2022 (8) TMI 1256 - SCH - Money Laundering

Money Laundering - assets disproportionate to known source of income - proceeds of crime - acquittal of the accused - scheduled offences - HELD THAT - The view as taken by the Trial Court in this matter had been a justified view of the matter and the High Court was not right in setting aside the discharge order despite the fact that the accused No. 1 had already been acquitted in relation to the scheduled offence and the present appellants were not accused of any scheduled offence. The impugned judgment and order is set aside and the order dated 04.01.2019 as passed by the Trial Court, allowing discharge application of the appellants, is restored - Appeal allowed.

Summary

Issues:
Challenge to High Court's decision setting aside discharge order under Prevention of Money-Laundering Act, 2002.

Analysis:
The Supreme Court addressed the challenge to the judgment and order of the High Court of Karnataka setting aside the discharge order passed by the IIIrd Additional District and Sessions Judge in a case under Section 3 of the Prevention of Money-Laundering Act, 2002. The appellants, wife and son of the accused No. 1, were accused of amassing assets disproportionate to known sources of income during the tenure of the accused No. 1 as Deputy Revenue Officer. The Lokayukta Police registered a case under the Prevention of Corruption Act, 1988, and later, the Directorate of Enforcement filed a complaint under the Act of 2002 against the accused No. 1 and the appellants.

During the trial, the accused No. 1 was acquitted of the offences under the Act of 1988, leading to an application for discharge under Section 277 of the Code of Criminal Procedure in the case related to the Act of 2002. Before the application was decided, the accused No. 1 passed away. Subsequently, the Trial Court discharged the appellants from the offences under the Act of 2002, emphasizing that the occurrence of a scheduled offence was necessary for the "proceeds of crime" to arise, and the commission of a scheduled offence was a prerequisite for proceeding under the Act of 2002.

The Directorate challenged the discharge order in the High Court, which set it aside, stating that the allegations and material prima facie established grounds for proceeding against the appellants under the Act of 2002. The appellants argued that a precedent set by a 3-Judge Bench clarified that the offence under Section 3 of the Act of 2002 was dependent on illegal gain of property resulting from criminal activity related to a scheduled offence. The ASG for the respondent did not contest this legal position.

The Supreme Court held that the Trial Court's view was justified as the accused No. 1 had been acquitted of the scheduled offence, and the appellants were not accused of any scheduled offence. Consequently, the appeal succeeded, and the impugned judgment of the High Court was set aside, restoring the Trial Court's order allowing the discharge application of the appellants. All pending applications were disposed of accordingly.