2023 (2) TMI 948 - HC - Money Laundering

Provisional attachment order - Money Laundering - scheduled offences or not - Petitioner was not arrayed as an accused and was merely a lender to M/s Omkar Realtors and Developers Pvt. Ltd. HELD THAT - A perusal of the impugned PAO in the present case shows that the origin of the said PAO is an FIR No. 109/2020 which was registered in the PS City Chowk, Aurangabad, Maharashtra under Sections 420, 406 and 34 of the Indian Penal Code, 1860 - A perusal of the order dated 18th October, 2022 passed by the Special Court under PMLA, Greater Bombay shows that M/s Omkar Realtors and Developers Private Limited which was arrayed as A-2, to whom the Petitioner had extended credit facility for the construction of the Worli Project , has also been discharged. Owing to this connection, the assets of the Petitioner were attached. The Supreme Court in Vijay Madanlal Choudhary Ors. v. UOI Ors., 2022 (7) TMI 1316 - SUPREME COURT , has categorically held that when the accused person has been discharged/acquitted in the scheduled offence or the criminal case against the accused person has been quashed, there can be no offence of money laundering against the accused person. Further, in the said judgement it has also been stated that no offence of money laundering can be made out against any person having property linked to the person accused in the scheduled offence. Therefore, in the event that the accused person is discharged in the PMLA case itself, the impugned PAO and the attachment of such property linked to the accused person, from the said PAO, deserves to be quashed. The Supreme Court in Indrani Patnaik Anr. v. Enforcement Directorate and Ors. 2022 (11) TMI 1311 - SUPREME COURT has recently held that there cannot be any prosecution in relation to an offence for which the accused person has already been discharged. This position of law in terms of proceedings under the PMLA has been recently considered by this Court in EMTA Coal Limited and Ors. v. The Deputy Director of Directorate of Enforcement, 2023 (1) TMI 694 - DELHI HIGH COURT . In the said judgement it was held that once the closure report in the offences under respective FIRs has been filed, no criminality is ascertainable and the respective PAOs as well as the ECIRs are liable to be quashed. After hearing all the ld. Counsels for the parties and considering the judgements of the Supreme Court as also this Court, the Court is clearly of the opinion that the impugned PAOs against the properties of Piramal cannot continue as the Petitioner was not arrayed as an accused and was merely a lender to M/s Omkar Realtors and Developers Pvt. Ltd. (ORDPL). Accordingly, the flats which were attached by the ED, as extracted in Table No. 9 extracted above are thus, released. Petition disposed off.

Summary

Issues Involved:
1. Legality of the Provisional Attachment Order (PAO) under the Prevention of Money Laundering Act (PMLA).
2. Discharge of the accused in the scheduled offence and its impact on the PAO.
3. Legal precedents and their application to the case.

Detailed Analysis:

1. Legality of the Provisional Attachment Order (PAO) under the Prevention of Money Laundering Act (PMLA):

The petitioner challenged the Provisional Attachment Order (PAO) dated 14th January 2022, issued by the Directorate of Enforcement (ED) under Section 5 of the PMLA. The PAO was based on FIR No. 109/2020 registered at City Chowk Police Station, Aurangabad, under Sections 420, 406, and 34 of the Indian Penal Code, 1860. The impugned PAO attached properties mortgaged with the petitioner, which were part of the Omkar 1973 Project financed by Yes Bank Ltd. and Piramal Realty Pvt. Ltd. The attachment was linked to the alleged proceeds of crime amounting to Rs. 330 crores used for the construction of Towers A, B, and C in the Omkar 1973 Worli project.

2. Discharge of the accused in the scheduled offence and its impact on the PAO:

The petitioner argued that the closure report filed by the Mumbai Police had been accepted by the trial court, and the case instituted by the ED had also been closed. The petitioner was merely a lender to M/s Omkar Realtors and Developers Pvt. Ltd. (ORDPL) and had no involvement in the alleged money laundering activities. The Special Court under PMLA, Greater Bombay, had discharged ORDPL, which was arrayed as A-2, from the case. The court noted that the term "Proceeds of Crime" under the PMLA is based on criminal activity related to a scheduled offence. When the scheduled offence is not in existence, there cannot be any tainted money, and without it, there is nothing to be laundered.

3. Legal precedents and their application to the case:

The Supreme Court in Vijay Madanlal Choudhary & Ors. v. UOI & Ors., 2022 SCC OnLine SC 929, held that if the accused person is discharged/acquitted in the scheduled offence, there can be no offence of money laundering against them or any person having property linked to the accused. The court emphasized that the offence under Section 3 of the PMLA is dependent on the illegal gain of property resulting from criminal activity related to a scheduled offence. This legal position was affirmed in subsequent cases such as Parvathi Kollur v. Enforcement Directorate, Adjudicating Authority v. Shri Ajay Kumar Gupta & Ors., and Directorate of Enforcement v. M/s Obulapuram Mining Company Pvt. Ltd. The Delhi High Court in Harish Fabiani and Ors. v. Enforcement of Directorate and Ors. reiterated that no action under PMLA can be taken unless there is a subsisting criminal complaint or inquiry related to a scheduled offence.

Conclusion:

After considering the submissions and the legal precedents, the court concluded that the impugned PAO against the properties of Piramal could not continue as the petitioner was not an accused but merely a lender to ORDPL. The attached flats were ordered to be released. The court granted liberty to the ED to seek revival of the PAO if there is any change in circumstances and allowed the petitioner to move an appropriate application if the properties are not released. The petition was disposed of with these observations.