2024 (11) TMI 995 - HC - Money Laundering

Money laundering case involving Rs. 7.20 crores from illegal lottery sales reopened after closure report set aside

HC set aside closure report in money laundering case involving Rs. 7.20 crores seized from illegal lottery ticket sales. Court found prima facie evidence ... Money Laundering - sale proceeds of lottery tickets - challenge to closure report - offences punishable under Sections 294N, Section 420 and 120B of Indian Penal Code - HELD THAT:- A legislation when brought into force with a legislative intent does not stay in the same shape, as it was intended to be. Evolution of the legislation is inevitable in a growing country. The operation and implementation of the law decides that the legislation is taken forward in its intended spirit and force. Once the legislation is applied and tested, the consequences of such application determine the character and fate of the legislation. The objects of the PMLA as intended is crystal clear from the day of its inception. Economic interest of our great nation is the soul object. The consequent implementation of the law should be in tandem with the legislative intent. Any misuse or abuse of the law will fracture the bones of PMLA, thereby rendering it wholly ineffective. Legislation of such nature must be handled with caution and must not injure any vital organs of Part III of the Constitution of India. To remind that facts of the present case at this juncture, the seizure of huge amount of cash of Rs. 7.20/- crores was on 12.03.2012. The sale agreement is said to have been entered into on 02.03.2012. The stamp paper has been released by the State Government only on 09.03.2012 and it was sold by the stamp vendor to one Smt.Vimala on 13.02.2012. It is a clear case of cheating by amassing money by sale of illegally printed lottery tickets attracting Section 420 of IPC, creation of a false document in the form of a sale agreement attracting the provisions of Sections 467, 468 and 471 of IPC and hence prima facie materials are available for both the predicate offence and the offence under PMLA. But the PMLA proceedings are sought to be scuttled by closing the proceedings in the predicate offence. In the present case, the State Investigating Agency registered the predicate offence, conducted investigation and against the dismissal of quash petition filed SLP before the Hon'ble Supreme Court and the criminal case was restored by the order of the Apex Court. When the prima facie case regarding a predicate offence has been upheld by the Hon'ble Supreme Court by restoring the criminal case in the predicate offence, filing closure report thereafter by the very same State Agency is undoubtedly suspicious and doubtful. The State Agency has made an attempt to bury the predicate offence against the accused persons in a suspicious manner and on extraneous considerations, which are visible through their actions including the closure report filed by the State police - The State Investigating Agency and the Enforcement Directorate are directed to proceed with the case in tandem, so as to ensure that the criminal case instituted is proceeded in accordance with law. However, the trial must go on uninfluenced by the observations, if any made relating to facts in the present case. The facts established and the legal position considered made us to arrive at an irresistible conclusion that the Closure Report filed by the 1st respondent dated 14.11.2022 accepted by the learned Judicial Magistrate-I, Alandur by order dated 17.11.2022 made in Crime No.304 of 2012 stands set aside - Accordingly, the Criminal Original Petition stands allowed. Issues Involved:1. Proceeds of Crime in the Present Case2. Maintainability of the Present Petition3. Inherent Powers of the High Court under Section 482 of Criminal Procedure Code4. Analysis of the Judgments Relied on by the Respondents5. Object of PMLA6. About the Closure Report by State Police and Acceptance by the Learned Magistrate7. Whether Creating an Ante Dated Document is Forgery8. About the Impugned OrderIssue-wise Detailed Analysis:1. Proceeds of Crime in the Present Case:The Enforcement Directorate (ED) had issued Provisional Attachment Orders for the proceeds of crime under the Prevention of Money Laundering Act (PMLA), which were confirmed by the Adjudicating Authority. However, the Appellate Tribunal set aside these attachments due to the closure of the predicate offence. The ED argued that the confiscation of proceeds of crime under Section 8(5) of PMLA necessitates challenging the closure report accepted by the Magistrate, as the proceeds of crime were projected as untainted through fabricated documents.2. Maintainability of the Present Petition:The respondents contended that the ED is not a victim or aggrieved person and thus lacks the standing to challenge the closure report. However, the court examined the issue of maintainability, noting that the ED's actions are dependent on the existence of a predicate offence. Since the Supreme Court allowed the ED to take appropriate legal steps, the ED's petition under Section 482 of the Criminal Procedure Code is maintainable to challenge the closure of the predicate offence.3. Inherent Powers of the High Court under Section 482 of Criminal Procedure Code:The court emphasized that Section 482 of the Criminal Procedure Code allows the High Court to prevent abuse of process and ensure justice, without limiting the petitioner's identity to an aggrieved person or victim. The ED, being concerned with the issues of proceeds of crime, is entitled to file the petition to correct any illegality and prevent miscarriage of justice.4. Analysis of the Judgments Relied on by the Respondents:The respondents cited judgments, including a Bombay High Court decision, arguing that the ED has no locus to intervene at the closure report stage. However, the court distinguished these cases, noting that the PMLA creates a separate set of offences and procedures. The Supreme Court left the question of law open, allowing the ED to pursue remedies under law, thus supporting the ED's standing in the present case.5. Object of PMLA:The court highlighted the PMLA's objective to prevent money laundering, which affects the economic health of the nation. The legislation aims to protect the common man's interests by ensuring fair investigation and prosecution of money laundering offences. The ED's role in identifying and prosecuting proceeds of crime is crucial to achieving the PMLA's objectives.6. About the Closure Report by State Police and Acceptance by the Learned Magistrate:The closure report filed by the State Police was deemed incorrect, as it ignored evidence of fabricated documents used to project tainted money as untainted. The Magistrate's acceptance of the report was criticized for being mechanical and not considering the Supreme Court's order restoring the predicate offence for investigation.7. Whether Creating an Ante Dated Document is Forgery:The creation of an ante-dated sale agreement on a stamp paper issued after the purported date was identified as fabrication under Section 464 IPC. The document was used to project illegal money as legitimate, meeting the criteria for forgery and related offences under Sections 467, 468, and 471 IPC.8. About the Impugned Order:The court found the Magistrate's order accepting the closure report to be a miscarriage of justice, as it failed to consider the evidence and legal context. The order was set aside, and the case was directed to proceed in accordance with law, ensuring that the PMLA proceedings are not undermined by the closure of the predicate offence.Conclusion:The High Court concluded that the closure report and its acceptance were improper, setting aside the Magistrate's order. The court directed the State Investigating Agency and the ED to proceed with the case in tandem, ensuring that the criminal proceedings continue lawfully, and the trial proceeds uninfluenced by the court's observations on the facts. The Criminal Original Petition was allowed, and the connected Miscellaneous Petition was closed.