A. Dharmaraj Rasalam v. Assistant Director, Directorate of Enforcement

Prevention of Money Laundering Act, 2002 – Sections 3, 4 – Stand-Alone Offense – Non-Inclusion in Predicate Offense Final Report – Effect.

Petitioner, Bishop and Chairman of educational institutions, sought to quash PMLA proceedings alleging his role in collecting and diverting funds obtained by promising medical admissions – Crime Branch omitted petitioner’s name from final reports in predicate offense (cheating under IPC)

Held

Non-inclusion in final reports does not absolve liability under PMLA, as money laundering is an independent offense – Allegations of petitioner’s involvement in directing parents and facilitating use of proceeds of crime (Rs. 3 crores diverted to parent organization) sufficient to sustain PMLA prosecution.

Vijay Madanlal Choudhary (2023) 12 SCC 1 and Pavana Dibbur (2023) 15 SCC 91 followed – Petition to quash proceedings dismissed.

Citation: 2025 (3) KLR 406 : 2025 KER 26144 : 2025 (2) KLT 536
Court: High Court of Kerala
Judge: V.G. Arun, J.
Case No.: Crl.M.C. No. 1932 of 2025; 24 March 2025
Counsel:

  • Petitioner: Advs. Mariya Rajan, Shinu J. Pillai, S. Suja, Ann Mariya John, Felix Samson Varghese
  • Respondent: SC for ED Jaishanker V. Nair

Facts

The petitioner, A Dharmaraj Rasalam, is the Bishop and Moderator of the Church of South India (CSI) and Chairman of educational institutions under the South Kerala Diocese, including Dr. Somervell Memorial CSI Medical College. In 2019, parents of aspiring medical students alleged that large sums were collected from them with promises of MBBS and PG admissions, which were neither fulfilled nor refunded. The Admission Supervisory Committee recommended a refund, leading to a Crime Branch investigation. Multiple FIRs were registered under Sections 120-B and 420 of the IPC against the petitioner and others. The Enforcement Directorate (ED) initiated a parallel investigation under the Prevention of Money Laundering Act, 2002 (PMLA), recording ECIR/KCZO/11/2020 on 12.03.2020 against the petitioner and others. On 08.05.2024, the ED filed a complaint (PMLA S.C. No. 3 of 2024) alleging offenses under Section 3 read with Section 70, punishable under Section 4 of the PMLA. The petitioner sought to quash these proceedings, arguing his non-inclusion in the Crime Branch’s final reports exonerated him from PMLA liability.

Issues

  1. Whether the non-inclusion of the petitioner’s name in the Crime Branch’s final reports for the predicate/scheduled offense absolves him from prosecution under the PMLA.
  2. Whether the proceedings under the PMLA against the petitioner constitute an abuse of the court’s process.

Arguments

Petitioner’s Contentions:

  • As Bishop and Chairman, the petitioner was not involved in the day-to-day administration of the medical college and only advised parents to meet relevant officials.
  • The Crime Branch omitted his name from the final reports, indicating no evidence of his involvement in the predicate offense (cheating under IPC).
  • Citing Vijay Madanlal Choudhary v. Union of India [(2023) 12 SCC 1], the petitioner argued that acquittal or discharge from the scheduled offense precludes PMLA prosecution.
  • Additional reliance was placed on M/s. Smartcoin Financials Pvt. Ltd. [2024 (3) ALT (Crl) 480] and Vinod Mathew Wilson [2024 SCC OnLine Ker 2348], asserting that without a predicate offense, PMLA proceedings are unsustainable.
  • Continuing PMLA proceedings without evidence of his involvement in the predicate offense is an abuse of process.

Respondent’s Contentions (ED):

  • The challenge is premature as the Magistrate has not yet accepted the Crime Branch’s final reports.
  • Non-inclusion in the final reports does not absolve the petitioner from PMLA liability, as money laundering is a stand-alone offense under Section 3 of the PMLA.
  • Investigation revealed that Rs. 7.22 crores was collected from parents, with the petitioner directing parents to the college’s comptroller, part of which (Rs. 3 crores) was diverted to the South Kerala Diocese for contract payments, indicating his role in handling proceeds of crime.
  • Reliance was placed on Pavana Dibbur v. Directorate of Enforcement [(2023) 15 SCC 91] and P. Rajendran v. Assistant Director [2022 SCC OnLine Mad. 9007], which held that PMLA prosecution does not require the accused to be named in the predicate offense.

Legal Provisions

  • Section 3, PMLA: Defines money laundering as any process or activity connected with proceeds of crime, including concealment, possession, acquisition, use, or projecting it as untainted property.
  • Section 4, PMLA: Prescribes punishment for money laundering.
  • Section 2(u), PMLA: Defines “proceeds of crime” as property obtained directly or indirectly from criminal activity.
  • Section 2(v), PMLA: Defines “property” broadly, encompassing all forms of assets.
  • Sections 120-B and 420, IPC: Predicate offenses (criminal conspiracy and cheating) forming the basis of the PMLA investigation.

Court’s Analysis and Reasoning

  1. Nature of Money Laundering Offense:
    • The court relied on Vijay Madanlal Choudhary to affirm that money laundering under Section 3 of the PMLA is an independent offense, distinct from the predicate offense. Involvement in any activity connected with proceeds of crime (e.g., concealment, use) constitutes money laundering, irrespective of direct involvement in the predicate offense.
    • Pavana Dibbur clarified that a person unconnected with the predicate offense can still be prosecuted under PMLA if involved in handling proceeds of crime. Thus, non-inclusion in the Crime Branch’s final reports does not automatically exonerate the petitioner.
  2. Petitioner’s Role in Proceeds of Crime:
    • The ED’s complaint alleged that the petitioner directed parents to the college’s comptroller, facilitating the collection of Rs. 7.22 crores. Part of this amount (Rs. 3 crores) was diverted to the South Kerala Diocese for contract works, indicating the petitioner’s involvement in the use and concealment of proceeds of crime.
    • The court found these allegations sufficient to establish a prima facie case under Section 3, as the petitioner’s actions connected him to the proceeds of crime, even if his role in the predicate offense (cheating) was not proven.
  3. Interpretation of Vijay Madanlal Choudhary:
    • The petitioner’s reliance on paragraph 467(d) of Vijay Madanlal Choudhary (stating that acquittal/discharge from the predicate offense precludes PMLA prosecution) was rejected. The court noted that this principle applies only when the predicate offense proceedings are fully quashed or the accused is acquitted/discharged, not when the accused is merely omitted from the final report.
    • In the present case, the predicate offense proceedings were ongoing, and the petitioner’s involvement in handling proceeds of crime constituted a distinct PMLA offense.
  4. Other Precedents:
    • Pavana Dibbur supported the view that PMLA prosecution can proceed against someone not named in the predicate offense, as long as their involvement with proceeds of crime is established.
    • P. Rajendran reinforced that PMLA is a stand-alone offense, and benefits of discharge/acquittal in the predicate offense do not extend to those not arrayed as accused in it.
  5. Abuse of Process:
    • The court rejected the petitioner’s claim of abuse of process, finding that the ED’s allegations regarding his role in the money trail warranted further investigation and trial under PMLA.

Held

  • The non-inclusion of the petitioner’s name in the Crime Branch’s final reports does not absolve him from prosecution under the PMLA, as money laundering is a stand-alone offense under Section 3.
  • The ED’s allegations of the petitioner’s involvement in directing parents and facilitating the use of proceeds of crime (Rs. 3 crores diverted to the South Kerala Diocese) justified continuing the PMLA proceedings.
  • The petition to quash the proceedings in PMLA S.C. No. 3 of 2024 was dismissed.

Key Precedents Cited

  1. Vijay Madanlal Choudhary v. Union of India [(2023) 12 SCC 1]: Money laundering is an independent offense; acquittal/discharge in predicate offense precludes PMLA prosecution only in specific circumstances.
  2. Pavana Dibbur v. Directorate of Enforcement [(2023) 15 SCC 91]: PMLA prosecution can target individuals unconnected to the predicate offense if involved with proceeds of crime.
  3. P. Rajendran v. Assistant Director [2022 SCC OnLine Mad. 9007]: PMLA is distinct from the predicate offense; discharge in the latter does not automatically apply to PMLA cases.
  4. M/s. Smartcoin Financials Pvt. Ltd. [2024 (3) ALT (Crl) 480]: PMLA proceedings quashed when no predicate offense exists (distinguished).
  5. Vinod Mathew Wilson [2024 SCC OnLine Ker 2348]: Similar view on predicate offense and PMLA linkage (distinguished).

Significance

This judgment reinforces the independent nature of money laundering offenses under the PMLA, clarifying that non-inclusion in predicate offense charge sheets does not bar prosecution if involvement with proceeds of crime is alleged. It underscores the broad scope of Section 3, PMLA, in targeting activities like concealment or use of tainted funds, even by individuals peripherally connected to the original crime.

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