2022 (5) TMI 1044 - HC - Money Laundering

Court quashes prosecution under PMLA due to lack of evidence, deems prosecution inappropriate without scheduled offence.

Dilip Lalwani And Another Versus Central Bureau of Investigation And Another

The court allowed the petition, quashing the prosecution complaint under the Prevention of Money Laundering Act (PMLA) and subsequent proceedings against ... Nature of transaction - sale and purchase of land or merely investment in the property - scheduled/predicate offence or not - HELD THAT:- This Court find force in the arguments of learned senior counsel for the petitioners that the petitioners through their companies have only made investment of money and purchased the land, in a legalized manner through registered sale deeds from November, 2004 to November, 2005 and later on in the year 2006, the said 03 land owning companies were purchased by Atul Bansal of M/s. A.B.W. Group, therefore, there is no evidence on record either of applying for licence for the purpose of setting-up of some township for earning profit nor there is any evidence collected by the Enforcement Directorate regarding any conspiracy of the petitioners with other co-accused, much less at the cost of repetition, it is observed that even the CBI investigation led to the same conclusion - from the bare perusal of the allegations and the material collected in support thereof, it can be safely held that no prima facie offence is made out against the petitioners. As per Section 44 of PMLA, it is clearly provided that the trial of the 'scheduled offence' of money laundering is to be tried together by the same Special Court, which is to try offence under the Code of Criminal Procedure, therefore, once in the 'scheduled offence', the petitioners are cited as witness, their prosecution under the PMLA with the same set of allegations, is nothing but misuse of process of law. In the present case, neither there is anything to raise a presumption of fact or law that any of the petitioners were aware that the purchase of land by their companies, sale consideration of which was paid by another company and duly accounted for in their Income-tax returns and later on, the sale of the entire share in the company to M/s. A.B.W. Group through banking channels were “proceeds of crime” deriving from any scheduled offence - Even there is nothing on record to show that the petitioners were intentionally projecting or claiming any “proceeds of crime” as untainted one. Therefore, in the absence of the same, merely because in the scheduled offence, the CBI investigation suggest that the other accused who had applied for obtaining licence from the department of the State of Haryana in conspiracy with the State functionaries, wherein the petitioners are cited only as witnesses, in the absence of any material, the offence of money laundering under Section 3 of the PMLA is not attracted from the bare perusal of the complaint. The present petition is allowed. Issues Involved:1. Quashing of proceedings under the Prevention of Money Laundering Act (PMLA).2. Coordination between CBI and Directorate of Enforcement during investigation.3. Validity of the prosecution complaint and summoning order against the petitioners.4. Applicability of the PMLA in the absence of a scheduled offence.5. Legitimacy of the petitioners' transactions and investments.Issue-wise Detailed Analysis:1. Quashing of Proceedings under PMLA:The petitioners sought to quash the proceedings arising from complaint No. ECIR/CDZO/04/2015 under Sections 3 and 4 of the PMLA and the order dated 30.06.2020 by the Special Judge, PMLA. The petitioners argued that they were never accused in the CBI investigation and were cited as witnesses. They claimed their transactions were legitimate investments in real estate, and they never applied for any development licenses.2. Coordination between CBI and Directorate of Enforcement:The petitioners requested that the CBI and Directorate of Enforcement coordinate during the investigation. The court noted that the CBI's investigation concluded that the petitioners were not involved in any criminal activity and were cited as witnesses (Nos. 300 and 301). The CBI did not find any evidence to prosecute the petitioners under the scheduled offence.3. Validity of the Prosecution Complaint and Summoning Order:The petitioners challenged the second supplementary prosecution complaint filed by the Directorate of Enforcement, which for the first time arraigned them as accused Nos. 5 and 6. The court found that the initial and supplementary complaints did not accuse the petitioners, and the allegations in the second complaint did not establish a prima facie case of money laundering.4. Applicability of the PMLA in the Absence of a Scheduled Offence:The court acknowledged that prosecution under Section 3 of the PMLA is an independent offence. However, since the CBI investigation did not find the petitioners guilty of any scheduled offence, their prosecution under the PMLA was deemed inappropriate. The court cited various judgments, including 'J. Sekar @ Sekar Reddy vs Directorate of Enforcement,' emphasizing that allegations must be proven beyond a reasonable doubt.5. Legitimacy of the Petitioners' Transactions and Investments:The court found that the petitioners' transactions were legitimate investments made through registered sale deeds and duly accounted for in their income tax returns. There was no evidence that the petitioners applied for any development licenses or conspired with state functionaries. The court concluded that the petitioners' prosecution under the PMLA was based on preponderance of probabilities rather than concrete evidence.Conclusion:The court allowed the petition, quashing the prosecution complaint No. ECIR/CDZO/04/2015 and the order dated 30.06.2020 by the Special Judge, PMLA, along with subsequent proceedings against the petitioners (accused Nos. 5 and 6). The court emphasized the lack of evidence against the petitioners and the inappropriateness of their prosecution under the PMLA in the absence of a scheduled offence.