The Special Court (PMLA), Rouse Avenue Courts, New Delhi, has delivered its judgment in the prosecution launched by the Directorate of Enforcement (ED) against former Ivory Clothing Pvt. Ltd. Director Sumeet Suri.
The prosecution originated from an Enforcement Case Information Report (ECIR) registered after an FIR lodged by the Economic Offences Wing (EOW), Delhi Police, alleging large-scale financial irregularities in Ivory Clothing Pvt. Ltd. The ED alleged that Suri had laundered proceeds of crime generated by siphoning off company funds while serving as a director of the company.
According to the Enforcement Directorate, Sumeet Suri, who managed the operational and financial affairs of Ivory Clothing Pvt. Ltd., took advantage of the prolonged absence of co-director and majority shareholder Aniljit Singh, whose father was suffering from terminal cancer.
The prosecution alleged that during the period between 2006 and 2008, Suri diverted more than ₹3 crore belonging to the company by: transferring funds to his own company, M/s Anjjane Clothing Pvt. Ltd.; creating forged invoices and false vouchers; routing money through multiple bank accounts; withdrawing company funds without authorization; using fake suppliers and fabricated bills; and investing the alleged proceeds in bank accounts, insurance policies and other financial assets.
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The ED further claimed that several bank accounts, insurance policies, PPF accounts and investments represented “proceeds of crime” and were provisionally attached under the provisions of the PMLA.
The money laundering prosecution was based upon FIR No. 125/2010 registered by Delhi Police for offences including Sections 420, 467, 468, 471 and 120-B IPC.
After trial in the predicate case, however, the Special Court convicted Sumeet Suri only for criminal breach of trust under Section 409 IPC, while acquitting him of offences under Sections 420, 468 and 471 IPC, which had formed the basis of the ED’s money laundering case.
Appeals against the conviction and acquittals remain pending before the Delhi High Court.
The defence argued that the PMLA proceedings could not survive because: Section 409 IPC is not a scheduled offence under the PMLA. The offences under Sections 420 and 471 IPC became scheduled offences only after statutory amendments that came into force after the alleged acts. Since the accused stood acquitted of the scheduled offences, the very foundation of the money laundering prosecution disappeared. The attached financial assets were acquired from legitimate sources and did not constitute proceeds of crime.
The defence also relied heavily upon the Supreme Court’s landmark judgment in Vijay Madanlal Choudhary v. Union of India, contending that a money laundering prosecution cannot continue independently where the scheduled offence itself does not survive.
The Enforcement Directorate argued that despite acquittal under certain IPC provisions, the accused had clearly enjoyed proceeds generated from criminal activity.
The agency submitted that approximately ₹47.47 lakh constituted identifiable proceeds of crime; provisional attachment orders had already been confirmed by the Adjudicating Authority; statutory presumptions under the PMLA operated against the accused; and the attached properties ought to be confiscated under Section 8 of the Act.
The complainant also urged the court to keep the proceedings pending until appeals arising from the predicate criminal case attained finality.
The Special Court undertook a detailed examination of the statutory definition of “proceeds of crime” under Section 2(1)(u) of the PMLA and analysed whether criminal activity relatable to a scheduled offence had been legally established.
The judgment carefully considered the earlier conviction in the EOW case, where Sumeet Suri had been convicted solely under Section 409 IPC while being acquitted of the offences that formed the scheduled offences relied upon by the Enforcement Directorate.
The Court also examined the rival submissions regarding attachment proceedings, the effect of pending appeals, and the judicial precedents governing the independent existence of money laundering proceedings.
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