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TMI Blog2022 (9) TMI 1625X X X X Extracts X X X X X X X X Extracts X X X X ..... f the law laid down by the Apex Court and would become an abuse of the process of law, resulting in miscarriage of justice. The complaint registered against the petitioners by the Directorate of Enforcement, Bengaluru Zone, Bengaluru and the proceedings against the petitioners pending before the III Additional District and Sessions Judge, D.K., Mangaluru in Spl.C. No. 74/2018, stand quashed - Criminal Petition is allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Apex Court in the case of VIJAY MADANLAL CHOUDHARY (supra). This Court in Crl.P. No. 9490/2021 and connected matter disposed on 24.08.2022, has considered the judgment in the case of VIJAY MADANLAL CHOUDHARY (supra) and has held as follows: "12. The issue now boils down to a legal jugglery as to whether accused 1 and 2 having been acquitted of the offences alleged under the IPC-predicate offence, the offence alleged i.e., scheduled offence under the Act can continue. The judgment relied on by the learned counsel appearing for the respondent in the case of DYANI ANTONY PAUL no doubt held the field and further proceedings could not have been interjected or interfered at this stage, as interpretation of proceeds of crime as given in DYANI ANTONY PAUL notwithstanding any order of any Court in the predicate offences, the scheduled offences under the Act can be permitted to continue, as proceeds of crime, if it is linked to the criminal activity, that would be enough circumstance to continue the proceedings. But, the subsequent judgment, rendered by the Apex Court on 27-07-2022 in VIJAY MADANLAL CHOUDHARY (supra), is what settles this issue. The Apex Court in the judgment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting or claiming". We are not so much concerned with this change introduced vide Act 2 of 2013. In other words, the provision as it stood prior to amendment vide Finance (No. 2) Act, 2019 remained as it is. Upon breaking-up of this provision, it would clearly indicate that - it is an offence of money-laundering, in the event of direct or indirect attempt to indulge or knowingly assist or being knowingly party or being actually involved in "any process or activity" connected with the proceeds of crime. The latter part of the provision is only an elaboration of the different process or activity connected with the proceeds of crime, such as its concealment, possession, acquisition, use, or projecting it as untainted property or claiming it to be as untainted property. This position stands clarified by way of Explanation inserted in 2019. If the argument of the petitioners is to be accepted, that projecting or claiming the property as untainted property is the quintessential ingredient of the offence of money-laundering, that would whittle down the sweep of Section 3. Whereas, the expression "including" is a pointer to the preceding part of the section which re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on to R.1 is fully addressed. • ML provision does not cover physical concealment of criminal proceeds. Amendments to the PMLA were enacted by Parliament on 17 December 2012 and came into force on 15 February 2013. • ML provision does not cover the sole knowing acquisition, possession and use of criminal proceeds The amended section 3 of the PMLA now reads. "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 proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property shall be guilty of the offence of money laundering." While the current formulation specifically refers to concealment, possession, acquisition and use, it does not do away with the condition that the proceeds of crime need to be "projected or claimed as untainted property". The working of the ML offence is thus not fully in line with the Vienna and Palermo Conventions but case law provided by India appears to mitigate the concerns regarding the possible limiting effect of the conditional element in the ML offence. On that b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... National Legal Services Authority v. Union of India. 266. In the Core Recommendations of the FATF referred to above, the same clearly mention that the word "and" in Section 3 of the 2002 Act would not be fully in line with the Vienna and Palermo Conventions. This doubt has been ably responded and elucidated by India to the international body by referring to the jurisprudence as evolved in India to interpret the word "and" as "or" in the context of the legislative intent - to reckon any (every) process or activity connected with the proceeds of crime constituting offence of money-laundering. To buttress the stand taken by India before the FATF, reliance has been justly placed on reported decisions of this Court amongst other Sanjay Dutt, which had occasion to deal with the expression "arms and ammunition" occurring in Section 5 of the TADA Act. The Court noted that if it is to be read conjunctively because of word "and", the object of prohibiting unauthorised possession of the forbidden arms and ammunition would be easily frustrated by the simple device of one person carrying the forbidden arms and his accomplice carrying its ammun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty so that neither is covered under Section 3 of the 2002 Act. 269. From the bare language of Section 3 of the 2002 Act, it is amply clear that the offence of money-laundering is an independent offence regarding the process or activity connected with the proceeds of crime which had been derived or obtained as a result of criminal activity relating to or in relation to a scheduled offence. The process or activity can be in any form - be it one of concealment, possession, acquisition, use of proceeds of crime as much as projecting it as untainted property or claiming it to be so. Thus, involvement in any one of such process or activity connected with the proceeds of crime would constitute offence of money-laundering. This offence otherwise has nothing to do with the criminal activity relating to a scheduled offence - except the proceeds of crime derived or obtained as a result of that crime. 270. Needless to mention that such process or activity can be indulged in only after the property is derived or obtained as a result of criminal activity (a scheduled offence). It would be an offence of money-laundering to indulge in or to assist or being party to the process or activity conn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... If there are any proactive steps towards such a cause, we cannot but facilitate the good steps. However, passions aside we must first balance the law to be able to save the basic tenets of the fundamental rights and laws of this country. After all, condemning an innocent man is a bigger misfortune than letting a criminal go. 273. On a bare reading of Section 3, we find no difficulty in encapsulating the true ambit, given the various arguments advanced. Thus, in the conspectus of things it must follow that the interpretation put forth by the respondent will further the purposes and objectives behind the 2002 Act and also adequately address the recommendations and doubts of the international body whilst keeping in mind the constitutional limits. It would, therefore, be just to sustain the argument that the amendment by way of the Explanation has been brought about only to clarify the already present words, "any" and "including" which manifests the true meaning of the definition and clarifies the mist around its true nature. 274. We may profitably advert to the judgment in Seaford Court Estates ltd, which states: "The question for decision in this case i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The same deal with the proposition as to the scope of an Explanation and the limits upto which it can stretch. Yet given the present scenario, we cannot find a strong footing to rely on the same in understating Section 3 of the 2002 Act as it stands today. Reference has been made to K.P. Varghese wherein the Court noted the Heydon Case and to the fact that the speech of the mover of the bill can explain the reason for introduction of the bill and help ascertain the mischief sought to be remedied, the objects and purposes of the legislation. Similarly, reference has been made to Hardev Motor Transport v. State of M.P and Martin Lottery Agencies Limited, which states that the role of an Explanation in the Schedule of the Act cannot defeat the main provision of the Act. Even otherwise, an Explanation cannot enlarge the scope and effect of a provision. Reference is also made to S. Sundaram Pillai v. V.R. Pattabiraman, which reads thus: "50. In Bihta Cooperative Development Cane Marketing Union Ltd. v. Bank of Bihar this Court observed thus: The Explanation must be read so as to harmonise with and clear up any ambiguity in the main section. It should not be so construed as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ok Munilal Jain. Reference has also been made to Nikesh Tarachand Shah. However, there the questions raised were not in respect of the meaning of money-laundering and pertinently the amendment has come post the judgment, hence, will have no real bearing, unless it can be shown that the amendment is in some other way contrary to the Indian law. 278. We also cannot countenance the argument made in light of possible harassment of innocent persons. It is noted that to the 1999 Bill, the Select Committee of the Rajya Sabha had pointed out that if even mere possession of money/property out of proceeds of crime were to be punishable then: "The Committee finds that sub-clauses (a) and (c) viewed •in the context of the provisions contained in clause 23 of the Bill may lead to harassment of innocent persons who bona fide and unknowingly deal with the persons who have committed the offence of money laundering and enter into transactions with them. Such persons purchasing property born out of proceeds of crime without having any inkling whatsoever about that are liable to be prosecuted if the sub-Clauses (a) & (c) remain in the Bill in the existing form. The fact of the matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he above analysis, we now proceed to summarize our conclusion on seminal points in issue in the following terms:- (i) The question as to whether some of the amendments to the Prevention of Money-laundering Act, 2002 could not have been enacted by the Parliament by way of a Finance Act has not been examined in this judgment. The same is left open for being examined along with or after the decision of the Larger Bench (seven Judges) of this Court in the case of Rojer Mathew. (ii) The expression "proceedings" occurring in Clause (na) of Section 2(1) of the 2002 Act is contextual and is required to be given expansive meaning to include inquiry procedure followed by the Authorities of ED, the Adjudicating Authority, and the Special Court. (iii) The expression "investigation" in Clause (na) of Section 2(1) of the 2002 Act does not limit itself to the matter of investigation concerning the offence under the Act and is interchangeable with the function of "inquiry" to be undertaken by the Authorities under the Act. (iv) The Explanation inserted to Clause (u) of Section 2(1) of the 2002 Act does not travel beyond the main provision predicating tracking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arrangement to secure the interests of the person as also ensures that the proceeds of crime remain available to be dealt with in the manner provided by the 2002 Act. The procedural safeguards as delineated by us hereinabove are effective measures to protect the interests of person concerned. (vii) The challenge to the validity of sub-section (4) of Section 8 of the 2002 Act is also rejected subject to Section 8 being invoked and operated in accordance with the meaning assigned to it hereinabove. (viii) The challenge to deletion of proviso to sub-section (1) of Section 17 of the 2002 Act stands rejected. There are stringent safeguards provided in Section 17 and Rules framed thereunder. Moreover, the pre-condition in the proviso to Rule 3(2) of the 2005 Rules cannot be read into Section 17 after its amendment. The Central Government may take necessary corrective steps to obviate confusion caused in that regard. (ix) The challenge to deletion of proviso to sub-section (1) of Section 18 of the 2002 Act also stands rejected. There are similar safeguards provided in Section 18. We hold that the amended provision does not suffer from the vice of arbitrariness. (x) The challenge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xv)(a) The process envisaged by Section 50 of the 2002 Act is in the nature of an inquiry against the proceeds of crime and is not "investigation" in strict sense of the term for initiating prosecution; and the Authorities under the 2002 Act (referred to in Section 48), are not police officers as such. (b) The statements recorded by the Authorities under the 2002 Act are not hit by Article 20(3) or Article 21 of the Constitution of India. (xvi) Section 63 of the 2002 Act providing for punishment regarding false information or failure to give information does not suffer from any vice of arbitrariness. (xvii) The inclusion or exclusion of any particular offence in the Schedule to the 2002 Act is a matter of legislative policy; and the nature or class of any predicate offence has no bearing on the validity of the Schedule or any prescription thereunder. (xviii)(a) In view of special mechanism envisaged by the 2002 Act, ECIR cannot be equated with an FIR under the 1973 Code. ECIR is an internal document of the ED and the fact that FIR in respect of scheduled offence has not been recorded does not come in the way of the Authorities referred to in Section 48 to commence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt 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. The Apex Court answers the very issue which is the kernel of the conundrum in the case at hand, in the aforesaid clause of conglomeration of conclusions. 13. It is germane to notice, the Apex Court in its judgment rendered on August 16th, 2022 in the case of PARVATHI KOLLUR AND ANOTHER V. STATE BY DIRECTORATE OF ENFORCEMENT, recording the admission of the Union of India with regard to the proposition of law as propounded by the Apex Court in the case of VIJAY MADANLAL CHOUDHARY (supra), allowed the appeal and set aside the judgment of this Court rendered in Crl.R.P. No. 590 of 2019. The said order reads as follows: "Learned counsel for the appellants has contended that the issue as involved in this matter is no more res integra, particularly for the view taken by a 3-Judge Bench of this Court in the case of Vijay Madanlal Choudhary & Ors. vs. Union Of India & Ors. decided on 27.07.2022 where, the consequence of failure of prosecution for the scheduled offence has been clearly provided in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Apex Court is that if they are discharged/acquitted or the criminal case against them is quashed, there can be no offence of money laundering against them or anyone claiming such property being the property linked to the scheduled offence through them. The contention of the respondent that the issue inter partes has become final is unacceptable, in the light of the afore-quoted judgment of the Apex Court, which is rendered considering every provision of the Act. This is again reiterated and the position of law is admitted by the Directorate of Enforcement, these would enure to the benefit of the petitioners, in the cases at hand. 15. Therefore, the issue need not detain this Court for long or delve deep into the matter in the light of the judgment of the Apex Court (supra). The solitary circumstance which would enure to the benefit of the accused in both these cases is acquittal of accused 1 and 2 in Criminal Appeal No. 414 of 2016 and the said acquittal becoming final and all the allegations of of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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