PMLA proceedings need a live predicate offence; accepted refer report and unscheduled allegations could not sustain continuation.

Proceedings under the Prevention of Money Laundering Act, 2002 require a live predicate scheduled offence giving rise to proceeds of crime. Where the police refer report found no scheduled offence and the jurisdictional court accepted that report, the statutory foundation for money-laundering action fell away and continuation of proceedings was not sustainable. A pending protest complaint did not revive that foundation because it did not disclose a scheduled offence, and later allegations based on unscheduled offences could not support the Act's invocation. The commentary states that ancillary action under the PMLA cannot survive once the underlying predicate offence is extinguished on the record.

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Issues: (i) Whether the acceptance of the police refer report, whereby the scheduled/predicate offences were found not made out, disables continuation of proceedings under the Prevention of Money Laundering Act, 2002. (ii) Whether the pending protest complaint and the subsequent allegations based on unscheduled offences sustain the continuation of proceedings under the Prevention of Money Laundering Act, 2002.

Issue (i): Whether the acceptance of the police refer report, whereby the scheduled/predicate offences were found not made out, disables continuation of proceedings under the Prevention of Money Laundering Act, 2002.

Analysis: The statutory scheme of the Prevention of Money Laundering Act, 2002 makes the existence of proceeds of crime arising from a scheduled offence the jurisdictional foundation for action under the Act. The definition of proceeds of crime and the offence of money-laundering both presuppose a criminal activity relating to a scheduled offence. On the facts, the investigation culminated in a refer report concluding that no offence was made out, and the jurisdictional court accepted that report. Once that foundation disappeared, the continuance of money-laundering proceedings could not be justified.

Conclusion: The issue is answered in favour of the petitioners. The accepted refer report meant that the predicate offences were no longer available to support continuation of proceedings under the Act.

Issue (ii): Whether the pending protest complaint and the subsequent allegations based on unscheduled offences sustain the continuation of proceedings under the Prevention of Money Laundering Act, 2002.

Analysis: A protest complaint, by itself, only operates as an objection to the final report and does not revive a concluded basis for money-laundering action unless it discloses a scheduled offence capable of constituting a predicate offence. The later complaint raised additional allegations relating to offences which were not scheduled offences, and the conspiracy allegation was tied to those unscheduled offences. As such, the pending protest complaint did not provide a valid statutory foundation for continuation of proceedings under the Act.

Conclusion: The issue is answered in favour of the petitioners. The pending protest complaint and the later allegations did not furnish a sustainable basis to continue the proceedings under the Act.

Final Conclusion: The money-laundering proceedings were quashed because the jurisdictional prerequisite of an existing predicate offence was not established on the record before the Court.

Ratio Decidendi: Proceedings under the Prevention of Money Laundering Act, 2002 cannot be initiated or continued unless there exists a live predicate offence giving rise to proceeds of crime; once that foundation is extinguished, ancillary action under the Act cannot survive.

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