Once regular case of scheduled offence is quashed, subsequent offence under PMLA not sustainable: Calcutta High Court

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The Calcutta High Court on Monday held that once a regular case of a scheduled offence under the Prevention of Money Laundering Act (PMLA) is quashed, the subsequent case registered cannot sustain [M/s Nik Nish Retail Ltd v. Assistant Director, Enforcement Directorate].

Justice Subhendu Samanta said in the judgment,

“The quashing of FIR of regular case automatically created a situation that the offences, stated and alleged in the FIR has no existence; thus the “Scheduled Offence” has also no existence after quashing of the FIR. When there is no “Scheduled Offence”, the proceeding initiated under the provisions of Prevention of Money Laundering Act, 2002 cannot stand alone.”

The Court was hearing a plea filed by a company that was booked in a case filed by the Central Bureau of Investigation (CBI) under Sections 120 B (criminal conspiracy), 420 (cheating), 409 (criminal breach of trust) of the Indian Penal Code and Section 13 (criminal misconduct by public servant) of the Prevention of Corruption Act.

The case pertained to alleged illegal transactions and defrauding Union Bank of India to the tune of ₹15 crore.

The CBI had lodged this scheduled offence in September 2009. Subsequently, the Enforcement Directorate (ED) lodged a case under the relevant provisions of the PMLA law.

Further, the CBI had filed a chargesheet in the case before a special designated court. Proceedings were also filed before the Debts Recovery Tribunal (DRT), Kolkata.

Subsequently, the ED attached properties of the petitioner company and its directors worth ₹10 crore. However, the Appellate Authority under the PMLA noted that these attached properties were not purchased from the ‘proceeds of crime’, and therefore quashed the provisional attachment orders.

Meanwhile, the Bank had amicably settled the dispute, with the petitioner company and other accused undertaking to pay ₹6 crore.

Based on this settlement, the petitioner company had moved the High Court in 2018, seeking to quash the CBI proceedings. The same were quashed.

However, the ED’s case continued, which was sought to be quashed by the present petition.

The company argued that the very existence of the scheduled offence is negated after the CBI’s case was quashed, and accordingly, the question of existence of any ‘proceeds of crime’ does not arise.

The ED contested this contention by arguing that mere settlement before the DRT did not wipe out the criminal activities of the petitioners. The agency argued that a huge amount of public money was involved in this case, and that the petitioners have deliberately committed the crime for which the proceeding under PMLA was initiated.

After hearing the arguments, the Court referred to Vijay Madanlal Chowdhury v. Union of India, wherein the Supreme Court had held that if a person is finally discharged/acquitted of the scheduled offence or the criminal case against him is quashed by a competent Court, there can be no offence of money laundering against him or any one claiming such property being the property linked to stated scheduled offence through him.

Therefore, the Bench opined that the pendency of PMLA case cannot be sustained at this juncture and quashed the same.

Advocates Ayan Bhattacharya and Meghajit Mukherjee appeared for the petitioners.

Advocate Vipul Kundalia represented the ED.

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