Provisions of PMLA cannot be invoked in the absence of nexus between Criminal Activity and Property acquired: Madras High Court

The Madras High Court held that the provisions of the Prevention of Money Laundering Act cannot be invoked in the absence of nexus between criminal activity and property acquired.

The petitioner, Viswanathan was into the business of imports and exports in the name and style of “Mercantile India”. Between 1999-2002, Viswanathan exported stainless steel utensils to Sri Lanka and between 2000-2001, he purchased 8 residential flats in Chennai.

The Directorate of Revenue Intelligence began an investigation of the exports made by Viswanathan and found that he was not entitled to Duty Entitlement Pass Book (DEPB) Scheme credit facility and therefore, issued a show-cause notice under the Customs Act to Viswanathan.

Eventually, the Commissioner of Customs passed an adjudication order denying DEPB credit facility to Viswanathan and ordered recovery of the same, besides levying fine and penalty on him.

However, the CESTAT, Chennai allowed the appeal preferred by Viswanathan by holding that the exports made by him cannot be termed to be fraudulent, as a sequel of which, demands were dropped. The Department did not agitate the matter further.

Viswanathan had a quarrel with Govindarajan and Panneerselvam, on account of which, the Panneerselvam lodged a complaint to the police alleging that Viswanathan is a Sri Lankan national and was holding a fake Indian passport.

After completing the investigation, the Directorate of Enforcement filed a complaint in the Principal Sessions Court for offences under Section 3 read with Section 4 of the PML Act against Viswanathan and his wife Kavitha, for quashing which, Viswanathan and Kavitha have filed the present criminal original petition invoking Section 482 Cr.P.C.

Mr. B. Kumar, counsel appearing for the petitioners, submitted that even if the averments in the FIR to the effect that Viswanathan had obtained an Indian passport by suppressing the fact that he is a Sri Lankan national, is true, the said offence was committed much before the coming into force of the PML Act and ergo, the prosecution stands vitiated.

The division bench of Justice P.N. Prakash and Justice V. Sivagnanam while disagreeing with the contention of Mr. Kumar said that the explanation that has been added to Section 3 of the PML Act vide Act 23 of 2019 sets to rest the argument that the predicate offence should have been committed only after the coming into force of the PML Act.

The court observed that Viswanathan had not committed an offence under the Customs Act, since he was not prosecuted under Section 135 of the Customs Act at all. Adjudication proceedings were initiated against him for the exports made by him during 1999-2002 and that has also attained finality in the order passed by the CESTAT, Chennai, holding that the exports made by him were not illegal.