2022 (10) TMI 10 - HC - Money Laundering

Money Laundering - proceeds of crime - reverse burden on the suspect - offence under section 3 punishable under Section 4 of Prevention of Money Laundering Act, 2002 - HELD THAT - Money laundering is the process of conversion of such proceeds of crime, dirty money to make it appear as legitimate money. As the Act deals with socio-economic offence, it deviates from the beaten track of the common law on the burden of proof. In fact Section 24 of the Act casts a reverse burden on the suspect. In any proceeding relating to the proceeds of crime under the Act, the Authority or Court shall presume that such proceeds of crime are involved in money laundering unless the person charged with the offence of money laundering under Section 3 proves to the contrary. The offence of money laundering is threefold including the stages of placement, whereby the criminals place the proceeds of crime to the general and genuine financial system, layering, whereby such proceeds of crime are spread into various transactions within the financial system and finally, integration, where the criminals avail the benefits of crime as untainted money. There are serious allegation of proceeds of crime and transferring the money to one company to another, the case is made out against the petitioners. There is no illegality in the orders by which the petitioners have been summoned - Petition dismissed.

Issues Involved:
1. Quashing of criminal proceedings under the Prevention of Money Laundering Act (PMLA).
2. Legitimacy of the orders taking cognizance and issuing summons.
3. Allegations of proceeds of crime and money laundering.
4. Validity of the attachment orders and ongoing appeals.

Issue-Wise Detailed Analysis:

1. Quashing of Criminal Proceedings under PMLA:
The petitioners sought to quash the entire criminal proceedings initiated against them, including the orders taking cognizance dated 17.07.2018 and 03.05.2019. The court reviewed the allegations and found that there were serious accusations of transferring and investing money obtained through illegal and corrupt practices, which constituted proceeds of crime under the PMLA. The court emphasized that the allegations were elaborately discussed in the adjudicating authority's order, highlighting the laundering of a substantial amount of money through various companies.

2. Legitimacy of the Orders Taking Cognizance and Issuing Summons:
The petitioners argued that the orders taking cognizance and issuing summons were based on incorrect facts and lacked legal and factual grounds. However, the court noted that the adjudicating authority had thoroughly examined the evidence and found a prima facie case against the petitioners. The court referred to the adjudicating authority's findings that significant amounts of money were laundered through the companies involved, and the petitioners were implicated based on substantial evidence, including statements made before the Income Tax authorities.

3. Allegations of Proceeds of Crime and Money Laundering:
The court examined the allegations that the petitioners were involved in laundering proceeds of crime generated through illegal activities. The court referred to Section 24 of the PMLA, which places the burden of proof on the accused to demonstrate that the proceeds of crime were not involved in money laundering. The court cited the Supreme Court's judgment in "Vijay Madanlal Choudhary & Others Vs. Union of India and others" to support the legal presumption that proceeds of crime are involved in money laundering unless proven otherwise by the accused. The court found that the petitioners failed to rebut this presumption and that the evidence presented by the Enforcement Directorate was sufficient to establish the link between the proceeds of crime and the petitioners.

4. Validity of the Attachment Orders and Ongoing Appeals:
The petitioners contended that the attachment orders issued by the adjudicating authority were erroneous and that their appeals against these orders were still pending. The court acknowledged that the petitioners had filed appeals against the attachment orders, but it emphasized that the pendency of these appeals did not invalidate the criminal proceedings. The court noted that the petitioners should have pursued their appeals rather than seeking to quash the criminal proceedings. The court concluded that there was no illegality in the orders summoning the petitioners and that the petitions to quash the proceedings were without merit.

Conclusion:
The court dismissed the petitions, finding that there were serious allegations of money laundering and that the petitioners had failed to demonstrate any illegality in the orders taking cognizance and issuing summons. The court emphasized the importance of addressing socio-economic offenses like money laundering and upheld the legal presumptions under the PMLA. The interim orders were vacated, and the pending interlocutory applications were disposed of.

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