No Predicate Offence, No Proceeds Of Crime : Supreme Court Quashes ED Complaint Related To Chhatisgarh Liquor Case

The Supreme Court on Monday (April 08) quashed the money laundering case in relation to the alleged Chhattisgarh liquor scam.

The Court noted that the complaint filed by the Enforcement Directorate (ED) was based on an alleged conspiracy(Section 120B IPC) to commit an Income Tax Act offence, which is not a scheduled offence as per the Prevention of Money Laundering Act(PMLA). Since there is no predicate offence, there are no proceeds of crime. Therefore, there can’t be a money laundering offence, the Court observed.

In this regard, the Court relied on its judgment in Pavana Dibbur v. ED which held that the ED can’t invoke PMLA by using Section 120B IPC when criminal conspiracy is not related to a scheduled offence.

“As there is no schedule offence, as held in the aforesaid decision(Pavana Dibbur), there cannot be any proceeds of crime within the meaning of clause (u) of Section 2 of PMLA. If there are no proceeds of crime, obviously offence under Section 3 of PMLA is not made out,” observed the bench comprising Justice Abhay S Oka and Ujjal Bhuyan.

When Additional Solicitor General SV Raju argued that it was premature to quash the complaints when the Special Court has not taken cognizance, the petitioners (represented by Senior Advocate Mukul Rohatgi) submitted that cognizance has been taken.

The Court observed that it was immaterial if cognizance was take or not, since the complaints are ex-facie unsustainable since there is no money laundering offence involved.

“Only mode by which cognizance of offence under Section 3 punishable under Section 4 of the PMLA be taken by the Special Court is upon a complaint made by the authority authorized on this behalf. Considering the provision of Section 46 (1) of PMLA, save as otherwise provided in PMLA, the provisions of CrPC shall apply to the proceedings before the Special Court. Therefore, once the complaint is filed before the Special Court, the provision of Section 200 and Section 204 of Cr.P.C. will apply. Before taking cognizance, the Special Court has to apply its mind to the question whether prima facie an offence under Section 3 of PMLA is made out. If the Special Court) is of the view that no prima facie offence under Section 3 is made out, the Court can exercise the powers under Section 203 of Cr.P.C. and dismiss the complaint. If prima facie case is made out, the Court can take recourse to Section 204 of Cr.P.C.

In this case, ex facie a scheduled offence is not in existence, therefore there can’t be proceeds of crime. Hence it follows that there cannot be an offence under Section 3 of PMLA. Therefore, no purpose is served by directing the Special Court to apply its mind in accordance with Section 203 read with Section 204 of Cr.P.C.”

The bench was hearing the writ petitions filed by IAS officer Anil Tuteja, his son Yash Tuteja, Karishma Dhebar, Anwar Dhebar, Arun Pati Tripathi and Siddharth Singhania. Only *Anwar Dhebar* and Arun Pathi Tripathi were named as accused in the complaint(others were named in the ECIR).

The Court said that since others are not named in the complaint, it was not necessary to entertain their petitions. The complaint as against Anwar Dhebar and Arun Pati Tripathi was quashed.

ASG submitted that there is a subsequent predicate offence, registered in Uttar Pradesh, against the petitioners, and that the ED will be filing complaint as regards the said offence. The Bench said that it was not commenting about future complaints as it was concerned only with the present complaint.

“It is not necessary for us to go into the issue of legality and validity of the proceeding which are likely to be initiated, and therefore all the contentions in that way are kept open,” the bench clarified.