To Say That ED Has To Wait For FIR In Scheduled Offence Will Make PMLA Unworkable, Says Supreme Court During Hearing

The Supreme Court on Wednesday remarked that while the existence of the predicate offence is a prerequisite for the commencement of the investigation by the ED under the PMLA, saying that the ED has to wait for the registration of the FIR in respect of the scheduled offence would make the system "unworkable" and be "counter-productive" to the intent of the PMLA.The Court cited practical situations where on account of the "influence" wielded by the accused over the local police, or the refusal by certain states to allow access to CBI for "political/administrative reasons", or the denial of sanction for prosecution for the predicate offence due to "various considerations", the FIR may not come to be registered. "What happens to the money laundering offence if the FIR is not registered and if the ED was not to proceed until then?", the court observed.The bench was considering the question of whether the Enforcement Directorate will have jurisdiction to probe the unaccounted money under PMLA in the absence of a prior FIR registered for the predicate offence. The Court was also deliberating on the issue of the sequencing of conduct of matters by the court in respect of the predicate offence and under the PMLA.It was the submission of Senior Advocate S. Niranjan Reddy, for the petitioners, that Money Laundering is "parasitic" and hence cannot arise if there is no scheduled offense and/or if there are no proceeds of crime; that it is only when proceeds of crime are sought to be projected as clean money the separate offence of money laundering arises. It was his case that the scheme of PMLA does not permit the money laundering offence to be continued if there is no scheduled offence and if there are no proceeds of crime. "While Section 8(7) of the PMLA deals with certain exceptional circumstances when money laundering offence can be continued, it clearly implies that in the absence of such special circumstances money laundering offence is parasitic", it was submitted.As regards the sequence of conducting matters, it was indicated that Section 43(2) of the PMLA provides that while trying an offence of money laundering, the Special Court shall also try any other offence; and that Section 44(1) clarifies that the scheduled offence shall also be tried by the Special Court trying the money laundering offence. Mr. Reddy advanced that his limited submission is that the decision in the PMLA case cannot precede the decision in scheduled offence case, though conducted simultaneously. "An analogy, on the legal principle, can be made on the offence of harbouring of offenders which is an offence under Section 212 of the IPC. Various High Courts have consistently taken the view that Section 212 is predicated on the person harboured being an offender. Therefore, unless the original offence is proved and the harboured person is held to be an offender; the person accused of harbouring him under Section 212 cannot be sentenced earlier. These judgments however recognise that in appropriate circumstances Section 212 offence can be tried simultaneously with the original offence", it was submitted.On Wednesday, Justice A. M. Khanwilkar observed, "Don't make arguments that will make the system unworkable. Offences can be registered at different points of time also- we don't know, it depends from case to case. The obligation of the special court is to try both the offences, and expeditiously. Accepting this argument is asking the trial court not to try this offence. Then until the predicate offence is tried and the judgment of conviction attains finality, that is, until the Supreme Court decides, nothing would proceed as regards the PMLA offence? For 20 years, nothing would happen? Look at the uncertainties. The way out should be such that it serves both- the justice system also and the interest of the accused"Continuing, the judge noted, "Suppose, the predicate offence is registered, the trial commences, then at some stage some information is received by the ED about commission of such predicate offence being registered and that there are proceeds of crime which are being used or in possession and therefore an offence is committed under PMLA. So it can be after one year also, it can be simultaneously also. One thing is certain is that PMLA cannot proceed without a predicate offence. Now the question is whether registration is essential, or even before registration, you can take notice of PMLA offence and inform the police officer concerned to take notice of this predicate offence and register it and proceed. It can be a mix of it. For one cause of action, we cannot deny the other cause of action which has arisen under the PMLA itself...""Keep in mind one of the possibilities- The person involved is so influential or placed at a high authority position. If the local police refuse to register the predicate crime, saying 'we will enquire' and all. If the accused is influential, he will put his weight in ensuring the police do that. Now,...

To Say That ED Has To Wait For FIR In Scheduled Offence Will Make PMLA Unworkable, Says Supreme Court During Hearing

Mehal Jain

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