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2022 (7) TMI 877
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....ST CHARGESHEET K. WHETHER ARTICLE 20(1) IN FACT VIOLATED L. IMPUGNED ATTACHMENT AND EQUIVALENT VALUE M. CONCLUSIONS N. OPERATIVE DIRECTIONS A. INTRODUCTION 2. These two writ petitions challenge proceedings initiated by the Directorate of Enforcement, the respondents herein, under the provisions of the Prevention of Money Laundering Act, 2002 (The Act). The leading writ petition had come to be preferred at a time when a provisional order of attachment came to be made under the Act. The Court, by its order of 06 January 2022, entertained the writ petition and called upon the respondents to file their replies. On 03 March 2022, this Court took notice of the proceedings initiated by the Adjudicating Authority before whom the matter came to be placed for the purposes of confirmation of the provisional order of attachment. Taking note of the rival submissions, this Court on that date allowed the amendments proposed and passed the following detailed order: - "CM APPL. 10948/2022 (for amendment of petition) in W.P.(C) 14999/2021 CM APPL. 10951/2022 (for amendment of petition) in W.P.(C) 15000/2021 The record reflects that the present petition was instituted at a stage when a ....
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....etitioners are charged did not even form part of scheduled offences as contemplated under the PMLA. Additionally, the Court notes that the recordal of satisfaction by the Adjudicating Authority, prima facie, does not appear to satisfy the requirements of Section 8 of the PMLA. The matter requires consideration. Till the next date of listing, there shall be stay of further proceedings before the Adjudicating Authority. Let this matter be posted again on 31.03.2022." 3. The aforesaid order was taken in appeal by the respondents in terms of LPA Nos. 179/2022 and 180/2022 which were dismissed by the Court on 22 March 2022 in the following terms: - "1. Aggrieved by the order dated 3rd March 2022 passed by the learned Single Judge in W.P.(C) Nos. 1499/2021 and 1500/2021, staying the proceedings before the adjudicating authority, the appellant has preferred the present appeals. 2. After some arguments, learned counsel for the appellant, on instructions, confines his relief only to the extent of the observations made in para 3 of the order dated 3rd March 2022 as the apprehension of the appellant is that this direction will be treated as a precedent in all other cases and wherever....
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.... and other accused in CC No. 3/2012 (First Chargesheet). The aforesaid chargesheet came to be challenged by PIL before this Court which in terms of its judgment of 05 September 2014 quashed the FIR as well as the consequential chargesheet which was submitted. That judgment rendered by this Court presently forms subject matter of challenge before the Supreme Court in SLP (Crl.) 2576/2015. Although that special leave petition remains pending on the board of the Supreme Court as on date, the judgment of this Court has neither been stayed nor placed in abeyance. 6. The record further reflects that subsequent to the allocation of the coal block in favour of PIL coming to be cancelled in terms of the directions issued in Manohar Lal Sharma, a second FIR came to be registered by CBI on 02 December 2016 numbered as RC No.221/2016/E0035. On conclusion of investigation, CBI proceeded to file a chargesheet numbered as 1/2022 (Second Chargesheet) before the competent court on 23 January 2020 alleging commission of offence under Section 120B read with Section 420 of the Indian Penal Code. The allegation in the second chargesheet essentially is that PIL submitted false and forged documents in o....
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....missed writ petitions challenging the constitutional validity of a particular statutory provision while an identical challenge was pending before the Supreme Court. It was in that backdrop that the Supreme Court observed that since an identical question was engaging the attention of that Court, the High Court should have deferred hearing on the writ petitions rather than dismissing the same and directing parties to approach the Supreme Court. The order of Deepak Talwar W.P. (Crl) 385/2019 which was cited pertained to a matter where prayers (b) and (c) and the challenge to the vires of a provision was identical to a challenge pending before the Supreme Court. In Asst. Director, Directorate of Enforcement CRL.M.C. 1455/2021 again the Court found that the proposed issues which were filed in proceedings before the Supreme Court were identical to those which arose in the appeals laid before this Court. 9. Having conferred its thoughtful consideration on the aforesaid contention, the Court finds itself unable to accede to the submission of Mr. Raju for the following reasons. It may, at the outset, be noted that the prayer for deferral of proceedings on the present writ petitions was rai....
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....r of the first chargesheet. It was in the aforesaid backdrop that Mr. Sibal argued that once that chargesheet had come to be quashed, no proceedings could have been validly initiated under the Act. In any case and without prejudice to the above, Mr. Sibal submitted that since undisputedly the impugned proceedings emanate from the second chargesheet and stand restricted to events upto 04 September 2003 only, and since the allocation of coal cannot constitute proceeds of crime, the writ petitions are liable to be allowed on this short ground alone. It was further urged by Mr. Sibal that admittedly the coal block had came to be allocated on 04 September 2003. It was pointed out that the Act itself came to be enforced subsequently on 01 July 2005. The provisions of Section 120B and 420 of the Indian Penal Code came to be included as scheduled offences only on 01 June 2009. In view of the aforesaid facts, Mr. Sibal, learned Senior Counsel, as well as Mr. Chawla, learned counsel, appearing in the connected writ petition contended that any penal action or attachment under the Act for acts of alleged money laundering which occurred prior to 01 July 2005 would be wholly illegal and violativ....
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.... amendment] and if so, is it permissible to do so? 7. Whether the filing of a chargesheet/complaint/FIR in the predicate offence is a prerequisite for an exercise of power of arrest under the PMLA? Can money laundering not be a standalone offence in the context of Section 3 read with Section 2(u) of the PMLA? 8. Whether the reliance on the statements recorded by the officers of the Enforcement Directorate during the investigation in judicial proceedings, violate Article 20[3] of the Constitution and are inadmissible in light of section 25 of the Evidence Act? 9. Whether the provisions concerning attachment of property under the PMLA violates the right to property under Article 300A? 10. Whether the PMLA can be applied to acts which occurred prior to the addition of offence under the Schedule to the said Act? 11. Whether a writ court can grant blanket no coercive steps order without any factual foundation being pleaded/being examined merely because constitutional validity of certain provisions has been challenged? 12. Whether the Sections 17 and 18 of PMLA, as amended, relating to search and seizure are unconstitutional and void? 13. Is the power of arrest conferred un....
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....ddressed by Mr. Sibal as well as Mr. Chawla essentially turn and rest on the facts leading to the filing of the present petitions, the past history of litigation inter partes and the jurisdiction of the Adjudicating Authority to proceed under the Act. In fact the submissions advanced at the behest of the petitioners proceeded on the assumption that the provisions of the Act were valid. 15. As noted hereinabove, these writ petitions do not call in question the constitutional validity of any provision of the Act. The writ petitions as well as the submissions addressed thereon proceed on the basis of the submission that an allocation of a coal block cannot constitute proceeds of crime and that the proceedings impugned here are wholly illegal and arbitrary in light of the facts noticed hereinabove as well as the quashing of the first chargesheet. For the aforesaid reasons, the submission as addressed by Mr. Raju in this respect is negatived. C. PRELIMINARY OBJECTION 16. The respondents then raised a further preliminary objection and contended that since the writ petitions only assail a show-cause notice issued under the Act, the High Court should refrain from entertaining that chall....
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....fically constituted for the purpose are not denuded of powers and authority to initially decide the matter and ensure that ultimate relief which may or may not be finally granted in the writ petition is not accorded to the writ petitioner even at the threshold by the interim protection granted. 6. In the instant case, the High Court has not indicated any reason while giving interim protection. Though, while passing interim orders, it is not necessary to elaborately deal with the merits, it is certainly desirable and proper for the High Court to indicate the reasons which have weighed with it in granting such an extraordinary relief in the form of an interim protection. This, admittedly, has not been done in the case at hand. 7. While issuing notice on 7-7-2003, this Court had granted interim stay of the impugned interim order. The respondent had entered appearance and we have heard the learned Senior Counsel on either side. In the fitness of things, taking into account the above circumstances, we dispose of the appeal with a direction that the proceedings emanating from the show-cause notice shall be continued, but the final order passed pursuant thereto shall not be communicat....
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..... However, those very decisions have also carved out the exceptions in which such a challenge would be sustainable. The Court takes note of the following principles as were enunciated in the celebrated and oft cited decision of the Supreme Court in Whirlpool Corporation Vs. Registrar of Trademarks (1998) 8 SCC 1:- "14. The power to issue prerogative writs under Article 226 of the Constitution is plenary in nature and is not limited by any other provision of the Constitution. This power can be exercised by the High Court not only for issuing writs in the nature of habeas corpus, mandamus, prohibition, quo warranto and certiorari for the enforcement of any of the Fundamental Rights contained in Part III of the Constitution but also for "any other purpose. 15. Under Article 226 of the Constitution, the High Court, having regard to the facts of the case, has a discretion to entertain or not to entertain a writ petition. But the High Court has imposed upon itself certain restrictions one of which is that if an effective and efficacious remedy is available, the High Court would not normally exercise its jurisdiction. But the alternative remedy has been consistently held by this Court....
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.... entertained the petition and granted the petitioner relief notwithstanding the existence of an alternative remedy. We need only add that the broad lines of the general principles on which the Court should act having been clearly laid down, their application to the facts of each particular case must necessarily be dependent on a variety of individual facts which must govern the proper exercise of the discretion of the Court, and that in a matter which is thus pre-eminently one of discretion, it is not possible or even if it were, it would not be desirable to lay down inflexible rules which should be applied with rigidity in every case which comes up before the Court." 18. The jurisdictional grounds on which the writ petitions were initially entertained were noticed in the orders of 06 January 2022 and 03 March 2022. It becomes pertinent to note that the writ petition was originally entertained at a time when a provisional order of attachment had come to be issued. It was at that stage that the Court had issued notice and called upon the parties to exchange pleadings. The amendment applications additionally laid challenge to the notice issued by the Adjudicating Authority initiatin....
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....lleged to amount to a misrepresentation with respect to its captive activity, submission of false and incorrect information in order to obtain allotment of the coal block and diversion of coal extracted from that block in the open market. In terms of that first FIR and chargesheet, PIL was alleged to have diverted 2,27,000 tons of coal in the open market and thus earned illegal profits amounting to Rs. 22.7 crores. The allegations forming subject matter of the first chargesheet were succinctly noticed by the Court in its judgment of 05 September 2014 as follows:- "3. During the course of hearing, the facts adverted to by learned Senior Counsel for petitioners as culled out from the charge-sheet are as under: I. M/s. Prakash Industries Ltd. (PIL) referred to as AccusedNo.4 installed a sponge iron plant in the year 1993 with an annual production capacity of 1,50,000 MT per annum with one functioning kiln. (Para-17.3 of the ChargeSheet at page-l46 of Vol.I refers) II. In the year 1996, accused No.4-PIL added another kiln increasing the annual production capacity to 2,50,000 MT per annum. Therefore, in the year 1996, the production capacity of Accused No.4-PIL was 4,00,000MTper....
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....000MTPAfor an over all capacity of 20,00,000 MTPA (Para-17.5 at page-147 of Charge-Sheet refers). XII. The Screening Committee in meetings of 7th & 8th December, 2008 requested applicants to make individual presentations and on July 3, 2008 met to finalize all recommendations pending with them. The recommendation for allocation of additional 12,00,000 MT P.A. by Ministry of Steel in favour of PIL from Vijay Central Coal Block was cleared. (Para-17.6 atpage-147 of Charge-sheet refers). XIII. However, before the final orders of allocation were made, M/s. SKS Ispat Power Ltd (SKS) on July 7, 2008 questioned the capacity of PIL as disclosed and accused PIL of inflated capacity and production figures to Secretary Coal. This representation was forwarded* in July 8, 2008 to Ministry of Steel. [Para-17.8 of Charge-sheet on page-148 and D-7(Annexure P-9) at page 250 refers]. XIV. On July 9, 2008 Ministry of Steel sought fresh production figures from PIL for the last 6 months in respect of its sponge iron plant at Champa. (Para-17. 9 at page 148 of Charge-Sheet at page 254 refers). XV. That PIL responded by letter dated 10.07.2008 under the alleged signatures of Accused No.3-A. K. Ch....
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....Coal were aware that the then current capacity for production of sponge iron was 6, 00, 000 MT P.A. and that the allege false representation of capacity by PIL is not substantiated. (at Para 6 page 349 in Vol. II refers). XXII. On further complaints, clarification was sought from AccusedNo.1 &2 on the contents of their spot verification report and they substantially reiterated their position on production capacity of PIL. XXIII. The crux of the prosecution is that the quantities of sponge iron manufactured by PIL as reflected in the attested copies of ER-1 Forms and in the report of Basak and Soumen Chatterjee on September 5, 2008 are inconsistent with the data forwarded by PIL along with ER-1 Forms in their letter dated July 23, 2008. In fact, according to the charge-sheet, there are no ER-1 forms in original as copies thereof were submitted to the Ministry of Steel along with the alleged communication of 10th July, 2008. The original ER-I Forms are in fact submitted to the Ministry of Steel by PIL on 23rd July, 2008. This fact is admitted by the prosecution Pg 150 of paper book refers)." The prosecution case on conspiracy angle qua petitioners is based on the following two e....
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....stification to put petitioners on trial in this case. 14. It would be worthwhile to note that the correct factual position was disclosed by petitioners, not only in its communication of 23rd July, 2008 (Annexure P-14), but at the earliest opportunity i.e. in petitioners' application of 12th January, 2007 for allotment of captive coal blocks, which is also a document (D-55) forming part of the charge-sheet. On behalf of respondent-CBI, it was much emphasized that petitioners' communication of 29 January, 2007 (Annexure P-5) disclosing the correct factual position is not part of the charge-sheet. This is true, but it appears from bare perusal of petitioners' communication of 29 January, 2007 (Annexure P-5) that it is a reiteration of petitioners' earlier communication of 12th January, 2007 (Annexure P-4) which infact is part of the charge-sheet and therein it is clearly disclosed that the existing capacity of the plant in question is 4 LTPA. No doubt, the sanctioned capacity of the existing plant in question was 8 lac metric tonnes per annum. Thus, there is no confusion about the existing capacity of the plant in question. 15. During the course of hearing, attenti....
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....ted to post allocation and diversion aspects in "respect of Chotia coal block were investigated in the said case and Charge-sheet and Supplementary Chargesheets were filed. Since, the post allocation aspect has already been investigated, the investigation in the present case is limited upto allocation stage only. 16.59. From the above facts, it is evident that Sh. V. P. Agarwal and Sh. A. K. Chaturvedi misrepresented before Ministry of Coal/Screening Committee and Ministry of Steel at many occasions on existing capacity of sponge iron, ISO9002 certification, existing capacity of induction furnaces (steel making capacity), existing capacity of fluidised .Bed Boiler and BIFR matter. . Sh. V. P. Agarwal also submitted forged CA's Certificate to Ministry of Coal and the Ministry of Steel. The accused persons Sh. V. P. Agarwal, Sh. A. K. Chaturvedi and the Company M/s Prakash industries Limited conspired with each other and thus got the Chotia coal block allocated fraudulently and dishonestly from the Ministry of Coal. Hence, the said accused persons committed the offences punishable under section 120-B r/w 420 and 471 of IPC and substantive offences thereof. It is, therefore, mos....
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....levelled against PIL is of having obtained that allocation by way of misrepresentation and fraudulent conduct. According to Mr. Sibal it was only monies and profits that may have been generated by the utilisation of that allocation which could have possibly fallen within the scope of the expression "proceeds of crime" as defined in Section 2(1)(u) of the Act. Mr. Sibal then submitted that the allocation of coal would also not fall within the ambit of Section 3 since that also proceeds on the basis of a party being involved in any process or activity connected with proceeds of crime and which process or activity may include the concealment, possession, acquisition or use of property along with conduct which may amount to projecting or claiming it to be untainted property. Mr. Sibal submitted that the allocation of coal was made by the Union Government and it cannot possibly be alleged that it was property which was concealed, possessed, acquired or used nor can it be alleged that the same was projected or claimed as untainted property. It was submitted that the allocation of coal was made by a public act of a competent authority in the Union Government and existed as such till it wa....
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....ay no allegation of any offence of money laundering having been committed by the petitioners after the Act had come into force. For the purposes of explaining the extent of the guarantee enshrined in Article 20(1) of the Constitution, Mr. Sibal placed reliance upon the decision of the Supreme Court in Mahipal Singh vs. CBI (2014) 11 SCC 282 and more particularly to the following paragraphs which are extracted hereunder: - "14. We have given our most anxious consideration to the rival submissions and in the light of what we have observed above, the submissions advanced by Mr Subramanium commend us. It is trite that to bring an accused within the mischief of the penal provision, ingredients of the offence have to be satisfied on the date the offence was committed. Article 20(1) of the Constitution of India permits conviction of a person for an offence for violation of law in force at the time of commission of the act charged as an offence. In the case in hand, examinations alleged to have been rigged had taken place in January 2010, June 2010, November 2010 and January 2011 and the date on which the first information reports were registered, more than one charge-sheets were not fil....
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....the present case. We find that on the date the offence was committed or came to be known, one of the ingredients of the offence i.e. submission of charge-sheet and cognizance of offence of specified nature in more than one case within the preceding period of ten years, has not been satisfied. Therefore, we have no other option than to hold that the accused cannot be prosecuted for the offence under Section 3 of MCOCA." Reliance was also placed on the judgment of the Supreme Court in State of Maharashtra vs. Kaliar Koil Subramaniam (1977) 3 SCC 525 and to the following principles which were laid down therein: - "6. It appears that the Legislature thereafter thought it proper to do away with the rule of evidence provided by sub-section (3) of Section 5 and inserted the new clause (e) in sub-section (1) of Section 5 as one more category of the offence of criminal misconduct. But it cannot be gainsaid that the new offence, under the newly inserted clause (e), became an offence on and from December 18, 1964 by virtue of Section 6 of the Amending Act 40 of 1964. In this view of the matter, the High Court rightly held that "in the absence of any evidence on record to show that the appe....
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....petitioners are in possession of proceeds of crime and which is a sine qua non for exercise of powers under Sections 5 and 8 of the Act. Referring to the order passed by the Adjudicating Authority while issuing notice to the petitioners, it was pointed out that the Adjudicating Authority has failed to record any independent reasons which may have led to the formation of a reasonable belief that the properties which were subjected to provisional attachment were in fact proceeds of crime. It was further urged that the Adjudicating Authority has only expressed his agreement with the prima facie opinion which had been formed by the Deputy Director and which had led to the order of provisional attachment having coming to be passed. According to learned counsel, the impugned order would ex facie establish an abject failure by the Adjudicating Authority to record reasons. It was submitted that this clearly evidenced a nonapplication of mind. 31. Turning then to the facts relating to the properties which had been provisionally attached, it was contended that they had been purchased prior to Sections 420 and 120B being included as scheduled offences and therefore cannot be related even rem....
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....ds of crime. The second limb, which is the core issue involved in present appeals covers 'value of property' derived/obtained from criminal activity. 15. The phrase 'property' has been defined under Section 2(1)(v) of the PMLA which is reproduced as under: Section 2(1)(v) "property" means any property or assets of every description, whether corporeal or incorporeal, movable or immovable, tangible or intangible and includes deeds and instruments evidencing title to, or interest in, such property or assets, wherever located. Explanation-For the removal of doubts, it is hereby clarified that the term "property" includes property of any kind used in the commission of an offence under this Act or any of the scheduled offences. 16. As per above Sub-Section; property includes movable, immovable, tangible, intangible, deeds and instruments evidencing title/interest in assets or property. Patent, copyright, goodwill are best example of incorporeal/intangible assets. xxxx xxxx xxxx 20. As per scheme of the PMLA, after recording of ECIR, two sets of proceedings are initiated in case of commission of offence of money laundering, namely provisional attachment of property at the end ....
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....s a party or is involved in concealment, possession, acquisition or use or projecting as untainted property or claiming as untainted property shall be guilty of an offence. If property purchased prior to commission of alleged offence or property not derived or obtained from commission of scheduled offence is declared as proceeds of crime, every person who is concerned with sale, purchase, possession or use of said property would be guilty of offence of money laundering. A person who is not connected with commission of scheduled offence as well property derived from said offence but had dealt with any other property of a person, who had committed scheduled offence, would fall within the ambit of Section 3 of the PMLA, which cannot be countenanced in law. There would be total chaos and uncertainty. The authorities would get unguided and unbridled powers and may implicate any person even though he has no direct or indirect connection with scheduled offence and property derived from thereon but has dealt with any other property (not involved in scheduled offence) of the person who has derived or obtained property from scheduled offence. It would amount to violation of Article 20 and 21....
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....tended that it is well settled that merely because a part of the requisite for action initiated under a statute is drawn from a point prior to the enforcement of the Act that does not make the Act retrospective. Learned ASG has referred to the decision of the U.S. Supreme Court in Samuels vs. Mc Curdy, Sheriff of Dekalb County, Georgia 1925 SCC online US SC 42 where the following observations were made: - "Three grounds are urged for reversal. First, the 1917 law under which liquor lawfully acquired can be seized and destroyed is an ex post facto law. Second, the law in punishing the owner for possessing liquor he had lawfully acquired before its enactment deprives him of his property without due process. Third, it violates the due process requirement by the seizure and destruction of the liquor without giving the possessor his day in court. First, the law is not ex post facto law. It does not provide a punishment for a past offense. It does not fix a penalty for the owner for having become possessed of the liquor. The penalty it imposes is for continuing to possess the liquor after the enactment of the law. It is quite the same question as that presented in Chicago & Alton R.R. ....
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....d or are the fruits of proceeds of crime. 34. Mr. Raju controverting the submissions of Mr. Sibal with respect to the validity of the Explanation as appended to Section 3 submitted that in the absence of any challenge to the validity of that provision formally by the writ petitioners, the submissions in that respect are not liable to be countenanced. According to Mr. Raju the Explanation clarifies that the offence of money laundering would be evidenced if it is found that a person is involved in one or more of the activities specified in the principal Section namely of concealment, possession, acquisition or use of proceeds of crime or projecting the same as untainted property or claiming it to be untainted in any manner whatsoever. According to the learned ASG, the Explanation only clarifies the provisions of Section 3 and consequently the submissions to the contrary are liable to be rejected. 35. It may be noted that while Mr. Sibal did address submissions touching upon the validity of the Explanation as introduced in Section 3, the Court finds no justification to rule or comment upon the same since and as was recorded hereinbefore, the validity of the provisions of the Act are....
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....ector, Directorate of Enforcement 2014 SCC OnLine Del 4889. The relevant paragraphs are extracted hereinbelow: - "18. The suggestion of the learned ASG that an attachment order under Section 5 of the PMLA would survive an acquittal of the concerned person for the alleged crime, is unsustainable. It was argued by the learned ASG that acquittal of the person after trial of a scheduled office would not release the order of attachment under PMLA till the trial for an offence under Section 3 of the PMLA is completed. This contention is based on an erroneous assumption that a trial for an offence of "money laundering" under the PMLA would survive. One is hard pressed to imagine how a trial for an offence of money laundering can continue where the fundamental basis - the commission of a schedule offence - in this case offence under Section 307 IPC - has been found to be disproved. 19. It necessarily follows that the attachment of a property is liable to be vacated if the existence of a scheduled offence is negated. Clearly, attachment of proceeds of crime cannot continue if the alleged scheduled offence is not established after trial. Given the scheme of the PMLA, attachment of proper....
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....finality pose no difficulty; in such cases, the proceedings under the Act would fail. 28. It was contended by Mr. Bhardwaj that, in terms of Section 8(5) of the Act, the attachment would continue till the conclusion of a trial of an offence under the Act before the Special Court irrespective of whether the person accused of the scheduled crime has been acquitted. In my view, this contention is also not acceptable. If the crime, which has allegedly resulted in the proceeds attached under the Act, is not established, the basis of the attachment would cease to exist and the question of proceeding further under the Act would not arise. The trial for an offence of money-laundering is also predicated on commission of a scheduled crime and would have to be terminated. It is only in cases where it is found that a scheduled crime has been committed that the question of determining whether an offence of money-laundering is made out would survive. Thus, in cases where the persons accused of a scheduled offence are acquitted, the fundamental premise that any proceeds have been derived or obtained from any activity relating to a scheduled offence by either the persons accused or any other per....
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....no case is pending against him. The learned Sessions Judge while passing the impugned summoning order has not taken into account this fact that the petitioner has already been discharged of all the scheduled offences. The properties which were allegedly acquired by the petitioner during crime period, were also not acquired during the offence period, except the one of which sufficient explanation has been given by the petitioner. There was, thus, no sufficient ground to have summoned the petitioner for facing trial under section 3 of the Prevention of Money-Laundering Act. It is a settled law that summoning of a person to face trial in respect of an offence, is a serious matter and the court should examine in detail and record a finding that a person, prima facie, is guilty of an offence. A serious responsibility rests upon the courts before passing of the summoning order and the court must be satisfied that there is sufficient material to proceed against the accused person. In the present case, the opposite parties concealed the material fact in the complaint that the petitioner had already been discharged from the scheduled offence and no trial was pending against him. The impugne....
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....ited and the contents of the impugned Order, this Court finds force in the argument that since no offences were made out against the Respondents as specified in the Schedule of the PMLA, the offence under Section 3/4 of the PMLA also, do not arise as the involvement in a scheduled offence is a prerequisite to the offence of money laundering. The Petitioner was not able to establish the allegations against the Respondents and as such the material produced was not sufficient to find guilt against them. Further, at the stage of framing of charges, the learned Additional Sessions Judge, had to only satisfy itself of the apprehension that whether the accused persons had committed the offences based on the material before it, without going into the extensive appreciation of the evidence. Since there was no material on record that casted a shadow of doubt over the Respondents, they were rightly discharged of the offences. Therefore, there is no apparent error, gross illegality or impropriety found in the Order of the learned Additional Sessions Judge." 42. Both Rajiv Chanana and Gagandeep Singh were dealing with situations where persons had either been acquitted or discharged of the pred....
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....th the offence on money laundering. Once the respondent is of the view that a person is involved in any process of activity connected with the "proceeds of crime", which definition is very wide then he gets the power to investigate further. When such an investigation gets completed and found that there indeed was a money laundering, then the matter will have to be proceeded with before the jurisdictional Court, on a complaint being taken on file. Hence, there is no difficulty in holding that both the investigations can go on using the same channel while their waters need not mix all the time." 44. It would be pertinent to note that VGN Developers has duly noticed the decision of this Court in Mahanivesh Oils. It has further taken into consideration the orders passed by the Division Bench in the Letters Patent Appeal taken against the said judgment to hold that the view expressed therein cannot be construed as conclusive or binding. This Court however notes that in VGN Developers, the Madras High Court was principally concerned with a situation where proceedings relating to the predicate offence had come to be settled pursuant to proceedings undertaken by the secured creditors unde....
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.... the offence under the PMLA will survive and stand alone on its own. A Predicate/Scheduled Offence is necessary only for registration of crime/launching prosecution under PMLA and once a crime is registered under the PMLA, then the ED has to take it to its logical end, as contemplated under Section 44 of the Act. 31. The PMLA itself, does not provide for any contingency like the case in hand and argued by the learned counsel for the Applicants. Section 44(b) only provides for filing of a complaint or submission of a closure report by the Investigating Agency under PMLA and none else. 32. If the contention of the learned counsel for the Applicants that, once the foundation is removed, the structure/work thereon falls is accepted, then it will have frustrating effect on the intention of Legislature in enacting the PMLA. The observations of the Hon'ble Supreme Court in the case of State of Punjab v. Davinder Pal Singh Bhullar, (supra) in paragraph No. 107 and Sanjaysingh Ramrao Chavan (Supra) in para No. 17 are in context of the facts of the said case and pertaining to the offences under the provisions of IPC and P.C. Act and therefore, the same cannot be applied to the case i....
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....e proceedings in both the offences, i.e., scheduled offence and money laundering offence are to be tried by the Special Court constituted under PML Act, if the same is connected to Sections 3 & 4 of PML Act. Further, by way of Finance (No. 2) Act, 2019 (23 of 2019), dated 01.08.2019, Section 44 of PML Act has been amended by inserting an explanation to clause (d) of sub-section (1), which reads as follows: "Explanation--For the removal of doubts, it is clarified that,--(i) the jurisdiction of the Special Court while dealing with the offence under this Act, during investigation, enquiry or trial under this Act, shall not be dependent upon any orders passed in respect of the scheduled offence, and the trial of both sets of offences by the same court shall not be construed as joint trial." The above explanation sets out in clear terms that trial of money laundering offence is independent trial and it is governed by its own provisions and it need not get interfered with the trial of scheduled offence. The PML Act, being a special enactment, contemplates a distinct procedure at the initial stage and thereafter provides for initiation of prosecution, in order to achieve the special p....
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....s of crime is a continuing activity, which itself shows the offence of money laundering is a continuing offence. Thus, a bare reading of Sections 2(1)(u), 3 and 44(1)(d) of PML Act along with explanations thereof makes it clear that the offence of money laundering is a standalone offence and the trial proceedings are completely different to that of the scheduled offence. Trial of money laundering offence is independent trial and it is governed by its own provisions, it will not meddle with the trial of scheduled offence. 16. Similar question came up for consideration before the Hon'ble High Court of Madras in Smt. Soodamani Dorai Vs. Joint Directorate of Enforcement's case (supra) relied by the respondents, wherein, it was held that adjudication, prosecution and trial under PML Act is independent of scheduled offence. It was held as follows: "In respect of the question whether criminal proceedings initiated by the police is a bar for proceedings under the Prevention of Money Laundering Act, the provisions of PMLA, 2002 are independent and having self-contained code. Before Amendment Act, 2012, the proceedings of PMLA, 2002 were fully depending upon the scheduled offence....
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....t a ground for preventing the Directorate of Enforcement from proceeding under the PMLA, 2002. 17. Further, a reading of the provisions of PML Act makes it clear that though the commission of scheduled offence is a fundamental pre-requisite for initiating proceedings under the PML Act, the offence of money laundering is independent of the scheduled offences. The scheme of the PML Act indicates that it deals only with laundering of money acquired by committing the scheduled offence. In other words, the PML Act deals only with the process or activity of proceeds of crime, including its concealment, possession, acquisition or use and it has nothing to do with the launch of prosecution for scheduled offence and continuation thereof. As stated above, the explanation to Section 44 of PML Act clearly indicates that the Special Court, while dealing with the offence under the PML Act, shall not be dependent upon any orders passed, in respect of the scheduled offence. It is apt to observe that money laundering, being an economic offence, poses a serious threat to the national economy and national interest and is committed with cool calculation and deliberate design and with motive of perso....
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....at oral and documentary evidence is the backbone to prove the guilt or innocence of the accused in a criminal trial. The trial in all criminal cases including money laundering offences is required to be conducted expeditiously. If the trial is delayed, it would result in impairment of the complainant to prove the case and also impairment of ability of the accused himself to defend his case. The factors like death, disappearance and non-availability of witnesses would also hamper the criminal administration of justice. Therefore, invariably, oral and documentary evidence is required to be placed on record expeditiously, to arrive at a just conclusion, Therefore, it is too early to say that the accused persons are likely to get acquittal in the scheduled offences. There are instances where conviction was recorded by the trial Court and the appellate Court had set aside the said conviction. In the instant case, mere apprehension that the Court below is going to record conviction against the accused persons under PML Act and they are likely to get acquittal in the predicate/scheduled offences would not be a ground to stall the proceedings. In the given facts and circumstances of the ca....
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....f proceedings relating to a predicate offence. 49. The Telangana High Court in V. Vijay Sai Reddy vs. Enforcement Directorate MANU/TL/1155/2021, held thus: - "17. Further, a reading of the provisions of PML Act makes it clear that though the commission of scheduled offence is a fundamental pre-requisite for initiating proceedings under the PML Act, the offence of money laundering is independent of the scheduled offences. The scheme of the PML Act indicates that it deals only with laundering of money acquired by committing the scheduled offence. In other words, the PML Act deals only with the process or activity of proceeds of crime, including its concealment, possession, acquisition or use and it has nothing to do with the launch of prosecution for scheduled offence and continuation thereof. As stated above, the explanation to Section 44 of PML Act clearly indicates that the Special Court, while dealing with the offence under the PML Act, shall not be dependent upon any orders passed, in respect of the scheduled offence. It is apt to observe that money laundering, being an economic offence, poses a serious threat to the national economy and national interest and is committed wit....
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....e being in force. 19. Further, if an accused in a predicate/scheduled offence is highly influential, either monetarily or by muscle power, and by use of his influence he/she gets the predicate/scheduled offence compromised or compounded to avoid further investigation in the offence under PML Act, it will put to an end to the independent investigation of Enforcement Directorate, which, is certainly not the intention of Legislature in enacting the PML Act. Therefore, if the contention of the learned senior counsel for the petitioners that offence under PML Act necessarily depend upon the predicate/scheduled offence and the fate of offence under PML Act depends upon the fate of predicate/scheduled offence is accepted, probably it would be the easiest mode to the accused to put an end to the investigation and trial of offences under PML Act, as the case may be. 21. Further, it is needless to state that oral and documentary evidence is the backbone to prove the guilt or innocence of the accused in a criminal trial. The trial in all criminal cases including money laundering offences is required to be conducted expeditiously. If the trial is delayed, it would result in impairment of t....
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....ate offence is compromised, compounded or quashed would not be the correct view to take in light of the provisions of the Act. In any case the judgments rendered by this Court in Rajiv Chanana and Gagandeep Singh clearly bind and would thus operate on the question. 51. This Court thus comes to the definite conclusion, that while the offense of money laundering may have been correctly described as a stand-alone offense in the sense of being a condition precedent for an allegation of money laundering being raised, that in itself would not infuse jurisdiction in proceedings that may be initiated under the Act even after a competent court has come to hold that no criminal offense stands committed or situations where the primary accused is discharged of the offense or proceedings quashed. When the offense of money laundering is described as a stand-alone offense, all that is sought to be conveyed is that it is to be tried separately in accordance with the procedure prescribed under the Act. It is evident from a reading of the Act that while the commission of a predicate offense constitutes the trigger for initiation of proceedings under the Act, the offense of money laundering must be ....
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....visions of penal statutes are constitutionally barred from operating retrospectively. The guiding expressions of Article 20(1) are "violation of a law in force" and "at the time of the commission of the act charged....". The Constitution thus constructs a negative command against penal action and conviction except for an offense created by a law which was in force at the time of commission of the act. The spirit of Article 20(1) was lucidly explained by the Supreme Court in Rao Shiv Bahadur Singh vs. State of V.P. 1953 SCR 1188 in the following words: - "8. Article 20(1) of the Constitution is as follows: "No person shall be convicted of any offence except for violation of a law in force at the time of the commission of the act charged as an offence, nor be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offence." This article in its broad import has been enacted to prohibit convictions and sentences under ex post facto laws. The principle underlying such prohibition has been very elaborately discussed and pointed out in the very learned judgment of Justice Willes in the well-known case of Ph....
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....s the conviction of a person or his subjection to a penalty under ex post facto laws. The prohibition under the article is not confined to the passing or the validity of the law, but extends to the conviction or the sentence and is based on its character as an ex post facto law. The fullest effect must therefore be given to the actual words used in the article. Nor does such a construction of Article 20 result in giving retrospective operation to the fundamental right thereby recognised. All that it amounts to is that the future operation of the fundamental right declared in Article 20 may also in certain cases result from acts and situations which had their commencement in the pre-Constitution period. In Queen v. St. Mary Whitechapel [116 ER 811 at 814] Lord Denman, C.J. pointed out that a statute which in its direct operation is prospective cannot properly be called a retrospective statute because a part of the requisites for its action is drawn from a time antecedent to its passing. The general principle therefore that the fundamental rights, have no retrospective operation is not in any way affected by giving the fullest effect to the wording of Article 20. This article must ac....
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....he actual passing of the Act, and it can well be urged that by such retrospective operation it becomes the law in force at the time of the commencement of the Act. It is obvious that such a construction which nullifies Article 20 cannot possibly be adopted. It cannot therefore be doubted that the phrase "law in force" as used in Article 20 must be understood in its natural sense as being the law in fact in existence and in operation at the time of the commission of the offence as distinct from the law "deemed" to have become operative by virtue of the power of legislature to pass retrospective laws. It follows that if the appellants are able to substantiate their contention that the acts charged as offences in this case have become such only by virtue of Ordinance 48 of 1949 which has admittedly been passed subsequent to the commission thereof, then they would be entitled to the benefit of Article 20 of Constitution and to have their convictions set aside. This leads to an examination of the relevant pre-existing law." 55. However, an equally well settled principle relating to the retroactive application of penal provisions is that merely because a requisite or facet for initiatio....
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....ich may have been committed and completed prior to the enforcement of the Act cannot be subjected to action under the Act. However, and at the same time it must also be held that an offense of money laundering that may be committed post 01 July 2005 would still be subject to the rigours of the Act notwithstanding the predicate offense having been committed prior to that date. As noted hereinabove, Section 3 creates an offense for money laundering. Neither that provision nor the Act is concerned with the trial of the predicate offense. Thus, any activity or process that may be undertaken by a person post 01 July 2005 in terms of which proceeds of crime are acquired, possessed or used and/or projected as untainted property would still be subject to the provisions of the Act. This because it is the act of money laundering committed after the enforcement of the Act which is being targeted and not the predicate offense. The Court also bears in mind the Explanation (ii) to Section 3 which clarifies that money laundering is a continuing activity and continues till such time as the person is directly or indirectly "enjoying" the proceeds of crime by its concealment, possession, acquisition....
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....n can be inflicted a penalty greater than what could have been inflicted under the law at the time when the offence was committed. Clearly, no proceedings under the Act can be initiated or sustained in respect of an offence, which has been committed prior to the Act coming into force. However, the subject matter of the Act is not a scheduled offence but the offence of money-laundering. Strictly speaking, it cannot be contended that the Act has a retrospective operation because it now enacts that laundering of proceeds of crime committed earlier as an offence. In The Queen v. The Inhabitants of St. Mary, Whitechapel (1848) 12 QB 120, the Court pointed out that "The Statute which in its direct operation of prospective cannot be properly be called a retrospective statute because a part of the requisites for that action is drawn from the time antecedent to its passing". Thus, with effect from 1st June, 2009 laundering proceeds of crime under Section 420 of the IPC is enacted as an offence of money-laundering punishable under Section 4 of the Act. It is important to note that the punishment under Section 4 of the Act is not for commission of a scheduled offence but for laundering procee....
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....r persons are accused. The funds had, thus, been laundered at a time when money-laundering was not an offence and proceedings under the Act cannot be initiated. 37. Although, the Respondent has not contended so in clear terms, it appears that the respondents are proceeding on the basis that an offence under Section 3 of the Act is a continuing offence. According to the respondent, the possession of any property linked to a scheduled offense irrespective of when it was acquired would itself constitute the offence of money-laundering. It is important to understand the import of such interpretation. This would mean that a person who has committed a scheduled crime; acquired proceeds therefrom; and thereafter, projected it as untainted money, prior to the Act coming into force, would nonetheless be guilty of the offence of money-laundering only for the reason that he is in possession of some property. This is so because the definition of proceeds of crime also includes the value of any property derived or obtained as a result of criminal activity relating to a scheduled crime. Further any such property - even in the hands of a person not accused of the scheduled crime or offense of m....
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....stage is Integration, where the benefit or proceeds of crime are available with the criminals as untainted money. There is much merit in this description of money-laundering and this also indicates that, by its nature, the offence of money-laundering has to be constituted by determinate actions and the process or activity of money-laundering is over once the third stage of integration is complete. Thus, unless such acts have been committed after the Act came into force, an offence of money-laundering punishable under Section 4 would not be made out. The 2013 Amendment to Section 3 of the Act by virtue of which the words "process or activity connected with proceeds of crime and projecting it as untainted property" were substituted by the words "any process or activity connected with proceeds of crime including concealment, possession, acquisition or use and projecting or claiming it as untainted property". The words "concealment, possession, acquisition or use" must be read in the context of the process or activity of money-laundering and this is over once the money is laundered and integrated into the economy. Thus, a person concealing or coming into possession or bringing proceeds....
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....stitution prohibits conviction except for violation of a law in force at the time of the commission of the offence. In other words, there cannot be any prosecution under the Act for laundering of money acquired by committing the scheduled offences prior to the introduction of the Act. The time of commission of the scheduled offences is therefore not relevant in the context of the prosecution under the Act. What is relevant in the context of the prosecution is the time of commission of the act of money laundering. There is, therefore, no substance in the argument that the investigation commenced as per Ext.P2 is hit by Article 20(1) of the Constitution." 60. The Allahabad High Court in Hari Narayan Rai, dealing with an identical question made the following succinct observations: - "5. Thus in substance, the argument is that the money alleged to have been acquired will not fall within the definition of "proceeds of crime" because the acts leading to its generation were not among the offences listed in the Schedule, as it stood on the date when those acts were committed. 6. The argument is misconceived. The reason is that what is being targeted by Section 3 and other provisions o....
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.... or activity connected thereto or directly or indirectly attempting to indulge or knowingly assist or knowingly be a party to the alleged activities and projecting it as untainted property, whereas the components of the offences under section 13 of the PC Act and Sections 120-B, 419, 420 and other IPC offences are entirely different. The prosecution under section 3 of the PML Act, by no stretch of imagination, could be equated with the prosecution under section 13 of the PC Act or other offences specified in the Schedule namely IPC or other laws. They are distinct and separate offences. Prosecution under section 3 of PML Act is not based on the outcome of the trial of the offenders under section 13 of the PC Act. A reading of section 3 of PML Act in unamended form would clearly indicate that even without there being any conviction of the accused in a predicate offence and even if the offender under section 3 of the PML Act is not a party to the predicate offence, still the prosecution could be launched against him if the offender is found involved in any process or activity connected with the 'proceeds of crime'. What is necessary to constitute the offence of money launderi....
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....hood of conflict of orders relating to the said offences." 51. The correlation between possession and acquisition of the subject matter of a crime which is made an offence post facto has been considered by the Hon'ble Apex Court in Mohan Lal v. State of Rajasthan, MANU/SC/0465/2015 : (2015) 6 SCC 222 : (AIR 2015 SC 2098), in the context of possession of contraband substance under NDPS Act. In the said case, the appellant/accused therein was convicted and punished under section 18 of the NDPS Act when admittedly the theft of contraband substance was committed prior to coming into force of NDPS Act. The FIR was registered against the appellant/accused therein prior to coming into force of NDPS Act and therefore a contention was taken before the Court that the possession of contraband substance having commenced prior to coming into force of the NDPS Act i.e., when the theft was committed on the intervening night of 12/13-11-1985 whereas the NDPS Act came into force on 14.11.1985, the accused cannot be subjected to an offence under a new Act which was not in force on the date of theft and possession of the contraband articles. Analyzing the concept of possession in the context of....
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....urt different from that which had competence at the time cannot 'ipso facto' be held to be unconstitutional. A person accused of the commission of a particular Court or by a particular procedure, except in so far as any constitutional objection by way of discrimination or the violation of any other fundamental right may be involved." In the instant case, Article 20(1) would have no application. The actus of possession is not punishable with retrospective affect. No offence is created under Section 18 of the NDPS Act with retrospective effect. What is punishable is possession of the prohibited article on or after a particular date when the statute was enacted, creating the offence or enhancing the punishment. Therefore, if a person is in possession of the banned substance on the date when the NDPS Act was enforced, he would commit the offence, for on the said date he would have both the 'corpus' and 'animus' necessary in law." (underlining supplied) 53. The above principle, in my view, applies with full force to the facts of this case. As already held above, petitioners are not prosecuted for the offence which is added in the schedule subsequent to the p....
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....om or involved in, money laundering. 77. Article 20 of the Constitution prohibits conviction except for violation of a law in force at the time of commission of an offence. In other words, there cannot be prosecution under the PML Act for laundering of money acquired by committing the schedule offences prior to the introduction of the PML Act. Therefore, the time of commission of scheduled offences would not be relevant in the context of the prosecution under the PML Act. What would be relevant in the context of prosecution is the time of commission of the act of money laundering. The question would be, whether a person involved in money laundering as provided under Section 3 of the PML Act has indulged in the said act or not has to be decided by the competent authority. What is the date of laundering of money will have to be decided on facts of each case and there cannot be any prescribed straight jacket formula. This is an important fact which the authority will have to examine and it is a mixed question of law and fact. 80. What is targeted by Section 3 is 'laundering of money' and therefore, the date of 'laundering' would be relevant. The expression 'l....
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....en place or continue post the enforcement of the Act itself. H. AXIS BANK VS. SEEMA GARG 66. The Court had while recording the submissions addressed by the respective counsels for parties noted the reliance placed by Mr. Chawla on the decision rendered by a Division Bench of the Punjab and Haryana High Court in Seema Garg. The decision in Seema Garg ex facie holds contrary to what was laid down by this Court in Axis Bank. Post the decision rendered in Seema Garg, various other High Courts have also followed the dictum laid down therein. Notwithstanding the above and the Court conscious that the decision in Axis Bank would bind, it would be apposite to briefly dilate on this issue in order to appreciate the submission addressed by Mr. Chawla on this score and turning on the decisions in Axis Bank and Seema Garg. 67. In order to appreciate the issue which arises the Court reproduces hereinbelow a chart which may indicate how the provisions of Section 2(1)(u), 2(1)(y) and Section 3 of the Act have transformed post the promulgation of the enactment on 1 July 2005. That chart is reproduced hereinbelow: - Section 2009 Amendment 2015 Amendment 2013 Amendment 2018 Amendment 2019 A....
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.... involved in any process or activity connected with the proceeds of crime it as untainted property shall be guilty of offence of money-laundering. Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property shall be guilty of offence of money-laundering. Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property shall be guilty of offence of money-laundering. 'Explanation.-For the removal of doubts, it is hereby clarified that,- (ii) a person shall be guilty of offence of money-laundering if such person is found to have directly or indirectly attempted to indulge or knowingly assisted or knowingly is a party or is actually involved in one or more of the following processes or activities conne....
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.... that the legislature has made provision for "provisional attachment" bearing in mind the possibility of circumstances of urgency that might necessitate such power to be resorted to. A person engaged in criminal activity intending to convert the proceeds of crime into assets that can be projected as legitimate (or untainted) would generally be in a hurry to render the same unavailable. The entire contours of the crime may not be known when it comes to light and the enforcement authority embarks upon a probe. The crime of such nature is generally executed in stealth and secrecy, multiple transactions (seemingly legitimate) creating a web lifting the veil whereof is not an easy task. The truth of the matter is expected to be uncovered by a detailed probe which may take long time to undertake and conclude. The total wrongful gain from the criminal activity cannot be computed till the investigation is completed. The authority for "provisional" attachment of suspect assets is to ensure that the same remain within the reach of the law. 106. Among the three kinds of attachable properties mentioned above, the first may be referred to, for sake of convenience, as "tainted property" in as ....
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.... long as such property is found held by the person who had indulged in such criminal activity, it amounting to money-laundering, as indeed those who may have aided or abetted such acts. Dispute, however, is likely to arise in relation to attachment or confiscation upon questions being raised at the instance of the person suspected of money-laundering (or his abettor) as to sufficiency of the material or reasons to believe for such action, as indeed of the fairness or propriety of the procedure followed. Dispute may also arise in such context if the property has been transferred to another person, after it had been acquired by the transaction relatable to money-laundering and before its attachment under PMLA. The third party may have a claim to agitate that it had been acquired by it bonafide and for lawful and adequate consideration. 109. The inclusive definition of "proceeds of crime" respecting property of the second above-mentioned nature - i.e. "the value of any such property" - gives rise (as it has done so in these five appeals) to potential multi-layered conflicts between the person suspected of money-laundering (the accused), a third party (with whom such accused may have....
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....interest in the targeted property, as indeed of the lawfulness and adequacy of consideration for such acquisition, would need scrutiny." 69. Axis Bank has taken the view that the first limb would comprise of tainted property and which would essentially be property in respect of which there would, at least prima facie, be evidence to establish that the source of its acquisition was the product of a specified crime. Axis Bank then proceeds to hold that this nature of property would also include that asset which may have been obtained or acquired by using the tainted property as its consideration whether directly or indirectly. The second kind of property which Axis Bank has recognised as falling within the ambit of Section 2(1)(u) was described to be untainted property and was explained to be that which may have been acquired "by the suspect legitimately without any connection with criminal activity or its result". According to the learned Judge, such property would also fall within the scope of the Act since the person holding an interest in such property is found involved in the proscribed criminal activity and in a situation where the tainted assets held by him are either not tra....
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....st (charge) in the subject property. Conversely, mere issuance of an order of attachment under PMLA cannot, by itself, render illegal the prior charge or encumbrance of a secured creditor, this subject to such claim of the third party (secured creditor) being bonafide. In these conflicting claims, a balance has to be struck. On account of exercise of the prerogative of the State under PMLA, the lawful interest of a third party which may have acted bonafide, and with due diligence, cannot be put in jeopardy. The claim of bonafide third party claimant cannot be sacrificed or defeated. A contrary view would be unfair and unjust and, consequently, not the intention of the legislature. The legislative scheme itself justifies this view. To illustrate, reference may be made to sub-section (8) of Section 8 PMLA where-under a power is conferred on the special court to direct the Central Government to "restore" a property to the claimant with a legitimate interest even after an order of confiscation has been passed. 150. The legislation on money-laundering, as is the case of similarly placed other legislations providing for forfeiture or confiscation of illegally acquired assets, contains ....
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....derived or obtained" from criminal activity but because they are of equivalent "value" as to the proceeds of crime which cannot be traced, it is essential that there be some nexus or link between such property on one hand and the person accused of or charged with the offence of money-laundering on the other. In cases of this nature, the person accused of money-laundering must have had an interest in such property at least till the time of engagement in the proscribed criminal activity from which he is stated to have derived or obtained pecuniary benefit which is to be taken away by attachment or confiscation. It is with this view that PMLA provides for a possible presumption to be drawn, under Section 24(b) using the expression "may presume", about a property being "involved in money-laundering" in the case of person other than the one who is charged with the offence of money-laundering. There is no doubt that such presumption, if drawn, may also be rebutted by evidence showing facts to the contrary. 161. The law conceives of possibility of third party interest in property of a person accused of money-laundering being created legitimately or, conversely, with ulterior motive "to ....
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....cing illicit pecuniary benefit to the former, cannot be defeated or frustrated by attachment of such property to such extent by the enforcement authority in exercise of its power under Section 8 PMLA. 164. Though the sequitur to the above conclusion is that the bonafide third party claimant has a legitimate right to proceed ahead with enforcement of its claim in accordance with law, notwithstanding the order of attachment under PMLA, the latter action is not rendered irrelevant or unenforceable. To put it clearly, in such situations as above (third party interest being prior to criminal activity) the order of attachment under PMLA would remain valid and operative, even though the charge or encumbrance of such third party subsists but the State action would be restricted to such part of the value of the property as exceeds the claim of the third party. 165. Situation may also arise, as seems to be the factual matrix of some of the cases at hand, wherein a secured creditor, it being a bonafide third party claimant vis-a-vis the alternative attachable property (or deemed tainted property) has initiated action in accordance with law for enforcement of such interest prior to the ord....
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.... It also pertinently held that interest acquired in deemed tainted property prior to the period during which the criminal activity was undertaken would be free from the rigours and penal provisions of the Act. It accordingly proceeded to propound the rule that the date or period of commission of criminal activity would be liable to be treated and recognised as the "cut off". On arriving at the aforesaid conclusion, the learned Judge held that any interest in the property of an accused vesting in a third party which had acquired the same for lawful and adequate consideration prior to the commission of the scheduled offence would not stand defeated or frustrated by attachment. 73. Proceeding then to deal with secured interests that may have been validly created and may be found to exist, Axis Bank holds that an order of attachment under the Act is not rendered unenforceable merely because a valid third-party encumbrance or charge exists in such property. The learned Judge explained the legal position and held that since action taken either by a secured creditor or the Directorate under the Act are both steps taken in accordance with law, harmoniously interpreted it must be held that....
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....om scheduled offence is taken or held outside India, the property of equivalent value held in India or abroad may be attached irrespective of date of purchase. We fully subscribe to the opinion expressed by Delhi High Court. We find that third limb of definition 'proceeds of crime' covers property equivalent to property held or taken outside India, thus date of purchase of property which is equivalent to property held outside India, is irrelevant. Any property irrespective of date of purchase may be attached if property derived or obtained from scheduled offence is held or taken outside India. 32. The moot question arises that whether property of equivalent value may be attached where property derived or obtained from scheduled offence is not held or taken outside India. If any property is permitted or held liable to be attached irrespective of its date of purchase, it would amount to declaring second and third limb of definition of 'proceeds of crime' one and same. As pointed out by counsel for Appellants, the third limb of definition clause was inserted by Act 20 of 2015. The aforesaid 3rd limb has been further amended w.e.f. 19.04.2018 enlarging the scope. The question arises ....
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....ved in money laundering is upon the person whose property is attached. There is no sense on the part of any person to discharge burden qua source of property if any property may be attached, irrespective of its source. 33. As per Section 8(6) of the PMLA, where the Special Court finds that offence of money laundering has not taken place or property is not involved in money laundering, it shall release such property. If contention of Respondent is upheld, there would be no need of recording findings by Special Court with respect to property attached being proceeds of crime, no sooner it is held that offence of money laundering has been committed, then the Special Court would be bound to confiscate every attached property because every property in the hand of a person, who had obtained or derived property from scheduled offence, would be proceeds of crime. 34. We deem it appropriate to examine contention of Respondents from another angle i.e. offence of money laundering as defined under Section 3 of the PMLA. As per Section 3 of the PMLA, any person who has directly or indirectly attempted to indulge or knowingly assisted or knowingly is a party or is involved in concealment, pos....
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....rior to registration of FIR or ECIR, the property derived from scheduled offence would not be available, however money generated from sale or transfer of said property in the form of cash or any other form of property may be available. The cash or any other form of property movable or immovable, tangible or intangible would be 'value of property' derived from commission of scheduled offence. 36. Andhara Pradesh High Court in the case of Satyam Computer Services (Supra) has expressed view similar to our above expressed view, however Delhi High Court in the case of Axis Bank (Supra) has expressed contrary view which we do not subscribe because Delhi High Court has declared/treated words 'value of such property' and 'property equivalent in value held within country' at par which cannot be countenanced in view of scheme and object of the Act. 37. There may be a case where a person accused of commission of scheduled offence, on account of destruction or disposal of property, is having no property. Non-availability of property derived from scheduled offence does not immune an accused from offence of money laundering committed under Section 3 of the PMLA. As per scheme of the Act, the....
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....s. It becomes pertinent to note [and as would be evident from the chart extracted hereinabove and which exhibits how Section 2(1)(u) came to be amended from time to time] that the expression "or the value of any such property" existed right from the inception of the Act itself. Section 2(1)(u) consequently as it stood originally included both property derived or obtained directly or indirectly by a person indulging in criminal activity as well as the value of any such property. The phrase "property equivalent in value" came to be introduced by virtue of the 2015 Amendment to the Act and while dealing with a situation where property is taken or held outside the country. To deal with such a situation, the Legislature by virtue of the 2015 Amendment also empowered the Directorate in such a contingency to initiate action against property equivalent in value held within the country itself. The words "or abroad" came to be included in the third limb of Section 2(1)(u) by virtue of the 2018 Amendment to the Act. The Court also bears in mind the Explanation which came to be added to Section 2(1)(u) which further sheds light on the expansive sweep of Section 2(1)(u) and prescribes that proc....
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....hemselves observed that the phrase "value of any such property" would not mean and include any property which has no link, direct or indirect, with property derived or obtained from commission of a scheduled offence. The Court observes that Section 2(1)(u) clearly and in unambiguous terms includes not only property derived or obtained directly or indirectly as a result of criminal activity relating to a scheduled offence but also the value of any such property. Seema Garg thus seems to gloss over the statutory imperatives underlying the deployment of the phrase "or the value of any such property" and the concept of deemed tainted properties enunciated in Axis Bank. On a plain textual interpretation of Section 2(1)(u) as well as in the backdrop of the amendatory history of that provision, this Court finds itself unable to agree with the line of reasoning adopted in Seema Garg. As held hereinbefore, affirmation of Seema Garg would amount to virtually deleting the phrase "or the value of any such property" from Section 2(1)(u). That would not only violate the well settled tenets of statutory construction but would clearly amount to the Court rewriting the provision itself in a manner ....
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.... the Hon'ble Supreme Court in Bengal Immunity Co. v. State of Bihar is: 23. It is a sound rule of construction of a statute firmly established in England as far back as 1584 when Heydon's case [3 Co. Rep 7a : 76 ER 637] was decided that- "... for the sure and true interpretation of all statutes in general (be they penal or beneficial, restrictive or enlarging of the common law) four things are to be discerned and considered: 1st. What was the common law before the making of the Act. 2nd. What was the mischief and defect for which the common law did not provide. 3rd. What remedy the Parliament hath resolved and appointed to cure the disease of the Commonwealth, and 4th. The true reason of the remedy; and then the office of all the Judges is always to make such construction as shall suppress the mischief, and advance the remedy, and to suppress subtle inventions and evasions for continuance of the mischief, and pro private commodo, and to add force and life to the cure and remedy, according to the true intent of the makers of the Act, pro bona publico." In In re Mayfair Property Company [LR [1898] 2 Ch. 28 at p. 35] Lindley, M.R. in 1898 found the rule "as necessa....
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....eeds of crime". Hence, could not have been attached in exercise of power under Section 5 of the PMLA. Therefore, the act of provisional attachment of the properties of respondent No. 5 by respondent-authorities suffers from arbitrariness and in flagrant violation of mandate of Section 5 of the PML Act, 2002. A similar issue was there before a Division Bench of Punjab and Haryana High Court in Seema Garg v. Deputy Director, Directorate of Enforcement reported in 2020 SCC OnLine P&H 738. The Hon'ble High Court elaborately considered the issue and held as follows: "31. Property purchased prior to commission of scheduled offence leaving aside date of enactment of PMLA, does not fall within ambit of first limb of definition of 'proceeds of crime', however it certainly falls within purview and ambit of third limb of the definition. Counsel for both sides have cited judgment of Delhi High Court in the case of Abdullah Ali Balsharaf v. Directorate of Enforcement (2019) 3 RCR (Cri) 798 to support their contention. As per said judgment, if property derived or obtained from scheduled offence is taken or held outside India, the property of equivalent value held in India or abroad may be ....
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....explanation enlarges scope of first limb of definition 'proceeds of crime' and does not affect second limb of definition. We find some substance in the contention of Respondents, however it is trite law that entire scheme of the Act must be read as a whole/in its entirety and every provision should be read in such a manner that it makes other provisions and scheme of Act coherent and meaningful. A provision cannot be read in isolation. The definition part does not create rights and liabilities, thus it should be examined in the light of other sections which create rights and liabilities. As per Section 8(1) of the PMLA, the Adjudicating Authority has to serve notice calling upon the person to indicate the source of his income, earning or assets out of which or by means of which he has acquired the property attached under Section 5 of the PMLA. Seeking explanation about source of property and furnishing explanation is meaningless if property inspite of genuine and explained source may be attached. As per Section 24 of the PMLA, burden to prove that property is not involved in money laundering is upon the person whose property is attached. There is no sense on the part of any person ....
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....n conjunction with Section 3 and 8 of the PMLA. If all these sections are read together, phrase 'value of such property' does not mean and include any property which has no link direct or indirect with the property derived or obtained from commission of scheduled offence i.e. the alleged criminal activity. 'Value of such property' means property which has been converted into another property or has been obtained on the basis of property derived from commission of scheduled offence e.g. cash is received as bribe and invested in purchase of some house. House is value of property derived from scheduled offence. Cash in the hands of an accused of offence under Prevention of Corruption Act, 1988 is property directly derived from scheduled offence, however if some movable or immovable property is purchased against said cash, the movable or immovable property would be 'value of property' derived from commission of scheduled offence. If a person gets some land or building by committing cheating (Section 420 of IPC) which is a scheduled offence and said building or land is sold prior to registration of FIR or ECIR, the property derived from scheduled offence would not be available, however ....
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....equential generation of proceeds of crime. The aforesaid allocation ultimately came to be quashed on 24 September 2014 by the Supreme Court in Manohar Lal Sharma. However, much before that verdict coming to be rendered, CBI on 07 April 2010 registered FIR No. RC/AC2/2010/A0001 alleging misrepresentation by PIL in order to obtain the coal allocation as well as diversion of coal extracted from the said block. The Special Judge CBI framed charges against PIL and other accused in C.C. No. 3 of 2012. That chargesheet was challenged by PIL before this Court which on 05 September 2014 quashed the FIR as well as the consequential chargesheet which was submitted. Although that judgment of the Court forms subject matter of challenge before the Supreme Court by way of SLP (Crl.) 2576 of 2015 which is presently pending, the decision of this Court has neither been stayed nor placed in abeyance. 83. The proceedings initiated by the Enforcement Directorate and impugned in these writ petitions emanate from a second FIR registered by the CBI on 02 December 2016 and was numbered as R.C. No. 221/2016/E0035. Investigation undertaken in terms of the second FIR has culminated in the filing of a charges....
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....ohar Lal Sharma (2014) 9 SCC 516, the Supreme Court extensively reviewed the system of allocation of coal blocks by the Union Government and explained that procedure as entailing the following steps. The allocation letter enabled the recipient to apply to the appropriate State Government for grant of a prospecting license or a mining lease dependent upon whether the block had been previously explored or not. The applicant was thereafter required to have a mining plan duly approved. The State Government on receipt of that plan was required to obtain the prior consent of the Union whereafter and upon receipt of environmental clearance and other statutory permissions, a mining lease would be granted by that Government. The nature of the right conferred on the allocatee by virtue of the allocation letter was explained by the Supreme Court in Manohar Lal Sharma in the following terms: - "75. We are unable to accept the submission of the learned Attorney General that allocation of coal block does not amount to grant of largesse. It is true that allocation letter by itself does not authorise the allottee to win or mine the coal but nevertheless the allocation letter does confer a very i....
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....ht to obtain a lease for excavation of mineral alone being conferred and parted with. On a consideration of the procedure for allotment of coal blocks and their allotment, it is manifest that the allocation of a coal block cannot stricto sensu be construed either as property or conferment of a right in property. It becomes pertinent to note that the expression property is defined by Section 2(1)(v) as property or assets of every description. The allocation at best represents a right conferred by the Union enabling the holder thereof to apply to the concerned State Government for grant of a mining lease. The allocation cannot per se be recognised as representing proceeds of crime. It would be the subsequent and consequential utilisation of that allocation, the working of the lease that may be granted, the generation of revenues from such operations and the investment of those wrongfully obtained monetary gains that can possibly give rise to an allegation of money laundering. It is the financial gains that may be derived and obtained or proceeds generated from such allocation which could be considered as falling within the net of Section 2(1)(u). 87. It becomes pertinent to bear in ....
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..... For the purposes of implementing or applying paragraph 1 of this article: a. it shall not matter whether the predicate offence was subject to the criminal jurisdiction of the Party; b. it may be provided that the offences set forth in that paragraph do not apply to the persons who committed the predicate offence; c. knowledge, intent or purpose required as an element of an offence set forth in that paragraph may be inferred from objective, factual circumstances. 3. Each Party may adopt such measures as it considers necessary to establish also as offences under its domestic law all or some of the acts referred to in paragraph 1 of this article, in any or all of the following cases where the offender: a. ought to have assumed that the property was proceeds: b. acted for the purpose of making profit; c. acted for the purpose of promoting the carrying on of further criminal activity. 4. Each Party may, at the time of signature or when depositing its instrument of ratification, acceptance, approval or accession, by declaration addressed to the Secretary General of the Council of Europe declare that paragraph 1 of this article applies only to predicate offences or categ....
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....eds of crime came to be acquired or obtained on that date. This they have woefully failed to do. As noted hereinabove, the gamut of allegations with respect to the generation of proceeds of crime relate to activities and events which ensued after 04 September 2003. That for reasons which stand recorded cannot be taken cognizance of for the purposes of evaluating the validity of proceedings under the Act. within the ambit of Section 2(1)(u). 91. That leads the Court to the irrefutable conclusion that once it is found that the allocation of coal would not fall within the scope of the definition of proceeds of crime, proceedings initiated based on a contrary assumption under the Act would also necessarily crumble and disintegrate. The aforesaid conclusion flows as a necessary sequitur to the Court finding that the allocation would not constitute "proceeds of crime". K. IMPACT OF QUASHING OF THE FIRST CHARGESHEET 92. It would be pertinent to recall that amongst the various charges which were levelled in the first chargesheet, it was inter alia alleged that PIL diverted 2,27,000 tons of coal to the black market and profited to the extent of Rs. 22.7 crores. It is this amongst other c....
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....e having been committed and which is included as a scheduled offense under the Act. In the absence of a scheduled offense having been committed, the question of laundering of proceeds of crime would not arise at all. Bearing in mind the fact that proceedings relating to the first chargesheet have come to be quashed, as a necessary corollary, it would have to be acknowledged that the Court found that the offenses as alleged to have been committed were not found to be evidenced. The decision of the Court amounted to an effacement and annulment of the criminal prosecution which was launched and initiated. The decision of this Court has the effect of a judicial declaration being entered that an offense under the Penal Code did not stand committed at all. 95. An allegation of money laundering is premised and dependent upon the commission of a criminal offense. Unless proceeds are found to have been derived or obtained from criminal activity, the question of money laundering would not arise. Money laundering, as noted above, is concerned with the commission of an offense which may have yielded revenues or profits and which are then concealed and conferred a sheath of legitimacy. Once th....
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....lement of the offense under Section 3 has an enduring and ineffaceable link to proceeds of crime. Absent the commission of a criminal offense, the foundation of proceedings initiated under the Act would undoubtedly fall and self-destruct. Regard must be had to the fact that not every criminal activity falls within the ambit of Section 3. While criminal activity may represent or evidence the commission of a predicate offense under the Penal Code, it is only activity relating to the laundering of proceeds of crime which can form subject matter of proceedings under the Act. However, once it is found that the allocation would not represent or fall within the scope of the expression proceeds of crime as defined under the Act, the question of money laundering would not arise at all. In view of the aforesaid, it cannot be said that Section 3 is attracted. 98. The Court further notes that it was the revenues generated from and pursuant to the allocation and the properties derived or acquired therefrom which may have fallen within the meaning of the expression "proceeds of crime". Those moneys generated or properties acquired when concealed, possessed or used and/or thereafter projected/cl....
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....e in the present case for the reason that the FIR alleging commission of the predicate offenses came to be registered as late as in 2016. On culmination of investigation, a chargesheet came to be submitted before the competent court in 2020. Thus, in the facts of the present case it is apparent that both the FIR as well as the chargesheet came to be registered and filed after the Act had come into force and subsequent to the inclusion of Sections 420 and 120B IPC as scheduled offenses therein. 102. More importantly the issue of the Act operating retroactively based on the date when a particular offense may come to be included in the schedule has already been ruled upon by the Court while dealing with Issue "G" where it was found that the date of inclusion of a crime as a scheduled offense would not be determinative and the issue would have to be decided bearing in mind whether an offence of money laundering stood committed after the Act had come into force. The various decisions rendered on this question have been duly considered and noted by the Court while ruling on Issue "G" and is thus not being repeated for the sake of brevity. The Court while dealing with Issue "G" has indep....
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....es would be liable to be invoked in cases where the actual tainted property cannot be traced or found out. It is only where the respondents are unable to discover the tainted property that they can take the statutory recourse to move against properties which may fall within the ambit of "value of any such property" or "property equivalent in value held within the country or abroad". To the aforesaid limited extent, properties purchased prior to 01 July 2005 may also become vulnerable and subject to action under the Act. However, enforcement action against such properties would have to satisfy the tests and safeguards as propounded in Axis Bank with the learned Judge observing that in such a situation it would have to be established that the person accused of money laundering had an interest in such property at least till the time that he indulged in the proscribed criminal activity. The learned Judge further observed that bona fide rights acquired by third parties prior to the commission of the predicate offense would stand saved. 106. Reverting however to the facts of the present case, as this Court reads the impugned show cause notice, it is manifest that the respondents have no....
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....e". Secondly, there is no allegation levelled against the petitioners that proceeds of crime had been derived or obtained prior to the allocation. Furthermore, if the Court were to even scrutinize acquisitions made after allocation and tread down that path, it faces the undisputed specter of the first chargesheet having been quashed. The judgment of the Court quashing those proceedings compels and constrains the Court to acknowledge that no criminal activity was indulged in. Viewed from this perspective also, the Court comes to the unescapable conclusion that the submissions advanced by the respondents on this score lack merit and are liable to be rejected. O. CONCLUSIONS 108. On an overall consideration of the issues delineated above, the Court comes to record the following conclusions: - A. When the offense of money laundering is described as a stand-alone offense, all that is sought to be conveyed is that it represents an independent offense and is to be tried separately in accordance with the procedure prescribed under the Act. The objective of the Act is to try charges of money laundering which entails proceeds of crime being acquired, possessed or used and/or projected as....
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....o be annulled by virtue of a judicial declaration with a competent Court finding that an offence could not be set to have been committed it would be impermissible to assert that a person or entity has indulged in money laundering. F. Since the offence of money laundering is essentially aimed at depriving persons of the fruits and benefits that may have been derived or obtained from criminal activity, the charge is inextricably linked to criminal activity. However, once it is found that a criminal offence does not stand evidenced, the question of any property being derived or obtained therefrom or its confiscation or attachment would not arise at all and in any case, proceedings if initiated under the Act would be wholly without jurisdiction or authority. G. The Court finds that the expression "proceeds of crime" creates an inextricable link between criminal activity and the acquisition of property and assets as a result thereof. If the charge of criminal activity ceases to exist in law, a charge of money laundering would neither sustain nor survive. The Court thus reiterates the conclusions as drawn and recorded in Rajeev Chanana and Gagandeep Singh. Consequently it must be hel....
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....qually well settled principle relating to the retroactive application of penal provisions is that merely because a requisite or facet for initiation of action pertains to a period prior to the enforcement of the statute, that would not be sufficient to characterize the statute as being retrospective. M. It must be borne in mind that the Act with which we are concerned, penalises acts of money laundering. It does not create a separate punishment for a crime chronicled or prescribed under the Penal Code. The Act does not penalise the predicate offense. That offense merely constitutes the substratum for a charge of money laundering being raised. Accordingly, while the commission of the predicate offense may be described as the sine qua non for an allegation of money laundering being laid against a person, it is an offense created independently owing its genesis to the Act which came to be promulgated on 01 July 2005. While the commission of a predicate offense may be a condition precedent for an allegation of money laundering being laid, it is the activities of money laundering alone which would determine the validity of proceedings initiated under the Act. N. The Court thus concl....
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....e was always connected with an exigency where property is taken or held outside the country. If the principle enunciated in Seema Garg were to be followed, it would clearly amount to reading Section 2(1)(u) absent the expression "value of any such property". That would not only violate the well settled tenets of statutory construction but would clearly amount to the Court re-writing the provision itself in a manner that it stands deprived of vital and purposive content. S. The Court while reiterating the principles laid down in Axis Bank also takes into consideration the nature of the malaise or mischief against which the Act purports to operate. It consequently finds no justification to read Section 2(1)(u) in a manner which may whittle down its apparent legislative intent and the extent of the power which it seeks to confer on the Directorate. T. Axis Bank also culled out various salutary and significant safeguards insofar as third-party interests, secured or unsecured, that may come to exist in property and thus balancing competing interests. Those safeguards clearly confer protection on a bona fide third-party interest that may come to exist in property acquired upon paymen....
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....o any monetary gains. It was only when the same was utilized that the question of illegal gains would have arisen. Y. The impugned proceedings rest on the second chargesheet which bids us to restrict scrutiny upto 04 September 2003 when the allocation came to be made. The proceedings under the Act thus cannot travel beyond the gamut of that chargesheet. The allegations of money laundering would thus have to be cabined and fenced in upto that date. This since the offense is stated to have been committed and completed on 04 September 2003. Thus, any event or offense that may have been allegedly committed post that date would clearly fall beyond the pale of scrutiny for the purposes of adjudging the validity of the impugned proceedings. Z. This aspect represents a critical pinion in this case since the criminal activity on which the allegation of money laundering is constructed and raised is the allocation of the coal block. As noted above, there is no allegation that any illegal monetary gains were derived or obtained as on 04 September 2003. This coupled with the fact that the allocation itself would not represent proceeds of crime leads the Court to the unescapable conclusion t....