Person Accused Of PMLA Offence Need Not Be An Accused In Scheduled Offence : Supreme Court

The Supreme Court clarified that a person accused of an offence under Section 3 of the Prevention of Money Laundering Act (PMLA) need not necessarily be shown as an accused in the scheduled offence. The judgment clarified that a person, unconnected to the scheduled offence but knowingly assisting in the concealment of the proceeds of crime, can be held guilty of committing an offence under Section 3 of the PMLA.

“It is not necessary that a person against whom the offence under Section 3 of the PMLA is alleged must have been shown as the accused in the scheduled offence. What is held in paragraph 270 of the decision of this Court in the case of Vijay Madanlal Choudhary supports the above conclusion. The conditions precedent for attracting the offense under Section 3 of the PMLA are that there must be a scheduled offense and that there must be proceeds of crime in relation to the scheduled offence as defined in clause (u) of sub­section (1) of Section 3 of the PMLA.”

The Supreme Court bench comprising Justice Abhay S. Oka and Justice Pankaj Mithal was hearing an appeal filed against the judgment of Karnataka HC which refused to quash the proceedings in a case pending before Special Judge, Bangalore for the offence of money laundering against her under PMLA.

In the present case, a complaint filed by the Enforcement Directorate (ED) on March 7, 2022, against the former Vice-Chancellor of Alliance University has stirred controversy. The ED has charged the petitioner under sections 44 and 45 of the Prevention of Money Laundering Act (PMLA), citing offenses defined under section 3 read with sections 8(5) and 70, which are punishable under section 4 of PMLA.

The allegations suggested that during her tenure as VC of Alliance University from 2014 to 2016, the petitioner, acquainted with Madhukar Angur (Accused no.1), conspired to execute a sham and nominal sale deed without any consideration, involving properties belonging to Alliance University. It was further claimed that she facilitated Accused No. 1 in using her bank accounts to conceal money siphoned from the university. Here, the FIR in the predicate offence were registered under Sections 143, 406, 407, 408, 409, 149 IPC.

Taking cognizance of the allegations, the Special Judge proceeded with the case. In response, the petitioner approached the Karnataka High Court, seeking to quash the proceedings under Section 482 of the Criminal Procedure Code (CrPC).

However, the High Court, relying on the judgment in Vijay Madanlal Choudhary v. Union of India & Ors., emphasized that the phrase used by the Apex Court is "any person" and not "any accused." Therefore, one need not be accused in the principal offense to be subject to proceedings under the Act. The court further held that even assisting in the process or activity constitutes a part of the crime of money laundering

Aggrieved by the same, the petitioner approached the Supreme Court.

The Court emphasized the conditions precedent for attracting the offense under Section 3 of the PMLA. It requires the presence of a scheduled offense and the existence of proceeds of crime related to the scheduled offense. The court illustrated this with a concrete example involving extortion offenses under Sections 384 to 389 of the Indian Penal Code (IPC).

It explained “To give a concrete example, the offences under Sections 384 to 389 of the IPC relating to “extortion” are scheduled offences included in Paragraph 1 of the Schedule to the PMLA. An accused may commit a crime of extortion covered by Sections 384 to 389 of IPC and extort money. Subsequently, a person unconnected with the offense of extortion may assist the said accused in the concealment of the proceeds of extortion. Therefore, it is not necessary that a person against whom the offence under Section 3 of the PMLA is alleged must have been shown as the accused in the scheduled offence.”

One of the crucial points highlighted in the judgment was that if the prosecution for the scheduled offense concludes with the acquittal or discharge of all the accused, or if the proceedings of the scheduled offense are entirely quashed, the scheduled offense ceases to exist. In such cases, individuals cannot be prosecuted for the offense punishable under Section 3 of the PMLA since there would be no proceeds of crime.

However, the court made it clear that an accused in a PMLA case, who becomes involved after the commission of the scheduled offence by assisting in the concealment or use of proceeds of crime, does not need to be an accused in the scheduled offence. Such individuals can still be prosecuted under the PMLA as long as the scheduled offense exists.

Thus, it concluded, “Thus, the second contention raised by the learned senior counsel appearing for the appellant on the ground that the appellant was not shown as an accused in the chargesheets filed in the scheduled offenses deserves to be rejected.”

The Court also held :

"Even if an accused shown in the complaint under the PMLA is not an accused in the scheduled offence, he will benefit from the acquittal of all the accused in the scheduled offence or discharge of  all the accused in the scheduled offence. Similarly, he will get the benefit of the order of quashing the proceedings of the scheduled offence"

Also from the judgment - ED Can't Invoke PMLA Using S.120B IPC When Criminal Conspiracy Isn't Linked To A Scheduled Offence : Supreme Court

Other reports about the judgment can be read here.

Case title: PAVANA DIBBUR v. THE DIRECTORATE OF ENFORCEMENT

Citation: 2023 LiveLaw (SC) 1021

Counsel for Petitioner: Meenakshi Arora, Senior Advocate, Ms. Ashima Mandla, Ms. Mandakini Singh, Mr. Surya Pratap Singh, Mr. Chandratanay Chaube, Ms. Nanakey Kalra, Ms. Ankita Chaudhary AOR

Counsel for Respondent: Mr. S.V Raju, Ld. ASG, Mr. Mukesh Kumar Maroria, AOR

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