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Charge Of Money Laundering Cannot Be Brought Against A Person Acquitted Of The Scheduled Offense: Supreme Court

Shvena Neendoor ,
  22 August 2022       Share Bookmark

Court :
Supreme Court of India
Brief :

Citation :
CrA 1254 OF 2022

Case title:
Parvathi Kollur Vs State by Directorate Of Enforcement

Date of Order: 
16th August 2022

Bench:
Justices Dinesh Maheshwari and Krishna Murari

Parties: 
Appellant- Parvathi Kollur
Respondent- State by Directorate Of Enforcement

SUBJECT

The Supreme Court instant case clarified yet again that a person acquitted of a scheduled offence cannot be prosecuted under the Prevention of Money-Laundering Act, 2002. 

The observations were made by a bench of Justices Dinesh Maheshwari and Krishna Murari after a deputy revenue officer, his wife, and their son sought discharge in a complaint brought against them by the Enforcement Directorate under the Prevention of Money Laundering Act.

Initially, the officer was charged by the Lokayukta Police. However, while the trial was ongoing, the central agency filed a complaint with a special court under Section 3 of the Act.

IMPORTANT PROVISIONS

Section 3 in The Prevention of Money-Laundering Act, 2002 – The section states that whoever directly or indirectly attempts to engage in, knowingly assists, or is a party to, or is actually involved in, any process or activity involving criminal proceeds and portraying it as untainted property is guilty of money-laundering.

Section 13(1)(e) of the Prevention of Corruption Act, 1988- The section talks about criminal misconduct by a public servant and includes the situation if he or any person acting on his behalf is in possession of, or has been in possession of, pecuniary assets or property disproportionate to his recognised sources of income at any time during the duration of his office for which the public servant cannot satisfactorily account.

Section 277 of the Code of Criminal Procedure, 1973- The section states if, after reviewing the case record and the documents submitted with it, and after hearing the accused's and prosecution's submissions, the Judge determines that there is insufficient ground to proceed against the accused, he must therefore discharge the accused and record his reasons.

OVERVIEW

  • The appellants, in this case, were the wife and son of accused No. 1, who was accused of amassing assets disproportionate to his recognised source of income to the tune of Rs.42,25,859/- during his tenancy as Deputy Revenue Officer. 
  • The Lokayukta Police filed a complaint under Section 13(1)(e) of the Prevention of Corruption Act, 1988, read with Section 13(2). The Directorate of Enforcement brought a case before the Special Court for the prosecution of the offence under Section 3 of the Act of 2002 against the accused No. 1 and the appellants.
  • The Special Judge (Lokayukta) acquitted accused No. 1 of the aforementioned offences under the Act of 1988, observing that the evidence presented by the prosecution was inadequate to convict him. 
  • The accused and current appellants then filed an application under Section 277 of the Code of Criminal Procedure, 1973, seeking discharge in the case involving the Act of 2002. The accused died before the application was considered and decided. 
  • Following that, the Trial Court granted the application and discharged the appellants from the offences, noting that the commission of a scheduled offence was the basic condition for giving way to "proceeds of crime," and that the commission of a scheduled offence was a prerequisite for proceeding under the Act of 2002.
  • Dissatisfied with the discharge order, the Directorate filed a revision petition with the High Court. The High Court then overturned the discharge order, observing that the allegations in the complaint and the evidence presented provided prima facie grounds for prosecuting the appellants for infractions under the Act of 2002.

ISSUES RAISED

Whether a money-laundering charge can be brought against parties not involved with the commission of the scheduled offense under The Prevention of Money-Laundering Act?

ARGUMENTS ADVANCED BY THE APPELLANT

  • Learned counsel for the appellants contended that the issue at hand is no longer res integra, particularly in light of the view expressed by a 3-Judge Bench of this Court in the matter of Vijay Madanlal Choudhary &Ors. vs. Union Of India[Special Leave Petition (Criminal) No. 4634 Of 2014]&Ors. decided on 27.07.2022, where the consequence of failure to prosecute for the scheduled offence has been clearly provided.
  • The case laid down that if the individual is ultimately acquitted of the scheduled offence or the criminal case against him has been quashed by a Court of competent jurisdiction, there will be no money-laundering charge brought against him or anyone asserting property linked to the stated scheduled offence through him.

ARGUMENTS ADVANCED BY THE RESPONDENT

  • It was stated that in all fairness, the respondent's counsel does not dispute the above-mentioned legal position as declared by this Court.

JUDGEMENT ANALYSIS

  • The court stated that the Trial Court's decision, in this case, was justified, and the High Court was incorrect in overturning the discharge order regardless of the fact that the accused had already been acquitted of the scheduled offence, and the current appellants were not alleged of any scheduled offence.
  • The court noted that only to investigate allegations of fraudulent proceeds of crime can the Enforcement Directorate make a complaint under the Prevention of Money Laundering Act. These proceeds, however, must be linked to a separate criminal offence (scheduled offence) committed by the individual.

CONCLUSION

This appeal was successful and was granted. The impugned judgement and order dated 17.12.2022 was reversed, and the order dated 04.01.2019 issued by the Trial Court granting the appellants' discharge application was reinstated.

Click here to download the original copy of the judgement
 

 
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