2024 (11) TMI 296 - SC - Money Laundering

Requirement of prior sanction under Section 197(1) of the Code of Criminal Procedure, 1973 (CrPC) for prosecuting the respondents, who are public servants, under the Prevention of Money Laundering Act, 2002 (PMLA) - HELD THAT - The allegation against the second respondent is of allocating an additional 10 lakh litres of water to India Cement Ltd. Taking the averments made in the complaint against him as it is, the act alleged against him has been committed by him while purporting to act in the discharge of his official duties. The allegation against the first respondent is of the allotment of land measuring 250 acres to M/s. Indu Tech Zone Private Ltd. Taking the averments made in the complaint as correct, the act alleged against him has been done by him purporting to act in the discharge of his official duties. In the case of both respondents, the acts alleged against them are related to the discharge of the duties entrusted to them. It is not even the allegation in the complaints that the two respondents were not empowered to do the acts they have done. There is a connection between their duties and the acts complained of. The second condition for the applicability of Section 197(1) also stands satisfied, and therefore, in this case, Section 197(1) of CrPC applies to the respondents, assuming that Section 197(1) of CrPC applies to the proceedings under the PMLA. Considering the object of Section 197(1) of the CrPC, its applicability cannot be excluded unless there is any provision in the PMLA which is inconsistent with Section 197(1) - the provisions of Section 197(1) of CrPC are applicable to a complaint under Section 44(1)(b) of the PMLA. Section 71 gives an overriding effect to the provisions of the PMLA notwithstanding anything inconsistent therewith contained in any other law for the time being in force. Section 65 is a prior section which specifically makes the provisions of the CrPC applicable to PMLA, subject to the condition that only those provisions of the CrPC will apply which are not inconsistent with the provisions of the PMLA. Therefore, when a particular provision of CrPC applies to proceedings under the PMLA by virtue of Section 65 of the PMLA, Section 71 (1) cannot override the provision of CrPC which applies to the PMLA. In this case, the cognizance of the offence under Section 3, punishable under Section 4 of the PMLA, has been taken against the respondents accused without obtaining previous sanction under Section 197(1) of CrPC. Therefore, the view taken by the High Court is correct - The order of cognizance against the other accused will remain unaffected - Appeal dismissed.

Summary

Issues Involved:
1. Whether prior sanction under Section 197(1) of the Code of Criminal Procedure, 1973 (CrPC) is required for prosecuting the respondents, who are public servants, under the Prevention of Money Laundering Act, 2002 (PMLA).
2. Whether the provisions of the CrPC, specifically Section 197(1), apply to proceedings under the PMLA.
3. The interpretation of Sections 65 and 71 of the PMLA concerning the applicability of CrPC provisions.

Issue-wise Detailed Analysis:

1. Requirement of Prior Sanction under Section 197(1) of CrPC:

The central issue was whether the prosecution of the respondents, who were public servants, required prior sanction under Section 197(1) of CrPC. The respondents argued that they were public servants and, therefore, the Special Court's cognizance of the complaints against them was invalid without such sanction. The Court noted that Section 197(1) aims to protect public servants from frivolous prosecutions for acts done in the discharge of their official duties. It was emphasized that for Section 197(1) to apply, two conditions must be met: (a) the accused must be a public servant removable from office only by or with the sanction of the Government, and (b) the alleged offence must be related to the discharge of official duties. The Court found that both respondents met these conditions, as their alleged acts were connected to their official duties. Consequently, the Court upheld the High Court's decision that prior sanction was necessary.

2. Applicability of CrPC Provisions to PMLA Proceedings:

The Court examined whether the provisions of CrPC, particularly Section 197(1), apply to proceedings under the PMLA. Section 65 of the PMLA states that the provisions of the CrPC apply to PMLA proceedings unless inconsistent with PMLA provisions. The Court found no inconsistency between Section 197(1) of the CrPC and the PMLA. Therefore, it held that Section 197(1) applies to PMLA proceedings, meaning that prior sanction is required for prosecuting public servants under the PMLA.

3. Interpretation of Sections 65 and 71 of the PMLA:

The Court analyzed Sections 65 and 71 of the PMLA to determine their impact on the applicability of CrPC provisions. Section 65 allows CrPC provisions to apply to PMLA proceedings unless inconsistent, while Section 71 gives PMLA provisions an overriding effect over inconsistent laws. The Court concluded that Section 71 does not override CrPC provisions that are consistent with the PMLA, such as Section 197(1). It emphasized that interpreting Section 71 to override Section 197(1) would render Section 65 redundant, which is impermissible. Thus, the Court affirmed that Section 197(1) of CrPC is applicable to PMLA proceedings.

Conclusion:

The Supreme Court upheld the High Court's decision that cognizance of the complaints against the respondents was invalid without prior sanction under Section 197(1) of CrPC. The Court clarified that the Special Court's cognizance against other accused remains unaffected, and the appellant may seek cognizance against the respondents if future sanction is obtained. The appeals were dismissed, affirming the requirement of prior sanction for prosecuting public servants under the PMLA.