2025 (12) TMI 946 - HC - Money Laundering

Criminal revision in PMLA illegal mining case rejected; Section 2(1)(u) proceeds, Section 50 statements justify charges

HC dismissed the criminal revision petitions filed by the petitioner-accused in money laundering proceedings linked to illegal mining. Interpreting ... Money Laundering - illegal mining - scheduled offence - failure to appreciate that the prosecution has not produced material which would show that the petitioner has, in any manner, dealt with “proceeds of crime” - prima facie case against the petitioner is made out or not, on the basis of the evidence which has been collected in course of investigation - HELD THAT:- It is evident from Section 2(1)(u) of PMLA Act, 2002 that “proceeds of crime” means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property or where such property is taken or held outside the country, then the property equivalent in value held within the country or abroad - it is evident that the reason for giving explanation under Section 2(1)(u) is by way of clarification to the effect that whether as per the substantive provision of Section 2(1)(u), the property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property or where such property is taken or held outside the country but by way of explanation the proceeds of crime has been given broader implication by including property not only derived or obtained from the scheduled offence but also any property which may directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offence. The issue of discharge was the subject matter before the Hon'ble Supreme Court in the case of State of Tamilnadu, by Inspector of Police in Vigilance and Anti-Corruption v. N. Suresh Rajan, [2014 (1) TMI 553 - SUPREME COURT], wherein the Hon'ble Apex Court has been observed that 'what needs to be considered is whether there is a ground for presuming that the offence has been committed and not whether a ground for convicting the accused has been made out. To put it differently, if the court thinks that the accused might have committed the offence on the basis of the materials on record on its probative value, it can frame the charge; though for conviction, the court has to come to the conclusion that the accused has committed the offence. The law does not permit a mini trial at this stage.' Thus, it is evident that the law regarding the approach to be adopted by the Court while considering an application for discharge of the accused person the Court has to form a definite opinion, upon consideration of the record of the case and the documents submitted therewith, that there is not sufficient ground for proceeding against the accused. Thus, it can be safely inferred that if, upon consideration of the record of the case and the documents submitted therewith, and after hearing the submissions of the accused and the prosecution in this behalf, the Judge considers that there is no sufficient ground for proceeding against the accused, he shall discharge the accused and record his reasons for doing so and if, after such consideration and hearing as aforesaid, the Judge is of the opinion that there is ground for presuming that the accused has committed an offence, the trial Court shall frame the charge. However, the defence of the accused cannot be looked into at the stage of discharge. The accused has no right to produce any document at that stage. The application for discharge has to be considered on the premise that the materials brought on record by the prosecution are true - It is settled position of law that the accused is entitled in law to know with precision what is the law on which they are put to trial. Charges are framed against the accused only when the Court finds that the accused is not entitled to discharge under the relevant provision of CrPC/BNSS. If, upon consideration of the record of the case and the documents submitted therewith, and after hearing the submissions of the accused and the prosecution in this behalf, the Judge considers that there is no sufficient ground for proceeding against the accused, he shall discharge the accused and record his reasons for doing so and if, after such consideration and hearing as aforesaid, the Judge is of the opinion that there is ground for presuming that the accused has committed an offence, the trial Court shall frame the charge - Therefore, the stage of discharge is a stage prior to framing of the charge and once the Court rejects the discharge application, it would proceed for framing of charge. At the stage of discharge, the Judge has merely to sift and weigh the evidence in order to find out whether or not there is sufficient ground for proceeding against the accused and in other words, the sufficiency of grounds would take within its fold the nature of the evidence recorded by the prosecution or the documents produced before the court which ex facie disclose that there are suspicious circumstances against the accused so as to frame the charge against him and after that if the Judge comes to a conclusion that there is sufficient ground to proceed, he will frame a charge and, if not, he will discharge the accused. Prima facie the petitioner's role in illegal mining and laundering of its proceeds stood firmly established through seized cash, banking trails, and statements recorded under Section 50 of the PMLA, therefore arraignment of the petitioner as an accused is thus not arbitrary, but based on material that surfaced during investigation - from perusal of case record, statements of witnesses, materials available on record, this Court is of the considered view that prima-facie sufficient materials are available on record for framing of charge against the present petitioner. This Court do not find any justifiable reason to interfere with the impugned orders - both the criminal revision petitions are hereby dismissed. 1. ISSUES PRESENTED AND CONSIDERED (1) Whether the orders rejecting discharge and framing charge under Section 3 punishable under Section 4 of the Prevention of Money Laundering Act, 2002 suffer from any legal or jurisdictional error. (2) Whether, on the basis of the material collected during investigation and placed before the Special Court, a prima facie case of money laundering is made out against the petitioner. 2. ISSUE-WISE DETAILED ANALYSIS Issue (1) & (2): Legality of rejection of discharge and framing of charge; existence of prima facie case under PMLA Legal framework (a) The Court considered the scheme, object and intent of the Prevention of Money Laundering Act, 2002 (PMLA), particularly Sections 2(1)(u) and (v) (definitions of 'proceeds of crime' and 'property'), Section 2(1)(y) (scheduled offence), Section 3 (offence of money laundering), Section 4 (punishment) and Section 24 (reverse burden). (b) 'Proceeds of crime' under Section 2(1)(u) was noted, along with the Explanation inserted by Act 23 of 2019, to include not only property derived from the scheduled offence but also any property directly or indirectly derived from any criminal activity relatable to a scheduled offence. (c) 'Scheduled offence' under Section 2(1)(y) was noted as including offences specified in Parts A, B and C of the Schedule; relevant scheduled offences here include Sections 120-B, 307, 379, 411, 414 IPC, Sections 3, 4, 5 of the Explosive Substances Act, Section 27 of the Arms Act, and Section 8 of the Environment (Protection) Act. (d) Section 3 PMLA was analysed with its Explanation: the offence of money laundering covers any person who directly or indirectly attempts to indulge, knowingly assists, is a party to, or is actually involved in any process or activity connected with proceeds of crime, including concealment, possession, acquisition, use, projecting or claiming such proceeds as untainted; such process/activity is a continuing offence. (e) The Court referred to the principles laid down in Vijay Madanlal Choudhary, Pavana Dibbur and other Supreme Court decisions regarding: (i) the wide ambit of 'proceeds of crime' and 'offence of money laundering'; (ii) the necessity of a scheduled offence as the source of proceeds; (iii) the permissibility of prosecuting a person under PMLA even if not arraigned in the predicate case; and (iv) the requirement that the authority have 'reason to believe' based on tangible, credible material that a person is involved with proceeds of crime. (f) On discharge and framing of charge, the Court considered Sections 250 and 252 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (corresponding to Sections 227 and 228 CrPC) and the settled law from multiple Supreme Court precedents (including N. Suresh Rajan, P. Vijayan, M.R. Hiremath, Sajjan Kumar, M.E. Shivalingamurthy, Asim Shariff, Amit Kapoor, Som Nath Thapa, Ghulam Hassan Beigh, Dipakbhai Patel): at the stage of discharge/charge, the court: (i) proceeds on the assumption that prosecution material is true; (ii) sifts and weighs material only to see if there is sufficient ground or strong/grave suspicion to proceed; (iii) does not hold a 'mini trial' or examine defence material; and (iv) frames charge if the accused 'might have committed' the offence on the basis of the material. (g) On revisional jurisdiction, the Court relied on Munna Devi, Asian Resurfacing and other cases to hold that revisional power is limited, cannot be equated with appellate power, and can interfere with orders on charge/discharge only to correct patent jurisdictional or legal error, or where facts taken at face value do not constitute the alleged offence. Interpretation and reasoning (h) The Court noted that the ECIR was not confined to the initial FIR in the toll tender case, but was based on multiple FIRs relating to illegal mining, storage, transportation and associated violence and extortion, all disclosing scheduled offences under the PMLA (including Sections 120-B, 307, 379, 411, 414 IPC; Explosive Substances Act offences; Arms Act; Environment Act). These FIRs were clubbed to unearth the larger illegal mining and money laundering syndicate. (i) It was accepted that illegal mining under the MMDR Act per se is not a scheduled offence; however, the Court held that the 'proceeds of crime' in this case were generated from criminal activities relatable to scheduled offences (e.g. Section 307 IPC, extortion, theft, handling of stolen property, explosive substances, environmental violations) committed in the context of a large-scale illegal mining syndicate. Once such scheduled offences generate proceeds, laundering those proceeds attracts Section 3 PMLA, regardless of whether the underlying illegality also violates the MMDR Act. (j) The Court rejected the contention that proceedings were founded solely on Section 120-B IPC or only on the first FIR. It held that: (i) conspiracy under Section 120-B IPC is itself a scheduled offence when read with a substantive scheduled offence; (ii) conspiracy draws its colour from the underlying offences; and (iii) subsequent FIRs, including those invoking Section 307 IPC and other scheduled provisions, supplied the requisite predicate offences. Thus, the registration of ECIR and invocation of PMLA jurisdiction were valid. (k) It was specifically noted that FIRs under Section 307 IPC alleged that the Toll Plaza had been taken under control for smooth passage of illegally mined minerals, and violence was used against anyone obstructing such transportation. Proceeds so generated would fall within 'proceeds of crime' as defined in Section 2(1)(u) read with its Explanation. (l) On the argument that the petitioner was neither named nor accused in the predicate FIRs/ECIR, the Court, relying on Pavana Dibbur and Vijay Madanlal Choudhary, held that: (i) an offence under Section 3 PMLA may be committed by a person who is not an accused in the scheduled offence; (ii) any person who knowingly assists in concealment, possession, acquisition, use, or projection of proceeds of crime is liable, even if unconnected with the commission of the scheduled crime itself; and (iii) therefore, non-mention of the petitioner in the FIRs or ECIR does not bar prosecution under PMLA if his role in dealing with proceeds of crime is otherwise established. (m) The Court examined in detail the second supplementary prosecution complaint, which described the petitioner's role and the evidence gathered. It noted specific allegations and material to show that: * The petitioner held a legitimate mining lease only over 13.13 acres (and, as summarised in the judgment, also a smaller lease in another area) but actually carried out mining over a total of about 21 acres, thereby conducting excess/unauthorised mining over about 7.8 acres-entirely illegal. * Between April 2019 and June 2022, while the petitioner obtained mining challans for approximately 23,908,985 CFT, the actual quantity mined was several times higher, evidencing large-scale illicit extraction generating unaccounted cash. * Joint inspection reports and other official records corroborated the excess and illegal mining attributed to the petitioner. * The petitioner was a close confidant and associate of the principal accused controlling the illegal mining syndicate and was responsible for (i) looking after the business of stone loading on railway rakes; (ii) loading 2-3 rakes per month; (iii) showing sales at discounted rates in his books and then selling at market value for the principal accused with payments routed into the latter's bank account; and (iv) day-to-day management of the principal accused's bank accounts and supply of illegally mined stone. (n) On financial involvement, the Court noted material indicating that: * A cash amount of Rs. 28,50,000/- was seized from the petitioner during the search on 08.07.2022; his explanation that it represented recent stone-sale proceeds was unsupported by documentary proof (e.g., invoices, GST returns, bank entries) and thus unsatisfactory at this stage. * The petitioner was found in possession of proceeds of crime amounting to Rs. 2,70,64,300/-, deposited into five bank accounts, constituting placement and layering of illicit cash into the banking system. * The petitioner allegedly assisted in laundering Rs. 4.87 crores of proceeds of crime on behalf of the principal accused, through an HDFC Bank account (bearing a specific number) operated using his linked mobile number, during the period 29.10.2021 to 18.05.2022. * Bank scrutiny revealed substantial cash deposits and financial transactions consistent with the placement and layering of illegal mining proceeds. (o) On the issue of reliance on statements recorded under Section 50 PMLA, the Court accepted the legal position that confessional statements of co-accused are not substantive evidence and cannot be the sole basis of conviction. However, it found that in this case the second supplementary prosecution complaint was supported by substantial independent evidence (search seizures, inspection reports, banking records, and Section 50 statements of the petitioner and other witnesses) and was not based solely on accomplice statements. (p) The Court held that, in light of Section 24 PMLA, once the prosecution establishes foundational facts-existence of proceeds of crime and the person's involvement in processes or activities connected therewith-the burden shifts to the accused to rebut the presumption. Here, prima facie, the seized cash, unexplained deposits, and banking trails, when read with other material, established such foundational facts. The petitioner's bare explanation without corroboration did not rebut the presumption at this stage. (q) Applying the settled law on discharge and framing of charge, the Court held that: * At this stage, the prosecution material must be assumed to be true; defences on merits cannot be considered. * The Court's limited task is to ascertain whether there is sufficient ground or strong suspicion to presume that the accused has committed the offence, not to determine guilt. * Economic offences and money laundering, given their complexity and impact, ordinarily require a full trial to unravel the entire chain of events and transactions; early discharge should be avoided unless the case is demonstrably groundless. (r) The Court found that the Special Judge had considered the rival submissions, examined the documents and statements, and, after applying the proper legal test, concluded that sufficient prima facie material existed to proceed. It rejected the suggestion that the Special Judge had acted mechanically or without reasons. (s) On revisional interference, the Court emphasised that it could not re-appreciate the material as in appeal, or conduct a meticulous examination to weigh the likelihood of conviction. It could interfere only if there was a legal bar to proceedings or the facts, taken at face value, did not constitute any offence. Neither condition was satisfied. Conclusions (t) The material in the second supplementary prosecution complaint and case record, viewed at the threshold stage, prima facie disclosed that the petitioner: * directly engaged in illegal stone mining on unauthorised land and on a scale far exceeding permitted limits, generating substantial illegal proceeds; * was a close associate of the principal accused, actively assisted in illegal mining operations, management of bank accounts, and supply of illegally mined material; * possessed and dealt with large amounts of unaccounted cash and deposited such funds into his and the principal accused's accounts, thereby engaging in placement and layering of proceeds of crime; and * thereby was directly and knowingly involved in processes and activities such as possession, use, acquisition, concealment, and projection of proceeds of crime as untainted property, attracting Section 3 PMLA. (u) Consequently, there existed sufficient prima facie material and at least strong suspicion to presume the commission of the offence of money laundering by the petitioner. The rejection of the discharge application and the framing of charge under Section 3 punishable under Section 4 PMLA were held to be legally proper and in consonance with the settled principles. (v) No patent illegality, jurisdictional error, or legal bar justifying revisional interference was found in the orders refusing discharge and framing charge. Both criminal revision petitions were, therefore, dismissed.