2016 (6) TMI 309 - HC - Money Laundering

Imports of Heavy Melting Scrap made by mis-declaring the relevant particulars to evade duty and prohibition - Constitutionality of vires of 2(y)(ii) of PMLA as amended vide section 145(ii) of the Finance Act, 2015 enhancing the monetary threshold for the offences specified under Part B of the Schedule from the total value involved in such offences from Rs. 30 lakhs or more to Rs. One crore or more - Two limitations in grant of bail imposed under Section 45(1) of PMLA are applicable in respect of all offence now falling under Part A of the Schedule to PMLA, after the amendment carried out in 2013 pursuant to proposal contained in Clause 33 of the Prevention of Money-Laundering (Amendment) Bill, 2011 whereby for the then existing Part A, a new Part A was proposed to be substituted, while omitting paragraphs 1 to 25 in the then existing Part B. Held that - the presumption of the petitioner that rigors in grant of Bail contained in Section 45(1) of PMLA extends to all the offences mentioned in such amended Part A is neither logical nor intended by the legislation. The offences which were in the earlier Part A of the Schedule (prior to 2013 Amendment) are evidently henious offences such as waging war against the country, offences under NDPS Act and Terrorist activities etc. Other scheduled offences, which prior to 2013 amendment were under Part B of the Schedule, cannot be equated with such heinous offences in the context of Section 45(1) of PMLA. Despite the above substantive amendment in the Schedule, we find no corresponding amendment simultaneously carried out in 2013, in Section 45(1), in respect of application of the limitations in grant of bail to person accused of Schedule offences earlier falling under Part B of the Schedule. We do not find any legislative intent from the perusal of the aforesaid Statement of Objects and Reasons as incorporated in the Prevention of Money-Laundering (Amendment) Bill, 2011 to apply such stringent limitations in grant of bail to person accused of Scheduled offences earlier falling under Part B of the Schedule, but now existing in Part A thereof. On the contrary, the only object sought to be achieved by the said 2013 amendment in Schedule was to overcome this monetary threshold limit of ₹ 30 lakhs so that for invocation of PMLA in respect of the laundering of proceeds of crime involved in offences earlier falling under Part B of the Schedule, there is no embargo of minimum value of ₹ 30 lacs. This 2013 amendment in Schedule carried out as proposed vide the Prevention of Money-Laundering (Amendment) Bill, 2011 was not intended to introduce a substantive amendment for creating an embargo on grant of bail to a person arrested under PMLA in respect of offences earlier falling under Part B of the Schedule. After having perused the Statement of Objects and Reasons as incorporated in the Prevention of Money- Laundering (Amendment) Bill, 2011 which led to 2013 amendment in Schedule, we are unable to agree with the petitioner that by necessary corollary of the aforesaid 2013 amendment, the stringent limitations in grant of bail were now made applicable to all scheduled offences which are punishable for more than three years and were put together in the new Part-A. Therefore, the reference to the offences under Part A of the Schedule in the context of Section 45 (1) requires to read down to apply only to those scheduled offences, which existed under the Part A of the Schedule prior to the said 2013 amendment in Schedule. Guided by the principles laid down by the Hon ble Supreme Court regarding statutory interpretation and the duty of the Court to secure the ends of justice, we have no hesitation in holding that in 2013, Part B of the Schedule was omitted and the Scheduled Offences falling thereunder were incorporated in Part A with the sole object to overcome the monetary threshold limit of ₹ 30 lakhs for invocation of PMLA in respect of the laundering of proceeds of crime involved in those offences. No substantive amendment was proposed with express intention to apply limitations on grant of bail as contained in Section 45(1) in respect of persons accused of such offences which were earlier listed in Part B. Therefore, twin limitations in grant of bail contained in Section 45(1) as it stands today, are not applicable qua a person accused of such offences which were earlier listed in Part B. If limitations in grant of bail under Section 45(1) of PMLA are sought to be applied to all those offences under the amended Part A which were earlier listed in Part B, it would offend Article 14 and 21 and would be contrary to the Statement of Objects and Reasons of the 2013 amendment in Schedule as incorporated in the Prevention of Money-Laundering (Amendment) Bill, 2011. We, therefore, in light of the Statement of Objects and Reasons as incorporated in the Prevention of Money-Laundering (Amendment) Bill, 2011 and the above discussion and findings, have no hesitation in holding that the reference to the offences under Part A of the Schedule in the context of Section 45(1) has to be necessarily read down to apply only to those persons who are arrested under Section 19 of PMLA on accusation of money laundering, who are accused of commission of scheduled offences which were listed under the Part A of the Schedule existing prior to 2013 amendment. In other words, the limitations in grant of bail under Section 45(1) of PMLA are not applicable to those persons who are arrested under PMLA on accusation of commission of such scheduled offences which were earlier listed under Part B of the Schedule (prior to amendment in Schedule carried out in 2013). Consequently, the provisions containing twin limitations in grant of bail under Section 45(1) would override the normal principles governing bail under Sections 438 and 439 qua the persons arrested on accusation of commission of such Scheduled Offences which were earlier listed under Part A of the Schedule. However, only the normal principles governing bail under Section 438 or 439 of the Code would apply in relation to a person arrested under PMLA on accusation of commission of such scheduled offences, which were earlier listed under Part B of the Schedule. Seeking direction for investigation of offence under Section 3 r/w 4 of PMA along with the offence under Customs Act - Held that - after perusing both the Acts, no specific provision found which completely overrides in this regard the provisions of Sections 200, 156(3) and 155(2) of the Code. Both the Acts however create a bar on taking cognizance vide section 137(1) of the Customs Act,1962 and second proviso to Section 45(1) of PMLA. As per the decision of Hon ble Supreme Court in the case of Directorate of Enforcement v. Deepak Mahajan 1994 (1) TMI 87 - SUPREME COURT OF INDIA , if any special procedure is prescribed under any provision of PMLA or Customs Act, 1962 which is in conflict with the provisions of the Code, such provision of PMLA or Customs Act, 1962 would have overriding effect on the conflicting provision of the Code. If there is no such overriding provision in these special statutes, the provisions contained in the Code would surely apply in view of section 4(2) read with section 5 of the Code. By application of Section 4(2) of the Code and in view of the aforesaid binding precedents, the words police officer appearing in these definitions would be read as officer authorized under the Customs Act, 1962 . Thus, in a cognizable offence under Customs Act, 1962 the Customs Officer would have power to arrest under Section 104(1) without a warrant. He would comply with provisions of Sections 154 to 157 by recording the information and sending forthwith a copy of the Report under Section 157 to the jurisdictional Magistrate. But in a non-cognizable offence under the Act, he would have to obtain from jurisdictional Magistrate permission to investigate and a warrant of arrest under Section 104(1) of the Act. In the Customs Act, 1962 the Chapter XIII-Searches, Seizure and Arrest , from Section 100 to 110A, uses the words Customs officer or proper officer or adjudicating authority . Therefore, no police officer can commence investigation, carry search, investigate, arrest , or grant provisional release of seized goods under the Customs Act, 1962, unless authorized under the Act in this behalf. In the context of the provisions of the said Chapter XIII-Searches, Seizure and Arrest , from Section 100 to 110 A, the provisions of the Code would be applicable only to the extent there is nothing inconsistent therewith in the Act. There are certain provisions under the Customs Act, 1962 which override the provisions of the Code such as Section 135-B, 137, 138 and 140A. So far as approaching a Magistrate and seeking directions for investigations into any offence under Customs Act, 1962 by any officer authorised under the said Act is concerned, there is no bar and the Magistrate may direct such investigations under Section 155(2) or 156(3) depending upon whether the alleged offence under Customs Act, 1962 in the complaint is cognizable or non-cognizable . However, the Magistrate cannot take cognizance of the offence unless the conditions specified in the overriding provisions of Section 137(1) or 137(2) are satisfied. Once such directions are issued by the Court, the officer authorised under the said act will follow the procedure specified under the Customs Act, 1962, Rules made thereunder and all those provisions of the Code for which there is no inconsistent provision in the Act. In PMLA, the position would be slightly different than Customs Act, 1962, although the principles governing the application of the procedure prescribed under the Code would remain the same. The offence of Money Laundering punishable under Section 4 is defined in Section 3. As per the said Section 3, the offence of money laundering necessarily requires knowingly projecting or claiming any proceeds of crime as untainted property. The property covered under the term proceeds of crime is defined in section 2(u) of PMLA, and the accused person shall necessarily derive or obtain such property, directly or indirectly as a result of criminal activity relating to such offence which is specified in the Schedule to PMLA. Therefore, any property derived or obtained, directly or indirectly as a result of any criminal activity relating only to such offence which is not specified in the Schedule to PMLA, would not be covered under the term proceeds of crime for the purpose of PMLA. Consequently, for invocation of section 3 against any person it is necessary that firstly there shall be such proceeds of crime , and secondly such person shall knowingly project or claim such proceeds of crime as untainted property. For conducting search or seizure under Section 17 or 18 of PMLA, the first proviso to sub-Section (1) of Section 17 and also of Section 18, create an embargo and bars such search unless in relation to the Scheduled Offence, either a report under Section 157 of the Code is forwarded to a Magistrate, or a complaint has been filed for taking cognizance by an officer authorised to investigate Scheduled Offence or other conditions specified are fulfilled. Therefore, so far as PMLA is concerned there is a bar on taking cognizance of any offence punishable under Section 4 except upon a complaint in writing, that too, by the specified officers only. In PMLA there is no question of filing a report under Section 173 for proceeding against the accused, and only if no case is made out after investigations, a closure report would have to be filed under Section 173. Merely on receipt of a complaint of money laundering from a private individual, the investigations cannot be directed by a Court or commenced by an authority under PMLA, unless the Scheduled Offence is registered under Section 154 and a report thereof is sent under Section 157 of the Code to the Magistrate, or, a complaint is filed for taking cognizance of a Scheduled Offence by an officer authorised to investigate Scheduled Offence. Further, cognizance of offence under PMLA can be taken only by a Special Court notified and designated under Section 43 for the specified area, and trial shall be in accordance with Section 44 read with Section 46 of PMLA. Section 46 of PMLA specifies that save as otherwise provided under PMLA, the provisions of Code, including the provisons of bails or bond, shall apply to the proceedings before a Special Court. Any such directions by a Court to the authority under PMLA to investigate an offence under PMLA would not amount to taking cognizance . However, for taking cognizance under PMLA specific bar contained in the second proviso to Section 45(1) would necessarily be applicable and the Special Court cannot take cognizance of any offence punishable under Section 4 except upon a complaint in writing made by the officer specified therein. As of now for the alleged Scheduled Offence under the Customs Act, 1962 neither any case is registered under Section 154 by the Customs Authorities for investigating any cognizable offence under the said Act, nor is there any report in respect of the same forwarded under Section 157 of the Code. There is no complaint for taking cognizance filed in Court by any officer authorized to investigate any non-cognizable offence under Customs Act, 1962. Therefore, at this stage, the prayer of the petitioner so far as PMLA is concerned is premature. Unless as indicated above the alleged Scheduled Offence under Customs Act, 1962 is registered under Section 154 and a report thereof is sent under Section 157 of the Code to the Magistrate, or, a complaint is filed for taking cognizance of the Scheduled Offence by an officer authorized to investigate the said Scheduled Offence, the petitioner cannot seek from the jurisdictional Magistrate any directions under the Code for investigations by the authority under PMLA. Therefore, the composite prayer seeking direction for investigation of offence under Section 3 r/w 4 of PMA along with the offence under Customs Act, 1962, would not be maintainable. Seeking issuance of certificate under Article 134-A of the Constitution of India - Held that - we have not come across any precedent where the following two issues concerning fundamental rights guaranteed under the Constitution under Article 14 and 21 have been decided by the Hon ble Supreme Court. Therefore, we are inclined to issue the Certificate as prayed for by the petitioner and grant leave to appeal. - Decided against the petitioner

Summary

Issues Involved:
1. Challenge to the vires of Section 2(y)(ii) of PMLA and insertion of Section 132 of Customs Act, 1962 in Part-B of the Schedule in PMLA.
2. Maintainability of a private criminal complaint for setting the criminal law into motion for investigating offences under PMLA and Customs Act, 1962.

Detailed Analysis:

1. Challenge to the Vires of Section 2(y)(ii) of PMLA and Insertion of Section 132 of Customs Act, 1962 in Part-B of the Schedule in PMLA:
The petitioner challenged the amendments made by the Finance Act, 2015, specifically Section 2(y)(ii) of PMLA, which increased the monetary threshold for offences under Part B of the Schedule from Rs. 30 lakhs to Rs. One crore, and the insertion of Section 132 of the Customs Act, 1962 in Part B of the Schedule. The petitioner argued these amendments were unconstitutional and contrary to the stringent conditions for bail under PMLA.

The court examined the legislative intent behind the 2013 amendment, which merged Part B offences into Part A to remove the monetary threshold for invoking PMLA. It was held that the stringent bail conditions under Section 45(1) of PMLA apply only to offences that were originally in Part A before the 2013 amendment. The court concluded that the amendments were not intended to impose stringent bail conditions on offences that were previously under Part B. Thus, the challenge to the vires of the amendments was rejected.

2. Maintainability of a Private Criminal Complaint for Setting the Criminal Law into Motion for Investigating Offences under PMLA and Customs Act, 1962:
The petitioner sought to file a private criminal complaint to initiate investigations into alleged offences under the Customs Act, 1962, and PMLA. The court analyzed the applicability of the Code of Criminal Procedure (CrPC) to special statutes like the Customs Act and PMLA.

The court noted that under the Customs Act, offences are categorized as either cognizable or non-cognizable. For cognizable offences, Customs officers can arrest without a warrant, whereas for non-cognizable offences, they need a warrant. The court held that the provisions of the CrPC apply to the extent that they are not inconsistent with the Customs Act or PMLA. It was also noted that a private individual could approach a Magistrate to seek directions for investigations under Sections 155(2) or 156(3) of the CrPC, but the Magistrate cannot take cognizance of the offence unless the conditions specified in Section 137 of the Customs Act are satisfied.

Regarding PMLA, the court emphasized that investigations cannot commence based on a private complaint unless the Scheduled Offence is registered under Section 154 of the CrPC and a report is forwarded to a Magistrate, or a complaint is filed by an authorized officer. The court held that the specific bar on taking cognizance under PMLA must be adhered to, and a private individual cannot directly set the criminal law into motion for offences under PMLA without following the prescribed procedures.

The court concluded that the composite prayer for investigating offences under both PMLA and the Customs Act was premature and not maintainable. The writ petition was dismissed, and a certificate under Article 134-A was issued for appeal to the Supreme Court on substantial questions of law regarding the application of stringent bail conditions and the maintainability of private complaints under PMLA.

Conclusion:
The court dismissed the writ petition, holding that the amendments to PMLA and the Customs Act were constitutional and that a private individual could not directly initiate criminal investigations under PMLA without following the prescribed procedures. The court issued a certificate for appeal to the Supreme Court on specific legal questions.