The order comes following guidelines laid down by the SC last month, specifying that a case under the Prevention of Money Laundering Act (PMLA) cannot continue if there is no scheduled offence and hence, the special court has no jurisdiction to extend judicial custody of persons arrested under the tough legislation
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If this court fails to apply Supreme Court guidelines and principles, it will lead to a situation where "Sun is there, but light has gone", observed a special PMLA judge on Wednesday while allowing the discharge pleas of two businessmen in a money laundering case in the absence of 'predicate' (scheduled) offence.
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The order comes following guidelines laid down by the SC last month, specifying that a case under the Prevention of Money Laundering Act (PMLA) cannot continue if there is no scheduled offence and hence, the special court has no jurisdiction to extend judicial custody of persons arrested under the tough legislation.
The Enforcement Directorate (ED) can file a complaint under the PMLA only to investigate the allegations of proceeds of crime. However, these proceeds have to be linked to a separate criminal offence (called scheduled offence) committed by the person.
The duo's discharge pleas were allowed by special PMLA court judge MG Deshpande. The judge had earlier granted interim bail to the two accused, Babulal Verma and Kamalkishor Gupta, senior executives of a real estate firm.
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"The PML Act read with the guidelines laid down by the Supreme Court in Vijay Choudhary (referring to the SC case). Duty is cast on the court to identify this situation and apply principles and guidelines laid down by the Supreme Court in this recent Authority, Vijay Choudhary. If this court fails to do so, certainly it will lead to a situation "Sun is there but the light has gone"," the special court said.
The judge opined the court is not only a 'repository' but also a 'custodia legis' (in the custody of the law) of rights of citizens, particularly that of undertrial prisoners.
If this power is exercised in utter disregard to the mandate of law, the right of life and liberty enshrined in the Constitution will be in danger of extinction. In this process, the court, which is the protector of the rights of citizens (undertrial prisoners), will become 'predator' of the rights, he observed.
The judge said where it is expedient the court should not hesitate to exercise the power to issue interim release of the accused as done in the present case. Such an act will effectively deter abuse of the process of criminal law for objects extraneous to its cause.
The ED had booked the two, Verma and Gupta, top executives of Omkar Relators and Developers, under provisions of the PMLA.
The case pertains to alleged irregularities in the execution of a scheme under the Slum Rehabilitation Authority (SRA) for the development of a housing society in Mumbai. The company and the two executives are also facing allegations of "diverting" more than Rs 400 crore loan taken from Yes Bank.
The money laundering case was based on a First Information Report (FIR) registered against the duo by the Aurangabad police in central Maharashtra.
As per the PMLA provisions, a prior FIR (scheduled offence) is a requisite for the ED to initiate action against a person under the Act.
The Aurangabad police recently filed a closure report in the case (scheduled offence) against Verma and Gupta which was accepted by the court, which discharged the duo.
As per the SC ruling, if a person is discharged or acquitted in the predicate offence, then the charges of PMLA also go.
Relying on this ruling, the duo, through their lawyers Rahul Agrawal and Vijay Agrawal, had moved the discharge applications before special judge Deshpande.
The lawyers had said Verma and Gupta should be discharged from the case as the PMLA case cannot stand on its own.
Special public prosecutor (SPP) Hiten Venegaokar, appearing for the ED, had submitted it was the first such application (after the Supreme court order) in the country.
Hence, if the special court passes any order in favour of the applicants, it will be the first such order and is likely to be followed and used by other courts in the country, said the ED counsel.
The special court has taken cognizance of the offence (after filing of charge-sheet) because there were reasons to believe involvement of accused persons in an offence under PMLA on the basis of available material, the SPP said.
"The same material is available now, then how it can be said that the accused are entitled to discharge or release? Venegaokar asked.
Further, the SPP argued that regular bail applications of both the accused were already rejected, provisional attachments were made by adopting procedure and there was tangible as well as credible evidence against the duo.
Therefore, even after 'C Summary' report is accepted, the PMLA case continues, the SPP said.
As per the provisions of the CrPC (Code of Criminal Procedure), 'C Summary' report is filed in cases where the FIR is found to be based on "mistake of facts".
The special court held acceptance of the summary report by the first class magistrate amounted to permanent shutdown of the case relating to the scheduled offence by absolving both the accused.
"It, thus, squarely falls within the categories prescribed by the Supreme Court that when there is no scheduled offence, there is no proceeds of crime. When there is no proceeds of crime, there is no money laundering under the PML Act. When there is no money laundering and there is no Scheduled Offence, the PMLA case cannot be continued by detaining both accused behind bars as undertrial prisoners, for an uncertain period," the court noted.
The special court observed considering the facts, the PMLA case against the accused cannot proceed.
Additionally, the judge noted when there was no scheduled offence at all, the continuation of the PMLA case will be nothing but a "futile work".
"Such futile work at the cost of detention of the accused is absolutely without any legal basis or justification," it added.
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