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TMI Blog2023 (4) TMI 1199X X X X Extracts X X X X X X X X Extracts X X X X ..... applicable in a case where the predicate offence itself has been closed on being compounded under Section 320 Cr.P.C. The Supreme Court in Vijay Madanlal Choudhary [ 2022 (7) TMI 1316 - SUPREME COURT ] dealt with the expression proceeds of crime and observed that it is only such property which is derived or obtained directly or indirectly as a result of criminal activity relating to a scheduled offence that can be regarded as proceeds of crime. Authorities under PMLA cannot resort to action against any person for money laundering on an assumption that the property recovered by them must be proceeds of crime and that a scheduled offence has been committed, unless the same is registered with the jurisdictional police or pending inquiry before the competent forum. This decision was examined in detail by a Single Bench of this Court in M/S. JAGATI PUBLICATION LTD VERSUS ENFORCEMENT DIRECTORATE [ 2022 (9) TMI 1448 - TELANGANA HIGH COURT] . After analysing the above decision of the Supreme Court, this Court held that the expression proceeds of crime which is the very essence of the offence of money laundering needs to be construed strictly. Only such property which is derived o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttachment. 4. As per the case of the appellants as projected in the writ affidavit, appellant No. 1 was arrayed as accused No. 1 in F.I.R.No.369 of 2009 registered before the Patancheru Police Station under Sections 120B, 420, 423, 468 and 471 of the Indian Penal Code, 1860 (IPC). Following investigation carried out by the police, charge sheet was filed in the Court of Additional First Class Judicial Magistrate, Sangareddy, which upon cognizance was registered as C.C.No. 319 of 2010. Following registration of the criminal case, ECIR/02/HZO/2010/1915 was registered under the Prevention of Money Laundering Act, 2002 (briefly, the PMLA hereinafter) by the Enforcement Directorate. Thereafter, provisional attachment order No. 06/2016 dated 30.12.2016 was passed by respondent No. 2 provisionally attaching the following properties of the appellants: (i) 80 guntas of land Sy. No. 151/A, registered vide document No. 5196/2009, dated 30.06.2009 with SRO, Sangareddy (R.O) in the name of Shri Manturi Shashi Kumar. (ii) 19 guntas of land at Sy. No. 122/A, registered vide document No. 1019/2015, dated 26.02.2015 with SRO, Sadasivpet in the name of Smt. Manturi Swapna, W/o. Shri Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of PMLA. 9. Learned Single Judge after considering the rival pleadings and submissions made at the Bar observed that in the present case, C.C. No. 319 of 2010 has ended in acquittal by way of compromise and not on merit. If exoneration in adjudication proceedings is on technical grounds and not on merit, prosecution may continue. Declining to grant any relief to the appellants, learned Single Judge however granted liberty to the appellants to approach the designated court for release of property by way of an application under Rule 3-A of the Prevention of Money Laundering (Restoration of Property) Rules, 2016, with the further observation that it was for the designated court to take a decision in the matter. Consequently, the writ petition came to be dismissed vide the order dated 17.10.2022. 10. Aggrieved, the present appeal has been filed. 11. On 16.02.2023 this Court while issuing notice, passed the following order: Heard Mr. Vedula Srinivas, learned Senior Counsel for the appellants. Appellants had filed the related writ petition for setting aside of the attachment of properties following closure of C.C.No. 319 of 2010. Learned Single Judge held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d (7) of PMLA, it is the Special Court which has the mandate to consider an application for release of attached property. He further submits that appellants have filed a criminal petition before this Court under Section 482 Cr.P.C, being Crl.P.No. 13439 of 2018, for quashing of proceedings in S.C. No. 342 of 2018. Instead of pursuing the criminal petition, appellants have filed the related writ petition which was rightly not entertained by the learned Single Judge. 14. Submissions made by learned counsel for the parties have received the due consideration of the Court. 15. Facts in the present appeal lie within a narrow compass. As already noted above, appellant No. 1 was an accused in the criminal case for offences which are considered as predicate offences under PMLA. In view thereof, a case was registered under PMLA following which the properties mentioned above were provisionally attached. Subsequently, the provisional attachment was confirmed by the adjudicating authority whereafter complaint was lodged before the designated court based on which S.C.No. 342 of 2018 has been registered. 16. In the meanwhile, in view of the settlement arrived at between the de facto com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an, any property derived or obtained directly or indirectly by any person as a result of criminal activity relating to a scheduled offence or the value of any such property or where such property is taken or held outside the country, then the property equivalent in value held with the country or abroad. As per the Explanation, it has been clarified that proceeds of crime include property not only derived or obtained from the scheduled offence but also any property which may directly or indirectly be derived or obtained as a result of any criminal activity related to the scheduled offence. 21. Thus the expression proceeds of crime is intrinsically related to a scheduled offence. It must be derived as a result of criminal activity relatable to a scheduled offence. 22. Before we deal with the decision of the Supreme Court in Vijay Madanlal Choudhary v. Union of India 2022 SCC OnLine SC 929 , we may briefly advert to the Prevention of Money Laundering (Restoration of Property) Rules, 2016, on which much reliance has been placed by Mr. V.Ramakrishna Reddy, learned counsel for the Enforcement Directorate. From the title of the said rules itself it is evident that the said rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmission of scheduled offence attached by the investigating agency dealing with that offence, cannot be wholly or partly 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ains as of now. 26. In the said decision, Supreme Court also posed the question as to whether the offence under Section 3 is a standalone offence? Answering this question, Supreme Court held that 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. Authorised officer under PMLA gets the authority to prosecute any person for the offence of money laundering only if there exists proceeds of crime within the meaning of Section 2(1)(u) of PMLA. Even though the PMLA is a complete code in itself, it is only in respect of matters connected with the offence of money laundering and for that, existence of proceeds of crime within the meaning of Section 2(1)(u) of PMLA is quintessential. Absent existence of proceeds of crime, the authorities under PMLA cannot step in or initiate any prosecution. Supreme Court held as follows: 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nizable offence (NC case), as the case may be. If the offence so reported is a scheduled offence, only in that eventuality, the property recovered by the authorised officer would partake the colour of proceeds of crime under Section 2(1)(u) of the 2002 Act, enabling him to take further action under the Act in that regard. 283. Even though, the 2002 Act is a complete Code in itself, it is only in respect of matters connected with offence of money-laundering, and for that, existence of proceeds 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 fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds of crime. Thereafter, this Court held that if a person is finally discharged/acquitted of the scheduled offence or the criminal case against him is quashed by a court of competent jurisdiction, there can be no offence of money laundering against him or anyone claiming such property being the property linked to the stated scheduled offence through him. Summing up the position, Single Bench of this Court held 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. 30. Adverting to the facts of the present case, it is evident that upon closure of the criminal case and acquittal of appellant No. 1 on discharge, there is no scheduled offence against the appellants. In the absence of any crime, question of any proceeds of crime would not arise. 31. We are, therefore, of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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