2024 (7) TMI 555 - HC - Money Laundering

Money Laundering - proceeds of crime - scheduled offence/predicate offence - attachment of bank accounts - illegal racket of kidney transplantation - HELD THAT - In Pavana Dibbur v. The Directorate of Enforcement 2023 (12) TMI 49 - SUPREME COURT the Hon ble Supreme Court held that an accused in the PMLA case who comes into the picture after the scheduled offence is committed by assisting in the concealment or use of proceeds of crime need not be an accused in the scheduled offence. Such an accused can still be prosecuted under PMLA so long as the scheduled offence exists. In Nik Nish Retail Ltd. v. Assistant Director Enforcement Directorate 2022 (11) TMI 1280 - CALCUTTA HIGH COURT the Calcutta High Court while dealing with a case where the FIR in respect of the predicate offence was quashed on the basis of settlement has held that the proceedings initiated under PMLA 2002 provisions cannot stand in isolation in the absence of any scheduled offence. The Telangana High Court in Manturi Shashi Kumar v. Director Directorate of Enforcement 2023 (4) TMI 1199 - TELANGANA HIGH COURT has also quashed a complaint under Section 3 of the PMLA 2002 on the grounds of the accused being discharged/acquitted of the scheduled offence. This Court in the case of Prakash Industries Ltd. v. Directorate of Enforecement 2022 (7) TMI 877 - DELHI HIGH COURT has taken a view that once it is found that a criminal offence does not stand evidenced the question of any property being derived or obtained therefrom or its confiscation or attachment would not arise at all. A bare perusal of the facts of the present case would show that the Trial Court had already acquitted the appellant-Jeevan Kumar of all the charges framed against him and the same has remained unchallenged by the respondent. Therefore his acquittal in the scheduled offence breaks the entire chain leading to the other appellants - the attachment proceedings in the present case are unsustainable as the appellants cannot be said to be involved in any activity connected with the proceeds of crime. The impugned order is set aside - appeal allowed.

Summary

Issues Involved:
1. Acquittal of the accused in the predicate offence and its impact on the attachment proceedings.
2. Involvement and role of other appellants who were not accused in the predicate offence.
3. Quashing of ECIR and consequential proceedings.
4. Validity of attachment proceedings under PMLA, 2002.

Detailed Analysis:

Issue 1: Acquittal of the Accused in the Predicate Offence and Its Impact on the Attachment Proceedings
The appellants challenged the attachment of properties under PMLA, 2002, following the acquittal of the appellant-Jeevan Kumar from the predicate offence. The court noted that the essential preconditions for an offence of money laundering under Section 3 of PMLA, 2002 include involvement in any process or activity connected with the proceeds of crime and projecting the same as untainted property. The court emphasized that the "proceeds of crime" must be derived from a scheduled offence. Since Jeevan Kumar was acquitted of the scheduled offence, the foundation for the money laundering charge was removed. The court cited the Supreme Court's ruling in Vijay Madanlal Choudhary, which held that if a person is acquitted of the scheduled offence, there can be no action for money laundering against them.

Issue 2: Involvement and Role of Other Appellants Who Were Not Accused in the Predicate Offence
The appellants-Rajiv Channa and M/S N.R. Merchant Pvt. Ltd. argued that they were not accused in the predicate offence and thus had no link with the generation of alleged proceeds of crime. The court acknowledged that since the appellant-Jeevan Kumar was acquitted of the scheduled offence, the entire chain leading to the other appellants was broken. Consequently, the other appellants could not be held liable for money laundering. The court referenced the Supreme Court's decision in Pavana Dibbur, which clarified that if the prosecution for the scheduled offence ends in acquittal or discharge, the scheduled offence ceases to exist, and thus, no one can be prosecuted for money laundering.

Issue 3: Quashing of ECIR and Consequential Proceedings
The court noted that the ECIR bearing no. ECIR/07/DZ/2008 and all consequential proceedings were quashed by this court in a separate judgment dated 15.01.2024. It was highlighted that the quashing of the ECIR and the acquittal of Jeevan Kumar nullified the basis for any further proceedings under PMLA, 2002. The court referenced the case of Parvathi Kollur, where the Supreme Court held that the discharge of the accused in the scheduled offence warranted the quashing of proceedings under PMLA, 2002.

Issue 4: Validity of Attachment Proceedings Under PMLA, 2002
The court examined Section 5 of PMLA, 2002, which deals with the attachment of property involved in money laundering. It was noted that the attachment proceedings were premised on the existence of proceeds of crime derived from a scheduled offence. Given the acquittal of Jeevan Kumar and the quashing of ECIR, the attachment proceedings could not be sustained. The court cited the Calcutta High Court's decision in Nik Nish Retail Ltd., which held that without a scheduled offence, proceedings under PMLA, 2002 could not stand.

Conclusion
The court set aside the judgment and final order dated 09.03.2015, along with the confirmation order dated 04.02.2011 and the PAO dated 09.09.2010. The appeals were allowed, and the pending applications were disposed of. The court concluded that the attachment proceedings were unsustainable as the appellants could not be involved in any activity connected with the proceeds of crime.