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TMI Blog2024 (11) TMI 995X X X X Extracts X X X X X X X X Extracts X X X X ..... he legislative intent. Any misuse or abuse of the law will fracture the bones of PMLA, thereby rendering it wholly ineffective. Legislation of such nature must be handled with caution and must not injure any vital organs of Part III of the Constitution of India. To remind that facts of the present case at this juncture, the seizure of huge amount of cash of Rs. 7.20/- crores was on 12.03.2012. The sale agreement is said to have been entered into on 02.03.2012. The stamp paper has been released by the State Government only on 09.03.2012 and it was sold by the stamp vendor to one Smt.Vimala on 13.02.2012. It is a clear case of cheating by amassing money by sale of illegally printed lottery tickets attracting Section 420 of IPC, creation of a false document in the form of a sale agreement attracting the provisions of Sections 467, 468 and 471 of IPC and hence prima facie materials are available for both the predicate offence and the offence under PMLA. But the PMLA proceedings are sought to be scuttled by closing the proceedings in the predicate offence. In the present case, the State Investigating Agency registered the predicate offence, conducted investigation and against the dismis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ASE:.......................19 (B) MAINTAINABILITY OF THE PRESENT PETITION:.....................20 (C) INHERENT POWERS OF THE HIGH COURT UNDER SECTION 482 OF CRIMINAL PROCEDURE CODE:.......................................... 25 (D) ANALYSIS OF THE JUDGMENTS RELIED ON BY THE RESPONDENTS:................................................................................... 27 (E) OBJECT OF PMLA:........................................................................ 30 (F) ABOUT THE CLOSURE REPORT BY STATE POLICE AND ACCEPTANCE BY THE LEARNED MAGISTRATE:............................32 (G) WHETHER CREATING AN ANTE DATED DOCUMENT IS FORGERY:.............................................................................................35 (H) ABOUT THE IMPUGNED ORDER:...............................................35 VI. CONCLUSION:........................................................................................ 42 Under assail is the Closure Report dated 14.11.2022 filed by the 1st respondent, accepted by the learned Judicial Magistrate-I, Alandur by order dated 17.11.2022 made in Crime No.304 of 2012. I.BRIEF FACTS OF THE CASE: 2. Based on reliable information received on 12.03.2012 tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Learned Judicial Magistrate, Alandur that during the course of investigation, the Investigating Officer collected the un-registered sale agreement dated 02.03.2012 between Mr.Martin/A2's wife Mrs.Leema Rose and Mr.Murthy/A3 typed on stamp paper bearing AE 147535 and 147536, which were issued by the State Government to the stamp vendor Mr.Mayilsamy only on 09.03.2012. The document was sold to the public through Government treasury, only on 13.03.2012, but the document was prepared by Mr.Murthy/A3 and Mrs.Leema Rose, as if the said agreement was prepared on 02.03.2012 on a date even prior to selling of the stamp paper by the Government to the stamp vendor. Therefore, the said act amounted to fabrication of document prepared by Mr.Murthy/A3 and A2's wife Mrs.Leema Rose, trying to give legal colour to illegal seized money of Rs. 7,20,05,000/-. Thus, the penal Sections were altered as Sections 294A, 420, 120B IPC and Section 467, 468 and 471 IPC and Mrs.Leema Rose/A4, wife of Mr.Martin/A2 was also arrayed as an accused in the predicate offence. Pertinently, Sections 420, 467 and 471 IPC are scheduled offences under PMLA. 6. The learned Single Judge of this Court in Crl.O.P.N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ke appropriate steps available under law, including to recall of the order passed by the Hon'ble Supreme Court of India. II.CONTENTIONS MADE ON BEHALF OF THE PETITIONER: 10. Mr.AR.L.Sundaresan, the learned Additional Solicitor General of India appearing on behalf of the petitioner/Enforcement Directorate would submit that the cryptic order accepting the closure report passed by the learned Judicial Magistrate, Alandur on 17.11.2022 is against all canons of justice. The Closure Report filed by the State police itself reveals that the genuineness of the alleged sale agreement dated 02.03.2012 would not be established, which means the defence of the accused that the unaccounted cash of Rs. 7,20,05,000/- found with Mr.Nagarajan/A1 was the consideration for the sale, which purportedly took place pursuant to the sale agreement dated 02.03.2012 also cannot be established. Therefore, on the said ground, Closure Report dated 14.11.2022 has no legs to stand. The learned Magistrate has not considered the materials available on record and the investigation earlier conducted by the State police themselves. All along the State Police opined that materials are available to prove the offence a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted agreement for sale. When the proceeds of crime is already in existence, the closure report suddenly filed by the State police would provide cause for the Enforcement Directorate to challenge the same. The serious economic offence of money laundering and the persons involved in the said offence, cannot be allowed to go scot-free and in such circumstances, when the Enforcement Directorate, on their independent investigation traced out the proceeds of crime and relevant materials are also collected, the offences made out under PMLA cannot be allowed to be buried. Thus, the Enforcement Directorate is to be construed as an aggrieved person, as they are the prosecutors under the PMLA. When the economic offences relating to money laundering is prima facie established, closure report, if filed on certain suspicious circumstances by the State police on extraneous circumstances, then the Enforcement Directorate is entitled to question the correctness of the said closure report by approaching the High Court. 14. The learned Additional Solicitor General of India relied on the petition filed by the Assistant Commissioner of Police, Central Crime Branch before the learned Judicial Magistrate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the State Police, once accepted by the Learned Magistrate, the Enforcement Directorate has no locus standi to challenge the same. When the predicate offence has been closed and found to be non-existent, the PMLA cannot be sustained, as per the ratio laid down Vijay Madanlal Choudhary and Others V. Union of India and Others [2022 SCC ONLINE SC 929] by the Hon'ble Supreme Court of India. When the IPC offence has not been made out as per the closure report filed by the State Police accepted by the Learned Judicial Magistrate, offence under PMLA cannot sustain. The Enforcement Directorate cannot be said to be an aggrieved person, since their actions under PMLA depend on the existence of a predicate offence. When the predicate offence disappeared, the PMLA offence cannot continue as per the principles laid down by the Hon'ble Apex Court in Vijay Madanlal Choudhary's case cited supra . 17. The learned Advocate General would further submit that mere ante-dating of a sale agreement is not a forgery. The sale agreement was acted upon. Thus, the offence is not made out. State Police filed a closure report on the said basis and the same was accepted by the Learned Judicial Magis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... report of the State police is accepted by the Learned Judicial Magistrate, the PMLA offence cannot sustain, in view of the legal principles settled by the Hon'ble Apex Court in Vijay Madanlal Choudhary's case cited supra. The Division Bench considered the principles laid down in the Vijay Madanlal Choudhary's case cited supra. 20. The matter was taken by way of an Appeal before the Hon'ble Supreme Court. Even the Hon'ble Supreme Court has observed the fact that a closure report was filed, which has been later accepted by the Learned Judicial Magistrate by order dated 17.11.2022. When the Hon'ble Supreme Court recorded the closure report accepted by the Learned Judicial Magistrate on 17.11.2022, now the Enforcement Directorate may not be permitted to reopen the PMLA offence, since the predicate offence is closed. The learned Senior Counsel relied on the financial statements produced by the accused persons for income tax assessment. V.DISCUSSIONS: 21. Since the present petition has been filed by the Directorate of Enforcement to quash the closure report filed in the predicate offence, the Enforcement Directorate mainly contended that proceeds of crime is in e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r impugned passed by the Learned Magistrate accepting the further actions drop report. 25. Let us examine the issue relating to maintainability. 26. Offence under Section 3 of PMLA deals with 'Proceeds of Crime', which is possessed, used, handled or projected as untainted money. Proceeds of Crime is defined under Section 2(1)(u) of PMLA as the proceeds that is generated out of a criminal activity in a scheduled offence. Sections 420, 467, 471 of Indian Penal Code (IPC) are scheduled offences. The predicate offence in the present case as originally registered was for Section 420 of IPC and subsequently altered based on the petition filed by the State Police and Sections 467 and 471 IPC are included. Thus, the sum of Rs. 7,20,05,000/- generated out of the criminal activity is a Proceeds of Crime . The proceeds of crime was attempted to be projected as untainted money by creating a fabricated document in the form of an ante dated sale agreement dated 02.03.2012. Thus, proceeds of crime has been identified and the persons, who have generated the proceeds of crime, used the proceeds of crime and projected the proceeds of crime as untainted money have also been identified. 27. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der PMLA cannot be continued. However, the judgment should be read only in the context of what is decided in the said case. It ought not to be read as Statute. The said judgment, more particularly, the above mentioned paragraphs, does not lay down that once there is an acquittal or discharge or quash in the predicate offence, the Enforcement Directorate cannot question the orders of the Learned Magistrate before the High Court under Section 482 of Criminal Procedure Code. There is no such absolute restrain in the judgment in Vijay Madanlal Choudhary's case cited supra . There is no such bar. On the contrary, in paragraph 290 of the said judgment, the Hon'ble Supreme Court has recognised the rights of Enforcement Directorate to work out the remedies as per law. The relevant portion of the said paragraphs are extracted hereunder; 290. ............................. In case the scheduled offence is not already registered by the jurisdictional police or complaint filed before the Magistrate, it is open to the authorised officer to still proceed under Section 5 of the 2002 Act whilst contemporaneously sending information to the jurisdictional police under Section 66(2) of the 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the issues is very well maintainable and the offence under PMLA born from and out of the predicate offence and after investigation the Enforcement Directorate identified the proceeds of crime . That being the factum, they cannot be said to be an alien to the issues involved. (D) ANALYSIS OF THE JUDGMENTS RELIED ON BY THE RESPONDENTS: 36. The respondents relied on the judgment in the case of Bhagwant Singh vs. Commissioner of Police [(1985) 2 SCC 537]. It is a Pre-PMLA judgment, wherein, the issues were considered by the Hon'ble Supreme Court. When the judgment itself is prior to PMLA, the proceeds of crime now present in the case on hand cannot be fit-in with the facts and principles considered by the Hon'ble Supreme Court in the above case. Thus, the facts are distinguishable. 37. The Prevention of Money Laundering Act, 2002 contemplates new set of offence and the procedures to be followed while dealing with the offence. The Enforcement Directorate under the PMLA is the Investigating Agency and working of the Enforcement Directorate with the State Investigating Agency shall be in tandem. Thus, the said judgment is of no avail to the respondents. 38. Mr.N.R.Elango, learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 26.09.2022 in the case of Directorate of Enforcement vs. State of Maharashtra (SLP(CRL).No.5524 of 2021) . The Hon'ble Apex Court has left the question of law open and further said that if the Enforcement Directorate has any other rights or remedies available to them, they may avail the same in accordance with law. Thus, we are of the considered opinion that the very ground raised by the respondents that the Enforcement Directorate cannot intervene in the matter is incorrect. The scope of Section 482 of Criminal Procedure Code is wider enough and Enforcement Directorate as a person in connection with the issues involved has got a right to file a petition if they are of the opinion that there is miscarriage of justice in the matter of acceptance of closure report filed by the State Investigating Agency after tracing out prima facie material against the accused persons relating to predicate offence. (E) OBJECT OF PMLA: 41. Free and fair investigation is the hallmark of the criminal justice system. It is essential that investigating agencies operate in free and fair manner to ensure that both the rights of the accused and the State are well protected during the course of inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ming that they are available, even then, the State Government Treasury Records reveals that the concerned stamp paper was issued only on 09.03.2012 is always available and is cast iron evidence that the alleged sale agreement dated 02.03.2012 is a false document ante dated on a stamp paper released only on 09.03.2012 by the Treasury. This proves the existence of both the predicate offence as well as the PMLA offence. 47. The stamp vendor and the buyer of the stamp paper Smt.Vimala were unavailable for examination, which would not justify for acceptance of the closure report by the Learned Magistrate. 48. The closure report of the State Police was filed on the findings from the judgment in Crl.O.P.Nos.13106 and 14917 of 2013 quashing the predicate offence, but the said judgment had been set aside by the Hon'ble Supreme Court in Crl.A.Nos.423 and 424 of 2018 dated 28.03.2018. This renders the reliance on it improper and irrelevant. 49. The Investigating Officer accepted that Mr.G.Moorthy / A3 paid the income tax on the alleged sale proceeds, overlooking the fact that such declarations could be based on self-assessment without verifying the legitimacy of the transaction. Further, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in the predicate offence. Pertinently, the State Police filed a petition before the Learned Judicial Magistrate, Alandur for alteration of penal provision that Sections 294A, 420, 120B IPC may please be altered as Sections 294A, 420, 120B IPC and 467, 468 and 471 IPC. In the said petition filed by the State Investigating Agency, they have categorically stated as follows; During the course of investigation I have collected the unregistered sale agreement dated 02.03.2012 made between A-2's wife Tmt.Leema Rose and A-3 Tr.G. Moorthy for the sale of his house of (A- 3) at new number 4, Old No.56, 3+d Main Road, Anna Nagar, Chennai 40, in the Indian non judicial stamp paper bearing number AE 147535 and 147536 were supplied by the State Government to one stamp vendor namely Tr.Mayilsamy on 09.03.2012, The above said document were sold to public only on 13.03.2012. But the document prepared by A-3 Tr.G. Moorthy and A-2's wife Tmt. Leema Rose is on 02.03.2012, which was prior to the selling of the stamp from Government to the vendor. It is further submitted that from the above fabricated documents prepared by A-3 and A-2's wife Tmt. Leema Rose for accounting the illegal money ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing inter alia quashing of aforesaid Crime No. 304 of 2012. A common counter affidavit dt. 25.06.2013 refuting all material allegations was filed by Assistant Commissioner of Police on behalf of State of Tamil Nadu. It was submitted, inter alia that the unregistered agreement dated 02.03.2012 was on a stamp paper which was issued by the State Government to the stamp vendor on 09.03.2012 and the same was sold to one Vimla on 13.03.3012. It was further submitted that the lottery tickets recovered during investigation were sent to the respective State Governments to check whether they were genuine and the report was still awaited. The counter affidavit further submitted that the investigation was still incomplete. 5. ....................... 6. ......................... 7. In our view the assessment made by the High Court at a stage when the investigation was yet to be completed, is completely incorrect and uncalled for. Presence of two crucial facts was enough to let the investigation go on, namely, recovery of huge amount of cash of Rs. 7.2 crores from the house of one of the accused and that such recovery was accepted by the accused. The explanation given by them about the alleged t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finding that the Enforcement Directorate is always at liberty to take appropriate action, which the law permits at their command. VI.CONCLUSION: 57. A legislation when brought into force with a legislative intent does not stay in the same shape, as it was intended to be. Evolution of the legislation is inevitable in a growing country. The operation and implementation of the law decides that the legislation is taken forward in its intended spirit and force. Once the legislation is applied and tested, the consequences of such application determine the character and fate of the legislation. 58. The objects of the PMLA as intended is crystal clear from the day of its inception. Economic interest of our great nation is the soul object. The consequent implementation of the law should be in tandem with the legislative intent. Any misuse or abuse of the law will fracture the bones of PMLA, thereby rendering it wholly ineffective. Legislation of such nature must be handled with caution and must not injure any vital organs of Part III of the Constitution of India. 59. The successful functioning of PMLA rests with the Investigating Agencies. Both the State and Central Investigating Agencies n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on'ble Supreme Court and the criminal case was restored by the order of the Apex Court. When the prima facie case regarding a predicate offence has been upheld by the Hon'ble Supreme Court by restoring the criminal case in the predicate offence, filing closure report thereafter by the very same State Agency is undoubtedly suspicious and doubtful. 64. In our opinion, the State Agency has made an attempt to bury the predicate offence against the accused persons in a suspicious manner and on extraneous considerations, which are visible through their actions including the closure report filed by the State police. 65. The State Investigating Agency and the Enforcement Directorate are directed to proceed with the case in tandem, so as to ensure that the criminal case instituted is proceeded in accordance with law. However, the trial must go on uninfluenced by the observations, if any made relating to facts in the present case. 66. The facts established and the legal position considered made us to arrive at an irresistible conclusion that the Closure Report filed by the 1st respondent dated 14.11.2022 accepted by the learned Judicial Magistrate-I, Alandur by order dated 17.11.2022 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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