Coal Allocation Per Se Does Not Amount To "Proceeds Of Crime" Under PMLA: Delhi High Court

Observing that the allocation of coal cannot be viewed as proceeds of crime per se, the Delhi High Court has observed that only the gains that may be obtained from criminal activity which are concealed or projected to be untainted can form the subject matter of the offence under the Prevention of Money Laundering Act (PMLA). Justice Yashwant Varma was of the view that it cannot be said that the allocation of coal is property as contemplated under the Act. "It is pertinent to note that the Act essentially seeks to confiscate properties and assets that may be derived or obtained from criminal activity and which may then be concealed. It is thus evident that it is only gains that may have been obtained by the utilization of the allocation which could have possibly been viewed as proceeds of crime," the Court said. The Court also observed that the commission of a predicate offense is the precipitate step for initiation of proceedings under the Act and that the offense of money laundering must be tried and established separately. "It is also pertinent to observe that the predicate offense constitutes the very foundation of a charge of money laundering. The entire edifice of a charge of money laundering is raised on an allegation of a predicate offence having been committed, proceeds of crime generated from such activity and a projection of the tainted property as having been legitimately acquired," the Court added. The Court also said that the description of the offense of money laundering as a stand-alone offense would not in itself infuse jurisdiction in proceedings that may be initiated under the Act even after a competent court has come to hold that no criminal offense stands committed or in situations where the accused is discharged of the offense or proceedings quashed.Essentially, the following observations were made:- The allegation of money laundering is premised and dependent upon the commission of a criminal offence. Unless proceeds are found to have been derived or obtained from criminal activity, the question of money laundering would not arise. - The Act is concerned with the commission of an offence which may have yielded revenues of profits which are then concealed and their source obfuscated. However, once the charge of commission of a scheduled offence itself comes to be annulled by virtue of a judicial declaration with a competent Court finding that an offence could not be set to have been committed it would be impermissible to assert that a person or entity has indulged in money laundering.- Since the offence of money laundering is essentially aimed at depriving persons of the fruits and benefits that may have been derived or obtained from criminal activity, the charge is inextricably linked to criminal activity. However, once it is found that a criminal offence does not stand evidenced, the question of any property being derived or obtained therefrom or its confiscation or attachment would not arise at all and in any case, proceedings if initiated under the Act would be wholly without jurisdiction or authority.- The Court finds that the expression ―proceeds of crime‖ creates an inextricable link between criminal activity and the acquisition of property and assets as a result thereof. If the charge of criminal activity ceases to exist in law, a charge of money laundering would neither sustain nor survive. The Court thus reiterates the conclusions as drawn and recorded in Rajeev Chanana and Gagandeep Singh. - Consequently it must be held that once it is found by a competent court, authority or tribunal that a predicate offence is either not evidenced or on facts it is held that no offence at all was committed, proceedings under the Act would necessarily have to fall or be brought to a close.- Turning then to Section 3 of the Act, the Court finds that the said provision would come into play only if proceeds of crime are found to have been generated. As this Court reads Section 3 it finds that the offence of money laundering has an enduring and ineffaceable link to proceeds of crime. Absent the commission of a criminal offence, the foundation of proceedings initiated under the Act would undoubtedly fall and self-destruct.- The Court further notes that not every criminal activity falls within the ambit of Section 3. While criminal activity may represent or evidence the commission of a predicate offence under the Penal Code, it is only activity relating to the laundering of proceeds of crime which can form the subject matter of proceedings under the Act. Absent the existence of criminal activity which may have resulted in proceeds of crime having been gained or obtained, a charge under Section 3 would not sustained.- The Court also bears in mind the language of Section 3 of the Act which links the activities and processes of money laundering to proceeds of crime. Section 3 creates an indelible link between property derived or obtained and criminal activity relating to a scheduled offence. It is...

Coal Allocation Per Se Does Not Amount To "Proceeds Of Crime" Under PMLA: Delhi High Court

Nupur Thapliyal

Only concealed gains obtained from criminal activity can form subject matter of offence.

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Nupur Thapliyal

Coal Allocation Per Se Does Not Amount To "Proceeds Of Crime" Under PMLA: Delhi High Court

Nupur Thapliyal

Only concealed gains obtained from criminal activity can form subject matter of offence.

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Nupur Thapliyal

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