2023 (1) TMI 919 - HC - Money Laundering

Petition dismissed under PMLA; court's decision doesn't impact criminal prosecution.

R. Kannan Versus The Assistant Director Directorate of Enforcement Government of India Ministry of Finance, Chennai

The court dismissed the petition, stating that the allegations against the petitioner prima facie attracted Section 3 of the Prevention of ... Money Laundering - generation of proceeds of crime or not - alleging perpetration of criminal activities in the sanction and disbursement of credit facility to the company - role of petitioner in the commission of offence - HELD THAT:- The requirement of projecting the proceedings of crime as untainted property may be one of the modes by which the offence is committed and is no longer a sine qua non for constituting the offence of money-laundering under Section 3 of the PML Act. The predicate offence against the petitioner is that he fraudulently sanctioned and disbursed the loan. The loan is, therefore, the proceeds of crime. It is necessary to notice that the scope of Section 3 is wide enough to cover all persons who “directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime.” It is clear that even a person who knowingly assists in any process or activity connected with the proceeds of crime would also be caught within the net of Section 3. In the case on hand, on a reading of the complaint, the allegation is that, but for the role played by the petitioner, the loans could not have been sanctioned and disbursed to A-1. Prima facie, these allegations would attract Section 3 of the PML Act. The conclusion have been arrived at in the light of a recent decision of the Supreme Court in DIRECTORATE OF ENFORCEMENT VERSUS PADMANABHAN KISHORE [2022 (11) TMI 53 - SUPREME COURT], wherein, it was observed that By handing over money with the intent of giving bribe, such person will be assisting or will knowingly be a party to an activity connected with the proceeds of crime. Without such active participation on part of the person concerned, the money would not assume the character of being proceeds of crime. The relevant expressions from Section 3 of the PML Act are thus wide enough to cover the role played by such person. The case set up in paragraph 10.6 of the complaint is that, A-5 had sanctioned and disbursed the credit facilities/loan. But, for the alleged active participation and assistance of the petitioner/A-5 the money so disbursed would not have assumed the character of proceeds of crime. Consequently, it cannot be said that the alleged role played by the petitioner does not come within the net of the definition of proceeds of crime under Section 3 of the PML Act. There are no ground to interfere with the criminal prosecution of the petitioner/A-5 - petition dismissed. Issues Involved:1. Quashing of proceedings and charges framed against the petitioner under Section 3 of the Prevention of Money-Laundering Act, 2002 (PML Act).2. Determination of whether the petitioner's actions constitute 'proceeds of crime' under Section 2(1)(u) of the PML Act.3. Application of precedents and legal principles from relevant Supreme Court judgments.Issue-Wise Detailed Analysis:1. Quashing of Proceedings and Charges:The petitioner sought to quash the proceedings and charges framed against him in C.C.No.14 of 2018 under Section 482 of the Code of Criminal Procedure (Cr.P.C). The petitioner was implicated for his role as the Chief Manager of Union Bank of India in sanctioning and disbursing a cash credit facility of Rs.6.25 crores to National Medicines Private Limited, which was alleged to be fraudulent. The petitioner argued that no offence under Section 3 of the PML Act was made out against him since he did not generate any 'proceeds of crime' as defined under Section 2(1)(u) of the PML Act.2. Determination of 'Proceeds of Crime':The court examined whether the actions of the petitioner fell within the definition of 'proceeds of crime' under Section 2(1)(u) of the PML Act. The term 'proceeds of crime' refers to any property derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence. The court referred to the Supreme Court's interpretation in Vijay Madanlal Choudhary and Others Vs. Union of India and Others, which clarified that not all properties involved in criminal activity are 'proceeds of crime.' The property must be derived or obtained as a result of criminal activity related to a scheduled offence.3. Application of Precedents and Legal Principles:The court considered the legal principles established in previous judgments, notably Vijay Madanlal Choudhary and Others Vs. Union of India and Others and Priti Saraf and Another Vs. State of NCT of Delhi and Another. The Supreme Court in Vijay Madanlal emphasized that the offence of money-laundering involves any process or activity connected with the proceeds of crime, including its concealment, possession, acquisition, or use. The court noted that the petitioner's role in sanctioning and disbursing the loan, which was subsequently used in fraudulent activities, prima facie attracted Section 3 of the PML Act.The court also referred to the judgment in Directorate of Enforcement Vs. Padmanabhan Kishore, which held that anyone knowingly assisting in any process or activity connected with the proceeds of crime falls under the purview of Section 3 of the PML Act. The court concluded that the petitioner's actions, which facilitated the fraudulent loan, rendered the money as proceeds of crime.Conclusion:The court dismissed the petition, stating that the allegations against the petitioner prima facie attracted Section 3 of the PML Act. The court emphasized that the observations were confined to the disposal of the petition and did not interfere with the ongoing criminal prosecution. The connected miscellaneous petition was also closed.