No PMLA case without scheduled offence: HC in Kolkata lottery ED case
Kolkata: Holding that a money-laundering case can’t stand without a subsisting criminal offence, the Calcutta High Court has quashed proceedings initiated by the Enforcement Directorate (ED) over alleged irregularities in lottery operations in Kolkata.
Justice Ajoy Kumar Mukherjee observed that once police investigations end in closure reports on the ground of “mistake of fact” and such reports are accepted by the magistrate, the basis for invoking the Prevention of Money Laundering Act (PMLA)
no longer exists. In such a situation, the court said, the alleged proceeds of crime also cease to exist unless the closure is later overturned in accordance with law.
The ED case arose from two FIRs registered at Bhawanipur and Beliaghata police stations alleging offences under the IPC and the Lotteries Regulation Act. After investigation, police filed closure reports in both cases, which were accepted by the courts. Despite this, the ED registered an Enforcement Case Information Report (ECIR), carried out searches, froze bank accounts and provisionally attached assets worth over Rs 400 crore, treating them as proceeds of crime. A prosecution complaint was later filed under the PMLA and cognisance was taken by a special court.
The court noted that the assets sought to be attached in the Kolkata money-laundering case were directly linked to the two Kolkata FIRs. Once those FIRs stood closed with judicial approval, the court held, the continuation of attachment and prosecution under the PMLA was not legally sustainable. The court also observed that the “reason to believe” required under the law must rest on clear material and cannot be based on suspicion after a closure report has been accepted.
The court rejected the ED’s argument that the Kolkata case could be sustained by linking it to a separate CBI case pending in another state, noting that the alleged proceeds in the Kolkata case were quantified and attributed only to the two city FIRs. It further held that continuing a second money-laundering case on the same basis would amount to duplication of proceedings.
The court quashed the ECIR and the money-laundering case pending before the special court in Kolkata.
However, it granted liberty to the ED to revive the proceedings if the closure of the predicate cases is set aside at a later stage or if fresh grounds arise to proceed under the PMLA.
