In a landmark judgment, the Supreme Court of India has clarified the application of the Prevention of Money Laundering Act (PMLA) in cases involving Section 120-B of the Indian Penal Code (IPC), which deals with criminal conspiracy. The Court ruled that an offense under Section 120-B IPC will be considered a scheduled offense under the PMLA only if the conspiracy is directed towards committing an offense that is specifically included in the schedule of the PMLA.
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The bench, comprising Justice Abhay S. Oka and Justice Pankaj Mithal, stated,
“An offence punishable under section 120-B will become a scheduled offence only if the conspiracy alleged is of committing an offence specifically included in the schedule. On that ground, we’ve quashed the proceedings.”
This decision came in response to an appeal against a judgment of the Karnataka High Court, which had refused to quash proceedings in a money laundering case against a former Vice-Chancellor of Alliance University. The Enforcement Directorate (ED) had charged the petitioner under the PMLA, citing offenses related to a sham sale deed and the use of bank accounts to conceal money.
Senior Advocate Meenakshi Arora, representing the appellant, argued that her client was not named in the FIR or subsequent charge sheet and was arraigned as an accused for the first time in a complaint under the PMLA. The Court questioned whether properties purchased prior to the commission of a predicate scheduled offense could be considered “Proceeds of Crime.”
The Court also addressed the hypothetical scenario of a theft of 100 crores where no scheduled offense other than 120-B is involved, questioning the power of authorities under PMLA to initiate prosecution. The Additional Solicitor General contended that the authorities would have the power to investigate, citing Section 120-B as a scheduled offense under Section 2(y) of the PMLA Act.
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However, the Court emphasized that the interpretation suggested by the ED would defeat the legislative object of making only selected offenses as scheduled offenses.
“If we accept such an interpretation, the statute may attract the vice of unconstitutionality for being manifestly arbitrary. It cannot be the legislature’s intention to make every offence not included in the Schedule a scheduled offence by applying Section 120¬B,”
the bench stated.
In conclusion, the Supreme Court’s ruling establishes a crucial legal precedent, ensuring that the PMLA is applied in a manner consistent with the legislative intent and the principles of justice. This judgment provides clarity on the scope of criminal conspiracy under the PMLA, significantly impacting future prosecutions under this act.
