ED Can't Invoke PMLA Using S.120B IPC When Criminal Conspiracy Isn't Linked To A Scheduled Offence : Supreme Court

In an important judgment pronounced today, the Supreme Court clarified that an offence of criminal conspiracy punishable under Section 120-B of the Indian Penal Code will be deemed a scheduled offence under the Prevention of Money Laundering Act (PMLA) only if the alleged conspiracy is directed towards committing an offence specifically included in the schedule of the PMLA.

“An offence punishable under section 120-B will become a scheduled offence only if the conspiracy alleged is of committing an offence specifically included in the schedule. On that ground, we've quashed the proceedings," ruled the Court.

The bench comprising Justice Abhay S. Oka and Justice Pankaj Mithal pronounced the judgment in an appeal against a judgment of the Karnataka High Court which refused to quash the proceedings in a case pending before Special Judge, Bangalore for the offence of money laundering against her under PMLA. 

Here, the FIR in the predicate offence were registered under Sections 143, 406, 407, 408, 409, 149 IPC. The Prevention of Money Laundering Act can be invoked only in relation to "proceeds of crime" arising out of offences which are mentioned in the schedule of the Act.  Though the offences in the present case were not "scheduled offences", the Enforcement Directorate applied the PMLA by invoking Section 120B IPC(which is a scheduled offence).

It may be recalled that last week, the special bench which was hearing applications to reconsider the Vijay Madanlal Choudhary judgment had orally remarked that ED cannot invoke Section 120B IPC when the criminal conspiracy is not linked to a scheduled offence.

In the present case, a complaint filed by the Enforcement Directorate (ED) on March 7, 2022, against the former Vice-Chancellor of Alliance University has stirred controversy. The ED has charged the petitioner under sections 44 and 45 of the Prevention of Money Laundering Act (PMLA), citing offenses defined under section 3 read with sections 8(5) and 70, which are punishable under section 4 of PMLA.

The allegations suggested that during her tenure as VC of Alliance University from 2014 to 2016, the appellant acquainted with Madhukar Angur (Accused no.1), conspired to execute a sham and nominal sale deed without any consideration, involving properties belonging to Alliance University. It was further claimed that she facilitated Accused No. 1 in using her bank accounts to conceal money siphoned from the university.

Taking cognizance of the allegations, the Special Judge proceeded with the case. In response, the petitioner approached the Karnataka High Court, seeking to quash the proceedings under Section 482 of the Criminal Procedure Code (CrPC).

However, the High Court, relying on the judgment in Vijay Madanlal Choudhary v. Union of India & Ors., emphasized that the phrase used by the Apex Court is "any person" and not "any accused." Therefore, one need not be accused in the principal offense to be subject to proceedings under the Act. The court further held that even assisting in the process or activity constitutes a part of the crime of money laundering

Aggrieved by the same, the appellant approached the Supreme Court.

During the hearing yesterday, Senior Advocate Meenakshi Arora, representing the appellant, argued that her client was neither named in the FIR nor in the subsequent chargesheet. The petitioner was only arraigned as an accused for the first time in a complaint under sections 44 and 45 of PMLA.

In response, the Additional Solicitor General contended that the PMLA is an independent code, and a person who is not named in the FIR can be arraigned as an accused.

The next question before the bench was whether properties purchased prior to the commission of a predicate schedule offence could be considered as "Proceeds of Crime".

Arora, relying on Vijay Madanlal Chowdhury v. Union of India, argued that proceeds of crime must be derived from criminal activity related to a scheduled offence. However, the ASG opposed this stance.

The third question centered on whether Section 120-B of the Indian Penal Code (IPC) can be utilized independently by authorities under PMLA for investigation or if it must be read together with other scheduled offenses.

Arora vehemently argued that Section 120-B cannot stand alone, emphasizing the need for a conspiracy to commit an illegal act mentioned in the scheduled offences under Section 2(y) of PMLA.

Finally, the Court had posed a hypothetical scenario to the ASG: "If there is a theft of 100 crores and there is no scheduled offense other than 120-B, then will the authorities under PMLA have the power to initiate the prosecution?"

The ASG had submitted that the authorities would rightfully have the power to investigate the offense, citing Section 120-B as a scheduled offense under Section 2(y) of the PMLA Act.

However, the Senior Counsel for the petitioner submitted that in accordance with Vijay Madanlal Chowdhury v. Union of India & Ors., the existence of proceeds of crimes is quintessential and authorities under PMLA cannot step in sans the thereof.

Case title: PAVANA DIBBUR v. THE DIRECTORATE OF ENFORCEMENT

Citation: 2023 LiveLaw (SC) 1021

Counsel for Petitioner: Meenakshi Arora, Senior Advocate, Ms. Ashima Mandla, Ms. Mandakini Singh, Mr. Surya Pratap Singh, Mr. Chandratanay Chaube, Ms. Nanakey Kalra, Ms. Ankita Chaudhary AOR

Counsel for Respondent: Mr. S.V Raju, Ld. ASG, Mr. Mukesh Kumar Maroria, AOR

Click here to read the judgment