2024 (1) TMI 1411 - HC - Money Laundering

Court Quashes PMLA Summons Due to Discharge in Related Offence; Proceedings Unsustainable Without Active Scheduled Offence.

The court quashed the summons issued under Section 50 of the PMLA, as the applicant had been discharged in the related scheduled offence, rendering the ... Money Laundering - proceeds of crime - challenge to summons issued under Sub-Section (2) and (3) of Section 50 of the Prevention of Money Laundering Act 2002 - challenge to constitutional vires of Section 50 - seeking declaration of the same as being violative of Article 20(3) of the Constitution read with Articles 14 and 21 thereof - HELD THAT:- The applicannt has already been discharged by the learned Special Judge, therefore, the summon dated 18.12.2021 issued by the respondent No. 3 to the petitioner in respect of the entry made in file Directorate of Enforcement Case numbered as File. No. F.No. GWZO/09/2020 (sd/-illegible)/1861 is hereby set aside and quashed. Matter closed. 1. ISSUES PRESENTED and CONSIDEREDThe judgment primarily revolves around the following legal issues:Whether the summons issued under Sub-Section (2) and (3) of Section 50 of the Prevention of Money Laundering Act, 2002 (PMLA) are valid and enforceable.The constitutional validity of Section 50 of the PMLA, particularly in light of Article 20(3) of the Constitution, read with Articles 14 and 21.Whether the offence of money laundering under Section 3 of the PMLA is dependent on the prosecution of a scheduled offence.The implications of a discharge in a scheduled offence on the proceedings under the PMLA.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Validity of Summons under Section 50 of PMLARelevant Legal Framework and Precedents: Section 50 of the PMLA empowers authorities to summon individuals for evidence and documents. The applicant challenged the summons issued under this section.Court's Interpretation and Reasoning: The court considered the fact that the applicant had been discharged by the Special Judge in the related scheduled offence, which impacted the validity of the summons.Key Evidence and Findings: The discharge order from the Special Judge and the lack of charges against the applicant in the scheduled offence were pivotal.Application of Law to Facts: The court applied the legal principles from the Supreme Court judgment in Vijay Madanlal Choudhary, emphasizing that without a pending scheduled offence, the PMLA proceedings could not stand.Treatment of Competing Arguments: The respondent did not object to granting relief, acknowledging the discharge in the scheduled offence.Conclusions: The summons were quashed as they were based on a non-existent charge in the scheduled offence.Issue 2: Constitutional Validity of Section 50 of PMLARelevant Legal Framework and Precedents: The applicant argued that Section 50 violated constitutional protections against self-incrimination (Article 20(3)) and the rights to equality and life (Articles 14 and 21).Court's Interpretation and Reasoning: The court did not delve deeply into this issue, as the primary relief sought was linked to the discharge in the scheduled offence.Key Evidence and Findings: The focus remained on the discharge in the scheduled offence, which rendered the constitutional challenge moot for the applicant.Application of Law to Facts: The court did not need to apply constitutional principles extensively, given the resolution of the primary issue.Treatment of Competing Arguments: The court did not engage with arguments on constitutional grounds due to the resolution of the summons issue.Conclusions: The court did not make a determination on the constitutional validity of Section 50.Issue 3: Dependency of Money Laundering Offence on Scheduled OffenceRelevant Legal Framework and Precedents: The PMLA defines money laundering as an offence connected to criminal activity related to a scheduled offence.Court's Interpretation and Reasoning: The court referenced the Supreme Court's interpretation in Vijay Madanlal Choudhary, which clarified that a money laundering charge requires an active scheduled offence.Key Evidence and Findings: The discharge in the scheduled offence was central to the court's decision to quash the summons.Application of Law to Facts: The court applied the Supreme Court's reasoning to conclude that without a scheduled offence, the PMLA proceedings could not continue.Treatment of Competing Arguments: The applicant's argument was supported by the Supreme Court precedent, and the respondents did not contest this point.Conclusions: The court concluded that the PMLA proceedings could not proceed without a pending scheduled offence.3. SIGNIFICANT HOLDINGSVerbatim Quotes of Crucial Legal Reasoning: 'The offence under Section 3 of the 2002 Act is dependent on illegal gain of property as a result of criminal activity relating to a scheduled offence... If the person is finally discharged/acquitted of the scheduled offence... there can be no offence of Money-Laundering against him.'Core Principles Established: The dependency of money laundering charges on the existence of a scheduled offence; the impact of discharge in a scheduled offence on PMLA proceedings.Final Determinations on Each Issue: The summons were quashed due to the discharge in the scheduled offence, and the court did not need to address the constitutional challenge to Section 50.