2023 (12) TMI 441 - HC - Money Laundering

Money Laundering - predicate offence - proceeds of crime - specific contention raised by the learned Senior Counsel appearing for the petitioners is that consequent to the acceptance of the refer report submitted by the police, the predicate offences based on which the proceedings under the PMLA were initiated are no longer in existence - whether the continuation of the proceedings under the PMLA in this case is legally sustainable? HELD THAT - It is now well settled that one of the basic requirements for initiating proceedings under the PMLA is the commission of an act or indulgence in any process of activity connected with the proceeds of crime by the accused persons - The Hon ble Supreme Court in Vijay Madanlal Choudhary s case 2022 (7) TMI 1316 - SUPREME COURT , after elaborately discussing the statutory provisions as well as the object and reasons behind the enactment of the PMLA, came to a specific conclusion that in the absence of a predicate offence, the proceedings initiated under the PMLA cannot be continued. Thus, the position of law in this regard is well settled. The existence of a predicate offence is a pre-requisite for initiating or continuing the proceedings under the PMLA. Therefore, the question to be considered in this case is whether the predicate offences exist. While considering the said question, the crucial document to be considered is Exhibit P18 refer report submitted by the Crime Branch in which, it is reported that the offences were not found out and the case was referred as a mistake of fact. On going through Exhibit P18 refer report, it can be seen that, the allegations raised by the respondents 3 and 4 were investigated into and found to be not correct. Whether the acceptance of the final report/refer report by the jurisdictional court will have any impact on proceedings under the PMLA? - HELD THAT - The learned Magistrate cannot refuse to take the refer report into the file, unless any defects or incompleteness in the said report are noted. In this case, no such defects or incompleteness are noted, and instead, the report as such was accepted. The term refer accepted , therefore, can only indicate that the conclusion arrived at by the Crime Branch in the refer report as such was accepted by the learned Magistrate, and the defacto complainant was granted an opportunity to pursue the protest complaint. What would be the consequence of the protest complaint, which is now pending consideration before the learned Magistrate, in relation to the proceedings initiated under the provisions of the PMLA? - HELD THAT - It is true that, the offence under Section 120B is included in the schedule. However, as far as the said offence is concerned, unless the criminal conspiracy relates to the commission of the offences coming within the schedule of PMLA, such conspiracy cannot be treated as a predicate offence. As far as the offence under Section 120B is concerned, which is criminal conspiracy, the character and punishment depend upon the offences, for the commission of which, the criminal conspiracy was entered into. Therefore, the criminal conspiracy has no independent existence as it will always depend upon the offence for which the conspiracy was entered - even if cognizance is to be taken for the offences referred to above, the same would not justify the initiation or continuation of the proceedings under PMLA as it cannot be held that those are predicate offences which would enable the 2nd respondent to continue the proceedings. The only irresistible conclusion possible is that, the predicate offences, based on which proceedings were initiated under the PMLA, are no longer in existence - the present proceedings are without any legal sanction, and therefore, interference is required - Petition allowed.

Summary

Issues Involved:
1. Jurisdiction and authority of proceedings under PMLA.
2. Impact of acceptance of police refer report on PMLA proceedings.
3. Validity of protest complaint against the final report.
4. Continuation of PMLA proceedings in the absence of predicate offences.

Summary:

Jurisdiction and Authority of Proceedings under PMLA:
The petitioners challenged the proceedings initiated under the Prevention of Money Laundering Act (PMLA), 2002, evidenced by Exhibits P20 and P21, arguing that the proceedings were without jurisdiction and authority, as they were based solely on Exhibit P12 FIR.

Impact of Acceptance of Police Refer Report on PMLA Proceedings:
The core issue was whether PMLA proceedings could continue after the acceptance of the police refer report, which concluded no offences were made out. The court noted that the acceptance of the refer report by the jurisdictional court indicated the conclusion that no predicate offences existed.

Validity of Protest Complaint Against the Final Report:
The respondents filed a protest complaint after a settlement agreement, raising new allegations not investigated by the Crime Branch. The court found that the protest complaint did not pinpoint deficiencies in the investigation and noted the settlement agreement where respondents agreed not to pursue the case further.

Continuation of PMLA Proceedings in the Absence of Predicate Offences:
The court emphasized that the existence of predicate offences is a prerequisite for PMLA proceedings. Since the refer report was accepted, and the new allegations in the protest complaint did not constitute scheduled offences under PMLA, the court concluded that the predicate offences were no longer in existence.

Conclusion:
The court allowed the writ petition, quashing all proceedings pursuant to ECIR/KCZO/28/2020 and Exhibits P20 and P21, clarifying that authorities could invoke PMLA provisions if predicate offences were later made out.