Money laundering prosecution cannot continue when predicate offences are quashed and proceeds of crime are not established.
Where the predicate offences were closed or quashed on merits and the material did not establish proceeds of crime or a sustainable nexus with money laundering, continuation of prosecution under the Prevention of Money Laundering Act, 2002 was impermissible. The Court treated the closure of the principal FIR, quashing of connected FIRs, the income tax authority's letter showing the seized cash belonged to the firm and was recorded in its cash book, and the refusal to sustain attachment as significant circumstances. It held that the record did not prove the basis for the PMLA case to the required standard and that continuing the enforcement complaint would amount to abuse of process. The impugned HC order was set aside and the enforcement proceedings and connected complaint were quashed.
Issues: Whether proceedings for money laundering under the Prevention of Money Laundering Act, 2002 could be sustained when the predicate offences stood closed or quashed and the material showed that the seized cash was accounted for and tax paid.
Analysis: The closure of the principal FIR in the predicate offence, the quashing of the connected FIRs, the income tax authority's letter stating that the seized currency belonged to the firm and was reflected in its cash book, and the adjudicating authority's refusal to sustain the attachment were treated as significant circumstances. The Court applied the principle that where exoneration in the underlying proceedings is on merits and the allegation is not sustainable, continuation of the connected criminal prosecution becomes an abuse of process. It further held that, on the record before it, the existence of proceeds of crime and the basis for the money-laundering case were not established with the degree of proof required in court.
Conclusion: The money-laundering prosecution could not be sustained and the appellant succeeded.
Final Conclusion: The impugned High Court order was set aside and the enforcement proceedings, together with the connected complaint, were quashed.
Ratio Decidendi: Where the predicate offence fails on merits and the material does not establish proceeds of crime or a sustainable nexus with money laundering, continuation of the prosecution under the Prevention of Money Laundering Act, 2002 is impermissible.
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AI Drafter ✕
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