2024 (12) TMI 1557 - HC - Money Laundering

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

VEM KRISHNA KEERTHAN Versus DIRECTORATE OF ENFORCEMENT

VEM KRISHNA KEERTHAN Versus DIRECTORATE OF ENFORCEMENT - TMI 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.