Madras HC: Person Not Been Prosecuted for Predicate Offence Can Be Prosecuted for Money Laundering Charges Under PMLA

Madras HC Law Insider

Bhuvana Marni

Published on: October 19, 2022 at 23:09 IST

According to the Madras High Court, the Supreme Court’s ruling in Vijay Madanlal Choudhary and Others vs. Union of India and Others does not prevent the Enforcement Directorate from prosecuting a person for the PMLA’s money laundering offence simply because they were not charged with the predicate offence.

The Justices PN Prakash and Teeka Raman’s panel found merit in the argument that, even if a person may not have participated in the initial illegal conduct that produced “proceeds of crime,” they may subsequently assist the primary accused in laundering those funds.

The Court was considering a quashing petition filed by a guy who was accused of willingly giving his identity to someone else so they could buy a house with contaminated money.

The ED arrested him by the Prevention of Money Laundering Act despite the CBI not prosecuting him in the corruption FIR. Several guys allegedly plotted to defraud M/s criminally.

With the assistance of its Manager M/s. Global Trade Finance Limited (GTFL) obtained a loan from the firm for Rs. 15 crores by using phoney documents. 166 acres of land were bought under the names of many people, including the petitioner, using the stolen funds.

Later, this land was sold to sincere purchasers.

When GTFL and SBI merged, the specifics of the fraudulent transaction were discovered. The CBI opened an investigation based on a complaint from the SBI for violations of Sections 13 of the Prevention of Corruption Act and Sections 420, 467, and 120-B of the IPC.

In these procedures, the petitioner was not an accused party.

Later, the petitioner was listed as an accused in a case filed by the Enforcement Directorate under Section 3 read with Section 4 of the PML Act.

The petitioner argued that because he was not a defendant in the CBI’s case against the Union of India and others, the Enforcement Directorate’s pursuit of him was unlawful.

He based this argument on the Supreme Court’s recent ruling in Vijay Madanlal Choudhary and Others vs. Union of India and Others.

The petitioners claimed, citing the Apex Courts decision, that a person’s prosecution under the PMLA cannot be maintained if they were acquitted or discharged from predicate offence for the predicate offence.

However, the aforesaid observation was made when the individual was identified as an accused in a predicate offence, and the Enforcement Directorate’s attorney informed the court. A person who was not accused of the primary offence was not eligible for this benefit.

The defence argued that even after the planned offence has been committed and proceeds of crime have been generated, additional parties might collaborate with the principal accused to conduct the crime of money laundering by aiding in the laundering of the illicit gains.

Such individuals might not have participated in the initial illegal behaviour that produced the “proceeds of crime” and might not be found guilty of the predicate offence.

However, since the offence under the PMLA is a standalone offence that is separate from the predicate offence, their prosecution under the PMLA cannot be deemed to be unlawful.

The court stated that because the petitioner was not a party to the predicate offence, the conclusion in Vijay Madanlal Choudhary could not be applied to the current case.

In the interest of logical reasoning, we cannot enlarge the scope of paragraph 467(d) of Vijay Madanlal’s case [supra] and read into it things that have not been mentioned. The court noted that rationality is not always present in the law.

“On facts, we find that Rajendran [A6] had voluntarily lent his name for the purchase of the property under the sale deed dated 09.09.2009 with the tainted money that was generated by G.Srinivasan [A1] and R. Manoharan [A2] by committing a scheduled offence. Under Section 24 of the PMLA, there is a statutory presumption which can be discharged only during trial,” Court added.

It thus dismissed the petition holding that it was devoid of any merits.

Case Title: P Rajendran vs. The Assistant Director, Directorate of Enforcement

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