‘Money laundering is distinct crime from scheduled offence’
Mohinder Verma
JAMMU, May 26: The High Court of Jammu & Kashmir and Ladakh has held that Enforcement Directorate (ED) can lawfully issue summons under the Prevention of Money Laundering Act (PMLA), 2002 even when the accused has been discharged in the predicate offence as money laundering itself is a separate crime, distinct from the original (or scheduled) offence like corruption, drug trafficking and fraud etc.
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The judgment was delivered by Justice Wasim Sadiq Nargal while dismissing a petition filed by Niket Kansal, operational head of M/s N K Pharmaceuticals Pvt Ltd, which is engaged in the marketing and transportation of the Codeine-based cough syrup “Cocrex”, challenging Enforcement Case Information Report (ECIR) under the Prevention of Money Laundering Act, 2002, summons issued under Section 50 of PMLA and related search/seizure actions.
The case of the petitioner was that he had been discharged in predicate NDPSA offences by the Special NDPSA Court, which found no evidence linking him to the alleged offences, and without a scheduled offence there could be no “proceeds of crime” to sustain PMLA proceedings.
After hearing Senior Advocate Sunil Sethi with Advocates Nitin Parihar and Siddharth Jamwal for the petitioner and DSGI Vishal Sharma for the Union of India through Enforcement Directorate, Justice Wasim Sadiq Nargal observed that the Supreme Court has elucidated that “proceeds of crime” under the PMLA encompasses not only property directly acquired from criminal activities associated with a scheduled offence but also property indirectly generated, including assets purchased or exchanged utilizing such illicit earnings.
“The 2019 Explanation merely clarifies this point and does not expand the definition. Thus, any property, including that obtained subsequently with illicit funds, is deemed tainted and may be subject to legal action, thereby supporting the objective of effectively combating money laundering”, the High Court said, adding “it is imperative to understand this definition within the framework of the overarching legislative intent, which aims to disrupt and dismantle the financial infrastructure underpinning illegal enterprises. This interpretation guarantees the legislative aim of mitigating economic crimes and redirecting the proceeds of crime into legitimate economic avenues is successfully achieved”.
About the fundamental legal question whether the summons issued against the petitioner can be annulled solely on the basis of his discharge in the predicate offence, the High Court said, “it is well-established in legal precedent that an individual’s discharge in the predicate offence does not inhibit the authorities from pursuing additional legal actions or enforcement measures including the issuance of summons”.
“The issuance of summons constitutes a separate procedural action that is not inherently invalidated by a discharge in a different yet related case (predicate crime).Furthermore, the legal provisions governing the issuance and enforcement of summons are intended to uphold the integrity of the legal process and it is not the court’s function to intervene in the lawful execution of this process unless unequivocal and compelling grounds for such intervention are demonstrated. Consequently, the authorities retain the right to execute the issued summons, as these acts are regulated by separate legal principles that are unaffected by the result of the underlying offence”, Justice Nargal said.
Pointing towards Supreme Court observations, the High Court said, “money laundering itself is a separate crime, distinct from the original (or scheduled) offence like corruption, drug trafficking, fraud etc. Even if the scheduled offence is tried under Indian Penal Code, NDPSA etc, money laundering is prosecuted separately under PMLA”, adding “a person can be prosecuted for money laundering even if he is not directly involved in the commission of the scheduled offence, so long as he is involved in the laundering process”.
“The offence is investigated and tried independently under the PMLA by the Enforcement Directorate and Special Courts designated for such matters. Therefore, the legal provisions of issuance and enforcement of summons are specifically designed to facilitate the effective collection of evidence for the purpose of investigation”, the High Court said, adding “the petitioner’s discharge doesn’t constitute a legitimate ground for nullifying the summons as the issuance of summons is a fundamental component in the execution of fair and unbiased investigation. The discharge should not be regarded as a legal obstacle to the authorities’ capacity for forward with the summons”.
“Mere discharge or quashing of FIR by a competent court doesn’t automatically result in the quashing of ECIR filed under the Prevention of Money Laundering Act, 2002. The two proceedings, which factually linked by the scheduled offence, are legally independent and governed separately”, the High Court said.
With these observations, the High Court that the matter of nullifying an ECIR must be evaluated independently and on a case-by-case basis considering the legal principles established by the Supreme Court. Accordingly, the High Court dismissed the petition.
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