2024 (8) TMI 1108 - HC - Money Laundering

Money Laundering - scheduled offence - proceeds of crime - misappropriation of funds of JKCA with criminal conspiracy with other accused persons. Registration of an FIR/case for a scheduled offence is a condition precedent for the registration of a case for money laundering under Section 3 of the PMLA or not - Enforcement Directorate can independently determine the commission of scheduled offences based on the charge-sheet filed by another investigating agency or not. HELD THAT - The offence of money laundering, as defined under Section 3 of PMLA, is not made out. For commission of offence of money laundering under Section 3 of PMLA, it is required to be demonstrated that the accused has directly or indirectly, knowingly or unknowingly involved in any process or activity connected with the proceeds of crime. Such activity could be concealment possession, acquisition or use of the proceeds of crime and projecting it as untainted property. Proceeds of crime is defined in Section 2 (1) (u) clearly means any property derived or obtained directly or indirectly by any person as a result of criminal activity relating to a scheduled offence. Coming to the charge-sheet presented by the CBI before the CJM, Srinagar, no scheduled offence is disclosed to have been committed. From a plain reading of Section 3 PMLA, it appears that offence under Section 3 PMLA can only be committed after a scheduled offence is committed. It is, thus, trite that commission of a scheduled offence is sine qua non for existence of proceeds of crime and commission of offence of money laundering under Section 3 of the PMLA Act. In the instant case, indisputably, the jurisdictional police, the CBI has not registered any case for commission of any scheduled offence. Enquiry by way of complaint before the CJM, Srinagar is also not in respect of any scheduled offence. In the absence of there being any case registered for commission of scheduled offence or any case pending enquiry or trial in respect of scheduled offence, authorities under PMLA have no jurisdiction to register ECIR and launch prosecution for offence of money laundering under Sections 3/4 of PMLA. When there is no scheduled offence having been registered or pending enquiry or trial, there are no proceeds of crime and, thus, there is no offence of money laundering under Section 3 of the Act. There are merit in the plea of the learned counsel for the petitioner and regret my inability to accept the argument of learned Additional Solicitor General of India which he very vehemently projected here. This petition is, accordingly, allowed.

Summary

Issues Involved:

1. Whether registration of an FIR/case for a scheduled offence is a condition precedent for the registration of a case for money laundering under Section 3 of the PMLA.
2. Whether the Enforcement Directorate can independently determine the commission of scheduled offences based on the charge-sheet filed by another investigating agency.

Issue-wise Detailed Analysis:

1. Registration of FIR/Case for Scheduled Offence as Condition Precedent:

The petitioner sought quashing of a complaint and prosecution under Sections 3 and 4 of the PMLA, arguing that the misappropriation of JKCA funds did not involve a scheduled offence under Section 2(y) of the PMLA. It was contended that offences under Sections 406 and 409 RPC, which were cited in the CBI charge-sheet, are not scheduled offences, and therefore, there could be no proceeds of crime or money laundering under the PMLA. The court referred to the Supreme Court judgment in Pavana Dibbur v. Directorate of Enforcement, which clarified that a conspiracy to commit an offence not listed as a scheduled offence does not make it a scheduled offence under Section 120-B RPC. Consequently, the charge-sheet pending before the Chief Judicial Magistrate, Srinagar, did not pertain to any scheduled offence, making the registration of a case for money laundering under the PMLA untenable.

2. Independent Determination by Enforcement Directorate:

The respondent argued that the CBI charge-sheet revealed elements of scheduled offences under Sections 411 and 424 RPC, justifying prosecution under the PMLA. However, the court emphasized that the Enforcement Directorate (ED) cannot independently assume jurisdiction to register an ECIR and launch prosecution based on its interpretation of the CBI charge-sheet. The ED must respect the conclusions drawn by the CBI unless varied or modified by a competent court. The court highlighted that the ED is not superior to the CBI and cannot preempt the outcome of judicial proceedings. The court also cited the Supreme Court's decision in Vijay Madal Lal Choudhary v. Union of India, which stated that authorities under the PMLA cannot act on assumptions and must rely on registered cases of scheduled offences.

Conclusion:

The court concluded that without a registered case or pending enquiry for a scheduled offence, the ED had no jurisdiction to register an ECIR or prosecute for money laundering under the PMLA. The complaint, charge-sheet, and charges framed by the Special Court were quashed. However, the court allowed for the possibility of fresh proceedings if the Chief Judicial Magistrate, Srinagar, later framed charges for scheduled offences. The judgment underscored the necessity for harmony between investigating agencies and adherence to judicial determinations.