TMI Blog2022 (3) TMI 941X X X X Extracts X X X X X X X X Extracts X X X X ..... end to a person, who is connected with criminal activity relating to scheduled offence, but may not be the offender of scheduled offence - It is not necessary that a person has to be prosecuted under the PMLA only in the event of such person having committed scheduled offence. Prosecution can be independently initiated under PMLA only for the offence of money laundering. Further, a careful perusal of Section 2(1)(u) of PMLA and the explanation thereof makes it clear that a wider definition is given to proceeds of crime including property not only derived or obtained from the scheduled offence, but also any property which may directly or indirectly be derived or obtained as a result of criminal activity relatable to a scheduled offence. Section 3 of PMLA further clarifies that a person shall be guilty of offence of money laundering, if such person is found to have directly or indirectly attempted to indulge or knowingly assists or knowingly is a party or is actually involved in concealment, possession, acquisition, use, projecting as untainted property, claiming as untainted property and the process or activity connected with the proceeds of crime is a continuing activity, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TICE SHAMEEM AKTHER Petitioner Advocate : Rajesh Kumar H Respondent Advocate : N Rajeshwar Raoast Sol Gen ORDER: This Criminal Petition, under Section 482 of the Code of Criminal Procedure, 1973, is filed by the petitioner, seeking to quash the complaint and investigation in ECIR/05/HYZO/2014, dated 25.02.2014 on the file of Joint Director, Enforcement Directorate, Hyderabad Zonal Office, Hyderabad. 2. Heard the submissions of Sri M.P.Chandramouli, learned senior counsel and Sri Dil Jit Singh Ahluwalia, learned counsel, appearing on behalf of Sri H.Rajesh Kumar, learned counsel for the petitioner, Sri T.Surya Karan Reddy, learned Additional Solicitor General of India appearing on behalf of respondent No.1, Sri Manu, learned counsel for respondent No.2 and perused the record. 3. Learned senior counsel appearing on behalf of the petitioner would inter alia submit that the petitioner is the Director of M/s. MBS Group of companies. The subject ECIR registered against the petitioner and others is liable to be quashed, as the ingredients of Section 3 of Prevention of Money Laundering Act, 2002 (for short, PMLA ) are not made out. Sine qua non for Section 3 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he total liability of MBS as ₹ 181.39 crores as on 31.03.2012 and estopped itself from altering the said liability further. Thereafter, MMTC engaged M/s.KPMG to conduct forensic audit to ascertain liability of MBS. On 31.12.2012, the MMTC lodged a complaint with the CBI, which was registered as RC No.1(A)/CBI/Hyd, for the offences under Sections 120B r/w 409, 420, 465, 471 477A of IPC and Section 13 of PC Act. Further, there was no rendition of accounts by MMTC. In fact, MMTC itself owes nearly ₹ 270 crores to MBS, as per Project Flash Report submitted by M/s.KPMG. Default on the part of MBS in making payments to MMTC due to losses on account of rupee difference, does not, ipso facto, make its funds as proceeds of crime under Section 3 of PMLA. Further, the amount derived by the petitioner by selling gold cannot be termed as proceeds of crime . Further, the Enforcement Directorate has issued provisional attachment order, wherein, 45 items of immovable property are mentioned in the schedule, which are alleged to be proceeds of crime . In fact, all the said properties were acquired by MBS prior to 25.04.2011, which is the starting point of the crime, according to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned Additional Solicitor General of India appearing on behalf of respondent No.1, while taking this Court through several factual aspects involved in the matter, vehemently contended that though the commission of scheduled offence is a fundamental pre-requisite for initiating proceedings under the PMLA, the offence of money laundering is independent of the scheduled offences. The scheme of the PMLA indicates that it deals only with laundering of money acquired by committing the scheduled offence. In other words, PMLA deals only with the process or activity of proceeds of crime, including its concealment, possession, acquisition or use and it has nothing to do with the launch of prosecution for scheduled offence and continuation thereof. Scheduled offence is only a trigger point to initiate investigation under PMLA and once ECIR is recorded, case registered under PMLA is independent, distinct and stand alone. Even if the predicate/scheduled offences are compromised, compounded, quashed or even in case the accused is acquitted, it does not affect proceedings under PMLA. In a recent judgment in Dalmia Cement (Bharat) Ltd, New Delhi and another Vs. Assistant Director, Enforcem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to take up investigation and it cannot be compared or equated with FIR. The present stage of the case is only at the summoning of the accused for the purpose of examination. After fulfilling the requirements under Section 3 of the PMLA, prima facie the Enforcement Directorate registered the subject ECIR and is proceeding with the investigation. ECIR is an administrative document, which is like a GD entry in police station. Further, as per Section 44(1)(b) of the PML Act, a Special Court may, upon a complaint made by an authority authorised in this behalf under this Act, take cognizance of the offence for which, the accused is committed to it for trial. Section 3 of PMLA comes into play when complaint is filed before the designated Special Court. The petitioner is required to appear before the ED authorities in relation to the subject ECIR to prove his innocence. If the petitioner could substantiate that he is innocent, he will not be charged with any offence under PMLA. A statutory duty is cast upon the petitioner to appear before the ED authorities, pursuant to the subject ECIR. Further, the so called One Time Settlement said to have been entered between the petitioner and MMTC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allegation in the complaint whether prima facie discloses an offence or not, but it should not convert itself to that of a trial Court and dwell into the disputed questions of fact. When a prosecution is asked to be quashed at an initial state, the tests to be applied by the Court is as to whether the uncontroverted allegations as made in the complaint prima facie establish the case. Though the powers of this Court under Section 482 Cr.P.C., are very wide, those powers are required to be exercised sparingly and with abundant caution. The Courts have to see whether the continuation of criminal proceedings would amount to abuse of process of law or would result in miscarriage of justice or that quashing of criminal proceedings would secure ends of justice. 8. The material placed on record and the submissions made reveal that on 31.12.2012, Mr.T.S.Rao, General Manager of MMTC, lodged a complaint with the Deputy Inspector General of Police, Central Bureau of Investigation, Anti Corruption Zone, Sultan Bazar, Hyderabad, alleging certain irregularities with regard to the gold transactions committed by the officials of MMTC in active connivance with the petitioner and other Directors o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the construction or meaning of any of the clauses of this Memorandum of Understanding, the matter shall be referred to a sole arbitrator to be appointed by General Manager, Hyderabad. The decision of the arbitrator so appointed shall be final and binding on both the parties and the venue of the arbitration is at Hyderabad. 10. Pursuant to the disputes that arose between the petitioner and the MMTC, the petitioner filed Arbitration Application No.5 of 2013 before this Court invoking the aforementioned arbitration clause in the MOU, dated 25.11.2005, seeking appointment of sole arbitrator for adjudicating the disputes between the petitioner and the MMTC. MMTC filed counter and contested the said Arbitration Application. This Court, vide order, dated 29.04.2020, dismissed the said Arbitration Application No.5 of 2013. Aggrieved by the same, the petitioner preferred SLP before the Hon ble Supreme Court of India and the same is at the stage of admission and no interim orders have been passed in the said SLP. While so, another MOU, dated 05.10.2012, has been entered in between the petitioner and MMTC, which is not in dispute. Relevant clauses of the said MOU reads as under: 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The core contentions raised on behalf of the petitioner are that since none of the alleged scheduled offences are prima facie made out against the petitioner, registration of the subject ECIR, which is based on the scheduled offences, is unsustainable; continuation of proceedings against the petitioner in the subject ECIR amounts to abuse of process of law and that the registration of the subject ECIR against the petitioner and investigating into the same is liable to be quashed in the interest of justice. On the other hand, the prime contentions raised on behalf of the respondents are that commission of scheduled offence is only a trigger point to initiate investigation under PMLA and once ECIR is recorded, case registered under PMLA is independent, distinct and stand alone; There is no magisterial intervention unlike a FIR and mere registration of ECIR against the suspects of offence under Section 3 of PMLA cannot go to mean that such persons are accused under Section 3 of PMLA; The petitioner is not an accused, but only a suspect of commission of offence under Section 3 of PMLA and therefore, all the contentions raised on behalf of the petitioner, as if he is accused, are misc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... makes it clear that a wider definition is given to proceeds of crime including property not only derived or obtained from the scheduled offence, but also any property which may directly or indirectly be derived or obtained as a result of criminal activity relatable to a scheduled offence. Section 3 of PMLA further clarifies that a person shall be guilty of offence of money laundering, if such person is found to have directly or indirectly attempted to indulge or knowingly assists or knowingly is a party or is actually involved in concealment, possession, acquisition, use, projecting as untainted property, claiming as untainted property and the process or activity connected with the proceeds of crime is a continuing activity, which itself shows the offence of money laundering is a continuing offence. Thus, a bare reading of Sections 2(1)(u), 3 and 44(1)(d) of PMLA along with explanations thereof makes it clear that the offence of money laundering is a stand-alone offence and the trial proceedings are completely different to that of the scheduled offence. 15. Similar question came up for consideration before the Hon ble High Court of Madras in Smt.Soodamani Dorai s case (6 supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... early stated that the burden of proof relating to proceeds of crime involved in money laundering is on the accused whereas the burden of proof in the scheduled offences is on the prosecution. Therefore, though the ECIR may have been registered following a scheduled offence, the property in possession of the person, against whom allegations are made, is found to be involved in money laundering, then he can be punished independently of the scheduled offence. Therefore, mere stay of the predicate offence is not a ground for preventing the Directorate of Enforcement from proceeding under the PMLA, 2002. 16. Further, the burden of proof in the predicate/Scheduled offences and the offence under PMLA is different. Section 24 of the PMLA reads as follows: 24. Burden of proof: In any proceeding relating to proceeds of crime under this Act- a) In the case of a person charged with the offence of money-laundering under Section 3, the Authority or Court shall, unless the contrary is proved, presume that such proceeds of crime are involved in money-laundering; and b) In the case of any other person the Authority or court, may presume that such proceeds of crime are involv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt in Dalmia Cement (Bharat) Ltd s case (11 supra), the erstwhile High Court for the State of Telangana and Andhra Pradesh, observed that when ECIR is lodged with the Directorate of Enforcement, there is no magisterial intervention unlike a FIR and mere registration of ECIR against the suspects of offence under Section 3 of PMLA cannot go to mean that such persons are accused under Section 3 of PMLA. Consequently, the protection against testimonial compulsion as under Cr.P.C as well as under Article 20(3) of the Constitution of India, would not be available. 20. The above judgment of Dalmia Cement (Bharat) Ltd s case (11 supra) has been upheld by a Division Bench of this Court in Writ Appeal Nos.198 and 199 of 2016, vide order dated 27.01.2022. 21. Further, as rightly contended by the learned Additional Solicitor General of India appearing on behalf of respondent No.1, mere registration of ECIR and issuance of summons does not give raise to any cause of action. A person who is called upon to make statements before the authorities cannot be said to be an accused of an offence and he is bound to comply with such direction. Section 50(2) of PMLA vests power in the competent auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation Report (ECIR) bearing No.CEZO/2/2013 dated 25.03.2013 to carry out investigation under the Prevention of Money-Laundering Act against the Petitioners. Moreover, the summons issued to the Petitioners is a preliminary one relating to the investigation under the Prevention of Money- Laundering Act by the authority concerned. The fact of the matter is that the Adjudicating Authority/machinery under the Prevention of Money- Laundering Act is designated to adjudge the breach of any statutory obligation and it is not a Court of Law or a Judicial Tribunal, in the considered opinion of this Court. Moreover, the Adjudicating Authority under the Prevention of Money-Laundering Act is not trying a criminal case. But only decides the effect of breach of obligations by the concerned. (emphasis supplied) 23. I have gone through the decisions relied upon by the learned senior counsel for the petitioner. The petitioner relied on Binod Kumar s case (1 supra) for the preposition that civil liability cannot be converted into criminal liability. In the cited decision, the Hon ble Apex Court referred to a decision in Indian Oil Corpn. v. NEPC India Ltd., {(2006) 6 SCC 736}, wherein, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nion that it is not a fit case to quash the subject ECIR registered against him by exercising the inherent power under Section 482 of Cr.P.C. 26. Naresh Prasad Agarwal s case (4 supra) is also a MMTC case. The petitioner therein sought to quash the charge-sheet filed against him in C.C. No.3 of 2014, on the file of the learned Special Judge for CBI cases (XII Judge, City Civil Court), Chennai under Section 482 of the Code of Criminal Procedure. The Hon ble Madras High Court, adverting to the facts of the case, the law applicable and various case laws, ultimately quashed the chargesheet against the petitioner therein. In the instant case, chargesheet filed by the predicate agency is not yet quashed. Moreover, the subject ECIR is registered to investigate into as to whether the petitioner has committed an offence under Section 3 of PMLA. Column 8 of the subject ECIR demonstrates the same. So, the facts of the case on hand cannot be equated with the facts of the case in the aforementioned decision. 27. Here, it is apt state that PMLA is a special enactment, enacted with a specific purpose and object, i.e., to track and investigate the cases of money laundering. The predicate/sch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the petitioner. Summons are issued to a person under Section 50(3) of PMLA requiring his attendance to give evidence or to produce any records during the course of investigation or proceedings. Hence, issuance of summons to the petitioner can neither be categorized as an act of prosecuting him, nor would make him an accused under PMLA. As rightly contended by the learned Assistant Solicitor General of India, if the petitioner proves his innocence before the ED authorities, he would not be charged with any offence under PMLA. Even otherwise, Section 50(3) mandates that all the persons so summoned shall be bound to attend in person or through authorized agents, as such officer may direct, and shall be bound to state the truth upon any subject respecting which they are examined or make statements, and produce such documents as may be required. Further, the proceedings under PMLA are deemed to be judicial proceedings within the meaning of Section 193 and under Section 228 of the Code of Criminal Procedure, 1973. Further, since the offences under Sections 120B, 420, 471 of IPC charged against the petitioner are Scheduled Offences under clause I of sub-section (y) of 2 of PMLA, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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