May 18, 2024 01:31 AM IST
The court’s statements came as it released on bail a Chhattisgarh businessman arrested in connection with a money laundering case
The Supreme Court on Friday underscored that offences under the Prevention of Money Laundering Act (PMLA) are “parasitic,” requiring predicate offences to exist. Without a predicate offence, the top court held, PMLA charges cannot stand on their own.
Supreme Court calls for a sentencing policy to ensure uniformity
Unlock exclusive access to the latest news on India’s general elections, only on the HT App. Download Now! Download Now!
In a decision that emphasised the necessity for a robust legal foundation in financial crime investigations, a bench of justices Surya Kant and KV Viswanathan highlighted that the Enforcement Directorate (ED) must thoroughly establish the underlying predicate offences before pursuing money laundering charges in a case even though one or more accused may not be named in the predicate offence.
“But there must be a predicate offence registered in the case. Otherwise, how can the agency proceed on its own? PMLA is a parasitic offence. It must have a predicate offence to survive. It doesn’t have its own legs to stand,” the bench told additional solicitor general SV Raju.
On his part, Raju contended that the probe into offence of money laundering was independent of the probe conducted by any other law enforcement agency in a predicate offence and thus, a person accused in an ED case need not necessarily be accused of a scheduled offence. The law officer cited a few Supreme Court judgments to buttress his submission.
Agreeing, the bench responded that the cavil was not with the ASG’s proposition in law but the fact remained that PMLA offences do not have independent standing and rely on the commission of a scheduled offence for their sustenance.
“You (ED) will be left clutching at straws if there is no predicate offence. There has to be a predicate offence somewhere and against someone for you to proceed under PMLA,” it added.
The court’s statements came as it released on bail a Chhattisgarh businessman arrested in connection with a money laundering case involving the illegal levy on coal transportation. In this case, the bench noted the absence of a predicate and scheduled offence in the case.
While the federal agency took up its investigation on the basis of a report from the Income Tax department and arrested businessman Sunil Kumar Agarwal in October 2022 following the registration of an ECIR in Chhattisgarh’s Raipur, a connected criminal case against a co-accused in the case was registered at Karnataka’s Bengaluru. The FIR in Bengaluru initially mentioned Section 384 (extortion, which is a scheduled offence under PMLA), but the charge sheet in the case later was filed under non-scheduled offences of destroying records and assaulting public servants. Noting the absence of predicate offence in the matter, the court said that a “strong prima facie” case is made out for releasing Agarwal on bail. It also gave the ASG six weeks to come back with a statement whether the Chhattisgarh police have independently investigated the allegations of an alleged scam of illegal levy on coal transportation. The proceeds of the crime, ED has alleged, were being used for “investing in benami assets, bribing officials to influence senior officers and also used by or on behalf of political executives of the state”.
ED initiates prosecution under PMLA predicated on a base case registered by CBI or any other law enforcement agency. ED registers an ECIR (equivalent to an FIR in ordinary criminal case) in order to probe the cases of money laundering related to the proceeds of crime which have been committed prior and an FIR for such an offence already exists. If the base FIR is quashed or the accused is exonerated of the charges, ED cannot continue its probe under PMLA, the Supreme Court held in its 2022 judgment in the Vijay Madanlal Chaudhary & Others v Union of India case.
In a November 2023 ruling in Pavana Dibbur, the top court further declared that criminal conspiracy, punishable under Section 120B of the Indian Penal Code, cannot be the only offence for the opening of a money laundering probe and that the conspiracy must relate to a crime enlisted as a scheduled offence under the 2002 Act. Based on this judgment, the Supreme Court in March quashed a case lodged against Karnataka deputy CM DK Shivakumar.
Supreme Court seeks Election Commission’s reply on plea over voter turnout data
The development on Friday has similarities with another case from Chhattisgarh relating to alleged corruption in the state’s liquor industry. This case was also based on a complaint by the Income Tax department, prompting the top court on April 8 to quash money laundering proceedings, holding that no scheduled offence was established for the agency to proceed under PMLA. A day later, ED lodged a fresh ECIR based on an FIR filed on January 17 by the Chhattisgarh Police, which named 70 people including Indian Administrative Service (IAS) officer Anil Tuteja, his son Yash Tuteja, several Congress leaders, bureaucrats, and businessmen over alleged corruption worth ₹2,000 crore.
