Background
In this case[1], the Petitioner was implicated in offence of commission of offence of illicit manufacturing, marketing and transportation of a cough syrup under Narcotic Drugs and Psychotropic Substances Act, 1985 (‘NDPS Act’) through two complaints filed by the Narcotics Control Bureau (‘NCB’) before the Special NDPS Court, Jammu (‘Trial Court’). The Trial Court vide order dated 13 December 2024 discharged the Petitioner in both the complaints finding no prima facie evidence to link him to the alleged offences. The said order was challenged by NCB before the Hon’ble High Court of Jammu & Kashmir and Ladakh (‘J&K High Court’).
Basis proceedings under the NDPS Act, the Enforcement Directorate (‘ED’) registered an ECIR on 3 October 2024 and initiated proceedings under the Prevention of Money Laundering Act, 2002 (‘PMLA’). Further, search and seizure action under Section 17 of PMLA was conducted on 13 February 2025 at the residential premises of the Petitioner. Thereafter, summons was issued under Section 50 of PMLA by ED. The Petitioner challenged the ECIR, the summons and the search and seizure action under PMLA before the J&K High Court on the ground that he has been discharged by the Trial Court in the predicate NDPS offences and therefore, proceedings under PMLA do not survive.
Judgment of the High Court:
Relying upon the judgment in case of Vijay Madanlal Choudhary &Ors., the High Court held that the validity of PMLA proceedings or summons must be assessed on a case-by-case basis and the discharge in the predicate offence should not act as an automatic basis for relief under the PMLA.
The findings of the High Court are as follows:
- The act of money laundering is a distinct and independent offence under Section 3 of PMLA, separate from the predicate offence. While the commission of a predicate offence is necessary to give rise to proceeds of crime, the act of laundering those proceeds through concealment, possession, acquisition, use or projections as untainted property constitutes a separate crime under PMLA. Meaning thereby that a person can be prosecuted for money laundering even if they are not directly involved in the commission of the scheduled offence so long as they are involved in the laundering process.
- The ED’s authority to issue summons under Section 50 of PMLA is intended for acquisition of factual evidence pertaining to money laundering offences and does not automatically mean that the summoned individual is an accused but, merely indicates that the person may have information/documents relevant for the investigation.
[1] Niket Kansal v. Union of India through Enforcement Directorate, Jammu (CrlM Nos. 286 & 287/2025 dated 22 May 2025)
LKS Comments:
- This decision of the High Court reaffirms the distinction between the offence of money laundering which is a separate and continuing offence under Section 3 of the PMLA and the scheduled offence that generates the alleged ‘proceeds of crime.’
- In our view, the High Court rightly held that the validity of the PMLA proceedings will have to be assessed on a case-to-case basis. In the judgment, the High Court upheld investigation under PMLA because the Trial Court did not quash the entire case made out in predicate offence but discharged the Petitioner on the ground that he was not involved in commission of predicate offence.
- In our view, the person being summoned/subject to investigation will be required to satisfy the courts/authorities that there is no predicate offence or the predicate offence has not led to generation of proceeds of crime in order to obtain relief under PMLA.