A predicate offense is essential for money laundering charges; without it, proceedings under the Prevention of Money Laundering Act cannot continue.

ORDER:

This Criminal Petition is filed under Section 482 of Code of Criminal Procedure, 1973 (for short ‘Cr.P.C’) to quash the proceedings against the petitioner/accused in ECIR/HYZO/04/2021 dated 18.01.2021.

2. The brief facts of the case are that the petitioner- Company, represented by Mr. Shashank Mudhra, is engaged in microfinance business in India. It is being investigated by the Enforcement Directorate based on an FIR filed under various sections, including 420, 506 of IPC, Section 67 of IT Act, 2008, and Section 3 of Telangana Money Lenders Act, 1349F. The Company seeks to quash proceedings under the Prohibition of Money Laundering Act (PMLA), 2002, stemming from ECIR No.ECIR/HYZO/04/2021. The FIR, registered by Cyber Crime, Cyberabad, implicated the petitioner-Company i.e., Smartcoin Application. The Company aims to nullify these proceedings initiated by respondent No.1.

3. On 23.12.2020, Sri K. Satish filed a complaint with Cyber Crime Police Station, Cyberabad Commissionate, leading to FIR No.1187 of 2020. He alleged that after downloading Cash TM, a microloan app, and uploading identification documents, he received a loan of Rs.2,292/- but was harassed by unknown persons demanding repayment. They allegedly accessed his contacts, sent abusive messages, and defamed him. Although Smart Coin, belonging to the Petitioner, was mentioned, it is clarified that Cash TM and Smart Coin are unrelated. Based on the FIR, Respondent No.1 registered an ECIR under PMLA, 2002, on 18.01.2021.

4. On 02.08.2022, a Provisional Attachment Order (PAO) was issued against the Petitioner under PMLA, 2002, attaching properties worth Rs.17,99,88,957/-. Despite the failure of Enforcement Directorate to provide the ECIR copy, the PAO and the order of the Adjudicating Authority reveal that the case of Enforcement Directorate relies solely on the FIR allegations. During the investigation, the Petitioner cooperated with Cyber Crime Police, Cyberabad, providing necessary documents. Key findings revealed the Complainant was a habitual user of loan apps, having availed three loans from the application of the Petitioner-Company prior to 12.12.2020, with no complaints. The Complainant fully repaid two loans and had no overdue payments. The Petitioner adheres to applicable laws, prohibiting extortionate recovery methods. The investigation concluded with the Petitioner being found innocent and placed in Column 12 of the Charge Sheet. As no cognizance was taken by the Magistrate, the Petitioner seeks quashing of PMLA proceedings, citing the findings of the Investigation Agency and the inability to sustain the case under PMLA.

5. Heard Sri T. Niranjan Reddy, learned Senior Counsel representing Sri TRVSSSV Prasad, learned counsel appearing on behalf of the petitioner as well as Sri Anil Prasad Tiwari, learned Standing Counsel for Enforcement Department, appearing on behalf of respondent No.2.

6. Learned counsel for the petitioner submitted that the investigation of the predicate agency found no evidence of the involvement of the petitioner in the alleged offences, and the final report was accepted by the learned IX Additional Metropolitan Magistrate, Kukatpally, absolving the petitioner of all charges. He further submitted that as the petitioner was not charged, there is no criminal activity to justify money laundering proceedings under PMLA, 2002 and that without a predicate offense, the proceedings are unauthorized and must be vitiated, as settled by law; if the predicate offense ceases to exist, PMLA proceedings cannot continue.

7. Learned counsel for the petitioner relied on the principle of law stated in M/s Jagati Publication Limited v. Enforcement Directorate, Officer of Kendriya Sedan, Hyderaba, Criminal Petition No.1072 of 2021 which cited the decision of the Honourable Supreme Court in Vijay Madanlal Chaudhary and Ors v. Union of India and Ors, 2022 SCC OnLine SC 929 wherein it is held as follows:

“27.2. Thus, the Supreme Court has expressed the view tha