Bombay High Court Quashes Money Laundering Charges After Discharge From The Related Predicate Offence

Bombay High Court Quashes Money Laundering Charges After Discharge From The Related Predicate Offence

The High Court of Judicature at Bombay has delivered a significant ruling in the case of Krishna Shantaram Chamankar vs Union of India , setting aside money laundering proceedings against the petitioners. A division bench comprising Justice A. S. Gadkari and Justice Rajesh S. Patil held that once a party has been discharged from the underlying "predicate offence," a prosecution under the Prevention of Money Laundering Act (PMLA) cannot be maintained.

Background of the Dispute

The petitioners, led by Krishna Shantaram Chamankar, were facing charges under the PMLA following an investigation by the Enforcement Directorate (ED). The probe originated from a case registered by the Anti Corruption Bureau (ACB) in Mumbai regarding the construction of the Maharashtra Sadan, High Mount Rest House, and other RTO buildings.

On July 31, 2021, the trial court granted the petitioners a discharge in the predicate offence case, finding no material against them. As the prosecuting agency, the ACB, did not challenge this order, it attained finality. The petitioners then moved the High Court, arguing that the collapse of the scheduled offence rendered the PMLA proceedings legally unsustainable.

Arguments from Both Sides

Counsel for the petitioners contended that, as they had been discharged from the scheduled offence, the PMLA charges must necessarily be quashed. They relied heavily on the Supreme Court’s landmark ruling in Vijay Madanlal Choudhary vs Union of India , which establishes that PMLA proceedings are tethered to the existence of a scheduled offence.

Conversely, the respondent authorities argued that PMLA prosecutions could proceed independently, citing a judgment from the Jammu and Kashmir High Court. They asserted that even without a standing predicate offence, the investigation into the "proceeds of crime" could continue. However, the High Court bench found this argument unconvincing, noting that the cited judgment was not binding and contradicted the settled position established by the Supreme Court.

Legal Analysis and Precedents

The High Court emphasized that the PMLA is a "special" enactment that relies on the commission of a scheduled offence to identify the proceeds of crime. Referring to the Vijay Madanlal Choudhary verdict, the bench highlighted that if a person is discharged or acquitted of a predicate offence, the foundation of the money laundering charge disappears. The court further referenced * Pavana Dibbur Vs. Directorate of Enforcement *, reinforcing that an accused in a PMLA case—even one not named in the predicate offence—benefits if the scheduled offence proceedings are quashed or if all accused are discharged.

Key Observations

The court underscored its reasoning with the following observations from the Vijay Madanlal Choudhary case:

> "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."

> "If the person is finally discharged/acquitted of the scheduled offence... 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."

Final Decision

Finding that the discharge order from the predicate offence case had attained finality, the High Court of Judicature at Bombay allowed the petition. The court ordered the quashing of the ECIR and the resulting charge-sheet against the petitioners. This ruling reaffirms that the PMLA cannot be used as a standalone tool for prosecution when the underlying criminal activity, as defined by law, has been effectively dismissed by a competent court. The decision provides essential clarity for legal professionals regarding the interdependent nature of money laundering prosecutions and predicate criminal litigation.