Civil settlements and asset disbursement to victims do not terminate or dilute independent criminal prosecution.

The Appellant challenged an order dated 17th September 2019 passed by the Appellate Tribunal (PMLA), which directed the Appellant to furnish an indemnity bond for Rs. 1095,27,17,055/- and an undertaking to deposit said amount if attached properties were found to be "proceeds of crime" at the conclusion of the trial.

Upon compliance, the Tribunal ordered the quashing of provisional attachments on the Appellant's movable properties (DEMAT accounts and bonds).

The Directorate of Enforcement (ED) cross-appealed against the lifting of these attachments.

During the proceedings, the National Company Law Tribunal (NCLT) sanctioned a settlement scheme for investors of the National Spot Exchange Limited (NSEL) and appointed a Monitoring Authority for fund distribution.

The NCLT order explicitly stated that the scheme would not override existing attachment orders or terminate pending criminal proceedings.

1. Whether a settlement scheme approved by a civil/quasi-judicial body (NCLT) can include covenants for the quashing or compounding of serious criminal proceedings.

2. Whether the release of attached assets for disbursement to victims/investors operates as a dilution of criminal charges against the accused under the PMLA.

The court relied on the provisions of the Prevention of Money Laundering Act, 2002 (PMLA) regarding the attachment of "proceeds of crime".

It applied the doctrine of separation of jurisdictions, holding that a Civil Court (NCLT) lacks the competence to determine or dilute the consequences of criminal prosecution through a consent-based scheme of arrangement.

The court emphasized the principle that serious criminal offences are matters of public interest and must be adjudicated to their logical conclusion by a competent Criminal Court regardless of private settlements.

The court examined Clause 24.6 of the proposed Settlement Scheme, which required parties to jointly apply for the quashing or discharge of criminal proceedings following a "Settlement Trigger".

The court rejected this clause, characterizing it as an indirect attempt by the accused to secure exoneration from serious allegations of fraud.

It reasoned that the NCLT's sanction of a civil settlement cannot override the statutory mandate of criminal law.

While the court recognized the need to provide relief to thousands of duped investors through the disbursement of funds, it clarified that the mechanism of settlement between parties cannot be used to bypass the criminal justice system.

The court concluded that criminal liability remains independent of asset distribution or civil restitution.

However, it held that the lifting of attachments for the purpose of disbursement shall in no manner be construed as a dilution or termination of criminal charges.

The court directed that criminal prosecutions must proceed independently and be concluded expeditiously by the relevant agencies.

All connected appeals and applications were disposed of in terms of these clarifications.