In a series of recent landmark decisions, the Delhi High Court provided clarity on several aspects of the Prevention of Money Laundering Act (PMLA), shaping the application of anti-money laundering laws in India. These rulings address critical issues such as the definition of “proceeds of crime,” procedural requirements for Enforcement Directorate (ED) complaints, and the balance between stringent bail provisions and constitutional mandates.
The court recently ruled that collecting funds illegally to commit a future scheduled offense does not constitute money laundering under the PMLA. Justice Jasmeet Singh underscored that “proceeds of crime” must stem from completed criminal activity rather than anticipated acts.
This decision arose in a case involving members of the banned Popular Front of India (PFI), where the ED alleged that the PFI raised funds through illegal means, intending to finance terrorist activities. The court found no evidence linking the collected funds to a completed scheduled offense. Criticizing the ED’s argument as “putting the cart before the horse,” the court highlighted that in that case fund collection preceded the alleged crimes and therefore could not be proceeds of crime.
The court also said that the accused lacked control over the deposited funds, further weakening the money laundering charges. Granting bail, the court invoked Article 21 of the Indian Constitution, cautioning against using stringent statutes to prolong pre-trial detention without expeditious trials.
In another significant judgment, the High Court granted bail to Hari Om Rai, MD of Lava International, who was accused in a money laundering case involving smartphone maker Vivo. Justice Manoj Kumar Ohri emphasized that money laundering charges should not equate to offenses like murder or rape, which carry harsher penalties such as death or life imprisonment. The ED accused Rai of facilitating Chinese nationals in committing predicate offenses, including visa fraud and forging documents to open bank accounts. However, the court noted the complexity of the case, involving 53 accused, 527 witnesses, and over 83,500 pages of evidence. Given the scale of the investigation, the trial was unlikely to conclude soon.
The court reiterated that Article 21 prevails over PMLA’s stringent bail provisions, asserting that prolonged incarceration without a foreseeable trial conclusion violates fundamental rights. This judgment underscores the balance required between enforcing anti-money laundering laws and protecting constitutional freedoms.
Addressing procedural issues, the High Court ruled that Special Courts under the PMLA are not required to record reasons for taking cognizance of ED complaints. Justice Chandra Dhari Singh upheld the legality of filing supplementary complaints under Section 44, as clarified by a 2019 amendment.
The ruling came while rejecting a plea from Sanjay Aggarwal, who argued that his inclusion in the ED’s complaint was improper due to an incomplete investigation. The court noted that the trial court had prima facie found sufficient grounds to proceed and emphasized that the 2019 amendment allows supplementary complaints to include additional evidence.
These judgments reflect a balanced approach to anti-money laundering enforcement in India. By refining the interpretation of “proceeds of crime” and aligning stringent PMLA provisions with constitutional safeguards, the Delhi High Court has underscored the importance of judicial scrutiny in safeguarding individual rights while combating financial crimes.
