TaxTMI 
TaxTMI 
2012 (5) TMI 240
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....amalinga Raju seeks (i) invalidation of sections 5(1), 8(1), 8(2), 8(3), 8(4), 23 and 24 of the Act ; (ii) a declaration that the provisional attachment order No. 1 of 2009 in ECIR No. 01/H20/2009, dated August 18, 2009 passed by the Deputy Director, Enforcement, Hyderabad (respondent No. 3), is arbitrary and illegal ; (iii) that the order dated January 14, 2010 passed by the adjudicating authority (respondent No. 4) in O. C. No. 38 of 2009 is arbitrary and illegal ; (iv) a declaration that the 4 respondent's direction to the petitioner to hand over possession of the attached properties is without jurisdiction and contrary to law and the Directorate of Enforcement (respondent No. 2) or any other officer is not entitled to take possession of the petitioner's properties ; (v) a declaration that the petitioner's properties sought to be attached by the impugned pro-visional attachment order (dated August 18, 2009) as confirmed by the impugned order (dated January 14, 2010) of the fourth respondent are free from attachment or encumbrance ; and (vi) for attendant reliefs. W. P. No 10769 of 2010 3. B. Teja Raju also s/o B. Ramalinga Raju seeks (i) invalidation of the same provisions....
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....he date of the hearing). A copy of the order dated November 20, 2009 was furnished to the several defendants including the petitioner on January 24, 2009. (D)The petitioner and some other defendants filed W. P. No. 27058 of 2009 challenging the adjudicating authority's notice dated September 15, 2009 and the order dated November 20, 2009. This court by the order dated December 1, 2009 in W. P. No. 25846 of 2009 (filed by another defendant) allowed the petitioner therein to appear before the adjudicating authority to seek information as to whether he was being proceeded against as one who committed an offence under section 3 of the Act or for being in possession of the proceeds of a crime. Consequent on this order the petitioner also applied to the adjudicating authority for relevant information. On December 7, 2009 the adjudicating authority informed all the defendants seeking information that they were being proceeded against for committing an offence under section 3 of the Act. (E)This court eventually disposed of the writ petition filed by the petitioner on December 10, 2009 on similar lines as other writ petitions directing that the proceedings before the adjudicating aut....
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.... a person may be attached under the section if an authorised officer has reason to believe that such property involved in money-laundering, if not immediately attached is likely to frustrate any proceedings under the Act. Section 5(1) is vague and confusing. While under the main provision [section 5(1)], "such property" is the property of a person charged of a scheduled offence ; the second proviso enables property of any person, and if involved in money-laundering, to be proceeded against. The term "involved in money-laundering" is vague and ambiguous. There is no indication as to the nature or degree of involvement required. It is not clear whether the liability runs with the property or is only in respect of property belonging to a person charged with committing a scheduled offence. The provision is also bereft of guidelines consistent and commensurate with the serious consequences that follow. The provision is therefore arbitrary and unconstitutional. The proviso to section 5(1) can be operated only from the date of coming into force of the provisions of the second Amendment Act. It cannot therefore apply against property acquired or possessed prior to enactment of this p....
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....of article 14. The impugned order of the adjudicating authority illustrates absence of focus and clarity as to what is adjudicated and decided upon ; on what criteria ; and under what procedure and application of standards of appreciation of evidence. The scheme of adjudication set out in section 8(1) to (3) being vague, unfair and diffused, is violative of article 14. Under the scheme of the Act even if a person is acquitted by the Special Court of the offence of money-laundering, the adjudicating authority's finding as to such person being involved in money-laundering and the involvement of such person in money-laundering would nonetheless stand undisturbed and such person would not have any recourse against orders of attachment and confiscation. The same consequence follows if the person is not even accused of or charged with the offence of money-laundering; and his guilt determined by improper standards of trial or proceedings and by an improper forum, is inflicted with punitive consequences. The provisions of the Act are thus arbitrary and offend articles 14, 21 and 300A of the Constitution. Section 8(4) of the Act as construed by the respondent authorities enables depri....
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....y its mind to whether there is substance in the complaint as to the commission of any scheduled offence, when and by whom the offence was allegedly committed. Since the adjudicating authority failed to deal with any of the submissions, contentions and arguments of the petitioner and other defendants ; since the order proceeds on generalisations, surmises and conjectures ; and the adjudicating authority erred in assuming and holding that it was not necessary to draw a conclusion as to the commission of an offence to consider adjudication under section 8 of the Act, the same is vitiated by an error in holding that the investigation by the CBI and the Directorate of Enforcement, are sufficient material to infer the commission of a scheduled offence as well as an offence under section 3 of the Act. The confirmation order is unsustainable for failure to consider whether determination of guilt as to commission of a scheduled offence ; whether for the purpose of punishment or for attachment and/or confiscation of property, must be predicated on the same standards of evidence "beyond reasonable doubt". 6. There are other and detailed challenges pleaded to the validity of the order of th....
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....as adverse impact on law and order maintenance. The provisions of the Act must therefore be interpreted consistently with the evil the provisions are intended to address ; (B)Money-laundering while facially appears to comprise one or more clear and simple financial transactions, involves and comprises a complex web of financial and other transactions. A money-laundering transaction usually involves three stages : (i)The placement stage : The malfeasant places the crime money into the normal financial system ; (ii)The layering stage : The money induced into the financial system is layered-spread out into several transactions within the financial system with a view to concealing the origin or original identity of the money and to make this origin/identity virtually disappear ; and (iii)The integration stage : The money is thereafter integrated into the financial system in such a way that its original association with crime is totally obliterated and the money could be used by the malfeasant and/or the accomplices to get it as untainted/clean money. (C)Money-laundering often involves five different directional fund flows : (i)Domestic money-laundering flows : In whic....
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.... order of provisional attachment is operative for a period not exceeding one hundred and fifty days from the date of such order (section 5(1) of the Act). (iv)On receipt of a complaint, under section 8(1) the adjudicating authority is required to issue a notice (to any person who has committed an offence under section 3 or is in possession of proceeds of crime), to indicate the sources of income, earnings and assets out of which or by means of which he has acquired the property attached under section 5(1) of the Act. If on considering the response and after granting an opportunity of hearing, the adjudicating authority is satisfied that any property is involved in money-laundering, it shall under section 8(3) issue an order confirming the provisional attachment. The confirmation of an order of provisional attachment by the adjudicating authority attains finality only after the adjudicating authority passes an order confiscating the property, after giving an opportunity to the persons concerned and when a person is found guilty of the scheduled offence by the competent court, after trial. (v)From the scheme of the Act and the evils its provisions are intended to address it is ....
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....he director or any other officer not below the rank of a Deputy Director, specifically authorised by the director for the purposes of section 5 ; the decision to provisionally attach the property must be supported by reasons to be recorded which must be based on material available in the possession of the attaching authority; no order of provisional attachment could be made unless, in relation to the scheduled offence a report has been forwarded to a Magistrate under section 173 of the Code of Criminal Procedure, 1973 or a complaint has been filed by a person authorised to investigate the offence set out in the Schedule to the Act, before a Magistrate or court for taking cognizance of the scheduled offence, as the case may be; the provisional attachment is limited for a period not exceeding one hundred and fifty days; under the second proviso to section 5(1) attachment of property even of persons not charged with committing a scheduled offence is permitted but must be exercised only in exceptional cases for reasons to be recorded in writing and on the basis of the material in possession of the authority concerned asserting that the property is involved in money-laundering and non-a....
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....a body whose independence is legislatively entrenched qua the qualifications prescribed and tenure protection provided vide sections 28 and 29 of the Act. A further appeal is provided to the High Court, to any person aggrieved by a decision or order of the Appellate Tribunal, both on a question of law and fact, arising from such order. M)The provisions of sections 23 and 24 of the Act are valid and unassailable. These provisions are incorporated to regulate an inherently complex and layered series of transactions involved in money-laundering operations section 23 enacts a presumption (applicable to adjudication or confiscation under section 8 of the Act), that where money-laundering involves plural and interconnected transactions and one or more of such transactions is/are proved to be involved in money-laundering, it shall, unless otherwise proved to the satisfaction of the adjudicating authority, be presumed that the remaining transaction forms part of such interconnected transactions. The presumption is a rebuttable presumption. (N)Section 24 inheres on a person accused of having committed the offence under section 3, the burden of proving that the proceeds of crime are un....
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.... of the proceedings (including the impugned proceeding), under the provisions of the Act are adverted to in brief : (a)On January 7, 2009 Sri B. Ramalinga Raju, the then chairman of SCSL addressed a letter to the board of directors admitting to inflated cash and bank balances; non-existent accrued interest; understated liability in respect of funds arranged by himself ; overstated debtors position; inflated revenues and operating margins and consequent artificial cash and bank balances. The letter dated January 7, 2009 admitted that falsified projections of the financial position of the SCSL in the balance sheet is the consequence of inflated profits over several years accentuated over the years by the company having to carry additional resources and assets to justify artificial higher levels of operation, thereby increasing the costs significantly. The letter further stated that the aborted MAYTAS acquisition deal by the SCSL was an attempt to fill the fictitious assets with real ones and that this stratagem would have solved the SCSL problem but MAYTAS payments would have been delayed ; (b)As a consequence of the disclosures in the letter dated November 7, 2009, share price....
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....uise of carrying out agricultural and other activities through these companies. With a view to investing the sale proceeds of the shares of SCSL in real estate and allied businesses and to shore up their personal financial positions, Sri Ramalinga Raju, B. Rama Raju and Sri B. Suryanarayana Raju floated the 327 companies, classified by the enforcement officials as A to D category companies. 83 companies are enumerated as Group A comprising the family members of Sri B. Ramalinga Raju viz., his wife Smt. Nandini Raju and his children Sri B. Teja Raju and B. Rama Raju (who are petitioners herein) as directors ; 78 companies are categorized as B-Group, having Sri B. Suryanarayana Raju his wife Jhansi Rani as directors; C group comprises 86 companies having Smt. B. Radha wife of B. Rama Raju as the director; and in D-group other family members and trusted employees of Sri B. Ramalinga Raju are the directors. (g)The five investment companies (formed in 1995) facilitated sale of shares of the family members of Sri B. Ramalinga Raju. The 327 companies are located at 12-addresses common to all. The investigation reveals that all the directors in these companies were either family member,....
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....dulent and artificially inflated shares of SCSL held through their holding company-SRSR Holdings and channelised into assets through some of the 327 companies floated through Ramalinga Raju's family members and trusted employees. Some of the 327 companies which received loans from several NBFCs could not repay the loans and the corresponding NBFCs sold the shares of SCSL pledged with them as collateral by SRSR Holdings, in the open market and settled their outstanding liability. While the shareholdings of Sri B. Ramalinga Raju and other close family members in SCSL was of the order of 18.78 per cent in June, 1998 ; and 11.48 per cent on March 31, 2002, it fell drastically continually thereafter by off loading and became nil by March 31, 2009. The investigation further reveals that from July 1, 2005 Sri B. Ramalinga Raju, Rama Raju, Suryanarayana Raju, Nandini Raju, Radha, Jhansi Rani, Teja Raju, Ramaraju and SRSR Holdings received a dividend of Rs. 66.38 crores (approximately) which constitutes proceeds of crime since the dividends were the product of a scheduled offence under the Act. Further Sri B. Ramalinga Raju, Rama Raju, Teja Raju and Rama Raju (Jr.) received approximately Rs....
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.... enhanced, comprehensive and consistent frame work of measures for combating money-laundering and terrorist financing. The FATF recommendations have been revised from time to time. THE PREVENTION OF MONEY-LAUNDERING ACT, 2002 : RELEVANT PROVISIONS : "The preamble Whereas the Political Declaration and Global Programme of Action, annexed to the resolution S-17/2 was adopted by the General Assembly of the United Nations at its seventeenth special session on the twenty-third day of February, 1990 ; And whereas the Political Declaration adopted by the Special Session of the United Nations General Assembly held on 8th to 10th June, 1998 calls upon the Member States to adopt national money-laundering legislation and programme ; And whereas it is considered necessary to implement the aforesaid resolution and the Declaration. BE it enacted by Parliament in the Fifty-third Year of the Republic of India. The Statement of Objects and Reasons appended to the Bill It is being realised, world over, that money-laundering poses a serious threat not only to the financial systems of countries, but also to their integrity and sovereignty. Some of the initiatives taken by the in....
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....rt on the 4th March, 1999 to the Lok Sabha. The recommendations of the Standing Committee accepted by the Central Government are that : (a)the expressions 'banking company' and 'person' may be defined; (b)in Part I of the Schedule under Indian Penal Code, the word, 'offence' under section 477A relating to falsification of accounts should be omitted; (c)'knowingly' be inserted in clause 3(b) relating to the definition of money-laundering; (d)The banking companies, financial institutions and intermediaries should be required to furnish information of transactions to the director instead of Commissioner of Income-tax; (e)The banking companies should also be brought within the ambit of clause II relating to obligations of financial institutions and intermediaries; (f)a definite time-limit of 24 hours should be provided for producing a person about to be searched or arrested before the Gazetted officer or Magistrate; (g)the words 'unless otherwise provide to the satisfaction of the authority concerned' may be inserted in clause 22 relating to presumption on interconnected transactions; (h)vacancy in the office of the chairperson of the Appellate Tribunal, by reas....
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....th legitimate money and its species like movable and immovable property. Thus certain economic offences, commercial frauds, crimes like murder, extortion have contributed to money-laundering in a significant manner. The perpetrators of such heinous crimes should not be allowed to enjoy the fruits of the money that passed under the activity and therefore the present enactment is intended to deprive the property which is related to the proceeds of specific crimes listed in the Schedule to the Act. Relevant Provisions of the Act : Relevant Provisions of The Act Chapter I PRELIMINARY 2. Definitions.‑ (1) . . . (d) 'attachment' means prohibition of transfer, conversion, disposition or movement of property by an order issued under Chapter III ; (p) 'Money-laundering' has the meaning assigned to it in section 3 ; (t) 'prescribed' means prescribed by rules made under this Act ; (u) 'proceeds of crime' means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property ; (v) 'property' means an property or assets of every description, whether corporea....
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.... with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime under this Chapter, he may, by order in writing, provisionally attach such property for a period not exceeding (one hundred and fifty days) from the date of the order, in the manner provided in the Second Schedule to the Income-tax Act, 1961 (43 of 1961), and the director or the other officer so authorised by him, as the case may be shall be deemed to be an officer under sub-rule (e) of rule 1 of that Schedule : Provided that no such order of attachment shall be made unless, in relation to the scheduled offence, a report has been forwarded to a magistrate under section 173 of the Code of Criminal Procedure, 1973 (2 of 1974), or a complaint has been filed by a person, authorised to investigate the offence mentioned in the schedule, before a magistrate or court for taking cognizance of the scheduled offence, as the case may be: Provided further that, notwithstanding anything contained in clause (b), any property of any person may be attached under this section if the director or any other officer not below the rank of Deputy Director authorised by him for th....
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....ld not be declared to be the properties involved in money-laundering and confiscated by the Central Government : Provided that where a notice under this sub-section specifies any property as being held by a person on behalf of any other person, a copy of such notice shall also be served upon such other person : Provided further that where such property is held jointly by more than one person, such notice shall be served to all persons holding such property. (2) The adjudicating authority shall, after‑ (a)considering the reply, if any, to the notice issued under sub-section (1) ; (b)hearing the aggrieved person and the director or any other officer authorised by him in this behalf ; and (c)taking into account all relevant materials placed on record before him, by an order, record a finding whether all or any of the properties referred to in the notice issued under sub-section (1) are involved in money-laundering : Provided that if the property is claimed by a person, other than a person to who the notice had been issued, such person shall also be given an opportunity of being heard to prove that the property is not involved in money-laundering. (3) Wher....
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....brances which may be enforced against such person by a suit for damages. Chapter V SUMMONS, SEARCHES AND SEIZURES, ETC. 16. power of survey.‑ (1) Notwithstanding anything contained in any other provisions of this Act, where an authority, on the basis of material in his possession, has reason to believe (the reasons of such belief to be recorded in writing) that an offence under section 3 has been committed, he may enter an place- (i)within the limits of the area assigned to him ; or (ii)in respect of which he is authorised for the purposes of this section by such other authority, who is assigned the area within which such place is situated, at which any act constituting the commission of such offence is carried on, and may require any proprietor, employee or any other person who may at that time and place be attending in any manner to, or helping in, such act so as to,- (i)afford him the necessary facility to inspect such records as he may require and which may be available at such place ; (ii)afford him the necessary facility to check or verify the proceeds of crime or any transaction related to proceeds of crime which may be found therein ; and (i....
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....dentification on such record or make or cause to be made extracts or copies therefrom ; (e)make a note or an inventory of such record or property ; (f)examine on oath any person, who is found to be in possession or control of any record or property, in respect of all matters relevant for the purposes of any investigation under this Act : Provided that no search shall be conducted unless, in relation to the scheduled offence, a report has been forwarded to a Magistrate under section 157 of the Code of Criminal Procedure, 1973 (2 of 1974), or a complaint has been filed by a person, authorised to investigate the offence mentioned in the Schedule, before a Magistrate or court for taking cognizance of the scheduled offence, as the case may be. (2) The authority, who has been authorised under sub-section (1) shall, immediately after search and seizure, forward a copy of the reasons so recorded along with material in his possession, referred to in that sub-section to the adjudicating authority in a sealed envelope, in the manner, as may be prescribed and such adjudicating authority shall keep such reasons and material for such period, as may be prescribed. (3) Where an auth....
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.... Gazetted officer, superior in rank to him, or Magistrate's Court. (4) If the requisition under sub-section (3) is made, the authority shall not detain the person for more than twenty-four hours prior to taking him before the Gazetted officer, superior in rank to him, or the Magistrate referred to in that sub-section : Provided that the period of twenty-four hours shall exclude the time necessary for the journey from the place of detention to the office of the Gazetted officer, superior in rank to him, or the Magistrate's court. (5) The Gazetted officer or the magistrate before whom any such person is brought shall, if he sees no reasonable ground for search, forthwith discharge such person but otherwise shall direct that search be made. (6) Before making the search under sub-section (1) or sub-section (5), the authority shall call upon two or more persons to attend and witness the search, and the search shall be made in the presence of such persons. (7) The authority shall prepare a list of record or property seized in the course of the search and obtain the signatures of the witnesses on the list. (8) No female shall be searched by any one except a female. (9....
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.... appeal under section 26 or forty-five days from the date of order under sub-section (5), whichever is earlier, if he is of the opinion that such property is relevant for the proceedings before the Appellate Tribunal. 23. Presumption in interconnected transactions. ‑ Where money-laundering involves two or more interconnected transactions and one or more such transaction is or are proved to be involved in money-laundering, then for the purposes of adjudication or confiscation under section 8, it shall, unless otherwise proved to the satisfaction of the adjudicating authority, be presumed that the remaining transactions form part of such interconnected transactions. 24. Burden of proof. ‑ When a person is accused of having committed the offence under section 3, the burden of proving that proceeds of crime are untainted property shall be on the accused. 71. Act to have overriding effect. ‑ The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force." 13. At the oral hearing, learned counsel Sri Gopal Chowdary (W. P. No. 23166 of 2010) and Sri S. Niranjan Reddy (W. P. N....
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....might or might not apply. The Act is a recent piece of legislation and the fullness of its personality and nuances of its several provisions will manifest and must be identified in the fullness of time and as occasions arise. Our exercise is adjudicatory and not an academic exercise nor a treatise on the provisions of the Act. We will confine analysis of the provisions of the Act as applicable to the narrow set of facts and circumstances of the cases on hand. Even in this respect our analysis of the facts and circumstances the assertions and responses are predicated on a prima facie view of the relevant factual matrix, since the trial of the scheduled offence is under way. Though the petitioners assert to be not yet accused of having committed a scheduled offence, it is the contention on behalf of the enforcement directorate as expressed by Sri Rajeev Awasthi, learned counsel for the enforcement directorate that the petitioners will also be eventually charged of an offence under section 3 of the Act. Our analysis of the provisions and their applicability to the facts of these cases is also tentative since the proceedings are now at the stage of confirmation of orders of provisional....
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....Substances, (to which India is a party and a signatory). Article 3 in Part XVII of this Convention sets out provisions pertaining to offences and sanctions. Certain provisions, of clauses (b) and (c ) of sub-section (1), and sub-sections (2) and (3) of article 3 are adverted to in this behalf. The provisions adverted to by the petitioners read : "Article 3 Offences and sanctions 1. Each party shall adopt such measures as may be necessary to establish as criminal offences under its domestic law, when committed intentionally : . . . (b)( i) The conversion or transfer of property, knowing that such property is derived from any offence or offences established in accordance with sub-paragraph (a) of this paragraph, or from an act of participation in such offence or offences, for the purpose of concealing or disguising the illicit origin of the property or of assisting any person who is involved in the commission of such an offence or offences to evade the legal consequences of his actions ; (ii) The concealment or disguise of the true nature, source, location, disposition, movement, rights with respect to, or ownership of property knowing that such property is derived fro....
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....confiscation of proceeds of crime, it is indicated that the State may consider the possibility of requiring that an offender demonstrate the lawful origin of the alleged proceeds of crime or other property liable to confiscation, to the extent the requirement is consistent with the principle of their domestic law and with the nature of judicial and other proceedings. It also provided that the provisions for seizure and confiscation should not be construed to prejudice the rights of bona fide third parties (article 12-clauses 7, 8). 18. Sri Gopal Chowdury has also contended, by reference to provisions of the Narcotic Drugs and Psychotropic Substances Act, 1985 that mens rea or some measure of an informed association with an offence is the sine qua non to constitute "illegally acquired property" under the NDPS Act. 19. We are required, in the context of the rival contentions in these writ petitions to interpret the Act in accordance with established and applicable principles of statutory interpretation. The unit of interpretation is the Act as a whole and such of those provisions which are considered for interpretation but in the context of the provisions of the Act. While the ....
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....SCC 400 ; S. Jagannath v. Union of India [1997] 2 SCC 87 ; Nilabati Behera v. State of Orissa [1993] 2 SCC 746 and Apparel Export Promotion Council v. A.K. Chopra [1999] 1 SCC 759. We therefore proceed to interpret the provisions of the Act within the frame work of its provisions, tested on the anvil of the limits on legislative powers enjoined by the provisions of our Constitution ; for we are not persuaded that there is any ambiguity that legitimises a resort to trans-legislation sources for guidance. 20. We had the benefit of perusing the judgment by a learned Division Bench of the Bombay High Court, dated August 5, 2010 in first Appeal Nos. 527 to 529 of 2010 (per A. M. Khanwilkar, J.). The very question as to whether the provisions in the Act are applicable for attachment and confiscation of property belonging to persons other than those charged and prosecuted of having committed a scheduled offence fell for consideration in this judgment. The appeals (to the Bombay High Court) were preferred (under section 42 of the Act) against the judgment and order of the Appellate Tribunal rejecting a challenge to orders of the adjudicating authority confirming orders of provisional at....
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....ion of property in the possession of a person not charged of having committed a scheduled offence, this contention in our considered view is wholly misconceived after enactment of the second proviso. The second proviso enjoins that any property of any person may be attached if the specified authority therein has reason to believe. The non obstante clause in the second proviso clearly excludes clause (b) of section 5(1). It is this clause (b) that incorporates the requirement that the proceeds of crime should be in possession of a person who is charged of having committed a scheduled offence, for initiating proceedings for attachment and confiscation. If the provisions of section 5(1)(b) are to be eschewed for ascertaining the meaning of the second proviso (qua the legislative injunct of the non obstante provision), on a true and fair construction of the provisions of section 5(1) including the second proviso thereof but ignoring clause (b), the legislative intent is clear, unambiguous and linear. Provided the other conditions set out in section 5 of the Act are satisfied, any property of any person (the expression "person", is not restrictively defined in section 2(s) limited to a ....
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....edures enumerated in Chapter III of the Act section 2(p) defines the expression "money-laundering" as ascribed in section 3. Section 3 defines the offence of money-laundering in an expansive locus as comprehending direct or indirect attempt to indulge; assist, be a party to or actually involved knowingly in any process or activity connected with the proceeds of the crime and projecting it as untainted property. On proof of guilt and conviction of the offence of money-laundering, the punishment provided in section 4 of the Act would follow after a due trial by the Special Court; which is conferred exclusive jurisdiction qua section 44, Chapter VII of the Act. The prosecution, trial and conviction for the offence of money-laundering are the criminal sanction administered by the legislation and effectuated by a deprivation of personal liberty as a disincentive to a malfeasant. The second matrix of proceedings targets the "proceeds of crime" defined in section 2(u); as any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property, for initial attachment and eventual confiscation....
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....f every description corporeal, incorporeal, movable, immovable, tangible, and intangible and includes deeds and instruments evidencing title to or interest in such property or assets wherever located. 30. The matrix of the relevant provisions of the Act compel the inference that the legislation subsumes that property which satisfies the definition of "proceeds of crime", prima facie is considered as property whose transfer [defined in section 2(za)] is subject to verification to consider whether the transfer is a stratagem of a money-laundering operation and is part of a layering transaction. As the provisions of the Act target malfeasants charged of an offence under section 3 and the proceeds of crime in the pos-session of a person so charged and any other person as well, the legislative intent is manifest that attachment and confiscation constitute a critical and clearly intended and specifically enacted strategy to combat the evil of money-laundering. A person though not accused/charged of an offence under section 3, when in possession of any proceeds of crime, from the provisions of the Act it is clear, has but a defeasible and not a clear title thereto. In the context of at....
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....agement or control of the company is accused of an offence under section 3) and would be proceeds of crime, so much of the quantum of the dividend received or the value of a share sold as constitutes proceeds of crime could be liable to attachment and confiscation. This in our considered view is the true and fair construction of the provisions of the Act. At this stage of the proceedings we cannot be oblivious of the fact that the petitioners and others, whose assets are being subjected to the processes under Chapter III of the Act, are alleged to be closely related to or employees of the individual(s) who orchestrated the massive scam and that these persons had traded in the shares of SCSL (with a presumptive insider information) when those shares had a peak value, achieved on account of the criminal conduct of Sri. Ramalinga Raju, and others. 34. The contention by the petitioners that attachment and confiscation of proceeds of crime in possession of a person who is not charged of an offence under section 3 or who has no knowledge or information as to the antecedent criminality are arbitrary and unfair legislative prescriptions is misconceived. 35. Section 24 inheres on a pe....
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....person not accused/charged of an offence under section 3 constitutes an arbitrary or unconstitutional legislative prescription. 39. The contention that the definition of "proceeds of crime" [section 2(u)] is too broad and is therefore arbitrary and invalid since it subjects even property acquired, derived or in the possession of a person not accused, connected or associated in any manner with a crime and thus places innocent persons in jeopardy, is a contention that also does not merit acceptance. In Attorney-General for India v. Amratlal Prajivandas [1994] 5 SCC 54 ; [1995] 83 Comp. Cas. 804, a Constitution Bench of the Supreme Court considering the validity of provisions of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 (SAFEMA) observed : "The relatives and associates are brought in only for the purpose of ensuring that the illegally acquired properties of the convict or detenu, acquired or kept in their names, do not escape the net of the Act. It is a well-known fact that persons indulging in illegal activities screen the properties acquired from such illegal activity in the names of their relatives and associates. Sometimes they transf....
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....ict or that they in fact did not or do not belong to such detenu/convict (p. 844)." 41. The Supreme Court concluded. "The application of the SAFEMA to the relatives and associates [in clauses (c) and ( d) of section 2(2)] is equally valid and effective inasmuch as the purpose and object of bringing such persons within the net of the SAFEMA is to reach the properties of the detenu or convict, as the case may be, wherever they are, howsoever they are held and by whomsoever they are held. They are not conceived with a view to forfeit the independent properties of such relatives and associates as explained in this judgment (p. 852)" 42. The SAFEMA targets for forfeiture "illegally acquired property" of a person (defined as a convict or detenu under specified enactments and relative or associate of such convict or detenu (the expression relative or associate also defined)). This is a 1976 enactment that provides for forfeiture of illegally acquired properties of smugglers and foreign exchange manipulators. The Act, on the other hand, specifically targets the wider pathology of money-laundering in relation to a large number of scheduled offences enumerated from a variety of spec....
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.... of specified legislative prescriptions. The Act is a later statute to the aforementioned Acts and specifically targets the perceived evil of money-laundering. The category of offences enumerated in Parts A, B and C of the Schedule of the Act elucidate the legislative intent that the several offences and the unlawful gains/wealth derived therefrom by malfeasant(s) are targeted and confiscated, including from others when the property being the derivative of criminal activity is laundered through one or more layered transactions and finds its way to the ownership, control or possession of non-offenders as well ; but in respect of scheduled offences. 46. The object of the Act is to prevent money-laundering and connected activities and confiscation of "proceeds of crime" and preventing legitimising of the money earned through illegal and criminal activities by investments in movable and immovable properties often involving layering of the money generated through illegal activities, i.e., by inducting and integrating the money with legitimate money and its species like movable and immovable property. Therefore, it is that the Act defines the expression "proceeds of crime" expansively....
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....tion 3 or otherwise, in view of the adjudication process applying to property seized under sections 17 and 18 of the Act. Neither the provisions of section 17 nor 18 require for search and seizure operations that the proceeds of crime involved in money-laundering should be in possession only of a person accused/charged of an offence under section 3. The provisions of clause (ii) of section 17(1) clearly (by employing the disjunctive "or") stipulate that search and seizure operations may proceed not only against a person who has committed an act which constitutes money-laundering but also against a person in possession of any proceeds of crime involved in money-laundering or in possession of records relating to money-laundering. On search of any person or seizure of such record or property constituting proceeds of crime in the possession, ownership or control of any person, which may be useful or relevant to any proceedings under the Act, a property, which constitutes proceeds of crime seized under section 17 or 18, is equally subject to the adjudicatory processes under section 8. 49. On analysis of the provisions of sections 5, 8, 17 and 18, it is clear that provisions of the Se....
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.... J.) ; Beg J. concurred, while Mathew and Chandrachud, J. (per Mathew, J.) recorded a dissenting opinion. The question involved was whether the assessees under the Central Sales Tax Act, 1956 (the "Central Act") could be made liable for penalty under the provisions of the State Sales Tax Act (the State Act) for default of payment of the tax liability under the Central Act. The assessees contended that there being no provision in the Central Act for imposition of penalty or default in payment of tax, imposition of penalty under the provisions of the State Act is illegal. In defence, the Revenue contended that the provision of penalty for default of payment of tax as enacted in the State Act is equally applicable to the payment and collection of the tax under the Central Act and is incidental to and part of the process of such payment and collection. Ray C. J. held that the provisions of the State Act imposing penalty for non-payment of the tax under the Central Act within the prescribed time is not attracted to impose penalty on dealers under the Central Act. The Central Act is a self-contained code which by the charging section creates liability for tax and penalty and section 9(2)....
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....islative response to the perceived evil, was repelled. Jeevan Reddy J. put it pithily when he observed : Bitter medicine is not bad medicine. 54. The huge quanta of illegally acquired wealth ; acquired from crime and economic and corporate malfeasance corrodes the vitals of rule of law ; the fragile patina of integrity of some of our public officials and State actors ; and consequently threatens the sovereignty and integrity of the Nation. Parliament has the authority to legislate and provide for forfeiture of proceeds of crime which is a produce of specified criminality acquired prior to the enactment of the Act as well. It has also the authority to recognise the degrees of harm an identified pejorative conduct has on the fabric of our society and to determine the appropriate remedy for the pathology. Issue B is answered accordingly. Issues C & D 55. Under issue C, the challenge to the provisions of section 8 on the ground of vagueness is considered. The petitioners also contend that the definitions, "money-laundering" [section 2(1)(p)] ; "proceeds of crime" [section 2(1)(u)] and the provisions of section 5 (enabling provisional attachment) are void for being vague. We....
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....a finite set of circumstances. By a reading of specific enactment requirements into a vaguely structured or worded law, courts attempt to insulate innocent behaviour from criminal sanction. Such interpretative techniques are not always possible. Eventually, a confusing law that cannot be cured by a narrow judicial interpretation will be struck down as unconstitutional violation of the Due Process Clause and ; (d) the doctrine avoids encroachment on the First Amendment freedoms, such as speech and religion. Since vague laws produce uncertainty in the minds of average citizens, some citizens will inevitably decline to undertake risky behaviour that might deprive them of liberty. Where vague provisions of legislation deter citizens from engaging in certain political and religious discourse, courts will apply heightened scrutiny to ensure that protected expressions are not suppressed. It must however be noted that though courts will scrutinise a vague law that strikes a fundamental freedom, in other cases the void for vagueness doctrine does not however require mathematical precision on the part of the legislators. Also, laws that regulate the economy are scrutinised less closely than ....
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....violate the equal protection clause of the 14th amendment. Insofar as the Antinoise Ordinance is concerned, the court held that it is not void for vagueness. It was held that this provision is marked by flexibility and reasonable breadth, rather than meticulous specificity but it is clear what the Ordinance prohibits. Designed for the protection of schools, the Ordinance forbids deliberately noisy activity that disturbs or is about to disturb normal school activity and at fixed times when the school is in session and enumerates a sufficiently fixed place "adjacent" to the school. 62. In a recent decision the Second Circuit struck down the Federal Communications Commission's (FCC) indecency policy as unconstitutionally vague because the FCC had applied its "patently offensive" standard and the policy's expectations so inconsistently that television broadcasters could not predict when they would be subject to sanction. In Fox Television Stations Inc. v. FCC 613 F. 3d 317 (2d CIR.2010), the Second Circuit Court held in a unanimous opinion (Judge Pooler joined by Judge Hall and senior Judge Leval) that the FCC's indecency policy was void for vagueness because it was so inconsistentl....
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....ne permissible and impermissible areas, and they also provide some guidance to ascertain the boundaries of these areas. They provide a frame work, a guide as to how one may behave, but certainty is only reached in instant cases, where law is actualised by a competent authority. By setting out the boundaries of permissible and non-permissible conduct, these norms give rise to legal debate. They bear substance, and they allow for a discussion as to their actualisation. They therefore limit enforcement discretion by introducing boundaries, and they also sufficiently delineate an area of risk to allow for substantive notice to citizens. No higher requirement as to certainty can be imposed on law in our modern State. The modern State intervenes today in fields where some generality in the enactments is inevitable. The substance of these enactments must remain nonetheless intelligible. The standard of 'absence of legal debate' applies to all enactments, irrespective of whether they are civil, criminal administrative or other." 64. The decisions of our Supreme Court in Romesh Thappar's case (supra); Khemka & Co. (Agencies) (P.) Ltd's. case (supra ) ; A.K. Roy's case (supra) and Kartar ....
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....enforcers. The judicial branch cannot determine a law's constitutionality simply by examining how it is enforced. The reason is readily apparent. If a court makes only the determination that an enforcer is behaving arbitrarily and with unrestrained discretion, it cannot know whether the enforcer's actions are authorised by an unconstitutionally vague law or whether the enforcer is acting outside the authority granted by a sufficiently tailored and, therefore, intra vires law. It is therefore appropriate that a court scrutinising a vagueness challenge must come to the law at issue rather than simply examine the actions or potential actions of its enforcer. 67. As pointed out in Matajog Dobey v. H.C. Bhari, [1955] 28 ITR 941 (SC) : a discretionary power is not necessarily a discriminatory power. The mere possibility that a power may be misused or abused cannot per se induce the court to deny the existence of the power. A provision cannot be struck down on the ground that although it is valid and not per se vague, it is likely to be employed for an unauthorised purpose or in a discriminatory fashion in the actual exercise of the discretion conferred by a provision vide Sukumar Mukh....
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....ng raft of provisions. The process of provisional attachment under section 5 ; seizure under section 17(1)(c) or 18(1) are, in the legislative scheme of the Act, intended to empower the appropriate authority to provisionally attach but without the consequence of dispossession from immovable property (under section 5) or to seize a property (under section 17 or 18), on the basis of a unilateral satisfaction of the appropriate authority (if there is reason to believe ; such belief to be recorded in writing), that such property constitutes proceeds of crime, in the possession, ownership or control of any person, whether or not accused of an offence under section 3. 72. At the provisional attachment stage under section 5(1) or a seizure under section 17 or 18, the prima facie satisfaction that the property in question constitutes proceeds of crime as defined in the Act, is a satisfaction that the appropriate authority arrives on his own ; on the basis of the report as to the scheduled offence forwarded to a magistrate under section 173 of the Code of Criminal Procedure, 1973 or a complaint filed by a person authorised to investigate an offence enumerated in the Schedule before a mag....
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....m whom it was seized, unless the adjudicating authority permits retention of such property beyond the said period. To a similar effect are the provisions of section 21 with regard to retention of records seized under section 17 or 18. 75. Proceeds of crime is defined as any property, derived or obtained by any person as a result of criminal activity relating to a scheduled offence or the value of such property. For confirmation of provisional attachment [under section 8(2)], the adjudicating authority must record a finding that all or any of the properties provisionally attached or seized are involved in money-laundering and only thereafter may be pass an order under section 8(3), confirming the provisional attachment made under section 5(1) or retention of a property seized under section 17 or 18. The vagueness challenge 76. Within the scheme of the provisions of the Act, on receipt of a complaint under section 5(5) (from the authority which passed the provisional attachment order) or pursuant to applications made under section 17(4) or 18(10) (pursuant to a search and seizure), the adjudicating authority is required, on the basis of the material in his possession to have....
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....er section 5(1)] or retention of property or the record seized (under section 17 or 18), the attachment or retention of the seized property or record as the case may be shall continue during the pendency of any proceedings relating to any scheduled offence before a court and would become final after the guilt of the person is proved in the trial court and the order of such trial court becomes final. 79. Under section 8(4), on confirmation of an order of provisional attachment [under sub-section (3)], the specified authority is enjoined to take possession of the attached property. 80. Section 8(6) provides that only when the attachment of any property or retention of the seized property or record becomes final under section 8(3)(b) i.e. (proof of guilt of the accused in the trial court and such order attaining finality), the adjudicating authority may initiate the process and shall again afford an opportunity of being heard to the person concerned with the property, before passing an order confiscating the property. 81. Clause (5) of section 20 and of section 21 provide that after an order of confiscation under section 8(6) is passed, the adjudicating authority shall direct....
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....king cognizance of a scheduled offence by a person authorised to investigate the scheduled offence. Further, confiscation proceedings in respect of an attached/retained property may be initiated only on proof of guilt of a person charged of an offence under section 3 and the order of the trial court becomes final section 23 enjoins a presumption in interconnected transactions ; that where money-laundering involves two or more interconnection transactions and one or more of these are proved to be involved in money-laundering, then for the purposes of adjudication or confiscation under section 8, it shall, unless otherwise proved to the satisfaction of the adjudicating authority, be presumed that the remaining transactions form part of such interconnected transactions (i.e., involved in money-laundering). 86. As we have observed earlier in this judgment in another context, the provisions of sections 3, 5, 8, 23 and 24 are also interrelated provisions and must be considered as components of a statutory symphony that elucidate the true scope of the onus probandi and the burden of proof. The argument as to incoherence as to the onus and standards of proof in section 8, proceeds on a ....
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....operty. The clear implication, though prima facie at this stage, is that the property in the ownership, control or possession of any person not accused of an offence under section 3 is proceeds of crime having nexus with or interconnected with the offence of money-laundering under section 3. Therefore at the stage of confirmation of provisional attachment under section 8, the person in possession of the property believed by the adjudicating authority to constitute proceeds of crime involved in money-laundering must satisfy the adjudicating authority by indicating the sources of his income, earning or assets, out of which or by means of which he has acquired the property attached under section 5(1) or seized under section 17 or 18, the evidence on which he relies to establish the claim of his income, earning or assets and other relevant information and particulars, that the property is acquired by him bona fide ; without knowledge or information of the association with criminality ; and out of his own income, earnings or assets and for fair market value, to dispel the presumption that the property is proceeds of crime involved in money-laundering. 88. The same is the burden even ....
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....ould fail if no evidence at all were given on either side.' This section shows that the initial burden of proving a prima facie case in his favour is cast on the plaintiff ; when he gives such evidence as will support a prima facie case, the onus shifts on to the defendant to adduce rebutting evidence to meet the case made out by the plaintiff. As the case continues to develop, the onus may shift back again to the plaintiff. It is not easy to decide at what particular stage in the course of the evidence the onus shifts from one side to the other. When after the entire evidence is adduced, the Tribunal feels it cannot make up its mind as to which of the versions is true, it will hold that the party on whom the burden lies has not discharged the burden ; but if it has on the evidence no difficulty in arriving at a definite conclusion, then the burden of proof on the pleadings recedes into the background. How the above rules relating to onus operate in a case is thus described by Lord Dunedin in Robins v. National Trust Co. [1927] AC 515 (PC) at page 520 ; (96 L.J.P.C. 84) : 'Their Lordships cannot help thinking that the appellant takes rather a wrong view of what is truly th....
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....The presumption is one of law and thereunder a court shall presume, inter alia, that the negotiable instrument or the endorsement was made or endorsed for consideration. In effect it throws the burden of proof of failure of consideration on the maker of the note or the endorser, as the case may be. The question is, how the burden can be discharged ? The rules of evidence pertaining to burden of proof are embodied in Chapter VII of the Evidence Act. The phrase 'burden of proof' has two meanings-one the burden of proof as a matter of law and pleading and the other the burden of establishing a case ; the former is fixed as a question of law on the basis of the pleadings and is unchanged during the entire trial, whereas the latter is not constant but shifts as soon as a party adduces sufficient evidence to raise a presumption in his favour. The evidence required to shift the burden need not necessarily be direct evidence, i.e., oral or documentary evidence or admissions made by opposite party ; it may comprise of circumstantial evidence or presumptions of law or fact. To illustrate how this doctrine works in practice, we may take a suit on a promissory note. Under section 101 of the Ev....
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....e is withheld by the plaintiff, section 114 enables the court to draw a presumption to the effect that, if produced, the said accounts would be unfavourable to the plaintiff. This presumption, if raised by a court, can under certain circumstances rebut the presumption of law raised under section 118 of the Negotiable Instruments Act. Briefly stated, the burden of proof may be shifted by presumptions of law or fact, and presumptions of law or presumptions of fact may be rebutted not only by direct or circumstantial evidence but also by presumptions of law or fact." 92. Section 22 of the Act also enjoins a presumption that "Where any records or property are or is found in the possession or control of any person in the course of a survey or a search, it shall be presumed that (i) such records or property belong or belongs to such person ; (ii) the contents of such records are true ; and (iii) the signature and every other part of such records which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person's handwriting, and in the case of a record, st....
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....uage employed in clause (c) of section 3, it is not possible or permissible to resort to the device of reading down. The said device is usually resorted to save a provision from being declared unconstitutional, incompetent and ultra vires. We are, therefore, of the opinion that neither the constitutional validity of the said definition can be questioned nor is there any warrant for reading down the clear and unambiguous words in the clause. So far as justification for such a provision is concerned, there is enough and more. After all, all these illegally acquired properties are earned and acquired in ways illegal and corrupt - at the cost of the people and the State. The State is deprived of its legitimate revenue to that extent. These properties must justly go back where they belong - to the State. What we are saying is nothing new or heretical. Witness the facts and ratio of a recent decision of the Privy Council in Attorney-General for Hong Kong v. Charles Warwick Reid [1993] 3 WLR 1143. The respondent, Reid, was a crown-prosecutor in Hong Kong. He took bribes as an inducement to suppress certain criminal prosecutions and with those monies, acquired properties in New Zealand, tw....
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.... course, even if the fiduciary relationship referred to in Attorney-General for Hong Kong v. Charles Warwick Reid [1993] 3 WLR 1143 (PC) is not present. It may be seen that the concept employed in Reid's case was a common law concept, whereas here is a case of an express statutory provision providing for such forfeiture. May we say in conclusion that 'the interests of society are paramount to individual interests and the two must be brought into just and harmonious relation. A mere property career is not the final destiny of mankind, if progress is to be the law of the future as it has been of the past' (Lewis Henry Morgan : Ancient Society) (p. 840)." 94. From the scheme of the Act and its several provisions, in particular the provisions of sections 8 and 22 to 24, it is clear that the Legislature considered it appropriate to inhere different shades of presumptions and thus corollary burdens, on persons in the ownership, control or possession of property believed to be proceeds of crime, depending on whether the person is accused of a scheduled offence or not, necessitating such person to dislodge the presumption by probative evidence or material. The inherence of such presumpt....
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....e of money-laundering, i.e., without mens rea or knowledge of antecedent criminality in the acquisition of such property, is an arbitrary prescription. 98. In our concluding analysis on issue A, we have noticed that the legislative intent is clear and specifically expressed by the several provisions of the Act, that proceeds of crime involved in money-laundering is targeted for eventual confiscation as a multi-national co-operative effort to control the incidence and spread of conduct which cripples financial systems of countries across the globe, corrodes the rule of law and governance systems and pejoratively impacts the integrity and sovereignty of Nations. We have also in the analysis on issue A noted that a person in possession, ownership or control of a property (provisionally attached or seized) is provided ample opportunity to produce relevant material and evidence to satisfy the adjudicating authority, at the stage of confirmation of provisional attachment or retention of the seized property [sections 8(1) to (3)], that the property was acquired out of lawful earnings or assets, that there were means to do so and thus the acquisition of the property is legitimate, bona ....
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....accused. 101. Section 8(4) of the Act enjoins the taking over of possession of an attached property on the passing of an order of confirmation of provisional attachment. This provision is arbitrary since dispossession precedes the recording of guilt/conviction by the Special Court in the prosecution of the offence of money-laundering under section 3 section 8(4) is therefore invalid, contend the petitioners. This conclusion in our considered view is without merit and misconceived. 102. At the stage of provisional attachment under section 5(1) a person interested in the enjoyment of the suspect immovable property is not deprived of enjoyment, in view of the provisions of sub-section (4) thereof. However section 8(4) enjoins taking over possession of the attached property whose provisional attachment is confirmed under section 8(3). On an holistic analysis of the several provisions of the Act, in particular of sections 5 and 8, we are of the considered view that the legislative intent underlying the preservation of the right to the enjoyment of immovable property provisionally attached under section 5(1) while enjoining taking over of possession on confirmation under section 8(....
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.... nascent stage of forming of a belief, unilaterally. 103. At the stage of confirmation of provisional attachment however, the person in ownership, control or possession of property is provided an opportunity to show cause why all or part of such property be not declared to be involved in money-laundering and confiscated by the Central Government. The person interested in the property is required by notice to indicate the source of his income, earning or assets, out of which or by means of which he has acquired the property provisionally attached or seized. An order confirming the provisional attachment, as already noticed, may be passed only on the adjudicating authority being satisfied, on considering the material on record including the material or evidence furnished in response to the notice issued under section 8(1) ; the reply furnished in response thereto ; and taking all and other relevant material into consideration, to record a finding that the property or so much of it, is involved in money-laundering. 104. Only at the confirmation stage is taking possession of the attached property legislatively enjoined [section 8(4)]. The reason for the prescription as to disposs....
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....nterconnected transactions. Money-laundering is defined in section 2(p) (with reference to section 3). Though section 3 defines the offence of money-laundering, the ingredients of the offence enumerated in this provision define money-laundering in its generic sense as applied by the Act to attachment and confiscation processes as well. Such duality is achieved by the drafting technique of defining money-laundering in section 2(p) by ascription of the definition of the offence of money-laundering in section 3. 108.This technique, though specific, is not unique. As observed in Life Insurance Corpn. of India v. Crown Life Insurance Co. [1965] 35 Comp. Cas. 741 ; AIR 1965 SC 1985 the object of a definition clause in a statute is to avoid the necessity of frequent repetitions in describing all the subject-matter to which the word or expression so defined is intended to apply. A definition section may borrow definitions from an earlier or an existing statute ; not necessarily in the definition section but in some other provision, of that Act ; and may equally borrow the definition from some other section of the same Act where a word or an expression is defined for a distinct purpose, ....
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....nected transactions and one or more such transactions is/are proved to be involved in money-laundering, then for the purposes of adjudication or confiscation under section 8, it shall, unless otherwise proved to the satisfaction of the adjudicating authority, be presumed that the remaining transactions form part of such interconnected transactions i.e., involved in money-laundering as well. 111. The presumption enjoined by section 23 is clearly a rebuttable presumption i.e., presumptio pro tantum. 112. In Izhar Ahmad Khan v. Union of India AIR 1962 SC 1052, Gajendragadkar, J. (as his Lordship then was) observed (in the majority opinion of the Constitution Bench) that : "The term 'presumption' in its largest and most comprehensive signification, may be defined to be an inference, affirmative or disaffirmative of the truth of false-hood of a doubtful fact or proposition drawn by a process of probable reasoning from something proved or taken for granted". Quoting with approval the statement of principle set out in the Principles of the Law of Evidence by Best, his Lordship observed that when the rules of evidence provide for the raising of a rebuttable or irrebuttable presumptio....
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....ttachment/seizure and confiscation and provides that the said appreciation will draw an inference from the fact of one or more transactions forming part of interconnected transactions having been proved to be involved in money-laundering, that the other transactions are also to be presumed so, unless the contrary is established. 117. As observed in Izhar Ahmad Khan's case (supra), the rule of presumption enjoined by section 23 takes away judicial discretion either to attach or not due probative value to the fact that one or more of the interconnected transactions have been proved to be involved money-laundering ; and requires prima facie due probative value to be attached and mandates an inference that the other transactions form part of the raft of interconnected transactions involved in money-laundering, subject of course to the said presumption being rebutted by proof to the contrary. 118. On the aforesaid analysis, since section 23 enjoins a rule of evidence and a rebuttable presumption considered essential and integral to effectuation of the purposes of the Act in the legislative wisdom ; a rebuttable and not an irrebuttable presumption, we are not persuaded to conclude ....
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....erson who has committed an offence under section 3 or otherwise section 8(1) while enjoining the adjudicating authority to issue a notice to a person in possession of proceeds of a crime, whether in his own right or on behalf of any other person, calling upon the noticee to indicate the sources of his income, earning or assets for the purposes of establishing that the acquisition of ownership, control or possession of the property by the noticee is bona fide and out of legitimate sources ; of his income, earning or assets, does not enact a presumption that where the noticee is a person accused of the offence under section 3, the provisionally attached property is proceeds of crime. Since camouflage and deceit are strategies inherent and integral to money-laundering operations and may involve successive transactions relating to proceeds of crime and intent to project the layered proceeds as untainted property, effectuation of the legislative purposes is achieved only where the burden is imposed on the accused to establish that proceeds of crime are untainted property. This is the legislative purpose and the justification for section 24 of the Act. 122. In response to a notice iss....
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....117 Taxman 349 (SC), Smt. Kesar Devi v. Union of India [2003] 6 JT 330 (SC), People's Union for Civil Liberties v. Union of India AIR 2004 SC 456 and Government of Andhra Pradesh v. P. Laxmi Devi [2008] 4 SCC 720. 125. The principle that the power of judicial review inhering in this court encompasses the jurisdiction and, therefore, the corollary obligation to invalidate laws which offend the limits delineated upon legislative power, in the several provisions of the Constitution, is well-established. It is an equally well-established principle that despite blurred walls of separation of powers in the Indian constitutional architecture, the Constitution nevertheless envisages a separation of powers. To the legislative branch is assigned the essential power and authority to make value and policy choices, to deal with the wide range of social, economic, law-and-order, security and developmental issues involving governance, which that representative and deliberative body, accountable to the people in our democratic context, is eminently qualified to make. Different levels of scrutiny by the judicial branch of legislative action, designed to maintain the vitality of our governance pr....
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....erent approaches to vires scrutiny are discernible, in scrutinising legislation regulating personal liberties or of freedoms relating to speech and expression heightened and stricter scrutiny vis-a-vis legislation dealing with social and economic choices where a relatively diffused scrutiny, is employed. R.K. Garg v. Union of India [1982] 133` ITR 239/[1981] 7 Taxman 53 (SC) exemplifies the latter approach of diffused scrutiny to economic legislation. 128. Having considered the several challenges to the provisions of the Act and on the various grounds addressed and in the context of the appropriate and applicable principles of judicial scrutiny we have recorded our conclusions on each of the issues formulated for decision. We now record a summary of our conclusions. Summary of conclusions On the several issues framed herein before we hold : (i) On Issue A : that property owned or in possession of a person, other than a person charged of having committed a scheduled offence is equally liable to attachment and confiscation proceedings under Chapter III ; and section 2(1)(u) which defines the expression "proceeds of crime", is not invalid ; (ii) On Issue B : that the pr....