Smt. Parvathi vs Directorate Of Enforcement on 7 March, 2025

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March 14, 2025

Karnataka High Court

Smt. Parvathi vs Directorate Of Enforcement on 7 March, 2025

Bench: M.Nagaprasanna

Reserved on : 20.02.2025
Pronounced on : 07.03.2025 R
IN THE HIGH COURT OF KARNATAKA AT BENGALURU

DATED THIS THE 07TH DAY OF MARCH, 2025

BEFORE

THE HON'BLE MR. JUSTICE M. NAGAPRASANNA

CRIMINAL PETITION No.1132 OF 2025

BETWEEN:

SMT. PARVATHI
AGED ABOUT 61 YEARS,
W/O SRI SIDDARAMAIAH,
RESIDING AT NO. 206, PRASIDDHA,
16TH CROSS, MC LAYOUT,
VIJAYANAGARA,
BENGALURU - 560 040.

PRESENTLY RESIDING AT 'CAUVERY',
KUMARA KRUPA ROAD,
BENGALURU - 560 001.

... PETITIONER
(BY SRI SANDESH CHOUTA, SR.ADVOCATE FOR
SRI KARTHIK NATESHA AND
MS.SANYA MALLI, ADVOCATES
SRI VIKRAM HUILGOL, SR.ADVOCATE FOR
SRI SAMRUDH HEGDE. ADVOCATE)

AND:

DIRECTORATE OF ENFORCEMENT
REPRESENTED BY ITS
2

ASSISTANT DIRECTOR,
BENGALURU ZONAL OFFICE,
3RD FLOOR, BLOCK 'B',
BMTC BUILDING, K.H.ROAD,
BENGALURU - 560 027.
... RESPONDENT

(BY SRI ARAVIND KAMATH, ADDL.SGI A/W
SRI MADHUKAR DESHPANDE, SPL.PP)

THIS CRIMINAL PETITION IS FILED UNDER SECTION 528 OF
BHARATIYA NAGARK SURAKSHA SANHITA, 2023 PRAYING TO a)
QUASH THE INVESTIGATION IN ECIR BEARING
F.NO.BGZO/25/2024 REGISTERED BY THE RESPONDENT AGAINST
THE PETITIONER ARISING OUT OF THE PREDICATE OFFENCE IN
CR.NO.11/2024, REGISTERED BY THE LOKAYUKTHA POLICE; b)
QUASH THE SUMMONS ISSUED U/S 50 OF PMLA VIDE
NO.PMLA/SUMMON/BGZO/2025/2809/8497 DTD 03.01.2025 AND
VIDE NO.PMLA/SUMMON/BGZO/2025/2903 DTD 24.01.2025 TO
THE PETITIONER HEREIN ANNEXURE A AND B ISSUED BY THE
RESPONDENT.

THIS CRIMINAL PETITION HAVING BEEN HEARD AND
RESERVED FOR ORDERS ON 20.02.2025, COMING ON FOR
PRONOUNCEMENT THIS DAY, THE COURT MADE THE FOLLOWING:-
3

CORAM: THE HON'BLE MR JUSTICE M.NAGAPRASANNA

CAV ORDER

The petitioner/accused No.2 in Crime No.11 of 2024 is

standing at the doors of this Court challenging registration of

Enforcement Case Information Report ('ECIR' for short) against the

petitioner arising out of predicate offence in Crime No.11 of 2024

registered by the Karnataka Lokayukta Police.

2. Shorn of unnecessary details, facts in brief germane are as

follows:-

The petitioner is the wife of the Chief Minister of the State of

Karnataka. Complaints come to be registered before the competent

Court invoking Section 200 of the Cr.P.C., against five accused.

Accused No.1 was depicted to be the Chief Minister of the State of

Karnataka, accused No.2 is the present petitioner and three other

accused. Approval as obtaining under Section 17A of the

Prevention of Corruption Act was sought from the hands of the

Governor to investigate into the alleged crime against the Chief
4

Minister of the State of Karnataka. The Governor, in terms of his

order, grants approval as obtaining under Section 17A of the

Prevention of Corruption Act, permitting investigation into the

allegations against the Chief Minister and his family. The said grant

of approval comes to be challenged before this Court in Writ

Petition No.22356 of 2024. This Court by its order dated

24-09-2024 negatives the said challenge and affirms grant of

approval by the Governor to investigate into the allegations.

3. Pursuant to the dismissal of the challenge as afore-noticed,

the concerned Court directs registration of a First Information

Report ('FIR') to investigate into the offence as obtaining under

Section 156(3) of the Cr.P.C. The investigation is directed to be

conducted by the Police wing of the Karnataka Lokayukta.

Therefore, FIR in Crime No.11 of 2024 comes to be registered

against the Chief Minister, the present petitioner and others. The

issue in the lis does not pertain to the merit of the crime so

registered in Crime No.11 of 2024. Four days after registration of

crime, two events happen on the said day i.e., on 01-10-2024. On

01-10-2024 the present petitioner who was the recipient of
5

fourteen sites from Mysore Urban Development Authority ('MUDA'

for short) as compensation for acquisition of land belonging to the

petitioner had returned those sites to MUDA and a deed of

cancellation of allotment is executed on the same day. On the said

day, the impugned ECIR comes to be registered by the Enforcement

Directorate. After registration of ECIR, summons comes to be

issued against the petitioner directing appearance before the

Enforcement Directorate in terms of summons dated 3-01-2025. It

is at that juncture the petitioner knocks at the doors of this Court

calling in question registration of crime and consequent act of

issuance of summons under Section 50 of the Prevention of Money

Laundering Act, 2002 ('the Act' for short).

4. Heard Sri Sandesh J. Chouta, learned senior counsel

appearing for the petitioner, and Sri Arvind Kamath, learned

Additional Solicitor General of India appearing for the respondent.

5. The learned senior counsel for the petitioner would take

this Court through the documents appended to the petition and

seeks to demonstrate that the action of the respondent/
6

Enforcement Directorate is laced with mala fides, as ECIR comes to

be registered within four days of registration of crime in Crime

No.11 of 2024. Even before determination in Crime No.11 of 2024

where the petitioner along with others was alleged of guilty of

offences; the guilty of offences he would mean the filing of charge

sheet in the predicate offence i.e., Crime No.11 of 2024 soon after

registration of the crime in which the petitioner was named as

accused No.2, the petitioner who was the recipient of 14 sites from

the hands of MUDA surrenders those sites and surrendering is

accepted and a deed of cancellation of allotment is also executed.

On the same day springs the impugned ECIR.

5.1. It is the submission of the learned senior counsel that as

on the date of registration of ECIR, the petitioner was not even in

possession of the alleged proceeds of crime. It is his submission

that the land belonging to the petitioner, which was gifted by

accused No.3 in the year 2005, is acquired by MUDA. Against the

said acquisition, the petitioner becomes entitled in terms of law for

grant of adequate compensation. She was compensated by

allotment of 14 sites. This becomes the subject matter of huge hue
7

and cry and the Governor grants approval to investigate into the

offence. The sites are surrendered. The petitioner is no longer in

possession, enjoyment and usage of the said sites. Therefore, there

cannot be an offence under Section 3 of the Act is what is

submitted by the learned senior counsel. It is his further submission

that the Enforcement Directorate should await the decision in the

predicate offence to come to conclude that there is prima facie case

of money laundering and there cannot be a parallel investigation. In

all, the crux of the submission is that the petitioner is neither in

possession, enjoyment or usage of the alleged proceeds of crime.

He would submit that it is not even proceeds of crime, as it was

compensation granted in terms of law by a statutory authority

against acquisition of land of the petitioner. This would not become

proceeds of crime is what the learned senior counsel would submit.

On the aforesaid submission, the learned senior counsel seeks

quashment of entire proceedings.

6. Per contra, the learned Additional Solicitor General would

refute the submissions in contending that the petitioner did hold 14

sites. In the affidavit during elections, the husband of the
8

petitioner, the present Chief Minister claims that he is the owner of

14 sites. Therefore, it is his submission that those sites were in

possession of the petitioner. But, for registration of crime they

would not have been surrendered and the mere fact that they have

been surrendered is itself an admission that it was proceeds of

crime. This would not take away the investigation against the

petitioner under the Act in terms of ECIR so registered. The learned

Additional Solicitor General would further contend that what is

challenged is summons. Summons issued under Section 50 of the

Act need not be issued only against an accused. It can be issued to

summon a witness or any person related to ECIR. Therefore, per se,

it cannot be challenged is his submission.

7. The learned senior counsel for the petitioner joining issue

would contend that he has challenged entire registration of ECIR

and summons issued in furtherance of registration of ECIR. If ECIR

goes the summons would also go. It his further submission that

summons under Section 50 can be issued only after determining

something that is proceeds of crime and the money trail leading to

any person who is connected with the proceedings of crime. He
9

would submit that none of these facts are obtaining in the case at

hand and, therefore, seeks quashment of entire proceedings.

8. Both the learned senior counsel and the learned Additional

Solicitor General have placed reliance on plethora of judgments of

the Apex Court and of different High Courts, all of which would bear

consideration qua their relevance in the course of the order.

9. I have given my anxious consideration to the submissions

made by the respective learned counsel and have perused the

material on record. In furtherance whereof, the issue that falls for

my consideration is:

"Whether the petitioner should be permitted to be

investigated into on the impugned ECIR?"

10. The afore-narrated facts are not in dispute. They are a

matter of record. Pursuant to the aforesaid registration of crime

which happens on 27-09-2024 two subsequent developments

emerge. The Enforcement Directorate registers an ECIR in ECIR

F.No.BGZO/25/2024. The ECIR comes to be registered on
10

01-10-2024. A little walk in the history of the reason and

registration of predicate offence in Crime No.11 of 2024 and

consequent registration of impugned ECIR is necessary to be

noticed. The petitioner, as observed hereinabove, is the wife of the

present Chief Minister of the State of Karnataka. Accused No.3, her

brother acquires certain lands which would come within the

precincts of MUDA in the year 2004, having purchased them from

accused No.4 one Devaraju. Six years after the purchase, accused

No.3, the brother-in-law of the Chief Minister gifts the property to

the present petitioner, his sister. The gift deed is in subsistence.

MUDA is said to have acquired the property of 3 acres and 16

guntas which belonged to the petitioner.

11. Against the said acquisition, the petitioner registers a

claim before MUDA for grant of compensation. MUDA assessed the

compensation and allots 14 sites in lieu of compensation for the act

of acquisition of land of the petitioner which was 3.16 acres. The

value of 14 sites was assessed to be ₹56 crores. Based upon the

said grant of compensation, investigation was permitted in Crime
11

No.11 of 2024 in terms of registration of crime on 27-09-2024. Four

days thereafter, the petitioner who was in possession of 14 sites as

compensation from MUDA surrenders those sites to the Authority.

The surrendering of sites on 01-10-2024 is accepted by the

Commissioner, MUDA and allotment stands cancelled by execution

of a deed of cancellation. The deed of cancellation reads as follows:

"NOW THIS DEED OF CANCELLATION WITNESSETH, AS
FOLLOWS:

1. The First Party hereby unconditionally and irrevocably
surrenders to the Second Party- Authority all rights, title,
and interest in the Schedule Property.

2. The First Party hereby confirms that she is voluntarily
surrendering peaceful and vacant possession of the Site
to the Second Party-Authority and have no further claims
or demands regarding the Schedule Property.

3. The Second Party-Authority agrees that upon execution of
this Deed of Cancellation, the Sale of the Schedule
Property to the First Party shall stand cancelled, and the
Second Party-Authority shall be free to deal with the Site
in any manner it deems fit.

4. The First Party has wholeheartedly out of her own free
will and accord, without any undue influence, threat or
force and without any monetary consideration whatsoever
is surrendering the Schedule Property to the Second
Party- Authority.

5. The First Party on this day by way of this deed has
absolutely transferred all rights, title, interest and
possession of the schedule property to Second Party-
Authority.
12

6. The Second Party shall be entitled to enjoy and deal with
the schedule property and all that comes with it, in any
manner it deems fit and shall enjoy the schedule property
as its rightful owners.

7. The First Party has not done or knowingly suffered any
act, deed or thing whereby the said property may be
encumbered, effected or impeached in title or otherwise.
The First Party hereby declares that the property hereby
surrendered is not subject to any lien, encumbrance,
charge, maintenance claims or attachment of any court.

8. The First Party has not bequeathed the Schedule Property
in favor of any person.

9. The expenses incurred towards stamp duty, registration
and execution of this deed have been exclusively borne
by the First Party

SCHEDULE PROPERTY

All that piece and parcel of residential site bearing No. 25
formed in Vijayanagar 3rd Stage C Block Layout, Mysuru
measuring East to West 24.00 Meters North to South 15.00
Meters totally measuring 360.00 Square Meters and bounded
on the

East by : Road

West by : Site No. 89

North by : Site No.26

South by : Site No. 24"

Pursuant to the aforesaid deed of cancellation comes about the

order dated 01-10-2024. The order accepting the surrender of

the sites reads as follows:
13

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ಆಯುಕರು
ೖಸೂರು ನಗ ಾ ವೃ ಾ ಾರ
ೖಸೂರು"

In terms of the afore-quoted deed of cancellation and acceptance of

the same by the order with the surrender of sites, the allotment or

the proceeds of allotment by way of its value was no longer with
16

the petitioner. Yet another instance happened on the same day i.e.,

01-10-2024. The Enforcement Directorate registers Enforcement

Case Information Report, the impugned ECIR on the strength of the

petitioner being accused No.2 in the predicate offence i.e., Crime

No.11 of 2024. The Directorate seeks to conduct investigation and

later issued summons to the petitioner invoking power under

Section 50 of the Act to enquire into the issue of money laundering

against the petitioner. Whether holding of sites and their return

would amount to proceeds of crime for the Enforcement Directorate

to initiate proceedings and issue summons is what is required to be

noticed, for which it becomes necessary to consider the genesis of

the Act and certain provisions which are germane.

12. The Prevention of Money Laundering Act, 2002 has its

roots in certain International Conventions and Treaties to which

India was a signatory. These conventions urge all the member

states who have ratified those conventions to enact laws to combat

money laundering in their respective nations. This was elaborated

in the Vienna convention of 20-12-1988. The reason to control

money laundering was primarily aimed to plug in illicit traffic in
17

Narcotic Drugs and Psychotropic Substances. Deliberations galore

later and the Act is promulgated in the year 2002. Sections, 2, 3, 5

and 50 of the Act are necessarily to be considered for a resolution

of the issue in the lis. They read as follows:

"2. Definitions.--(1) In this Act, unless the context
otherwise requires,--

(a) "Adjudicating Authority" means an Adjudicating Authority
appointed under sub-section (1) of Section 6;

(b) "Appellate Tribunal" means the Appellate
Tribunal referred to in Section 25;

(d) "attachment" means prohibition of transfer, conversion,
disposition or movement of property by an order issued
under Chapter III;

(da) "authorised person" means an authorised person as
defined in clause (c) of Section 2 of the Foreign Exchange
Management Act, 1999 (42 of 1999);]

(e) "banking company" means a banking company or a co-
operative bank to which the Banking Regulation Act, 1949
(10 of 1949) applies and includes any bank or banking
institution referred to in Section 51 of that Act;

(f) "Bench" means a Bench of the Appellate Tribunal;

(fa) "beneficial owner" means an individual who ultimately
owns or controls a client of a reporting entity or the
person on whose behalf a transaction is being conducted
and includes a person who exercises ultimate effective
control over a juridical person;]
18

(g) "Chairperson" means the Chairperson of the Appellate
Tribunal;

(h) "chit fund company" means a company managing,
conducting or supervising, as foreman, agent or in any
other capacity, chits as defined in Section 2 of the Chit
Funds Act, 1982 (40 of 1982);

(ha) "client" means a person who is engaged in a financial
transaction or activity with a reporting entity and includes
a person on whose behalf the person who engaged in the
transaction or activity, is acting;]

(i) "co-operative bank" shall have the same meaning as
assigned to it in clause (dd) of Section 2 of the Deposit
Insurance and Credit Guarantee Corporation Act, 1961
(47 of 1961);

(ia) "corresponding law" means any law of any foreign
country corresponding to any of the provisions of this Act
or dealing with offences in that country corresponding to
any of the scheduled offences;

(ib) "dealer" has the same meaning as assigned to it in clause
(b) of Section 2 of the Central Sales Tax Act, 1956 (74 of
1956);]

(j) "Deputy Director" means a Deputy Director appointed
under sub-section (1) of Section 49;

(k) "Director" or "Additional Director" or "Joint Director"
means a Director or Additional Director or Joint Director,
as the case may be, appointed under sub-section (1) of
Section 49;

(l) "financial institution" means a financial institution as
defined in clause (c) of Section 45-I of the Reserve Bank
of India Act, 1934 (2 of 1934) and includes a chit fund
company, a housing finance institution, an authorised
person, a payment system operator, a non-banking
financial company and the Department of Posts in the
Government of India;
19

(m) "housing finance institution" shall have the meaning as
assigned to it in clause (d) of Section 2 of the National
Housing Bank Act, 1987 (53 of 1987);

(n) "intermediary" means,--

(i) a stock-broker, 12[* * *], share transfer agent,
banker to an issue, trustee to a trust deed,
registrar to an issue, merchant banker,
underwriter, portfolio manager, investment adviser
or any other intermediary associated with securities
market and registered under Section 12 of
the Securities and Exchange Board of India Act,
1992 (15 of 1992); or

(ii) an association recognised or registered under
the Forward Contracts (Regulation) Act, 1952 (74
of 1952) or any member of such association; or

(iii) intermediary registered by the Pension Fund
Regulatory and Development Authority; or

(iv) a recognised stock exchange referred to in clause
(f) of Section 2 of the Securities Contracts
(Regulation) Act, 1956 (42 of 1956);]

(na) "investigation" includes all the proceedings under
this Act conducted by the Director or by an
authority authorised by the Central Government
under this Act for the collection of evidence;

(o) "Member" means a Member of the Appellate Tribunal and
includes the Chairperson;

(p) "money-laundering" has the meaning assigned to it
in Section 3;

(q) "non-banking financial company" shall have the same
meaning as assigned to it in clause (f) of Section 45-I of
the Reserve Bank of India Act, 1934 (2 of 1934);

(r) "notification" means a notification published in the Official
Gazette;
20

(ra) "offence of cross border implications", means--

(i) any conduct by a person at a place outside India
which constitutes an offence at that place and
which would have constituted an offence specified
in Part A, Part B or Part C of the Schedule, had it
been committed in India and if such
person 16[transfers in any manner] the proceeds of
such conduct or part thereof to India; or

(ii) any offence specified in Part A, Part B or Part C of
the Schedule which has been committed in India
and the proceeds of crime, or part thereof have
been transferred to a place outside India or any
attempt has been made to transfer the proceeds of
crime, or part thereof from India to a place outside
India.

Explanation.--Nothing contained in this clause shall
adversely affect any investigation, enquiry, trial or
proceeding before any authority in respect of the offences
specified in Part A or Part B of the Schedule to the Act
before the commencement of the Prevention of Money-
Laundering (Amendment) Act, 2009;

(rb) "payment system" means a system that enables payment
to be effected between a payer and a beneficiary,
involving clearing, payment or settlement service or all of
them.

Explanation.--For the purposes of this clause, "payment
system" includes the systems enabling credit card
operations, debit card operations, smart card operations,
money transfer operations or similar operations;

(rc) "payment system operator" means a person who operates
a payment system and such person includes his overseas
principal.

Explanation.--For the purposes of this clause, "overseas
principal" means,--
21

(A) in the case of a person, being an individual, such
individual residing outside India, who owns or
controls or manages, directly or indirectly, the
activities or functions of payment system in India;

(B) in the case of a Hindu undivided family, Karta of
such Hindu undivided family residing outside India
who owns or controls or manages, directly or
indirectly, the activities or functions of payment
system in India;

(C) in the case of a company, a firm, an association of
persons, a body of individuals, an artificial juridical
person, whether incorporated or not, such
company, firm, association of persons, body of
individuals, artificial juridical person incorporated or
registered outside India or existing as such and
which owns or controls or manages, directly or
indirectly, the activities or functions of payment
system in India;]

(s) "person" includes--

(i) an individual,

(ii) a Hindu undivided family,

(iii) a company,

(iv) a firm,

(v) an association of persons or a body of
individuals, whether incorporated or not,

(vi) an every artificial judicial person not falling
within any of the preceding sub-clauses, and

(vii) an any agency, office or branch owned or
controlled by any of the above persons
mentioned in the preceding sub-clauses;

(sa) "person carrying on designated business or profession"
means,--
22

(i) a person carrying on activities for playing games of
chance for case of kind, and includes such activities
associated with casino;

(ii) Inspector-General of Registration appointed under
Section 3 of the Registration Act, 1908 (16 of
1908) as may be notified by the Central
Government;]

(iii) real estate agent, as may be notified by the Central
Government;

(iv) dealer in precious metals, precious stones and
other high value goods, as may be notified by the
Central Government;

(v) person engaged in safekeeping and administration
of cash and liquid securities on behalf of other
persons, as may be notified by the Central
Government; or

(vi) person carrying on such other activities as the
Central Government may, by notification, so
designate, from time to time;

(sb) "precious metal" means gold, silver, platinum, palladium
or rhodium or such other metal as may be notified by the
Central Government;

(sc) "precious stone" means diamond, emerald, ruby, sapphire
or any such other stone as may be notified by the Central
Government;

(t) "prescribed" means prescribed by rules made under this
Act;

(u) "proceeds of crime" means any property derived or
obtained, directly or indirectly, by any person as a
result of criminal activity relating to a scheduled
offence or the value of any such property or where
such property is taken or held outside the country,
23

then the property equivalent in value held within
the countryor abroad;

Explanation.--For the removal of doubts, it is
hereby clarified that "proceeds of crime" include
property not only derived or obtained from the
scheduled offence but also any property which may
directly or indirectly be derived or obtained as a
result of any criminal activity relatable to the
scheduled offence;(v) "property" means any
property or assets of every description, whether
corporeal or incorporeal, movable or immovable,
tangible or intangible and includes deeds and
instruments evidencing title to, or interest in, such
property or assets, wherever located;

Explanation.--For the removal of doubts, it is
hereby clarified that the term "property" includes
property of any kind used in the commission of an
offence under this Act or any of the scheduled
offences;

(va) "real estate agent" means a real estate agent as defined
in clause (88) of Section 65 of the Finance Act, 1994 (32
of 1994);]

(w) "records" include the records maintained in the form of
books or stored in a computer or such other form as may
be prescribed;

(wa) "reporting entity" means a banking company, financial
institution, intermediary or a person carrying on a
designated business or profession;]

(x) "Schedule" means the Schedule to this Act;

(y) "scheduled offence" means--

(i) the offences specified under Part A of the
Schedule; or
24

(ii) the offences specified under Part B of the Schedule
if the total value involved in such offences is one
crore rupees or more; or

(iii) the offences specified under Part C of the Schedule.

(z) "Special Court" means a Court of Session designated as
Special Court under sub-section (1) of Section 43;

(za) "transfer" includes sale-purchase, mortgage, pledge, gift,
loan or any other form of transfer of right, title,
possession or lien;

(zb) "value" means the fair market value of any property on
the date of its acquisition by any person, or if such date
cannot be determined, the date on which such property is
possessed by such person.

(2) Any reference, in this Act or the Schedule, to any
enactment or any provision thereof shall, in relation to an area
in which such enactment or such provision is not in force, be
construed as a reference to the corresponding law or the
relevant provisions of the corresponding law, if any, in force in
that area.

3. Offence of money-laundering.--Whosoever
directly or indirectly attempts to indulge or knowingly
assists or knowingly is a party or is actually involved in
any process or activity connected with the 26[proceeds of
crime including its concealment, possession, acquisition
or use and projecting or claiming] it as untainted
property shall be guilty of offence of money-laundering.

Explanation.--For the removal of doubts, it is
hereby clarified that,--

(i) a person shall be guilty of offence of money-
laundering if such person is found to have directly
or indirectly attempted to indulge or knowingly
assisted or knowingly is a party or is actually
involved in one or more of the following processes
or activities connected with proceeds of crime,
namely--
25

(a) concealment; or

(b) possession; or

(d) use; or

(e) projecting as untainted property; or

(f) claiming as untainted property,
in any manner whatsoever;

(ii) the process or activity connected with proceeds of
crime is a continuing activity and continues till such
time a person is directly or indirectly enjoying the
proceeds of crime by its concealment or possession
or acquisition or use or projecting it as untainted
property or claiming it as untainted property in any
manner whatsoever.
... ... ...
5. Attachment of property involved in money-
laundering.--(1) Where the Director or any other officer
not below the rank of Deputy Director authorised by the
Director for the purposes of this section, has reason to
believe (the reason for such belief to be recorded in
writing), on the basis of material in his possession, that--

(a) any person is in possession of any proceeds of
crime; and

(b) such proceeds of crime are likely to be concealed,
transferred or dealt with in any manner which may
result in frustrating any proceedings relating to
confiscation of such proceeds of crime under this
Chapter,

he may, by order in writing, provisionally attach such
property for a period not exceeding one hundred and
eighty days from the date of the order, in such manner as
may be prescribed:
26

Provided that no such order of attachment shall be made
unless, in relation to the scheduled offence, a report has been
forwarded to a Magistrate under Section 173 of the Code of
Criminal Procedure, 1973 (2 of 1974), or a complaint has been
filed by a person authorised to investigate the offence
mentioned in that Schedule, before a Magistrate or Court for
taking cognizance of the scheduled offence, as the case may be,
or a similar report or complaint has been made or filed under
the corresponding law of any other country:

Provided further that, notwithstanding anything contained
in first proviso, any property of any person may be attached
under this section if the Director or any other officer not below
the rank of Deputy Director authorised by him for the purposes
of this section has reason to believe (the reasons for such belief
to be recorded in writing), on the basis of material in his
possession, that if such property involved in money-laundering
is not attached immediately under this Chapter, the non-
attachment of the property is likely to frustrate any proceeding
under this Act.

Provided also that for the purposes of computing the
period of one hundred and eighty days, the period during which
the proceedings under this section is stayed by the High Court,
shall be excluded and a further period not exceeding thirty days
from the date of order of vacation of such stay order shall be
counted.

(2) The Director, or any other officer not below the rank
of Deputy Director, shall, immediately after attachment under
sub-section (1), forward a copy of the order, along with the
material in his possession, referred to in that sub-section, to the
Adjudicating Authority, in a sealed envelope, in the manner as
may be prescribed and such Adjudicating Authority shall keep
such order and material for such period as may be prescribed.

(3) Every order of attachment made under sub-section
(1) shall cease to have effect after the expiry of the period
specified in that sub-section or on the date of an order made
under 32[sub-section (3)] of Section 8, whichever is earlier.
27

(4) Nothing in this section shall prevent the person
interested in the enjoyment of the immovable property attached
under sub-section (1) from such enjoyment.

Explanation.--For the purposes of this sub-section,
"person interested", in relation to any immovable property,
includes all persons claiming or entitled to claim any interest in
the property.

(5) The Director or any other officer who provisionally
attaches any property under sub-section (1) shall, within a
period of thirty days from such attachment, file a complaint
stating the facts of such attachment before the Adjudicating
Authority.
... ... ...
50. Powers of authorities regarding summons,
production of documents and to give evidence, etc.--(1)
The Director shall, for the purposes of Section 13, have the
same powers as are vested in a civil court under the Code of
Civil Procedure, 1908 (5 of 1908) while trying a suit in respect
of the following matters, namely:--

(a) discovery and inspection;

(b) enforcing the attendance of any person, including any
officer of a 117[reporting entity], and examining him on
oath;

(d) receiving evidence on affidavits;

(e) issuing commissions for examination of witnesses and
documents; and

(f) any other matter which may be prescribed.

(2) The Director, Additional Director, Joint Director,
Deputy Director or Assistant Director shall have power to
summon any person whose attendance he considers necessary
whether to give evidence or to produce any records during the
course of any investigation or proceeding under this Act.
28

(3) All the persons so summoned shall be bound to attend
in person or through authorised agents, as such officer may
direct, and shall be bound to state the truth upon any subject
respecting which they are examined or make statements, and
produce such documents as may be required.

(4) Every proceeding under sub-sections (2) and (3) shall
be deemed to be a judicial proceeding within the meaning of
Section 193 and Section 228 of the Indian Penal Code (45 of
1860).

(5) Subject to any rules made in this behalf by the
Central Government, any officer referred to in sub-section (2)
may impound and retain in his custody for such period, as he
thinks fit, any records produced before him in any proceedings
under this Act:

Provided that an Assistant Director or a Deputy Director
shall not--

(a) impound any records without recording his reasons for so
doing; or

(b) retain in his custody any such records for a period
exceeding three months, without obtaining the previous
approval of the Joint Director."
(Emphasis supplied)

Sections 2(1)(u), 3 and 50 form the fulcrum of the lis. Section

2(1)(u) defines proceeds of crime which would mean any property

derived or obtained directly or indirectly as a result of criminal

activity to a scheduled offence or the value of such property. It

clarified further that holding of the property and taking it forward

becomes proceeds of crime. Section 3 makes it an offence to
29

laundering proceeds of crime. The ingredients of proceeds of crime

in the definition itself is inclusive of concealment, possession,

acquisition or use and projecting or claiming it as untainted

property. Section 5 deals with attachment of property involved in

money laundering. Section 50 deals with powers of the authorities

to issue summons for production of documents and to give

evidence. The interpretation of the aforesaid provisions and their

purport need not detain this court for long or delve deep into the

matter.

13. A Three Judge Bench of the Apex Court in the case of

VIJAY MADANLAL CHOUDHARY v. UNION OF INDIA1, has in

elaboration, examined threadbare the provisions of the Act. Certain

paragraphs of the said judgment are necessary to be noticed and

they read as follows:

"106. The "proceeds of crime" being the core of the
ingredients constituting the offence of money laundering, that
expression needs to be construed strictly. In that, all properties
recovered or attached by the investigating agency in connection
with the criminal activity relating to a scheduled offence under
the general law cannot be regarded as proceeds of crime. There
may be cases where the property involved in the commission of
scheduled offence attached by the investigating agency dealing

1
(2023) 12 SCC 1
30

with that offence, cannot be wholly or partly regarded as
proceeds of crime within the meaning of Section 2(1)(u) of the
2002 Act -- so long as the whole or some portion of the
property has been derived or obtained by any person "as a
result of" criminal activity relating to the stated scheduled
offence. To be proceeds of crime, therefore, the property must
be derived or obtained, directly or indirectly, "as a result of"
criminal activity relating to a scheduled offence. To put it
differently, the vehicle used in commission of scheduled offence
may be attached as property in the case (crime) concerned, it
may still not be proceeds of crime within the meaning of Section
2(1)(u) of the 2002 Act. Similarly, possession of unaccounted
property acquired by legal means may be actionable for tax
violation and yet, will not be regarded as proceeds of crime
unless the tax legislation concerned prescribes such violation as
an offence and such offence is included in the Schedule to the
2002 Act. For being regarded as proceeds of crime, the property
associated with the scheduled offence must have been derived
or obtained by a person "as a result of" criminal activity relating
to the scheduled offence concerned. This distinction must be
borne in mind while reckoning any property referred to in the
scheduled offence as proceeds of crime for the purpose of the
2002 Act. Dealing with proceeds of crime by way of any process
or activity constitutes offence of money laundering under
Section 3 PMLA.

107. Be it noted that the definition clause includes any
property derived or obtained "indirectly" as well. This would
include property derived or obtained from the sale proceeds or
in a given case in lieu of or in exchange of the "property" which
had been directly derived or obtained as a result of criminal
activity relating to a scheduled offence. In the context of the
Explanation added in 2019 to the definition of the expression
"proceeds of crime", it would inevitably include other property
which may not have been derived or obtained as a result of any
criminal activity relatable to the scheduled offence. As noticed
from the definition, it essentially refers to "any property"
including abroad derived or obtained directly or indirectly. The
Explanation added in 2019 in no way travels beyond that intent
of tracking and reaching up to the property derived or obtained
directly or indirectly as a result of criminal activity relating to a
scheduled offence. Therefore, the Explanation is in the nature of
clarification and not to increase the width of the main definition
31

of "proceeds of crime". The definition of "property" also contains
Explanation which is for the removal of doubts and to clarify
that the term property includes property of any kind used in the
commission of an offence under the 2002 Act or any of the
scheduled offences.

108. In the earlier part of this judgment, we have already
noted that every crime property need not be termed as
proceeds of crime but the converse may be true. Additionally,
some other property if purchased or derived from the proceeds
of crime even such subsequently acquired property must be
regarded as tainted property and actionable under the Act. For,
it would become property for the purpose of taking action under
the 2002 Act which is being used in the commission of offence
of money laundering. Such purposive interpretation would be
necessary to uphold the purposes and objects for enactment of
the 2002 Act.

109. Tersely put, it is only such property which is derived
or obtained, directly or indirectly, as a result of criminal activity
relating to a scheduled offence that can be regarded as
proceeds of crime. The authorities under the 2002 Act cannot
resort to action against any person for money laundering on an
assumption that the property recovered by them must be
proceeds of crime and that a scheduled offence has been
committed, unless the same is registered with the jurisdictional
police or pending inquiry by way of complaint before the
competent forum. For, the expression "derived or obtained" is
indicative of criminal activity relating to a scheduled offence
already accomplished. Similarly, in the event the person named
in the criminal activity relating to a scheduled offence is finally
absolved by a court of competent jurisdiction owing to an order
of discharge, acquittal or because of quashing of the criminal
case (scheduled offence) against him/her, there can be no
action for money laundering against such a person or person
claiming through him in relation to the property linked to the
stated scheduled offence. This interpretation alone can be
countenanced on the basis of the provisions of the 2002 Act, in
particular Section 2(1)(u) read with Section 3. Taking any other
view would be rewriting of these provisions and disregarding the
express language of the definition clause "proceeds of crime", as
it obtains as of now.
... ... ...
32

113. Thus, it is clear from a bare reading of two very
initial international conventions attempting to establish a world
order to curb money laundering, gave a very wide interpretation
to the concept of money laundering. There has been a
consensus that acquisition, possession, use, concealing or
disguising the illicit origin of illegitimately obtained money to
evade legal consequences would be money laundering. Further,
concealing and disguising too were clearly a part of money
laundering and as such there was no bar or understating that
pointed to the fact that there was a need to project the monies
as untainted. This was obviously subject to the fundamental
principles of the domestic law of the countries. However, the
growth of the jurisprudence in this law did not stop or end
there. As we progressed into a world equipped with the internet
and into a digital age, criminals found new ways to launder and
the law found new ways to tackle them.
... ... ...
133. Independent of the above, we have no hesitation in
construing the expression "and" in Section 3 as "or", to give full
play to the said provision so as to include "every" process or
activity indulged into by anyone, including projecting or claiming
the property as untainted property to constitute an offence of
money laundering on its own. The act of projecting or claiming
proceeds of crime to be untainted property presupposes that the
person is in possession of or is using the same (proceeds of
crime), also an independent activity constituting offence of
money laundering. In other words, it is not open to read the
different activities conjunctively because of the word "and". If
that interpretation is accepted, the effectiveness of Section 3 of
the 2002 Act can be easily frustrated by the simple device of
one person possessing proceeds of crime and his accomplice
would indulge in projecting or claiming it to be untainted
property so that neither is covered under Section 3 of the 2002
Act.

134. From the bare language of Section 3 of the 2002
Act, it is amply clear that the offence of money laundering is an
independent offence regarding the process or activity connected
with the proceeds of crime which had been derived or obtained
as a result of criminal activity relating to or in relation to a
scheduled offence. The process or activity can be in any form --
be it one of concealment, possession, acquisition, use of
33

proceeds of crime as much as projecting it as untainted property
or claiming it to be so. Thus, involvement in any one of such
process or activity connected with the proceeds of crime would
constitute offence of money laundering. This offence otherwise
has nothing to do with the criminal activity relating to a
scheduled offence -- except the proceeds of crime derived or
obtained as a result of that crime.

135. Needless to mention that such process or activity
can be indulged in only after the property is derived or obtained
as a result of criminal activity (a scheduled offence). It would be
an offence of money laundering to indulge in or to assist or
being party to the process or activity connected with the
proceeds of crime; and such process or activity in a given fact
situation may be a continuing offence, irrespective of the date
and time of commission of the scheduled offence. In other
words, the criminal activity may have been committed before
the same had been notified as scheduled offence for the purpose
of the 2002 Act, but if a person has indulged in or continues to
indulge directly or indirectly in dealing with proceeds of crime,
derived or obtained from such criminal activity even after it has
been notified as scheduled offence, may be liable to be
prosecuted for offence of money laundering under the 2002 Act
-- for continuing to possess or conceal the proceeds of crime
(fully or in part) or retaining possession thereof or uses it in
trenches until fully exhausted. The offence of money laundering
is not dependent on or linked to the date on which the
scheduled offence, or if we may say so, the predicate offence
has been committed. The relevant date is the date on which the
person indulges in the process or activity connected with such
proceeds of crime. These ingredients are intrinsic in the original
provision (Section 3, as amended until 2013 and were in force
till 31-7-2019); and the same has been merely explained and
clarified by way of Explanation vide Finance (No. 2) Act, 2019.
Thus understood, inclusion of clause (ii) in the Explanation
inserted in 2019 is of no consequence as it does not alter or
enlarge the scope of Section 3 at all.

136. As mentioned earlier, the rudimentary
understanding of "money laundering" is that there are three
generally accepted stages to money laundering, they are:
34

136.1. Placement : which is to move the funds from direct
association of the crime.

136.2. Layering : which is disguising the trail to foil
pursuit.

136.3. Integration : which is making the money available
to the criminal from what seem to be legitimate sources.
... ... ...
143. However, in the present case we find that the
Explanation only sets forth in motion to clear the mist around
the main definition, if any. It is not to widen the ambit of
Section 3 of the 2002 Act as such. Further, the meaning
ascribed to the expression "and" to be read as "or" is in
consonance with the contemporary thinking of the international
community and in consonance with the Vienna and Palermo
Conventions.
... ... ...
150. Be it noted that the authority of the authorised
officer under the 2002 Act to prosecute any person for
offence of money laundering gets triggered only if there
exist proceeds of crime within the meaning of Section
2(1)(u) of the 2002 Act and further it is involved in any
process or activity. Not even in a case of existence of
undisclosed income and irrespective of its volume, the
definition of "proceeds of crime" under Section 2(1)(u)
will get attracted, unless the property has been derived
or obtained as a result of criminal activity relating to a
scheduled offence.

151. It is possible that in a given case after the discovery
of huge volume of undisclosed property, the authorised officer
may be advised to send information to the jurisdictional police
[under Section 66(2) of the 2002 Act] for registration of a
scheduled offence contemporaneously, including for further
investigation in a pending case, if any. On receipt of such
information, the jurisdictional police would be obliged to register
the case by way of FIR if it is a cognizable offence or as a non-
cognizable offence (NC case), as the case may be. If the offence
so reported is a scheduled offence, only in that eventuality, the
property recovered by the authorised officer would partake the
colour of proceeds of crime under Section 2(1)(u) of the 2002
35

Act, enabling him to take further action under the Act in that
regard.

152. Even though the 2002 Act is a complete code
in itself, it is only in respect of matters connected with
offence of money laundering, and for that, existence of
proceeds of crime within the meaning of Section 2(1)(u)
PMLA is quintessential. Absent existence of proceeds of
crime, as aforesaid, the authorities under the 2002 Act
cannot step in or initiate any prosecution.

153. In other words, the authority under the 2002
Act is to prosecute a person for offence of money
laundering only if it has reason to believe, which is
required to be recorded in writing that the person is in
possession of "proceeds of crime". Only if that belief is
further supported by tangible and credible evidence
indicative of involvement of the person concerned in any
process or activity connected with the proceeds of crime,
action under the Act can be taken forward for attachment
and confiscation of proceeds of crime and until vesting
thereof in the Central Government, such process initiated
would be a stand-alone process.
... ... ...

Conclusion

382. In light of the above analysis, we now proceed
to summarise our conclusion on seminal points in issue in
the following terms:
... ... ...
382.8. The offence under Section 3 of the 2002 Act
is dependent on illegal gain of property as a result of
criminal activity relating to a scheduled offence. It is
concerning the process or activity connected with such
property, which constitutes the offence of money
laundering. The authorities under the 2002 Act cannot
prosecute any person on notional basis or on the
assumption that a scheduled offence has been
committed, unless it is so registered with the
jurisdictional police and/or pending enquiry/trial
including by way of criminal complaint before the
36

competent forum. If the person is finally
discharged/acquitted of the scheduled offence or the
criminal case against him is quashed by the court of
competent jurisdiction, there can be no offence of money
laundering against him or any one claiming such property
being the property linked to stated scheduled offence
through him."

(Emphasis supplied)

The Apex Court considers various contentions advanced while

defining what could be the proceeds of crime. At paragraphs 96 and

97, the Apex Court notices the preamble and the reason for

bringing in the Act. It is noticed that it was enacted to prevent

money laundering and to provide for confiscation of property

derived from such money laundering. At paragraph 99 the Apex

Court considers Section 2(1)(p) which deals with money laundering

and Section 2(1)(u) which defines proceeds of crime. The Apex

Court then travels to Section 3 and considers what could be the

process and activity of money laundering. The Apex court considers

what is proceeds of crime in paragraph 106 and what would mean

the purport of Section 2(1)(u). At paragraph 136 the Apex Court

observes that the rudimentary understanding of money laundering

is that there has to be three generally accepted stages i.e.,
37

placement; layering; integration. Placement would be the funds

from direct association of the crime; layering would disguising the

trail to foil pursuit and integration would be making the money

available to the criminal from what seem to be legitimate sources.

Therefore, the Apex Court hold that making tainted money into

untainted money or even its projection would amount to money

laundering.

14. Several High Courts have considered the purport of the

Act and the afore-quoted provisions both before and after the

judgement of the Apex Court in the case of VIJAY MADANLAL

CHOUDHARY. The Apex Court in case of NIKESH TARACHAND

SHAH v. UNION OF INDIA2 has held as follows:

".... .... ....

11. Having heard the learned counsel for both sides, it is
important to first understand what constitutes the offence of
money laundering. Under Section 3 of the Act, the kind of
persons responsible for money laundering is extremely wide.
Words such as "whosoever", "directly or indirectly" and
"attempts to indulge" would show that all persons who are even
remotely involved in this offence are sought to be roped in. An
important ingredient of the offence is that these persons
must be knowingly or actually involved in any process or
activity connected with proceeds of crime and "proceeds

2
(2018) 11 SCC 1
38

of crime" is defined under the Act, by Section 2(1)(u)
thereof, to mean any property derived or obtained
directly or indirectly, by any person as a result of criminal
activity relating to a scheduled offence (which is referred
to in our judgment as the predicate offence). Thus,
whosever is involved as aforesaid, in a process or activity
connected with "proceeds of crime" as defined, which
would include concealing, possessing, acquiring or using
such property, would be guilty of the offence, provided
such persons also project or claim such property as
untainted property. Section 3, therefore, contains all the
aforesaid ingredients, and before somebody can be
adjudged as guilty under the said provision, the said
person must not only be involved in any process or
activity connected with proceeds of crime, but must also
project or claim it as being untainted property.
(Emphasis supplied)

The Apex Court holds that persons responsible for money

laundering is wide. Whoever directly or indirectly attempts to

indulge would show that all persons who even remotely involved in

the offence are sought to be rope in. Therefore, whoever actively

connected with the proceeds of crime which would include

concealing, possession or using such property would be guilty of the

offence. The Apex Court further holds that one can be adjudged

guilty only when the person involved in the process or actively

connected with the proceeds of crime and the person projecting or

claiming it being an untainted money. It becomes germane to

notice the Division Bench judgment of the High Court of Madras in
39

the case of S.SRINIVASAN v. ASSISTANT DIRECTOR,

DIRECTOR OF ENFORCEMENT3, wherein it is held as follows:

".... .... ....

29. Section 2(1)(u) defines "proceeds of crime means
any property derived or obtained, directly or indirectly, by any
person as a result of criminal activity relating to a scheduled
offence or the value of any such property or where such
property is taken or held outside the country then the property
equivalent in value held within the country or abroad". Thus, it
is relevant to consider the scope of Section 3 which provides
offence of money laundering.

30. Section 3 stipulates that "whosoever directly or
indirectly attempts to indulge or knowingly assists or knowingly
is a party or is actually involved in any process or activity
connected with the proceeds of crime including its concealment,
possession, acquisition or using and projecting it as untainted
property shall be guilty of offence of money laundering".

31. The expression "money laundering", ordinarily,
means the process or activity of placement, layering and finally
integrating the tainted property in the formal economy of the
country. However, Section 3 has a wider reach. The offence, as
defined, captures every process and activity in dealing with the
proceeds of crime, directly or indirectly, and not limited to the
happening of the final act of integration of tainted property in
the formal economy to constitute an act of money-laundering.
This is amply clear from the original provision, which has been
further clarified by insertion of explanation vide Finance (No. 2)
Act, 2019, Section 3, as amended. The act of projecting or
claiming proceeds of crime to be untainted property
presupposes that the person is in possession of or is using the
same (proceeds of crime), also an independent activity
constituting offence of money-laundering. In other words, it is
not open to read the different activities conjunctively because of
the word "and". If that interpretation is accepted, the
effectiveness of Section 3 of the 2002 Act can be easily

3
2024 SCC OnLine Mad.5418
40

frustrated by the simple device of one person possessing
proceeds of crime and his accomplice would indulge in
projecting or claiming it to be untainted property so that neither
is covered under Section 3 of the 2002 Act. Thus, a person
who is as longer as in possession and enjoyment of
proceeds of crime, the PMLA can certainly be invoked. It
is also submitted that the subsequent amendments made
to the PMLA in respect of Section 3 of the PMLA has been
upheld by the Supreme Court of India on the premise that
all the said amendments are in clarificatory in nature.

32. Therefore, mere possession of proceeds of
crime would be sufficient to invoke the provisions of the
PMLA. Using the proceeds of crime by itself is an offence.
Since the scope of Section 3 is wider enough to cover
various circumstances in order to curb the economic
offences, the High Court cannot restrict its meaning so as
to restrain the authorities from invoking the provisions of
the PMLA.

33. Section 24 of the PMLA denotes "burden of proof". "In
any proceeding relating to proceeds of crime under the 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". Therefore, the presumptions of
the authorities, investigation conducted and documents
collected would be sufficient to proceed against a person under
the PMLA. Unless contrary is proved, presume that such
proceeds of crime are involved in money laundering. Therefore,
the burden of proof lies on the affected person, who in turn has
to prove his innocence during the course of trial. Adjudication of
those materials placed by the petitioners would be unnecessary
for this Court, while dealing with the discharge petitions."

(Emphasis supplied)
The Division Bench holds whoever directly or indirectly attempts to

indulge or knowingly assist a party for concealment, possession,
41

acquisition and using, would be guilty of possessing proceeds of

crime. The Division Bench therein holds that the person had abetted

the commission of crime. Therefore, the order which declined to

discharge the accused therein was affirmed.

15. The High Court of Jammu and Kashmir in the case of

HILAL AHMAD MIR & ORS. V DIRECTORATE OF

ENFORCEMENT DY.,4 elaborates on this issue and holds as

follows:

".... .... ....

10. Before proceeding further in the matter, a
reference to Section 2(1) (p), 2(1)(u), Section 3 and
Section 4 of the Prevention of Money Laundering Act,
2002 would be also relevant, which are reproduced
hereunder:

"Section 2(1)(p)

"Money-laundering" has the meaning assigned
to it in Section 3.

Section 2(1) (u)

"Proceeds of crime" means any property derived
or obtained, directly or indirectly, by any person as a
result of criminal activity relating to a scheduled
offence or the value of any such property [or where
such property is taken or held outside the country,

4
CRM(M) No. 484/2024, decided on 03.01.2025
42

then the property equivalent in value held within the
country or abroad;

Explanation--For the removal of doubts, it is
hereby clarified that "proceeds of crime" include
property not only derived or obtained from the
scheduled offence but also any property which may
directly or indirectly be derived or obtained as a result
of any criminal activity relatable to the scheduled
offence;]

Section 3.

"Offence of money-laundering.--
Whosoever directly or indirectly attempts to
indulge or knowingly assists or knowingly is a
party or is actually involved in any process or
activity connected with the 2 ["proceeds of
crime" including its concealment, possession,
acquisition or use and projecting or claiming] it
as untainted property shall be guilty of offence
of money laundering."

Explanation.-For the removal of doubts, it is hereby
clarified that,-- (i) a person shall be guilty of offence of money-
laundering if such person is found to have directly or indirectly
attempted to indulge or knowingly assisted or knowingly is a
party or is actually involved in one or more of the following
processes or activities connected with "proceeds of crime",
namely-- (a) concealment; or (b) possession; or (c)
acquisition; or (a) use; or (e) projecting as untainted property;
or (f) claiming as untainted property, in any manner
whatsoever; (ii) the process or activity connected with
"proceeds of crime" is a continuing activity and continues till
such time a person is directly or indirectly enjoying the
"proceeds of crime" by its concealment or possession or
acquisition or use or projecting it as untainted property or
claiming it as untainted property in any manner whatsoever.]

Section 4.

"Punishment for money-laundering.--
Whoever commits the offence of money-
43

laundering shall be punishable with rigorous
imprisonment for a term which shall not be less
than three years but which may extend to seven
years and shall also be liable to fine 28[* * *]:
Provided that where the "proceeds of crime"
involved in money-laundering relates to any
offence specified under paragraph 2 of Part A of
the Schedule, the provisions of this section shall
have effect as if for the words "which may
extend to seven years", the words "which may
extend to ten years" had been substituted."

What emanates from the aforesaid provisions is
that in order to constitute an offence of money-laundering
as defined under Section 3 (Supra) , the most important
thing is that there must be an activity connected with the
"proceeds of crime", which proceeds of crime in terms of
the aforesaid definition would mean any property derived
or obtained directly or indirectly by any person as a result
of criminal activity relating to a scheduled offence or the
value of any such property.

Thus, in order to constitute an offence under
Section 3 of PMLA, Section 2(1)(u) is to be read together
with Section 3 of PMLA to find out whether the ingredients
of the offence of money-laundering are made out or not.
When read so, the offence of money-laundering can said to
have been committed by fulfilment of following conditions:-

i. Scheduled offence must have been committed;
ii. Commission of scheduled offence must have
resulted in some "proceeds of crime";

iii. Person accused of money-laundering must have
indulged in an activity connected with such
"proceeds of crime".

It needs to be mentioned here that the activity
connected with the "proceeds of crime" attributed to an
accused must be the voluntary act of the accused.

.... .... ...
44

15. It is pertinent to mention here and as has been
noticed in the preceding paras as well, that during the course of
investigation, land in question as also the Bank accounts of 18
land owners, in whose accounts the loan amount had been
directly transferred/credited by the Bank were attached to
prevent the land owners from withdrawing the money so
transferred/credited and that the said attachment of the Bank
accounts of the land owners became subject matter of the
litigation before the Apex Court, wherein the Apex Court passed
orders to facilitate the land owners the withdrawal of the said
money, having been deposited/credited in their accounts in lieu
of the land having been perpetually leased out in favour of the
Society.

Having regard to the aforesaid position obtaining in the
matter, inasmuch as the admitted facts noticed in the preceding
paras, the alleged offence manifestly has not resulted in any
"proceed of crime" in favour of the petitioners herein. A-
fortiori, it cannot be said that the petitioners have
indulged in any activity connected with the "proceeds of
crime" for unless there are "proceeds of crime", there
cannot be any activity about the "proceeds of crime", in
that, existence of "proceeds of crime" pursuant to the
predicate offence is sine qua non for commission of
offence of money-laundering, to be precise that if there is
no money or property, a question of money-laundering
would not arise.

A reference in this regard to the judgment of the Apex
Court passed in case titled as Vijay Mananlal Choudhary and
others vs. Union of India and others reported in 2022 SCC
Online SC 929 would be relevant, wherein at para 283 and 284
following has been held:-

"283. Even though, the 2002 Act is a complete
Code in itself, it is only in respect of matters
connected with offence of money-laundering, and for
that, existence of "proceeds of crime" within the
meaning of Section 2(1)(u) of the Act is
quintessential. Absent existence of "proceeds of
crime", as aforesaid, the authorities under the 2002
Act cannot step in or initiate any prosecution.
45

284. In other words, the Authority under the
2002 Act, is to prosecute a person for offence of
money-laundering only if it has reason to believe,
which is required to be recorded in writing that the
person is in possession of ""proceeds of crime"". Only
if that belief is further supported by tangible and
credible evidence indicative of involvement of the
person concerned in any process or activity connected
with the "proceeds of crime", action under the Act
can be taken forward for attachment and confiscation
of "proceeds of crime" and until vesting thereof in the
Central Government, such process initiated would be
a standalone process."

What emanates from the above position of law is that the
Apex Court, inter alia, has held that in absence of "proceeds of
crime", the Authority under PMLA have no jurisdiction to
proceed.

16. Further perusal of the record tends to show and as
has been noticed in the preceding paras, admittedly no money
was transferred to the accounts of the petitioners herein,
therefore, there was no occasion for the petitioners herein to
indulge in any activity associated with the so called "proceeds of
crime" as the money that has been released out of the
sanctioned loan, which is described as the "proceeds of crime" in
the complaint, had admittedly been transferred/credited directly
into the accounts of the land owners and the petitioners herein
had never been in possession or control of the said money,
which is alleged to have been laundered. As has been pointed
out earlier, in order to constitute the offence of money-
laundering, it is imperative that one should be first in
possession of the "proceeds of crime" and then engage in
an activity to project it as untainted property, which
however, is missing in the instant case. In the instant
case, "proceeds of crime" in favour of the petitioners
would have arisen only had the petitioners developed the
plots in the colony and sold them to earn profit in the
process, in that, the said profits would have been the
"proceeds of crime" and any activity related to such
profits may have resulted in money-laundering, which
stage in the instant case has not reached.
46

The fact that the money that was transferred in the
accounts of the land owners which had been attached on the
premise that the same is "proceeds of crime" and was released
in favour of the said land owners by the orders of the Apex
Court cannot be overlooked, in that, if the said money in the
accounts of the land owners was "proceeds of crime", the same
would not have been ordered to be released in favour of the
land owners and treating the said money in the accounts of the
land owners for the purpose of making out a case of money-
laundering against the petitioners herein under said
circumstances cannot but said to be not only abuse of process of
law, but as well an attempt to overreach the orders of the Apex
Court, in that, the transaction between the land owners and the
Society essentially has been treated as a genuine transaction by
the Apex Court while ordering release of money in question in
favour of the land owners.

17. Thus, what emanates from the above is that
none of the ingredients of the offence of money-
laundering against the petitioners herein is found to be
existing in the present case, more so in view of the fact
that an act of mortgaging the property with the Bank for
securing the loan that is said to have been obtained fraudulently
without following Banking rules and regulations cannot by any
stretch of imagination be termed as money-laundering and that
the act of the petitioners herein of having fraudulently secured
loan for development and establishment of satellite township by
submitting false documents, at the most makes out a case for
forgery or Bank fraud."

(Emphasis supplied)

The judicial interpretation of Section 2(1)(u) and 3 of the Act is that

the person should be in possession, enjoyment and usage of the

property, which is alleged to be proceeds of crime projecting it to

be untainted money.
47

16. The challenge in the case at hand, apart from the

challenge to the ECIR is to the summons issued under Section 50 of

the Act quoted supra. Submissions are made by the learned

Additional Solicitor General taking this Court through several

judgments of the Apex Court and that of other Courts as to whether

summons can be challenged or otherwise. The contention of the

learned Additional Solicitor General as noted hereinabove is that,

summons cannot be challenged and there is no precedent holding

that issuance of summons can be challenged and it is to be

quashed. All these submissions are the ones considered by the

coordinate Bench, in which the learned Additional Solicitor General

himself has appeared and had projected identical submissions.

Therefore, noticing the submissions and answering them all over

again notwithstanding the fact that the coordinate Bench has

considered and answered all those issues would only bulk this

judgment. I, therefore, deem it appropriate to follow suit the

findings of the coordinate Bench. The coordinate Bench in the case

of DR. NATESHA D.B. v. DIRECTORATE OF ENFORCEMENT5 has

held as follows:

5
Writ Petition No.32956 of 2024 decided on 27.01.2025
48

".... .... ....

Issues:

8. After considering the arguments of the learned
counsel for the parties, the following issues emerge for
consideration :

i. Whether the authorisation issued to conduct the
impugned search and seizure at the residence of
the petitioner on 28.10.2024 and 29.10.2024, and
the consequent statement recorded under Section
17 of PMLA, 2002 suffers from lack of jurisdiction?

ii. Whether the said impugned search and seizure and
the statement recorded, is bad in law for lack of
the requisite "reason to believe" under section
17(1) of PMLA, 2002, and is therefore, an abuse of
process of law?

iii. Whether the impugned summons/notices
issued under Section 50 of PMLA, 2002 and
the various statements recorded thereunder,
be sustained under the law?

iv. Whether, in the course of its administration and
execution of the PMLA, 2002, the attachment of
property under Section 5 of the Act must
mandatorily precede the conduct of search and
seizure under Section 17 of the said Act?"

(Emphasis supplied)

Issue No.3 is germane to be considered for resolution of the lis, as

the petitioner in the case at hand has also been issued summons

under Section 50, like the petitioner who had been issued summons

in the said case. Certain findings of the coordinate Bench prior to
49

answering of the said issue are also necessary to be noticed. The

coordinate Bench holds as follows:

"Discussion and Analysis

9. Before delving into the issues raised for
consideration, it is necessary to advert to the relevant
provisions of the Act.

9.1. Section 2(1)(na) of the PMLA, 2002, defines the
term investigation as;

"including all the proceedings under this Act conducted by
the Director or by an authority authorised by the Central
Government under this Act for the collection of evidence".

9.2. Section 2(1)(u) of the Actdefines the term
proceeds of crime as;

"any property derived or obtained, directly or indirectly,
by any person as a result of criminal activity relating to a
scheduled offence or the value of any such property [or where
such property is taken or held outside the country, then the
property equivalent in value held within the country or abroad;

9.3. Section 3 of PMLA, 2002 defines the Offence of
money-laundering.--

"Whosoever directly or indirectly attempts to indulge or
knowingly assists or knowingly is a party or is actually involved
in any process or activity connected with the proceeds of crime
including its concealment, possession, acquisition or use and
projecting or claiming it as untainted property shall be guilty of
offence of money-laundering.
50

Explanation.--For the removal of doubts, it is hereby
clarified that,--

(i) a person shall be guilty of offence of money-laundering
if such person is found to have directly or indirectly attempted
to indulge or knowingly assisted or knowingly is a party or is
actually involved in one or more of the following processes or
activities connected with proceeds of crime namely:--

(a) concealment; or
(b) possession; or
(c) acquisition; or
(d) use; or
(e) projecting as untainted property; or
(f) claiming as untainted property, in any manner
whatsoever;

10. A cumulative reading of Sections 2(1)(na), 2(1)(u),
and 3 of the Prevention of Money Laundering Act, 2002 (PMLA)
establishes the following essential elements required to attract
an offence under Section 3 thereof:

1) The existence of proceeds of crime in relation to a
criminal activity relating to any scheduled offence,
specified in the schedule; and

2) Evidence of actual involvement or animus/intention
on part of the accused in the scheduled offence(s),
or any other person, subsequent to the
accomplishment of the scheduled offence, to assist
in any process or activity connected with the
proceeds of crime including, its -
51

a) concealment, or
b) possession, or
c) acquisition, or
d) use, or
e) projecting or claiming the proceeds of the crime as
untainted property.

3) Mere inadvertent possession or incidental handling
of the property (proceeds of crime), without the
requisite criminal intent, would not suffice to
attract an offence under Section 3.

4) It is relevant to note that any process or activity
connected with the proceeds of the crime comes to
a close only upon cessation of illicit gains.

5) i) The scope of concealment includes removal,
disposal or movement of the proceeds of crime in
such a manner as to hide its illicit origins.

ii) The scope of use, projection or claim of
proceeds of crime as untainted property includes all
processes committed to or activities undertaken to
integrate illicit gains as legal. This typically involves
layering of transactions to obscure the origin of the
funds, and investing such proceeds in legitimate
businesses or assets to make them appear lawful.

11. The aforementioned elements ensure that the
scope of the investigation remains tied to the twin objectives of
the PMLA:

• Combating money laundering as a
standalone offence.

• Ensuring that the property associated with
criminal activities is identified, confiscated,
or attached to prevent misuse in the
financial system.

.... .... ....
52

ISSUE NO. 3

35. The petitioner herein further challenges the
repeated issuance of summons under Section 50 of the PMLA,
arguing that these summons are vague because they do not
specify whether the petitioner is being treated as an accused or
a witness. This, according to the petitioner, violates the
constitutional protection against self-incrimination under Article
20(3) of the Constitution.

36. Section 50 of PMLA deals with Powers of authorities
regarding summons, production of documents and to give
evidence, etc. and the relevant portions thereof, reads thus -

"Section 50. - ...

(2) The Director, Additional Director, Joint Director,
Deputy Director or Assistant Director shall have power to
summon any person whose attendance he considers
necessary whether to give evidence or to produce any
records during the course of any investigation or
proceeding under this Act.

(3) All the persons so summoned shall be bound to
attend in person or through authorised agents, as such
officer may direct, and shall be bound to state the truth
upon any subject respecting which they are examined or
make statements, and produce such documents as may be
required.

(4) Every proceeding under sub-sections (2) and (3)
shall be deemed to be a judicial proceeding within the
meaning of section 193 and section 228 of the Indian Penal
Code (45 of 1860)."
(Emphasis supplied)

37. In the case of Vijay Madanlal (supra), the
Hon'ble Supreme Court clarified that the process under Section
50 of the PMLA, which involves summoning a person whose
presence is needed for gathering evidence or records, is part of
an inquiry into the proceeds of crime, and not an investigation
for prosecution under the Act. There is no formal accusation
brought against the summoned individual at this stage, to
warrant invoking the constitutional guarantee under Article
20(3).
53

38. In the case of Abhishek Banerjee v. Directorate
of Enforcement (2024) INSC 668, the Supreme Court dealt
with a challenge to the issuance of summons and reaffirmed the
ratio enunciated in the case of Vijay Madanlal and held that
summons can be issued even to witnesses during the inquiry. It
further stated that the procedure under the Act and its rules
require the officer issuing the summons to follow Rule 11 of the
PMLA Rules, 2005 which mandates the issuance of summons in
Form V. The summons must include details such as the name,
designation, and address of the summoning officer.

39. The Supreme Court in the case of Mahabir Prasad
Rungta v. Directorate of Enforcement, in SLP (Crl) No.
12353/2024, also followed the Vijay Madanlal case and stated
that money laundering charges under the PMLA cannot be
concluded until the trial for the predicate offence is completed.

40. In Sudarshan Ramesh v. Union of India
(2023) SCC OnLine Kar 71, a coordinate Bench of this Court
dealt with a case, where the petitioner was repeatedly
summoned in connection with an investigation involving his
brother, who was implicated in a scheduled offence under the
PMLA. The Court noted that despite the petitioner cooperating,
nothing incriminating had been found, and he had been
summoned without any reasonable grounds other than his
family connection. The Court held that the principle of probable
cause or reasonable grounds is fundamental to the criminal
justice system, and that a person cannot be repeatedly
summoned without probable cause for convenience of the
prosecution.

41. In response, the learned Additional Solicitor
General of India, contended that Section 50 of the Act
empowered the authorized officers to summon any person
necessary to give necessary evidence or produce any record. In
support of the same, the learned ASG drew the attention of the
Court to various precedents, including the case of Director
General of Income Tax (Investigation) v. Spacewood
Furnishers Pvt. Ltd. (2015) 12 SCC 179, wherein the
Hon'ble Supreme Court stated that while the reasons for search
and seizure conducted under Income Tax Act, 1961 must be
recorded, they do not need to be communicated to the person
at that time. The Court also emphasized that judicial review
54

cannot question the adequacy of the reasons for search, but
only their relevance, and that any review of the sufficiency of
the reasons or the authenticity of the information is not
permissible. Therefore, the ASG argued that this Court cannot
review the adequacy of the reasons for the search conducted
under Section 17 and the issuance of summons under Section
50 of the PMLA.

42. In the case of Assistant Commissioner of
Income Tax v. Rajesh Jhaveri Stock Broker Pvt. Ltd.,
(2008) 14 SCC 208, the Hon'ble Apex Court opined that the
phrase "reason to believe" in Section 147 of the Income Tax
Act, 1961 means a cause or justification for the purpose of
assessing or reassessing income chargeable to tax, if income for
any assessment year had escaped assessment. The Court
further held that this expression does not require the assessing
officer to have finally ascertained the facts with legal evidence
or conclusion. It was emphasized that the assessing officer must
act fairly towards the taxpayer while administering the statute.

43. The learned ASG also referred to the case of Vijay
Madanlal Choudhary & Ors. v. Union of India & Ors.
(2022) SCC OnLine SC 1929, where the Supreme Court
observed that the provisions of the PMLA, 2002 aim not only to
investigate money laundering but also to prevent money
laundering and confiscate any property related to money
laundering. The Court noted that the trifold objectives of the Act
make it distinct from the process of investigating a scheduled
offence. The Court further held that the authority conducting the
search under Section 17 of the Act must forward a copy of the
recorded reasons and material in its possession to the
adjudicating authority in a sealed envelope immediately after
the search and seizure. This procedure ensures that the
contents are not tampered with, thereby guaranteeing
procedural fairness and accountability. The Apex Court also
noted that Section 62 of the Act provides punishment for
officials conducting vexatious searches.

43.1. Relying on the above, in response to the allegation
that the impugned search was arbitrary, the learned ASG
argued that the PMLA has in-built safeguards against
arbitrariness and misuse of power, and therefore, this Court
55

should not be compelled to review the search and issuance of
summons at this stage.

44. In the case of Kirit Shrimankar v. Union of
India & Ors., WP (Crl.) No. 109/2013, DD 20.11.2014,
and connected matters, the Hon'ble Supreme Court observed
in a challenge to the issuance of summons under Section 108 of
the Customs Act, 1962 or Section 14 of the Central Excise Act,
that seeking extraordinary constitutional relief under Article 32
of the Constitution was premature, where the same was sought
on the grounds that petitioner had alleged that officers
conducting a search at the residence of his ex-wife had
threatened arrest unless the petitioner complied with their
demands. The Court held that the petitioner should have
pursued the remedy under law only when any positive action
was taken to his prejudice.

44.1. Therefore, the learned ASG, relying on the above,
argued that the petitioner herein cannot seek a similar relief
under Article 226 of the Constitution, as no action prejudicial to
the petitioner has yet been taken. The summons issued under
Section 50 of the PMLA were lawful and aimed at gathering
evidence and records for the investigation under the Act.
Therefore, the petition should be dismissed as premature.

45. The High Court of Kerala in C M Raveendran v.
Union of India (2020) SCC OnLine Ker 7335 reaffirmed the
above ratio, stating that no cause of action arises merely
because a person is called upon to state the truth or make a
statement and produce documents. The Court further held that
any apprehension of being coerced into giving a statement
based on repeated issuance of summons is not a valid ground to
seek constitutional relief under Article 226.

46. In the case of Union of India & Anr. v.
Kunisetty Satyanarayana (2006) 12 SCC 28, the Hon'ble
Supreme Court dismissed a challenge against the framing of
charges in a disciplinary action initiated by the postal
department against the petitioner, who was accused of
submitting a forged 'scheduled tribe' caste certificate. The Court
observed that a writ petition does not lie against a charge-sheet
or show-cause notice, as it does not give rise to a cause of
56

action. The Court stated that a writ petition can only be filed
when a final order, affecting the rights of the party, is passed.

47. In Virbhadra Singh & Anr. v. Enforcement
Directorate & Anr. (2017) SCC OnLine Del 8930, where the
summons issued under Section 50 of the PMLA were challenged,
and one of the petitioners therein claimed to have been illegally
detained and tortured into making false statements, the High
Court of Delhi ruled that enforcement officers have the authority
to summon and examine any person for investigative purposes.
The Court stated that a person summoned under Section 50 is
not necessarily an accused at that time; they may become an
accused later if arrested or prosecuted. It further held that no
one can avoid responding to a summons simply because of the
apprehension that they might be prosecuted in the future.

48. In the case of Raghav Bahl v. Enforcement
Directorate (WP (Crl.) No.2392/2021), the Delhi High Court
referred to the above case and also to case Kirit Shrimankar
(supra). It concluded that there was no violation of the
petitioner's fundamental or legal rights that would warrant
intervention by the writ court at the summons stage.

49. In the case of State of Gujarat v. Choodamani
Parmeshwaran Iyer, (2023) SCC OnLine SC 1043, the
Hon'ble Supreme Court dealt with a challenge to summons
under Section 145 of the Central Excise Act and Section 69 of
the Goods and Services Tax Act. The petitioners argued that
they were summoned due to suspected tax evasion and
apprehended arrest. The Court held that those summoned must
appear before the authorities for questioning and that the High
Court's writ jurisdiction cannot be invoked at the summons
stage to seek anticipatory bail.

50. In Directorate of Enforcement v. State of
Tamil Nadu (SLP (Crl.) No.1959-1963/2024), the Supreme
Court clarified that under Section 50 of PMLA, authorized
officers have the power to summon anyone whose attendance is
necessary to give evidence or produce records for investigation.
Those summoned are required to comply with the same.

51. In Talib Hassan Darvesh v. Directorate of
Enforcement, (2024) SCC OnLine Del 1811, the Delhi High
57

Court rejected a challenge to summons issued by the
Enforcement Directorate (ED) on the grounds that the summons
were vague. The petitioner had argued that the summons did
not specify their status as a witness or suspect and did not
mention the documents required. The Court held that the ED
could issue summons without specifying the exact documents,
as they are authorized to investigate and issue summons under
PMLA. It further ruled that protection from summons cannot be
granted unless the petitioner is absolved in the predicate
offence through discharge, acquittal, or quashing, in line with
the statutory rigours of Section 45 of PMLA.

52. In Moloy Ghatak v. Directorate of Enforcement
(2023) SCC OnLine 7443, the Delhi High Court addressed a
challenge to repeated summons issued to a petitioner who was
not yet an accused in the predicate offence. The Court found the
petitioner's request to quash the Enforcement Case Information
Report (ECIR) prematurely, because the ECIR was not provided
for review, and the petitioner himself was uncertain about his
status. The ED confirmed that the petitioner was not an accused
at the time of the summons and had not been summoned for
prosecution purposes.

53. In the present case, summons under Section 50
were issued following the 'illegal' search and seizure conducted
under Section 17 of the PMLA. However, as established in the
preceding paragraphs, the reasons recorded for the search do
not satisfy the essential elements required to establish the
commission of an offence under Section 3 of the PMLA. As a
result, the search and seizure lacked proper authority for there
being no proper reason to warrant such a search. The
respondent-Agency can summon any person to record a
statement or produce a document or record only in cases where
there is credible evidence that an offence under Section 3 of
PMLA has been committed, and in such circumstances, the
person who has been summoned cannot raise any grievance
against the issuance of summons.

54. Thus, in light of the circumstances of this case,
where no prima facie case has been established showing that an
offence has been committed under the PMLA, and no
incriminating material has been elicited at the time of search
and seizure, the issuance of summons to the petitioner lacks
58

legal authority. The petitioners cannot be compelled to appear
and record their statements or produce documents, as such
actions would unjustly infringe upon their personal right to
liberty."

The coordinate Bench holds that for an offence under Section 3 of

the Act there should be possession, concealment, enjoyment and

usage of the proceeds of crime, be it property or funds. Issue No.3

quoted supra is answered by the coordinate Bench in favour of the

petitioner therein. The coordinate Bench holds that when there is no

prima facie case established showing that an offence has been

committed under the Act and no incriminating material has been

elicited at the time of search and seizure, issuance of summons

would lack legal authority and it was observed that the petitioner

could not be compelled to appear and give statement as that would

infringe upon personal right and liberty of that petitioner. The

findings recorded therein are necessary to be paraphrased to the

facts obtaining in the case at hand. In the said case, the person to

whom the summons was issued was not an accused. In the case at

hand, the petitioner is an accused in the predicate offence i.e.,

Crime No.11 of 2024. Notwithstanding the petitioner being an

accused in the predicate offence, whether ingredients of Section 3
59

are met in the case at hand for proceeding further is what is

required to be noticed.

17. As observed hereinabove, Section 3 has certain

ingredients to be present. It should be concealment, possession,

acquisition and usage of property which is allegedly proceeds of

crime. What is proceeds of crime in the case at hand is sites

granted in lieu of compensation. The compensation is granted under

respective enactments. Whether the petitioner or other accused

are guilty of those offences is being investigated into by the

Lokayukta Police pursuant to registration of a crime in Crime No.11

of 2024. The facts as on the date of registration of ECIR is that the

petitioner is not in possession, enjoyment and usage of sites that

were allotted to her, as they have been surrendered and

cancellation of allotment has happened. Therefore, there is no

laundering in the case at hand.

18. In the case at hand, the alleged proceeds of crime are

referable to allotment of sites. The coordinate bench in the case of

NATESHA supra holds in two of its paragraphs that allotment of
60

sites cannot become proceeds of crime. The coordinate Bench has

held as follows:

"... ... ...

25. Similarly, in the present case, the alleged
predicate offence pertains to the illegal allotment of sites
during the petitioner's tenure as the Commissioner of
MUDA. However, there is no evidence to demonstrate that
any consideration passed in relation to the conveyance or
relinquishment of such sites was received by the
petitioner. Consequently, the petitioner cannot be
attributed any role in possessing, concealing, or using the
proceeds of crime to constitute an offence under Section
3 of the PMLA, 2002.

26. Furthermore, mere possession of a site that
was allegedly illegally allotted to an accused in
connection with a scheduled offence does not, by itself,
constitute an offence under the Prevention of Money
Laundering Act, 2002 (PMLA), unless the essential
ingredients of the offence as defined under Section 3 of
the Act are satisfied.

... ... ...

34. It is now well settled that reason to believe must
exist on the basis of evidence regarding the existence of certain
facts. In the instant case, no such material as was in possession
at the time of search, has been furnished to this Court to
probablize the purported involvement of the petitioner. In
absence of the same, any conclusion arrived at necessitating the
search does not satisfy the threshold of "reason to believe", as
envisaged under the PMLA, and is therefore, no more than a
mere suspicion of involvement in the offence under the Act.
Thus, this Court is of the opinion that the impugned search and
seizure conducted at the residence of the petitioner was
unwarranted and based on unfounded suspicion, and is
therefore, an abuse of process of law."

(Emphasis supplied)
61

In the light of the findings rendered by the coordinate Bench, as

also different High Courts interpreting what would be proceeds of

crime and whom would be guilty of proceeds of crime, the case at

hand neither projects the petitioner being in possession, enjoyment

and usage of proceeds of crime.

19. The Enforcement Directorate has filed detailed objections

appending to it proceedings of search, seizure and attachment of

property. While so doing, it has relied on those very judgments

which have all been considered by the coordinate Bench as quoted

supra. A communication from the Enforcement Directorate to the

Additional Director General of Police, Lokayukta dated 30-11-2024

is produced as Annexure-R1. The allegations against the petitioner,

and all other accused are verbatim similar to what is alleged in the

complaint registered before the concerned Court which has become

a crime in Crime No.11 of 2024.

20. To a pointed query, the learned Additional Solicitor

General submitted that it is not only the petitioner whom the

Enforcement Directorate is concerned, but it is examining a larger
62

picture; large illegalities or money laundering against several

persons. Those proceedings are also appended as Annexure-R2

where it makes a provisional attachment under sub-section (1) of

Section 5 of the Act. The statements of several persons are

recorded and illegalities in allotment to several other persons form

the fulcrum of attachment order. To quote, illegal allotment to one

Ravi Kumar; illegal allotment to one Abdul Wahid and illegal

allotments to several other persons. There is nothing against the

petitioner or other accused in Crime No.11 of 2024 recorded with

evidence of statements that the sites that were allotted to the

petitioner were taken forward for laundering them. This is the

information that the Enforcement Directorate has rendered to the

Lokayukta. Insofar as other layouts are concerned, illegal

allotments are projected. Transfer of sites to relatives and

associations of one G.T. Dinesh Kumar is projected. Likewise,

transfer of sites to so many people by MUDA and illegal allotment to

societies galore. Therefore, provisional attachment orders are

passed. The sites of the petitioner, as they were surrendered as on

01-10-2024, have not become subject matter of attachment.
63

21. As submitted by the learned Additional Solicitor General,

the Enforcement Directorate has found a larger picture of corruption

and laundering in MUDA to which the present petitioner is no way

responsible. The information gathered qua others could be taken

forward by the Enforcement Directorate in a manner known to law.

But, those cannot be attached to Crime No.11 of 2024. Even

according to the investigation, search, seizure, and recording of

statements, nothing has emerged against the petitioner, except the

repetition of what was an allegation at the outset which formed the

fulcrum of Crime No.11 of 2024. Therefore, in the peculiar facts of

this case, in view of the preceding analysis as also, the judgment

rendered by the coordinate Bench, this Court is of the considered

view that the petitioner cannot be permitted to be prosecuted for

offences under the provisions of Money Laundering Act through the

impugned ECIR. However, the findings rendered herein are for the

purpose of consideration of the case qua the impugned ECIR. This

would not become applicable to proceedings in Crime No.11 of

2024. The petition thus, deserves to succeed.
64

22. For the aforesaid reasons, the following:

ORDER

(i) Criminal Petition is allowed.

(ii) Enforcement Case Information Report in F.No.
BGZO/25/2024 issued against the petitioner by the
respondent stands quashed.

(iii) All consequential actions, including summons issued,
pursuant to registration of ECIR, are also obliterated.

Consequently, pending applications if any, also stand

disposed.

Sd/-

(M.NAGAPRASANNA)
JUDGE

Bkp
CT:MJ

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Author: M.Nagaprasanna

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