TaxTMI 
TaxTMI 
2015 (1) TMI 1310
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....nt Act 2005 [20 of 2005] dt. 21.5.2005, as the said provision does not bear any reasonable and rational nexus with variety of Scheduled offences mentioned in the Schedule under the Act which may even be non­cognizable, bailable and on much lighter pedestal, for being unreasonable and ultra vires, and consequently unconstitutional, illegal, arbitrary, discriminatory, and thus being violative of Articles 14, 19 and 21 of the Constitution of India, and this Hon'ble Court may read down, lay down, expound, interpret and deliberate upon the scope and perspective of Section 45 of PMLA so as to harmonize the same in juxtaposition with various scheduled offences [under amended Part A of the Schedule], [b] To read down, expound, deliberate and interpret the scope and perspective of Section 19 of PMLA in light of section 49(3) read with Rules notified by GSR 446[E] dated 1.7.2005, in consonance and harmony with settled constitutional mandate of Articles 14, 21 and 22 of Constitution of India as also in the context of various provisions under the Code of Criminal Procedure, 1973, as amended from to time and the Guidelines laid down by the Hon'ble Apex Court in D.K.Basu vs State ....
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....n GSR 441(E) dated 1.7.2005 issued by the Central Government appointing Director to exercise the "exclusive" power conferred under section 19 of PMLA [v] Article 14, 21, 22 of the Constitution of India. [e] At the interim / ad­interim stage­ [i] The proceedings under PMLA against the Petitioner may please be stayed, [ii]The Petitioner may please be released on regular bail in the above case in ECIR/01/SRT/2014, [f] Dispense with filing of affidavit in support to this Petition as the Petitioner is in judicial custody; [g] For such other or further order/s in the peculiar facts of the case. 1.2 The petitioner of Special Criminal Application No.4672 of 2014 has filed this petition under Articles 226 and 227 of the Constitution of India, with the following prayers: "[A]To strike down Section 45 of the Prevention of Money­Laundering Act, 2002 [hereinafter referred to as `PMLA'] [as inserted / substituted by Amendment Act 2005 [20 of 2005] dt. 21.5.2005], as the said provision does not bear any reasonable and rational nexus with variety of Scheduled offences mentioned in the Schedule under the Act which may even be non­cogniza....
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.... Act, [iii] records to show compliance of Rules notified by GSR 446(E) dated 1.7.2005, and [d] For issuance of an appropriate writ of Habeas corpus, or order or direction under Article 226 of the Constitution of India, directing forthwith release of the Petitioner from custody, by setting aside the Impugned Arrest Order dated 1.9.2014 and the consequent remand proceedings, as the arrest of the Petitioner is manifestly illegal, without jurisdiction, null and void ab initio, for clear violation of­ [i] The directives of the Hon'ble Apex Court in D.K.Basu v. State of West Bengal, 1997 (1) SCC 416 [more particularly those prescribed in sub­para (2), (9) and (10) of Para 35 thereof, [ii]The provisions of PML Act including amongst others of Section 19(1) of PML Act, which mandatorily prescribe the arrest to be made on the basis of such "material in possession", on the basis of which there exists "reason to believe" that person is `guilty' or an offence under the PML Act; which shall be `recorded in writing'; and pursuant to arrest to inform him of the `Grounds' for such arrest, [iii] Rules notified by Central Government vide GSR ....
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....ccused persons named in the said ECIR dated 17.4.2014. 2.4 Under the provisions of PML Act, although there is no bar on filing a Charge Sheet under section 173(2) of Code of Criminal Procedure, however, second proviso to impugned section 45 provides for filing of a Complaint in writing in the manner prescribed. Therefore, on 18.7.2014, after completing investigations qua the persons accused there under, the Deputy Director of the Directorate of Enforcement filed a complaint before Trial Court against 79 accused, including natural persons and legal entities. The petitioner herein is not named as accused in this exhaustive complaint filed by the Enforcement Directorate against 79 accused, which relief on plethora of statements. 2.5 On 01.09.2014, the petitioner on being summoned appeared before the respondent NO.3. He was coerced to give a confession. He was threatened that even his family members will be roped in the matter and put behind baRs.Vide impugned Arrest Order dated 1.9.2014, the petitioner was arrested by respondent No.3 purportedly in exercise of powers conferred by Section 19(1) of PMLA, while alleging to have reasons to believe that the petitioner has been guilty....
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....rd his statements as per his version and in his own handwriting, he was coerced to sign typed statements prepared by the officers of Respondent No.3 without knowing the contents thereof. By use of coercive measures, various such statements and endorsements were obtained from the petitioner, against his will and contrary to facts. The petitioner was not even permitted to read the contents of statements recorded by the officers of respondent No.3. The petitioner submits that false statements which were fictitious creations of the officers were forcefully thrusted upon the petitioner, and the same are far from being voluntary and thus liable to be rejected. 2.9 On 8.9.2014, the application for opposing further remand and for seeking bail was filed by the petitioner before the trial Court, inter alia seeking temporary bail till final disposal of the application. 3 The case of the respondent No.3, as stated on oath, against the petitioners, is as under: 3.1 That certain information was received from the Joint Commissioner of Customs, Customs Division, Surat that companies M/s. Harmony Diamonds Pvt. Ltd., M/s. Agni Gems Pvt. Ltd. and M/s. R. A. Distributors Pvt. Ltd. have made f....
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....nd Mahendra Kumar Ranka 085005500850 and 085005500879 650.42 9 M/s. Trinetra Trading Pvt. ltd. 6/1943, Office No. 303, Cabin No. 1, 3rd Floor, Navakar Building, Opp. Sumit Kumar Babel and Mahendra Kumar Ranka 085005500849 and 085005500880 176.18 3.3 Investigation have also revealed that the companies based in Hong Kong and Dubai were the beneficiaries of foreign remittances made and the following table shows the amount of rupees in crores were fraudulently remitted by the above said Indian firms. 3.4 Investigation as to who are the sources of such huge funds revealed that fake firms with dummy partners have made RTGS Credits from their respective bank accounts with Axis Bank to the ICICI Bank accounts of above mentioned companies. Sr No Name of the company Address Name of the partners 1 M/s. Aarzoo Enterprises 6/1854, PAI, Shop No. 4, Cab. No. 1, Navkar Chambers, Bhojabhai No Tekro, Mahidarpura, Surat, 395003 Faisal Reza M Ali Patel and Zahir Abbas M Patel 2 M/s. GT Traders 6/869, Ami Kunj Building, Ground Floor, Back Side, Cabin No. A, Chapariya Sheri, Mahidarpura, Surat­395003 Shahid M. Tambo....
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....everal firms, individuals, cheque discounters, commission agents and others based in New Delhi, Mumbai, Surat, Chandigarh, Hyderabad and Ahmedabad have made RTGS transfers to the partnership firms. 3.7 The respondent No.3 had initially started investigation under the FEMA,1999, and following in the FIR NO. I/16/2014 dtd. 11.04.2014 and FIR No. I/17/2014 dtd. 13.04.2014 registered by the Detection of Crime Branch, Surat Police under Sections 420, 465, 467, 468, 471, 477 A of IPC upon the complaint of ICICI Bank investigations under the Prevention of Money Laundering Act, 2002 (PMLA) have been initiated as the Offences under Section 420, 467, 471 of IPC are 'scheduled offences' in terms of Section 2(y) under the Prevention of Money Laundering Act, 2002, which have been registered against the above said companies and its directoRs.Upon scrutiny of the said two FIRs, a case was registered under ECIR No. 01/2014 dtd. 17/04/2014 by the Directorate of Enforcement, Surat for investigation into the offence of money laundering under PMLA, 2002. 3.8 One Shri Afroz Mohamed Hasanfatta one of the petitioner in cognate writ petition along with one Shri Madanlal Jain was the brain behind the....
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....esh Chandra & Co for collecting the cash and during a period of time the cash amounting to Rs. 150 crore was stated to have been transferred. The said cash was delivered to various persons on the instructions of Shri Prafful Patel, Surat. Shri Madanlal Jain in his statement dtd. 22/07/2014 has stated the sources of funds received through RTGS in second layer companies namely, M/s. Vandana & Co, M/s. GT Traders, M/s. Maruti Trading, M/s.Jash Traders, M/s. Aarzoo Enterprises, M/s. Millennium & Co, M/s. Natural Trading and M.D. Enterprise. He had stated that Shri Rakesh Kothari would ensure credits through RTGS transfer to the companies from places like Mumbai , Surat and Delhi. He had also stated that Shri Rakesh Kothari would use the fraudulent remittances made to Hong Kong and Dubai for smuggling of Gold and Diamonds. To specific question on the names of the companies in which Shri Rakesh Kothari had ensured the RTGS transfers to which Shri Madanlal Jain stated that Shri Rakesh made RTGS to M/s.GT Traders and M/s. Vandana & Co. The forensic analysis of the computer seized from the Office of Shri Madanlal Jain has the messages sent from Shri Jayesh Desai regarding the debit ad....
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....ed the RTGS and the RTGS procured in Surat money was given to the Angadias; that the angadias thereafter would transport the money from their Office in Mumbai to Surat and would give it to the persons arranging RTGS in Surat; that the name of RTGS arranging persons were Shri Sagar and Shri Dharmendra; that those two were main persons who arranged RTGS and the total money given by him to the following angadias which was around Rs. 750 Crore were M/s. P. Umesh Chandra & Co, M/s. Gujarat Angadia, M/s. Jayantilal Ambalal Choksi, M/s. S. Babulal, Shri Arpit, Fofal wadi, Bhuleshwar, M/s. Soma Magan, Fofal wadi, Bhuleshwar and in addition to above, certain cheque discounters in Mumbai would also arrange direct RTGS from Mumbai itself; that his brother Shri Rajesh Kothari alias Raju Kothari has a company named Al Khayal Al Dhahabi Jewellery LLC, M­1, M­2, M­3, Gold Souq, Deilva, P.O. Box, 51377, Dubai, U.A.E. 4 According to the petitioner of Special Civil Application No.4496 of 2014, FIR No.5/16 of 2014 was registered by District Crime Branch, Surat on 11.04.2014 alleging various offences under IPC against one M/s. R.A.Distributors Pvt. Ltd., Surat and its directors for prep....
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....08.10.2014. 4.1 In the above mentioned factual aspects, petitioners have filed the present petitions under Article 226 of the Constitution of India with manifold prayers as quoted herein above. 4.2 At the outset, legality, validity and constitutionality of the PML Act is not under challenge. However, Section 45 of PML Act is challenged as arbitrary, unreasonable, illegal, discriminatory inasmuch as certain offences under amended schedule, which can even be non­cognizable and bailable and/or had much lighter importance mandates such offences not only cognizable and non­bailable, but also put onerous restrictions on accused persons of such schedule offences while taking bail from the competent court of law and such accused persons have to undergo rigor of provisions of Section 45 of the PML Act which makes it impossible for them to get any relief unless the court is satisfied that there are reasonable grounds for believing such accused person is not guilty of such offence and that he is not likely to commit any offence while on bail. That in the present case, when the petitioner herein is not even accused of any schedule offence, still, rigors of impugned Section 45 are....
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....mended Act, 2009, the Schedule was partly amended and the offences of lesser gravity remained in Part B of the said Schedule with monetary ceiling. That on 27.11.2011 the Directorate of Enforcement issued a circular Order bearing [Tech] No.03/2011 after cadre restructure of the Directorate and re­designation of posts at various levels. 4.5 On 03.01.2013, Prevention of Money Laundering [Amendment] Act, 2013 was amended further to amend the PML Act and Section 3 of the Act came to be amended and vide Section 30 of the amended act, even offences enumerated in Part B of the Schedule were also inserted in Part A of the Schedule by omitting Part B and substituting Part A of the said Schedule. That on 08.02.2013 Central Government appointed 15.02.2013 as the date on which provisions of Prevention of Money Laundering Act, 2012 came into force by putting same into gazette. 4.6 That Section 54 also came to be amended and which was pertaining to certain officers empowered to assist in inquiry etc. and clause [g] of the said section 54 provide that officers of enforcement appointed under sub­section (1) of Section 36 and Foreign Exchange Management Act, 1999 along with other s....
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....nd bailable offence], any offence under PMLA concerning Proceeds of Crime qua such Scheduled offence, would attracts rigors of Section 45(1) of PMLA thereof (supra). Although the petitioner is not an accused of any scheduled offence, and as such rigors of section 45 are not applicable to him, the respondents are making their endeavors to any how incarcerate the petitioner for oblique purposes. In any event, such provisions are therefore certainly tantamount to transgressing into fundamental rights of life and liberty of persons guaranteed in Articles 14, 19, 21 and 22 of the Constitution of India. 5.2 It is further submitted that viewed from any perspective, the provisions relating to bail under PMLA as well as construction of nature of offences there under, cannot be made in such a manner which may render the very purpose thereof to be oppressive, harsh, indiscriminate and repugnant to basic fundamental right of an individual. 5.3 It is further submitted that law on the subject is no more res integra that­ [i] if the court wants to ignore any law on the ground that it violates the Constitution,declaration by the Court of its unconstitutionality is essential. Eve....
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....ontext otherwise requires,­ (c) "Arresting Officer" means the Director, Deputy Director, Assistant Director or any other officer, authorized in this behalf by the Central Government by general or special order to exercise the power to arrest any person under sub­section (1) of Section 19 of the Act;" "(e) "Director" or "Deputy Director" or "Assistant Director" means a Director or a Deputy Director or an Assistant Director, as the case may be, appointed under sub­section (1) of Section 49 of the Act;" "(f) "Form" means forms appended to these rules;" "(g) "material" means any information or material in the possession of the Director or Deputy Director or Assistant Director or any authorized officer, as the case may be, on the basis of which he has recorded reasons under subsection(1) of Section 19 of the Act;" "(h) "order" means the order of arrest of a person and includes the grounds for such arrest under sub­section (1) of Section 19 of the Act;" (I) Rule 3 of the aforesaid Rules further prescribes that pursuant to the arrest, the Arresting Officer shall prepare an index of the copy of the order and the material....
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....lso define and limit the scope and manner of exercise of powers and functions by any authority under the PMLA. It is not open for the respondents to claim the rules and notifications issued by the Central Government as redundant, much less when the personal liberty of any citizen is taken away in violation of the rules and notifications issued by the Central Government. 5.8 It is further submitted that in exercise of powers conferred by sub­section (1) read with clause (b) of sub­section (2), of Section 73 of the PML Act, the Central Government has notified Rules. 5.9 It is further submitted that on 26.9.2013, the purported Grounds of Arrest were handed over to the counsel for the petitioner, after the arguments in the bail application were concluded by them on earlier date. Even these purported Grounds of Arrest contain the following manifest illegalities­ [a] The same are not even titled as 'Grounds of Arrest'. [b] The same are not even addressed to the petitioner. [c] No FIR of any Scheduled Offence is remotely mentioned in the Grounds of Arrest. [d] No gist of any Scheduled Offence is mentioned in the Grounds of A....
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....ason to believe the applicant as guilty of offence under PML Act, have not even been served upon the applicant, though mandatory under the provisions of sub­section (1) of Section 19 of PML Act. The existence of such grounds for arriving at such reasonable belief is pre­requisite for arrest under PML Act and are required to be recorded in writing. Hence, non­supply of such "Grounds of Arrest", at the time of arrest or immediately thereafter is fatal and hence the applicant is entitled to be released on bail even on this ground. It is further submitted that the arrest officer shall record purported belief that the applicant is guilty of offence under PML Act and thus having arrived at such belief, non­communication of the grounds of arrest has rendered the arrest illegal, null and void ab initio and hence the petitioner is entitled to be released on bail. The applicant has also placed on record by way of an illustration "Grounds of Arrest" being served upon arrest under PML Act. Noncommunication of grounds of arrest to the applicant is thus in violation of Article 14, 21 and 22 of the Constitution of India. Along with the above emphasis is laid on para 30 guidelines ....
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....s procedure, the exclusivity of the offence and section 45 has to be read in consonance with the Aims and Objective of the said Act. It is further submitted that public interest is paramount in the subject case and PMLA, 2002 has been enacted to serve public interest as evident in the opening statement of the Statement of Objects and Reasons, which is as under: "It is being realized, world over, that money­laundering poses a serious threat not only to the financial systems of countries, but also to their integrity and sovereignty." 6.2 It is submitted that the nature and classification of schedule offence be it bailable or cognizable or non bailable or non cognizable has no bearing on offence under S.3 of PMLA as the mandate of the same provides for a distinct offence under Section 3 which is punishable under Section 4 of the statute and creates a new, different and a separate investigation under PML Act which is totally exclusive and divergent of the course and nature of schedule offence investigated and prosecuted by the predicate agency and henceforth, it is pertinent to mention that Section 45 which has its applicability over the offence under Section 3 has to be deal....
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....his authority from Section 19 of the Prevention of Money laundering Act, 2002 and as far as Directors, Deputy Directors, or Assistant Directors are concerned, no authorization of Central Government is required and that, as far as the contention of the petitioner in terms of the power to arrest has been conferred by Central Government exclusively upon the Director in the Enforcement Directorate vide Notification GSR 441(E) dated 01.07.2005, the words used in the notification do not show that the Director was to have powers under the Act to the exclusion of all other officers. It only reveals that the Director has the exclusive power but not necessarily to the exclusion of the others, who are empowered under the Act. It is further submitted that in terms of S. 54 (g) of PMLA, 2002 that other officers of enforcement who are not specially empowered to authorized powers under various Sections like 19, 17 etc. are also to assist the officers like Director, Joint Director, Deputy Director, Assistant Director who exercises the power to arrest etc. under provisions of PMLA and hence 54(g) provides just as the staff to assist the officer exercising and the Assistant Director was well within ....
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....ns of the petitioner against the Directorate as to coercion and threatening are nothing but the afterthought just to abuse the due process of law and it is respectfully submitted that the arrest under section 19 (1) of PML Act by respondent no. 3 is valid and within the powers conferred upon him by Section 19 read with Rules notified vide GSR 446 (E) dated 1.7.2005 of Prevention of Money Laundering Act, 2002 and not in derogation with the fundamental rights enshrined by the Constitution of India as the said arrest comes under the purview and fulfills requirement of S. 19. It is also submitted to the Hon'ble Court that as provided by S. 19 (1) grounds of arrest were communicated to the accused, and a due medical check up was under taken after which accused was produced within stipulated time frame before the Hon'ble Designated Judge under PML Act, Ahmedabad along with the detailed Production memo providing reasons and written grounds of such arrest and the application for custody thereof which were not objected by the petitioner during the said production. It is further submitted that the baseless allegation as to derogation of fundamental rights are nothing but an afterthought adde....
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.... was no question of coercion or duress. The petitioner in his own handwriting has also mentioned that whatever was stated during the remand period was voluntarily, without any coercion and the facts to the best of his knowledge. 6.16 It is further submitted that on 08.09.2014 application opposing further enforcement custody has never been an issue involved in the given case as Enforcement Directorate has not prayed for any further custody of the petitioner and in addition to that Hon'ble Designated Court vide their order dated 09/09/2014 was pleased to reject the prayer of temporary bail to the petitioner and as on date the alleged involvement of the petitioner in offence of money laundering has been made clear by filing of a prosecution complaint dated 29.10.2014 against the petitioner and others in the Hon'ble Designated Court. The proceeds derived from helping Shri Madanlal Jain and others in the illegal transfer of money to Hong Kong and Dubai are being investigated against the petitioner. 6.17 It is further submitted that the Arrest Memo was served to petitioner and the inventory of the belongings of the petitioner were handover to Shri Amit Solanki, a Chartered Account ....
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....strength of fake documents to Dubai for smuggling of Gold and Diamonds was stated by Shri Madanlal Jain. Shri Rajesh Kothari is a beneficiary of the unlawful remittances to Dubai and his role has been evident by the summary of email messages sent from the computer of Shri Madanlal Jain wherein the summary reads as under: details of debit of Rajesh Kothari's account. It is submitted that the petitioner is guilty of offence under Money laundering in as much as he had financially helped Shri Madanlal Jain for making RTGS transfers to the companies owned by Shri Madanalal Jain. The Petitioner has used cheque discounters, angadia firms for sending money to various places and has also made arrangements for RTGS transfers from Mumbai itself. The statements of various persons who transferred monies belonging to the petitioner and further allowed the same for RTGS transfers is insurmountable. 6.19 It is further submitted that the petitioner with his strong financial clout sourced huge chunks of money to the companies mentioned under Group C which belonged to Shri Madanlal Jain is undeniable. That the petitioner having lent money to Shri Madanlal Jain for his fraudulent activities has als....
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....himself as stated the way the funds were seen to be transferred through RTGS. Shri Rajesh Kothari, the brother of the petitioner has been named by Shri Madanlal Jain to be a beneficiary of illegal remittances in Dubai and the petitioner with the help of his brother used such illegal remittances for smuggling of Gold and Diamonds is incontrovertible. Hence it is most respectfully submitted that the petitioner is guilty of offence of money laundering as defined under Section 3 of PMLA,2002. 6.22 It is further submitted that the petitioner's involvement in the offence of money laundering has been established by the statements of various persons and the investigation carried out by the Directorate of Enforcement following which a prosecution complaint has been duly filed against the accused before Designated Court on 29/10/2014. Shri Madanlal Jain for whom the petitioner lent Rs. 750 crore financial help for illegal transfer of money amounting to Rs. 5395.75 Crore has stated that the two brothers, the Petitioner and Shri Rajesh Kothari used the illegal remittances for the sake of smuggling of Gold and Diamonds. The petitioner has himself named various commission agents and cheque di....
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.... but proceeds of crime as has been defined under Section 2 (1) (u) of PMLA,2002. 6.25 It is further submitted that it has been held by the Hon'ble Designated Judge under PML Act, Ahmedabad that the Respondent No. 3 i.e. Assistant Director of Enforcement has been authorized to execute arrest and arrest is not invalid in law vide their order dated 09.09.2014 and Hon'ble Designated Court was also pleased to reject the interim and regular bail application of the petitioner. The Hon'ble Designated Court was pleased to reject the bail application of petitioner vide its seasoned order dated 8/10/2014. 6.26 It is further submitted that on mere perusal of the bare provisions of Section 37 of NDPS Act and Section 45 of the PML Act shows similarity in the provisions moreover, the S. 45 of PML Act cannot be construed as violative of the Constitution of India on sole reasons of providing grounds in addition to the normal bail procedure provided under code of criminal procedure, furthermore the mandate of the Act is intended to make money laundering an offence and provide for its punishment thereof so as to deprive the offender to enjoy fruits of money which has ill gotten source, hencefor....
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....me has been communicated to the petitioner as described in above paragraphs. 6.31 It is further submitted that the impugned provisions and the actions or inactions of the Respondents cannot be upheld as legal and proper and in consonance with the fundamental rights guaranteed under the constitution of India. 7 Mr. Sunit Shah, learned counsel for the petitioner of Special Civil Application No.4672 of 2014 adopted the arguments canvassed by learned Senior Advocate Shri Vikram Chaudhary appearing for the petitioner in Special Civil Application No.4496 of 2014. He further relied on debate in the Rajya Sabha [Council of States] when the Prevention of Money Laundering Bill, 1999 was presented after it was passed by Lok Sabha [House of Representatives]. He further submitted that under Section 24 of the Act burden of proof is shifted upon accused, and therefore, it is virtually impossible for an accused of scheduled offence under Money Laundering Act to secure his freedom. 8 Before dealing with the rival contentions and submissions made by the learned counsels for the parties, the relevant provisions of the Prevention of Money­Laundering Act, 2002 and The Prevention of Money&s....
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....Typically constitute illicit capital flight from a country and do not return back to the country; and [v] Flow­through: The funds enter a country as part of the laundering process and largely depart for integration elsewhere. [D] The Act is a special Law and a self contained code intended to address the increasing scourge of money laundering and provides for confiscation of property derived from or involved in money laundering. The Act provides a comprehensive scheme for investigation, recording of statements, search and seizure, provisional attachment and its confirmation, confiscation and prosecution. The provisions of the Act [vide Sec.71] are enacted to have an overriding effect [entrenched by a non­obstante provision], notwithstanding anything inconsistent therewith contained in any other law fro the time being in force. [E] The provisions of the Act are fair, reasonable and have sufficient safeguards, checks and balances to prevent arbitrary exercise of power and/or abuse by the authorities and provide several layers of scrutiny at various stages of the proceedings. [F] A person accused of money laundering is subject to broadly two parallel actions: ....
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....ial institutions regarding reportable transactions; [iii] confiscation of the proceeds of crime; [iv]declaring money­laundering to be an extraditable offence; and [v] promoting international co­operation in investigation of money­laundering. [d] the Political Declaration and Global Programme of Action adopted by United Nations General Assembly but its Resolution No.S­17/2 of 23rd February, 1990, inter alia, calls upon the member States to develop mechanism to prevent financial institutions from being used for laundering of drug related money and enactment of legislation to prevent such laundering. [e] the United Nations in the Special Sessions on countering World Drug Problem Together concluded on the 8th to the 10th June, 1998 has made another declaration regarding the need to combat moneylaundering. India is a signatory to this declaration. 2 In view of an urgent need for the enactment or a comprehensive legislation inter alia for preventing money­laundering and connected activities confiscation of proceeds of crime, setting u of agencies and mechanisms for co­coordinating measures for combating money­laundering, etc....
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....grant of bail so that the Court may grant bail to a person who is below sixteen years of age, or woman, or sick or infirm, (b) levy of fine for default of non­compliance of the issue of summons, etc. (c) make provisions for having reciprocal arrangement for assistance in certain matters and procedure for attachment and confiscation of property so as to facilitate the transfer of funds involved in money­laundering kept outside the country and extradition of the accused persons from abroad. 4 The Bill seeks to achieve the above objects. Act 15 of 2003 The Prevention of Money­Laundering Bill having been passed by both the Houses of Parliament received the assent of the President on 17th January, 2003. It came on the Statute Book as THE PREVENTION OF MONEYLAUNDERING ACT, 2002 (15 of 2003). Section 2 contains definitions. [c] "Assistant Director" means an Assistant Director appointed under sub­section (1) of section 49; [d] "attachment" means prohibition of transfer, conversion, disposition or movement of property by an order issued under Chapter III; [da]"authorised person" means an authorised person as defined in clause (c) of sec....
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....of crime including tis concealment, possession, acquisition or use and projecting or claiming it as untainted property shall be guilty of offence of moneylaundering. 4 Punishment for money­laundering.­ Whoever commits the offence of money­laundering shall be punishable with rigorous imprisonment for a term which shall not be less than three years but which may extend to seven years and shall also be liable to fine which may extend to five lakh rupees: Provided that where the proceeds of crime involved in money­laundering relates to any offence specified under paragraph 2 of Part A of the Schedule, the provisions of this section shall have effect as if for the words "which may extend to seven years", the words "which may extend to ten years" had been substituted. 19 Power to arrest.­ [1] If the Director, Deputy Director, Assistant Director or any other officer authorised in this behalf by the Central Government by general or special order, has on the basis of material in his possession, reason to believe (the reason for such belief to be recorded in writing) that any person has been guilty of an offence punishable under this Act, he may arrest such pe....
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....e the Public Prosecutor opposes the application, the court is satisfied that there are reasonable grounds for believing that he is not guilty of such offence and that he is not likely to commit any offence while on bail. Provided that a person, who, is under the age of sixteen years, or is a woman or is sick or infirm, may be released on bail, if the Special Court so directs: Provided further that the Special Court shall not take cognizance of any offence punishable under section 4 except upon a complaint in writing made by­ [i] the Director; or [ii]any officer of the Central Government or a State Government authorised in writing in this behalf by the Central Government by a general or special order made in this behalf by that Government. [1A] Notwithstanding anything contained in the Code of Criminal Procedure, 1973, [1973 (2 of 1974], or any other provision of this Act, no police officer shall investigate into an offence under this Act unless specifically authorized, by the Central Government by a general or special order, and, subject to such conditions as may be prescribed. [2] The limitation on granting of bail specified in sub­section (1) is in addit....
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...., instructions and directions of the Central Government: Provided that no such orders, instructions or directions shall be issued so as to­ [a] require any authority to decide a particular case in a particular manner; or [b] interfere with the discretion of the Adjudicating Authority in exercise of his functions. 53 Empowerment of certain officers.­ The Central Government may, by a special or general order, empower an officer not below the rank of Director of the Central Government or of a State Government to act as an authority under this Act: Provided that the Central Government may empower an officer below the rank of Director if the officer of the rank of the Director or above are not available in a particular area. 54 Certain officers to assist in inquiry, etc.­ The following officers are hereby empowered and required to assist the authorities in the enforcement of this Act, namely:­ [a] to [f] xxx [g] officers of enforcement appointed under subsection (1) of section 36 of the Foreign Exchange Management Act, 1999 (40 of 1999); 73 Power to make rules.­ [1] The Central Government may, by notificatio....
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....tion. 36. Directorate of Enforcement - [1] The Central Government shall establish a Directorate of Enforcement with a Director and such other officers or class of officers as it think fit, who shall be called officers of Enforcement, for the purposes of this Act. [2] Without prejudice to provisions of sub­section (1), the Central Government may authorise the Director of Enforcement or an Additional Director of Enforcement or a Special Director of Enforcement or a Deputy Director of Enforcement to appoint officers of Enforcement below the rank of an Assistant Director of Enforcement. [3] Subject to such conditions and limitations as the Central Government may impose, an officer of enforcement may exercise the powers and discharge the duties conferred or imposed on him under this Act. Relevant notifications / Orders / Circular, are reproduced hereinbelow: "Notification New Delhi, the 1st July, 2005 G.S.R.440[E] - In exercise of the powers conferred by sub­section (1) of Section 49 of the Prevention of Money­laundering Act, 2002 [15 of 2003], the Central Government hereby appoints, with effect from the 1st day of July, 2005, the Director, Financial Intell....
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....d by sub­section (1) of Section 49 of the Prevention of Money­laundering Act, 2002 (15 of 2003), the Central Government hereby appoints, with effect from the 1st day of July, 2005, the Special Director holding office immediately before the said date under the Foreign Exchange Management Act, 1999 (42 of 1999), as the Additional Director for the purpose of the Prevention of Money­laundering Act, 2002. [F.No.6/2/2005­E.S.] ANUJ SARANGI, Director ORDER New Delhi, the 13th September, 2005 S.O.1274[E] - In exercise of the powers conferred by Sub­section (1) of Section 49 of the Prevention of Money­laundering Act, 2002 (15 of 2003) the Central Government hereby appoints, with effect from the 1st day of July, 2005, the Deputy Director holding office immediately before the said date under the Foreign Exchange Management Act, 1999 (42 of 1999), as the Deputy Director for the purpose of the Prevention of Money­laundering Act, 2002. [F.No.6/2/2005­E.S.]] ANUJ SARANGI, Director ORDER New Delhi, the 13th September, 2005 S.O.1275[E] - In exercise of the powers conferred by Sub­section (1) of Section 49 of the Prevention of Money&s....
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....to approval of Special Director (II)Statutory Authorities under FEMA: The Assistant Director shall continue to act as Investigating Officer. The authorities and functions presently being discharged by the officers shall continue to be so discharged. (III) Legal cadre: The legal cadre shall be consulted in all matters relating to legal issues as well as before the Courts/Tribunals/Adjudicating authorities. The above mentioned authorities shall also perform other works/functions, as may be specifically assigned to them from time to time by the Director of Enforcement/their supervisory officers. 9 The Apex Court in the case of Ram Jethmalani & ORs. vs. Union of India & ORs.reported in (2011)8 SCC 1, extensively considered unaccounted / black money generated in India by Indians and transferred and accumulated in foreign banks and about prevention of money­laundering and Part­I of the above order begins as under: "1 "Follow the money" was the short and simple advice given by the secret informant, within the American Government, to Bob Woodward, the journalist from Washington Post, in aid of his investigations of the Watergate Hotel break in. Money has ....
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....nstances of tax evasion, to increase in volume and in intensity. 14. When a catchall word like "crimes" is used, it is common for people, and the popular culture to assume that it is "petty crime," or crimes of passion committed by individuals. That would be a gross mis­characterization of the seriousness of the issues involved. Far more dangerous are the crimes that threaten national security, and national interest. For instance, with globalization, nation states are also confronted by the dark worlds of international arms dealers, drug peddlers, and various kinds of criminal networks, including networks of terror. International criminal networks that extend support to home­grown terror or extremist groups, or those that have been nurtured and sustained in hostile countries, depend on networks of formal and informal, lawful and unlawful mechanisms of transfer of monies across boundaries of nationstates. They work in the interstices of the micro­structures of financial transfers across the globe, and thrive in the lacunae, the gaps in law and of effort. The loosening of control over those mechanisms of transfers, guided by an extreme neo­liberal thirst to c....
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....harges as an offence is within plain meaning of words used and such words are not to be stretched on any notion by supplying casus omissus. 10.3 Maxwell in the Interpretation of Statutes [12th Edn.] says : "the strict construction of penal statutes seems to manifest itself in four ways : in the requirement of express language for the creation of an offence; in interpreting strictly words settling out the elements of an offence; in requiring the fulfillment to the letter of statutory conditions precedent to the infliction of punishment; and in insisting on the strict observance of technical provisions concerning criminal procedure and jurisdiction. 10.4 In Craies and Statute Law [7th Edn. At P.529] it is said that penal statutes must be construed strictly. At page 530 of the said treatise, referring to [U.S. v. Wiltberger [1820]2 Wheat [US] 76], it is observed, thus : the distinction between a strict construction and a more free one has, no doubt in modern times almost disappeared, and the question now is, what is the true construction of the statute? I should say that in a criminal statute you must be quite sure that the offence charged is within the letter of the law. This R....
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.... must be so construed that the Court is able to maintain a delicate balance between a judgment of acquittal and conviction and an order granting bail much before commencement of trial. The Court will be required to maintain finding as to the possibility of his committing a crime after grant of bail. However, such an offence in future must be an offence under the Act and not any other offence. Since it is difficult to predict the future conduct of an accused, the Court must necessarily consider this aspect of the matter having regard to the antecedents of the accused, is propensities and the nature and manner in which he is alleged to have committed the offence. 10.7 That Section 2 of Chapter I contains various definitions and money laundering is defined under Section 2(p) makes a reference that `money laundering' means the meaning assigned to it in section 3 of Chapter II under the head Offences of Money­Laundering is wide and extensive. 10.8 It is worth noting that Section 3 is again amended and earlier words "with the proceeds of crime and projecting" came to be substituted by Act 2 of 2013 with effect from 15.02.2013 vide S.O. 343(E), dated 8.2.2013, with the words....
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.... Section 3 read with Sections 44 and 45 of PML Act and to take care of attachment, confiscation of such tainted property under sections 5, 8, etc. subject to outcome at the end of trial before the special court. In the above context, section 24 of PML Act cast burden of proof upon an accused person to prove that proceeds of crime are untainted property. 10.12 A bare perusal of section 45 of the PML Act reveals that it is pertaining to offences to be cognizable and non­bailable and begins with nonobstinate clause "notwithstanding anything contained in the Code of Criminal Procedure, 1973" and mandates that no person accused of offence punishable for term of imprisonment for more than 3 years under Part A of the Schedule shall be released on bail or on his own bond unless; [i] the Public Prosecutor has been given opportunity to oppose the application for such release; and [ii] Where the Public Prosecutor opposes such application, the court has to satisfy about existence of reasonable grounds for believing that such accused person is not guilty of such offences and that he is not likely to commit such offences while on bail. The above two conditions are of course subject to two....
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.... individual after omission of Part B and inclusion by way of substitution of Part A of the schedule under Section 2[y] of the PML Act resulting into a stricter procedure if considered in view of aforementioned facet of money laundering read with object and reasons of the Act, we are of the view that such an amendment Act 2 of 2013 with effect from 15.02.2013 consequently resulting into such offender under section 3 of the PML Act to undergo rigor of Section 45 is not ultra vires to the Constitution of India. That such offences of lesser gravity having negligible consequences if related or connected with criminal activities of offenders of Section 3 of PML Act viz. money laundering transactions having interstate and/or cross border implications become menace to humankind. Even to trace out its source, transfer and ultimate use even by terrorists group or outlaws jeopardize integrity and sovereignty of nations and having far reaching consequences on financial system / economies of such sovereign state along with security of the citizens cannot be viewed only on the touchstone of cognizable or non­cognizable and bailable and non­bailable offences as contended by the learned Se....
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....uthority under the Act and Section 49 is about appointment and powers of authorities and other officers, Section 50 is about powers of authorities regarding summons, production of documents and to give evidence etc. Section 51 is for jurisdiction of authorities. Section 52 is for powers of Central Government to issue directions and Section 53 is for empowerment of certain officers and Section 54 is for certain officers to arrest in inquiry. Section 73 empowers the Central Government to make the rules and sub­section (1) of section 73 specifically provides that the Central Government may, by notification, make rules for carry out the provisions of this Act and sub­section (2) states in particular, and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matteRs.Clause [p] includes the manner in which order and the material referred to in section 2 and Section 19 shall be maintained and precisely for this purpose. Clause [a] provides for form in which records referred to in the Act to be maintained. 10.14 The Rules, 2005 defines "Arresting Officer" as per definition under rule 2(c) and contains, "," [coma] after....
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....ction (2) of section 19 further imposes duty upon such competent authority to forward a copy of such arrest with the material in his possession to the adjudicating authority in a sealed envelop as per the procedure prescribed and subsection (3) of Section 19 mandates that every person arrested under that section shall have to be produced before the learned Magistrate or the Metropolitan Magistrate, as the case may be, having jurisdiction, within a period of 24 houRs.The above provisions are in consonance with Article 22(1) of the constitution of India. 10.18 That the Ministry of Finance, Department of Revenue has appointed the Enforcement Officer in the Directorate of Enforcement appointed under sub­section (2) of Section 36 of FEMA as Assistant Director for the purpose of PML Act and such order is issued in exercise of powers conferred by sub­section (1) of Section 49 of the PML Act. When the above notification is in force and subsequent orders are issued on the same line by the Ministry of Finance, Department of Revenue, Central Government and definition of Assistant Director as contained in Section 2(1)(c) of PML Act means the Assistant Director appointed under sub&sh....
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....fect arrest under Section 19(1) of the PML Act, in which reliance was placed on Scheme of the Act viz. Sections 19, 45, 49, 73, etc came into consideration along with SR 441(E) dated 01.07.2005 and other such notifications. The learned Single Judge of Bombay High Court in paras 13 to 17 held as under: "13.I have considered these arguments. First the rules which have been relied on have been framed in exercise of powers under clauses (1) and (p) of sub­section (2) of Section 73 of the Act. These clauses (a) and (p) of Section 73(2) read as under: "73.(2)(a) the form in which records referred to in this act may be maintained; (p) the manner in which the order and the material referred to in sub­section (2) of Section 19 shall be maintained. 14. The rules were, thus, framed in order to prescribe forms in which records were to be maintained and the manner in which order and material referred to in sub­section (2) of section 19 was to be maintained. The term "Arresting Officer" was defined for the purpose of those rules only. Inserting in clause (c) (1) of Rule (2) of those Rules, a subsequent comma, [,] after the words, "or any other offi....
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....ffect from the 1ast day of July, 2005, the Director of Enforcement holding office immediately before the said date under the Foreign Exchange Management Act, 1999 (42 of 1999), as director to exercise the exclusive powers conferred under Section 5, section 8, section 17, section 18, section 19, section 20, section 21, sub­section (1) of section 26, section 45, section 50, section 57, section 60, section 62, and section 63, of the said Act and the said Director shall also concurrently exercise powers conferred by sub­section (3) sub­section (4) and subsection (5), of section 26, section 39, section 40, section 41, section 42, section 48, section 49, section 66 and section 69 of the aforesaid Act". 17. As rightly submitted by the learned Advocate General, the words used in the notification do not show that the Director was to have powers under Section 5, 8, 17, 18, 19, 20, 21, 26, 28 of the Act, to the exclusion of all other offences. It only shows that the Director has the exclusive power but not necessarily to the exclusion of others, who have been empowered under the Act. Since the act itself does not provide for any power in the Central Government to issue no....
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.... Deputy Director and Assistant Director for exercise of powers under PML Act. This is further evident from the fact that in continuation of order No. S.O. 906[E] dated 21.04.2010 issued by Ministry of Finance in exercise of powers conferred by sub­section (1) of Section 49 of the PML Act, the Central Government has appointed enforcement officer in the Directorate of Enforcement appointed under sub­section (2) of Section 36 of The Foreign Exchange Management Act, 1999 as Assistant Director for the purpose of PML Act, 2002. Circular Order No.03/2011 dated 27.08.2011 further designated the posts of Deputy Director, Assistant Director Grade­I and Assistant Director, Grade­II and conferred power of arrest upon Assistant Director, subject to approval of Special Director. Therefore, harmonious reading of Sections 48 to 54 and definition of Assistant Director contained in Section 2[c] of PML Act reveal the Assistant Director - respondent No.3 in this case is duly empowered to order arrest under Section 19 of the PML Act. 10.23 That in view of our holding that the Assistant Director of Directorate of Enforcement - respondent No.3 is competent and authorized officer und....
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....and we find no breach of any procedural enumerated either under Article 19(1)of the PML Act or under Article 22(1) of the Constitution of India. Further, since the subject matter is pending before the competent designated court and upon registering complaint, we do not further deliberate on the import of the nature of involvement of the petitioners for the offences under Section 3 of the PML Act, but the fact remains that affidavit filed by the respondent No.3 placing his version on the record remains undisputed till the matter was heard and kept for judgment. 10.26 Thus, it cannot be said that order of arrest suffers from vice of any illegality on the ground that it is ordered by the incompetent or unauthorized and there is no failure in adhering procedure laid down under Seton 19(1) of the PML Act and further no breach to the guidelines laid down in the case of D.K.Basu [supra] and it cannot be said that the petitioners are detained or confined illegally warranting issuance of writ of Habeas Corpus. At the same time respondent No.3 - Assistant Director of Enforcement is competent and authorized to issue order of arrest under Section 19(1) of the PML Act and no case is made out....
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.... integration normally associated with a moneylaundering operation, to be effective and successful, is the contention on behalf of the respondents. Section 23 enjoins a presumption in respect of inter­connected transactions. Money­laundering is defined in Section 2 (p) (with reference to Section 3). Though Section 3 defines the offence of money­laundering, the ingredients of the offence enumerated in this provision define money­laundering 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 moneylaundering in Section 2 (p) by ascription of the definition of the offence of money­laundering in Section 3. This technique, though specific, is not unique. As observed in LIC of India Vs. Crown Life Insurance Co., 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....
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....re money­laundering involves two or more connected transactions and one or more such transactions is/are proved to be involved in money­laundering, 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 money­laundering as well. The presumption enjoined by Section 23 is clearly a rebuttable presumption i.e., presumptio pro tantum. In Izhar Ahmad v. Union of India, 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 false­hood 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 irr....
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....nt/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 money­laundering, that the other transactions are also to be presumed so, unless the contrary is established. As observed in Izhar Ahmad (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 money­laundering; 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 moneylaundering, subject of course to the said presumption being rebutted by proof to the contrary. 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 that the provi....
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.... a person 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 money­laundering 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. In response to a notice....
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....e provisions as per golden rule of interpretation. 13 In the case of D.K.Basu [supra], the Apex Court upheld the basic human rights of an individual in the context of Article 21 of the Constitution of India vis­a­vis custodial violence and deprecated naked violation of human dignity by custodial violence and found third degree methods are totally impermissible. While laying down mandatory guidelines in paras 35 and 36 of the said judgement mandated police authorities and likewise to follow such guidelines strictly and breach thereof would entail serious consequences, including proceedings to be taken up by the Court concerned in accordance with law, including punishment for contempt of court. However, as we have noticed, discussed and upheld that arrest of the petitioners by a competent officer viz. The Assistant Director - respondent No.3 herein duly empowered to do so and further envisaged procedure under Section 19 of the PML Act, which galore on the record of the case. Therefore, judgement in the case of D.K.Basu [supra] is not applicable to the facts of the present petitioners. 13.1 The decision in the case of Harikishan [supra] was in the context of order of det....