2026 (1) TMI 1233 - HC - Money Laundering

Money laundering under PMLA: prosecution reinstated for continuing laundering and attachment of proceeds restored for trial

The article addresses whether inclusion of a scheduled offence in the PMLA exposes past acts to penal consequences and whether attachment under the PMLA ... Continuing offence - proceeds of crime - offence of money-laundering - retrospective operation / Article 20(1) of the Constitution - discharge u/s 227 Cr.P.C. - revisional jurisdiction under Sections 397, 401 & 482 Cr.P.C. - Special Court under the PMLA - attachment under Section 5(1) PMLA - Whether the offence punishable u/s 467 of the IPC is a scheduled offence or not and when it was included in the PMLA. - HELD THAT:- It is not a dispute that the FIR was registered for offences under sections 120b/409/419/465/467/468/471/and 474 of the IPC, and that, upon receipt of the FIR and relevant materials, the ED registered an ECIR on 21.12.2009 and proceeded to investigate the offence of money-laundering under section 3 of the PMLA and complaint was filed before the designated Court in the year 2013. It is equally undisputed that section 467 of IPC stood included as a scheduled offence under Part A of the Schedule to the PMLA by virtue of the 2009 Amendment, which came into force on 1st June, 2009. The prosecution is not predicated upon retrospectively criminalising the acts constituting forgery under Section 467 IPC. Rather, the proceedings are founded upon the allegation that after Section 467 was included in the Schedule, the accused continued to possess, use, and project the proceeds derived from such offence as untainted property. Such application of the Act does not offend Article 20(1) of the Constitution, as clarified in Vijay Madanlal Choudhary [2022 (7) TMI 1316 - SUPREME COURT (LB)] since the penal consequence attaches to the continuing laundering activity and not to the past commission of the predicate offence per se. The attachment of property under Section 5(1) of the PMLA was also erroneously set aside on the assumption that attachment proceedings are purely penal in nature. The Supreme Court has categorically held that attachment and confiscation proceedings under the PMLA are civil and preventive measures, intended to deprive the offender of the benefits of crime, and are not rendered invalid merely because the scheduled offence predates the enactment or amendment, so long as the proceeds of crime subsist and are traceable. The Court failed to appreciate the distinct scope, object, and operation of the offence of money- laundering, and erroneously conflated the date of commission of the scheduled offence with the commission of the offence under Section 3 of the PMLA. Accordingly, this Court is of the considered view that the discharge of the accused was founded on an incorrect understanding of the statutory scheme of the PMLA and runs contrary to the binding ratio of Vijay Madanlal Choudhary [2022 (7) TMI 1316 - SUPREME COURT (LB)] At the stage of consideration of discharge, the allegations disclose sufficient material to prima facie indicate continuing laundering activity after the inclusion of Section 467 IPC as a scheduled offence, warranting a full-fledged trial. The date of commission of the scheduled offence is, therefore, not determinative. The continuation of laundering activity or the enjoyment of proceeds of a crime after the enforcement of the Act or the relevant amendment, is of utmost importance. The Order passed by the Learned Special (CBI) Court No. 1, Calcutta and Special Court of PMLA, Calcutta in ML Case, whereby the accused persons were discharged and directed the return of the articles confiscated and seized from them upon allowing their petition under Section 227 of the Code stands set aside. The Trial Court is requested to proceed with the proceedings in accordance with law independently and take to its logical conclusion. Issues: Whether the Special Court was justified in discharging the accused on the ground that Section 467 IPC was not a scheduled offence at the time of the alleged predicate acts and that the Prevention of Money Laundering Act, 2002 (PMLA) has no retrospective operation, thereby precluding continuation of PMLA proceedings and attachment.Analysis: The issue requires examination of (i) when Section 467 IPC was included in the Schedule to the PMLA, (ii) the scope of Section 3 PMLA and the definition of 'proceeds of crime' under Section 2(1)(u), and (iii) whether money-laundering under Section 3 is dependent solely on the date of the predicate offence or may be founded on continuing processes involving proceeds of crime after a scheduled offence is included. The statutory framework shows Section 467 IPC was incorporated into the Schedule by the 2009 amendment effective 1 June 2009. Section 3 PMLA penalises any process or activity connected with proceeds of crime (including concealment, possession, acquisition, use or projecting/claiming as untainted property) and, as interpreted in Vijay Madanlal Choudhary, captures continuing laundering activity. Attachment and confiscation under the PMLA serve civil/preventive purposes. Where allegations on the face of the complaint disclose post-inclusion conduct of possession, use or projection of proceeds as untainted property, prima facie material exists to sustain PMLA proceedings despite the predicate acts predating the Schedule inclusion. The Special Courts reasoning that PMLA proceedings are vitiated solely because predicate acts occurred before inclusion conflates the date of the predicate offence with the date of continuing laundering activity and is inconsistent with the authoritative interpretation of Section 3 and related provisions.Conclusion: The discharge of the accused on the ground that Section 467 IPC was not a scheduled offence at the time of the predicate acts and that PMLA has no retrospective operation was legally unsustainable; the matter discloses prima facie continuing laundering activity post-inclusion and therefore the Special Court order of discharge is set aside in favour of the Enforcement Directorate.