Money Laundering Includes Every Activity Dealing With Proceeds Of Crime, Not Limited To Final Act Of Integrating Money Into Economy: Madras HC

Justice SM Subramaniam and Justice V Sivagnanam noted that the wording of Section 3 should not be read conjunctively merely because the definition uses the word 'and'. The court added that if such an interpretation was accepted, the whole Section would be rendered less effective as one person would possess the proceeds of crime and another would project it as tainted money so that neither would be covered under the Act. The court thus observed that PMLA could be invoked against a person, who was no longer in possession and enjoyment of proceeds of crime.

“The act of projecting or claiming proceeds of crime to be untainted property presupposes that the person is in possession of or is using the same (proceeds of crime), also an independent activity constituting offence of money-laundering. In other words, it is not open to read the different activities conjunctively because of the word "and". If that interpretation is accepted, the effectiveness of Section 3 of the 2002 Act can be easily frustrated by the simple device of one person possessing proceeds of crime and his accomplice would indulge in projecting or claiming it to be untainted property so that neither is covered under Section 3 of the 2002 Act. Thus, a person who is as longer as in possession and enjoyment of Proceeds of Crime, PMLA can certainly be invoked,” the court observed.

The court was hearing petitions filed by Pallab Sinha (former Superintendent of Customs) and Jagmohan Meena (former Preventive Officer) who were working at Unaccompanied Baggage (Air), Customs, Chennai from June 18, 2009, to November 23, 2009.

The charge against the petitioners was that while working at the Customs office, they received illegal gratification from passengers from foreign countries for clearance of their unaccompanied baggage by charging less or no duty through a private person. The CBI registered an FIR against the petitioners and other officers for offences under Section 7,8, 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act 1988 read with Section 120 (B) of the IPC. One Haniffa also handed over amounts that he claimed to have received from the accused to the CBI.

Based on the FIR, the ED registered an ECIR in 2012 and also provisionally attached the amounts received from the accused persons. Though the accused persons filed discharge petitions, the same were dismissed by the Additional Special Court for CBI Cases. The present revision petitions were filed challenging these orders.

The petitioners argued that cash seized by the CBI was immediately deposited in the court in the year 2009 and thus when the ECIR was registered in 2012, the accused persons were not in possession of “proceeds of crime”. It was argued that as per the pre-amended provision, which existed at the time, concealment or possession was not an offence. The Special Public Prosecutor, however, opposed the plea and submitted that the petitioners were advancing an erroneous interpretation of Section 3 of PMLA.

The court noted that as per the judgments of the Supreme Court, mere possession of tainted money would fall within the definition of money laundering. The court also noted that as per the order of the Supreme Court in Y. Balaji Vs. Karthik Dasari, mere receipt of bribe money amounts to proceeds of crime and would fall under S. 3 of PMLA.

Thus, the court noted that the question of discharging the petitioners on the ground that they did not possess the proceeds of crime after 2009 was untenable. The court was thus not inclined to interfere with the findings of the trial court and thus rejected the petitions.

Counsel for the Petitioner: Mr. R. Raja Rathinam, Senior Counsel for Mr.M.S.Sriram & Mr. A.Ashwin Kumar

Counsel for the Respondents: Mr.P.Siddharthan Special Public Prosecutor for ED

Citation: 2024 LiveLaw (Mad) 354

Case Title: Pallab Sinha and another v The Deputy Director

Case No: Crl.R.C.Nos.1697 & 1699 of 2022