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TMI Blog2024 (3) TMI 926X X X X Extracts X X X X X X X X Extracts X X X X ..... orting Section 202 of Cr.PC, thus, the argument presented by the learned Senior Counsel for the petitioner, asserting that the issuance of summons violated Section 202 of Cr.PC is untenable. Can the petitioner, who is not charged with the predicate offence, still be prosecuted for the offence under the PMLA Act? - HELD THAT:- In the present case, the scheduled offences are under investigation by the jurisdictional police. Therefore, the petitioner can be subjected to prosecution under the PMLA, if it can be established that the petitioner has prima facie committed an offence under Section 3 of the PMLA. Does the investigation under the PMLA Act provide sufficient evidence to establish that the petitioner - accused No. 7 has prima facie committed the offence alleged? - HELD THAT:- There is no evidence to suggest that the petitioner, who is a payment gateway, had knowledge that the funds transferred to the merchant IDs of accused No. 5 were derived from criminal activity related to a scheduled offence, nor did they knowingly assist accused No. 5 in concealing or transferring illicit proceeds as clean money. Even if we accept the statements from the Director of accused No. 5 and the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, and abused them etc. 4. As the offences under Sections 384, 385, 419, 420 IPC are scheduled offences under the PMLA Act, the case was referred to the respondent herein. The respondent conducted an investigation, and submitted the complaint arraigning the petitioner as accused No. 7. 5. In the complaint, it is stated that the accused No. 7 is a payment gateway, and they were negligent in allowing the transactions in the name of the accused No. 5 without due diligence, and the said allegation is substantiated by the statement of the employee of the accused No. 7. 6. The learned Sessions Judge, after perusing the materials on record, took cognizance of the aforesaid offences and issued summons. 7. Sri C V Nagesh and Sri Sandesh J Chouta, the learned Senior Counsel representing the petitioner s counsel, Sri Abhishek Kumar, presented the following arguments: a) The allegation against the accused No. 7 is that without verification of the credibility of an entity viz., M/s. Jamnadas Morarji Finance Pvt. Ltd., (accused No. 5), allowed the transactions in the name of the accused No. 5 without due diligence. Therefore, in the absence of any allegation or material that the petitioner was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Ltd. And another vs- State of Punjab (Crl. A No. 749/2021). b) It is not a condition precedent that the investigation for a predicate offence should be completed, and a charge sheet to be filed for launching prosecution under the provisions of the Act, 2002. c) The petitioner, who claims to be an intermediary, can claim immunity for the offence under the IT Act as stated under Section 79 of the IT Act, and cannot claim immunity for the offences committed under the Act, 2002. d) Though, the petitioner is not accused of the predicate offences, the offence under Section 3 of the Act, 2002 is a standalone offence, and the material on record clearly establishes the involvement of the petitioner in commission of offence under this Act, 2002. In support, reliance is placed on the decision of the Hon ble Supreme Court in the case of Vijay Madanlal Choudhary vs- Union of India 2022 SCC OnLine SC 929 (para-295). e) The contention of the petitioner that the knowledge of proceeds of crime is not established against it, and therefore, launching of prosecution under the PMLA Act is impermissible lacks substance. The possession of proceeds of crime being key to the offence of money laundering, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommitted to it for trial. 16. Section 70 of the 2002 Act deals with offence by company and Explanation 2 to the said provision clarifies that a company can be prosecuted irrespective of whether the prosecution or conviction of any juridical person if contingent upon the prosecution or conviction of any individual. 17. Section 202 of Cr.PC pertains to the postponement of issuance of process, mandating that the Magistrate shall postpone the issuance of process against an accused, who is residing beyond his jurisdiction, and shall enquire himself or direct the investigation for the purpose of residing whether or not, there is sufficient ground for proceeding. 18. In the case of Pavana Dibbur vs- The Directorate of Enforcement in Crl.A No. 2779/2023 (DD 29.11.2023), the Hon'ble Supreme Court interpreted Section 3 of the Act, 2002 establishing that the offence under Section 3 can occur subsequent to the commission of a schedule offence. It was elucidated that an individual, regardless of his connection to the scheduled offence, is deemed guilty under Section 3, if he is knowingly assisting in concealing the proceeds of the crime or facilitating the use of proceeds. 19. In the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stitutes offence of money-laundering under Section 3 of the Act. 295. As aforesaid, in this backdrop the amendment Act 2 of 2013 came into being. Considering the purpose of the amended provisions and the experience of implementing/enforcement agencies, further changes became necessary to strengthen the mechanism regarding prevention of money-laundering. It is not right in assuming that the attachment of property (provisional) under the second proviso, as amended, has no link with the scheduled offence. Inasmuch as Section 5(1) envisages that such an action can be initiated only on the basis of material in possession of the authorised officer indicative of any person being in possession of proceeds of crime. The precondition for being proceeds of crime is that the property has been derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence. The sweep of Section 5(1) is not limited to the accused named in the criminal activity relating to a scheduled offence. It would apply to any person (not necessarily being accused in the scheduled offence), if he is involved in any process or activity connected with the proceeds of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so be terms as a co-accused because they would certainly receive legal fees from such accused who would have paid it from some money which is alleged to be the money transacted for illegal purpose by illegal means since that is the basic ingredient of PMLA. In that case, probably wherever such accused spent some money which may be for petrol, grocery, clothes, traveling and transportation etc., basically every money spent by such accused is to be termed as tainted money and everyone has to prove that they have not used such tainted money for any illegal act. However, it can certainly be argued by respondents that if such accused travel by the help of the tainted money so as to continue the offence and commit the offence then, such traveler helps the accused in doing his illegal activity. Though this may be an extreme example and not possible to be considered as such, the fact remains that the provisions of the Act and its interpretation of the respondent certainly lead to the such situation, which is described herein in above as an illustration. 24. The Hon ble Supreme Court in the case of Cheminova India Ltd. (supra) ruled that the Magistrate, while taking cognizance, need not rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on-banking financial company, and the money was laundered through the account of the accused No. 5, and the proceeds of the crime were found to be lying in the account of accused No. 5, which are the recovered loans and the subject matter of the investigation of the schedule offences by the jurisdictional police. iii) The petitioner accused No. 7 which is a payment gateway created merchant ID in the name of accused No. 5 without carrying out proper due diligence. While opening the account, it did not verify the genuineness of the persons applying for the accounts, and also did not verify whether the persons are linked to accused No. 7 or not, and whether they are the authorized signatory of the accused No. 5 or not. Despite failing the penny test and providing forged cheques by the unauthorized persons, the accused No. 7 continued operations in these merchant IDs. This fact has been admitted by Sri Amitabh Tiwari in his statement given under PMLA, 2002. Thus, the accused No. 7 has knowingly assisted the unauthorized person in creating the merchant IDs. and collecting and disbursing money to these merchant IDs. An amount of Rs. 86,44,049/- was earned by the accused No. 7 from the me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31. These elements form a basis to prosecute a person under Section 3 of the PMLA. 32. The allegations which is the basis for prosecuting the petitioner - accused No. 7 is as follows: i) The role of the accused No. 7 is to act as payment aggregator allowing merchants to accept payment without having direct integration with the bank/payment gateway. ii) Merchant ID was created in the name of accused No. 5 without proper due diligence by verifying the genuineness of the person applying for the account, and also whether they are authorized signatory of accused No. 5. Despite failing any penny test, and on the basis of forged cheque provided by the unauthorized person, knowingly assisted the unauthorized person in creating the merchant IDs, and collecting and disbursing the money to these merchant IDs, which is admitted by Sri Amitabh Tiwari, an employee of accused No. 7. 33. Sri Lalith Mohan Tayal, Director of accused No. 5 stated that the accused No. 5 has not entered into any agreement with accused No. 7, and the said three persons who created the merchant IDs are not associated with the company, and the accused No. 5 has not opened any account with any Bank or payment created. 34. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loyee of accused No. 7, at most, it indicates that accused No. 7 was negligent in setting up the merchant IDs in the name of accused No. 5. Intent is essential to constitute an offense under Section 3 of the PMLA. Therefore, the commission amount earned by accused No. 7 cannot be deemed a result of facilitating the illegal money-lending business of accused No. 5, as there is no evidence to establish that accused No. 7 had the intention to commit the crime under Section 3 of the PMLA. 37. When there is no prima facie material to substantiate that the Accused No. 7 knowingly facilitated the transfer of proceeds of the crime, no presumption can be drawn that the Petitioner was involved in money laundering as stated under Section 24, and the burden is on Petitioner to prove otherwise. 38. The aforesaid discussion clearly establishes that the complaint averments does not apparently satisfy the essential elements to constitute the offences alleged against the Petitioner, and, therefore the continuation of the criminal proceedings will be an abuse of the process of the law. Accordingly, I pass the following: ORDER i) The petition is allowed. ii) The impugned proceedings in Spl. CC No. 623 ..... 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