2019 (9) TMI 8 - HC - Money Laundering

Offence under PMLA - summons issued by ED to appear for an investigation and other proceedings - HELD THAT - As to whether by a criminal conspiracy the offences indicated in the schedule to PML Act is made out or not would be an issue which can be unearthed only after investigation. During the course of investigation, the authorities may arrive at a conclusion that there is no necessity to further investigate the matter and it may drop the investigation or in the event of authorities finding there is some material, it may then proceed to adjudicate. It all depends on circumstances emerging from investigation in a given case. If principles of interpretation is adopted, then, there was no necessity for the expression conspiracy being indicated in several enactments as found in the schedule to the PML Act. Section 120B of IPC found in part-A of the schedule to PML Act refers to IPC offences only and if it was referable to other offences, the framers of law would not have incorporated the expression conspiracy under Part-A Paragraph -1 as defined under other enactments. Section 120B is a predicate, distinct and stand alone offence. The inclusion of said offence under the schedule is not under challenge in these writ petitions. As rightly contended by Sri K M Nataraj, learned Additional Solicitor General of India that summons issued under Section 50(2) of PML Act has nothing to do with the regulations as defined under the Regulatory Rules and said rules is referable only to proceedings for adjudication and not to pre-adjudication proceedings. In fact, Section 50(2) does not refer to an accused at all. Summons issued under Section 50(2) is contrary to the Adjudicating Authority Procedure Regulation, 2013 and it does not contain material particulars nor the details which is required to be furnished by the petitioner - A plain reading of the said Regulation would indicate that same has been enacted in exercise of the power conferred by subsection (15) of Section 6 of the Act. Section 6 of the Act relates to the power of adjudicating authorities and the composition of such adjudicating authority. Section 2(a) defines Adjudicating Authority to mean an authority appointed under sub-section (1) of Section 6. Section 2(na) defines Investigation so as to include all proceedings under the Act conducted by the Director or by an authority authorized by the Central Government under the Act for collection of evidence. Section 6(15) provides the method of adjudication to be followed by the adjudicating authority and it does not refer to any procedure to be adopted by the investigating authority. The definition clauses as noticed herein above viz., sections 2(a) and 2(na) is relatable to adjudicating authority and not to investigation and they are separate, distinct and independent. Hence, mere mention of Section 50(2) or 50(3) in the summons issued, it cannot be contended by petitioners that even at pre-adjudication stage i.e., during investigation stage, the authorities are required to state or reveal the nature of material upon which they intend to rely upon for summoning a person for investigation. If same is accepted, it would defeat the purpose of investigation itself. In the light of aforestated discussion and for the reasons indicated hereinabove, this Court is of the considered view that there is no merit in these writ petitions

Summary

Issues Involved:
1. Quashing of summons issued by the Enforcement Directorate (ED) under the Prevention of Money Laundering Act (PML Act).
2. Validity of the basis for issuing summons, particularly the involvement of non-scheduled offences under the Income Tax Act (IT Act).
3. The applicability and interpretation of Section 120B of the Indian Penal Code (IPC) as an independent offence under the PML Act.
4. The procedural aspects and jurisdiction of the ED in issuing summons under Section 50(2) and (3) of the PML Act.
5. Alleged violation of fundamental rights under Article 21 of the Constitution of India.

Detailed Analysis:

1. Quashing of Summons Issued by the ED:
The primary relief sought in these writ petitions was the quashing of summons issued by the ED to the petitioners to appear for investigation. The court examined the legality of these summons under the PML Act. The petitioners argued that the summons were based on offences under the IT Act, which are not scheduled offences under the PML Act, and hence, the proceedings should be quashed. However, the court held that the PML Act and its provisions are independent of the predicate offences and can be invoked even if the predicate offence is not a scheduled offence under the PML Act.

2. Validity of Basis for Issuing Summons:
The petitioners contended that the summons were issued based on an investigation that stemmed from a search conducted by the Income Tax Department, which resulted in a complaint for offences under the IT Act. They argued that since these offences are not scheduled offences under the PML Act, the proceedings under the PML Act should not continue. The court, however, clarified that the PML Act is a standalone enactment and the proceedings under it are independent, separate, and distinct from proceedings under other laws. The mere suspicion of money laundering is sufficient for the ED to investigate.

3. Applicability and Interpretation of Section 120B IPC:
A significant argument was whether Section 120B IPC (criminal conspiracy) could be invoked independently under the PML Act. The court held that Section 120B IPC is a standalone offence and its inclusion in Part-A of the Schedule to the PML Act means that it can be invoked independently. The court cited various judgments to support that criminal conspiracy is an independent offence and does not necessarily require the commission of a predicate offence. The court emphasized that the offence of money laundering under Section 3 of the PML Act is independent and does not require a predicate offence to be prosecuted.

4. Procedural Aspects and Jurisdiction of the ED:
The petitioners argued that the summons issued under Section 50(2) and (3) of the PML Act were vague and lacked material particulars, thus violating principles of natural justice. The court rejected this argument, stating that the PML Act provides for a distinct procedure for investigation and prosecution. The court clarified that the Adjudicating Authority Procedure Regulation, 2013, is applicable only to adjudication proceedings and not to pre-adjudication investigations. The court also noted that the ED has the jurisdiction to issue summons for investigation under the PML Act.

5. Alleged Violation of Fundamental Rights:
The petitioners claimed that their right to liberty under Article 21 of the Constitution was being violated by the summons issued for investigation. The court held that the mere issuance of a summons for investigation does not infringe upon the fundamental rights of the petitioners. The court emphasized that judicial review of administrative actions, such as the issuance of summons, should be exercised sparingly and only in cases where there is a clear violation of fundamental rights or lack of jurisdiction.

Conclusion:
The court dismissed the writ petitions, holding that the PML Act is a standalone enactment with independent procedures for investigation and prosecution. The summons issued by the ED under Section 50(2) and (3) of the PML Act were found to be valid, and the court rejected the contentions that the proceedings were based on non-scheduled offences or that they violated the petitioners' fundamental rights. The court affirmed the jurisdiction of the ED to investigate suspected money laundering activities, even if they are related to non-scheduled offences under other laws.