Karnataka High Court
Mrs Richa Saxena vs Directorate Of Enforcement on 30 May, 2023
Author: M.Nagaprasanna
Bench: M.Nagaprasanna
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WP No. 3901 of 2023
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 30TH DAY OF MAY, 2023
BEFORE
THE HON'BLE MR JUSTICE M.NAGAPRASANNA
WRIT PETITION NO. 3901 OF 2023 (GM-RES)
BETWEEN:
MRS RICHA SAXENA
AGED ABOUT 57 YEARS
R/A NO.63, 14TH B MAIN
16TH CROSS, SECTOR-4
OPPOSITE BDA COMPLEX
H S R LAYOUT AGARA
BANGALORE - 560 034.
...PETITIONER
Digitally signed
by (BY SRI NISHIT KUMAR SHETTY, ADV.)
PADMAVATHI
BK AND:
Location: HIGH
COURT OF 1. DIRECTORATE OF ENFORCEMENT
KARNATAKA
GOVERNMENT OF INDIA
BANGALORE ZONAL OFFICE
3RD FLOOR, BLOCK-B
BMTC BUILDING
SHANTHINAGAR, K.H. ROAD
BENGALURU - 560 027
REP. BY ITS DIRECTOR.
2. THE JOINT DIRECTOR
DIRECTORATE OF ENFORCEMENT
GOVERNMENT OF INDIA
BANGALORE ZONAL OFFICE
3RD FLOOR, BLOCK-B
BMTC BUILDING
SHANTHINAGAR, K.H. ROAD
BENGALURU - 560 027.
3. THE ASSISTANT DIRECTOR
DUIRECTORATE OF ENFORCEMENT
GOVERNMENT OF INDIA
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WP No. 3901 of 2023
BANGALORE ZONAL OFFICE
3RD FLOOR, BLOCK-B
BMTC BUILDING
SHANTHINAGAR, K.H. ROAD
BENGALURU - 560 027.
...RESPONDENTS
(BY SRI MADHUKAR DESHPANDE, ADV., FOR R-1 TO R-3)
THIS WP IS FILED UNDER ARTICLES 226 AND 227 OF THE
CONSTITUION OF INDIA PRAYING TO ISSUE DIRECTION QUASHING
THE SUMMON NO.PMLA/SUMMON/BGZO/2023/1175 DATED
02.02.2023 ISSUED BY THE R3 WHO IA ATTACHED TO THE R1
INSTITUTION IN HIS CAPACTIY AS THE ASSISTANT DIRETOR,
ADDRESSED TO THE PETITONER SUMMONING HER PRESENCE ON
16.02.2023 AT 3 PM ALLEGEDLY IN EXERCISE OF HIS POWERS
UNDER SECTION 50 OF THE PREVENTION OF MONEY LAUNDERING
ACT, WHICH IS PRODUCED AS ANNEXURE-A.DECLARING THE
ACTION OF THE R3 IN CONTINUING THE INVESTIGATION IN
ECIR/BGZO/18/2015/3748 NOT ONLY HIGHLY ARBITRARY, ILLEGAL
AND WITHOUT AUTHORITY OF LAW BUT ALSO ABUSE OF PROCESS
OF LAW ANNEXURE-A.
THIS PETITION, COMING ON FOR PRELIMINARY HEARING,
THIS DAY, THE COURT MADE THE FOLLOWING:
ORDER
The petitioner is before this Court calling in question summons issued to the petitioner by the respondent-
Enforcement Directorate on 02.02.2023.
2. Heard the learned Counsel Sri Nishit Kumar Shetty appearing for the petitioner and the learned Counsel Sri Madhukar Deshpande appearing for the respondents.
3. Sans details facts germane are as follows:
-3- WP No. 3901 of 2023The petitioner is an accused in Crime No.110/2015 registered for the offences punishable under Sections 392, 120B, 201 of the IPC and Sections 7, 9, 12, 13(d), 13(2) of the Prevention of Corruption Act, 1988. Based upon the registration of the said crime, a search was conducted upon the house of the petitioner which resulted in a crime being registered in Crime No.64/2015 against the petitioner for the offences punishable under Sections 13(1)(e) & 13(2) read with Section 120B of the IPC. The police after investigation filed a 'B' report before the concerned court. The concerned court in terms of its order dated 20.04.2021 after hearing the complainant accepts the 'B' report and closes the proceedings against the petitioner.
4. It is thereafter the present notice emerges from respondent no.2-Enforcement Directorate. It is this notice that drives the petitioner to this Court in the subject petition.
5. Learned Counsel appearing for the petitioner would contend that the 'B' report has been filed in favour of the petitioner by the investigating agency and the concerned court has after hearing the complainant accepted the 'B' report and closed the proceedings. Therefore, it forms the closure of the proceedings in the predicate offence. Once that having been -4- WP No. 3901 of 2023 closed, learned Counsel would submit that the Enforcement Directorate would not get a right to initiate proceedings and issue summons to the petitioner. He would seek quashment of the proceedings initiated by the Enforcement Directorate.
6. Learned Counsel Sri Madhukar Deshpande representing the Enforcement Directorate would seek to refute the submissions to contend that acceptance of 'B' report and closure of the proceedings albeit after hearing the complainant would not be an order on merits and it is not an acquittal of the petitioner after a full blown trial. Therefore, he would submit that the proceedings in the Enforcement Case Information Report (ECIR) should be permitted to continue. He would seek dismissal of the petition.
7. I have given my anxious consideration to the submissions made by the respective learned Counsel and have perused the material on record.
8. The afore narrated facts are not in dispute. After registration of the crime in Crime No.110/2015 before the Old Hubli Police Station against several accused, the crime leads to the petitioner. The leading of the crime to the petitioner leads -5- WP No. 3901 of 2023 to registration of a separate crime against the petitioner in Crime No.64/2015 for the afore quoted offences. The police/investigating agency conducted the investigation and filed a 'B' summary report before the concerned court. The concerned Court on hearing complainant, closed the proceedings on acceptance of 'B' summary report.
9. It is after the aforesaid events, respondent no.2- Enforcement Directorate seeks to issue summons to the petitioner in a proceedings instituted. In the light of acceptance of the 'B' report by the concerned court and closure of the proceedings qua Crime No.64/2015, whether the Enforcement Directorate would get a right to continue the proceedings is what is necessary to be considered.
10. The issue that has fallen for consideration need not detain this Court for long or delve deep into the matter as the three Judge bench of the Apex Court in the case of VIJAY MADANLAL CHOUDHARY & OTHERS VS UNION OF INDIA & OTHERS1, has held as follows:
12022 SCC OnLine SC 929 -6- WP No. 3901 of 2023 "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 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.
-7- WP No. 3901 of 2023(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 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 -8- WP No. 3901 of 2023 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.
(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 -9- WP No. 3901 of 2023 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.
(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.
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WP No. 3901 of 2023(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.
(xxi) The argument about proportionality of punishment with reference to the nature of scheduled offence is wholly unfounded and stands rejected."
(Emphasis supplied)
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WP No. 3901 of 202311. The Apex Court in the afore quoted paragraph has clearly held that if the accused in the predicate case gets acquitted on three circumstances, (1) by an order of acquittal after full blown trial, (2) if the proceedings are quashed by the High Court in exercise of its jurisdiction under Section 482 Cr.PC, or (3) if the accused gets discharged of the offences. If these circumstances are met, the proceedings in the Enforcement Case Information Report (ECIR) cannot be permitted to be continued. The circumstances narrated by the Apex Court (supra) is not the one that is found in the case at hand. The petitioner is neither acquitted after a full blown trial nor discharged from the array of accused and the proceedings against him are not quashed by this Court in exercise of its jurisdiction under Section 482 of the Cr.P.C. The circumstance in which the petitioner is placed though does not form a part of the Apex Court's finding, the effect is the same. The cause is different, but the effect is to what the Apex Court has held.
12. The submission of the learned counsel for the respondent that the petitioner is not acquitted after a full blown trial as acceptance of a 'B' report will not amount to acquittal is
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WP No. 3901 of 2023unacceptable, as the Apex Court also recognizes closure of the proceedings on discharge of the accused; even in the case of discharge, no trial is conducted against the accused.
Therefore, closure of the proceedings on acceptance of 'B' report and such acceptance becoming final would be closure of proceedings akin to a discharge, as in both the cases no trial is held. Therefore, the petitioner does become entitled to the benefit of the finding of the Apex Court supra and his entitlement leads to obliteration of the proceedings against him as initiated by the Enforcement Directorate.
13. For the afore stated reasons, the following:
ORDER
(i) The Criminal Petition is allowed.
(ii) The summons issued to the petitioner on 02.02.2003 by respondent no.2 stands quashed.
Sd/-
JUDGE KK