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Offence Of Money Laundering Not A Standalone Offence: Delhi High Court

Aditi Rai ,
  18 January 2023       Share Bookmark

Court :
Delhi High Court
Brief :

Citation :
WP(C ) 3821/2022

CASE TITLE:

Emta Coal Limited & Ors. V. The Deputy Director Of Enforcement

DATE OF ORDER:

10 January 2023

JUDGE(S):

Justice Pratibha M. Singh

SUBJECT

The Delhi High Court in the present case reiterated the view taken by the Apex Court on several occasions that existence of a charge under a scheduled offence is a requisite for initiating or continuing with proceedings under the Prevention of Money Laundering Act, 2002. It observed that an attachment under section 5 of PMLA Act can not survive an acquittal of the concerned person from the scheduled offence.

IMPORTANT LEGAL PROVISIONS

PREVENTION OF MONEY LAUNDERING ACT, 2002

Section 5- provisional attachment of proceeds of crime in case the officer is of the opinion that the same will be dealt with in a way so as to defeat the provisions of this act.

BRIEF FACTS OF THE CASE

  • Three writ petitions challenging the order of the Enforcement Directorate to provisionally attach the properties of the petitioners u/s 5 of Prevention of Money Laundering Act.
  • The background of the matters is that in all the above cases, proceedings under Prevention of Corruption Act was initiated by CBI against the appellants. Subsequent proceedings under Prevention of Money Laundering offenses were also initiated against the appellants
  • However, charges under Corruption Act were later dropped after further inquiry.
  • The Enforcement Directorate, in the meantime, passed orders for provisional attachment of the properties and assets belonging to appellants.

ARGUMENTS RAISED BY THE APPELLANT

  • The appellants contended that the order of provisional attachment of the properties can no longer be valid as the charges under the predicate offence (Corruption Act) has been dropped by the CBI and the same has been affirmed by the Trial Court.

ARGUMENTS RAISED BY THE RESPONDENT

  • The respondent contended that the unless and until the Trial Court comes to a conclusion that the assets are not proceeds of crime, the attachment orders can continue.

LEGAL ISSUE

  • Whether the offence of Money Laundering is a standalone offence or existence of a predicate offence is a sina quo non for attracting its provision?

ANALYSIS BY THE COURT

  • While adjudicating upon the matter, the Court discussed the ratios of various judgements by the Supreme Court in the disputed field.
  • The Court observed that in Vijay Madanlal Choudhary v. Union Of India & Ors. [2022 SCC OnLine SC 929]. The Apex Court held that in order to constitute ‘proceeds of crime’ for attracting the offence under Prevention of Money Laundering Act, the existence of a criminal complaint pending enquiry and /or trial would be necessary. The Court held that to continue any proceeding under Money Laundering Act, existence of a predicate offence is a mandatory requisite. The Court observed-
  • “In the considered opinion of this Court once it is found by the competent authority that a predicate offence is either not evidenced or on facts it is held that no offence at all was committed, proceedings under the Act would necessarily have to fall or be brought to a close.”
  • The Court thus observed that it necessarily follows from the view taken by the Apex Court that attachment of property is to be vacated if the existence of a scheduled offence is negated.

CONCLUSION

Observing the view taken by the Apex Court in Vijay Madanlal’s case, the Court concluded that after filing of Closure Report by CBI, all proceedings under Prevention of Money Laundering Act were required to be dropped. As such, the order of provisional attachment can not stand.

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