Money-laundering liability can extend beyond scheduled-offence accused to auditors linked with handling criminal proceeds and layered funds.
Money-laundering liability may arise even where a person is not accused in the scheduled offence, if material prima facie links that person to handling proceeds of a subsisting scheduled offence. The continuing-offence framework covers direct or indirect assistance, participation, concealment, possession, acquisition, use, or projection of criminal proceeds as untainted property. Auditors may fall within "other officer" liability where their consent, connivance, or neglect is connected with a company's laundering activity, including alleged fictitious entries or fund layering. Quashing jurisdiction is exercised sparingly and does not permit assessment of evidentiary reliability where the complaint discloses a prima facie offence requiring trial.
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.