The Supreme Court on December 19 set aside the Gauhati High Court’s order quashing summons issued under the Prevention of Money Laundering Act, 2002 (PMLA) to Vilelie Khamo. The High Court had quashed the summons after the respondent was discharged in the scheduled offence by a Special Court.
A bench comprising Justices M.M. Sundresh and Aravind Kumar held that proceedings under PMLA cannot be quashed merely because an individual has been discharged in the predicate offence. It emphasized that money laundering is a standalone offence under the PMLA and is not dependent on the outcome of proceedings related to the scheduled offence.
High Court’s Ruling and ED’s Challenge
The Gauhati High Court, in its order dated January 3, 2023, quashed the summons issued by the Enforcement Directorate (ED) under Sections 50(2) and (3) of the PMLA on the grounds that the respondent had already been discharged in the predicate offence. The ED challenged this decision before the Supreme Court, arguing that the High Court deviated from settled legal principles.
Additional Solicitor General Rajkumar Bhaskar Thakare, appearing for the ED, submitted that the High Court failed to consider that the offence of money laundering is distinct from the scheduled offence. Thakare contended that the High Court should not have interfered at the stage of summons, as the investigation into proceeds of crime was still underway.
Respondent’s Argument
Advocate S. Borgohain, appearing for the respondent, argued that the discharge in the scheduled offence made the summons under PMLA unsustainable. Relying on the Supreme Court’s judgment in Vijay Madanlal Choudhary v. Union of India (2022), Borgohain contended that money laundering depends on the illegal gain of property from a scheduled offence. He also informed the Court that no clarification was provided on whether the respondent was to appear as an accused or a witness.
Justice Sundresh, however, remarked that the High Court should not have quashed the summons at this stage. The bench observed that whether the respondent would be arraigned as an accused or not would be decided later. For now, the respondent would only be treated as a witness.
Supreme Court’s Ruling
The Supreme Court allowed the ED to continue its investigation under PMLA and reinstated the summons. The bench held that:
The issuance of summons does not imply coercive action or prosecution. Money laundering is an independent offence, and discharge in the predicate offence does not preclude investigations under PMLA. The High Court erred in interfering at the summons stage and delving into the merits of the case prematurely. The Court clarified that no coercive steps would be taken against the respondent at this stage. It left open the question of law regarding whether a person discharged in the scheduled offence can later be prosecuted under PMLA.
Case Background
The case concerns allegations of misappropriation of ₹3.61 crore during the construction of the Nagaland High Court complex in Kohima. An FIR was registered by the Central Bureau of Investigation (CBI) under Sections 120(B) and 420 of the Indian Penal Code (IPC) and Sections 13(1)(d) and 13(2) of the Prevention of Corruption Act, 1988. The FIR alleged that Nagaland PWD officials and contractors, including the respondent, conspired to carry out sub-standard construction and misappropriated public funds. The Enforcement Directorate, based on the FIR, initiated proceedings under PMLA to investigate the proceeds of crime. The ED issued summons to the respondent under Section 50(2) of the PMLA. However, the respondent filed a writ petition in the Gauhati High Court seeking to quash the summons, citing his discharge in the predicate offence by the Special Court, CBI, Dimapur.
The Supreme Court reinstated the summons issued by the ED and allowed the investigation to proceed. It ruled that:
- Summons under PMLA cannot be quashed solely because the individual was discharged in the predicate offence.
- The ED is entitled to investigate money laundering as a standalone offence.
- The respondent would be treated as a witness for now, and no coercive steps would be taken.
Case Title: Director, Enforcement Directorate & Anr. v. Vilelie Khamo
SLP (Crl.) No. 15189/2024
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