2022 (3) TMI 196 - HC - Money Laundering

Money Laundering - scheduled offence - predicate offence - untainted money - proceeds of crime - calling for records - raising huge loans for starting a Medical College and Hospital - violation of banking norms - Non-Performing Asset (NPA) - HELD THAT - In this case, Raveendranatha Reddy, who was the Branch Manager of Andhra Bank, appears to have sanctioned the loans to T.D.Naidu in rank violation of the Rules and therefore, he is facing the prosecution along with T.D.Naidu, before the XI Additional Special Court for CBI Cases, Chennai, for the offences under Sections 120-B r/w 420, 468 and 471 IPC and Section 13(2) r/w 13(1)(d) of the PC Act - there is no shred of material to show that Raveendranatha Reddy, had, in any manner, directly or indirectly, assisted T.D.Naidu in projecting the proceeds of crime (viz., loan amount that was disbursed by Andhra Bank to T.D.Naidu) as untainted money for him to be prosecuted under Sections 3 and 4 of the PML Act. It is true that this Court has dismissed the quash petition of the coaccused in this case, but, the complaint disclosed specific overt acts against Prabavathy (A2), Tataji (A3), Sonia (A4) and Varadharajan (A5) as to how they had assisted T.D.Naidu in projecting the proceeds of crime as untainted property. However, the case of Raveendranatha Reddy stands on a different footing, inasmuch as, he had only helped T.D.Naidu to get huge loans from the Andhra Bank by abusing his official position and nothing beyond that. Hence, the prosecution of Raveendranatha Reddy for the offence under Section 3 r/w 4 of the PML Act cannot be sustained. The proceedings qua Raveendranatha Reddy on the file of the Principal Sessions Court (Special Court for the PML Act Cases), Chennai, stands quashed - petition allowed.

Summary

Issues:
1. Quashing of criminal proceedings under the Prevention of Money Laundering Act, 2002 against an individual.

Analysis:
The High Court of Madras, comprising Mr. Justice P.N.Prakash and Ms. Justice R.N.Manjula, heard a criminal original petition seeking to quash the records in C.C.No.31 of 2015 related to alleged violations under the Prevention of Money Laundering Act, 2002. The petition was filed by an individual (referred to as Raveendranatha Reddy) in connection with a case involving the sanctioning of loans for a Medical College and Hospital project in 2008. The Enforcement Directorate (ED) had registered a case against multiple accused, including Raveendranatha Reddy, for offenses under Sections 3 and 4 of the PML Act. The ED alleged that the individual had knowingly assisted in defrauding the bank and engaging in activities connected with money laundering. The primary allegation against Raveendranatha Reddy was his involvement in processing and sanctioning loans based on forged documents, leading to the acquisition of proceeds of crime amounting to approximately ?151 crores.

The court examined the ingredients required to establish criminal liability under Section 3 r/w 4 of the PML Act, emphasizing that the generation and projection of proceeds of crime as untainted property are essential elements. The judgment referenced the Supreme Court's observations in Nikesh Tarachand Shah Vs. Union of India, highlighting the wide scope of persons liable for money laundering and the necessity of knowingly or actually being involved in activities related to proceeds of crime. In this case, Raveendranatha Reddy was facing prosecution in a separate case for offenses under the Indian Penal Code and the Prevention of Corruption Act, but there was no evidence to suggest his direct or indirect involvement in projecting the proceeds of crime as untainted money.

The court differentiated Raveendranatha Reddy's case from that of other co-accused, noting that while there were specific allegations against them for assisting in projecting the proceeds of crime as untainted property, Raveendranatha Reddy's involvement was limited to facilitating the loan approval process. Consequently, the court allowed the criminal original petition, quashing the proceedings against Raveendranatha Reddy in C.C.No.31 of 2015. The judgment highlighted the lack of evidence implicating Raveendranatha Reddy in assisting in projecting the proceeds of crime as untainted money, leading to the decision to dismiss the prosecution under the PML Act.