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TMI Blog2024 (4) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... g to the impugned complaint by the Directorate of Enforcement under the PMLA, is as under:- 2.1. S.Gowthaman and his brother S.Mahendran started a limited company by name, M/s.Sangam Organics and Chemicals Limited on 31.03.1995. For the working capital of the said Company, they availed loan around Rs. 10 Crores from Vijaya Bank, Trichy. For the purpose of availing loan, they submitted inflated balance sheet of their Company, prepared with the assistance of their Charted Accountant by name, Ganesh and some officers of the Bank. When they failed to repay the loan, their Company was declared as NPA. As on 24.07.2007, the Company owe to Vijaya Bank, a sum of Rs. 10.55 Crores. 2.2. Based on the complaint given by the Vigilance Officer, Vijaya Bank, the Superintendent of Police, CBI (BS & FC), Bangalore, registered case in Crime No.6 of 2007 against Gowthaman, his brother Mahendran and few other bank officials (public servants) for offences under Section 120 (b) read with Sections 420, 467, 468 and 471 I.P.C. and Section 13(2) read with Section 13(1) (d) of the Prevention of Corruption Act. On completion of investigation, final report filed against Gowthaman (A1), Mahendran (A2), M/s.S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchase of properties were proceeds of crime. The ingredients, which are required to satisfy the meaning of 'proceeds of crime' is totally absent. Just because, case under Sections 420, 467 and 471 I.P.C. read with Section 120-B I.P.C., is taken cognizance by a Court, ipso facto the Directorate of Enforcement cannot initiate proceeding under the PMLA. The outcome of the predicate offence is necessary to ascertain whether there is any proceeds of crime and even thereafter, there must be material to indicate the said proceeds of crime derived from the predicate offence been processed for converting the tainted properties into untainted properties, ''holding proceeds of crime'' is not a presumptive fact. Firstly, there must be a crime proved. Then, it must also be proved that the crime has yielded some proceeds. Thirdly, the persons accused indulgence in the process of converting the tainted money into untainted money. 2.7. The said ground which was earlier available for any person, who were accused of offence under the PMLA, no more available after the authoritative pronouncement of the Hon'ble Supreme Court in Vijay Madanlal Choudhary and others vs. Un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spectively, towards adjustment of the loan. While all these events took place much earlier to 01.06.2009, the day on which Part - A, Paragraph - 1 pertaining to I.PC. offences were brought into force, prosecuting him is unconstitutional. (iv) Further, under Section 44 of the PMLA, offences punishable under Section 4 of the Act and any scheduled offence connected to the offence under that Section shall be triable by the Special Court constituted for that area in which the offence has been committed. The scheduled offence tried before the Chief Judicial Magistrate, Trichy, whereas the case under the PMLA, is now transferred to Special Court for CBI cases, Madurai. Prosecution in two different Courts, has caused prejudice to A6. 3. Per contra, the learned Additional Solicitor General, on behalf of the respondents submitted that the issues raised in these two petitions are no more res integra in view of the judgment rendered in Vijay Madanlal Choudhary case [cited supra]. Referring the identical arguments placed on behalf of the private parties and the response by the State in that case, the learned Additional Solicitor General of India submitted that, in the instant petitions, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstitute an act of money laundering. 7. The following passages in Vijay Mandanlal Choudhary case as paginated in 2022 Livelaw (SC) 633, are extracted for convenient sake. ''33. Tersely put, it is only such property which is derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence can be regarded as proceeds of crime. The authorities under the 2002 Act cannot resort to action against any person for money-laundering on an assumption that the property recovered by them must be proceeds of crime and that a scheduled offence has been committed, unless the same is registered with the jurisdictional police or pending inquiry by way of complaint before the competent forum. For, the expression "derived or obtained" is indicative of criminal activity relating to a scheduled offence already accomplished. Similarly, in the event the person named in the criminal activity relating to a scheduled offence is finally absolved by a Court of competent jurisdiction owing to an order of discharge, acquittal or because of quashing of the criminal case (scheduled offence) against him/her, there can be no action for money-laundering against s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent on or linked to the date on which the scheduled offence or if we may say so the predicate offence has been committed. The relevant date is the date on which the person indulges in the process or activity connected with such proceeds of crime. These ingredients are intrinsic in the original provision (Section 3, as amended until 2013 and were in force till 31.7.2019); and the same has been merely explained and clarified by way of Explanation vide Finance (No.2) Act, 2019. Thus understood, inclusion of Clause (ii) in Explanation inserted in 2019 is of no consequence as it does not alter or enlarge the scope of Section 3 at all.'' 8. With the above clarification to the legal position, the Hon'ble Supreme Court, while concluding , had again reiterated by way of summarizing the seminal points as under:- ''187 (v) (a) Section 3 of the 2002 Act has a wider reach and captures every process and activity, direct or indirect, in dealing with the proceeds of crime and is not limited to the happening of the final act of integration of tainted property in the formal economy. The Explanation inserted to Section 3 by way of amendment of 2019 does not expand the purport ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e money laundering is a process involving many stages like:- (a) Placement (which is to move the funds from direct association of the crime); (b) Layering (which is disguising the trail to foil pursuit); and (c) Integration (which is making the money available to the criminal from what seem to be legitimate sources), the prosecution under PMLA can be initiated at any time. 10. Section 3 and the Explanation (ii) to Section 3 of the PMLA is interpreted by the Hon'ble Supreme Court as, 'money laundering as defined under Section 3 has a wider reach and captures every process and activity, direct or indirect, in dealing with the proceeds of crime and is not limited to the happening of the final act of integration or tainted property in the formal economy. The Explanation inserted to Section 3 by way of amendment of 2019 does not expand the purport of Section 3, but is only clarificatory in nature. So it include 'every' process or activity indulged into by anyone.' 11. In view of the pronouncement of the Hon'ble Supreme Court extracted above, this Court is of the view that the petitions to quash does not carry any merit to sustain. 12. In the result, these Crim ..... X X X X Extracts X X X X X X X X Extracts X X X X
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