Discharge In Predicate Offence Does Not Nullify Summons Under PMLA: Jammu & Kashmir & Ladakh High Court
The Court said that money laundering is a distinct offence, and an independent legal framework under the PMLA governs its investigation and prosecution.
The High Court of Jammu & Kashmir and Ladakh has held that the discharge of an accused in the predicate offence does not automatically invalidate proceedings or summons issued under the Prevention of Money Laundering Act, 2002 (PMLA).
A Single Bench of Justice Wasim Sadiq Nargal observed, “The summons issued to the petitioner constitutes a procedural measure within the legal framework, and its validity persists despite the petitioner’s discharge in the predicate offence.”
The Court added, “The discharge in the predicate offence, albeit substantial, does not, as a legal principle, impact the ongoing validity of the summons…Consequently, the issuance of summons under the PMLA should be regarded as an essential element of due process, intended to advance the rule of law and bolster public trust in the legal system.”
Senior Advocate Sunil Sethi appeared for the Petitioner, while Deputy Solicitor General of India Vishal Sharma appeared for the Enforcement Directorate.
Brief Facts
The Petitioner, associated with a pharmaceutical company, was discharged by the Special Court in proceedings under the NDPS Act. The discharge order recorded that there was no material on record except confessional statements recorded under Section 67 of the NDPS Act, which lacked corroborative evidence. The Trial Court held that there was absolutely no evidence against the accused, except confession statements.
Despite the discharge, proceedings under the PMLA were initiated against the Petitioner, along with issuance of summons under Section 50 of the PMLA were issued.
The Petitioner contended that once there was a discharge in the predicate offence, the foundational requirement for prosecuting under the PMLA ceases to exist.
Reasoning of the Court
The Court rejected the contention that the discharge in the predicate offence automatically invalidates the PMLA proceedings.
The Court referred to the decision of the Supreme Court in Vijay Madanlal Choudhary v. Union of India, wherein it was held that the offence of money-laundering is an independent offence regarding the process or activity connected with the proceeds of crime, and such 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.
Further, the Court noted, “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… If the person is finally discharged/acquitted of the scheduled offence… there can be no offence of money-laundering against him…”
However, the Court clarified that the mere discharge does not nullify the procedural validity of a summons under Section 50 PMLA. It added, “The petitioner’s discharge does not constitute a legitimate ground for nullifying the summons… The authorities may execute the summons issued pursuant to the applicable legislative laws and procedural regulations.”
The Court also noted that the discharge order is under challenge in a pending revision, observing, “The order of discharge has been formally contested by the respondents, and a criminal revision…is currently pending before this Court. The proceedings…will be depend upon the outcome of the revision petition, which will effectively settle the issues relating to the legitimacy of the discharge.”
The Court clarified that the PMLA is not merely an adjunct to the predicate offence, holding, “The ECIR…is not simply an extension of the FIR; rather, it is founded on the exclusive aim of investigating and prosecuting money laundering offences… the offence of money laundering under Section 3 of the Act is a distinct and ongoing offence that must be evaluated independently.”
Consequently, the Court dismissed the petition, being devoid of merit.
Cause Title: Niket Kansal v. Union of India through Enforcement Directorate (CRM(M) No. 140/2025)
Appearance:
Petitioner: Senior Advocate Sunil Sethi; Advocates Nitin Parihar, Siddharth Jamwal
Respondent: Deputy Solicitor General of India Vishal Sharma
