Prakash Industries Limited Vs Union of India (Delhi High Court)
Delhi High Court held that power of Enforcement Directorate (ED) stands confined to the offense of money laundering as defined in terms of Prevention of Money Laundering Act, 2002.
Facts-
These two writ petitions raise an important question relating to the powers of the Enforcement Directorate to provisionally attach properties u/s. 5 of the Prevention of Money Laundering Act, 2002 even though no proceedings relating to the predicate offense may have been initiated by the competent agency functioning under an independent statute and in terms of which the scheduled offense stands created. The ancillary and yet equally fundamental issue which the Court is called upon to answer is whether the ED could be recognised to have the jurisdiction to enforce the measures contemplated in Section 5 of the Act solely upon it being of the opinion that the material gathered in the course of an investigation or enquiry evidences the commission of a predicate offense. The questions posited would also raise the ancillary issue of the powers that the ED could be recognised to derive from the Act while investigating an offense of money laundering.
Conclusion-
Held that initiation of action under Section 5 of PMLA is premised on the competent authority having reason to believe that a person is in possession of proceeds of crime. The formation of opinion under the said provision is not related to the commission of a scheduled offence. Property, in order to be recognised even prima facie as being proceeds of crime must necessarily be preceded by ―criminal activity relating to a scheduled offense”. This is also evident from the use of the expressions ―as a result of” and ―derived or obtained” in Section 2(1)(u) of the Act. The evidence of criminal activity would be either a First Information Report, a complaint or a chargesheet as envisaged under various statutes. However, in absence thereof it would be wholly impermissible for the ED to itself become the arbiter of whether a scheduled offense stands committed.
What needs to be emphasised is that the PMLA empowers the ED to investigate Section 3 offenses only. Its power to investigate and enquire stands confined to the offense of money laundering as defined in that Section. However, the same cannot be read as enabling it to assume from the material that it may gather in the course of that investigation that a predicate offense stands committed.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
