Person Not Prosecuted For Predicate Offence Can Be Prosecuted For Money Laundering Under PMLA: Madras High Court

The Madras High Court has made it clear that Supreme Court's decision in Vijay Madanlal Choudhary and others v. Union of India and others does not preclude the Enforcement Directorate from prosecuting a person for offence of money laundering under PMLA, merely because such person was not prosecuted for the predicate offence.

The bench of Justices PN Prakash and Teeka Raman found force in the submission that while a person may not be involved in the original criminal activity that had resulted in the generation of "proceeds of crime", such person may later help the main accused in laundering the proceeds of crime.

The Court was hearing a quashing petition moved by a man accused of voluntarily lending his name for purchase of property using tainted money. Though he was not prosecuted by the CBI in the corruption FIR, he was booked by the ED under Prevention of Money Laundering Act (PMLA). 

It was alleged that a group of men had entered into a criminal conspiracy to cheat M/s.Global Trade Finance Limited (GTFL) and received a loan of Rs. 15 crore from the company using fake documents with the help of its Manager. Using this siphoned off money, 166 acres of land was purchased in the name of different persons including the petitioner. This land was later sold to genuine buyers.

The details of fraudulent transaction was noticed when GTFL was merged with SBI. On a complaint given by SBI, the CBI registered a case for offences u/s.120-B r/w 420, 467 and 471 IPC and Section 13 of the Prevention of Corruption Act. The petitioner was not an accused in these proceedings. Later, the Enforcement Directorate also registered a case for the offence u/s.3 r/w 4 of the PML Act in which the petitioner was named as an accused. 

Relying upon the recent decision of Supreme Court in Vijay Madanlal Choudhary and others v. Union of India and others, the petitioner contended that since he was not an accused in the proceedings by the CBI, his prosecution by the Enforcement Directorate was illegal. Quoting the Apex Court decision, the petitioners submitted that when a person was acquitted or discharged in the predicate offence, his prosecution under PMLA cannot be maintained.

However, counsel for the Enforcement Directorate informed the court that the above observation was made when the person was named as an accused in predicate offense. This benefit was not applicable to a person who was not made an accused in the predicate offense. 

The counsel submitted that even after commission of the scheduled offence and generation of proceeds of crime, different persons can join the main accused either as abettors or conspirators for committing the offence of money laundering by helping him in laundering the proceeds of crime. Such persons may not be involved in the original criminal activity that had resulted in the generation of "proceeds of crime", and thus may not be convicted in the predicate offense. But at the same time their prosecution under the PMLA cannot be said to be illegal as the offence under PMLA is a standalone offence and is different and distinct from the predicate offense.

The court thus noted that the observation in Vijay Madanlal Choudhary could not be applied in the present case as the petitioner was not an accused in the predicate offence. 

We cannot enlarge the scope of paragraph 467(d) of Vijay Madanlal's case [supra] and read into it things that have not been said, in the name of logical reasoning. Law is not always logic, the court observed.

"On facts, we find that Rajendran [A6] had voluntarily lent his name for the purchase of the property under the sale deed dated 09.09.2009 with the tainted money that was generated by G.Srinivasan [A1] and R. Manoharan [A2] by committing a scheduled offence. Under Section 24 of the PMLA, there is a statutory presumption which can be discharged only during trial," Court added.

It thus dismissed the petition holding that it was devoid of any merits. 

Case Title: P Rajendran v. The Assistant Director, Directorate of Enforcement

Case No: Criminal Original Petition No.19880 of 2022

Citation: 2022 LiveLaw (Mad) 435

Counsel for the Petitioner: Mr.Sharath Chandran for Mr.S.Ramesh

Counsel for the Respondent: Mr.N.Ramesh Special Public Prosecutor [ED]