2025 (7) TMI 353 - HC - Money Laundering

Money Laundering - proceeds of crime - predicate offence - extortion of crores of money on the pretext of providing relief to her husband in the nature of release from Tihar Jail - seeking quashing of an ECIR registered under Section 3 and 4 PMLA - HELD THAT - It is well settled that the offence and the trial both for the scheduled offence and PMLA offence are independent. In any event the T. T. Antony 2001 (7) TMI 1322 - SUPREME COURT line of cases relate to registration of second or multiple FIRs. Moreover as per Sukhpal Singh Khaira 2022 (12) TMI 497 - SUPREME COURT the Court under Section 319 of Cr.P.C can also array a person as an accused who may not have been charge-sheeted. In any event as per the provisions of MCOCA prosecution would have to prove that there was an organized crime and an organized crime syndicate and only then property derived from the same would invite a conviction under Section 3(5) of MCOCA - Even if the offence under MCOCA were not proven by the prosecution (in the proceedings for the predicate offence) the proceeds of crime would still remain if the IPC offence stands proved. At this stage (pre-trial and pre-charge) therefore inviting the Court to quash the FIR on the basis of the similarity between the provisions contained in MCOCA and PMLA is unmerited and unwarranted. All aspects pleaded in the case put by petitioner (recorded in paragraph 17 above) are subjective issues which require to be established through trial. As an illustration the petitioner contends that there was reluctance on her part she was misled hoodwinked persuaded she voluntarily participated in the investigation she was ignorant and was subjected to over indulgent actions of an admirer/fans/suitor and in substance has been conned. All these aspects are not established crystallized or proved yet. Ex facie these are subjective issues and petitioner is asserting that the Court accepts these as inviolable truths or as an optimistic interpretation of the facts in her favour. Conclusivity can only precipitate during the trial which is the filtration mechanism offered by the criminal justice process. Accepting these interpretations in favour of the petitioner at this stage would upend the process completely. The Court is of the opinion that the petition and plea of petitioner cannot be entertained for quashing of the ECIR/DLZO- II/54/2021 dated 8th August 2021 and 2nd supplementary complaint dated 17th August 2022 - Petition dismissed.

Summary

The core legal questions considered by the Court in this matter include:

(i) Whether the petitioner, who is a witness in the predicate offence, can be prosecuted as an accused under the Prevention of Money Laundering Act, 2002 (PMLA) for allegedly receiving and possessing proceeds of crime;

(ii) Whether the petitioner's prosecution under PMLA is sustainable despite her not being an accused in the predicate offence and having been exonerated under provisions of the Maharashtra Control of Organised Crime Act, 1999 (MCOCA) which forms part of the predicate offence;

(iii) Whether the petitioner had the requisite knowledge or mens rea that the gifts and benefits received by her were proceeds of crime;

(iv) Whether an omission by the petitioner to conduct due diligence regarding the criminal antecedents of the accused Sukesh Chandrashekhar can amount to an offence under PMLA;

(v) Whether the petitioner's role as a witness in the predicate offence violates her constitutional right against self-incrimination when she is simultaneously an accused in the PMLA proceedings;

(vi) Whether the Enforcement Directorate (ED) has adopted a discriminatory or "pick and choose" approach in prosecuting the petitioner while not proceeding against other similarly placed persons;

(vii) Whether the ECIR and subsequent proceedings against the petitioner are liable to be quashed at the pre-charge stage.

Issue-wise Detailed Analysis

1. Prosecution of a Witness in Predicate Offence as Accused under PMLA

The legal framework recognizes that offences under PMLA and the predicate offence are independent, though related. The Supreme Court in Vijay Madanlal Choudhary and Pavana Dibbur clarified that a person may be an accused under PMLA even if not charged in the predicate offence, provided foundational facts are established. Section 44(1)(d) of PMLA and its Explanation (i) explicitly state that trials under the scheduled offence and PMLA are separate and not joint trials.

The Court noted that the petitioner, though a witness in the predicate offence, has been arrayed as accused in the PMLA proceedings based on evidence of possession and concealment of proceeds of crime. Reliance on Amit Katyal and Satish Babu Sana confirmed that this position is legally tenable.

The petitioner's argument that this dual role violates her right against self-incrimination was rejected, with the Court emphasizing statutory protections under Section 132 of the Indian Evidence Act, which compels witnesses to answer relevant questions but protects them from prosecution based on those answers, except for giving false evidence.

2. Foundational Facts and Legal Presumption under Section 24 of PMLA

The Court examined the foundational facts required to trigger the legal presumption under Section 24 of PMLA, as elaborated in Vijay Madanlal Choudhary:

• Existence of a scheduled offence;
• Property in question derived or obtained from the criminal activity;
• Person concerned is involved directly or indirectly in any process or activity connected with the proceeds of crime.

All three foundational facts were found to be prima facie established on the material on record. The petitioner admitted receipt of gifts and benefits, and evidence showed concealment and possession. The legal presumption thus arises, which the petitioner can rebut by producing evidence during trial.

The Court underscored that at the pre-charge stage, the trial court need only be satisfied that the accused might have committed the offence, without delving into the probative value of evidence, which is for trial.

3. Knowledge or Mens Rea of the Petitioner Regarding Proceeds of Crime

The petitioner contended that she was unaware that the gifts and benefits received were proceeds of crime and was misled by an associate, Pinky Irani, who disabused her of Sukesh's criminality. The petitioner relied on a 2020 news article shared in February 2021, which did not mention the extortion offence, and argued that mere omission to verify criminal antecedents does not amount to illegal omission or knowledge.

The Court held that these are factual disputes requiring trial. The petitioner's staggered disclosures, deletion of mobile data, and concealment of facts suggest possible knowledge or at least a "lurking suspicion" of illegality. The Court noted that "knowledge" for PMLA purposes may include turning a blind eye or consciously ignoring suspicious facts. The petitioner's contention that she was a victim of a con is a matter for trial.

The Court rejected the petitioner's reliance on cases involving negligence or absence of intent, emphasizing that PMLA offences may be established by involvement in any process or activity connected with proceeds of crime, regardless of the degree of knowledge, subject to trial.

4. Omission to Conduct Due Diligence

The petitioner argued that no legal duty existed to investigate Sukesh's antecedents and that omission to do so cannot form the basis of prosecution. The Court observed that the issue is not merely legal or illegal omission but whether the petitioner's omission was coupled with knowledge or involvement in concealment or possession of proceeds of crime. This is a triable issue and not amenable to quashing at this stage.

5. Similarity between MCOCA and PMLA Offences and Exoneration under MCOCA

The petitioner contended that since Sections 3(5) and 4 of MCOCA (forming part of the predicate offence) deal with possession of property derived from organized crime and are akin to PMLA provisions, her exoneration under MCOCA should preclude prosecution under PMLA.

The Court rejected this argument, relying on Vijay Madanlal Choudhary, which holds that the offences under PMLA and predicate offences (including MCOCA) are independent. Non-charge or exoneration under MCOCA does not bar prosecution under PMLA. The Court further noted that acquittal or exoneration is a judicial process that cannot be equated with omission to array a person as accused.

6. Alleged Discriminatory or Pick and Choose Prosecution

The petitioner asserted that other celebrities similarly placed, who received gifts from Sukesh and had direct contact with him in jail, were not prosecuted, indicating arbitrary or discriminatory prosecution.

The Court held that the issue of parity is relevant at the stage of bail or sentencing but is not a ground for quashing the ECIR. The Court declined to interfere in the prosecutorial discretion exercised by the ED at this stage.

7. Quashing of ECIR at Pre-Charge Stage

The Court emphasized established principles that quashing of criminal proceedings at the pre-charge or pre-trial stage is an extraordinary remedy to be exercised sparingly and only in rare cases. Reliance was placed on Rathish Babu Unnikrishnan, Bhajan Lal, and Soma Chakravarty, which caution against detailed inquiry into the merits or truthfulness of allegations before trial.

The Court noted that the material on record prima facie discloses offences under PMLA and that the petitioner's arguments essentially challenge the sufficiency or credibility of evidence, which is for trial. The Court declined to conduct a "pre-trial trial" and rejected the plea for quashing.

8. Conduct of Petitioner During Investigation

The Court considered the prosecution's case that the petitioner initially denied receipt of gifts and financial transactions, improved her statements only upon confrontation with evidence, and deleted mobile data, which could amount to tampering with evidence and concealment of proceeds of crime. These factual allegations strengthen the case for trial.

Significant Holdings

"The Supreme Court categorically stated that the burden on accused was an evidentiary burden to be discharged by producing evidence regarding the facts 'within his personal knowledge'."

"Legal presumption would arise on establishing at least three basic or foundational factors - that first, there is a scheduled offence; second, that the property in question has been derived from that criminal activity; and third, that person accused in PMLA is directly or indirectly involved in any process or activity connected with the said proceeds of crime."

"The offence and the trial, both for the scheduled offence and PMLA offence, are independent."

"A person may be an accused under PMLA even if not charged in the predicate offence."

"The Court should be slow to grant the relief of quashing a complaint at a pre-trial stage, when the factual controversy is in the realm of possibility particularly because of the legal presumption."

"Whether, in fact, the accused committed the offence, can only be decided in the trial."

"Knowledge for the purposes of PMLA may include turning a blind eye or consciously ignoring suspicious facts."

"The petitioner's role as a witness in the predicate offence does not bar prosecution under PMLA nor violate right against self-incrimination, given statutory protections."

"The Court cannot interfere with prosecutorial discretion at the stage of quashing on the ground of alleged selective prosecution."

"Deletion of data and concealment of facts by the petitioner during investigation are material facts to be considered at trial."

Final determinations on each issue:

• The petitioner's prosecution under PMLA is not barred by her being a witness in the predicate offence or by her exoneration under MCOCA provisions;
• The foundational facts for presumption under Section 24 of PMLA are prima facie established and the petitioner's knowledge and involvement are triable issues;
• Omission to conduct due diligence does not absolve the petitioner from prosecution, as knowledge and concealment remain to be examined at trial;
• Allegations of selective prosecution do not warrant quashing of the ECIR;
• Quashing of criminal proceedings at the pre-charge stage is not warranted given the material on record;
• The petitioner's conduct during investigation, including delayed disclosures and deletion of data, supports the continuation of proceedings.