Properties attached under PMLA not proceeds of crime after acquittal in scheduled offense: Delhi High Court

The Delhi High Court recently held that once a person is acquired or discharged of the ‘scheduled offense’ in a money laundering case, then properties attached in such a case can’t be termed as “proceeds of crime” under the Prevention of Money Laundering Act (PMLA).

The observations came as the High Court dismissed an appeal by the Enforcement Directorate (ED) against a trial court’s decision to discharge the accused persons of charges under the PMLA after they were acquitted of the scheduled/predicate offenses under the Indian Penal Code. After the discharge, the trial court also released all the immovable properties and ordered the de-freezing of all the bank accounts of the accused.

Referring to various decisions of the Supreme Court on this aspect a single judge bench of Justice Vikas Mahajan in its April 30 order said, “The position thus, emerging from the aforesaid decisions is that the scheduled offense and the proceeds of crime generated therefrom is the very foundation for the offense of money laundering”.

“Once a person is discharged or acquitted from the scheduled offense, the very foundation gets knocked out and the charge of Money Laundering will not survive as there will be no proceeds of crime. Concomitantly, the properties attached under the PMLA cannot legally be treated as proceeds of crime or be viewed as property derived or obtained from criminal activity,” underscored Justice Mahajan.

Justice Mahajan also said that until the acquittal is reversed all its effects will continue to operate and the “mere filing of an appeal against acquittal in a predicate offense” would not mean that the accused would continue to suffer the “rigours” of criminal proceedings or attachment under the PMLA.

Festive sacrifice

A scheduled or predicate offense is those which are specified in the schedules of the PMLA. Justice Mahajan said the trial court’s order in October 2023 rightly discharged the accused persons for offenses under the PMLA and that there was also no infirmity in the trial court’s November 7, 2023, order whereby the attached movable and immovable properties were directed to be released.

Justice Mahajan said Section 8(6) of the Prevention of Money Laundering Act makes it “amply clear” that if an accused under the Act is discharged/acquitted, the trial court under Section 8(6) has “no option but to pass an order releasing the properties attached under the PMLA”.

There was no substance in the ED’s submission that an appeal was a continuation of the proceedings before the trial court, Justice Mahajan stated further. Justice Mahajan added in the “context of criminal proceedings”, the trial conclusions when it results in acquittal; in case of a conviction the trial concludes against the accused with the imposition of sentence.

First uploaded on: 02-05-2024 at 11:16 IST

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