2024 (1) TMI 1303 - HC - Money Laundering

Money laundering - proceeds of crime - issuance of summons - whether the respondents can issue summons to anyone under the garb of investigation to examine whether there exists proceeds of crime on the basis of the four First Information Reports relating to the scheduled/predicate offence and to call everyone in this State on mere assumption that every case registered for offence relating to illegal mining coupled with scheduled offence is capable of generating proceeds of crime as a result of crime committed under the schedule? HELD THAT - The Hon ble Supreme Court had occasion to record the statement of the learned Additional Solicitor General while deciding the case in Vijay Madanlal Choudhary 2022 (7) TMI 1316 - SUPREME COURT that the Enforcement Directorate had taken up 2086 cases for investigation in the last five years under the PMLA, 2002 out of registration of approximately 33 lakh First Information Reports relating to predicate offences by the police and other enforcement agencies. That means only 0.063% of cases registered for predicate offence is being investigated under the PMLA, 2002. If an investigation is permissible on mere assumption of commission of predicate offence in lakhs of cases based on registration of similar cases, that requires summons being issued to lakhs or even crores of persons throughout the country. Therefore, this Court should step in to draw the lakshman rekha by prescribing a well-defined and guarded procedure in the matter of investigation. The investigation cannot be like an unruly horse with the possible mischief and misuse of power by irresponsible officers who can be politically motivated or can act with ulterior motive causing immense hardships and irretrievable damage to many innocent. When the involvement of any of the petitioners either in the commission of predicate offence or the suspected generation of proceeds of crime as a result of criminal activity relating to the scheduled offence or about petitioners' knowledge is not shown by any verifiable material, the question to be considered is whether the proceedings under the PMLA, 2002 would survive at all against petitioners when no criminality is suspected connecting the petitioners either to the scheduled offence or about the involvement of the petitioners through anyone who is shown as accused in the PMLA proceedings. The offence under Section 3 of the PMLA, 2002 is dependent upon illegal gain of property as a result of criminal activity relating to scheduled offence that there can be no offence of money-laundering against anyone claiming such property being the property linked to stated scheduled offence through him. When the criminal case against any individual for the predicate offence is quashed by the Court of competent jurisdiction or the person accused for the predicate offence is finally discharged or acquitted, this Court has to quash the PMLA proceedings - Though absolute power is given to respondents under the PMLA, 2002, when such power is exercised in a manner affecting the civil right and liberty of individuals especially when the power is exercised with oblique motive or the impugned proceedings suffer from legal mala fides. The Hon ble Supreme Court has categorically held that all properties recovered or attached through investigating agency even in connection with the criminal activity relating to scheduled offence in the general law cannot be regarded as proceeds of crime. This Court finds prima facie case and balance of convenience in favour of the petitioners and hence, considering the serious prejudice that is likely to be caused on account of repeated summons being issued by the respondents to the petitioners in these writ petitions, is inclined to grant interim protection - Petition disposed off.

Summary

Issues Involved:
1. Legality of the proceedings under the Prevention of Money-Laundering Act, 2002 (PMLA, 2002).
2. Validity of the summons issued to the petitioners.
3. Connection between the petitioners and the scheduled offences.
4. Procedural irregularities in the investigation.
5. Judicial review under Article 226 of the Constitution of India.

Issue-wise Detailed Analysis:

1. Legality of the proceedings under PMLA, 2002:
The writ petitions seek to quash the proceedings initiated under reference ECIR/CEZOII/22/2023 dated 11.09.2023, arguing that they contravene the foundational principles of the PMLA, 2002, and Supreme Court precedents. The investigation basis is the registration of FIRs for scheduled offences, particularly under Section 3 of the PMLA, 2002. The FIRs cited involve serious allegations including murder, corruption, and illegal mining, suggesting a prima facie case for money laundering. However, the petitioners argue that the proceedings lack specific material linking them to the alleged offences or proceeds of crime.

2. Validity of the summons issued to the petitioners:
The petitioners received summons for their appearance in connection with the investigation. They expressed surprise, stating they have no knowledge or involvement in the scheduled offences. The summons were described as vague, not disclosing any specific purpose. The petitioners argued that there is no reason for their involvement under Section 50 of the PMLA, 2002. The court noted that the petitioners are not named as accused or suspects in the FIRs or the ECIR proceedings, and no specific material connects them to the offences.

3. Connection between the petitioners and the scheduled offences:
The petitioners argue that they are not involved in any of the scheduled offences mentioned in the FIRs. They are engaged in legitimate businesses such as excavator hiring, construction, and education. The court found no verifiable material linking the petitioners to the predicate offences or proceeds of crime. The investigation appears to be based on general assumptions rather than specific evidence.

4. Procedural irregularities in the investigation:
The petitioners argued that the investigation is a "roving enquiry" without specific material linking them to the offences. The court emphasized the need for a well-defined and guarded procedure to prevent misuse of power. The investigation cannot be based on mere assumptions or general allegations without specific evidence. The court highlighted the importance of protecting individuals' rights and preventing arbitrary exercise of power.

5. Judicial review under Article 226 of the Constitution of India:
The court considered whether it can quash the ECIR proceedings under Article 226. It noted that the power under Article 226 is broader than under Section 482 of the Code of Criminal Procedure. The court emphasized the need to prevent misuse of power and protect individuals' rights. It found that the proceedings against the petitioners suffer from legal mala fides and permitting them would result in abuse of process.

Conclusion:
The court granted interim protection to the petitioners, staying the operation of the summons issued to them pending disposal of the writ petitions. The court emphasized the need for specific material linking individuals to predicate offences and proceeds of crime before proceeding under the PMLA, 2002. The investigation must be based on concrete evidence rather than general assumptions or allegations.