Commission of scheduled offence is a prerequisite for prosecuting an offence under Prevention of Money Laundering Act: J&K High Court

Jammu and Kashmir High Court: In a petition filed under Section 482¹ of the Criminal Procedure Code, 1973, seeking to quash a complaint filed by the respondent (Enforcement Directorate) alleging an offence of money laundering under Section 3 of the Prevention of Money Laundering Act, 2002 (PMLA), a single-judge bench of Sanjeev Kumar, J., found that the CBI had not charged the petitioner with any scheduled offence, which is a necessary precondition for invoking PMLA provisions and quashed the complaint, charge sheet, and charges framed by the Designated Special Court, Srinagar, under the PMLA.

Factual Matrix

In the instant matter, the petitioner filed the present petition for quashing of a complaint filed by the respondent under the PMLA for money laundering. The charges stemmed from an alleged misappropriation of funds from the Jammu & Kashmir Cricket Association (JKCA) in conspiracy with others. The petitioner argued that the offences cited under Sections 406 and 409 of the Ranbir Penal Code, 1989 (RPC) were not scheduled offences under the PMLA, making the prosecution under PMLA unsustainable. However, the respondent countered that, while the CBI charge sheet mentioned Sections 120-B, 406, and 409 RPC, the charge-sheet also contained elements of scheduled offences under Sections 411 and 424 RPC, thereby, justifying the prosecution under PMLA.

Moot Point

1. Whether the registration of an FIR for a scheduled offence is a sine qua non (essential condition) for prosecuting a money laundering case under the PMLA.

2. Whether the Enforcement Directorate can independently assess the charge sheet filed by the CBI to determine the presence of a scheduled offence under PMLA.

Court’s Analysis

The Court relied on Pavana Dibbur v. Directorate of Enforcement, 2023 SCC OnLine SC 1586, where the Supreme Court clarified that a conspiracy under Section 120-B IPC would only be a scheduled offence if it involves committing an offence specifically listed in the PMLA schedule. The Supreme Court held that

1. “It is not necessary that a person, against whom the offence under Section 3 of the PMLA is alleged, must have been shown as the accused in the scheduled offence;

2. Even if an accused shown in the complaint under the PMLA is not an accused in the scheduled offence, he will benefit from the acquittal of all the accused in the scheduled offence or discharge of all the accused in the scheduled offence. Similarly, he will get the benefit of the order of quashing the proceedings of the scheduled offence;

3. The first property cannot be said to have any connection with the proceeds of the crime as the acts constituting scheduled offence were committed after the property was acquired;

4. The issue of whether the appellant has used tainted money forming part of the proceeds of crime for acquiring the second property can be decided only at the time of trial; and

5. The offence punishable under Section 120-B of the IPC will become a scheduled offence only if the conspiracy alleged is of committing an offence which is specifically included in the Schedule.”

The Court stated that since the CBI’s charge sheet against the petitioner pertained only to non-scheduled offences the prosecution under PMLA could not be sustained. The Court emphasised that the Enforcement Directorate could not assume jurisdiction based on an assumption that the material collected by the CBI might disclose a scheduled offence. The Court held that the Enforcement Directorate must respect the CBI’s findings unless varied or modified by a competent court.

Court’s Decision

The Court ruled in favor of the petitioner and quashed the complaint and charges under PMLA. The Court held that —

1. The commission of a scheduled offence is a prerequisite for prosecuting an offence under the PMLA.

2. The Enforcement Directorate cannot independently reinterpret the CBI’s charge sheet to establish the presence of a scheduled offence if the investigating agency (CBI) has not explicitly charged the accused with a scheduled offence.

The Court, however, left the door open for the Enforcement Directorate to initiate fresh proceedings if the Chief Judicial Magistrate, Srinagar, were to frame charges for scheduled offences under PMLA in the future.

[Ahsan Ahmad Mirza v. Directorate of Enforcement, 2024 SCC OnLine J&K 674, Decided on 14-08-2024]

Advocates who appeared in this case :

Mr. Shariq J. Reyaz and Mr. M. Syed Bhat, Counsel for the Petitioner

Mr. S.V. Raju ASGI with Mr. Zoheb Hossein and Manin Jain, Special Counsel and Mr. T.M. Shamshi, DSGI with Mr. Faizan and Ms. Rehana Qayoom and Ms. Monika Kohli, Counsel for the Respondent