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TMI Blog2023 (4) TMI 1315X X X X Extracts X X X X X X X X Extracts X X X X ..... , projection of the same as untainted property. The proceeds of crime allude to any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence. It may also include the value of any such property or in cases where such property is taken or held outside the country, then the property equivalent in value held within the country or abroad. The Explanation to Section 2(1)(u) of PMLA, 2002 further clarifies that the proceeds of crime would 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 consequence of any criminal activity pertaining to the scheduled offence. In Nik Nish Retail Ltd. v. Assistant Director, Enforcement Directorate [ 2022 (11) TMI 1280 - CALCUTTA HIGH COURT ], the Calcutta High Court, while dealing with a case where the FIR in respect of the predicate offence was quashed on the basis of settlement has held that the proceedings initiated under PMLA, 2002 provisions cannot stand in isolation in the absence of any scheduled offence. This Court, in the case of Prakash Industries Ltd. v. Directorate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c. Appeal (PMLA) 14/2023] is stated to have been allegedly involved in an illegal racket of kidney transplantation and had allegedly committed various offences including the offences punishable under Section 307 of the Indian Penal Code, 1860 ["IPC"] and Sections 18, 19 and 20 of the Transplantation of Human Organs Act, 1994 ["TOHO Act, 1994"]. Since the alleged offences constituted a scheduled offence under PMLA, 2002, the PAO was passed against the appellant-Jeevan Kumar. 3. It is also alleged that the money belonging to the appellant- Jeevan Kumar was invested into the properties developed by the appellant-Rajiv Channa [in Misc. Appeal (PMLA) 13/2023] albeit he was not made an accused in the predicate offence i.e., the FIR/ Regular Case ("RC") registered by the CBI. Since the appellant-Rajiv Channa was alleged to have been involved in projecting the income of the appellant-Jeevan Kumar as untainted property, it led to the passing of the PAO. 4. In Misc. Appeal (PMLA) 15/2023, the appellant-M/S N.R. Merchant Pvt. Ltd. is alleged to have purchased the subject property being Plot No. 77, allotted to M/s Anchal Paper (P) Ltd. / Shri. Raghuvinder Singh in Eco Tech, Greater NOIDA (U ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 1994. 8. On 08.02.2008, the investigation in the abovementioned FIR was entrusted to the CBI and in pursuance of the same, a case being RC/1(E)/08/CBI/EOU-VII/ND was registered under Section 120B read with Sections 326, 342, 417, 465, 473, 307 and 506 of the IPC and Sections 18, 19 and 20 of the TOHO Act, 1994 against various persons, including the appellant-Jeevan Kumar. 9. After conclusion of investigation, the chargesheet was filed by the CBI on 29.04.2008 and consequently, a regular case was registered as CBI Case No. 7 of 2008. The trial was conducted by the Court of ASJ/Special Judge (CBI), Panchkula, Haryana ("the Trial Court"). 10. On 12.05.2008, an Enforcement Case Investigation Report ["ECIR"] bearing no. ECIR/07/DZ/2008 was registered by the Delhi Zonal Office of Directorate of Enforcement ["ED"] under Section 3/4 of PMLA, 2002. In this ECIR, the appellant-Jeevan Kumar was framed as an accused alongwith other persons. The said case was premised on the ground that the appellant-Jeevan Kumar had committed various offences, including offence punishable under Section 307 of the IPC, which is a scheduled offence under Paragraph 1 of Part B of the Schedule app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in OC No. 66/2010. 13. In March 2011, the appellants preferred statutory appeals being FPA-PMLA-169/DLI/2011, FPA-PMLA-167/DLI/2011 and FPA-PMLA-168/DLI/2011 against the abovementioned confirmation order, before the Appellate Tribunal under PMLA, 2002. 14. On 24.04.2012, charges were framed against the appellant-Rajiv Channa under Sections 3 and 4 of PMLA, 2002 in ECIR/07/DZ/2008, wherein, he pleaded not guilty and claimed trial. 15. In the meantime, on 22.03.2013, in CBI Case No.7/2008, the Trial Court acquitted the appellant-Jeevan Kumar from all the charges. The said decision remained unchallenged and has attained finality. 16. Subsequently, vide judgment dated 15.01.2024, this Court in Crl. M.C. No.1622/2013 quashed the ECIR bearing no. ECIR/07/DZ/2008 alongwith all the consequential proceedings arising therefrom. The relevant paragraph of the said decision is reproduced as under:- "13. In view of the aforesaid legal position, the complaint filed by the respondent/ED and the consequential proceedings cannot survive. Considering that the co-accused Dr. Jeevan Kumar has been acquitted by the trial court vide judgment dated 22.03.2013 and that the said judgment has not been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all the consequential proceedings arising therefrom and the charge framed against the appellant-Rajiv Channa vide order dated 24.04.2012, respectively. He, therefore, submitted that considering the quashing of the prosecution complaint, all the proceedings in furtherance of prosecution, including attachment would also not sustain and are therefore, liable to be quashed. He relied upon the decision of the Hon'ble Supreme Court in the case of Vijay Madanlal Choudhary v. Union of India, [2022 SCC OnLine SC 929] to substantiate his arguments. 21. With respect to the appellant-M/S N.R. Merchant Pvt. Ltd., it is urged that the said appellant is a bona fide purchaser of the property being Plot No. 77, allotted to M/s Anchal Paper (P) Ltd., / Shri. Raghuvinder Singh in Eco Tech, Greater NOIDA (UP), which has been alleged to be earlier bought by the appellant-Jeevan Kumar allegedly using the proceeds of crime. It has been contended that the appellant- Jeevan Kumar has no connection with the instant property and in any case, since he had already been acquitted of the predicate offence, there is no rationale to affirm the attachment proceedings qua the subject property. 22. Per contra, Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act which deals with the "offence of money-laundering". Section 3 of PMLA, 2002 stipulates that "whosoever 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 offence of money-laundering". 28. Thus, for the commission of an offence of money laundering, the essential preconditions which emerge from the aforesaid provisions are that firstly, it requires an involvement in any process or activity connected with the proceeds of crime; and secondly, projection of the same as untainted property. 29. Clause (u) of subsection (1) of Section 2 of PMLA, 2002 defines "proceeds of crime", which reads as under: "Section 2(1)(u) -'Proceeds of crime' means 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 within the country ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y involved in money laundering, it is apposite to advert to the judicial pronouncements which squarely answer the issue which has arisen for consideration in the cases at hand. In Vijay Madanlal Choudhary (supra), the Hon'ble Supreme Court explicated the meaning and intent of Section 2(1)(u) read with Section 3 of PMLA, 2002 and held as under:- "253. Tersely put, it is 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. The authorities under the 2002 Act 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 by way of complaint before the competent forum. For, the expression "derived or obtained" is indicative of criminal activity relating to a scheduled offence already accomplished. Similarly, in the event the person named in the criminal activity relating to a scheduled offence is finally absolved by a Court of competent jurisdiction owing to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 quashed by the Court of competent jurisdiction, there can be no offence of money-laundering against him or anyone claiming such property being the property linked to stated scheduled offence through him." [Emphasis supplied] 34. In Pavana Dibbur v. The Directorate of Enforcement, Criminal Appeal No. 2779 of 2023 decided on 29 November 2023, the Hon'ble Supreme Court held as follows:- "16. In a given case, if the prosecution for the scheduled offence ends in the acquittal of all the accused or discharge of all the accused or the proceedings of the scheduled offence a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the following terms: "187. …….(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 quashed by the Court of competent jurisdiction, there can be no offence of money-laundering against him or any one claiming such property being the property linked to stated scheduled offence through him." 8. Learned ASG appearing for the respondent, in all fairness, does not dispute the above position of law declared by this Court. 9. The result of the discussion aforesaid is that the view as taken by the Trial Court in this matter had been a justified view o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Shashi Kumar v. Director, Directorate of Enforcement, [2023 SCC OnLine TS 1098] has also quashed a complaint under Section 3 of the PMLA, 2002 on the grounds of the accused being discharged/acquitted of the scheduled offence. The relevant observations of the said judgment are set out below:- "28. Thus, according to Supreme Court, the offence under Section 3 of PMLA is dependent on illegal gain of property as a result of criminal activity relating to a scheduled offence. If the person is finally discharged or acquitted of the scheduled offence or the criminal case against him is quashed by the court, there can be no offence of money laundering against him or anyone claiming such property being the property linked to the scheduled offence. It is immaterial for the purpose of PMLA whether acquittal is on merit or on composition." 39. This Court, in the case of Prakash Industries Ltd. v. Directorate of Enforecement [2022 SCC OnLine Del 2087], has taken a view that once it is found that a criminal offence does not stand evidenced, the question of any property being derived or obtained therefrom or its confiscation or attachment would not arise at all. The relevant paragraph of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and literal interpretation of Section 2(1)(u) read with Section 3 of PMLA, 2002 which has been enunciated in Vijay Madanlal Choudhary (supra) and reiterated by the Hon'ble Supreme Court in Pavana Dibbur (supra) and by this Court in Prakash Industries (supra), suggests that if the elementary foundation i.e., the scheduled offence is itself removed, consequential proceedings emanating therefrom shall also fall. 41. A bare perusal of the facts of the present case would show that the Trial Court had already acquitted the appellant-Jeevan Kumar of all the charges framed against him vide judgment dated 22.03.2013 and the same has remained unchallenged by the respondent. Therefore, his acquittal in the scheduled offence breaks the entire chain leading to the other appellants. Moreover, this Court, vide judgment dated 15.01.2024, had quashed the ECIR bearing no. ECIR/07/DZ/2008 alongwith all the consequential proceedings arising therefrom, and the charge framed qua the appellant-Rajiv Channa vide order dated 24.04.2012. Thus, a necessary corollary would be that all the proceedings in furtherance of prosecution, including attachment, would also fall and are therefore, liable to be quashe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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