2023 (2) TMI 1097 - HC - Money Laundering

Money Laundering - proceeds of crime - seeking release of the attached properties - HELD THAT - In Vijay Madanlal Choudhary Ors. v. UOI Ors., 2022 (7) TMI 1316 - SUPREME COURT the Supreme Court has held that if the person accused has been discharged or acquitted of the scheduled/predicate offence, then there can be no offence of money laundering against the said accused person. The Supreme Court in Indrani Patnaik Anr. v. Enforcement Directorate and Ors. 2022 (11) TMI 1311 - SUPREME COURT has recently held that there cannot be any prosecution in relation to an offence for which the accused person has already been discharged. This position of law in terms of proceedings under the PMLA has been recently considered by this Court in EMTA Coal Limited and Ors. v. The Deputy Director of Directorate of Enforcement 2023 (1) TMI 694 - DELHI HIGH COURT . In the said judgement it was held that once the closure report in the offences under respective FIRs has been filed, no criminality is ascertainable and the respective PAOs as well as the ECIRs are liable to be quashed. In view of the settled legal position in Vijay Madanlal Choudhary and the subsequent decisions and orders thereafter, the properties of Mr. Sachin Joshi and M/s. Muktanand Agro Farming Pvt. Ltd. which were attached by the impugned PAOs shall be released - Petition disposed off.

Issues Involved:
1. Challenge to the Provisional Attachment Order (PAO) issued by the Directorate of Enforcement (ED) under Section 5 of the Prevention of Money Laundering Act (PMLA).
2. Direction for release of the attached properties.
3. Maintainability of the petitions on the ground of territorial jurisdiction.
4. Discharge of the petitioners in the PMLA case by the Special Court.
5. Legal implications of discharge/acquittal in the scheduled/predicate offence on the PAO under PMLA.

Detailed Analysis:

1. Challenge to the Provisional Attachment Order (PAO):
The petitions challenge the PAO No. 1/2022 dated 14th January 2022, issued by the ED under Section 5 of the PMLA. The PAO was based on FIR No. 109/2020 dated 7th March 2020, invoking Sections 420, 406, and 34 of the Indian Penal Code, 1860. The allegations against the petitioner, Mr. Sachin Joshi, included the utilization of "Proceeds of Crime" amounting to Rs. 80 crores for various purposes, leading to the attachment of properties owned by M/s. Muktanand Agro Farming Pvt. Ltd., where Mr. Joshi was a majority shareholder and ultimate beneficiary.

2. Direction for Release of Attached Properties:
The petitioners sought the release of the attached properties, arguing that the PAO was based solely on the connection between Mr. Sachin Joshi and M/s. Muktanand Agro Farming Pvt. Ltd. The Court noted that the Special Court had discharged Mr. Sachin Joshi from the PMLA case, thereby invalidating the basis for the attachment of properties.

3. Maintainability of the Petitions on the Ground of Territorial Jurisdiction:
The respondents raised a preliminary objection regarding the maintainability of the petitions due to lack of territorial jurisdiction. This objection was dismissed by the Court, relying on a previous order dated 2nd June 2022 in a related case, where it was held that the Court had jurisdiction to entertain the petitions.

4. Discharge of the Petitioners in the PMLA Case by the Special Court:
The Special Court, Greater Bombay, discharged Mr. Sachin Joshi and his companies in the ECIR No. ECIR/03/MBZO-II/20/2020, finding no evidence of criminality that would result in the generation of proceeds of crime. The Court observed that the allegations did not establish any foundational facts to qualify for recording the ECIR or further PMLA investigation. The Special Court's order highlighted that Mr. Joshi was not involved in generating, placing, layering, or integrating the proceeds of crime, and no money trail linked him to the alleged proceeds of crime.

5. Legal Implications of Discharge/Acquittal in the Scheduled/Predicate Offence on the PAO under PMLA:
The Court referred to the Supreme Court's ruling in Vijay Madanlal Choudhary & Ors. v. UOI & Ors., which stated that if the accused is discharged or acquitted of the scheduled/predicate offence, there can be no offence of money laundering against them. This principle was reaffirmed in subsequent Supreme Court judgments, including Parvathi Kollur v. Enforcement Directorate and Adjudicating Authority v. Shri Ajay Kumar Gupta & Ors. The Court concluded that since Mr. Sachin Joshi was discharged in the PMLA case, the PAO and the attachment of properties resulting from it deserved to be quashed.

Conclusion:
The Court quashed the impugned PAO and ordered the release of the properties attached under it, in light of the discharge of Mr. Sachin Joshi in the PMLA case and the settled legal position. The Court granted liberty to the ED to seek revival of the PAO if circumstances change and allowed the petitioners to move an appropriate application if the properties are not released.

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