In its 16 March 2021 decision in Babulal Verma v Enforcement Directorate (Criminal Application 201/2021 with Criminal Bail Application 974/2021), the Bombay High Court was posed with an issue regarding the fate of proceedings under the Prevention of Money Laundering Act (PMLA) 2002 in the event of compromise or compounding in a predicate offence.
The proceedings were brought before the Bombay High Court by means of a petition under Section 482 of the Code of Criminal Procedure 1973. Significantly, the applicants sought to set aside an order of a special judge which had allowed the application of Respondent 1, the Enforcement Directorate, for an extension of the applicants' judicial custody period and rejected the application preferred by the applicants (which sought a grant of bail). The applicants, based on the compromise that ensued in the proceedings relating to a predicate offence, challenged the order of the special judge, among other things, on the ground that:
once the Scheduled Offence lodged against the Applicants is compromised/ compounded by the Complainant therein, the structure of the present crime registered by ED falls on ground, as it does not survive and is non-est.
The court, while considering various provisions under the PMLA, noted that the act's object is to "investigate into the offence of money-laundering and to punish the accused for commission of the said offence". The court further reiterated that a "statute is to be construed according to the intent of [it], that make it and the duty of judicature is to act upon the true intention of the Legislature". At the same time, the court, relying on several judicial precedents, including Radha Mohan Lakhotia v Deputy Director, PMLA, Directorate of Enforcement (reported in 2010, SCC Online Bom 1116) and VGN Developers P Ltd v The Deputy Director, Directorate of Enforcement (MANU/TN/6087/2019), affirmed that the mere filing of a closure report by the investigating agency in a predicate offence will not create any impediment to or hurdle in the process of the Enforcement Directorate's investigation of an offence registered under the PMLA. In fact, as per the court, the existence of a predicate office is only a precursor to the initiation of proceedings under the PMLA. However, once an offence is registered as a scheduled offence, it stands on its own and does not require the support of a predicate or scheduled offence or depend on the ultimate result of said predicate or scheduled offence. Accordingly, the court held that:
[e]ven if the Predicate/Scheduled Offence is compromised, compounded, quashed or the accused therein is/are acquitted, the investigation of ED under PMLA does not get affected, wiped away or ceased to continue. It may continue till the ED concludes investigation and either files complaint or closure report before the Court of competent jurisdiction.
Further, while referring to Sections 3 and 4 of the PMLA, the court observed that the investigation of an offence under Section 3:
is not dependent upon the ultimate result of the Predicate/ Scheduled Offence. In other words, it is a totally independent investigation as defined and contemplated under Section 2(na), of an offence committed under Section 3 of the said Act.
According to the court:
predicate/ scheduled offence is necessary only for registration of crime/ launching prosecution under PMLA and once a crime is registered under the PMLA, then the ED has to take it to its logical end, as contemplated under Section 44 of the Act.
This judgment is significant as it ensures that perpetrators of serious economic offences cannot use actions such as compromise or settlement to undermine the object of a statute of public importance.
