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2022 (5) TMI 309 - SC - Money LaunderingMoney Laundering - schedule offence - proceeds of crime - Section 44(1) of PMLA - HELD THAT - It is clear that the I.T. Department made search in the official/commercial premises of the appellant and other connected persons. Later, I.T. Department vide communication dated 16.5.2019 which was issued in response to the letter of the appellant dated 1.5.2019 and also of I.T. Department dated 13.5.2019 was satisfied that the cash which was recovered from the officials/commercial premises of the appellant is explained and tax was paid in the selfassessment for the Financial Year 2016-17 - Therefore, the proceedings started on the basis of intriguing recovery of cash and other items in fact, does not exist and the I.T. Department itself was satisfied with the recovery after investigation in the year 2019. Therefore, the finding recorded in the impugned order by the High Court in paragraph 14 with regard to recovery of new currency notes of denomination of Rs. 2000 cannot be countenanced. On the basis of the intimation given by the I.T. Department and registration of the FIR by the CBI which was closed, the Directorate of ED registered ECIR/CEZO/19/2016 under Sections 3, 4 8(5) of PMLA. After the said FIR, Deputy Director (ED) passed an order under Section 5(1) of PMLA on 1.6.2017 attaching the property. For confirmation of attachment, OC No. 785 of 2017 was filed by the Department which is rejected by the Adjudicating Authority while exercising the power under Section 5(5) of PMLA. On analysing the report of I.T. Department and the reasoning given by CBI while submitting the final closure report in RC MA1 2016 A0040 and the order passed by the Adjudicating Authority, it is clear that for proceeds of crime, as defined under Section 2(1)(u) of PMLA, the property seized would be relevant and its possession with recovery and claim thereto must be innocent. In the present case, the schedule offence has not been made out because of lack of evidence. The Adjudicating Authority, at the time of refusing to continue the order of attachment under PMLA, was of the opinion that the record regarding banks and its officials who may be involved, is not on record. Therefore, for lack of identity of the source of collected money, it could not be reasonably believed by the Deputy Director (ED) that the unaccounted money is connected with the commission of offence under PMLA - On perusal of the statement of Objects and Reasons specified in PMLA, it is the stringent law brought by Parliament to check money laundering. Thus, the allegation must be proved beyond reasonable doubt in the Court. Even otherwise, it is incumbent upon the Court to look into the allegation and the material collected in support thereto and to find out whether the prima facie offence is made out. Unless the allegations are substantiated by the authorities and proved against a person in the court of law, the person is innocent. The High Court by the impugned order has recorded the finding without due consideration of the letter of the I.T. Department and other material in right perspective. Therefore, these findings of the High Court cannot be sustained. Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Quashing of proceedings under the Prevention of Money Laundering Act, 2002 (PMLA). 2. Connection between the scheduled offence and the offence of money laundering. 3. Validity of the closure report by the Central Bureau of Investigation (CBI). 4. Provisional attachment order by the Enforcement Directorate (ED). 5. Adjudicating Authority's refusal to confirm the attachment order. 6. Exoneration based on lack of evidence. Detailed Analysis: 1. Quashing of Proceedings under PMLA: The appellant sought to quash the proceedings under Sections 3 and 4 of the PMLA, arguing that the FIR related to the scheduled offence was closed for lack of evidence. The High Court dismissed the petition, stating that the offence of money laundering is independent of the scheduled offence, as PMLA deals with the process or activity concerning the proceeds of crime. 2. Connection Between the Scheduled Offence and the Offence of Money Laundering: The High Court held that while the commission of a scheduled offence is a fundamental precondition for initiating proceedings, the offence of money laundering remains independent. The argument that the absence of evidence for the scheduled offence should lead to the quashing of PMLA proceedings was rejected. 3. Validity of the Closure Report by CBI: The CBI registered multiple FIRs against the appellant, including RC MA1 2016 A0040, RC MA1 2016 A0051, and RC MA1 2016 A0052. The High Court quashed FIRs RC MA1 2016 A0051 and RC MA1 2016 A0052, allowing allegations to be treated as supplementary to RC MA1 2016 A0040. The CBI submitted a closure report for RC MA1 2016 A0040, which was accepted by the Additional Sessions Judge, citing a lack of sufficient evidence. 4. Provisional Attachment Order by ED: The ED registered an offence under ECIR No. 19 of 2016 and passed a provisional attachment order under Section 5(1) of PMLA. The appellant challenged this order, leading to a refusal by the Adjudicating Authority to confirm the attachment due to lack of identification of bank officers involved in converting old currency notes into new ones. 5. Adjudicating Authority's Refusal to Confirm the Attachment Order: The Adjudicating Authority dismissed the attachment order, stating that the description of the involved bank officers was not on record. The Authority found that the allegation of laundering unaccounted money through bank officials was speculative and not legally tenable. 6. Exoneration Based on Lack of Evidence: The Supreme Court referenced the judgments in Radheshyam Kejriwal and Ashoo Surendranath Tewari, emphasizing that exoneration in adjudication proceedings on merits should lead to the quashing of criminal prosecution. The Court found that the proceedings under PMLA could not be sustained due to the lack of evidence and the closure of the scheduled offence FIRs. Conclusion: The Supreme Court set aside the High Court's order, quashing the proceedings in ECR CEZO 19/2016 and Complaint No. 2 of 2017 under PMLA. The Court concluded that the evidence was insufficient to prove the allegations beyond a reasonable doubt, and the appellant should be considered innocent until proven guilty.
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