Introduction
The Hon’ble Supreme Court (‘SC’), in its landmark judgement in the case of Yash Tuteja v. Union of India,[i] held that there could be no question of proceeds of crime (‘POC’) in the absence of any scheduled offence under the Prevention of Money Laundering Act, 2002 (‘PMLA’). Relying on its decision in the case of Pavana Dibbur v. Directorate of Enforcement,[ii] the SC emphasised the existence of a scheduled offence under the PMLA is a condition precedent before raising any question on the POC.
Brief Facts
The writ petition (‘WP’) in this case challenged the complaint filed by the Directorate of Enforcement (‘ED’) under s. 44(1)(b) of the PMLA. The alleged scheduled offences on which the complaint was based were under various sections of the Income-tax Act, 1961 (‘IT Act’), read with ss. 120B, 191, 199, 200, 204 of the Indian Penal Code, 1860 (‘IPC’).
This challenge was based on two primary grounds. First, that except for s. 120B of the IPC, none of the offences levelled against the Petitioner were scheduled offences within the meaning of s. 2(1)(y) of the PMLA. Second, as a consequence of the first, no prima facie commission of a scheduled offence could be made out from the registered complaint and hence, the complaint filed by the ED was liable to be quashed.
Held
The SC ruled in favour of the accused Petitioner, quashing the complaint filed by the ED. Additionally, it disposed of other connected petitions filed by the Petitioners who were not named as accused persons in the said complaint.
It concluded that no scheduled offence was established by the complaint, as the alleged offences were not classified as scheduled offences under the PMLA. Consequently, there were no POC, and thus, no offence under s. 3 of the PMLA could arise.
It was held that it is not necessary for a person against whom an offence under s. 3 of the PMLA is alleged to have been shown as an accused in the scheduled offence. The SC noted that even if a person is accused in the PMLA complaint but not in the scheduled offence, they would benefit from the acquittal or discharge of all the accused persons in the scheduled offence.
Further, the SC held that the first property could not be connected with the POC, as the acts constituting the scheduled offence occurred after the property was acquired. It stated that the question of whether the petitioner used tainted money to acquire the second property would need to be decided at trial.
Analysis
The decision of the SC serves as a significant check against the misuse of the provisions of the PMLA, thereby preventing undue harassment of the accused. It highlights the weight of scheduled offences and the gravity of complaints filed under PMLA. Adding a qualification to s. 120B of the IPC, the SC noted that despite being a scheduled offence, it would only come under the purview of the PMLA if the alleged conspiracy is listed in the schedule and the offence could be traced to the matter of money laundering. Similarly, the benefit of acquittal of the accused or the quashing of the complaint will extend to all the accused persons, including those who are not named under the scheduled offences.
Taking cognizance of an offence by the Special Courts is immaterial if the complaint itself is unsustainable and no prima facie case of money laundering could be established in such circumstances. This decision reiterates that the existence of POC is a prerequisite for determining a scheduled offence under the PMLA and confirms that the quashing of complaints where scheduled offences are absent renders subsequent proceedings futile.
End Notes
[i] [2024] 161 taxmann.com 494 (SC) [08-04-2024]
[ii] 2023 SCC OnLine SC 1586
Authored by Shivangi Bharadwaj, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinion.