2024 (5) TMI 203 - HC - Money Laundering

Money Laundering - scheduled offences - predicate offence - respondent nos. 1 and 2 in the scheduled offence acquitted - continuation of proceedings under the PMLA - release of properties attached by the petitioner/ED on the premise that the same are proceeds of crime - pendency of appeal preferred against the order of acquittal in the scheduled offence - HELD THAT - The controversy articulated in the above noted two questions is no more res integra. The Hon ble Supreme Court with reference to the relevant provisions of PMLA in Vijay Madanlal Choudhry 2022 (7) TMI 1316 - SUPREME COURT has observed The offence under Section 3 of the 2002 Act is dependent on illegal gain of property as a result of criminal activity relating to a scheduled offence. It is concerning the process or activity connected with such property, which constitutes the offence of money-laundering. The Authorities under the 2002 Act cannot prosecute any person on notional basis or on the assumption that a scheduled offence has been committed, unless it is so registered with the jurisdictional police and/or pending enquiry/trial including by way of criminal complaint before the competent forum. In Parvathi Kollur 2022 (8) TMI 1256 - SC ORDER , the appellants therein were acquitted from the predicate / scheduled offence under the Prevention of Corruption Act, 1988 and premised on the said acquittal, the appellants were discharged from the offence under the PMLA by the Special Court observing that the occurrence of a scheduled offence was the basic condition for giving rise to proceeds of crime and that commission of scheduled offence was a pre-condition for proceeding under the PMLA. However, the said order of discharge was set aside by the High Court on a revision filed by the Directorate of Enforcement. In Prakash Industries Ltd. v. Directorate of Enforcement, 2022 (7) TMI 877 - DELHI HIGH COURT , a Coordinate bench of this Court dealing with an identical question held that charge of money laundering will not survive after the charges in respect of the predicate offence are quashed or the accused is discharged. It was further observed that when it has been found that the accused had not indulged in any criminal activity, the property cannot be treated as proceeds of crime. Once a person is discharged or acquitted from the scheduled offence, the very foundation gets knocked out and the charge of Money Laundering will not survive as there will be no proceeds of crime. Concomitantly, the properties attached under the PMLA cannot legally be treated as proceeds of crime or be viewed as property derived or obtained from criminal activity - till the judgment of acquittal predicate offence is reversed in an appeal, all the effects of acquittal will continue to operate and mere filing of an appeal against acquittal in a predicate offence would not mean that the respondents will continue to suffer the rigors of criminal proceedings or attachment under the PMLA. The upshot of above discussion is that no proceedings under the PMLA could be sustained after the acquittal of the respondent nos. 1 and 2 in the predicate offence. Accordingly, the learned Special Judge vide order dated 09.10.2023 has rightly discharged the respondents herein from the offences under the PMLA. Likewise, there is no infirmity in the order dated 07.11.2023 whereby the attached movable and immovable properties were directed to be released by the learned Special Judge. The petition is dismissed.

Summary

Issues Involved:
1. Legality of the discharge of respondents from the offence of money laundering u/s 3 of the PMLA.
2. Release of attached properties and bank accounts following the acquittal in the predicate offence.
3. Impact of the pending appeal against the acquittal in the predicate offence on the PMLA proceedings.

Summary:

1. Discharge from Money Laundering Offence u/s 3 of PMLA:
The petition challenged the order dated 09.10.2023 by the Special Judge discharging respondents from offences u/s 3 of the PMLA. The Special Judge observed that since the respondents were acquitted in the scheduled offence, the PMLA proceedings could not continue. The Supreme Court in Vijay Madanlal Choudhry vs. UOI emphasized that the offence under Section 3 of the PMLA depends on illegal gain from a scheduled offence. If acquitted in the scheduled offence, there can be no money laundering offence.

2. Release of Attached Properties and Bank Accounts:
Following the discharge, the Special Judge ordered the release of attached properties and bank accounts on 07.11.2023. The court noted that the properties could not be considered proceeds of crime after the acquittal. Section 8(6) of the PMLA mandates the release of attached properties if the accused is acquitted, as reiterated in Parvathi Kollur vs. Enforcement of Directorate and other cases.

3. Impact of Pending Appeal Against Acquittal:
The petitioner argued that the acquittal had not attained finality due to a pending appeal by the State of Jharkhand. However, the court held that mere filing of an appeal does not negate the effects of acquittal. The PMLA proceedings cannot be sustained post-acquittal unless the acquittal is reversed. The Supreme Court in M/s Nik Nish Retail Ltd. clarified that if the acquittal is reversed, PMLA proceedings can be revived.

Conclusion:
The court dismissed the petition, affirming that no proceedings under the PMLA could be sustained after the acquittal in the predicate offence. The discharge of respondents and the release of attached properties were upheld as legally sound.