The Supreme Court set aside an impugned judgment by the Karnataka High Court holding that a property cannot be said to have any connection with the 'proceeds of the crime' if the acts constituting scheduled offences under the Prevention of Money Laundering Act (hereinafter referred to ‘PMLA’) were committed after the property was acquired.
Facts of the Case:
The respondent had filed a complaint under the second proviso to Section 45(1) of PMLA against the appellant before the Special Court for PMLA Cases in Bengaluru. The appellant sought to quash the complaint under Section 482 of the Code of Criminal Procedure, but the High Court dismissed this petition.
The appellant had acquired a property from Alliance Business School for Rs. 13.5 crores in 2013 and another property (Second Property) from Madhukar Angur for Rs. 2.47 crores in 2019. Both the appellant and her husband served as Vice-Chancellors of Alliance University.
An FIR was filed in 2017 against Madhukar Angur, alleging the collection of Rs. 107 crores from students. An Enforcement Case Information Report (ECIR) was registered in 2020, and the ED attached the First and Second Properties in 2021. The appellant was accused of conspiring with Madhukar Angur, facilitating the use of her bank accounts to siphon university funds, and assisting in activities connected with the proceeds of crime.
The High Court, relying on the decision in Vijay Madanlal Choudhary & Ors. vs. Union of India & Ors ( (2022) SCC Online SC 929)., dismissed the appellant's petition.
Contentions of the Appellant:
- The appellant argued that the acquisition of the first property in question predated the alleged scheduled offence and the second property was legitimately funded by the appellant.
- It was contended that since the appellant was not named in chargesheets related to scheduled offences, she could not be prosecuted under the PMLA.
- The appellant relied on Vijay Madanlal Choudhary Case to support that acquittal or discharge in scheduled/predicate offences should bar PMLA prosecution.
- Stating the absence of scheduled offences beyond Section 120-B of the Indian Penal Code (IPC), the appellant argued that a conspiracy must be linked to a scheduled offence for PMLA prosecution.
Contentions of the Respondent:
- The respondent argued that the appellant's financial capacity didn't negate the possibility of using funds siphoned (proceeds of crime) for property acquisition and such a matter must be examined during trial.
- The respondent contended that a person could be guilty of money laundering under the PMLA, even if not accused in the predicate offence, citing Section 3 of the PMLA.
- Referring to Paragraphs 4 and 6 of Part A of the Schedule of the PMLA, the respondent argued that the legislature intended certain offences to be linked. The validity of the Schedule, upheld in previous cases, should remain unchanged.
Observations of the Court:
Stressing the pivotal role of "proceeds of crime" as under PMLA and the precondition of a scheduled offence for such proceeds, the Supreme Court cited Clause (u) of Section 2(1) and Clause (y) to define "proceeds of crime" and "scheduled offence." Drawing on the precedent established in the Vijay Madanlal Choudhary Case, the Court affirmed that property linked to a scheduled offence's criminal activity constitutes proceeds of crime.
The Court discussed the inclusion of Section 120B of the IPC in Part A of the Schedule of the PMLA and discussed the legislative intent behind it. The Court concluded that for Section 120B of IPC to become a scheduled offence under the PMLA, the criminal conspiracy must be to commit an offence that is already a scheduled offence.
The Supreme Court examined the arguments advanced by the parties and held the following:
- 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;
- Even if an accused shown in the complaint under the PMLA is not an accused in the scheduled offence, they 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;
- The first property cannot be said to have any connection with the proceeds of the crime as the acts constituting the scheduled offence were committed after the property was acquired;
- The issue of whether the appellant has used tainted money forming part of the proceeds of crime for acquiring the second property can be decided only at the time of trial; and
- The offence punishable under Section 120B of the IPC will become a scheduled offence only if the conspiracy alleged is of committing an offence which is specifically included in the Schedule.
The Decision of the Court:
The Supreme Court held that the appellant cannot be prosecuted for the offences punishable under Section 3 of the PMLA due to the reasons mentioned above and set aside the impugned judgment by the Karnataka High Court.
Case Title: Pavana Dibbur vs. The Directorate of Enforcement
Coram: Hon'ble Mr. Justice Abhay S. Oka and Hon'ble Mr. Justice Pankaj Mithal
Case no.: Criminal Appeal No.2779 of 2023
Citation: 2023 Latest Caselaw 890 SC
Advocates for the Appellant: Ms. Meenakshi Arora, Sr. Adv., Ms. Ashima Mandla, Adv., Ms. Mandakini Singh, Adv., Mr. Surya Pratap Singh, Adv., Ms. Ankita Chaudhary, AOR, Mr. Chandratanay Chaubey, Adv., Ms. Nanakey Kalra, Adv.
Advocates for the Respondent: Mr. S.V. Raju, ASG, Mr. Zoheb Hossain, Adv., Mr. Mukesh Kumar Maroria, AOR, Ms. Alka Agarwal, Adv., Mr. Annam Venkatesh, Adv., Ms. Sairica Raju, Adv., Mr. Ankit Bhatla, Adv., Mr. Hitarch Raja, Adv., Ms. Madhumitta K., Adv., Mr. Harsh Paul Singh, Adv., Ms. Sonali Sharma, Adv., Mr. Vinayak Sharma, Adv., Mr. Kshitiz Aggarwal, Adv., Mr. Samrat Goswami, Adv.
Read Judgment @LatestLaws.com
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