[PMLA] Charges Can't Proceed If Investigation Into Predicate Offence Is Stalled: J&K High Court

A bench of Justice Sanjay Dhar clarified,

“Offences under PMLA are stand alone offences, yet their origin is the Scheduled offences. Once the Scheduled offence ceases to exist or is extinguished, an accused cannot be proceeded against in respect of offences under PMLA”.

Background:

The case involved a petitioner who was arrested by the Enforcement Directorate (ED) for alleged money laundering linked to a bank loan fraud. However, the petitioner challenged the arrest, arguing that the High Court of Punjab and Haryana had already ordered a stay on the investigation into the bank loan fraud (the predicate offence).

The petitioner, represented by Senior Counsel Mr. Vikram Chaudhari, argued that the ED's actions were baseless since money laundering charges are essentially dependent on a proven predicate offence. With the investigation into the predicate offence on hold, the very basis for the money laundering charges crumbles, the counsel pointed.

The ED, represented by the Deputy Solicitor General of India, countered that the petitioner had already challenged the ED proceedings before the High Court of Punjab and Haryana. The ED argued that the petitioner could not invoke the jurisdiction of two separate courts for the same relief.

They further contended that a stay on the predicate offence investigation doesn't prevent the ED from initiating its own probe into money laundering, and that proceedings under PMLA can continue unless the accused is discharged, acquitted, or the FIR for the predicate offence is quashed.

Observations Of The Court:

Addressing the preliminary objection qua the maintainability of the present writ petition as the petitioner had already invoked the jurisdiction of the High Court of Punjab and Haryana for challenging the proceedings Justice Dhar pointed out their distinct causes of action and recorded,

“One thing is clear that the cause of action for invoking the jurisdiction of High Court of Punjab and Haryana and cause of action for invoking the jurisdiction of this Court are separate from each other, inasmuch as, there are two different events, that have taken place on different occasions, may be the same are part of a single transaction”.

The court then delved into legal interpretations of PMLA qua the effect of stay order in a predicate offence and acknowledged contrasting judgments from various High Courts. While some, like those in Madras and Telangana, previously ruled that a stay on the predicate offence didn't hinder the ED's investigation, Justice Dhar noted these predated a crucial Supreme Court decision.

Spotlighting the 2022 Supreme Court verdict in Vijay Mandanlal Choudhary and others v. Union of India the court highlighted the Supreme Court's observation that money laundering charges can't be pursued if the accused is ultimately acquitted of the predicate offence or if the case against them is quashed. The court reasoned that a stay on the predicate offence investigation essentially "eclipses" the proceedings, impacting the money laundering charges that stem from it.

“...Once investigation in FIR relating to predicate scheduled offences is stayed, the proceedings in the said FIR would get eclipsed. The same will definitely have a bearing upon the offences of money laundering as the said offences owe their origin to the predicate offences. Therefore, the said offences would also stand eclipsed till such time the stay of investigation is in operation”, Justice Dhar recorded.

Based on the Supreme Court's precedent and the inherent link between predicate offences and money laundering charges, the court concluded that the ED likely overstepped its bounds in this case.

The court accordingly ordered the petitioner's release on bail subject to certain conditions, including furnishing bail bonds, cooperating with the ED investigation, surrendering his passport, and not leaving the country without permission.

However, the court clarified that this bail would be automatically revoked if the stay on the predicate offence investigation was lifted.

Case Title: Anil Kumar Aggarwal V/s Enforcement Directorate th. its Assistant Director, Jammu

Citation: 2024 LiveLaw (JKL) 44

Counsel For Appellant(s)/Petitioner(s): Mr. Vikram Chaudhari, Sr. Adv. with Mr. Tejeshwar Singh, Adv. Ms. Arveen Sekhon, Adv.

Click Here To Read/Download Judgment