Court Rules PMLA Proceedings Based on Civil Disputes as Abuse of Process
In a significant ruling, the Allahabad High Court has quashed the proceedings under the Prevention of Money Laundering Act, 2002 (PMLA) against Tulsiani Construction and Development Ltd. and its directors. The Court found that the proceedings were initiated based on disputes that were essentially civil or commercial in nature, thus constituting an abuse of the process of law.
Presiding over the matter, Justice Subhash Vidyarthi adjudicated on an application under Section 482 of the Criminal Procedure Code, which challenged the order of the Special Judge, Anti-Corruption, CBI West/E.D., Lucknow. The original order had taken cognizance of offences under Sections 3 and 4 of the PMLA, summoning the company and its directors to trial.
The case originated when Punjab National Bank lodged an FIR against Tulsiani Construction for allegedly not delivering flats to buyers within the stipulated time, causing a financial loss to the bank. The Enforcement Directorate (ED) subsequently initiated proceedings under PMLA, alleging that the company had siphoned off the proceeds of crime for personal gain.
However, the High Court found that the FIRs and subsequent proceedings were essentially commercial disputes. It noted that several settlements had already been reached with the bank and flat buyers, indicating the civil nature of the disputes. The Court emphasized that using criminal law to resolve civil disputes is improper and that the PMLA should not be weaponized for coercive settlements.
The judgment also criticized the trial court for issuing a summoning order without adequately addressing the objections raised by the applicants, highlighting the necessity for reasons in judicial orders to ensure fairness and transparency. The Court reinforced that economic offences cannot be settled and that any settlement of monetary disputes further underscores the civil nature of the case.
The ruling draws on various precedents, including those from the Supreme Court, which stress that criminal proceedings should not be pursued where civil remedies are appropriate. The judgment underscores the principle that proceedings under PMLA cannot be sustained if they arise from civil or commercial disputes, thereby protecting individuals and entities from misuse of the criminal justice system.
Bottom line:-
Proceedings under the Prevention of Money Laundering Act, 2002 (PMLA) cannot be instituted based on disputes that are purely civil or commercial in nature. Attachment of property acquired long before the alleged scheduled offence and not linked to proceeds of crime is unsustainable.
Statutory provision(s): Prevention of Money Laundering Act, 2002 (Sections 2(u), 3, 4), Criminal Procedure Code, 1973 (Section 482)
