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2023 (1) TMI 694 - HC - Money LaunderingMoney Laundering - provisional attachment order - scheduled/ predicate offence - proceeds of crime - Petitioners have been discharged in the scheduled/ predicate offence - It is submitted by petitioner that a closure report filed by the CBI has been accepted by the Trial Court in respect of the predicate offence and no criminal charges are now pending against the Petitioners - HELD THAT - A perusal of the orders passed in Parvathi Kollur 2022 (8) TMI 1256 - SC ORDER leaves no matter of doubt in the mind of the Court that if there is an acquittal/ discharge or a closure report has been filed in the predicate offence, the ECIR would not stand and the same would be liable to be quashed. For example, in ADJUDICATING AUTHORITY (PMLA) AND ORS. VERSUS SHRI AJAY KUMAR GUPTA ORS. 2023 (1) TMI 681 - SC ORDER , there was acquittal in the predicate offence. In view of the said fact, the Supreme Court was of the view that the appeal filed by the Adjudicating Authority (PMLA) would not survive. Similarly, in DIRECTORATE OF ENFORCEMENT VERSUS M/S OBULAPURAM MINING COMPANY PVT LTD 2023 (1) TMI 682 - SC ORDER , closure report had been accepted by the Trial Court qua the predicate offence. The Supreme Court was again of the view that proceedings under PMLA will not survive and the Court proceeded to quash the ECIR. In the facts of the present case, the Trial Court, in the complaint case which was pending before it, has clearly come to a conclusion that the closure report deserves to be accepted and no criminality is ascertainable as the documents in respect thereof were not available - the impugned attachment orders dated 14th February, 2022 and 20th June, 2022 as also the ECIRs are quashed. Petition allowed.
Issues Involved:
1. Challenge to provisional attachment orders issued under the Prevention of Money Laundering Act (PMLA). 2. Impact of the closure report filed by the Central Bureau of Investigation (CBI) on the provisional attachment orders. 3. Legal precedents regarding the continuation of attachment orders post-discharge or acquittal in predicate offenses. Detailed Analysis: Issue 1: Challenge to Provisional Attachment Orders The petitioners challenged the provisional attachment orders dated 14th February 2022 and 20th June 2022, issued by the Directorate of Enforcement (ED) under Section 5 of the PMLA. The orders attached various properties and assets belonging to the petitioners. The attachment orders were based on Enforcement Case Information Reports (ECIRs) registered after an FIR was filed by the CBI under various sections of the IPC and the Prevention of Corruption Act, 1988. Issue 2: Impact of the Closure Report by CBI The CBI filed a closure report on 8th January 2021, which was accepted by the Trial Court on 25th July 2022. The Trial Court concluded that no prima facie evidence could be gathered to prove the commission of offenses under the IPC and the Prevention of Corruption Act. The Court noted significant handicaps during the investigation, including missing documents and the inability to ascertain any criminality in the allocation of coal blocks. Consequently, the Trial Court accepted the closure report, effectively discharging the petitioners from the predicate offenses. Issue 3: Legal Precedents on Continuation of Attachment Orders The petitioners argued that, based on recent Supreme Court and Delhi High Court decisions, the provisional attachment orders should not survive since the predicate offenses had been closed. They cited the Supreme Court's judgment in Vijay Madanlal Choudhary v. Union of India, which held that the existence of a predicate offense is a necessary precondition for any assets to be considered as "proceeds of crime" under Section 3 of the PMLA. The Supreme Court's decision emphasized that if a person is discharged or acquitted of the predicate offense, there can be no offense of money laundering against them. The petitioners also referred to other Supreme Court judgments, including: - Parvathi Kollur v. Enforcement Directorate - Adjudicating Authority v. Shri Ajay Kumar Gupta & Ors. - Directorate of Enforcement v. M/s Obulapuram Mining Company Pvt. Ltd. These judgments reiterated that the closure of proceedings under the PMLA is the natural consequence of an acquittal or discharge in the predicate offense. Court's Analysis and Conclusion The Court analyzed the arguments and the relevant legal precedents. It noted that the Supreme Court in Vijay Madanlal Choudhary had categorically stated that for the existence of "proceeds of crime" under Section 2(1)(u) of the PMLA, the existence of a criminal complaint pending inquiry or trial is necessary. The Court concluded that since the Trial Court had accepted the closure report and no criminal charges were pending against the petitioners, the provisional attachment orders could not continue. The Court also referenced the Delhi High Court's judgment in Prakash Industries v. Directorate of Enforcement, which held that the offense of money laundering cannot be a standalone offense and is dependent on the commission of a predicate offense. In light of the settled legal position and the acceptance of the closure report by the Trial Court, the Court quashed the impugned attachment orders dated 14th February 2022 and 20th June 2022, as well as the ECIRs. Conclusion All petitions were allowed, and all pending applications were disposed of. The Court did not order any costs.
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