Money laundering case cannot continue if court stays proceedings in predicate offence: HC

A view of the High Court of Karnataka. | Photo Credit: V. SREENIVASA MURTHY

If the proceedings in the predicate offence are stayed by a court, then the linked proceedings for alleged money laundering, initiated based on the predicate offence, also cannot be allowed to continue till the court permits the continuation of proceedings in the predicate offence, said the High Court of Karnataka.

“If the allegations in the predicate offences are considered to be the flesh, the offences under the Prevention of Money Laundering Act (PMLA) is the blood, they are impregnable,” and therefore, if the predicate offences are not permitted to move forward, the proceedings under the PMLA also cannot, the court said.

Justice M. Nagaprasanna passed the order while partly allowing a petition filed by C. Uma Reddy, Kavveri Telecom Products Ltd., and others. The petitioners had questioned the Enforcement Directorate’s (ED) August 2022 order of provisionally attaching several of their assets.

CBI charge sheet

The Central Bureau of Investigation (CBI) had filed charge sheet against the petitioners and their companies after investigating the complaint lodged by Dena Bank in 2017 alleging that they availed of loan from the bank and diverted it for purposes other than for which loan was granted. Later, the ED had initiated a separate proceedings against them for alleged money laundering.

However, the High Court, in a separate petition filed by them, in 2020 stayed the cognisance of offence taken by a trial court based on the CBI’s charge sheet, and the ED in 2022 had provisionally attached their assets.

The High Court has now said though the provisional attachment order passed by the ED is strictly as per the law but the ED cannot continue further proceedings and the provisional attachment has to be kept in abeyance till the disposal of petitioners’ other petition, in which the High Court had passed an interim order staying the cognisance of offences taken against them by the trial court.

Meanwhile, the High Court made it clear that keeping provisional attachment in abeyance would mean that the properties subject to attachment cannot be released in favour of the petitioners nor can they be confirmed or sold by the ED.