Supreme Court Directs Special PMLA Court to Withhold Judgment Until Charges Are Framed in CBI Case

Supreme Court Directs Special PMLA Court to Withhold Judgment Until Charges Are Framed in CBI Case

In a significant ruling, the Supreme Court of India directed a Special Court under the Prevention of Money Laundering Act (PMLA) to refrain from passing a final judgment in a money laundering case until charges are framed in a related Central Bureau of Investigation (CBI) offence. This decision emphasizes the importance of coordination between parallel proceedings under the PMLA and the CBI’s investigation into predicate offences.

The Bench, comprising Justice Bela M. Trivedi** and Justice Satish Chandra Sharma, delivered the ruling on Tuesday, stating that although the PMLA trial may continue in accordance with the law, the Special Court must withhold its judgment until the charges are framed in the CBI’s predicate offence case.

Background of the Case

The case in question involves a Hong Kong-based company director**, implicated in a large-scale financial fraud involving Punjab National Bank, Chennai. In 2017, the CBI’s Chennai branch registered an FIR against 19 Indian entities and unnamed public officials. The allegations included the fraudulent opening of multiple bank accounts and the remittance of ₹450 Crores to entities based in Hong Kong and Dubai. Despite these transactions, no corresponding goods were exported to India.

Following this, the Enforcement Directorate (ED), Chennai registered an Enforcement Case Information Report (ECIR) related to the same transactions under the PMLA. The petitioner, represented by advocates Gaurav Gupta and Deepanshu Choithani, contested the proceedings against him.

Petitioner's Arguments

The petitioner argued that, although the CBI FIR was filed in 2017, no chargesheet has been submitted in the case thus far. Furthermore, the petitioner claimed he was neither named in the CBI FIR nor in the ED’s ECIR but was later prosecuted and had charges framed against him in the PMLA Special Court.

One of the petitioner’s primary concerns was that the PMLA trial might conclude soon, as there are only five witnesses in the case. However, the CBI investigation could continue for an indefinite period, creating an unusual legal situation where the petitioner could be convicted under PMLA while potentially never being charged or tried under the CBI for the predicate offence.

Legal Implications and Anomalies

The petitioner highlighted a possible legal anomaly in the case. The PMLA case may conclude with a conviction based on charges that are unrelated to the predicate offence, which is still under investigation by the CBI. If the CBI does not eventually file charges or if the petitioner is not charged in the CBI case, it would lead to a situation where the petitioner faces a criminal conviction without being formally charged for the underlying offence that gave rise to the PMLA case.

This, according to the petitioner, creates a scenario where the burden of proof under Section 24 of the PMLA may be misapplied. Section 24 shifts the burden of proof to the accused in PMLA cases, but the petitioner argued that this provision should only apply after formal charges have been filed by a competent court in a predicate offence.

Supreme Court’s Directive

The Supreme Court, acknowledging the potential legal inconsistency, issued its directive to the PMLA Special Court in Chennai, ensuring that no final judgment is passed until the CBI frames charges in the predicate offence. This decision balances the need for timely proceedings under the PMLA with the requirement of addressing any predicate offences under the Indian Penal Code (IPC) and the Prevention of Corruption Act.

Relevance of FEMA and PMLA

The petitioner further argued that the allegations in the CBI FIR, which involve the remittance of foreign exchange, do not necessarily prove that the funds were proceeds of crime. He contended that, at best, the case could involve a violation of the Foreign Exchange Management Act (FEMA), which is a civil offence and not included as a scheduled offence under the PMLA.

As a result, the petitioner challenged the applicability of the PMLA in this case, stating that unless the CBI can establish that the funds were proceeds of crime generated from criminal activity, the PMLA charges should not apply.

Conclusion

The Supreme Court’s ruling ensures that legal procedures in cases involving both PMLA and CBI investigations are coordinated effectively. The decision highlights the importance of maintaining procedural fairness and preventing *inconsistent legal outcomes between money laundering cases and their related predicate offences. 

With the next steps contingent on the framing of charges by the CBI, the outcome of this case will serve as a key precedent in ensuring that PMLA trials are aligned with the broader investigation of predicate crimes.

This ruling will also shed light on how the reverse burden of proof under Section 24 of the PMLA is applied in cases where the CBI investigation is incomplete. The case will likely draw attention to the interplay between PMLA and FEMA violations and whether certain foreign exchange violations should fall within the purview of the PMLA.