TaxTMI 
TaxTMI 
2022 (9) TMI 1716
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....oney Laundering Act, 2002 (briefly, "PMLA" hereinafter) and the "consequential offences" under PMLA. Related prayer made is for quashing order dated 11.01.2021 passed by the learned Special Judge for CBI Cases, Hyderabad in Crl.M.P.No.1417 of 2020 in S.C.No.2 of 2017. 3. It is stated that petitioner has been accused of committing offences under Sections 420 and 120B read with Section 420 of the Indian Penal Code, 1860 (IPC) as per charge sheet filed by the Central Bureau of Investigation (CBI) in C.C.No.24 of 2013 pending on the file of Principal Special Judge for CBI Cases, Hyderabad. The matter is at the stage of framing of charge. 4. While at that stage, categorizing Sections 420, 471 and 120B IPC as "scheduled offences" under PMLA and in furtherance of the allegation that petitioner had committed the consequential offence of "money laundering", respondent has filed complaint before the Special Court for CBI Cases, Hyderabad (briefly, "Special Court" hereinafter) in S.C.No.2 of 2017. 5. Both C.C.No.24 of 2013 and S.C.No.2 of 2017 filed by the respondent are being heard on the discharge applications filed by the petitioner. 6. According to the petitioner, after argume....
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....ound by the said order. Therefore, the Court can look into the submissions made by the petitioner de hors the decision in Crl P. No.1073 of 2021 and batch. 10. On the other hand, Mr. T. Surya Karan Reddy, learned Additional Solicitor General of India submits that impugned order dated 10.01.2021 is a correct order and calls for no interference. In so far decision of the learned Single Bench of this court in Madhu Koneru (supra) is concerned, he submits that respondent has filed Special Leave Petition before the Supreme Court bearing Diary No.29438 of 2021 which is pending. In so far the decision of this Court dated 10.08.2021 in Crl.P.No.1073 of 2021 and batch is concerned, learned Additional Soicitor General of India submits that the aforesaid judgment is based on sound principles. The same having not been challenged and interfered with, it has attained finality. Therefore, the present case is squarely covered by the aforesaid decision dated 10.08.2021. In the circumstances, learned Additional Solicitor General of India seeks dismissal of the criminal revision case. 11. After the case was reserved for judgment, on being mentioned and on memo dated 02.08.2022 being filed, the ....
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....ons made by learned counsel for the parties have received the due consideration of the Court. 16. It is not in dispute that petitioner is an accused in C.C.No.24 of 2013 facing prosecution for alleged commission of "scheduled offence". It is also not in dispute that petitioner is also an accused in the complaint filed by the respondent alleging commission of the offence of money laundering under Section 3 of PMLA by the petitioner. 17. It may be mentioned that petitioner along with other accused had earlier filed miscellaneous petition before the Special Court requesting it to defer all further proceedings in S.C.No.2 of 2017 till the conclusion of adjudication in C.C.No.24 of 2013. By the order dated 17.01.2020, Special Court held that C.C.No.24 of 2013 and S.C.No.2 of 2017 were being posted on every working Friday simultaneously. Following the decision of the Jharkhand High Court in Anosh Ekka v. Enforcement Directorate [W.P. (CRl) No.257 of 2012 and batch, dated 19.02.2013], trial of scheduled offence and trial of offence punishable under PMLA were directed to be proceeded simultaneously. 18. Later or petitioner moved the Special Court in Crl.M.P.No.1417 of 2020 to take....
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....' means whether both have to be heard together or one be heard in immediate succession of the other i.e. C.C.No.26/2013 and S.C.No.1/2018 which qualify for simultaneous hearing. In predicate offence if the accused is acquitted, offence of money laundering cannot continue. (f) None of the allegations in the complaint touch money laundering and they do not in any manner come under PMLA. Adjudicating authority is an officer of ED. (g) PMLA starts from assumption, like Section 212 of IPC. Except Section 3 of PMLA, there is no other IPC offence. (h) Person not arrayed in the scheduled offence can be prosecuted under PMLA. Offences are distinct, but the scheduled offence hinges upon the ED complaint. Money laundering offence cannot be tried ahead of the predicate/scheduled offence. (i) Scheduled offence events and money laundering events are one and the same and there are no additional facts in the ED complaint. There is no evidence about the proceeds of crime. Money laundering offence starts at the end of predicate offence, harbouring of offence is a stand-alone offence. (j) Facts in the scheduled offence (C.C.No.26/2013) and facts in mon....
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....ey laundering nor can be tried simultaneously. Therefore, the offence of money laundering shall precede the trial of predicate/scheduled offence. It was held as under: 32. Prevention of Corruption Act, 1988 and the Prevention of Money Laundering Act, 2002, are two different enactmens, they decide the controversies that arise under respective Acts, one authority cannot interfere with the function of other authority under different Acts. PML Act has overriding effect under Section 71. 33. In view of my discussions above, offence under Money Laundering Act (S.C.No.1/2018) is a stand-alone offence, hence point No.1 is answered in favour of complainant/ED. Scheduled offence (C.C.No.26/2013) cannot precede the offence under money laundering (S.C.No.1/2018) nor can be tried simultaneously, hence point No.3 is answered against the accused. Point No.2: 34. In view of my discussions above, as point No. 1 is answered in favour of complainant/ED and the offence under money laundering (S.C.No.1/2018) shall precede the trial of the predicate/scheduled offence (C.C.No.26/2013). Hence, this point is answered accordingly. Point No.4: 35. In the ....
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....r is actually involved in any process or activity connected with the proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property shall be guilty of committing the offence of money laundering. The Explanation clarifies that a person shall be guilty of the offence of money laundering if such person is found to have directly or indirectly attempted to indulge or knowingly assisted or knowingly is a party or is actually involved in concealment or possession or acquisition or use or projecting as untainted property or claiming as untainted property, in any manner whatsoever. It is further clarified that the process or activity connected with proceeds of crime is a continuing activity and continues till such time a person is directly or indirectly enjoying the proceeds of crime by its concealment or possession or acquisition or use or projecting it as untainted property or claiming it as untainted property in any manner whatsoever. 19.2. While on Section 3, we may mention that Section 4 provides for punishment for committing the offence of money laundering. 20. Reverting back to Section 2(1)(u), it defines proceeds....
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....gnate one or more Courts of Session as Special Court or Special Courts for such area or areas or for such case or class or group of cases as may be specified in the notification. Explanation .- In this sub-section, "High Court" means the High Court of the State in which a Sessions Court designated as Special Cour was functioning immediately before such designation. (2) While trying an offence under this Act, a Special Court shall also try an offence, other than an offence referred to in sub- section (1), with which the accused may, under the Code of Criminal Procedure, 1973 (2 of 1974), be charged at the same trial. 23.1. Thus, as per sub-section (2), while trying an offence under PMLA, ¿ Special Court designated as such under sub- section (1) shall also try an offence, other than an offence referred to in sub-section (1), with which the accused may be charged at the same trial under the provisions of CrPC. 24. Section 44 deals with offences triable by Special Courts. Section 44 is extracted as under: 44. Offences triable by Special Courts. (1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974),- (....
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.... High Court regarding bail under section 439 of the Code of Criminal Procedure, 1973 (2 of 1974) and the High Court may exercise such powers including the power under clause (b) of sub-section (1) of that section as if the reference to "Magistrate" n that section includes also a reference to a "Special Court" designated under section 43. 24.1. Sub-sect on (1) of Section 44 starts with a non-obstante clause. It says that notwithstanding anything contained in CrPC, an offence punishable under Section 4 and any scheduled offence connected to the offence under that section shall be triable by the Special Court constituted for the area in which the offence has been committed. If the Court which has taken cognizance of the scheduled offence is other than the Special Court which has taken cognizance of the complaint of the offence of money laundering, it shall on an application by the authority authorized to file a complaint under PMLA commit the case relating to the scheduled offence to the Special Court and the Special Court shall on receipt of such case proceed to deal with it from the stage at which it is committed. While trying the scheduled offence or the offence of money launder....
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....ceedings of predicate/scheduled offences and offences under PML Act be conducted simultaneously? 25.1. Learned Single Judge adverted to Section 44(1)(d) of PMLA and thereafter held that trial of money laundering offence is an independent trial and need not get interfered with the trial of scheduled offence. Offence of money laundering contemplated under Section 3 of PMLA is an independent offence i.e., a standalone offence. Learned Single Judge concluded that a bare reading of Sections 2(1)(u), 3 and 44(1)(d) of PMLA along with Explanations thereto makes it clear that the offence of money laundering is a standalone offence and the trial proceedings are completely different from that of the scheduled offence. Trial of money laundering offence is an independent trial; it will not meddle with the trial of scheduled offence. On the above basis, learned Single Judge negatived the contention raised that without proving the guilt of the accused in the predicate/scheduled offence, trial of offences under PMLA cannot be proceeded with; and that money laundering offence starts at the end of predicate offence. 26. Keeping the principles of judicial discipline and the doctrine of precede....
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....less the concerned tax legislation prescribes such violation as an offence and such offence is included in the Schedule of the 2002 Act. For being regarded as proceeds of crime, the property associated with the scheduled offence must have been derived or obtained by a person "as a result of" criminal activity relating to the concerned scheduled offence. This distinction must be borne in mind while reckoning any property referred to in the scheduled offence as proceeds of crime for the purpose of the 2002 Act. Dealing with proceeds of crime by way of any process or activity constitutes offence of money-laundering under Section 3 of the Act. ... ... ... ... 253. Tersely put, it is only such property which is derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence can be regarded as proceeds of crime. The authorities under the 2002 Act cannot resort to action against any person for money-laundering on an assumption that the property recovered by them must be proceeds of crime and that a scheduled offence has been committed, unless the same is registered with the jurisdictional police or pending inquiry by way of c....
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....st qualify the definition of "proceeds of crime" under Sec ion 2(1)(u) of the 2002 Act. As observed earlier, all or whole of the crime property linked to scheduled offence need not be regarded as proceeds of crime, but all properties qualifying the definition of "proceeds of crime" under Section 2(1)(u) will necessarily be crime properties. Indeed, in the event of acquittal of the person concerned or being absolved from allegation of criminal activity relating to scheduled offence, and if it is established in the court of law that the crime property in the concerned case has been rightfully owned and possessed by him, such a property by no stretch of imagination can be termed as crime property and ex-consequenti proceeds of crime within the meaning of Section 2(1)(u) as it stands today. On the other hand, in the trial in connection with the scheduled offence, the Court would be obliged to direct return of such property a : belonging to him. It would be then paradoxical to still regards such property as proceeds of crime despite such adjudication by a Court of competent jurisdiction. It is well within the jurisdiction of the concerned Court trying the scheduled offence to pronounce ....
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....al Government, such process initiated would be a standalone process. 28. Supreme Court has thus taken the view that the offence under Section 3 is dependent on the wrongful and illegal gain of property as a result of criminal activity relating to a scheduled offence. The property must qualify the definition of "proceeds of crime" under Section 2(1)(u) of PMLA. All or whole of the crime property linked to the scheduled offence need not be regarded as proceeds of crime, but all properties qualifying the definition of "proceeds of crime" under Section 2(1)(u) will necessarily be crime properties. What is significant, however, to note is the clear enunciation by the Supreme Court that in the event of acquittal of the person concerned or being absolved from allegation of criminal activity relating to the scheduled offence, and if it is established in the Court of law that the crime property in the concerned cash : has been rightfully owned and possessed by him, such a property by no stretch of imagination can be termed as crime property and ex-consequenti proceeds of crime within the meaning of Section 2(1)(u). Supreme Court noted that in the trial in connection with the scheduled of....
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.... decide the issue in favour of the person in possession of the property as not being proceeds of crime or for any other valid ground. Before such order is passed by the Special Court, it would be a case of serious miscarriage of justice, if not abuse of process to take physical possession of the property held by such person. Further, it would serve no purpose by hastening the process of taking possession of the property and then returning the same back to the same person at a later date pursuant to the order passed by the Court of compete it jurisdiction. Moreover, for the view taken by us while in erpretating Section 3 of the 2002 Act regarding the offence of money-laundering, it can proceed only if it is establish ed that the person has directly or indirectly derived or obtained proceeds of crime as a result of criminal activity relating to or relatable to a scheduled offence or was involved in any process or activity connected with proceeds of crime. 307. It is unfathomable as to how the action of confiscation can be resorted to in respect of property in the event of his acquittal or discharge in connection with the scheduled offence. Resultantly, we would sum up by obs....
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....of money laundering. The Authorities under the 2002 Act cannot prosecute any person on notional basis or on the assumption that a scheduled offence has been committed, unless it is so registered with the jurisdictional police and/or pending enquiry/trial including by way of criminal complaint before the competent forum. If the person is finally discharged/acquitted of the scheduled offence or the criminal case against him is quashed by the Court of competent jurisdiction, there can be no offence of money laundering against him or any one claiming such property being the property linked to stated scheduled offence claiming him. 31.1. Thus, Supreme Court has rendered a clear and categorical finding that offence under Section 3 of PMLA is dependent on illegal gain of property as a result of criminal activity relating to a scheduled offence. If the person is finally discharged/acquitted of the scheduled offence or criminal case against him is quashed by a Court of competent jurisdiction, there can be no offence of money laundering against him or anyone claiming such property being the property linked to stated scheduled offence through him. 32. This decision of the Supreme Court ....
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....ls and will proceed separately. The investigation, enquiry or trial under PMLA would not be dependent upon any "order" in respect of the scheduled offence. An "order" as is understood in CrPC is not a conclusive pronouncement at the end of the trial. Section 235 of CrPC says that after hearing arguments and point of law, the judge shall give a judgment in the case, which may either be of acquittal or of conviction. It is on this basis, Supreme Court has observed that conviction under Section 4 of PMLA for committing offence under Section 3 is dependent upon conviction for a scheduled offence; if there is no crime there cannot be any proceeds of crime. And if there are no proceeds of crime, the offence of money laundering cannot be sustained. It is on this logic, Supreme Court has held as above in Vijay Madanlal Choudhary (supra). 35. From the above, the position which emerges is that existence of scheduled offence and proceeds of crime being the property derived or obtained as a result of criminal activity relating to the scheduled offence are sine qua non for not only initiating prosecution under PMLA, but also for continuation thereof. In the absence of these two conditions, t....