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2020 (8) TMI 856 - HC - Money LaunderingJurisdiction for initiation of proceedings under the provisions of PML Act - absence of conviction of the offender for the predicate offence - Proceeds of crime - HELD THAT - Offence of money laundering is expansively defined u/s. 3 and the Explanation inserted by amendment 2019 to this section to section 44, being clarificatory of the legal position ab inceptio, applies to the case of the petitioner, contend Mr. Prasanna Kumar Mr. Jayakar Shetty; they justified this submission through interpretative process - the expansive definition of the offence of Money-Laundering as it existed prior to insertion of aforesaid Explanation also covers the case of petitioner; now that, the challenge to the CBI investigation is held to be unsustainable, petitioner's case has been rendered worse; therefore, the submission that the impugned communication is without competence or justification, does not merit acceptance. There are no other ground having been urged and both the writ petitions being devoid of merits, are liable to be dismissed - petition dismissed.
Issues Involved:
1. Quashing of criminal proceedings initiated by CBI. 2. Freezing of bank accounts under the Prevention of Money Laundering Act, 2002. Detailed Analysis: 1. Quashing of Criminal Proceedings Initiated by CBI: The petitioners, second and third accused in a registered crime, sought the quashment of criminal proceedings initiated pursuant to FIR No. CBI/ACB/BLR 2019 RC 18(A)/2019, pending before the XXI Addl. City Civil & Sessions Judge cum Spl. Judge for CBI cases, Bangalore City. The offences involved include sections 420, 468, and 471 read with section 120B of IPC, 1860, and section 13(1)(d) read with section 13(2) of the Prevention of Corruption Act, 1988. The petitioners argued that the transaction was purely civil in nature and should not be a subject of criminal investigation by the CBI. They cited various correspondences and proposals for One Time Settlement (OTS) with the Bank, emphasizing that the second petitioner had resigned as a director before the company was declared a willful defaulter. They also argued that the delay in initiating criminal proceedings was unjustifiable. The CBI opposed the petition, contending that the petitioners and other accused had committed fraud by diverting funds, falsifying data, and fabricating records. They argued that the criminality of the acts does not wither away merely because the Bank has resorted to civil action for recovery. The court, after hearing both parties, declined to grant indulgence in the matter, stating that the allegations in the FIR and accompanying documents like the Forensic Audit Report and the resolution of the Fraud Identification Committee prima facie exhibited all the ingredients of the offences stated. The court emphasized that a set of facts might constitute both a civil wrong and a crime, and the legal proceedings concerning them may run concurrently. The court also noted that the delay in initiating criminal proceedings did not merit consideration at the stage of investigation, especially given the seriousness of the alleged offences and the substantial amount of public money involved. 2. Freezing of Bank Accounts Under the Prevention of Money Laundering Act, 2002: In the connected writ petition, the petitioner sought the quashing of the impugned communication dated 15.5.2020, whereby the bank accounts of the accused company were frozen in view of the ongoing investigation under the provisions of the Prevention of Money Laundering Act, 2002 (PML Act). The petitioner argued that there was no justification or jurisdiction for initiation of proceedings under the PML Act in the absence of conviction for the "predicate offence." The court rejected this submission, stating that the PML Act is a stand-alone enactment that differentiates between scheduled offences and money laundering offences. The proceedings under the PML Act are independent, separate, distinct, and different from the proceedings initiated for scheduled offences by other law enforcement agencies. The court referred to a Co-ordinate Bench decision in W.P. No. 5299/2019 and other High Court decisions, emphasizing that the initiation and accomplishment of confiscatory proceedings under the PML Act are not pre-conditioned or post-conditioned with the criminal proceedings that may or may not culminate in the conviction of the offender. The court concluded that the departmental proceedings for confiscating the proceeds of crime and the criminal proceedings for punishing the offender can run concurrently and need not converge at any point. The court also noted that the expansive definition of the "offence of Money-Laundering" under section 3 of the PML Act, as clarified by the 2019 amendment, applies to the case of the petitioner. Conclusion: Both writ petitions were dismissed as devoid of merits, with no other grounds urged. The court upheld the criminal proceedings initiated by the CBI and the freezing of bank accounts under the PML Act, emphasizing the independent and concurrent nature of civil and criminal proceedings in cases involving allegations of fraud and money laundering.
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