1. Appeal against setting aside discharge for offences under Section 3, Prevention of Money-Laundering Act, 2002, following acquittal in the scheduled offence under Prevention of Corruption Act, 1988. (Para 2 , 3 , 4 , 5 , 6 )
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2023 Supreme(SC) 556
SUPREME COURT OF INDIA
DINESH MAHESHWARI, KRISHNA MURARI, JJ.
Parvathi Kollur & Anr. - Appellants
Versus .
State By Directorate Of Enforcement - Respondent
Criminal Appeal No. 1254 of 2022(Arising out of S.L.P.(Crl.) No. 4258 of 2021)
Decided on : 16-08-2022.
Important Points
The offence under Section 3 of the Prevention of Money-Laundering Act, 2002 is dependent on illegal gain of property as a result of criminal activity relating to a scheduled offence, and prosecution cannot proceed on the assumption of a scheduled offence without it being registered or pending enquiry/trial before the competent forum.
Subject
Criminal Law - Money Laundering
Act Referred
Headnote
Money Laundering - Discharge Order - Prevention of Money-Laundering Act, 2002 - Section 3
Fact of the Case:
The appellants, wife and son of the accused No. 1, were charged under the Prevention of Money-Laundering Act, 2002 for amassing assets disproportionate to known sources of income. The accused No. 1 was acquitted of the related offences under the Prevention of Corruption Act, 1988.
Finding of the Court:
The Trial Court allowed the discharge application of the appellants, stating that the occurrence of a scheduled offence was a pre-condition for proceeding under the Act of 2002. The High Court set aside the discharge order, finding prima facie grounds for proceeding against the appellants under the Act of 2002.
Issues: The main issue was whether the appellants could be proceeded against under the Act of 2002 in the absence of a scheduled offence.
Ratio Decidendi: The court relied on the legal principle that the offence under Section 3 of the Act of 2002 is dependent on illegal gain of property as a result of criminal activity relating to a scheduled offence. It emphasized that the authorities cannot prosecute any person on the assumption that a scheduled offence has been committed unless it is registered or pending enquiry/trial before the competent forum.
Final Decision: The appeal succeeded, and the impugned judgment and order were set aside, restoring the Trial Court's discharge application of the appellants.
Legal Category Hierarchy
Advocates:
Advocate Appeared:
For the Appellant : Mr. Manoj Pandey, Adv., Mr. Saurabh Trivedi, AOR
For the Respondent: Mr. Tushar Mehta LD SG, Mr. S.V. Raju, LD ASG, Mr. M.K.Maroria, AOR, Mr. Kanu Agarwal, Adv., Mr. Zoheb Hussain, Adv., Mr. Annam Venkatesh, Adv.
Advocate Appeared:
For the Appellant : Mr. Manoj Pandey, Adv., Mr. Saurabh Trivedi, AOR
For the Respondent: Mr. Tushar Mehta LD SG, Mr. S.V. Raju, LD ASG, Mr. M.K.Maroria, AOR, Mr. Kanu Agarwal, Adv., Mr. Zoheb Hussain, Adv., Mr. Annam Venkatesh, Adv.
Table of Contents
2. Appellants contend that acquittal in the scheduled offence precludes prosecution for money-laundering under the Prevention of Money-Laundering Act, 2002, a position not disputed by the respondent. (Para 7 , 8 )
3. The court found the Trial Court's discharge order justified since the primary accused was acquitted of the scheduled offence. (Para 9 )
4. Prosecution for money-laundering cannot proceed if the person is finally discharged or acquitted of the scheduled offence. (Para 7 , 9 )
5. Appeal allowed; High Court order set aside and Trial Court's discharge order restored. (Para 10 , 11 )
6. Can a person be prosecuted for money-laundering on the assumption that a scheduled offence was committed?
No. Authorities under the Prevention of Money-Laundering Act, 2002, cannot prosecute any person on a notional basis or on the assumption that a scheduled offence has been committed unless it is registered with the jurisdictional police or pending enquiry/trial. (Para 7 )
7. What is the effect of a final acquittal or discharge in a scheduled offence on a money-laundering charge?
If a person is finally discharged or acquitted of the scheduled offence, or the criminal case is quashed by a competent court, there can be no offence of money-laundering against them or anyone claiming property linked to that scheduled offence. (Para 7 )
8. Is the commission of a scheduled offence a prerequisite for the existence of proceeds of crime?
Yes. The occurrence of a scheduled offence is the basic condition for giving rise to proceeds of crime, and the commission of a scheduled offence is a pre-condition for proceeding under the Prevention of Money-Laundering Act, 2002. (Para 5 , 7 )
ORDER :
1. Leave granted.
2. The appellants herein have questioned the judgment and order dated 17.12.2020 as passed by the High Court of Karnataka at Bengaluru in Criminal Revision Petition No. 590 of 2019 whereby, the High Court allowed the revision petition filed by the respondent and set aside the discharge order passed by the IIIrd Additional District and Sessions Judge, D.K., Mangaluru (Karnataka) for the offence under Section 3 of the Prevention of Money-Laundering Act, 2002(hereinafter referred to as ‘the Act of 2002’).
3. The appellants herein are wife and son of the accused No. 1 against whom the allegations had been that during his tenure as Deputy Revenue Officer, he amassed assets disproportionate to his known source of income to an extent of Rs.42,25,859/-. For this, the Lokayukta Police registered a case under Section 13(1)(e) read with Section 13(2) of the Prevention of Corruption Act, 1988 (hereinafter referred to as ‘the Act of 1988’). During the pendency of trial, the Directorate of Enforcement registered a case against the accused No. 1 and the appellants under the Act of 2002 and filed a complaint on 08.06.2016 before the Special Court for trial of the offence under Section 3 thereof.
4. In the meantime, the Special Judge (Lokayukta) acquitted the accused No. 1 of the offences aforesaid under the Act of 1988 while observing that the evidence produced by the prosecution was insufficient to hold him guilty. Then, the accused No. 1 as also the present appellants moved an application under Section 277 of the Code of Criminal Procedure, 1973 seeking discharge in the case pertaining to the Act of 2002. Before the said application was considered and decided, the accused No. 1 expired on 08.05.2018.
5. Thereafter, the Trial Court, by its judgment and order dated 04.01.2019, allowed the application and discharged the appellants from the offences pertaining to the Act of 2002 while observing that occurrence of a scheduled offences was the basic condition for giving rise to “proceeds of crime”; and commission of scheduled offence was a pre-condition for proceeding under the Act of 2002.
6. Aggrieved by the said discharge order, the Directorate preferred a revision petition before the High Court. The High Court proceeded to set aside the discharge order while observing that the allegations made in the complaint and the material produced, prima facie, made out sufficient ground for proceeding against the appellants for offences under the Act of 2002.
7. Learned counsel for the appellants has contended that the issue as involved in this matter is no more res integra, particularly for the view taken by a 3-Judge Bench of this Court in the case of Vijay Madanlal Choudhary & Ors. vs. Union Of India & Ors. decided on 27.07.2022 where, the consequence of failure of prosecution for the scheduled offence has been clearly provided in the following terms:
“187. …….(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.”
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 t
