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Delhi High Court Rules on the Effect of Acquittal in Money Laundering Cases

Introduction

In the case of Rajiv Channa v. Union of India[i], the Hon’ble Delhi High Court (‘DHC’) addressed the interplay between acquittal in a predicate offence and the subsequent proceedings under the Prevention of Money Laundering Act, 2002 (‘PMLA’). The DHC quashed the enforcement case information report (ECIR’) along with all consequential proceedings, including attachments, which were in furtherance of prosecution.

Brief Facts

  • On 25.01.2008, a first information report (‘FIR’) was registered against Jeevan Kumar (‘Appellant no. 1’) and others under s. 420 of the Indian Penal Code, 1860 (‘IPC’) and ss. 18 & 19 of the Transplantation of Human Organs Act, 1994 (‘TOHO Act’).

  • The investigation of the abovementioned FIR was transferred to the Central Bureau of Investigation (‘CBI’), leading to the registration of a regular case under ss. 120B, 326, 342, 417, 465, 473, 307, and 506 of the IPC, and ss. 18, 19, and 20 of the TOHO Act.

  • It was also alleged that money belonging to appellant no. 1 had been invested in the properties developed by Rajiv Channa (‘Appellant no. 2’). Further, it was alleged that the funds of Appellant no. 1 were invested in properties developed by Appellant no. 2, who was not named as an accused in the CBI’s FIR. The involvement of Appellant no. 2 in projecting Appellant no. 1’s income as untainted property led to the issuance of the provisional attachment order (‘PAO’).

  • An ECIR was registered against the appellants and other persons on the ground that they have committed scheduled offences under the PMLA. Subsequently, a complaint was made as per s. 5(5) of the PMLA before the Adjudicating Authority seeking adjudication and confirmation of the PAO.

  • In the matter concerning the CBI case, the Trial Court acquitted Appellant no. 1 of all charges and subsequently, Appellant no. 2 was also acquitted. This decision was not appealed, and the ECIR and all consequential proceedings arising therefrom were quashed.

  • The Appellants filed an instant appeal arguing that their acquittal disrupted the entire chain of evidence linking to other appellants and negated the existence of ‘proceeds of crime’ as defined under s. 2(1)(u) of the PMLA. Consequently, in the absence of ‘proceeds of crime,’ the attachment of properties under s. 5(5) of the PMLA was unjustifiable.

Held

  • After analyzing various judgments submitted by the Appellants, the DHC held that a bare perusal of the facts of the instant case showed that the Trial Court had already acquitted the Appellants of all charges, and the same had remained unchallenged by the respondent.

  • Consequently, the acquittal in the scheduled offence broke the entire chain leading to the other appellant, as elucidated by the legal maxim ‘sublato fundamento cadit opus,’ meaning that upon removal of the foundation, the work collapses.

  • The DHC quashed the ECIR along with all the consequential proceedings arising therefrom.

Our Analysis

The decision of the DHC in this case provides a legal precedent, emphasizing the inseparability of predicate offences from money laundering charges under PMLA. This decision aligns with the interpretation of the Hon’ble Supreme Court as established in the case of Vijay Madanlal Choudhary v. Union of India[ii], which was reaffirmed in the case of Pavana Dibbur v. The Directorate of Enforcement[iii] and upheld by the DHC in the case of Prakash Industries Ltd. v. Directorate of Enforcement[iv]. The impact of this judgment will extend beyond the immediate parties involved, setting a clear guideline for future instances in which the linkage between predicate offences and money laundering allegations must be unequivocal.



End Notes

[i] 2024 SCC OnLine Del 2535

[ii] 2022 SCC OnLine SC 929

[iii] 2023 SCC OnLine SC 1586

[iv] 2022 SCC OnLine Del 2087








Authored by Manmohan Bhola, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinion.

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