2025 (12) TMI 1737 - HC - Money Laundering

Money-laundering charges over siphoning public funds by a public servant: no s.197 CrPC sanction needed at cognizance stage.

Cognizance for offences under ss. 3 and 4 PMLA was challenged on the ground that prior sanction under s. 197 CrPC was mandatory for prosecuting a public ... Money Laundering - cognizance of the offences u/s 3 and 4 of the PMLA, 2002 was taken without adhering to the mandatory requirement of sanction u/s 197 of the Code of Criminal Procedure, 1973 corresponding to Section 218 of the Bharatiya Nagarik Suraksha Sanhita, 2023 - HELD THAT:- Section 197 of the Code of Criminal Procedure gives protection to public servants employed in the Central Government or the State Government, protecting them from vexatious criminal proceeding while acting as public servants. By various judicial pronouncements, protection has been extended to any act which exceeds their official duty while officiating as a public servant. If there is reasonable connection between the act and the performance of their official duty any excess will not be sufficient ground to deprive the public servants from protection conferred under section 197(1) of the Code of Criminal Procedure. However, accumulating ill-gotten wealth by siphoning State funds cannot be said to be part of official duty of any public servant. From the facts of the present case, it can be said that the petitioner Pooja Singhal had sanctioned funds for different development projects which she was not authorized to do so and in turn, she has accumulated ill-gotten money. Prima facie, as per the case of the Respondents, she has not been able to account for the money which has been recovered or attributed to have been recovered from her or her associates. Sanction under section 197 of the Code of Criminal Procedure is only for the acts reasonably connected to official duty, not personal illegal acts even if done by the public servants. Sanction under section 197 of the Code of Criminal Procedure is not for shielding corrupt officials. In the case of Gurmeet Kaur versus Devendra Gupta [2024 (7) TMI 414 - DELHI HIGH COURT], the Hon’ble Supreme Court has held that guiding principle governing the necessity of prior sanction stands well crystalized. Pivotal inquiry is that whether the impugned act is reasonably connected to discharge of official duty. If the act is wholly unconnected or manifestly devoid of any nexus to official functions of the public servant, the requirement of sanction obviate. Conversely, whether there exists any reasonable link between the act complained of and the official duty of public servant, the protective umbrella of section 197 of the Code of Criminal Procedure and section 170 of the Police Act is attracted. In such cases, prior sanction assumes the character of sine qua non regardless of, whether public servant exceeds the scope of authority or acted improperly while discharging his duty. Whether the learned Special Judge should have taken cognizance after obtaining sanction for prosecution of the petitioner? - HELD THAT:- It is settled principle of law that the issue of sanction under section 197 of the Code of Criminal Procedure can be taken up before the learned Trial Court at any stage of the proceedings. It would depend on the nature of the evidence that the prosecution may lead in course of the trial. In fact, sanction can be obtained at any stage before the pronouncement of the judgment. Thus, taking of cognizance in the present case by the Special Court without sanction will not vitiate the cognizance order. Accordingly, this writ application is dismissed. Issues: Whether the cognizance taken by the Special Court under Section 3 punishable under Section 4 of the Prevention of Money Laundering Act, 2002 against a public servant without obtaining prior sanction under Section 197(1) of the Code of Criminal Procedure, 1973 vitiates the cognizance order.Analysis: Section 197(1) CrPC bars cognizance of offences allegedly committed by certain public servants while acting or purporting to act in discharge of official duty unless previous sanction is obtained; the protection applies where the act is directly and reasonably connected with official duty. Provisions of the PMLA (including Section 65 making CrPC provisions applicable and Section 71 dealing with overriding effect) require examination for inconsistency, but those CrPC provisions applicable to PMLA continue to operate. Judicial guidance establishes the 'reasonable connection' test: sanction is necessary where the alleged offence is reasonably connected to official functions; conversely, wholly personal or corrupt acts lacking nexus to official duty fall outside the protective ambit. Accumulation of ill-gotten wealth by siphoning state funds is manifestly unconnected with the discharge of official duty and thus not protected by Section 197. The availability of sanction can be tested and sought at any stage of proceedings, including prior to conviction.Conclusion: The objection to cognizance on ground of absence of prior sanction under Section 197(1) CrPC does not vitiate the cognizance in the present case; issue decided against the petitioner and in favour of the respondent.