With CBI charges gone, ED case now in spotlight

With a Delhi court discharging former Delhi chief minister Arvind Kejriwal, former deputy CM Manish Sisodia and 21 others in the CBI's excise policy case on Friday, attention turned to the parallel money laundering proceedings, with the accused now expected to move a court seeking quashing of the Enforcement Directorate’s (ED) case under the Prevention of Money Laundering Act (PMLA).

- Utkarsh Anand and Neeraj Chauhan

The legal question that is set to dominate the next phase is both technical and consequential: can a PMLA prosecution survive once the predicate offence (the foundational criminal case) has been judicially knocked down?

On Friday, special judge Jitendra Singh held that the agency's material did not even disclose a prima facie case.

The CBI FIR, registered in August 2022 under IPC conspiracy and cheating provisions along with sections of the Prevention of Corruption Act, formed the basis of ED’s money laundering probe.

With the special court holding that the CBI case does not cross the threshold of grave suspicion, the accused are now likely to argue that PMLA proceedings have lost their statutory foundation.

The anticipated challenge rests squarely on the law declared by the SC over the past three years.

In Vijay Madanlal Choudhary vs Union of India (2022), while upholding the constitutional validity of key PMLA provisions, the top court made a crucial clarification that if a person is finally discharged, acquitted, or if the criminal case relating to the scheduled offence is quashed, “there can be no offence of money-laundering against him”.

The reasoning flows from the statute itself. Section 2(1)(u) defines “proceeds of crime” as property derived or obtained as a result of criminal activity relating to a scheduled offence. If that scheduled offence does not survive judicial scrutiny, the definitional requirement collapses. The court cautioned that ED can't proceed on an assumption that a scheduled offence exists; the existence of such offence is a jurisdictional fact.