The Delhi High Court has determined that no proceedings under the Prevention of Money Laundering Act, 2002 (PMLA), can be sustained following the acquittal of the accused in the predicate offence.
Justice Vikas Mahajan’s bench noted that properties attached under the PMLA cannot be legally considered as proceeds of crime or derived from criminal activity.
The petitioner, the Directorate of Enforcement (ED), has challenged the October 9, 2023 order issued by the Special Judge under Sections 3 and 4 of the PMLA. The respondents/accused were discharged from the alleged offences mentioned in the complaint filed by the petitioner/Directorate of Enforcement.
The Special Judge dismissed the charges of money laundering under Section 3 of the Prevention of Money Laundering Act (PMLA), as alleged in the complaint filed by the petitioner/ED. The court noted that the money laundering offence was linked to a scheduled offence. Since the accused were acquitted by the relevant court for the scheduled offence, the criminal proceedings under the PMLA could not be pursued because there can be no money laundering without the commission of the scheduled offence by the accused.
While criminal proceedings under the PMLA were ongoing, the competent authority attached certain bank accounts and immovable properties. The adjudicating authority confirmed the attachment of these properties and bank accounts under Section 8(3) of the PMLA.
Following the discharge of the accused from the money laundering offence under the PMLA, the Special Judge subsequently issued an order dated November 7, 2023, releasing all the immovable properties and directing the defreezing or release of all the bank accounts.
The petitioner argued that the State of Jharkhand is in the process of appealing against the acquittal, and therefore, the Special Judge’s order directing the release of attached immovable properties and bank accounts should be stayed to prevent the present petition from becoming ineffective. The petitioner contended that the finality of the respondent’s acquittal in the predicate offence will only be established once it has been upheld by the appellate court and higher courts.
On the other hand, the accused argued that an acquittal strengthens the presumption of innocence in favor of the accused, and the filing or pendency of an appeal against the acquittal should not be seen as a continuation of the trial or prosecution.
The main issue was whether proceedings under the PMLA could be sustained despite the respondent’s acquittal for the scheduled offence.
Another related question raised was whether the properties attached by the petitioner/ED, under the belief that they were proceeds of crime, could be released while an appeal against the acquittal for the scheduled offence was pending.
The court held that the scheduled offence and the proceeds of the crime form the basis of the money laundering offence. If a person is acquitted of the scheduled offence, the foundation for the money laundering charge collapses because there are no proceeds of crime.
The court determined that the Special Judge rightly discharged the respondents from the PMLA offences. The order dated November 7, 2023, directing the release of attached movable and immovable properties by the Special Judge was found to be free of any defects.
