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. 1. ISSUES PRESENTED AND CONSIDERED (i) Whether prior sanction under Section 197(1) of the Code of Criminal Procedure was mandatory for taking cognizance of offences under Sections 3 and 4 of the Prevention of Money Laundering Act, 2002, on the allegations made against a public servant. (ii) Whether, on the nature of allegations (defalcation/siphoning of State funds and accumulation of ill-gotten wealth), the impugned acts could be treated as acts 'while acting or purporting to act in the discharge of official duty' so as to attract the bar on cognizance without sanction. (iii) Whether taking cognizance without sanction, assuming sanction is required, necessarily vitiates the cognizance order, given the Court's view on the stage at which sanction issues may be raised/obtained. 2. ISSUE-WISE DETAILED ANALYSIS Issue (i)-(ii): Applicability of Section 197(1) CrPC sanction to cognizance for PMLA offences against a public servant Legal framework (as discussed by the Court): The Court treated Section 197 CrPC as conferring protection only in respect of acts 'reasonably connected' with official duty, and not extending to personal illegal acts. The Court also proceeded on the premise that the petitioner was a public servant but emphasized that sanction is not a device for 'shielding corrupt officials.' Interpretation and reasoning: Applying the 'reasonable connection' test, the Court held that 'accumulating ill-gotten wealth by siphoning State funds' cannot be regarded as part of any public servant's official duty. On the pleaded facts, the Court considered that the petitioner allegedly sanctioned funds for development projects without being authorized and allegedly accumulated unaccounted money. Such conduct was characterized as personal illegal activity lacking nexus with legitimate official functions. Therefore, the Court concluded that Section 197 protection is confined to official-duty-linked acts (including excess in performance having reasonable connection), but does not cover corruption/illegal enrichment even if committed while holding office. Conclusion: The Court concluded that, on the allegations examined, prior sanction under Section 197(1) CrPC was not required because the alleged acts were not reasonably connected with discharge of official duty. Issue (iii): Effect of absence of sanction on cognizance and stage for raising/obtaining sanction Legal framework (as discussed by the Court): The Court held that the question of sanction under Section 197 CrPC may be raised before the trial court 'at any stage of the proceedings,' depending on the nature of evidence led during trial, and further observed that sanction can be obtained at any stage before pronouncement of judgment. Interpretation and reasoning: The Court reasoned that because sanction issues can be examined later based on trial evidence, absence of sanction at the cognizance stage does not automatically invalidate cognizance in the present circumstances. This was tied to the Court's view that sanction is meant for acts connected with official duty and not for personal illegal acts; hence, cognizance without sanction was not treated as fatal here. Conclusion: The Court held that cognizance taken without sanction in the present case would not vitiate the cognizance order, and therefore refused to quash it and dismissed the writ petition.