The Supreme Court on Tuesday said that an individual acquitted of a scheduled offence cannot be prosecuted under the Prevention of Money Laundering Act, Live Law reported.
A bench of Justices Dinesh Maheshwari and Krishna Murari made the observations after a deputy revenue officer, his wife and their son moved the court, seeking to be discharged in a case filed against them by the Enforcement Directorate under the Prevention of Money Laundering Act.
Initially, the Lokayukta Police had filed a case against the officer. But during the pendency of the trial, the central agency registered a complaint under Section 3 of the Act before a special court.
The section states 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 proceeds of crime and projecting it as untainted property shall be guilty of the offence of money-laundering”.
Later, the special judge of the Lokayukta acquitted the officer of offences under the Prevention of Corruption Act, 1988, saying that evidence submitted by the prosecution was not sufficient to show that he was guilty. During the course of the case, one of the accused died and after this, a trial court discharged the other, observing that proceedings under the Prevention of Money Laundering Act cannot continue in the absence of a scheduled offence.
However, the Enforcement Directorate moved the Karnataka High Court against the trial court order. The High Court allowed the agency’s revision plea and set aside the discharge judgement.
In its Tuesday’s order, the Supreme Court said, “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.”
Justice Maheshwari was part of a three-judge bench that in July upheld the core amendments of the Prevention of Money Laundering Act. The bench had said that if a person is absolved of the scheduled offence by a court, then no further action can be taken.
In their Tuesday’s order, Justice Maheshwari and Justice Murari said:
“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.”— Supreme Court
The judges also said that the Karnataka High Court’s decision to set aside the trial court order was “not right”.
The Enforcement Directorate can file a complaint under the Prevention of Money Laundering Act only to investigate the allegations of fraudulent proceeds of crime. However, these proceeds have to be linked to a separate criminal offence (scheduled offence) committed by the person.
On August 8, a special court in Mumbai granted interim bail to two realty group promoters who were arrested by the Enforcement Directorate in a money-laundering case. Special Judge MG Deshpande had noted that it was “crystal clear that if there is no scheduled or predicate offence, the PMLA case cannot continue”.