Acquittal From Predicate Offence Would Lead To Cessation Of Consequential Proceedings Including Attachment Under PMLA: Delhi High Court Reiterates

The Delhi High Court has reiterated that if the elementary foundation i.e., the scheduled offence is itself removed, consequential proceedings under the Prevention of Money Laundering Act, 2002 shall also fall.

The division bench comprising Justices Purushaindra Kumar Kaurav And Yashwant Varma observed, “the appellant-Jeevan Kumar had already been acquitted of the scheduled offence, there can be no action for money-laundering against the other appellants in relation to the property linked to the stated scheduled offence. An inference can plausibly be drawn from the legal maxim sublato fundamento cadit opus which means that upon removal of the foundation, the work collapses.”

“Thus, the plain and literal interpretation of Section 2(1)(u) read with Section 3 of PMLA, 2002 which has been enunciated in Vijay Madanlal Choudhary (supra) and reiterated by the Hon‟ble Supreme Court in Pavana Dibbur (supra) and by this Court in Prakash Industries (supra), suggests that if the elementary foundation i.e., the scheduled offence is itself removed, consequential proceedings emanating therefrom shall also fall,” the bench added.

The above ruling came in appeals assailing order of the Appellate Tribunal, PMLA, dismissing first appeals of the appellants against the confirmation order in an Enforcement Case Information Report (ECIR).

In the first appeal, Jeevan Kumar was accused of involvement in an illicit kidney transplantation operation and various offenses, including those outlined in the Indian Penal Code and the Transplantation of Human Organs Act. These offenses were categorized as scheduled offenses under the Prevention of Money Laundering Act (PMLA) of 2002, leading to a provisional attachment order (PAO) against him.

Additionally, it was alleged that funds belonging to Jeevan Kumar were invested in properties developed by Rajiv Channa, even though Channa was not formally charged in the initial criminal case. The involvement of Channa in laundering Kumar's purportedly tainted assets further justified the issuance of the PAO.

In the subsequent appeal, it was claimed that M/S N.R. Merchant Pvt. Ltd. had purchased a property previously owned by Jeevan Kumar, which was alleged to have been acquired using illicit funds. While the company's name wasn't explicitly mentioned in the PAO, it faced repercussions as it acquired the property after the attachment proceedings, unaware of the initial circumstances surrounding the transaction.

In 2008, a complaint was lodged against Jeevan Kumar and others for offenses under the IPC and the Transplantation of Human Organs Act. The case was investigated by the CBI, leading to charges filed in 2008. Concurrently, in 2008, the Enforcement Directorate registered a case under the Prevention of Money Laundering Act (PMLA) against Jeevan Kumar. Properties were attached, and a complaint was filed in 2010, resulting in a provisional attachment order. In 2011, the Adjudicating Authority confirmed the order, which was appealed in 2011. In 2012, charges were framed against Rajiv Channa under the PMLA. In 2013, Jeevan Kumar was acquitted in the CBI case. In 2024, the court quashed the proceedings related to the PMLA case and annulled charges against Rajiv Channa.

The Court at the outset observed, that though the present appeals were preferred under Section 42 of PMLA, 2002 on a number of questions of law, the solitary issue which required its consideration was 'whether acquittal of the accused i.e., Jeevan Kumar from the predicate offence and quashing of criminal proceedings mentioned above qua the appellant-Rajiv Channa, shall also lead to the cessation of the attachment proceedings.'

Taking note of the fact that the Trial Court had already acquitted the appellant-Jeevan Kumar of all the charges framed against him vide judgment dated 22.03.2013 and the same had remained unchallenged by the respondent, the Court observed, “his acquittal in the scheduled offence breaks the entire chain leading to the other appellants. Moreover, this Court, vide judgment dated 15.01.2024, had quashed the ECIR bearing no. ECIR/07/DZ/2008 alongwith all the consequential proceedings arising therefrom, and the charge framed qua the appellant-Rajiv Channa vide order dated 24.04.2012. Thus, a necessary corollary would be that all the proceedings in furtherance of prosecution, including attachment, would also fall and are therefore, liable to be quashed.”

The Court cited Supreme Court's judgment in Vijay Madanlal Choudhary case where it was held "in the event the person named in the criminal activity relating to a scheduled offence is finally absolved by a Court of competent jurisdiction owing to an order of discharge, acquittal or because of quashing of the criminal case (scheduled offence) against him/her, there can be no action for money-laundering against such a person or person claiming through him in relation to the property linked to the stated scheduled offence."

Thus, the Court held that the attachment proceedings in the present case were unsustainable as 'the appellants cannot be said to be involved in any activity connected with the proceeds of crime.'

In view of the aforesaid, the Court set aside the judgment and final order dated 09.03.2015 and also quashed the confirmation order. Accordingly, instant appeals were allowed.

Case Title: Rajiv Channa Vs Union Of India

Citation: 2024 LiveLaw (Del) 452

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