2024 (12) TMI 471 - AT - Money Laundering

Money Laundering - Provisional Attachment Order - consequences of the discharge of the accused from predicate offence - HELD THAT - The facts on record shows that the FIR was registered against Chhagan Bhujbal and his sons apart from the associates. The attachment of the properties was made even for the entities in light of the fact that they belong to the accused involved in the crime. The fact now remains that the accused to whom the entities belong have been discharged by the Competent Court and the order passed in the year 2021 has attained finality in absence of its challenge. Therefore the attachment of the properties has been questioned not only by the individual but also the entities belonging to them. There are substance in the argument of the appellant in reference to the facts of the case. The accused involved in this case have been discharged. Thus there are reasons to accept the argument of the learned counsel for the appellant. The respondent has contested the argument in reference to an order passed by the Special Court PMLA to deny the dropping of proceedings despite the discharge of the accused from the predicate offence - In the instant case the specific allegation exists against the accused for the commission of a predicate offence. The offence under the Act of 2002 is in reference to their alleged criminal acts pertaining to the scheduled offence where they have been discharged. Hence when the accused have been discharged from the scheduled offence the impugned orders cannot sustain. The orders of the provisional attachment so also its confirmation are set aside. The appeal is allowed.

Issues Involved:

1. Legality of the Provisional Attachment Order (PAO) under the Prevention of Money Laundering Act, 2002.
2. Status and impact of the discharge of accused persons in the predicate offence.
3. Applicability of the Supreme Court's judgments regarding the continuation of proceedings under the Prevention of Money Laundering Act when the predicate offence is dismissed.

Issue-wise Detailed Analysis:

1. Legality of the Provisional Attachment Order (PAO):

The appeal was filed by the Directorate of Enforcement challenging the order of the Adjudicating Authority, which set aside the Provisional Attachment Order (PAO) No. 15/2016. The Adjudicating Authority had concluded that the applicant was a bona fide purchaser before the issuance of the PAO and determined that the property in question could not be treated as proceeds of crime. Consequently, the PAO concerning the property was not confirmed. The Appellate Tribunal upheld this decision, emphasizing that the property acquired bona fide and legally could not be attached.

2. Status and Impact of the Discharge of Accused Persons:

The main accused individuals, against whom the FIR No. 35/2015 was registered for the predicate offence, were discharged by the Special Court, ACB, on 09.09.2021. This discharge was not challenged by the predicate agency, thus attaining finality. The Tribunal noted that the discharge of the accused from the predicate offence undermined the basis for the PAO, as the proceedings under the Prevention of Money Laundering Act are contingent upon the existence of a predicate offence. The Tribunal referenced the discharge order, which stated that several accused, including prominent figures, were discharged under section 227 of the Code of Criminal Procedure for offences under the Prevention of Corruption Act and the Indian Penal Code.

3. Applicability of Supreme Court's Judgments:

The Tribunal relied on the judgments of the Supreme Court, particularly in Vijay Madan Lal Chaudhary v. Union of India, which clarified that proceedings under the Prevention of Money Laundering Act must be predicated on a scheduled offence. If the accused are discharged from the predicate offence, the proceedings for money laundering cannot continue. The Tribunal reiterated that the offence under the Act of 2002 is dependent on illegal gain from a scheduled offence, and without such an offence, the attachment and confirmation orders cannot be sustained. The Tribunal also referenced the judgment in Parvathi Kollur & Anr. v. Directorate of Enforcement, which supported the view that proceedings cannot continue if the predicate offence is dismissed.

The Tribunal concluded that the accused having been discharged from the predicate offence, the PAO and its confirmation could not be upheld. The appeal was dismissed, with the Tribunal noting that if the discharge order is reversed, the appellant may file for revival of the appeal. The decision was pronounced in open court, with no order as to costs due to the peculiar circumstances of the case.

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