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New Delhi: Arguably a first, a special court last week refused to take cognisance of a prosecution complaint (equivalent to a charge sheet) filed by the Enforcement Directorate (ED) in a money laundering case despite the conviction of the accused in the scheduled offence filed by the CBI The court refused to take cognisance of ED's prosecution complaint against M/s Rathi Steel and its top executives, who were booked by ED under the Prevention of Money Laundering Act (PMLA) in connection with a coal allocation case . The said allocation was made in Chhattisgarh to the company in August 2008. The court also ordered that all properties attached by ED be detached.It is pertinent to mention that all the accused named in ED's prosecution complaint had earlier been convicted by a special CBI judge for cheating and criminal conspiracy and were sentenced to three years of rigorous imprisonment in 2016. ED had alleged that the letter of allocation of coal block received by M/s Rathi Steel constituted proceeds of crime, as it had been obtained by overstating the land in possession of the company in the feedback form. ED further contended that ₹3.08 crore, received by M/s Rathi Steel & Power Ltd from the issue of shares pursuant to its disclosure of having a letter of allocation issued in its favour in its annual report, also constituted proceeds of crime. Appearing on behalf of M/s Rathi Steel and the other respondents, advocate Vijay Aggarwal, citing a Supreme Court judgement, contended that the allocation letter was merely a grant of largesse.Aggarwal argued that if the letter of allocation itself were to be termed "proceeds of crime," it would obliterate the distinction between the scheduled offence and offence of money laundering, and money laundering would cease to be an independent and distinct offence. He contended that no financial gain or property had been derived through allocation letter, as no coal had been extracted and even a mining lease had not been executed.Finding merit in these contentions, the court ruled that the company, having not obtained any direct financial benefit or economic gain from the allocation letter, could not be prosecuted under PMLA, as the valuable right associated with the allocation letter had not been converted into financial or commercial gains by obtaining a mining lease and extracting coal. On the aspect of the ₹3.08 crore being proceeds of crime, the court held that the ED does not possess jurisdiction to treat every subsequent commercial transaction of an accused as "proceeds of crime" in the absence of a demonstrable nexus with the scheduled offence, and that not every transaction by an accused after the commission of the scheduled offence can be termed proceeds of crime.