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2024 (3) TMI 926 - HC - Money LaunderingMoney Laundering - scheduled offences - cognizance of offence - issuance of summons without conducting an enquiry as prescribed under Section 202 of Cr.PC - petitioner not charged with the predicate offence, still be prosecuted for the offence under the PMLA Act or not - sufficient evidence to establish that the petitioner - accused No. 7. Is it permissible to take cognizance and issue summons without conducting an enquiry as prescribed under Section 202 of Cr.PC? - HELD THAT - Upon examination of Clause (b) to Sub-Section 1 of Section 44, it is evident that the Special Court, irrespective of the provisions in the Code of Criminal Procedure, possesses the authority to take cognizance of an offence under Section 3 without being committed to trial. In the present case, the complaint was lodged by the respondent, an authorized Officer, and the Special Court can take cognizance without resorting Section 202 of Cr.PC, thus, the argument presented by the learned Senior Counsel for the petitioner, asserting that the issuance of summons violated Section 202 of Cr.PC is untenable. Can the petitioner, who is not charged with the predicate offence, still be prosecuted for the offence under the PMLA Act? - HELD THAT - In the present case, the scheduled offences are under investigation by the jurisdictional police. Therefore, the petitioner can be subjected to prosecution under the PMLA, if it can be established that the petitioner has prima facie committed an offence under Section 3 of the PMLA. Does the investigation under the PMLA Act provide sufficient evidence to establish that the petitioner - accused No. 7 has prima facie committed the offence alleged? - HELD THAT - There is no evidence to suggest that the petitioner, who is a payment gateway, had knowledge that the funds transferred to the merchant IDs of accused No. 5 were derived from criminal activity related to a scheduled offence, nor did they knowingly assist accused No. 5 in concealing or transferring illicit proceeds as clean money. Even if we accept the statements from the Director of accused No. 5 and the employee of accused No. 7, at most, it indicates that accused No. 7 was negligent in setting up the merchant IDs in the name of accused No. 5. Intent is essential to constitute an offense under Section 3 of the PMLA. Therefore, the commission amount earned by accused No. 7 cannot be deemed a result of facilitating the illegal money-lending business of accused No. 5, as there is no evidence to establish that accused No. 7 had the intention to commit the crime under Section 3 of the PMLA - When there is no prima facie material to substantiate that the Accused No. 7 knowingly facilitated the transfer of proceeds of the crime, no presumption can be drawn that the Petitioner was involved in money laundering as stated under Section 24, and the burden is on Petitioner to prove otherwise. The complaint averments does not apparently satisfy the essential elements to constitute the offences alleged against the Petitioner, and, therefore the continuation of the criminal proceedings will be an abuse of the process of the law - Petition allowed.
Issues Involved:
1. Permissibility of taking cognizance and issuing summons without conducting an enquiry under Section 202 of Cr.PC. 2. Prosecution of the petitioner under the PMLA Act despite not being charged with the predicate offence. 3. Sufficiency of evidence under the PMLA Act to establish prima facie offence by the petitioner. Summary: Issue 1: Permissibility of taking cognizance and issuing summons without conducting an enquiry under Section 202 of Cr.PC. Upon examining Section 44 of the PMLA Act, it is evident that the Special Court can take cognizance of an offence under Section 3 without being committed to trial, irrespective of the provisions in the Code of Criminal Procedure. The complaint was lodged by an authorized Officer, thus the Special Court can take cognizance without resorting to Section 202 of Cr.PC. Therefore, the argument asserting that the issuance of summons violated Section 202 of Cr.PC is untenable. Issue 2: Prosecution of the petitioner under the PMLA Act despite not being charged with the predicate offence. Section 3 and legal precedents establish that an individual, even if not directly involved in the criminal activity generating the proceeds of the crime, can be prosecuted under the PMLA if they knowingly participate in concealing or utilizing the proceeds of the crime. The petitioner can be subjected to prosecution under the PMLA if it can be established that they have prima facie committed an offence under Section 3 of the PMLA. Issue 3: Sufficiency of evidence under the PMLA Act to establish prima facie offence by the petitioner. The investigation revealed that the petitioner, a payment gateway, created merchant IDs in the name of accused No. 5 without proper due diligence, and despite failing the penny test and providing forged cheques, continued operations in these merchant IDs. This negligence was admitted by an employee of the petitioner. However, there is no evidence to suggest that the petitioner had knowledge that the funds transferred were derived from criminal activity related to a scheduled offence, nor did they knowingly assist in concealing or transferring illicit proceeds. The essential elements to constitute an offence under Section 3 of the PMLA, including intent, are not satisfied. Therefore, the continuation of the criminal proceedings against the petitioner would be an abuse of the process of law. Order: The petition is allowed, and the impugned proceedings in Spl. CC No. 623/2023 on the file of the 21st Addl. City Civil and Sessions Judge and Principal Civil Court for CBI Cases initiated by the respondent - Directorate of Enforcement insofar as it relates to petitioner - accused No. 7 is hereby quashed.
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