COMPLAINT AGAINST GOVERNMENT OFFICIALS UNDER PREVENTION OF MONEY LAUNDERING ACT, 2002

[DR.MARIAPPAN GOVINDARAJAN]

In DIRECTORATE OF ENFORCEMENT VERSUS BIBHU PRASAD ACHARYA, ETC. - 2024 (11) TMI 296 - SUPREME COURT, the Directorate of Enforcement filed complaints against two persons viz., Bibhu Prasad Acharya and Adityanath Das under Section 44(1)(b) of the Prevention of Money Laundering Act, 2002 (‘Act’ for short) for committing and offence under Section 3 the Act, punishable under Section 4 of the Act. 

Section 3 of the Act provides that 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. Section 4 of the Act provides punishment for committing an offence under Section 3 of the Act.  Section 4 provides that whoever commits the offence of money-laundering shall be punishable with rigorous imprisonment for a term which shall not be less than three years but which may extend to seven years and shall also be liable to fine.

The Special Court took cognizance of the complaints filed by the Directorate of Enforcement.  On the basis of the complaints the Special Court issued notices to the accused persons.  Both the accused persons filed a writ petition before the High Court challenging the cognizance taken by the Special Court.  The petitioners prayed the High Court to quash the complaints on the ground that both of them are government servants.  Without getting permission under Section 197(1) of Code of Criminal Procedure, 1973 (‘Cr.PC’ for short) the complaints could not be filed against them.  The High Court quashed the complaints taking cognizance by the Special Court, holding that prior permission under Section 197(1) of the Cr.PC. 

The Directorate of Enforcement filed appeals before the Supreme Court against the order of the High Court.  The appellant Department submitted the following before the Supreme Court-

• Section 71 of the Act provides that the provisions thereof have an overriding effect over the provisions of the other statutes, including the CrPC.
• The requirement of obtaining a sanction under Section 197(1) of CrPC will be inconsistent with the provisions of the Act.
• At the relevant time the first respondent was the Vice Chairman and Managing Director of Andhra Pradesh Industrial Infrastructure Corporation Limited.
• He was  not a public servant under Section 197(1) of Cr.PC as he was not removable from the office save by or with the sanction of the Government.
• He was not employed in connection with the affairs of the State Government at the time of the commission of the offence.
• the issue of the requirement of sanction will have to be decided at the time of the trial.
• The respondents’ act of money laundering cannot be considered to have been done in the discharge of their official duties.

The respondents submitted the following before the Supreme Court-

• The Memorandum of Association and Articles of Association of the Corporation provides that the power to appoint a Director of the Corporation and power to remove him vested in the State Government.
• Therefore, the first respondent continued to be a public servant as contemplated by Section 197(1) of CrPC.
• The plea of absence of sanction can be raised at any stage of the proceedings, and it is not necessary to wait till the final hearing of the complaint.

The Supreme Court considered the submissions of both the Department and the respondents.  The Supreme Court analysed the provisions of Section 197(1) of Cr.PC.  The object of the said section is to protect the public servants from prosecutions and are not prosecuted for anything they do in the discharge of their duties.  However, this protection is not unqualified.  They can be prosecuted with a previous sanction from the appropriate government.            

The Supreme Court relied on its own judgments in the following cases-

• CENTER FOR PUBLIC INTEREST LITIGATION AND ANR VERSUS U.O.I. & ANR - 2005 (10) TMI 530 - SUPREME COURT;
• PARKASH SINGH BADAL AND ANR. VERSUS STATE OF PUNJAB AND ORS. - 2006 (12) TMI 548 - SUPREME COURT.

In the former case the Supreme Court held that before Section 197 can be invoked, it must be shown that the official concerned was accused of an offence alleged to have been committed by him while acting or purporting to act in the discharge of his official duties.  One safe and sure test in this regard would be to consider if the omission or neglect on the part of the public servant to commit the act complained of could have made him answerable for a charge of dereliction of his official duty. If the answer to this question is in the affirmative, it may be said that such act was committed by the public servant while acting in the discharge of his official duty and there was every connection with the act complained of and the official duty of the public servant.

In the second case, the Supreme Court observed that the question relating to the need of sanction under Section 197 of the Code is not necessarily to be considered as soon as the complaint is lodged and, on the allegations, contained therein. This question may arise at any stage of the proceeding. The question whether sanction is necessary or not may have to be determined from stage to stage. 

The Supreme Court observed that in this case the Special Court took cognizance on the exhaustive complaints and therefore the question of requiring previous sanction is highly required to be considered.  The first respondent is a civil servant on deputation.  The second respondent is working as Principal Secretary, I&CAD Department of the Government of Andhra Pradesh, removable from his office by or with the sanction of the Government.  Clause 71(b) of the Memorandum provides that the Government shall have the power to remove any Director, including the Chairman, Vice Chairman and Managing Director.  Therefore, at the relevant time, the State Government had the power to remove the first respondent from the post of Vice Chairman and Managing Director of the Corporation.

There are two conditions for the applicability of Section 197(1) of the Cr.PC. as detailed below-

• the accused must be a public servant removable from his office by or with the government's sanction.
• The offence alleged to have been committed by the public servant while acting or purporting to act in the discharge of his duty.

The first condition is satisfied in the case of both the respondents as they are civil servants.  The allegation against the first respondent is that he was indirectly involved in the offence of money laundering by knowingly assisting  Indu group of companies in the creation of vast proceeds of crime.   The allegation against the second respondent is that conspiracy with Shri Y.S.Jagan Mohan Reddy, he extended favour to India Cement Limited by allotting an additional 10 lakh litres of water from River Kagna without referring the matter to  Interstate Water Resources Authority and by violating the existing norms, regulations and procedures.  Therefore, the Supreme Court considered that there is no embargo on considering the plea of absence of sanction, after cognizance is taken by the Special Court of the offences punishable under Section 4 of the Act.  The case of both respondents, the acts alleged against them are related to the discharge of the duties entrusted to them.   Thus, the second condition for the applicability of Section 197(1) also stands satisfied.  Therefore, in this case prior sanction is required to file complaints against the respondents.   The provisions of Section 197(1) of CrPC are applicable to a complaint under Section 44(1)(b) of the Act.

Those provisions of CrPC which apply to the PMLA by virtue of Section 65 will continue to apply to the PMLA, notwithstanding Section 71. If Section 71 is held applicable to such provisions of the CrPC, which apply to the PMLA by virtue of Section 65, such interpretation will render Section 65 otiose. No law can be interpreted in a manner which will render any of its provisions redundant.

The Supreme Court dismissed the appeal filed by the Enforcement Department.  The Supreme Court held that it will be open for the appellant to move the Special Court to take cognizance of the offence against the two respondents if a sanction under Section 197(1) of CrPC is granted in future.