2022 (3) TMI 941 - HC - Money Laundering

Court upholds Enforcement Directorate's ECIR registration under Prevention of Money Laundering Act, dismisses petitioner's request.

The court upheld the legal sustainability of the registration of ECIR/05/HYZO/2014 by the Enforcement Directorate, emphasizing the independent nature of ... Money Laundering - proceeds of crime - predicate/scheduled offence - registration of the subject ECIR, sustainable or not - Criminal liability or not - HELD THAT:- The trial of money laundering offence is independent trial and it is governed by its own provisions and it need not get interfered with the trial of scheduled offence. The PMLA, being a special enactment, contemplates a distinct procedure at the initial stage and thereafter provides for initiation of prosecution, in order to achieve the special purpose envisaged under the Act and as such, it cannot be construed that proceedings under the PMLA are to be equated with prosecution initiated under the criminal proceedings for predicate/scheduled offences. Thus, initiation of action under the PMLA cannot have any implication or impact in respect of registration of other cases, either under the Indian Penal Code or any other penal laws. The offence of money laundering contemplated under Section 3 of the PMLA is an independent offence. A reference to criminal activity relating to offence under PMLA has a wider connotation, and it may extend to a person, who is connected with criminal activity relating to scheduled offence, but may not be the offender of scheduled offence - It is not necessary that a person has to be prosecuted under the PMLA only in the event of such person having committed scheduled offence. Prosecution can be independently initiated under PMLA only for the offence of money laundering. Further, a careful perusal of Section 2(1)(u) of PMLA and the explanation thereof makes it clear that a wider definition is given to ‘proceeds of crime’ including 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 criminal activity relatable to a scheduled offence. Section 3 of PMLA further clarifies that a person shall be guilty of offence of money laundering, if such person is found to have directly or indirectly attempted to indulge or knowingly assists or knowingly is a party or is actually involved in concealment, possession, acquisition, use, projecting as untainted property, claiming as untainted property and the process or activity connected with the proceeds of crime is a continuing activity, which itself shows the offence of money laundering is a continuing offence - a bare reading of Sections 2(1)(u), 3 and 44(1)(d) of PMLA along with explanations thereof makes it clear that the offence of money laundering is a stand-alone offence and the trial proceedings are completely different to that of the scheduled offence. In the instant case, the dispute is not between two private individuals. The petitioner is alleged to have caused wrongful loss to MMTC, a public sector enterprise, to a huge magnitude of ₹ 194 crores. Basing upon the complaint lodged by MMTC, the CBI registered a case against the petitioner and basing upon the case registered by CBI, the Enforcement Directorate registered the subject ECIR basing upon the scheduled offences registered by the predicate agency. In the given facts and circumstances of the case, in the subject dispute, it cannot be said that civil liability is converted into criminal liability. The Enforcement Directorate has issued only summons under Section 50(3) of PMLA to the petitioner. Summons are issued to a person under Section 50(3) of PMLA requiring his attendance to give evidence or to produce any records during the course of investigation or proceedings. Hence, issuance of summons to the petitioner can neither be categorized as an act of prosecuting him, nor would make him an accused under PMLA. As rightly contended by the learned Assistant Solicitor General of India, if the petitioner proves his innocence before the ED authorities, he would not be charged with any offence under PMLA - the adjudicating authority under the PMLA is not trying a criminal case, but only decides the effect of breach of obligations by the concerned. Further, ECIR registered by Enforcement Directorate cannot be equated with an FIR under Section 154 of Cr.P.C. The petitioner, instead of cooperating with the investigation, filed this quash petition, which is nothing but a premature attempt to escape from his criminal liability, if any. This Court is of the considered opinion that continuation of proceedings in the subject ECIR against the petitioner would not amount to abuse of process of law. In the interests of justice also, the proceedings against the petitioner in the subject ECIR cannot be quashed - the Criminal Petition is dismissed. Issues Involved:1. Legal sustainability of the registration of ECIR/05/HYZO/2014 by the Enforcement Directorate.2. Quashing of the subject ECIR/05/HYZO/2014 by exercising inherent power under Section 482 of Cr.P.C.Issue 1: Legal sustainability of the registration of ECIR/05/HYZO/2014 by the Enforcement DirectorateThe petitioner argued that the ECIR registered against him and others is liable to be quashed as the ingredients of Section 3 of the Prevention of Money Laundering Act, 2002 (PMLA) are not made out. The petitioner contended that the alleged wrongful loss to MMTC due to foreign exchange fluctuation does not make the funds 'proceeds of crime' under Section 3 of PMLA. The petitioner also highlighted that the properties attached by the Enforcement Directorate were acquired before the alleged crime period.The respondent argued that the commission of a scheduled offence is a trigger point for initiating proceedings under PMLA, and the offence of money laundering is independent of the scheduled offences. They emphasized that the PMLA deals with the process or activity of proceeds of crime and is not affected by the status of the scheduled offence. The respondent further argued that the petitioner is required to appear before the ED authorities to prove his innocence, and the registration of the ECIR is only a step to initiate the investigation.The court observed that the PMLA is a special enactment with a distinct procedure for investigating money laundering offences. It emphasized that the offence of money laundering is a stand-alone offence and is independent of the scheduled offence. The court noted that the Enforcement Directorate has the authority to investigate the proceeds of crime and that the registration of the ECIR is legally sustainable as it is a preliminary step for investigation.Issue 2: Quashing of the subject ECIR/05/HYZO/2014 by exercising inherent power under Section 482 of Cr.P.C.The petitioner argued that none of the alleged scheduled offences are prima facie made out against him, and the continuation of proceedings in the subject ECIR amounts to abuse of process of law. The petitioner contended that the registration of the ECIR against him is unsustainable and should be quashed in the interest of justice.The respondent countered that the petitioner is not an accused but a suspect of the offence under Section 3 of PMLA. They argued that the petitioner is required to appear before the ED authorities to prove his innocence and that the investigation under PMLA is independent and distinct from the scheduled offence. The respondent emphasized that the burden of proof in PMLA cases is different and that the proceedings under PMLA are deemed to be judicial proceedings.The court noted that the PMLA has an overriding effect on any other law and that the proceedings under PMLA are independent of the scheduled offence. It highlighted that the burden of proof in PMLA cases is on the accused, and the petitioner is required to comply with the summons issued by the Enforcement Directorate. The court observed that the petitioner has not made out any valid grounds to quash the ECIR and that the continuation of proceedings in the subject ECIR would not amount to abuse of process of law.The court concluded that the criminal petition is devoid of merit and dismissed it, stating that the interim relief granted earlier stands vacated. The court emphasized that the investigation by the Enforcement Directorate should proceed to ascertain the truth of the allegations made against the petitioner.Conclusion:The court dismissed the criminal petition, upholding the legal sustainability of the registration of ECIR/05/HYZO/2014 by the Enforcement Directorate and rejecting the petitioner's request to quash the subject ECIR. The court emphasized the independent and distinct nature of proceedings under PMLA and the necessity for the petitioner to cooperate with the investigation.