If scheduled offence under PMLA is itself removed, consequential proceedings emanating therefrom shall also fall: Delhi HC quashes provisional attachment order in money-laundering case
Justices Yashwant Varma &Purushaindra Kumar Kaurav [08-04-2024]

Read Order: RAJIV CHANNA AND ORS v. UNION OF INDIA AND ORS [DEL HC- MISC. APPEAL(PMLA) 13/2023]

Tulip Kanth

New Delhi, April 9, 2024: The Delhi High Court has quashed a provisional attachment order in a money-laundering case with the observation that when one of the appellants had already been acquitted of the scheduled offence under PMLA, there could be no action against the other appellants in relation to the property linked to the stated scheduled offence.

In this case, the appellant-Jeevan Kumar was 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 and Sections 18, 19 and 20 of the Transplantation of Human Organs Act, 1994 [TOHO Act]. Since the alleged offences constituted a scheduled offence under PMLA, 2002, the provisional attachment order (PAO) was passed against the appellant-Jeevan Kumar.

The facts were that a written complaint was filed and an FIR was registered against the appellant-Jeevan Kumar and others for offences punishable under Section 420 of the IPC and Sections 18/19 of the TOHO Act, 1994. The investigation in the FIR was entrusted to the CBI and in pursuance of the same, a case 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.

An Enforcement Case Investigation Report [ECIR] 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 appended to PMLA, 2002.

Thereafter, PAO was passed whereby, various properties of all the appellants herein were attached, prohibiting further alienation.A complaint under Section 5(5) of PMLA, 2002 was subsequently preferred by the ED before the Adjudicating Authority under PMLA, 2002 seeking adjudication. The Adjudicating Authority confirmed the PAO.The appellants preferred statutory appeals against the abovementioned confirmation order. Charges were framed against the appellant-Rajiv Channa under Sections 3 and 4 of PMLA, 2002 wherein, he pleaded not guilty and claimed trial.

The Trial Court acquitted the appellant-Jeevan Kumar from all the charges. The said decision remained unchallenged and has attained finality.Subsequently, the High Court quashed the ECIR alongwith all the consequential proceedings arising therefrom.

The appellants had approached the Delhi High Court challenging the appeals under Section 42 of the PMLA assailing the common order passed by the Appellate Tribunal, PMLA, New Delhi whereby, the first appeals of the appellants against the confirmation order passed proceedings arising from the provisional attachment order [PAO] were dismissed by the Appellate Tribunal.

It was the case of the appellants that when the appellant-Jeevan Kumar had already been acquitted in the predicate offence on merits vide a detailed judgment, there was no reason to sustain the attachment of properties of the appellants. It was submitted that when no proceeds of crime were found to have been generated in the first place, then there did not arise a question of laundering the same. In light of the quashing of the prosecution complaint, it was contended that all the proceedings in furtherance of prosecution, including attachment would also not sustain and are therefore, liable to be quashed.

The Division Bench of Justice Yashwant Varma &Justice Purushaindra Kumar Kaurav, at the outset, opined that Section 42 of PMLA, 2002 empowers any person aggrieved by a decision or order of the Appellate Tribunal to file an appeal to the High Court within the prescribed period of sixty days from the date of communication of the decision or order of the Appellate Tribunal to him on any question of law or fact arising out of such order.“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.”

It was observed that since the appellant-Jeevan Kumar had already been acquitted of the scheduled offence, there could be no action for money-laundering against the other appellants in relation to the property linked to the stated scheduled offence.

Placing reliance upon Vijay Madanlal Choudhary v. Union of India and PavanaDibbur v. The Directorate of Enforcement,Prakash Industries Ltd. v. Directorate of Enforecement, the Bench said, “Thus, the plain 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 PavanaDibbur (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.”

So far as the contention raised on behalf of the respondent regarding the deferment of the adjudication of the present case in light of the issue being sub judice before the Supreme Court in the case of Directorate of Enforcement v. Gagan Deep Singh (SLP (Crl.) Diary No.42315/2022)was concerned, the Bench did find any merit in the argument of the respondents. The said order could neither expressly nor impliedly be construed to be any kind of stay on adjudication of the present proceedings. Reference was also made to wherein it has been opined that the High Courts will proceed to decide matters on the basis of the law as it stands.

Allowing the instant appeals, the Bench held that the attachment proceedings in the present case were unsustainable as the appellants couldn’t be said to be involved in any activity connected with the proceeds of crime. Accordingly, the confirmation order alongwith the PAO were also quashed.