Collecting Funds In Illegal Way To Commit Scheduled Offence In Future Is Not 'Money Laundering' Under PMLA: Delhi High Court

The Delhi High Court on Wednesday (December 4) held that collection of funds in an illegal way to commit a scheduled offence in future is not an offence of money laundering under Prevention of Money Laundering Act.

In doing so, the court underscored that 'proceeds of crime' has to be generated as a result of the alleged criminal activity.

“The funds so collected are not proceeds of crime and can be proceeds of crime only when they were generated as a result of scheduled offence,” Justice Jasmeet Singh said.

The Court said that offence committed by the collection of funds may be an offence under any law including a scheduled offence but cannot be termed as a 'proceeds of crime' to invoke section 3 of PMLA.

“The proceeds of crime has to be generated as a result of criminal activity (scheduled offence). The collection of funds in an illegal way to commit a scheduled offence in future is not an offence of money laundering under PMLA,” it added.

The Court made the observations while granting bail to three accused- Parvez Ahmed, Abdul Muqeet and Mohd Ilyas, in a money laundering case concerning the banned organization Popular Front of India (PFI).

The Enforcement Directorate (ED) had alleged that the accused, being members or office bearers of PFI, collected funds for and on behalf of the organization from unknown sources, provided fake receipts and showed the collections as legitimate donations to utilize those funds to commit terrorist activities (scheduled offence).

Allowing the bail pleas, the Court said that the case set up by ED that the funds which the accused persons were generating were used for committing a scheduled offence, hence proceeds of crime, is not the scheme of PMLA.

Questioning the ED's case in the matter the high court said,“On perusing the Complaint, there is no evidence to show that any scheduled offence has been committed, it is stated that the petitioners participated in the anti-CAA protests in Delhi which culminated in Delhi Riots. Learned counsels for the petitioners have rightly pointed out that in the present case i.e. collection of funds precedes the crime i.e. Delhi Riots. The proceeds of crime has to be generated as a result of criminal activity (scheduled offence). The collection of funds in an illegal way to commit a scheduled offence in future is not an offence of money laundering under PMLA...The case set up by the ED is putting the cart before the horse".

It added that even assuming for the sake of argument that the accused had generated proceeds of crime, even then, "prima facie", they did not have control over the said alleged proceeds of crime.

“In the present case, the role of the petitioners is that they collected funds and deposited the same to the accountant or PFI‟s account. Hence, in this scenario, prima facie, the dominion and control over the generation of alleged proceeds of crime is not of the petitioners herein,” the Court said.

Observing that the offence of money laundering was not made out against the accused persons, Justice Singh said that special statutes have stringent conditions for grant of bail but they should not become means to detain the accused without there being any possibility of concluding the trial, expeditiously.

“Merely charging an accused person under the provisions of these special statutes should not become a punishment in itself which violates Article 21. A perusal of the aforesaid judgment also shows that Article 21 prevails over the stringent conditions of section 45 of PMLA and in case the accused has been incarcerated for a reasonably long period of time without there being any reasonable chance of concluding trial, Article 21 will take primacy,” the Court said.

Counsel for Parvez Ahmed: Advocates Adit S Pujari, A Nowfal, Shaurya Mittal and Mantika Vohra

Counsel for Abdul Muqeet: Advocates Satyakam, Talha Abdul Rahman, Sudhanshuy Tewari and Arif Hussain

Counsel for Mohd Ilyas: Senior Advocate Shadan Farasat with advocates A Nowfal, Harshit Anand, Aman Naqvi and Niharika

Counsel for ED: Special Counsel Zoheb Hossain, Panel Counsel Vivek Gurnani with advocates Kartik Sabhdarwal, Pranjal Tripathi, Kanishk Maurya and Azeeq Mushtaque

Title: PARVEZ AHMED v. ED and other connected matters

Click here to read order