2024 (10) TMI 60 - HC - Money Laundering

Money Laundering - proceeds of crime - scheduled offences - vicarious liability on the companies - attachment of properties - HELD THAT -The value of any such property or the property equivalent in value held within the country or abroad is also to be construed as proceeds of crime . Therefore, the circumstances indicated under Section 2(1)(u) of PMLA are that any property derived by a person, in result of criminal activity relating to a scheduled offence can be treated as proceeds of crime. The value of any such property or if such property is taken or held outside the country, then the property equivalent in value held within the country can be construed as proceeds of crime. Therefore, some properties, in result of criminal activity, is held outside the country, then the property equivalent in value held within the country can be attached by the Enforcement Directorate. The very object of the provision would be to protect the economic interest of the country. Therefore, the petitioners cannot take a ground that the property attached were purchased prior to the scheduled offence between the years 2010 and 2017. Explanation (2) to Section 70 of PMLA clarifies that a company may be prosecuted, notwithstanding, whether the prosecution or conviction of any legal juridical person shall be contingent on the prosecution or conviction of any individual. Therefore, it is expressly clarified under Section 70 of PMLA that a company may be prosecuted. Thus, the ground taken by the petitioners that the company cannot be held vicariously liable runs counter to Section 70 of PMLA and stands rejected. The merits involved in the Provisional Attachment Order need not be adjudicated in the present petitions filed under Section 482 Cr.P.C. - this Court has no hesitation in arriving at a conclusion that the respondent have made out a prima facie case for prosecuting the individual persons and the companies under Section 70 of PMLA. Thus, the petitioners have to establish their defence on merits and based on documents and evidences available on record. Petition dismissed.

Summary

Issues:
1. Quashing of complaint under PMLA in Special CC. No.2 of 2021
2. Vicarious liability of companies for alleged offences
3. Properties attached under PMLA purchased before alleged commission of scheduled offence
4. Interpretation of "Proceeds of Crime" under Section 2(1)(u) of PMLA
5. Jurisdiction of Appellate Tribunal under Section 26 of PMLA
6. Prosecution of companies under PMLA
7. Merits of Provisional Attachment Order
8. Prima facie case for prosecuting individuals and companies under PMLA

Analysis:

The petitioners sought to quash the complaint under PMLA in Special CC. No.2 of 2021, arguing that companies cannot be vicariously liable for alleged offences committed by individuals. They contended that properties attached under PMLA were purchased before the scheduled offence, thus not linked to proceeds of crime. The petitioners relied on legal precedents to support their arguments, emphasizing the definition of "Proceeds of Crime" under Section 2(1)(u) of PMLA.

The respondents opposed, asserting that money laundering was identified, and the Provisional Attachment Order was confirmed based on scheduled offences. They argued that the petitioners should approach the Appellate Tribunal under Section 26 of PMLA. The respondents distinguished legal precedents cited by the petitioners, emphasizing the applicability of Sections 2(1)(u) and 3 of PMLA in the present case.

The Court analyzed Section 2(1)(u) of PMLA, clarifying that properties derived from criminal activity can be treated as proceeds of crime, even if held within the country. The Court highlighted that companies can be prosecuted under PMLA, rejecting the argument against vicarious liability. It emphasized the need to protect the economic interests of the country by attaching properties acquired through criminal activities held outside India.

Regarding the Provisional Attachment Order, the Court directed aggrieved parties to approach the Appellate Tribunal under Section 26 of PMLA. It concluded that a prima facie case existed for prosecuting individuals and companies under PMLA. The Court dismissed the petitions, instructing the Trial Court to proceed uninfluenced by its observations, with no costs awarded.