Deposit Made Under Section 21(5) MMDRA For Illegal Mining Not "Proceeds Of Crime" Under PMLA : SC Expresses Prima Facie View

The Supreme Court has expressed a prima facie view that deposit made under Section 21(5) of the Mines and Minerals Development and Regulation Act(MMDRA) for unlawful mining cannot be treated as "proceeds of crime" under the Prevention of Money Laundering Act(PMLA).

A bench comprising Justices AM Khanwilkar and Dinesh Maheshwari made this observation while hearing an application seeking to restrain the Enforcement Directorate from proceeding against a deposit made under Section 21(5) of the MMDRA.

Under Section 21(5), the State Government has the power to recover from a person the price of minerals raised without lawful authority.

As per the PMLA, "proceeds of crime" means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property.

Notably, the MMDRA is not a scheduled offence under the PMLA.

The petitioner relied on the observations of the Supreme Court in Common Cause vs Union of India (2017) 9 SCC 499 in which it was held that Section 21(5) MMDRA was not a penal provision but was intended to compensate the State for unlawful mining.

"Prima facie, we find force in the argument that such deposit cannot be treated as proceeds of crime", the bench observed while issuing notice to the ED.

The case will be next considered on April 7.

Click here to read/download the order