Case: Navdeep Singh vs. Assistant Director, Directorate of Enforcement
Judgement Copy / MANU/PH/1764/2018

In this case before the High Court of Punjab and Haryana (Court), the petitioner, Navdeep Singh, had filed a petition for quashing of complaint under the Prevention of Money Laundering Act, 2002 (PMLA).

Prior to this, there was specific information with the police to the effect that the petitioner had indulged in sale of narcotics and it was pursuant to the said secret information that the petitioner and his co-accused, Srabjit Singh, were arrested and the petitioner was found in possession of 95 grams of heroin and an amount of Rupees 9 lacs was also recovered from him. Consequently, FIR was lodged for offence under Sections 21 and 25 of Narcotic Drugs and Psychotropic Substances Act, 1985 (NDPS Act). Since offence under Section 21 of NDPS Act is listed amongst the scheduled offences in the ‘Schedule’ to the PMLA, therefore, an offence under Section 3 punishable under Section 4 of the PMLA was attracted.

When the proceedings under Section 5 of the PMLA Act for attachment of amount of Rupees 9 lacs were initiated and provisional attachment order was passed which was confirmed by the Adjudicating Authority, the trial in respect of the NDPS case was still pending. Even when the complaint was filed, the trial was still pending and it was afterwards that the trial concluded and the petitioner and his co-accused were convicted.

The material question before the Court was whether prosecution for offence under Section 3 of PMLA could be initiated during the pendency of attachment proceedings or before the attachment confirmation attains finality or before the conviction of the petitioner under the NDPS Act attains finality.

The counsel for respondents contended that there is no statutory bar for prosecuting the accused under PMLA either during pendency of proceedings under any other Act or even during pendency of the attachment proceedings under PMLA and placed reliance upon judgment of Delhi High Court in J. Sekar v. Union of India (2018 III AD ( Delhi ) 638) [http://lobis.nic.in/ddir/dhc/SMD/judgement/11-01-2018/SMD11012018CW53202017.pdf] in which the Division Bench, after examining the scheme of PMLA observed as follows:

“36. There are, therefore, two parallel streams-

(i) criminal proceedings before the Special Court for trial of the offences under Section 3 read with Section 4 PMLA and;

(ii) the departmental proceedings before the authorities instituted under the PMLA, i.e. the Director, the AA, and the AT, the orders of which are subject to appeal before the High Court.”

The Court held that the proceedings for attachment are separate and in the nature of interim measures required to be taken to avoid a situation where proceedings are rendered redundant on account of the property being squandered away. If the designated officer has reason to believe, based on the material in his possession, that a person is in possession of proceeds of crime and, such proceeds, are likely to be concealed, transferred or dealt with in any manner which may result in frustrating proceedings relating to confiscation of ‘proceeds of crime’, he may proceed to attach the property in question. In fact it is in anticipation of prosecution that attachment proceedings are initiated.

Additionally, the second proviso to Section 5(1), when read with the first proviso, would itself make it clear that attachment or pendency of attachment proceedings would not affect filing of a complaint under PMLA. While the first proviso to Section 5(1) envisages the provisional attachment being made simultaneously with the filing of the challan in the criminal Court for offences under Sections 3 and 4 of PMLA, the second proviso carves out an exception by providing that in case the Director or any other authorised officer has reason to believe that if such property involved in money laundering is not attached immediately the non-attachment of the property is likely to frustrate any proceeding under this Act, the attachment may be made prior to initiation of criminal proceedings.

While proceedings under Sections 5 and 8 of PMLA are conducted by Enforcement Authorities, a complaint for offence under section 3 of PMLA is dealt with by a Special Court presided over by a judicial officer. Needless to mention that the Special Court is neither bound not governed not influenced by any order passed by the Enforcement Authorities and has to act independently on the basis of evidence led before it.

IT was also held that it was not the order of attachment which is foundation for lodging a complaint under section 3 of PMLA but it is the factum of recovery of the amount of Rupees 9 lakhs, prima facie believed to be ‘proceeds of crime’ which forms the foundation for prosecuting the accused for offence under section 3 of PMLA.

Thus it was found that there is no ground for quashing the complaint and the petition was dismissed.

For more information please write to Mr. Vijay Pal Dalmia at [email protected]