2025 (1) TMI 549 - HC - Money Laundering

Money Laundering - whether Enforcement Directorate can resort to action against any person for money laundering on an assumption that the property recovered by them must be proceeds of crime and that a scheduled offence has been committed unless the same is registered with the jurisdictional police or pending inquiry by way of complaint before a competent forum? - HELD THAT - The complaint dated 11.03.2024, ECIR dated 20.06.2022, prosecution complaint dated 11.03.2024 and summoning order dated 05.04.2024 issued in the matter of State Versus Lakhwinder Singh in case bearing No.1/24, before the learned Special Court (PMLA) Dharamshala, are quashed. It is however, made clear that notwithstanding the aforesaid quashing, it shall remain open to the Enforcement Directorate to register ECIR afresh and launch prosecution against the petitioner under Section 3 of the PMLA, if ultimately the Court of Addl. Chief Judicial Magistrate, Una frames charges, alters charges in terms of Section 239 of BNSS for offence/offences, which are specifically mentioned in the schedule of PMLA. Conclusion - The court quashed the ECIR, prosecution complaint, and summoning order due to the lack of a scheduled offence. Petition disposed off.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

Whether the Enforcement Directorate (ED) can proceed with actions under the Prevention of Money Laundering Act (PMLA) without a scheduled offence being registered or pending inquiry.
Whether the complaint and proceedings initiated by the ED against the petitioner under the PMLA are valid in the absence of a predicate offence.
Whether the prosecution complaint and subsequent proceedings, including the summons issued by the Special Court, Dharamshala, should be quashed.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: ED's Authority to Proceed Without a Scheduled Offence

Relevant Legal Framework and Precedents: The PMLA requires a scheduled offence to be registered or under inquiry for actions under the Act. The petitioner referenced the case of Pavana Dibbur Vs. Directorate of Enforcement, which highlighted that Section 120B of IPC is not a scheduled offence unless it involves a conspiracy to commit a scheduled offence under the PMLA.
Court's Interpretation and Reasoning: The court agreed with the petitioner's contention that without a scheduled offence, the ED's actions under the PMLA are not justified.
Key Evidence and Findings: The FIR registered did not include offences under the IPC sections 120B and 420, which are not scheduled offences under the PMLA.
Application of Law to Facts: The court applied the legal requirement of a scheduled offence being necessary for PMLA proceedings and found that the absence of such an offence invalidated the ED's actions.
Treatment of Competing Arguments: The Deputy Solicitor General conceded that the absence of a scheduled offence was a valid point raised by the petitioner.
Conclusions: The court concluded that the ED's proceedings were invalid in the absence of a scheduled offence and quashed the complaint and related proceedings.

Issue 2: Validity of the Prosecution Complaint and Proceedings

Relevant Legal Framework and Precedents: The PMLA requires that a scheduled offence be registered or pending inquiry for a valid prosecution complaint. The petitioner referenced the judgment in Vijay Mandal Chaudhary and Ors. Vs. Union of India, which emphasized this requirement.
Court's Interpretation and Reasoning: The court found that the prosecution complaint dated 11.03.2024 and the subsequent summoning order lacked validity due to the absence of a scheduled offence.
Key Evidence and Findings: The proceedings were based on the ECIR and prosecution complaint, which did not involve any registered or pending scheduled offence.
Application of Law to Facts: The court applied the legal framework requiring a predicate offence and found the ED's complaint and proceedings to be without basis.
Treatment of Competing Arguments: The respondent's counsel did not contest the legal position that a scheduled offence is necessary for PMLA proceedings.
Conclusions: The court quashed the prosecution complaint and related proceedings due to the absence of a scheduled offence.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "No fault can be found with the aforesaid contentions so being raised."
Core Principles Established: The necessity of a scheduled offence for proceedings under the PMLA is reaffirmed. Without such an offence, actions by the ED under the PMLA are invalid.
Final Determinations on Each Issue: The court quashed the ECIR, prosecution complaint, and summoning order due to the lack of a scheduled offence. However, it left open the possibility for the ED to initiate fresh proceedings if a scheduled offence is later established.

The petition was disposed of, and the pending applications, if any, were also resolved in line with the judgment.

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