2022 (3) TMI 231 - HC - Money Laundering

Money Laundering - provisional attachment of property - scheduled offences - murder - attempt to murder - abduction - extortion - criminal intimidation - kidnapping - cheating - can the petitioner be prosecuted for the offences u/s.3 and 4 of the PMLA? - HELD THAT - The petitioner, being the Managing Director of the Pothy brothers, has been prosecuted for purchasing the impugned property from the daughter of an alleged criminal. The word alleged criminal is carefully used because Sridhar is no more alive for him to contest the allegations against him. For mulcting criminal liability u/s.3 and 4 of the PMLA, the prosecution should place materials before the Court to show that the person has not only acquired the property by committing a scheduled offence, but, he should have projected that property as untainted - In this case, it is the definite case of the prosecution that the impugned property was acquired by Sridhar in the name of his wife by committing various criminal activities. Of course, a name lender to the principal accused can also be brought within the net of section 3 r/w 4 of the PMLA as abettors. In other words, where the principal offender projects a tainted property as an untainted one, not only will he be held liable, but also all others who had helped him to project the tainted property as untainted. It is not the case of the prosecution that the petitioner herein was projecting a tainted property as an untainted one nor is it their case that the petitioner had abetted D. Sridhar in projecting a tainted property as an untainted one. The petitioner was only a bonafide purchaser of the impugned property from the daughter of D. Sridhar. This sale deed is a registered document, which the prosecution themselves rely upon - A perusal of the averments in the sale deed shows that the petitioner had paid various amount by RTGS to Kumari, the mother of Dhanalakhmi Sridhar on 31.12.2015, 13.01.2016 and 23.02.2016 and has also deducted TDS for that. This payment to the mother of Dhanalakshmi Sridhar, which has been reflected in the sale deed itself, cannot amount to an offence u/s.3 r/w 4 of the PMLA. The prosecution of the petitioner u/s.3 and 4 of the PMLA in S.C.No.74 of 2017 is an abuse of process of law. Ergo, this Criminal Original Petition is allowed.

Summary

Issues involved:

1. Quashing of the complaint in S.C.No.74 of 2017.
2. Provisional attachment of property under the Prevention of Money Laundering Act, 2002 (PMLA).
3. Bona fide purchaser defense.
4. Allegations of money laundering and proceeds of crime.
5. Undertaking given by the petitioner in previous proceedings.

Issue-wise detailed analysis:

1. Quashing of the complaint in S.C.No.74 of 2017:
The petitioner sought to quash the complaint in S.C.No.74 of 2017, which was filed by the Enforcement Directorate (ED) under Sections 3 and 4 of the PMLA. The court noted that the petitioner was prosecuted for purchasing property from the daughter of an alleged criminal, Sridhar. The court observed that for a prosecution under Sections 3 and 4 of the PMLA, the prosecution must show that the person not only acquired the property by committing a scheduled offense but also projected the property as untainted. The court found no material to show that the petitioner was aware that the property was acquired through criminal activities. Therefore, the court quashed the prosecution against the petitioner.

2. Provisional attachment of property under PMLA:
The impugned property was provisionally attached by the ED under Section 5 of the PMLA, alleging that it was acquired through proceeds of crime. The Pothy brothers challenged this attachment, and the appellate Tribunal set aside the provisional attachment, finding that the Pothy brothers were bona fide purchasers and not involved in any crime or money laundering. The court noted that the appellate Tribunal's findings were based on facts and that the Pothy brothers had no direct link to the criminal activities of Sridhar.

3. Bona fide purchaser defense:
The petitioner argued that he was a bona fide purchaser of the property and had no knowledge of its tainted nature. The court referred to the sale deed, which showed that the petitioner had paid the entire sale consideration through RTGS transfers and deducted TDS. The court found that the petitioner had acted in good faith and that the payments made to the mother of Dhanalakshmi Sridhar did not amount to an offense under Sections 3 and 4 of the PMLA.

4. Allegations of money laundering and proceeds of crime:
The ED alleged that the petitioner acquired the property knowing it was part of proceeds of crime. The court noted that the prosecution must show that the petitioner was involved in projecting the tainted property as untainted. The court found no evidence to support this allegation and concluded that the petitioner was only a bona fide purchaser.

5. Undertaking given by the petitioner in previous proceedings:
The petitioner had given an undertaking in previous proceedings that they would have no objection to the continuation of criminal proceedings against the accused parties. The court held that this undertaking did not estop the petitioner from challenging the criminal proceedings under Section 482 Cr.P.C. The court emphasized that there cannot be any estoppel against statute and that the petitioner had a statutory remedy.

Conclusion:
The court allowed the Criminal Original Petition, quashing the prosecution against the petitioner in S.C.No.74 of 2017. The court noted that the petitioner must abide by the verdict of the trial court regarding the confiscation of the impugned property under Sections 8(5), (6), (7), and (8) of the PMLA. The connected miscellaneous petition was closed accordingly.