2023 (4) TMI 1315 - HC - Money Laundering

Money Laundering - predicate/scheduled offence - illegal racket of kidney transplantation - offences including the offences punishable under Section 307 of the Indian Penal Code 1860 and Sections 18 19 and 20 of the Transplantation of Human Organs Act 1994 - whether acquittal of the accused i.e. Jeevan Kumar from the predicate offence and quashing of criminal proceedings mentioned above qua the appellant-Rajiv Channa shall also lead to the cessation of the attachment proceedings? - HELD THAT - For the commission of an offence of money laundering the essential preconditions which emerge from the aforesaid provisions are that firstly it requires an involvement in any process or activity connected with the proceeds of crime; and secondly projection of the same as untainted property. The proceeds of crime allude to any property derived or obtained directly or indirectly by any person as a result of criminal activity relating to a scheduled offence. It may also include the value of any such property or in cases where such property is taken or held outside the country then the property equivalent in value held within the country or abroad. The Explanation to Section 2(1)(u) of PMLA 2002 further clarifies that the 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 consequence of any criminal activity pertaining to the scheduled offence. In Nik Nish Retail Ltd. v. Assistant Director Enforcement Directorate 2022 (11) TMI 1280 - CALCUTTA HIGH COURT the Calcutta High Court while dealing with a case where the FIR in respect of the predicate offence was quashed on the basis of settlement has held that the proceedings initiated under PMLA 2002 provisions cannot stand in isolation in the absence of any scheduled offence. This Court in the case of Prakash Industries Ltd. v. Directorate of Enforecement 2022 (7) TMI 877 - DELHI HIGH COURT has taken a view that once it is found that a criminal offence does not stand evidenced the question of any property being derived or obtained therefrom or its confiscation or attachment would not arise at all. A bare perusal of the facts of the present case would show that the Trial Court had already acquitted the appellant-Jeevan Kumar of all the charges framed against him vide judgment dated 22.03.2013 and the same has remained unchallenged by the respondent. Therefore his acquittal in the scheduled offence breaks the entire chain leading to the other appellants. Moreover this Court vide judgment dated 15.01.2024 had quashed the ECIR bearing no. ECIR/07/DZ/2008 alongwith all the consequential proceedings arising therefrom and the charge framed qua the appellant-Rajiv Channa vide order dated 24.04.2012. Thus a necessary corollary would be that all the proceedings in furtherance of prosecution including attachment would also fall and are therefore liable to be quashed. The attachment proceedings in the present case are unsustainable as the appellants cannot be said to be involved in any activity connected with the proceeds of crime - Appeal disposed off.

Summary

Issues Involved:
1. Acquittal of the accused from the predicate offence and its impact on attachment proceedings.
2. Involvement of appellants not accused in the FIR.
3. Quashing of ECIR and consequential proceedings.

Summary:

Issue 1: Acquittal of the accused from the predicate offence and its impact on attachment proceedings

The appellants challenged the common order dated 09.03.2015 by the Appellate Tribunal, PMLA, which dismissed their appeals against the confirmation of the provisional attachment order (PAO) dated 09.09.2010. The primary issue was whether the acquittal of the accused, Jeevan Kumar, from the predicate offence and the quashing of criminal proceedings against Rajiv Channa would lead to the cessation of the attachment proceedings. The court noted that the essential preconditions for an offence of money laundering under Section 3 of PMLA, 2002, include involvement in any process connected with the proceeds of crime and projecting it as untainted property. Since Jeevan Kumar was acquitted of the scheduled offence, there could be no action for money laundering against the appellants. The court referred to the Supreme Court's decision in Vijay Madanlal Choudhary, which held that if the person is acquitted of the scheduled offence, there can be no offence of money laundering against him or anyone claiming such property. Consequently, the attachment proceedings were found unsustainable.

Issue 2: Involvement of appellants not accused in the FIR

The appellants Rajiv Channa and M/S N.R. Merchant Pvt. Ltd. were not accused in the FIR registered by the CBI. The court held that since the appellants were not involved in the generation of the alleged proceeds of crime or the scheduled offence, the attachment of their properties was unjustifiable. The court emphasized that the proceeds of crime must be directly or indirectly derived from criminal activity relating to a scheduled offence, which was not the case here.

Issue 3: Quashing of ECIR and consequential proceedings

The court also addressed the quashing of the ECIR bearing no. ECIR/07/DZ/2008 and all consequential proceedings arising therefrom. The court noted that the ECIR and the charge framed against Rajiv Channa were quashed by a previous judgment dated 15.01.2024. The court reiterated that once the foundation of the scheduled offence is removed, the consequential proceedings, including attachment, must also fall. The court rejected the respondent's argument to defer the adjudication of the present case due to a pending issue before the Supreme Court, citing that the High Courts must proceed based on the law as it stands.

Conclusion:

The judgment and final order dated 09.03.2015 by the Appellate Tribunal, the confirmation order dated 04.02.2011, and the PAO dated 09.09.2010 were set aside. The court allowed the appeals and quashed the attachment proceedings, concluding that the appellants could not be said to be involved in any activity connected with the proceeds of crime.