Karnataka High Court
Sri Pratap Singh Tiwari vs Directorate Of Enforcement on 7 September, 2022
Author: M.Nagaprasanna
Bench: M.Nagaprasanna
-1-
CRL.P No. 1928 of 2022
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 7TH DAY OF SEPTEMBER, 2022
BEFORE
THE HON'BLE MR JUSTICE M.NAGAPRASANNA
CRIMINAL PETITION NO. 1928 OF 2022
BETWEEN:
1. SRI PRATAP SINGH TIWARI
S/O LATE SHRI KUNDAN SINGH
AGE 68 YEARS
RETIRED DIRECTOR OF PHYSICAL EDCUATION
DHARWAD UNIVERSITY, DHARWAD
PERMANENT RESIDENCE AT
NO. 185, GANGAMRUTHA
BANASHANKARI - JAYANAGAR
KALABURAGI 585105
2. SMT. SHEELA TIWARI
AGE 67 YEARS
EDITOR, CHINTAK KANNADA DAILY
W/O SRI. PRATAP SINGH TIWARI
PERMANENT RESIDENCE AT
NO.185, GANGAMRUTHA
BANASHANKRI - JAYANAGAR
KALABURAGI 585105
Digitally signed by
PADMAVATHI B K
Location: HIGH
COURT OF
KARNATAKA
...PETITIONERS
(BY SRI. VISHAL PRATAP SINGH ,ADVOCATE)
-2-
CRL.P No. 1928 of 2022
AND:
DIRECTORATE OF ENFORCEMENT
REPRESENTED BY ITS
ASSISTANT DIRECTRORATE
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPT. OF REVENUE
3RD FLOOR, B BLOCK
BMTC, SHANTHINAGAR
KH ROAD,
BENGALURU 560 027
...RESPONDENT
(BY SRI. M.UNNIKRISHNAN, ADVOCATE)
THIS CRL.P IS FILED U/S.482 CR.P.C PRAYING TO 1.
QUASH THE ECIR NO.70/BGZO/2009-10, COMPLAINT,
REGISTERED AGAINST THE PETITIONERS BY THE
DIRECTORATE OF ENFORCEMENT, BENGALURU ZONE,
BENGALURU THE RESPONDENT HEREIN. THE COPY OF THE
ECIR, COMPLAINT IS MARKED AND FILED AS ANNEXURE-A
AND B RESPECTIVELY. 2. QUASH THE PROCEEDINGS AGAINST
THE PETITIONERS PENDING BEFORE THE III ADDITIONAL
DISTRICT AND SESSIONS JUDGE, D.K., MANGALURU FOR THE
OFFENCE P/U/S 3 AND 4 OF P.M.L. ACT IN SPL.C.NO.74/2018.
3. ALTERNATIVELY, TO DISCHARGE PETITIONER NO.1 - DR.
PRATAP SINGH TIWARI AND PETITIONER NO.2 - SMT. SHEELA
TIWARI IN SPL.C.NO.74/2018 PENDING BEFORE THE III
ADDITIONAL DISTRICT AND SESSIONS JUDGE, D.K.,
MANGALURU FOR THE OFFENCE P/U/S 3 AND 4 OF P.M.L. ACT
IN SPL.C.NO.74/2018 BY SETTING ASIDE THE ORDER DATED
07.01.2022 WHICH IS FILED AS ANNEXURE-C. 4. RESTORE
ALL THE PROPERTIES ATTACHED BY THE RESPONDENT IN ECIR
NO.70/BZ/2009-10 TO THE PETITIONERS.
THIS PETITION, COMING ON FOR ADMISSION, THIS DAY,
THE COURT MADE THE FOLLOWING:
-3-
CRL.P No. 1928 of 2022
ORDER
The petitioners are before this Court calling in question registration of Enforcement Case Information Report (hereinafter referred to as 'ECIR' for short) ECIR No.70/BGZO/2009-10 for offences punishable under Sections 3 and 4 of Prevention of Money Laundering Act, 2002 (hereinafter referred to as 'PML Act' for short) in Special Case No.74/2018.
2. Heard Sri Vishal Pratap Singh, learned counsel appearing for the petitioners and Sri Unnikrishnan, representing the Enforcement Directorate.
3. Brief facts that leads the petitioners to this Court in the subject petition, as borne out from the pleadings are as follows:
On 01.12.2009, the Lokayuktha registers a complaint for offences punishable under Sections 13(1)(e) read with Section 13(2) of the Prevention of Corruption Act, 1988 (for short 'PC Act') against the petitioner. On 31.03.2010, on the basis of FIR so registered for offences punishable under the PC Act, ECIR No.70/BGZO/2009-10 is registered against the petitioners.-4- CRL.P No. 1928 of 2022
4. The Police after investigation in the Lokayuktha case, registered for the offences punishable under Section 13(1)(e) read with Section 13(2) of the PC Act and file their final report on 30.06.2015, before the concerned Court. The concerned Court after a full blown trial, acquit the petitioners in terms of its order dated 05.01.2021. The said acquittal has become final as on date.
5. Notwithstanding the said acquittal, the Enforcement Directorate sought to continue the case in ECIR No.70/BGZO/2009-10, which was by then a special case in S.C.No.74/2018. The continuance of the case before the concerned Court in S.C.No.74/2018 is what drives the petitioners to this Court in the subject petition.
6. Sri Vishal Pratap Singh, learned counsel appearing for the petitioners, would contend that the petitioners having been acquitted in the predicate offence under the PC Act. The continuance of further proceedings under the PML Act would be without jurisdiction.
-5- CRL.P No. 1928 of 20227. On the other hand, the learned counsel appearing for the respondent though would refute the submissions made by the learned counsel for the petitioners but he is not in a position to dispute the position of law as is laid down by the Apex Court in the case of VIJAY MADANLAL CHOUDHARY & ORS. v/s UNION OF INDIA & ORS reported in 2022 SCC Online SC 929.
8. I have given my anxious consideration to the submissions made by the respective learned counsel and have perused the material on record.
9. The afore-narrated facts are not in dispute. The petitioners who were alleged of offences punishable under the PC Act i.e., Section 13(1)(e) read with Section 13(2) of the Act has been acquitted after a full blown trial in the year 2021. By then, the judgment of the Apex Court in the case of VIJAY MADANLAL CHOUDHARY (supra) was yet to be pronounced.
The Apex Court rendered its judgment in the aforesaid case on 27.07.2022. The issue in the case at hand stands completely covered by the judgment rendered by the Apex Court in the -6- CRL.P No. 1928 of 2022 case of VIJAY MADANLAL CHOUDHARY (supra). This Court in Crl.P.No.9490/2021 and connected matter disposed on 24.08.2022, has considered the judgment in the case of VIJAY MADANLAL CHOUDHARY (supra) and has held as follows:
"12. The issue now boils down to a legal jugglery as to whether accused 1 and 2 having been acquitted of the offences alleged under the IPC - predicate offence, the offence alleged i.e., scheduled offence under the Act can continue. The judgment relied on by the learned counsel appearing for the respondent in the case of DYANI ANTONY PAUL no doubt held the field and further proceedings could not have been interjected or interfered at this stage, as interpretation of proceeds of crime as given in DYANI ANTONY PAUL notwithstanding any order of any Court in the predicate offences, the scheduled offences under the Act can be permitted to continue, as proceeds of crime, if it is linked to the criminal activity, that would be enough circumstance to continue the proceedings. But, the subsequent judgment, rendered by the Apex Court on 27-07-2022 in VIJAY MADANLAL CHOUDHARY (supra), is what settles this issue. The Apex Court in the judgment (supra) specifically interpreting Section 3 of the Act has held 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 -7- CRL.P No. 1928 of 2022 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,--
(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;-8- CRL.P No. 1928 of 2022
(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 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 -9- CRL.P No. 1928 of 2022 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 above. 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 actors Actions taken to remedy underlying Rating deficiencies 1-ML offence PC •(High) monetary Amendments to India's threshold condition for Prevention of Money Laundering most ML predicates. Act (PMLA) were enacted by Parliament on 17 December 2012 and came into force on 15 February 2013.
All predicate offences previously contained in Part B of the Schedule (46 offences with a threshold value of INR 3 million ("30 lakh rupees" of USD 60000) were added in Part A without a threshold value. Part C of the Schedule now includes all offences listed in Part A, supplemented by all offences covered by Chapter XVII of the Penal Code, 1860, when these offences have cross-border implications. All in all, the list of predicate offences continues to include 156 offences under 28 different statutes but without
- 10 -CRL.P No. 1928 of 2022
any monetary threshold. As result, the major technical deficiency identified in relation to R.1 is fully addressed.
•ML provision does not Amendments to the PMLA were cover physical enacted by Parliament on 17 concealment of December 2012 and came into criminal proceeds. force on 15 February 2013.
• ML provision does The amended section 3 of the not cover the sole PMLA now reads. "Whosoever knowing acquisition, directly or indirectly attempts to possession and use indulge or knowingly assists or of criminal proceeds knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property shall be guilty of 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 a person is found to be directly or indirectly involved in any
- 11 -
CRL.P No. 1928 of 2022process 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 --
- 12 -
CRL.P No. 1928 of 2022to reckon any (every) 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
- 13 -
CRL.P No. 1928 of 2022Section 3 as "or", to give full play to the said provision so as to include "every" process or activity indulged into by anyone, including projecting or claiming the property as untainted property to constitute an offence of money-laundering on its own. The act of projecting or claiming proceeds of crime to be untainted property presupposes that the person is in possession of or is using the same (proceeds of crime), also an independent activity constituting offence of money-laundering. In other words, it is not open to read the different activities conjunctively because of the word "and". If that interpretation is accepted, the effectiveness of Section 3 of the 2002 Act can be easily frustrated by the simple device of one person possessing proceeds of crime and his accomplice would indulge in projecting or claiming it to be untainted 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,
- 14 -
CRL.P No. 1928 of 2022irrespective of the date and time of commission of the scheduled offence. In other words, the criminal activity may have 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
- 15 -
CRL.P No. 1928 of 2022the 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 remembered that it is not within human powers
- 16 -CRL.P No. 1928 of 2022
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)
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
- 17 -
CRL.P No. 1928 of 2022an 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 Bihar 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,
- 18 -
CRL.P No. 1928 of 2022(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.aspx - 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 Jain. Reference has also been made to Nikesh Tarachand
- 19 -
CRL.P No. 1928 of 2022Shah. 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
- 20 -
CRL.P No. 1928 of 2022argument or the view that 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."
Answering those arguments the Apex Court concludes as follows:
"CONCLUSION
467. In light of the above analysis, we now proceed to summarize 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
- 21 -CRL.P No. 1928 of 2022
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 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
- 22 -
CRL.P No. 1928 of 2022claiming 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 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.
- 23 -
CRL.P No. 1928 of 2022(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.
(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
- 24 -
CRL.P No. 1928 of 2022by 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.
(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.
- 25 -
CRL.P No. 1928 of 2022(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 to impress upon the executive to take corrective measures in this regard expeditiously.
- 26 -
CRL.P No. 1928 of 2022(xxi) The argument about proportionality of punishment with reference to the nature of scheduled offence is wholly unfounded and stands rejected."
(Emphasis supplied) Clause (v) of the conclusion assumes significance. Clause (v) is answering the interpretation of Section 3 and holds that the offence under Section 3 is dependent on illegal gain of property as a result of criminal activity relating to a scheduled offence. It is concerning the process or activity connected with such property which constitutes the offence of money laundering. The Apex Court holds that the authorities under the Act cannot prosecute any person on notional basis or on the assumption that the scheduled offence has been committed, unless it is so registered with the jurisdictional police and/or pending enquiry/trial including by way of criminal complaint before the competent forum. The Apex Court answers the issue further holding that if a person is finally discharged/acquitted of the predicate offences or the criminal case against him is quashed by a 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. The Apex Court answers the very issue which is the kernel of the conundrum in the case at hand, in the aforesaid clause of conglomeration of conclusions.
13. It is germane to notice, the Apex Court in its judgment rendered on August 16th, 2022 in the case of PARVATHI KOLLUR AND ANOTHER V. STATE BY DIRECTORATE OF ENFORCEMENT, recording the admission of the Union of India with regard to the proposition of law as propounded by the Apex Court in the case
- 27 -
CRL.P No. 1928 of 2022of VIJAY MADANLAL CHOUDHARY (supra), allowed the appeal and set aside the judgment of this Court rendered in Crl.R.P.No.590 of 2019. The said order reads as follows:
"Learned counsel for the appellants has contended that the issue as involved in this matter is no more res integra, particularly for the view taken by a 3-Judge Bench of this Court in the case of Vijay Madanlal Choudhary & Ors. vs. Union Of India & Ors. decided on 27.07.2022 where, the consequence of failure of prosecution for the scheduled offence has been clearly provided in the following terms:
"187. .......(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."
Learned ASG appearing for the respondent, in all fairness, does not dispute the above position of law declared by this Court. The result of the discussion aforesaid is that the view as taken by the Trial Court
- 28 -
CRL.P No. 1928 of 2022in this matter had been a justified view of the matter and the High Court was not right in setting aside the discharge order despite the fact that the accused No. 1 had already been acquitted in relation to the scheduled offence and the present appellants were not accused of any scheduled offence.
In view of the above, this appeal succeeds and is allowed. The impugned judgment and order dated 17.12.2020 is set aside and the order dated 04.01.2019 as passed by the Trial Court, allowing discharge application of the appellants, is restored."
The Apex Court in the case of PARVATHI KOLLUR (supra) notices the judgment in the case of VIJAY MADANLAL CHOUDHARY and records the admission of the Union of India and quashes the proceedings. On the bedrock of what the Apex Court declares, the case at hand merits consideration.
14. It is not in dispute that accused 3, 4 and 5 are hauled into the proceedings under the Act only because the property that they have acquired is linked to the criminal activity of accused 1 and 2. Accused 1 and 2 are into the proceedings under the Act for the reason of allegations of money laundering under Section 3, as according to the prosecution it is proceeds of crime. Therefore, the entire issue initiated by the Enforcement Directorate against the accused herein would revolve round Section 3 of the Act. Section 3 of the Act is interpreted by the Apex Court (supra). The conclusion of the Apex Court is that if they are discharged/acquitted or the criminal case against them is quashed, there can be no offence of money laundering against them or anyone claiming such property being the
- 29 -
CRL.P No. 1928 of 2022property linked to the scheduled offence through them. The contention of the respondent that the issue inter partes has become final is unacceptable, in the light of the afore-quoted judgment of the Apex Court, which is rendered considering every provision of the Act. This is again reiterated and the position of law is admitted by the Directorate of Enforcement, these would enure to the benefit of the petitioners, in the cases at hand.
15. Therefore, the issue need not detain this Court for long or delve deep into the matter in the light of the judgment of the Apex Court (supra). The solitary circumstance which would enure to the benefit of the accused in both these cases is acquittal of accused 1 and 2 in Criminal Appeal No.414 of 2016 and the said acquittal becoming final and all the allegations of offences under the Act being linked to the offence under the IPC against accused 1 and 2. Therefore, if the proceedings under the PML Act are permitted to be continued in the teeth of the undisputed facts and the judgments of the Apex Court (supra), it would become an abuse of the process of the law and would result in miscarriage of justice."
In the light of the judgment of the Apex Court in the case of VIJAY MADANLAL CHOUDHARY (supra) and that of this Court as afore-extracted, the issue in the case at hand need not detain this Court or delve into the matter. In the teeth of the facts narrated hereinabove, permitting further proceedings to continue would run foul of the law laid down by the Apex
- 30 -
CRL.P No. 1928 of 2022Court and would become an abuse of the process of law, resulting in miscarriage of justice.
10. For the aforesaid reasons, following:
ORDER i. Criminal Petition is allowed.
ii. The complaint registered against the petitioners in ECIR No. 70/BGZO/2009-10 by the Directorate of Enforcement, Bengaluru Zone, Bengaluru and the proceedings against the petitioners pending before the III Additional District and Sessions Judge, D.K., Mangaluru in Spl.C.No.74/2018, stand quashed.
iii. Petitioner No.1 - Dr. Pratap Singh Tiwari and Petitioner No.2 - Smt. Sheela Tiwari are discharged in Spl.C.No.74/2018, pending before the III Additional District and Sessions Judge, D.K., Mangaluru by setting aside the order dated 07.01.2022 in Spl.C.No.74/2018.
iv. Consequently, the petitioners would be entitled to release of all properties attached by the respondent in ECIR No.70/BGZO/2009-10.
v. Liberty is reserved to the respondents -
Enforcement Directorate to reopen the proceedings
- 31 -
CRL.P No. 1928 of 2022in the event, the order of acquittal passed by the concerned Court on 05.01.2021 is set aside by a superior judicial fora.
Sd/-
JUDGE KA