/2022 INSC 0353/ REPORTABLE IN THE SUPREME COURT OF INDIA  CRIMINAL APPELLATE JURISDICTION CRIMINAL APPEAL NO. 738  OF 2022 (Arising out of Special Leave Petition (Crl.) No. 8305 of 2021) J.Sekar @Sekar Reddy                                           …Appellant Versus Directorate of Enforcement                                  ...Respondent J U D G M E N T       Leave  granted. 2. This   appeal   arises   out   of   the   judgment   dated 04.02.2021 passed by the Division Bench of the High Court of Madras   in   Crl.   O.P.   No.   24200   of   2017   which   was   filed   for quashing  of   the proceedings in C.C. No. 2 of 2017. The High Court,   while   dismissing   the   petition   under   Section   482   of   the Criminal Procedure Code (for short ‘Cr.P.C.’) inter­ alia held that the argument  of  the appellant that  the FIR with  respect to schedule   offence   was   closed   for   want   of   evidence   and   in absence   of   connected   evidence   with   a   crime   of   schedule 1 offence,   the   prosecution   for   offences   under   Sections   3   &   4 of the Prevention of Money Laundering Act, 2002 (for short “PMLA”)   cannot   be   sustained.     It   is   also   held     that   the commission of schedule offence may be a fundamental pre­ condition   for   initiating   the   proceedings   but   the   offence   of money   laundering   is   independent   of   the   schedule   offence because   the   PMLA   deals   with   the   process   or   activity   with respect   to   the   proceeds   of   crime   including   concealment, possession,   acquisition   or   use,   however   in   the   light   of   the explanation   of   Section   44(1)   of   PMLA,   the   argument   of   the appellant was repelled.  The High  Court further held that if any observation has come in the bail application, having no material   to   connect   with   the   commission   of   any   offence, would not be enough to quash the proceedings.   The Court relied   upon   the   seizure   made   by   the   I.T.   Department including  that of the currency notes of denomination of Rs. 2000   in   the   context   that   the   currency   notes   of denomination   of   Rs.   500   and   Rs.   1000     ceased   to   be   legal tender   by   order   of   the   Government   at   the   time   of demonetization   and   the   people   were   in   queue   to   exchange 2 those   old   currency   notes   for   new   ones.     As   the   seizure   of currency notes of Rs. 33 crores in the denomination of Rs. 2000   was   made,   therefore,   the   closure   report   made   by Central   Bureau   Investigation   (in   short   ‘CBI’)   in   schedule offence cannot be relied upon. 2. Briefly,   the   facts   relevant   for   the   purpose   of   the appeal   are   that   the   appellant   J.   Sekar   Reddy   is   the Managing   Partner   of   M/s   SRS   Mining   which   is   a partnership   firm   engaged   in   sand   mining   since   2013   and he had deposited Rs 312.64 Crores in three bank accounts of the firm. On 08.12.2016 and 09.12.2016, the Income Tax Department,   Chennai   (for   short   “I.T.   Department”) conducted search in the official/commercial premises of the appellant   and   others   and   seized   currency   amounting   to Rs.106,98,89,800/­   and   128.495   kg   of   gold   (valued   at Rs.36,72,07,311). 3. Thereafter, from 08.12.2016 to 12.12.2016, appellant joined inquiry before the IT Department   about the seizure of   currency   notes   and   gold .   Subsequently   on   19.12.2016, the   CBI   registered   RC   40(A)   2016/CBI/ACB/CHENNAI   for 3 offences   under   Sections   120­B   r/w   409,   420   of   Indian Penal   Code   (in   short   ‘IPC’)   and   Section   13(2),   r/w   13(1)(c) and   13(1)(d)   of   the   Prevention   of   Corruption   Act,1988   (in short ‘PC Act’) against the appellant and two others.   4. The   Enforcement   Directorate   after   perusing   the   FIR of   the   CBI   felt   that   in   addition   to   the   scheduled   offences, the   provisions   of     under   Sections   2(1)(x)   and   2(1)(y)   of   the PMLA   attract,   however   registered   the   offence   at   ECIR   No. 19   of   2016   dated   19.12.2016   against   the   appellant   and others.   The   respondent   had   enquired   and   conducted   the investigation   and,   recorded   the   statement   of   the   appellant and others and found new currency notes of denomination of   Rs.2,000/­   of   a   total   value   of   Rs.33,74,92,000/   in   a subsequent search on the official and commercial premises of the appellant.  5. In   the   meantime,   the   CBI   had   filed   the   custody petition   which   was   dismissed   by   the   Special   Court   vide order   dated   30.12.2016 .   The   CBI   had   also   registered   two FIRs   being   Crime   No.   RC   MA1   2016   A0051   at   1500   hrs. and RC MA1 2016 A0052 at 1510 hrs on 30.12.2016 by a 4 margin   of   ten   minutes   time.     The   appellant   filed   the   bail application   in   RC   MA1   2016   A0040   and   RC   MA1   2016 A0051   before   the   Principal   Special   Judge   for   CBI   Cases, Chennai.     The   Special   Court,   by   order   dated   17.3.2017 granted bail to the appellant imposing certain conditions. 6. Subsequently,   Deputy   Director   (ED),   Chennai   in ECIR   CEZO/19/2016   passed   an   order   for   provisional attachment   in   exercise   of   the   power   under   Section   5(1)   of PMLA   for   a   specified   period   of   one   month.     On   submitting the  complaint  OC  No. 785 of  2017 before the  Adjudicating Authority   for   confirmation   of   the   order   of   provisional attachment,    it  refused  to  confirm  the  order  of  attachment and   dismissed   the   same.     In   the   order,   the   Adjudicating Authority   stated   that   the   description   of   the   bank   or   bank officers   is   not   on   record.     In   absence   of   any   identification, who   were   the   bank   officers   who   converted   the denomination   of   old   currency   notes   into   new   and   that   too from   which   bank,   there   was   no   material   with   the   Deputy Director   for   making   a   reasonable   belief   for   change   of   old into   new   currency   notes   through   the   bank   officers   and 5 observed that  the  said allegation is based on  speculations, which are not legally tenable. 7. It   is   relevant   to   note   that   RCMA1   2016   A0051   and RCMA1   2016   A0052   were   challenged   by   the   appellant   as well  as  other   co­accused  before  the   Madras  High   Court  by filing Crl. O.P. Nos. 24200 and 24202 of 2017 invoking the power under Section 482 Cr.P.C., which were decided by a common order dated 27.6.2018 and the High Court in para 32   quashed   the   RC   MA1   2016   A0051   and   RC   MA1   2016 A0052   against   the   appellant   and   other   co­accused   giving liberty   to   the   CBI   to   treat   the   allegations   made   in   FIRs   as supplementary allegations or to merge the same in first FIR RC MA1 2016 A0040. 8 It is most relevant to note that CBI after investigation in   the   main   case   in   RC   MA1   2016   A0040   submitted   the closure   report   before   the   Additional   Sessions   Judge,   CBI Court,   Chennai   in   exercise   of   power   under   Section   173(2) Cr.P.C.     The   said   report   was   accepted   vide   order   dated 25.9.2020   with   an   observation   that   for   lack   of   sufficient evidence, nothing incriminating is found which may surface 6 on the part of accused persons.   Therefore, from the above facts,   it   is   clear   that   the   CBI   registered   three   cases   out   of which   in   the   main   case   RC   MA1   2016   A0040,   the   final closure   report   was   submitted   by   CBI   itself   which   was accepted by the Court and in remaining  two cases bearing Nos.     RC   MA1   2016   A0051   and   RC   MA1   2016   A0052,   the High   Court   quashed   the   FIRs   with   respect   to   schedule offence. 9 So   far   as   the   investigation   made   by   the   I.T. Department on the basis of search is concerned, the same is   closed.     The   appellant   sought   information   from   the   I.T. Department   vide   communication   dated   11.5.2019.     In respect   to   the   same,   the   I.T.   Department   vide   letter   dated 16.5.2019  provided  the  details  of  seizure made  by  it     from the appellant.  It is apparent that the new currency notes of denomination   of   Rs.   2000   belonged   to   M/s   SRS   Mining which   is   recorded   in   its   cash   book.     Those   currency   notes seized are from the proceeds of the sand sales by M/s SRS Mining.     The   details   of   the   tax,     paid   before   or     after   self­ assessment   for   Financial   Year   2016­17   satisfied     the 7 Authority   that   money   so   seized   was   accounted   money   or tax paid. 10. The   appellant   contending   all   the   above   facts, approached   the   High   Court   of   Madras   invoking   the jurisdiction   under   Section   482   Cr.P.C.   seeking   quashment of the proceedings related to PMLA case and prayed for the following reliefs : (i) To stay all further proceedings in CC No. 2 of 2017 on the file of the Hon’ble Principal Sessions Court, Chennai pending disposal of the above criminal original petition. (ii) To call for the records in CC No. 2 of 2017 on the file of the Hon’ble Principal Sessions Court, Chennai and quash the same and pass such further other order, orders as deemed fit and proper in the circumstances of the case and thus render justice. By   the   impugned   order   dated   4.2.2021,   the   High   Court   of Madras dismissed the said petition. 11.  We   have   heard   Shri   Vikram   Chaudhari,   learned Senior   Counsel   for   the   appellant   and   Shri   S.V.   Raju, learned   Additional   Solicitor   General   on   behalf   of   the respondent. 8 12 Learned   senior   counsel   for   the   appellant   urged   that for   invocation   of   PMLA,   pre­existing   occurrence   of   the scheduled offence is required because the proceeds of crime are   essential   property   derived   from   criminal   activity   of   the said   offence.     The   Adjudicating   Authority   dealt   with   the order   of   the   Deputy   Director   (ED)   and   for   lack   of   evidence refused   to   pass   an   order   for   attachment.       As   per   the material   available   on   record,   the   offence   of   money laundering specified in Section 2(1)(p) and also in Section 3 of   PMLA   is   not   made   out.     It   is   further   urged   that   as   per Section   8(1)   of   PMLA,   a   show   cause   notice   may   be   issued regarding   the   attached   property   if   the   said   Authority   is having reason to believe that any person has committed an offence   under   Section   3   or   is   in   possession   of   proceeds   of crime.     The   adjudication   proceedings   and   criminal proceedings are independent to each other but the material for   commission   of   offence   recorded   by   the   authorities   in those   proceedings   may   be   a   relevant   factor,   in   particular when   for   lack   of   evidence,   the   Authority   itself   is   satisfied that   the   attachment   of   the   proceedings   in   PMLA   case 9 cannot   be   continued.     Reliance   has   been   placed   on   the judgments   of   this   Court   in   Radheshyam   Kejriwal   Vs. State   of   West   Bengal   (2011)3SCC   581   and   Ashoo Surendranath   Tewari   vs.   Deputy   Superintendent   of Police, EOW, CBI and Another  (2020) 9 SCC 636. 13. On   the   other   hand,   Shri   S.V.   Raju,   learned Additional   Solicitor   General   on   behalf   of   the   respondent contends   that   the   order   passed   by   the   Adjudicating Authority under Section 5(5) PMLA is subject to the appeal which is pending before the Appellate Authority.  Therefore, the   order   of   the   Adjudicating   Authority   and   the   finding recorded therein are not sufficient to quash the proceedings in   the   present   case.     Learned   ASG   is   not   in   a   position   to controvert   the   arguments   on   merits   as   advanced   by   the learned senior counsel for the appellant. 14. After having heard learned   counsels and on perusal of   the   material   available   on   record,   it   is   clear   that   the   I.T. Department   made   search     in     the   official/commercial premises   of   the   appellant   and   other   connected   persons. Later,   I.T.   Department     vide   communication     dated 10 16.5.2019 which was issued  in response to the letter of the appellant   dated   1.5.2019     and   also   of   I.T.     Department dated     13.5.2019   was     satisfied   that   the   cash   which   was recovered   from   the   officials/commercial   premises   of   the appellant   is   explained   and     tax   was   paid   in   the   self­ assessment for the Financial Year 2016­17 .   The said letter is reproduced as thus : “ GOVERNMENT OF INDIA OFFICE OF THE JOINT DIRECTOR OF INCOME-TAX(INV)(OSD) UNIT-2(1), Room No. 223, 2 nd Floor, Income Tax Investigation Wing, M G Road Nungambakkam, Chennai-600 034. Telefax : 044-28253651 Kg.arunraj@incometax.gov.in UNIT2(1)/2019-20 16.05.2019 To: The Managing Partner M/s SRS Mining 317, Elite Empire G-12, Valluvarkottam High Road Nungambakkam Chennai-34 Sir, Sub: Search in the case of M/s SRS Mining and others-request to provide information-Reg Ref: Your letter dated 01.05.2019 received in this office on 13.05.2019 **** Please refer to the above. 2. The details requested by you are given below point wise:- (i) The date of initiation of search action in the case of M/s SRS Mining and others is 08.12.2016. This office didn’t refer the case to the CBI and the CBI suo-moto initiated proceedings after news of seizure of huge amount of new Rs 2000 notes emerged. (ii) The seized cash and gold belong to M/s SRS Mining, a partnership firm whose partners are Shri S. Ramachandran, Shri K.Rethinam and Shri J.Sekar (iii) From the residence of Shri J.Sekar cash of Rs. 12,00,000/- in old currencies was seized (iv) The details of seizure of new currencies of Rs. 2000 notes made in the various premises are given below:- 11 S.No. Name and address of the assessee New Denomination Rs. 2000 seized (in Rs.) 1 M/s SRS Mining, No.36, Sudhamma Building, Flat No. 1, First Floor, Rear Block, Vijayaragava Road, T. Nagar, Channai – 600 017 8,00,00,000 2 M/s SRS Mining, 26/14, Yogammbai Street, T Nagar, Chennai – 600 017 1,63,06,000 3 M/s SRS Mining, 3 rd Floor, VBC Solitaire, No. 47 & 49, Bazullah Road, T Nagar, Chennai – 600 017 13,16,000 4 G.Venkatesh, Venu Jewellers, No. 127, shop No. 18, NSC Bose Road, Adinath complex, Sowcarpet, Chennai – 600 079 11,86,000 5 K. Umapathy, Royal India Gems & Jewels P Ltd., No. 226, Old No. 124, Shop No. 18,19,20 4 th Floor, Adinath Complex, Chennai – 600 079 1,00,000 6 M/s SRS Mining, Tata Ace Vehicle TN23 BC 5757 24,00,00,000 Total 33,89,08,000 The new currencies belong to M/s SRS Mining and they were recorded in the parallel cash book of M/s SRS Mining. (v) As per the seized documents, the source of new currencies seized is from proceeds of sand sales by M/s SRS Mining. (vi) The details of prepaid tax paid by SRS Mining before the search action are given below:- Sl. No. AY Advance tax Rs. TDS/TCS Rs. Total prepaid tax paid Rs. 1 2016-17 12,00,00,000/- 58,35,283/- 12,58,35,283/- 2 2017-18 18,00,00,000/- 42,98,471/- 18,42,98,471/- Total 31,01,33,754/- Post Search, M/s SRS Mining has paid Rs. 22,00,00,000/- towards self- assessment tax for AY 2017-18 relevant to FY 2016-17. Yours faithfully (K G ARUNRAJ IRS) Joint Director of Income Tax (Inv.) (OSD) Unit 2 (1), Chennai” Therefore, the proceedings started on the basis of intriguing recovery of cash and other items in fact, does not exist and 12 the   I.T.   Department   itself   was   satisfied   with   the   recovery after investigation in the year 2019.   Therefore, the finding recorded   in   the   impugned   order   by   the   High   Court     in paragraph   14   with   regard   to     recovery   of   new   currency notes   of   denomination   of   Rs.   2000   cannot   be countenanced. 15. Reverting to the issue of registration of the main FIR by the CBI bearing No. RC MA1 2016 A0040 and thereafter two   other   cases   RC   MA1   2016   A0051   and   RC   MA1   2016 A0052  are based upon the information furnished by the I.T. Department.     As   discussed   above,   the   cases   bearing   Nos. RC   MA1  2016 A0051 and  RC   MA1 2016  A0052   have  been quashed   by   the   High   Court   vide   order   dated   27.6.2018 passed in Criminal O.P. No. No. 409 of 2017. Thereafter in the   main   FIR   RC   MA1   2016   A0040,   CBI   submitted   its closure   report.   The   said   closure   report   has   been   accepted by the Court in exercise of the power under Section 173(2) Cr.P.C.   on   25.9.2020.       The   relevant   extracts   of     closure report find mention in the court order is  reproduced thus: “ The  Inspector of  Police, CBI, ACB, Chennai  has submitted   a   final   report   through   Senior   Public 13 Prosecutor,   CBI,   praying   an   order   to   close   the FIR pending before this court in RC MA1 2016 A 0040   U/s   120­B   r/w   409,   420   IPC   and   Sec. 13(2)   r/w   13   (1)   (c)   (d)   of   PC   Act,   1989…..This court   perused   all   the   relevant   records   including the   FIR,   Statement   recorded   under   Section   161 of   Cr.P.C.,   the   documents   collected   during investigation, by the Investigating Officer and   in the   final   report   it   is   submitted   that   this   court may   be   pleased   to   accept   this   Closure   Report under   Section­173(2)   of   Cr.P.C.   and   may   drop the action against  A1 to  A6 for lack of sufficient Evidence.   There   was   nothing   incriminating surfaced   on   the   part   of   accused   persons,   as these   accused   1   to   6   had   in   conspiracy   with unknown   bank   officials   and   public   servants cheated the Government of India. 4.       The   evidence   on   record   is   not   adequate   to launch   prosecutable   case   against   the   accused persons   beyond   reasonable   doubt   to   establish that   they   fraudulently   converted   the unauthorised cash held by them in old currency notes in to NHD, thereby depriving the public, in enforcing their right and thus the accused 1 to 6 had   in   conspiracy   with   unknown   bank   officials and   public   servants   cheated   the   Government   of India. 6.       The   investigation   has   not   established   the allegations   levelled   against   A1   to   A6.   On   the basis   of   statement   of   witnesses   of   LW1   to   170 and   documents   D1   to   D879   and   M.O.I   to   8 collected   during   the   investigation,   there   is   no sufficient evidence to launch prosecution against the   accused   1   to   6   persons,   for   the   offences   of Criminal   Conspiracy,   Cheating,   Criminal misconduct. 7.       As   per   the   oral   and   documentary   evidence, the   allegations   in   the   FIR   to   the   effect   that   the accused   persons   have   caused   wrongful   loss   to the   Government   of   India   to   the   tune   of approximately   247.13   Crores   and   obtaining corresponding   wrongful   gain   to   themselves,   is not   substantiated   with   prosecutable   evidence. Hence   the   final   report   has   been   filed   for 14 recommending   closure   of   the   case   report   has been filed for recommending closure of the case 8.       …..Hence   this   court   is   convinced   and satisfied   to   accept   the   prayer   of   closure   of   the case….. 9.   …..The reasons submitted by the prosecution for   closure   of   F.I.R.   in   the   absence   of   any evidence is acceptable.” Thus,   it   is   clear   that   the   FIR   with   respect   to   schedule offence registered by the CBI with respect to proceeds of the crime including property attached has been closed. 16. On   the   basis   of   the   intimation   given   by   the   I.T. Department   and   registration   of   the   FIR   by   the   CBI   which was     closed,   the   Directorate   of   ED   registered ECIR/CEZO/19/2016 under Sections 3, 4 & 8(5) of PMLA . After   the   said   FIR,   Deputy   Director   (ED)   passed   an   order under   Section   5(1)   of   PMLA   on   1.6.2017   attaching   the property.     For   confirmation   of   attachment,   OC   No.   785   of 2017 was filed by the Department which is rejected by the Adjudicating  Authority  while  exercising the  power under  Section 5(5) of PMLA.  The Adjudicating Authority observed as thus: “ It is pertinent to note that about two years have lapsed since   passing   of   the   said   bail   order   dated   17.03.2017, and   over   two   years   have   passed   after   filing   of   FIR, 15 however   till   date   no   Final   Report   is   filed   by   the concerned   Investigating   Officer   investigating   the scheduled offences. Most material is the fact that so far no   bank   or   bank   officers   are   identified,   either   by   the officer   investigating   the   schedule   offences   or   even   the Enforcement   Directorate,   Chennai.   In   view   of   the absence   of   any   bank   or   bank   officers   having   been identified,   it   was   necessary   for   the   Deputy   Director   to consider   the   absence   and/   or   non­identification   of   any bank   or   bank   officers.   Nothing   is   adduced   or   available on   record   as   to   which   banks   and   which   bank   officers are   involved,   who   have   unauthorizedly   converted demonetized   old   currency   into   new   currency.   The reasonable   belief   as   is   formed   by   the   Deputy   Director reveals that the vital aspect concerning the fact that no such   bank   or   bank   officers   are   existing   or   found   is  not considered   by   the   Deputy   Director   at   all.   The Reasonable   Belief   is   thus   impaired.   The   Reasonable Belief   formed   by   the   Deputy   Director   inter   alia   is   that the accused  persons have  laundered  their  unaccounted money   in   conspiring   with   the   bank   officials   of   various banks   who   helped   them   laundering   the   unaccounted money.   There   is   nothing   on   record   which   reveals   the name of even single bank, much less, the various banks as stated by  the Deputy  Director. Similarly not  a single bank official is identified or named and there is nothing on   record   which   reveals   any   such   detail.   Consequently the   Reasonable   Belief   becomes   baseless   and   is   mere speculation   of   the   Deputy   Director.   Such   a   belief   can not   be   justified   and   sustained.   The   aspect   concerning non­identification   and/   or   non­availability   of   any   bank and   bank   officials,   goes   to   the   root   of   the   formation   of the   entire   Reasonable   Belief.   The   Additional   Director/ Joint   Director/   Deputy   Director   ought   to   have   directed the   Enforcement   Directorate   Officers   to   investigate   or cause to be investigated the aspect concerning the bank or   bank   officers.   The   Deputy   Director   ought   to   have deliberated   on   the   issue   and   proceeded,   which   is   not done.   In   the   absence   of   such   basic   material   the Reasonable   Belief   entertained   by   the   Deputy   Director specifically   forming   the   Reasonable   Belief   that   the accused   laundered   their   unaccounted   money   in conspiring  with the bank officials of various banks who helped them in laundering the unaccounted money, can not be legally tenable. 16 The   Reasonable   Belief   of   the   Deputy   Director   further upon it’s analysis indicates that the Deputy Director has entertained   the   Reasonable   Belief   as   stated   in   para   21, 26   &   27   of   the   Provisional   Attachment   Order,   only   in respect   of   a   part   of   the   seized   amount   of   Rs. 334792000/­,   without   specifying   as   to   what   quantum and   as   to   what   part   of   the   seized   amount   of   Rs. 334792000/­   in   the   form   of   movable   properties   is related to the schedule offences. The   formation   of   the   Reasonable   Belief   only   for   part   of the   seized   amount   and   yet   proceeding   to   attach   the entire   seized   amount   vitiates   the   entire   Reasonable Belief   and   renders   it   as   illegal.   It   is   seen   from   the Reasonable Belief that such an exercise was not carried out by the Deputy Director. The   reasonable   belief   formed   by   the   Deputy   Director that the new currency, which were seized by the Income Tax Authorities are nothing but the currency received in lieu   of   exchange   of   old   currency   notes   (demonetized currency)   inclusive   of   commission   for   such   exchange received   by   S/  Shri  J.   Sekar   Reddy,   M.   Premkumar,   S. Srinivaslu, S. Ramachandran & K. Rethinam, is neither based on any specified material nor is justified.  It   is   therefore,   concluded   that   the   reasonable   belief formed by  the Deputy Director  in this regard cannot  be sustained,   the   same   having   been   not   based   on   any specifically   material   and   the   same   is   merely   surmises, conjectures and speculation.  Considering   the   material   in   O.C.,   the   written   replies/ additional written reply/ submissions of the Defendants and   the   arguments   above   referred,   I   find   that   the property   provisionally   attached   by   PAO   No.   14/2017 dated   12.06.2017,   i.e.   49,480   kgs   of   gold   valued   of   Rs. 13,96,88,246   mentioned   in   para   22   of   PAO(para   1   of this order) is not involved in money laundering.   ” 17. In the said sequel of facts, the legal position emerges by   the   judgment   of   Radheshyam   Kejriwal   (supra)   is 17 relevant in which this Court has culled out the ratio of the various other decisions pertaining to the issue involved and has observed as thus: “ 12 After referring to various judgments, this Court then culled   out   the   ratio   of   those   decisions   in   para   38   as follows: (Radheshyam Kejriwal Case) 38.   The   ratio   which   can   be   culled   out   from   these decisions can broadly be stated as follows: (i)   Adjudication   proceedings   and   criminal prosecution   can   be   launched simultaneously; (ii)   Decision   in   adjudication   proceedings   is not   necessary   before   initiating   criminal prosecution; (iii)   Adjudication   proceedings   and   criminal proceedings are independent in nature to each other; (iv)   The   finding   against   the   person   facing prosecution   in   the   adjudication proceedings   is   not   binding   on   the proceeding for criminal prosecution; (v)   Adjudication   proceedings   by   the Enforcement   Directorate   is   not prosecution   by   a   competent   court   of   law to attract the provisions of Article 20(2) of the   Constitution   or   Section   300   of   the Code of Criminal Procedure; (vi)   The   finding   in   the   adjudication proceedings   in   favour   of   the   person facing   trial   for   identical   violation   will depend  upon the nature of finding. If the exoneration   in   adjudication   proceedings is   on   technical   ground   and   not   on   merit, prosecution may continue; and (vii)   In   case   of   exoneration,   however,   on merits where the allegation is found to be not   sustainable   at   all   and   the   person held innocent, criminal prosecution on the same   set   of   facts   and   circumstances 18 cannot   be   allowed   to   continue,   the underlying   principle   being   the   higher standard of proof in criminal cases.” 13. It finally concluded: (Radheshyam Kejriwal case   “39.   In   our   opinion,   therefore,   the   yardstick would be to judge as to whether the allegation in the adjudication proceedings as well as the proceeding for prosecution is identical and the exoneration   of   the   person   concerned   in   the adjudication proceedings is on merits. In case it   is   found   on   merit   that   there   is   no contravention   of   the   provisions   of   the   Act   in the   adjudication   proceedings,   the   trial   of   the person   concerned   shall   be   an   abuse   of   the process of the court. 14 .  From our point of view, para 38(vii) is important and   if   the   High   Court   has   bothered   to   apply   this parameter,   then   on   a   reading   of   the   CVC   report   on the   same   facts,   the   appellant   should   have   been exonerated.” In   the   case   of   Ashoo   Surendranath   Tewari   (supra),   this Court   relied   upon   the   judgment   of   Radheyshyam Kejriwal   (supra)   and   set­aside   the   judgment   of   the   High Court while exonerating the appellants because the chance of conviction in a criminal case in the  same facts appeared to be bleak. 18. In   view   of   the   aforesaid   legal   position   and   on analysing   the   report   of   I.T.   Department   and   the   reasoning given by CBI while submitting the final closure report in RC 19 MA1 2016 A0040 and the order passed by the Adjudicating Authority,   it   is   clear   that   for  proceeds   of  crime,   as   defined under Section 2(1)(u) of PMLA, the property seized would be relevant and its possession with recovery and claim thereto must   be   innocent.       In   the   present   case,   the   schedule offence has not been made out because of lack of evidence. The   Adjudicating   Authority,   at   the   time   of   refusing   to continue   the   order   of   attachment   under   PMLA,   was   of   the opinion   that   the   record   regarding   banks   and   its   officials who may be involved, is not on record.   Therefore, for lack of identity of the source of collected money, it could not  be reasonably   believed   by   the   Deputy   Director   (ED)   that   the unaccounted   money   is   connected   with   the   commission   of offence under  PMLA.   Simultaneously, the letter  of the I.T. Department   dated   16.5.2019   and     the   details     as mentioned, makes it clear that for the currency seized, the tax is already paid, therefore, it is not the quantum  earned and   used   for   money   laundering.     In   our   opinion,   even   in cases   of   PMLA,   the   Court   cannot   proceed   on   the   basis   of preponderance   of   probabilities.     On   perusal   of   the 20 statement   of   Objects   and   Reasons   specified   in   PMLA,   it   is the   stringent   law   brought   by   Parliament   to   check   money laundering.     Thus,     the   allegation   must   be   proved   beyond reasonable   doubt   in   the   Court.   Even   otherwise,   it   is incumbent   upon   the   Court   to   look   into   the   allegation   and the   material   collected   in   support   thereto   and   to   find   out whether   the   prima   facie   offence   is   made   out.     Unless   the allegations are substantiated by the authorities and proved against a person in the court of law, the person is innocent. In   the   said   backdrop,   the   ratio   of   the   judgment   of Radheshyam   Kejriwal   (supra)   in   paragraph   38   (vi)   and (vii)  aptly applicable in the facts of the present case.  19. As discussed above, looking to the facts of this case, it   is   clear   by   a   detailed   order   of   acceptance   of   the   closure report of the schedule offence in RC MA1 2016 A0040 and the   quashment   of   two   FIRs   by   the   High   Court   of   the schedule   offence   and   of   the   letter   dated   16.5.2019   of   I.T. Department   and   also   the   observations   made   by   the Adjudicating   Authority   in   the   order   dated   25.2.2019,   the evidence  of continuation  of  offence in  ECR CEZO  19/2016 21 is  not   sufficient.  The   Department   itself   is  unable   to   collect any   incriminating   material   and   also   not   produced   before this Court even after a lapse of 5 ½  years to prove its case beyond   reasonable   doubt.     From   the   material   collected   by the   Agency,   they   themselves   are   prima   facie   not   satisfied that   the   offence   under   PMLA   can   be   proved   beyond reasonable   doubt.       The   argument   advanced   by   learned ASG regarding pendency of the appeal against the order of Adjudicating   Authority   is   also   of   no   help   because   against the   order   of   the   Appellate   Authority   also,   remedies   are available.     Thus,   looking   to   the   facts   as   discussed hereinabove and the ratio of the judgments of this Court in Radheshyam Kejriwal   (supra) and   Ashoo Surendranath Tewari  (supra), the chance to prove the allegations even for the   purpose   of   provisions   of   PMLA   in   the   Court   are   bleak. Therefore,     we   are   of   the   firm   opinion   that   the   chances   to prove   those   allegations   in   the   Court   are   very   bleak.   It   is trite   to   say,     till   the   allegations   are   proved,   the   appellant would be innocent. The High Court by the  impugned order has   recorded   the   finding   without   due   consideration   of   the 22 letter   of   the   I.T.   Department   and   other   material   in   right perspective.     Therefore,   in   our   view,   these   findings     of   the High Court cannot be sustained.  20. Accordingly, we set­aside the impugned order passed by   the   High   Court.     Consequently,   this   appeal   is   allowed. ECR   CEZO   19/2016   including   Complaint   bearing   No.   2   of 2017 stands quashed.  ………………………….J. [ VINEET SARAN ] ……………………………J. NEW DELHI ; [ J.K. MAHESHWARI ] MAY 5, 2022. 23