Prosecution Under PMLA Not Possible After Accused Is Acquitted Of Scheduled Offence: Supreme Court

The Supreme Court reiterated that an person acquitted of scheduled offence cannot be prosecuted under Prevention of Money-Laundering Act, 2002.

In this case, the Lokayukta Police registered a case under Section 13(1)(e) read with Section 13(2) of the Prevention of Corruption Act, 1988 against the accused, who was a Deputy Revenue Officer. During the pendency of trial, the Directorate of Enforcement registered a case against the accused and his wife and son and filed a complaint under Section 3 of the PMLA Act before the Special Court. Later, the Special Judge (Lokayukta) acquitted him of the offences aforesaid under the Prevention of Corruption Act of 1988 while observing that the evidence produced by the prosecution was insufficient to hold him guilty. Then, the accused moved an application under Section 277 of the Code of Criminal Procedure, 1973 seeking discharge in the case pertaining to the  PMLA Act. One of the accused expired  and thereafter the Trial Court discharged the other accused observing that occurrence of a scheduled offences was the basic condition for giving rise to "proceeds of crime"; and commission of scheduled offence was a pre-condition for proceeding under the PMLA Act. Allowing the Revision Petition filed by the Enforcement Directorate, the High Court set aside this order of discharge.

In appeal, the bench comprising Justices Dinesh Maheshwari and Krishna Murari noted the following observations made in Vijay Madanlal Choudhary vs Union of India 2022 LiveLaw (SC) 633: 

"The offence under Section 3 of the 2002 Act is dependent on illegal gain of property as a result of criminal activity relating to a scheduled offence. It is concerning the process or activity connected with such property, which constitutes the offence of money-laundering. The Authorities under the 2002 Act cannot prosecute any person on notional basis or on the assumption that a scheduled offence has been committed, unless it is so registered with the jurisdictional police and/or pending enquiry/trial including by way of criminal complaint before the competent forum. If the person is finally discharged/acquitted of the scheduled offence or the criminal case against him is quashed by the Court of competent jurisdiction, there can be no offence of money laundering against him or any one claiming such property being the property linked to stated scheduled offence through him.""

Allowing the appeal, the court observed thus:

The result of the discussion aforesaid is that the view as taken by the Trial Court in this matter had been a justified view of the matter and the High Court was not right in setting aside the discharge order despite the fact that the accused No. 1 had already been acquitted in relation to the scheduled offence and the present appellants were not accused of any scheduled offence.

Case details

Parvathi Kollur vs State by Directorate Of Enforcement | 2022 LiveLaw (SC) 688 | CrA 1254 OF 2022 | 16 August 2022 | Justices Dinesh Maheshwari and Krishna Murari

Headnotes

Prevention of Money-Laundering Act, 2002 ; Section 3 - Accused no.1  acquitted of scheduled offence - Prosecution of Wife and son of the accused under PMLA Act - The view as taken by the Trial Court in this matter had been a justified view of the matter and the High Court was not right in setting aside the discharge order despite the fact that the accused No. 1 had already been acquitted in relation to the scheduled offence and the present appellants were not accused of any scheduled offence - Referred to Vijay Madanlal Choudhary vs Union of India 2022 LiveLaw (SC) 633. 

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