2023 (2) TMI 1031 - HC - Money Laundering

Court quashes Provisional Attachment Order under PMLA, releases properties.

The court concluded that the Provisional Attachment Order (PAO) dated 14th January 2022, issued under the Prevention of Money Laundering Act (PMLA), was ... Provisional Attachment Order - scheduled offences or not - the proceedings against the Petitioner, its directors, and shareholders in the scheduled offense as also the offense under the PMLA have been closed.- HELD THAT:- In Vijay Madanlal Choudhary [2022 (7) TMI 1316 - SUPREME COURT], the Supreme Court has in categorical terms held that for the existence of ‘proceeds of crime’ under Section 2(1)(u) of the PMLA, the existence of a criminal complaint pending enquiry and/or trial would be necessary. Further, if the person in question has been finally discharged or acquitted of the scheduled/predicate offence, there can be no offence of money laundering against the said person. In Parvathi Kollur v. Enforcement Directorate [2022 (8) TMI 1256 - SC ORDER], the Supreme Court also specifically referred to the paragraph as mentioned above in Vijay Madanlal Choudhary and held that when the accused person has been acquitted in the scheduled offence under the PMLA, the closure of the proceedings under the PMLA against the accused person and persons said to connected to the accused person would be the natural consequence. The Supreme Court in Indrani Patnaik & Anr. v. Enforcement Directorate and Ors. [2022 (11) TMI 1311 - SUPREME COURT] has recently held that there cannot be any prosecution in relation to an offence for which the accused person has already been discharged. In view of the settled legal position in Vijay Madanlal Choudhary and the subsequent decisions and orders thereafter, the properties of M/s Omkar Realtors and Developers Pvt. Ltd., which were attached by the impugned PAO, shall be released. The PAO deserves to be quashed in view of the legal position as held in the above judgments - Petition disposed off. Issues Involved:1. Maintainability of the petition due to territorial jurisdiction.2. Validity of the Provisional Attachment Order (PAO) under the Prevention of Money Laundering Act (PMLA).3. Impact of discharge orders by the Special Court under PMLA on the PAO.4. Legal precedents and their applicability to the case.Detailed Analysis:1. Maintainability of the Petition Due to Territorial Jurisdiction:The respondents raised a preliminary objection regarding the maintainability of the petition on the grounds of lack of territorial jurisdiction. This objection was rejected based on a previous order in a similar case (W.P. (C) 6354/2022), and the court directed both parties to maintain the status quo.2. Validity of the Provisional Attachment Order (PAO) under the Prevention of Money Laundering Act (PMLA):The petitioner sought to quash the PAO dated 14th January 2022, issued by the Directorate of Enforcement (ED) under Section 5(1) of the PMLA. The PAO was based on FIR No. 109/2020 registered under Sections 420, 406, and 34 of the Indian Penal Code. The Special Court under PMLA, Greater Bombay, had discharged the petitioner and its directors/shareholders from the scheduled offense and the PMLA offense, rendering the PAO invalid.3. Impact of Discharge Orders by the Special Court under PMLA on the PAO:The petitioner argued that the PAO could no longer be valid as the Special Court had discharged the accused in the scheduled offense and the PMLA offense. The discharge orders dated 24th August 2022 and 18th October 2022 were critical in this context. The respondents, however, contended that the matter should not be disposed of as the ED had challenged the discharge order, which was pending before the Bombay High Court. 4. Legal Precedents and Their Applicability to the Case:The petitioner relied on several judgments, including Vijay Madanlal Choudhary & Ors. v. UOI & Ors., which stated that for the existence of 'proceeds of crime' under Section 2(1)(u) of the PMLA, a pending criminal complaint or trial is necessary. If the person is discharged or acquitted of the scheduled offense, there can be no offense of money laundering. This principle was reaffirmed in subsequent cases such as Parvathi Kollur v. Enforcement Directorate and Adjudicating Authority v. Shri Ajay Kumar Gupta & Ors.The court considered these submissions and noted that the PAO was based on FIR No. 109/2020, which had been closed, and the accused had been discharged. The court referred to the Supreme Court's decision in Vijay Madanlal Choudhary, which emphasized that without a subsisting scheduled offense, there could be no money laundering offense. The court also cited the Division Bench's decision in Harish Fabiani and Ors. v. Enforcement of Directorate, which supported the same view.Conclusion:Considering the facts and legal precedents, the court concluded that the PAO dated 14th January 2022 could no longer be sustained. The court quashed the PAO and ordered the release of the attached properties of M/s Omkar Realtors and Developers Pvt. Ltd. However, the court clarified that if the Bombay High Court permits the ED to seek variation or proceed further under the PMLA, the ED may revive the PAO in accordance with the law. The petition was disposed of, and liberty was granted to the petitioners to move an appropriate application if the properties are not released.