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TMI Blog2022 (9) TMI 1448X X X X Extracts X X X X X X X X Extracts X X X X ..... ceeds of crime which is the very essence of the offence of money laundering needs to be construed strictly. Only such property which is derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence can be regarded as proceeds of crime. On the above basis, Supreme Court has held that in the event the person named in the criminal activity relating to a scheduled offence is finally absolved by a Court of competent jurisdiction either on account of discharge or acquittal or quashing of the criminal case (scheduled offence), there can be no action for money laundering against such a person or a person claiming through him in relation to the property linked to the stated scheduled offence. No other view is possible - Supreme Court expressed the view that it is unfathomable as to how the action of confiscation can be resorted to in respect of property in the event of acquittal or discharge of the person in connection with the scheduled offence. The above decision of the Supreme Court has now cleared the legal position. It succinctly sums up that offence under Section 3 is dependent on the wrongful and illegal gain of property as a result of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ges is that existence of scheduled offence and proceeds of crime being the property derived or obtained as a result of criminal activity relating to the scheduled offence are sine qua non for not only initiating prosecution under PMLA, but also for continuation thereof. In the absence of these two conditions, the Special Court dealing with the offence under PMLA would not be competent to pronounce on the guilt or otherwise of the person concerned accused of money laundering. Petition allowed. - THE HON BLE THE CHIEF JUSTICE UJJAL BHUYAN FOR THE PETITIONER : ADVOCATE N NAVEEN KUMAR FOR THE RESPONDENT : ADVOCATE ASSISTANT SOLICITOR GENERAL OF INDIA ORDER: Heard Mr. S.Niranjan Reddy, learned Senior Counsel for Mr. N.Naveen Kumar, learned counsel for the petitioner and Mr. T.Surya Karan Reddy, learned Additional Solicitor General of India for Mr. B.Narasimha Sarma, learned counsel for the respondent. 2. This criminal petition has been filed under Section 482 of the Code of Criminal Procedure, 1973 (briefly CrPC hereinafter) seeking a correction in the appropriate procedure to be followed while conducting enquiry and trial of offences classified as sched ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng for the petitioner has referred to the order of the Special Court dated 11.01.2021 and submits that Special Court was not justified in holding that the offence of money laundering is a standalone offence and shall precede the trial of predicate/scheduled offence. He has referred to a Single Bench decision of this Court in Madhu Koneru v. Directorate of Enforcement [2021 SCC OnLine TS 646] , more particularly to paragraph 22 thereof, to contend that once the charge sheet in respect of scheduled offences is quashed, there cannot exist anymore scheduled offence for the purpose of prosecution under Sections 3 and 4 of PMLA. He has also referred to a Single Bench decision of this Court dated 10.08.2021 passed in Crl.P.No.1073 of 2021 and batch and submits that reason given in the said order that offence of money laundering is a standalone offence; is independent of the scheduled offence; and consequently it can proceed independently of the trial for the scheduled offence is not based on sound logic. Submitting that the principle of res judicata is not applicable in criminal proceedings, he contends that this Court can pass appropriate order without being bound by the said order. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case until a formal order of confiscation is passed is not warranted as the provision in Section 8(4) of PMLA can be resorted to only by way of exception and not as a rule. 13. Responding to the above submissions, learned Additional Solicitor General of India contends that application of the decision of the Supreme Court in Vijay Madanlal Choudhary (supra) would not be necessary in the present batch of cases as there is already a decision of a Coordinate Bench holding that there is no infirmity in the view taken by the Special Court that prosecution under PMLA can proceed ahead of prosecution for scheduled offence . For the same group of cases, there cannot be two sets of different opinions rendered by this Court. It would lead to an incongruous situation. 14. However, learned Senior Counsel for the petitioner submits that the earlier decision of the Coordinate Bench in Crl.P.No.1073 of 2021 and batch would no longer be the correct law in view of the decision rendered by the Supreme Court in Vijay Madanlal Choudhary (supra). Special Court is bound to follow the decision of the Supreme Court in Vijay Madanlal Choudhary (supra). 15. Submissions made by learned counsel for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a stand-alone offence, hearing on charges may be taken up without any delay by considering the gravity of offence as PMLA is a special legislation. 18.1. However, this was objected to by learned counsel for the petitioner. On behalf of the petitioner, the following contentions were raised: (a) The scheduled offence must result in a profit or proceeds of a crime, proceeds of crime must be laundered and crime must be resulted in money laundering. (b) Ideal way is that the predicate offence has to be tried first and complainant/ED never said that the scheduled offence has to be tried independently and earlier thereto ED said that it can be tried simultaneously. (c) Without a conviction in the scheduled offence i.e. C.C.No.26/2013 proceeds of crime will not arise and PMLA case i.e. S.C.No.1/2018 cannot be tried first and independently. (d) Company running into losses is not money laundering and one of the allegations in the complaint touch the same. (e) Simultaneous means whether both have to be heard together or one be heard in immediate succession of the other i.e. C.C.No.26/2013 and S.C.No.1/2018 which qualify for simultaneous hearing. In predica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial under scheduled offence i.e. C.C.No.26/2013? 3) If the answer is in the negative, whether scheduled offence (C.C.No.26/2013) must precede the trial in S.C.No.1/2018 or both the offences i.e. scheduled offence and money laundering offence shall be tried simultaneously? 4) To what relief? 18.4. After referring to several decisions of the Supreme Court and High Courts, learned Special Court observed that it was 13 trying both the predicate/scheduled offences and the offence of money laundering and thereafter concluded that Prevention of Corruption Act, 1988 and PMLA are two different enactments. They decide the controversies that arise under the respective Acts; one authority cannot interfere with the functioning of the other authority under the different Acts; and PMLA has overriding effect over other law. Special Court held that the offence of money laundering is a standalone offence. Scheduled offence cannot precede the offence under money laundering nor can be tried simultaneously. Therefore, the offence of money laundering shall precede the trial of predicate/scheduled offence. It was held as under: 32. Prevention of Corruption Act, 1988 and the Preventio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctly or indirectly attempted to indulge or knowingly assisted or knowingly is a party or is actually involved in one or more of the following processes or activities connected with proceeds of crime, namely:- (a) concealment; or (b) possession; or (c) acquisition; or (d) use; or (e) projecting as untainted property; or (f) claiming as untainted property, in any manner whatsoever; (ii) the process or activity connected with proceeds of crime is a continuing activity and continues till such time a person is directly or indirectly enjoying the proceeds of crime by its concealment or possession or acquisition or use or projecting it as untainted property or claiming it as untainted property in any manner whatsoever. 19.1. Thus, from the above, it is deducible that whoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property shall be guilty of committing the offence of money laundering. The Explanation clarifies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... involved in such offences is one crore rupees or more; or offences specified under Part C of the Schedule. Schedule means the Schedule to the PMLA (Section 2(1)(x)). 22. Section 8 deals with adjudication into complaint that any person has committed an offence under Section 3 or is in possession of proceeds of crime. After following the procedure laid down in Section 8, the adjudicating authority may record a finding that all or any of the properties mentioned in the show cause notice or involved in money laundering which may lead to attachment of the property and later on confiscation. 23. We may now refer to Section 43 of PMLA. Section 43 deals with Special Courts and reads as under: 43. Special Courts:- (1) The Central Government, in consultation with the Chief Justice of the High Court, shall, for trial of offence punishable under Section 4, by notification, designate one or more Courts of Session as Special Court or Special Courts for such area or areas or for such case or class or group of cases as may be specified in the notification. Explanation.-In this sub-section, High Court means the High Court of the State in which a Sessions Court designated as Speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Explanation.--For the removal of doubts, it is clarified that,-- (i) the jurisdiction of the Special Court while dealing with the offence under this Act, during investigation, enquiry or trial under this Act, shall not be dependent upon any orders passed in respect of the scheduled offence, and the trial of both sets of offences by the same court shall not be construed as joint trial; (ii) the complaint shall be deemed to include any subsequent complaint in respect of further investigation that may be conducted to bring any further evidence, oral or documentary, against any accused person involved in respect of the offence, for which complaint has already been filed, whether named in the original complaint or not. (2) Nothing contained in this section shall be deemed to affect the special powers of the High Court regarding bail under section 439 of the Code of Criminal Procedure, 1973 (2 of 1974) and the High Court may exercise such powers including the power under clause (b) of sub-section (1) of that section as if the reference to Magistrate in that section includes also a reference to a Special Court designated under section 43. 24.1. Sub-section (1) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same Special Court trying the offence of money laundering. This has a purpose which we will dilate at a later stage. 25. Before we analyse the basic thrust of the contention of learned Senior Counsel for the petitioner vis- -vis Section 44 of PMLA, more particularly the Explanation thereto, it would be apposite to briefly dilate on the earlier decision of this Court rendered in Crl.P.No.1073 of 2021 and batch, decided on 10.08.2021. Learned Single Judge framed amongst others the following two questions: 1. Whether hearing on charges and trial proceedings can go on in subject Sessions Cases registered for the offences under PML Act before commencement of hearing on charges and trial proceedings in the subject Calendar Cases registered for the predicate/scheduled offences? 2. Whether trial proceedings of predicate/scheduled offences and offences under PML Act be conducted simultaneously? 25.1. Learned Single Judge adverted to Section 44(1)(d) of PMLA and thereafter held that trial of money laundering offence is an independent trial and need not get interfered with the trial of scheduled offence. Offence of money laundering contemplated under Section 3 of PMLA i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly regarded as proceeds of crime within the meaning of Section 2(1)(u) of the 2002 Act so long as the whole or some portion of the property has been derived or obtained by any person as a result of criminal activity relating to the stated scheduled offence. To be proceeds of crime, therefore, the property must be derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence. To put it differently, the vehicle used in commission of scheduled offence may be attached as property in the concerned case (crime), it may still not be proceeds of crime within the meaning of Section 2(1)(u) of the 2002 Act. Similarly, possession of unaccounted property acquired by legal means may be actionable for tax violation and yet, will not be regarded as proceeds of crime unless the concerned tax legislation prescribes such violation as an offence and such offence is included in the Schedule of the 2002 Act. For being regarded as proceeds of crime, the property associated with the scheduled offence must have been derived or obtained by a person as a result of criminal activity relating to the concerned scheduled offence. This distinction must be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or money laundering against such a person or a person claiming through him in relation to the property linked to the stated scheduled offence. No other view is possible. 27.3. Thereafter, analyzing various provisions of PMLA, in paragraph 281 of the report, the Supreme Court posed the question as to whether the offence under Section 3 is a standalone offence? Supreme Court answered the question in the following manner: 281. The next question is : whether the offence under Section 3 is a standalone offence? Indeed, it is dependent on the wrongful and illegal gain of property as a result of criminal activity relating to a scheduled offence. Nevertheless, it is concerning the process or activity connected with such property, which constitutes offence of money-laundering. The property must qualify the definition of proceeds of crime under Section 2(1)(u) of the 2002 Act. As observed earlier, all or whole of the crime property linked to scheduled offence need not be regarded as proceeds of crime, but all properties qualifying the definition of proceeds of crime under Section 2(1)(u) will necessarily be crime properties. Indeed, in the event of acquittal of the person concerne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eds of crime within the meaning of Section 2(1)(u) of the Act is quintessential. Absent existence of proceeds of crime, as aforesaid, the authorities under the 2002 Act cannot step in or initiate any prosecution. 284. In other words, the Authority under the 2002 Act, is to prosecute a person for offence of money-laundering only if it has reason to believe, which is required to be recorded in writing that the person is in possession of proceeds of crime . Only if that belief is further supported by tangible and credible evidence indicative of involvement of the person concerned in any process or activity connected with the proceeds of crime, action under the Act can be taken forward for attachment and confiscation of proceeds of crime and until vesting thereof in the Central Government, such process initiated would be a standalone process. 28. Supreme Court has thus taken the view that the offence under Section 3 is dependent on the wrongful and illegal gain of property as a result of criminal activity relating to a scheduled offence. The property must qualify the definition of proceeds of crime under Section 2(1)(u) of PMLA. All or whole of the crime property linked t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the property held by such person. Paragraphs 306 and 307 of the report are extracted as under: 306. The learned counsel appearing for the Union of India, had invited our attention to the recommendations made by FATF in 2003 and 2012 to justify the provision under consideration. The fact that non-conviction based confiscation model is permissible, it does not warrant an extreme and drastic action of physical dispossession of the person from the property in every case which can be industrial/ commercial/ business and also residential property, until a formal order of confiscation is passed under Section 8(5) or 8(7) of the 2002 Act. As demonstrated earlier, it is possible that the Special Court in the trial concerning money-laundering offence may eventually decide the issue in favour of the person in possession of the property as not being proceeds of crime or for any other valid ground. Before such order is passed by the Special Court, it would be a case of serious miscarriage of justice, if not abuse of process to take physical possession of the property held by such person. Further, it would serve no purpose by hastening the process of taking possession of the property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld then be paradoxical to still regard such property as proceeds of crime despite acquittal by a Court of competent jurisdiction. 31. Finally Supreme Court summarized its conclusions on the various points. Relevant for our deliberation is the conclusion reached by the Supreme Court in paragraph 467(v)(d) which is extracted as follows: 467. In the light of the above analysis, we now proceed to summarise our conclusion on seminal points in issue in the following terms:- *** *** *** *** (v) (d) The offence under Section 3 of the 2002 Act 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 Authorities under the 2002 Act cannot prosecute any person on notional basis or on the assumption that a 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. If the person is finally discharged/acquitted of the scheduled offence or the criminal case against him is qua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the part of the Court which had taken cognizance of the scheduled offence to commit the same to the Special Court which had taken cognizance of the complaint of money laundering once an application is filed. There is no discretion on the Court which had taken cognizance of the scheduled offence. It must mandatorily commit the trial of scheduled offence to the Special Court trying the offence of money laundering. This is to ensure that it is the same Court which tries both the offences so as to rule out any contrary or conflicting decisions leading to a paradoxical situation. It is in this context that the Explanation which is clarificatory in nature needs to be understood. Certainly, the two trials cannot be construed as joint trial. These are separate trials and will proceed separately. The investigation, enquiry or trial under PMLA would not be dependent upon any order in respect of the scheduled offence. An order as is understood in CrPC is not a conclusive pronouncement at the end of the trial. Section 235 of CrPC says that after hearing arguments and point of law, the judge shall give a judgment in the case, which may either be of acquittal or of conviction. It is on th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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