2023 (11) TMI 1083 - HC - Money Laundering

Money Laundering - continuation of ECIR instituted under the PMLA against the petitioner - petitioner stands acquitted of the charges in a duly constituted criminal trial of the allegations of committing the predicate offence - HELD THAT - The Hon ble Supreme Court in VIJAY MADANLAL CHOUDHARY ORS. VERSUS UNION OF INDIA ORS. 2022 (7) TMI 1316 - SUPREME COURT has clearly observed that such property which is derived or obtained directly or indirectly as a result of criminal activity relating to a scheduled offence can be recorded as proceeds of crime but the authorities under the 2002 Act 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 unless the same is registered with the jurisdictional police or pending inquiry by way of complaint before the competent forum and in the event 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 because of quashing of the criminal case (schedule offence) against him their can be no action for money laundering against such a person or person claiming through him in relation to the property link to the stated scheduled offences. The order passed by the learned Session Judge, Patna whereby cognizance of offence under Section 4 of the Act has been taken and the petitioner has been summoned is hereby quashed - Petition allowed.

Summary

Issues Involved:
The judgment addresses the issue of whether an ECIR instituted under the Prevention of Money Laundering Act can continue when the accused stands acquitted of the predicate offences. It also delves into the definition of money laundering, the linkage between scheduled offences and money laundering, and the treatment of properties acquired by an acquitted individual.

Consideration of ECIR Validity:
The petitioner sought quashing of an order taking cognizance of an offence under the Prevention of Money Laundering Act based on an ECIR. The petitioner argued that the ECIR cannot continue when the accused has been acquitted of the predicate offences, which are essential for instituting a case under the Act.

Definition of Money Laundering:
The judgment clarifies that merely earning money through crime does not constitute money laundering. It emphasizes that money laundering involves obtaining or deriving property from scheduled offences and then projecting it as untainted property. The intrinsic linkage between scheduled offences and money laundering is highlighted.

Impact of Acquittal on Proceeds of Crime:
The judgment discusses that if a person is acquitted of the predicate offences, any property rightfully owned by them cannot be considered proceeds of crime. It cites the Hon'ble Supreme Court's observations that property derived from criminal activity related to scheduled offences can be deemed proceeds of crime, but action for money laundering cannot be taken against an acquitted individual in relation to such property.

Relevance of Supreme Court Judgment:
The petitioner relied on a Supreme Court judgment to support the argument that properties acquired by the accused, who has been acquitted of predicate offences, cannot be treated as proceeds of crime. The Court, after considering the submissions and the Supreme Court's judgment, quashed the order taking cognizance of the offence under the Prevention of Money Laundering Act.

This summary encapsulates the key issues addressed in the judgment, including the interpretation of money laundering laws, the impact of acquittal on the treatment of acquired properties, and the relevance of legal precedents in determining the validity of ECIRs in such cases.