Mere Possession Of 'Proceeds Of Crime' Sufficient To Invoke PMLA, HC Cannot Restrict Its Meaning To Restrain Authorities: Madras High Court

“Therefore, mere possession of proceeds of crime would be sufficient to invoke the provisions of PMLA. Using the proceeds of crime by itself is an offence. Since the scope of Section 3 is wider enough to cover various circumstances in order to curb the economic offences, High Court cannot restrict its meaning so as to restrain the Authorities from invoking the provisions of PMLA,” the court observed.

The bench of Justice SM Subramaniam and Justice AD Maria Clete noted that the expression money laundering ordinarily meant placing, layering and integrating tainted property in the formal economy, since the Section has wider reach it would capture every process and activity dealing with proceeds of crime, directly or indirectly and not limited to happening of the final act of integration.

The court added that projecting the proceeds of crime as untainted property presupposed the possession of the same and the two could not be read conjunctively because of the word “and”. The court remarked if the two were read conjunctively, the effectiveness of the Section would be frustrated as a person and his accomplice may try to use the same to wriggle out of liability.

“The act of projecting or claiming proceeds of crime to be untainted property presupposes that the person is in possession of or is using the same (proceeds of crime), also an independent activity constituting offence of money-laundering. In other words, it is not open to read the different activities conjunctively because of the word “and”. If that interpretation is accepted, the effectiveness of Section 3 of the 2002 Act can be easily frustrated by the simple device of one person possessing proceeds of crime and his accomplice would indulge in projecting or claiming it to be untainted property so that neither is covered under Section 3 of the 2002 Act,” the court said.

The court was hearing a petition filed by S Srinivasan to discharge him from the money laundering offence. The case was that Srinivasan, who was the General Secretary of the All India Overseas Bank Employee Union Trust had colluded with the trust President, one L Balasubramanian and floated the money collected in the name of the trust for their own profits and projected the proceeds of crime as untainted, thereby committing the offence of money laundering as defined under Section 3 of the PMLA. Based on the FIR registered by the CBI, the ED registered the ECIR.

On behalf of Srinivasan, it was argued that he was not connected with the money collected by Balasubramanian on behalf of the trust and that he was not associated with the administration of the trust. Claiming that he was neither in possession nor in use of any property purchased by the trust, it was submitted that the element of “knowingly assist” or “knowingly is a party” or “is actually involved in any processes of activity connected with the proceeds of crime and projecting it as untainted property” as contemplated under Section 3 of PMLA was missing.

The ED however argued that the prosecution complaint was sufficient to form an opinion that a prima facie case was made out against Srinivasan and would reveal his role.

The court agreed with the ED and noted that the trial court had considered the allegations set out in the complaint and formed an opinion that Srinivasan had made out a prima facie case for discharge. Thus, finding no infirmity or perversity in the order of the Special Judge, the court dismissed the petition.

Counsel for Petitioner: Mr.R.Raja Rathinam Senior Counsel For Mr.K.Shankar

Counsel for Respondents: Mr.P.Sidharthan Special Public Prosecutor [For Enforcement Directorate]

Citation: 2024 LiveLaw (Mad) 380

Case Title: S.Srinivasan v The Assistant Director

Case No: CRL.R.C.No.1153 of 2023