High Court of KeralaSingle Judge2023-06-19Writ petition allowed; Ext. P2 quashed; All fur...

K. M. Shaji and Asha Shaji v. Union of India and others

Case / Petition Number:WP(C) No. 15214 of 2022

Case Details & Bench

Court: High Court of Kerala
Hon'ble Judges: P. V. Kunhikrishnan
Judgment Date: 2023-06-19
Court Decision / Holding: Writ petition allowed; All further proceedings consequent to Ext. P2 are quashed.
Final Disposition: Writ petition allowed; Ext. P2 quashed; All further PMLA proceedings arising therefrom quashed.

Parties to the Case

Appellants / Petitioners

K. M. Shaji
Asha Shaji

Respondents

Union of India represented by the Secretary to the Government, Ministry of Finance, New Delhi
Directorate of Enforcement, Southern Region, Chennai
Special Director, Directorate of Enforcement, Southern Region, Chennai
Deputy Director, Directorate of Enforcement, Kozhikode Sub Zonal Office, Kozhikode

Legal Representation & Advocates

Counsels for Petitioners

• Babu S. Nair
• Smitha Babu
• P. A. Rajesh
• Shamseera
• C. Ashraf
• R. B. Rajesh
• Jinu Antony

Case Synopsis & Summary

This writ petition challenges proceedings under the Prevention of Money Laundering Act, 2002 (PMLA) arising from an FIR registered by the Vigilance and Anti-Corruption Bureau, Kannur, alleging illegal gratification in 2014 related to the allocation of higher secondary courses at Azheekkode High School. The petitioners, a former Kerala MLA and his wife, contend that the Provisional Attachment Order (Ext. P2) under the PMLA, dated 12-04-2022, and the ongoing PMLA proceedings are without jurisdiction and violate Article 20(1) of the Constitution, since there is no “scheduled offence” established in the initiating crime (FIR Exhibit P1). They seek quashing of Ext. P2 and a mandamus restraining the 4th respondent from proceeding under the PMLA (Sections 5(5) and 6(2), which are also subject to challenge). The petition relies on a Kerala High Court Crl.M.C. No. 4861/2022 quashing criminal proceedings and on the Supreme Court’s Vijay Madanlal Choudhary v. Union of India (2022) SCC Online SC 929, which holds that money-laundering offences depend on proceeds of a scheduled offence and cannot proceed where the scheduled offence is not established. The judge accepts this reasoning, notices consistency with apex court guidance, and ultimately allows the writ petition, quashing Ext. P2 and all further PMLA actions arising therefrom.

Provisions of Law Cited

Prevention of Money Laundering Act, 2002 (PMLA)Section 2(1)(y) of the PMLASection 5(1) of the PMLASection 5(5) of the PMLASection 6(2) of the PMLAArticle 20(1) of the Constitution of India

Legal Doctrines & Maxims

The offence under Section 3 of the PMLA is dependent on illegal gain of property arising from criminal activity relating to a scheduled offence; money-laundering concerns the process or activity connected with such property and cannot be prosecuted on a notional basis without a registered scheduled offence.
If the scheduled offence is discharged/acquitted or quashed, there can be no offence of money-laundering against the person or linked property.

Submissions & Arguments

Contentions of Appellants / Petitioners

The petitioners contend that Ext. P2 (the provisional attachment) and the entire PMLA proceedings are without jurisdiction because the inquiry originated from an FIR involving allegations of bribery that do not establish a scheduled offence. They invoke Article 20(1) and rely on the 2022 Supreme Court decision Vijay Madanlal Choudhary v. Union of India, as well as a Kerala High Court order in Crl.M.C. No. 4861/2022, asserting that money-laundering offences hinge on the existence of a scheduled offence and on the linked proceeds; thus, quashing the underlying criminal case invalidates the PMLA proceedings. They urge quashing Ext. P2 and preventing further PMLA action (Sections 5(5), 6(2)).

Contentions of Respondents

The respondents argue that PMLA proceedings are independent of the underlying criminal case and that provisional attachment under the PMLA is a valid interim measure based on the FIR, irrespective of the status of a scheduled offence. They contend that Article 20(1) does not bar the PMLA process and that adjudicating authority presence and the statutory framework (Sections 5 and 6) justify continuation unless a final order dictates otherwise.

Cited Precedents (2)

Case Name	Citation	Treatment	Explanation
Vijay Madanlal Choudhary and others v. Union Of India and others	2022 SCC Online SC 929	Positive	The apex court’s reasoning that money-laundering offences require a scheduled offence to be established and that quashing the scheduled offence undermines the PMLA action is adopted to justify quashing the present PMLA proceedings.
Crl.M.C.No.4861/2022	Crl.M.C.No.4861/2022	Mentioned Only	Referenced as a prior quashing of criminal proceedings; not treated as a binding controlling authority in the current decision, but cited to support the petitioner's line of argument.

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Extracted Judgment Text

Exact text extracted from official judgment records.

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR. JUSTICE P.V.KUNHIKRISHNAN MONDAY, THE 19[TH] DAY OF JUNE 2023 / 29TH JYAISHTA, 1945** ## **WP(C) NO. 15214 OF 2022** ## **PETITIONERS:** 1 K.M. SHAJI AGED 51 YEARS S/O.BEERANKUTTY, KALATHODIKA HOUSE, NEAR A.R. CAMP, NGO QUARTERS, VENGERI P.O., KOZHIKKODE, PIN - 673010 2 ASHA SHAJI AGED 43 YEARS W/O.K.M. SHAJI, KALATHODIKA HOUSE, NEAR A.R. CAMP, NGO QUARTERS, VENGERI P.O., KOZHIKKODE, PIN - 673010 BY ADVS. BABU S. NAIR SMITHA BABU P.A.RAJESH SHAMSEERA. C.ASHRAF R.B.RAJESH JINU ANTONY ## **RESPONDENTS:** 1 THE UNION OF INDIA REPRESENTED BY THE SECRETARY TO THE GOVERNMENT, MINISTRY OF FINANCE, 3RD FLOOR, JEEVAN DEEP BUILDING SANSAD MARG NEW DELHI-, PIN - 110001 2 THE DIRECTOR DIRECTORATE OF ENFORCEMENT, 6TH FLOOR, LOK NAYAK BHAVAN, KHAN MARKET, NEW DELHI, PIN - 110003 3 THE SPECIAL DIRECTOR DIRECTORATE OF ENFORCEMENT, SOUTHERN REGION, SASTHRI BHAVAN, CHENNAI, PIN - 600006 4 THE DEPUTY DIRECTOR DIRECTORATE OF ENFORCEMENT, KOZHIKKODE SUB ZONAL OFFICE, 2ND AND 3RD FLOOR, KENDRIYA BHAVAN, M.S. BABURAJ ROAD, KALLAYI, KOZHIKKODE, PIN - 673003 WP(C) NO. 15214 OF 2022 **==> picture [7 x 9] intentionally omitted <==** BY ADVS. S.MANU JAISHANKAR V.NAIR SRI. JAISHANKAR V. NAIR, SC , ENFORCEMENT DIRECTORATE THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 19.06.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C) NO. 15214 OF 2022 3 **P.V.KUNHIKRISHNAN, J. -----------------------------W.P.(C)No. 15214 of 2022** **---------------------------------------------Dated this the 19[th] day of June, 2023** ## **JUDGMENT** The above writ petition is filed with the following prayers: _“(i) Call for the entire records leading up to Exhibit P2 (provisional attachment order) and quash the same by the issuance of a writ of certiorari or any other appropriate writs, orders or directions;_ _(ii) Declare that the entire proceedings initiated by the 4th respondent under the Prevention of Money Laundering Act, 2002 against the petitioners on the basis of Exhibit P1 F.I.R is unsustainable and without jurisdiction in view of the Constitutional protection under Article 20(1) of the Constitution of India;_ _(iii) Issue a writ of mandamus or any other appropriate writs, orders or directions commanding the respondents not to proceed under the PML Act against the petitioners on the_ WP(C) NO. 15214 OF 2022 4 _basis of Exhibit P1, as there is no scheduled offence as provided under Section 2(1)(y) of the PML Act is involved on the basis of the allegations in Exhibit P1;_ _(iv) Issue a writ of mandamus or any other appropriate writs, orders or directions commanding the 4th respondent, not to file any complaint against the petitioners under Section 5(5) of the PML Act as there is no adjudicating authority under Section 6(2) of the PML Act and presently the same is Quorum Non Judis;_ _(v) Grant such other reliefs as this Hon'ble Court may deem fit and proper in the circumstances of the case. ”[SIC]_ 2. The first petitioner is a former member of the Kerala Legislative Assembly and the 2[nd] petitioner is his wife. It is the case of the petitioner that, one Koduvan Padmanabhan, who is a leader of CPM had given a complaint in the year 2020 to the Chief Minister of Kerala stating that the first petitioner had accepted an illegal gratification of WP(C) NO. 15214 OF 2022 5 Rs.25 Lakhs from the management of Azheekkode High School, a private aided management school, for the purpose of allocation of additional Higher Secondary courses to the school in the year 2014. It is further stated that, from the office of the Chief Minister, the complaint was forwarded to the Vigilance Department and consequently, Crime No.1/2020 was registered on 18-04-2020 in the Kannur Unit of Vigilance and Anti Corruption Bureau. Ext.P1 is the F.I.R. Taking note of the registration of the F.I.R., the 4[th] respondent initiated proceedings under the provisions of Prevention of Money Laundering Act, 2002 (for short PMLA) and subsequently an order under Section 5(1) of the PMLA, ordering provisional attachment of the properties was passed on 12-04-2022. The petitioners are challenging the entire proceedings WP(C) NO. 15214 OF 2022 6 initiated under the PMLA and also Ext.P2 order as the same is without authority. 3. Heard the learned counsel appearing for the petitioners and the learned Standing counsel appearing for the respondents. 4. When this writ petition came up for consideration, the counsel appearing for the petitioners submitted that, the entire proceedings in Ext.P1 FIR is quashed by this Court as per the judgment dated 13.04.2023 in Crl.M.C.No.4861/2022. The counsel submitted that, in the light of the judgment of the Apex Court in **Vijay Madanlal Choudhary and others vs. Union Of India and others** [2022 SCC Online SC 929], if the criminal proceedings are quashed, the proceedings under the PMLA will not stand. I think there is some force in the argument of the WP(C) NO. 15214 OF 2022 7 ## petitioner. It will be better to extract the relevant portion (paragraph No.187 conclusion No.D) of the judgment in **Vijay Madanlal'** s case (supra). _“(d). The offence under Section 3 of the 2002 Act is dependent on illegal gain of property as a result of criminal activity relating to a scheduled offence. It is concerning the process or activity connected with such property, which constitutes the offence of money-laundering. The Authorities under the 2002 Act cannot prosecute any person on notional basis or on the assumption that a scheduled offence has been committed, unless it is so registered with the jurisdictional police and/or pending enquiry/trial including by way of criminal complaint before the competent forum. If the person is finally discharged/acquitted of the scheduled offence or the criminal case against him is quashed by the Court of competent jurisdiction, there can be no offence of money-laundering against him or any one claiming such property being the property linked to stated scheduled offence through him.”_ ## In the light of the above observation of the WP(C) NO. 15214 OF 2022 8 Apex Court, I am of the considered opinion that the proceedings initiated against the petitioners will not stand. Hence this writ petition is to be allowed. Therefore, this writ petition is allowed in the following manner: i. All further proceedings consequent to Ext.P2 are quashed. Sd/- DM **P.V.KUNHIKRISHNAN JUDGE** WP(C) NO. 15214 OF 2022 9 ## **APPENDIX OF WP(C) 15214/2022** ## PETITIONER EXHIBITS EXHIBIT P1 A TRUE COPY OF THE F.I.R. IN CRIME NO.1/2020 OF THE VIGILANCE AND ANTI CORRUPTION BUREAU , KANNUR UNIT DATED, 18-4-2020 EXHIBIT P2 TRUE COPY OF THE ORDER ISSUED BY THE 4TH RESPONDENT AS ORDER NO.02/2022/KZSZO DATED, 12-4-2022 EXHIBIT P3 TRUE COPY OF THE SHOW CAUSE NOTICE AND COMPLAINT RECEIVED BY THE PETITIONER FROM THE ADJUDICATING AUTHORITY DATED 09/06/2022 NO. CC 1734/2022/575 RESPONDENT EXHIBITS EXHIBIT R4(B) TRUE COPY OF THE GAZATTE OF INDIA NOTIFICATION DATED 03.01.2013 (ACT NO.2 OF 2013) EXHIBIT R4(A) TRUE COPY OF THE GAZETTE OF INDIA NOTIFICATION DATED 06.03.2009 (ACT NO.21 OF 2009) EXHIBIT R4(A) TRUE COPY OF THE GAZETTE OF INDIA NOTIFICATION DATED 06.03.2009 (ACT NO.21 OF 2009) EXHIBIT R4(B) TRUE COPY OF THE GAZATTE OF INDIA NOTIFICATION DATED 03.01.2013 (ACT NO.2 OF 2013) EXHIBIT R4(B) TRUE COPY OF THE GAZATTE OF INDIA NOTIFICATION DATED 03.01.2013 (ACT NO.2 OF 2013) WP(C) NO. 15214 OF 2022 10 EXHIBIT R4(A) EXHIBIT R4(A) TRUE COPY OF THE GAZETTE OF INDIA NOTIFICATION DATED 06.03.2009 (ACT NO.21 OF 2009) EXHIBIT R4(A) TRUE COPY OF THE GAZETTE OF INDIA NOTIFICATION DATED 06.03.2009 (ACT NO.21 OF 2009) EXHIBIT R4(B) TRUE COPY OF THE GAZATTE OF INDIA NOTIFICATION DATED 03.01.2013 (ACT NO.2 OF 2013) //TRUE COPY// PA TO JUDGE