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2022 (9) TMI 1286 - HC - Money LaunderingMoney Laundering - Validity of look out circular - proceeds of crime - Constitutional Validity of Section 2(1)(u), Section 50 and Explanation to Section 44 of the Prevention of Money Laundering Act, 2002 - scheduled/predicate offences or not - HELD THAT - The Hon ble Supreme Court in Vijay Madanlal Choudhary 2022 (7) TMI 1316 - SUPREME COURT has been clear and categorical in its reasoning. The undeniable sequitur of the reasoning is that firstly, authorities under the PMLA cannot resort to action against any person for money-laundering on an assumption that the property recovered by them must be proceeds of crime and that a scheduled offence has been committed; secondly, the scheduled offence must be registered with the jurisdictional police or pending inquiry by way of complaint before the competent forum; thirdly, in the event there is already a registered scheduled offence but the person named in the criminal activity relating to a scheduled offence is finally absolved by a Court of competent jurisdiction owing to an order of discharge, acquittal or quashing of the criminal case of the scheduled offence, there can be no action for money laundering against not only such a person but also any person claiming through him in relation to the property linked to the stated scheduled offence. No action under PMLA can be resorted to unless there is a substratum of a scheduled offence for the same, which substratum should legally exist in the form of a subsisting (not quashed) criminal complaint/inquiry or if it did exist the accused has since been discharged or acquitted by a Court of competent jurisdiction. The relief sought regarding constitutionality or vires of various provisions of the Prevention of Money Laundering Act, 2002 is infructuous having been decided by the Hon ble Supreme Court in Vijay Madanlal Choudhary Ors. Vs. Union of India Ors. - All proceedings set aside - application disposed off.
Issues Involved:
1. Constitutionality of specific provisions of the Prevention of Money Laundering Act, 2002 (PMLA). 2. Validity of ECIR No. ECIR/07/HIU/2021. 3. Validity of summons issued under the said ECIR. 4. Validity of Look Out Circulars (LOCs) issued under the said ECIR. 5. Continuation of proceedings under the said ECIR despite quashing of the predicate FIR No. 129/2021 by the High Court of Bombay. Issue-wise Detailed Analysis: 1. Constitutionality of Specific Provisions of PMLA: The petitioners sought a declaration that Section 2(1)(u), Section 50, and the Explanation to Section 44 of the PMLA are unconstitutional. However, the Supreme Court in Vijay Madanlal Choudhary & Ors Vs. Union of India & Ors. had already decided on the constitutionality of these provisions. Consequently, the Delhi High Court found that the issue of constitutionality does not arise, rendering the petitioners' prayers in this regard infructuous. 2. Validity of ECIR No. ECIR/07/HIU/2021: The petitioners argued that the ECIR should be quashed because the predicate offence registered under FIR No. 129/2021 had been quashed by the High Court of Bombay. The Supreme Court in Vijay Madanlal Choudhary (supra) stated that if the scheduled offence is quashed, there can be no money laundering case. The Delhi High Court agreed, noting that the FIR was quashed in toto, and thus, the ECIR based on it cannot survive. 3. Validity of Summons Issued Under the Said ECIR: The petitioners contended that the summons issued under the said ECIR should be set aside. The Court found that since the ECIR was quashed, all proceedings arising from it, including the summons, should also be set aside. 4. Validity of Look Out Circulars (LOCs) Issued Under the Said ECIR: The petitioners sought to quash the LOCs issued against them. The Court held that since the ECIR and all proceedings arising from it were set aside, the LOCs issued under the said ECIR should also be quashed. 5. Continuation of Proceedings Under the Said ECIR Despite Quashing of the Predicate FIR: The respondents argued that the FIR was quashed only concerning the petitioners before the Bombay High Court, not in toto. They also contended that the ED could still proceed with provisional attachment under PMLA. The Court rejected these arguments, emphasizing that the FIR was quashed entirely, and thus, no proceedings under the ECIR could continue. Conclusion: The Delhi High Court concluded that: a) The issue of constitutionality of PMLA provisions is infructuous due to the Supreme Court's judgment in Vijay Madanlal Choudhary & Ors. b) ECIR No. ECIR/07/HIU/2021 is quashed. c) All proceedings arising from the ECIR are set aside, including search, seizure, and summons. d) The LOCs issued under the ECIR are quashed. All pending applications were disposed of as infructuous.
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