution cannot survive a final acquittal/quashing/discharge in the scheduled offence is treated as ratio determinativa for the facts where the predicate offence has attained finality by acquittal/discharge. Observations regarding procedural avenues to revive PMLA proceedings if predicate convictions are later restored or altered are ancillary and operate as practical guidance (not the central constitutional or statutory ratio). Conclusion: Where the predicate/scheduled offence has been finally disposed of by acquittal/discharge or quashed and that order is not under challenge, there can be no offence under Section 3 of PMLA against the accused or persons claiming property through him; the corresponding PMLA complaint and consequential proceedings are liable to be quashed. Issue 2 - Whether to await Supreme Court outcome before deciding High Court petitions raising the above issue Legal framework: High Courts are bound to decide matters according to the law as it stands and to follow binding precedents. There is no general obligation on a High Court to await the decision of a higher court on an interlocutory or pending supervisory petition unless the Supreme Court has specifically directed suspension or reference; conflicting coordinate-bench decisions require careful regard to facts, but earlier binding precedent should be followed. Precedent treatment: The Court noted controlling guidance that High Courts should not decline to decide cases on the ground that a leading Supreme Court judgment has been referred to a larger bench or is subject to review, nor should they await the outcome of pending proceedings in the Supreme Court unless specifically directed to do so. When faced with conflicting coordinate bench decisions, the earlier decision of equal strength is to be followed unless distinguishable on facts. Interpretation and reasoning: The Court rejected the enforcement agency's request to adjourn the petition sine die pending the Supreme Court's decision in an SLP, observing that the High Court must apply the existing binding ratio. Absent a specific stay or direction from the Supreme Court, routine pendency of an SLP does not prevent High Courts from deciding matters where the law appears settled by higher authority and relevant factual finality (e.g., unchallenged acquittal) exists. Ratio vs. Obiter: The ruling that the petition should not be adjourned pending the Supreme Court's consideration is a procedural holding applicable to the present facts; it follows established principles and is operative (ratio) for court practice, not mere obiter. Conclusion: The High Court need not defer decision pending the outcome of an interlocutory Supreme Court petition; it should decide petitions on extant law and facts unless a specific stay or direction from the Supreme Court requires otherwise. Issue 3 - Relief appropriate when PMLA complaint cannot survive due to final acquittal in predicate offence; liberty to revive Legal framework: Where the legal foundation for PMLA prosecution is extinguished by final acquittal or quashing of the scheduled offence, ancillary investigational actions (registration of ECIR/complaint, lookout circulars, attachment proceedings insofar as premised on the alleged scheduled offence) lose their legal basis and are liable to be set aside. At the same time, statutory and procedural law permit revival of proceedings if circumstances change (e.g., predicate conviction is reinstated or earlier order is set aside on appeal/review), subject to applicable safeguards. Precedent treatment: Consistent with precedent, courts have quashed ECIRs/complaints and consequential actions where the predicate offence no longer subsists. Courts have also preserved a limited liberty for the enforcement agency to initiate appropriate proceedings afresh or revive them in the event of altered circumstances or final appellate reversal restoring the predicate offence. Interpretation and reasoning: Applying the guiding principle that PMLA offences require a subsisting scheduled offence, the Court concluded that the ECIR/complaint and all consequential proceedings (including lookout circulars) must be quashed where the predicate accused has been finally acquitted and that acquittal stands unchallenged. However, recognizing the enforcement agency's statutory remedies, the Court granted liberty to initiate fresh or revival proceedings should the factual or legal situation change (for example, if a higher court reverses the acquittal), thereby balancing finality and the agency's right to pursue legitimate prosecutions. Ratio vs. Obiter: The quashing of the PMLA complaint and consequential orders is ratio for the facts of final, unchallenged acquittal. The express grant of liberty to revive proceedings in specified future contingencies is a practical, prospective safeguard rather than an obiter remark. Conclusion: The correct relief where a scheduled offence has been finally and unchallengedly dismissed is to quash the PMLA complaint/ECIR and consequential proceedings, while preserving the enforcement agency's right to institute or revive proceedings in the event of altered circumstances or a later final adjudication restoring the predicate offence.
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