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2022 (9) TMI 1498 - 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. Whether the offence of money laundering is a standalone offence. 2. Whether the trial for the offence of money laundering should precede, follow, or be conducted simultaneously with the trial of the scheduled offence. 3. The impact of the Supreme Court's ruling in Vijay Madanlal Choudhary on the interpretation of the Prevention of Money Laundering Act (PMLA). Detailed Analysis: 1. Whether the offence of money laundering is a standalone offence: The petitioner argued that the offence of money laundering under Section 3 of PMLA is not standalone and is dependent on the scheduled offence. They cited the Supreme Court's ruling in Vijay Madanlal Choudhary, which held that the offence under Section 3 is dependent on the wrongful and illegal gain of property as a result of criminal activity related to a scheduled offence. The respondent, however, contended that money laundering is a standalone offence, independent of the scheduled offence, as supported by the amended Section 44 of PMLA and various High Court judgments. 2. Whether the trial for the offence of money laundering should precede, follow, or be conducted simultaneously with the trial of the scheduled offence: The Special Court initially ruled that the trial for money laundering should precede the trial for the scheduled offence, treating money laundering as a standalone offence. The petitioner argued that this approach could violate their right to a fair trial, as the outcome of the scheduled offence trial would significantly impact the money laundering trial. The Supreme Court in Vijay Madanlal Choudhary clarified that the existence of proceeds of crime is essential for prosecuting money laundering, and if the accused is acquitted of the scheduled offence, the money laundering charge cannot stand. 3. The impact of the Supreme Court's ruling in Vijay Madanlal Choudhary on the interpretation of PMLA: The Supreme Court's decision in Vijay Madanlal Choudhary emphasized that the offence of money laundering is dependent on the illegal gain from a scheduled offence. It stated that if the accused is acquitted or discharged from the scheduled offence, the money laundering charge cannot be sustained. This ruling overrides the earlier High Court decision that treated money laundering as a standalone offence. The Supreme Court also highlighted that the trial for money laundering should ideally await the outcome of the scheduled offence trial to avoid paradoxical results. Conclusion: The High Court quashed the Special Court's order dated 11.01.2021, directing that while the trial for money laundering can proceed independently, it should await the outcome of the scheduled offence trial. This ensures that the trial for money laundering is not rendered moot if the accused is acquitted of the scheduled offence. The Criminal Revision Case was allowed to this extent, aligning with the Supreme Court's ruling in Vijay Madanlal Choudhary.
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