2013 (9) TMI 1144 - HC - Money Laundering

Validity of Enforcement Directorate's Summons Upheld under Money-Laundering Act

M. Shobana, M. Senthamarai and A. Valluvan Versus Assistant Director, Directorate of Enforcement

M. Shobana, M. Senthamarai and A. Valluvan Versus Assistant Director, Directorate of Enforcement - TMI Issues Involved:1. Legality of the summons issued by the Directorate of Enforcement under the Prevention of Money-Laundering Act, 2002.2. The applicability of Article 20(3) of the Constitution of India regarding the right against self-incrimination.3. The concept of double jeopardy under Article 20(2) of the Constitution of India.4. The jurisdiction and authority of the Directorate of Enforcement in conducting investigations under the Prevention of Money-Laundering Act, 2002.5. The impact of pending criminal proceedings and compounding applications on the summons issued under the Prevention of Money-Laundering Act, 2002.Detailed Analysis:1. Legality of the Summons Issued by the Directorate of Enforcement:The Petitioners challenged the summons issued by the Directorate of Enforcement dated 10.04.2013, requiring them to appear for investigation under Section 50(2) and (3) of the Prevention of Money-Laundering Act, 2002. The court noted that the summons were issued for gathering evidence to ascertain the proceeds of crime involved in money laundering. The summons were deemed to be judicial proceedings within the meaning of Section 193 and 228 of the Indian Penal Code. The court found that the issuance of summons was within the competence of the Directorate of Enforcement and was a preliminary step in the investigation process.2. Applicability of Article 20(3) of the Constitution of India:The Petitioners argued that the summons violated their right against self-incrimination under Article 20(3) of the Constitution of India. They contended that being forced to give statements before the Directorate of Enforcement would restrict their rights. However, the court referred to precedents, including the decision in Poolpandi v. Superintendent, Central Excise, where it was held that the protection under Article 20(3) does not extend to proceedings under statutes like the Customs Act. The court concluded that the summons did not violate Article 20(3) as the proceedings were not criminal in nature but administrative and investigative.3. Concept of Double Jeopardy under Article 20(2) of the Constitution of India:The Petitioners claimed that the summons amounted to double jeopardy, as they were already facing criminal charges under Sections 419 and 420 IPC. The court clarified that the proceedings under the Prevention of Money-Laundering Act are independent of the criminal proceedings and are aimed at tracing and attaching the proceeds of crime. The court cited the decision in Director of Enforcement v. M/s. MCTM Corporation Private Limited, where it was held that adjudication under FERA does not constitute a criminal prosecution. Therefore, the plea of double jeopardy was not applicable.4. Jurisdiction and Authority of the Directorate of Enforcement:The court emphasized that the Directorate of Enforcement is the authorized agency to investigate offences under the Prevention of Money-Laundering Act. The objective of the Act is to prevent money laundering and to provide for the attachment and confiscation of property derived from or involved in money laundering. The court noted that the Directorate of Enforcement had the authority to issue summons and conduct investigations independently of the criminal proceedings.5. Impact of Pending Criminal Proceedings and Compounding Applications:The Petitioners argued that the summons were premature as the criminal proceedings were still pending, and a compounding application was filed. The court observed that the compounding of offences under Section 320 of Cr.P.C. does not affect the independent investigation under the Prevention of Money-Laundering Act. The court also noted that the Hon'ble Supreme Court had stayed the further investigation by CBCID but had not stayed the investigation under the Prevention of Money-Laundering Act. Therefore, the summons issued by the Directorate of Enforcement were valid and not affected by the pending criminal proceedings or compounding applications.Final Disposition:The court dismissed the writ petitions, holding that the summons issued by the Directorate of Enforcement were valid and within their jurisdiction. The proceedings under the Prevention of Money-Laundering Act are independent and aimed at tracing and attaching the proceeds of crime. The plea of double jeopardy and violation of Article 20(3) of the Constitution of India were not applicable. The court also dismissed the application for impleading M/s. Al Tirven Steels Limited as a respondent.