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2022 (9) TMI 1496 - HC - Money LaunderingMoney Laundering - proceeds or crime - stand-alone offences or not - preceding the trial under scheduled offence - Seeking a correction in the appropriate procedure to be followed while conducting enquiry and trial of offences classified as scheduled offences under the Prevention of Money Laundering Act, 2002 - HELD THAT - The proceeds of crime means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property or where such property is taken or held outside the country, then the property equivalent in value held within the country or abroad. The Explanation clarifies that proceeds of crime would include property not only derived or obtained from the scheduled offence but also any property which may directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offence - Scheduled offence is defined in Section 2(1)(y) to mean offences specified under Part A of the Schedule; or offences under Part B of the Schedule if the total value involved in such offences is one crore rupees or more; or offences specified under Part C of the Schedule. Schedule means the Schedule to the PMLA (Section 2(1)(x)). In Vijay Madanlal Choudhary 2022 (7) TMI 1316 - SUPREME COURT , Supreme Court was called upon to deal with the pleas concerning validity and interpretation of certain provisions of PMLA and the procedure followed by the Enforcement Directorate while inquiring into/investigating offences under PMLA. Following the decision of the Supreme Court in NIKESH TARACHAND SHAH VERSUS UNION OF INDIA AND ANR 2017 (11) TMI 1336 - SUPREME COURT , Parliament amended Section 45 of PMLA vide Act 13 of 2018 so as to remove the defect noted in the said decision and to revive the effect of the twin conditions specified in Section 45 to offences under PMLA. Thus, Supreme Court has expressed the view that expression proceeds of crime which is the very essence of the offence of money laundering needs to be construed strictly. 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. On the above basis, Supreme Court has held that in the event the person named in the criminal activity relating to a scheduled offence is finally absolved by a Court of competent jurisdiction either on account of discharge or acquittal or quashing of the criminal case (scheduled offence), there can be no action for money laundering against such a person or a person claiming through him in relation to the property linked to the stated scheduled offence. No other view is possible. The Supreme Court posed the question as to whether the offence under Section 3 is a standalone offence? - 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. Section 44 of PMLA clarifies that notwithstanding anything in Cr.P.C., any scheduled offence and an offence punishable under Section 4 of PMLA are to be tried by the Special Court having territorial jurisdiction. However, if the Court which had 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, the authority authorized under the PMLA to file complaint shall file an application before the Special Court trying the scheduled offence and on such application being filed, the Special Court shall commit the case relating to the scheduled offence to the Special Court, which shall thereafter proceed with the case from the stage at which it is committed. The purpose behind this provision is to ensure that the scheduled offence and the offence of money laundering under PMLA are not tried by two different Courts which may lead to contrary/conflicting verdicts - 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 Cr.P.C. is not a conclusive pronouncement at the end of the trial. Section 235 of Cr.P.C. 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. Thus, 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, the Special Court dealing with the offence under PMLA would not be competent to pronounce on the guilt or otherwise of the person concerned accused of money laundering. Petition allowed.
Issues Involved:
1. Correct procedure for conducting enquiry and trial of "scheduled offences" under PMLA. 2. Quashing of the order dated 11.01.2021 by the Special Judge for CBI Cases, Hyderabad. 3. Determination of whether the offence of money laundering is a standalone offence. 4. Applicability of the Supreme Court's decision in Vijay Madanlal Choudhary v. Union of India. Issue-wise Detailed Analysis: 1. Correct Procedure for Conducting Enquiry and Trial of "Scheduled Offences" under PMLA: The petitioner argued that the trial for the scheduled offence should precede or be simultaneous with the trial for the offence of money laundering to ensure a fair trial. The respondent contended that money laundering is a standalone offence and can proceed independently of the trial for the scheduled offence. The Special Court had earlier ruled that the trial in the money laundering case should precede the trial in the scheduled offence case, which the petitioner challenged. 2. Quashing of the Order Dated 11.01.2021 by the Special Judge for CBI Cases, Hyderabad: The petitioner sought to quash the order dated 11.01.2021, which held that the enquiry and trial in the money laundering case (S.C. No. 2 of 2017) are not dependent on the scheduled offence case (C.C. No. 24 of 2013). The petitioner contended that this order violated their right to a fair trial as the trial for the scheduled offence should precede or be simultaneous with the trial for the offence of money laundering. 3. Determination of Whether the Offence of Money Laundering is a Standalone Offence: The petitioner referred to the Supreme Court's decision in Vijay Madanlal Choudhary v. Union of India, arguing that the offence under Section 3 of PMLA is dependent on the wrongful and illegal gain of property as a result of criminal activity relating to a scheduled offence. The Supreme Court held that the existence of proceeds of crime is essential for initiating any prosecution under PMLA. If the person is acquitted of the scheduled offence, there can be no action for money laundering against them. 4. Applicability of the Supreme Court's Decision in Vijay Madanlal Choudhary v. Union of India: The Supreme Court clarified that the offence of money laundering is dependent on the existence of proceeds of crime derived from a scheduled offence. The Court held that if a person is acquitted of the scheduled offence, the property cannot be considered proceeds of crime, and there can be no prosecution for money laundering. The decision emphasized that the trial for the scheduled offence and the money laundering offence should not lead to conflicting verdicts, and the Special Court should take a pause and await the decision in the scheduled offence trial. Conclusion: The High Court quashed the impugned order dated 11.01.2021 and directed that while the trial for the offence of money laundering can proceed independently, the Special Court should await the outcome of the trial for the scheduled offence. This approach ensures that the trial for the scheduled offence, which has a bearing on the trial for the offence of money laundering, is concluded first to avoid paradoxical results. The Criminal Petition was allowed to this extent, and any pending miscellaneous petitions were closed.
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