AI TextHeadnote
Issues: (i) Whether absence of accusation in the scheduled offence bars prosecution for money-laundering under Section 3 of the Prevention of Money Laundering Act, 2002; (ii) Whether an auditor may prima facie be proceeded against as an "other officer" under Section 70 of the Prevention of Money Laundering Act, 2002; and (iii) Whether the prosecution complaint disclosed a prima facie case warranting refusal of quashing under Section 482 of the Code of Criminal Procedure, 1973.
Issue (i): Whether absence of accusation in the scheduled offence bars prosecution for money-laundering under Section 3 of the Prevention of Money Laundering Act, 2002.
Analysis: Section 3 covers a person who directly or indirectly assists, participates in, or is involved with proceeds of crime, including their concealment, possession, acquisition, use, or projection as untainted property. The statutory explanation treats such activity as a continuing offence. A person who enters the transaction after commission of the scheduled offence may therefore be proceeded against where the scheduled offence subsists and the material indicates assistance in handling its proceeds of crime.
Conclusion: Absence of accusation in the scheduled offence does not bar prosecution under Section 3 where the person is prima facie connected with laundering the proceeds of a subsisting scheduled offence.
Issue (ii): Whether an auditor may prima facie be proceeded against as an "other officer" under Section 70 of the Prevention of Money Laundering Act, 2002.
Analysis: Section 70 extends vicarious liability to directors, managers, secretaries, and other officers where the company's contravention is attributable to their consent, connivance, or neglect. The duties of an auditor under Section 143 of the Companies Act, 2013 include scrutiny of accounts, transactions, loans, and advances. The material indicated that the auditor of family-controlled companies was allegedly connected with fictitious entries, diversion and layering of funds through shell entities. The auditor's appointment was also prima facie inconsistent with the disqualification prescribed by Section 141(3) of the Companies Act, 2013. Whether the alleged transactions occurred without knowledge remains a matter for trial.
Conclusion: An auditor may prima facie fall within the expression "other officer" under Section 70 and be proceeded against where material indicates involvement in, or connivance with, the company's laundering activity.
Issue (iii): Whether the prosecution complaint disclosed a prima facie case warranting refusal of quashing under Section 482 of the Code of Criminal Procedure, 1973.
Analysis: Inherent jurisdiction to quash criminal proceedings is exercisable sparingly and does not permit an assessment of the reliability or genuineness of the allegations. The complaint and investigation material prima facie indicated accommodation entries, diversion and layering of loan funds, and a commission allegedly earned for facilitating the transactions. These allegations disclosed an offence under the PMLA and required adjudication on evidence at trial.
Conclusion: The complaint disclosed a prima facie case, and no ground existed for quashing the proceedings at the preliminary stage.
Final Conclusion: The allegations concerning laundering of proceeds of crime and the accused's asserted role in the corporate transactions must be tested through trial.
Money-laundering prosecution - person not accused in scheduled offence - Liability of auditor for company contravention under PMLA - Quashing of PMLA complaint - prima facie case Money-laundering prosecution - person not accused in scheduled offence - Maintainability of a money-laundering prosecution against a person not accused in the scheduled offence - HELD THAT: - The process or activity connected with proceeds of crime is a continuing activity. A person who enters the picture after commission of the scheduled offence by knowingly assisting in the concealment or use of proceeds of crime need not be an accused in the scheduled offence, provided that the scheduled offence subsists. [Paras 35, 36] The objection founded solely on the petitioner's absence from the predicate FIRs was rejected. Liability of auditor for company contravention under PMLA - Liability of an auditor of family-owned companies for alleged money-laundering through shell-company transactions - HELD THAT: - An auditor may fall within the expression "other officer" for the purposes of company liability where the alleged contravention involves consent, connivance or neglect. The statutory duties of an auditor, the related-party disqualification in the audit appointment, and the material indicating false book entries and facilitation of diversion and layering of funds furnished a prima facie basis to proceed. Whether the alleged contraventions occurred without the auditor's knowledge was held to be a matter for trial. [Paras 42, 43, 45, 46, 47] The plea that the petitioner could not be proceeded against under the company-offence provision was not accepted at the quashing stage. Quashing of PMLA complaint - prima facie case - Exercise of inherent jurisdiction to quash the PMLA complaint at the preliminary stage - HELD THAT: - The power to quash criminal proceedings is to be exercised sparingly and without undertaking an inquiry into the reliability or genuineness of the allegations. Taken at face value, the allegations in the complaint disclosed a cognizable offence and the material placed by the respondents warranted a trial to determine the chain of transactions and culpability. [Paras 49, 50, 51, 52, 53] Quashing was held premature and the petition was dismissed. Final Conclusion: The petition seeking quashing of the PMLA complaint was dismissed, leaving the allegations and the petitioner's culpability to be determined at trial.