TaxTMI 
TaxTMI 
2024 (1) TMI 1303
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....ugned proceedings insofar as the petitioners are concerned, pending disposal of the writ petitions. 2. The basis for investigation of the offence of money-laundering, particularly, Section 3 of the PMLA, 2002, is the registration of First Information Reports in different parts of the State for a few scheduled offences. The gist of contents, as seen from the impugned Enforcement Case Information Report, reads thus:- Materials relating to commission of scheduled offence and assessment of proceeds of crime: (i) First Information Report in Crime No. 68 of 2023 dated 25.04.2023 was registered by Murappanadu Police Station, Tuticorin District under Sections 449, 332, 302 and 506(ii) of IPC for murder of a Village Administrative Officer of Murappanadu region in Tuticorin District. The crime was committed by sand mining mafia after the police had registered a case against the sand mining mafia on the complaint of Village Administrative Officer before Murappanadu Police Station, which was for theft of sand under Section 379 of IPC. (ii) First Information Report in Crime No. 2 of 2022 dated 05.02.2022 had been registered by Vigilance and Anti-Corruption, The....
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....ehind the murder is to keep generating proceeds of crime through illegal mining activities and to hide their activities relating to proceeds of crime generated through the scheduled offence under the PMLA, 2002 and thereby prima facie commit the offence of money-laundering; that the registration of First Information Reports for scheduled offence prima facie shows that it is a fit case for investigation under the PMLA, 2002. The impugned proceedings refer to the above general statements based on the four First Information Reports to justify the investigation into offence of money-laundering under Section 3 of the PMLA, 2002. It is pertinent to mention that 26 persons were named as accused in the impugned proceedings including two of them who are shown as deceased. 4. The petitioners in all the writ petitions have received summons for the individual's appearance to give evidence in connection with the investigation in connection with the impugned proceedings. It is stated by the individual petitioners that in response to the summons they received, they have issued a reply with the following contents:- (a) The petitioners expressed their surprise on the receipt of summ....
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.... Choudhary and others v. Union of India and others, 2022 SCC Online (SC) 929 and referred to the provisions of PMLA, 2002 to substantiate the following submissions:- (i) The proceeds of crime, as defined under Section 2(1)(u) of the PMLA, 2002, refers only to property which may directly or indirectly be derived as a result of any criminal activity relatable to a scheduled offence and that "proceeds of crime" being the core of the ingredients constituting the offence of money-laundering, without identifying any property derived or obtained either directly or indirectly as a result of criminal activity relating to a scheduled offence, there cannot be a roving enquiry or investigation by summoning anyone against whom the respondents have no prima facie material to link them to a predicate offence or to anyone who is accused of money-laundering. (ii) No action against any person for money-laundering can be resorted to on mere assumption or notion that there exists proceeds of crime merely because a scheduled offence capable of generating proceeds of crime has been registered. (iii) Since the offence under Section 3 of the PMLA, 2002 is dependent on illegal ga....
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....he general accusations levelled against public servants and persons indulge in illegal sand mining throughout the State do not warrant issuing summons to the petitioners. This is beyond one's comprehension when one understands the real object, purpose and limits of the PMLA, 2002. (vii) In any event, a PMLA case cannot go beyond the contours and boundaries laid down by scheduled/predicate offence. Therefore, it is incomprehensible as to how the respondents usurp their jurisdiction by making sweeping allegations in the impugned ECIR and commence investigations under the PMLA, 2002 for all causes related to illegal mining, in the absence of such a general or broader F.I.R. (viii) When the respondents have no material or reason to believe that the petitioners may have some knowledge of "proceeds of crime" as a result of any criminal activity in relation to the scheduled offence referred to in the four First Information Reports, issuance of summons to the petitioners is condemnable and should be deprecated, especially when no "proceeds of crime" is identified. (ix) When the petitioners in all the writ petitions are not connected in any way with any of the sch....
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....Union of India and others, 2022 SCC OnLine (SC) 929. (b) Order passed by this Court in W.P. Nos. 33459 to 33468 of 2023 dated 28.11.2023 (State of Tamil Nadu represented by its Secretary, Public and Rehabilitation Department and others v. Directorate of Enforcement, Chennai). (c) Judgment passed by a learned single Judge of Gujarat High Court in the case of Jafar Mohammed Hasanfatta v. Deputy Director, 2017 SCC OnLine Guj 2476. (d) Order of a learned single Judge of Rajasthan High Court in S.B .Crl. M.P. No. 7313 of 2023 dated 22.11.2023 (Mewa Ram Jain v. State of Rajasthan and others). 7. The other learned Senior Counsels appearing for the petitioners in W.P. Nos. 35515 & 35658 of 2023 also adopted the arguments of the learned Senior Counsel Mr. Vikram Chaudri and prayed for a similar interim order granted by this Court in a batch of writ petitions in W.P .Nos. 33459 to 33468 of 2023 dated 28.11.2023, where the summons issued to the District Collectors of five districts were the subject matter of challenge before this Court and that this Court has granted interim stay of operation of the summons impugned therein to the District Collector concerned. ....
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....e criminal proceedings/complaint/FIR in exercise of powers under Section 482 Cr.P.C. and/or under Article 226 of the Constitution of India, our final conclusions are as under: i) Police has the statutory right and duty under the relevant provisions of the Code of Criminal Procedure contained in Chapter XIV of the Code to investigate into a cognizable offence; ii) Courts would not thwart any investigation into the cognizable offences; iii) It is only in cases where no cognizable offence or offence of any kind is disclosed in the first information report that the Court will not permit an investigation to go on; iv) The power of quashing should be exercised sparingly with circumspection, as it has been observed, in the 'rarest of rare cases (not to be confused with the formation in the context of death penalty). v) While examining an FIR/complaint, quashing of which is sought, the court cannot embark upon an enquiry as to the reliability or genuineness or otherwise of the allegations made in the FIR/complaint; vi) Criminal proceedings ought not to be scuttled at the initial stage; vii) Quashing of a complaint/FIR should be....
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....ons make out a cognizable offence and the court has to permit the investigating agency/police to investigate the allegations in the FIR; xvi) The aforesaid parameters would be applicable and/or the aforesaid aspects are required to be considered by the High Court while passing an interim order in a quashing petition in exercise of powers under Section 482 Cr. P.C. and/or under Article 226 of the Constitution of India. However, an interim order of stay of investigation during the pendency of the quashing petition can be passed with circumspection. Such an interim order should not require to be passed routinely, casually and/or mechanically. Normally, when the investigation is in progress and the facts are hazy and the entire evidence/material is not before the High Court, the High Court should restrain itself from passing the interim order of not to arrest or "no coercive steps to be adopted" and the accused should be relegated to apply for anticipatory bail under Section 438 Cr. P.C. before the competent court. The High Court shall not and as such is not justified in passing the order of not to arrest and/or "no coercive steps" either during the investigation or till the i....
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....n and evidence to be presented before the Adjudicating Authority. It is not necessarily for initiating a prosecution against the noticee as such. The power entrusted to the designated officials under this Act, though couched as investigation in real sense, is to undertake inquiry to ascertain relevant facts to facilitate initiation of or pursuing with an action regarding proceeds of crime, if the situation so warrants and for being presented before the Adjudicating Authority. It is a different matter that the information and evidence so collated during the inquiry made, may disclose commission of offence of money- laundering and the involvement of the person, who has been summoned for making disclosures pursuant to the summons issued by the Authority. At this stage, there would be no formal document indicative of likelihood of involvement of such person as an accused of offence of money-laundering. If the statement made by him reveals the offence of money-laundering or the existence of proceeds of crime, that becomes actionable under the Act itself. To put it differently, at the stage of recording of statement for the purpose of inquiring into the relevant facts in connection with ....
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....e 1973 Code. Under Section 2(h) of the 1973 Code, the investigation is done by a "police officer" or by any person (other than a Magistrate) who is authorised by a Magistrate thereby to collect the evidence regarding the crime in question. Whereas, the investigation under Section 2(1)(na) of the 2002 Act is conducted by the Director or by an authority authorised by the Central Government under the 2002 Act for the collection of evidence for the purpose of proceeding under this Act. Obviously, this investigation is in the nature of inquiry to initiate action against the proceeds of crime and prevent activity of money-laundering. In the process of such investigation, the Director or the authority authorised by the Central Government referred to in Section 48 of the 2002 Act is empowered to resort to attachment of the proceeds of crime and for that purpose, also to do search and seizure and to arrest the person involved in the offence of money-laundering. While doing so, the prescribed authority (Director, Additional Director, Joint Director, Deputy Director or Assistant Director) alone has been empowered to summon any person for recording his statement and production of documents as ....
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....re were inconsistencies in these provisions. They have now been removed. We have now enabled only the Director or an officer authorised by him to investigate offences. Of course, we would, by rule, set up a threshold; and, below that threshold, we would allow State police officers also to take action. The second anomaly that we found was that the expression "investigation officer" and the word "investigation" occur in a number of sections but they were not defined in the Act. Consequently, one has to go to the definition in the Criminal Procedure Code and that Code provides only "investigation by a police officer or by an officer authorised by a magistrate". So, clearly, there was a lacuna in not enabling the Director or the Assistant Director under this Act to investigate offences. That has been cured now. .... What we are doing is, we are inserting a new Section, 2(n)(a) defining the term, 'investigation'; making an amendment to Sections 28, 29 and 30, dealing with tribunals; amending Sections 44 and 45 of the Act to make the offence noncognisable so that only the Director could take action; and also making consequential changes in Sec....
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....vestigation concerning the offence under the Act and is interchangeable with the function of "inquiry" to be undertaken by the Authorities under the Act. (iv) The Explanation inserted to Clause (u) of Section 2(1) of the 2002 Act does not travel beyond the main provision predicating tracking and reaching upto the property derived or obtained directly or indirectly as a result of criminal activity relating to a scheduled offence. (v) (a) Section 3 of the 2002 Act has a wider reach and captures every process and activity, direct or indirect, in dealing with the proceeds of crime and is not limited to the happening of the final act of integration of tainted property in the formal economy. The Explanation inserted to Section 3 by way of amendment of 2019 does not expand the purport of Section 3 but is only clarificatory in nature. It clarifies the word "and" preceding the expression projecting or claiming as "or"; and being a clarificatory amendment, it would make no difference even if it is introduced by way of Finance Act or otherwise. (b) Independent of the above, we are clearly of the view that the expression "and" occurring in Section 3 has to be constru....
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....nfusion caused in that regard. (ix) The challenge to deletion of proviso to sub-section (1) of Section 18 of the 2002 Act also stands rejected. There are similar safeguards provided in Section 18. We hold that the amended provision does not suffer from the vice of arbitrariness. (x) The challenge to the constitutional validity of Section 19 of the 2002 Act is also rejected. There are stringent safeguards provided in Section 19. The provision does not suffer from the vice of arbitrariness. (xi) Section 24 of the 2002 Act has reasonable nexus with the purposes and objects sought to be achieved by the 2002 Act and cannot be regarded as manifestly arbitrary or unconstitutional. (xii)(a) The proviso in Clause (a) of sub-section (1) of Section 44 of the 2002 Act is to be regarded as directory in nature and this provision is also read down to mean that the Special Court may exercise judicial discretion on case-to-case basis. (b) We do not find merit in the challenge to Section 44 being arbitrary or unconstitutional. However, the eventualities referred to in this section shall be dealt with by the Court concerned and by the Authority concerned i....
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.... the nature or class of any predicate offence has no bearing on the validity of the Schedule or any prescription thereunder. (xviii)(a) In view of special mechanism envisaged by the 2002 Act, ECIR cannot be equated with an FIR under the 1973 Code. ECIR is an internal document of the ED and the fact that FIR in respect of scheduled offence has not been recorded does not come in the way of the Authorities referred to in Section 48 to commence inquiry/investigation for initiating "civil action" of "provisional attachment" of property being proceeds of crime. (b) Supply of a copy of ECIR in every case to the person concerned is not mandatory, it is enough if ED at the time of arrest, discloses the grounds of such arrest. (c) However, when the arrested person is produced before the Special Court, it is open to the Special Court to look into the relevant records presented by the authorised representative of ED for answering the issue of need for his/her continued detention in connection with the offence of money-laundering. (xix) Even when ED manual is not to be published being an internal departmental document issued for the guidance of the Authoritie....
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....that he may reply appropriately. Without reference to any of the provisions of the PMLA, 2002, the learned single Judge of Rajasthan High Court has observed that the petitioner therein has right to know for what purpose and in what manner his presence would be required so as to enable him to collect the requisite material in order to justify the summons issued by the respondents. Therefore, while allowing the petition to quash the summons, liberty was given to the Enforcement Directorate to issue fresh summons with better particulars after the completion of election in which the petitioner was found to be busy. 15. This Court is unable to find any precedent or supporting provisions under the PMLA, 2002 to justify the conclusions of the learned single Judge of Rajasthan High Court. The Hon'ble Supreme Court in Vijay Madanlal Choudhary case has reiterated the scope of investigation vide the paragraph extracted earlier in this judgment. Apart from that, the Hon'ble Supreme Court has also elaborated the scope of investigation to include all proceedings even to facilitate the adjudication by the adjudicating authority referred to in Chapter III. It has also been observed by the Hon'b....
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....earned Additional Solicitor General while deciding the case in Vijay Madanlal Choudhary that the Enforcement Directorate had taken up 2086 cases for investigation in the last five years under the PMLA, 2002 out of registration of approximately 33 lakh First Information Reports relating to predicate offences by the police and other enforcement agencies. That means only 0.063% of cases registered for predicate offence is being investigated under the PMLA, 2002. If an investigation is permissible on mere assumption of commission of predicate offence in lakhs of cases based on registration of similar cases, that requires summons being issued to lakhs or even crores of persons throughout the country. Therefore, this Court should step in to draw the lakshman rekha by prescribing a well-defined and guarded procedure in the matter of investigation. The investigation cannot be like an unruly horse with the possible mischief and misuse of power by irresponsible officers who can be politically motivated or can act with ulterior motive causing immense hardships and irretrievable damage to many innocent. In other words, with the draconian law which can result in attachment and confiscation proc....
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....to a scheduled offence. To put it differently, the vehicle used in commission of scheduled offence may be attached as property in the concerned case (crime), it may still not be proceeds of crime within the meaning of Section 2(1)(u) of the 2002 Act. Similarly, possession of unaccounted property acquired by legal means may be actionable for tax violation and yet, will not be regarded as proceeds of crime unless the concerned tax legislation prescribes such violation as an offence and such offence is included in the Schedule of the 2002 Act. For being regarded as proceeds of crime, the property associated with the scheduled offence must have been derived or obtained by a person "as a result of" criminal activity relating to the concerned scheduled offence. This distinction must be borne in mind while reckoning any property referred to in the scheduled offence as proceeds of crime for the purpose of the 2002 Act. Dealing with proceeds of crime by way of any process or activity constitutes offence of money-laundering under Section 3 of the Act." 20. In the cases on hand, the petitioners in W.P.Nos.35656 & 35515 of 2023 are engaged in excavator hiring business or undertaking loading....
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....crime. The authorities under the 2002 Act cannot resort to action against any person for money-laundering on an assumption that the property recovered by them must be proceeds of crime and that a scheduled offence has been committed, unless the same is registered with the jurisdictional police or pending inquiry by way of complaint before the competent forum. For, the expression "derived or obtained" is indicative of criminal activity relating to a scheduled offence already accomplished. Similarly, in the event the person named in the criminal activity relating to a scheduled offence is finally absolved by a Court of competent jurisdiction owing to an order of discharge, acquittal or because of quashing of the criminal case (scheduled offence) against him/her, there can be no action for money-laundering against such a person or person claiming through him in relation to the property linked to the stated scheduled offence. This interpretation alone can be countenanced on the basis of the provisions of the 2002 Act, in particular Section 2(1)(u) read with Section 3. Taking any other view would be rewriting of these provisions and disregarding the express language of definition clause....
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....object the actuation or catalysation by malice is not legicidal. The action is bad where the true object is to reach an end different from the one for which the power is entrusted, goaded by extraneous considerations, good or bad, but irrelevant to the entrustment. When the custodian of power is influenced in its exercise by considerations outside those for promotion of which the power is vested the court calls it a colourable exercise and is undeceived by illusion. In a broad, blurred sense, Benjamin Disraeli was not off the mark even in law when he stated: "I repeat . . . that all power is a trust - that we are accountable for its exercise - that, from the people, and for the people, all springs, and all must exist". Fraud on power voids the order if it is not exercised bona fide for the end designed. Fraud in this context is not equal to moral turpitude and embraces all cases in which the action impugned is to effect some object which is beyond the purpose and intent of the power, whether this be malice-laden or even benign. If the purpose is corrupt the resultant act is bad. If considerations, foreign to the scope of the power or extraneous to the statute, enter the verdict or ....