2022 (11) TMI 153 - HC - Money Laundering

Money Laundering - Scheduled offence - Legal jugglery - framing of charges - Acquittal form predicate offence - accused 1 and 2 are said to have involved in the commission of murder of one Rajesh and one Ramu while injuring few others in a farm house belonging to one Muddappa situated behind APMC in Hunsur - petitioners having been acquitted of the predicate offences made under the IPC - whether accused 1 and 2 having been acquitted of the offences alleged under the IPC predicate offence, the offence alleged i.e., scheduled offence under the Act can continue? - HELD THAT - The offence under Section 3 is dependent on illegal gain of property as a result of criminal activity relating to a scheduled offence. It is concerning the process or activity connected with such property which constitutes the offence of money laundering. The Apex Court holds that the authorities under the Act cannot prosecute any person on notional basis or on the assumption that the scheduled offence has been committed, unless it is so registered with the jurisdictional police and/or pending enquiry/trial including by way of criminal complaint before the competent forum. The Apex Court answers the issue further holding that if a person is finally discharged/acquitted of the predicate offences or the criminal case against him is quashed by a Court of competent jurisdiction, there can be no offence of money laundering against him or any one claiming such property being the property linked to stated scheduled offence through him. The Apex Court answers the very issue which is the kernel of the conundrum in the case at hand, in the aforesaid clause of conglomeration of conclusions. The view as taken by the Trial Court in this matter had been a justified view of the matter and the High Court was not right in setting aside the discharge order despite the fact that the accused No. 1 had already been acquitted in relation to the scheduled offence and the present appellants were not accused of any scheduled offence. It is not in dispute that accused 3, 4 and 5 are hauled into the proceedings under the Act only because the property that they have acquired is linked to the criminal activity of accused 1 and 2. Accused 1 and 2 are into the proceedings under the Act for the reason of allegations of money laundering under Section 3, as according to the prosecution it is proceeds of crime. Therefore, the entire issue initiated by the Enforcement Directorate against the accused herein would revolve round Section 3 of the Act. Section 3 of the Act is interpreted by the Apex Court (supra). The conclusion of the Apex Court is that if they are discharged/acquitted or the criminal case against them is quashed, there can be no offence of money laundering against them or anyone claiming such property being the property linked to the scheduled offence through them. The contention of the respondent that the issue inter partes has become final is unacceptable. The Criminal Petitions are allowed.

Summary

Issues Involved:
1. Legality of framing charges under the Prevention of Money Laundering Act, 2002 (PMLA) against the petitioners after their acquittal in predicate offences under the Indian Penal Code (IPC).
2. Interpretation and application of Section 3 of the PMLA in light of recent Supreme Court judgments.

Issue-wise Detailed Analysis:

1. Legality of Framing Charges under PMLA Post Acquittal in Predicate Offences:
The petitioners challenged the order dated 20.11.2021 by the XLVII Additional City Civil and Sessions Judge and Special Judge for CBI cases, Bangalore, which framed charges against them under Sections 3, 4, and 8(5) of the PMLA. The petitioners argued that since they were acquitted of the predicate offences under the IPC, the proceedings under the PMLA should be quashed. The predicate offences included Sections 307, 449, 201, 427, 143, 144, 147, and 302 of the IPC, for which accused 1 and 2 were initially convicted but later acquitted by the High Court due to lack of evidence.

2. Interpretation and Application of Section 3 of the PMLA:
The respondent, represented by the Enforcement Directorate, argued that proceedings under the PMLA could continue independently of the outcome of the predicate offences, citing a previous judgment in DYANI ANTONY PAUL AND OTHERS v. UNION OF INDIA. However, the Supreme Court's recent judgment in VIJAY MADANLAL CHOUDHARY AND OTHERS v. UNION OF INDIA clarified that if the accused are acquitted or the proceedings against them are quashed by a competent court, the proceedings for scheduled offences under the PMLA linked to those predicate offences cannot continue.

The High Court noted that the Supreme Court's judgment in VIJAY MADANLAL CHOUDHARY held that the offence under Section 3 of the PMLA is dependent on the illegal gain of property as a result of criminal activity relating to a scheduled offence. The Supreme Court concluded that if a person is acquitted of the scheduled offence, there can be no offence of money laundering against them or anyone claiming such property linked to the scheduled offence.

Further, the High Court referenced the Supreme Court's order in PARVATHI KOLLUR AND ANOTHER V. STATE BY DIRECTORATE OF ENFORCEMENT, which reiterated the position that the proceedings under the PMLA should be quashed if the accused are acquitted of the predicate offences.

Conclusion:
The High Court concluded that the framing of charges against the petitioners under the PMLA was not sustainable in light of their acquittal in the predicate offences. The court emphasized that continuing the proceedings under the PMLA would result in an abuse of the process of law and miscarriage of justice. Consequently, the criminal petitions were allowed, and the impugned proceedings in Special C.C.No.303 of 2018 were quashed.