Introduction
The Hon’ble Madras High Court in Pallab Sinha v. Deputy Director, Directorate of Enforcement[i], made significant observations regarding offences under the Prevention of Money Laundering Act, 2002 (‘PMLA’). The Court examined whether mere possession of ‘Proceeds of Crime’ (‘PoC’) constitutes the offence of money laundering under s. 3 of the PMLA.
Brief Facts
Between June and November 2009, Pallab Sinha and other customs officials (‘Petitioners’) employed at the Unaccompanied Baggage Unit Customs, Chennai, allegedly engaged in corrupt practices by accepting illegal gratification from passengers with unaccompanied baggage. The Petitioners allegedly bypassed procedures and charged reduced customs duties.
The commission of such illegal acts by the Petitioners was revealed when the Central Bureau of Investigation (‘CBI’) conducted a surprise search on 23.11.2009. Subsequently, the CBI registered an FIR, naming the Petitioners and certain other private individuals, in which it was alleged that the Petitioners had violated ss. 7, 8, and 13(2) read with s. 13(1)(d) of the Prevention of Corruption Act, 1988 (‘PC Act’) and s. 120(B) of the Indian Penal Code, 1860 (‘IPC’).
During the investigation, the CBI recovered and seized certain unaccounted cash from the residences of different Petitioners. On several occasions, this amount was attributed to customs officers K. Baskar and Pallab Sinha.
Subsequently, a chargesheet was filed by CBI against 31 people, including 13 customs officials, under s. 120-B, read with s. 420, s. 468, s. 471 of IPC and the ss. 7, 8, and 13(2) read with s. 13(1)(a)(b) of the PC Act. Based on such FIR, the Enforcement Directorate (‘ED’) registered an Enforcement Case Information Report (‘ECIR’) under the PMLA on 18.07.2012 and initiated a money laundering investigation qua the Petitioners, provisionally attaching seized cash.
In 2021, the Petitioners filed a discharge petition, contending that the 2013 amendment to PMLA introducing ‘possession and concealment’ of PoC could not be applied retrospectively, as they were no longer in possession of the cash which was seized in 2009, and immediately deposited in the Court thereafter. Hence, no PMLA offence could be made against the Petitioners.
The discharge petitions filed by the Petitioners were dismissed by the Trial Court while observing that the 2013 amendment to PMLA was clarificatory in nature and that possession of proceeds of crime, even prior to such amendment, fell within the scope of the PMLA. Thus, aggrieved by such dismissal, the Petitioners filed the present petition.
Held
The High Court upheld the Trial Court dismissing the revision petition, holding that the Petitioners’ arguments on the retrospective application of s. 3 of the PMLA lacked merit. The court noted that mere involvement in corrupt activities itself qualifies as PoC under s. 2(1)(u) of the PMLA. Therefore, whether or not the accused was in possession of the PoC after 2009, the provisions of the PMLA were applicable. Consequently, the court deemed the petitioners' discharge application, based on the unsubstantiated claim of 'non-possession' of PoC, untenable in law.
Relying on established jurisprudence and the observations made by the Hon’ble Supreme Court in Vijay Madanlal Choudhary v. Union of India[ii], the High Court also reiterated that s. 3 of the PMLA has a wide reach. It covers all activities related to the PoC, including possession. Further, the High Court also relied upon Y. Balaji’s[iii]’ case to reaffirm that the mere act of taking a bribe amounts to a person acquiring PoC. It noted that even without possession, this act of acquisition alone qualifies as an offence of money laundering under s. 3 of the PMLA. Consequently, the court found the petitioners' submissions unworthy of acceptance.
Our Analysis
This case reiterates established jurisprudence on money laundering offences. The baseless assumption on which the Petitioners had moved the discharge application ought to have been rejected, especially in light of the observations made by the Hon’ble Supreme Court in Vijay Madanlal’s case. Nonetheless, the High Court has correctly adjudicated the matter, reinforcing the broad scope of s. 3 of the PMLA.
A bare perusal of the s. 3 clearly establishes that it has been drafted in a manner that makes money laundering a continuous offence. S. 3 identified six different activities, i.e., (i)concealment, (ii) acquisition, (iii) possession, (iv) use, (v) projecting as untainted property, and (vi) claiming as untainted property and even isolated commission of any of the aforementioned acts amounts to the commission of the offence of money laundering. Thus, it would not be an exaggeration to state that the mere act of even touching tainted money is sufficient to trigger prosecution under the PMLA.
PMLA focuses on punishing the corrupt; hence, it has been interpreted broadly—all possible loopholes, like the one discussed in the captioned matter, have been tightly shut through wide and strict interpretation and implementation of the statute. The decision of the High Court reinforces PMLA’s comprehensive framework, which is to combat financial crimes at all levels.
End Notes
[i] 2024 SCC OnLine Mad 4484.
[ii] 2022 SCC OnLine SC 929.
[iii] 2023 SCC OnLine SC 645, Y. Balaji v. Karthik Dasari.
Authored by Shreya Manchanda, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinions.