2021 (4) TMI 1202 - HC - Money Laundering

Scheduled offence - proceeds of crime - Indian citizen or not - offence under Section 420 IPC - DEPB Scheme - HELD THAT - From a reading of Section 2(u) of the PML Act which defines the expression proceeds of crime , it is limpid that the profit derived or obtained must be a result of a criminal activity which relates to a schedule offence. Even if we take the allegations in the FIR in Cr.No.123 of 2008 as gospel truth and that Viswanathan (A.1) had committed a criminal activity of obtaining an Indian passport and has thereby committed an offence under Section 420 IPC, there is no scope for him to obtain or derive any property as a result of the said criminal activity. To put it more plainly, Viswanathan (A.1) represented to the passport authorities that he is an Indian citizen and obtained passport suppressing the fact that he is a Sri Lankan citizen. The Directorate of Revenue Intelligence had found only irregularities in the exports and had not launched a criminal prosecution against the petitioners. Even the adjudication order that was passed by the Commissioner of Customs has been set aside in appeal by the CESTAT. An illegal immigrant from Bangladesh enters Kolkata; obtains Aadhaar card and ration card from the authorities concerned by projecting himself as a local Muslim; carries on a lawful business and earns by working hard; pays income tax, GST, etc. and buys properties. Can the properties purchased by him be categorised as proceeds of crime on the ground that subsequently, an FIR is registered against him under Section 420 IPC, provisions of the Passports Act and Foreigners Act on the ground that he is not an Indian citizen? The answer to this question is an emphatic 'No', for, there should be a nexus between the criminal activity and the property acquired therefrom. In the absence of this nexus, the provisions of the PML Act cannot be invoked. This criminal original petition stands allowed.

Summary

Issues Involved:
Quashment of proceedings in C.C. No.10 of 2017 on the file of the Principal Sessions Court (Special Court for PMLA Cases), Chennai.

Detailed Analysis:

1. Background of the Case:
The petitioner, Viswanathan (A.1), was involved in imports and exports under the business name "Mercantile India." Issues arose regarding his eligibility for Duty Entitlement Pass Book (DEPB) Scheme credit facility due to an investigation by the Directorate of Revenue Intelligence. Subsequent legal proceedings were initiated against him, which were eventually resolved in his favor by the CESTAT, Chennai.

2. Criminal Allegations and Investigations:
A complaint was lodged against Viswanathan (A.1) alleging that he held a fake Indian passport. This led to a police case being registered against him under various sections. Additionally, the Directorate of Enforcement initiated a case under the Prevention of Money Laundering Act, 2002 (PML Act) based on the FIR, which disclosed an offense under Section 420 IPC.

3. Legal Arguments and Supreme Court Precedent:
The petitioner argued that the offense, if any, was committed before the enactment of the PML Act, thereby vitiating the prosecution. However, the court cited a Supreme Court judgment and the amended Section 3 of the PML Act to refute this argument.

4. Citizenship Dispute and Legal Implications:
The court raised the critical issue of Viswanathan's citizenship, emphasizing that only the Central Government can determine citizenship under the Citizenship Act. The historical context of Tamil refugees and changes in Indian policy post-1991 were also highlighted.

5. Proceeds of Crime and PML Act Interpretation:
The court analyzed the definition of "proceeds of crime" under the PML Act and emphasized the necessity of a direct nexus between criminal activity and property acquired. It was argued that obtaining an Indian passport did not result in any property gain qualifying as proceeds of crime.

6. Inclusion of Co-Accused and International Conventions:
The court questioned the inclusion of Viswanathan's wife, Kavitha (A.2), as a co-accused, highlighting the lack of evidence regarding any proceeds of crime associated with her. The relevance of international conventions and UN charters was dismissed due to the absence of a direct link between the alleged criminal activity and any financial gains.

7. Final Judgment and Quashing of Proceedings:
Ultimately, the court quashed the proceedings in C.C. No.10 of 2017, ruling in favor of the petitioners and allowing the criminal original petition. The decision was based on the lack of evidence linking the alleged criminal activities to any proceeds of crime, leading to the closure of connected criminal miscellaneous petitions.

This detailed analysis of the judgment provides a comprehensive understanding of the legal issues, arguments presented, and the court's reasoning leading to the final decision to quash the proceedings.