4 Ingredients for constituting offence under PMLA

The aspect of knowledge or involvement has been discussed by Gujarat High Court in the case of Jafar Mohammed Hasanfatta and Ors (Appellants) Vs Deputy Director and Ors. (Respondents) MANU/GJ/0219/2017   wherein   the Hon'ble Court observed as under:-

A  holistic  reading  of  this  definition  of  'proceeds  of  crime '   and the penal provision under Section 3  of PMLA, which uses conjunctive   'and',   makes   it   luminous   that   any  persons concerned  in  any  process or  activity  connected  with  such "proceeds of crime" relating to  a "scheduled offence" including its concealment, possession, acquisition or use can be guilty of money laundering, only if  both of the two prerequisites are satisfied i.e.-

“(i) Firstly, if he-

           (a) directly or indirectly 'attempts' to indulge,

   (b)  “ knowingly” either assists or is a party, or

       (c) is  “ actually involved ‟ in such activity; and

(ii) Secondly, if he also projects or claims it as untainted property;"

The second of the two pre-requisites to attract Section 3 of PMLA would be satisfied only if the person also projects or claims proceeds of crime as untainted property. For making such claim or to project 'proceeds of crime' as untainted, the knowledge of tainted nature i.e. the property being 'proceeds of crime' derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence, would be utmost necessary.

 

The four ingredients which are determinative factors on the basis of which it can be said that whether any person or any property is involved in money laundering or not. If there is no direct / indirect involvement of any person or property with  the proceeds of  the crime nor there is  any aspect of knowledge in any person with respect to involvement or assistance  nor   the   said  person   is   party   to   the   said transaction, then it cannot be said that the said person is connected with any activity or process with the proceeds of the crime. The same principle should be applied while judging the involvement of any property of any person in money laundering. This is due to the reason that if the property has no direct involvement in the proceeds of the crime and has passed on hands to the number of purchasers which includes the bona fide purchaser without notice, the said purchaser who is not having any knowledge about the involvement of the said property with the proceeds of the crime nor being the participant in the said transaction ever, cannot be penalized for no fault of his. Therefore, it cannot be the Scheme of the Act whereby bona fide person without having any direct/ indirect  involvement  in  the  proceeds  of  the  crime  or  its dealings can be made to suffer by mere attachment of the property at the initial stage and later on its confirmation on the basis of mere suspicion when the element of mens rea or knowledge is missing.

By

Vijay Pal Dalmia, Advocate
Supreme Court of India and High Court

Mobile: +91 9810081079

Email: vpdalmia@gmail.com

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