2024 (7) TMI 1577 - HC - Money Laundering

Money Laundering - predicate offence - Seeking to quash the proceedings initiated by the Enforcement Directorate - inherent powers of the High Court under Section 482 of the Code of Criminal Procedure (Cr.P.C) can be invoked to quash the proceedings initiated by the ED - HELD THAT - Concededly, the crime registered against respondent Nos. 3 to 5 has resulted in a final report referring the case as civil in nature. The final report has been accepted by the Chief Judicial Magistrate on 05.01.2024 as per Annexure A5, which is also not disputed. In view of the above, the predicate offence does not survive any more. Since the predicate offence is not in existence, the ED cannot continue its investigation on the proceeds of crime emanating out of the predicate offence. Consequently, the ED ought to have immediately closed the case. Having not done so, petitioner is justified in approaching this Court. Section 482 Cr.P.C saves the inherent power of the High Court. The said provision clothes this Court with the power to make such orders as may be necessary to give effect to any order under the Cr.P.C to prevent abuse of the process of any Court or to even secure the ends of justice. A reading of section 482 Cr.P.C itself is sufficient to comprehend the profound extent and scope of the power vested upon this Court. Any order passed under the provisions of the Cr.P.C can be given its full effect by issuing appropriate orders under section 482 Cr.P.C. The scope of the power under section 482 Cr.P.C is not limited or constricted by the character or nature of the order under challenge. Even an administrative order can be quashed in exercise of the power under section 482 Cr.P.C, if it is required to give effect to an order issued under the Cr.P.C or if it is necessary to secure the ends of justice. The final report in the predicate offence did not reveal the commission of any criminal offence. The order of the learned Chief Judicial Magistrate, Thrissur accepting the final report as RC.No. 73/2023 on 05.01.2024 is an order issued under the Cr.P.C. To give full effect to such an order, this Court can exercise its inherent powers to quash a proceeding, including an administrative document like the ECIR, when it continues to exist, without legal authority. Conclusion - The existence of a predicate offence is essential for proceedings under the PML Act. The High Court has inherent powers under Section 482 Cr.P.C to quash proceedings to prevent abuse of process and secure justice. Application allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

• Whether the proceedings initiated by the Enforcement Directorate (ED) under the Prevention of Money Laundering Act, 2002 (PML Act) can continue when the predicate offence has been closed as a civil matter.
• Whether the inherent powers of the High Court under Section 482 of the Code of Criminal Procedure (Cr.P.C) can be invoked to quash the proceedings initiated by the ED.
• Whether an Enforcement Case Information Report (ECIR) can be challenged under Section 482 Cr.P.C.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Continuation of ED proceedings post-closure of the predicate offence

• Relevant legal framework and precedents: The PML Act stipulates that money laundering offences are contingent upon the existence of a scheduled offence (predicate offence). The Supreme Court in Vijay Madanlal Choudhary and Others v. Union of India and Others established that if the predicate offence is quashed or results in acquittal, no money laundering offence can be sustained.
• Court's interpretation and reasoning: The court reasoned that since the predicate offence was closed as a civil matter, the ED's proceedings should not continue as there is no underlying criminal activity to investigate.
• Key evidence and findings: The final report by the Crime Branch, accepted by the Chief Judicial Magistrate, indicated no criminal offence was committed, thus nullifying the predicate offence.
• Application of law to facts: The court applied the principle that without a predicate offence, the basis for the ED's investigation under the PML Act is invalid.
• Treatment of competing arguments: The ED's argument that the ECIR cannot be challenged under Section 482 Cr.P.C was dismissed, as the court found this position legally untenable.
• Conclusions: The ED's proceedings cannot continue without a predicate offence, and thus, the proceedings were quashed.

Issue 2: Invocation of Section 482 Cr.P.C

• Relevant legal framework and precedents: Section 482 Cr.P.C grants inherent powers to the High Court to prevent abuse of process and to secure the ends of justice. The Supreme Court in R. P. Kapur v. State of Punjab outlined scenarios where these powers can be invoked.
• Court's interpretation and reasoning: The court emphasized the broad scope of Section 482 Cr.P.C, allowing the High Court to quash proceedings even for administrative documents like an ECIR if it serves justice.
• Key evidence and findings: The court noted the absence of any criminal findings in the final report of the predicate offence.
• Application of law to facts: The court applied Section 482 Cr.P.C to quash the ECIR, as the continuation of the ED's proceedings was deemed an abuse of process.
• Treatment of competing arguments: The court disagreed with the ED's contention that ECIRs are immune from challenge under Section 482 Cr.P.C, citing the need to prevent abuse of process.
• Conclusions: The court concluded that it is within its powers to quash the ECIR to uphold justice.

3. SIGNIFICANT HOLDINGS

• Verbatim quotes of crucial legal reasoning: "If the person is finally discharged/acquitted of the scheduled offence or the criminal case against him is quashed by the Court of competent jurisdiction, there can be no offence of money-laundering against him or anyone claiming such property being the property linked to stated scheduled offence through him."
• Core principles established: The existence of a predicate offence is essential for proceedings under the PML Act. The High Court has inherent powers under Section 482 Cr.P.C to quash proceedings to prevent abuse of process and secure justice.
• Final determinations on each issue: The proceedings initiated by the ED were quashed due to the absence of a predicate offence. The High Court's inherent powers under Section 482 Cr.P.C were rightfully invoked to quash the ECIR.