Karnataka High Court
Smt. Pavana Dibbur vs The Directorate Of Enforcement on 27 September, 2022
Author: M. Nagaprasanna
Bench: M. Nagaprasanna
1
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 27TH DAY OF SEPTEMBER, 2022 R
BEFORE
THE HON'BLE MR. JUSTICE M. NAGAPRASANNA
CRIMINAL PETITION No.3542 OF 2022
BETWEEN:
SMT. PAVANA DIBBUR
W/O. LATE AYYAPPA DORE,
AGED ABOUT 44 YEARS,
RESIDING AT NO. 528,
SANGAMA, 5TH CROSS,
HMT LAYOUT, R.T. NAGAR,
BENGALURU - 560 032.
... PETITIONER
(BY SRI MURTHY D.NAIK, SR. ADVOCATE A/W
SRI H.PAVANA CHANDRA SHETTY, ADVOCATE)
AND:
THE DIRECTORATE OF ENFORCEMENT
GOVERNMENT OF INDIA,
REPRESENTED BY ITS ASSISTANT DIRECTOR,
BENGALURU ZONAL OFFICE,
3RD FLOOR, "B" BLOCK,
B.M.T.C., SHANTHINAGAR, TTMC,
K.H. ROAD,
BENGALURU - 560 027.
... RESPONDENT
(BY SRI MADHUKAR DESHPANDE, ADVOCATE)
2
THIS CRIMINAL PETITION IS FILED UNDER SECTION 482 OF
CR.P.C., PRAYING TO i) QUASH THE COMPLAINT DATED
07.03.2022 AT ANNEXURE-B, IN SPL.C.C.NO.781/2022
(P.C.R.NO.13/2022) PENDING ON THE FILE OF PRINCIPAL CITY
CIVIL AND SESSIONS JUDGE (SPECIAL COURT OF PMLA CASES
UNDER PREVENTION OF MONEY LAUNDERING ACT (PMLA), 2002)
BENGALURU CITY, BENGALURU AS AGAINST THE
PETITIONER/ACCUSED NO.6 AND ETC.,
THIS CRIMINAL PETITION HAVING BEEN HEARD AND
RESERVED FOR ORDERS ON 03.08.2022, COMING ON FOR
PRONOUNCEMENT THIS DAY, THE COURT MADE THE
FOLLOWING:-
ORDER
The petitioner is before this Court calling in question complaint dated 07-03-2022 in Special C.C.No.781 of 2022 pending before the Principal City Civil and Sessions (Special Court for PMLA Cases under the Prevention of Money Laundering Act, 2002) Bangalore City and has further sought quashment of entire proceedings in the aforesaid special case registered under the provisions Prevention of Money Laundering Act, 2002 ('the PMLA' for short).
32. Facts adumbrated in brief, are as follows:-
A complaint is registered against the petitioner and several others in P.C.R.No.13 of 2022 on 7-03-2022 by the Directorate of Enforcement for offences punishable under Sections 44 and 45 of the PMLA for commission of offences of money laundering as defined under Section 3 read with Sections 8(5) and 70 which become offence punishable under Section 4 of the PMLA. The allegation in the complaint is that during her tenure as Vice-
Chancellor of M/s Alliance University between 23-12-2014 and 7-01-2016, the petitioner got acquainted with Madhukar G.Angur, accused No.1 and in furtherance of the conspiracy with accused No.1 executed a sham and a nominal sale deed of conveyance without any sale consideration pertaining to the properties belonging to Alliance University into her name. It was further alleged that she facilitated accused No.1 to use her bank accounts in order to conceal the siphoned/misappropriated money from Alliance University thereby attracted the provisions under Sections 2(1)(x)(y), 3 and 4 of the PMLA. Based upon the said complaint so registered, the learned Special Judge takes cognizance of the 4 offences against accused Nos. 1 to 6 for offences punishable under Section 4 of the Act in terms of his order dated 17-03-2022 and PCR was then registered as Special C.C.No.781 of 2022 on 22-03- 2022. It is the order of the Special Judge taking cognizance that drives the petitioner to this Court in the subject petition.
3. Heard learned senior counsel Sri Murthy D.Naik along with Sri Pavana Chandra Shetty, learned counsel appearing for the petitioner and the learned counsel Sri Madhukar Deshpande appearing for the respondent.
4. The learned senior counsel would contend that there is no scheduled offence much less any offence which is pending against the petitioner for invoking the provisions under the PMLA. The ingredients necessary to constitute the offence under the Act are not made out in the complaint against the petitioner. The order of the Special Judge dated 17-03-2022 summoning the petitioner and other accused is without application of judicial mind which is the necessary ingredient of Section 204 of the Cr.P.C. The respondent has no jurisdiction to file the complaint as he has no valid authorization in the eye of law.
55. The learned counsel appearing for the respondent/ Directorate of Enforcement would take this Court through the documents appended to the petition and the provisions of the Act to contend that there are specific allegations with regard to the provisions of the PMLA against the petitioner who may not be an accused in the predicate offences but has ingredients to the scheduled offence under the Act and would submit that it is a matter for trial as accused No.1 who is the principal accused in the crime so registered against him unless gets acquitted, the proceedings against the petitioner cannot be stalled.
6. The matter was heard and reserved for its judgment.
Before it could be pronounced, a three Judge Bench of the Apex Court rendered its judgment on 27-07-2022 in the case of VIJAY MADANLAL CHOUDHARY AND OTHERS v. UNION OF INDIA -
2022 SCC OnLine SC 929. In the light of the said judgment, both the counsel moved the matter for further hearing and the respective learned counsel appearing for the parties were heard further. The learned senior counsel representing the petitioner taking this Court through the judgment in VIJAY MADANLAL 6 CHOUDHARY would contend that the petitioner not being an accused in the principal offence under the IPC, on notions and assumptions the present proceedings under the Act cannot continue, as the Apex Court has clearly held in several paragraphs of the judgment that if the accused under the Act is not an accused in the principal offence, further proceedings would become an abuses of the process of law.
7. The learned counsel representing the respondent refuting the submissions again takes this Court to the very judgment to demonstrate that the understanding of the judgment by the learned senior counsel is erroneous, as the Apex Court has clearly held that if the principal offender gets acquitted, it is only then the proceedings against all connected to the said crime would get obliterated and, therefore, submits that the present petition be dismissed to await the outcome of the allegations against accused No.1 against whose allegation, the allegation of the petitioner under the Act is linked.
8. I have bestowed my anxious consideration to the respective submissions made by the respective learned counsel 7 and perused the material on record and the judgment rendered in the case of VIJAY MADANLAL CHOUDHARY (supra). In furtherance whereof, the issues that fall for my consideration are:
(i) Whether the petitioner can be proceeded for offences under the Act in the light of the judgment rendered by the Apex Court in the case of VIJAY MADANLAL CHOUDHARY?
(ii) Whether the respondent did not have competence to register the complaint?
(iii) Whether the order of the learned Special Judge suffers from want of application of mind?
(iv) Whether cognizance taken by the learned Sessions Judge would run counter to sub-section (2) of Section 202 of the CrPC?
8. Point No.1:
(i) Whether the petitioner can be proceeded for offences under the Act in the light of the judgment rendered by the Apex Court in the case of VIJAY MADANLAL CHOUDHARY?
Certain facts need to be noticed before considering the issue that has arisen. The allegation against the petitioner is that while she was working as Vice-Chancellor of M/s Alliance University between 23-12-2014 and 7-01-2016 she got acquainted with 8 accused No.1 and indulged in certain transactions. A property was purchased by the petitioner from Alliance Business School represented by accused No.1 Mr. Madhukar G.Angur who was at that point in time Director and Chairman in terms of a sale deed dated 01-07-2013 for a consideration of Rs.13,50,00,000/-
measuring 5 acres in Gollahalli Village, Jigani Hobli, Anekal Taluk.
Justification of the petitioner is that the property was purchased from her own earnings and on raising a loan of Rs.10 crores from Kotak Mahindra Bank. The petitioner resigned from the post on 7-01-2016 and after her resignation, it appears that Srivari Education Services was established in the names of accused Nos.
4 and 5 and in their names accused No.1 had collected fees from students using its bank account which was illegally opened. Since the petitioner had resigned on 7-01-2016 from Alliance University, it is the justification that she has no role to play in the said transaction. These are the broad allegations against the petitioner. The contents of the complaint insofar as the petitioner is concerned read as follows:-
"VI. Role of Smt. Pavana Dibbur (Accused6):9
(a) Background: Smt. Pavana Dibbur is an Indian Citizen having Aadhar card bearing No. 706312143329 and having valid PAN card bearing No.ANJPD4105B. She passed graduation in 2001 from Bangalore University, LLB in 2005 from Bangalore University, LLM in 2007 from Kuvempu University and PhD in 2009 from Bangalore University.
After graduation in 2003, she joined MLA Collage, Bangalore as a lecturer and worked there till 2004. Then she joined Seshadripuram College, Bangalore as a lecturer and worked there till 2009. She joined M/s Alliance University as a Vice-Chancellor.
(b) Role: Pavana Dibbur (A-6) was a Vice-Chancellor in M/s Alliance University during the period 2015-16 that her husband, late Ayyappa Dore, was also working as Vice- Chancellor in M/s Alliance University from 2010 to 2015 and who has got close acquaintance with A-1; that she is furtherance of the conspiracy with A1 had got execution of sham and nominal sale deed/deed of conveyance without any sale consideration pertaining to the properties belonged to alliance university in her name for the benefit of A1; that she had also facilitated A1 to use her banks accounts in order to conceal the siphoned/ misappropriated amount from Alliance University and thereby knowingly assisted A1 in the process or activity connected with proceeds of crime. Further the immovable property situated at Khata No.37/22 Old Nos. 5A and 5/5 situated at Gollahalli Village, Jgani Hobli, Anekal Taluk, Bangalore valued at Rs.13.50 crores acquired by her (A-6) which was provisionally attached vide PAO No.09/2021 dated 27-09- 2021 is equivalent to the proceeds of crime involved in money laundering and hence liable for confiscation in terms of Section 8(5) of PMLA, 2002.
(c) Conclusion: Thus it is evident that Pavana Dibbur (A-
6) was a Vice-Chancellor in M/s Alliance University during the period 2015-16 that her husband, late Ayyappa Dore, was also working as Vice-Chancellor in M/s Alliance University from 2010 to 2015 and who has got close acquaintance with A1; that she in furtherance of the conspiracy with A1 had got execution of sham and nominal sale deed/deed of conveyance without any sale consideration 10 pertaining to the properties belonged to alliance university in her name for the benefit of A1 and had also facilitated A1 to use her banks accounts in order to conceal the siphoned/misappropriated amount from Alliance University and thereby knowingly assisted A1 in the process or activity connected with proceeds of crime.
Therefore Accused No.6 had knowingly assisted and actually involved in criminal activities and committed scheduled offences defined under Section 2(1)(x)(y) of PMLA, 2002 thus committed offence of money laundering under Section 3 of PMLA, 2002 punishable under Section 4 of the PMLA, 2002."
(Emphasis added) The role of the petitioner is traced to the dates during which she was functioning as Vice-Chancellor and the conclusion against her, was that the property that was purchased for a sale consideration of Rs.13,50,00,000/- was only on paper and there was no consideration passed on pertaining to the property belonging to Alliance University and it is the proceeds of crime of accused No.1 in a larger conspiracy in which accused No.1 is embroiled in. The contention of the petitioner is that the crime that is alleged against her is in no way traceable to the allegation against accused No.1 to whom the present petitioner is linked for the 11 offences under the Act. The allegations against accused No.1 are as follows:
I. FIR No. and Nature of Scheduled Offences and place where it is being tried.
(i) Information was received by the complainant that exceptionally high turnover is in SB A/c 917000000516824 in the name of Mr. Madhukar G.Angur and complaint received against the said person suspecting his involvement in misappropriation of funds. Investigation under Foreign Exchange Management Act, 1999 (herein referred to as FEMA for sake of brevity) was initiated based on the aforesaid information/compliant. During the investigation under FEMA, it was revealed that more than 07 FIRs have been registered against Mr. Madhukar G.Angur and others, in the various police station in the Bangalore. Out of the multiple FIRs, the details of FIRs in which schedule offences are mentioned, are as follows:
(a) FIR in crime No.188/2017 dated 11-11-2017 was registered by Anekal Police Station, Bangalore Rural, Bangalore based on the complaint of Shri Madhusudan Mishra against Mr. Madhukar Angur, Ms. Priyanka B.S and seven others, under Section 143, 406, 407, 408, 409 and 149 of the IPC 1860.
(b) FIR in Crime No.730/2016 dated 11-06-2016 was registered by Madiwala Police Station, Bangalore based on the complaint of Shri Abhay Chhabbi against Mr. Madhukar G.Angur, Smt. Priyanka M.Angur and others under Sections 506, 120B, 143, 144, 147, 148 and 149 of the IPC,1860;
(c) FIR in crime No.119/2016 dated 04-03-2016 dated 04-03-2016 was registered by Jayaprakash Nagar Police Station, Bangalore against Mr. Madhukar G.Angur and others under Sections 417, 420, 376 and 506 of IPC, 1860.12
(d) FIR in crime No.52/2017 dated 28-09-2017 was registered by Shankarapura Police Station, Bangalore against Mr. Madhukar G.Angur, Smt. Priyanka M.Angur and others under Sections 506, 504, 143, 149 and 420 of IPC, 1860."
(Emphasis added) On the strength of the afore-quoted offences under the IPC alleged against accused No.1, the petitioner would seek to contend that it can no way be connected to the purchase of properties by the petitioner, as accused No.1 is alleged to have committed offences punishable under Sections 417, 420, 376 and 506 of the IPC in Crime No.119 of 2016 and is also an accused in Crime No.730 of 2016 for offences punishable under Sections 506, 120B, 143, 144, 147, 148 and 149 of the IPC and formation of unlawful assembly. Therefore, he would contend, if the principal accused is alleged of rape under Section 376 of the IPC, it cannot be imagined as to how the petitioner would become an accused under the provisions of the Act in predicate offences. The reliance is placed on the judgment in the case of VIJAY MADANLAL CHOUDHARY to contend that the petitioner having no role to pay qua accused No.1 in the offences under the IPC cannot be continued under the provisions of the PMLA and, therefore, 13 proceedings against the petitioner should be quashed is clearly on a misreading of the judgment of the Apex Court in the case of VIJAY MADANLAL CHOUDHARY.
9. In the light of what is afore-contended, it becomes necessary to consider the judgment of the Apex Court, in extenso.
The Apex Court considers provisions of the Act right from its preamble. The Apex Court at paragraph 242 of the judgment under the head 'Preamble of the Act' has held as follows:
"242. The Preamble of the 2002 Act reads thus:
"An Act to prevent money-laundering and to provide for confiscation of property derived from, or involved in, money- laundering and for matters connected therewith or incidental thereto.
WHEREAS the Political Declaration and Global Programme of Action, annexed to the resolution S-17/2 was adopted by the General Assembly of the United Nations at its seventeenth special session on the twenty-third day of February, 1990;
AND WHEREAS the Political Declaration adopted by the Special Session of the United Nations General Assembly held on 8 to 10 June, 1998 calls upon the Member States to adopt national money-laundering legislation and programme;
AND WHEREAS it is considered necessary to implement the aforesaid resolution and the Declaration."14
At paragraphs 245 to 254 the Apex Court further interpreting the definition under the Act has held as follows:
"245. Section 2 defines some of the expressions used in the relevant provision(s) of the 2002 Act. We may usefully refer to some of the expressions defined in this section having bearing on the matters in issue, namely (as amended from time to time) -
"2. Definitions.--(1) In this Act, unless the context otherwise requires,--
(a) "Adjudicating Authority" means an Adjudicating Authority appointed under sub-section (1) of section 6;
(b) "Appellate Tribunal" means the Appellate Tribunal referred to in section 25;
(c) "Assistant Director" means an Assistant Director appointed under sub-section (1) of section 49;
(d) "attachment" means prohibition of transfer, conversion, disposition or movement of property by an order issued under Chapter III;
*********
(j) "Deputy Director" means a Deputy Director appointed under sub-section (1) of section 49;
(k) "Director" or "Additional Director" or "Joint Director"
means a Director or Additional Director or Joint Director, as the case may be, appointed under sub- section (1) of section 49;
********* (na) "investigation" includes all the proceedings under this Act conducted by the Director or by an authority authorised by the Central Government under this Act for the collection of evidence];
********* 15
(p) "money-laundering" has the meaning assigned to it in section 3;
*********
(t) "prescribed" means prescribed by rules made under this Act;
(u) "proceeds of crime" means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property or where such property is taken or held outside the country, then the property equivalent in value held within the country or abroad;
Explanation.--For the removal of doubts, it is hereby clarified that "proceeds of crime" include property not only derived or obtained from the scheduled offence but also any property which may directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offence;
(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;
*********
(x) "Schedule" means the Schedule to this Act; (y) "scheduled offence" means--
(i) the offences specified under Part A of the Schedule; or 16
(ii) the offences specified under Part B of the Schedule if the total value involved in such offences is one crore rupees or more; or
(iii) the offences specified under Part C of the Schedule;
(z) "Special Court" means a Court of Session designated as Special Court under sub-section (1) of section 43; (za) "transfer" includes sale, purchase, mortgage, pledge, gift, loan or any other form of transfer of right, title, possession or lien;
(zb) "value" means the fair market value of any property on the date of its acquisition by any person, or if such date cannot be determined, the date on which such property is possessed by such person"
246. We would now elaborate upon the meaning of "investigation" in Clause (na) of Section 2(1). It includes all proceedings under the Act conducted by the Director or an authority authorised by the Central Government under this Act for collection of evidence. The expression "all the proceedings under this Act" unquestionably refers to the action of attachment, adjudication and confiscation, as well as actions undertaken by the designated authorities mentioned in Chapter VIII of the Act, under Chapter V of the Act, and for facilitating the adjudication by the Adjudicating Authority referred to in Chapter III to adjudicate the matters in issue, including until the filing of the complaint by the authority authorised in that behalf before the Special Courts constituted under Chapter VII of the Act. The expression "proceedings", therefore, need not be given a narrow meaning only to limit it to proceedings before the Court or before the Adjudicating Authority as is contended but must be understood contextually. This is reinforced from the scheme of the Act as it recognises that the statement recorded by the Director in the course of inquiry, to be deemed to be judicial proceedings in terms of Section 50(4) of the 2002 Act. Needless to underscore that the authorities referred to in Section 48 of the Act are distinct from the Adjudicating Authority referred to in Section 6 of the 2002 Act. The Adjudicating Authority referred to in Section 6 is entrusted with the task of adjudicating the matters in issue for 17 confirmation of the provisional attachment order issued under Section 5 of the 2002 Act, passed by the Authority referred to in Section 48 of the Act. The confirmation of provisional attachment order is done by the Adjudicating Authority under Section 8 of the 2002 Act, and if confirmed, the property in question is ordered to be confiscated and then it would vest in the Central Government as per Section 9 of the 2002 Act subject to the outcome of the trial of the offence under the 2002 Act (i.e., Section 3 of offence of money-laundering punishable under Section 4). Suffice it to observe that the expression "proceedings" must be given expansive meaning to include actions of the authorities (i.e., Section 48) and of the Adjudicating Authority (i.e., Section 6), including before the Special Court (i.e., Section 43).
247. The task of the Director or an authority authorised by the Central Government under the 2002 Act for the collection of evidence is the intrinsic process of adjudication proceedings. In that, the evidence so collected by the authorities is placed before the Adjudicating Authority for determination of the issue as to whether the provisional attachment order issued under Section 5 deserves to be confirmed and to direct confiscation of the property in question. The expression "investigation", therefore, must be regarded as interchangeable with the function of "inquiry" to be undertaken by the authorities for submitting such evidence before the Adjudicating Authority.
248. In other words, merely because the expression used is "investigation" -- which is similar to the one noted in Section 2(h) of the 1973 Code, it does not limit itself to matter of investigation concerning the offence under the Act and Section 3 in particular. It is a different matter that the material collected during the inquiry by the authorities is utilised to bolster the allegation in the complaint to be filed against the person from whom the property has been recovered, being the proceeds of crime. Further, the expression "investigation" used in the 2002 Act is interchangeable with the function of "inquiry" to be undertaken by the Authorities under the Act, including collection of evidence for being presented to the Adjudicating Authority for its consideration for confirmation of provisional attachment order. We need to keep in mind that the expanse of the provisions of the 2002 Act is of prevention of money-laundering, attachment of 18 proceeds of crime, adjudication and confiscation thereof, including vesting of it in the Central Government and also setting up of agency and mechanism for coordinating measures for combating money-laundering.
249. Coming to the next relevant definition is expression "money-laundering", it has the meaning assigned to it in Section 3 of the Act. We would dilate on this aspect while dealing with the purport of Section 3 of the Act a little later.
250. The other relevant definition is "proceeds of crime" in Section 2(1)(u) of the 2002 Act. This definition is common to all actions under the Act, namely, attachment, adjudication and confiscation being civil in nature as well as prosecution or criminal action. The original provision prior to amendment vide Finance Act, 2015 and Finance (No. 2) Act, 2019, took within its sweep any property (mentioned in Section 2(1)(v) of the Act) derived or obtained, directly or indirectly, by any person "as a result of"
criminal activity "relating to" a scheduled offence (mentioned in Section 2(1)(y) read with Schedule to the Act) or the value of any such property. Vide Finance Act, 2015, it further included such property (being proceeds of crime) which is taken or held outside the country, then the property equivalent in value held within the country and by further amendment vide Act 13 of 2018, it also added property which is abroad. By further amendment vide Finance (No. 2) Act, 2019, Explanation has been added which is obviously a clarificatory amendment. That is evident from the plain language of the inserted Explanation itself. The fact that it also includes any property which may, directly or indirectly, be derived as a result of any criminal activity relatable to scheduled offence does not transcend beyond the original provision. In that, the word "relating to" (associated with/has to do with) used in the main provision is a present participle of word "relate" and the word "relatable" is only an adjective. The thrust of the original provision itself is to indicate that any property is derived or obtained, directly or indirectly, as a result of criminal activity concerning the scheduled offence, the same be regarded as proceeds of crime. In other words, property in whatever form mentioned in Section 2(1)(v), is or can be linked to criminal activity relating to or relatable to scheduled offence, must be regarded as proceeds of crime for the purpose of the 2002 Act. It must follow that the Explanation inserted in 2019 is merely 19 clarificatory and restatement of the position emerging from the principal provision [i.e., Section 2(1)(u)].
251. The "proceeds of crime" being the core of the ingredients constituting the offence of money-laundering, that expression needs to be construed strictly. In that, all properties recovered or attached by the investigating agency in connection with the criminal activity relating to a scheduled offence under the general law cannot be regarded as proceeds of crime. There may be cases where the property involved in the commission of scheduled offence attached by the investigating agency dealing with that offence, cannot be wholly or partly regarded as proceeds of crime within the meaning of Section 2(1)(u) of the 2002 Act -- so long as the whole or some portion of the property has been derived or obtained by any person "as a result of"
criminal activity relating to the stated scheduled offence. To be proceeds of crime, therefore, the property must be derived or obtained, directly or indirectly, "as a result of" criminal activity relating 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.
252. Be it noted that the definition clause includes any property derived or obtained "indirectly" as well. This would include property derived or obtained from the sale proceeds or in a given case in lieu of or in exchange of the "property" which had been directly derived or obtained as a result of criminal activity relating to a scheduled offence.
20In the context of Explanation added in 2019 to the definition of expression "proceeds of crime", it would inevitably include other property which may not have been derived or obtained as a result of any criminal activity relatable to the scheduled offence. As noticed from the definition, it essentially refers to "any property" including abroad derived or obtained directly or indirectly. The Explanation added in 2019 in no way travels beyond that intent of tracking and reaching upto the property derived or obtained directly or indirectly as a result of criminal activity relating to a scheduled offence. Therefore, the Explanation is in the nature of clarification and not to increase the width of the main definition "proceeds of crime". The definition of "property" also contains Explanation which is for the removal of doubts and to clarify that the term property includes property of any kind used in the commission of an offence under the 2002 Act or any of the scheduled offences. In the earlier part of this judgment, we have already noted that every crime property need not be termed as proceeds of crime but the converse may be true. Additionally, some other property is purchased or derived from the proceeds of crime even such subsequently acquired property must be regarded as tainted property and actionable under the Act. For, it would become property for the purpose of taking action under the 2002 Act which is being used in the commission of offence of money-laundering. Such purposive interpretation would be necessary to uphold the purposes and objects for enactment of 2002 Act.
253. Tersely put, it is only such property which is derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence can be regarded as proceeds of 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 21 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 "proceeds of crime", as it obtains as of now.
254. By and large the debate today is restricted to the discrepancy between the word 'and', which features in the original definition, against the 'or' in the newly inserted Explanation in Section 3. While the stand of the Government is that there is no requirement under Section 3 to project or claim the proceeds of crime as untainted property. The petitioners have claimed that said interpretation will be unconstitutional. For, the requirement is that not only does a predicate crime need to be committed, it in turn needs to generate proceeds of crime and it must also then be projected as untainted property to qualify for the crime of money- laundering. The general scheme of the law of this land is that any law which is questioned is presumed to be unblemished and within the confines of the Constitutional principles so laid down within the Constitution. Yet, as the arguments, challenges laid against the interpretation of the impugned section are so many we find it necessary to see how India embarked on the framing of the definition of "money-laundering" under Section 3 of the 2002 Act. Thereafter, we will see how the Parliament over the years responded to changes and suggestions from the outside world, notably the FATF. Thus, in seriatim we endeavour to see the international Conventions which led to the evolution of money- laundering, based on which the Government decided to enact the law, followed by the FATF recommendations which have led to the amendments, then the debates in the Parliament of India followed by the law of the land as laid down by this Court."
(Emphasis supplied) 22 The Apex Court in the aforesaid paragraphs clearly delineates importance of legislation and definitions under the Act and also holds what is a scheduled offence and who get involved in the scheduled offence under the Act. The Apex Court further from paragraph 263 begins to consider Section 3 of the Act which is the meat of the present subject matter. The Apex Court, in extenso delineates what is the purpose of Section 3 of the Act. The Apex Court holds as follows:
"263. Coming to Section 3 of the 2002 Act, the same defines the offence of money-laundering. The expression "money- laundering", ordinarily, means the process or activity of placement, layering and finally integrating the tainted property in the formal economy of the country. However, Section 3 has a wider reach. The offence, as defined, captures every process and activity in dealing with the proceeds of crime, directly or indirectly, and not limited to the happening of the final act of integration of tainted property in the formal economy to constitute an act of money-laundering. This is amply clear from the original provision, which has been further clarified by insertion of Explanation vide Finance (No. 2) Act, 2019. Section 3, as amended, reads thus:
"3. 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 456[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,--23
(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, possession, acquisition or use and projecting or claiming". We are not so much concerned with this change introduced vide Act 2 of 2013. In other words, the provision as it stood prior to amendment vide Finance (No. 2) Act, 2019 remained as it is. Upon breaking-up of this provision, it would clearly indicate that -- it is an offence of money-laundering, in the event of direct or indirect attempt to indulge or knowingly assist or being knowingly party or being actually involved in "any process or activity" connected with the proceeds of crime. The latter part of the provision is only an elaboration of the different process or activity connected with the proceeds of crime, such as its concealment, possession, acquisition, use, or projecting it as untainted property or claiming it to be as untainted property. This 24 position stands clarified by way of Explanation inserted in 2019. If the argument of the petitioners is to be accepted, that projecting or claiming the property as untainted property is the quintessential ingredient of the offence of money-laundering, that would whittle down the sweep of Section 3. Whereas, the expression "including" is a pointer to the preceding part of the section which refers to the essential ingredient of "process or activity" connected with the proceeds of crime. The Explanation inserted by way of amendment of 2019, therefore, has clarified the word "and" preceding the expression "projecting or claiming"
as "or". That being only clarificatory, whether introduced by way of Finance Bill or otherwise, would make no difference to the main original provision as it existed prior to 2019 amendment. Indeed, there has been some debate in the Parliament about the need to retain the clause of projecting or claiming the property as untainted property. However, the Explanation inserted by way of amendment of 2019 was only to restate the stand taken by India in the proceedings before the FATF, as recorded in its 8th Follow- Up Report Mutual Evaluation of India June 2013 under heading "Core Recommendations". This stand had to be taken by India notwithstanding the amendment of 2013 vide Act 2 of 2013 (w.e.f. 15.2.2013) and explanation offered by the then Minister of Finance during his address in the Parliament on 17.12.2012 as noted above458. Suffice it to note that the municipal law (Act of 2002) had been amended from time to time to incorporate the concerns 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 Actions taken to remedy deficiencies Factors underlying Rating 1-ML offence PC • (High) monetary Amendments to India's Prevention of Money threshold condition Laundering Act (PMLA) were enacted by for most ML Parliament on 17 December 2012 and came predicates. 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 25 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 relation to R.1 is fully addressed.
• ML provision does Amendments to the PMLA were enacted by not cover physical concealment of Parliament on 17 December 2012 and came criminal proceeds. into force on 15 February 2013.
• ML provision does The amended section 3 of the PMLA now not cover the sole reads. "Whosoever directly or indirectly knowing attempts to indulge or knowingly assists or acquisition, knowingly is a party or is actually involved in possession and any process or activity connected with the use of criminal proceeds of crime including its concealment, proceeds possession, acquisition or use and projecting or claiming it as untainted property shall be guilty of the offence of money laundering."
While the current formulation specifically refers to concealment, possession, acquisition and use, it does not do away with the condition that the proceeds of crime need to be "projected or claimed as untainted property".
The working of the ML offence is thus not fully in line with the Vienna and Palermo Conventions but case law provided by India appears to mitigate the concerns regarding the possible limiting effect of the conditional element in the ML offence. On that basis, it can be concluded that the scope of these technical deficiencies is relatively minor. It is not expected that there will be any impact on the effectiveness of India's AML regime. The deficiency is mostly addressed."
(emphasis supplied)
265. To put it differently, the section as it stood prior to 2019 had itself incorporated the expression "including", which is indicative of reference made to the different process or activity connected with the proceeds of crime. Thus, the principal provision (as also the Explanation) predicates that if 26 a person is found to be directly or indirectly involved in any process or activity connected with the proceeds of crime must be held guilty of offence of money-laundering. If the interpretation set forth by the petitioners was to be accepted, it would follow that it is only upon projecting or claiming the property in question as untainted property, the offence would be complete. This would undermine the efficacy of the legislative intent behind Section 3 of the Act and also will be in disregard of the view expressed by the FATF 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 been restated in Githa Hariharan, as also in People's Union for Civil Liberties, and National Legal Services Authority v. Union of India.
266. In the Core Recommendations of the FATF referred to above, the same clearly mention that the word "and" in Section 3 of the 2002 Act would not be fully in line with the Vienna and Palermo Conventions. This doubt has been ably responded and elucidated by India to the international body by referring to the jurisprudence as evolved in India to interpret the word "and" as "or" in the context of the legislative intent -- to reckon any (every) 27 process or activity connected with the proceeds of crime constituting offence of money-laundering. To buttress the stand taken by India before the FATF, reliance has been justly placed on reported decisions of this Court amongst other Sanjay Dutt, which had occasion to deal with the expression "arms and ammunition" occurring in Section 5 of the TADA Act. The Court noted that if it is to be read conjunctively because of word "and", the object of prohibiting unauthorised possession of the forbidden arms and ammunition would be easily frustrated by the simple device of one person carrying the forbidden arms and his accomplice carrying its ammunition so that neither is covered under Section 5 when any one of them carrying more would be so liable. The principle underlying this analysis by the Constitution Bench must apply proprio vigore to the interpretation of Section 3 of the 2002 Act. To the same end, this Court in the case of Ishwar Singh Bindra v. The State of U.P., Joint Director of Mines Safety and Gujarat Urja Vikas Nigam Ltd. v. Essar Power Ltd, interpreted the word "and" in the concerned legislation(s) as word "or" to give full effect to the legislative intent.
267. The Explanation as inserted in 2019, therefore, does not entail in expanding the purport of Section 3 as it stood prior to 2019, but is only clarificatory in nature. Inasmuch as Section 3 is widely worded with a view to not only investigate the offence of money-laundering but also to prevent and regulate that offence. This provision plainly indicates that any (every) process or activity connected with the proceeds of crime results in offence of money- laundering. Projecting or claiming the proceeds of crime as untainted property, in itself, is an attempt to indulge in or being involved in money-laundering, 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 28 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 property so that neither is covered under Section 3 of the 2002 Act.
269. From the bare language of Section 3 of the 2002 Act, it is amply clear that the offence of money- laundering is an independent offence regarding the process or activity connected with the proceeds of crime which had been derived or obtained as a result of criminal activity relating to or in relation to a scheduled offence. The process or activity can be in any form -- be it one of concealment, possession, acquisition, use of proceeds of crime as much as projecting it as untainted property or claiming it to be so. Thus, involvement in any one of such process or activity connected with the proceeds of crime would constitute offence of money-laundering. This offence otherwise has nothing to do with the criminal activity relating to a scheduled offence -- except the proceeds of crime derived or obtained as a result of that crime.
270. Needless to mention that such process or activity can be indulged in only after the property is derived or obtained as a result of criminal activity (a scheduled offence). It would be an offence of money- laundering to indulge in or to assist or being party to the process or activity connected with the proceeds of crime; and such process or activity in a given fact situation may be a continuing offence, irrespective of the date and time of commission of the scheduled offence. In other words, the criminal activity may have 29 been committed before the same had been notified as scheduled offence for the purpose of the 2002 Act, but if a person has indulged in or continues to indulge directly or indirectly in dealing with proceeds of crime, derived or obtained from such criminal activity even after it has been notified as scheduled offence, may be liable to be prosecuted for offence of money- laundering under the 2002 Act -- for continuing to possess or conceal the proceeds of crime (fully or in part) or retaining possession thereof or uses it in trenches until fully exhausted. The offence of money- laundering is not dependent on or linked to the date on which the scheduled offence or if we may say so the predicate offence has been committed. The relevant date is the date on which the person indulges in the process or activity connected with such proceeds of crime. These ingredients are intrinsic in the original provision (Section 3, as amended until 2013 and 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 30 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 people to identify and seize such money is heavy. If there are any proactive steps towards such a cause, we cannot but facilitate the good steps. However, passions aside we must first balance the law to be able to save the basic tenets of the fundamental rights and laws of this country. After all, condemning an innocent man is a bigger misfortune than letting a criminal go.
273. On a bare reading of Section 3, we find no difficulty in encapsulating the true ambit, given the various arguments advanced. Thus, in the conspectus of things it must follow that the interpretation put forth by the respondent will further the purposes and objectives behind the 2002 Act and also adequately address the recommendations and doubts of the international body whilst keeping in mind the constitutional limits. It would, therefore, be just to sustain the argument that the amendment by way of the Explanation has been brought about only to clarify the already present words, "any" and "including" which manifests the true meaning of the definition and clarifies the mist around its true nature.
274. We may profitably advert to the judgment in Seaford Court Estates ltd, which states:
"The question for decision in this case is whether we are at liberty to extend the ordinary meaning of "burden" so as to include a contingent burden of the kind I have described. Now this court has already held that this sub- section is to be liberally construed so as to give effect to the governing principles embodied in the legislation (Winchester Court Ld. v. Miller); and I think we should do the same. Whenever a statute comes up for consideration it must be 31 remembered that it is not within human powers to foresee the manifold sets of facts which may arise, and, even if it were, it is not possible to provide for them in terms free from all ambiguity. The English language is not an instrument of mathematical precision. Our literature would be much the poorer if it were. This is where the draftsmen of Acts of Parliament have often been unfairly criticized. A judge, believing himself to be fettered by the supposed rule that he must look to the language and nothing else, laments that the draftsmen have not provided for this or that, or have been guilty of some or other ambiguity. It would certainly save the judges trouble if Acts of Parliament were drafted with divine prescience 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) 32
275. Let us now also refer to the various cases that have been pressed into service by the petitioners. The same deal with the proposition as to the scope of an Explanation and the limits upto which it can stretch. Yet given the present scenario, we cannot find a strong footing to rely on the same in understating Section 3 of the 2002 Act as it stands today. Reference has been made to K.P. Varghese wherein the Court noted the Heydon Case and to the fact that the speech of the mover of the bill can explain the reason for introduction of the bill and help ascertain the mischief sought to be remedied, the objects and purposes of the legislation. Similarly, reference has been made to Hardev Motor Transport v. State of M.P and Martin Lottery Agencies Limited, which states that the role of an Explanation in the Schedule of the Act cannot defeat the main provision of the Act. Even otherwise, an Explanation cannot enlarge the scope and effect of a provision. Reference is also made to S. Sundaram Pillai v. V.R. Pattabiraman, which reads thus:
"50. In Bihta Cooperative Development Cane Marketing Union Ltd. v. Bank of Bihar477 this Court observed thus:
The Explanation must be read so as to harmonise with and clear up any ambiguity in the main section. It should not be so construed as to widen the ambit of the section.
*********
53. Thus, from a conspectus of the authorities referred to above, it is manifest that the object of an Explanation to a statutory provision is--
(a) to explain the meaning and intendment of the Act itself,
(b) where there is any obscurity or vagueness in the main enactment, to clarify the same so as to make it consistent with the dominant object which it seems to subserve,
(c) to provide an additional support to the dominant object of the Act in order to make it meaningful and purposeful, 33
(d) an Explanation cannot in any way interfere with or change the enactment or any part thereof but where some gap is left which is relevant for the purpose of the Explanation, in order to suppress the mischief and advance the object of the Act it can help or assist the Court in interpreting the true purport and intendment of the enactment, and
(e) it cannot, however, take away a statutory right with which any person under a statute has been clothed or set at naught the working of an Act by becoming an hindrance in the interpretation of the same."
(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 the cases of D.R. Fraser & Co. Ltd. v. The Minister of National Revenue, Tofan Singh and Ashok Munilal 34 Jain. Reference has also been made to Nikesh Tarachand Shah. However, there the questions raised were not in respect of the meaning of money-laundering and pertinently the amendment has come post the judgment, hence, will have no real bearing, unless it can be shown that the amendment is in some other way contrary to the Indian law.
278. We also cannot countenance the argument made in light of possible harassment of innocent persons. It is noted that to the 1999 Bill, the Select Committee of the Rajya Sabha had pointed out that if even mere possession of money/property out of proceeds of crime were to be punishable then:
"The Committee finds that sub-clauses (a) and
(c) viewed •in the context of the provisions contained in clause 23 of the Bill may lead to harassment of innocent persons who bona fide and unknowingly deal with the persons who have committed the offence of money laundering and enter into transactions with them. Such persons purchasing property born out of proceeds of crime without having any inkling whatsoever about that are liable to be prosecuted if the sub-Clauses (a) & (c) remain in the Bill in the existing form.
The fact of the matter is that these sub-clauses do not provide any protection or defence to this category of persons."
(emphasis supplied)
279. Accordingly, the phrase "and projecting it as untainted property" was added the initial definition in the 2002 Act. However, it can also be inferred from here that since the initial strokes of drafting the Act, the intention was always to have a preventive Act and not simply a money- laundering (penal) Act. Today, if one dives deep into the financial systems, anywhere in the world, it is seen that once a financial mastermind can integrate the illegitimate money into the bloodstream of an economy, it is almost indistinguishable. In fact, the money can be simply wired abroad at one click of the mouse. It is also well known that once this money leaves the country, it is almost impossible to get it back. Hence, a simplistic argument or the view that 35 Section 3 should only find force once the money has been laundered, does not commend to us. That has never been the intention of the Parliament nor the international Conventions.
280. We 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 unknown source."
(Emphasis supplied) As conclusion to the submissions on Section 3, the Apex Court holds as follows:
463. It is urged that there is no gradation of punishment depending on the nature of offence which may be committed by the principal offender and other offenders. Section 4 of the 2002 Act makes no distinction between person directly involved in the process or activity connected with the proceeds of crime and the other not so directly involved. Further, the scheduled offence may have been committed by someone else and the offence of money-
laundering by third person owing to being involved in the process or activity connected with the proceeds of crime. The petitioners have relied on Section 201 and 212 of IPC. It is their case that 36 this distinction is absent in Section 4 of the 2002 Act which provides that the term of rigorous imprisonment shall not be less than three years and extend upto seven years or ten years, as the case may be, with fine. This argument to say the least is flimsy and tenuous. For, the punishment under Section 4 is not in relation to the predicate offence, but offence of money-laundering under Section 3 of the 2002 Act. The person may be involved in any one or more than one process or activity connected with the proceeds of crime. All of them are treated as one class of offender involved in money-laundering. The proceeds of crime may be derived or obtained as a result of criminal activity with which the offender involved in money-laundering offence may not be directly concerned at all. Even so, he becomes liable to be proceeded under Section 3 and punished under Section 4 of the 2002 Act. The principle of an accessory after the fact will have no application to the offence of money-laundering. Suffice it to observe that the argument under consideration is devoid of merit.
464. On the basis of same analogy, it was argued that the twin conditions of bail contained in Section 45 of the 2002 Act would act grossly disproportionate and illogical qua a person who is not directly connected with the scheduled offence but merely an accessory after the fact. Even this argument needs to be stated to be rejected for the same reason.
465. The above analysis, in our view, is sufficient to answer the diverse issues canvassed before us. We have attempted to extensively deal with the essential aspects to record our conclusion issue-wise. Further, we do not wish to dissect every reported decision cited before us to obviate prolixity.
466. We once again clarify that in this judgment, we have confined our analysis only to the issues regarding the validity and interpretation of the provisions of the 2002 Act, referred to above. We have not dealt with any other issue involved in individual cases concerning 2002 Act as the parties have been given liberty to pursue their other remedies before appropriate forum. Furthermore, we have delinked the matters pertaining to 37 other legislations and issues arising therefrom from this batch of cases, for being proceeded appropriately.
CONCLUSION
467. In light of the above analysis, we now proceed to summarise our conclusion on seminal points in issue in the following terms:--
(i) The question as to whether some of the amendments to the Prevention of Money-laundering Act, 2002 could not have been enacted by the Parliament by way of a Finance Act has not been examined in this judgment. The same is left open for being examined along with or after the decision of the Larger Bench (seven Judges) of this Court in the case of Rojer Mathew.
(ii) The expression "proceedings" occurring in Clause (na) of Section 2(1) of the 2002 Act is contextual and is required to be given expansive meaning to include inquiry procedure followed by the Authorities of ED, the Adjudicating Authority, and the Special Court.
(iii) The expression "investigation" in Clause (na) of Section 2(1) of the 2002 Act does not limit itself to the matter of investigation 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 38 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 construed as "or", to give full play to the said provision so as to include "every"
process or activity indulged into by anyone. Projecting or claiming the property as untainted property 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 offence through him.
(vi) Section 5 of the 2002 Act is constitutionally valid. It provides for a balancing arrangement to secure the interests of the person as also ensures that the proceeds of crime remain available to be dealt with in the manner 39 provided by the 2002 Act. The procedural safeguards as delineated by us hereinabove are effective measures to protect the interests of person concerned.
(vii) The challenge to the validity of sub-section (4) of Section 8 of the 2002 Act is also rejected subject to Section 8 being invoked and operated in accordance with the meaning assigned to it hereinabove.
(viii) The challenge to deletion of proviso to sub- section (1) of Section 17 of the 2002 Act stands rejected. There are stringent safeguards provided in Section 17 and Rules framed thereunder. Moreover, the pre-condition in the proviso to Rule 3(2) of the 2005 Rules cannot be read into Section 17 after its amendment. The Central Government may take necessary corrective steps to obviate confusion 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 in accordance with the interpretation given in this judgment.
40(xiii)(a) The reasons which weighed with this Court in Nikesh Tarachand Shah for declaring the twin 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 principles and rigours of Section 45 may apply.
(xiv) The beneficial provision of Section 436A of the 1973 Code could be invoked by the accused arrested for offence punishable under the 2002 Act.
(xv)(a) The process envisaged by Section 50 of the 2002 Act is in the nature of an inquiry against the proceeds of crime and is not "investigation" in strict sense of the term for initiating prosecution; and the Authorities under the 2002 Act (referred to in Section 48), are not police officers as such.
(b) The statements recorded by the Authorities under the 2002 Act are not hit by Article 20(3) or Article 21 of the Constitution of India.
41(xvi) Section 63 of the 2002 Act providing for punishment regarding false information or failure to give information does not suffer from any vice of arbitrariness.
(xvii) The inclusion or exclusion of any particular offence in the Schedule to the 2002 Act is a matter of legislative policy; and 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 Authorities (ED officials), the department ought to explore the desirability of placing information on its website which may broadly outline the scope of the authority of the functionaries under the Act and measures to be adopted by them 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 42 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) At paragraph-463 the Apex Court considers Section 4 of the Act which deals with punishment under the Act and holds that there is no gradation of punishment under the Act and in conclusion at paragraph 467 delineates interpretation of the Act. What is germane for a consideration of the case at hand is, clause (v) of the conclusions arrived at by the Apex Court. To arrive at the said conclusion, the Apex Court, in the preceding paragraphs which are quoted hereinabove, delineates Section 3 of the Act. Section 3 of the Act delineates 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 would become amenable to the provisions of the Act.
10. The expression is broken up by the Apex Court to indicate that the offence of money laundering would be in the event of direct or indirect attempt to indulge or knowingly assist 43 or being knowingly a party to any process or activity connected with the proceeds of crime. The Apex Court further holds that the Section as it stood prior to 2019 had itself incorporated the expression "including" which would be indicative of the reference made to different process or activity connected with the proceeds of crime. The phrase deployed by the Apex Court is "if a person' and not 'if an accused'. The unmistakable purport of the observation of the Apex Court in the considered view of this Court is that one need not be an accused in the principal offence to be hauled into proceedings under the Act.
11. In the paragraph quoted supra, on interpretation of Section 3, the Apex Court concludes that even assisting in the process or activity is a part of the crime of money laundering. This would clearly plug the argument of the learned senior counsel appearing for the petitioner that the judgment of Apex Court would enure to the benefit of the petitioner to quash the proceedings.
4412. Much emphasis is laid by the learned senior counsel on clause (v) of the conclusion quoted supra with particular reference to sub-clause (d) therein. The Apex Court considers that offence under Section 3 of the Act is dependent upon illegal gain of property as a result of crime activity relating to a scheduled offence. It is concerning the process or activity connected with such property which constitutes the offence of money laundering.
Though the Apex Court holds that the authorities cannot prosecute any person on notional basis or assume that a scheduled offence has been committed unless they have so registered a crime or an enquiry pending or trial pending by way of criminal complaint before a competent forum against such person under the Act or if a person is finally discharged or acquitted even those cannot be prosecuted under the Act. The two deviations made in the aforesaid sub-clause are answered at a later stage in the same sub-clause. Once the person who is alleged of the scheduled offences or the criminal case against him is quashed or he is acquitted by a Court of competent jurisdiction, there can be no offence of money laundering against him or anyone claiming such property being the property linked to stated scheduled offence 45 through him. Here again, in the considered view of this Court, the purport of conclusive paragraph is that if the principal accused is acquitted of the offence under the IPC or any predicate offence to which the offences under the money laundering Act is linked to other accused, those proceedings under the PMLA cannot continue. Acquittal of the principal accused should precede any such consideration. Once principal accused is acquitted, further proceedings against those who are accused under the PMLA cannot be continued, in the light of the acquittal of the principal accused, to whose offence, allegations under the PMLA are made.
They being accused in the principal offence under the IPC or not is immaterial.
13. Therefore, there is no gainsaying in the submission of the learned senior counsel appearing for the petitioner that the judgment of the Apex Court covers the issue and the crime registered under the Act against the petitioner should be obliterated; it cannot be obliterated unless accused No.1 is acquitted of all the offences that are alleged against him in the crimes so registered that are linked to the offence of the petitioner 46 under the PMLA. Therefore, the first issue that has arisen for consideration is answered against the petitioner for the reasons afore-quoted.
14. Point No.2:
(ii) Whether the respondent did not have competence to register the complaint?
Insofar as the contention of competence of the respondent to register a complaint, the said issue need not detain this Court for long or delve deep into the matter as a Co-ordinate Bench of this Court in the case of ABBAS MOHAMMED KHAN v. THE DEPUTY DIRECTOR, ENFORCEMENT DIRECTORATE1 considering the very issue under the Act has held as follows:
"10. It is the specific case of the petitioner that Central Government did not issue any special authorization for the officer on deputation to be worked as deputy director and Assistant Director in the office of the Directorate of Enforcement and PML Act. As such, no powers conferred on those officers under Section 48 of the PML Act, absolutely there is no authority or filing the complaint by the Assistant Director against the petitioner under the PML Act. The vacancy circular also not available to show the exercise of power under Section 49(1) of PML Act and on the deputation basis as authority for the purpose of investigation no special order has been passed therefore, the action taken by the respondent under the PML Act is nonest in the eye of law. On the other hand the 1 Writ Petition No.14245 of 2021 decided on 25th January 2022 47 respondent counsel produced the documents in order to show the appointment of the respondent 1 and 2 by way of notification issued by the Central Government which is in accordance with the Section 45(1A) of the PML Act and also if an officer deputed to the ED by showing their designation, the officers will get all powers vested in the PML Act and they can exercise the jurisdiction under the Act.
11. For the convenience, the second proviso to Section 45 as under:
"Provided further that the Special Court shall not take cognizance of any offence punishable under Section 4 except upon a complaint in writing made by -
(i)the Director; or
(ii)any officer of the Central Government or a State Government authorised in writing in this behalf by the Central Government by a general or special order made in this behalf by that Government."
12. The amendment to Section 45 came into force with effect from 1.7.2005 as per Section 145 (1-A) of PML Act as under:
"(1-A) Notwithstanding anything contained in the Code of Criminal Prcedure, 1973 (2 of 1974), or any other provision of this Act, no police officer shall investigate into an offence under this Act unless specifically authorised, by the Central Government by a general or special order, and, subject to such conditions as may be prescribed."
13. On bare reading of Sub-section (2) to the 2nd proviso to the section 45 (1) of PML Act empowers any officer of the Central Government or a State Government authorize in writing in this behalf by a Central Government by a general or special order made in this behalf by that Government. The amendment to provision 45 i.e., 145 (1- A) provides that no police officers shall investigate into an offence under this Act unless specifically authorized by Central Government by a general or special order and subject to such conditions as may be prescribed.
4814. On perusal of the same in my opinion, the complaint in this case has been filed by respondent 2 who is the Assistant Director, working in Enforcement Directorate, (ED) filed the complaint by exercising the power under the PML Act. The learned Senior counsel for the petitioner has strenuously contended the Asst. Director post was filled up by deputation from the police department and he is B group officer and he cannot be posted to Group A cadre but the respondent counsel submits there is no such eligibility criteria prescribed for the posting and the Central Government issued a notification posting the officers by exercising the power under Section 49 of PML Act for convenience it is necessary to refer the Sections 48 and 49 of the Act as under:
"Section 48. Authorized under Act - There shall be the following classes of authorities for the purposes of this Act, namely:-
(a) Director or Additional Director or Joint Director,
(b) Deputy Director,
(c) Assistant Director, and
(d) such other class of officers as may be appointed for the purposes of this Act."
"49. Appointment and powers of authorities and other officers.--
(1) The Central Government may appoint such persons as it thinks fit to be authorities for the purposes of this Act.
(2) Without prejudice to the provisions of sub-
section (1), the Central Government may authorise the Director or an Additional Director or a Joint Director or a Deputy Director or an Assistant Director appointed under that sub-section to appoint other authorities below the rank of an Assistant Director.
(3) Subject to such conditions and limitations as the Central Government may impose, an authority may exercise the powers and discharge the duties conferred or imposed on it under this Act."
4915. The counsel for the respondent produced the notifications issued by the Central Government for the officers were being deputed to work in ED and exercise the power under the PML Act.
16. The counsel for the respondent also produced appointment order notification dated 1.7.2005 issued by the Government of India, Ministry of Finance, Department of Revenue in the Gazette which is as under:-
"G.S.R.440(E) - In exercise of the powers conferred by sub-section (1) of section 49 of the Prevention of Money-laundering Act 2002 (15 of 2003), the Central Government hereby appoints, with effect from the 1st day of July, 2005, the Director of Enforcement holding office immediately before the said date under the Foreign Exchange Management Act, 1999 (42 of 1999), as the Director to exercise the exclusive powers conferred under Section 5, section 8, section 16, section 17, section 18, section 19, section 20, section 21, sub-section (1) of section 26, section 45, section 50, section 57, section 60, section 62 and section 63 of the said Act and the said Director shall also concurrently exercise powers conferred by sub-section (3), sub-section (4) and sub-section (5) of section 26, section 39, section 40, section 41, section 42, section 48, section 49, section 66 and section 69 of the afore-said Act."
17. The another general order dated 11.11.2014 which is read as under:-
"In exercise of the powers conferred under sub- section on ( ) of section 45 of the prevention of Money laundering Act 2002 (15 of 2003) hereafter referred to as the Act), the Central Government hereby authorizes the officers not below the rank of Assistant Directors in the Directorate of Enforcement to file complaint under Section 45 of the Act before the designated Special Court constituted under sub- section (1) of section 43 of the Act for trial of offence punishable under Section 4 of the Act."50
18. On reading of the above said notifications, admittedly the officers working under ED are deputation posts borrowing the officers from other office of the Central Government including the police officials from the State Government. The notification dated 11.11.2014 the Government of India authorizes the officers not below the rank of Assistant Directors in the ED are empowered under Section 45 of the PML Act to file the complaint before the special Court constituted under Section 43 (1) of the PML Act for the trial of offence punishable under Section 4 of the PML Act.
19. The respondent counsel also produced the administrative order of the ED issued by the Central Government of India dated 18.8.2017 by order (admission) No.144/2017, at Sl.No.14. Basavaraj R. Magdum who is ranked Superintendent of Police worked in Karnataka Lokayuktha has been selected and appointed as Assistant Director of ED on the deputation basis. The said notification of the Central Government in respect of the deputation of Basavaraj as Assistant Director on 18.8.2017. This notification was not challenged by any person aggrieved before the court or set aside by any court. Once a police officer of DSP rank has been deputed to work as Assistant Director in ED, and the said officer become an authorized officer under Section 45 (1A) of the PML Act and once he has taken charges as Asst. Director of ED he can exercise the power to investigate the matter as provided under Section 2(na) of the PML Act.
20. On bare reading of Section 48, it refers the classes of authorities for the purpose of PML Act as Director or Additional Director or Joint Director, Deputy Director, Assistant Director and such other classes of officers as may be appointed for the purpose of this Act. Here in this case, Basavaraj Magdum was a Deputy Superintendent of Police, Lokayukta and he has been selected and appointed as Assistant Director by the Central Government exercising the power under Section 49(1) of the PML Act.
21. As I have already stated above, the order of appointment issued by the Central Government dated 51 01.07.2005 empowers the officers for appointment to be worked as authorities under the ED. By an appointment order dated 18.08.2017 Basavaraj Magdum was selected and appointed on deputation basis and posted to work as Assistant Director until further orders with effect from 29.09.2017. This administrative order (Admn. No.144/ 2017) clearly reveals that, on 29.09.2017, the said officer Basavaraj R. Magdum took charge as Assistant Director on deputation basis. Therefore, once the officer is posted as an Assistant Director, the Government by exercising power under Section 49(1) of the PML Act, he becomes the Assistant Director for the purpose of Section 48(1)(c) of the PML Act.
22. Sub-Section (2) of Section 49 of PML Act defines that without prejudice to the provisions of sub-section (1), the Central Government may authorise the Director or an Additional Director or a Joint Director or a Deputy Director or an Assistant Director appointed under that sub-section to appoint other authorities below the rank of an Assistant Director. Sub-section (3) of Section 49 imposes conditions and limitations as the Central Government may impose, an authority may exercise the powers and discharge the duties conferred or imposed on it under this Act. On this background of appointment of respondent No.2 as Assistant Director, he can exercise the power under the PML Act for filing the complaint as per Section 45 of the PML Act in view of the notification dated 11.11.2014.
23. Therefore, respondent No.2 as an Assistant Director who after taking charge, is empowered to file the complaint before the Special Court under Section 45 of PML Act. The complainant has categorically stated in the complaint at first para stating that the complaint being filed under Sections 44 and 45 of the PML Act for commission of offence defined under Section 3 of the PML Act read with Section 70 and 8(5) and Section 4 of the PML Act and the complainant has been an authorized officer for filing this complaint in view of authorization issued by the Government of India, Ministry of 52 Finance, Department of Revenue, New Delhi in F. No.6/14/2008-ES dated 11.11.2014. Therefore, once the officer is posted as an Assistant Director, he has exercised the power and filed the complaint before the Special Court. Therefore, the contention of the learned Senior Counsel that respondent No.2 has no authority to file the complaint cannot be accepted."
(Emphasis supplied) In the light of the judgment of the Co-ordinate Bench answering the very issue, this Court need not reiterate the delineation by the Co-ordinate Bench. Therefore, the second point that has arisen for consideration is also answered against the petitioner.
15. Point No.3:
(iii) Whether the order of the learned Special Judge suffers from want of application of mind?
The order taking cognizance upon the complaint registered by the respondent dated 17-03-2022 of the Special Court reads as follows:
"The Director of Enforcement, Government of India, represented by complainant Ajay Chowdari, Assistant Director has filed the present complaint under Section 44 and 45 of Prevention of Money Laundering act, 2002 for the offence punishable under Section 4 of the Prevention of Money Laundering Act, 2002.
2. The complaint is filed by the public servant i.e., Assistant Director of Directorate of Enforcement, 53 Government of India and he is authorized by the Government to file the complaint by virtue of the Notification. The complainant being public servant and by acting in discharging of his official duty has filed the complaint. Hence, in terms of Section 200(a) of Cr.P.C. the recording of sworn statement is dispensed with.
3. Perused the complaint averments and the documents produced along with complaint in Volume No.1 to 10. There is sufficient prima facie material evidence against accused Nos. 1 to 6 for the offence punishable under Section 4 of Prevention of Money Laundering Act, 2002 and accordingly the cognizance is taken against accused Nos. 1 to 6 for the offence punishable under Section 4 of Prevention of Money Laundering Act, 2002.
Register the case as Special Criminal Case against the above referred accused. The office is directed to incorporate the ECIR records with this case.
Issue summons to A1 to A6 returnable by
8.04.2022."
(Emphasis supplied)
It is this order that is alleged to be suffering from non-application of mind. This submission is again unacceptable in the light of the judgment of the Apex Court in the case of PRADEEP S.WODEYAR v. STATE OF KARNATAKA2 wherein the Apex Court has considered this very submission and holds that cognizance is taken of the offence and not the offender. The finding of the Apex Court from paragraphs 49-57 reads as follows:2
2021 SCC OnLine SC 1140 54 "C.3 Cognizance of the offence and not the offender
49. It is a well settled principle of law that cognizance as envisaged in Section 190 of the CrPC is of the offence and not of the offender. The expression "cognizance of any offence" is consistently used in the provisions of Sections 190, 191, 192 and 193.
50. Section 193 of the old CrPC Code (of 1898) stated that Court of Session shall not take cognizance of any offence unless the 'accused has been committed' to it by the Magistrate. However, Section 193 of the CrPC 1973 states that cognizance of an offence shall be taken after the 'case has been committed' to it by the Magistrate. A comparison of the provisions in the Old and New Code is tabulated below:
Old Code (1898) New Code (1973)
193. Cognizance of offences by 193. Cognizance of offences by Courts of Session.--Except as Courts of Session.-- Except as otherwise expressly provided by this otherwise expressly provided by this Code or by any other law for the time Code or by any other law for the time being in force, no Court of Session shall being in force, no Court of Session shall take cognizance of any offence as a take cognizance of any offence as a Court of original jurisdiction unless the Court of original jurisdiction unless the accused has been committed to it by case has been committed to it by a a Magistrate duly empowered in that Magistrate under this Code.
behalf.
(emphasis supplied)
51. In Kishun Singh v. State of Bihar, the question before the Court was whether the Court of Sessions to which a case has been committed to for trial by the Magistrate, can 55 without recording evidence, summon a person not named in the police report by exercise of its power under Section 319 CrPC. The two judge Bench held that when a case is committed to the Court of Sessions by the Magistrate under Section 209 on the ground that it is exclusively triable by it, the Sessions Court would have the power to take cognizance of the offence. It was thus held that since cognizance is taken of the offence and not the accused, if any material suggests the complicity of other persons in the offence, the Court of Sessions can summon such other persons. The court, by drawing a comparison between Section 193 of the Code of 1973 and the Code of 1898, and on a reading of Section 209 CrPC held that both the committal and cognizance is of the offence and not the accused/offender. Justice AM Ahmadi (as the learned Chief Justice then was) summarized the position in law in the following observations:
"7. [...] Section 190 of the Code sets out the different ways in which a Magistrate can take cognizance of an offence, that is to say, take notice of an allegation disclosing commission of a crime with a view to setting the law in motion to bring the offender to book. Under this provision cognizance can be taken in three ways enumerated in clauses (a), (b) and (c) of the offence alleged to have been committed. The object is to ensure the safety of a citizen against the vagaries of the police by giving him the right to approach the Magistrate directly if the police does not take action or he has reason to believe that no such action will be taken by the police. Even though the expression 'take cognizance' is not defined, it is well settled by a catena of decisions of this Court that when the Magistrate takes notice of the accusations and applies his mind to the allegations made in the complaint or police report or information and on being satisfied that the allegations, if proved, would constitute an offence decides to initiate judicial proceedings against the alleged offender he is said to have taken cognizance of the offence. It is essential to bear in mind the fact that cognizance is in regard to the offence and not the offender.
[...] 56 It may immediately be noticed that under the old provision a Court of Session could not take cognizance of an offence as a court of original jurisdiction unless the accused was committed to it whereas under the recast section as it presently stands the expression the accused has been replaced by the words the case. As has been pointed out earlier, under Section 190 cognizance has to be taken for the offence and not the offender; so also under Section 193 the emphasis now is to the committal of the case and no more on the offender. So also Section 209 speaks of committing the case to the Court of Session. On a conjoint reading of these provisions it becomes clear that while under the old Code in view of the language of Section 193 unless an accused was committed to the Court of Session the said court could not take cognizance of an offence as a court of original jurisdiction; now under Section 193 as it presently stands once the case is committed the restriction disappears."
"16...Thus, on a plain reading of Section 193, as it presently stands once the case is committed to the Court of Session by a Magistrate under the Code, the restriction placed on the power of the Court of Session to take cognizance of an offence as a court of original jurisdiction gets lifted. On the Magistrate committing the case under Section 209 to the Court of Session the bar of Section 193 is lifted thereby investing the Court of Session complete and unfettered jurisdiction of the court of original jurisdiction to take cognizance of the offence which would include the summoning of the person or persons whose complicity in the commission of the crime can prima facie be gathered from the material available on record."
52. In other words, upon the committal by the Magistrate, the Court of Sessions is empowered to take cognizance of the whole of the incident constituting the offence. The Court of Sessions is thus invested with the complete jurisdiction to summon any individual accused of the crime. The above principles were reiterated in a two 57 judge Bench decision in State of W.B. v. Mohd. Khalid Justice S Mohan speaking for the Court observed:
"43.[...] Section 190 of the Code talks of cognizance of offences by Magistrates. This expression has not been defined in the Code. In its broad and literal sense, it means taking notice of an offence. This would include the intention of initiating judicial proceedings against the offender in respect of that offence or taking steps to see whether there is any basis for initiating judicial proceedings or for other purposes. The word 'cognizance' indicates the point when a Magistrate or a Judge first takes judicial notice of an offence. It is entirely a different thing from initiation of proceedings; rather it is the condition precedent to the initiation of proceedings by the Magistrate or the Judge. Cognizance is taken of cases and not of persons."
53. In Dharam Pal (supra), a Constitution Bench was deciding on whether the Court of Sessions has the power under Section 193 CrPC to take cognizance of the offence and then summon other persons not mentioned as accused in the police report. The issue was referred to a five-judge Bench in view of the conflicting decisions in Kishun Singh (supra) and Ranjit Singh v. State of Punjab. As discussed above, while in Kishun Singh (supra), it was held that the Sessions Court held such a power under Section 193 CrPC, it was held in Ranjit Singh (supra) that from the stage of committal till the Sessions Court reaches the stage indicated in Section 230 CrPC, the Court could not arraign any other person as the accused. Chief Justice Altamas Kabir, speaking for the Constitution Bench affirmed the view in Kishun Singh (supra) on the ground that the Magistrate before whom the final report is submitted has ample powers to disagree with the report filed by the police under Section 173(2) and to proceed against the accused persons de hors the police report. However, if the interpretation in Ranjit Singh (supra) were to be followed, it would lead to an anomaly where the Sessions Court would not have this power till the Section 319 stage is reached, which the Magistrate would otherwise have. In that context, the Constitution Bench observed:
58"35. In our view, the Magistrate has a role to play while committing the case to the Court of Session upon taking cognizance on the police report submitted before him under Section 173(2) CrPC. In the event the Magistrate disagrees with the police report, he has two choices. He may act on the basis of a protest petition that may be filed, or he may, while disagreeing with the police report, issue process and summon the accused. Thereafter, if on being satisfied that a case had been made out to proceed against the persons named in column 2 of the report, proceed to try the said persons or if he was satisfied that a case had been made out which was triable by the Court of Session, he may commit the case to the Court of Session to proceed further in the matter."
54. In RN Agarwal v. RC Bansal, a Special Judge took cognizance of the offences punishable under Sections 120-B, 420, 468 and 471 IPC as well as Section 13(1)(d) of the Prevention of Corruption Act. The Special Judge however, summoned the prosecution witnesses. The prosecution witnesses approached the High Court under Section 482 CrPC seeking to quash the summons issued against them. The High Court quashed the summons order passed by the Special Judge. This Court allowed the appeal holding that the Special Judge in view of Sections 193 and 209, took cognizance of the offence and therefore had the power to arraign other accused in the case based on the material available before it at that stage.
55. It is evident from the discussion in Kishun Singh (supra) and Dharam Pal (supra) that in view of the provisions of Section 193 CrPC, cognizance is taken of the offence and not the offender. Thus, the Magistrate or the Special Judge does not have the power to take cognizance of the accused. The purpose of taking cognizance of the offence instead of the accused is because the crime is committed against the society at large. Therefore, the grievance of the State is against the commission of the offence and not the offender. The offender as an actor is targeted in the criminal procedure to provide punishments so as to 59 prevent or reduce the crime through different methods such as reformation, retribution and deterrence. Cognizance is thus taken against the offence and not the accused since the legislative intent is to prevent crime. The accused is a means to reach the end of preventing and addressing the commission of crime.
56. In the factual matrix before us, the Special Judge by an order dated 30 December 2015 referred to all the relevant material before him, including the FIR and witness statements, before taking cognizance. The question that arises is whether merely because the cognizance order mentions that cognizance is taken against the 'accused', the entire proceedings would be vitiated. The order taking cognizance inadvertently mentioned that the Special Judge has taken cognizance against the accused instead of the offence. This would not vitiate the entire proceedings, particularly where material information on the commission of the offence had been brought to the notice of and had been perused by the Special Judge.
57. In order to prove that the irregularity vitiates the proceeding, the accused must prove a 'failure of justice' as prescribed under Section 465 CrPC. In view of the discussion in the previous section on the applicability of Section 465 CrPC (and the inability to prove failure of justice) to the cognizance order, the irregularity would not vitiate the proceedings. Moreover, bearing in mind the objective behind prescribing that cognizance has to be taken of the offence and not the offender, a mere change in the form of the cognizance order would not alter the effect of the order for any injustice to be meted out."
(Emphasis supplied) The Apex Court from paragraphs 76 onwards considers cognizance and application of mind and holds as follows:
"C.5 Cognizance order and non-application of mind 60
76. The counsel for the appellant has contended that the order of the Special Judge taking cognizance has not sufficiently demonstrated application of mind to the material placed before him. To substantiate this contention, the appellant relied on the decisions in Pepsi Foods Ltd. v. Special Judicial Magistrate, Fakhruddin Ahmad v. State of Uttaranchal Mehmood Ul Rehman v. Khazir Mohammad Tunda, Sunil Bharti Mittal v. CBI and RavindranathaBajpe v. Bangalore Special Economic Zone Ltd. The respondent argued that this Court has made a distinction on application of mind by the judge for the purpose of taking cognizance based on a police report on the one hand and a private complaint under Section 200 CrPC on the other, and that the requirement of a demonstrable application of mind in the latter case is higher. For this purpose, the counsel relied on this Court's decisions in Bhushan Kumar v. State (NCT of Delhi) and State of Gujarat v. Afroz Mohammed Hasanafatta.
77. The decision of this Court in Pepsi Foods Ltd. (supra), arose out of the institution of a complaint filed against the appellants under Section 7 read with Section 16 of the Prevention of Food Adulteration Act 1964. The allegation in the complaint was that the appellants sold a bottle of beverage which was adulterated. After recording primary evidence, the Magistrate passed orders summoning the appellants. The appellants instituted proceedings before the High Court under Section 482 CrPC for quashing the summoning order and the proceedings. It was in this backdrop, that while adverting to the procedure envisaged in Chapter XV of the CrPC more particularly the provisions of Section 200, Justice DP Wadhwa speaking for a two judge Bench held:
"12. [...] One of the modes by which a court can take cognizance of an offence is on filing of a complaint containing facts which constitutes such offence. A Magistrate taking cognizance of an offence on complaint shall examine upon oath the complainant and the witnesses present, if any, and the substance of such examination shall be reduced 61 to writing and shall be signed by the complainant and the witnesses, and also by the Magistrate (Sections 190 and 200 of the Code)."
78. Having noticed that proceeding had been initiated on the basis of a complaint, this Court held:
"28. Summoning of an accused in a criminal case is a serious matter. Criminal law cannot be set into motion as a matter of course. It is not that the complainant has to bring only two witnesses to support his allegations in the complaint to have the criminal law set into motion. The order of the Magistrate summoning the accused must reflect that he has applied his mind to the facts of the case and the law applicable thereto. He has to examine the nature of allegations made in the complaint and the evidence both oral and documentary in support thereof and would that be sufficient for the complainant to succeed in bringing charge home to the accused. It is not that the Magistrate is a silent spectator at the time of recording of preliminary evidence before summoning of the accused. The Magistrate has to carefully scrutinize the evidence brought on record and may even himself put questions to the complainant and his witnesses to elicit answers to find out the truthfulness of the allegations or otherwise and then examine if any offence is prima facie committed by all or any of the accused."
79. On the facts, the Court held that the allegations against the appellants did not establish any offence under Section 7 of the Prevention of Food Adulteration Act and there was no basis in the complaint to make such allegation. Setting aside the order of the High Court, this Court accordingly quashed the complaint. The genesis of the decision in Pepsi Foods Ltd. is founded on a complaint made to the Magistrate upon which steps had been initiated pursuant to the provision of Section 200 of the CrPC.
80. In Sunil Bharti Mittal (supra), the case before this Court arose out of alleged irregularities in 62 the grant of an additional Spectrum in 2002. The case was being monitored by this Court. The CBI registered a case and after completion of the investigation filed a charge-sheet in the court of the Special Judge. The CBI, among others, mentioned three telecom companies as accused persons in respect of offences under Section 13(2) read with 13(1)(d) of the PC Act and allied offences. When the matter was taken up for the issuance of summons to the accused persons, the Special Judge while recording satisfaction that there was enough incriminating material to proceed against the accused named in the charge-sheet also found that three individuals, namely, the CMD, MD and Director of the three telecom companies were an alter ego of the respective companies. While taking cognizance of the cases, summons were issued not only to the accused in the charge-sheet but to the aforesaid three persons as well. Two of them moved this Court. Justice A K Sikri, while speaking for the three judge Bench, held that before taking cognizance of an offence, the Magistrate should have applied his mind to the case to satisfy himself that the allegations would constitute an offence:
"48. Sine qua non for taking cognizance of the offence is the application of mind by the Magistrate and his satisfaction that the allegations, if proved, would constitute an offence. It is, therefore, imperative that on a complaint or on a police report, the Magistrate is bound to consider the question as to whether the same discloses commission of an offence and is required to form such an opinion in this respect. When he does so and decides to issue process, he shall be said to have taken cognizance. At the stage of taking cognizance, the only consideration before the court remains to consider judiciously whether the material on which the prosecution proposes to prosecute the accused brings out a prima facie case or not."63
81. Justice Sikri observed that while the Magistrate is empowered to issue process against a person who has not been charge-sheeted, there has to be sufficient material in the police report showing his involvement. The Court held that no such exercise was carried out by the Special Judge and in its absence, the order summoning the appellants could not be sustained. The decision in Sunil Bharti Mittal (supra) arose out of a police report but clearly involved a situation where appellants had not been arraigned as accused in the charge-sheet. The Magistrate had issued summons to them merely treating them to be an alter ego of the company. This Court held that it was a wrong (and a 'reverse') application of the principle of alter ego and that the order summoning them could not be sustained.
82. In Mehmood Ul Rehman (supra), a complaint was filed by the Respondent under Section 500 of the Ranbir Penal Code (in parimateria to Section 500 of the IPC). The Magistrate passed the following order:
"4. [...] Perused the complaint, and the statements recorded. In the first instance of proceedings, let bail warrant to the tune of Rs. 15,000/- be issued against the alleged accused persons, with direction to the accused persons to cause their appearance before this Court on 22-4- 2007, to answer the material questions."
83. The Respondent filed a petition before the High Court seeking to quash the proceedings initiated by the Magistrate. The High Court rejected the petition. Before this Court, a contention was raised that the Magistrate had not applied his mind to the complaint to form an opinion on whether the allegations would constitute an offence. Relying on Pepsi Foods Ltd. (supra), it was observed that the Magistrate ought to have applied his mind to the allegations and must be satisfied that the facts alleged would constitute an offence. The order of the Magistrate was set aside by this Court on the ground that the order did not indicate an application of mind by the Magistrate. The facts in this case fall squarely within Section 190(1)(a) 64 CrPC since the Magistrate was only guided by the complaint before him. Moreover, Justice Kurian Joseph, writing for the two-judge Bench has clearly taken note of the difference between Section 190(1)(a) and 190(1)(b):
"21. Under Section 190(1)(b) CrPC, the Magistrate has the advantage of a police report and under Section 190(1)(c) CrPC, he has the information or knowledge of commission of an offence. But under Section 190(1)(a) CrPC, he has only a complaint before him. The Code hence specifies that "a complaint of facts which constitute such offence". Therefore, if the complaint, on the face of it, does not disclose the commission of any offence, the Magistrate shall not take cognizance under Section 190(1)(a) CrPC. The complaint is simply to be rejected."
84. In Fakruddin Ahmed (supra), a complaint was lodged before the Judicial Magistrate alleging commission of offences under Sections 240, 467, 468 and 471 IPC. The Magistrate directed the police to register the case and investigate it. The Magistrate thus, instead of following the procedure laid down under Section 200 or 202 CrPC, ordered that the matter be investigated and a report be submitted under Section 173(2) of the Code. Based on the police report, cognizance was taken by the Magistrate. A two-judge Bench of this Court observed that the Magistrate must apply his mind before taking cognizance of the offence. However, no observation was made that the cognizance order based on a police report needs to be 'well-reasoned'. On the facts of the case, the Court held that since the cognizance order was not placed before the High Court, it did not have the opportunity to review if the Magistrate had applied his mind while taking cognizance. The matter was thus remanded back to the High Court for it to peruse the documents and then decide the Section 482 petition afresh.
85. It must be noted that the decisions in Pepsi Foods Ltd. (supra) and Mehmood Ul Rehman (supra) arose in the context of a private complaint. Though the decision 65 in Sunil Bharti Mittal (supra) arose from a police report, it is evident from the narration of facts in the earlier part of this judgment that in that case, the charge-sheet had not named the Chief Executive Officers of the Telecom Companies as accused. The Magistrate, however, furnished the reason that the CEO was an alter ego of the Telecom Company which, as this Court noted in its judgment was a "reverse application" of the alter ego doctrine. Similarly, the cognizance order in Fakruddin Ahmed (supra) was based on a police report. However, this Court remanded the case back to the High Court for fresh consideration of the validity of the cognizance order and did not review the Magistrate's satisfaction before issuing the cognizance order. Therefore, none of the above judgments referred to support the contention of the appellant. Though all the above judgments mention that the Magistrate needs to apply his mind to the materials placed before him before taking cognizance, they have been differentiated on facts from the present case as unlike the present case where cognizance was taken based on the SIT report, in those cases cognizance was taken based on a complaint. The difference in the standard of proof for application of mind with reference to cognizance based on a complaint and police report has been briefly discussed in Mehmood Ul Rehman (supra) and Fakruddin Ahmed (supra). A two- judge Bench of this Court in Afroz Mohammed Hasanfatta (supra) laid down the law on the difference of the standard of review of the application of mind by the Judge while taking cognizance based on a police report and a private complaint.
86. In Afroz Mohammed Hasanfatta (supra), a complaint was filed by the Manager of a Bank against a Private Limited Company alleging that in pursuance of a conspiracy, the Company was importing rough and polished diamonds from the foreign market and selling them in the local market. On verification, the bills of entry were found to be bogus. Based on the complaint, an FIR was registered for offences under Sections 420, 465, 467, 468, 471, 477A and 120B of the Penal Code. A charge-sheet was submitted under Section 173 CrPC against two persons and the respondent was referred to as a suspect. A 66 supplementary charge-sheet was submitted inter alia against the respondent and based on it, cognizance was taken by the Magistrate. The High Court set aside the order of the Chief Judicial Magistrate taking cognizance. Justice Banumathi speaking for the two judge Bench dealt with the issue as to whether while taking cognizance of an offence under Section 190(1)(b) CrPC, the Court has to record reasons for its satisfaction before the issuance of summons. Relying upon the decision in Pepsi Foods Ltd. (supra), it was urged by the accused that the order for the issuance of process without recording reasons was correctly set aside by the High Court. Moreover, it was urged that there was no application of mind by the Magistrate. While distinguishing the decision in Pepsi Foods Ltd. (supra) on the ground that it related to taking of cognizance in a complaint case, the court held since in a case of cognizance based on a police report, the Magistrate has the advantage of perusing the materials, he is not required to record reasons:
"23. Insofar as taking cognizance based on the police report is concerned, the Magistrate has the advantage of the charge-sheet, statement of witnesses and other evidence collected by the police during the investigation. Investigating officer/SHO collects the necessary evidence during the investigation conducted in compliance with the provisions of the Criminal Procedure Code and in accordance with the rules of investigation. Evidence and materials so collected are sifted at the level of the investigating officer and thereafter, charge-sheet was filed. In appropriate cases, opinion of the Public Prosecutor is also obtained before filing the charge- sheet. The court thus has the advantage of the police report along with the materials placed before it by the police. Under Section 190(1)(b) CrPC, where the Magistrate has taken cognizance of an offence upon a police report and the Magistrate is satisfied that there is sufficient ground for proceeding, the Magistrate directs issuance of process. In case of taking cognizance of an 67 offence based upon the police report, the Magistrate is not required to record reasons for issuing the process. In cases instituted on a police report, the Magistrate is only required to pass an order issuing summons to the accused. Such an order of issuing summons to the accused is based upon satisfaction of the Magistrate considering the police report and other documents and satisfying himself that there is sufficient ground for proceeding against the accused. In a case based upon the police report, at the stage of issuing the summons to the accused, the Magistrate is not required to record any reason. In case, if the charge- sheet is barred by law or where there is lack of jurisdiction or when the charge-sheet is rejected or not taken on file, then the Magistrate is required to record his reasons for rejection of the charge-sheet and for not taking it on file."
(emphasis supplied)
87. The Special Judge, it must be noted, took cognizance on the basis of a report submitted under Section 173 CrPC and not on the basis of a private complaint. Therefore, the case is squarely covered by the decision in Afroz Mohammed Hasanfatta (supra). The Special Judge took note of the FIR, the witness statements, and connected documents before taking cognizance of the offence. In this backdrop, it would be far-fetched to fault the order of the Special Judge on the ground that it does not adduce detailed reasons for taking cognizance or that it does not indicate that an application of mind. In the facts of this case, therefore, the order taking cognizance is not erroneous."
(Emphasis supplied) The Apex Court holds that it must be noted that the Special Judge therein took cognizance on the basis of a report submitted under Section 173 of the Cr.P.C. and not on the basis of a private 68 complaint. Therefore, the case would squarely be covered by the decision in the case of STATE OF GUJARAT v. AFROZ MOHAMMED HASANFATTA3 and the order taking cognizance did bear application of mind. The Apex Court at paragraph 101 draws up conclusion of its findings which also notices application of mind. Paragraph 101 reads as follows:
"D. The Conclusion
101. In view of the discussion above, we summarise our findings below:
(i) The Special Court does not have, in the absence of a specific provision to that effect, the power to take cognizance of an offence under the MMDR Act without the case being committed to it by the Magistrate under Section 209 CrPC. The order of the Special Judge dated 30 December 2015 taking cognizance is therefore irregular;
(ii) The objective of Section 465 is to prevent the delay in the commencement and completion of trial. Section 465 CrPC is applicable to interlocutory orders such as an order taking cognizance and summons order as well. Therefore, even if the order taking cognizance is irregular, it would not vitiate the proceedings in view of Section 465 CrPC;
(iii) The decision in Gangula Ashok (supra) was distinguished in Rattiram (supra) based on the stage of trial. This differentiation based on the stage of trial must be read with reference to Section 465(2) CrPC. Section 465(2) does not indicate that it only covers challenges to pre-trial orders after the conclusion of the trial. The cardinal principle that guides Section 465(2) CrPC is that the challenge to an irregular order 3 (2019) 20 SCC 539 69 must be urged at the earliest. While determining if there was a failure of justice, the Courts ought to address it with reference to the stage of challenge, the seriousness of the offence and the apparent intention to prolong proceedings, among others;
(iv) In the instant case, the cognizance order was challenged by the appellant two years after cognizance was taken. No reason was given to explain the inordinate delay. Moreover, in view of the diminished role of the committal court under Section 209 of the Code of 1973 as compared to the role of the committal court under the erstwhile Code of 1898, the gradation of irregularity in a cognizance order made in Sections 460 and 461 and the seriousness of the offence, no failure of justice has been demonstrated;
(v) It is a settled principle of law that cognizance is taken of the offence and not the offender.
However, the cognizance order indicates that the Special Judge has perused all the relevant material relating to the case before cognizance was taken. The change in the form of the order would not alter its effect. Therefore, no 'failure of justice' under Section 465 CrPC is proved. This irregularity would thus not vitiate the proceedings in view of Section 465 CrPC;
(vi) The Special Court has the power to take cognizance of offences under MMDR Act and conduct a joint trial with other offences if permissible under Section 220 CrPC. There is no express provision in the MMDR Act which indicates that Section 220 CrPC does not apply to proceedings under the MMDR Act;
(vii) Section 30B of the MMDR Act does not impliedly repeal Section 220 CrPC. Both the provisions can be read harmoniously and such an interpretation furthers justice and prevents hardship since it prevents a multiplicity of proceedings;
(viii) Since cognizance was taken by the Special Judge based on a police report and not a private 70 complaint, it is not obligatory for the Special Judge to issue a fully reasoned order if it otherwise appears that the Special Judge has applied his mind to the material;
(ix) A combined reading of the notifications dated 29 May 2014 and 21 January 2014 indicate that the Sub- Inspector of Lokayukta is an authorized person for the purpose of Section 22 of the MMDR Act. The FIR that was filed to overcome the bar under Section 22 has been signed by the Sub-Inspector of Lokayukta Police and the information was given by the SIT. Therefore, the respondent has complied with Section 22 CrPC; and
(x) The question of whether A-1 was in-charge of and responsible for the affairs of the company during the commission of the alleged offence as required under the proviso to Section 23(1) of the MMDR Act is a matter for trial. There appears to be a prima facie case against A-1, which is sufficient to arraign him as an accused at this stage."
(Emphasis supplied) If clauses (iv), (v) and (viii) of the concluding findings of the Apex Court is taken note of, what becomes unmistakably clear is, irregularity in a cognizance order becomes curable in Section 460 or 461 of the IPC, unless failure of justice has been demonstrated;
cognizance is taken of the offence and not the offender. The Special Judge observing that he has perused all relevant material relating to the case before cognizance was taken, cannot result in failure of justice; since cognizance is taken on a police report and not on a private complaint and it is not obligatory for the Judge to 71 pass a fully reasoned order, if it otherwise appears that the Special Judge had applied his mind to the material. The afore-
extracted order taking cognizance, in the considered view of this Court, is in consonance with the afore-quoted principles laid down by the Apex Court.
16. The judgment that was tossed by the appellant therein -
PRADEEP S.WODEYAR was against the judgment rendered by a Co-ordinate Bench of this Court in PRADEEP S.WODEYAR v.
STATE OF KARNATAKA4. The Co-ordinate Bench recorded the order of the Special Judge taking cognizance. The Co-ordinate Bench had held as follows:
"13. As per the said clause, the first party namely accused No. 3 was responsible to obtain the mineral dispatch permit. But, the allegations in the charge sheet proceed on the basis that accused No. 2 herein transported the alleged minerals without obtaining the permit which presupposes that accused No. 2 transported the said minerals without insisting accused No. 3 from obtaining the prior permit. Therefore, even this contention does not come to the aid of the petitioner/accused No. 2 to come clear of the charges leveled against him.
14. In so far as the validity of the order of cognizance and the summons issued to the petitioners is concerned, on perusal of the order sheet it is noticed that a 4 2020 SCC OnLine Kar 3416 72 brief order is made by the learned Special Judge, which is extracted here below:
"Perused the final report Cognizance is taken against accused no. 1 to 5, Register the case against the accused no. 1 to 5, Register the case and issue summons to accused no. 1 to 5 returnable by 16-01-2016."
15. As rightly submitted by the learned counsel appearing for the petitioners/accused, this order does not specify the offences in respect of which cognizance has been taken by the Special Court. It is also not forthcoming in this order as to whether cognizance has been taken in respect of the offences under IPC or under the provisions of MMDR Act or Forest Rules. In other cases, a detailed order has been passed taking cognizance of specific offences and accordingly, summons have been issued to the petitioners. Nonetheless, it is submitted at the Bar that the summons issued to the respective accused contained the details of the offences for which the summons were issued. Records also indicate that on appearing before the learned Special Judge, the petitioners moved for bail based on the offences mentioned in the summons. Therefore, it is clear that right from the inception, the petitioners were aware of the offences for which summons were issued to them. It is in this background, the objection raised by the petitioners/accused questioning the correctness and legality of the order of cognizance and the consequent summoning order issued by the Special Court requires to be considered.
16. What is taking cognizance is not defined in the Criminal Procedure Code. But, it is now well settled that any Magistrate who takes cognizance of an offence must apply his mind to the facts of the case for the purpose of proceedings in a particular way. In R.R. CHARI v. STATE OF UTTAR PRADESH, AIR 1951 SC 207, the Hon'ble Supreme Court relying on the dicta on GOPAL MARWARI v. EMPEROR, AIR 1943 Pat 245, has 73 observed that, "the word 'cognizance' was used in the Code to indicate the point when the Magistrate or a Judge first takes judicial notice of an offence. It is a different thing from the initiation of proceedings". Section 209 of the Code also provides for taking cognizance of the offence by the Magistrate while committing the case to the Sessions Court for trial but, the cognizance taken by the Magistrate under Section 209 is quite different from the cognizance taken by the Magistrate under Section 190(1)(a) of the Code or the cognizance taken by the Sessions Court before commencing the trial after committal. In the instant case, undisputediy, the learned Special Judge has proceeded to take cognizance of the alleged offences after the submission of the final report by SIT.
17. The reading of the cognizance order passed by the learned Special Judge clearly indicates that on perusal of the charge sheet submitted by the SIT, learned Special Judge has taken cognizance of the alleged offences purportedly under Section 190(1)(a) of the Code and has proceeded to issue summons to the petitioners/accused, as such, there cannot be any difficulty in holding that by considering the facts of the case as borne on the final report, the learned Special Judge has taken cognizance of IPC offences as well as the offences under the provisions of Forest Rules and MMDR Act.
18. It is trite law that while taking cognizance and issuing summons in respect of IPC offences, based on the report under Section 173 of the Code, law does not require the Magistrate to pass elaborate order recording reasons for issuance of summons; though the order must reflect that he has considered the final report and satisfied himself that there is sufficient ground for proceeding against the accused named in the final report.
19. In BHUSHAN KUMAR v. STATE OF (NCT OF DELHI), (2012) 5 SCC 424, the Hon'ble Supreme Court has reiterated the requirement of application of mind in the process of taking cognizance and following the decision 74 in CHIEF ENFORCEMENT OFFICER v. VIDEOCON INTER- NATIONAL LIMITED, (2008) 2 SCC 492, has held that in the process thus issued, the Magistrate need not explicitly state the reasons. Paragraphs 12 and 13 of the decision in CHIEF ENFORCEMENT OFFICER, read as under:--
"12. A "summons" is a process issued by a court calling upon a person to appear before a Magistrate, It is used for the purpose of notifying an individual of his legal obligation to appear before the Magistrate as a response to violation of law. In other words, the summons will anrounce to the person to whom it is directed that a legal proceeding has been started against that person and the date and time on which the person must appear in court. A person who is summoned is legally bound to appear before the court on the given date and time. Wilful disobedience is liable to be punished under Section 174 IPC. It is a ground for contempt of court.
13. Section 204 of the Code does not mandate the Magistrate to explicitly state the reasons for issuance of summons. It clearly states that if in the opinion of a Magistrate taking cognizance of an offence, there is sufficient ground for proceeding, then the summons may be issued. This section mandates the Magistrate to form an opinion as to whether there exists a sufficient ground for summons to be issued but it is nowhere mentioned in the section that the explicit narration of the same is mandatory, meaning thereby that it is not a prerequisite for deciding the validity of the summons issued."
20. In the backdrop of the above principle, if the order of cognizance and the summons issued by the learned Magistrate in the instant cases is analyzed, it is clear from the above order that on consideration of the final report submitted by SIT, the learned Special Judge has taken cognizance of the alleged offences and has issued summons to the petitioners. Therefore, there can be no difficulty in 75 upholding the validity of the cognizance taken by the learned Special Judge and the summons issued to the petitioners insofar as the IPC and Forest offences are concerned.
.... .... .... ....
30. As a result, I hold that the impugned order of cognizance and summons issued by the learned Special Judge do not suffer from any error or illegality vitiating the proceedings pending against the petitioners. For the reasons discussed above, impugned order shall be construed as the orders passed by the learned Special Judge on the complaint filed by the authorized officer insofar as the allegations constituting the offences falling under the provisions of the MMDR Act are concerned."
(Emphasis supplied) It is the afore-quoted judgment of the Co-ordinate Bench that is affirmed by the Apex Court in the case of PRADEEP S.WODEYAR. Therefore, if the order taking cognizance which is extracted supra is affirmed by the Apex Court in PRADEEP S.WODEYAR, the present impugned order taking cognizance as quoted hereinabove would definitely demonstrate application of mind on the part of the learned Special Judge.
17. Therefore, the contention that there is no application of mind in the case at hand as is urged by the learned senior counsel is repelled. This Court has come across plethora of orders taking cognizance which demonstrate non-application of mind, as 76 sometimes there are one line orders of taking cognizance not noticing even the offence or recording minimum necessary reason of application of mind. Even jurisdictional facts while taking cognizance are ignored in several cases. It is those cases which would become cases where interference was called at the hands of this Court qua order taking cognizance as the Apex Court in PRADEEP S.WODEYAR (supra) holds that elaborate reasons are not required to be given by the concerned Court while taking cognizance, but it should bear application of mind. In my considered view, the order taking cognizance by the Special Judge does bear application of mind and the fact that the report is filed by a public servant cannot be ignored, as filing of a false report or a wrong report, the public servant becomes accountable for the same and liable for action to be taken against him. Wherefore, finding the order taking cognizance being in consonance with the principles enunciated by the Apex Court in the case of PRADEEP S.WODEYAR, the contention so tendered is also rendered unacceptable.
7718. In the light of the judgment rendered by the Apex Court in the case of PRADEEP S.WODEYAR (supra), the said point is also answered against the petitioner.
19. Issue No.4:
(iv) Whether cognizance taken by the learned Sessions Judge would run counter to sub-section (2) of Section 202 of the CrPC?
The contention of the learned senior counsel appearing for the petitioner is that unless there is an order of committal by the learned Magistrate to the Court of Sessions and him calling upon the complainant to produce all his witnesses and examine them on oath as obtaining under sub-section (2) of Section 202, if not followed would vitiate entire proceedings. To consider this submission, it is germane to notice certain provisions of the PMLA and the CrPC as interplay between the two would resolve the contention. Sub-section (2) of Section 202 reads as follows:
"202. Postponement of issue of process. - (1) ... ... ... ...
(2) In any inquiry under sub-section (1), the Magistrate may, if he thinks fit, take evidence of witnesses on oath;
Provided that if it appears to the Magistrate that the offence complained of is triable exclusively the Court of 78 Session, he shall call upon the complainant to produce all his witnesses and examine them on oath."
(Emphasis supplied) Sub-section (2) of Section 202 mandates that in an inquiry under sub-section (1) the Magistrate may, if he thinks fit take evidence of witnesses on oath provided that if it appears to the Magistrate that the offence complained of is triable exclusively by the Court of Sessions, he shall call upon the complainant to produce all his witnesses and examine them on oath. The issue at hand is concerned with the offences punishable under the provisions of the PMLA. Section 4 of the Cr.P.C. reads as follows:
"4. Trial of offences under the Indian Penal Code and other laws.--(1) All offences under the Indian Penal Code (45 of 1860) shall be investigated, inquired into, tried, and otherwise dealt with according to the provisions hereinafter contained.
(2) All offences under any other law shall be investigated, inquired into, tried, and otherwise dealt with according to the same provisions, but subject to any enactment for the time being in force regulating the manner or place of investigating, inquiring into, trying or otherwise dealing with such offences."
(Emphasis supplied) Sub-section (2) of Section 4 mandates that all offences under any other law shall be investigated, inquired into, tried, and otherwise dealt with according to the same provisions of the respective 79 enactments. Section 193 of the Cr.P.C. is also germane to be noticed. Section 193 reads as follows:
"193. Cognizance of offences by Courts of Session.--Except as otherwise expressly provided by this Code or by any other law for the time being in force, no Court of Session shall take cognizance of any offence as a Court of original juris-diction unless the case has been committed to it by a Magistrate under this Code."
Section 193 mandates that except as otherwise expressly provided by this Code or by any other law for the time being in force, no Court of Session shall take cognizance of any offence as a Court of original jurisdiction unless the case has been committed to it by the Magistrate under the Code. Therefore, on a coalesce of the aforesaid provisions what would unmistakably emerge is, if the Magistrate is of the opinion that it is a case to be tried only by the Court of Session, then he would perform the duty as obtaining under the proviso to sub-section (2) of Section 202 of the Cr.P.C.
That would be the normal circumstance, if no other law is governing the offence. The PMLA, is without dispute a special enactment. Chapter VII of the PMLA deals with Special Courts.
Section 43 of the PMLA defines Special Courts and reads as follows:
80"43. Special Courts.--(1) The Central Government, in consultation with the Chief Justice of the High Court, shall, for trial of offence punishable under Section 4, by notification, designate, one or more Courts of Session as Special Court or Special Courts for such area or areas or for such case or class or group of cases as may be specified in the notification.
Explanation.--In this sub-section, "High Court" means the High Court of the State in which a Sessions Court designated as Special Court was functioning immediately before such designation.
(2) While trying an offence under this Act, a Special Court shall also try an offence, other than an offence referred to in sub-section (1), with which the accused may, under the Code of Criminal Procedure, 1973 (2 of 1974), be charged at the same trial."
The Special Court constituted under the PMLA to try the offences arising out of PMLA is itself a Court of Session. Section 45 of the PMLA makes provisions of the Cr.P.C. applicable and it reads as follows:
"45. Offences to be cognizable and non-
bailable.--(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), no person accused of an offence under this Act shall be released on bail or on his own bond unless--
(i) the Public Prosecutor has been given an opportunity to oppose the application for such release; and
(ii) where the Public Prosecutor opposes the application, the court is satisfied that there are reasonable grounds for believing that he is not guilty of such offence and that he is not likely to commit any offence while on bail:81
Provided that a person, who, is under the age of sixteen years, or is a woman or is sick or infirm or is accused either on his own or along with other co-accused of money- laundering a sum of less than one crore rupees, may be released on bail, if the Special Court so directs:
Provided further that the Special Court shall not take cognizance of any offence punishable under Section 4 except upon a complaint in writing made by--
(i) the Director; or
(ii) any officer of the Central Government or a State Government authorised in writing in this behalf by the Central Government by a general or special order made in this behalf by that Government.
(1-A) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), or any other provision of this Act, no police officer shall investigate into an offence under this Act unless specifically authorised, by the Central Government by a general or special order, and, subject to such conditions as may be prescribed.
(2) The limitation on granting of bail specified in sub- section (1) is in addition to the limitations under the Code of Criminal Procedure, 1973 (2 of 1974) or any other law for the time being in force on granting of bail.
Explanation.--For the removal of doubts, it is clarified that the expression "Offences to be cognizable and non- bailable" shall mean and shall be deemed to have always meant that all offences under this Act shall be cognizable offences and non-bailable offences notwithstanding anything to the contrary contained in the Code of Criminal Procedure, 1973 (2 of 1974), and accordingly the officers authorised under this Act are empowered to arrest an accused without warrant, subject to the fulfilment of conditions under section 19 and subject to the conditions enshrined under this section."
82It directs that a Special Court shall be deemed to be a Court of Session. The offences triable by the Special Court are found in Section 44. An offence punishable under Section 4 and any scheduled offence connected to the offence under that section shall be triable by the Special Court. Cognizance is now taken by the Sessions Court, as designated under sub-section (1) of Section 43 of the PMLA.
20. Therefore, the contention of the learned counsel that if the learned Magistrate has to pass an order on his opinion that it is exclusively triable by a Sessions Judge, he would direct the complainant to produce all the witnesses for their examination on oath is not called for when the offences are tried by a designated Court for trying the offences under the PMLA. If the learned Magistrate had taken cognizance of a proceeding over which he is not empowered to take which would touch upon the jurisdiction of the Magistrate, it is only then such order of cognizance would become an order taking cognizance in violation of law. In the case at hand it is not disputed that cognizance is taken by the designated Court - a Court of Session.
8321. The judgment relied on by the learned senior counsel in the case of ROSY V. STATE OF KERALA - (2000)2 SCC 230 would become inapplicable to the facts of the case at hand, as it was dealing with the offences under the Penal Code and not the offences under the PMLA or any other special enactment. The other judgment relied on rendered by the High Court of Jharkhand only follows ROSY (supra). Therefore, the issue will have to be dealt with considering the interplay between the provisions of the PMLA, a special enactment and the CrPC. The finding hereinabove may not be considered to be that the CrPC is completely inapplicable to the provisions of the PMLA. PMLA itself in terms of Section 46 makes CrPC as applicable only in those areas which do not find a place for such procedure in the PMLA. Reference is being made to the judgment of the Constitution Bench of the Supreme Court in the case of A.R.ANTULAY v. RAMDAS SRINIWAS NAYAK AND OTHERS5. The Apex Court in the said case has held as follows:
"31. It was then submitted that if the object underlying 1952 Act was to provide for a more speedy trial of offences of corruption by a public servant, this laudable 5 (1984) 2 SCC 500 84 object would be thwarted if it is ever held that a private complaint can be entertained by a Special Judge. Developing the argument it was pointed out that assuming that a private complaint is maintainable before taking cognizance, a Special Judge will have to examine the complainant and all the witnesses present as enjoined by Section 200. The Judge thereafter ordinarily will have to postpone issue of process against the accused, and either inquiry into the case himself or direct an investigation to be made by a police officer and in cases under the 1947 Act by police officers of designated rank for the purpose of deciding whether or not there is sufficient ground for proceeding. [Section 202(1)]. If the Judge proceeds to hold the inquiry himself, he is obliged to take evidence on oath but it was said that if the Court of Special Judge is a Court of Session, the case would be governed by proviso to sub-section (2) of Section 202, CrPC and that therefore, he will have to call upon the complainant to produce all his witnesses and examine them on oath. This would certainly thwart a speedy trial was the apprehension disclosed and therefore, it was said that there is internal contra-indication that a private complaint is not maintainable. We find no merit in the submission. As has been distinctly made clear that a Court of Special Judge is a Court of original criminal jurisdiction and that it can take cognizance of an offence in the manner hereinbefore indicated, it may be that in order to test whether the complaint disclosed a serious offence or that there is any frivolity involved in it, the Judge may insist upon holding an inquiry by postponing the issue of process. When a private complaint is filed, the court has to examine the complainant on oath save in the cases set out in the proviso to Section 200 CrPC. After examining the complainant on oath and examining the witnesses present, if any, meaning thereby that the witnesses not present need not be examined, it would be open to the court to judicially determine whether a case is made out for issuing process. When it is said that court issues process, it means the court has taken cognizance of the offence and has decided to initiate the proceeding and as a visible manifestation of taking cognizance, process is issued which means that the accused is called upon to appear before the court. This may either take the form of a summons or a warrant, as the case may be. It may be that after examining the complainant and his 85 witnesses, the court in order to doubly assure itself may postpone the issue of process, and call upon the complainant to keep his witnesses present. The other option open to the court is to direct investigation to be made by a police officer.
And if the offence is one covered by the 1947 Act, the investigation, if directed, shall be according to the provision contained in Section 5-A. But it must be made distinctly clear that it is neither obligatory to hold the inquiry before issuing process nor to direct the investigation of the offence by police. The matter is in the judicial discretion of the court and is judicially reviewable depending upon the material disclosed by the complainant in his statement under oath under Section 200, called in the parlance of criminal courts verification of the complaint and evidence of witnesses if any. It was however, urged that if Section 5-A can be dispensed with by holding that a private complaint is maintainable, the court at least should ensure pre- process safeguard by insisting upon the examination of all witnesses that the complainant seeks to examine and this will be counter-productive as far as the object of a speedy trial is concerned. Viewed from either angle, there is no merit in this submission. Primarily, examination of witnesses even at a pre-process stage by Special Judge is not on the footing that the case is exclusively triable by a Court of Session as contemplated by Section 202(2) proviso. There is no commitment and therefore, Section 202(2) proviso is not attracted. Similarly, till the process is issued, the accused does not come into the picture. He may physically attend but is not entitled to take part in the proceeding. (See Nagawwa (smt) v. Veeranna Shivalingappa Konjalgi [(1976) 3 SCC 736: 1976 SCC (Cri) 507: AIR 1976 SC 1947] ) Upon a complaint being received and the court records the verification, it is open to the court to apply its mind to the facts disclosed and to judicially determine whether process should or should not be issued. It is not a condition precedent to the issue of process that the Court of necessity must hold the inquiry as envisaged by Section 202 or direct investigation as therein contemplated. The power to take cognizance without holding inquiry or directing investigation is implicit in Section 202 when it says that the Magistrate may "if 86 he thinks fit, postpone the issue of process against the accused and either inquire into the case himself or direct an investigation to be made by a police officer..., for the purpose of deciding whether or not there is sufficient ground for proceeding". Therefore, the matter is left to the judicial discretion of the court whether on examining the complainant and the witnesses if any as contemplated by Section 200 to issue process or to postpone the issue of process. This discretion which the court enjoys cannot be circumscribed or denied by making it mandatory upon the court either to hold the inquiry or direct investigation. Such an approach would be contrary to the statutory provision. Therefore, there is no merit in the contention that by entertaining a private complaint, the purpose of speedy trial would be thwarted or that a pre-process safeguard would be denied."
(Emphasis supplied)
22. In the light of the aforesaid provisions of the Act and the statute, the contention of the learned senior counsel for the petitioner that the act of taking cognizance by the Court of Session, without it being committed by the learned Magistrate, in the peculiar facts of this case, is fundamentally flawed. Therefore, the contentions so advanced by the learned senior counsel are unacceptable, as also, the armory from his arsenal, as they would lend no support to the contentions so advanced. Therefore, the issue that has arisen for consideration is also answered against the petitioner.
8723. Finding no merit in the petition, the petition is dismissed.
Consequently, I.A.No.1/2022 stands disposed.
This Court places its appreciation for the able assistance rendered by Mr.Angad.K., Law Clerk cum Research Assistant attached to this Court.
Sd/-
JUDGE bkp CT:MJ