2024 (12) TMI 1557 - HC - Money Laundering

Telangana HC upholds PMLA proceedings despite petitioner being witness in predicate offence, not accused

Telangana HC dismissed petition challenging PMLA proceedings. Court held money laundering is an independent offence focusing on proceeds of crime, not ... Money Laundering - predicate/scheduled offence - maintainability of proceedings under the PMLA, when he is not named as an accused in the predicate offence - Petitioner's role as a witness in the predicate offence - HELD THAT:- From the definition of Section 3 of the PMLA, it is clear that any person who knowingly assists or indulges in any activity or is involved in any of the processes connected with the proceeds of crime is guilty of the offence of money laundering. The essential ingredient for the offence of money laundering, therefore, is the existence of proceeds of crime. The ‘proceeds of crime’ means any property which is derived or obtained as a result of a criminal activity. Such criminal activity relates to the offences included in the Schedule to the PMLA. In other words, any property derived or obtained as a result of commission of any of the offences mentioned in the Schedule to the PMLA will be treated as ‘proceeds of crime’. While the offence of money laundering is dependent on the existence of the predicate offence, it is also an independent offence which seeks to prosecute the persons dealing with proceeds of crime. In other words, the offence of money laundering is not concerned with the ingredients of the alleged predicate offence. It is only concerned with the generation of proceeds of crime and whether the accused has dealt with such proceeds of crime. The status of the Petitioner as a witness in the predicate offence is also not a ground to quash the proceedings under the PMLA. The Allahabad High Court in Mohan Lal Rathi v. Union of India [2023 (9) TMI 1069 - ALLAHABAD HIGH COURT] dealt with a case where the Petitioner therein had turned an approver and was granted pardon in the predicate offence. In the said case, the Petitioner therein contended that as he was granted pardon and he was an approver/witness, the proceedings against him under the PMLA cannot be continued. The Allahabad High Court rejected the said contention and held that proceedings under the PMLA were maintainable despite grant of pardon. The next ground raised by the Petitioner was that no scheduled offence as alleged existed when the FIR in relation to the predicate offence was registered. In support of the said ground, the Petitioner advanced two arguments. Firstly, that when the ECIR was registered only Section 120B of the IPC was stated to be the alleged predicate offence - there can be no dispute that Section 120B of the IPC alone cannot be treated as a scheduled offence to invoke the proceedings under the PMLA. However, the contention that only Section 120B of the IPC was invoked as the predicate offence in the present case is misconceived. The FIR and Charge Sheets in relation to the predicate offence clearly mention that Section 12 of the PCA was also invoked. The said FIR and the Charge Sheets have been referred to in the ECIR. In the present case, the question is whether as on the date of registration of the ECIR, there was material with the Respondent to show that the Petitioner or the other accused were dealing with any part of the proceeds of crime. As per the ECIR dated 26.11.2018, the alleged proceeds of crime is the alleged bribe amount of Rs. 5 crore. As on the date of registration of the ECIR, only Rs. 50 lakhs were seized. It is reasonable to draw an inference that the remaining part of the alleged proceeds of crime worth Rs. 4.5 crore were either being concealed or used or being projected as untainted money or were in possession of any or all of the accused. Therefore, there is enough prima facie material to hold that as on the date of the registration of the ECIR, i.e., 26.11.2018, the offence of money laundering was continuing - Both of the said offences were part of the Schedule to the PMLA as on the date of registration of the ECIR. Therefore, this Court cannot accept the argument of the Petitioner that no scheduled offence existed when the alleged act of bribery took place and when the proceeds of crime were seized. In Y. Balaji [2023 (6) TMI 594 - SUPREME COURT], the Supreme Court held that an offence of corruption constitutes and the generation of proceedings are like ‘Siamese twins’. Therefore, there is sufficient material to justify the filing of the impugned prosecution complaint and to continue the proceedings under the PMLA. Conclusion - i) The PMLA proceedings are maintainable against the Petitioner despite him not being named as an accused in the predicate offence, as the offence of money laundering is independent and focuses on the handling of proceeds of crime. ii) The timing of the inclusion of Section 12 of the PCA in the Schedule to the PMLA does not affect the proceedings, as money laundering is a continuing offence. iii) The stay on the trial of the predicate offence does not affect the PMLA proceedings, as there is no final absolution of the accused in the scheduled offence. iv) The Petitioner's status as a witness in the predicate offence does not preclude prosecution under the PMLA. Petition dismissed. 1. ISSUES PRESENTED and CONSIDEREDThe core legal issues considered in this judgment include:Whether the proceedings under the Prevention of Money Laundering Act, 2002 (PMLA) are maintainable against the Petitioner when he is not named as an accused in the predicate offence.Whether the proceedings under the PMLA can be initiated when the alleged scheduled offence was not a part of the Schedule to the PMLA at the time of the commission of the predicate offence.Whether the proceedings under the PMLA can continue when the trial in the predicate offence is stayed by the Supreme Court.Whether the non-inclusion of Section 12 of the Prevention of Corruption Act (PCA) as a scheduled offence in the Enforcement Case Information Report (ECIR) affects the validity of the proceedings.Whether the Petitioner's role as a witness in the predicate offence affects the maintainability of the PMLA proceedings against him.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Maintainability of PMLA Proceedings Against the PetitionerThe Petitioner argued that he was not named as an accused in the predicate offence and thus, proceedings under the PMLA are not maintainable. The Court referred to the definition of money laundering under Section 3 of the PMLA, which penalizes anyone involved in activities connected with the proceeds of crime. The Court emphasized that a person need not be involved in the predicate offence to be prosecuted under the PMLA. The Supreme Court in Pavana Dibbur v. Directorate of Enforcement clarified that an accused in PMLA proceedings need not be an accused in the scheduled offence. The Court concluded that the Petitioner's involvement in the alleged money laundering activities suffices for proceedings under the PMLA.Issue 2: Timing of Scheduled Offence Inclusion in the PMLAThe Petitioner contended that the alleged predicate offence occurred before Section 12 of the PCA was included in the Schedule to the PMLA. The Court noted that money laundering is a continuing offence and the relevant date is when the accused indulges in activities connected with the proceeds of crime. The Supreme Court in Vijay Madanlal Chaudhary held that the date of commission of the scheduled offence is irrelevant for prosecuting money laundering if the accused continues to deal with the proceeds of crime. The Court found that as of the ECIR registration date, the alleged proceeds of crime were still being dealt with, justifying the PMLA proceedings.Issue 3: Impact of Stay on Predicate Offence ProceedingsThe Petitioner argued that the stay on the trial of the predicate offence by the Supreme Court should extend to the PMLA proceedings. The Court, referencing Vijay Madanlal Chaudhary, determined that unless the accused in the scheduled offence is finally absolved, the PMLA proceedings can continue. A stay does not equate to an acquittal or discharge, and thus, the PMLA proceedings remain valid.Issue 4: Non-Inclusion of Section 12 of the PCA in the ECIRThe Petitioner asserted that the omission of Section 12 of the PCA in the ECIR invalidates the proceedings. The Court clarified that the ECIR is a preliminary document and the prosecution complaint, which included Section 12 of the PCA, is the critical document. The omission in the ECIR was deemed a mere oversight and not sufficient to invalidate the proceedings.Issue 5: Petitioner's Role as a Witness in the Predicate OffenceThe Petitioner's status as a witness in the predicate offence was argued as a ground to dismiss the PMLA proceedings. The Court referred to Mohan Lal Rathi v. Union of India and Amit Katyal v. Union of India, which held that being a witness in the predicate offence does not preclude prosecution under the PMLA. The Court concluded that the Petitioner's role as a witness does not affect the maintainability of the PMLA proceedings.3. SIGNIFICANT HOLDINGSThe Court held that:The PMLA proceedings are maintainable against the Petitioner despite him not being named as an accused in the predicate offence, as the offence of money laundering is independent and focuses on the handling of proceeds of crime.The timing of the inclusion of Section 12 of the PCA in the Schedule to the PMLA does not affect the proceedings, as money laundering is a continuing offence.The stay on the trial of the predicate offence does not affect the PMLA proceedings, as there is no final absolution of the accused in the scheduled offence.The omission of Section 12 of the PCA in the ECIR does not invalidate the proceedings, as the prosecution complaint correctly lists the scheduled offences.The Petitioner's status as a witness in the predicate offence does not preclude prosecution under the PMLA.The Court dismissed the criminal petition and vacated the interim order, allowing the proceedings under the PMLA to continue.