Offence Committed In Foreign Country Can Be Treated As Predicate Offence Under PMLA When Proceeds Of Crime Travels To India: Delhi HC

The Delhi High Court has held that an offence committed in a foreign country under laws of that nation can be treated as a predicate offence under PMLA if it has “cross border implications” and the proceeds of the crime have travelled to India.

Perusing various provisions under PMLA and Part C of the Schedule, Justice Vikas Mahajan said:

“…if an offence has been committed in a foreign country under the laws of that country, the same can be treated as a predicate offence provided such offence corresponds to any of the offences specified under Part C of the PMLA and it has cross border implications in the sense that the proceeds of such crime has travelled to India.”

The court noted that the definition of “corresponding law” has been inserted by way of the 2013 amendment under PMLA which clarifies the position that corresponding law would mean any law of any foreign country dealing with the offences of that country which correspond to the scheduled offences.

It added that the expression “area” in sub-section (2) of Section 2 of PMLA would also mean “any foreign country.”

“The effect of the said sub-section is that it creates a deeming fiction wherein the corresponding law of any foreign country dealing with the offences in that country will have to be read into the schedule of PMLA,” the court said.

Justice Mahajan held that a predicate offence under the corresponding law of a foreign country can only be tried as per the procedure in force in that foreign country and Section 44(1)(c) of the Act will have no application in such a situation.

The court made the observations while granting bail to three individuals, Adnan Nisar, Shivang Malkoti and Vishal Moral.

ED had received a Mutual Legal Assistance (MLA) Request from the U.S. Department of Justice. It was alleged that Moral, an Indian National, had committed the money laundering offence under the US Code.

A victim in the US has reported that in August 2022, cryptocurrencies worth approximately US$ 527,615.45 had been fraudulently transferred from the virtual currency addresses of his Ledger Hardware Wallet. It was found that both addresses were linked to an account belonging to Moral.

ED was satisfied that the offences being investigated by the US authorities under their relevant laws correspond to Section 75 of the Information Technology Act, 2000 and Sections 420 & 424 IPC in India, which fall under the Schedule of the PMLA.

ED conducted searches and it was revealed that Moral had been committing the said offences along with many individuals, Indian and foreign nationals, including Malkoti and Nisar who had been assisting him.

Justice Mahajan analyzed Section 60 which provides for attachment, seizure and confiscation of property in the contracting State of India.

The court observed that though a request from the contracting state may be confined to attachment, seizure, freezing or confiscation of the property in India, steps to be taken for executing the said request may include conducting an inquiry, investigation or survey.

The Court agreed with ED's submission that the request of the U.S. Authorities in the MLA was to obtain evidence and when such a request was received, the probe agency was empowered to do everything required, including the arrest of the accused post lodging of a case under section 3 and 4 of the PMLA, to gather all evidence that may be available.

“Clearly, the predicate offence has been committed in U.S. and the same is being tried there though it has cross border implications. It is only the offence under PMLA that is being tried in India. Since the proceeds of crime related to the predicate offence have travelled to India, the offence under PMLA being a standalone offence, has been committed in India in its entirety, therefore, no sanction as mandated under proviso to Section 188 CrPC is required for the said offence,” the court said.

However, taking judicial notice of the corresponding law of the U.S., Justice Mahajan said that in the absence of material on record in the form of a relevant statute supported by the opinion of experts, there was nothing to establish even prima facie that the alleged predicate offence corresponds to the offences mentioned in the Schedule of the PMLA.

Incidentally, in the absence of the commission of the scheduled offence, there cannot be any proceeds of crime, the court said.

It was prima facie observed that there was a missing link to establish that the seized amount from the account of Moral were proceeds of crime from an offence committed in the U.S. which corresponded to the scheduled offences.

It further added that merely seizure of the amount pursuant to an MLA request is not sufficient for Moral to assume the burden to convince the Court in terms of Section 45 of the PMLA that there were reasonable grounds to believe that he was not guilty of an offence under the Act.

“…the role ascribed to co-accused Adnan Nisar and Shivang Malkoti is subsidiary to that of main accused/Vishal Moral, therefore, all the factors discussed in favour Vishal Moral in the scheme of broad probabilities shall enure to their benefit as well,” the court said.

Counsel for Petitioners: Mr. Tanveer Ahmed Mir, Mr. Kartik Venu, Mr. Shashwat Sarin and Mr. Ariana D. Ahluwalia Advs

Counsel for Respondent: Mr. Zoheb Hossain, Special Counsel for ED with Mr. Vivek Gurnani Mr. Kartik Sabharwal and Mr. Abhipriya Rai, Advs

Title: ADNAN NISAR v. ED & other connected matters

Citation: 2024 LiveLaw (Del) 1030

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