2017 (9) TMI 1606 - HC - Money Laundering

Offence under Sections 3 and 4 of the Prevention of Money Laundering Act 2002 - Held that - The illegal activities committed by the persons in the helm of affairs cannot be attributed to the petitioner company more particularly the allegation of forgery as all those illegalities were committed by them behind the back and without the involvement of the petitioner company. Thus if the allegations made are taken at their face value and accepted in their entirety they do not prima facie constitute any offence or make out a case against the petitioner company. The petitioners cannot be proceeded against under sections 3 and 4 of the Act 2002. The trial Court has failed to consider all these legal aspects and therefore the order impugned is liable to be set aside.

Summary

Issues:
1. Application of the Prevention of Money Laundering Act, 2002 to the case.
2. Alleged delay in invoking provisions of the Prevention of Money Laundering Act, 2002.
3. Retroactive application of criminal liability.
4. Prosecution under the Prevention of Money Laundering Act, 2002 for incidents pre-2009.

Analysis:
1. The case involved a revision filed by accused Nos. 1 to 3 challenging an order passed by the Metropolitan Sessions Judge, Cyberabad, in a criminal matter. The accused were charged with acquiring assets disproportionate to their known sources of income. The CBI initiated proceedings under the Prevention of Corruption Act, 1988, and later, the Directorate of Enforcement filed a case under the Prevention of Money Laundering Act, 2002. The defense argued that the Money Laundering Act cannot be applied retroactively to incidents pre-2009 when the alleged offenses occurred. The court examined the intentional aspect of money laundering and found that the allegations in both the corruption and money laundering cases were identical.

2. The defense raised concerns about the delay of 3 to 4 years in invoking the provisions of the Prevention of Money Laundering Act, 2002 against the accused. The court noted the absence of a satisfactory explanation for this delay in applying sections 3 and 4 of the Money Laundering Act to the accused. This raised questions about the timing and procedural aspects of invoking the money laundering charges against the accused.

3. The defense argued that the application of the Prevention of Money Laundering Act, 2002 to the case should be prospective, not retrospective. Citing legal precedents, the defense contended that criminal liability cannot be imposed retroactively for incidents that occurred before the relevant laws were in force. The defense relied on judgments highlighting the principle that new laws cannot be applied to past incidents.

4. The court considered the timeline of events, noting that the alleged offenses took place in 2008, before the relevant amendments came into effect in 2009. The defense emphasized that prior to the amendment, none of the provisions invoked by the Enforcement Directorate were part of the legal framework. The court agreed with the defense's argument that the accused cannot be prosecuted under the Money Laundering Act for acts committed before the relevant provisions were enacted. Relying on legal precedents and constitutional provisions, the court concluded that the accused should be discharged from the charges under the Prevention of Money Laundering Act, 2002.