Sheetalkumar Manere vs Directorate Of Enforcement on 16 February, 2023

[Cites 40, Cited by 0]

Karnataka High Court

Sheetalkumar Manere vs Directorate Of Enforcement on 16 February, 2023

Bench: M. Nagaprasanna

                            1



        IN THE HIGH COURT OF KARNATAKA AT BENGALURU

          DATED THIS THE 16TH DAY OF FEBRUARY, 2023         R
                           BEFORE

          THE HON'BLE MR. JUSTICE M. NAGAPRASANNA

           WRIT PETITION No.1269 OF 2023 (GM - RES)


BETWEEN:

1.     SHEETALKUMAR MANERE
       AGED ABOUT 57 YEARS,
       S/O SHRI SUDHAKAR MANERE
       R/O 20/783/2, 'NARAYNI'
       YESH LAXMI HALL ROAD,
       ICHALKARANJI, DIST. KOLHAPUR - 416 115
       MAHARASHTRA.

2.     JYOTI SHEETALKUMAR MANERE
       AGED ABOUT 50 YEARS,
       W/O SHRI SHEETALKUMAR MANERE
       R/O 20/783/2, 'NARAYNI'
       YESH LAXMI HALL ROAD,
       ICHALKARANJI, DIST. KOLHAPUR - 416 115
       MAHARASHTRA.

                                                ... PETITIONERS

(BY SRI RAJIV YADHAV, ADVOCATE FOR
    SRI A.B.PATIL, ADVOCATE)

AND:

DIRECTORATE OF ENFORCEMENT
THROUGH ADDITIONAL DIRECTOR,
BANGALORE ZONAL OFFICE
                                2



BMTC B BLOCK
3RD FLOOR, SHANTINAGAR
KH ROAD,WILSON GARDEN
BENGALURU - 560 027
KARNATAKA.
                                                    ... RESPONDENT

(BY SRI MADHUKAR DESHPANDE, ADVOCATE)

      THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND
227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE
INVESTIGATION AND ALL PROCEEDINGS IN ENFORCEMENT CASE
INVESTIGATE REPORT BEARING NUMBER ECIR/BGZO/85/2022
INITIATED BY THE BANGALORE ZONAL OFFICE OF THE
DIRECTORATE OF ENFORCEMENT.



     THIS WRIT PETITION HAVING BEEN HEARD AND RESERVED
FOR ORDERS ON 07.02.2023, COMING ON FOR PRONOUNCEMENT
THIS DAY, THE COURT MADE THE FOLLOWING:-


                              ORDER

The petitioners are before this Court calling in question registration of an Enforcement Case Information Report ('ECIR') initiated by the Bangalore Zonal office of the Directorate of Enforcement.

2. Sans unnecessary details, facts in brief, are as follows:-

The petitioners are accused in Crime No.23 of 2018. The 1st petitioner is alleged to have been closely associated with the complainant who is not a party to these proceedings from the year 2014 and had several transactions with the complainant. Based upon certain allegations, a complaint comes to be registered against the petitioners before the Ashoknagar Police Station, Hubballi in Crime No.23 of 2018. Several proceedings have gone on in the said crime and the Police after investigation have filed a charge sheet in the matter. The matter is pending consideration before the concerned Court of jurisdiction. The present case does not concern merit of Crime No.23 of 2018 or its aftermath qua the offences under the Indian Penal Code.

3. The Enforcement Directorate ('ED' for short) initiates certain proceedings in the year 2022. The basis for such initiation is involvement of petitioners in Crime No.23 of 2018. What drives the petitioners to this court is not the merit of registration of the said crime. The petition is preferred on the ground that proceedings initiated by the ED at Bangalore Zonal Office suffer from want of 4 territorial jurisdiction. It is contending this, the present petition is preferred.

4. Heard Sri Rajiv Yadav, learned counsel appearing for the petitioners and Sri Madhukar Deshpande, learned counsel appearing for the respondent.

5. The learned counsel appearing for the petitioners would admit that the solitary contention in the case at hand is that the proceeding suffers from want of territorial jurisdiction and if the ED, Zonal Office, Bangalore had no jurisdiction to even register the ECIR, issuance of summons or any further proceedings would become contrary to law. It is his submission that none of the transactions as necessary under Section 3 of the Prevention of Money Laundering Act, 2002 ('the Act' for short) has happened within the territorial limits of Karnataka. Every transaction had happened in Mumbai and therefore, it is only the office of the Enforcement Directorate at Mumbai that would get jurisdiction to enquire into the offences under the Act. He would submit that the very provision of the statute makes it unequivocally clear that the 5 ED, Zonal Office, Bangalore cannot proceed against the petitioners.

He would seek to place reliance on the judgment of the Apex Court in the case of VIJAY MADANLAL CHOUDHARY AND OTHERS v.

UNION OF INDIA AND OTHERS1 to buttress his submission that the offence under the Act is a standalone and independent offence and, therefore, it has to be initiated only where the ingredients of Section 3 have happened and not elsewhere and would seek quashment of the entire proceedings.

6. On the other hand, the learned counsel for the ED would refute the submissions to contend that the ECIR cannot be registered until a FIR is registered under the scheduled offence/ predicate offence. Without that there cannot be a proceeding under the Act. Admittedly, the crime is registered and charge sheet is filed in the jurisdictional Court at Hubballi. Therefore, the Zonal Office, Bangalore alone is competent to enquire into the allegations under the Act as the two are inter-linked and would seek dismissal of the petition.

2022 SCC OnLine SC 929 6

7. I have given my anxious consideration to the submissions made by the respective learned counsel and perused the material on record.

8. The petitioners and the complainant/Sanjay Ghodawat were acquaintances. Certain transactions have happened between the two with regard to real estate. Based upon several allegations on the said transactions, multiple complaints come to be registered against the petitioners between June and October, 2018 in Crime Nos. 23 to 25, 27 to 30 and 45 of 2018. The petitioners called in question registration of multiple FIRs in certain proceedings before the Dharwad Bench of this Court. This Court quashed all the FIRs on the ground that it would amount to multiple of FIRs and directed all other crimes be treated as additional charge sheets in Crime No.23 of 2018. The CID to whom the investigation was entrusted, filed a charge sheet against the petitioners in Crime No.23 of 2018 for offences punishable under Sections 409, 411 and 420 read with Sections 34 and 37 of the IPC. The concerned Court has taken cognizance of the said offences against the petitioners on 09-09- 2022. After the concerned Court taking cognizance against the 7 petitioners for the aforesaid offences, the respondent/ED institutes certain proceedings in ECIR/BGZO/85/2022. Summons were issued to several of the accused in the said ECIR and not to the petitioners. On an apprehension that the petitioners would also be issued summons and coercive action would be taken against them, the petitioners have knocked at the doors of this Court in the subject petition.

9. As observed hereinabove, the contention of the learned counsel for the petitioners is that the Bangalore Zonal Office which had registered the crime and now wanting to issue summons has no jurisdiction to initiate proceedings at Bangalore. The plea of want of jurisdiction is raised on the ground that none of the transactions have happened in Bangalore and in terms of Section 3 of the Act, it is only the office within whose jurisdiction the transactions have happened would get power to initiate proceedings and issue summons in furtherance of registration of such crime.

Since emphasis is placed upon the provisions of the Act to contend that the ED had no jurisdiction, it is germane to notice the provisions of the Act themselves. Section 2(1)(p) of the Act defines 8 what is money laundering. Money laundering in terms of Section 2(1)(p) is as obtaining under Section 3. Section 3 reads as follows:

"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 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;

(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."

Chapter-II begins with Section 3 which deals with money laundering. Whosoever directly or indirectly attempts to indulge or 9 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 tainted property would be guilty of offence of money laundering. Therefore, the offence of money laundering would be against any person who is involved in any process of activity connected with the proceeds of crime. The soul of crime is proceeds of crime. The proceeds of crime cannot spring from thin air. The proceeds of crime is to be based on registration of crime. Therefore, the offence of money laundering though is independent and standalone offence cannot be initiated without the foundation of registration of a crime and it is proceeds of crime.

10. In the case at hand, not one but several crimes were registered and what remains now is crime No.23 of 2018 in which the CID has filed a charge sheet on 09-09-2022 and the Court has taken cognizance for the aforesaid offences. Therefore, the foundation is satisfied. There is a crime registered against the petitioners and that crime is registered at Hubballi. Cognizance on the charge sheet is taken at Hubballi. The crime that is registered 10 at Hubballi involves several transactions between the complainant and the petitioners. Therefore, the Enforcement Directorate registers ECIR in Karnataka at the Bangalore Zonal office. If there was no crime registered in Karnataka, the submission of the learned counsel for the petitioners that the proceeding suffers from want of territorial jurisdiction would have become acceptable as without the FIR, ECIR cannot exist.

11. In the event the concerned Court hearing the offence under the IPC would consider and accept the submission of the learned counsel for the petitioners that the very proceeding under the IPC even suffers from want of territorial jurisdiction and had to be transferred to Mumbai, the present impugned proceedings would, without doubt, follow the said order inasmuch as, the present proceeding also will have to be transferred to Mumbai as they are intertwined. Mere depiction of it being a standalone offence would not mean that it can exist without a FIR being registered for the predicate offence under any provision of law. Registration of crime is sine qua non for registration of ECIR. Therefore, where the 11 crime is registered, it is only the said place would become the territory for the Enforcement Directorate to initiate its proceedings.

12. Much reliance is placed upon the judgment of the Apex Court in the case of VIJAY MADANLAL CHOUDHARY (supra) with particular reference to Paragraphs 263, 269 and 270 where the Apex Court considers Section 3 of the Act. Paragraphs 263, 269 and 270 in VIJAY MADANLAL CHOUDHARY's case read 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 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-

(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.

... ... ...

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 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."

There can be no qualm about what is observed by the Apex Court, but the Apex Court did not consider territorial jurisdiction under which an ECIR can be registered. The conclusion of the Apex Court is what answers the issue. The Apex Court at paragraph 467 draws up its conclusions for the preceding findings rendered by it. They read as follows:

"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.

(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 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 16 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 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 unreasonable-ness.

(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.

(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) 19 Clause (v)(a) supra clarifies what are proceeds of crime. Clause

(v)(d) is what forms the fulcrum of the entire analysis. Clause

(v)(d) again observes that the offence under Section 3 of the Act is dependent on illegal gain of property as a result of criminal activity relating to a scheduled offence. Therefore, the Apex Court clearly holds that the foundation for registration of an ECIR is criminal activity in a scheduled offence. It is concerning the process or activity connected with such property that constitutes the offence of money laundering. The Apex Court establishes the connection between the predicate offence and the offence under the Act. It is further observed that the authorities under the Act cannot prosecute any person on notional basis, unless a scheduled offence is committed and such an offence is registered with the jurisdictional Police and is pending enquiry/trial by way of criminal complaint before any competent forum. Therefore, the connection is further strengthened.

13. The Apex Court mandates that there should be a crime registered before the jurisdictional police; it should be pending inquiry or trial as a result of a criminal complaint before the 20 competent forum. Therefore, unless the accused is involved in a criminal activity and that criminal activity has been registered by way of a FIR before the jurisdictional police and is pending trial before the competent forum, the ED cannot initiate proceedings on a notional basis or assumption of any scheduled offence. Therefore, the offences under Section 3 are intertwined with the scheduled offence under any enactment. The said conclusion further vindicates the aforesaid interpretation. If a person is finally discharged or acquitted of the scheduled offence or the proceedings are quashed by a court of competent jurisdiction, offence of money-laundering against him cannot continue. The offence of money laundering can be subsisting as long as the proceedings for the scheduled offences would continue; they are co-terminus. If the criminal activity gets terminated by any of the three modes supra, the offence under the Act will get vanished. The aforesaid finding of the Apex Court establishes a clear link between the two. If the criminal activity is alleged within the jurisdiction of Hubballi, the Enforcement Directorate cannot initiate its proceedings at Mumbai, as the link between the two has to be within the State of Karnataka. It would have been an altogether different circumstance if the proceedings in 21 Crime No.23 of 2018 had been transferred to Mumbai; it is not so in the case at hand. Therefore, the contention of the petitioners that Section 3 mandates that crime should be registered where the ingredients of Section 3 have happened is unacceptable as it is fundamentally flawed.

14. In somewhat similar circumstance, the Apex Court in the case of RANA AYYUB v. DIRECTORATE OF ENFORCEMENT2 rendered on 07-02-2023 has considered this issue. Rana Ayyub, the petitioner therein in a petition under Article 32 of the Constitution of India challenged summons issued by the ED and on considering the contentions therein, the Apex Court formulates issues at paragraph 16 and answers them thereon. The Apex Court holds as follows:

"16. From the rival contentions, it appears that two questions arise for consideration before us. They are (i) whether the trial of the offence of money-laundering should follow the trial of the scheduled/predicate offence or vice versa; and (ii) whether the Court of the Special Judge, Anti- Corruption, CBI Court No. 1, Ghaziabad, can be said to have exercised extra-territorial jurisdiction, even though the offence alleged, was not committed within the jurisdiction of the said Court.

2023 SCC OnLine 109 22

17. In order to find an answer to question No. 1, it is necessary for us to take note of a few provisions of the PMLA.

18. The word "money-laundering" is defined in Section 2(1)(p) of the Act to have the same meaning as assigned to it in Section 3. Section 3 of the Act makes a person guilty of the offence of money-laundering, if he (i) directly or indirectly attempts to indulge; or (ii) knowingly assists or; (iii) knowingly is a party; or (iv) is actually involved in any process or activity. Such process or activity should be connected to 'proceeds of crime' including its concealment or possession or acquisition or use. In addition, a person involved in such process or activity connected to proceeds of crime, should be projecting or claiming it as untainted property. The Explanation under Section 3 makes it clear that even if the involvement is in one or more of the following activities or processes, namely, (i) concealment;

(ii) possession; (iii) acquisition; (iv) use; (v) projecting it as untainted property; or (vi) claiming it as untainted property, the offence of money-laundering will be made out.

19. Thus, Section 3 comprises of two essential limbs, namely, (i) involvement in any process or activity;

and (ii) connection of such process or activity to the proceeds of crime. The expression "proceeds of crime" is defined in Section 2(1)(u) to mean 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 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.

20. PMLA provides for a two-pronged approach, one for dealing with the proceeds of crime and the other for dealing with the person guilty of the offence of money-laundering. While Chapter III and Chapter VI prescribe the procedure for dealing with the proceeds of crime, through a process of attachment, confirmation through adjudication and an appellate remedy to the Special Tribunal, Chapter VII deals with the prosecution of the money launderers by Special Courts.

21. Section 43(1) of the Act provides for the constitution of Special Courts, by the Central Government, in consultation with the Chief Justice of the High Court. Sub-section (2) of 23 Section 43 empowers a Special Court constituted under Section 43(1), also to try an offence other than the offence punishable under Section 4 of the PMLA, with which the accused may be charged at the same trial under the Cr. P.C. In other words, a Special Court is constituted under Section 43(1) primarily for the purpose of trying an offence punishable under Section 4. But sub-section (2) of Section 43 confers an additional jurisdiction upon such a Special Court to try any other offence with which the accused may be charged at the same trial. Section 43 reads as follows:--

"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 Criminal Procedure Code, 1973 (2 of 1974), be charged at the same trial."

22. Section 44 deals with the question of territorial jurisdiction of the Special Court, constituted under Section 43(1). At the outset, Section 44(1) takes note of two different contingencies, namely, (i) cases where the scheduled offence as well as the offence of money-laundering are committed within the territorial jurisdiction of the same Special Court constituted under Section 43(1); and (ii) cases where the Court which has taken cognizance of the scheduled offence, is other than the Special Court which has taken cognizance of the complaint of the offence of money-laundering. Section 44(1) reads as follows:

"44. Offences triable by Special Courts.-- (1) Notwithstanding anything contained in the Criminal Procedure Code, 1973 (2 of 1974),--

(a) an offence punishable under section 4 and any scheduled offence connected to the offence under that section shall be triable by the Special Court constituted for the area in which the offence has been committed:

Provided that the Special Court, trying a scheduled offence before the commencement of this Act, shall continue to try such scheduled offence; or;

(b) a Special Court may, upon a complaint made by an authority authorised in this behalf under this Act take cognizance of offence under section 3, without the accused being committed to it for trial;

Provided that after conclusion of investigation, if no offence of money-laundering is made out requiring filing of such complaint, the said authority shall submit a closure report before the Special Court; or

(c) if the court which has taken cognizance of the scheduled offence is other than the Special Court which has taken cognizance of the complaint of the offence of money-laundering under sub-clause (b), it shall, on an application by the authority authorised to file a complaint under this Act, commit the case relating to the scheduled offence to the Special Court and the Special Court shall, on receipt of such case proceed to deal with it from the stage at which it is committed.

(d) a Special Court while trying the scheduled offence or the offence of money-laundering shall hold trial in accordance with the provisions of the Criminal Procedure Code, 1973 (2 of 1974), as it applies to a trial before a Court of Session.

Explanation.--For the removal of doubts, it is clarified that,--

(i) the jurisdiction of the Special Court while dealing with the offence under this Act, during investigation, enquiry or trial under this Act, shall not be dependent upon any orders passed in respect of the scheduled offence, and the trial of both sets of offences by the same court shall not be construed as joint trial;

(ii) the complaint shall be deemed to include any subsequent complaint in respect of further investigation that may be conducted to bring any further evidence, oral or documentary, against any accused person involved in respect of the offence, for which complaint has already been filed, whether named in the original complaint or not."

23. What is dealt with by Section 44(1)(a) is a situation where there is no complication. Section 44(1)(a) lays down the most fundamental rule relating to territorial jurisdiction, by providing that an offence punishable under Section 4 of the PMLA and any scheduled offence connected to the same shall be triable by the Special Court constituted for the area in which the offence has been committed. It is relevant to note that Section 44(1)(a) uses the expression "offence" in three places in contradistinction to the expression "scheduled offence" used only once. This usage is not without significance. In all three places where the word "offence" alone is used, it connotes the offence of money- laundering. The place where the expression "scheduled offence" is used, it connotes the predicate offence. By prescribing that an offence punishable under Section 4 of the PMLA and any scheduled offence connected to the same shall be triable by the Special Court constituted for the area in which "the offence" has been committed, Section 44(1)(a) makes it crystal clear that it is the Special Court constituted under Section 43(1), which will be empowered to try even the scheduled offence connected to the same.

24. After mapping out/laying down such a general but fundamental rule, the Act then proceeds to deal with a more complicated situation in Section 44(1)(c). The question as to what happens if the Court which has taken cognizance of the scheduled offence is other than the Special Court which has taken cognizance of the offence of money-laundering, is what is sought to be answered by clause (c) of sub-section (1) of Section 44. If the Court which has taken cognizance of the scheduled offence is different from the Special Court which has taken cognizance of the offence of money-laundering, then the authority authorised to file a complaint under PMLA should make an application to the Court which has taken cognizance of the scheduled offence. On the application so filed, the Court which has taken cognizance of the scheduled offence, should commit the case relating to the scheduled offence to the Special Court which has taken cognizance of the complaint of money- laundering.

25. Therefore, it is clear that the trial of the scheduled offence should take place in the Special Court which has taken cognizance of the offence of money- laundering. In other words, the trial of the scheduled offence, insofar as the question of territorial jurisdiction is concerned, should follow the trial of the offence of money-laundering and not vice versa.

26. Since the Act contemplates the trial of the scheduled offence and the trial of the offence of money-laundering to take place only before the Special Court constituted under Section 43(1), a doubt is prone to arise as to whether all the offences are to be tried together. This doubt is sought to be removed by Explanation (i) to Section 44(1). Explanation (i) clarifies that the trial of both sets of offences by the same Court shall not be construed as joint trial.

27. A careful dissection of clauses (a) and (c) of sub- section (1) of Section 44 shows that they confer primacy upon the Special Court constituted under Section 43(1) of the PMLA. These two clauses contain two Rules, namely, (i) that the offence punishable under the PMLA as well as a scheduled offence connected to the same shall be triable by the Special Court constituted for the area in which the offence of money-

laundering has been committed; and (ii) that if cognizance has been taken by one Court, in respect of the scheduled offence and cognizance has been taken in respect of the offence of money-laundering by the Special Court, the Court trying the scheduled offence shall commit it to the Special Court trying the offence of money-laundering.

28. It is only because of the Special Court constituted under Section 43(1) being conferred primacy that Section 44(1) begins with the words "notwithstanding anything contained in the Code of Criminal Procedure". Though the PMLA contains a non-obstante clause in relation to the Cr. P.C., both in Section 44(1) and in Section 45(1), there are two other provisions where the Code of Criminal Procedure is specifically declared to apply to the proceedings before a Special Court. Section 46(1) specifically makes the provisions of the Cr. P.C. applicable to proceedings before a Special Court. Similarly, Section 65 of the PMLA makes the provisions of Cr. P.C. apply to arrest, search and seizure, attachment, confiscation, investigation, prosecution and all other proceedings under the Act.

29. Therefore, it is clear that the provisions of the Cr. P.C. are applicable to all proceedings under the Act including proceedings before the Special Court, except to the extent they are specifically excluded. Hence, Section 71 of the PMLA providing an overriding effect, has to be construed in tune with Section 46(1) and Section 65.

30. Having taken note of the relevant provisions of the PMLA, which have a bearing upon the jurisdiction of the Special Court, let us now turn our attention to some of the provisions of the Cr. P.C., which deal with the question of territorial jurisdiction.

31. As pointed out by this Court in Kaushik 5 Chatterjee v. State of Haryana , the question of territorial jurisdiction in criminal cases revolves around, (i) place of commission of the offence; or (ii) place where the consequence of an act, both of which constitute an offence, ensues; or (iii) place where the accused was found; or (iv) place where the victim was found; or (v) place where the property in respect of which the offence was committed, was found; or (vi) place 28 where the property forming the subject-matter of an offence was required to be returned or accounted for, etc., according as the case may be.

32. As articulated in Kaushik Chatterjee (supra), the jurisdiction of a civil court is limited by territorial as well as pecuniary limits, but the jurisdiction of a criminal court is determined by (i) the offence; and/or (ii) the offender.

33. The discussion on the question of territorial jurisdiction in terms of the provisions of the Cr. P.C. can be cut short by extracting the principles culled out in paragraphs 19 to 21 of the decision in Kaushik Chatterjee. They read as follows:

"19. Chapter XIII of the Criminal Procedure Code, 1973 contains provisions relating to jurisdiction of criminal courts in inquiries and trials. The Code maintains a distinction between (i) inquiry; (ii) investigation; and (iii) trial. The words "inquiry" and "investigation" are defined respectively, in clauses

(g) and (h) of Section 2 of the Code.

20. The principles laid down in Sections 177 to 184 of the Code (contained in Chapter XIII) regarding the jurisdiction of criminal courts in inquiries and trials can be summarised in simple terms as follows:

20.1. Every offence should ordinarily be inquired into and tried by a court within whose local jurisdiction it was committed. This rule is found in Section 177. The expression "local jurisdiction" found in Section 177 is defined in Section 2(j) to mean "in relation to a court or Magistrate, means the local area within which the court or Magistrate may exercise all or any of its or his powers under the Code".

20.2. In case of uncertainty about the place in which, among the several local areas, an offence was committed, the Court having jurisdiction over any of such local areas may inquire into or try such an offence.

20.3. Where an offence is committed partly in one area and partly in another, it may be inquired into or tried by a court having jurisdiction over any of such local areas.

20.4. In the case of a continuing offence which is committed in more local areas than one, it may be inquired into or tried by a court having jurisdiction over any of such local areas.

20.5. Where an offence consists of several acts done in different local areas it may be inquired into or tried by a court having jurisdiction over any of such local areas. (Numbers 2 to 5 are traceable to Section 178) 20.6. Where something is an offence by reason of the act done, as well as the consequence that ensued, then the offence may be inquired into or tried by a court within whose local jurisdiction either the act was done or the consequence ensued. (Section 179) 20.7. In cases where an act is an offence, by reason of its relation to any other act which is also an offence, then the first mentioned offence may be inquired into or tried by a court within whose local jurisdiction either of the acts was done. (Section 180) 20.8. In certain cases such as dacoity, dacoity with murder, escaping from custody, etc., the offence may be inquired into and tried by a court within whose local jurisdiction either the offence was committed or the accused person was found.

20.9. In the case of an offence of kidnapping or abduction, it may be inquired into or tried by a court within whose local jurisdiction the person was kidnapped or conveyed or concealed or detained.

20.10. The offences of theft, extortion or robbery may be inquired into or tried by a court within whose local jurisdiction, the offence was committed or the stolen property was possessed, received or retained.

20.11. An offence of criminal misappropriation or criminal breach of trust may be inquired into or tried by a court within whose local jurisdiction the offence was committed or any part of the property was received or 30 retained or was required to be returned or accounted for by the accused person.

20.12. An offence which includes the possession of stolen property, may be inquired into or tried by a court within whose local jurisdiction the offence was committed or the stolen property was possessed by any person, having knowledge that it is stolen property. (Nos. 8 to 12 are found in Section 181) 20.13. An offence which includes cheating, if committed by means of letters or telecommunication messages, may be inquired into or tried by any court within whose local jurisdiction such letters or messages were sent or received.

20.14. An offence of cheating and dishonestly inducing delivery of the property may be inquired into or tried by a court within whose local jurisdiction the property was delivered by the person deceived or was received by the accused person.

20.15. Some offences relating to marriage such as Section 494 IPC (marrying again during the lifetime of husband or wife) and Section 495 IPC (committing the offence under Section 494 with concealment of former marriage) may be inquired into or tried by a court within whose local jurisdiction the offence was committed or the offender last resided with the spouse by the first marriage. (Nos. 13 to 15 are found in Section 182) 20.16. An offence committed in the course of a journey or voyage may be inquired into or tried by a court through or into whose local jurisdiction that person or thing passed in the course of that journey or voyage. (Section 183).

20.17. Cases falling under Section 219 (three offences of the same kind committed within a space of twelve months whether in respect of the same person or not), cases falling under Section 220 (commission of more offences than one, in one series of acts committed together as to form the same transaction) and cases falling under Section 221, (where it is doubtful what 31 offences have been committed), may be inquired into or tried by any court competent to inquire into or try any of the offences. (Section 184).

21. Apart from Sections 177 to 184, which lay down in elaborate detail, the rules relating to jurisdiction, Chapter XIII of the Code also contains a few other sections. Section 185 empowers the State Government to order any case or class of cases committed for trial in any district, to be tried in any Sessions Division. Section 186 empowers the High Court, in case where two or more courts have taken cognizance of the same offence and a question as to which of them should inquire into or try the offence has arisen, to decide the district where the inquiry or trial shall take place. Section 187 speaks of the powers of the Magistrate, in case where a person within his local jurisdiction, has committed an offence outside his jurisdiction, but the same cannot be inquired into or tried within such jurisdiction. Sections 188 and 189 deal with offences committed outside India."

34. It may be seen from the principles culled out from Sections 177 to 184 of the Cr. P.C. that almost all contingencies that are likely to arise have been carefully thought out and laid down in these provisions.

35. The only contingency that could not have been provided in the above provisions of the Cr. P.C., is perhaps where the offence of money-laundering is committed. This is why Section 44(1) begins with a non-obstante clause. The whole picture is thus complete with a combined reading of Section 44 of the PMLA and the provisions of Sections 177 to 184 of the Cr. P.C."

(Emphasis supplied) The aforesaid judgment of the Apex Court has set at rest the controversy.

15. If the case at hand is considered on the bedrock of the principles laid down by the Apex Court in VIJAY MADANLAL CHOUDHARY and RANA AYYUB (supra) what would unmistakably emerge is that the Zonal office at Bangalore of the ED does have the jurisdiction to initiate proceedings and take the issue under the Act to its logical conclusion. No fault can be found with the ED initiating proceedings or continuing the process against the petitioners.

16. In the result, the petition lacking in merit stands rejected and the interim protection granted stands dissolved.

Consequently, I.A.No.1 of 2023 also stands disposed.

Sd/-

JUDGE bkp CT:MJ

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