Directorate of Enforcement v. Akhilesh Singh & Ors.

15. The learned counsel has also placed reliance on the following decisions in - (i) Directorate of Enforcement vs. Gagandeep Singh & Ors.: Crl.Rev.P.493/2017 orders dated 14.07.2017 and 11.05.2018; (ii) Directorate of Enforcement vs. Gagandeep Singh & Ors.: SLP (Crl.) D. No. 42315/2022 decided on 10.02.2023; and (iii) Joint Director ED vs. A. Raja & Ors., 2020:DHC:2892 to contend that despite the order of discharge/acquittal in the offence under the PMLA, the Hon’ble Supreme Court, as well as, this Court had stayed the impugned orders insofar as the same related to the release of attached properties.

16. Learned counsel further submits that the attached properties are only in custody of law and the same have to be protected pending decision of the appeal in predicate offence, otherwise, there is every likelihood that the respondents would dissipate, misappropriate or create third party interest in the attached moveable/immovable properties to frustrate the very purpose of pending appeal against the acquittal in predicate offence, which would entail multiplicity of proceedings and procedural complications.

17. Per contra, it is contended by the learned counsel that once a person is acquitted, the presumption of innocence in favour of the accused is strengthened and filing or pendency of an appeal against the acquittal cannot be considered as a continuation of trial / prosecution. In support of his contention, learned counsel places reliance on the following decisions in - (i) Bharat Sanchar Nigam Ltd. vs. S Rajagopal and Another: 2015 Law Suit (Mad) 3534 (DB), (ii) Rameshwar @ Balli vs. State of M.P.: 2022 Law Suit (MP) 1719, (iii) Balak Singh Thakur vs. State of M.P. 2014 SCC Online MP 1036, and (iv) R.C. Dubey vs. M.P. State Electricity Board:

18. He further contends that once the respondents have been acquitted in the predicate offence, the criminal proceedings under the PMLA will not survive, therefore, the learned Special Judge had rightly passed the impugned order discharging the respondents from the offences under the PMLA. In support of his contention, the learned counsel has placed reliance on the decision in (i) Parvathi Kollur vs. Enforcement of Directorate, 2022 SCC OnLine SC 1975; (ii) Emta Coal Limited & Ors. vs. The Deputy Director Directorate of Enforcement, 2023 SCC OnLine Del 6177; (iii) Adjudicating Authority vs. Shri Ajay Kumar Gupta & Ors., 2022 SCC OnLine SC 2091; and (iv) Directorate of Enforcement vs. M/s Obulapuram Mining Company Pvt. Ltd., 2022 SCC OnLine SC 2198.

19. Next, it is argued by the learned counsel for the respondents that the pendency of an appeal in a predicate offence against acquittal does not bar the Special Court to release the properties attached under the PMLA case as pursuant to the acquittal of the accused in predicate offence, attached properties could no more be treated as proceeds of crime or properties obtained from criminal activity.

20. He submits that if an accused under the PMLA is discharged / acquitted, the learned Special Judge is obliged to pass an order releasing the properties so attached, in terms of Section 8(6) of the PMLA, therefore, there is no infirmity in the order of the learned Special Judge directing release of the attached properties/bank accounts. Section 8(6) of the PMLA reads as under:

place or the property is not involved in money-laundering, it shall order release of such property to the person entitled to receive it.”

21. It is, therefore, urged by the learned counsel that the present petition deserves to be dismissed.

22. The moot question which falls for consideration in the present case is whether the proceedings under the PMLA could be continued despite the acquittal of the respondent nos.[1] and 2 in the scheduled offence. Yet another related question that arises for consideration is whether the properties attached by the petitioner/ED on the premise that the same are proceeds of crime could be released notwithstanding the pendency of appeal preferred against the order of acquittal in the scheduled offence.

23. The controversy articulated in the above noted two questions is no more res integra. The Hon’ble Supreme Court with reference to the relevant provisions of PMLA in Vijay Madanlal Choudhry (supra) has observed as under:-

the criminal case (scheduled offence) against him/her, there can be no action for money-laundering against such a person or person claiming through him in relation to the property linked to the stated scheduled offence. This interpretation alone can be countenanced on the basis of the provisions of the 2002 Act, in particular Section 2(1)(u) read with Section 3. Taking any other view would be rewriting of these provisions and disregarding the express language of definition clause “proceeds of crime”, as it obtains as of now.

XXXX XXXX XXXX

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 activity connected with such property, which constitutes offence of money-laundering. The property must qualify the definition of “proceeds of crime” under Section 2(1)(u) of the 2002 Act. As observed earlier, all or whole of the crime property linked to scheduled offence need not be regarded as proceeds of crime, but all properties qualifying the definition of “proceeds of crime” under Section 2(1)(u) will necessarily be crime properties. Indeed, in the event of acquittal of the person concerned or being absolved from allegation of criminal activity relating to scheduled offence, and if it is established in the court of law that the crime property in the concerned case has been rightfully owned and possessed by him, such a property by no stretch of imagination can be termed as crime property and ex-consequenti proceeds of crime within the meaning of Section 2(1)(u) as it stands today. On the other hand, in the trial in connection with the scheduled offence, the Court would be obliged to direct return of such property as belonging to him. It would be then paradoxical to still regard such property as proceeds of crime despite such adjudication by a Court of competent jurisdiction. It is well within the jurisdiction of the concerned Court trying the scheduled offence to pronounce on that matter.

467. In light of the above analysis, we now proceed to summarise our conclusion on seminal points in issue in the following terms:-

(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.” (Emphasis Supplied)

24. In Parvathi Kollur (supra), the appellants therein were acquitted from the predicate / scheduled offence under the Prevention of Corruption Act, 1988 and premised on the said acquittal, the appellants were discharged from the offence under the PMLA by the Special Court observing that the occurrence of a scheduled offence was the basic condition for giving rise to “proceeds of crime” and that commission of scheduled offence was a precondition for proceeding under the PMLA. However, the said order of discharge was set aside by the High Court on a revision filed by the Directorate of Enforcement. In an appeal, the order of the High Court was set aside by the Hon’ble Supreme Court referring to the three Judge Bench decision in Vijay Madanlal Choudhry (supra). It was held as under:

competent jurisdiction, there can be no offence of moneylaundering 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 of the matter and the High Court was not right in setting aside the discharge order despite the fact that the accused No. 1 had already been acquitted in relation to the scheduled offence and the present appellants were not accused of any scheduled offence.

10. In view of the above, this appeal succeeds and is allowed. The impugned judgment and order dated 17.12.2020 is set aside and the order dated 04.01.2019 as passed by the Trial Court, allowing discharge application of the appellants, is restored.

25. Likewise, in Pavana Dibbur v. The Directorate of Enforcement, 2023 SCC OnLine SC 1586, the Hon’ble Supreme Court held as under:

offence. Such an accused can still be prosecuted under PMLA so long as the scheduled offence exists. Thus, the second contention raised by the learned senior counsel appearing for the appellant on the ground that the appellant was not shown as an accused in the chargesheets filed in the scheduled offences deserves to be rejected.”

26. In Nik Nish Retail Ltd. & Anr. vs. Assistant Director, Enforcement Directorate, Govt. of India & Ors.: CRR No.2752 of 2018, the Calcutta High Court had quashed the FIR in respect of the predicate offence on the basis of settlement and following the same, the proceedings initiated under the provisions of the PMLA were also quashed. The Special Leave Petition filed by the Directorate of Enforcement, titled as Assistant Director Enforcement Directorate vs. M/s Nik Nish Retail Ltd. & Ors.: SLP(Crl.) Diary No(s).24321/2023, challenging the quashing of PMLA proceedings, was dismissed by the Hon’ble Supreme Court observing as under: “In paragraph 187 (v) (d) of the decision in the case of Vijay Madanlal Chowdhury & Ors. v. Union of India & Ors. (2022) SCC OnLine SC 929, it is held that even if predicate offence is quashed by the Court of competent jurisdiction, there can be no offence of money laundering against the accused. Appropriate proceedings can be always filed by the concerned parties for challenging the order by which predicate offence was quashed. If the said order is set aside and the case is revived, it will be always open for the petitioner to revive the proceedings under the Prevention of Money Laundering Act, 2002. The Special Leave Petition is accordingly disposed of. Pending application also stands disposed of.”

27. In Prakash Industries Ltd. v. Directorate of Enforcement, 2022 SCC OnLine Del 2087, a Coordinate bench of this Court dealing with an identical question held that charge of money laundering will not survive after the charges in respect of the predicate offence are quashed or the accused is discharged. It was further observed that when it has been found that the accused had not indulged in any criminal activity, the property cannot be treated as proceeds of crime. The relevant part of the decision reads thus:

merits that the accused had not indulged in any criminal activity, the property cannot legally be treated as proceeds of crime or be viewed as property derived or obtained from criminal activity.”

28. The position thus, emerging from the aforesaid decisions is that the scheduled offence and the proceeds of crime generated therefrom is the very foundation for the offence of Money Laundering. Once a person is discharged or acquitted from the scheduled offence, the very foundation gets knocked out and the charge of Money Laundering will not survive as there will be no proceeds of crime. Concomitantly, the properties attached under the PMLA cannot legally be treated as proceeds of crime or be viewed as property derived or obtained from criminal activity.

29. Further, submission of the learned counsel for the petitioner/ED is that since the appeal has been preferred by the State of Jharkhand against the judgment of acquittal in the predicate offence, therefore, the acquittal of the respondent nos. 1 and 2 in the predicate offence has not attained finality and consequently, the properties attached under the PMLA cannot be released, is to be considered only to be rejected. A perusal of Section 8(6) of the PMLA makes amply clear that if an accused under the PMLA is discharged / acquitted, the learned Special Judge under Section 8(6) has no option but to pass an order releasing the properties attached under the PMLA. Incidentally, the order of the Hon’ble Supreme Court passed in M/s Nik Nish Retail Ltd. (supra) leave no manner of doubt that if the judgment of acquittal in predicate offence is reversed in an appeal, it will be always open for the petitioner/ED to revive the proceedings under the PMLA. In other words, till the judgment of acquittal predicate offence is reversed in an appeal, all the effects of acquittal will continue to operate and mere filing of an appeal against acquittal in a predicate offence would not mean that the respondents will continue to suffer the rigors of criminal proceedings or attachment under the PMLA.

30. There is also no substance in the submission of the learned counsel for the petitioner/ED that an appeal preferred against the order of acquittal is a continuation of the proceedings before the Trial Court, inasmuch as it is trite law that in the context of criminal proceedings, the trial concludes when the same results in acquittal, though in the case of conviction the trial is concluded against the convicted accused with the imposition of sentence.[1]

31. Reliance placed by the petitioner on the order of the Hon’ble Supreme Court in Gagandeep Singh (supra) is misplaced. In the said case the Hon’ble Supreme Court while issuing notice in the SLP, formulated the questions to be decided akin to those which arise in the present case and also directed to maintain status quo with reference to the properties attached under the PMLA, but the said order is only an interim order and it does not lay down a law. However, this Court is obliged to proceed and decide the controversy involved in the present case on the basis of the law as it stands.[2]

32. The upshot of above discussion is that no proceedings under the PMLA could be sustained after the acquittal of the respondent nos.[1] and 2 in the predicate offence. Accordingly, the learned Special Judge vide order dated 09.10.2023 has rightly discharged the respondents herein from the offences under the PMLA. Likewise, there is no infirmity in the order dated 07.11.2023 whereby the attached movable and immovable properties were directed to be released by the learned Special Judge. Sukhpal Singh Khaira vs. State of Punjab: (2023) 1 SCC 289 Union Territory of Ladakh v. J&K National Conference: 2023 SCC OnLine SC 1140

33. In view of the above, the petition is dismissed. All pending applications are also disposed of.

VIKAS MAHAJAN, J. APRIL 30, 2024