ED Can't Invoke PMLA Using Section 120B IPC When Conspiracy Is Not Related To Scheduled Offence : Justice Sanjiv Khanna

Supreme Court Judge Justice Sanjiv Khanna observed that the Enforcement Directorate cannot invoke the Prevention of Money Laundering Act (PMLA) against an accused citing Section 120B of the Indian Penal Code (which deals with the offence of criminal conspiracy), if the alleged conspiracy is not related to a scheduled offence under the PMLA.

The bench comprising Justices Sanjay Kishan Kaul, Sanjiv Khanna and Bela M Trivedi is hearing a batch of applications seeking the reconsideration of the 2022 verdict in Vijay Madanlal Chaudhary v. Union of India which upheld the ED's powers relating to arrest, summoning, search and seizure and the stringent bail conditions and the reversal of the burden of proof under the PMLA.

The Prevention of Money Laundering Act can be invoked only in relation to "proceeds of crime" arising out of offences which are mentioned in the schedule of the Act.

During the hearing, Senior Advocates Kapil Sibal and Dr Abhishek Manu Singhvi, appearing for the petitioners, told the bench that the ED is applying the PMLA to income tax evasion cases too, although the Income Tax Act is not a scheduled offence, by using Section 120B IPC (which is a scheduled offence). Thus, by alleging criminal conspiracy to commit income tax offences, the ED is invoking the money laundering act, the bench was told. "In innumerable cases, S120B is added as a stand-alone offence," Singhvi said.

Justice Khanna expressed his disapproval of this approach of the ED. While agreeing that Section 120B is a standalone offence, Justice Khanna said that unless the parent offence is included in the PMLA, then the PMLA cannot be applied merely by alleging criminal conspiracy.

"If the ED says that by adding 120B added to a non-scheduled offence, cognisance can be can taken under PMLA for registration of ECIR, then I have an issue," Justice Khanna said.

"Unless parent offence is included, S 120B standalone will not make it a money laundering offence," Justice Khanna added.

Sibal argued that the PMLA was enacted with the intention to deal with organized and cross-border crimes and narcotic syndicates, but now, a host of ordinary crimes have been added as scheduled offences, resulting in a deviation from the original objective of the legislation.

The hearing will continue tomorrow.

Live updates from the hearing can be read here.

Case Details

Directorate of Enforcement v. M/s Obulapuram Mining Company Private Limited | Criminal Appeal No. 1269 of 2017