IMPORTANT POINT
Money laundering – In cases of PMLA, Court cannot proceed on the basis of preponderance of probabilities – Allegation must be proved beyond reasonable doubt in Court.

JUDGMENT

1. Leave granted.

2. This appeal arises out of the judgment dated 04.02.2021 passed by the Division Bench of the High Court of Madras in Crl. O.P. No. 24200 of 2017 which was filed for quashing of the proceedings in C.C. No. 2 of 2017. The High Court, while dismissing the petition under Section 482 of the Criminal Procedure Code (for short 'Cr.P.C.') inter-alia held that the argument of the appellant that the FIR with respect to schedule offence was closed for want of evidence and in absence of connected evidence with a crime of schedule offence, the prosecution for offences under Sections 3 & 4 of the Prevention of Money Laundering Act, 2002 (for short "PMLA") cannot be sustained. It is also held that the commission of schedule offence may be a fundamental precondition for initiating the proceedings but the offence of money laundering is independent of the schedule offence because the PMLA deals with the process or activity with respect to the proceeds of crime including concealment, possession, acquisition or use, however in the light of the explanation of Section 44(1) of PMLA, the argument of the appellant was repelled. The High Court further held that if any observation has come in the bail application, having no material to connect with the commission of any offence, would not be enough to quash the proceedings. The Court relied upon the seizure made by the I.T. Department including that of the currency notes of denomination of Rs. 2000 in the context that the currency notes of denomination of Rs. 500 and Rs. 1000 ceased to be legal tender by order of the Government at the time of demonetization and the people were in queue to exchange those old currency notes for new ones. As the seizure of currency notes of Rs. 33 crores in the denomination of Rs. 2000 was made, therefore, the closure report made by Central Bureau Investigation (in short 'CBI') in schedule offence cannot be relied upon.

3. Briefly, the facts relevant for the purpose of the appeal are that the appellant J. Sekar Reddy is the Managing Partner of M/s SRS Mining which is a partnership firm engaged in sand mining since 2013 and he had deposited Rs 312.64 Crores in three bank accounts of the firm. On 08.12.2016 and 09.12.2016, the Income Tax Department, Chennai (for short "I.T. Department") conducted search in the official/commercial premises of the appellant and others and seized currency amounting to Rs. 106,98,89,800/- and 128.495 kg of gold (valued at Rs. 36,72,07,311).

4. Thereafter, from 08.12.2016 to 12.12.2016, appellant joined inquiry before the IT Department about the seizure of currency notes and gold. Subsequently on 19.12.2016, the CBI registered RC 40(A) 2016/CBI/ACB/CHENNAI for offences under Sections 120-B r/w 409, 420 of Indian Penal Code (in short 'IPC') and Section 13(2), r/w 13(1)(c) and 13(1)(d) of the Prevention of Corruption Act, 1988 (in short 'PC Act') against the appellant and two others.

5. The Enforcement Directorate after perusing the FIR of the CBI felt that in addition to the scheduled offences, the provisions of under Sections 2(1)(x) and 2(1)(y) of the PMLA attract, however registered the offence at ECIR No. 19 of 2016 dated 19.12.2016 against the appellant and others. The respondent had enquired and conducted the investigation and, recorded the statement of the appellant and others and found new currency notes of denomination of Rs. 2,000/- of a total value of Rs. 33,74,92,000/ in a subsequent search on the official and commercial premises of the appellant.

6. In the meantime, the CBI had filed the custody petition which was dismissed by the Special Court vide order dated 30.12.2016. The CBI had also registered two FIRs being Crime No. RC MA1 2016 A0051 at 1500 hrs. and RC MA1 2016 A0052 at 1510 hrs on 30.12.2016 by amargin of ten minutes time. The appellant filed the bail application in RC MA1 2016 A0040 and RC MA1 2