The Madras High Court has held that mere possession of crime proceeds sufficient to invoke Prevention of Money Laundering Act (PMLA) provisions.
The bench of Justice S.M.Subramaniam and Justice A.D.Maria Clete has observed that in any proceeding relating to proceeds of crime under PMLA in a case of a person charged with offence of money laundering under Section 3, the authority or Court shall unless the contrary is proved presume that such proceeds of crime are involved in money laundering and in the case of any other person, the authority or Court may presume that such proceeds of crime involved in money laundering”.
Table of Contents
Background
The Central Bureau of Investigation (CBI) registered FIR against Mr.L.Balasubramanian and others for collecting money from various persons from lower level cadres in Indian Overseas Bank.
Another FIR was registered by the CBI, ACB for the offences under Section 120B of IPC and Section 13(2) read with Section 13(1)(e) of the Prevention of Corruption Act, 1988 against L.Balasubramanian for amassing huge assets disproportionate to his known source of income.
As per the FIR L.Balasubramanian had amassed huge wealth in the form of Fixed Deposits and immovable properties to the tune of Rs.2,03,84,378 disproportionate to his known sources of income.
Another FIR was registered by the Central Crime Branch, Chennai City under Sections 406, 408, 471, 420 and 506(ii) IPC against Mr.L.Balasubramanian, Mr.S.Srinivasan (petitioner) and other person belonging to All India Indian Overseas Bank Employees Union for diverting the funds collected from the members of All India Indian Overseas Bank Employees Union and purchasing property in the name of Mr.L.Balasubramanian.
The offences under Sections 120B, 420 and 472 of IPC and offences under Sections 7, 9 and 13 of the Prevention of Corruption Act, 1988 are scheduled offences under the Prevention of Money-Laundering Act, 2002, which empowers the Enforcement Directorate to investigate in respect of offences committed under Section 3 of PMLA.
The ED after receiving the documents from the CBI, Chennai and having found that there is prima facie case made out under the provisions of PMLA recorded Enforcement Case Information Report (ECIR) and took up the investigation.
During the course of investigation under the provisions of the PMLA, the depositions were recorded under the provisions of Section 50(2) and (3) of PMLA and obtained documents from the Bank, Sub Registrar Office, etc.
The Deputy Director, Directorate of Enforcement, Chennai issued a Provisional Attachment Order under Section 5(1) of PMLA and provisionally attached Bank Fixed Deposits and Bank balances worth Rs.2.19/- Crores held with the name of All India Indian Overseas Bank Employees Union Welfare Charitable and Endowment Trust besides two Cars and an Apartment in the names of Mr.L.Balasubramanianand All India Indian Overseas Bank Employees Union Welfare Charitable and Endowment Trust, in which the petitioner was a trustee. Considering it as ‘proceeds of crime’ in terms of Section 2(1)(u) of PMLA.
Arguments
The petitioner contended that the petitioner is no way connected with the money collected on behalf of Trustee. He had not involved in the administration of the Association. Therefore, implicating the petitioner as an accused is beyond the scope of the provisions of PMLA.
The petitioner contended that the petitioner had not purchased any movable or immovable property out of the funds of the trust and he was not enjoying any benefits as a trustee. He was neither in possession nor in use any of the property purchased by the trust.
The petitioner contended that the element of “knowingly assist” or “knowingly is a party” or “is actually involved in any processes of activity connected with the proceeds of crime and projecting it as untainted property” as contemplated under Section 3 of PMLA is missing in the case of petitioner and the Trial Court failed to consider this aspect, while passing the impugned order.
The department contended that based on the scheduled offence, ECIR was recorded and the Enforcement Directorate took up the investigation independently and found that the alleged offence of money laundering is made out against the accused persons and after recording statement under Section 50 and collection of materials, complaint has been filed before the Special Court for PMLA. Therefore, there is no infirmity and the impugned order was rightly rejected by the Trial Court.
Relevant Provisions – Definition Of ‘Person’ Under PMLA & IPC
According to Section 11 of the IPC, the term “person” includes any company or association or body of persons, whether incorporated or not. This definition is significant as it clarifies that the provisions of the IPC apply not only to individuals but also to other entities like companies and associations. The definition of “person” is wide-ranging and comprehensive, covering both incorporated and unincorporated entities.
This means that the IPC can be used to prosecute companies, partnerships, societies, and other bodies of persons for offences committed under the Code.
An association of persons or a body of individuals, whether incorporated or not” As such there is no ambiguity that trust is included or falls under the ambit of the definition for person as defined under PMLA, 2002. Further a conjoint reading of Section 2(s) and Section 70 of PMLA, 2002 makes it clear that trust is also an artificial person, as it is an association of parties who jointly fulfil a common purpose.
Conclusion
The court held that the Trial Court considered the allegations set out in the complaint and formed an opinion that the petitioner has failed to made out a prima facie case for discharge.
“We do not find any infirmity or perversity with reference to the findings made by the Special Court rejecting the discharge petition,” the court said.
Case Details
Case Title: S.Srinivasan Versus The Assistant Director, Director of Enforcement, Chennai
Case No.: CRL.R.C.No.1153 of 2023 and CRL.M.P.No.9042 of 2023
Date: 04.10.2024
Counsel For Appellant: R.Raja Rathinam
Counsel For Respondent: P.Sidharthan
