PMLA cannot be invoked citing criminal conspiracy under Section 120B IPC unless conspiracy is for money laundering: Supreme Court

The Supreme Court ruled on Wednesday that for a money-laundering case to be initiated on allegations of a criminal conspiracy, the conspiracy has to be linked with a money-laundering offence already included in the scheduled offences under the Prevention of Money Laundering Act (PMLA). [Pavana Dibbur vs Directorate of Enforcement].A bench of Justices Abhay S Oka and Pankaj Mithal held that allowing criminal conspiracy to be a scheduled offence by itself, without any link to any money laundering offence, would render the PMLA meaningless and redundant.."An offence punishable under Section 120B of IPC (punishment for criminal conspiracy) will become a scheduled offence only if the conspiracy alleged is of committing an offence which is otherwise a scheduled offence. In other words, an offence punishable under Section 120-B of IPC will become a scheduled offence only if the conspiracy alleged is of committing an offence which is otherwise a scheduled offence (or a money laundering offence)," the Court ruled. .The Court explained that if a standalone allegation under Section 120B of the Indian Penal Code (IPC) is allowed to be treated as sufficient to launch a PMLA probe, then any and every offence under the IPC could attract PMLA. "Every crime which may generate proceeds of crime need not be a scheduled offence. Therefore, only certain specific offences have been included in the Schedule ... even if an offence registered is not a scheduled offence, the provisions of the PMLA and, in particular, Section 3 will be invoked by simply applying Section 120B," the bench reasoned..The top court was hearing an appeal challenging a decision of the Karnataka High Court, which had refused to quash a money-laundering case against the former Vice-Chancellor (appellant) of Alliance University in Bengaluru.The appellant and her husband, along with others accused, were accused of siphoning fees collected from students to purchase land for the institute..The Court opined that it was not the intention of the legislature to allow any offence capable of generating proceeds to become a scheduled offence by applying Section 120B of IPC. In this regard, the Court also pointed out that many other IPC offences that could generate undue profits (or "proceeds of a crime") have not been included in the schedule to the PMLA.The Court further observed that the PMLA, being a criminal law, has to be interpreted strictly. If two views are possible while interpreting such a law, the more lenient view has to be adopted, the Court added. .The Court also pointed out that the offence of criminal conspiracy itself does not always amount to an "aggravated offence" and is only meant to incorporate a principle of vicarious liability. While so, allowing every non-scheduled offence to be converted into a PMLA offence would make the statute manifestly arbitrary, the Court held..The apex court, therefore, set aside the Karnataka High Court order on finding that no scheduled offence under the PMLA had been invoked against the appellant except for Section 120B of the IPC. "Except for Section 120B of the IPC, no other offence in the schedule has been applied. Therefore, in this case, the scheduled offence does not exist at all. Hence, the appellant cannot be prosecuted for the offences punishable under Section 3 of the PMLA," the Court held. .The Court, however, rejected an argument made on behalf of the appellant that PMLA can be invoked only against a person who is shown as the person "accused" of a scheduled offence. "An accused in the PMLA case who comes into the picture after the scheduled offence is committed by assisting in the concealment or use of proceeds of crime need not be an accused in the scheduled offence. Such an accused can still be prosecuted under PMLA so long as the scheduled offence exists," the Court reasoned..The Court added that a person made an accused in a money laundering case, but not for a scheduled offence, would also stand to benefit if the money laundering case is ultimately quashed. "Even if an accused shown in the complaint under the PMLA is not an accused in the scheduled offence, he will benefit from the acquittal of all the accused in the scheduled offence or discharge of all the accused in the scheduled offence. Similarly, he will get the benefit of the order of quashing the proceedings of the scheduled offence," the Court held. .Senior Advocate Meenakshi Arora appeared for the appellant.Additional Solicitor General SV Raju appeared for the Enforcement Directorate (ED)..On a related note, a three-judge bench of the Supreme Court had recently orally opined that the ED cannot invoke the PMLA for tax evasion cases by merely citing a "criminal conspiracy" charge, since offences under the Income Tax Act are not scheduled offences under the PMLA..[Read Judgment]