The Bench of Justice Sanjeev Kumar of the High Court of J&K and Ladakh while deciding a petition under Section 482 of the Code of Criminal Procedure (hereinafter referred to as “CrPC”) pronounced that for launching prosecution under Section 3 of the Prevention of Money Laundering Act (hereinafter referred to as ‘PMLA’) commission of ‘Scheduled Offence’ is sine qua non.

The Petitioner before the Court had challenged a complaint filed by the respondent against him alleging commission of offence of money laundering under Section 3 of PMLA as also the impugned prosecution launched against the petitioner pursuant to the order of cognizance and the order framing charges against him passed by the Designated Special Court (the Court of Principal Sessions Judge, Srinagar). 

In the case where the allegation against the Petitioner was that he misappropriated the funds of JKCA with criminal conspiracy with other accused persons and that the funds so misappropriated have been laundered by layering them into other bank accounts thereby generating proceeds of crime within the meaning of Section 2(1)(u) of PMLA, the Petitioner argued that with respect to the said allegation, the CBI has already registered an FIR under Sections 120-B, 406 and 409 Ranbir Penal Code (RPC), and that both the aforesaid offences i.e. S.406 and S.409 RPC, are not scheduled offences as defined under Section 2(y) of PMLA. Therefore, it was the primary ground of the Petitioner that commission of scheduled offence is a sine qua non for offence of money laundering and that in the absence of commission of schedules offence, there could be no proceeds of crime and no offence under PMLA. 

To the contrary, the Respondents argued that though the chargesheet present by the CBI before the competent court is only with respect to commission of offences under Section 120-B, 406 and 409 RPC, however, a perusal of the CBI charge-sheet would reveal the ingredients of commission of scheduled offences punishable under Section 411 and 424 RPC, as such petitioner cannot escape prosecution under the PMLA.

The Court upon consideration of the matter while observing, “For commission of offence of money laundering under Section 3 of PMLA, it is required to be demonstrated that the accused has directly or indirectly, knowingly or unknowingly involved in any process or activity connected with the proceeds of crime. Such activity could be concealment possession, acquisition or use of the proceeds of crime and projecting it as untainted property”, noted that the chargesheet pending before the Trial Court does not disclose any offence scheduled under the PMLA. 

The Court while holding that the authorities under PMLA cannot resort to action against any person for money laundering only on the assumption that the property recovered by them must be proceeds of crime further observed, “From a plain reading of Section 3 PMLA, it appears that offence under Section 3 PMLA can only be committed after a scheduled offence is committed. It is, thus, trite that commission of a scheduled offence is sine qua non for existence of proceeds of crime and commission of offence of money laundering under Section 3 of the PMLA Act.”

Furthermore, while turning down the argument of the Enforcement Directorate (ED) that is not bound by the conclusions drawn by the CBI and it can independently look into the material contained in the charge-sheet to come to a conclusion that the petitioner has committed a scheduled offence to justify registration of case under PMLA, the Court held, “The Enforcement Directorate is not an authority or investigating agency in any manner superior to CBI, nor is it vested with or conferred the power and jurisdiction to sit in appeal against the investigation made and the conclusion drawn by the later. The Enforcement Director being a parallel investigating agency in respect of crimes under PMLA must accept the investigation carried by another investigating agency and the conclusion drawn by the said agency in respect of commission of the offences other than the offences under PMLA.”

The Court, thus, while allowing the Petition, however, made clear that notwithstanding quashing of the charges, it shall remain open to the Enforcement Director to register ECIR afresh and launch prosecution against the petitioner under Section 3 of the PMLA if ultimately the Court of Chief Judicial Magistrate, Srinagar (Trial Court) frames charges for offence/offences, which are specifically mentioned in the schedule of PMLA.