2023 (5) TMI 1029 - HC - Money Laundering

Court quashes PMLA proceedings lacking scheduled offences; Enforcement Directorate can revive if new evidence surfaces.

The Court quashed ECIR No. ECIR/PJZO/03/2022 and related proceedings under the Prevention of Money Laundering Act, 2002 (PMLA) as the Petitioners were not ... Money Laundering - existence of scheduled offences or not - no accused persons shown in FIR - Petitioners contend that since no scheduled offences were alleged against them and even though more than a year had elapsed after filing the prosecution complaint against them, no summons could be issued to the Petitioners under the PMLA - HELD THAT:- In Vijay Madanlal Choudhary [2022 (7) TMI 1316 - SUPREME COURT], the Hon'ble Supreme Court, in the context of attachment of property, held that it is only such property which is derived or obtained directly or indirectly as a result of criminal activity relating to a scheduled offence that can be regarded as proceeds of crime. Therefore, the Authorities under the PLMA 2002 cannot act against any person for money laundering on the assumption that a scheduled offence has been committed unless the same is registered with the jurisdictional Police or pending inquiry/trial, including by way of criminal complaint before the competent forum. The Hon'ble Supreme Court held that taking any other view would be rewriting of these provisions and disregarding express language of the definition clause 'proceeds of crime', as it obtains now. Based upon Vijay Madanlal Choudhary, a case is made out for a grant of relief to the Petitioners now that it is clear that there is no prosecution against the Petitioners for any scheduled offence under the PMLA 2002. Based upon the communication dated 20/4/2023, addressed by the Crime Branch to the Enforcement Directorate, no case is made to dismiss these Petitions or defer hearings therein - As and when investigations are completed, and further, if the Petitioners are implicated for their involvement in any of the scheduled offences, the Respondent will have the liberty to seek revival of the PMLA proceedings by taking appropriate steps. However, based on the communication dated 20/4/2023, no case has been made to deny relief to the Petitioners. The Division Bench found that a 'C' summary report had been filed regards the scheduled offences. The Division Bench relied upon State of Maharashtra vs. Bhimrao Vithal Jadhav [1974 (9) TMI 137 - BOMBAY HIGH COURT], where it had been observed that granting of a 'C' summary amounts to an acquittal. After quoting from Vijay Madanlal Choudhary (supra), the Division Bench concluded that if a person is discharged or acquitted of a scheduled offence by a competent Court, there could be no offence of money laundering against him. Finally, the Division Bench held that since no scheduled offence was alleged against the Petitioner because of the closure report filed by the Police, the impugned FIR registered by the Enforcement Directorate would not survive, and the said ECIR would have to be quashed, and set aside. Petition allowed. Issues Involved:1. Quashing of ECIR No. ECIR/PJZO/03/2022 and related proceedings under the Prevention of Money Laundering Act, 2002 (PMLA).2. Legality of proceedings initiated when no scheduled offence under PMLA is alleged against the Petitioners.3. Consideration of Supreme Court precedents on the necessity of scheduled offences for PMLA prosecution.Summary:Issue 1: Quashing of ECIR No. ECIR/PJZO/03/2022 and related proceedings under PMLAThe Petitioners sought the quashing of ECIR No. ECIR/PJZO/03/2022 dated 28/1/2022 and the proceedings in PMLA No. 01/2022 pending before the Additional Sessions Judge and Special Court under PMLA 2002, at Mapusa, Goa. They also sought to quash the attachment proceedings initiated under the same ECIR.Issue 2: Legality of proceedings initiated when no scheduled offence under PMLA is alleged against the PetitionersThe Petitioners argued that since they were not named in FIR No. 10/2022 and no scheduled offences under PMLA were alleged against them, the proceedings should be quashed. The FIR initially included offences under Sections 420, 409, 120-B read with Section 34 of the IPC and Sections 3 and 4 of the Goa Public Gambling Act, 1976, along with Section 66-D of the Information Technology Act, 2000. However, the charge sheet filed later only invoked Sections 3 and 4 of the Goa Public Gambling Act, dropping the scheduled offences under Sections 420 and 120-B of IPC.Issue 3: Consideration of Supreme Court precedents on the necessity of scheduled offences for PMLA prosecutionThe Petitioners relied on the Supreme Court's decision in Vijay Madanlal Choudhary and ors. Vs. Union of India and ors., which held that prosecution under PMLA could not proceed without a scheduled offence being registered. They also cited Indrani Patnaik vs Directorate of Enforcement and ors., where the Supreme Court quashed the prosecution complaint as the Petitioners were discharged of the scheduled offences.The Court noted that the Petitioners were not named in FIR No. 10/2022, and the charge sheet did not include any scheduled offences under PMLA. The Supreme Court in Vijay Madanlal Choudhary (supra) held that the offence under Section 3 of PMLA is dependent on the illegal gain of property due to criminal activity relating to a scheduled offence. Therefore, the prosecution under PMLA could not proceed in the absence of a scheduled offence.The Court also referred to the communication dated 20/4/2023 from the Crime Branch, which indicated that further investigation was ongoing. However, no scheduled offences were yet alleged against the Petitioners.Based on these findings and the precedents, the Court concluded that the impugned ECIR and related proceedings should be quashed. However, the Court granted the Enforcement Directorate the liberty to revive the proceedings if future investigations revealed the Petitioners' involvement in any scheduled offences under PMLA.Conclusion:The Court allowed both Petitions, making the Rule absolute in terms of prayer clauses (a), (b), and (c). The impugned ECIR No. ECIR/PJZO/03/2022 dated 28/1/2022 and all proceedings arising from it, including the prosecution complaint dated 3/6/2022 and attachment proceedings, were quashed. The Enforcement Directorate was granted the liberty to revive the proceedings if new material indicated the Petitioners' involvement in any scheduled offences under PMLA.