2023 (8) TMI 1408 - HC - Money Laundering

Seeking release of provisional attachment order - Money Laundering or not - no scheduled offences - predicative offences were already quashed - HELD THAT - It is not in dispute that predicative offences registered against the accused have been quashed by this Court. The Division Bench of High Court of Telangana while dealing with similar case in Manturi Shashi Kumar and Another Versus The Director, Directorate of Enforcement, Basheerbagh, Hyderabad 2023 (4) TMI 1199 - TELANGANA HIGH COURT , has duly taken into consideration the judgment of the Hon ble Apex Court in Vijaya Madanlal Choudhary Vs Union of India - In the said judgment the Division Bench of Telangana High Court has taken the facts and circumstances of the case therein into consideration and held that if a person is finally discharged/acquitted of the scheduled offence or the criminal case registered against him is quashed by the Court of competent jurisdiction there can be no money laundering against him or any one claiming such property being the property linked in scheduled offence through him. However, in the present case, the provisional attachment took place on the ground that, predicative offences have been registered against the members and other officials of the NRIAS. In view of quashing of the said crimes, there are no scheduled offences. As held by the Hon ble Supreme Court in the judgment referred, since there is no scheduled offence, there can be no offence of money laundering. The judgment relied on by the learned Senior counsel for the petitioner is squarely applicable to the facts of this case. The provisional attachment order set aside - petition allowed.

Summary

Issues Involved:
The issues involved in this case include the legality of the provisional attachment of the petitioner company's bank account under the Prevention of Money Laundering Act, 2002, despite the quashing of the scheduled offences against the accused.

Issue 1 - Provisional Attachment of Bank Account:
The petitioner sought relief to declare the provisional attachment of their company's bank account as illegal, arbitrary, and violative of constitutional rights. The investigation under PMLA was initiated against the petitioner and officials of another entity for alleged misappropriation of funds. The petitioner argued that they had no nexus with the other entity except for a former shareholder who had settled financial matters and left the company. Despite the quashing of scheduled offences, the authorities proceeded with the enquiry, leading to the freezing of the petitioner's account.

Issue 2 - Legal Arguments:
The petitioner's senior counsel contended that the authorities lacked jurisdiction to continue the proceedings after the quashing of scheduled offences. Reference was made to a judgment by the High Court for Telangana and a Supreme Court case regarding the strict interpretation of "proceeds of crime" under the PMLA. The counsel argued that since there were no scheduled offences, there could be no offence of money laundering, making the provisional attachment unjustified.

Issue 3 - Respondent's Opposition:
The standing counsel for the respondents opposed the relief sought, emphasizing the authority's power to proceed with the enquiry under the PMLA. They argued that the judgment relied upon by the petitioner was not applicable to the case, as there was a distinction between initiating prosecution for a scheduled offence and provisional attachment under the Act. The respondents suggested that the petitioner could address their concerns through an explanation before the adjudicating authority and through the appeal process.

Judgment:
The High Court, after considering the arguments and relevant legal precedents, concluded that the provisional attachment of the petitioner's bank account was unjustified due to the quashing of scheduled offences. Citing the Supreme Court's interpretation of "proceeds of crime," the Court held that without scheduled offences, there could be no offence of money laundering. Therefore, the writ petition was allowed, setting aside the provisional attachment order and directing the release of the petitioner's bank account. No costs were awarded, and any pending applications were closed.