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TMI Blog2022 (9) TMI 1626X X X X Extracts X X X X X X X X Extracts X X X X ..... at hand and the judgment rendered by this Court, if the proceedings under the PMLA are permitted to be continued qua the petitioners, it would become an abuse of the process of law and would result in miscarriage of justice. The impugned proceedings in Special Case No. 59/2016 pending before the III Additional District and Sessions and Special Judge, D.K., Mangaluru stand quashed - The Criminal Petition is allowed. - THE HON'BLE MR JUSTICE M. NAGAPRASANNA For the Appellant : SRI. RAHUL GORAWAR., ADVOCATE For the Respondenr : SRI. MADHUKAR DESHPANDE, SPL. P.P. ORDER Petitioners are before this Court calling in question proceedings instituted in Special Case No. 59/2016 for offences punishable under Sections 45, 3, 4 and 8(5) of the Prevention of Money Laundering Act, 2002 ( PMLA for short) 2. Heard Sri. Rahul Gorawar, learned counsel appearing for petitioners and Sri. Madhukar Deshpande, learned Special Public Prosecutor appearing for respondent. 3. The proceedings under the Prevention of Corruption Act, 1988 were instituted against the 1st petitioner for offences punishable under Section 13(1)(e) r/w 13(2) of the said Act and the 2nd petitioner is the wife of the 1st petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot limited to the happening of the final act of integration of tainted property in the formal economy to constitute an act of money-laundering. This is amply clear from the original provision, which has been further clarified by insertion of Explanation vide Finance (No. 2) Act, 2019. Section 3, as amended, reads thus: 3. Offence of money-laundering. 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 456[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. Explanation. For the removal of doubts, it is hereby clarified that, (i) a person shall be guilty of offence of money laundering if such person is found to have directly or indirectly attempted to indulge or knowingly assisted or knowingly is a party or is actually involved in one or more of the following processes or activities connected with proceeds of crime, namely: (a) concealment; or (b) possession; or (c) acquisition; or (d) use; or (e) projecting as untainted property; or (f) claiming ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dment of 2019 was only to restate the stand taken by India in the proceedings before the FATF, as recorded in its 8th Follow-Up Report Mutual Evaluation of India June 2013 under heading Core Recommendations . This stand had to be taken by India notwithstanding the amendment of 2013 vide Act 2 of 2013 (w.e.f. 15.2.2013) and explanation offered by the then Minister of Finance during his address in the Parliament on 17.12.2012 as noted above. Suffice it to note that the municipal law (Act of 2002) had been amended from time to time to incorporate the concerns and recommendations noted by the international body. We may usefully refer to the Core Recommendations of the FATF concerning India of June 2013, which reads thus: Core Recommendations Recommendations Rating Summary of Factors underlying Rating Actions taken to remedy deficiencies 1-ML offence PC (High) monetary threshold condition for most ML predicates. Amendments to India's Prevention of Money Laundering Act (PMLA) were enacted by Parliament on 17 December 2012 and came into force on 15 February 2013. All predicate offences previously contained in Part B of the Schedule (46 offences with a threshold value of INR 3 million ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on set forth by the petitioners was to be accepted, it would follow that it is only upon projecting or claiming the property in question as untainted property, the offence would be complete. This would undermine the efficacy of the legislative intent behind Section 3 of the Act and also will be in disregard of the view expressed by the FATF in connection with the occurrence of the word and preceding the expression projecting or claiming therein. This Court in Pratap Singh v. State of Jharkhand, enunciated that the international treaties, covenants and conventions although may not be a part of municipal law, the same be referred to and followed by the Courts having regard to the fact that India is a party to the said treaties. This Court went on to observe that the Constitution of India and other ongoing statutes have been read consistently with the rules of international law. It is also observed that the Constitution of India and the enactments made by Parliament must necessarily be understood in the context of the present-day scenario and having regard to the international treaties and convention as our constitution takes note of the institutions of the world community which had b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at offence. This provision plainly indicates that any (every) process or activity connected with the proceeds of crime results in offence of money-laundering. Projecting or claiming the proceeds of crime as untainted property, in itself, is an attempt to indulge in or being involved in money-laundering, just as knowingly concealing, possessing, acquiring or using of proceeds of crime, directly or indirectly. This is reinforced by the statement presented along with the Finance Bill, 2019 before the Parliament on 18.7.2019 as noted above. 268. Independent of the above, we have no hesitation in construing the expression and in Section 3 as or , to give full play to the said provision so as to include every process or activity indulged into by anyone, including projecting or claiming the property as untainted property to constitute an offence of money-laundering on its own. The act of projecting or claiming proceeds of crime to be untainted property presupposes that the person is in possession of or is using the same (proceeds of crime), also an independent activity constituting offence of money-laundering. In other words, it is not open to read the different activities conjunctively b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edicate offence has been committed. The relevant date is the date on which the person indulges in the process or activity connected with such proceeds of crime. These ingredients are intrinsic in the original provision (Section 3, as amended until 2013 and were in force till 31.7.2019); and the same has been merely explained and clarified by way of Explanation vide Finance (No. 2) Act, 2019. Thus understood, inclusion of Clause (ii) in Explanation inserted in 2019 is of no consequence as it does not alter or enlarge the scope of Section 3 at all. 271. As mentioned earlier, the rudimentary understanding of money-laundering is that there are three generally accepted stages to money-laundering, they are: (a) Placement : which is to move the funds from direct association of the crime. (b) Layering : which is disguising the trail to foil pursuit. (c) Integration : which is making the money available to the criminal from what seem to be legitimate sources. 272. It is common experience world over that money laundering can be a threat to the good functioning of a financial system. However, it is also the most suitable mode for the criminals deal in such money. It is the means of livelihood ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for this or that, or have been guilty of some or other ambiguity. It would certainly save the judges trouble if Acts of Parliament were drafted with divine prescience and perfect clarity. In the absence of it, when a defect appears a judge cannot simply fold his hands and blame the draftsman. He must set to work on the constructive task of finding the intention of Parliament, and he must do this not only from the language of the statute, but also from a consideration of the social conditions which gave rise to it, and of the mischief which it was passed to remedy, and then he must supplement the written word so as to give force and life to the intention of the legislature. That was clearly laid down by the resolution of the judges in Heydon's case, and it is the safest guide today. Good practical advice on the subject was given about the same time by Plowden in his second volume Eyston v. Studd. Put into homely metaphor it is this: A judge should ask himself the question : If the makers of the Act had themselves come across this ruck in the texture of it, how would they have straightened it out? He must then do as they would have done. A judge must not alter the material of wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act by becoming an hindrance in the interpretation of the same. (emphasis supplied) 276. However, in the present case we find that the Explanation only sets forth in motion to clear the mist around the main definition, if any. It is not to widen the ambit of Section 3 of the 2002 Act as such. Further, the meaning ascribed to the expression and to be read as or is in consonance with the contemporary thinking of the international community and in consonance with the Vienna and Palermo Conventions. 277. Reference has also been made to judgments which refer to the purport of side notes in the interpretation of a statute in Thakurain Balraj Kunwar v. Rae Jagatpal Singhhttps://www.scconline.com/Members/SearchResult.aspx - FN0479, Nalinakhya Bysack v. Shyam Sunder Haldar, Chandroji Rao v. Commissioner of Income Tax, M.P., Nagpur, Board of Muslim Wakfs, Rajasthan v. Radha Kishan, Tara Prasad Singh v. Union of India, Sakshi v. Union of India, Guntaiah v. Hambamma and C.Gupta v. Glaxo-Smithkline Pharmaceuticals Ltd. However, we find them of no use in the present case as we have already held that the Explanation only goes on to clarify the main or original provision. Other cases, which are o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... removing the necessity of projection from the definition will render the predicate offence and money-laundering indistinguishable. This, in our view, is ill founded and fallacious. This plea cannot hold water for the simple reason that the scheduled offences in the 2002 Act as it stands (amended up to date) are independent criminal acts. It is only when money is generated as a result of such acts that the 2002 Act steps in as soon as proceeds of crime are involved in any process or activity. Dealing with such proceeds of crime can be in any form being process or activity. Thus, even assisting in the process or activity is a part of the crime of money-laundering. We must keep in mind that for being liable to suffer legal consequences of ones action of indulging in the process or activity, is sufficient and not only upon projection of the ill-gotten money as untainted money. Many members of a crime syndicate could then simply keep the money with them for years to come, the hands of the law in such a situation cannot be bound and stopped from proceeding against such person, if information of such illegitimate monies is revealed even from an unknown source. Answering those arguments th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sted 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 relating to a scheduled offence. It is concerning the process or activity connected with such property, which constitutes the offence of money-laundering. The Authorities under the 2002 Act cannot prosecute any person on notional basis or on the assumption that a scheduled offence has been committed, unless it is so registered with the jurisdictional police and/or pending enquiry/trial including by way of criminal complaint before the competent forum. If the person is finally discharged/acquitted of the scheduled offence or the criminal case against him is quashed by the Court of competent jurisdiction, there can be no offence of money-laundering against him or any one claiming such property being the property linked to stated scheduled offence through him. (vi) Section 5 of the 2002 Act is constitutionally valid. It provides for a balancing arrangement to secure the interests of the perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evive the same provision in the existing form. (b) We are unable to agree with the observations in Nikesh Tarachand Shah distinguishing the enunciation of the Constitution Bench decision in Kartar Singh and other observations suggestive of doubting the perception of Parliament in regard to the seriousness of the offence of money-laundering, including about it posing serious threat to the sovereignty and integrity of the country. (c) The provision in the form of Section 45 of the 2002 Act, as applicable post amendment of 2018, is reasonable and has direct nexus with the purposes and objects sought to be achieved by the 2002 Act and does not suffer from the vice of arbitrariness or unreasonableness. (d) As regards the prayer for grant of bail, irrespective of the nature of proceedings, including those under Section 438 of the 1973 Code or even upon invoking the jurisdiction of Constitutional Courts, the underlying principles and rigours of Section 45 may apply. (xiv) The beneficial provision of Section 436A of the 1973 Code could be invoked by the accused arrested for offence punishable under the 2002 Act. (xv)(a) The process envisaged by Section 50 of the 2002 Act is in the nature o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expeditiously. (xxi) The argument about proportionality of punishment with reference to the nature of scheduled offence is wholly unfounded and stands rejected. (Emphasis supplied) Clause (v) of the conclusion assumes significance. Clause (v) is answering the interpretation of Section 3 and holds that the offence under Section 3 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 connected with such property which constitutes the offence of money laundering. The Apex Court holds that the authorities under the Act cannot prosecute any person on notional basis or on the assumption that the scheduled offence has been committed, unless it is so registered with the jurisdictional police and/or pending enquiry/trial including by way of criminal complaint before the competent forum. The Apex Court answers the issue further holding that if a person is finally discharged/acquitted of the predicate offences or the criminal case against him is quashed by a Court of competent jurisdiction, there can be no offence of money laundering against him or any one claiming such property being the property l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the present appellants were not accused of any scheduled offence. In view of the above, this appeal succeeds and is allowed. The impugned judgment and order dated 17.12.2020 is set aside and the order dated 04.01.2019 as passed by the Trial Court, allowing discharge application of the appellants, is restored. The Apex Court in the case of PARVATHI KOLLUR (supra) notices the judgment in the case of VIJAY MADANLAL CHOUDHARY and records the admission of the Union of India and quashes the proceedings. On the bedrock of what the Apex Court declares, the case at hand merits consideration. 14. It is not in dispute that accused 3, 4 and 5 are hauled into the proceedings under the Act only because the property that they have acquired is linked to the criminal activity of accused 1 and 2. Accused 1 and 2 are into the proceedings under the Act for the reason of allegations of money laundering under Section 3, as according to the prosecution it is proceeds of crime. Therefore, the entire issue initiated by the Enforcement Directorate against the accused herein would revolve round Section 3 of the Act. Section 3 of the Act is interpreted by the Apex Court (supra). The conclusion of the Ape ..... X X X X Extracts X X X X X X X X Extracts X X X X
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