ED cannot initiate PMLA proceedings if criminal conspiracy is not for commission of any scheduled offence
In a recent judgment in case of Pavana Dibbur v. Directorate of Enforcement, the Supreme Court has held that the offence of criminal conspiracy under Section 120-B of Indian Penal Code (‘IPC’) will become a scheduled offence only if the conspiracy relates to commission of an offence which is otherwise a scheduled offence under the Prevention of Money Laundering (‘PMLA’). The Supreme Court held that in absence of such other offence being a scheduled offence under PMLA, there cannot be proceeds of crime.
In this case, Pavana Dibbur (‘Appellant’) had purchased two immovable properties in 2013 and 2019 respectively. The first property was purchased from Alliance Business School in 2013. The second property was purchased in 2019 from a person named Madhukar Angur (‘main accused’) who impersonated as chancellor of Alliance University and collected INR 107 crore from students between January 2017 to November 2017.
In this regard, four First Information Reports (‘FIRs’) were registered against various persons in 2016 and 2017. In the chargesheets filed in respect of three FIRs, the name of the Appellant was not mentioned as an accused. Further, amongst various offences mentioned in the chargesheet, only offence of criminal conspiracy under Section 120-B was a scheduled offence under PMLA. Other offences mentioned in the chargesheet were not scheduled offences under PMLA. In the fourth FIR, a closure report was filed.
The Enforcement Directorate (‘ED’) registered an Enforcement Case Information Report (‘ECIR’) against various persons on 16 October 2020. The Appellant was also accused of offence of money laundering on the ground that the Appellant facilitated the main accused by allowing him to use Appellant’s bank accounts to siphon university funds and both properties were attached by the ED. A complaint was also filed before the Special Court under PMLA.
The Appellant approached the High Court of Karnataka to quash the complaint; however, the same was dismissed by the High Court. Aggrieved by the same, the Appellant approached the Supreme Court.
Judgement of the Supreme Court
The Supreme Court in its Judgement dated 29 November 2023 held that there were no proceeds of crime in this case as the alleged criminal conspiracy does not relate to commission of any of the scheduled offences and therefore, proceedings under PMLA cannot be initiated. The Supreme Court quashed the complaint filed by the ED before the Special Court.
The legal position decided by the Supreme Court is as follows:
1. For the offence of money laundering, it is not necessary that the accused must also be an accused in the scheduled offence;
2. Though not an accused in the scheduled offence, such person will benefit in the money laundering proceedings from the acquittal or discharge of all the accused in the scheduled offence or quashing of the proceedings of the scheduled offence;
3. A property cannot be said to have any connection with the proceeds of crime if the acts constituting the scheduled offence were committed after the property was acquired;
4.The offence of criminal conspiracy under Section 120-B of the IPC will become a scheduled offence only if the criminal conspiracy is to commit an offence which is specifically included in the Schedule to the PMLA.