The Supreme Court of India has reiterated the crucial dependency of offences under the Prevention of Money Laundering Act (PMLA) on predicate offences, stating that PMLA charges cannot stand alone without an established underlying crime. The apex court underscored this principle while addressing a bail application for a businessman implicated in a money laundering case related to illegal coal transportation levies in Chhattisgarh.
Key Highlights:
- Dependency on Predicate Offence: The court highlighted that money laundering charges under PMLA are inherently “parasitic” and require a predicate offence to validate their investigation. Without a registered predicate offence, the Enforcement Directorate (ED) cannot proceed with money laundering charges.
- Legal Foundation: The bench, comprising Justices Surya Kant and KV Viswanathan, emphasized that the ED must thoroughly establish the predicate offences before pursuing money laundering charges, even if the accused in the PMLA case is not named in the predicate offence.
- ASG’s Argument: Additional Solicitor General SV Raju argued that the investigation of money laundering can be independent of other law enforcement probes into predicate offences, citing previous Supreme Court judgments. However, the bench clarified that the absence of a predicate offence invalidates the PMLA charges.
- Bail Granted: The court granted bail to businessman Sunil Kumar Agarwal, noting the absence of a predicate and scheduled offence in the case. The bench observed that a “strong prima facie” case existed for his release.
Specific Case Details:
- Case Background: The ED initiated its investigation based on a report from the Income Tax department and arrested Agarwal in October 2022. The original FIR in Bengaluru mentioned Section 384 (extortion), a scheduled offence under PMLA. However, the charge sheet later filed under non-scheduled offences undermined the basis for the PMLA charges.
- Court’s Observation: The court noted the necessity of having a predicate offence for the PMLA charges to stand, emphasizing that the ED would be “clutching at straws” without one.
- Further Instructions: The Supreme Court granted the ASG six weeks to provide a statement on whether the Chhattisgarh police had independently investigated allegations of an illegal levy on coal transportation.
Legal Precedents:
- Vijay Madanlal Chaudhary Case: In 2022, the Supreme Court ruled that if the base FIR is quashed or the accused exonerated, the ED cannot continue its probe under PMLA.
- Pavana Dibbur Case: The court declared in November 2023 that criminal conspiracy alone cannot trigger a money laundering investigation; the conspiracy must relate to a scheduled offence under the PMLA.
Similar Case in Chhattisgarh:
- Liquor Industry Corruption: A similar case involving alleged corruption in Chhattisgarh’s liquor industry was also quashed due to the absence of a scheduled offence. However, a new ECIR was lodged following an FIR by the Chhattisgarh Police naming several high-profile individuals.
Conclusion:
The Supreme Court’s decision reinforces the necessity for a solid legal foundation in financial crime investigations, ensuring that the ED can only proceed with PMLA charges when a predicate offence is clearly established. This ruling aims to maintain the integrity and legal basis of money laundering prosecutions, preventing investigations based solely on circumstantial or unsubstantiated allegations.
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