Money-laundering proceedings require a live scheduled offence; absent that foundation, ECIR and consequential action cannot survive.

Proceedings under the Prevention of Money Laundering Act, 2002 depend on the existence of criminal activity relating to a scheduled offence and the resulting proceeds of crime. Where the petitioners were not named in the FIR, the charge-sheet had dropped the scheduled offences, and no live prosecution for a scheduled offence was pending against them, the ECIR could not sustain the prosecution complaint or attachment action. A later communication referring to further investigation did not cure the absence of a subsisting scheduled offence. The ECIR and all consequential PMLA proceedings were liable to be quashed, though liberty remained to revive action if later material established involvement in a scheduled offence.

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Issues: Whether the Enforcement Case Information Report, the prosecution complaint, and the attachment proceedings under the Prevention of Money Laundering Act, 2002 could survive when no scheduled offence was pending or made out against the petitioners.

Analysis: The legal foundation for proceedings under Section 3 of the Prevention of Money Laundering Act, 2002 is the existence of criminal activity relating to a scheduled offence and the resulting proceeds of crime. The Court applied the principle that prosecution for money-laundering cannot rest on a mere assumption that a scheduled offence exists, and that registration or pendency of the scheduled offence is necessary for such prosecution. On the facts, the petitioners were not named in the FIR, the charge-sheet dropped the scheduled offences, and no prosecution for a scheduled offence was pending against them. The subsequent communication only indicated further investigation and did not alter the absence of a live scheduled offence against the petitioners.

Conclusion: The impugned ECIR and all proceedings arising therefrom, including the prosecution complaint and attachment proceedings, were liable to be quashed. The petitioners succeeded, while liberty was reserved to revive proceedings if future material showed involvement in a scheduled offence.

Final Conclusion: Money-laundering proceedings cannot be sustained in the absence of a subsisting scheduled offence against the persons proceeded against, though revival remains open if subsequent investigation so justifies.

Ratio Decidendi: Proceedings under the Prevention of Money Laundering Act, 2002 are dependent on criminal activity relating to a scheduled offence, and where the accused is not shown to be facing a live scheduled offence, prosecution under Section 3 cannot be maintained.

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