2025 (7) TMI 1459 - HC - Money Laundering

Proceedings under PMLA Quashed for Violating Section 223(1) BNSS's Pre-Cognizance Hearing Requirement

The HC quashed the proceedings under the PMLA against the petitioners, holding that taking cognizance without affording a pre-cognizance hearing, as ... Money Laundering - cognizance of offences under Sections 3 and 4, read with Section 70 of the PMLA against each of the petitioners - seeking quashing of the proceedings initiated in connection with the complaint - violation of the First Proviso to Section 223 of the Bhartiya Nagarik Suraksha Sanhita, 2023 - absence of the words “including any complaint filed by a person authorised under Special Law”, as enumerated in Section 210 (1) (a) of the BNSS - burden to show “prejudice” and “miscarriage of justice” to vitiate an order taking cognizance - complaints under the PMLA are in the nature of charge sheets and not “complaints” under Sections 210 and 223 of the BNSS - concessions given by the ED and divergent stands taken by it in previous cases can be taken note of while deciding the issues involved or not. Whether violation of the first proviso to Section 223, BNSS vitiates the order of taking cognizance and consequential proceedings? - HELD THAT:- The “procedure established in law” concerned in the present case is the power of the jurisdictional Magistrate to take cognizance of an offence, which sets the ball rolling for a criminal investigation and trial to be initiated. Such power, however, is circumscribed by the right of hearing ensured by the first proviso to Section 223(1) of the BNSS. Thus, on a proper reading of Article 21, the personal liberty of a person cannot be curtailed or deprived except according to the procedure established by law which, in the present case, includes giving the accused an opportunity of being heard before taking cognizance of an offence allegedly committed by him. As such, it would be a rampant violation of Article 21 itself if cognizance is taken, obviously resulting in the initiation of a criminal proceeding which directly affects the personal liberty of the accused, without giving the accused his opportunity of hearing. Section 24 of the PMLA imposes a reverse burden on the accused to prove innocence, which is counter-intuitive to criminal jurisprudence in India. As held in Baldev Singh (State of Punjab v. Baldev Singh, [1999 (7) TMI 630 - SUPREME COURT] “the severer the punishment, the greater has to be the care taken to see that all safeguards provided in a statute are scrupulously followed”. Hence, it is all the more necessary to put the right of hearing afforded to the accused under the first proviso to Section 223(1) of the BNSS, which is obviously a progressive piece of legislation keeping in view the transition of criminal jurisprudence from a retributive to a reformative regime, on its proper pedestal of a mandatory pre-requisite of cognizance under Section 210, BNSS. Thus, the negation of such right altogether cannot be relegated to a mere irregularity, the compliance of which would not affect the cognizance itself and, consequentially, the resultant proceedings. This issue is answered in the affirmative, holding that the denial of opportunity of hearing to the accused persons/petitioners prior to taking cognizance under Section 210, BNSS, is fatal to such cognizance and vitiates the order of cognizance itself, along with the subsequent proceedings undertaken in pursuance thereof. Whether absence of the words “including any complaint filed by a person authorised under Special Law”, as enumerated in Section 210 (1) (a) of the BNSS, in Section 223, BNSS excludes operation of the first proviso to Section 223 to cognizance in respect of such complaints? - HELD THAT:- Section 210 in its entirety, including the newly introduced provisions therein, are circumscribed in a sweeping manner by the modalities prescribed in Section 223. Hence, the first proviso to Section 223, along with all other provisions of the said Section, would be applicable to Section 210 as a whole, in its new Avatar as well - Section 223(1) has two distinct components-examination upon oath of the complainants and witnesses present and reducing the substance thereof to writing signed by the complainants and the witnesses on the one hand, and giving an opportunity of hearing to the accused on the other. While the second proviso to Section 223 remains as it was in the Cr.P.C. and carves out an exception regarding the examination of the complainant and the witnesses in certain cases, no corresponding exception has been provided in Section 223 with regard to opportunity of hearing to the accused, in case of complaints under special statutes. Thus, by its very omission, the legislative intent is manifested to the effect that no relaxation regarding opportunity of evidence being given to an accused, as provided under the first proviso to Section 223(1), BNSS has been sought to be read into Section 223 with regard to complaints under special laws. The absence of the words “including any complaint filed by a person authorised under any Special Law” in Section 223 of the BNSS does not have the impact of exclusion of the operation of the first proviso to Section 223(1) in respect of complaints under Special Laws - this issue is held in the negative. Whether the accused has a burden to show “prejudice” and “miscarriage of justice” to vitiate an order taking cognizance on the ground of depriving the accused of pre-cognizance opportunity of hearing? - HELD THAT:- The right of hearing prior to cognizance, being a necessary incident of the maxim Audi Alteram Partem, which is a cardinal tenet of natural justice and a part and parcel of the right to life and personal liberty, is self-effulgent and need not be illumined by the further borrowed light of “prejudice” or “miscarriage of justice” - Section 65, read with Section 46 of the PMLA, make it abundantly clear that the provisions of the Criminal Procedure Code are applicable to all proceedings before Special Courts under the PMLA. Vide Notification No. S.O. 2790 (E) dated July 16, 2024, the provisions of the BNSS have replaced the Cr.P.C. in the said Sections. Thus, there cannot be any manner of doubt that if the mandatory provision of the first proviso to Section 223(1) of BNSS is violated, in view of the negative language in which the said proviso is couched, the cognizance itself becomes a nullity and is patently vitiated. This court is of the firm view that the denial of the right of prior hearing, as enumerated in the first proviso to Section 223 of the BNSS, is sufficient to vitiate the order taking cognizance, without any further requirement on the part of the accused to prove prejudice and/or miscarriage of justice. In fact, the very denial of the right constitutes the prejudice and miscarriage of justice. Whether complaints under the PMLA are in the nature of charge sheets and not “complaints” under Sections 210 and 223 of the BNSS? - HELD THAT:- A bare perusal of Section 46(1), read in conjunction with Section 65, of PMLA indicates that the provisions of the Cr.P.C. shall be applicable to proceedings before the Special Court and to all other proceedings under the PMLA. Vide Notification No. S.O. 2790 (E) dated July 16, 2024, the provisions of the BNSS have been introduced in place of Cr.P.C. Thus, it is the provisions of the BNSS which govern the criminal proceedings in respect of the PMLA as well as the Special Courts constituted thereunder. Section 44(1)(b) of the PMLA provides that a Special Court may, upon a complaint being made by an authority authorised in this behalf under the PMLA, take cognizance of an offence under Section 3 without the accused being committed to it for trial. Thus, the power of a Special Court to take cognizance, conferred under Section 44(1)(b), is circumscribed by Sections 46 and 65 of the PMLA, which enable the applicability of BNSS to such cognizance. The said principle has also been reiterated in Yash Tuteja [2024 (5) TMI 468 - SUPREME COURT] and Tarsem Lal [2024 (5) TMI 837 - SUPREME COURT]. It is to be noted that Section 44(1)(b) of the PMLA uses the expression “complaint”. Where the Legislature consciously uses a particular word, the same, unless there is anything to militate against the same in any other law or elsewhere in the same law, has to be read in the sense as used in the statute. In the event the law-makers were of the intention to treat the complaint under the PMLA to be a charge sheet, they would specifically provide so in the Act itself. Having not done so, a “complaint” has to be read as precisely that, within the contemplation of the PMLA and not as a charge sheet. In fact, the process of investigation and subsequent trial is initiated only upon such cognizance being taken by a Special Court - this issue is also decided in against the ED and in favour of the petitioners. Whether the concessions given by the ED and divergent stands taken by it in previous cases can be taken note of while deciding the issues involved herein? - HELD THAT:- On a more fundamental premise, it is trite law that counsel’s concession on law cannot be treated to be binding on the parties and their cannot be admission against the law. The question which has arisen before this Court is one of legal interpretation of a statute. No amount of admission by any of the parties, either way, can be a relevant factor in such interpretation - Thus, the apparently contradictory stand taken by the ED before different courts is not a germane factor in the present adjudication and, thus, a non-issue. Hence, such divergence of stands taken by the ED before different forums/courts is hereby held to be immaterial for the present purpose. The impugned order dated February 15, 2025, taking cognizance of the offences made out in the complaints against the petitioners under the PMLA, being patently violative of the first proviso to Section 223(1), BNSS, since no pre-cognizance opportunity of hearing was given to the petitioners, is vitiated in law and a nullity in the eye of law - Petition allowed. ISSUES: Whether violation of the first proviso to Section 223(1) of the Bhartiya Nagarik Suraksha Sanhita, 2023 (BNSS) vitiates the order of taking cognizance and consequential proceedings.Whether the absence of the words 'including any complaint filed by a person authorised under Special Law' in Section 223, BNSS excludes the operation of the first proviso to Section 223 to cognizance in respect of such complaints.Whether the accused bears the burden to show 'prejudice' and 'miscarriage of justice' to vitiate an order taking cognizance on the ground of depriving the accused of a pre-cognizance opportunity of hearing.Whether complaints under the Prevention of Money-Laundering Act, 2002 (PMLA) are in the nature of charge sheets and not 'complaints' under Sections 210 and 223 of the BNSS.Whether concessions given by the Enforcement Directorate (ED) and divergent stands taken by it in previous cases can be taken note of while deciding the issues involved. RULINGS / HOLDINGS: The denial of opportunity of hearing to the accused prior to taking cognizance under Section 210, BNSS, in violation of the first proviso to Section 223(1), BNSS, is fatal and vitiates the order of cognizance as well as subsequent proceedings; such non-compliance is not a mere irregularity but an incurable illegality.The absence of the phrase 'including any complaint filed by a person authorised under Special Law' in Section 223, BNSS does not exclude the operation of the first proviso to Section 223(1) in respect of complaints under Special Laws; the first proviso applies to such complaints.The accused is not required to demonstrate 'prejudice' or 'miscarriage of justice' to vitiate cognizance taken without affording the pre-cognizance opportunity of hearing; the right to hearing is a substantive right and its denial itself constitutes prejudice and miscarriage of justice.Complaints under the PMLA are to be treated as 'complaints' within the meaning of Sections 210 and 223 of the BNSS and not as charge sheets; the PMLA does not treat such complaints as charge sheets, and the procedural provisions of BNSS apply accordingly.Concessions made by the ED or divergent stands taken by it before different courts, including consent orders, are not binding precedents and are immaterial for statutory interpretation; counsel's concessions cannot override legal interpretation. RATIONALE: The Court applied the statutory framework of the BNSS, particularly Sections 210 and 223, which govern the power and procedure for taking cognizance of offences, emphasizing that Section 223 circumscribes Section 210 and mandates a pre-cognizance hearing as a mandatory procedural safeguard.The Court relied on constitutional principles under Article 21, holding that deprivation of personal liberty must be 'according to procedure established by law,' which includes the right to be heard before cognizance is taken, reflecting the principle of audi alteram partem embedded in natural justice.Precedents from the Supreme Court, including Kushal Kumar Agarwal v. Directorate of Enforcement and related judgments, were applied to affirm that complaints under the PMLA are subject to procedural safeguards under the BNSS and that non-compliance with mandatory provisions vitiates cognizance.The Court distinguished between 'empowerment' of Magistrates under Section 210 and procedural requirements under Section 223, clarifying that Section 506(e) BNSS, which mitigates irregularities relating to lack of authority, does not apply to non-compliance with the first proviso to Section 223.The Court rejected the ED's argument that prejudice must be shown, holding that the right to pre-cognizance hearing is substantive and mandatory, and that denial of such right itself constitutes prejudice and miscarriage of justice.The Court noted the legislative intent to balance the authority to take cognizance under special laws with safeguards against abuse by introducing the first proviso to Section 223 simultaneously with amendments to Section 210, thereby applying the hearing requirement to complaints under special laws like the PMLA.Regarding conflicting stands by the ED, the Court referenced the principle that consent orders and counsel's concessions are not binding precedents and cannot alter statutory interpretation or constitutional mandates.The Court emphasized the severity of PMLA offences and the reverse burden on the accused, underscoring the necessity of strict compliance with procedural safeguards to protect fundamental rights.