PMLA | Offence Of Money Laundering Layered, Includes Stages Preceding & Succeeding The Offence But Mere Suspicion Not Prima Facie Proof: Delhi HC

The Delhi High Court on Thursday held that the offence of money laundering under the Prevention of Money Laundering Act, 2002 is layered and multi-fold which includes the stages preceding and succeeding the offence.

Justice Chandra Dhari Singh added that the PMLA is a special enactment to combat the menace of money laundering, keeping in view the illegal practices that have been surfacing with respect to transfer and use of tainted money and subsequent acquisition of properties by using the same. 

"The offence of money laundering is three- fold including the stages of placement, whereby the criminals place the proceeds of crime to the general and genuine financial system, layering, whereby such proceeds of crime are spread into various transactions within the financial system and finally, integration, where the criminals avail the benefits of crime as untainted money. The offence of money laundering under the PMLA is therefore, layered and multi-fold and includes the stages preceding and succeeding the offence of laundering money as well," the Court said. 

The observation was made while dismissing a revision petition filed by Enforcement Directorate assailing an order dated 15th May, 2017, passed by the Special Judge whereby all the accused persons were discharged on the ground that no prima facie case was made out against them.

Criminal proceedings under PMLA were initiated against the accused persons on the basis of independent intelligence gathered by ED regarding money laundering activities. An FIR under Section 21, 25, 29 and 61 of the Narcotic Drugs and Psychotropic Substance Act, 1985, and 420, 468, 471 and 120B of the Indian Penal Code, 1860 was registered by the State Special Operation Cell, Amritsar.

A Mutual Assistance Request (MAR) was also issued by the Australian Competent Authority regarding the involvement of the accused persons in criminal activities that constitute offences under Part A and Part C of the schedule to PMLA, based on which, on 24th September, 2014, ED had initiated criminal proceedings under the PMLA against the Respondents accused.

It was the case of the ED that the Respondents accused were found to be allegedly involved in an international syndicate of laundering the money generated out of drug trafficking in Australia and other countries.

The "Operation Zanella" of the Australian Federal Police revealed that the proceeds of the crime were laundered by the Respondents and their associates by sending the same through their Australian bank accounts to their bank accounts in Hong Kong and were thereby, made available to carry out activities of organized crime in different countries.

While the three accused were based in India, other four accused were based in Australia, who according to the agency had been carrying out cross border criminal activities together.

The Special Judge, considering all the material before it, vide the impugned order discharged all the respondents accused and released their properties.

It was observed by the Additional Sessions Judge that as per the material available it cannot be established that the accused persons were involved in any offence involving money laundering and the complaints have been made on the basis of suspicion of the Petitioner. It was further noted that any suspicion which is not well founded cannot be considered a prima facie proof.

ED had filed a supplementary complaint on the basis of findings and recovery made during further investigation. Thereafter, taking into account all the material before it, the Additional Sessions Judge had discharged the Respondents accused of sec. 3 and 4 of the PMLA and sec. 20, 22 and 27A of the NDPS Act.

ED was thus aggrieved by the said Order of discharge and had impugned the same by invoking the revisional jurisdiction of the High Court.

At the outset, the Court analyzed the legislative scheme of the PMLA. It observed thus:

"The legislation of PMLA had been enacted with the objective to prevent and control money laundering and to confiscate and seize the property obtained from the laundered money. The PMLA is a specific and special enactment to combat the menace of laundering of money, keeping in view the illegal practices that have been surfacing with respect to transfer and use of tainted money and subsequent acquisition of properties by using the same."

The Court added that the the offence of money laundering is not to be appreciated in isolation but is to be read with the complementary provisions, that is, the offences enlisted in the Schedule of the Act.

"The bare perusal of the abovementioned provisions of the PMLA establishes the pre-requisite relation between the commission of scheduled offences under the PMLA and the subsequent offence of money laundering. The language of Section 3 clearly implies that the money involved in the offence of money laundering is necessarily the proceeds of crime, arising out of a criminal activity in relation to the scheduled offences enlisted in the Schedule of the Act. Hence, the essential ingredients for the offence of Section 3 of the PMLA become, first, the proceeds of crime, second, proceeds of crime arising out of the offences specified in the Schedule of the Act and third, the factum of knowledge while commission of the offence of money laundering," the Court observed at the outset.

The Court was of the view that the ED was not able to establish the allegations against the Respondents accused and that the material produced was not sufficient to find guilt against them.

"Since there was no material on record that casted a shadow of doubt over the Respondents, they were rightly discharged of the offences. Therefore, there is no apparent error, gross illegality or impropriety found in the Order of the learned Additional Sessions Judge," the Court said.

Accordingly, upholding the impugned order, the Court dismissed the revision petition.

Case Title: DIRECTORATE OF ENFORECEMENT v. GAGANDEEP SINGH & ORS

Citation: 2022 LiveLaw (Del) 124

Click Here To Read Order