Proceedings under PMLA cannot continue if no scheduled offence, says court

“It is crystal clear that if there is no scheduled/predicate offence, the PMLA case cannot continue. Similarly, the PMLA court cannot have jurisdiction to continue a PMLA case in the absence of a case relating to scheduled offence. The guidelines of the Honourable Supreme Court…are very clear. This court has no jurisdiction to extend judicial custody of the accused under PMLA when there is no scheduled offence,” special judge M G Deshpande said in his order on Monday.

The ED, as a prosecuting agency, can file a complaint under PMLA only to probe allegations of money-laundering of proceeds of crime. These proceeds, therefore, have to be linked to a separate criminal offence allegedly committed by the person based on which the ED files its independent complaint under PMLA. The separate criminal offence is called a scheduled offence or predicate offence.

The Supreme Court, in its key order on PMLA last month, observed that if a person is absolved by a court in the scheduled offence filed against them, there can be no separate action for money-laundering against such a person.

Two accused, Babulal Varma and Kamalkishor Gupta, were arrested in January 2021 linked to an alleged money-laundering case against a firm called Omkar Realtors and Developers Private Limited. The ED’s complaint against them and others, including actor-businessman Sachin Joshi, is related to an FIR filed in 2020 in Aurangabad on charges of cheating Aurangabad Gymkhana and its directors.

Their lawyers Vijay Aggarwal and Rahul Agarwal told the court on Monday that the closure report filed by the police in the case in Aurangabad was accepted by a local court, noting that the complaint was filed due to a misunderstanding and that the commercial transactions dues were cleared by the accused. The lawyers submitted that a “single minute spent” by the two accused in custody amounted to illegal detention since there is no scheduled offence against them.

Referring to the Supreme Court order, lawyer Aggarwal submitted that since the closure report was accepted and there is no scheduled offence, the PMLA case by the ED cannot continue. Based on the submissions, the special court directed the ED to file its reply. ED prosecutors Hiten Venegavkar and Kavita Patil sought time to file a reply stating that the plea was filed “surprisingly” and that its officials were not aware about it. The court allowed the adjournment application while ordering that the two be released in the meantime as interim relief. The court also said that issues of “surprise” raised by ED do not arise once the issue of illegal detention is brought up.

“Once it is pointed out that the custody of the accused is likely to turn into illegal detention, certainly the court cannot grant liberal adjournments to ED for filing say and arguing the application at their convenience by continuing the judicial custody of the accused…,” the court said, adding that the question of illegal detention is to be heard expeditiously.

The court directed the release of Varma and Gupta on a personal bond of Rs 5 lakh and said that it was ready to hear the matter daily considering ED’s urgency to hear the plea.