Supreme Court Dismisses Ex-AAP Councillor Tahir Hussain's Plea Challenging Money Laundering Charges

A Bench of Justices V Ramasubramanian and Pankaj Mithal, in the order, said,

“The case is only at the stage of framing of the charges. Therefore, we see no reason to interfere with the impugned order at this stage. It is needless to say that the proceedings have to be as per in the judgement laid down in Vijay Madanlal Choudary vs Union of India”.

In 2022, the Top Court upheld the provisions of the Prevention of Money Laundering Act, 2002 which relate to the power of arrest, attachment and search and seizure conferred on the Enforcement Directorate in Vijay Madanlal’s case.

Hussain was challenging a Delhi High Court order which had dismissed his plea challenging the charges framed against him in a money laundering case registered in connection with the North East Delhi riots of 2020.

Justice Anu Malhotra had observed that the alleged commission of a conspiracy "even for the purpose of GST violation in order to avail money" through criminal conspiracy for using proceeds of crime to commit 2020 riots and to cause unrest, prima facie falls within the ambit of commission of a scheduled offence under PMLA.

Before the Bench today, Senior Advocate Menaka Guruswamy, appearing for the petitioner argued that anti-riot laws cannot be used to initiate money laundering proceedings. “The companies are legitimate. The State prejudicing us through 3 FIRs is a dark time in this city's history”.

The ED's case is that he was the ultimate beneficiary of laundered money and used it during the riots in North- East Delhi in February 2020. The PMLA case was registered on the basis of the three FIRs lodged in relation to the riots - FIR No. 59/2020, FIR No. 65/2020 and FIR No. 88/2020.

She pointed out that none of the 21 witnesses produced by the State were aware of any money laundering or proceeds from it.

The state's “best scenario” is referring to “fake invoices”, which again isn’t a money laundering offence but a GST offence, it was argued.

“That's a GST offence arising out of legitimate businesses. It is not a scheduled offence. The origin of the money is not criminal; it's a part of the business”.

According to the Enforcement Directorate, Hussain "hatched a conspiracy with his associates to fraudulently withdraw money" from the accounts of certain companies — M/s. Show Effect Advertisement Pvt. Ltd. (SEAPL), M/s. Essence Cellcom Pvt. Ltd. (ECPL) and M/s. Essence Global Services Pvt. Ltd. (EGSPL), "owned and controlled" by him "through bogus and malafide transactions with bogus entry operator on the strength of fake bills".

The State should not only show a scheduled offence but also a predicate offence, the senior advocate further argued.

“If the state is allowed to turn every riot to a laundering offence, it negates the substance of the Vijay Madanlal Chowdary Judgement….State seeks to prejudice us. Money laundering is a serious offence. Predicate offence not being made out cannot be justified.”

Guruswamy further argued that the State must show either of the two-that the companies are tainted or that money in the Companies is being laundered.

“State must show either that that the companies are tainted. They are welcome to show that but they are unable to show that. Or that money in the Companies is being laundered. State is showing flow of money, trail of the money between legitimate corporations.”

The Bench then asked if the petitioner’s argument was this - at the stage of income, it should be linked to a crime, at the stage of expenditure, it’s not required.

“No. We are on proceeds of crime. It should be tainted”, she clarified.

Pointing to one of the FIRs, Guruswamy argued that it’s a “textbook FIR” for criminal conspiracy. “There is nothing in it (any of the FIRs) which relates to cash or money laundering or proceeds of crime”.

“If you are an accused in the other three FIRs, what remains?”, the Bench asked.

There should have been an FIR in the relevant jurisdiction speaking of a scheduled offence, Guruswamy added.

The Bench disagreed with this argument.

“A scheduled offence wherever it is committed, an independent FIR can be registered. It does not mean that an FIR will have to be registered, thereafter an ECIR (the document registered by ED in money laundering cases).”

At this juncture, it also said that if there’s a causal connection between the FIR and prosecution complaint, the court only has to look at the allegations. All other aspects would come up at the time of trial.

ED submitted that there was an alleged conspiracy to fund the riots in which fake bills were prepared and cash was later given to various persons to commit the offences.

It was also argued that there was enough material to show that property and proceeds of crime were used in furtherance of a larger conspiracy to fund the riots.

Case Title: Mohd. Tahir Hussain vs Assistant Director, ED | SLP (Crl) 2491/2023