Money laundering by persons in power erodes public confidence: SC dismisses ex-Gujarat IAS officer’s plea

Noting that money laundering by those in power eroded public confidence in governance and led to systemic vulnerabilities in financial institutions, the Supreme Court on Monday dismissed former Gujarat IAS officer Pradeep Sharma’s plea seeking quashing of charges in cases probed by the Enforcement Directorate.

“The alleged offences in the present case have a direct bearing on the economy, as illicit financial transactions deprive the state of legitimate revenue, distort market integrity, and contribute to economic instability. Such acts, when committed by persons in positions of power, erode public confidence in governance and lead to systemic vulnerabilities within financial institutions,” a Bench of Justices Vikram Nath and P B Varale said, dismissing Sharma’s petition.

Sharma had challenged the Gujarat High Court’s March 14, 2023, order dismissing his criminal revision application and refusing to quash the trial court’s order rejecting his discharge plea in a money laundering case under the Prevention of Money Laundering Act, 2002.

“It is evident that the appellant (Sharma) has failed to establish any legally sustainable ground warranting interference by this Court at a pre-trial stage. The submissions made in support of the appeal are neither legally untenable nor in the best interest of justice,”

Writing the judgment for the Bench, Justice Nath said, “The offence alleged against the appellant is clearly a continuing offence under the PMLA, and the quantum of proceeds of crime involved far exceeds the   statutory threshold and requires proper investigation and judicial scrutiny. The findings of the Courts below are well-reasoned and do not call for interference.”

It also dismissed Sharma’s plea seeking a preliminary inquiry into the multiple corruption cases filed against him by Gujarat Police.

Noting that money laundering had far-reaching consequences, not only in terms of individual acts of corruption but also in causing significant loss to the public exchequer, the Bench said, “The PMLA was enacted to combat the menace of money laundering and to curb the use of proceeds of crime in the formal economy. Given the evolving complexity of financial crimes, courts must adopt a strict approach in matters concerning economic offences to ensure that perpetrators do not exploit procedural loopholes to evade justice.”

The Bench said the case involved grave allegations of financial misconduct, misuse of position, and involvement in transactions constituting money laundering.

“The appellant seeks an end to the proceedings at a preliminary stage, effectively preventing the full adjudication of facts and evidence before the competent forum. However, as established in multiple judicial pronouncements, cases involving economic offences necessitate a thorough trial to unearth the complete chain of events, financial transactions, and culpability of the accused,” it said.

From the material placed by the federal probe agency, coupled with the broad legislative framework of the PMLA, the Bench found the necessity to allow the trial to proceed and not discharge the appellant at the nascent stage of framing of charges.

“The argument that the proceedings are unwarranted is devoid of substance in light of the statutory objectives, the continuing nature of the offence, and the significant financial implications arising from the alleged acts. Discharging the appellant at this stage would be premature and contrary to the principles governing the prosecution in money laundering cases,” the verdict said.

Given the severe and grave nature of the allegations against the appellant, the court said, it was imperative that he must undergo thorough judicial scrutiny during trial.

“A proper trial is necessary to unearth the full extent of the offence, to evaluate the evidence produced by the appellant, to analyse the complete chain of final transactions, and find out the veracity of the severe allegations and the amount of proceeds of crime. The legal framework under the PMLA serves as a crucial mechanism to ensure that individuals involved in laundering proceeds of crime are brought to justice and that economic offences do not go unpunished,” the bench said.

From the materials on record it was evident that Sharma failed to establish any legally sustainable ground warranting interference at a pre-trial stage, it said.

“The offence alleged against the appellant is clearly a continuing offence under the PMLA, and the quantum of proceeds of crime involved far exceeds the statutory threshold and requires proper investigation and judicial scrutiny. The findings of the courts below are well reasoned and do not call for interference,” it held.