Funds for future crimes not ‘proceeds of crimes’, says HC

The Delhi high court on Wednesday ruled that funds collected illegally to commit a crime (a scheduled offence) in the future, cannot be an offence under the Prevention of Money Laundering Act (PMLA), and that to be defined as “proceeds of crime”, these funds would have to be generated by the crime.

To be sure, the illegality in the collection of funds could make it a scheduled offence under any law, but the funds collected would not count as proceeds of crime under Section 3 of PMLA, justice Jasmeet Singh said.

“The proceeds of crime has to be generated as a result of criminal activity (scheduled offence). The collection of funds in an illegal way to commit a scheduled offence in future is not an offence of money laundering under PMLA,” he added, granting bail to Parvez Ahmed, Abdul Muqeet and Mohd Ilyas, in a money laundering case concerning the banned organisation Popular Front of India (PFI).

The Enforcement Directorate alleged that the three were actively involved and instrumental in the fund-raising activities of PFI as part of a larger criminal conspiracy to raise and use such funds in various unlawful activities. It claimed that the money was raised from unknown sources and that fake receipts were created.

In their petition before the high court the three functionaries represented by senior advocate Shadan Farasat, advocates Aadith Pujari and Satyakam, submitted that ED’s complaint did not make out any money laundering offence against them and there was nothing in the complaint which indicated that the amounts were received by them on account of any PFI related activity, let alone the proceeds of crime.

Drawing the court’s attention to their period of incarceration (the three have been in jail since September 2022), the counsel contended that they had been in custody for more than two years for an offence in which the maximum sentence is seven years and there was no likelihood for the trial to complete in near future due to the number of witnesses and volume of documents.

ED, represented by special counsel Zoheb Hossain, submitted that the offence of money laundering commenced pursuant to the criminal conspiracy for raising and utilising funds by PFI and its related organizations for various terror activities. Opposing their bail, Hossain also asserted that the funds collected were used for terror funding, including the payment made to terrorists.

The court in its 31-page verdict, granted the petitioners bail saying that the offence was not made out against them and the case set up by the ED was “putting the cart before the horse”.

While ordering for their release on bail on personal bond for a sum of ₹50,000, the court also took note of the pace of trial and opined that the stringent conditions in a special statute for grant of bail should not become a means to detain an accused without there being a possibility of expeditious conclusion of trial. Underlining the intent behind the fundamental right to life and personal liberty enshrined under article 21 of the Constitution, the court said that merely charging an accused under the provision of PMLA should not become a punishment which violates fundamental rights.