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2022 (9) TMI 1497 - 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. Appropriate procedure for conducting enquiry and trial of offences classified as "scheduled offences" under the Prevention of Money Laundering Act, 2002 (PMLA). 2. Quashing of the order dated 11.01.2021 passed by the Special Judge for CBI Cases, Hyderabad. 3. Whether the offence of money laundering is a standalone offence and its trial can proceed independently of the trial for the scheduled offence. 4. Impact of the Supreme Court's decision in Vijay Madanlal Choudhary v. Union of India on the current case. Detailed Analysis: 1. Appropriate Procedure for Conducting Enquiry and Trial of Scheduled Offences under PMLA: The petitioner argued that the trial for the scheduled offence should either precede or be conducted simultaneously with the trial for the offence of money laundering under PMLA. The respondent contended that money laundering is a standalone offence and can be tried independently. The Special Court initially held that the trial for the offence of money laundering should precede the trial for the scheduled offence. However, the High Court, referencing the Supreme Court's decision in Vijay Madanlal Choudhary, clarified that the offence of money laundering is dependent on the wrongful and illegal gain of property as a result of criminal activity relating to a scheduled offence. Therefore, the trial for the scheduled offence should have a bearing on the trial for money laundering. 2. Quashing of the Order Dated 11.01.2021: The Special Court had ruled that the trial for the offence of money laundering should precede the trial for the scheduled offence. This order was challenged by the petitioner. The High Court quashed the order dated 11.01.2021, stating that while the trial for money laundering can proceed independently, it should await the outcome of the trial for the scheduled offence to avoid paradoxical results, as highlighted by the Supreme Court in Vijay Madanlal Choudhary. 3. Whether the Offence of Money Laundering is a Standalone Offence: The Special Court had previously held that the offence of money laundering is a standalone offence and can be tried independently of the scheduled offence. However, the High Court, referencing the Supreme Court's decision, clarified that the offence under Section 3 of PMLA is dependent on the illegal gain of property as a result of criminal activity relating to a scheduled offence. Therefore, the trial for money laundering should consider the outcome of the trial for the scheduled offence. 4. Impact of the Supreme Court's Decision in Vijay Madanlal Choudhary v. Union of India: The Supreme Court in Vijay Madanlal Choudhary clarified that the offence of money laundering 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 High Court noted that this decision is binding and must be followed. The Supreme Court also emphasized that if a person is acquitted or discharged of the scheduled offence, there can be no prosecution for money laundering against them. This decision overruled the earlier view that money laundering is a standalone offence and can proceed independently of the trial for the scheduled offence. Conclusion: The High Court quashed the order dated 11.01.2021 and directed that while the trial for money laundering can proceed independently, it should await the outcome of the trial for the scheduled offence to avoid paradoxical results. This decision aligns with the Supreme Court's ruling in Vijay Madanlal Choudhary, which clarified that the offence of money laundering is dependent on the illegal gain of property from a scheduled offence. The Criminal Petition was allowed to this extent, and all miscellaneous petitions were closed.
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