PMLA jurisdiction requires a scheduled offence; Enforcement Directorate cannot independently convert non-scheduled offences for prosecution.
PMLA jurisdiction depends on an underlying scheduled offence because "proceeds of crime" can arise only from criminal activity relating to such an offence. The Court stated that, where the police case and charge-sheet disclose only non-scheduled offences, prosecution for money laundering cannot be sustained unless a scheduled offence is registered, is pending inquiry, or is otherwise found in criminal proceedings before the competent court. It also held that the Enforcement Directorate cannot independently treat non-scheduled offences as scheduled offences or assume jurisdiction to register an ECIR on that basis. The PMLA complaint, prosecution case, and charges were quashed, with liberty to proceed afresh if a competent criminal court later frames charges for scheduled offences.
Issues: (i) Whether registration of an FIR or case for a scheduled offence is a condition precedent for launching prosecution for money laundering under the Prevention of Money Laundering Act, 2002. (ii) Whether the Enforcement Directorate can independently treat non-scheduled offences in the police charge-sheet as scheduled offences and found jurisdiction to register an ECIR and prosecute under the Prevention of Money Laundering Act, 2002.
Issue (i): Whether registration of an FIR or case for a scheduled offence is a condition precedent for launching prosecution for money laundering under the Prevention of Money Laundering Act, 2002.
Analysis: Liability for money laundering under Section 3 of the Prevention of Money Laundering Act, 2002 depends on the existence of "proceeds of crime", and "proceeds of crime" arise only from criminal activity relating to a scheduled offence. The Court applied the governing principles that, unless a scheduled offence is registered, is pending inquiry, or survives in criminal proceedings before the competent forum, the enforcement machinery under the Act cannot assume that proceeds of crime exist. On the admitted facts, the underlying police investigation and charge-sheet were only for offences that were not scheduled offences.
Conclusion: A scheduled offence is a necessary precondition, and in its absence prosecution under the Prevention of Money Laundering Act, 2002 could not be sustained.
Issue (ii): Whether the Enforcement Directorate can independently treat non-scheduled offences in the police charge-sheet as scheduled offences and found jurisdiction to register an ECIR and prosecute under the Prevention of Money Laundering Act, 2002.
Analysis: The Court held that the Enforcement Directorate cannot sit in appeal over the police investigation or charge-sheet and cannot substitute its own view on whether the disclosed offences amount to scheduled offences. The competent criminal court alone must determine what offences are made out on the material collected by the investigating agency. Until such court finds scheduled offences, the Enforcement Directorate cannot pre-empt that determination by independently assuming jurisdiction on the footing that the same material discloses scheduled offences.
Conclusion: The Enforcement Directorate could not independently convert the non-scheduled offences in the charge-sheet into scheduled offences for the purpose of PMLA jurisdiction.
Final Conclusion: The complaint under the Prevention of Money Laundering Act, the prosecution case, and the charges framed were quashed, while leaving open liberty to proceed afresh if the competent criminal court later frames charges for scheduled offences.
Ratio Decidendi: Jurisdiction under the Prevention of Money Laundering Act, 2002 arises only when the alleged laundering is linked to criminal activity relating to a scheduled offence, and the Enforcement Directorate cannot independently assume the existence of such scheduled offence contrary to the subsisting police case unless a competent criminal court so determines.
TaxTMI 
AI Drafter ✕
TaxTMI 
