TaxTMI 
TaxTMI 
2026 (9) TMI 557
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....No.0372021A0016 from which the petitioner stands discharged by order dated 29.06.2026 passed in Crl.R.P.No.497/2025 vide Annexure-G. iii) Pass such other order or direction as this Hon'ble Court deems fit in the interests of justice and equity." 2. Proceedings were initiated against the petitioner by the respondent arising out of a charge sheet filed by the Central Bureau of Investigation (CBI) in C.C.No.29835/2022, where the petitioner was arraigned as accused No.3 for offences punishable under Sections 420, 468 and 471 of the IPC. In the said proceedings, an application under Section 239 of the Code of Criminal Procedure, having been filed for discharge, the 17th ACJM (Special Court for CBI cases, Bengaluru) rejected the said application on 01.09.2025. 3. A Criminal Revision Petition in Crl.R.P.No.497/2025 was filed before the XLVI Additional City Civil and Sessions Judge and Special Judge for CBI cases at Bengaluru City, which came to be allowed on 29.06.2026 setting aside the order dated 01.09.2025 and discharging the petitioner on the ground that there was no general consent by the State of Karnataka for the CBI to investigate in the State of Karnataka and as su....
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....ceed against a person merely on the basis of a presumption or on a notional assumption that a scheduled offence has been committed. The scheduled offence must have been registered with the jurisdictional police and must be the subject matter of investigation, enquiry or trial, including proceedings pursuant to a criminal complaint before the competent Court. The proceedings under the PMLA, according to the learned Senior Counsel, cannot be sustained in the absence of the foundational scheduled offence from which the alleged proceeds of crime are stated to have arisen. 4.5. Learned Senior Counsel would further contend that the Hon'ble Apex Court has expressly dealt with the consequence of the person being finally discharged or acquitted of the scheduled offence. In such circumstances, as held in paragraph No.382.8 of Vijay Madanlal Choudhary (supra), there can be no offence of money-laundering against such person, nor against any person claiming such property through him, where the property is alleged to be linked to the stated scheduled offence. 4.6. It is his submission that, in the present case, the discharge application filed by the petitioner in respect of the schedul....
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....es deserves to be rejected." 4.9. By relying on the aforesaid paragraph of Pavana Dibbur he submits that the Hon'ble Apex Court has categorically held that where the prosecution in respect of the scheduled offence culminates in the acquittal of the accused, discharge of the accused, or quashing of the proceedings relating to the scheduled offence, the scheduled offence ceases to exist in the eye of law. Consequently, in the absence of a subsisting scheduled offence, there can be no proceeds of crime arising therefrom and, therefore, the foundation for prosecution under Section 3 of the Prevention of Money-Laundering Act, 2002 (PMLA) would itself cease to exist. 4.10. It is, therefore, his submission that the continuance of proceedings under the PMLA cannot be sustained independently of the scheduled offence when the proceedings relating to such scheduled offence have already culminated in a manner recognised in paragraph 18 of Pavana Dibbur. According to him, once the very existence of the scheduled offence comes to an end by acquittal, discharge of all the accused, or quashing of the proceedings in their entirety, the necessary jurisdictional foundation for treating any ....
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....13(2) of the Prevention of Corruption Act, 1988 (for short, the 'PC Act'). Consequently, the High Court has quashed the proceedings against the respondents in SLP (Crl.) No.16533/2023 initiated under Sections 3 and 4 of the Prevention of Money Laundering Act, 2002 (for short, the 'PMLA'). Aggrieved, the appellants are before us. 4. We have perused the impugned judgments. With respect to the predicate offence under the PC Act, the High Court discharged the respondent while going into the issue of validity of the sanction which is specifically prohibited under Section 19(3)(a) of the PC Act. The aforesaid decision of the High Court is obviously contrary to the law laid down by this Court in 'State Vs. T. Venkatesh Murthy', reported in (2004) 7 SCC 763, 'State of Madhya Pradesh Vs. Virender Kumar Tripathi' reported in (2009) 15 SCC 533 and in 'State of Bihar & Ors. Vs. Rajmangal Ram', reported in (2014) 11 SCC 388." 5.2. By relying on Lakshman Rao Peshve, her submission is that the Hon'ble Supreme Court recently considered a situation where the proceedings relating to the predicate offence under the PC Act had been brought to an end by an order of discharge, followed b....
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....ed to exist by reason of acquittal of all the accused, discharge of all the accused, or quashing of the proceedings relating to the scheduled offence in its entirety. The said principle, according to her, cannot be mechanically applied to every order of discharge irrespective of the ground on which such discharge has been granted. 5.7. She accordingly submits that the crucial question is not merely whether the petitioner has been discharged from the predicate offence, but whether such discharge has the effect of extinguishing the scheduled offence itself on merits. If the discharge is founded only on a technical or procedural defect and does not amount to a judicial determination that the scheduled offence was not committed, according to her, the existence of the scheduled offence and the alleged proceeds of crime cannot be treated as having been extinguished for the purposes of the PMLA. 5.8. On the aforesaid premise, she submits that the proceedings initiated under Section 3 of the PMLA against the petitioner cannot be quashed solely on the ground that the petitioner has been discharged in the predicate criminal proceedings, particularly when such di....
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...., held the order of discharge to be contrary to the law laid down in the decisions referred to therein. Consequently, the foundation upon which the High Court had discharged the accused in the predicate offence itself was found to be legally impermissible. 11. Thus, Lakshman Rao Peshve cannot be understood as laying down a general proposition that whenever an accused is discharged in the predicate offence on a ground described as "technical", the proceedings under the PMLA would necessarily survive. The effect of the order terminating the predicate proceedings would necessarily depend upon the nature and legal effect of the order by which the predicate proceedings have been brought to an end. 12. In the present case, the circumstances are materially different. The issue before the Revision Court was not one relating to the validity of sanction or any other procedural irregularity which could be cured or which did not affect the competence of the investigating agency. The Revision Court has categorically held that the CBI had no jurisdiction to register the FIR and investigate the alleged offence within the State of Karnataka in the absence of the requisite consent of the Stat....
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....in their complete quashing. 18. It is also relevant to bear in mind the relationship between the predicate offence and the offence of money-laundering. The proceedings under the PMLA are not an independent prosecution divorced from the scheduled offence. The alleged "proceeds of crime" must have a nexus with criminal activity relating to a scheduled offence. Where the predicate prosecution itself has been completely quashed on the ground that the investigating agency had no jurisdiction to initiate or investigate the same, the Enforcement Directorate cannot, merely by virtue of being a separate investigating agency, create an independent existence for the alleged scheduled offence or the alleged proceeds of crime. 19. The Enforcement Directorate is, in the present case, the second prosecuting/investigating agency which has proceeded on the basis of the alleged predicate offence. Its jurisdiction under the PMLA cannot be considered in isolation from the existence of the scheduled offence and the alleged proceeds of crime arising therefrom. Once the proceedings constituting the predicate offence have been completely quashed and there is no subsisting prosecution in respect ther....
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....ly been stayed or rendered temporarily inoperative. They have been quashed on the categorical finding that the CBI lacked jurisdiction to register the FIR and investigate the alleged offence. In the absence of any challenge to that order by the CBI, there is no subsisting predicate prosecution which the ED can independently rely upon for continuing the proceedings under Section 3 of the PMLA. 25. The Enforcement Directorate, therefore, cannot contend in the present proceedings that the predicate offence continues to exist while simultaneously accepting that the proceedings initiated by the CBI have come to an end. The ED cannot for the purpose of sustaining its own proceedings, seek to treat the same predicate offence as continuing to exist. 26. It is necessary to emphasise that the ED's proceedings under the PMLA are not proceedings for determining whether the CBI had jurisdiction to investigate the predicate offence. That issue has already been adjudicated upon by the competent Court. If the CBI was aggrieved by such determination, it was for the CBI to assail the same before the appropriate forum. The ED cannot circumvent the consequence of the order by independently a....
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....the ED to keep alive, through the PMLA proceedings, a prosecution which the competent Court has already held to be without jurisdiction. 32. Viewed from this perspective also, the decision in Lakshman Rao Peshve does not advance the case of the respondent. In that case, the order terminating the predicate proceedings was itself found by the Hon'ble Apex Court to be legally erroneous and was accordingly set aside. In the present case, the order of the Revision Court holding that the CBI lacked jurisdiction continues to operate. There is no order of the superior Court setting aside or staying the said finding. Therefore, so long as that order remains in force, the ED cannot proceed on the assumption that the predicate offence continues to exist. 33. The distinction is, therefore, fundamental: in Lakshman Rao Peshve, the termination of the predicate proceedings was itself undone by the Hon'ble Apex Court; in the present case, the termination of the predicate proceedings continues to hold the field. The ED cannot, in the absence of any challenge by the CBI, seek to achieve indirectly what the CBI itself has not sought to achieve directly. 34. Accordingly, the absence o....
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....s of crime. The foundational fact necessary for invoking the definition of "proceeds of crime" against the petitioner is consequently absent. 39. This is not a case where the petitioner has merely ceased to be an accused in the predicate offence on account of a subsequent procedural development while the criminal prosecution against him continues in another form. The proceedings themselves have been quashed. The legal consequence of such quashing is that, insofar as the petitioner is concerned, the prosecution initiated against him in respect of the predicate offence no longer survives. 40. In substance, once the proceedings against the petitioner have been quashed in their entirety, it would be wholly artificial to contend that the petitioner continues to have "proceeds of crime" arising from that very predicate offence. There cannot be proceeds of crime against a person when, insofar as that person is concerned, the alleged criminal activity constituting the scheduled offence no longer survives in law. 41. The position becomes clearer if the consequence of the quashing order is considered. After the proceedings against the petitioner have been quashed, the petitioner sta....
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....fence and has, on that basis, quashed the proceedings against the petitioner, the legal consequence is that there is no subsisting prosecution against the petitioner in respect of that alleged predicate offence. The foundation upon which the allegation of proceeds of crime is made against the petitioner has consequently disappeared. 47. Thus, even assuming that the predicate offence as an alleged transaction may continue to be investigated or prosecuted against some other person, that circumstance cannot, by itself, sustain the PMLA proceedings against the petitioner after the predicate proceedings against him have been completely quashed. The ED cannot convert a predicate offence against another person into a subsisting predicate offence against the petitioner. 48. The distinction between the present case and the situation contemplated in Pavana Dibbur is also required to be understood in this context. The principle laid down by the Hon'ble Apex Court is founded upon the absence of a surviving scheduled offence and, consequently, the absence of proceeds of crime. In the present case, at least insofar as the petitioner is concerned, the scheduled-offence proceedings have ....