Prosecution under PMLA is not Sustainable as Income Tax Dept has no Case against Accused: Supreme Court sets aside HC’s Order [Read Judgment]

The Supreme Court has quashed the Madras High Courts’ order as the criminal prosecution regarding money laundering cannot be allowed to continue as the Income Tax (IT) Department held the appellant innocent under the same set of facts and circumstances.

The bench consisting of Mr. Justice Vineet Saran and  Mr. Justice J.K. Maheshwari ruled in favor of the appellant- J. Sekar Reddy, managing partner of SRS Mining which is engaged in sand mining. Currency amounting to Rs.106,98,89,800/- and gold of the value of Rs.36,72,07,311/- were seized from the premises of the appellant and others by the IT Department. Subsequently, the CBI registered a case against the appellant and two others, Suo-moto under S.120B read with S.409 and S.420 of The Indian Penal Code and S.13(2) read with S.13(1)(c) and S. 13(1)(c) of the Prevention of Corruption Act, 1988. The Enforcement Directorate (ED) added S.2(1)(x) and S.2(1)(y) from the Prevention of Money Laundering Act, 2002.

The IT department found all the seized material to be accounted for in the company’s books and tax was paid in a self-assessment by the company. A closure report was administrated by the CBI. Yet, the ED continued the case even when no incriminating evidence was found.

The court recalled the case of Radheshyam Kejriwal v. State of West Bengal which held “In case of exoneration, however, on merits where the allegation is found to be not sustainable at all and the person held innocent, criminal prosecution on the same set of facts and circumstances cannot be allowed to continue, the underlying principle being the higher standard of proof in criminal cases”

The bench held that “The Adjudicating proceedings and criminal proceedings are independent of each other but the material for the commission of offense recorded by the authorities in those proceedings may be a relevant factor, in particular, when for lack of evidence, the authority itself is satisfied that the attachment of the proceedings in PMLA case cannot be continued”

“The High Court by the impugned order has recorded the findings without due consideration of the letter of the I.T department and other material in the right perspective. Therefore, in our view, these findings of the High Court cannot be sustained.”

Adv. Vikram Chaudhari, learned Senior Counsel appeared for the petitioner and Adv. S.V Raju, learned Additional Solicitor General for the respondent.

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