TaxTMI 
TaxTMI 
2023 (1) TMI 1467
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.....02.2012. The police after investigation filed a charge sheet in Spl.C.C.No.188/2013 and a second charge sheet in Spl.C.C.No.190/2013 and on the same facts, the third charge sheet in Spl.C.C.No.189/2013. Therefore, the proceedings against the petitioner were in Spl.C.C.Nos.188/2013, 189/2013, 190/2013. 4. During the pendency of those proceedings, the respondents registers an Enforcement Case Information Report ('ECIR' for short) in ECIR No.BGZO/05/2015 Summons/2790 and issued summons to the petitioner and again on 02.11.2018, issued the very summons that were earlier issued for seeking his presence before the concerned. It is at that juncture, the petitioner knocks at the doors of this Court seeking quashment of the entire proceedings in ECIR No.BGZO/05/2015 Summons/2790. 5. At the time when the petition was filed calling in question the aforesaid summons, the law with regard to, whether the proceedings initiated by the Enforcement Directorate would continue after the acquittal of an accused in the predicate offence, was fluid and not lucid. The law is now clear and crystalised by the judgment of the Apex Court in the case of VIJAY MADANLAL CHOUDHARY & ORS. V/s ....
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....ffence of money-laundering. Explanation.--For the removal of doubts, it is hereby clarified that,-- (i) 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 connected with proceeds of crime, namely:-- (a) concealment; or (b) possession; or (c) acquisition; or (d) use; or (e) projecting as untainted property; or (f) claiming as untainted property, in any manner whatsoever; (ii) the process or activity connected with proceeds of crime is a continuing activity and continues till such time a person is directly or indirectly enjoying the proceeds of crime by its concealment or possession or acquisition or use or projecting it as untainted property or claiming it as untainted property in any manner whatsoever." 264. This section was first amended vide Act 2 of 2013. The expression "proceeds of crime and projecting" was substituted by expression "proceeds of crime including its concealment, possessi....
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....ns and recommendations noted by the international body. We may usefully refer to the Core Recommendations of the FATF concerning India of June 2013, which reads thus: "Core Recommendations Recommendations Rating Summary of Actors underlying Rating Action taken of remedy deficiencies 1- ML offence PC (High Monetary ) threshold condition for most ML Predicates Amendments to india's prevention of money laundering act (PMLA) were enacted by Parliament on 17 December 2012 and came into force on 15 February 2013 All predicate offences previously contained in Part B of the Schedule (46 offences with a threshold value of INR 3 million ("30 lakh rupees" of USD 60000) were added in Part A without a threshold value. Part C of the Schedule now includes all offences listed in Part A, supplemented by all offences covered by Chapter XVII of the Penal Code, 1860, when these offences have cross-border implications. All in all, the list of predicate offences continues to include 156 offences under 28 different statutes but without any monetary threshold. As result, the major technical deficiency identified in relatio....
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.... in connection with the occurrence of the word "and" preceding the expression "projecting or claiming" therein. This Court in Pratap Singh v. State of Jharkhand, enunciated that the international treaties, covenants and conventions although may not be a part of municipal law, the same be referred to and followed by the Courts having regard to the fact that India is a party to the said treaties. This Court went on to observe that the Constitution of India and other ongoing statutes have been read consistently with the rules of international law. It is also observed that the Constitution of India and the enactments made by Parliament must necessarily be understood in the context of the present-day scenario and having regard to the international treaties and convention as our constitution takes note of the institutions of the world community which had been created. In Apparel Export Promotion Council v. A.K. Chopra, the Court observed that domestic Courts are under an obligation to give due regard to the international conventions and norms for construing the domestic laws, more so, when there is no inconsistency between them and there is a void in domestic law. This view has bee....
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....dering, just as knowingly concealing, possessing, acquiring or using of proceeds of crime, directly or indirectly. This is reinforced by the statement presented along with the Finance Bill, 2019 before the Parliament on 18.7.2019 as noted above. 268. Independent of the above, we have no hesitation in construing the expression "and" in Section 3 as "or", to give full play to the said provision so as to include "every" process or activity indulged into by anyone, including projecting or claiming the property as untainted property to constitute an offence of money-laundering on its own. The act of projecting or claiming proceeds of crime to be untainted property presupposes that the person is in possession of or is using the same (proceeds of crime), also an independent activity constituting offence of money-laundering. In other words, it is not open to read the different activities conjunctively because of the word "and". If that interpretation is accepted, the effectiveness of Section 3 of the 2002 Act can be easily frustrated by the simple device of one person possessing proceeds of crime and his accomplice would indulge in projecting or claiming it to be untainted propert....
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....d were in force till 31.7.2019); and the same has been merely explained and clarified by way of Explanation vide Finance (No. 2) Act, 2019. Thus understood, inclusion of Clause (ii) in Explanation inserted in 2019 is of no consequence as it does not alter or enlarge the scope of Section 3 at all. 271. As mentioned earlier, the rudimentary understanding of 'money-laundering' is that there are three generally accepted stages to money-laundering, they are: (a) Placement : which is to move the funds from direct association of the crime. (b) Layering : which is disguising the trail to foil pursuit. (c) Integration : which is making the money available to the criminal from what seem to be legitimate sources. 272. It is common experience world over that money-laundering can be a threat to the good functioning of a financial system. However, it is also the most suitable mode for the criminals deal in such money. It is the means of livelihood of drug dealers, terrorist, white collar criminals and so on. Tainted money breeds discontent in any society and in turn leads to more crime and civil unrest. Thus, the onus on the Government and the....
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....ce and perfect clarity. In the absence of it, when a defect appears a judge cannot simply fold his hands and blame the draftsman. He must set to work on the constructive task of finding the intention of Parliament, and he must do this not only from the language of the statute, but also from a consideration of the social conditions which gave rise to it, and of the mischief which it was passed to remedy, and then he must supplement the written word so as to give "force and life" to the intention of the legislature. That was clearly laid down by the resolution of the judges in Heydon's case, and it is the safest guide today. Good practical advice on the subject was given about the same time by Plowden in his second volume Eyston v. Studd. Put into homely metaphor it is this: A judge should ask himself the question : If the makers of the Act had themselves come across this ruck in the texture of it, how would they have straightened it out? He must then do as they would have done. A judge must not alter the material of which it is woven, but he can and should iron out the creases." (emphasis supplied) 275. Let us now also refer to the various cases that have been presse....
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.... (emphasis supplied) 276. However, in the present case we find that the Explanation only sets forth in motion to clear the mist around the main definition, if any. It is not to widen the ambit of Section 3 of the 2002 Act as such. Further, the meaning ascribed to the expression "and" to be read as "or" is in consonance with the contemporary thinking of the international community and in consonance with the Vienna and Palermo Conventions. 277. Reference has also been made to judgments which refer to the purport of side notes in the interpretation of a statute in Thakurain Balraj Kunwar v. Rae Jagatpal Singhhttps://www.scconline.com/Members/SearchResult.asp x - FN0479, Nalinakhya Bysack v. Shyam Sunder Haldar, Chandroji Rao v. Commissioner of Income Tax, M.P., Nagpur, Board of Muslim Wakfs, Rajasthan v. Radha Kishan, Tara Prasad Singh v. Union of India, Sakshi v. Union of India, Guntaiah v. Hambamma and C.Gupta v. Glaxo- Smithkline Pharmaceuticals Ltd. However, we find them of no use in the present case as we have already held that the Explanation only goes on to clarify the main or original provision. Other cases, which are of no help to the present issue, are ....
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....e may also note that argument that removing the necessity of projection from the definition will render the predicate offence and money- laundering indistinguishable. This, in our view, is ill founded and fallacious. This plea cannot hold water for the simple reason that the scheduled offences in the 2002 Act as it stands (amended up to date) are independent criminal acts. It is only when money is generated as a result of such acts that the 2002 Act steps in as soon as proceeds of crime are involved in any process or activity. Dealing with such proceeds of crime can be in any form --being process or activity. Thus, even assisting in the process or activity is a part of the crime of money-laundering. We must keep in mind that for being liable to suffer legal consequences of ones action of indulging in the process or activity, is sufficient and not only upon projection of the ill-gotten money as untainted money. Many members of a crime syndicate could then simply keep the money with them for years to come, the hands of the law in such a situation cannot be bound and stopped from proceeding against such person, if information of such illegitimate monies is revealed even from an unknow....
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....operty would constitute an offence of money-laundering on its own, being an independent process or activity. (c) The interpretation suggested by the petitioners, that only upon projecting or claiming the property in question as untainted property that the offence of Section 3 would be complete, stands rejected. (d) The offence under Section 3 of the 2002 Act is dependent on illegal gain of property as a result of criminal activity relating to a scheduled offence. It is concerning the process or activity connected with such property, which constitutes the offence of money-laundering. The Authorities under the 2002 Act cannot prosecute any person on notional basis or on the assumption that a scheduled offence has been committed, unless it is so registered with the jurisdictional police and/or pending enquiry/trial including by way of criminal complaint before the competent forum. If the person is finally discharged/acquitted of the scheduled offence or the criminal case against him is quashed by the Court of competent jurisdiction, there can be no offence of money- laundering against him or any one claiming such property being the property linked to stated scheduled....
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.... conditions in Section 45(1) of the 2002 Act, as it stood at the relevant time, as unconstitutional in no way obliterated the provision from the statute book; and it was open to the Parliament to cure the defect noted by this Court so as to revive the same provision in the existing form. (b) We are unable to agree with the observations in Nikesh Tarachand Shah distinguishing the enunciation of the Constitution Bench decision in Kartar Singh and other observations suggestive of doubting the perception of Parliament in regard to the seriousness of the offence of money-laundering, including about it posing serious threat to the sovereignty and integrity of the country. (c) The provision in the form of Section 45 of the 2002 Act, as applicable post amendment of 2018, is reasonable and has direct nexus with the purposes and objects sought to be achieved by the 2002 Act and does not suffer from the vice of arbitrariness or unreasonableness. (d) As regards the prayer for grant of bail, irrespective of the nature of proceedings, including those under Section 438 of the 1973 Code or even upon invoking the jurisdiction of Constitutional Courts, the underlying princ....
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....hem as also the options/remedies available to the person concerned before the Authority and before the Special Court. (xx) The petitioners are justified in expressing serious concern bordering on causing injustice owing to the vacancies in the Appellate Tribunal. We deem it necessary to impress upon the executive to take corrective measures in this regard expeditiously. (xxi) The argument about proportionality of punishment with reference to the nature of scheduled offence is wholly unfounded and stands rejected." (Emphasis supplied) Clause (v) of the conclusion assumes significance. Clause (v) is answering the interpretation of Section 3 and holds that the offence under Section 3 is dependent on illegal gain of property as a result of criminal activity relating to a scheduled offence. It is concerning the process or activity connected with such property which constitutes the offence of money laundering. The Apex Court holds that the authorities under the Act cannot prosecute any person on notional basis or on the assumption that the scheduled offence has been committed, unless it is so registered with the jurisdictional police and/or pending enq....
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.... Learned ASG appearing for the respondent, in all fairness, does not dispute the above position of law declared by this Court. The result of the discussion aforesaid is that the view as taken by the Trial Court in this matter had been a justified view of the matter and the High Court was not right in setting aside the discharge order despite the fact that the accused No.1 had already been acquitted in relation to the scheduled offence and the present appellants were not accused of any scheduled offence. In view of the above, this appeal succeeds and is allowed. The impugned judgment and order dated 17.12.2020 is set aside and the order dated 04.01.2019 as passed by the Trial Court, allowing discharge application of the appellants, is restored." The Apex Court in the case of PARVATHI KOLLUR (supra) notices the judgment in the case of VIJAY MADANLAL CHOUDHARY and records the admission of the Union of India and quashes the proceedings. On the bedrock of what the Apex Court declares, the case at hand merits consideration. 14. It is not in dispute that accused 3, 4 and 5 are hauled into the proceedings under the Act only because the property that they have a....