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TMI Blog2024 (1) TMI 1303X X X X Extracts X X X X X X X X Extracts X X X X ..... g to predicate offences by the police and other enforcement agencies. That means only 0.063% of cases registered for predicate offence is being investigated under the PMLA, 2002. If an investigation is permissible on mere assumption of commission of predicate offence in lakhs of cases based on registration of similar cases, that requires summons being issued to lakhs or even crores of persons throughout the country. Therefore, this Court should step in to draw the lakshman rekha by prescribing a well-defined and guarded procedure in the matter of investigation. The investigation cannot be like an unruly horse with the possible mischief and misuse of power by irresponsible officers who can be politically motivated or can act with ulterior motive causing immense hardships and irretrievable damage to many innocent. When the involvement of any of the petitioners either in the commission of predicate offence or the suspected generation of proceeds of crime as a result of criminal activity relating to the scheduled offence or about petitioners' knowledge is not shown by any verifiable material, the question to be considered is whether the proceedings under the PMLA, 2002 would surviv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecedents. Incidentally, the petitioners in all the writ petitions have also prayed for interim stay of all further proceedings arising out of the impugned proceedings insofar as the petitioners are concerned, pending disposal of the writ petitions. 2. The basis for investigation of the offence of money-laundering, particularly, Section 3 of the PMLA, 2002, is the registration of First Information Reports in different parts of the State for a few scheduled offences. The gist of contents, as seen from the impugned Enforcement Case Information Report, reads thus:- Materials relating to commission of scheduled offence and assessment of proceeds of crime: (i) First Information Report in Crime No. 68 of 2023 dated 25.04.2023 was registered by Murappanadu Police Station, Tuticorin District under Sections 449, 332, 302 and 506(ii) of IPC for murder of a Village Administrative Officer of Murappanadu region in Tuticorin District. The crime was committed by sand mining mafia after the police had registered a case against the sand mining mafia on the complaint of Village Administrative Officer before Murappanadu Police Station, which was for theft of sand under Section 379 of IPC. (ii) First I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of offence under Section 302 of IPC, it appears that the sole motive behind the murder is to keep generating proceeds of crime through illegal mining activities and to hide their activities relating to proceeds of crime generated through the scheduled offence under the PMLA, 2002 and thereby prima facie commit the offence of money-laundering; that the registration of First Information Reports for scheduled offence prima facie shows that it is a fit case for investigation under the PMLA, 2002. The impugned proceedings refer to the above general statements based on the four First Information Reports to justify the investigation into offence of money-laundering under Section 3 of the PMLA, 2002. It is pertinent to mention that 26 persons were named as accused in the impugned proceedings including two of them who are shown as deceased. 4. The petitioners in all the writ petitions have received summons for the individual's appearance to give evidence in connection with the investigation in connection with the impugned proceedings. It is stated by the individual petitioners that in response to the summons they received, they have issued a reply with the following contents:- (a) The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia and others, 2022 SCC Online (SC) 929 and referred to the provisions of PMLA, 2002 to substantiate the following submissions:- (i) The proceeds of crime, as defined under Section 2(1)(u) of the PMLA, 2002, refers only to property which may directly or indirectly be derived as a result of any criminal activity relatable to a scheduled offence and that proceeds of crime being the core of the ingredients constituting the offence of money-laundering, without identifying any property derived or obtained either directly or indirectly as a result of criminal activity relating to a scheduled offence, there cannot be a roving enquiry or investigation by summoning anyone against whom the respondents have no prima facie material to link them to a predicate offence or to anyone who is accused of money-laundering. (ii) No action against any person for money-laundering can be resorted to on mere assumption or notion that there exists proceeds of crime merely because a scheduled offence capable of generating proceeds of crime has been registered. (iii) Since the offence under Section 3 of the PMLA, 2002 is dependent on illegal gain of property as a result of criminal activity relating to a sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing throughout the State do not warrant issuing summons to the petitioners. This is beyond one s comprehension when one understands the real object, purpose and limits of the PMLA, 2002. (vii) In any event, a PMLA case cannot go beyond the contours and boundaries laid down by scheduled/predicate offence. Therefore, it is incomprehensible as to how the respondents usurp their jurisdiction by making sweeping allegations in the impugned ECIR and commence investigations under the PMLA, 2002 for all causes related to illegal mining, in the absence of such a general or broader F.I.R. (viii) When the respondents have no material or reason to believe that the petitioners may have some knowledge of proceeds of crime as a result of any criminal activity in relation to the scheduled offence referred to in the four First Information Reports, issuance of summons to the petitioners is condemnable and should be deprecated, especially when no proceeds of crime is identified. (ix) When the petitioners in all the writ petitions are not connected in any way with any of the scheduled/predicate offence and there is no transaction of money trail which may remotely connect the petitioners, there is no sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Public and Rehabilitation Department and others v. Directorate of Enforcement, Chennai). (c) Judgment passed by a learned single Judge of Gujarat High Court in the case of Jafar Mohammed Hasanfatta v. Deputy Director, 2017 SCC OnLine Guj 2476. (d) Order of a learned single Judge of Rajasthan High Court in S.B .Crl. M.P. No. 7313 of 2023 dated 22.11.2023 (Mewa Ram Jain v. State of Rajasthan and others). 7. The other learned Senior Counsels appearing for the petitioners in W.P. Nos. 35515 35658 of 2023 also adopted the arguments of the learned Senior Counsel Mr. Vikram Chaudri and prayed for a similar interim order granted by this Court in a batch of writ petitions in W.P .Nos. 33459 to 33468 of 2023 dated 28.11.2023, where the summons issued to the District Collectors of five districts were the subject matter of challenge before this Court and that this Court has granted interim stay of operation of the summons impugned therein to the District Collector concerned. 8. Per contra, the learned Additional Solicitor General raised a preliminary objection as to the maintainability of the writ petitions or criminal original petition under Section 482 of the Code of Criminal Procedure to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of the Code of Criminal Procedure contained in Chapter XIV of the Code to investigate into a cognizable offence; ii) Courts would not thwart any investigation into the cognizable offences; iii) It is only in cases where no cognizable offence or offence of any kind is disclosed in the first information report that the Court will not permit an investigation to go on; iv) The power of quashing should be exercised sparingly with circumspection, as it has been observed, in the rarest of rare cases (not to be confused with the formation in the context of death penalty). v) While examining an FIR/complaint, quashing of which is sought, the court cannot embark upon an enquiry as to the reliability or genuineness or otherwise of the allegations made in the FIR/complaint; vi) Criminal proceedings ought not to be scuttled at the initial stage; vii) Quashing of a complaint/FIR should be an exception rather than an ordinary rule; viii) Ordinarily, the courts are barred from usurping the jurisdiction of the police, since the two organs of the State operate in two specific spheres of activities and one ought not to tread over the other sphere; ix) The functions of the judiciary and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Article 226 of the Constitution of India. However, an interim order of stay of investigation during the pendency of the quashing petition can be passed with circumspection. Such an interim order should not require to be passed routinely, casually and/or mechanically. Normally, when the investigation is in progress and the facts are hazy and the entire evidence/material is not before the High Court, the High Court should restrain itself from passing the interim order of not to arrest or no coercive steps to be adopted and the accused should be relegated to apply for anticipatory bail under Section 438 Cr. P.C. before the competent court. The High Court shall not and as such is not justified in passing the order of not to arrest and/or no coercive steps either during the investigation or till the investigation is completed and/or till the final report/chargesheet is filed under Section 173 Cr. P.C., while dismissing/disposing of the quashing petition under Section 482 Cr.P.C. and/or under Article 226 of the Constitution of India. xvii) Even in a case where the High Court is prima facie of the opinion that an exceptional case is made out for grant of interim stay of further inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r being presented before the Adjudicating Authority. It is a different matter that the information and evidence so collated during the inquiry made, may disclose commission of offence of money- laundering and the involvement of the person, who has been summoned for making disclosures pursuant to the summons issued by the Authority. At this stage, there would be no formal document indicative of likelihood of involvement of such person as an accused of offence of money-laundering. If the statement made by him reveals the offence of money-laundering or the existence of proceeds of crime, that becomes actionable under the Act itself. To put it differently, at the stage of recording of statement for the purpose of inquiring into the relevant facts in connection with the property being proceeds of crime is, in that sense, not an investigation for prosecution as such; and in any case, there would be no formal accusation against the noticee. Such summons can be issued even to witnesses in the inquiry so conducted by the authorised officials. However, after further inquiry on the basis of other material and evidence, the involvement of such person (noticee) is revealed, the authorised offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceeding under this Act. Obviously, this investigation is in the nature of inquiry to initiate action against the proceeds of crime and prevent activity of money-laundering. In the process of such investigation, the Director or the authority authorised by the Central Government referred to in Section 48 of the 2002 Act is empowered to resort to attachment of the proceeds of crime and for that purpose, also to do search and seizure and to arrest the person involved in the offence of money-laundering. While doing so, the prescribed authority (Director, Additional Director, Joint Director, Deputy Director or Assistant Director) alone has been empowered to summon any person for recording his statement and production of documents as may be necessary by virtue of Section 50 of the 2002 Act. Sensu stricto, at this stage (of issuing summon), it is not an investigation for initiating prosecution in respect of crime of money-laundering as such. That is only an incidental matter and may be the consequence of existence of proceeds of crime and identification of persons involved in money-laundering thereof. The legislative scheme makes it amply clear that the authority authorised under this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsequently, one has to go to the definition in the Criminal Procedure Code and that Code provides only investigation by a police officer or by an officer authorised by a magistrate . So, clearly, there was a lacuna in not enabling the Director or the Assistant Director under this Act to investigate offences. That has been cured now. . What we are doing is, we are inserting a new Section, 2(n)(a) defining the term, investigation ; making an amendment to Sections 28, 29 and 30, dealing with tribunals; amending Sections 44 and 45 of the Act to make the offence noncognisable so that only the Director could take action; and also making consequential changes in Section 73. I request hon. Members to kindly approve of these amendments so that the Act could be amended quickly and we could bring it into force. 12. Since the Hon ble Supreme Court considered the submissions of the learned Senior Counsels appearing for the private parties in the context of examining the constitutionality of the provisions of the Act, the Hon ble Supreme Court did not focus much on the procedural aspects, leaving it open to the aggrieved to challenge such procedural irregularities. The Hon ble Supreme Court ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime and is not limited to the happening of the final act of integration of tainted property in the formal economy. The Explanation inserted to Section 3 by way of amendment of 2019 does not expand the purport of Section 3 but is only clarificatory in nature. It clarifies the word and preceding the expression projecting or claiming as or ; and being a clarificatory amendment, it would make no difference even if it is introduced by way of Finance Act or otherwise. (b) Independent of the above, we are clearly of the view that the expression and occurring in Section 3 has to be construed as or , to give full play to the said provision so as to include every process or activity indulged into by anyone. Projecting or claiming the property as untainted property would constitute an offence of money-laundering on its own, being an independent process or activity. (c) The interpretation suggested by the petitioners, that only upon projecting or claiming the property in question as untainted property that the offence of Section 3 would be complete, stands rejected. (d) The offence under Section 3 of the 2002 Act is dependent on illegal gain of property as a result of criminal activity relatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y or unconstitutional. (xii)(a) The proviso in Clause (a) of sub-section (1) of Section 44 of the 2002 Act is to be regarded as directory in nature and this provision is also read down to mean that the Special Court may exercise judicial discretion on case-to-case basis. (b) We do not find merit in the challenge to Section 44 being arbitrary or unconstitutional. However, the eventualities referred to in this section shall be dealt with by the Court concerned and by the Authority concerned in accordance with the interpretation given in this judgment. (xiii)(a) The reasons which weighed with this Court in Nikesh Tarachand Shah [(2018) 11 SCC 1] for declaring the twin conditions in Section 45(1) of the 2002 Act, as it stood at the relevant time, as unconstitutional in no way obliterated the provision from the statute book; and it was open to the Parliament to cure the defect noted by this Court so as to revive the same provision in the existing form. (b) We are unable to agree with the observations in Nikesh Tarachand Shah [(2018) 11 SCC 1] distinguishing the enunciation of the Constitution Bench decision in Kartar Singh [(1994) 3 SCC 569] ; and other observations suggestive of doubti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial Court, it is open to the Special Court to look into the relevant records presented by the authorised representative of ED for answering the issue of need for his/her continued detention in connection with the offence of money-laundering. (xix) Even when ED manual is not to be published being an internal departmental document issued for the guidance of the Authorities (ED officials), the department ought to explore the desirability of placing information on its website which may broadly outline the scope of the authority of the functionaries under the Act and measures to be adopted by them as also the options/remedies available to the person concerned before the Authority and before the Special Court. (xx) The petitioners are justified in expressing serious concern bordering on causing injustice owing to the vacancies in the Appellate Tribunal. We deem it necessary to impress upon the executive to take corrective measures in this regard expeditiously. (xxi) The argument about proportionality of punishment with reference to the nature of scheduled offence is wholly unfounded and stands rejected. 13. However, a learned Judge of the Gujarat High Court in Jafar Mohammed Hasanfatta v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s reiterated the scope of investigation vide the paragraph extracted earlier in this judgment. Apart from that, the Hon ble Supreme Court has also elaborated the scope of investigation to include all proceedings even to facilitate the adjudication by the adjudicating authority referred to in Chapter III. It has also been observed by the Hon ble Supreme Court that under the PMLA, 2002, collection of evidence is the intrinsic process of adjudication proceedings and that the evidence so collected pursuant to the investigation by the authorities can be placed before the adjudicating authority for determination of the issue as to whether the provisional attachment order issued under Section 5 deserves to be confirmed and to direct confiscation of the property in question. When the enquiry to be undertaken by the authorities under the Act can be for collection of evidence for being presented to the adjudicating authority for its consideration for confirmation of the provisional attachment order, this Court may not quash the summons merely because the petitioners are not involved in the commission of any predicate offence. Therefore, this Court is not persuaded by the judgments relied upo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tigation cannot be like an unruly horse with the possible mischief and misuse of power by irresponsible officers who can be politically motivated or can act with ulterior motive causing immense hardships and irretrievable damage to many innocent. In other words, with the draconian law which can result in attachment and confiscation proceedings affecting several business concerns or to cause irretrievable damage to the business prospects of innocent people, the Courts have to strike a balance to prevent any collateral damage. The object of the legislation is not to cripple the economy of this country which would follow if the power is arbitrarily exercised based on assumptions. It is in that context this Court is unable to discard the concern and grievance of the petitioners in permitting a roving enquiry based on the alleged open source of illegal mining practices rampant across Tamil Nadu and the enormous environmental damage and the possible nexus between illegal miners and officials in the State. 18. In the course of hearing, the learned Additional Solicitor General was unable to point out any connection between any of the petitioners in the writ petitions and the four First Inf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e purpose of the 2002 Act. Dealing with proceeds of crime by way of any process or activity constitutes offence of money-laundering under Section 3 of the Act. 20. In the cases on hand, the petitioners in W.P.Nos.35656 35515 of 2023 are engaged in excavator hiring business or undertaking loading contracts or involved in other construction works. The petitioner in W.P.No.35658 of 2023 is an educationalist, who has established Pushkaran Agricultural Science College in Pudukkottai and also serving as Chairman of Dharani Group of Industrial companies. He appears to be a multifaceted personality. None of the three petitioners are shown as accused in the impugned ECIR proceedings. Their connection to the predicate offence referred to in the four First Information Reports is not supported by any piece of paper or material or a statement recorded in any of the four cases registered. Even before the accused in the impugned proceedings are summoned, summons have been issued to the petitioners. This statement is not opposed by the learned Additional Solicitor General when the matters were heard extensively. When the involvement of any of the petitioners either in the commission of predicate o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heduled offence. This interpretation alone can be countenanced on the basis of the provisions of the 2002 Act, in particular Section 2(1)(u) read with Section 3. Taking any other view would be rewriting of these provisions and disregarding the express language of definition clause proceeds of crime , as it obtains as of now. 22. As it was reiterated in the concluding portion, the offence under Section 3 of the PMLA, 2002 is dependent upon illegal gain of property as a result of criminal activity relating to scheduled offence that there can be no offence of money-laundering against anyone claiming such property being the property linked to stated scheduled offence through him. When the criminal case against any individual for the predicate offence is quashed by the Court of competent jurisdiction or the person accused for the predicate offence is finally discharged or acquitted, this Court has to quash the PMLA proceedings. Hence this Court is convinced that this Court should exercise its power to prevent any misuse in appropriate cases. Though absolute power is given to respondents under the PMLA, 2002, when such power is exercised in a manner affecting the civil right and liberty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch is beyond the purpose and intent of the power, whether this be malice-laden or even benign. If the purpose is corrupt the resultant act is bad. If considerations, foreign to the scope of the power or extraneous to the statute, enter the verdict or impel the action, mala fides or fraud on power vitiates the acquisition or other official act. 10. By these canons it is easy to hold that where one of the requisites of Sections 4 or 6 viz. that the particular land is needed for the public purpose in view, is shown to be not the goal pursued but the private satisfaction of wreaking vengeance, if the moving consideration in the selection of the land is an extraneous one, the law is derailed and the exercise is bad. Not that this land is needed for the mandi, in the judgment of government, but that the mandi need is hijacked to reach the private destination of depriving an enemy of his land through back-seat driving of the statutory engine! To reach this conclusion, there is a big if to be proved if the real object is the illegitimate one of taking away the lands of Respondents 1 to 21 to vent the hostility of Respondent 22, under the mask of acquisition for the mandi. This Court is abl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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