2025 (6) TMI 1437 - HC - Money Laundering

Money Laundering - proceeds of crime - proceeding under PMLA 2002 are within jurisdiction or not - offences allegedly committed between June 13 2005 and June 16 2007 - Schedule of offences to the Act was amended with effect from June 1 2009 - applicability of pecuniary jurisdictional limits - HELD THAT - In the facts and circumstances of the present case it appears that the appellants were dealing with immovable properties concerned as well as the proceeds of the crime subsequent to June 1 2009. Therefore the contention of the appellants cannot be agreed upon that the period of offence being prior to June 1 2009 therefore the provisions of Act of 2002 are not attracted. The proceedings initiated by ED as against the appellants herein relates to Section 2(1)(y) Clause (i) of the Act of 2002 which does not prescribe any pecuniary value. That apart Clause (ii) prior to its amendment stood at Rs. 30 lakhs whereas the proceeds of the crime are in excess of Rs. 5.24 crores. Even taking the value prescribed by way of the amendment to Clause (ii) then also the proceedings are in respect of proceeds of crime far in excess of the prescribed limit - In a proceeding under the Act 2002 so as to adjudicate whether the subject-matter falls within the pecuniary jurisdiction or not one should be concerned with the quantum of the fraud committed rather the value of the immovable properties concerned. Moreover the prescription of value as made under the Act 2002 under Section 2(1)(y) relates to Part-B of the Schedule and not to Part-A thereof. The offence alleged as against the appellants are under Part-A of the Schedule. The contention that the proceedings being below the prescribed pecuniary limit is without any basis. Conclusion - The offence alleged as against the appellants are under Part-A of the Schedule. The contention that the proceedings being below the prescribed pecuniary limit is without any basis. There are no merit in the present appeal - appeal dismissed.

Summary

Two appeals challenge the Final Order dated February 25, 2025, passed by the Appellate Tribunal under SAFEMA, New Delhi, concerning proceedings initiated under the Prevention of Money Laundering Act, 2002 (hereinafter "the Act of 2002"). The core legal questions addressed by the Court are:

1. Whether the Enforcement Directorate (ED) had jurisdiction to proceed under the Act of 2002 for offences allegedly committed between June 13, 2005 and June 16, 2007, given that the Schedule of offences to the Act was amended with effect from June 1, 2009.

2. Whether the pecuniary jurisdictional limits prescribed under the Act of 2002 apply to the present proceedings, particularly considering the value of the properties involved and the nature of the scheduled offences.

3. Whether the appellants' possession of the proceeds of crime after the amendment of the Schedule to the Act impacts the applicability of the Act of 2002.

4. The relationship between ongoing proceedings under the Recovery of Debts due to Banks and Insolvency Act, 1993, and criminal proceedings, vis-`a-vis the invocation of the Act of 2002.

Issue 1: Jurisdiction of the Enforcement Directorate under the Act of 2002 for offences committed prior to June 1, 2009

Relevant Legal Framework and Precedents: The Act of 2002 aims to prevent money laundering and provides for attachment and confiscation of property derived from or involved in money laundering offences. The Schedule to the Act lists the offences which, when committed, trigger the applicability of the Act. The Schedule was amended effective June 1, 2009. The question arises whether offences committed prior to the amendment fall under the purview of the Act, especially when the alleged proceeds remain in possession of the accused after the amendment.

Court's Interpretation and Reasoning: The Court emphasized that the essence of the Act is to prevent money laundering by targeting possession of proceeds of crime. The temporal aspect of the offence's commission is not determinative if the accused remain in possession of the proceeds after the amendment date. The Court reasoned that the appellants continued to possess the proceeds of the crime beyond June 1, 2009, and therefore, the ED's jurisdiction under the Act of 2002 is valid.

Key Evidence and Findings: The appellants borrowed from Indian Overseas Bank by mortgaging immovable properties and failed to repay the loan. The Central Bureau of Investigation (CBI) registered an FIR alleging fraud from June 13, 2005 to May 16, 2007, involving a loss of Rs. 5.24 crores to the bank. The Enforcement Directorate initiated investigation and attached 11 immovable properties under a Provisional Attachment Order dated April 3, 2014. The adjudicating authority confirmed the attachment on June 30, 2016.

Application of Law to Facts: Since the appellants were in possession of the proceeds of crime after June 1, 2009, the date of amendment to the Schedule, the invocation of the Act of 2002 is justified. The Court rejected the appellants' contention that the offences being prior to the amendment date excludes the applicability of the Act.

Treatment of Competing Arguments: The appellants argued that since the offences were committed before the amendment, the Act could not be invoked. The Court countered this by focusing on possession of proceeds post-amendment, a continuous offence under the Act. The Court also noted the appellants' failure to commit to any repayment schedule and their continued possession of the alleged proceeds of crime.

Conclusion: The Court held that the ED had jurisdiction to proceed under the Act of 2002 despite the offences being committed prior to June 1, 2009, because the appellants continued to possess the proceeds of crime after that date.

Issue 2: Applicability of Pecuniary Jurisdictional Limits under the Act of 2002

Relevant Legal Framework and Precedents: Section 2(1)(y) of the Act of 2002 defines "scheduled offence." Clause (ii) of this section prescribes a pecuniary threshold for certain offences, which was amended in 2015 to raise the limit from Rs. 30 lakhs to Rs. 1 crore. However, offences under Part A of the Schedule do not prescribe any pecuniary limit.

Court's Interpretation and Reasoning: The Court clarified that the proceedings initiated by the ED relate to offences under Part A of the Schedule, which do not have any pecuniary limit. Even if Clause (ii) were applicable, the proceeds of crime in this case exceed Rs. 5.24 crores, well above the prescribed limits. The Court further noted that the relevant consideration is the quantum of fraud committed, not the value of the immovable properties mortgaged.

Key Evidence and Findings: The fraud amount alleged is Rs. 5.24 crores, which significantly exceeds both the Rs. 30 lakhs and Rs. 1 crore thresholds. The properties mortgaged were valued less than Rs. 30 lakhs, but the Court held this irrelevant for jurisdictional purposes under the Act.

Application of Law to Facts: Since the offences fall under Part A of the Schedule, which does not prescribe any pecuniary limit, the appellants' argument regarding jurisdiction based on property value is without basis. The Court emphasized that the value of the proceeds of crime is the relevant factor.

Treatment of Competing Arguments: The appellants contended that the value of the immovable properties was below Rs. 30 lakhs, and hence, the authorities lacked jurisdiction. The Court rejected this, emphasizing the nature of the scheduled offence and the amount involved in the fraud.

Conclusion: The Court held that the pecuniary limits do not constrain the jurisdiction of the authorities under the Act in this case, as the offences fall under Part A of the Schedule and the proceeds of crime exceed the prescribed thresholds.

Issue 3: Effect of Pending Proceedings under Recovery of Debts and Criminal Proceedings on the Invocation of the Act of 2002

Relevant Legal Framework: The Recovery of Debts due to Banks and Insolvency Act, 1993, and criminal proceedings operate independently of the Act of 2002. The Act of 2002 specifically targets money laundering and the proceeds of crime.

Court's Interpretation and Reasoning: The appellants' reliance on pending recovery and criminal proceedings to avoid the invocation of the Act of 2002 was found untenable. The Court observed that the appellants did not demonstrate any intention to repay the bank or to relinquish possession of the proceeds of crime. The Act's purpose to prevent money laundering is distinct and can be invoked irrespective of other pending proceedings.

Key Evidence and Findings: The appellants indicated proposals for settlement with the bank and ongoing proceedings before the Debts Recovery Tribunal. However, no concrete payment schedule or repayment intention was demonstrated during the hearing.

Application of Law to Facts: The Court applied the principle that possession of proceeds of crime triggers the applicability of the Act of 2002, notwithstanding other pending proceedings. The appellants' failure to show bona fide repayment efforts reinforced the validity of the ED's proceedings.

Treatment of Competing Arguments: The appellants argued that pending recovery and criminal proceedings preclude the invocation of the Act. The Court rejected this, holding that the Act operates independently and concurrently to prevent money laundering.

Conclusion: The Court held that the pendency of recovery and criminal proceedings does not bar the invocation of the Act of 2002 against the appellants.

Significant Holdings and Core Principles Established:

"The essence [of the Act of 2002] which should be kept in mind while deciding the issue as to whether or not the period of the commission of the offence, is beyond the Act of 2002. The test would be whether or not with the coming into force of the Act of 2002 as also the subsequent amendments thereto, the persons charged under the Act, 2002 are in possession of the proceeds of the crime. If the answer to the issue as to whether the persons charged are in possession of the proceeds of the crime, after the Act, 2002 and its amendment came into effect, is in the affirmative then the invocation of the Act, 2002 against such charged persons cannot be faulted." (Para 14)

"The proceedings initiated by ED as against the appellants herein relates to Section 2(1)(y) Clause (i) of the Act of 2002 which does not prescribe any pecuniary value... The offence alleged as against the appellants are under Part-A of the Schedule. The contention that the proceedings being below the prescribed pecuniary limit is without any basis." (Paras 16-19)

"In such circumstances, we do not find any merit in the present appeal." (Para 20)

The Court dismissed both appeals and connected applications without any order as to costs.