2026 (1) TMI 1400 - DSC - Money Laundering

Proceeds of crime and money laundering: absence of predicate offence or proceeds precludes PMLA prosecution, discharges ordered.

Proceeds of crime and money-laundering liability depend on existence of a scheduled (predicate) offence and identifiable proceeds of crime; absent ... Proceeds of crime - scheduled offence - offence of money-laundering - discharge under Section 227 Cr.P.C. - benefit of discharge/acquittal in predicate offence - Appellate Tribunal for SAFEMA orders on attachment - HELD THAT:- Having regard to the mandate of law, no trial can proceed against the accused persons who are discharged from the case of predicate offence. Also when there are specific findings that there was no generation of proceeds of crime, no question arises of layering or siphoning of the proceeds of crime further. Therefore, the role attributed to the rest of the accused in PMLA case comes to an end. They cannot be prosecuted for the offence of money laundering, when there is no more a case of generation of crime proceeds in existence. To prosecute the accused for the offence of money laundering under PMLA, the existence of scheduled (predicate) offence is must. Existence of predicate offence can only established by proceeds of crime, of which layering or siphoning is possible. As such the very foundation of offence of money laundering is the crime proceeds of the predicate offence. In the absence of subsisting predicate offence and existence of “proceeds of crime”, within the meaning of Section 2(1)(u) of the Act, no offence under section 3 read with 4 of PMLA can be made out. The prosecution under PMLA without existence of the proceeds of crime related to the predicate offence is akin to a tree without roots, devoid of legal sustenance and incapable of surviving judicial scrutiny. The prosecution i.e. ED had traced proceeds of crime and its siphoning, and attached the properties which were allegedly acquired or purchased out of the proceeds of crime of the predicate offence. As observed in para Supra, the Appellant Tribunal of SAFEMA has set aside all the provisional and confirmed attachment orders with the observation that those properties cannot be said to have been acquired using the proceeds of crime. As such, at present no property is under attachment in the present case. It is necessary to note here that the said orders of the Appellate Tribunal have also not been challenged by the prosecution. The orders of discharge of accused in the predicate offence have reached finality. The orders of release of the attached properties have also reached finality. Under these circumstances, continuation of the PMLA proceedings for the offence under section 3 r/w 4 becomes a dead-wood. At this juncture, it is necessary to note that discharge applications are not filed by all the accused in the case. Further, discharge applications of accused no.31 Prashant Chamankar, accused no.38 Vinodkumar Goenka and No. 48 D. B. Realty were rejected by this Court before passing of the order of discharge of accused persons in the cases of predicate offences. The Revision Petitions against the orders of this Court are pending before the Hon’ble High Court and for this reason, at this stage, no effective orders could be passed in respect of accused nos.31, 38 and 48. Some of the accused have not filed application for discharge. Therefore, no orders could be passed about continuation of proceedings against them. However, it is necessary to discharge all the applicants from the charge of the offence of money laundering. Issues: Whether the accused/applicants are entitled to discharge under Section 227 Cr.P.C. from prosecution under Section 3 read with Section 4 r/w Section 70 of the Prevention of Money Laundering Act, 2002, in view of discharge of accused in the predicate offences and release of attached properties.Analysis: The matter turns on the existence of proceeds of crime derived or obtained as a result of a scheduled offence and the finality of orders in the proceedings concerning those scheduled offences. Section 2(1)(u) PMLA defines 'proceeds of crime' as property derived or obtained directly or indirectly by any person as a result of criminal activity relating to a scheduled offence. Section 3 PMLA penalises processes or activities connected with such proceeds. The authorities and precedents require a subsisting predicate offence and identifiable proceeds of crime for prosecution under PMLA; discharge, acquittal, or quashing of the scheduled offence or final findings that no offence was made out undermine the foundation for PMLA prosecution. The Court noted that trial courts in the predicate cases recorded specific findings of no sufficient material and discharged multiple accused; those discharge orders have not been challenged by the prosecuting agencies. The Appellate Tribunal (SAFEMA) has set aside provisional attachment orders and released properties on similar grounds. Given these final orders, the prosecution lacks a subsisting scheduled offence and proved proceeds of crime necessary to maintain charges under Sections 3 and 4 of PMLA against the applicants.Conclusion: The applicants are discharged from the offence under Section 3 punishable under Section 4 read with Section 70 of the Prevention of Money Laundering Act, 2002; the discharge applications are allowed.