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TMI Blog2023 (11) TMI 1251X X X X Extracts X X X X X X X X Extracts X X X X ..... of its volume is noticed, the proceeds of crime under Section 2(1)(u) cannot be presumed, unless the property has been derived or obtained as a result of criminal activity relating to a scheduled offence - the existence of proceeds of crime within the meaning of Section 2(1)(u) of the PMLA, 2002 is quintessential, as held by the Hon'ble Supreme Court and in the absence of existence of proceeds of crime as aforesaid, the authorities under the PMLA, 2002 cannot step in or initiate any prosecution. Even the Hon'ble Supreme Court in Vijay Madanlal Choudhary has observed that the respondent even if it had unearthed any particular offence and found proceeds of crime relating to the said offence, then under Section 66(2), the respondent is bound to inform the investigating agency about such offence. Only if the offence is scheduled offence, the respondent will get a right to further investigate the proceeds of crime, as held by the Hon'ble Supreme Court. Having regard to the interpretation of various provisions by the Hon'ble Supreme Court, this Court is prima facie convinced that the nature of enquiry contemplated by issuing the impugned summons is not within the jurisdic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ections of the Constitutional Courts. The petitioners in the first set of five writ petitions are the petitioners in the second set of five writ petitions. 3. Pending disposal of the first set of writ petitions concerning the impugned summons issued to the respective District Collectors, the petitioners have prayed for interim stay of operation of the impugned summons issued to the concerned District Collector of the five Districts, who are shown as the third petitioner in each of the writ petitions. 4. We have heard Mr.Dushyant Dave, learned Senior Counsel assisted by Mr.Amit Anand Tiwari, learned Additional Advocate General for the petitioners in W.P. Nos. 33459 to 33463 of 2023, Mr.R.Shunmugasundaram, learned Advocate General assisted by Mr.K.M.D.Muhilan, Ms.A.G.Shakeenaa for the petitioners in W.P. Nos. 33464 to 33468 of 202 and Mr.AR.L.Sundaresan, learned Additional Solicitor General assisted by Mr.N.Ramesh, learned Special Public Prosecutor (Enforcement Directorate) for the respondent in all the writ petitions. 5. Mr.Dushyant Dave, learned Senior Counsel, while challenging the constitutionality of the impugned proceedings, made several submissions, particularly for the purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e principles of federalism under the Constitution. (vii) He also relied upon several provisions of the PMLA, 2002 in support of his arguments and we are inclined to consider the submissions on the admitted facts in the following paragraphs. 6. The respondent, namely, the Assistant Director, Directorate of Enforcement has filed an objection affidavit. The learned Additional Solicitor General raised a preliminary objection stating that the writ petitions are not maintainable by the State Government, as the State is not an aggrieved person to challenge the process of investigation. The learned Additional Solicitor General also relied upon a few complaints registered in different parts of the State. Referring to the Enforcement Case Information Report (ECIR), the learned Additional Solicitor General submitted that as per the First Information Report mentioned in the ECIR, prima facie, it is observed that the activities of illegal mining are happening in the State of Tamil Nadu in collusion with officials and local mafia, hand in glove. When serious allegations involving theft of national wealth and cheating or offences under the Prevention of Corruption Act are also registered along wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conduct investigation in relation to mining violations, which is within the exclusive domain of the State Government. Though the learned Senior Counsel appearing for the petitioners relied upon a few judgments of the Hon'ble Supreme Court for the proposition that the writ petitions filed by the State Government are maintainable wherever the State is an aggrieved person, this Court finds a thin difference between the State Government filing writ petition as a person individually affected and the State challenging the action of the Central Government agency for usurping the very power of the State Government and its instrumentalities. Since the State Government complains about invasion into their jurisdiction, which according to them, is opposed to true federalism, they are entitled to be heard on such serious issues as person suffering legal injury. Therefore, though the cases relied upon by the learned Senior Counsel fall in different context, we are prima facie convinced that the State Government can maintain the writ petitions having regard to the issues raised by them. Further the District Collectors to whom impugned summons are issued are also parties as third petitioner in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any 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]; [Explanation.--For the removal of doubts, it is hereby clarified that proceeds of crime include property not only derived or obtained from the scheduled offence but also any property which may directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offence;] 10. The scope and object of Section 3 and the relevant provisions under the PMLA, 2002 have been elaborately discussed by the larger Bench of the Hon'ble Supreme Court in the case of Vijay Madanlal Choudhary v. Union of India reported in 2022:INSC:757. After an elaborate discussion, the Hon'ble Supreme Court, considering the question whether the offence under Section 3 is a standalone offence, has held as follows:- 281. The next question is : whether the offence under Section 3 is a standalone offence? Indeed, it is dependent on the wrongful and illegal gain of property as a result of criminal activity r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case by way of FIR if it is a cognizable offence or as a non-cognizable offence (NC case), as the case may be. If the offence so reported is a scheduled offence, only in that eventuality, the property recovered by the authorised officer would partake the colour of proceeds of crime under Section 2(1)(u) of the 2002 Act, enabling him to take further action under the Act in that regard. 283. Even though, the 2002 Act is a complete Code in itself, it is only in respect of matters connected with offence of money-laundering, and for that, existence of proceeds of crime within the meaning of Section 2(1)(u) of the Act is quintessential. Absent existence of proceeds of crime, as aforesaid, the authorities under the 2002 Act cannot step in or initiate any prosecution. (emphasis supplied) The Hon'ble Supreme Court summarized their conclusion by seminal points, in paragraph 467. Paragraph 467(v)(d) and 467(xv)(a) are relevant for our purpose, and hence, they are extracted below:- 467.(v)(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 connect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edicate offence. From the report, it is seen that the respondent has relied upon four First Information Reports. The first one is registered by Murappanadu Police Station, Thoothukudi District for the alleged offence under Section 302 of Indian Penal Code. The second one refers to the case registered by Vigilance Anti-Corruption, Theni for the alleged offence under Sections 120(B) 471 of Indian Penal Code and for the offence under the Prevention of Corruption Act. The third case is registered by the Vigilance and Anti-Corruption, Thanjavur for the alleged offence under Sections 120(B), 420 of Indian Penal Code and for the offence under the Prevention of Corruption Act. Referring to the fact that the cases which are registered are related to illegal mining, the learned Additional Solicitor General pointed out that the cases were registered not only for the offence or violation under the provisions of Mines and Minerals (Development and Regulation) Act, but also for the scheduled offences. 13. The learned Additional Solicitor General produced a few First Information Reports. The First Information Report in Crime No. 68 of 2023 dated 25.04.2023 is for the alleged offence under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scheduled offence. In Paragraph-8 of the Enforcement Case Information Report, it is stated that the mining mafias who are involved in theft of national wealth are generating huge proceeds of crime. When offences under Sections 302, 120(B), 420, 471 of IPC or Section 7(a) and other provisions of the Prevention of Corruption Act are scheduled offences as specified under Part A of the Schedule of PMLA, 2002, it is submitted that a prima facie case for an offence of money-laundering as defined under Section 3 of the PMLA, 2002 is made out. However, the impugned summon, which is purportedly issued in exercise of the power under Section 50(2) of the PMLA, 2002, shows that the respondent required the District Collector concerned to appear before the respondent to give evidence and produce records as named in the annexure in connection with the investigation under the PMLA, 2002. The annexure to the summons issued to the District Collectors would show that the District Collectors concerned have to appear with copy of their Aadhar and passport size photographs along with the list of all sand mining sites in the district concerned in the prescribed format. From the format, it is seen that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in that case, the Hon'ble Supreme Court has rejected the contention after referring to the provisions of PMLA, 2002 and its objects by referring to the history of the legislation. It was observed therein that the First Information Report registered against the accused therein shows commission of offence included in the schedule by taking illegal gratification for providing appointment to several persons in the Public Transport Corporation. Hon'ble Supreme Court recorded the fact that in all three cases already registered, allegation is that crores of money had been collected by the accused. Since it was the bribe money that was allegedly collected by a Minister in the said case, that ill-gotten money was held to be the proceeds of crime within the meaning of Section 2(1)(u) of the PMLA, 2002. It was in the said factual context after finding that the ill-gotten bribe money constitutes proceeds of crime within the meaning of Section 2(1)(u) of the PMLA, 2002, the Hon'ble Supreme Court has observed that it is no rocket science to know that a public servant receiving illegal gratification is in possession of proceeds of crime. It was further observed that the argument that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inform the investigating agency about such offence. Only if the offence is scheduled offence, the respondent will get a right to further investigate the proceeds of crime, as held by the Hon'ble Supreme Court. Having regard to the interpretation of various provisions by the Hon'ble Supreme Court, this Court is prima facie convinced that the nature of enquiry contemplated by issuing the impugned summons is not within the jurisdiction of the respondent. It is just an attempt to investigate the possibility of identifying any proceeds of crime as a result of any criminal activity, which is not so far registered by the State agencies. Since this Court is prima facie convinced that the enquiry contemplated by the impugned summons is not within the domain or within the authority of the respondent, as per Section 50 of the PMLA, 2002, is inclined to grant an order of interim stay of operation of the summons impugned in the five writ petitions, namely, W.P. Nos. 33459, 33460, 33461, 33462 33467 of 2023. Accordingly, being convinced that there is a prima facie case and balance of convenience in favour of petitioners, there shall be an order of interim stay of operation of the impugn ..... X X X X Extracts X X X X X X X X Extracts X X X X
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