Supreme Court: In a criminal appeal against the Karnataka High Court’s judgment, whereby the accused person’s application under Section 482 of the Code of Criminal Procedure, 1973 (‘CrPC’) for quashing the complaint filed by Directorate of Enforcement (‘ED’) under the second proviso to Section 45(1) of the Prevention of Money Laundering Act, 2002 (‘the PMLA’), the Division Bench of Abhay S. Oka* and Pankaj Mithal, JJ. held that an accused in the PMLA case who comes into picture after the scheduled offence is committed by assisting in the concealment or use of proceeds of crime need not be an accused in the scheduled offence and such an accused can still be prosecuted under PMLA so long as scheduled offence exists.
The ED alleged that the accused conspired with the another accused/ her husband who was charged with offence under Section 3 of the PMLA and executed nominal sale deeds in respect of the properties purchased by her husband in her name in order to benefit him. The accused also allowed her husband to use her bank accounts to siphon the Alliance University funds of Rs. 107 crores, where he was Vice- Chancellor from 2010 to 2015. In the matter at hand, the Alliance Business School purchased the first property for the consideration of Rs.13.05 crores and the property was brought from the Alliance Business School by the accused by a registered sale deed for a consideration of Rs.13.5 crores. A second property was purchased by the accused from her husband for a consideration of Rs.2.47 crores.
Therefore, the ED had registered an Enforcement Case on 16-10-2020 against the accused person’s husband and other persons for commission of offence under Section 3 of the PMLA. Thereafter, a complaint was filed on 13-10-2021 against the accused before the Special Court for PMLA Cases at Bengaluru for offence under the second proviso to Section 45(1) of the PMLA.
The accused filed an application before the Karnataka High Court for quashing the said complaint filed against her. However, the High Court dismissed the accused’s application. Hence, the present appeal.
The effect of the accused/ appellant not being shown as an accused in predicate offence
The Court explained that the existence of ‘proceeds of crime’ is sine qua non for the offence under Section 3 of the PMLA. The Court said that to constitute any property as ‘proceeds of crime it must be derived or obtained directly or indirectly by any person as a result of criminal activity relating to a scheduled offence. The Court on perusal of Section 2(1)(u) and (v) of the PMLA said that the explanation to Section 2(1)(u) clarifies that the proceeds of crime include property, not only derived or obtained from scheduled offence but also any property which may directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offence and even the value of any such property will also be the proceeds of crime.
Further, the Court perused the Section 2(1)(y) which defines ‘scheduled offence’ as- (i) the offences specified under Part A of the Schedule; or (ii) the offences specified under Part B of the Schedule if the total value involved in such offences is one crore rupees or more; or (iii) the offences specified under Part C of the Schedule.”
On the aspect that the condition precedent for the existence of proceeds of crime is the existence of a scheduled offence, the Court referred to Vijay Madanlal Choudhary v. Union of India 2022 SCC OnLine SC 929, wherein it was held that it is only such property which is derived or obtained or indirectly, as a result of criminal activity relating to a scheduled offence can be regarded as proceeds of crime
The Court said that an offence under Section 3 can be committed after a scheduled offence is committed. The Court explained that a person who is unconnected with the scheduled offence, knowingly assists the concealment of the proceeds of crime or knowingly assists the use of proceeds of crime, can be held guilty of committing an offence under Section 3 of the PMLA. The Court also illustrated that the offences under Sections 384 to 389 of the Penal Code, 1860 (‘IPC’) relating to ‘extortion’ are scheduled offences included in Schedule to the PMLA. An accused may commit a crime of extortion covered by Sections 384 to 389 of IPC and extort money, subsequently, a person unconnected with the offence of extortion may assist the said accused in the concealment of the proceeds of extortion. The Court said that such a person can be found guilty of the offence of money laundering. Therefore, the Court held that it is not necessary that a person against whom the offence under Section 3 of the PMLA is alleged must have been shown as the accused in the scheduled offence. The Court also relied on Vijay Madanlal Choudhary (supra) for the said conclusion, wherein it was said that “the criminal activity may have been committed before the same had been notified as scheduled offence, but if a person has indulged in or continues to indulge directly or indirectly in dealing with proceeds of crime, derived or obtained from such criminal activity even after it has been notiifed as scheduled offence, may be liable to be prosecuted for offence of money laundering under Section 3 of the PMLA.”
Thus, the Court said that an accused in the PMLA case who comes into picture after the scheduled offence is committed by assisting in the concealment or use of proceeds of crime need not be an accused in the scheduled offence and such an accused can still be prosecuted under PMLA so long as scheduled offence exists.
Whether the offence of criminal conspiracy under Section 120-B of the IPC, included in Paragraph 1 of the Schedule of PMLA, can be treated as a ‘scheduled offence’ even if the criminal conspiracy alleged is to commit an offence which is not a part of the Schedule?
The Court looked at the legislature’s intention behind the inclusions of offences of IPC in the ‘scheduled offences’ under the Schedule of the PMLA. The Court said that the legislative intent gathered from the defintion of ‘Scheduled Offence’ is that every crime which may generate proceeds of crime need not be a scheduled offence, therefore, only certain specific offences have been included in the Schedule. The Court also said that if two reasonable interpretations can be given to a particular provision of a penal statute, the Court should generally adopt the interpretation that avoids the imposition of penal consequences, hence, adopting a more lenient approach.
The Court said that only because there is a conspiracy to commit an offence, the same does not become an aggravated offence and the object of Section 120B is to punish those involved in conspiracy to commit a crime, though they may not have committed any overt act that constitutes the offence. Thus, the Court viewed that the offence under Section 120-B of IPC included in Part A of the Schedule will become a scheduled offence only if the criminal conspiracy is to commit any offence already included in Parts A, B, or C of the Schedule.
Thus, applying the above principles to the matter at hand, the Court held that accused cannot be prosecuted for the offences punishable under Section 3 of the PMLA, as there is no allegation of the commission of criminal conspiracy to commit any of the offences included in the Schedule of the PMLA.
[Pavana Dibbur v. ED (Directorate of Enforcement), 2023 SCC OnLine SC 1586, Decided on 29-11-2023]
*Judgment Authored by: Justice Abhay S. Oka