2020 (3) TMI 202 - HC - Money Laundering

High Court sets aside order in money laundering & pollution case, stresses statutory compliance

The High Court set aside the order dated 29.04.2019, rejecting the discharge application in a case involving allegations under the Prevention of Money ... Money Laundering - proceeds of crime - allegation that proceeds of crime utilised subsequently by the accused persons for acquisition of various movable/immovable assets so as to project them as 'untainted' on continued basis even after 1st June, 2009, which is an offence under Section 3 of PML Act - HELD THAT:- It is undisputed that initially, ECIR was registered with the allegation that the total value involved in the instant offence is more than ₹ 30 lac and due to contravention of provisions under Section 37 of the Act, the proceeding was initiated in terms of the provisions under Section 2y(ii) of the PML Act for the purpose of investigation. It is also undisputed that during the course of investigation, Assistant Director, Directorate of Enforcement wrote a letter to Chief Environment Officer on 13th December, 2013 and requested to provide the valuation of the unit, which was not installed in the factory, in reply to which, information was given by the said Officer that cost of the device/chimney, which was not installed at the time of inspection, is ₹ 2 lac. Thereafter, Complaint Case No. 04 of 2015 was filed by Enforcement Directorate in the court of Special Judge (PML Act) with the allegation that the inspection of factory was conducted by the officers of the Board on 16th July, 2007 and it was found that no pollution control equipment was installed in the factory as per the provisions laid down in the Act. From the record, it is also evident that after purchasing the land in question in the year 2004 for running the factory, the revisionist had applied for consent of the Board in the year 2007 and the inspection of the premises was conducted by the officers of the Board, in which, the pollution control unit was not found. As by way of Act No. 23 of 2019, Explanation clause has been added in Section 2(u) of the PML Act, which clearly provides that the 'Proceed of Crime' include property not only derived or obtained from the scheduled offence but also any property which may directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offence. Indisputably, in the present case, the cost of the unit, viz. ₹ 2 lac, which was not installed at the factory, is treated as 'Proceed of Crime'. Learned counsel for the respondent failed to dispute the fact that initially the allegation levelled was that total value involved in the offence was more than ₹ 30 lac, which is categorically mentioned in the ECIR, but later on, in the complaint case, only the cost of equipment which was not installed, is treated as a 'Proceed of Crime' - Admittedly, the court below failed to consider this aspect of the matter. Revision allowed. Issues Involved:1. Legality of the order dated 29.04.2019 passed by Special Judge, PMLA/Sessions Judge, Lucknow.2. Allegations under Section 3/4 of Prevention of Money Laundering Act, 2002 (PMLA).3. Conviction under Section 37 of the Air (Prevention and Control of Pollution) Act, 1981.4. Determination of 'Proceeds of Crime' under PMLA.5. Compliance with Section 2(y)(ii) of PMLA regarding the threshold value for investigation.6. Validity of the discharge application rejection.Detailed Analysis:1. Legality of the Order Dated 29.04.2019:The revisionist challenged the order dated 29.04.2019 by the Special Judge, PMLA/Sessions Judge, Lucknow, which rejected the discharge application. The High Court scrutinized the procedural and substantive aspects of the case, particularly focusing on the interpretation and application of relevant sections of the PMLA and the Air (Prevention and Control of Pollution) Act.2. Allegations Under Section 3/4 of PMLA:The case originated from allegations that the revisionist and his firm generated 'Proceeds of Crime' amounting to Rs. 52,42,525/- through unauthorized operations without pollution control measures. The Enforcement Directorate initiated proceedings under PMLA based on the complaint by the U.P. Pollution Control Board, which claimed the firm operated without necessary consent, thereby violating Section 21 of the Act.3. Conviction Under Section 37 of the Air (Prevention and Control of Pollution) Act, 1981:The revisionist was initially convicted under Section 37 of the Act for operating the factory without proper air pollution control measures. This conviction was later overturned in Criminal Appeal No. 106 of 2011, leading to the revisionist's acquittal. The appellate order attained finality and was not challenged further by the Board.4. Determination of 'Proceeds of Crime' Under PMLA:The key contention was whether the alleged amount of Rs. 2,00,000/-, representing the cost of uninstalled pollution control equipment, could be classified as 'Proceeds of Crime.' The court noted that the initial investigation claimed the revisionist earned Rs. 52,42,525/- during 2005-06 and 2006-07, but subsequent findings only identified the Rs. 2,00,000/- as the disputed amount.5. Compliance with Section 2(y)(ii) of PMLA Regarding the Threshold Value for Investigation:Section 2(y)(ii) of PMLA stipulates that for an offence to be investigated under Part-B of the schedule, the total value involved must be Rs. 30 lac or more. The court observed that the initial allegations met this threshold, but the final investigation only identified Rs. 2,00,000/- as 'Proceeds of Crime,' which did not meet the required threshold.6. Validity of the Discharge Application Rejection:The court found that the lower court did not adequately consider the discrepancy between the initial allegations and the final findings. The Special Judge's rejection of the discharge application was deemed improper, given that the amount in question did not meet the statutory threshold for a PMLA investigation.Conclusion:The High Court set aside the impugned order dated 29.04.2019, allowed the revision, and remanded the matter back to the lower court for fresh consideration, emphasizing the need to adhere to the statutory requirements and the observations made regarding the definition and threshold of 'Proceeds of Crime' under PMLA.