Supreme Court PMLA Act Case Judgment | VIJAY MADANLAL CHOUDHARY & ORS. VERSUS UNION OF INDIA & ORS

Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले

REPORTABLE

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

SPECIAL LEAVE PETITION (CRIMINAL) NO. 4634 OF 2014

VIJAY MADANLAL CHOUDHARY & ORS. ...PETITIONER(S)

VERSUS

UNION OF INDIA & ORS. ...RESPONDENT(S)

WITH

SPECIAL LEAVE PETITION (CIVIL) NO. 28394 OF 2011

SPECIAL LEAVE PETITION (CIVIL) NO. 28922 OF 2011

SPECIAL LEAVE PETITION (CIVIL) NO. 29273 OF 2011

SPECIAL LEAVE PETITION (CRIMINAL) NO.............OF 2022

(@ DIARY NO. 41063 OF 2015)

SPECIAL LEAVE PETITION (CRIMINAL) NO. 9987 OF 2015

SPECIAL LEAVE PETITION (CRIMINAL) NO.10018 OF 2015

SPECIAL LEAVE PETITION (CRIMINAL) NO. 10019 OF 2015

SPECIAL LEAVE PETITION (CRIMINAL) NO. 993 OF 2016

TRANSFER PETITION (CRIMINAL) NO. 150 OF 2016

TRANSFER PETITION (CRIMINAL) NOS.151-157 OF 2016

WRIT PETITION (CRIMINAL) NO. 152 OF 2016

SPECIAL LEAVE PETITION (CRIMINAL) NO. 11839 OF 2019

SPECIAL LEAVE PETITION (CRIMINAL) NO. 2890 OF 2017

SPECIAL LEAVE PETITION (CRIMINAL) NO. 5487 OF 2017

CRIMINAL APPEAL NO. 1269 OF 2017

CRIMINAL APPEAL NO. 1270 OF 2017

CRIMINAL APPEAL NOS. 1271-1272 OF 2017

WRIT PETITION (CRIMINAL) NO. 202 OF 2017

SPECIAL LEAVE PETITION (CRIMINAL) NO............OF 2022

(@ DIARY NO(S). 9360 OF 2018)

SPECIAL LEAVE PETITION (CRIMINAL) NO............OF 2022

(@ DIARY NO(S). 9365 OF 2018)

SPECIAL LEAVE PETITION (CRIMINAL) NO............OF 2022

(@ DIARY NO(S). 17000 OF 2018)

SPECIAL LEAVE PETITION (CRIMINAL) NO............OF 2022

(@ DIARY NO(S). 17462 OF 2018)

SPECIAL LEAVE PETITION (CRIMINAL) NO............OF 2022

(@ DIARY NO(S). 20250 OF 2018)

SPECIAL LEAVE PETITION (CRIMINAL) NO............OF 2022

(@ DIARY NO(S). 22529 OF 2018)

SPECIAL LEAVE PETITION (CRIMINAL) NO. 1534 OF 2018

SPECIAL LEAVE PETITION (CRIMINAL) NOS. 1701-1703 OF 2018

SPECIAL LEAVE PETITION (CRIMINAL) NO. 1705 OF 2018

SPECIAL LEAVE PETITION (CRIMINAL) NO. 2971 OF 2018

SPECIAL LEAVE PETITION (CRIMINAL) NO. 4078 OF 2018

SPECIAL LEAVE PETITION (CRIMINAL) NO. 5444 OF 2018

SPECIAL LEAVE PETITION (CRIMINAL) NO. 6922 OF 2018

SPECIAL LEAVE PETITION (CRIMINAL) NO. 7408 OF 2018

SPECIAL LEAVE PETITION (CRIMINAL) NO. 8156 OF 2018

SPECIAL LEAVE PETITION (CRIMINAL) NO. 11049 OF 2018

CRIMINAL APPEAL NO. 223 OF 2018

CRIMINAL APPEAL NOS. 391-392 OF 2018

CRIMINAL APPEAL NOS. 793-794 OF 2018

CRIMINAL APPEAL NO. 1114 OF 2018

CRIMINAL APPEAL NO. 1115 OF 2018

CRIMINAL APPEAL NO. 1210 OF 2018

WRIT PETITION (CRIMINAL) NO. 26 OF 2018

WRIT PETITION (CRIMINAL) NO. 33 OF 2018

WRIT PETITION (CRIMINAL) NO. 75 OF 2018

WRIT PETITION (CRIMINAL) NO. 117 OF 2018

WRIT PETITION (CRIMINAL) NO. 173 OF 2018

WRIT PETITION (CRIMINAL) NO. 175 OF 2018

WRIT PETITION (CRIMINAL) NO. 184 OF 2018

WRIT PETITION (CRIMINAL) NO. 226 OF 2018

WRIT PETITION (CRIMINAL) NO. 251 OF 2018

WRIT PETITION (CRIMINAL) NO. 309 OF 2018

WRIT PETITION (CRIMINAL) NO. 333 OF 2018

WRIT PETITION (CRIMINAL) NO. 336 OF 2018

TRANSFERRED CASE (CRIMINAL) NO. 3 OF 2018

TRANSFERRED CASE (CRIMINAL) NO. 4 OF 2018

TRANSFERRED CASE (CRIMINAL) NO. 5 OF 2018

TRANSFER PETITION (CIVIL) NO. 1583 OF 2018

SPECIAL LEAVE PETITION (CRIMINAL) NO. 244 OF 2019

SPECIAL LEAVE PETITION (CRIMINAL) NO. 3647 OF 2019

SPECIAL LEAVE PETITION (CRIMINAL) NOS. 4322-4324 OF 2019

SPECIAL LEAVE PETITION (CRIMINAL) NO. 4546 OF 2019

SPECIAL LEAVE PETITION (CRIMINAL) NO. 5153 OF 2019

SPECIAL LEAVE PETITION (CRIMINAL) NO. 5350 OF 2019

SPECIAL LEAVE PETITION (CRIMINAL) NO. 6834 OF 2019

SPECIAL LEAVE PETITION (CRIMINAL) NO. 8111 OF 2019

SPECIAL LEAVE PETITION (CRIMINAL) NO. 8174 OF 2019

SPECIAL LEAVE PETITION (CRIMINAL) NO. 9541 OF 2019

SPECIAL LEAVE PETITION (CRIMINAL) NO. 9652 OF 2019

SPECIAL LEAVE PETITION (CRIMINAL) NO. 10627 OF 2019

WRIT PETITION (CRIMINAL) NO. 9 OF 2019

WRIT PETITION (CRIMINAL) NO. 16 OF 2019

WRIT PETITION (CRIMINAL) NO. 49 OF 2019

WRIT PETITION (CRIMINAL) NO. 118 OF 2019

WRIT PETITION (CRIMINAL) NO. 119 OF 2019

WRIT PETITION (CRIMINAL) NO. 122 OF 2019

WRIT PETITION (CRIMINAL) NO. 127 OF 2019

WRIT PETITION (CRIMINAL) NO. 139 OF 2019

WRIT PETITION (CRIMINAL) NO. 147 OF 2019

WRIT PETITION (CRIMINAL) NO. 173 OF 2019

WRIT PETITION (CRIMINAL) NO. 205 OF 2019

WRIT PETITION (CRIMINAL) NO. 212 OF 2019

WRIT PETITION (CRIMINAL) NO. 217 OF 2019

WRIT PETITION (CRIMINAL) NO. 239 OF 2019

WRIT PETITION (CRIMINAL) NO. 244 OF 2019

WRIT PETITION (CRIMINAL) NO. 253 OF 2019

WRIT PETITION (CRIMINAL) NO. 261 OF 2019

WRIT PETITION (CRIMINAL) NO. 263 OF 2019

WRIT PETITION (CRIMINAL) NO. 266 OF 2019

WRIT PETITION (CRIMINAL) NO. 267 OF 2019

WRIT PETITION (CRIMINAL) NO. 272 OF 2019

WRIT PETITION (CRIMINAL) NO. 273 OF 2019

WRIT PETITION (CRIMINAL) NO. 283 OF 2019

WRIT PETITION (CRIMINAL) NO. 285 OF 2019

WRIT PETITION (CRIMINAL) NO. 286 OF 2019

WRIT PETITION (CRIMINAL) NO. 287 OF 2019

WRIT PETITION (CRIMINAL) NO. 288 OF 2019

WRIT PETITION (CRIMINAL) NO. 289 OF 2019

WRIT PETITION (CRIMINAL) NO. 298 OF 2019

WRIT PETITION (CRIMINAL) NO. 299 OF 2019

WRIT PETITION (CRIMINAL) NO. 300 OF 2019

WRIT PETITION (CRIMINAL) NO. 303 OF 2019

WRIT PETITION (CRIMINAL) NO. 305 OF 2019

WRIT PETITION (CRIMINAL) NO. 306 OF 2019

WRIT PETITION (CRIMINAL) NO. 308 OF 2019

WRIT PETITION (CRIMINAL) NO. 309 OF 2019

WRIT PETITION (CRIMINAL) NO. 313 OF 2019

WRIT PETITION (CRIMINAL) NO. 326 OF 2019

WRIT PETITION (CRIMINAL) NO. 346 OF 2019

WRIT PETITION (CRIMINAL) NO. 365 OF 2019

WRIT PETITION (CRIMINAL) NO. 367 OF 2019

CRIMINAL APPEAL NO. 682 OF 2019

SPECIAL LEAVE PETITION (CRIMINAL) NO. 647 OF 2020

SPECIAL LEAVE PETITION (CRIMINAL) NO. 260 OF 2020

SPECIAL LEAVE PETITION (CRIMINAL) NO. 618 OF 2020

SPECIAL LEAVE PETITION (CRIMINAL) NO. 1732 OF 2020

SPECIAL LEAVE PETITION (CRIMINAL) NO. 2023 OF 2020

SPECIAL LEAVE PETITION (CRIMINAL) NO. 2814 OF 2020

SPECIAL LEAVE PETITION (CRIMINAL) NO. 3366 OF 2020

SPECIAL LEAVE PETITION (CRIMINAL) NO. 3474 OF 2020

SPECIAL LEAVE PETITION (CRIMINAL) NO. 5536 OF 2020

SPECIAL LEAVE PETITION (CRIMINAL) NO. 6128 OF 2020

SPECIAL LEAVE PETITION (CRIMINAL) NO. 6172 OF 2020

SPECIAL LEAVE PETITION (CRIMINAL) NO. 6303 OF 2020

SPECIAL LEAVE PETITION (CRIMINAL) NO. 6456 OF 2020

SPECIAL LEAVE PETITION (CRIMINAL) NO. 6660 OF 2020

WRIT PETITION (CRIMINAL) NO. 5 OF 2020

WRIT PETITION (CRIMINAL) NO. 9 OF 2020

WRIT PETITION (CRIMINAL) NO. 28 OF 2020

WRIT PETITION (CRIMINAL) NO. 35 OF 2020

WRIT PETITION (CRIMINAL) NO. 36 OF 2020

WRIT PETITION (CRIMINAL) NO. 39 OF 2020

WRIT PETITION (CRIMINAL) NO. 49 OF 2020

WRIT PETITION (CRIMINAL) NO. 52 OF 2020

WRIT PETITION (CRIMINAL) NO. 60 OF 2020

WRIT PETITION (CRIMINAL) NO. 61 OF 2020

WRIT PETITION (CRIMINAL) NO. 89 OF 2020

WRIT PETITION (CRIMINAL) NO. 90 OF 2020

WRIT PETITION (CRIMINAL) NO. 91 OF 2020

WRIT PETITION (CRIMINAL) NO. 93 OF 2020

WRIT PETITION (CRIMINAL) NO. 124 OF 2020

WRIT PETITION (CRIMINAL) NO. 137 OF 2020

WRIT PETITION (CRIMINAL) NO. 140 OF 2020

WRIT PETITION (CRIMINAL) NO. 142 OF 2020

WRIT PETITION (CRIMINAL) NO. 145 OF 2020

WRIT PETITION (CRIMINAL) NO. 169 OF 2020

WRIT PETITION (CRIMINAL) NO. 184 OF 2020

WRIT PETITION (CRIMINAL) NO. 221 OF 2020

WRIT PETITION (CRIMINAL) NO. 223 OF 2020

WRIT PETITION (CRIMINAL) NO. 228 OF 2020

WRIT PETITION (CRIMINAL) NO. 239 OF 2020

WRIT PETITION (CRIMINAL) NO. 240 OF 2020

WRIT PETITION (CRIMINAL) NO. 259 OF 2020

WRIT PETITION (CRIMINAL) NO. 267 OF 2020

WRIT PETITION (CRIMINAL) NO. 285 OF 2020

WRIT PETITION (CRIMINAL) NO. 286 OF 2020

WRIT PETITION (CRIMINAL) NO. 311 OF 2020

WRIT PETITION (CRIMINAL) NO. 329 OF 2020

WRIT PETITION (CRIMINAL) NO. 366 OF 2020

WRIT PETITION (CRIMINAL) NO. 380 OF 2020

WRIT PETITION (CRIMINAL) NO. 385 OF 2020

WRIT PETITION (CRIMINAL) NO. 387 OF 2020

WRIT PETITION (CRIMINAL) NO. 404 OF 2020

WRIT PETITION (CRIMINAL) NO. 410 OF 2020

WRIT PETITION (CRIMINAL) NO. 411 OF 2020

WRIT PETITION (CRIMINAL) NO. 429 OF 2020

WRIT PETITION (CIVIL) NO. 1401 OF 2020

SPECIAL LEAVE PETITION (CRIMINAL) NO............OF 2022

(@ DIARY NO(S). 8626 OF 2021)

SPECIAL LEAVE PETITION (CRIMINAL) NO............OF 2022

(@ DIARY NO(S). 31616 OF 2021)

SPECIAL LEAVE PETITION (CRIMINAL) NO............OF 2022

(@ DIARY NO. 11605 OF 2021)

SPECIAL LEAVE PETITION (CRIMINAL) NO. 609 OF 2021

SPECIAL LEAVE PETITION (CRIMINAL) NO. 734 OF 2021

SPECIAL LEAVE PETITION (CRIMINAL) NO. 1031 OF 2021

SPECIAL LEAVE PETITION (CRIMINAL) NO. 1072 OF 2021

SPECIAL LEAVE PETITION (CRIMINAL) NO. 1073 OF 2021

SPECIAL LEAVE PETITION (CRIMINAL) NO. 1107 OF 2021

SPECIAL LEAVE PETITION (CRIMINAL) NO. 1355 OF 2021

SPECIAL LEAVE PETITION (CRIMINAL) NO. 1440 OF 2021

SPECIAL LEAVE PETITION (CRIMINAL) NO. 1403 OF 2021

SPECIAL LEAVE PETITION (CRIMINAL) NO. 1586 OF 2021

SPECIAL LEAVE PETITION (CRIMINAL) NO. 1855 OF 2021

SPECIAL LEAVE PETITION (CRIMINAL) NO. 1920 OF 2021

SPECIAL LEAVE PETITION (CRIMINAL) NOS. 2050-2054 OF 2021

SPECIAL LEAVE PETITION (CRIMINAL) NO. 2237 OF 2021

SPECIAL LEAVE PETITION (CRIMINAL) NO. 2250 OF 2021

SPECIAL LEAVE PETITION (CRIMINAL) NO. 2435 OF 2021

SPECIAL LEAVE PETITION (CRIMINAL) NO. 2818 OF 2021

SPECIAL LEAVE PETITION (CRIMINAL) NO. 3228 OF 2021

SPECIAL LEAVE PETITION (CRIMINAL) NO. 3274 OF 2021

SPECIAL LEAVE PETITION (CRIMINAL) NO. 3439 OF 2021

SPECIAL LEAVE PETITION (CRIMINAL) NO. 3514 OF 2021

SPECIAL LEAVE PETITION (CRIMINAL) NO. 3629 OF 2021

SPECIAL LEAVE PETITION (CRIMINAL) NO. 3769 OF 2021

SPECIAL LEAVE PETITION (CRIMINAL) NO. 3813 OF 2021

SPECIAL LEAVE PETITION (CRIMINAL) NO. 3921 OF 2021

SPECIAL LEAVE PETITION (CRIMINAL) NO. 4024 OF 2021

SPECIAL LEAVE PETITION (CRIMINAL) NO. 4834 OF 2021

SPECIAL LEAVE PETITION (CRIMINAL) NO. 5156 OF 2021

SPECIAL LEAVE PETITION (CRIMINAL) NO. 5174 OF 2021

SPECIAL LEAVE PETITION (CRIMINAL) NO. 5252 OF 2021

SPECIAL LEAVE PETITION (CRIMINAL) NO. 5457 OF 2021

SPECIAL LEAVE PETITION (CRIMINAL) NO. 5652 OF 2021

SPECIAL LEAVE PETITION (CRIMINAL) NOS. 5696-5697 OF 2021

SPECIAL LEAVE PETITION (CRIMINAL) NO. 6189 OF 2021

SPECIAL LEAVE PETITION (CRIMINAL) NO. 6338 OF 2021

SPECIAL LEAVE PETITION (CRIMINAL) NO. 6847 OF 2021

SPECIAL LEAVE PETITION (CRIMINAL) NOS. 7021-7023 OF 2021

SPECIAL LEAVE PETITION (CRIMINAL) NO. 8429 OF 2021

SPECIAL LEAVE PETITION (CIVIL) NOS. 8764-8767 OF 2021

SPECIAL LEAVE PETITION (CIVIL) NO. 20310 OF 2021

TRANSFER PETITION (CRIMINAL) No. 435 OF 2021

WRIT PETITION (CIVIL) No. 56 OF 2021

WRIT PETITION (CRIMINAL) NO. 4 OF 2021

WRIT PETITION (CRIMINAL) NO. 6 OF 2021

WRIT PETITION (CRIMINAL) NO. 11 OF 2021

WRIT PETITION (CRIMINAL) NO. 18 OF 2021

WRIT PETITION (CRIMINAL) NO. 19 OF 2021

WRIT PETITION (CRIMINAL) NO. 21 OF 2021

WRIT PETITION (CRIMINAL) NO. 27 OF 2021

WRIT PETITION (CRIMINAL) NO. 33 OF 2021

WRIT PETITION (CRIMINAL) NO. 40 OF 2021

WRIT PETITION (CRIMINAL) NO. 47 OF 2021

WRIT PETITION (CRIMINAL) NO. 66 OF 2021

WRIT PETITION (CRIMINAL) NO. 69 OF 2021

WRIT PETITION (CRIMINAL) NO. 144 OF 2021

WRIT PETITION (CRIMINAL) NO. 179 OF 2021

WRIT PETITION (CRIMINAL) NO. 199 OF 2021

WRIT PETITION (CRIMINAL) NO. 207 OF 2021

WRIT PETITION (CRIMINAL) NO. 239 OF 2021

WRIT PETITION (CRIMINAL) NO. 263 OF 2021

WRIT PETITION (CRIMINAL) NO. 268 OF 2021

WRIT PETITION (CRIMINAL) NO. 282 OF 2021

WRIT PETITION (CRIMINAL) NO. 301 OF 2021

WRIT PETITION (CRIMINAL) NO. 323 OF 2021

WRIT PETITION (CRIMINAL) NO. 359 OF 2021

WRIT PETITION (CRIMINAL) NO. 370 OF 2021

WRIT PETITION (CRIMINAL) NO. 303 OF 2021

WRIT PETITION (CRIMINAL) NO. 305 OF 2021

WRIT PETITION (CRIMINAL) NO. 453 OF 2021

WRIT PETITION (CRIMINAL) NO. 454 OF 2021

WRIT PETITION (CRIMINAL) NO. 475 OF 2021

WRIT PETITION (CRIMINAL) NO. 520 OF 2021

WRIT PETITION (CRIMINAL) NO. 532 OF 2021

J U D G M E N T

A.M. KHANWILKAR, J.

Table of Contents

Particulars Paragraph No(s).

Preface 1(a)-(d)

Submissions of the Private Parties

• Mr. Kapil Sibal, Senior Counsel 2(i)–(xxiii)

• Mr. Sidharth Luthra, Senior Counsel 3(i)–(iii)

• Dr. Abhishek Manu Singhvi,

Senior Counsel

4(i)–(ix)

• Mr. Mukul Rohatgi, Senior Counsel 5(i)-(iii)

• Mr. Amit Desai, Senior Counsel 6(i)-(iii)

• Mr. S. Niranjan Reddy, Senior Counsel 7(i)-(ii)

• Dr. Menaka Guruswamy,

Senior Counsel

8(i)-(v)

• Mr. Aabad Ponda, Senior Counsel 9(i)-(ii)

• Mr. Siddharth Aggarwal, Senior Counsel 10(i)-(iii)

• Mr. Mahesh Jethmalani, Senior Counsel 11(i)-(iii)

• Mr. Abhimanyu Bhandari, Counsel 12(i)-(iv)

• Mr. N. Hariharan, Senior Counsel 13

• Mr. Vikram Chaudhari, Senior Counsel 14(i)-(v)

• Mr. Akshay Nagarajan, Counsel 15

Submissions of the Union of India

• Mr. Tushar Mehta,

Solicitor General of India

16(i)-(lxxx)

• Mr. S.V. Raju,

Additional Solicitor General of India

17(i)-(lxvi)

Consideration

• The 2002 Act 19-22

• Preamble of the 2002 Act 23-24

• Definition Clause 25-36

• Section 3 of the 2002 Act 37-55

• Section 5 of the 2002 Act 56-70

• Section 8 of the 2002 Act 71-76

• Searches and Seizures 77-86

• Search of persons 87

• Arrest 88-90

• Burden of proof 91-103

• Special Courts 104-114

• Bail 115-149

• Section 50 of the 2002 Act 150-173

• Section 63 of the 2002 Act 174

• Schedule of the 2002 Act 175 & 175A

• ECIR vis-à-vis FIR 176-179

• ED Manual 180-181

• Appellate Tribunal 182

• Punishment under Section 4 of the

2002 Act

183-186

Conclusion 187(i)-(xx)

Order 1-7

PREFACE

1. In the present batch of petition(s)/appeal(s)/case(s), we are

called upon to deal with the pleas concerning validity and

interpretation of certain provisions of the Prevention of MoneyLaundering Act, 20021 and the procedure followed by the

1 For short, “PMLA” or “the 2002 Act”

Enforcement Directorate2 while inquiring into/investigating offences

under the PMLA, being violative of the constitutional mandate.

(a) It is relevant to mention at the outset that after the decision of

this Court in Nikesh Tarachand Shah vs. Union of India & Anr.3,

the Parliament amended Section 45 of the 2002 Act vide Act 13 of

2018, so as to remove the defect noted in the said decision and to

revive the effect of twin conditions specified in Section 45 to offences

under the 2002 Act. This amendment came to be challenged before

different High Courts including this Court by way of writ petitions.

In some cases where relief of bail was prayed, the efficacy of

amended Section 45 of the 2002 Act was put in issue and answered

by the concerned High Court. Those decision(s) have been assailed

before this Court and the same is forming part of this batch of cases.

At the same time, separate writ petitions have been filed to challenge

several other provisions of the 2002 Act and all those cases have

been tagged and heard together as overlapping issues have been

raised by the parties.

2 For short, “ED”

3 (2018) 11 SCC 1

(b) We have various other civil and criminal writ petitions, appeals,

special leave petitions, transferred petitions and transferred cases

before us, raising similar questions of law pertaining to

constitutional validity and interpretation of certain provisions of the

other statutes including the Customs Act, 19624, the Central Goods

and Services Tax Act, 20175, the Companies Act, 20136, the

Prevention of Corruption Act, 19887, the Indian Penal Code, 18608

and the Code of Criminal Procedure, 19739 which are also under

challenge. However, we are confining ourselves only with challenge

to the provisions of PMLA.

and interpretation of provisions under the PMLA, there are special

leave petitions filed against various orders of High

Courts/subordinate Courts across the country, whereby prayer for

grant of bail/quashing/discharge stood rejected, as also, special

4 For short, “1962 Act” or “the Customs Act”

5 For short, “CGST Act”

6 For short, “Companies Act”

7 For short, “PC Act”

8 For short, “IPC”

9 For short, “Cr.P.C. or “the 1973 Code”

leave petitions concerned with issues other than constitutional

validity and interpretation. Union of India has also filed

appeals/special leave petitions; and there are few transfer petitions

filed under Article 139A(1) of the Constitution of India.

(d) Instead of dealing with facts and issues in each case, we will be

confining ourselves to examining the challenge to the relevant

provisions of PMLA, being question of law raised by parties.

SUBMISSIONS OF THE PRIVATE PARTIES

2. Mr. Kapil Sibal, learned senior counsel appearing for the

private parties/petitioners in the concerned matter(s) submitted that

the procedure followed by the ED in registering the Enforcement

Case Information Report10 is opaque, arbitrary and violative of the

constitutional rights of an accused. It was submitted that the

procedure being followed under the PMLA is draconian as it violates

the basic tenets of the criminal justice system and the rights

enshrined in Part III of the Constitution of India, in particular

Articles 14, 20 and 21 thereof.

10 For short, “ECIR”

(i) A question was raised as to whether there can be a procedure

in law, where penal proceedings can be started against an individual,

without informing him of the charges? It was contended that as per

present situation, the ED can arrest an individual on the basis of an

ECIR without informing him of its contents, which is per se arbitrary

and violative of the constitutional rights of an accused. The right of

an accused to get a copy of the First Information Report10A at an early

stage and also the right to know the allegations as an inherent part of

Article 21. Reference was made to Youth Bar Association of India

vs. Union of India & Anr.11 in support of this plea. Further, as per

law, the agencies investigating crimes need to provide a list of all the

documents and materials seized to the accused in order to be

consistent with the principles of transparency and openness12. It

was also submitted that under the Cr.P.C., every FIR registered by

an officer under Section 154 thereof is to be forwarded to the

jurisdictional Magistrate. However, this procedure is not being

followed in ECIR cases. Further, violation of Section 157 of the

10A For short, “FIR”

11 (2016) 9 SCC 473 (Para 11.1); and Court on its Own Motion vs. State, 2010 SCC OnLine Del

4309 (Paras 39 & 54)

12 Criminal Trials Guidelines Regarding Inadequacies and Deficiencies, In re, vs. State of Andhra

Pradesh & Ors., (2021) 10 SCC 598 (Para 11); also see: Nitya Dharmananda & Anr. vs. Gopal

Sheelum Reddy & Anr., (2018) 2 SCC 93 (Para 8).

Cr.P.C. was also alleged and it was submitted that this has led to

non-compliance with the procedure prescribed under the law

(Cr.P.C.) and the law laid down by this Court in catena of decisions.

It was vehemently argued that in some cases the ECIR is voluntarily

provided, while in others it is not, which is completely arbitrary and

discriminatory.

(ii) It was argued that as per definition of Section 3 of the PMLA,

the accused can either directly or indirectly commit moneylaundering if he is connected by way of any process or activity with

the proceeds of crime and has projected or claimed such proceeds

as untainted property. In light of this, it was suggested that the

investigation may shed some light on such alleged proceeds of crime,

for which, facts must first be collected and there should be a

definitive determination whether such proceeds of crime have

actually been generated from the scheduled offence. Thus, there

must be at least a prima facie quantification to ensure that the

threshold of the PMLA is met and it cannot be urged that the ECIR

is an internal document. Therefore, in the absence of adherence to

the requirements of the Cr.P.C. and the procedure established by

law, these are being violated blatantly13.

(iii) An anomalous situation is created where based on such ECIR,

the ED can summon accused persons and seek details of financial

transactions. The accused is summoned under Section 50 of the

PMLA to make such statements which are treated as admissible in

evidence. Throughout the process, the accused might well be

unaware of the allegations against him. It is clear that Cr.P.C. has

separate provisions for summoning of the accused under Section

41A and for witnesses under Section 160. The same distinction is

absent under the PMLA. Further, Chapter XII of the Cr.P.C. is not

being followed by the ED and, as such, there are no governing

principles of investigation, no legal criteria and guiding principles

which are required to be followed. As such, the initiation of

investigation by the ED, which can potentially curtail the liberty of

the individual, would suffer from the vice of Article 14 of the

Constitution of India14

13 Lalita Kumari vs. Government of Uttar Pradesh and Ors., (2014) 2 SCC 1 (Para 120.1)

14 E.P. Royappa vs. State of Tamil Nadu & Anr., (1974) 4 SCC 3; also see: S.G. Jaisinghani vs.

Union of India and Ors, (1967) 2 SCR 703 and Nikesh Tarachand Shah, (supra at Footnote No.3)

(Paras 21-23).

(iv) Mr. Sibal, while referring to the definition of “moneylaundering” under Section 3 of the PMLA, submitted that the ED

must satisfy itself that the proceeds of crime have been projected as

untainted property for the registration of an ECIR or the application

of the PMLA. It has been vehemently argued that the offence of

money-laundering requires the proceeds of crime to be mandatorily

‘projected or claimed’ as ‘untainted property’. Meaning thereby that

Section 3 is applicable only to the generation of proceeds of crime,

such proceeds being projected or claimed as untainted property. It

is stated that the pertinent condition of ‘and’ projecting or claiming

cannot be ousted and made or interpreted to be ‘or’ by the

Explanation that has been brought about by way of the amendment

made vide Finance (No.2) Act, 2019. It has been submitted that such

an act would also be unconstitutional, as being enlarging the ambit

of a principal section by way of adding an Explanation.

(v) It is also stated that the general practice is that the ED registers

an ECIR immediately upon an FIR of a predicate offence being

registered. The cause of action being entirely different from the

predicate offence, as such, can lead to a situation where there is no

difference between the predicate offence and money-laundering. In

support of the said argument, reliance was placed on the Article 3 of

the Vienna Convention15, where words like “conversion or transfer of

property”, “for the purpose of concealing or disguising the illicit

origin of the property or of assisting any person who is involved in

the commission of such an offence or offences to evade the legal

consequences of his actions”, have been used. It is urged that what

was sought to be criminalised was not the mere acquisition and use

of proceeds of crime, but it was the conversion or transfer for the

purpose of either concealing or disguising the illicit origin of the

property to evade the legal consequences of one’s actions. Reference

was also made to the Preamble of the PMLA which refers to India’s

global commitments to combat the menace of money-laundering.

Learned counsel has then referred to the definition of “moneylaundering” as per the Prevention of Money-Laundering Bill, 199916

to show how upon reference to the Select Committee of the Rajya

Sabha, certain observations were made and, hence, the amendment

was effected, wherein the words “and projecting it as untainted

15 United Nations adopted and signed the Convention against Illicit Traffic in Narcotic Drugs

and Psychotropic Substances (hereinafter referred to as “Vienna Convention” or “the 1988

Convention” or “the UN Drugs Convention”, as the case may be)

16 For short, “1999 Bill”

property” were added to the definition which was finally passed in

the form of PMLA. We have reproduced the relevant

sections/provisions hereinbelow at the appropriate place. Reliance

has also been placed on the decision of Nikesh Tarachand Shah17

(vi) The safeguard provided by Section 173 of the Cr.P.C., it is

argued, was present in the original enactment of 2002 (PMLA). The

same has now supposedly been whittled down by various

amendments over the years. It has been submitted that by way of

amendments in 2009, proviso have been added to Sections 5 and

17, which have diluted certain safeguards. Further, it is submitted

that the safeguard under Section 17(1) has been totally done away

with in the amendment made in 2019. To further this argument, it

has been suggested that the filing of chargesheet in respect of a

predicate offence was impliedly there in Section 19 of the PMLA,

since there is a requirement which cannot be fulfilled sans an

investigation, to record reasons to believe that ‘any person has been

guilty of an offence punishable under this Act’. In respect of Section

50, it is urged that though there is no threshold mentioned in the

17 Supra at Footnote No.3 (Para 11)

Act, yet the persons concerned should be summoned only after the

registration of the ECIR. It is, thus, submitted that any attempt to

prosecute under the PMLA without prima facie recordings would be

inconsistent with the Act itself and violative of the fundamental

rights.

(vii) It is urged that the derivate Act cannot be more onerous than

the original. It is suggested that the proceeds of crime and the

predicate offence are entwined inextricably. Further, the

punishment for generation of the proceeds of crime cannot be

disproportionate to the punishment for the underlying predicate

offence. The same analogy ought to apply to the procedural

protections, such as those provided under Section 41A of the

Cr.P.C., which otherwise would be foul of the constitutional

protections under Article 21.

(viii) Learned counsel has also challenged the aspect of the

Schedule being overbroad and inconsistent with the PMLA and the

predicate offences. It is argued that even in the Statements of

Objects and Reasons of the 1999 Bill, it has been stated that the Act

was brought in to curb the laundering stemming from trade in

narcotics and drug related crimes. Reference is also made to the

various conventions that are part of the jurisprudence behind the

PMLA18. It was to be seen in light of organised crime, unlike its

application today to less heinous crimes such as theft. It is

submitted that there was no intention or purpose to cover offences

under the PMLA so widely. It is also submitted that there are certain

offences which are less severe and heinous than money-laundering

itself and that the inclusion of such offences in the Schedule does

not have a rational nexus with the objects and reasons of the PMLA

and the same is unreasonable, arbitrary and violative of Articles 14

and 21 of the Constitution of India.

(ix) It has been submitted that the PMLA cannot be a standalone

statute. To bolster this claim, reliance has been placed on speeches

made by Ministers in the Parliament. Further reliance has been

placed on K.P. Varghese vs. Income Tax Officer, Ernakulum &

Anr.19

, Union of India & Anr. vs. Martin Lottery Agencies

18 United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic

Substances, 1988 (for short, “Vienna Convention”); Basle Statement of Principles, 1989; Forty

Recommendations of the Financial Action Task Force on Money Laundering, 1990; Political

Declaration and Global Program of Action adopted by the United Nations General Assembly on

23.02.1990; and Resolution passed at the UN Special Session on countering World Drug

Problem Together – 8th to 10th June 1998.

19 (1981) 4 SCC 173 (Para 8)

Limited20 and P. Chidambaram vs. Directorate of

Enforcement21

(x) Our attention is also drawn to the provisions which have now

been replaced in the statute. Prior to 2013 amendment, Section 8(5)

of the PMLA was to the following effect: -

“8. Adjudication—

….

(5) Whereon conclusion of a trial for any scheduled

offence, the person concerned is acquitted, the attachment

of the property or retention of the seized property or record

under sub-section (3) and net income, if any, shall cease to

have effect.”

However, vide amendment in 2013, the words ‘trial for any

scheduled offence’ were replaced with the words ‘trial of an offence

under this Act’. It is urged that for the property to qualify as

proceeds of crime, it must be connected in some way with the activity

related to the scheduled offence. Meaning thereby that if there is no

scheduled offence, there can be no property derived directly or

indirectly; thus, an irrefutable conclusion that a scheduled offence

is a pre-requisite for generation of proceeds of crime.

20 (2009) 12 SCC 209 (Para 38)

21 (2019) 9 SCC 24 (Para 25)

(xi) It is further argued that an Explanation has been added to

Section 44(1)(d) of the PMLA by way of Finance (No. 2) Act, 2019,

which posits that a trial under the PMLA can proceed independent

of the trial of scheduled offence. It is submitted that the Explanation

is being given a mischievous interpretation when it ought to be read

plainly and simply. It is stated that the Explanation relates only to

the Special Court and not the trial of the scheduled offence. It is

submitted that a Special Court can never convict a person under the

PMLA without returning a finding that a scheduled offence has been

committed.

(xii) It is submitted that the application of Cr.P.C. is necessary since

it is a procedure established by law and there cannot be an

investigation outside the purview of Section 154 or 155 of the Cr.P.C.

Reference is made to the constitutional safeguards of reasonability

and fairness. It is submitted that the Act itself, under Section 65,

provides for the applicability of the Cr.P.C.22

It is pointed out that

several safeguards, procedural in nature are being violated. To

illustrate a few - non registration of FIR, lack of a case diary,

22 Ashok Munilal Jain & Anr. vs. Assistant Director, Directorate of Enforcement, (2018) 16 SCC

158 (Paras 3-5)

restricted access to the ECIR, violation of Section 161 of the Cr.P.C.,

Section 41A of the Cr.P.C., lack of magisterial permission under

Section 155 of the Cr.P.C. Such unguided use of power to investigate

and prosecute any person violates Articles 14 and 21 of the

Constitution.

(xiii) Another argument raised by the learned counsel is that the ED

officers are police officers. It is submitted that the determination of

the same depends on: (1) what is the object and purpose of the

special statute and (2) the nature of power exercised by such

officers? The first argument in this regard is that if it can be shown

that in order to achieve the objectives of the special statute -

preventive and detection steps to curb crime are permitted and

coercive powers are vested, then such an officer is a police officer.

Further, such an officer is covered within the ambit of Sections 25

and 26 of the Indian Evidence Act, 187223. In support of the test to

gauge the objective of the statute, reference has been made to State

of Punjab vs. Barkat Ram24, wherein it was held —a customs

23 For short, “the 1872 Act” or “the Evidence Act”

24 (1962) 3 SCR 338; Also see: Tofan Singh vs. State of Tamil Nadu, 2020 SCC OnLine SC 882

(Para 88)

officer is not a police officer within the meaning of Section 25 of the

1872 Act. It is also stated that police officers had to be construed

not in a narrow way but in a wide and popular sense. Reference is

made to Sections 17 and 18 of the Police Act, 186125, whereunder

an appointment of special police officers can be made. Thus, it is

stated that it is not necessary to be enrolled under the 1861 Act, but

if one is invested with the same powers i.e., the powers for prevention

and detection of crime, one will be a police officer. Then, the PMLA

is distinguished from the 1962 Act, Sea Customs Act, 187826,

Central Excise Act, 194427 and the CGST Act. The dissenting

opinion of Subba Rao, J. in Barkat Ram28 is also relied upon.

Thereafter, it is stated that PMLA, being a purely penal statute, one

needs to look at the Statement of Objects and Reasons of the 1999

Bill and the Financial Action Task Force29 recommendations.

25 For short, “1861 Act”

26 For short, “1878 Act” or “the Sea Customs Act”

27 For short, “1944 Act” or “the Central Excise Act”

28 Supra at Footnote No.24

29 For short, “FATF” – an inter-governmental body, which is the global money laundering and

terrorist financing watchdog.

(xiv) Reliance was also placed on Raja Ram Jaiswal vs. State of

Bihar30

. Further, it has been stated that even in Tofan Singh vs.

State of Tamil Nadu31, the case of Raja Ram Jaiswal32 has been

relied upon and it is concluded that when a person is vested with

the powers of investigation, he is said to be a police officer, as he

prevents and detects crime. Further, the powers under Section 50

of the PMLA for the purpose of investigation are in consonance with

what has been held in Tofan Singh33 and establishes a direct

relationship with the prohibition under Section 25 of the 1872 Act.

Another crucial point raised is that most statutes where officers have

not passed the muster of ‘police officers’ in the eyes of law, contain

the term “enquiry” in contrast with the term “investigation” used in

Section 50 of the PMLA. A parallel has also been drawn between the

definition of “investigation” under the PMLA in Section 2(1)(na) and

Section 2(h) of the Cr.P.C. Further, it is urged that the test of power

to file ‘chargesheet’ is not determinative of being a police officer.

30 AIR 1964 SC 828

31 2020 SCC OnLine SC 882 (Para 88) (also at Footnote No.24)

32 Supra at Footnote No.30

33 Supra at Footnote No.31 (also at Footnote No.24)

(xv) It is then urged that Section 44(1)(b) of the PMLA stipulates

that cognizance can be taken only on a complaint being made by the

Authority under the PMLA. Whereas, in originally enacted Section

44(1)(b), both the conditions i.e., ‘filing of a police report’, as well as,

‘a complaint made by an authority’ were covered. Learned counsel

also reminisces of the speech of the then Finance Minister on the

Prevention of Money-Laundering (Amendment) Bill, 200534 in the

Lok Sabha on 06.05.2005. However, it was also conceded that the

amendment of Section 44(1)(b) of the PMLA removed the words,

“upon perusal of police report of the facts which constitute an

offence under this Act or”. Next amendment made was insertion of

Section 45(1A) and Section 73(2)(ua), by which the right of police

officers to investigate the offence under Section 3 was restricted

unless authorised by the Central Government by way of a general or

special authorisation. Further amendment was deletion of Section

45(1)(a) of the PMLA, making the offence of money-laundering under

the PMLA a non-cognizable offence. Further, it is submitted that

amendment to Section 44(1)(b) has been made as a consequence for

34 For short, “2005 Amendment Bill”

making the offence under the PMLA non-cognizable. It is stated that

even today if investigation is done by a police officer or another, he

can only file a complaint and not a police report. Therefore, the

above-mentioned test is irrelevant and inapplicable. Absurdity that

arises is due to two investigations being conducted, one by a police

officer and the other by the authorities specified under Section 48.

An additional point has been raised that the difference between a

complaint under the PMLA and a chargesheet under the Cr.P.C. is

only a nomenclature norm and they are essentially the same thing.

Thus, basing the determination of whether one is a police officer or

not, on the nomenclature, is not proper.

(xvi) In respect of interpretation and constitutionality of Section

50 of the PMLA, our attention is drawn to Section 50(2) which

pertains to recording of statement of a person summoned during the

course of an investigation. In that, Section 50(3) posits that such

person needs to state the truth. Further, he has to sign such

statement and suffer the consequences for incorrect version under

Section 63(2)(b); and the threat of penalty under Section 63(2) or

arrest under Section 19.

(xvii) It is urged that in comparison to the constitutional law, the

Cr.P.C. and the 1872 Act, the provisions under the PMLA are

draconian and, thus, violative of Articles 20(3) and 21 of the

Constitution. Our attention is drawn to Section 160 of the Cr.P.C.

when person is summoned as a witness or under Section 41A as an

accused or a suspect. In either case, the statement is recorded as

per Section 161 of the Cr.P.C. Safeguards have been inserted by

this Court in Nandini Satpathy vs. P.L. Dani & Anr.35, while also

the protection under Section 161(2) is relied on. Thus, based on

Sections 161 and 162, it is submitted that such evidence is

inadmissible in the trial of an offence, unless it is used only for the

purpose of contradiction as stipulated in Section 145 of the 1872

Act. Further, it is stated that proof of contradiction is materially

different from and does not amount to the proof of the matter

asserted36 and can only be used to cast doubt or discredit the

testimony of the witness who is testifying before Court37. The

legislative intent behind Section 162 of the Cr.P.C. is also relied

35 (1978) 2 SCC 424

36 Tahsildar Singh & Anr. vs. State of U.P., AIR 1959 SC 1012 (paras 16-17, 42); Also see: V.K.

Mishra & Anr. vs. State of Uttarakhand & Anr., (2015) 9 SCC 588 (paras 15-20)

37 Somasundaram alias Somu vs. State represented by the Deputy Commissioner of Police, (2020)

7 SCC 722 (para 24)

upon, as has been held in Tahsildar Singh & Anr. vs. State of

U.P.

38.

(xviii) It is, therefore, urged that the current practice of the ED is

such that it violates all these statutory and constitutional

protections by implicating an accused by procuring signed

statements under threat of legal penalty. The protection under

Section 25 of the 1872 Act is also pressed into service.

(xix) To make good the point, learned counsel proceeded to delineate

the legislative history of Section 25 of the 1872 Act. He referred to

the first report of the Law Commission of India and the Cr.P.C.,

which was based on gross abuse of power by police officers for

extracting confessions.39

Further, this protection was transplanted

into the 1872 Act40, where on the presumption that a confession

made to a police officer was obtained through force or coercion was

fortified41. It was pointed out that recommendations of three Law

Commissions – 14th, 48th and 69th which advocated for allowance of

38 AIR 1959 SC 1012 (also at Footnote No.36)

39 185th Law Commission Report on the Indian Evidence Act, 1872 (2003)

40 See also: Barkat Ram (supra at Footnote No.24)

41 Balkishan A. Devidayal vs. State of Maharashtra, (1980) 4 SCC 600 (para 14)

such confessions to be admissible, were vehemently rejected in the

185th Law Commission Report. Thus, relying on Raja Ram

Jaiswal42 where a substantial link between Section 25 of the 1872

Act, police officer and confession has been settled. Therefore, the

present situation where prosecution can be mounted under Section

63 for failing to give such confessions is said to be contrary to

procedure established by law interlinked with the right to a fair trial

under Article 21. Reliance has also been placed on Selvi & Ors. vs.

State of Karnataka43, the 180th Law Commission Report and

Section 313 of the Cr.P.C. as being subsidiaries of right against selfincrimination and right to silence, not being read against him.

(xx) Learned counsel then delineated on the preconditions for

protection of Article 20(3). First, the person standing in the

character of an accused, as laid down in State of Bombay vs. Kathi

Kalu Oghad44, has been referred to. In this regard, it is submitted

that the term may be given a wide connotation and an inclusion in

the FIR, ECIR, chargesheet or complaint is not necessary and can

42 Supra at Footnote No.30

43 (2010) 7 SCC 263 (paras 87-89)

44 AIR 1961 SC 1808

be availed even by suspects at the time of interrogation. It is urged

that both the position of law stands clarified in Nandini Satpathy45

and Selvi46 — even to the extent where answering certain questions

can incriminate a person in other offences or where links are

furnished in chain of evidence required for prosecution. It is then

urged that the expression ‘shall be compelled’ is not restricted to

physical state, but also mental state of mind and it is argued that

nevertheless a broad interpretation must be given to the

circumstances in which a person can be so compelled for recording

of statement. Additionally, the term ‘to be a witness’ would take

within its fold ‘to appear as a witness’ and it is said that it must

encompass protection even outside Court in investigations

conducted by authorities such as the ED47

. It was also argued that

this protection should extend beyond statements that are

confession, such as incriminating statements which would furnish

a link in the chain of evidence against the person.

45 Supra at Footnote No.35

46 Supra at Footnote No.43

47 M.P. Sharma & Ors. vs. Satish Chandra, District Magistrate, Delhi & Ors., (1954) SCR 1077

(para 10).

(xxi) It is submitted that the test which this Court ought to

consider for determination of the vires of Section 50 of the PMLA is:

whether a police officer is in a position to compel a person to render

a confession giving incriminating statement against himself under

threat of legal sanction and arrest? It is further pointed out that

the ED as a matter of course records statement even when the

accused person is in custody. In some circumstances, a person is

not even informed of the capacity in which he/she is being

summoned. What makes it worse is the fact that the ED claims the

non-application of Chapter XII of the Cr.P.C. It does not register FIR

and keeps the ECIR as an internal document. All the abovementioned circumstances are said to render the questioning by the

ED, which might not be restricted to the offence of money-laundering

alone, as a testimonial compulsion48. Hence, advocating the

protection of Article 20(3) of the Constitution, it is submitted that all

safeguards and protections are rendered illusionary.

(xxii) Finally, an argument is raised that Section 50 of the PMLA is

much worse than Section 67 of the Narcotic Drugs and Psychotropic

48 Even the applicability of Prevention of Money-Laundering (Forms, Search and Seizure or

Freezing and the Manner of Forwarding the Reasons and Material to the Adjudicating Authority,

Impounding and Custody of Records and the Period of Retention) Rules, 2005.

Substance Act, 198549. Further, the NDPS Act is the underlying

reason for the PMLA and this Court in Tofan Singh50, in no

uncertain terms, has given protection in respect of confessional

statement even in the NDPS Act. The much harder and harsher

punishment of death in the NDPS Act is also contrasted against the

PMLA. It is also submitted that constitutional safeguards cannot be

undermined by the usage of the term ‘judicial proceedings’. The

term has been defined in Section 2(i) of the Cr.P.C. which includes

any proceeding in the course of which evidence is or may be legally

‘taken on oath’

. Section 50(1) has been distinguished for being in

respect of only Section 13 of the PMLA. It is also submitted that the

enforcement authority is not deemed to be a civil Court; it can be

easily concluded that an investigation done by the enforcement

authority is not a judicial proceeding and Section 50 of the PMLA

falls foul of the constitutional safeguards.

(xxiii) Pertinently, arguments have also been advanced in

respect of the implication of laws relating to money bills and their

49 For short, “NDPS Act”

50 Supra at Footnote No.31 (also at Footnote No.24)

51 Assistant Collector of Central Excise, Guntur vs. Ramdev Tobacco Company, (1991) 2 SCC 119

(para 6)

application to the Amendment Acts to the PMLA. However, at the

outset, we had mentioned that this issue is not a part of the ongoing

discourse in this matter and we refrain from referring to the

arguments raised in that regard.

3. Next submissions were advanced by Mr. Sidharth Luthra,

learned senior counsel on the same lines. He argued that the

current procedure envisaged under the PMLA is violative of Article

21 of the Constitution of India. The procedure established by law

has to be in the form of a statute or delegated legislation and pass

the muster of the constitutional protections.52 The Cr.P.C. has

several safeguards in respect of arrested investigation; they are also

rooted in the Cr.P.C. of 1898. They are reflective of the constitutional

protections. The manual, circulars, guidelines of the ED are

executive in nature and as such, cannot be used for the curtailment

of an individual liberty. Under the PMLA, there is no visible sign of

these protections against police's power of search and arrest; it is in

stark contrast with the constitutional protections given also the

52 Gudikanti Narasimhulu & Ors. vs. Public Prosecutor, High Court of Andhra Pradesh, (1978) 1

SCC 240 (paras 1, 2, 10)

reverse presumption against innocence at stage of bail under Section

45 of the PMLA. Further, the destruction of the presumption of

innocence under Sections 22, 23 and 45 cannot even meet the test

at the pre-complaint and pre-cognizance stage53 and the accused

cannot escape the rigors of custody as per Section 167 of the Cr.P.C.

As such, these conditions of reverse burden are in violation of

Articles 14 and 21 of the Constitution. Presumption of innocence

even in the pre-constitutional era has been a part of the right to a

fair trial.54

After the Constitution came into existence, it has formed

a part of a human right and procedure established by law.55

Lack of

oversight in an investigation under the PMLA is said to be in gross

violation of justice, fairness and reasonableness. It is also pointed

out that while the predicate offence might be investigated, protected

under the garb of the Cr.P.C., the non-application of such

safeguards under the PMLA is wholly unjustified.56

The procedure

as envisaged under the PMLA, especially under Section 17, vests the

53 Ranjitsing Brahmajeetsing Sharma vs. State of Maharashtra & Anr., (2005) 5 SCC 294 (paras

10, 11 and 21).

54 Attygalle & Anr. vs. The King, AIR 1936 PC 169

55 Noor Aga vs. State of Punjab & Anr., (2008) 16 SCC 417

56 State of West Bengal & Ors. vs. Committee for Protection of Democratic Rights, West Bengal &

Ors., (2010) 3 SCC 571 (Para 68)

executive with the supervisory power in an investigation. The same

is anathema to the rule of law and the magisterial supervision of an

investigation is an integral part and is a necessity for ensuring free

and fair investigation.57

(i) It is further submitted that not supplying of the ECIR to the

accused is in gross violation of Article 21 of the Constitution, the

ECIR being equivalent to an FIR instituted by the ED. It contains

the grounds of arrest, details of the offences; and as such, without

the knowledge of the ingredients of such a document the ability of

the accused to defend himself at the stage of bail cannot be fully

realized. It may also hamper the ability to prepare for the trial at a

later stage58

. Further, it is submitted that even under the 1962 Act

and the Foreign Exchange Regulation Act, 197359, Section 167 of

the Cr.P.C. has been held to be applicable and also found to be a

human right60

. Further, it is argued that there is no rational basis

for a search or a seizure to be reported to the Adjudicating Authority,

57 Sakiri Vasu vs. State of Uttar Pradesh & Ors., (2008) 2 SCC 409 (paras 15-17)

58 Youth Bar Association of India (supra at Footnote No.11); Also see: D.K. Basu vs. State of W.B.,

(1997) 1 SCC 416

59 For short, “FERA”

60 Directorate of Enforcement vs. Deepak Mahajan & Anr., (1994) 3 SCC 440

as they have no control. Further, the PMLA has two sets of processes

for attachment and confiscation which is subject to final

determination. Hence, lack of judicial oversight is irrational, as

attachment is a step-in aid for final adjudication. In absence of

safeguards and supply of ECIR, a fair investigation is not a statutory

obligation. This is contrary to the Constitution and the Cr.P.C.

Further, it is submitted that personal liberty under Article 21 cannot

be curtailed as the ED manuals, circulars and guidelines are

administrative directions and cannot be regarded as law under

Article 13 of the Constitution. Such restrictions on personal liberty

based on administrative directions are neither reasonable

restrictions nor law under Articles 13 and 19(2) of the Constitution.

Reliance has been placed on a plethora of cases, such as Bidi

Supply Co. vs. Union of India & Ors.61

, Collector of Malabar &

Anr. vs. Erimmal Ebrahim Hajee62

, G.J. Fernandes vs. The State

of Mysore & Ors.63 and Bijoe Emmanuel & Ors. vs. State of

61 AIR 1956 SC 479 (para 9)

62 AIR 1957 SC 688 (paras 8,9)

63 AIR 1967 SC 1753 (para 12)

Kerala & Ors.64

to show that the inapplicability of Chapter XII of

the Cr.P.C. cannot be countenanced.

(ii) It is also argued that the PMLA has inadequate safeguards for

guaranteeing a fair investigation. For, there are no safeguards akin

to Sections 41 to 41D, 46, 49, 50, 51, 55, 55A, 58, 60A of the Cr.P.C.

Under Chapters V and VII of the PMLA, safeguards are limited to

Sections 16 to 19 and 50. The onerous bail conditions under Section

45 are in the nature of jurisdiction of suspicion that is preventive

detention under Article 22(3) to 22(7), which in itself has various

safeguards which are absent in the PMLA. Further, post 2019

amendment, making money-laundering a cognizable and nonbailable offence, there are no more checks and balances present

against the exercise of discretion by the ED. Magisterial oversight

has been revoked; also, supervision envisaged under Section 17 is

that of the executive which is against the rule of law and right of fair

trial65. It is also stated that under the current scheme, an accused

will be subject to two different procedures which is under the

predicate offence and under the PMLA. To illustrate, Sections 410

64 (1986) 3 SCC 615 (paras 9, 10, 13-19)

65 Sakiri Vasu (supra at Footnote No.57) (paras 15-17)

and 411 of the IPC are scheduled offences overlapping with Sections

3 and 4 of the PMLA. However, the safeguards provided are nowhere

uniform. The same is unreasonable and manifestly arbitrary66. It is

also to be noted that the PMLA does not expressly exclude the

application of Chapter XII of the Cr.P.C. and as such, ambiguity

must be interpreted in a way that protects fundamental rights of the

people67

(iii) The next leg of the argument is to the effect that subsequent

amendment cannot revive Section 45, which was struck down as

unconstitutional by the decision in Nikesh Tarachand Shah68. The

same could have not been revived by the 2018 and 2019

amendments. A provision or a statute held to be unconstitutional

must be considered stillborn and void, and it cannot be brought back

to life by a subsequent amendment that seeks to remove the

constitutional objection. It must be imperatively re-enacted69

Further, even in arguendo, the twin conditions are manifestly

66 Subramanian Swamy vs. Director, Central Bureau of Investigation & Anr., (2014) 8 SCC 682

(paras 49, 70).

67 Tofan Singh (supra at Footnote Nos. 24 and 31) (para 4.10)

68 Supra at Footnote No.3

69 Saghir Ahmad vs. State of U.P. & Ors., AIR 1954 SC 728 (para 23); Also see: Deep Chand vs.

The State of Uttar Pradesh & Ors., (1959) Supp. 2 SCR 8 (para 21)

arbitrary as it is against the basic criminal law jurisprudence of the

right of presumption of innocence. This right has been recognized

under International Covenant on Civil and Political Rights70, as well

as, by this Court in Babu vs. State of Kerala71.

It is also contended

that subjecting an accused person not arrested during investigation

to onerous bail conditions under Section 45 is contrary to the

decision of this Court72. It was urged that even other statutes have

such twin conditions for bail such as Terrorist and Disruptive

Activities (Prevention) Act, 198773, the Maharashtra Control of

Organised Crime Act, 199974 and the NDPS Act. However, it is

pointed out that it has been held that such onerous conditions were

necessary only in certain kinds of cases - for example, terrorist

offences, which are clearly a distinct and incompatible offence in the

face of PMLA. Further, it is argued that even under the Unlawful

Activities (Prevention) Act, 196775, the Court has to examine only

70 For short, “ICCPR”

71(2010) 9 SCC 189 (paras 27 and 28)

72 Satender Kumar Antil vs. Central Bureau of Investigation & Anr., (2021) 10 SCC 773 and

clarificatory order dated 16.12.2021 in MA No. 1849/2021

73 For short, “TADA Act”

74 For short, “MCOCA”

75 For short, “UAPA”

whether the allegation is prima facie true while granting bail, but in

case of PMLA, the Court has to reach a finding that there are

reasonable grounds for believing that the accused is not guilty before

granting bail. Thus, as soon as charges are framed, a person is

disentitled to apply for bail as prima facie case is made out, which

helps in achieving the purpose of preventive detention without

procedure established by law76. Further, these deep restrictive

conditions even under the UAPA and the NDPS Act are restricted

only to parts of these Acts and not to the whole of them. However,

the same is not the case under the PMLA, as it is applicable to all

predicate offences. Such an approach ignores crucial distinctions

such as nature, gravity and punishment of different offences in the

Schedule of PMLA and treats unequals as equals. This is in violation

of Article 14 of the Constitution of India. Reliance is also placed on

United States vs. Anthony Salerno77, where restrictive bail

provisions are permitted in pre-trial detention because of the

presence of detailed procedural safeguards. Still, it is argued, that

such restrictive bail provisions cannot oust the ability of

76 Ayya alias Ayub vs. State of U.P. & Anr., (1989) 1 SCC 374 (paras 11-17)

77 107 S.Ct. 2095 (1987)

Constitutional Court to grant bail on the ground of violation of Part

III of the Constitution78

Further, it has been held that Magistrate

must ensure that frivolous prosecution is weeded out. Provisions

such as Sections 21, 22, 23 and 45 of the PMLA reverse the burden

and curtail the jurisdiction of the trial Court arbitrarily in violation

of the findings of this Court79

Thus, various counts that have been

argued herein point out that the PMLA suffers from manifest

arbitrariness in light of Shayara Bano vs. Union of India & Ors.80

and Joseph Shine vs. Union of India81

4. Next in line for submissions on behalf of private parties is

Dr. Abhishek Manu Singhvi, learned senior counsel. He firstly

argued the point of burden of proof under Section 24 of the PMLA.

He has pointed out that prior to amendment, the entire burden of

proof right from investigation till the judgment was on the accused.

Even though this has changed post 2013 amendment and some

balance has been restored, it has not fully cured this section of its

78 Union of India vs. K.A. Najeeb, (2021) 3 SCC 713 : 2021 SCC Online SC 50 (para 18)

79 Krishna Lal Chawla & Ors. vs. State of Uttar Pradesh & Anr., (2021) 5 SCC 435

80 (2017) 9 SCC 1 (paras 87, 101)

81 (2019) 3 SCC 39 (paras 61, 103, 105)

unconstitutional nature. He has gone into the legislative history of

the Act and stated that originally the presumption was raised even

prior to the trial and state of charge, this was diluted by the

amendment of 2013 thereafter the presumption would only apply

after the framing of charges.

(i) Learned senior counsel submits that the wording of Section 24

refers to formal framing of charges under Section 211 of the Cr.P.C.

For this submission, he relies on the speech of the Minister

introducing the amendment in the Parliament. It has been stated

that presumption is raised in relation to the fact of moneylaundering. Such a presumption cannot be raised in relation to an

essential ingredient of an offence. The commission of an offence, as

such, cannot be presumed. In reference to Section 4 of the 1872

Act, distinction between sub-sections (a) and (b) of Section 24 is

highlighted, wherein the former states - ‘shall presume’ and the

latter states - ‘may presume’.

(ii) It is urged that post amendment also there is no requirement

for the prosecution to prove any facts once the charges are framed.

The entire burden of disproving the case, as set out in the complaint,

inverts onto the accused. It is, hence, contrary to the requirement

of proof of foundational facts, as is seen in other legislations. Such

an inversion is not present in any other statute. It is stated that

even in the NDPS Act, where no requirement of foundational facts

was provided, this Court has read such necessity into the Act. As

for sub-section (b), it is pointed out that the ‘may presume’ provision

eliminates the safeguards of sub-section (a) and provides no

guidance as to when a presumption is to be invoked. The learned

counsel also points the discrepancy that the word ‘authority’

appearing in Section 24, which also appears in Section 48, is

distinctive in nature and that Section 24 absurdly allows an

investigator to presume the commission of an offence. This is clearly

arbitrary and de hors logic. In light of the same, the constitutional

vires of the section are challenged or a reading down to fulfil the

constitutional mandate is pressed for.

(iii) The next point of attack for Dr. Singhvi, learned senior counsel

is the constitutionality of Sections 17 and 18. The absence of

safeguards in lieu of searches and seizures is canvassed. It has been

pointed out that such searches or seizures can take place even

without an FIR having been registered or a complaint being filed

before a competent Court. Foremost, the legislative history of these

two Sections is pointed out. It is shown that originally the search

and seizure was to be conducted after the filing of a chargesheet or

complaint in the predicate offence. Thereafter, the protection was

diluted by the 2009 amendment, wherein it was provided that the

search and seizure operations would take place only after forwarding

a report to the Magistrate under Section 157 of the Cr.P.C. It was

only in 2019 that these final safeguards were also completely

removed by the Finance (No. 2) Act, 2019. The effect, it is argued, is

such that the ED has unfettered powers to commit searches and

seizures without any investigation having been done in the predicate

offence, and sometimes even without an FIR being registered. There

are no prerequisites or safeguards as the ED can now simply walk

into a premises. Even for non-cognizable offences, the ED need not

wait for the filing of a complaint before a Court. In this way, in the

absence of any credible information to investigate, the ED cannot be

allowed to use such uncanalized power. The magisterial oversight

cannot be replaced by the limited oversight of the Adjudicating

Authority, as they have no real control over the ED, especially in

case of criminal investigations. Thus, it is submitted that such lack

of effective checks and balances is unreasonable and violative of

Articles 14 and 21 of the Constitution.

(iv) Our attention is also drawn to the Prevention of MoneyLaundering (Forms, Search and Seizure or Freezing and the Manner

of Forwarding the Reasons and Material to the Adjudicating

Authority, Impounding and Custody of Records and the Period of

Retention) Rules, 200582, and it is prayed that this Court must

clarify that these rules are not ultra vires Sections 17 and 18 of the

PMLA. Pertinently, they relate to the provisions of Cr.P.C. being

applicable to searches under the Act.

(v) Next leg of submissions challenges the vires of the second

proviso of Section 5(1), as it allows for attachment independent of

the existence of a predicate offence, given that such property might

not even be proceeds of crime. Though an emergency procedure, no

threshold had to be met and the first proviso has no application. It

is also submitted that the proviso cannot travel beyond the scope of

the main provision. Our attention is drawn to the legislative history;

it is stated that the PMLA did not originally contain the second

82 For short, “Seizure Rules, 2005”

proviso. Attachment was only to be done after filing of chargesheet

in the predicate offence. For the first time, in 2009, this proviso was

added, to avoid frustration of the proceedings. It is submitted that

this proviso has no anchor to either the scheduled offence or the

proceeds of crime. It is at the mere satisfaction of the officer. In this

way, it is submitted, attachment of property of any person can be

made, with no fetters. Our attention is also drawn to the use of word

‘any’ for person and property and its distinction from the term

‘proceeds of crime’, having a direct nexus with the ambit of the main

Section. It is argued that it is not to be mixed with any offence but

only scheduled offences. The ED is alleged to employ this language

in attaching property purchased much before the commission of

scheduled offences, to the extent not having any nexus. It is

submitted that there has to be a link between the second proviso to

the proceeds of crime and scheduled offence being investigated

under a specific ECIR before the ED.83

(vi) Submissions with respect to Section 8 of the PMLA maintain

that Section 8(4) allows the ED to take possession of the attached

83 Dwarka Prasad vs. Dwarka Das Saraf, (1976) 1 SCC 128, Also see: Satnam Singh & Ors. vs.

Punjab & Haryana High Court and Ors., (1997) 3 SCC 353

property at the stage of confirmation of provisional attachment made

by the Adjudicating Authority. It is submitted that this deprivation

of a person’s right to property at such an early stage without the due

process of law, is unconstitutional. Further the period of attachment

under Section 8(3)(a) of the PMLA is also arbitrary and

unreasonable. To make good the point, the relevant legislative

history is pointed out. The original enactment where provisional

attachment would continue during the pendency of proceedings

related to ‘any scheduled offence’. Thereafter in 2012, the same was

changed to ‘any offence under the PMLA’, followed by 2018

amendment – ‘a period of ninety days during investigation of the

offence or during pendency of proceedings under the PMLA’, and

finally by 2019 amendment the increase from ‘ninety days’ to ‘three

hundred and sixty-five days’. We are also taken through the

elaborate process of attachment of property. Thereby, it is

highlighted that the ED can take possession of property after a single

adjudicatory process, wherein there is no oversight over the ED. It

is stated that such alienation of property without any proceedings

having been brought before the Court is undoubtedly an

unconstitutional act. As for Section 8(3)(a) clarification is sought in

light of the confusion that it allows for a continuation of the

confirmed provisional attachment for three hundred and sixty-five

days or during the pendency of proceedings under the PMLA. This

might lead to a reading where the ED has a period of three hundred

and sixty-five days to file its complaint.

(vii) Learned counsel then referred to the Prevention of MoneyLaundering (Taking Possession of Attached or Frozen Properties

Confirmed by the Adjudicating Authority) Rules, 201384 wherein

specific challenge is raised against Rules 4(4), 5(3), 5(4) and 5(6).

The main ground of challenge is disproportionality, similar to the

attachment issue, transfer of attached shares and mutual funds,

depressing of value of property, eviction of owners of a movable

property, possession of productive assets along with gross income,

all monetary benefit is stated to be arbitrary, reasonable, absurd and

disproportionate. Herein, it is highlighted that various anomalies

may crop up, such as taking of the shares and the ED becoming the

majority shareholder in corporations, attachment of properties

worth far more than the value of proceeds of crime. Under Section

84 For short, “Taking Possession Rules, 2013”

2(1)(zb), the expression “value” is defined as fair market value on the

date of acquisition and not fair market value on date of attachment.

Arguably, property bought years ago is thereby undervalued by the

ED. Attachment of immovable property and eviction in case of

unregistered leases is also challenged. To challenge this

disproportionate imposition and restrictions, reliance is placed on

Shayara Bano85and Anuradha Bhasin vs. Union of India &

Ors.86

(viii) It is then urged by the learned counsel that Section 45(1) of the

PMLA, reverses the presumption of innocence at the stage of bail as

an accused. According to him, the accused at this stage can never

show that he is not guilty. It is also maintained that these are

disproportionate and excessive conditions for a bail. Reference is

also made to Nikesh Tarachand Shah87 to the limited extent that

the 2018 amendment has not removed invalidity, pointed out in the

aforesaid judgment of this Court. It is also stated that regardless of

the amendment, the twin condition is in violation of Article 21 of the

85 Supra at Footnote No.80 (paras 101-102)

86 2020 (3) SCC 637

87 Supra at Footnote No.3

Constitution by virtue of the nature of the offence under PMLA. It is

stated that presumption of innocence is a cardinal principle of

Indian criminal jurisprudence.88

Reference is also made to Kiran

Prakash Kulkarni vs. The Enforcement Directorate and Anr.

Arguments have also been raised against an amendment through a

Money Bill being violative of Article 110 of the Constitution. The

need for interpretation by Rojer Mathew vs. South Indian Bank

Limited and Ors.

90 has also been asserted. The 2018 amendment

is also challenged by referring to the notes on Clauses of the Finance

Bill, 2018. It is also pointed out that similar amendments were

proposed for the 1962 Act in the year 2012 and, yet, the same were

dropped at the insistence of members of the Parliament91

(ix) Further, given the maximum punishment of seven (7) years

under PMLA, it was argued that it is disproportionate when

comparing the same to other offences under the IPC which are far

more serious in nature and are punishable with death. In light of

the same, it is highly questionable as to how such an onerous

88 Arnab Manoranjan Goswami vs. State of Maharashtra & Ors., (2021) 2 SCC 427 (para 70)

89 Order dated 11.4.2019 in S.L.P. (Criminal) No.1698 of 2019

90 (2020) 6 SCC 1

91 Speech of Shri. Arun Jaitley dated 26.3.2012 in the Rajya Sabha

condition can be imposed on an accused. It is also pointed out that

several scheduled offences are bailable. Further, the anomaly that

at the time of arrest under Section 19 no documents are provided in

certain cases, has also been highlighted. It was also stated that it is

a near impossibility to get bail as under the UAPA, TADA Act, or the

Prevention of Terrorism Act, 200292.

5. Mr. Mukul Rohatgi, learned senior counsel was next to argue on

behalf of private parties. He urged that the Explanation to Section

44 is contrary to Section 3 read with Section 2(1)(u), hence, the same

is unsustainable and arbitrary in the eyes of law. Special emphasis

was laid on the expression “shall not be dependent upon any order

by the Trial Court in the scheduled offence”. It was argued that both

trials may be tried by the same Court. In such a case, Section 3

offence cannot be given pre-eminence, as that would run contrary to

Section 3 and would be manifestly arbitrary, given the fact that an

acquittal in the scheduled offence cannot lead to one being found

guilty for the derivative offence of money-laundering. A direct link

between the proceeds of crime and Section 3 offence was also

92 For short, “POTA”

highlighted. It was submitted that the Special Court cannot

continue with the trial for Section 3 offence once acquittal in the

predicate offence takes place. Section 44 unmistakably provides for

the Special Court trial of money-laundering. It was pointed out that

it is normal that if one is acquitted for the predicate offence, the

money-laundering procedure could still go on. This is contrary to

the definition under Section 3, which states that money-laundering

is inextricably linked to the predicate offence.

(i) It was also pointed out that the usual practice is of filing an

ECIR on the same day or right after the FIR has been filed by

replicating it almost verbatim. Canvassing for proper procedure and

investigation before filing of the ECIR and initiation of the process

under the PMLA, reference was also made to other Acts, such as

Smugglers and Foreign Exchange Manipulators Act, 197693, FERA

or Conservation of Foreign Exchange and Prevention of Smuggling

Activities Act, 197494 and the 1962 Act, being Acts which would not

subsist alone or by themselves without the predicate offences95

93 For short, “SAFEMA”

94 For short, “COFEPOSA”

95 Barendra Kumar Ghosh vs. The King Emperor, 1924 SCC OnLine PC 49 : AIR 1925 PC 1

(ii) It was also argued that often the ED widens the investigation

beyond what is contained in the chargesheet. This is contrary to the

intentions of the Act. The true meaning of the definition under

Section 3 of the PMLA was proposed to be divided into three

components of predicate offence, proceeds of crime and

projecting/claiming as untainted. It was conceded that even

abetment would form a part of the offence and as a consequence,

whoever attempts, assists, abets, incites - are all covered by the

same. For predicate offence and Section 3, it was stated that if the

former is gone, the latter cannot subsist.

(iii) Next argument raised pertained to the ambit and meaning of

Section 3. It was submitted that mere possession or concealment of

proceeds of crime will not constitute money-laundering and this was

bolstered by the phrase ‘projecting or claiming as untainted

property’. The “and” was stated to be a watertight compartment.

The Finance Minister’s 2012 Rajya Sabha Speech was also relied

upon to showcase how “and projecting” was an essential element.

6. Mr. Amit Desai, learned senior counsel also advanced

submissions on behalf of private parties. He also took us through

the history of money-laundering, starting from the Conventions to

the FATF and UN General Assembly Resolution96, which led to the

1999 Bill to help combat and prevent money-laundering. He relies

on the Statement of Objects and Reasons of the Act97, followed by

the initial ambit of Sections 2(1)(p), 2(1)(u) and 3, which were

amended by the 2013 amendment. It is stated that the Act

presupposes the commission of a crime which is the predicate

offence; hence the questions to be answered by this Court are related

to retrospectivity. Firstly - whether authorities can proceed against

an accused when commission of the predicate offence predates the

addition of the said offences to the Schedule of the PMLA? Secondly

- whether the authorities can proceed against the properties

obtained or projected prior to the commission of an offence under

this Act? Thirdly - whether authorities can proceed when the

predicate offence and the projecting predate the commencement of

this Act? Fourthly - whether jurisdiction subsists under the Act

96 Special Session of the United Nations held for 'Countering World Drug Problem Together' held

in June 1998.

97 “objective was to enact a comprehensive legislation inter alia for preventing money laundering

and connected activities confiscation of proceeds of crime, setting up of agencies and

mechanisms for coordinating measures for combating money-laundering, etc”. It was also

indicated that the proposed Act was “an Act to prevent money-laundering and to provide for

confiscation of property derived from, or involved in, money-laundering and for matters

connected therewith or incidental thereto”.

when no cognizance has been taken, the accused has been

discharged or acquitted or the offence compounded? Lastly, learned

counsel also challenges the rigors of the twin conditions for being

incongruent with general bail provisions under Sections 437 and

439 of the Cr.P.C. as being ultra vires.

(i) Learned counsel refers to one of the cases in this batch,

wherein the properties sought to be acquired by the ED were

obtained by the petitioner prior to 2009, while the commission of

offence was in 2013 and Section 13 of the PC Act was inserted into

the PMLA Schedule for the first time in 2009. This, it is maintained

cannot fit into the term “proceeds of crime” under Section 2(1)(u),

the same having been done prior to 2009. It has also been submitted

that for the determination of money-laundering under Section 3 or

any other provision of the Act, the relevant time has to be the time

of the commission of the scheduled offence. The rationale being that

only the presence of a scheduled offence can lead to the generation

of proceeds of crime and, hence, in return the offence of moneylaundering can be committed. Thus, in a way it is suggested that

the starting point for a conviction for Section 3 might be the

commission of a scheduled offence. The argument in respect of the

protections provided by the Constitution under Article 20(1), as per

which ingredients for an offence must exist on the day the crime is

committed or detected, have also been impressed in opposition of

any retrospective or retroactive application of the Act. To bolster the

arguments, reliance has been placed on the decisions of this Court

in Soni Devrajbhai Babubhai vs. State of Gujarat and Ors.98

Mahipal Singh vs. Central Bureau of Investigation & Anr.99

Tech Mahindra Limited vs. Joint Director, Directorate of

Enforcement, Hyderabad & Ors.100

, and Gadi Nagavekata

Satyanarayana vs. Deputy Director Directorate of

Enforcement101 and that of Delhi High Court in Arun Kumar

Mishra vs. Directorate of Enforcement102

, M/s. Ajanta

Merchants Pvt. Ltd. vs. Directorate of Enforcement103 and M/s.

Mahanivesh Oils & Foods Pvt. Ltd. vs. Directorate of

Enforcement104

98 (1991) 4 SCC 298 (also at Footnote No.131)

99 (2014) 11 SCC 282

100 WP No. 17525/2014 decided on 22.12.2014 by High Court of Andhra Pradesh

101 2017 SCC Online ATPMLA 2

102 2015 SCC OnLine Del 8658

103 2015 SCC OnLine Del 8659. The decision was assailed by ED before this Court in SLP (Crl.)

No. 18478/2015, wherein an order of Status-quo came to be passed.

104 2016 SCC OnLine Del 475. The judgement however was challenged by ED in LPA before the

Division Bench wherein it was held that the same shall not be treated as precedent.

(ii) The argument that to qualify for the offence of moneylaundering, the essential ingredient of ‘projection’ or ‘claiming’ it as

‘untainted property’ is imperative, has also been pressed into

service. It is also urged that proceeds of crime can only be generated

from the commission of a predicate offence and the commencement

of investigation arises only if a predicate offence has generated such

proceeds of crime only subsequent to the inclusion of the predicate

offence to the Schedule of the PMLA. Another point that has been

highlighted is that the projecting, if done prior to the date of

inclusion of the offence to the Schedule, the same cannot be

continuing and as such, is stated to be stillborn for the purposes of

the PMLA.

(iii) It is urged that for the purposes of bail, it is settled law

that offences punishable for less than seven years allows a person

to be set free on bail. As such, the liberty as enunciated by Article

21 of the Constitution cannot be defeated by such an Act. Thus,

Section 45(2) of the PMLA is contrary to general principles of bail

and the Constitution of India. It is also pointed out that Section 437

of the Cr.P.C. imposing similar conditions as Section 45(2) restricts

it to offences punishable with either life imprisonment or death.

Under no condition can it be said that the bail conditions under the

PMLA, imposing maximum seven years, are reasonable. Without

prejudice to the aforementioned argument, it was stated that Section

45(2) could only be applicable to bail applications before the Special

Court and the special powers under Section 439 Cr.P.C. It was

submitted that in light of the same, special powers be given to the

Special Court under the PMLA, as these provisions, draconian in

nature, were contemplated only in Acts, such as TADA Act, POTA,

MCOCA & NDPS Act, since securing the presence was difficult in all

of the above. Further, unless Section 3 was to be restricted to

organised crime syndicate, which was in fact the real intent, the bail

provisions are liable to be struck down.

7. Mr. S. Niranjan Reddy, learned senior counsel contends that it

is essential to first understand as to whether money-laundering is a

standalone offence or dependent on the scheduled offence? He

points out that the ED has maintained the former stance. It has

been pointed out that this view has been rejected by the High Courts

of Delhi, Allahabad and Telangana. On the contrary, the High

Courts of Madras and Bombay have accepted such a view. It has

been added that the ED's contention is based on the Explanation

added to Section 44(1)(d) by the 2019 amendment. Concededly,

though there are certain exemptions in Section 8(7), it is contended,

that the same are only for special circumstances. Learned counsel

then refers to the sequence of conducting the matters and points out

Sections 43(2) and 44(1), whereby the Special Court can try the

scheduled offence, as well as, the money-laundering offence. He

points out that due to different findings of different High Courts,

certain questions have arisen as to the sequence of conducting the

said two cases. The High Courts of Jharkhand and Kerala have

taken a view that both matters can be tried simultaneously; there is

no necessity to hold back the trial of money-laundering until the

scheduled offence has been tried. It has been submitted that the

High Court of Kerala finds that the offence of money-laundering is

dependent on the scheduled offence. The High Court for the State

Telangana, on the other hand, finds money-laundering completely

independent of the scheduled offence. To drive the point home,

attention is drawn towards Section 212 of the IPC, where the High

Courts have taken a view that unless the original offence is proved,

the person harbouring the accused cannot be sentenced. However,

it is also pointed out that Section 212 can be tried simultaneously

with the original offence.

(i) Additionally, it has been submitted that Section 2(1)(u) and

Section 3 of the PMLA have been given a very expansive meaning,

whereby people who do not have knowledge or have not participated,

being totally unrelated third parties, are also being roped in to the

investigations. The culpability has to be maintained. Wrong

interpretation is given to proceeds of crime to be any property even

obtained or derived indirectly. Persons who have not committed the

scheduled offence deriving certain indirect benefits, even without

knowledge, based on Section 24 presumption are held to be guilty of

laundering money.

(ii) Further, the question of retrospectivity has also been

addressed, whereby after the 2019 amendment, money-laundering

is now said to be a continuing offence connected with the proceeds

of crime. It is urged that the ED contends that prosecution or

attachment can take place irrespective of whether the alleged offence

was committed even prior to enactment in 2002, irrespective of the

addition of the predicate offence in the PMLA Schedule. It is

submitted that there are various amendments which are substantive

in nature, being given retrospective effect, such as

Sections 2(1)(u), 3, 8, 24, 44, etc. It has also been brought to our

notice that prior to the 2013 amendment in the context of Section 8,

the High Court of Andhra Pradesh, the Madras High Court and the

High Court of Gujarat have held that attachment causes civil

consequences of confiscation. Meaning that in case a scheduled

offence is committed prior to the enactment of the PMLA or inclusion

of certain offences in its Schedule, attachment or confiscation can

go on. However, since then, the amendment has brought about a

new legal question. Today, the line between civil and criminal

consequences has changed, since Section 8 now is dependent upon

one being held guilty for money-laundering. Hence, it cannot be

applied retrospectively for predicate offences or scheduled offences

committed prior to the PMLA enactment. Reference has also been

made to the finding of the Hyderabad High Court where Section 8(5)

being quasi criminal, has been found to be prospective.

8. Dr. Menaka Guruswamy, learned senior counsel urged that

substantive due process has replaced procedure established by

law105. Learned counsel has also pointed out aspects of substantive

due process and the procedure of mandatory open Court review. In

the context of right of accused during interrogation, it was submitted

that this Court dealt with ‘due process’ rights in the Mohammed

Ajmal Mohammad Amir Kasab alias Abu Mujahid vs. State of

Maharashtra106, where the use of Miranda rights has been rejected.

Learned counsel has also gone into the facts of the case, where it is

stated that there has been a six year long pre-trial procedure in both

the predicate offence and laundering offence with limited right of

participation and a reverse burden of proof.

(i) It has also been argued that Section 50 infringes upon the right

to liberty of a person summoned under the Act and violates the right

against self-incrimination. The non-compliance with Section 53 is

penalized through Section 63 of the PMLA. The learned counsel has

adopted the arguments made by other learned counsel in reference

to Tofan Singh107. It is argued that the use of the term “any person”

105 Mohd. Arif alias Ashfaq vs. Registrar, Supreme Court of India & Ors., (2014) 9 SCC 737 (para

28); Also see: Sunil Batra vs. Delhi Administration & Ors., (1978) 4 SCC 494; Mithu vs. State of

Punjab, (1983) 2 SCC 277.

106 (2012) 9 SCC 1

107 Supra at Footnote No.31 (also at Footnote No.24)

without exclusion of the accused under Section 50 is in violation of

the due process. No safeguards provided under the Cr.P.C. and the

1872 Act are extended to person proceeded for PMLA offence. It is

stated that the stage at which a person is guaranteed the

constitutional right under Article 20(3), cannot be made malleable

through legislation. It is stated that even though the PMLA is a

complaint-based procedure, by way of Section 50, one cannot ignore

the pre-complaint stage. As such, Section 50 must be rendered

unconstitutional. Further, it is argued that the ED practice is a

perverse incentive structure for constitutional infringement where

an accused is trapped and sweeping interrogations are conducted

aimed at justifying the summons issued. In respect of Section

44(1)(d), it is stated that the right to a fair trial is taken away and

this provision irreversibly prejudices the accused in the trial

adjudicating the predicate offence.108

(ii) Further, the Explanation to Section 44(1)(d) requires the two

trials to be conducted before the Special Court, but as separate

trials, is said to render the requirement of a fair trial impossible. To

108 Nahar Singh Yadav & Anr. vs. Union of India & Ors., (2011) 1 SCC 307

bolster this ground, it is said that when a judge receives evidence

under Section 50 of the PMLA in case of money-laundering, he

cannot remain an independent authority when deciding the

predicate offence based on the material placed before him. Thus,

this paradoxical provision forms a complete absurdity for a judge

dealing with two different sets of rights for the same accused

regarding the connected facts. That is for every predicate offence

which would have otherwise been tried by a Magistrate, the

investigation by the ED will tend to influence the mind of the judge109

Further, reliance has also been placed on Suo Motu Writ (Crl.) No. 1

of 2017 in Re: To issue certain guidelines regarding inadequacies

and deficiencies in criminal trials110. The Court has incorporated

the Draft Rules of Criminal Practice, 2021 which have been

circulated for adoption by all High Courts. It is also argued that

Section 44 takes away the right of appeal from the predicate offences

triable by the Magistrate's Court111

109 Hanumant Govind Nargundkar & Anr. vs. State of Madhya Pradesh, AIR 1952 SC 343 (para

10)

110 Criminal Trials Guidelines Regarding Inadequacies and Deficiencies, In re, vs. State of Andhra

Pradesh & Ors., (supra at Footnote No.12)

111 Himanshu Singh Sabharwal vs. State of Madhya Pradesh & Ors., (2008) 3 SCC 602

(iii) It is urged that the PMLA creates an overbroad frame with no

fetters on investigation. The refusal to provide a copy of the ECIR

creating an opacity surrounding the usage of the ED Manual is also

under challenge. Section 4(b)(v) of the Right to Information Act,

2005112 is pressed into service to showcase that every public

authority is obligated to publish within 120 days of enactment of the

Act - the rules, regulations, instructions, manuals and records held

by it or its employees for discharge of its functions. Contrary to the

above-mentioned provisions, the ED Manual is said to be a mystery

for the general public. Reference is also made to the decision of the

Bombay High Court, wherein the Maharashtra Police was asked to

provide a copy of the police manual in response to an RTI

application113. It is submitted that such non-disclosure of the ED

Manual is unsustainable in law. It makes the securing of pre-trial

rights of an accused difficult. Even the CBI manual which is based

on a statutory provision of the Cr.P.C., has been found by this Court

to be necessary and to be adhered scrupulously by the CBI114

112 For short, “RTI Act”

113 State of Maharashtra vs. Chief Information Commissioner & Anr., 2018 SCC OnLine Bom

1199

114 Vineet Narain & Ors. vs. Union of India & Anr., (1998) 1 SCC 226; Also see: Shashikant vs.

Central Bureau of Investigation & Ors., (2007) 1 SCC 630; Central Bureau of Investigation vs.

Similarly, other authorities, such as the Central Vigilance

Commission, Income Tax authorities, authorities under the 1962

Act, police authorities, jail authorities, are all governed by manual

published by them. Thus, it is only the ED which follows a distinct

approach of non-disclosure.

(iv) It has also been argued that the Schedule of the PMLA renders

several bailable offences as non-bailable when this Court has

repeatedly held that bail is the rule and jail is the exception115

Predicate offences which under their original act such as the Bonded

Labour System (Abolition) Act, 1976116, are bailable but on the

application of the PMLA, become non-bailable. The intention and

provision of the underlying special Act, hence, becomes otiose by the

overbroad provisions of the PMLA. In another breath, it is argued

that the attachment procedure under the PMLA runs contrary to the

provisions contained in the predicate offence. It is also perplexing,

as the underlying statute itself contain the procedure to attach

Ashok Kumar Aggarwal, (2014) 14 SCC 295; and State of Jharkhand through SP, Central Bureau

of Investigation vs. Lalu Prasad Yadav alias Lalu Prasad, (2017) 8 SCC 1.

115 State of Rajasthan, Jaipur vs. Balchand alia Baliay, (1977) 4 SCC 308; Also see: Sanjay

Chandra vs. Central Bureau of Investigation, (2012) 1 SCC 40; State of Kerela vs. Raneef, (2011)

1 SCC 784 (para 15).

116 For short, “1976 Act”

illegal proceeds of crime. Aid of the UAPA and Securities and

Exchange Board of India Act, 1992117 is taken to buttress that while

under the predicate offence, attachment can take place only after

the conviction, Section 5 of the PMLA enables attachment of property

prior to conviction. This creates two different standards and two

different criminal attachment proceedings for essentially the same

offence. Even the Cr.P.C. provides for depriving criminals of the fruit

of the crimes and allows for the true owner of the property to be

restored with the position thereof by way of Section 452(5).

(v) The next point argued is in respect of the adjudicatory paralysis

in the Appellate Tribunal. It is submitted that it is one of the only

safeguards in this draconian law to provide an oversight to prevent

abuse of mechanism of attachment. Even this oversight has been

rendered redundant since there has been no appointment of a

chairperson or members of the said Tribunal since 21.09.2019.

Thus, making the Tribunal redundant. Further, it is stated that

taking the possession at the stage when only a provisional

attachment has been made, can cause great hardship and financial

117 For short, “SEBI Act”

ruin, amounting to virtually declaring a person guilty and is

avoidable. Further, certain official data has been brought to our

attention to demonstrate the ineffectiveness of the unconstitutional

legislations, where raids have increased each financial year and, yet,

since 2005 the number of convictions till 2015-16 has remained zero

and, thereafter, reached a maximum of four in 2018-19.

9. Then, Mr. Aabad Ponda, learned senior counsel contended that

without prejudice to all the submissions, Section 50(3) and Section

63(2)(a) and (c) of the PMLA, insofar as they relate to the accused

persons, are ultra vires being violative of Articles 20(3) and 21 of the

Constitution of India. He submitted that under the current scheme

of the Act, a scheduled offence requires a prior FIR. A person so

named in the FIR would stand in the character of an accused person,

and as such, he cannot be compelled to incriminate himself or

produce documents incriminating himself under Section 50(3) of the

PMLA. The next leg of the argument is to the extent that Section

63(2)(c), which mandatorily penalises person for disobedience of

Section 50, cannot be applicable to an accused person given the

constitutional protections of Articles 20(3) and 21, whereby he has

the right to exercise his fundamental right to silence. We are also

shown the analogous provisions similar to Section 50(3) and 50(4) of

the PMLA in other statutes, such as Section 171A of the 1878 Act,

inserted by Section 12 of the Sea Customs (Amendment) Act, 1955;

Section 108 of the 1962 Act; Section 14 of the Central Excises and

Salt Act, 1944118 and Section 40 of the FERA. Learned counsel

further argued and distinguished custom officers and other above

referred officers from the ED officers to the effect that they only

recover duty and do not investigate crimes like the ED officials. Even

otherwise, it is to be noted that even though Section 50 of the PMLA

may appear to be akin to summons issued under Section 18 of 1962

Act and other above-mentioned statutes, however, there is a deep

differentiation. For, when a person is summoned under the abovementioned Acts, such as the 1962 Act, he is not in the shoes of an

accused. He only becomes an accused once an FIR or complaint has

been filed before a Magistrate. This, however, he states, is not the

case under the PMLA. To drive home the point as to who stands in

the character of an accused, reference has been made to certain

Constitution Bench decisions of this Court, which have already been

118 For short, “CESA 1944 Act”

referred to by the previous learned counsel. To wit, Romesh

Chandra Mehta vs. State of West Bengal119

, Balkishan A.

Devidayal vs. State of Maharashtra 120 and Selvi121.

(i) Similarly, Mr. Ponda, learned senior counsel also relied on the

decision in Ramanlal Bhogilal Shah & Anr. vs. D.K. Guha &

Ors.122 and pointed out that even in cases of FERA, a person stands

in the character of an accused in a separate FIR for the same

transaction. He cannot be compelled to incriminate himself. He

maintains that this is a case wherein the ED itself had investigated

the accused under the FERA. It was found that even though

ordinarily under the FERA a person is not an accused, however, in

this particular case, an FIR had been registered against the said

person and he, being an accused, could not be compelled to answer

questions that would incriminate him. The same plea has also been

upheld in Poolpandi & Ors. vs. Superintendent, Central Excise

and Ors.

123

. It was urged that an accused cannot be compelled to

119 (1969) 2 SCR 461 : AIR 1970 SC 940

120 (1980) 4 SCC 600 (also at Footnote No.41)

121 Supra at Footnote No.43

122 (1973) 1 SCC 696 (paras 2, 3, 4, 5, 11, 12, 17, 18-25)

123 (1992) 3 SCC 259

produce any incriminating documents which he does not want to

produce. Reliance was placed on State of Gujarat vs. Shyamlal

Mohanlal Choksi124

. Moreover, it is reiterated that the protection

against self-incrimination applies not only in Court proceedings, but

also at the stage of investigation125

(ii) Further, it was urged that Section 2(1)(na) of the PMLA defines

“investigation”. As such, proceedings under Section 50 is clearly a

part of investigation for the collection of evidence. The summons

under Section 50(2) is to give evidence or produce records during the

course of investigation under the Act, thus, protected by Article

20(3). Section 50(4) of the PMLA also stipulates that they are judicial

proceedings, therefore, a person accused will be protected under

Article 20(3). Section 63(2)(a) and 63(2)(c) inflict grave prejudice

upon the accused, as he is liable to be further prosecuted for the

failure to give information and provide documents which will

incriminate him. Our attention is also drawn to the usual practice

wherein persons are labelled as non-cooperative during the

124 AIR 1965 SC 1251 (and the Majority view from paras 23 onwards, relevant paras 32, 34 and

41)

125 Relied on Kathi Kalu Oghad (supra at Footnote No. 44), Nandini Satpathy (supra at Footnote

No.35), Selvi (supra at Footnote No.43) and Tofan Singh (supra at Footnote Nos.24 and 31)

proceedings which are judicial in nature and used as a pretext to

arrest or extend remand under the PMLA. It is a direct affront to

fundamental rights and a travesty of justice.

10. Mr. Siddharth Aggarwal, learned senior counsel, also

appeared for the private parties. His main opposition is to the

retrospective application of the PMLA. Certain questions are raised

with respect to whether prosecution for money-laundering is

permissible if the commission of scheduled offence and proceeds of

crime takes place prior to the PMLA coming into force; and, similarly,

in a situation when it is committed prior to the offence being made

part of the Schedule of the PMLA. It is submitted that the prohibition

against retrospective operation of substantial criminal statutes is a

constitutional imperative which needs to be given its fullest

interpretation in a purposive manner. He highlights the three

situations where interpretation is warranted. One, where

transactions were concluded prior to the enforcement of PMLA; two,

prior to the offences being added to the Schedule of the PMLA; and

three, whether amendment is applied with retrospective effect

couched in the guise of an Explanation introduced by the 2019

amendment.

(i) It is urged that no person can be convicted for criminal offence

unless it has been specifically given retrospective effect, given the

essential ingredient of ‘knowledge’ of the person for taking such an

action and exposing himself to criminal liability. In line with the

protection under Article 20(1) and the maxim of ‘nova constitutio

futuris formam imponere debet non praeteritis’

126, judgments of this

Court were relied to urge that the general rule is applicable when the

purpose of the statute in question is to affect vested rights/impose

new burdens/impair existing obligations127

(ii) To make good the submission on retrospectivity, it is pointed

out that as per the definition, money-laundering is dependent on

proceeds of crime, which in turn depends on criminal activity

relating to a scheduled offence. As such, it is stated that no proceeds

of crime can exist to be generated from a criminal activity unless the

126 Keshavan Madhava Menon vs. The State of Bombay, AIR 1951 SC 128 (para 15)

127 See : Soni Devrajbhai Babubhai (supra at Footnote No.98) (paras 8-10); Ritesh Agarwal &

Anr. vs. Securities and Exchange Board of India & Ors., (2008) 8 SCC 205 (para 25]; Harjit Singh

vs. State of Punjab, (2011) 4 SCC 441 (paras 13-14); Varinder Singh vs. State of Punjab & Anr.,

(2014) 3 SCC 151 (para 10); and Commissioner of Income Tax (Central)-I, New Delhi vs. Vatika

Township Private Limited, (2015) 1 SCC 1 (paras 27-31)

PMLA comes into force. That too, it has to be connected to the date

when the Schedule has accepted the new predicate offence. It only

means that property which is not “proceeds of crime”, cannot by

virtue of PMLA, retrospectively characterised as such in a true sense.

Further, prior to the enactment of the PMLA, there was no similar

offence dealing in proceeds of crime or economic advantages derived

from criminal offences. He points out that there were various

enactments which dealt with the illegal fruits of criminal activity.

Thus, the PMLA cannot be added to the list of disabilities in law to

illegal monies in a retrospective manner. He was critical about many

amendments taken place over the years and especially the fact that

the true import of Section 3 is being expanded by a mere addition of

an Explanation in 2019. As such the purport of the main, a much

narrow provision, cannot be changed128. None of the amendments

to Section 3 or changes in Schedule have a language bearing a

retrospective effect. Section 3 amendment was only “for removal of

doubts” in contrast with the amendment of Section 45 which was

128 Bihta Co-operative Development and Cane Marketing Union Ltd. & Anr. vs. Bank of Bihar &

Ors., AIR 1967 SC 389 (paras 5 & 7-8]; Dattatraya Govind Mahajan & Ors. vs. State of

Maharashtra & Anr., (1977) 2 SCC 548 (para 9); S. Sundaram Pillai & Ors. vs. V.R. Pattabiraman

& Ors., (1985) 1 SCC 591 (paras 27 & 45-53); Jagan M. Seshadri vs. State of T.N., (2002) 9 SCC

639; and Hardev Motor Transport vs. State of M.P. & Ors., (2006) 8 SCC 613 (para 31)

“deemed to have always meant”. Several judgments of the High

Courts, pending adjudication before this Court, holding that the

PMLA cannot be applied retrospectively, were also referred129

(iii) Additionally, the impact of insertion of Clause (ii) of the

Explanation to Section 3 vide the 2019 amendment, is also

questioned. It is stated that a continuing offence is not defined in

any statute. Some offences are described in a way that make it clear

that the offending activity is a continuing one, some illustrations are

in Section 281 in the Cantonments Act, 2006130; Section 36(1)(iii)(d)

in the Pharmacy Act, 1948131 and Sections 162(1) & 220(3) in the

Companies Act. Hence, a continuing offence is one which can be

distinguished from an offence which is committed once and for all.

It is submitted that it is an offence where until the obeying or

compliance of rule or a requirement is effectuated, every subsequent

129 Tech Mahindra Ltd. (supra at Footnote No.100) (Telangana & AP High Court, decided on

22.12.2014 – paras 12, 33, 65-67 & 68-71) read with Order dt. 08.12.2017 passed by this Court

in SLP (Crl.) Diary No. 34143/2017; M/s. Ajanta Merchants Pvt. Ltd. (supra at Footnote No.103

– paras 20-22 & 29); Arun Kumar Mishra (supra at Footnote No. 102 – paras 19-21 & 27-28);

Mahanivesh Oils & Foods Pvt. Ltd. (supra at Footnote no. 104 – paras 25-27, 33-35, 37 & 38-

39]; Obulapuram Mining Company Pvt. Ltd. vs. Joint Director, Directorate of Enforcement,

Government of India, ILR 2017 Kar 1846 (paras 5 & 10-12); Ajay Kumar Gupta & Ors. vs.

Adjudicating Authority (PMLA) & Ors., (2017) 2 LW (Cri) 252 (paras 7, 10 & 13-22) and Madhu

Koneru vs. The Director of Enforcement, Crl. Pet.No. 4130/2019, decided on 02.06.2021 by the

High Court of Telangana (paras 31-32).

130 For short, “2006 Act”

131 For short, “1948 Act”

non-compliance leads to the commission of the offence again and

again132. In case of money-laundering, it is urged that there is a

clear starting point and an end point to the same, where the

generation of proceeds of crime starts and ends in the integration of

proceeds of crime into the financial bloodstream as untainted

money. Thus, though it may take place over time but it cannot be

considered as a continuing offence. Further, for the purpose of

substantive interpretation, no reference can be made to the

Explanation added by the 2019 amendment, since it is a mere

explanation which cannot widen the ambit of the main section

itself133

11. Mr. Mahesh Jethmalani, learned senior counsel was next in

line to advance submissions on behalf of the private parties. He

submitted that Section 44(1)(a) of the PMLA is unconstitutional and

violative of Articles 14 and 21 of the Constitution. He contends that

there is no nexus of the said Section with the object of the PMLA.

132 State of Bihar vs. Deokaran Nenshi & Anr., (1972) 2 SCC 890 (para 5); Commissioner of Wealth

Tax, Amritsar vs. Suresh Seth, (1981) 2 SCC 790 (paras 11-17). [Note: observations on

‘continuing offence’ affirmed by this Court in Smt. Maya Rani Punj (Smt.) vs. Commissioner of

Income Tax, Delhi, (1986) 1 SCC 445 (paras 15-20)]

133 M/s. Ajanta Merchants Pvt. Ltd. (supra at Footnote No.103) (para 37)

This section does not contemplate a joint trial of the offence under

Section 3 and the scheduled offence. Further, he interprets Section

44(1)(a) to mean that the Special Court can only try the scheduled

offence, but not together; it has to be separately tried as per the

provisions of the Cr.P.C. It is also said that the rationale behind this

change is difficult to fathom. On the other hand, it is pointed out

that the accused's right of being tried as per the Cr.P.C., for

scheduled offence is being violated, at least in respect of 37 out of

58 scheduled offences of the IPC noted in the Schedule to the 2002

Act, are triable exclusively by a Magistrate of the First Class or any

Magistrate. In support of this argument, reliance has been placed

on A.R. Antulay vs. R.S. Nayak & Anr.134

. It is submitted that the

present interpretation of this section leads to the violation of the

right to be tried by a Magistrate First Class, the right of a first appeal

to Sessions Court under Section 374(3) and the right of revision to

the High Court under Section 401 of the Cr.P.C. from the appellate

judgment of the Sessions Court. This leads to a rather oppressive

interpretation where an accused who is not charged under the PMLA

offence but only under the predicate offence is also tried by the

134 AIR 1988 SC 1531 (para 59): (1988) 2 SCC 602

Special Court. This is also hit by the fact that several of the

scheduled offences within the PMLA are themselves part of special

statutes which prescribe that they shall be tried by the Special Court

established under those special statutes exclusively. For example,

the PC Act, the NDPS Act and the National Investigation Agency Act,

2008135. Thus, in such a case the PMLA Special Court cannot have

power to try offences punishable under those Acts. The phrase ‘any

scheduled offences’ as contemplated under Section 44(1)(a) of the

PMLA is in a manifest conflict with these three statutes and, hence,

liable to be struck down. Learned counsel also submits that the

Section is a legal absurdity as to how a Special Court could try a

scheduled offence before the commencement of the Act without

which commencement of the Special Court has no existence. It is

also stated the discretion to choose which issue or scheduled offence

to try before the Special Court lies only with the authority authorised

to file a complaint under the PMLA, which is a discretionary and

unfettered arbitrary power.

135 For short, “NIA Act”

(i) As regards Section 44(1)(c), it is urged that the same does not

mandate disclosure of any reason for filing the application. Further,

such an application can be moved at any stage of the proceedings

for the inquiry or trial of a scheduled offence. Such a provision

cannot be read to allow committal at a stage when the trial is over

and only the judgment remains to be delivered. This tantamounts

to authorising exercise of administrative fiat in respect of subject

matter, which is in fact a quasi-judicial act. Similarly, even the

Magistrate is not obligated to state reasons while deciding the

application and as such his order, if not reasoned, will be a nullity.

The interpretation of the words ‘commit’ and ‘committed’ is said to

be misconceived under Section 44(1)(c). It is urged that the use of

the word ‘committal’ is inappropriate and the real intention of the

present Section is a mere transfer of the case to the PMLA Special

Court. As such, it is submitted that the case be sent to the Special

Court which has already taken cognizance of the complaint under

the PMLA and not any other Special Court. Reliance has been placed

on the decision of the Delhi High Court in Directorate of

Enforcement vs. Surajpal & Ors.136 and on the other hand, the

136 2018 SCC OnLine Del 10472 (Paras 15-16)

decision of the High Court of Kerala in Inspector of Police, CBI vs.

Assistant Directorate, Directorate of Enforcement (PMLA) &

Anr.137

, wherein it is observed that it is not mandatory to make an

application for committal to Special Court in every case and,

similarly, not mandatory for the Court to allow every such

application without application of mind and dehors the merits of the

case. Hence, the conflict of view between the two High Courts needs

to be resolved.

(ii) Referring to Section 45, it is argued that Sections 201 and 212

of the IPC provide for graded punishment or in line with the principle

of an accessory after the fact. Attention has been drawn to a few

cases to show that these Sections prescribe gradation of punishment

depending on the nature of offence which the principal offender has

committed138

. It is stated that Section 3 of the PMLA offence also is

one kind of an accessory after the fact offence. It is also maintained

that in certain cases the proceeds of crime or the scheduled offence

may be committed by some person and the laundering might be done

137 2019 SCC OnLine Ker 4546

138 Sou. Vijaya Alias Baby vs. State of Maharashtra, (2003) 8 SCC 296 (Para 6); Also see: State

of Karnataka vs. Madesha & Ors, (2007) 7 SCC 35 and In Re Kuttayan alias Nambi Thevar, AIR

1960 Mad 9

by a completely different person. In such a case, where moneylaundering is not directly connected with the scheduled offence, the

laundering is merely an accessory after the fact. He submits that

even though the offence of money-laundering is a serious offence,

however, the severest punishment is only seven years. Thus, twin

conditions under Section 45 are grossly disproportionate and

illogical for the crimes provided under the PMLA. It is also stated

that the equation of the bail provisions under the PMLA cannot be

made to the NDPS Act or UAPA. Further, even a serial murderer

who may be liable for capital punishment is not subjected to such

stringent condition, as under Section 45 of the PMLA. Irrespective

of the deleterious impact on the economy of a country, it does not

shock the conscience of the society as much as the conduct of the

serial murderer. Reliance is also placed upon Nikesh Tarachand

Shah139 in support of the argument that even if the amendment to

Section 45 (which was struck down in the aforementioned case)

saves the conditions from the vices on which it was struck down, the

vice of Article 21 persists owing to the presumption of innocence

139 Supra at Footnote No.3

having been turned on its head. It is also said that the current

provision has no compelling State interest for tackling serious crime

and we must be doubly sure to allow such attack on the fundamental

right of personal liberty.

(iii) As for Section 24 and the burden of proof which is reversed

within this Act, it is stated that Section 24(a) applies only after

charges have been framed by the Special Court. Section 24(b) refers

to persons not charged with the offence of money-laundering under

Section 3 and it is further contended that Section 24(a) and (b) have

no application to proceedings for bail. Furthermore, it is stated that

presumption of innocence is a golden thread running through all

criminal proceedings. This can apply only in cases of extremely

serious offences on the ground of compelling State interest. It is

submitted that in such a case where the maximum sentence is of

seven years, such a provision is ultra vires Article 21 of the

Constitution. It is argued that in special statutes like UAPA, MCOCA

and the PC Act, the reverse burden of proof has only been upheld

due to the compelling State interest, such as security and public

order. Thus, it is agreed that in cases of narco terrorism,

underworld, gangs the undoubted evils may prosper; hence, Section

24(a) can accordingly be read down so as to apply to cases of

laundering where the predicate offence seeks to punish nefarious

activities.

12. Mr. Abhimanyu Bhandari, learned counsel also argued on

behalf of private parties. His foremost challenge is to the

interpretation of Section 3, post addition of the Explanation vide the

2019 amendment. He has more or less reiterated the same

arguments as advanced by the previous learned counsel that by way

of Explanation, the ingredient of offence under Section 3 is sought

to be altered by reading “and” as “or”. He has relied upon the reports

and speeches of the Minister in the Parliament. Additionally, he has

placed reliance on the Vienna Convention and United Nations

Convention Against Transnational Organized Crime, 2000140, which

state that money-laundering is only committed if the ‘use’ and/or

‘concealment’ is ‘for the purposes of concealing or disguising the

illicit origin of the property’ or ‘helping any person who has been

involved in the commission of the predicate offence to evade the legal

140 For short, “Palermo Convention” or “the 2000 UN Convention”

consequences of his/her action’

141. Reliance is also placed on

Nikesh Tarachand Shah142, wherein it has been held that it is the

concealing or disguising by projecting tainted monies as untainted

money and not their spending that is prohibited.

(i) Thus, exception is taken that the Explanation as added by the

2019 amendment has wholly changed the scope of the main

provision which is the definition. It is contrary to the concerns of

the Select Committee and subsequent to this Explanation, a person

would now commit the offence of money-laundering the minute

proceeds of crime are generated. A similarity is drawn with Section

1956 of the United States Code143 where money-laundering is to

conceal the illicit background of the source of the money. Further,

reliance is also placed on American decisions where the Circuit

Courts have held that it is not spending or using of proceeds of crime

that amounts to the offence of money-laundering, but laundering of

such proceeds of crime144. Further, it has been stated that this

141 See Article 6 of the Palermo Convention

142 Supra at Footnote No.3

143 Title 18 US Code S. 1956- Laundering of Monetary Instruments

144 United States of America vs. Renee Armstrong Sanders, 929 F.2d 1466 (10th Cir. 1991);

United States of America vs. Paul Johnson, 440 F.3d 1286, 1293 (11th Cir. 2006); United States

of America v Roger Faulkenberry, 614 F.3d 573 (6th Cir. 2010); and Jennifer Wang, Yes, That is

Court in a catena of decisions, held that newly added Explanations

must be read so as to harmonise and clear of ambiguity in the main

Section and cannot be construed to widen the ambit of the previous

state of the Section145

(ii) The next contention is regarding the definition of “proceeds of

crime” and use of value thereof, defined under Section 2(1)(u) of the

PMLA. It is argued that it can be categorised into three types

namely: one - property derived or obtained, directly or indirectly, by

any person as a result of criminal activity relating to a scheduled

offence; or, two - the value of such property that is property derived

or obtained, directly or indirectly, by any person as a result of

criminal activity relating to a scheduled offence; and third - where

such property is taken on field outside the country, then the

property equivalent in value held within the country or abroad.

(iii) It is submitted that by reason of the Explanation(s) added in

2019, it cannot be interpreted to include property not only derived

or obtained from the scheduled offence but also any property which

Money Laundering. Oh Wait, It's Not: The Impact of Cuellar on Concealment Money Laundering

Case Law, 18 J Bus L 255 (2015).

145 Nagar Palika Nigam vs. Krishi Upaj Mandi Samiti & Ors., AIR 2009 SC 187 and Rohitash

Kumar & Ors. vs. Om Prakash Sharma & Ors., AIR 2013 SC 30.

may directly or indirectly be derived or obtained as a result of any

criminal activity relatable to the scheduled offence. Further, the

Explanation to the term “property”, also would now include property

“used in the commission of an offence”. To this, reference is made

to Articles 1 and 5 of the Vienna Convention and Article 12 of the

Palermo Convention to show that if the criminal activity does not

generate any proceeds, then there cannot be any ‘proceeds of crime’.

Further, the ambit of property also is said to have been enlarged

disproportionately. As such, proceeds of crime need to be generated

from the scheduled offence alone and not any criminal activity. To

demonstrate the vice, various illustrations were also pointed out to

us. It is imperative that Courts can differentiate between property

being used to commit an offence and property derived from the

commission of an offence, as is already accepted in other common

law countries146. Thus, it is submitted that such an amendment by

way of Explanation cannot expand the scope of a section. Reference

is also made to the fact that attachment of property of an equivalent

value where the actual proceeds are no longer available, is similar to

other Acts, such as the UAPA, the NDPS Act, the Prohibition of

146 R v Ahmad, [2012] 2 All ER 1137; Also see: R v James, [2012] 2 Cr App R (S) 253

Benami Property Transactions Act, 1988147 and the Fugitive

Economic Offenders Act, 2018148, all having similar definition of

proceeds of crime. Objection is taken to term “property equivalent

in value”, where properties are attached which have been derived

from proceeds of crime even if they are different from the original

form when the proceeds were generated149. Further, for the

interpretation of ‘value thereof’, it is said that a broader

interpretation would be contrary to Sections 8(5) and 8(6) of the

PMLA. Hence, by way of illustration, where the original proceeds of

crime are interchanged and mixed with legitimate money, it is

argued that giving a broad interpretation to ‘value thereof’ would be

unreasonable150

(iv) In respect of Section 8, it is argued that the true meaning of

the words “take possession” of property under Section 8(4) should

be constructive possession instead of physical possession since it is

highly prejudicial for the accused during the pendency of the trial.

147 For short, “1988 Act”

148 For short, “2018 Act”

149 Abdullah Ali Balsharaf & Anr. vs. Directorate of Enforcement & Ors., 2019 SCC Online Del

6428; and Seema Garg vs. Deputy Director, Directorate of Enforcement, 2020 SCC Online P&H

738

150 Seema Garg (supra at Footnote No.149 above)

100

Reliance is placed on a decision that has been stayed by the Division

Bench of the Madras High Court which had originally held it to be

symbolic possession instead of actual151. It is urged that Article

300A is not only a constitutional right but also a human right.

Further, confiscation is only subject to conviction and such

disposition in all practical sense, leads to a confiscation prior to such

conviction. Further, since there is no compensation in case a person

is eventually acquitted, this would be a disproportionate action. As

such, the argument that one needs to be restrained from selling or

creating encumbrance is valid, the dispossession is not.

13. Mr. N. Hariharan, learned senior counsel, who argued next,

referred to Nikesh Tarachand Shah152. Vide this decision, twin

conditions in Section 45(1)(ii) of the PMLA, came to be struck down

being violative of Articles 13(2), 14 and 21 of the Constitution. He

submits that post Constitution laws declared unconstitutional for

violation of Part III as void ab initio cannot be revived by

151 A. Kamarunnisa Ghori vs. The Chairperson, Prevention of Money Laundering, Union of India,

2012 (4) CTC 608 : 2012 Writ LR 719

152 Supra at Footnote No. 3

101

amendments153, as such laws are void since inception. Further, he

relied upon State of Gujarat & Anr. vs. Shri Ambica Mills Ltd.,

Ahmedabad & Anr.154, to contend that Section 45(1) cannot

survive on the statute books155. Reference has also been made to G.

Mohan Rao vs. State of Tamil Nadu & Ors.156. In his argument,

two situations evolving from the decision of Nikesh Tarachand

Shah157 have been put forth. One, where only the twin conditions

were stuck down and the remaining provision remained untouched.

Second, where classification based on Part A of the Schedule was

also struck down in addition to striking down of the twin conditions.

The second situation is said to be even more damaging given that

the substitution by the Finance Act, 2018 is targeted only to this

classification of Part-A of the Schedule, since the Court in the

reported decision found this classification to be manifestly arbitrary,

as it bore no rational relation to the object of the Act. Hence, the

substitution by the Finance Act, 2018 cannot be justified, as the

153 Deep Chand (supra at Footnote No.69); Saghir Ahmad (supra at Footnote No. 69) and

Mahendra Lal Jaini vs. State of Uttar Pradesh & Ors., AIR 1963 SC 1019

154 (1974) 4 SCC 656

155 Supra at Footnote No.154

156 2021 SCC OnLine SC 440

157 Supra at Footnote No. 3

102

substitution of this pre-existing term cannot appear on the statute

book due to the striking down. It also reminded that this submission

was made without prejudice to the contention that the twin

conditions themselves need to be enacted separately since they have

been struck down. Further, even if the violation of Article 14 has

been cured, such amendments cannot go on to cure the defect of

violation of Article 21.

14. Mr. Vikram Chaudhari, learned senior counsel also

representing private parties, raised a challenge against the twin

conditions of Section 45(1) which were held unconstitutional in

Nikesh Tarachand Shah158. Relying on the dictum of this Court

in State of Manipur & Ors. vs. Surajkumar Okram & Ors.159, he

submitted that once held unconstitutional, a statute is obliterated

entirely, as if it had never been passed, non-est for all purposes. He

has also relied on his own interpretation of how Section 45(1) is to

be read post Nikesh Tarachand Shah160. He has also pointed out

158 Supra at Footnote No. 3

159 2022 SCC OnLine SC 130

160 Supra at Footnote No. 3

103

that despite this decision an editorial error where bare acts, post the

judgment, did not remove the offending (void) provision. It is,

therefore, submitted that issue is not whether twin conditions under

Section 45(1) would apply or not or of their constitutional validity,

but would be as to their existence. He also referred to Clauses 204

and 205 of the Bill which amended Section 45 in 2018161. The

intention was to take steps to further delink the scheduled offence

and money-laundering offence, and to allow the Courts to apply

lenient bail provisions, for sick and infirm. Further, the

interpretation to the amendment sought by the State is said to be

ill-founded and untenable since there is no reference to the

pronouncement of Nikesh Tarachand Shah162 and was for the

purpose of delinking the scheduled offence and money-laundering.

(i) In respect of the procedure found in Chapter XII of the Cr.P.C.

for the purposes of investigation, he relied upon Ashok Munilal

161 Which states that “(v) to amend section 45 of the Act relating to offences to be cognizable

and non-bailable and to amend sub-section (1) of section 45 to substitute the words “punishable

for a term of imprisonment of more than three years under Part A of the Schedule” by words

“under this Act” so as to take a step further towards delinking the Scheduled offence and

money laundering offence. Further, it seeks to amend the proviso in subsection (1) by inserting

the words “or is accused either on his own or along with other co-accused of money laundering

a sum of less than Rupees one crore”, after the words “sick or infirm” to allow the Court to

apply lenient bail provisions in case of money laundering offence is not grave in nature.”

(emphasis supplied)

162 Supra at Footnote No. 3

104

Jain & Anr. vs. Assistant Director, Directorate of

Enforcement163, wherein it had been noted that Section 4(2) of the

Cr.P.C. prescribes mandatory application even in respect to special

statutes unless expressly barred164. Thus, the dictum is that the

provisions of the Cr.P.C. would be applicable to the extent in the

absence of any contrary provision in the special Act or any special

provision excluding the jurisdiction or applicability of the Cr.P.C.

The point of admissibility of statement made to customs officers and

Section 25 of the 1872 Act is also touched again165

. Relying upon

Om Prakash & Anr. vs. Union of India & Anr.166

, it is argued that

in the absence of a procedure to investigate irrespective of

cognizability, no investigation can be permitted in law. And in

respect of cognizable offence, the investigation cannot go on without

recording information under Section 154 or 155 of the Cr.P.C.,

forwarding of report or FIR to competent Magistrate under Section

157 of Cr.P.C., maintaining a paginated case diary as under Section

163 (2018) 16 SCC 158 (also at Footnote No.22)

164 M.K. Ayoob & Ors. vs. Superintendent, Customs Intelligence Unit, Cochin & Anr., 1984 Crl.L.J.

949; and The Senior Intelligence Officer, Directorate of Revenue, Madras vs. M.K.S. Abu Bucker,

1990 Cri.L.J 704.

165 A.R. Antulay vs. Ramdas Sriniwas Nayak & Anr. (1984) 2 SCC 500

166 (2011) 14 SCC 1

105

172 of the Cr.P.C., as also, its production before the Magistrate, as

provided by Section 167.

(ii) A passing reference is also made to the Railway Property

(Unlawful Possession) Act, 1966167, whereby vide Section 6, the

application of Section 155 Cr.P.C. was excluded, but in the case of

PMLA, since there is no express departure from these provisions of

the Cr.P.C., it being a non-cognizable offence, all these protections

must come into play. In contradistinction, if it is found to be a

cognizable offence, all protections including under Sections 154,

157, 167 and 172 Cr.P.C., will prevail.

(iii) Reliance was also placed on Union of India vs. Thamisharasi

& Ors.168 with respect to the NDPS Act and the application of the

provisions of the Cr.P.C. For our perusal, a comparative chart had

been presented to show the various provisions of the Cr.P.C., which

are not displaced in the PMLA. Thus, it is urged that safeguards of

the Cr.P.C. were applicable being mandatory, to the extent of the

Magistrate being a part of all stages of investigation, commencement

and closure of investigation, maintenance of a case diary, adherence

167 For short, “1966 Act”

168 (1995) 4 SCC 190

106

to Sections 154, 155 and 157, ability to pursue anticipatory bail,

bail under Sections 437 and 439, inherent jurisdiction under

Section 482 and Article 226 of the Constitution and other records or

information which helps to curb fishing and roving enquiries.

(iv) Reliance is placed on the decision of Punjab & Haryana High

Court at Chandigarh in Gorav Kathuria vs. Union of India &

Ors.169, which has attained finality, as this Court has declined to

interfere in the order of the High Court. Reliance is also placed on

the decision of this Court in D.K. Basu vs. State of W.B.

170

. It is

urged that in a case under the Drugs and Cosmetics Act, 1940171

where police officers could no longer investigate, FIRs were made

over to the Drug Inspectors. This is indicative of the correct

procedure to be followed, unless otherwise provided, even

investigation of offences under the special Acts will be governed by

Cr.P.C. alone.172

169 2016 SCC OnLine P&H 3428

170 (1997) 1 SCC 416 (also at Footnote No.58)

171 For short, “1940 Act”

172 Union of India vs. Ashok Kumar Sharma & Ors., 2020 SCC OnLine SC 683

107

(v) It is then argued that an umbilical cord connection exists

between the scheduled offence and the money-laundering offence.

The Explanation of Section 44 is to disconnect the link between the

two, since the findings recorded in the trial of the scheduled offence

would not have a bearing on the case under the PMLA. Again,

reference is made to Nikesh Tarachand Shah173. It is urged that

the proceeds of crime under Section 2(1)(u) are relatable to a specific

scheduled or predicate offence due to the insertion of the word ‘the’

instead of ‘any’ and, as such, the ambit cannot be broadened to ‘any’

scheduled or predicate offence174. He submits that certain

conclusions are inevitable. Before the ED starts investigation, there

must be some commencement under the scheduled or predicate

offence. The trials for the specifically connected proceeds of crime

and scheduled or predicate offence must be tried together. Finding

showing no involvement of accused to the proceeds of crime or

criminal activity must cease the proceedings under the PMLA. Noncompliance of Section 44(1)(c) will vitiate the PMLA proceedings.

Further, it is submitted that the scope of money-laundering is

173 Supra at Footnote No. 3

174 Canon India Private Limited vs. Commissioner of Customs, 2021 SCC OnLine SC 200

108

limited to projecting and claiming as untainted property, that too

relatable to the scheduled offence175. In light of the said argument,

it is said that the projecting of such proceeds of crime as untainted

can be termed as a standalone offence. In furtherance of same,

certain facts of the case being Criminal Appeal Nos. 391-392/2018

titled Adjudicating Authority (PMLA) and Ors. vs. Ajay Kumar

Gupta and Ors., were also referred to, where the FIR and scheduled

offence are both prior to the coming into force of the PMLA and, yet,

an ECIR was filed in 2015 after a delay of about 10 years.

15. Mr. Akshay Nagarajan was the last learned counsel to argue on

behalf of the private parties. He contended that even though the

definitions under Section 3 read with Section 2(1)(u), two conjunctive

parts, are meant to cover scheduled offences, they are being used to

bring within its sweep even non-scheduled offences. He has

contended that the present definition of Section 3 is wide enough to

take within its sweep any non-scheduled offence due to the first part

of the definition, “acquisition, use, concealment, possession is

175 Attorney General for India & Ors. vs. Amratlal Prajivandas & Ors., (1994) 5 SCC 54

109

capable”. However, this contrast is impermissible in law176. To

buttress this plea, provision of Section 71 of the IPC and Article 20(2)

are invoked177. He has also submitted that for the purpose of Section

50(3), any statement recorded and deemed to be judicial proceeding,

cannot be used in light of Section 132 of the 1872 Act178

SUBMISSIONS OF THE UNION OF INDIA

16. Mr. Tushar Mehta, learned Solicitor General led the arguments

on behalf of the Union of India, followed by Mr. S.V. Raju, learned

Additional Solicitor General.

(i) At the outset, it is submitted by the learned Solicitor General

that as on date, around 4,700 cases are being investigated by the

ED, which is a small number as compared to annual registration of

the cases under the Money Laundering Act in UK (7,900), USA

(1,532), China (4,691), Austria (1,036), Hongkong (1,823), Belgium

(1,862), Russia (2,764). Further, only 2086 cases were taken up for

176 Sanjay Dutt vs. State through C.B.I., Bombay, (1994) 6 SCC 86

177 The State of Bombay vs. S.L. Apte & Anr., AIR 1961 SC 578; Also see: Thomas Dana vs. State

of Punjab, AIR 1959 SC 375

178 Hira H. Advani etc. vs. State of Maharashtra, (1969) 2 SCC 662, Also see: R. Dineshkumar

alias Deena vs. State represented by Inspector of Police & Ors., (2015) 7 SCC 497 (paragraphs

41-44)

110

investigation in last five years under the PMLA out of registration of

approximately 33 lakh FIRs relating to predicate offences by police

and other enforcement agencies.

(ii) It is asserted that the validity of the PMLA shall have to be

judged in the background of international development and

obligation of India to prevent money-laundering, as moneylaundering impacts not only the country in which the predicate

offence takes place, but also the economy of other countries where

“proceeds of crime” is laundered.

(iii) It is submitted that the object of the PMLA which affect the

economic fabric of the nation, is to prevent money-laundering,

regulate certain activities relatable to money-laundering, confiscate

the “proceeds of crime” and the property derived therefrom and

punish the offenders. The development of international consensus

towards the offence of money-laundering has been highlighted. It is

submitted that prior to 1988, there was no concept of “proceeds of

crime” and the same was recognized for the first time in Regina vs.

Cuthbertson & Ors.179 by the House of Lords. England was one of

179 [1981] A.C. 470

111

the first countries to take legislative action against proceeds of crime

on the recommendations of the Hodgson Committee by enacting

Drug Trafficking Offences Act, 1986 (later replaced by the Drug

Trafficking Act, 1994) which empowered the Courts to confiscate the

proceeds of drug trafficking.

(iv) Later, the Vienna Convention imposed obligation on each

participating country to criminalize offences related to drug

trafficking and money-laundering180, to which India is a party.

(v) It is submitted that the provisions of the Palermo Convention

were delineated to ensure that participating countries should have

appropriate legislation to prevent money-laundering and further, the

Convention also placed obligation on the participating nations to

utilize relevant international anti-money laundering initiatives in

establishing their domestic regulatory and supervisory regimes.

(vi) Further, it is submitted that on 31.10.2003, the UN General

Assembly adopted United Nations Convention Against Corruption,

whose Preamble recognized the importance of preventing, detecting

and deterring international transfers of illicitly acquired assets, and

180 Article 3(1)(a)&(b) of the Vienna Convention, 1988

112

strengthening international cooperation in asset recovery. The

Convention mandated the participating States to conduct enhanced

scrutiny of accounts sought or maintained by politically exposed

persons and their associates and to implement measures to monitor

the movement of cash and other instruments across their borders

so that a ‘paper trail’ be created which could assist law enforcement

authorities in investigating the transfers of illicit assets.

(vii) Thus, relying on the international Conventions, the Union of

India has submitted that it is the international obligations of the

State to not only recognize the crime of money-laundering but also

to take steps for preventing the same.

(viii) To highlight the role played by the FATF in combating the

menace of money-laundering, the respondent has traced the origin

of FATF and stated its process of reviewing the compliance with its

recommendations by every State and the consequences of noncompliance. It is submitted that the FATF was established by the

Heads of State or Government of the seven major industrial nations

(Group of Seven, G-7) joined by the President of the European

Commission in a summit in Paris in July, 1989 which is famous for

its ‘Forty Recommendations’ to combat money-laundering and,

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hence, carry out its own evaluation and enforcement on the issue of

money-laundering across the world. Thus, it acts as a dedicated

body dealing with this issue. It is submitted that FATF has

recognized dynamic nature of money-laundering and thus

attempted to respond to the money-laundering techniques that are

constantly evolving, by reviewing its recommendations. Further, the

FATF has adopted its Non-Cooperative Countries or Territories

(“NCCT”) initiative in a report issued on 14.2.2020, according to

which a 25 points criteria was recognized which is consistent with

the Forty Recommendations of the FATF and which identified

‘detrimental rules and practices’ in the international effort to combat

laundering. It thus established a review process to target delinquent

countries and territories where the anti-laundering regime is

ineffective in practice and to take steps against those countries. The

steps which FATF may take against a non-compliant nation include

‘conditioning, restricting, targeting or even prohibiting financial

transactions with non-cooperative jurisdictions’.

(ix) It is submitted that the measures against money-laundering

have evolved over the period of time. Further, FATF has taken

preventive, regulatory and monitoring steps through keeping a

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watch on suspicious or doubtful transactions by amending its Forty

Recommendations in 2003 and 2012.

(x) It is further submitted that FATF assess the progress of its

members in complying with the FATF recommendations through

assessments performed annually by the individual members and

through mutual evaluations which provides an in-depth description

and analysis of a country’s system for preventing criminal abuse of

the financial system, as well as, by focused recommendations to the

country to further strengthen its system.

(xi) It is submitted that upon evaluation, a country will be placed

immediately into enhanced follow-up if it does not comply with the

FATF technical and “big six” recommendations or has a low

effectiveness outcome181

(xii) It is further submitted that jurisdictions under monitoring

then, based on their commitments and compliances, are put in two

types of list viz., grey list and black list, which serve as a signal to

181 (i) It has 8 or more Non-compliant NC/ Partially Compliant (PC) ratings for technical

compliance; (ii) It is rated NC/PC on any one or more of R.3, 5, 10, 11 and 20 “big six”

recommendations; or (iii) It has a low level of effectiveness for 4 or more of the 11 effectiveness

outcomes.

115

the global financial and banking system about heightened risks in

transactions with the country in question which not only severely

affect its international reputation but also impose economic

challenges, such as impacting the bond/credit market of the

country, impacting the banking and financial sector of the country,

affecting cross-border capital flows, especially for the trade sector,

documentary requirements for export and import payments, such as

letters of credit may become more challenging to fulfil, potentially

raising costs and hampering business for companies engaged in

trade, adversely affecting the economy due to a lack of investment

opportunities which may further deteriorate the financial health of

the country and the country may also be deemed as a ‘high-risk

country’.

(xiii) Further, the learned Solicitor General has relied on a report

by the International Monetary Fund182 (IMF) - Anti-Money

Laundering and Combating the Financing of Terrorism (AML/CFT)

Report on the Effectiveness of the Program to state the potential

economic effects that may arise from such financial crimes, such as

182 For short, “IMF”

116

destabilizing capital inflows and outflows, loss of access to

international financial markets as a result of deterioration in the

country’s reputation, difficulty in supervising financial institutions,

undermining of the stability of a country’s financial system and

adverse effect on growth of the country.

(xiv) The respondent has further relied on Council of Europe

Convention on Laundering, Search, Seizure and Confiscation of the

Proceeds from Crime and on the Financing of Terrorism (2005) to state

that nations are free to choose the definition of ‘predicate offences’

for money-laundering purposes from the list of offences given under

the Convention, for example, by providing a list of those offences, a

category offences, or by reference to offences that have a maximum

term of imprisonment of one year or more (or, for states that have

minimum thresholds for offences, those with imprisonment of a

minimum of six months) and to take measures which are preventive

in nature.

(xv) To illustrate the global development of the approach against

money-laundering, 1991 Money Laundering Directive (‘First

Directive’) adopted by the European Union is cited which imposed

obligations on credit institutions and financial institutions in

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relation to customer identification and record-keeping, internal

controls and training of staff and mandatory reporting of suspicious

transactions. The Second Directive (2001) widened the number of

institutions that fell within the scope of reporting obligations and

also expanded the range of predicate offences for the purpose of

money-laundering. EU Third Directive (2005) was directed to bring

the EU legislation into line with the revisions to the FATF

Recommendations and further expanded the range of institutions

within its scope to include life insurance intermediaries and widened

the definition of high value dealers to capture those who accept cash

payments of €15,000 or more. A definition of ‘serious crimes’ was

included that constituted ‘predicate offences’, including all offences

punishable by a maximum sentence of one year or more, or a

minimum sentence of six months or more (in jurisdictions where

minimum sentences are applied), as well as other specified offences

including serious fraud and corruption. It is submitted that the EU

Fourth Directive on Money Laundering (2015) aimed to improve the

regulatory European framework after taking into account new FATF

recommendations published in 2012.

118

(xvi) It is further submitted that the purpose of December 1988

Statement on Prevention of Criminal Use of the Banking System for

the Purpose of Money-Laundering issued by the Basel Committee

was to ensure that banks are not used to hide or launder funds

acquired through criminal activities.

(xvii) To emphasize on the role of international cooperation to

combat money-laundering, it has been stated that the Financial

Intelligence Unit created by the Egmont Group, which is an

international forum to combat money-laundering, should serve as a

national centre for receiving, analyzing and disseminating

suspicious transaction reports, and should have access on a timely

basis to the financial, administrative and law enforcement

information that it requires to properly undertake its functions as

per the revised FATF Recommendations.

(xviii) The Union of India has further traced the origin of the term

“money-laundering” and stated that the term arose in United States

in 1920s, which was used by the American Police Officers with

reference to the ownership and use of launderettes by mafia groups

as the launderettes gave them a means of giving a legitimate

appearance to money derived from criminal activities. The profits

119

gained through these launderettes were thus termed ‘laundered’.

Further, the term ‘money-laundering’ was first used with a legal

meaning in an American judgment of 1982 concerning the

confiscation of laundered Columbian drug proceeds.

(xix) It is further submitted that the goal of money-laundering is

to conceal the predicate offences and to ensure that the criminals

‘enjoy’ their proceeds. Further, the money-laundering takes place

through ‘a complex process often using the latest technology, of

sanitizing money in such a manner that its true nature, source or

use is concealed, thereby creating an apparent justification for

controlling or possessing the laundered money’ in a number of

intermediate steps.

(xx) It is stated that the reasons for fighting money-laundering,

firstly, is to enable law enforcement authorities to confiscate the

proceeds of predicate criminal activities so as to undermine

organized crime by taking away the incentive for these criminal

activities relatable to offences. Secondly, to apprehend high level

criminals as they themselves stay aloof from criminal activities but

do come into contact with the proceeds of these activities, thereby

creating a ‘paper trail’. Thirdly, to prevent criminals from

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destabilizing the national economy because of its corruptive

influence on financial markets and the reduction of the public’s

confidence in the international financial system and lastly to deter

the money launderers from impacting the growth rate of the world

economies.

(xxi) It is stated that the principal sources of illegal proceeds are

collar crimes (tax, fraud, corporate crimes, embezzlement and

intellectual property crimes), drug related crimes and smuggling of

goods, evasion of excise duties, corruption and bribery (and the

embezzlement of public funds).

(xxii) To show the global impact of money-laundering, it is

submitted that the IMF and the FATF have estimated that the scale

of money-laundering transactions is between 2% and 5% of the

global GDP. It is also stated that the United Nations has recently

put the figure of money-laundering at USD 2.1 trillion or 3.6% of

global GDP. Thus, the operation of money-laundering has

international dimension. It is submitted that measures being taken

at the national level would be inadequate, which made it necessary

to establish effective international co-operation mechanisms to allow

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national authorities to co-operate in the prevention and prosecution

of money-laundering and in international ‘proceeds-hunting’.

(xxiii) Further, it is submitted that the measures to combat moneylaundering have evolved from post facto criminalization to preventive

approach with its stress on the reporting obligations. The definition

of “money-laundering” is now no more restricted to the elements of

projection and untainted property.

(xxiv) It is stated that India, and its version of the PMLA, is ‘merely

a cog in this international vehicle’ and as India is a signatory to these

treaties, therefore, is bound legally and morally, to adopt the best

global practices and respond to the changing needs of the times. It

is, therefore, submitted that the constitutionality of the PMLA has to

be adjudicated from the stand point of the country’s obligations and

evolving responsibilities internationally.

(xxv) The learned Solicitor General invited our attention to the

introduction to the PMLA. Making reference to the Statement of

Objects and Reasons of the Act, he submits that the Act was enacted

with the intent of establishing a strict and stringent framework to

address the global menace of money-laundering. Refuting the

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private parties’ attempt to classify the Act as being a purely penal

statute, he submits that the PMLA is an amorphous or hybrid

statute, which has regulatory, preventive and penal aspects.

Learned Solicitor General then walked us through the various

provisions of the PMLA, and submitted that categorizing the Act as

being merely penal in nature, would not only defeat the purpose of

the Act, but would also be against the express provisions enshrined

therein.

(xxvi) It is further submitted by the Union of India that the PMLA is

a complete Code in itself, and establishes a specific separate

procedure to the extent necessary and to be followed in proceedings

under the Act. Laying down a brief summary of the legislative

scheme of the Act, the respondent submits that there has been a

conscious legislative departure from conventional penal law in India.

Considering the peculiar nature of money-laundering – which

requires prevention, regulation and prosecution, a completely

different scheme is framed by the Legislature. The new scheme

introduced for dealing with the money-laundering is as a part of

India’s global responsibility in international law. While complying

with the mandate of FATF, the Legislature has very consciously

123

ensured that the Act becomes compliant with the Constitution of

India. Referring to the rules formulated under the PMLA, it is also

submitted that the scheme of the Act and rules framed thereunder

prescribe an elaborate procedure to ensure complete confidentiality,

and place sufficient inbuilt checks and balances to prevent potential

abuse.

(xxvii) The respondent then sheds some light on the offences

being investigated by the Directorate of Enforcement. It is submitted

that the number of cases taken up for investigation each year has

risen from 111 cases in 2015-16 to 981 in 2020-21. Comparing the

number of cases registered annually under money-laundering

legislations, it is submitted that the low registration of cases in India

is due to the robust mechanism for risk-based selection of cases for

investigation. The ED is focusing its attention on cases involving

high value of proceeds of crime and cases involving serious predicate

offence involving terror financing, narcotics, corruption, offence

involving national security, etc. To that effect, it is highlighted that

attachment proceedings concerning some of the fugitives, who are

facing action, were done and assets worth Rs.19,111.20 crores out

of a total fraud of Rs.22,585.83 crores were attached. Furthermore,

124

the investigation in 57 cases of terror and Naxal financing has

resulted in identification of proceeds of crime worth over Rs.1,249

crores and attachment of proceeds of crime of Rs.982 crores (256

properties) and filing of 37 prosecution complaints and conviction of

two terrorists under PMLA. Lastly, it is stated that the quantum of

proceeds of crime involved in the bunch cases under the PMLA which

are under consideration in these matters is Rs.67,104 crores.

(xxviii) Having laid down the basic scheme of the PMLA, learned

Solicitor General proceeded to discuss the definition of “moneylaundering” as per Section 3 of the Act. Tracing its origin, it is

submitted that the term “money-laundering” finds its initial

definition in Article 3.1(b)(i)(ii) and (c)(i) of the Vienna Convention.

However, the Vienna Convention limited the predicate offences to

drug trafficking offences, and, consequently, led to the adoption of

an expansive definition covering the widest range of predicate

offences under the Palermo Convention. Building upon the

definitions contained in the Vienna Convention and the Palermo

Convention, the FATF recommended member countries to expand

the predicate offences to include serious crimes. The same was

made binding on the member countries by way of Recommendation

125

No. 1 and Recommendation No. 3 of the FATF. Subsequent to its

enactment, the PMLA became subject to evaluation by the FATF

based on the Forty Recommendations formulated by the FATF. In

2010, the FATF adopted the ‘Mutual Evaluation of the Anti-Money

Laundering (AML) and Combating the Financing of Terrorism (CFT)

Regime of India Report’183. As per Recommendation No. 1 of the

Mutual Evaluation Report, the concealment, possession, disposition

and use of proceeds of crime were not criminalized by PMLA, and

India was, thus, held to be not fully compliant. Thus, with a view to

address the legal deficiency as pointed out by FATF and to make it

globally compliant, the Prevention of Money-Laundering

(Amendment) Act, 2012 amended Section 3 to include these

activities. In support of his argument, learned Solicitor General

draws our attention to the Statement of Object and Reasons of

Prevention of Money Laundering (Amendment) Bill, 2011184, and the

parliamentary debates surrounding the amendment.

(xxix) Summing up the recommendations of the FATF, it is clarified

by the learned Solicitor General that even in an act of mere

183 For short, “Mutual Evaluation Report”

184 For short, “2011 Bill”

126

concealment, mere possession or mere use of “proceeds of crime” or

“activity” connected with the proceeds of crime, per se, is an offence.

In other words, if a person conceals the proceeds of crime, keeps it

in his possession or uses it, he is guilty of money-laundering

irrespective of as to whether he is projecting it as untainted or not.

This is for the simple reason that if a person conceals something

(proceeds of crime), it is an act committed knowingly and, thus, the

question of that person projecting that very thing either as tainted

or untainted does not arise.

(xxx) It is further explained that the anomaly resulting from an

erroneous drafting was successfully explained during the 2013

review of FATF by categorically contending that all expressions

following the term “including” are mere illustrative and

independently constitute an offence of money-laundering without

being dependent upon each other. Thus, so long as a person

knowingly becomes a party or is actually involved in any process or

activity connected with proceeds of crime, such a person is guilty of

money-laundering.

(xxxi) In order to lend further credibility to the sanctity of the FATF

Mutual Evaluation Report and the recommendations contained

127

therein, the learned Solicitor General took us through the numerous

amendments incorporated in the PMLA by way of the 2012

Amendment Act which was largely based on the recommendation of

the FATF. Special emphasis is laid on the amendments carried out

in Sections 5 and 8 of the Act pursuant to FATF recommendations.

It is further submitted that apart from the PMLA, corresponding

amendments to the UAPA, the NDPS Act and the Companies Act

have been also made as a sequel to the FATF recommendation

during the Mutual Evaluation of India.

(xxxii) Learned Solicitor General submitted that the interpretation

put forth by the other side, would effectively result in granting the

accused a license to commit the offence of money-laundering and

thereafter either conceal the proceeds of crime, or keep them in his

possession, or use them and thereby wriggle out of the legislative

intent of preventing money-laundering by raising a plea that the

same were never claimed/projected as being untainted property.

Reliance is placed on Seaford Court Estates Ld. vs. Asher185, to

point out that principles of statutory interpretation dictate that any

185[1949] 2 K.B. 481.

128

interpretation which leads to mischief should be avoided and the

statute should be so construed that the legislative intent is not

defeated. It is submitted that the limitations of traditional approach

to crime and in fact, highlights the importance of the evolved

approach of anti-money laundering laws in the nature of the PMLA.

Thus, the definition of “money-laundering” as it exists, passes the

muster, both under Articles 14 and 21 of the Constitution of India.

(xxxiii) It is further submitted that the Explanation to Section 3

inserted vide Finance (No.2) Act, 2019, is merely clarificatory in

nature and elucidates the legislative intent behind the provision.

Reliance is placed on the background/justification of the

amendments to PMLA as contained in the debate on the Finance Bill,

2019186.

(xxxiv) Strong emphasis is laid on the use of the word ‘any’ in the

phrase ‘any process or activity’. A careful reading of Section 3 of the

PMLA clearly provides that any process or activity which itself has a

wider meaning also includes the process or activity of concealment,

possession, acquisition, use and/ or projecting, claiming it as

186 For short, “2019 Bill”

129

untainted property. Placing reliance on Shri Balaganesan Metals

vs. M.N. Shanmugham Chetty & Ors.187, it is submitted that all or

every type/ species of process or activity connected with proceeds of

crime shall be included while interpreting the nature of process or

activities connected with the proceeds of crime.

(xxxv) It is further submitted that all and any activities relating

to proceeds of crime including solitary – possession, concealment,

use or acquisition, constitute and offence of money-laundering,

independent of the final projection. It is submitted that such an

interpretation is necessary to effectively implement the Act in its true

spirit. It is submitted that considering the definition prevailing in

India, it is necessary that any and all of the activity or process

occurring in the definition after the word ‘including’ is considered to

be merely illustrative and not restrictive. Reliance is placed on

catena of judgements188 to show that the use of the term ‘including’

187 (1987) 2 SCC 707

188M/s. Doypack Systems Pvt. Ltd. vs. Union of India & Ors., (1988) 2 SCC 299; Municipal

Corporation of Greater Bombay & Ors. vs. Indian Oil Corporation Ltd., 1991 Supp (2) SCC 18;

Regional Director, Employees’ State Insurance Corporation vs. High Land Coffee Works of P.F.X.

Saldanha and Sons & Anr., (1991) 3 SCC 617; Forest Range Officer & Ors. vs. P. Mohammed Ali

& Ors., 1993 Supp (3) SCC 627; Commercial Taxation Officer, Udaipur vs. Rajasthan Taxchem

Ltd., (2007) 3 SCC 124; Associated Indem Mechanical (P) Ltd. vs. W.B. Small Industries

Development Corpn. Ltd., & Ors. (2007) 3 SCC 607; N.D.P. Namboodripad (Dead) by LRs. vs.

Union of India & Ors., (2007) 4 SCC 502; Oswal Fats and Oils Limited vs. Additional

Commissioner (Administration), Bareilly Division, Bareilly & Ors. (2010) 4 SCC 728; and Mamta

130

is not restrictive, but rather further enlarges the scope of the

definition.

(xxxvi) Depending upon the facts of the case, he submits that it

is quite likely that accused of money-laundering may fall in more

than one of the above categories. Therefore, the focus of investigation

should be on identification of all the process or activity connected

with proceeds of crime including the specific processes and

activities, which have been included as illustrations in Section 3.

Reliance is placed on Rohit Tandon vs. Directorate of

Enforcement189, to bring forth the interplay between various

aspects of Section 3 of the PMLA.

(xxxvii) The learned Solicitor General has also cited other

authorities including the observations made by this Court in Kartar

Singh vs. State of Punjab190

, R. Sai Bharathi vs. J. Jayalalitha

& Ors.191 and Subramanian Swamy vs. Union of India, Ministry

of Law & Ors.192, to show that it is the sole prerogative of the

Surgical Cotton Industries, Rajasthan vs. Assistant Commissioner (Anti-Evasion), Bhilwara,

Rajasthan, (2014) 4 SCC 87.

189 (2018) 11 SCC 46

190 (1994) 3 SCC 569

191 (2004) 2 SCC 9

192 (2016) 7 SCC 221

131

Legislature to define a “crime”, and it is this definition that should

be at the center of any challenge to a criminal provision.

(xxxviii) It is urged that the ‘projection’ of proceeds of crime cannot

be held as a mandatory requirement under Section 3 of the Act;

otherwise, it will become impossible to punish a person for the

offence of money-laundering who “knowingly assists” or who is

“knowingly a party” or who is “actually involved” in any process or

activity connected with the proceeds of crime. It is, therefore,

submitted that the correct interpretation of the word “and” should

be “or” as it was always intended by the legislature. Further, it is

stated that any interpretation contrary to this will render the

provision meaningless. To bolster this argument, reliance is placed

on the decision of this Court in Sanjay Dutt vs. State through

C.B.I., Bombay (II)193. In that case the Court held that the word

‘and’ should be interpreted as ‘or’ and the words “arms and

ammunition” should not be read conjunctively; otherwise, the object

of the Act will be defeated. Therefore, on a similar line, it is argued

that mere concealment or use or possession of the proceeds of crime

193 (1994) 5 SCC 410

132

would amount to an offence of money-laundering and any other

interpretation of the Section would be contrary to the India’s

international obligation and FATF recommendations. It is submitted

that such interpretation of the word “and” would not amount to

judicial legislation, as such exercise is only done to give effect to the

legislative intent by correcting ‘faultiness of expression’194

. He has

relied on Joint Directors of Mines Safety vs. M/s Tandur and

Nayandgi Stone Quarries (P) Ltd.195 to contend that the word “and”

was interpreted as “or” by the Court to give effect to the legislative

intent of the Mines Act, 1952196.

(xxxix) Emphasis is also laid on the application of international

law while interpreting domestic law and it is stated that the domestic

Courts are under an obligation to give due regard to the international

Conventions for construing domestic laws197. The learned Solicitor

General has further placed reliance on People's Union for Civil

194 Regina vs. Oakes 1959 (2) QB 350, Ishwar Singh Bindra & Ors. vs. The State of U.P., (1969)

1 SCR 219 and Gujarat Urja Vikas Nigam Ltd. vs. Essar Power Ltd., (2008) 4 SCC 755

195 (1987) 3 SCC 208

196 For short, “Mines Act”

197 Pratap Singh vs. State of Jharkhand & Anr., (2005) 3 SCC 551 and National Legal Services

Authority vs. Union of India & Ors., (2014) 5 SCC 438

133

Liberties vs. Union of India & Anr.198 and Githa Hariharan &

Anr. vs. Reserve Bank of India & Anr.199 to submit that the

international Treaties and Conventions may be relied on by the

domestic Courts so as to give effect to the international law, if such

law is not inconsistent with any domestic law.

(xl) While referring to Sections 4 and 5 of the Cr.P.C., it is urged

that Cr.P.C is a generic procedural law with no universal application

over any other special criminal or penal legislations. It is stated that

the Legislature is competent to provide a different procedure than

that of Cr.P.C, provided that the special procedure has adequate

constitutional safeguards. Therefore, it is submitted that the

Parliament has provided a distinct procedure under the PMLA which

is also manifested from Sections 65 and 71 of the PMLA. It is stated

that due to the peculiar nature of the offence of money-laundering,

the Legislature in its wisdom has provided a special procedure for

investigation and trial of the offence under the Act. However, it is

submitted that where the application of Cr.P.C is not expressly or by

198 (2005) 2 SCC 436

199 (1999) 2 SCC 228

134

necessary implication excluded, the provisions of Cr.P.C will apply

in light of Section 65 of PMLA as well.

(xli) It is argued that the PMLA is a complete Code in itself, which

creates a new offence and provides separate machinery to the extent

necessary for dealing with it. Therefore, the provisions of PMLA

would override the provisions of the Cr.P.C. in relation to such

express dispensation in view of Section 71 of this (PMLA) Act. In

support of this argument, reliance is placed on Rohtas vs. State of

Haryana & Anr.200

, Ajmer Singh & Ors. vs. Union of India &

Ors.201

, Usmanbhai Dawoodbhai Memon & Ors. vs. State of

Gujarat202

, Central Bureau of Investigation vs. State of

Rajasthan & Ors.203

, State (Union of India) vs. Ram Saran204

Mahmadhusen Abdulrahim Kalota Shaikh (2) vs. Union of India

& Ors.205

, Lalita Kumari vs. Govt. of Uttar Pradesh & Ors.206

Gautam Kundu vs. Directorate of Enforcement (Prevention of

200 (1979) 4 SCC 229

201 (1987) 3 SCC 340

202 (1988) 2 SCC 271

203 (1996) 9 SCC 735

204 (2003) 12 SCC 578

205 (2009) 2 SCC 1

206 (2014) 2 SCC 1 (also at Footnote No.13)

135

Money-Laundering Act), Government of India207 and Union of

India & Ors. vs. Chandra Bhushan Yadav208

(xlii) Next, it is argued that wording of Section 71 must be given

effect to. It is asserted that the insertion of a non-obstante clause in

a statute has the effect of overriding anything inconsistent or

repugnant thereto209. It is stated that this Court in Deep Chand vs.

The State of Uttar Pradesh & Ors.210 laid down some tests for

determining whether any inconsistency or repugnancy exists

between two statutes. The Court held that it has to be seen whether

the provisions are in direct conflict with each other; whether the

legislative intent was to lay down an exhaustive Code on the subject

matter and thereby replace the previous law and whether the two

legislations operate in the same field.

(xliii) It is argued that when a statute has expressly provided a

repealing section then the maxim ‘est exclusio alterius’ (the express

intention of one person or thing is the exclusion of another) will

207 (2015) 16 SCC 1

208 (2020) 2 SCC 747

209 Aswini Kumar Ghose & Anr. vs. Arabinda Bose & Anr, AIR 1952 SC 369 and Central Bank of

India vs. State of Kerala & Ors., (2009) 4 SCC 94

210 (1959) Supp. 2 SCR 8 : AIR 1959 SC 648 (also at Footnote No.69)

136

apply, thereby application of existing statute is excluded in case of

any inconsistency between the two211

(xliv) Reliance has also been placed on Innoventive Industries

Limited vs. ICICI Bank & Ors.212

, wherein in respect of a similar

provision in the Insolvency and Bankruptcy Code, 2016213, it was

held that the provisions of the stated Code ought to be given primacy

over other statutes. It is, therefore, submitted that the procedure

under the Cr.P.C to the extent of inconsistent proviso in PMLA,

stands excluded by way of Section 71 of the Act by necessary

implication. The doctrine of ‘generalia specialibus non derogant’, has

also been invoked, which means that general law yields to special

law. Reliance is placed on the decision of House of Lords in

Elizabeth Warburton vs. James Loveland214. It is submitted that

the said decision has been followed in Patna Improvement Trust

vs. Smt. Lakshmi Devi & Ors.215

, The South India Corporation

(P) Ltd. vs. The Secretary, Board of Revenue, Trivandrum &

211 Kishorebhai Khamanchand Goyal vs. State of Gujarat & Anr., (2003) 12 SCC 274

212 (2018) 1 SCC 407

213 For short, “IBC”

214 (1831) 2 Dow & Cl 480

215 1963 (Supp.) 2 SCR 812

137

Anr.216

, Anandji Haridas and Co. (P) Ltd. vs. S.P. Kasture &

Ors.217

, Maharashtra State Board of Secondary and Higher

Secondary Education & Anr. vs. Paritosh Bhupeshkumar Seth

& Ors.218

, Usmanbhai Dawoodbhai Memon219 and Ethiopian

Airlines vs. Ganesh Narain Saboo220

(xlv) It is then submitted that the controversies regarding offence

under the Act being cognizable or non-cognizable is irrelevant

because the definitions of the cognizable offence under Section 2(c)

and non-cognizable offence under Section 2(l) of the Cr.P.C. are

clearly inapplicable in the case of ED officers who are not police

officers221, as these two definitions only apply to “police officer”.

Secondly, the application of these two definitions is restricted to the

offences mentioned under the First Schedule of the Cr.P.C. and the

offence under the Act (PMLA) is clearly not an offence specified

therein. It is submitted that even under Part II of the First Schedule,

the offence under the Act would be cognizable. Further, the purpose

216 (1964) 4 SCR 280

217 AIR 1968 SC 565

218 (1984) 4 SCC 27

219 Supra at Footnote No.202

220 (2011) 8 SCC 539

221 Romesh Chandra Mehta (supra at Footnote No.119)

138

of categorizing an offence on the basis of cognizable and noncognizable offence is to indicate whether a police officer can arrest a

person without warrant. The Act under Section 19 confers

unequivocal power of arrest without warrant. Therefore, the

question as to whether an offence of money-laundering is cognizable

or non-cognizable, is irrelevant.

(xlvi) It is submitted that from the very inception of the PMLA, the

offences were made cognizable under Section 45 of the Act.

However, the word ‘cognizable’ was causing unnecessary confusion,

as it seemed that offence being cognizable, the jurisdictional police

officers are also empowered to investigate the offence and submit

chargesheet after the investigation. Although such confusion had

no basis as only the ED officers have been empowered to conduct

investigation, who are not police officers under the Act, and after the

investigation only a complaint could be filed by him before the

Special Court. To remove this anomaly, the word ‘cognizable’ was

deleted and the definition of investigation was inserted under

Section 2(1)(na) of the Act. In this regard, the learned Solicitor

General has cited relevant extracts of speech of then Finance

Minister while introducing 2019 amendment.

139

(xlvii) It is submitted that the Legislature had no intention to

make the offence under the PMLA to be non-cognizable which is

manifest from the unamended marginal note222 of Sections 19 and

45 of the Act. It is further stated that Section 19 of the PMLA has a

special purpose with regard to the peculiar nature of the offence. It

is then submitted that the Legislature has deliberately avoided the

provision of registration of FIR, supplying the copy of FIR to the

Magistrate and requiring the authorities to obtain arrest warrant

because due to the nature of offence, there are high chances that the

accused may eliminate the traces of offence if he had any prior notice

of the investigation. The same view has been taken by the

Jharkhand High Court in Hari Narayan Rai vs. Union of India &

Anr.223

, Punjab & Haryana High Court at Chandigarh in Karam

Singh & Ors. vs. Union of India & Ors.224

, Bombay High Court in

Chhagan Chandrakant Bhujbal vs. Union of India & Ors.225

Delhi High Court in Vakamulla Chandrashekhar vs.

222 Bhagirath vs. Delhi Administration, (1985) 2 SCC 580 and Eastern Coalfields Limited vs.

Sanjay Transport Agency & Anr., (2009) 7 SCC 345

223 2010 SCC OnLine Jhar 475

224 2015 SCC OnLine P&H 19739

225 2016 SCC OnLine Bom 9938

140

Enforcement Directorate & Anr.226

, Virbhadra Singh & Anr. vs.

Enforcement Directorate & Anr.227

, Moin Akhtar Qureshi vs.

Union of India & Ors.228 and this Court in Directorate of

Enforcement vs. Vakamulla Chandrashekhar229

. However, in

W.P. (Crl.) No. 363 of 2018 and Crl. M.A. No. 2151 of 2018 i.e.,

Rajbhushan Omprakash Dixit vs. Union of India & Anr., the

Division Bench of the High Court took a different view and referred

the matter to a larger bench. It is submitted that the said order is

contrary to the decisions of this Court in Serious Fraud

Investigation Office vs. Rahul Modi & Anr.230 and of the High

Courts.

(xlviii) Further, the binary created by the private parties of an

offence being cognizable or non-cognizable is immaterial in the case

of PMLA, which is a Code in itself and provides a special procedure

for investigation. It is argued that the compartmentalization of the

offence under the Act is pointless because if the offence is held to be

226 2017 SCC OnLine Del 12810

227 2017 SCC OnLine Del 8930

228 vide order dated 01.12.2017 in W.P. (Crl.) No.2465/2017

229 Order dated 04.01.2018 in SLP (Crl.) Diary No. 36918/2017

230 (2019) 5 SCC 266

141

cognizable, then it will be mandatory to register an FIR. However,

under the scheme of the PMLA, only an ECIR is registered, which

cannot be equated with an FIR and it is only for administrative

convenience for identification of each case.

(xlix) It is argued that the decision of this Court in K.I. Pavunny

vs. Assistant Collector (HQ), Central Excise Collectorate,

Cochin231, squarely applies to the present case, wherein it had been

held that Chapter XII of the Cr.P.C will not apply during the

investigations under the 1962 Act.

(l) It is submitted that various High Courts have already answered

the question under consideration and held that the offence under

the Act is cognizable, so far as power of arrest without warrant is

concerned and the ECIR registered under the Act cannot be equated

with an FIR.232

Strong reliance has been placed upon the decisions

in Virbhadra Singh233 and Dalmia Cement (Bharat) Limited &

Anr. vs. Assistant Director of Enforcement Directorate234.

231 (1997) 3 SCC 721

232 Karam Singh (supra at Footnote No.224) and Chhagan Chandrakant Bhujbal (supra at

Footnote No.225)

233 Supra at Footnote No.227

234 2016 SCC OnLine Hyd 64

142

(li) It is submitted that the nature of the amendment can only be

inferred from the scheme of the Act prior to the amendment and

subsequent to the amendment, and it is the substance rather than

the form which determines the nature of the Act. To lend support to

his submissions, learned Solicitor General has relied on Zile Singh

vs. State of Haryana & Ors.235 and Commissioner of Income

Tax I, Ahmedabad vs. Gold Coin Health Food Private Limited236.

(lii) It is argued that the amendment of Section 45 only clarifies

that the offence under the Act is cognizable in nature so far as the

power of arrest without warrant is concerned. It is further submitted

that the amendment being clarificatory in nature would operate

retrospectively. To bolster this argument, reliance has been placed

on Commissioner of Income Tax, Bhopal vs. Shelly Products &

Anr.

237

, Gurcharan Singh vs. Directorate of Revenue

Intelligence238

, Assistant Electrical Engineer vs. Satyendra Rai

& Anr.239

, Commissioner of Income Tax (Central)-I, New Delhi

235 (2004) 8 SCC 1

236 (2008) 9 SCC 622

237 (2003) 5 SCC 461

238 (2008) 17 SCC 28

239 (2014) 4 SCC 513

143

vs. Vatika Township Private Limited240

, State Bank of India vs.

V. Ramakrishnan & Anr.241, and Union of India & Ors. vs.

Mudrika Singh242.

(liii) It is then submitted that there are adequate safeguards under

Section 19 of the PMLA, which makes the provision Constitutioncompliant. It is submitted that firstly, the power of arrest under

Section 19 can be exercised only by a Director, Deputy Director,

Assistant Director or any other police officer authorized in this behalf

by the Central Government as opposed to Cr.P.C., where the power

of arrest can be exercised by any police officer without a warrant

even on the basis of reasonable suspicion, as per Section 41 of the

Cr.P.C. The Director, who is the head of ED, is appointed by a

neutral process mentioned under Section 25 of Central Vigilance

Commission Act, 2003243. Therefore, only persons of particular rank

who are appointed by statute have the power to arrest any person

under Section 19 of the PMLA. Secondly, there must be material in

240 (2015) 1 SCC 1 (also at Footnote No.127)

241 (2018) 17 SCC 394

242 2021 SCC OnLine SC 1173

243 For short, “CVC Act”

144

possession with the Authority before the power of arrest can be

exercised as opposed to Cr.P.C which gives the power of arrest to

any police officer and the officer can arrest any person merely on the

basis of a complaint, credible information or reasonable suspicion

against such person. Thirdly, there should be reason to believe that

the person being arrested is guilty of the offence punishable under

PMLA in contrast to the provision in Cr.P.C., which mainly requires

reasonable apprehension/suspicion of commission of offence. Also,

such reasons to believe must be reduced in writing. Fifthly, as per

the constitutional mandate of Article 22(1), the person arrested is

required to be informed of the grounds of his arrest. It is submitted

that the argument of the other side that the accused or arrested

persons are not even informed of the case against them, is contrary

to the plain language of the Act, as the Act itself mandates that the

person arrested is to be informed of the ground of his arrest. Sixthly,

the Authority arresting the person is required to forward a copy of

the order of arrest and material in its possession to the Adjudicatory

Authority in a sealed envelope, which is required to be retained for

a period of ten (10) years as per the Prevention of Money Laundering

[the Forms and Manner of Forwarding a Copy of Order of Arrest of a

145

Person along with the Material to the Adjudicating Authority and its

Period of Retention] Rules, 2005. Seventhly, it is stated that the

person arrested is required to be produced before the Special Court

or the Magistrate within twenty-four hours of his arrest. Thus, the

competent Court can look at the material in possession of the

Director and the reasons formed by him to believe that the person is

guilty of the offence under the PMLA, so as to satisfy itself of the

legality of his arrest.

(liv) It is submitted that as there is nothing contrary in the PMLA

to Section 167 of Cr.P.C., therefore, the provisions of remand under

Section 167 Cr.P.C. would also apply and any further detention of

the arrested person would only be allowed by the competent Court

and, for the same reasons, Chapter V of the Cr.P.C. would also apply

in case of arrest made under the PMLA.

(lv) Further, it is submitted that the guidelines issued in Arnesh

Kumar vs. State of Bihar & Anr.244 will have no application for

the purpose of arrest under PMLA. The guidelines in the said

decision were issued to avoid misuse of the provision of arrest, while

244 (2014) 8 SCC 273

146

in the case of the PMLA, there is already a higher threshold specified

for arresting any person. Therefore, there is no possibility of

arbitrary arrest under the PMLA. Whereas, since the decision to

arrest is taken by high official after complying with threshold

requirements in law, there will be presumption that he has acted

bona fide.

(lvi) It is stated that considering the nature and gravity of the

offence, the serving of notice to a person as prescribed under Section

41A of Cr.P.C. would materially interfere with fair investigation being

done by high official bestowed with such responsibility and make the

investigation redundant.

(lvii) Further, it is submitted that the contention of the private

parties that the power under Section 19 of PMLA can only be invoked

after a complaint is filed, is devoid of any merits. It is submitted that

in a complaint case under the PMLA, a complaint is similar to the

police report filed under Section 173 of the Cr.P.C, which makes the

arrest a part of investigation which would always be prior to filing of

the complaint under Section 44 or further complaint as

contemplated in Explanation in Section 44. Further, the proviso to

Section 44(1)(b) which provides for filing of a closure report before

147

the Special Court, if after investigation no offence of moneylaundering is made out, makes it absolutely clear that the complaint

is to be filed after the conclusion of investigation.

(lviii) It is submitted that Section 19 of PMLA is pari materia to

Section 35 of the FERA and Section 103 of the 1962 Act and their

validity has been upheld by this Court. Reliance is placed on

Romesh Chandra Mehta245 to urge that the filing of complaint,

after the investigation, is not a necessary prerequisite before

arresting the person.

(lix) Reliance is then placed on the decision of this Court in Union

of India vs. Padam Narain Aggarwal & Ors.246, wherein the

Court examined the power to arrest under Section 104 of 1962 Act.

Relying on the decision, it was stated that the power to arrest is

statutory in character and cannot be interfered with and can only be

exercised on objective considerations free from whims, caprice or

fancy of the officer. The law takes due care to ensure individual

freedom and liberty by laying down norms and providing safeguards

245 Supra at Footnote No.119

246 (2008) 13 SCC 305

148

so that the authorities may not misuse such power. It is submitted

that the requirement of “reason to believe” and “recording of such

reasons in writing” prevent arbitrariness and makes the provision

compliant with Article 14. This is reinforced from the fact that only

313 arrests have been made under the PMLA in 17 years of

operations of the PMLA.

(lx) Canadian judgment in Gifford vs. Kelson247 was also relied

on to state that “reason to believe” conveys conviction of the mind

founded on evidence regarding the existence of a fact or the doing of

an act, therefore, is of a higher standard than mere suspicion.

Reliance has been further placed on Premium Granites & Anr. vs.

State of T.N. & Ors.248 to urge that the requirement of giving

reasons for exercise of the power by itself excludes chances of

arbitrariness. The learned Solicitor General has further relied on

the decision in M/s. Sukhwinder Pal Bipan Kumar & Ors. vs.

State of Punjab & Ors.249 to state that there is a presumption that

the discretion will not be abused where the discretion is vested with

247 (1943) 51 Man. R 120

248 (1994) 2 SCC 691

249 (1982) 1 SCC 31

149

a high-ranking officer. Lastly, reliance was placed on Ahmed

Noormohmed Bhatti vs. State of Gujarat & Ors.250 and Manzoor

Ali Khan vs. Union of India & Ors.251 to urge that mere possibility

of abuse by the authority, which is vested with the discretion to

exercise the power, cannot be a ground to render the provision

unconstitutional.

(lxi) It is then submitted that the quantum of punishment cannot

be the sole basis for determining the gravity of offence. The

Legislature has several statutory mechanisms to bring about

deterrence effect so as to prevent the commission of an offence and

the quantum of punishment is only one such mechanism. It is

further submitted that a stringent condition of bail is relatable to the

object of creating a deterrent effect on persons who may commit the

offence of money-laundering which is also manifest in the Preamble

of the Act. To give effect to the international standards of preventing

money-laundering prescribed by FATF and other international

treaties, stringent bail conditions are necessary and the Legislature

has provided enough safeguards under Section 19 so as to balance

250 (2005) 3 SCC 647

251 (2015) 2 SCC 33

150

the rights of the accused and to protect the interest of the

investigation as well. It is urged that the legislative policy of the

country has consistently treated money-laundering as a serious

offence affecting the microeconomic strength of the country.

Further, it is stated that the twin conditions under Section 45 of the

PMLA are reasonable from the stand point of the accused and his

rights under Article 21 of the Constitution, which provides an

objective criteria and intelligible differentia, hence, does not violate

Article 14 of the Constitution. Further it is submitted that there are

only some issues on which the international community is building

consensus and money-laundering is one of them, others being

terrorism, drug related offences and organized crime and the twin

conditions are provided in all three categories of laws by the

Legislature.

(lxii) Relying on international Conventions, such as Vienna

Convention, Palermo Convention and FATF Recommendations, it is

urged that the same concern has been expressed by the global

community, which is reflected in all the above-mentioned

Conventions. It is further submitted that Section 45 of the PMLA

fulfils the mandate of international Conventions as the

151

implementation of the PMLA is monitored internationally and is

linked to India's international obligations.

(lxiii) It is submitted that in furtherance of the legitimate State

interest, departure from ordinary criminal procedure has been made

under the PMLA. Reliance has been placed on A.K. Roy vs. Union

of India & Ors.252 to urge that that ‘the liberty of the individual has

to be subordinated, within reasonable bounds, to the good of the

people’. Further, the twin conditions are not novel or draconian in

nature as they are also present in other numerous special

enactments for the welfare of the people and they not only provide

deterrent effect but also tackle the offence of money-laundering. It

is submitted that this Court in Nikesh Tarachand Shah253 has not

reckoned this crucial aspect. It is submitted that the length of

punishment is not the only indicator of the gravity of the offence and

private parties have wrongly argued that the twin conditions cannot

be made applicable in a legislation which carry a punishment of only

seven (7) years. Gravity of offence is to be judged on a totality of

factors, especially keeping in mind the background in which the

252 (1982) 1 SCC 271

253 Supra at Footnote No. 3

152

offence came to be recognized by the Legislature in the specific

international context. To buttress this submission, the learned

Solicitor General has relied on State of Gujarat vs. Mohanlal

Jitamalji Porwal & Anr.254, Y.S. Jagan Mohan Reddy vs.

Central Bureau of Investigation255, Nimmagadda Prasad vs.

Central Bureau of Investigation256

, Gautam Kundu257, and

State of Bihar & Anr. vs. Amit Kumar alias Bachcha Rai258.

Further, reliance has been placed on Mohd. Hanif Quareshi & Ors.

vs. State of Bihar & Ors.259 to state that the seriousness of an

offence and its impact on society is the subject matter of legislative

wisdom and Legislature understands and correctly appreciates the

needs of its own people.

(lxiv) It is submitted that persons involved in the offence of moneylaundering are influential, intelligent and resourceful and the crime

is committed with full pre-meditation, which ensures that the

254 (1987) 2 SCC 364

255 (2013) 7 SCC 439

256 (2013) 7 SCC 466

257 Supra at Footnote No.207

258 (2017) 13 SCC 751

259 AIR 1958 SC 731

153

offence is not detected and even if it is detected, investigation agency

cannot trace the evidence. Further, it is stated that the offence is

committed with the help of advanced technology so as to conceal the

transaction, which makes the stringent bail conditions justified.

Twin conditions of bail under Section 45 protect the interests of the

accused as well as that of the prosecution. Reliance has been placed

on Talab Haji Hussain vs. Madhukar Purshottam Mondkar &

Anr.260, to state that the fair trial must not only be fair to the

accused but also be fair to the prosecution, so that a person guilty

of the offence may not be acquitted.

(lxv) It is submitted that in case of offence of money-laundering,

mere routine conditions which ensure presence of the accused

during trial or protect the evidence, are not enough because of the

trans-border nature of the offence of money-laundering and

influence which may be exercised by the accused. An accused can

anonymously remove the money trail using the technology, which is

available today so as to make the investigation infructuous.

Therefore, even deposit of the passport of the accused may not deter

260 (1958) SCR 1226

154

the accused from fleeing the course of justice or to eliminate the

evidence.

(lxvi) It is submitted that economic offences constitute a class apart

and need to be visited with different approach in the matter of bail.

Further, the fact that the economic offences are considered as a

different class of offences, recognizes the grave and serious nature

of the offence with deep rooted conspiracy, as they involve huge loss

of public funds, thus, affecting the economy of the country as a

whole. It is submitted that the Court while granting bail must keep

in mind the nature of accusations, the nature of evidence in support

thereof, the severity of the punishment which conviction will entail,

the character of the accused, circumstances which are peculiar to

the accused, reasonable possibility of securing the presence of the

accused, reasonable apprehension of the witnesses being tampered

with and the larger interests of the public/State. It is submitted that

granting or refusal to grant bail depends on the nature of offence,

needs of investigation, status of the accused and other factors. The

Legislature, being aware of the need of the day, is competent to

provide a special procedure for grant of bail. It would be wrong to

say that the Court has unfettered discretion in granting or refusal to

155

grant the bail. It is true that the Court exercises discretion while

granting or refusing bail, but that exercise of power has to be within

the legislative framework. It is stated that the requirement of the

Court being satisfied that the “accused is not guilty of an offence” is

not a novel legislative device. Section 437 of Cr.P.C. also imposes a

similar condition261. Moreover, the twin conditions have been

provided for by the Parliament in numerous other enactments as

well. It is submitted that the Parliament is competent to classify

offences and offenders in different categories. The Parliament has

classified the offence of money-laundering as a separate class of

offence from ordinary criminal laws. The said classification was

necessary because the PMLA was framed in a specific international

context, providing for separate and special architecture for

investigation.

261 437. When bail may be taken in case of non- bailable offence.— (1) When any person

accused of, or suspected of, the commission of any non-bailable offence is arrested or detained

without warrant by an officer in charge of a police station or appears or is brought before a

Court other than the High Court or Court of Session, he may be released on bail, but—

(i) such person shall not be so released if there appear reasonable grounds for believing

that he has been guilty of an offence punishable with death or imprisonment for life;

…..

(emphasis supplied)

156

(lxvii) The offence of money-laundering is a new offence created

by the PMLA, which has a high threshold of arrest as given under

Section 19, which itself justifies high threshold for grant of bail.

Nature of the offence being peculiar, makes manner of investigation

far more difficult than in ordinary penal offences. The PMLA is a

complete Code in itself, which creates a separate machinery to tackle

the social menace, having adequate safeguards. It is submitted that

Legislature has on numerous occasions made departures from the

ordinary penal and procedural laws as and when the situation

arrived. The classification of the offence on the basis of public policy

and underlying purpose of the Act cannot be said to be unreasonable

or arbitrary. Therefore, the Parliament is fully competent to deal

with special type of cases by providing a distinct and different

procedure which in the circumstances, cannot be said to be

unreasonable. Therefore, it is submitted that a different standard

for bail can be provided in an offence which serves a special purpose.

To buttress these submissions, reliance has been placed on Kathi

Raning Rawat vs. State of Saurashtra262, Kedar Nath Bajoria

262 AIR 1952 SC 123

157

& Anr. vs. The State of West Bengal263

, Special Reference No.1

of 1978264 and Kartar Singh265.

(lxviii) Further reliance has been placed on Asbury Hospital vs.

Cass County266

, Chiranjit Lal Chowdhuri vs. The Union of India

& Ors.267 and The State of Bombay & Anr. vs. F.N. Balsara268

to urge that ‘the principle of equality does not mean that every law

must have universal application for all persons who are not by

nature, attainment or circumstances in the same position and the

varying needs of different classes of persons often require separate

treatment’. Therefore, the State has power to classify persons on the

basis of intelligible differentia and object which the legislation seeks

to achieve. It is submitted that the classification of the offence of

PMLA and the stringent conditions of bail under Section 45 are,

therefore, not arbitrary and are based on intelligible differentia in

263 AIR 1953 SC 404

264 (1979) 1 SCC 380

265 Supra at Footnote No.190

266 326 US 207 [1945]

267 (1950) SCR 869

268 (1951) SCR 682

158

line with the object of the Act which is to bring about deterrence

effect.

(lxix) Learned Solicitor General has further relied on Articles 38,

39(b), 39(c) and 51(b) & 51(c) of the Constitution to state that the

objective of the Act is to fulfil the mandate of the Constitution,

enshrined in the Directive Principles of State Policy. Reliance has

been further placed on Workmen of Meenakshi Mills Limited &

Ors. vs. Meenakshi Mills Ltd. & Anr.269

, Papnasam Labour

Union vs. Madura Coats Ltd. & Anr.

270 and M.R.F. Ltd. vs.

Inspector Kerala Govt. & Ors.271 to state that the Parliament can

impose restriction which has the effect of promoting or effectuating

a directive principle and such restriction can be safely presumed to

be a reasonable restriction in public interest. Reliance has also been

placed on State of Karnataka & Anr. vs. Shri Ranganatha

Reddy & Anr.

272 and State of Tamil Nadu and Ors. vs. L. Abu

269 (1992) 3 SCC 336

270 (1995) 1 SCC 501

271 (1998) 8 SCC 227

272 (1977) 4 SCC 471

159

Kavur Bai and Ors.

273, to state that the Article 39(b) of the

Constitution shall be given a broad meaning.

(lxx) It is submitted that the mandatory twin conditions of bail

contained in Section 45 of the PMLA prescribe a reasonable

restriction which has a reasonable nexus with the object sought to

be achieved viz., creating deterrence from committing the offence of

money-laundering and, therefore, cannot be treated as arbitrary or

unreasonable or violative of Article 14 or 21 of the Constitution.

Reliance has been placed on Kartar Singh274 and Ranjitsing

Brahmajeetsing Sharma vs. State of Maharashtra and Anr.

275,

wherein the similar twin conditions were upheld by this Court in

TADA Act and MCOCA respectively, to contend that the twin

conditions provided under PMLA are not unreasonable so as to

violate Article 21 of the Constitution.

(lxxi) It is submitted that the limitations on the grant of bail is in

addition to those provided under Cr.P.C. Reliance has also been

placed on Collector of Customs, New Delhi vs. Ahmadalieva

273 (1984) 1 SCC 515

274 Supra at Footnote No.190

275 (2005) 5 SCC 294 (also at Footnote No.53)

160

Nodira276 to urge that the satisfaction contemplated under Section

45 regarding the accused being not guilty has to be based upon

“reasonable grounds”, which means something more than prima

facie grounds. Further reliance has been placed on Supdt.,

Narcotics Control Bureau, Chennai vs. R. Paulsamy277

, Union

of India vs. Gurcharan Singh278

, Ahmadalieva Nodira279

, Union

of India vs. Abdulla280

, Ranjitsing Brahmajeetsing Sharma281

Narcotics Control Bureau vs. Karma Phuntsok & Ors.282

Chenna Boyanna Krishna Yadav vs. State of Maharashtra &

Anr.

283, N.R. Mon vs. Mohd. Nasimuddin284

, State of

Maharashtra vs. Bharat Shanti Lal Shah and Ors.

285, Union of

India vs. Rattan Mallik alias Habul286

, The State of

276 (2004) 3 SCC 549

277 (2000) 9 SCC 549

278 (2003) 11 SCC 764

279 Supra at Footnote No.276

280 (2004) 13 SCC 504

281 Supra at Footnote No.275 (also at Footnote No.53)

282 (2005) 12 SCC 480

283 (2007) 1 SCC 242

284 (2008) 6 SCC 721

285 (2008) 13 SCC 5

286 (2009) 2 SCC 624

161

Maharashtra vs. Vishwanath Maranna Shetty287

, Union of

India vs. Niyazuddin Sk. & Anr.288, Satpal Singh vs. State of

Punjab289

, National Investigation Agency vs. Zahoor Ahmad

Shah Watali290 and Serious Fraud Investigation Office vs.

Nittin Johari & Anr.291 to urge that the twin conditions with regard

to the grant of bail are mandatory in nature, as has already been

held by the Courts in aforementioned cases.

(lxxii) Reliance has also been placed on Modern Dental College

and Research Centre & Ors. vs. State of Madhya Pradesh &

Ors.292 to urge that the reasonability of a statute should be seen

from the point of view of general public and not from the point of

view of a person on whom the restrictions are imposed. Reliance has

also been placed on Bell, Attorney General vs. Wolfish293 to argue

that detention of a person does not mean that he has been punished

287 (2012) 10 SCC 561

288 (2018) 13 SCC 738

289 (2018) 13 SCC 813

290 (2019) 5 SCC 1

291 (2019) 9 SCC 165

292 (2016) 7 SCC 353

293 441 US 520 (1979)

162

by the government. Decision in Schall vs. Martin294, to state that

the legislative intent must be looked at in order to determine whether

the restriction on liberty constitutes ‘impermissible punishment or

permissible regulation’.

(lxxiii) Learned Solicitor General has argued that the decision in

Nikesh Tarachand Shah295 was based on the fact that the twin

conditions of bail, as per the unamended provision, would apply to

cases of bail in respect of both the predicate offence and also the

offence of money-laundering. It is submitted that the reasons due

to which the Court in Nikesh Tarachand Shah296 held the twin

conditions to be unconstitutional, are firstly because the

unamended provision had a classification which was based on

sentencing of the scheduled offence, and secondly, because the

applicability of the twin conditions was restricted only to a particular

class of offences within the PMLA i.e., offences punishable for a term

of imprisonment of more than three (3) years under Part A of the

Schedule and not to all the offences under the PMLA. It is stated

294 467 US 253 (1984)

295 Supra at Footnote No. 3

296 Supra at Footnote No. 3

163

that both the above defects have been removed by the amendment

post Nikesh Tarachand Shah297. Therefore, the basis and the

element of arbitrariness, as pointed out by the Court in Nikesh

Tarachand Shah298, has been taken away by the Parliament so as

to cure the defect.

(lxxiv) It is submitted that, concededly, a law which is struck down

by the Court due to legislative incompetence can never be made

operative by the logic of curing the defect. However, if a law has

been struck down by the Court as being violative of Part III of the

Constitution, then the Legislature has the power to cure the reason

or defect which persuaded the Constitutional Court to hold it to be

violative of Part III of the Constitution and, thereafter, the provision

will be back in its full force, as the declaration by the Constitutional

Court of the provision being unconstitutional mainly results in

making the provision inoperative and unenforceable while the

provision remains on the statute book. To buttress this submission

reliance has been placed on Patel Gordhandas Hargovindas &

297 Supra at Footnote No. 3

298 Supra at Footnote No. 3

164

Ors. vs. The Municipal Commissioner, Ahmedabad & Anr.299

Shri Prithvi Cotton Mills Ltd. & Anr. vs. Broach Borough

Municipality & Ors.300, Bhubaneshwar Singh & Anr. vs. Union

of India & Ors.301

, Comorin Match Industries (P) Ltd. vs. State

of T.N.302, Indian Aluminium Co. & Ors. vs. State of Kerala &

Ors.303, Bakhtawar Trust & Ors. vs. M.D. Narayan & Ors.304

State of Himachal Pradesh vs. Narain Singh305, Goa

Foundation & Anr. vs. State of Goa & Anr.306 and Cheviti

Venkanna Yadav vs. State of Telangana & Ors.307.

(lxxv) It is further submitted that the judgment of this Court in

Nikesh Tarachand Shah308 is per incuriam, as the Court failed to

take note of the judgment of a larger Bench in Rohit Tandon309,

299 AIR 1963 SC 1742

300 (1969) 2 SCC 283

301 (1994) 6 SCC 77

302 (1996) 4 SCC 281

303 (1996) 7 SCC 637

304 (2003) 5 SCC 298

305 (2009) 13 SCC 165

306 (2016) 6 SCC 602

307 (2017) 1 SCC 283

308 Supra at Footnote No.3

309 Supra at Footnote No.189

165

which clearly indicated the mandatory nature and reasonability of

twin conditions. Reliance has been placed on Behram Khurshed

Pesikaka vs. The State of Bombay310

, M.P.V. Sundararamier &

Co. vs. The State of Andhra Pradesh & Anr.311 and F.N.

Balsara312 to state that a law which is not within the competence

of the Legislature is a nullity. However, a law which is within the

competence of the Legislature but repugnant to the constitutional

prohibitions, is only unenforceable and if the prohibitions are

removed, then the law will become effective without any need of reenactment of the provision. It is submitted that the Court in Deep

Chand313 was concerned with the doctrine of eclipse and the

observation of the Court that such eclipse cannot operate

retrospectively and cannot save the validity of the law, was said in a

different context. Further reference has been laid on Jagannath,

etc. etc. vs. Authorised Officer, Land Reforms & Ors. etc.314, to

submit that the Court in this case negated a similar argument made

310 (1955) 1 SCR 613

311 (1958) SCR 1422

312 Supra at Footnote No.268

313 Supra at Footnote No.210 (also at Footnote No.69)

314 (1971) 2 SCC 893

166

on the basis of Deep Chand315. It is submitted that the contentions

of the private parties based on the decision in State of Manipur316

are totally misconceived, as the Court in that case neither had the

intent nor had the occasion to decide the issue of taking away the

basis after declaration of unconstitutionality.

(lxxvi) It is, thus, submitted that the law laid down in Nikesh

Tarachand Shah317 is per incuriam. For, it failed to take notice of

the international background of the PMLA. Further, the judgment

completely ignores the fact that economic offences form separate

class and the twin conditions for money-laundering is a reasonable

classification. The Court had no occasion to consider the question

of ‘legitimate State interest’ in providing for twin conditions for a

separate class of offences.

(lxxvii) Further, it is submitted that the Court was in error to

make distinction between anticipatory bail and regular bail and

wrongly restricted the operation of Section 45 to post-arrest bail. It

is stated that if it is held that the twin conditions under Section 45

315 Supra at Footnote No.210 (also at Footnote No.69)

316 Supra at Footnote No.159

317 Supra at Footnote No.3

167

are only applicable to regular bail and not to anticipatory bail, then

the provision may not stand the scrutiny on the touchstone of Article

14 of the Constitution. Thus, the finding of the Court in paragraph

42 of the reported decision needs to be overruled. It is submitted

that there is no conceptual difference between anticipatory bail and

regular bail and to substantiate this argument, reliance has been

placed on the Sushila Aggarwal & Ors. vs. State (NCT of Delhi)

& Anr.

318. It is urged that the observation of this Court in Nikesh

Tarachand Shah319 about non-applicability of the twin conditions

for bail in case of anticipatory bail should be considered as an obiter

dicta. Reliance has been placed on Municipal Corporation of

Delhi vs. Gurnam Kaur320 to state that the casual expressions of a

Judge in the judgment carry no weight at all.

(lxxviii) It is further submitted that the interpretation of the Court

in Nikesh Tarachand Shah321 is erroneous, because it ignores the

non-obstante clause under Section 45 which ousts the applicability

318 (2020) 5 SCC 1

319 Supra at Footnote No. 3

320 (1989) 1 SCC 101

321 Supra at Footnote No. 3

168

of Section 438 Cr.P.C. The words ‘anticipatory bail’ are not used

separately in the Cr.P.C and pre-arrest bail is mainly a species of

bail in the Cr.P.C. Therefore, it is submitted that Section 45 of the

PMLA and the conditions mentioned therein govern the entire

subject of bail under PMLA. It is further submitted that even the

Constitutional Courts should be loath to ignore the express mandate

of the statute which imposes stringent conditions of bail on a person

accused of an offence under the PMLA.

(lxxix) Further it is argued that the reliance of the private parties

on the decision in Hema Mishra vs. State of Uttar Pradesh &

Ors.322 is completely misplaced, as the Court in that case was

dealing with the situation wherein the provision concerning

anticipatory bail had been deleted by a local State enactment, and

even in that case, the Court held that the power under Article 226

of the Constitution to grant anticipatory bail ought to be exercised

in extremely rare circumstances. Therefore, the said judgment has

no applicability in the present case.

322 (2014) 4 SCC 453

169

(lxxx) It is submitted that the argument of the private parties

which was based on the Section 44(2) of the PMLA, that the twin

conditions in Section 45 are applicable only to the Special Court and

not to the High Court, is totally erroneous. Clarification under

Section 44 was required, as similar provision in special enactments

have been interpreted to oust the maintainability of bail application

directly to the High Court323

. Thus, Section 44 mainly deals with the

issue of jurisdiction. Further, it is submitted that if the twin

conditions for bail are held to be applicable only when the

application of bail is filed in the Special Court and not when the

application for bail is filed before the High Court, then such

interpretation would completely render the provision arbitrary.

17. At the outset, it is submitted by Mr S.V. Raju, Additional

Solicitor General of India that for attracting Article 20(3) of the

Constitution, three things should be established. Firstly, the person

should be accused of an offence; secondly, such a person should be

compelled to make the statement; and thirdly, such compulsion

323 Usmanbhai Dawoodbhai Memon (supra at Footnote No.202)

170

should be for the purpose of being a witness against himself. Unless

all these three ingredients exist, the protection of Article 20(3) cannot

be attracted.

(i) With regard to the requirement of “person accused of an

offence”, it is submitted that there has to be a formal accusation

against such person, which should either be in the form of FIR or a

complaint filed before the Court. It is urged that for Article 20(3) of

the Constitution to apply, the concerned person should be an

accused at the time when the statement was made by him and not

because the person concerned is accused of offence at the time of

trial. Therefore, the thrust of the plea is that a statement recorded

under Section 50(2) of the PMLA would not violate Article 20(3) of

the Constitution, if the person making the statement is not an

accused of or named in money-laundering offence at the time when

the statement under Section 50(2) was made. Reliance has been

placed on M.P. Sharma & Ors. vs. Satish Chandra, District

Magistrate & Ors.324 to state that ‘formal accusation’ relating to

the commission of the offence is a pre-requisite condition for the

324 (1954) SCR 1077 (also at Footnote No.47)

171

applicability of Article 20(3). Reliance has also been placed on

Mohammed Dastagir vs. The State of Madras325, wherein a

Constitution Bench of this Court observed that Article 20(3) would

be available only to those persons against whom FIR has been

registered. Therefore, it is contended that necessity of a formal

accusation can only be met by the registration of an FIR or

submission of a complaint against the concerned person, in order to

make him an accused for the purpose of Article 20(3) of the

Constitution. Further reliance has been made on Kathi Kalu

Oghad326, wherein an eleven-Judge Bench of this Court held that

the person who made the statement must stand in the character of

accused at the time when the statement was made in order to attract

Article 20(3). The decision of five-Judge Bench of this Court in Raja

Narayanlal Bansilal vs. Maneck Phiroz Mistry & Anr.327 has

also been relied upon. It is urged that the examination of a person

cannot be regarded as proceeding started against him, as it is only

after gathering information against a person through examination,

325 AIR 1960 SC 756

326 Supra at Footnote No.44

327 AIR 1961 SC 29

172

it may be concluded that there is a commission of an offence or not.

Accusation of an offence is, therefore, a condition precedent for the

application of Article 20(3) of the Constitution328

. Reliance has also

been placed on Romesh Chandra Mehta329 to state that lodging of

an FIR or a complaint is the essential requirement of formal

accusation, as a person stands in the character of an accused only

when a FIR is lodged against him in respect of an offence or when a

complaint is made against him relating to the commission of an

offence. It is stated that the Court in Romesh Chandra Mehta330

has further approved the view of the Madras High Court in Collector

of Customs, Madras vs. Kotumal Bhirumal Pihlajani & Ors.331,

wherein the Court held that when the statements are recorded by

customs officers under Section 108 of 1962 Act, the maker of the

statement do not stand in the position of an accused. Similar view

of the Bombay High Court in the case of Laxman Padma Bhagat

vs. The State332 was also approved and the contrary view of the

328 K. Joseph Augusthi vs. M.A. Narayanan, AIR 1964 SC 1552

329 Supra at Footnote No.119

330 Supra at Footnote No.119

331 1966 SCC OnLine Mad 145

332 1964 SCC OnLine Bom 59

173

Calcutta High Court in Calcutta Motor Cycle Co. vs. Collector of

Customs & Ors.333 was held to be incorrect.

(ii) Reliance has been placed on Harbansingh Sardar

Lenasingh & Anr. vs. The State of Maharashtra & Ors.334 to

state that a statement recorded by a customs officer under Section

108 of the 1962 Act is admissible evidence and is not hit by Section

25 of 1872 Act or Article 20(3) of the Constitution, as the same has

been concluded by the decision of this Court in Romesh Chandra

Mehta335. It is further submitted that the Court in Nandini

Satpathy336 was not concerned with Article 20(3) of the

Constitution and accepted the view of this Court in Romesh

Chandra Mehta337 as correct. Therefore, it is submitted that at the

stage of recording of statements under Section 50(2) of the PMLA,

only information is being collected for deciding as to whether the

attachment of the property has to take place and at that stage there

is no accusation against any person. Reliance has also been placed

333 1955 SCC OnLine Cal 275

334 (1972) 3 SCC 775

335 Supra at Footnote No.119

336 Supra at Footnote No.35

337 Supra at Footnote No.119

174

on Balkishan A. Devidayal338 and Poolpandi339 to state that only

a person against whom any formal accusation of the commission of

an offence has been made, can be a person accused of an offence

within the meaning of Article 20(3)340 of the Constitution, which may

be specifically made against him in an FIR or a formal document

resulting in the prosecution in Court. Further, reliance has been

made on Poolpandi341 to state that the ratio of Romesh Chandra

Mehta342 cannot be ignored because of observations made in

Nandini Satpathy343. Therefore, it is submitted that when

statements under Section 50(2) of the PMLA are made by a person,

then at that stage such person does not stand in the character of an

accused, as there is no formal accusation against him by way of a

complaint or an FIR and thus, there is no violation of Article 20(3) of

the Constitution.

338 Supra at Footnote Nos.120 (also at Footnote No.41)

339 Supra at Footnote No.123

340 K.I. Pavunny (supra at Footnote No.231) and Tofan Singh (supra at Footnote Nos.24 and 31)

341 Supra at Footnote No.123

342 Supra at Footnote No.119

343 Supra at Footnote No.35

175

(iii) With regard to the issue of ‘compulsion’, it is submitted that

this issue will arise only when the person concerned is held to be

‘accused’ of an offence. Reliance has been further placed on M.P.

Sharma344 and Nandini Satpathy345 to state that compelled

testimony can be ‘procured not merely by physical threats or

violence but by psychic torture, atmospheric pressure,

environmental coercion, tiring interrogative prolixity, overbearing

and intimidatory methods and the like, not legal penalty’. Therefore,

it is submitted that ‘compulsion’ is a question of fact, to be decided

at the stage of trial and cannot be generalized and decided in the

present case.

(iv) Relying on the case of Nandini Satpathy346 and C. Sampath

Kumar vs. Enforcement Officer, Enforcement Directorate,

Madras347, it is submitted that the legal penalties imposed on a

person on his refusal to answer truthfully, cannot be regarded as a

compulsion within the meaning of Article 20(3) of the Constitution.

Therefore, it is submitted that the contentions of the private parties

344 Supra at Footnote No.324 (also at Footnote No.47)

345 Supra at Footnote No.35

346 Supra at Footnote No.35

347 (1997) 8 SCC 358

176

that provisions contained in Sections 50(3), 50(4) and 63(2) amount

to legal compulsion violating the fundamental right under Article

20(3) of the Constitution, is devoid of any merit.

(v) With regard to the issue of ‘being a witness against oneself’, it

is submitted that the witness can be classified into four types – (i)

relevant yet innocent; (ii) relevant and may have no incriminatory

force; (iii) incriminatory without being confessional; and (iv)

confessional. Relying on the case of Nandini Satpathy348, it is

submitted that Article 20(3) applies to confessions and selfincriminations, but leaves untouched other relevant facts.

Therefore, unless there is an admission of an offence in clear terms,

the statement even if it is gravely incriminatory in nature, will not

amount to a confession349

. It is further submitted that apart from

above four categories of witnesses, there can be two other categories,

namely, a witness who makes an admission not amounting to

confession and a witness whose statement comprises both

exculpatory and inculpatory statements. Reliance has been placed

on the case of Central Bureau of Investigation vs. V.C. Shukla &

348 Supra at Footnote No.35

349 Aghnoo Nagesia vs. State of Bihar, AIR 1966 SC 119

177

Ors.350, to state that a statement made by an accused is admissible

in evidence under Section 21 of the 1872 Act, if it falls short of a

confession. It is, therefore, submitted that the question whether a

statement is a confession or not, is essentially a question of fact,

which cannot be decided in the present case.

(vi) The respondent has further relied on the judgment of Andhra

Pradesh High Court in Dalmia Cement (Bharat) Limited351,

wherein it was held that an ECIR cannot be equated with an FIR.

Therefore, the person against whom the summons has been issued

under Section 50(2) read with Section 50(3), is not a person accused

of an offence. Hence, Section 50 does not violate Article 20(3) of the

Constitution. Reliance has been placed on the decision of the Delhi

High Court in Virbhadra Singh352 to state that mere registration of

an ECIR would not render any person an accused of the offence of

money-laundering. Reliance has also been placed on Vakamulla

Chandrashekhar353, wherein it is stated that a Division Bench of

350 (1998) 3 SCC 410

351 Supra at Footnote No.234

352 Supra at Footnote No.227

353 Supra at Footnote No.226

178

the Delhi High Court held that the person against whom summons

has been issued under Section 50 of the PMLA cannot be construed

as person accused of an offence, unless a complaint is filed before

the Special Court.

(vii) Replying to the submissions of Mr. Aabad Ponda, learned

senior counsel, it is submitted by the learned Additional Solicitor

General that in Ramanlal Bhogilal Shah354, there was already an

FIR registered against the accused under the FERA Act, therefore,

he stood in the character of accused person. Whereas, in the case

of PMLA, the FIR is registered for the predicate offence and not for

the offence of money-laundering. Therefore, the ratio of Ramanlal

Bhogilal Shah355 cannot be applied in the present case as the two

offences - predicate offence and the offence of money-laundering are

different.

(viii) With regard to Section 25 of the 1872 Act, it is submitted that

for the bar contained under Section 25 of the 1872 Act to apply,

three things need to be established – (i) confession; (ii) such

354 Supra at Footnote No.122

355 Supra at Footnote No.122

179

concession is made to a police officer; and (iii) the person should be

an accused. It is submitted that the officers who record statements

under Section 50 of the PMLA are not police officers; therefore,

Section 25 of the 1872 Act will not apply in case the statement is

made to ED officers. It is stated that the statements recorded by

police under Section 161 of the Cr.P.C. are different than the

statement recorded by the ED officer under Section 50(2) of the

PMLA. As such, statements are treated as ‘evidence’ in the

proceedings under the Act. It is further stated that Section 108 of

the 1962 Act is pari materia to Section 50 of the PMLA and the

statements recorded therein are considered as evidence. Reliance

has been placed on Tofan Singh356, wherein it was held that Section

67 of the NDPS Act is different from Section 108 of the 1962 Act,

insofar as the statements made therein are evidence as opposed to

Section 67 of the NDPS Act. Therefore, it is stated that the same

reasoning will apply in this case and as the statements recorded

under Section 50(2) are considered as evidence, the ED officer

cannot be termed as ‘police officer’.

356 Supra at Footnote No.31 (also at Footnote No.24)

180

(ix) Further, reliance has been placed on Section 45(1A) of the

PMLA to submit that the Section bars investigation of an offence by

police officers into the offence of money-laundering and if the ED

officers are held to be police officers, then they would become

incompetent to investigate the offence of money-laundering under

the PMLA. It is submitted that in various decisions of this Court, it

has been held that the officers who are not empowered to file a

chargesheet are not police officers. To buttress this submission, the

reliance has been placed on Badaku Joti Svant vs. State of

Mysore357

, Romesh Chandra Mehta358

, Illias vs. The Collector

of Customs, Madras359, State of U.P. vs. Durga Prasad360 and

Balkishan A. Devidayal361.

(x) It is urged that as the officers of the ED are not empowered to

file a chargesheet and consequently, they cannot be regarded as

police officer. After investigation, the ED officers can only file a

complaint before the Special Court under Section 44(1)(b) of the

357 AIR 1966 SC 1746

358 Supra at Footnote No.119

359 AIR 1970 SC 1065

360 (1975) 3 SCC 210

361 Supra at Footnote No.120 (also at Footnote No.41)

181

PMLA. Further, it is stated that as per the definition of “complaint”

under Section 2(d) of the Cr.P.C., a ‘police report’ cannot be regarded

as a ‘complaint’, as they are both mutually exclusive terms. It is

further submitted that a police officer cannot submit a complaint

and an ED officer cannot file a chargesheet. Otherwise, Section

155(4) and Section 155(2) would be rendered otiose, as in a case

falling under Section 155(4) of the Cr.P.C., if the police officer after

investigation forms an opinion that only non-cognizable case is made

out, then in such a situation he is required to file a police report in

view of provision of Section 155(4), but due to the operation of

Section 2(d), the same will be treated as a complaint and the police

officer would be treated as a complainant. Also, in a case where

Magistrate orders the police officer to investigate a non-cognizable

offence under Section 155(2) of the Cr.P.C., then in view of operation

of Section 155(3) of the Cr.P.C., the police officer would necessarily

file a chargesheet. However, due to the operation of Section 2(d), the

chargesheet will be treated as a complaint and he will be treated as

a complainant. It is submitted that in case where a police officer

investigates a non-cognizable offence, the Legislature has, by way of

a deeming fiction, treated the chargesheet as a ‘complaint’, whereas

182

no such fiction applies in the case of officer investigating a PMLA

offence, as he can only file a complaint which does not require any

fiction or deeming provision. Therefore, even in case of noncognizable offence, the police officer is only empowered to file a police

report, whereas in case of the PMLA offence, the ED officers are only

required to file a complaint which is not to be treated as a

chargesheet, otherwise the Legislature would have provided for a

reverse deeming fiction of treating the complaint as a chargesheet.

(xi) Reliance has been placed on Commissioner of Income Tax,

West Bengal vs. Calcutta Stock Exchange Association Ltd.

362 to

state that the word “deemed” shows that the Legislature was

deliberately using the fiction of treating something as something

else. Reliance has been placed on the decision of the Delhi High

Court in Lajpat Rai Sehgal & Ors. vs. State363, to state that after

investigation of non-cognizable offence the police officer has to

submit a report which is deemed to be a complaint. Reliance has

also been placed on the decision of the Delhi High Court in Narain

362 AIR 1959 SC 763

363 1983 (5) DRJ 1 : 23 (1983) DLT 314

183

Singh vs. The State364, wherein a similar view has been taken. It

is submitted that this Court in several cases, has held that the

function of police officers are prevention and detection of a crime.

Reliance has been placed on the decision in Barkat Ram365 to urge

that the primary function of police officers is to maintain law and

order. The Authority empowered to investigate the offence in above

mentioned case was not concerned with the maintenance of law and

order and detection and prevention of crime, but with some other

function such as collection and levy of duty on goods or detection

and prevention of smuggling of goods. Notwithstanding the fact that

some incidental powers of search, seizure, arrest and investigation

of an offence are also conferred on such officer, he cannot be termed

as a police officer as his primary function is to detect and prevent

smuggling of goods so as to protect the state exchequer. Therefore,

it is submitted that the dominant purpose is to be seen.

In case of the PMLA, the dominant purpose is prevention of money364 1986 (10) DRJ 109 : 30 (1986) DLT 118

365 Supra at Footnote No.24

184

laundering, attachment and confiscation of property involved in

money-laundering, whereas all other matters with which the ED

officers are involved, are only incidental matters. Therefore, as

submitted, the ED officers cannot be termed as police officers. The

Preamble of the Act and Statement of Objects and Reasons of the

Act have been relied upon to state that the officers of the ED are

primarily concerned with the prevention of money-laundering and

for confiscation of property derived from or involved in moneylaundering.

(xii) Reliance has been placed on Pareena Swarup vs. Union of

India366 to state that the object of the PMLA is to bring the proceeds

of crime back into the economy. Reliance has also been placed on

the decision of the Delhi High Court in Vakamulla

Chandrashekhar367 to state that the offence of money-laundering

has both, civil and criminal consequences and the Act empowers the

Adjudicating Authority with the powers of civil Court, so as to

adjudicate on the issue of whether any property is involved in

366 (2008) 14 SCC 107

367 Supra at Footnote No.226

185

money-laundering and to attach and ultimately confiscate such

property.

(xiii) Relying on Section 50(4), it is stated that ED officers act

judicially under Section 50(2), whereas a police officer recording a

statement under Section 161 of the Cr.P.C. does not act judicially.

To substantiate the argument, reliance has been placed on

Balkishan A. Devidayal368.

(xiv) It is further stated that the proceedings under the PMLA are

judicial proceedings, similar to the proceedings under the 1962 Act

under Section 108. Therefore, on a parity of reasoning, the ED

officials are not police officers, as held in Balkishan A.

Devidayal369. It is further submitted that under Section 63(2) of

the PMLA, the ED officials are empowered to impose penalty which

is a judicial function, whereas the police officials have no such

power. It is also submitted that the contentions of the private parties

that the statement recorded under Section 50(2) will have to comply

with the requirements of Section 162 of the Cr.P.C., is devoid of any

368 Supra at Footnote Nos.120 (also at Footnote No.41)

369 Supra at Footnote Nos.120 (also at Footnote No.41)

186

substance, as the statements recorded under Section 50(2) of the

PMLA are not statements recorded under Section 161 of the Cr.P.C.

Under Section 50(2) of PMLA, the ED officer is not a police officer as

he is acting judicially under the provision. The statement recorded

under Section 50(2) is treated as evidence, whereas such is not the

case with the statement recorded under Section 161 of the Cr.P.C.

Statements under Section 50(2) are required to be signed, whereas

such is not the case with statements recorded under Section 161 of

the Cr.P.C. Further, the investigation under the PMLA is different

from the investigation under the Cr.P.C. It is then submitted that

as the statements given under Section 50 of the PMLA are required

to be signed and are given in the judicial proceeding within the

meaning of Sections 193 and 228 of the IPC, therefore, the

presumption under Section 80 of the 1872 Act will apply and it shall

be presumed that the document is genuine and the circumstances

under which it was taken are true and such evidence, statement or

confession was duly taken. Whereas, Section 80 of the 1872 Act

cannot have any application under the statements made under

Section 161 of the Cr.P.C. To buttress the submission, reliance was

placed on the decisions of this Court in Baleshwar Rai & Ors. vs.

187

The State of Bihar370 and Dipakbhai Jagdishchandra Patel vs.

State of Gujarat & Anr.371. Even by applying Section 65 of the

PMLA, it is stated that the bar of Section 162 of the Cr.P.C. cannot

be applied to statements made under Section 50(2) of the PMLA

because of the inconsistencies shown above. Further, if the

Legislature had intended to apply Section 162 of the Cr.P.C., then it

would have done so in the Act itself, as it has been done under the

Bihar and Orissa Excise Act, 1915372.

(xv) It is submitted that the ratio of Tofan Singh373, where it was

held that the statement recorded under Section 67 of the NDPS Act

cannot be used as a confessional statement for the trial of an offence

under the NDPS Act, will not apply to Section 50(2) of the PMLA. It

is also submitted that the provisions of the PMLA are materially

different from that of the NDPS Act. In the case of NDPS Act, a

regular police officer, as well as, a designated officer, both are

permitted to investigate the offence under the NDPS Act. Whereas,

in the case of the PMLA, there is a bar contained in Section 45(1A)

370 (1963) 2 SCR 433

371 (2019) 16 SCC 547

372 For short, “1915 Act”

373 Supra at Footnote No.31 (also at Footnote No.24)

188

of the PMLA which prohibits a police officer from investigating the

offence under the PMLA. In the NDPS Act, because of such

provision, Sections 161 to 164 of the Cr.P.C., as also Section 25 of

the 1872 Act, would be applicable making the recorded statement

inadmissible, in case the statements are recorded by a police officer.

However, if the same investigation is conducted by a designated

officer other than the police officer, then such provisions will not

apply, making the procedure discriminatory and in violation of

Article 14 of the Constitution, which is not the case under the PMLA.

(xvi) It is submitted that in case of the NDPS Act, there is no

provision of further investigation by the designated officer. However,

if the investigation is made by a police officer, then in that case he

has the power to further investigate under Section 173(8) of the

Cr.P.C. Such inconsistency does not occur in the case of the PMLA,

as in this case, because of the bar contained in Section 45(1A), the

police officers are not entitled to investigate the offence of moneylaundering. And further, the Explanation (ii) to Section 44 of the

PMLA contemplates filing of subsequent complaint in case any

further investigation is conducted.

189

(xvii) Another anomaly noted by this Court in Tofan Singh374 is

that when such designated officer is investigating the offence under

the NDPS Act, then he has no power to file closure report. However,

there is no such anomaly present in the PMLA Act because the

investigating authority can file a closure report under the proviso to

Section 44(1)(b) of the PMLA.

(xviii) It is further submitted that in Tofan Singh375, it was held

that if the statement recorded under Section 67 of the NDPS Act is

held to be admissible in all situations, then it will render Section 53A

of the NDPS Act otiose, whereas the PMLA does not contain any

provision similar to Section 53A of the NDPS Act.

(xix) Further, in the case of the NDPS Act, prevention, detection

and punishment of crime was not held to be ancillary function of the

Act. However, in the case of the PMLA, the main purpose is

prevention of money-laundering and confiscation of property derived

from or involved in money-laundering.

374 Supra at Footnote No.31 (also at Footnote No.24)

375 Supra at Footnote No.31 (also at Footnote No.24)

190

(xx) Further, the PMLA does not contain any provision which invest

the power of an officer in-charge of a police station, including the

power to file a chargesheet, in the investigating officer as contained

in the NDPS Act. Moreover, in case of the NDPS Act, the

investigating authority is required to file a chargesheet. However, in

case of the PMLA, cognizance is taken on a complaint.

(xxi) Lastly, it is contended that Section 50 of the PMLA is almost

identical to Section 108 of the 1962 Act. Therefore, the statements

made under Section 50 are evidence as opposed to Section 67 of the

NDPS Act. Hence, Section 50(2) of the PMLA cannot be read down

as done in Tofan Singh376, in case of Section 67 of the NDPS Act.

(xxii) The respondent has demonstrated the legislative history of

Section 24 of the PMLA and cited Recommendation 3 of the FATF

(2003)/ Recommendation 4 of FATF (2012) to state that the FATF

had stipulated that the burden of proving the lawful origin of the

property shall be on the accused. In view of the FATF

recommendations and the recommendations of the Standing

Committee of Finance (2011-12), comprehensive amendments were

376 Supra at Footnote No.31 (also at Footnote No.24)

191

made to the provisions of the PMLA. It is submitted that the

Standing Committee of Finance recommended that there should be

adequate safeguards for persons not charged with the offence of

money-laundering; therefore Section 24 was amended in its present

form. It is submitted that the concerns of the Standing Committee

have been incorporated under the provision by using the word “may”

in case of any other person and the word “shall” in case of a person

charged with the offence of money-laundering under Section 24 of

the PMLA. Therefore, it would be wrong to say that the provision is

not constitutionally valid, as the provision itself contains safeguard

for the person not charged with the offence of money-laundering.

(xxiii) It is submitted that in criminal trials the standard of proof

is beyond reasonable doubt. However, such rule of evidence is

neither found in Section 101 nor in Section 3 of the 1872 Act, which

defines the word “proved”. Therefore, it cannot be said that this

principle is a principle of universal application and, therefore,

Legislature in appropriate classes of legislations would be competent

to take departure from this principle. It is submitted that when

Legislature enacts a provision which states that the burden of proof

is shifted to the accused then what is actually done is that standard

192

of proof beyond reasonable doubt is lowered. It is submitted that

Professor Glanville Williams in his book - The Proof of Guilt has also

criticized the doctrine of proving the guilt of the accused beyond

reasonable doubt. It is stated that this principle generally entails

the acquittal of the guilty person which frustrate the investigation of

the police, as a result of which they may resort to improper methods

of obtaining convictions, also the law and order gets into the turmoil.

(xxiv) Respondent admits that the principle of innocence is a

human right and forms the basis of criminal jurisprudence377

Reliance has been placed on Hiten P. Dalal vs. Bratindranath

Banerjee378, which dealt with an offence under Section 138 of the

Negotiable Instruments Act, 1881379 and considered the effect of

presumption raised under Section 139 thereof, to urge that the

presumptions are rule of evidence and do not conflict with the

presumption of innocence. The prosecution is obliged to prove the

case against the accused beyond reasonable doubt. However, such

obligation may be discharged with the help of presumptions of law

377 Narendra Singh & Anr. vs. State of M.P., (2004) 10 SCC 699

378 (2001) 6 SCC 16

379 For short, “1881 Act”

193

or fact unless the accused rebut the presumption by showing the

reasonable possibility of non-existence of the presumed fact. It is

stated that there is a need to balance the rights of the accused with

the interest of the society. Reliance is placed on Krishna

Janardhan Bhat vs. Dattatraya G. Hegde380 to urge that the

nature of offence, seriousness and gravity thereof may be taken into

consideration in interdicting the presumption of innocence.

Reliance has also been placed on Sucha Singh vs. State of

Punjab381 to state that departure from traditional rule relating to

the burden of proof is imperative; otherwise, the offenders in serious

offences would be the major beneficiaries and the society would be

the casualty. It is submitted that the PMLA is an Act which tackles

a social evil and does require departure from normal criminal

jurisprudence. Reliance has been placed on P.N. Krishna Lal &

Ors. vs. Govt. of Kerala & Anr.382 to state that the purpose of law

should be taken into consideration while interpreting the law. It is

submitted that sometimes harsh remedies are required, which takes

380 (2008) 4 SCC 54

381 (2001) 4 SCC 375

382 1995 Supp (2) SCC 187

194

a departure from normal criminal jurisprudence to tackle new and

emerging situations. Further reliance has been placed on the 47th

Report of the Law Commission, 1972, which observed that special

efforts are necessary to eliminate the effect of socio-economic

offences and stringent provisions are essential to safeguard the

national wealth and welfare. It is submitted that the PMLA seeks to

achieve the goal of deterrence and also confiscation of proceeds of

crime and, therefore, the provision is in line with the 47th Law

Commission report. It is pointed out that even the general statutes

such as the IPC and the 1872 Act also provide for the reverse burden

of proof383. It is, therefore, submitted that the shifting of burden of

proof which is nothing but a departure from ordinary criminal

jurisprudence of proving the case beyond reasonable doubt, is not

only contained in the special statutes, which tends to prevent

serious crime against the society at large, but is also contained in

the provisions of the IPC and the 1872 Act. Thus, it cannot be said

that presumption of innocence is a constitutional guarantee.

383 Mukesh Singh vs. State (Narcotic Branch of Delhi), (2020) 10 SCC 120

195

(xxv) It is submitted that to give effect to the object of the NDPS Act,

the Court in Noor Aga vs. State of Punjab & Anr.384, upheld the

constitutional validity of Sections 35 and 54 of the NDPS Act, which

provides presumption against the accused and reverse burden of

proof. Reliance has also been placed on Seema Silk & Sarees &

Anr. vs. Directorate of Enforcement & Ors.385, wherein the Court

upheld the challenge to the constitutional validity of Section 18 of

the FERA, which provides for reverse burden of proof, to state that

a legal provision does not become unconstitutional merely because

it provides for reverse burden of proof. Further Reliance is placed

on Sodhi Transport Co. & Ors. vs. State of U.P. & Ors.386 to state

that a rebuttable presumption, which is a rule of evidence, cannot

be said to be unconstitutional because the person concerned has the

opportunity to displace the presumption by leading evidence. It is

submitted that Section 24 of the PMLA also provides for rebuttable

presumption and, therefore, the accused has the opportunity to lead

evidence so as to displace the presumption against him. Thus, it

384 (2008) 16 SCC 417 (also at Footnote No.55)

385 (2008) 5 SCC 580

386 (1986) 2 SCC 486

196

cannot be said that Section 24 is unreasonable, arbitrary or

unconstitutional.

(xxvi) With regard to Section 24(a) of the PMLA, it is submitted that

two conditions are required to be satisfied for the presumption under

Section 24(a) to apply. Firstly, person should be ‘charged’ with the

offence of money-laundering and secondly, there should be ‘proceeds

of crime’. It is only when both the conditions are satisfied, it can be

said that the presumption will operate against the accused.

(xxvii) Reliance has been placed on Union of India vs. Prafulla

Kumar Samal & Anr.387 to state that for framing of charges, a

prima facie case against the accused has to be made out by the

prosecution388, which means that a grave suspicion should be there

against the accused. Therefore, the requirement of framing of

charges against the accused under Section 3 of the PMLA itself acts

as a safeguard against the arbitrary exercise of the provision.

Secondly, it is stated that the existence of proceeds of crime will be

387 (1979) 3 SCC 4

388 Dilawar Balu Kurane vs. State of Maharashtra, (2002) 2 SCC 135, Yogesh alias Sachin

Jagdish Joshi vs. State of Maharashtra, (2008) 10 SCC 394, P. Vijayan vs. State of Kerala & Anr.,

(2010) 2 SCC 398, Sajjan Kumar vs. Central Bureau of Investigation, (2010) 9 SCC 368, Sheoraj

Singh Ahlawat and Ors. vs. State of Uttar Pradesh & Anr., (2013) 11 SCC 476 and Dipakbhai

Jagdishchandra Patel (supra at Footnote No.371)

197

the foundational fact under Section 24(a) of the Act. It is further

submitted by the learned Additional Solicitor General that even

when the presumption against the accused is applied then also the

accused will have the opportunity to rebut the same by leading

evidence or by replying adequately under Section 313 of the Cr.P.C.

or by cross examining the prosecution witness.

(xxviii) A comparison is drawn between Section 24 of the PMLA

and Section 106 of the 1872 Act to submit that similar results would

appear even if the provision like Section 24(a) of the PMLA was not

there because of Section 106 of the 1872 Act. By way of an

illustration, it has been explained that the results of Section 106 and

Section 24(a) would be the same in a case where money is lying in a

house where incidentally a person is found, then the burden of

proving that the person has nothing to do with the proceeds of crime

is on that person itself because of Section 106 of the 1872 Act, which

states that when any fact is especially within the knowledge of any

person, the burden of proving that fact is upon him. Reliance has

been placed on the Sarbananda Sonowal vs. Union of India &

198

Anr.389, wherein it was held that the facts regarding date of birth,

place of birth, name of parents, place of citizenship and birth, are all

facts within the special personal knowledge of the concerned person

and it will be impossible for the State to lead evidence on aforesaid

points. Therefore, any fact which would be impossible for the

prosecution to establish, as is specially and exceptionally within the

exclusive knowledge of the accused, would have to be proved by the

accused himself. Therefore, it is submitted that the shifting of

burden of proof under Section 24(a) of the PMLA is not violative of

Article 14 or 21 of the Constitution of India.

(xxix) It is further pointed out that the contentions of the private

parties that the Court in Noor Aga390 and Tofan Singh391 has read

into Section 54 of the NDPS Act the requirement of proving

foundational fact of possession, is wholly incorrect and misplaced,

as it would be clear from the bare language of Section 54 itself that

the possession is the foundational fact which has to be established

389 (2005) 5 SCC 665

390 Supra at Footnote No.384 (also at Footnote No.55)

391 Supra at Footnote No.31 (also at Footnote No.24)

199

and only then the presumption under Section 54 of the NDPS Act

will apply.

(xxx) With regard to Section 24(b) of the PMLA, it is submitted that

it applies to a person who is not charged with the offence of moneylaundering and uses the word ‘may’ instead of ‘shall’. It is submitted

that presumptions falling under the category of ‘may presume’ does

not make it obligatory on the Court to regard such fact as proved

and it is the discretion of the Court to either regard such fact as

proved or may call proof of it. Whereas, presumptions falling under

the category of ‘shall presume’ are mandatory in nature, also known

as legal presumptions, and the Court has to regard such fact as

proved unless and until it is disproved392

. It is, therefore, submitted

that presumption contained under Section 24(b) is discretionary in

nature. It is submitted that the presumption under Section 24(b)

can be raised at the stage of bail and other proceedings, prior to the

stage of framing of charges. As before granting bail under the PMLA,

the Court has to be satisfied that the accused is not guilty of the

392 State of Madras vs. A. Vaidyanatha Iyer, AIR 1958 SC 61 and M. Narsinga Rao vs. State of

A.P., (2001) 1 SCC 691

200

offence; therefore, the Court may resort to Section 24(b) in exercise

of its discretion.

(xxxi) Further, it is submitted that the word “Authority” under

the PMLA refers to the Adjudicating Authority and not authority

under Section 48 of the PMLA. It is further submitted that the

arguments of the private parties that Section 24(b) of the PMLA is

draconian in nature, is wholly incorrect, as the presumption is

discretionary in nature. Foundational fact of proceeds of crime is

condition precedent to the application of the provision and the

presumptions can only be raised before the Court or Adjudicating

Authority.

(xxxii) Further, while relying on the decision in Pareena

Swarup393 and Madras Bar Association vs. Union of India &

Anr.394 and Section 6 of the PMLA, it is stated that Adjudicating

Authority is an independent Authority, without prejudice to the fact

that the functions of Authority is civil in nature and standard of

393 Supra at Footnote No.366

394 (2021) 7 SCC 369

201

proof would be preponderance of probabilities and not proof beyond

reasonable doubt in a proceeding before it.

(xxxiii) Repelling the challenge under Article 20(1) of the

Constitution with regard to the retrospective applicability of the Act,

it is submitted that the Act does not punish or seek to punish a

person for any act committed prior to the PMLA or prior to the

addition of the concerned offence in the Schedule to the PMLA

coming into force. It is submitted that Article 20(1) of the

Constitution prohibits the making of an ex post facto criminal law

i.e., making an act a crime for the first time and making that law

retrospective. It also prohibits infliction of a penalty greater than

that which might have been inflicted under the law in force when the

act was committed. Reference has been made to Rao Shiv Bahadur

Singh & Anr. vs. The State of Vindhya Pradesh395 to urge that

what is prohibited under Article 20(1) is only the conviction or

sentence and not trial thereof. It has been further emphasized that

the expression ‘law in force’ used in Article 20(1), refers to the law in

fact in existence and in operation at the time of the commission of

395 AIR 1953 SCC 394

202

the offence, as distinct from the law “deemed” to have become

operative by virtue of the power of Legislature to pass retrospective

law.

(xxxiv) In light of the said principles, it is submitted that an

offence might be either a ‘single act’ i.e., an offence which is

terminated by a single act, or a ‘continuing offence’ i.e., an act which

does not terminate by a single act, but rather continues to subsist

over a period of time. It is submitted that the offence of moneylaundering, as described under Section 3 of the PMLA, in a given

case would be a continuing offence, and, thus, cannot be labelled as

having retrospective operation. It is submitted that the objective of

the PMLA is not to punish the accused for the scheduled offence, but

rather for the independent offence of money-laundering committed

under Section 3 of the Act. The argument proceeds that an Act

cannot be said to be retrospective just because a part of the

requisites for its action is drawn from a time antecedent to its

passing396

396 The State of Maharashtra vs. Vishnu Ramchandra, (1961) 2 SCR 26 and Sajjan Singh vs. The

State of Punjab, (1964) 4 SCR 630

203

(xxxv) The respondent has placed reliance on Mohan Lal vs.

State of Rajasthan397. In this case, theft of 10 kgs of opium had

taken place prior to the coming into force of the NDPS Act, but opium

was subsequently recovered after the commencement of the NDPS

Act. Inter alia, the conviction under the NDPS Act was challenged

on the ground that there can be ex post facto application of the NDPS

Act. This Court, while upholding the conviction and rejecting the

plea of Article 20(1), observed that what is punishable is the

possession of the prohibited article on or after a particular date when

the statute was enacted, making the offence punishable or

enhancing the punishment. It is, thus, submitted that in the case

of an offence under the PMLA, the date of coming into force of the

PMLA i.e., 01.07.2005 or the date when the predicate offence was

committed, is irrelevant if the PMLA offence is committed on a date

subsequent to both the above date. Similarly, reliance is also placed

on the decisions of the Supreme Court of the United States in

Samuels vs. McCurdy, Sheriff398 and Chicago & Alton Railroad

Company vs. Henry A. Tranbarger399 to restate the

397 (2015) 6 SCC 222.

398 1925 SCC OnLine US SC 42.

399 238 U.S. 67.

204

aforementioned principles of law. Additionally, our attention was

drawn to the provisions governing period of limitation, namely

Sections 469400 and 472401 of the Cr.P.C. It is submitted that as per

Section 469, in case of a single act, the date of commencement of

the limitation period is the date on which the offence was committed.

However, the position is different for a continuing offence, in as

much as, the date of commencement of the limitation period in such

a case would be the date on which the continuing offence ended402

Reliance has been placed on Gokak Patel Volkart Ltd. vs.

Dundayya Gurushiddaiah Hiremath & Ors.403

, wherein this

Court while dealing with Section 630 of the Companies Act, held that

the offence of wrongful possession is recurring and continues until

the wrongful possession is put to an end. This Court further held

400 469. Commencement of the period of limitation.—(1) The period of limitation, in relation

to an offender, shall commence,—

(a) on the date of the offence; or

(b) where the commission of the offence was not known to the person aggrieved by the

offence or to any police officer, the first day on which such offence comes to the knowledge

of such person or to any police officer, whichever is earlier; or

identity of the offender is known to the person aggrieved by the offence or to the police

officer making investigation into the offence, whichever is earlier.

(2) In computing the said period, the day from which such period is to be computed shall be

excluded.

401 472. Continuing offence.—In the case of a continuing offence, a fresh period of limitation

shall begin to run at every moment of the time during which the offence continues.

402 Section 472 of the Cr.P.C.

403 (1991) 2 SCC 141.

205

that such an offence is committed over a span of time and the last

act of the offence will control or amount to the commencement of the

period of limitation. Thus, the offences involving possession are

continuing in nature, and the period of limitation for such offences

would start from the date of cessation of the possession.

(xxxvi) It is then submitted that the concept of possession is

central to the offence of money-laundering. Inasmuch as, all the six

activities recognized under Section 3 of the Act involve an element of

possession of proceeds of crime. He further goes on to state that

such possession need not necessarily be actual physical possession,

but also may be legal or constructive possession. To this effect,

reliance is placed on Gunwantlal vs. The State of Madhya

Pradesh404, wherein the concept of constructive possession was

recognized by this Court. Strong emphasis has been laid on Section

2(1)(fa)405 of the Act, which defines the term “beneficial owner”, to

404 (1972) 2 SCC 194.

405 2. Definitions.—(1) In this Act, unless the context otherwise requires,—

…..

(fa) “beneficial owner” means an individual who ultimately owns or controls a client of a

reporting entity or the person on whose behalf a transaction is being conducted and includes a

person who exercises ultimate effective control over a juridical person.

206

urge that the concept of constructive possession is recognized under

the Act as well. It is submitted that possession of proceeds of crime

being key to the offence of money, all activities having an element of

possession after 01.07.2005 shall fall within the ambit of the Act

irrespective of the date on which the scheduled offence was

committed. For, the offence of money-laundering is a continuing

offence, the cause of action for which renews with every day of

possession. Thus, it is submitted that the argument of the private

parties claiming protection of Article 20(1) is devoid of merit.

(xxxvii) At the outset, it is submitted that an ECIR under the

PMLA is not required be registered like an FIR under Section 154,

Cr.P.C. It is further submitted that as per the scheme of the Cr.P.C.,

a police officer is mandatorily required to register an FIR under

Section 154 upon receipt of information regarding commission of a

cognizable offence. However, the PMLA contains no such provision

regarding receipt of information or registration406. To lend support

to his arguments, the learned Additional Solicitor General points out

certain differences between investigation under the Cr.P.C. and the

406 Lalita Kumari (supra at Footnote Nos.13 and 206)

207

PMLA. Firstly, the nature of “investigation”, as envisaged under

Section 2(h)407 of the Cr.P.C. is different from that under the PMLA,

as defined under Section 2(1)(na)408 of the PMLA, insofar as the

investigation under the Cr.P.C. is a proceeding for collection of

evidence. Therefore, any proceeding that does not amount to

collection of evidence, cannot amount to investigation, and only

upon the registration of the FIR, can the police officer start

investigation. Secondly, it is submitted that an investigation under

the Cr.P.C. is ordinarily required to be conducted by a police officer,

or any person so authorized by a Magistrate. In contrast, Section

45(1A)409 of the PMLA explicitly bars investigation by a police officer,

407 2. Definitions.—(1) In this Code, unless the context otherwise requires,—

…..

(h) “investigation” includes all the proceedings under this Code for the collection of evidence

conducted by a police officer or by any person (other than a Magistrate) who is authorised by a

Magistrate in this behalf;

408 2. Definitions.—(1) In this Act, unless the context otherwise requires,—

…..

(na) “investigation” includes all the proceedings under this Act conducted by the Director or by

an authority authorised by the Central Government under this Act for the collection of evidence;]

409 45. Offences to be cognizable and non-bailable.—(1) Notwithstanding anything contained

in the Code of Criminal Procedure, 1973 (2 of 1974), no person accused of an offence under this

Act shall be released on bail or on his own bond unless—

…..

(1A) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974),

or any other provision of this Act, no police officer shall investigate into an offence under this

Act unless specifically authorised, by the Central Government by a general or special order,

and, subject to such conditions as may be prescribed.

208

save for cases when the officer is specifically authorized by the

Central Government. Thirdly, investigation under the Cr.P.C.

necessarily needs to be for purpose of collecting evidence in relation

to cognizable offences for which an FIR under Section 154 has been

registered410. On the contrary, investigation i.e., collection of

evidence under the PMLA need not necessarily be in relation to the

cognizable offence of money-laundering, but it can also be for the

purposes of attachment, confiscation, formulation of reasons to

conduct search or seizure under Section 17, or personal search

under Section 18, etc. This further implies that unlike the procedure

under the Cr.P.C., where the registration of an FIR is a condition

precedent to initiation of investigation411, in such cases, the

investigation can commence even prior to the receipt of information

pertaining to commission of money-laundering. In this regard, the

learned Additional Solicitor General draws our attention to Section

17(1)(iv) and Section 5(1) of the PMLA which empower the Director

to collect evidence by way of search and seizure, and attachment of

410 H.N. Rishbud and Inder Singh vs. The State of Delhi, (1955) 1 SCR 1150; Union of India vs.

Prakash P. Hinduja & Anr., (2003) 6 SCC 195; and Manubhai Ratilal Patel through Ushaben vs.

State of Gujarat & Ors., (2013) 1 SCC 314

411 State of West Bengal & Ors. vs. Swapan Kumar Guha & Ors., (1982) 1 SCC 561 and

Shashikant (supra at Footnote No.114).

209

property respectively. It is submitted that this power to investigate,

conferred upon the Director by these provisions, is based on a

‘reason to believe’ that a person may be in possession of property

related to crime412 or proceeds of crime413, and can be exercised at a

stage preceding the receipt of information regarding commission of

a cognizable offence.

(xxxviii) It is then submitted that the provisions of the Cr.P.C. have

limited applicability to the proceedings under the PMLA. According

to Section 65 of the PMLA, the provisions of the Cr.P.C. shall apply

to arrest, search and seizure, attachment, confiscation,

investigation, prosecution and all other proceedings under the Act,

so long as the same are not inconsistent with the provisions of the

Act. It is the case of the respondents that registration of an FIR does

not amount to collection of evidence, and, thus, is outside the

purview of “investigation”, as defined under Section 2(1)(na) of the

PMLA. Consequently, it is submitted that since the registration of

an FIR does not fall into any of seven categories contemplated under

412 Section 17(1)(iv) of the PMLA

413 Section 5(1)(a) of the PMLA

210

Section 65, Section 154 of the Cr.P.C. will not apply to proceedings

under the PMLA.

(xxxix) As regards the provision of a copy of the ECIR to the

accused, it is submitted that unlike an FIR which is a statutory

mandate, an ECIR is an internal document and, thus, need not be

supplied to the accused. In response to the argument of the private

parties that the failure to supply a copy of the ECIR prejudices the

rights of an accused, it is stated that revealing a copy of the ECIR

would defeat the purpose of the Act and would frustrate recovery

provisions like attachment of property. The learned Additional

Solicitor General also refutes the submission of the private parties

that a copy of the ECIR would be useful for grant of anticipatory bail.

It is submitted that in cases of offences under the IPC, anticipatory

bail can be applied for even prior to the registration of an FIR414

Moreover, it is often the case that the FIR is registered against

unknown persons, and the FIR, therefore, cannot be said to be an

encyclopaedia of all the facts415

414 Shri Gurbaksh Singh Sibbia & Ors. vs. State of Punjab, (1980) 2 SCC 565; Deepak Mahajan

(supra at Footnote No.60); and Sushila Aggarwal (supra at Footnote No.318)

415 Superintendent of Police, CBI & Ors. vs. Tapan Kumar Singh, (2003) 6 SCC 175

211

(xl) Next, learned Additional Solicitor General made submissions

on the challenge to constitutionality of Sections 17 and 18 of the

PMLA (i.e., the provisions relating to the power of search and

seizure). According to him, Section 17 in itself contains sufficient

safeguards. Reference is made to Section 17(1), to highlight that

only the Director or any other officer not below the rank of Deputy

Director, who are high ranking officials, can authorise a search and

that too only on the basis of a reason to believe of the existence of

conditions laid down therein. It is submitted that the vesting of the

power to authorise a search and seizure under Section 17 with the

highest responsible authority prevents misuse of the provision.

Reliance is placed on Pooran Mal vs. The Director of Inspection

(Investigation), New Delhi & Ors.416, to that effect. This is yet

bolstered by the mandate of having to record the reasons to believe

in writing. It is further pointed out that in terms of Section 17(2),

the officer conducting the search shall forward a copy of the reasons

recorded and material in his possession to the Adjudicating

Authority in a sealed envelope immediately after the search and

seizure. It is submitted that this safeguard ensures that the reasons

416 (1974) 1 SCC 345.

212

so recorded upon a search and seizure and the material in the

possession of the concerned officer is not tampered with. It is also

submitted that in terms of Section 17(4), the Authority seizing the

records or property shall, within a period of thirty days from the date

of such seizure, file an application with the Adjudicating Authority

for the retention of the said records. Pursuant to such application,

the Adjudicating Authority, in terms of Section 8, then issues a show

cause notice to the concerned person whose records or property are

seized. Thus, the concerned person is given ample opportunity to

be heard and show cause as to why such records or property should

not be retained.

(xli) Emphasis is laid on Section 62 of the PMLA, which provides

for a punishment of imprisonment of up to a period of two years or

a fine up to fifty thousand rupees or both for a vexatious search

made without recording reasons in writing. It is submitted that

providing a punishment for a vexatious search is sufficient

safeguard against the arbitrary exercise of power of search by the

concerned Authority417

417 R.S. Seth Gopikrishan Agarwal vs. R.N. Sen, Assistant Collector of Customs & Ors., (1967) 2

SCR 340.

213

(xlii) He then went on to illustrate various safeguards contained in

Section 18 of the Act. It is submitted that in terms of Section 18(2),

the Authority shall forward a copy of the reasons recorded to the

Adjudicating Authority in a sealed envelope to ensure that the

records of search and seizure are not tampered with. Other

safeguards include the right of the person to be searched to be taken

to a Gazetted Officer or Magistrate before the search, if such person

so requires418; and the right of the person to be searched to be

released if there are no reasonable grounds for search are found after

the person is taken to a Gazetted Officer or Magistrate419. The PMLA

also mandates the Authority to call at least two witnesses before a

search and conduct the search before such witnesses.420

The

Authority seizing any property during the search of a person is

mandated to prepare a list of the record or the property seized and

get the same signed by the witnesses421. A female shall be searched

only by a female422. Similar to the mandate of Section 17(4), the

418 Section 18(3). The inherent value of such a right has been recognised by this Court in State

of Punjab vs. Baldev Singh, (1999) 6 SCC 172

419 Section 18(5) of the PMLA

420 Section 18(6) of the PMLA

421 Section 18(7) of the PMLA

422 Section 18(8) of the PMLA

214

provisions of Section 18(10) also provide the concerned person

whose records or property are seized, an opportunity to show cause

as to why such records or property should not be retained.

(xliii) Lack of safeguards in the Cr.P.C. are also highlighted. With

respect to seizures, it is submitted that the same is governed by

Section 102 of the Cr.P.C., and empowers a police officer to seize any

property upon a mere suspicion. This is in stark contrast to Section

17(1) of the PMLA which permits seizure only when there is a reason

to believe, and such reason is recorded in writing. With respect to

search, it is submitted that Section 165 of the Cr.P.C. practically

permits any officer above the rank of Constable to exercise such

power, as opposed to Section 17 of the PMLA, which confers such

power only upon the Director or any other officer not below the rank

of Deputy Director.

(xliv) In an attempt to establish that the power of search and

seizure is not arbitrary, our attention has been drawn to the

decisions of this Court in Pooran Mal423; Income-Tax Officer,

Special Investigation Circle-B, Meerut vs. Messrs Seth Brothers

423 Supra at Footnote No.416

215

& Ors. etc.424 and Dr. Partap Singh & Anr. vs. Director of

Enforcement, Foreign Exchange Regulation Act & Ors.

425

The

learned Additional Solicitor General further defends the power of the

Authority to search the place of a person without an FIR. It is

submitted that the PMLA serves a two-fold purpose of not only being

penal, but also preventive in nature. In order to avoid a situation

where the property involved in money-laundering disappears or is

disposed of before an FIR is filed in respect of predicate offence, the

PMLA empowers seizure without an FIR. Attention is invited to

Section 17(1)(iv) of the PMLA, which uses the phrase ‘related to

crime’, and it is submitted that the use of these words show that the

Authority is empowered to seize such properties without an FIR in

order to ascertain whether such properties pertain to a scheduled

offence or whether such properties are proceeds of crime. The

argument of the private parties that the Authority under the PMLA

cannot conduct a search on the same day without conducting any

investigation, is also rebutted by the learned Additional Solicitor

General. It is submitted that in light of the mandate to record the

424 (1969) 2 SCC 324

425 (1985) 3 SCC 72

216

reasons to conduct the search/seizure in writing, such an

apprehension is ill-founded. Rather, a party aggrieved by the

sufficiency or lack of such reasons, always has the option to agitate

the same before the Adjudicating Authority, when an application for

the retention of the records seized or frozen is filed.

(xlv) Lastly, it is submitted that by virtue of Section 65 of the

PMLA, the provisions of the Cr.P.C. relating to search and seizure

cannot be applied to proceedings under the Act. Section 65 of the

PMLA states that the provisions of Cr.P.C. shall apply subject to the

condition that the same are not inconsistent with those of the PMLA.

It is submitted that the provisions contained in Sections 17 and 18

are self-contained with adequate safeguards, and will override the

provisions of the Cr.P.C. which are at variance.

(xlvi) In reply to the challenge of the private parties to the

applicability of the proviso to Rule 3 of the Seizure Rules, 2005,

learned Additional Solicitor General submits that the rules framed

under a statute cannot be ultra vires the statute. Prior to the

amendment of Section 17, the proviso to the Section required that a

report be forwarded to the Magistrate under Section 157 of the

Cr.P.C. prior to the conduct of a search under Section 17. After the

217

amendment, the proviso was removed, but a similar proviso

continues to exists under Rule 3 of the aforementioned rules.

Placing reliance on Union of India & Anr. vs. Purushottam426, it

is submitted that rules must be interpreted in a manner which

would be in harmony with the parent statute, and, therefore, even

though the rules are unamended, the proviso to Rule 3 cannot be

read into the Act and is ultra vires the Act.

(xlvii) The respondent has highlighted the legislative history of

Sections 5 and 8 of the PMLA. It is submitted that sub-section (1)

of Section 5 has been amended four times in the years 2009, 2013,

2015 and 2018 respectively. It is stated that Section 5(1) was

amended vide Prevention of Money-Laundering (Amendment) Act,

2009 and second proviso was inserted for the first time which made

the provision for ‘immediate attachment’ of the property involved in

money-laundering.

(xlviii) It was observed in the Mutual Evaluation Report of the

FATF and the Asia Pacific Group that the confiscation of criminal

proceeds depends on conviction of the accused under the scheduled

426 (2015) 3 SCC 779.

218

offence, which gives rise to an apprehension of confiscation

proceedings becoming infructuous if the accused dies during the

pendency of criminal proceedings. This technical irregularity has a

negative impact on the effectiveness of the confiscation regime;

therefore, FATF recommended corrective steps to remove this

irregularity. Accordingly, Sections 5 and 8 were amended on the

recommendation of FATF, as pointed out above.

(xlix) It is submitted that in the Fifty Sixth Report of the Standing

Committee on Finance relating to the 2011 Bill published by the Lok

Sabha Secretariat on 08.05.2012, it was proposed to delete the

requirement of framing of charge under the scheduled offence

against a person before a property can be attached from such

person, as in a given case a property may come to rest with someone

who has nothing to do with the scheduled offence or even with the

offence of money-laundering.

(l) It was further proposed to make confiscation of property

independent of conviction of an accused under the scheduled

offence, as in a given case money-laundering may be done by a

person who has not committed the scheduled offence or property

may come to rest with someone who has not committed any offence.

219

Therefore, to avoid such situations, Section 8(5) was proposed to be

amended so as to provide for attachment and confiscation of the

proceeds of crime independent of conviction, so long as the predicate

offence and the offence of money-laundering have taken place and

the property in question is involved in money-laundering. The

Parliament acting on such recommendations amended sub-section

(1) of Section 5 vide Prevention of Money-Laundering (Amendment)

Act, 2012 and deleted the requirement that attachment can be made

only qua the person who has been charged for committing the

scheduled offence. Further, Section 8(3)(a) of the PMLA was also

amended to provide that on confirmation, the attachment would

continue during the pendency of proceedings related to an offence

under the PMLA or under the corresponding law of any other

country. Therefore, it is averred that Sections 5 and 8 of the PMLA,

as they now stand, enable the attachment and dispossession of the

persons from the proceeds of crime without being dependent on the

proceedings of the scheduled offence, in consonance with the

recommendations of the FATF and global standards.

(li) Further to show the link between second proviso to Section 5

and the scheduled offence, it is submitted that the prerequisite for

220

the application of ‘emergency attachment’ provision under second

proviso to Section 5 of the PMLA is that the Authority concerned

must have some material in its possession showing that such

property is involved in money-laundering, which clearly establishes

the link of second proviso with the scheduled offence. Relying on

sub-section (5) of Section 8, it is averred that the properties which

can be confiscated are properties involved in money-laundering and

also the properties used for the commission of the offence of moneylaundering. It is submitted that the ambit of sub-section (1) of

Section 5 is very wide, which not only covers persons who are

involved in the commission of scheduled offence, but also any person

in possession of the proceeds of crime, who need not be the person

accused of PMLA offence or who is being tried for the scheduled

offence. It is further submitted that it would not be correct to say

that ‘any property’ of ‘any person’ can be attached by invoking the

second proviso to Section 5, as the proviso only deals with the

property which is involved in money-laundering. Further, it is stated

that the person whose property is sought to be attached may not be

charged under the scheduled offence. Therefore, it is urged that the

scheme of second proviso is consistent with Section 5(1) of PMLA. It

221

is also submitted that under the second proviso the Parliament has

provided various safeguards in the form of conditions that have to

be satisfied before the power under the proviso can be invoked. It is

stated that firstly, the power of provisional attachment can only be

exercised by a high-ranking officer; secondly, such officer has to

record the ‘reasons to believe’ that the property is proceeds of crime

or involved in money-laundering and lastly, he should be satisfied

that if the property is not attached immediately, the confiscation

proceedings under the PMLA will get frustrated. Further, it is

submitted that such belief must be formed on the basis of material

in the possession of the officer. It is then submitted that the

expression ‘property involved in money-laundering’ under the

second proviso to Section 5 is wide enough to cover the proceeds of

crime as well. Therefore, it is submitted that only the property that

is involved in the money-laundering can be attached under the

second proviso and not ‘any property’. It is urged that the ambit of

second proviso to Section 5 is wider than that of main provision of

Section 5 itself, as second proviso enables the attachment of ‘any

property involved in money-laundering’, whereas the main provision

only allows the attachment of ‘proceeds of crime’.

222

(lii) It is contended that although the function of a proviso is to add

something or to carve out an exception on a subject not covered by

the main Section, however, in many cases, Courts have treated even

a proviso as ‘a substantive provision conferring substantive

powers’427. It is further submitted that even Section 8(5), on the

conclusion of the trial, not only permits confiscation of property

involved in money-laundering but also the property used for the

commission of the offence of money-laundering. Therefore, such

interpretation of the second proviso to Section 5 of the PMLA is

consistent with the entire scheme of the Act.

(liii) Learned Additional Solicitor General has further refuted the

argument of the private parties that the attachment of property

equivalent in value of the proceeds of crime can only be done if the

proceeds of crime are situated outside India. It is stated that it is

manifest from the definition of “proceeds of crime” under Section

2(1)(u) of the PMLA that the proceeds of crime would not only cover

the concerned property, but also the value of such property. It is

further submitted that the attachment of property under second

427 The Georgia Railroad and Banking Company vs. James M. Smith, 128 US 174 (1888) and

Commissioner of Stamp Duties vs. Atwill & Ors., (1973) 1 All ER 576

223

proviso is in consonance with the object of the PMLA. Reliance has

been placed on Attorney General for India & Ors. vs. Amratlal

Prajivandas & Ors.428

, wherein the Court upheld the

constitutionality of definition of “illegally acquired property” and

application of SAFEMA to the relatives and associates of detenues.

Further, Order 38 Rule 5 of the Code of Civil Procedure, 1908429 has

also been relied upon to state that the attachment of property can

also be done before judgment, so as to secure the subject matter of

the suit during the pendency of the suit430. It is submitted that the

object of Section 5(1) is similar to that of Order 38 Rule 5 which is

to secure the properties from getting disposed of before the

confiscation of such property.

(liv) The respondent has further highlighted the procedural

safeguards given under second proviso to Section 5(1) of the PMLA.

It is submitted that the Authority under the Act will have to first

apply its mind to the materials on record and record its reasons to

believe in writing before taking any further action. Secondly, the

428 (1994) 5 SCC 54 (also at Footnote No.175)

429 For short, “CPC” or “1908 Code”

430 Raman Tech. & Process Engg. Co. & Anr. vs. Solanki Traders, (2008) 2 SCC 302

224

Authority must be satisfied that if property will not be immediately

attached, the confiscation proceedings might get frustrated. Thirdly,

it is stated that order under Section 5(1) is only a provisional order

which is valid only for 180 days, subject to the confirmation of

Adjudicating Authority. Fourthly, a copy of the order of provisional

attachment is to be forwarded to the Adjudicating Authority in a

sealed envelope. Fifthly, the Authority is mandated to file a

complaint before the Adjudicating Authority within 30 days of the

order of the provisional attachment. Sixthly, it is stated that the life

of a provisional attachment order is 180 days or the date when the

Adjudicating Authority makes an order under Section 8(2) PMLA,

whichever is earlier. Seventhly, a show cause notice is served on the

aggrieved person, calling upon such person to indicate the sources

of his income, earning or assets or by means of which he has

acquired the property attached under Section 5(1) PMLA. Therefore,

it is submitted that the PMLA ensures that the principles of natural

justice do not get violated. Eighthly, the noticee will have the

opportunity to produce evidence on which he relies before the

Adjudicating Authority. Ninthly, it is stated that due procedure is

225

followed by the Adjudicating Authority which hear both the parties

before passing any order

(lv) Further, under Section 8(6) of the PMLA, the Special Court is

empowered to release the property if after the conclusion of the trial

it is found that no offence of money-laundering has taken place or

the property is not involved in money-laundering.

(lvi) Next, learned Additional Solicitor General highlights the

provisions for challenging the orders passed by the Adjudicating

Authority. It is submitted that the order passed by the Adjudicating

Authority is subject to appeal before the Appellate Tribunal. Also,

the order passed by the Tribunal is appealable under Section 42 of

the PMLA before the High Court on any question of fact or question

of law. Therefore, it is submitted that the ED cannot attach any

property on its whims and fancies. Further, PMLA ensures ample

judicial scrutiny of the order of attachment.

(lvii) It is submitted that even a third party has the right to

challenge the provisional attachment order under Section 8(2) of the

PMLA and if the Adjudicating Authority is satisfied that the property

is not involved in money-laundering and the claim of the third party

226

is legitimate one, then it may release such property from attachment.

Reliance has been placed on Radha Mohan Lakhotia, Indian

National and Citizen vs. Deputy Director, PMLA, Directorate of

Enforcement, Ministry of Finance, Department of Revenue431 to

state that the Bombay High Court has even before the amendment

of Section 5(1), held that a provisional attachment order can even be

passed against the person who is not named as an accused in the

commission of scheduled offence. Further it is stated that the High

Courts in the following cases, while relying on Radha Mohan

Lakhotia432, have upheld the validity of Section 5(1) of the PMLA:

B. Rama Raju vs. Union of India & Ors.433, Alive Hospitality and

Food Private Limited vs. Union of India & Ors.434

, K.

Sowbaghya vs. Union of India & Ors.435

, Usha Agarwal vs.

Union of India & Ors.436 and J. Sekar vs. Union of India &

Ors.437.

431 2010 SCC OnLine Bom 1116

432 Supra at Footnote No.431

433 2011 SCC OnLine AP 152

434 2013 SCC OnLine Guj 3909

435 2016 SCC OnLine Kar 282

436 2017 SCC OnLine Sikk 146

437 2018 SCC OnLine Del 6523

227

(lviii) With regard to the constitutional validity of Section 8, it is

submitted that ‘no person has a right to enjoy the fruits of a property

which is the product of crime’.

(lix) It is submitted that the possession of the property involved in

money-laundering can be validly taken before the conviction of a

person for the offence of money-laundering, as the non-convictionbased asset forfeiture model, also known as civil forfeiture

legislation, is prevalent even in countries such as United States of

America, Italy, Ireland, South Africa, UK, Australia and certain

provinces of Canada. Further, it is stated that the confiscation of

property without conviction under Section 8(4) is in consonance with

the Recommendation No.3 of FATF (2003)/Recommendation No.4 of

FATF (2012).

(lx) It is further submitted that non-conviction-based attachment

and taking possession of property cannot be considered as

unconstitutional, since such property can only be confiscated upon

conclusion of trial leading to conviction, as provided under Section

8(5) of the PMLA. It is averred that the judicial oversight of

Adjudicating Authority is an adequate safeguard provided under the

Act.

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(lxi) The respondent has relied on Biswanath Bhattacharya vs.

Union of India and Ors.438 to urge that the sovereign would be

completely justified in confiscating a property which is obtained by

a person through illegal means439. It is further submitted that the

Taking Possession Rules, 2013 provides that before eviction of a

person from the concerned property a notice of 10 days’ time has to

be served upon him, which is an adequate safeguard provided under

the Act as it enables the aggrieved person to take a suitable action

under Section 26 of the PMLA.

(lxii) It is further pointed out that before the confirmation of the

attachment order, any person having an interest in the property

have the opportunity of being heard by the Adjudicating Authority.

Therefore, it is submitted that the power conferred by Section 8(4) of

the PMLA to dispossess a person in possession of ‘proceeds of crime’

or ‘the property involved in money-laundering’ even before the

conviction is perfectly valid, reasonable and justified.

438 (2014) 4 SCC 392

439 Divisional Forest Officer & Anr. vs. G.V. Sudhakar Rao & Ors., (1985) 4 SCC 573 and Yogendra

Kumar Jaiswal & Ors. vs. State of Bihar & Ors., (2016) 3 SCC 183

229

(lxiii) To counter the argument of the private parties that the

attachment of the property will lapse if no proceedings is initiated

under the Act by way of filing a complaint before the Special Court

before the expiry of three hundred and sixty-five days of the

attachment, it is submitted that the period of attachment under

Section 8(3) of the PMLA will be three hundred and sixty-five days or

during the pendency of ‘any proceedings’ which includes any

proceeding including of bail, quashing etc.

(lxiv) It is submitted that the expression ‘pendency of proceedings’

relating to an offence under the PMLA before a Court is broad

enough to mean any pending proceedings relating to an offence

under the Act440. Therefore, it is stated that even if for some reason

a complaint has not been filed after three hundred and sixty-five

days from the date of attachment then such attachment should not

lapse.

(lxv) It is submitted that when a provisional attachment order is

finally confirmed, then no person can claim any right, title or interest

to the proceeds of crime or property involved in money-laundering.

440 Kamlapati Trivedi vs. State of West Bengal, (1980) 2 SCC 91

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Therefore, only on a conclusion of trial under the Act and upon a

finding by the Special Court that the offence of money-laundering

has not taken place or the property is not involved in moneylaundering, an order for release of such property can be made.

(lxvi) Further, it is stated a person may file frivolous litigations so

as to prolong the proceedings. Therefore, Section 8(3)(a) requires a

broad construction so as to deny the money launderer from enjoying

the proceeds of crime. It is stated that the object of the Act is also

manifest from Section 8(7) where even after the death of the accused

the proceeds of crime or property involved in money-laundering can

be confiscated upon an order of the Special Court. Therefore, for the

abovementioned reasons, it is stated that the expression “during the

pendency of the proceedings” requires a broad construction.

CONSIDERATION

18. We have heard Mr. Kapil Sibal, Dr. Abhishek Manu Singhvi,

Mr. Sidharth Luthra, Mr. Mukul Rohatgi, Mr. Vikram Chaudhari,

Mr. Amit Desai, Mr. S. Niranjan Reddy, Ms. Menaka Guruswami,

Mr. Siddharth Aggarwal, Mr. Aabad Ponda, Mr. N. Hariharan and Mr.

Mahesh Jethmalani, learned senior counsel appearing for private

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parties and Mr. Tushar Mehta, learned Solicitor General of India and

Mr. S.V. Raju, learned Additional Solicitor General of India,

appearing for the Union of India.

THE 2002 ACT

19. The Act was enacted to address the urgent need to have a

comprehensive legislation inter alia for preventing moneylaundering, attachment of proceeds of crime, adjudication and

confiscation thereof including vesting of it in the Central

Government, setting up of agencies and mechanisms for

coordinating measures for combating money-laundering and also to

prosecute the persons indulging in the process or activity connected

with the proceeds of crime. This need was felt world over owing to

the serious threat to the financial systems of the countries, including

to their integrity and sovereignty because of money-laundering. The

international community deliberated over the dispensation to be

provided to address the serious threat posed by the process and

activities connected with the proceeds of crime and integrating it

with formal financial systems of the countries. The issues were

debated threadbare in the United Nation Convention Against Illicit

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Traffic in Narcotic Drugs and Psychotropic Substances, Basle

Statement of Principles enunciated in 1989, the FATF established at

the summit of seven major industrial nations held in Paris from 14th

to 16th July, 1989, the Political Declaration and Noble Programme

of Action adopted by United Nations General Assembly vide its

Resolution No.S-17/2 of 23.2.1990, the United Nations in the

Special Session on countering World Drug Problem Together

concluded on the 8th to the 10th June, 1998, urging the State parties

to enact a comprehensive legislation. This is evident from the

introduction and Statement of Objects and Reasons accompanying

the Bill which became the 2002 Act. The same reads thus:

“INTRODUCTION

Money-laundering poses a serious threat not only to

the financial systems of countries, but also to their

integrity and sovereignty. To obviate such threats

international community has taken some initiatives. It has

been felt that to prevent money-laundering and connected

activities a comprehensive legislation is urgently needed. To

achieve this objective the Prevention of Money-laundering Bill,

1998 was introduced in the Parliament. The Bill was referred

to the Standing Committee on Finance, which presented its

report on 4th March, 1999 to the Lok Sabha. The Central

Government broadly accepted the recommendation of the

Standing Committee and incorporated them in the said Bill

along with some other desired changes.

STATEMENT OF OBJECTS AND REASONS

It is being realised, world over, that moneylaundering poses a serious threat not only to the financial

systems of countries, but also to their integrity and

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sovereignty. Some of the initiatives taken by the international

community to obviate such threat are outlined below:—

(a) the United Nations Convention Against Illicit

Traffic in Narcotic Drugs and Psychotropic

Substances, to which India is a party, calls for

prevention of laundering of proceeds of drug crimes

and other connected activities and confiscation of

proceeds derived from such offence.

(b) the Basle Statement of Principles, enunciated in

1989, outlined basic policies and procedures that

banks should follow in order to assist the law

enforcement agencies in tackling the problem of

money-laundering.

the summit of seven major industrial nations, held

in Paris from 14th to 16th July, 1989, to examine

the problem of money-laundering has made forty

recommendations, which provide the foundation

material for comprehensive legislation to combat

the problem of money-laundering. The

recommendations were classified under various

heads. Some of the important heads are—

(i) declaration of laundering of monies carried

through serious crimes a criminal offence;

(ii) to work out modalities of disclosure by

financial institutions regarding reportable

transactions;

(iii) confiscation of the proceeds of crime;

(iv) declaring money-laundering to be an

extraditable offence; and

(v) promoting international co-operation in

investigation of money-laundering.

(d) the Political Declaration and Global Programme of

Action adopted by United Nations General Assembly by its

Resolution No. S-17/2 of 23rd February, 1990, inter alia,

calls upon the member States to develop mechanism to

prevent financial institutions from being used for

laundering of drug related money and enactment of

legislation to prevent such laundering.

(e) the United Nations in the Special Session on countering

World Drug Problem Together concluded on the 8th to the

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10th June, 1998 has made another declaration regarding

the need to combat money-laundering. India is a signatory

to this declaration.

2. In view of an urgent need for the enactment or a

comprehensive legislation inter alia for preventing moneylaundering and connected activities confiscation of proceeds

of crime, setting up of agencies and mechanisms for

coordinating measures for combating money-laundering, etc.,

the Prevention of Money-Laundering Bill, 1998 was

introduced in the Lok Sabha on the 4th August, 1998. The

Bill was referred to the Standing Committee on Finance,

which presented its report on the 4th March, 1999 to the Lok

Sabha. The recommendations of the Standing Committee

accepted by the Central Government are that (a) the

expressions “banking company” and “person” may be defined;

(b) in Part I of the Schedule under Indian Penal Code the word

offence under section 477A relating to falsification of accounts

should be omitted; (c) ‘knowingly’ be inserted in clause 3(b)

relating to the definition of money-laundering; (d) the banking

companies financial institutions and intermediaries should be

required to furnish information of transactions to the Director

instead of Commissioner of Income-tax (e) the banking

companies should also be brought within the ambit of clause

II relating to obligations of financial institutions and

intermediaries; (f) a definite time-limit of 24 hours should be

provided for producing a person about to be searched or

arrested person before the Gazetted Officer or Magistrate; (g)

the words “unless otherwise proved to the satisfaction of the

authority concerned” may be inserted in clause 22 relating to

presumption on inter-connected transactions; (h) vacancy in

the office of the Chairperson of an Appellate Tribunal, by

reason of his death, resignation or otherwise, the senior-most

member shall act as the Chairperson till the date on which a

new Chairperson appointed in accordance with the provisions

of this Act to fill the vacancy, enters upon his office; (i) the

appellant before the Appellate Tribunal may be authorised to

engage any authorised representative as defined under

section 288 of the Income-tax Act, 1961, (j) the punishment

for vexatious search and for false information may be

enhanced from three months imprisonment to two years

imprisonment, or fine of rupees ten thousand to fine of rupees

fifty thousand or both; (k) the word ‘good faith’ may be

incorporated in the clause relating to Bar of legal proceedings.

The Central Government have broadly accepted the above

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recommendations and made provisions of the said

recommendations in the Bill.

3. In addition to above recommendations of the standing

committee the Central Government proposes to (a) relax the

conditions prescribed for grant of bail so that the Court may

grant bail to a person who is below sixteen years of age, or

woman, or sick or infirm, (b) levy of fine for default of noncompliance of the issue of summons, etc. (c) make provisions

for having reciprocal arrangement for assistance in certain

matters and procedure for attachment and confiscation of

property so as to facilitate the transfer of funds involved in

money-laundering kept outside the country and extradition of

the accused persons from abroad.

4. The Bill seeks to achieve the above objects.”

(emphasis supplied)

Notably, before coming into force of the 2002 Act, various other

legislations were already in vogue to deal with attachment and

confiscation/forfeiture of the proceeds of crime linked to concerned

offences and yet another added recently in 2016, such as:

a) The Forfeiture Act, 1857 [Repealed in 1922];

b) The Criminal Law Amendment Ordinance, 1944;

c) The Unlawful Activities (Prevention) Act, 1967 [Chapter V

(inserted in 2013)];

d) The Wild Life (Protection) Act, 1972 [Chapter VIA inserted

in 2003];

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e) The Code of Criminal Procedure, 1973 [Chapter XXXIV –

Disposal of Property];

f) The Smugglers and Foreign Exchange Manipulators

(Forfeiture of Property) Act, 1976;

g) The Narcotic Drugs and Psychotropic Substances Act,

1985 [Chapter VA inserted in 1989];

h) The Prevention of Corruption Act, 1988 [Section 5(6)];

i) The Maharashtra Control of Organised Crime Act, 1999

[Section 20] [While this is a State law, it has been adopted

by several States, or has served as a model law for other

States]; and

j) The Anti-Hijacking Act, 2016 [Section 19].

As aforesaid, notwithstanding the existing dispensation to deal with

proceeds of crime, the Parliament enacted the Act as a result of

international commitment to sternly deal with the menace of moneylaundering of proceeds of crime having transnational consequences

and on the financial systems of the countries. The Prevention of

Money-laundering Bill was passed by both the Houses of Parliament

and received the assent of President on 17.1.2003. It came into force

237

on 1.7.2005 titled “The Prevention of Money-Laundering Act, 2002

(15 of 2003)”.

20. The broad framework of the 2002 Act is that it consists of ten

chapters. Chapter I deals with the short title, extent and

commencement and definitions. Chapter II deals with offence of

money-laundering. Chapter III deals with the mechanism of

attachment, adjudication and confiscation. Chapter IV deals with

obligations of the banking companies, financial institutions and

intermediaries. Chapter V is in respect of steps and safeguards to

be taken for issuing summons, carrying out searches and seizures

including power to arrest, presumptions and burden of proof.

Chapter VI deals with the matters concerning Appellate Tribunal.

Chapter VII deals with matters concerning Special Courts, Chapter

VIII is regarding the Authorities under the Act and their jurisdiction

and powers. Chapter IX deals with reciprocal arrangement for

assistance in certain matters and procedure for attachment and

confiscation of property. Chapter X deals with miscellaneous and

incidental matters. In terms of Section 73 in this Chapter, the

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Central Government has made rules for carrying out the provisions

of the Act. The said rules deal with different aspects namely:

a) The Prevention of Money-laundering (the Manner of Forwarding

a Copy of the Order of Provisional Attachment of Property along

with the Material, and Copy of the Reasons along with the

Material in respect of Survey, to the Adjudicating Authority and

its period of Retention) Rules, 2005;

b) The Prevention of Money-laundering (Receipt and Management

of Confiscated Properties) Rules, 2005;

c) The Prevention of Money-laundering (Maintenance of Records)

Rules, 2005 as amended by (Fifth Amendment) Rules, 2019;

d) The Prevention of Money-laundering (Forms, Search and

Seizure or Freezing & the Manner of Forwarding the Reasons

and Material to the Adjudicating Authority, Impounding and

Custody of Records and the Period of Retention) Rules, 2005;

e) The Prevention of Money-laundering (the Forms and the

Manner of Forwarding a Copy of Order of Arrest of a Person

along with the Material to the Adjudicating Authority and its

Period of Retention) Rules, 2005;

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f) The Prevention of Money-laundering (the Manner of Forwarding

a Copy of the Order of Retention of Seized Property along with

the Material to the Adjudicating Authority and the period of its

Retention) Rules, 2005;

g) The Prevention of Money-laundering (Manner of Receiving the

Records Authenticated Outside India) Rules, 2005;

h) The Prevention of Money-laundering (Appeal) Rules, 2005;

i) The Prevention of Money-laundering (Appointment and

Conditions of Service of Chairperson and Members of

Adjudicating Authorities) Rules, 2007;

j) The Adjudicating Authority (Procedure) Regulations, 2013;

k) The Prevention of Money-laundering (Issuance of Provisional

Attachment Order) Rules, 2013;

l) The Prevention of Money-laundering (Taking Possession of

Attached or Frozen Properties Confirmed by the Adjudicating

Authority) Rules, 2013;

m) The Prevention of Money-laundering (Restoration of Property)

Rules, 2016 as amended by (Amendment) Rules, 2019.

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We may further note that the 2002 Act has been amended from time

to time to address the exigencies and for the need to strengthen the

mechanisms as per the recommendations made by the international

body to address the scourge of laundering of proceeds of crime

affecting the financial systems and also integrity and sovereignty of

the country. The list of amending Acts is as follows:

a) The Prevention of Money-Laundering (Amendment) Act, 2005

(20 of 2005) (w.e.f. 1-7-2005);

b) The Prevention of Money-Laundering (Amendment) Act, 2009

(21 of 2009) (w.e.f. 1-6-2009);

c) The Prevention of Money-Laundering (Amendment) Act, 2012

(2 of 2013) (w.e.f. 15-2-2013);

d) The Finance Act, 2015 (20 of 2015) (w.e.f. 14-5-2015);

e) The Black Money (Undisclosed Foreign Income and Assets) and

Imposition of Tax Act, 2015 (22 of 2015) (w.e.f. 1-7-2015);

f) The Finance Act, 2016 (28 of 2016) (w.e.f. 1-6-2016);

g) The Finance Act, 2018 (13 of 2018) (w.e.f. 19-4-2018);

h) The Prevention of Corruption (Amendment) Act, 2018 (16 of

2018) (w.e.f. 26-7-2018);

i) The Finance Act, 2019 (7 of 2019) (w.e.f. 20-3-2019);

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j) The Aadhaar and other Laws (Amendment) Act, 2019 (14 of

2019) (w.e.f. 25-7-2019); and

k) The Finance (No.2) Act, 2019 (23 of 2019) (w.e.f. 1-8-2019).

21. The petitioners have questioned the amendments brought

about by the Parliament by taking recourse to Finance Bill/Money

Bill. At the outset, it was made clear to all concerned that the said

ground of challenge will not be examined in the present proceedings

as it is pending for consideration before the Larger Bench of this

Court (seven Judges) in view of the reference order passed in Rojer

Mathew441. We are conscious of the fact that if that ground of

challenge is to be accepted, it may go to the root of the matter and

amendments effected vide Finance Act would become

unconstitutional or ineffective. Despite that, it had become

necessary to answer the other contentions which may otherwise

require consideration in the event of the principal ground of

challenge is answered against the petitioners. In any case, until the

larger Bench decides that issue authoritatively, the authorities and

the Adjudicating Authority as well as the Courts are obliged to give

441 Supra at Footnote No.90

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effect to the amended provisions. Resultantly, the other issues

raised in this batch of cases being recurring and as are involved in

large number of cases to be dealt with by the authorities and the

Adjudicating Authority under the Act and the concerned Courts on

daily basis, including the Constitutional Courts, it has become

necessary to answer the other grounds of challenge in the meantime.

On that understanding, we proceeded with the hearing of the batch

of cases before us to deal with the other challenges regarding the

concerned provision(s) being otherwise unconstitutional and ultra

vires.

22. We do not deem it necessary to deal with the factual matrix

involved in the concerned case. For, after answering the issues

regarding the validity as dealt with herein, including interpretation

of the concerned provision(s), the petitioners can be relegated to

pursue their other remedies (such as for bail, quashing, discharge,

etc.), before the appropriate forum.

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PREAMBLE OF THE 2002 ACT

23. The Preamble of the 2002 Act reads thus:

“An Act to prevent money-laundering and to provide

for confiscation of property derived from, or involved in,

money-laundering and for matters connected therewith

or incidental thereto.

WHEREAS the Political Declaration and Global

Programme of Action, annexed to the resolution S17/2 was adopted by the General Assembly of the

United Nations at its seventeenth special session on the

twenty-third day of February, 1990;

AND WHEREAS the Political Declaration adopted by

the Special Session of the United Nations General

Assembly held on 8th to 10th June, 1998 calls upon the

Member States to adopt national money-laundering

legislation and programme;

AND WHEREAS it is considered necessary to

implement the aforesaid resolution and the

Declaration.”

Even the Preamble of the Act reinforces the background in which the

Act has been enacted by the Parliament being commitment of the

country to the international community. It is crystal clear from the

Preamble that the Act has been enacted to prevent moneylaundering and to provide for confiscation of property derived from

or involved in money-laundering and for matters connected

therewith or incidental thereto. It is neither a pure regulatory

legislation nor a pure penal legislation. It is amalgam of several

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facets essential to address the scourge of money-laundering as such.

In one sense, it is a sui generis legislation.

24. As aforesaid, it is a comprehensive legislation dealing with all

the related issues concerning prevention of money-laundering,

attachment of proceeds of crime, adjudication and confiscation

thereof including vesting of it in the Central Government, setting up

of agencies and mechanisms for coordinating measures for

combating money-laundering and also to prosecute the persons

indulging in the process or activity connected with the proceeds of

crime. While considering the challenge to the relevant provision(s)

of the 2002 Act, we cannot be oblivious to the objects and reasons

for enacting such a special legislation and the seriousness of the

issues to be dealt with thereunder including having transnational

implications. Every provision in the 2002 Act will have to be given

its due significance while keeping in mind the legislative intent for

providing a special mechanism to deal with the scrouge of moneylaundering recognised world over and with the need to deal with it

sternly.

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DEFINITION CLAUSE

25. Section 2 defines some of the expressions used in the relevant

provision(s) of the 2002 Act. We may usefully refer to some of the

expressions defined in this section having bearing on the matters in

issue, namely (as amended from time to time) –

“2. Definitions.—(1) In this Act, unless the context

otherwise requires,—

(a) “Adjudicating Authority” means an Adjudicating

Authority appointed under sub-section (1) of section 6;

(b) “Appellate Tribunal” means the Appellate Tribunal

442[referred to in] section 25;

appointed under sub-section (1) of section 49;

(d) “attachment” means prohibition of transfer,

conversion, disposition or movement of property by an

order issued under Chapter III;

*** *** ***

(j) “Deputy Director” means a Deputy Director appointed

under sub-section (1) of section 49;

(k) “Director” or “Additional Director” or “Joint Director”

means a Director or Additional Director or Joint Director,

as the case may be, appointed under sub-section (1) of

section 49;

*** *** ***

443[(na)“investigation” includes all the proceedings under

this Act conducted by the Director or by an authority

authorised by the Central Government under this Act for

the collection of evidence];

*** *** ***

442 Subs. by Act 28 of 2016, sec. 232(a), for “established under” (w.e.f. 1-6-2016)

443 Ins. by Act 20 of 2005, sec. 2 (w.e.f. 1-7-2005)

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(p) “money-laundering” has the meaning assigned to it in

section 3;

*** *** ***

(t) “prescribed” means prescribed by rules made under

this Act;

(u) “proceeds of crime” means any property derived or

obtained, directly or indirectly, by any person as a result

of criminal activity relating to a scheduled offence or the

value of any such property 444[or where such property is

taken or held outside the country, then the property

equivalent in value held within the country] 445[or

abroad];

446[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;]

(v) “property” means any property or assets of every

description, whether corporeal or incorporeal, movable or

immovable, tangible or intangible and includes deeds and

instruments evidencing title to, or interest in, such

property or assets, wherever located;

447[Explanation.—For the removal of doubts, it is

hereby clarified that the term “property” includes

property of any kind used in the commission of an offence

under this Act or any of the scheduled offences];

*** *** ***

(x) “Schedule” means the Schedule to this Act;

(y) “scheduled offence” means—

(i) the offences specified under Part A of the Schedule;

444 Ins. by the Finance Act, 2015 (20 of 2015), sec. 145(i) (w.e.f. 14-5-2015).

445 Ins. by Act 13 of 2018, sec. 208(a) (w.e.f. 19-4-2018, vide G.S.R. 383(E), dated 19th April,

2018)

446 Ins. by the Finance (No.2) Act, 2019, sec. 192(iii) (w.e.f. 1-8-2019)

447 Ins. by Act 2 of 2013, sec. 2(x) (w.e.f. 15-2-2013, vide S.O. 343(E), dated 8.2.2013).

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448[(ii) the offences specified under Part B of the

Schedule if the total value involved in such offences is

449[one crore rupees] or more; or]

450[(iii) the offences specified under Part C of the

Schedule;]

(z) “Special Court” means a Court of Session designated

as Special Court under sub-section (1) of section 43;

(za) “transfer” includes sale, purchase, mortgage, pledge,

gift, loan or any other form of transfer of right, title,

possession or lien;

(zb) “value” means the fair market value of any property

on the date of its acquisition by any person, or if such

date cannot be determined, the date on which such

property is possessed by such person”

26. We would now elaborate upon the meaning of “investigation” in

Clause (na) of Section 2(1). It includes all proceedings under the Act

conducted by the Director or an authority authorised by the Central

Government under this Act for collection of evidence. The expression

“all the proceedings under this Act” unquestionably refers to the

action of attachment, adjudication and confiscation, as well as

actions undertaken by the designated authorities mentioned in

Chapter VIII of the Act, under Chapter V of the Act, and for

448 Subs. by Act 21 of 2009, sec. 2(vi), for sub-clause (ii) (w.e.f. 1-6-2009). Sub-clause (ii), before

substitution, stood as under:

“(ii) “the offences specified under Part B of the Schedule if the total value involved in

such offence is thirty lakh rupees or more;”

449 Subs. by the Finance Act, 2015 (20 of 2015), sec. 145(ii), for “thirty lakh rupees” (w.e.f.

14.5.2015)

450 Subs. by Act 21 of 2009 (see Footnote No.448)

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facilitating the adjudication by the Adjudicating Authority referred

to in Chapter III to adjudicate the matters in issue, including until

the filing of the complaint by the authority authorised in that behalf

before the Special Courts constituted under Chapter VII of the Act.

The expression “proceedings”, therefore, need not be given a narrow

meaning only to limit it to proceedings before the Court or before the

Adjudicating Authority as is contended but must be understood

contextually. This is reinforced from the scheme of the Act as it

recognises that the statement recorded by the Director in the course

of inquiry, to be deemed to be judicial proceedings in terms of

Section 50(4) of the 2002 Act. Needless to underscore that the

authorities referred to in Section 48 of the Act are distinct from the

Adjudicating Authority referred to in Section 6 of the 2002 Act. The

Adjudicating Authority referred to in Section 6 is entrusted with the

task of adjudicating the matters in issue for confirmation of the

provisional attachment order issued under Section 5 of the 2002 Act,

passed by the Authority referred to in Section 48 of the Act. The

confirmation of provisional attachment order is done by the

Adjudicating Authority under Section 8 of the 2002 Act, and if

confirmed, the property in question is ordered to be confiscated and

249

then it would vest in the Central Government as per Section 9 of the

2002 Act subject to the outcome of the trial of the offence under the

2002 Act (i.e., Section 3 of offence of money-laundering punishable

under Section 4). Suffice it to observe that the expression

“proceedings” must be given expansive meaning to include actions

of the authorities (i.e., Section 48) and of the Adjudicating Authority

(i.e., Section 6), including before the Special Court (i.e., Section 43).

27. The task of the Director or an authority authorised by the

Central Government under the 2002 Act for the collection of

evidence is the intrinsic process of adjudication proceedings. In

that, the evidence so collected by the authorities is 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.

The expression “investigation”, therefore, must be regarded as

interchangeable with the function of “inquiry” to be undertaken by

the authorities for submitting such evidence before the Adjudicating

Authority.

250

28. In other words, merely because the expression used is

“investigation” — which is similar to the one noted in Section 2(h) of

the 1973 Code, it does not limit itself to matter of investigation

concerning the offence under the Act and Section 3 in particular. It

is a different matter that the material collected during the inquiry by

the authorities is utilised to bolster the allegation in the complaint

to be filed against the person from whom the property has been

recovered, being the proceeds of crime. Further, the expression

“investigation” used in the 2002 Act is interchangeable with the

function of “inquiry” to be undertaken by the Authorities under the

Act, including collection of evidence for being presented to the

Adjudicating Authority for its consideration for confirmation of

provisional attachment order. We need to keep in mind that the

expanse of the provisions of the 2002 Act is of prevention of moneylaundering, attachment of proceeds of crime, adjudication and

confiscation thereof, including vesting of it in the Central

Government and also setting up of agency and mechanism for

coordinating measures for combating money-laundering.

251

29. Coming to the next relevant definition is expression “moneylaundering”, it has the meaning assigned to it in Section 3 of the Act.

We would dilate on this aspect while dealing with the purport of

Section 3 of the Act a little later.

30. The other relevant definition is “proceeds of crime” in Section

2(1)(u) of the 2002 Act. This definition is common to all actions

under the Act, namely, attachment, adjudication and confiscation

being civil in nature as well as prosecution or criminal action. The

original provision prior to amendment vide Finance Act, 2015 and

Finance (No.2) Act, 2019, took within its sweep any property

(mentioned in Section 2(1)(v) of the Act) derived or obtained, directly

or indirectly, by any person “as a result of” criminal activity “relating

to” a scheduled offence (mentioned in Section 2(1)(y) read with

Schedule to the Act) or the value of any such property. Vide Finance

Act, 2015, it further included such property (being proceeds of crime)

which is taken or held outside the country, then the property

equivalent in value held within the country and by further

amendment vide Act 13 of 2018, it also added property which is

abroad. By further amendment vide Finance (No.2) Act, 2019,

Explanation has been added which is obviously a clarificatory

amendment. That is evident from the plain language of

the inserted Explanation itself. The fact that it also includes any

252

property which may, directly or indirectly, be derived as a result of

any criminal activity relatable to scheduled offence does not

transcend beyond the original provision. In that, the word “relating

to” (associated with/has to do with) used in the main provision is a

present participle of word “relate” and the word “relatable” is only an

adjective. The thrust of the original provision itself is to indicate that

any property is derived or obtained, directly or indirectly, as a result

of criminal activity concerning the scheduled offence, the same be

regarded as proceeds of crime. In other words, property in whatever

form mentioned in Section 2(1)(v), is or can be linked to criminal

activity relating to or relatable to scheduled offence, must be

regarded as proceeds of crime for the purpose of the 2002 Act. It

must follow that the Explanation inserted in 2019 is merely

clarificatory and restatement of the position emerging from the

principal provision [i.e., Section 2(1)(u)].

31. The “proceeds of crime” being the core of the ingredients

constituting the offence of money-laundering, that expression needs

to be construed strictly. In that, all properties recovered or attached

by the investigating agency in connection with the criminal activity

253

relating to a scheduled offence under the general law cannot be

regarded as proceeds of crime. There may be cases where the

property involved in the commission of scheduled offence attached

by the investigating agency dealing with that offence, cannot be

wholly or partly regarded as proceeds of crime within the meaning

of Section 2(1)(u) of the 2002 Act — so long as the whole or some

portion of the property has been derived or obtained by any person

“as a result of” criminal activity relating to the stated scheduled

offence. To be proceeds of crime, therefore, the property must be

derived or obtained, directly or indirectly, “as a result of” criminal

activity relating to a scheduled offence. To put it differently, the

vehicle used in commission of scheduled offence may be attached as

property in the concerned case (crime), it may still not be proceeds

of crime within the meaning of Section 2(1)(u) of the 2002 Act.

Similarly, possession of unaccounted property acquired by legal

means may be actionable for tax violation and yet, will not be

regarded as proceeds of crime unless the concerned tax legislation

prescribes such violation as an offence and such offence is included

in the Schedule of the 2002 Act. For being regarded as proceeds of

crime, the property associated with the scheduled offence must have

254

been derived or obtained by a person “as a result of” criminal activity

relating to the concerned scheduled offence. This distinction must

be borne in mind while reckoning any property referred to in the

scheduled offence as proceeds of crime for the 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.

32. Be it noted that the definition clause includes any property

derived or obtained “indirectly” as well. This would include property

derived or obtained from the sale proceeds or in a given case in lieu

of or in exchange of the “property” which had been directly derived

or obtained as a result of criminal activity relating to a scheduled

offence. In the context of Explanation added in 2019 to the definition

of expression “proceeds of crime”, it would inevitably include other

property which may not have been derived or obtained as a result of

any criminal activity relatable to the scheduled offence. As noticed

from the definition, it essentially refers to “any property” including

abroad derived or obtained directly or indirectly. The Explanation

added in 2019 in no way travels beyond that intent of tracking and

reaching upto the property derived or obtained directly or indirectly

255

as a result of criminal activity relating to a scheduled offence.

Therefore, the Explanation is in the nature of clarification and not

to increase the width of the main definition “proceeds of crime”. The

definition of “property” also contains Explanation which is for the

removal of doubts and to clarify that the term property includes

property of any kind used in the commission of an offence under the

2002 Act or any of the scheduled offences. In the earlier part of this

judgment, we have already noted that every crime property need not

be termed as proceeds of crime but the converse may be true.

Additionally, some other property is purchased or derived from the

proceeds of crime even such subsequently acquired property must

be regarded as tainted property and actionable under the Act. For,

it would become property for the purpose of taking action under the

2002 Act which is being used in the commission of offence of moneylaundering. Such purposive interpretation would be necessary to

uphold the purposes and objects for enactment of 2002 Act.

33. Tersely put, it is only such property which is derived or

obtained, directly or indirectly, as a result of criminal activity

relating to a scheduled offence can be regarded as proceeds of crime.

256

The authorities under the 2002 Act cannot resort to action against

any person for money-laundering on an assumption that the

property recovered by them must be proceeds of crime and that a

scheduled offence has been committed, unless the same is registered

with the jurisdictional police or pending inquiry by way of complaint

before the competent forum. For, the expression “derived or

obtained” is indicative of criminal activity relating to a scheduled

offence already accomplished. Similarly, in the event the person

named in the criminal activity relating to a scheduled offence is

finally absolved by a Court of competent jurisdiction owing to an

order of discharge, acquittal or because of quashing of the criminal

case (scheduled offence) against him/her, there can be no action for

money-laundering against such a person or person claiming through

him in relation to the property linked to the stated scheduled 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.

257

34. By and large the debate today is restricted to the discrepancy

between the word ‘and’, which features in the original definition,

against the ‘or’ in the newly inserted Explanation in Section 3. While

the stand of the Government is that there is no requirement under

Section 3 to project or claim the proceeds of crime as untainted

property. The petitioners have claimed that said interpretation will

be unconstitutional. For, the requirement is that not only does a

predicate crime need to be committed, it in turn needs to generate

proceeds of crime and it must also then be projected as untainted

property to qualify for the crime of money-laundering. The general

scheme of the law of this land is that any law which is questioned is

presumed to be unblemished and within the confines of the

Constitutional principles so laid down within the Constitution. Yet,

as the arguments, challenges laid against the interpretation of the

impugned section are so many we find it necessary to see how India

embarked on the framing of the definition of “money-laundering”

under Section 3 of the 2002 Act. Thereafter, we will see how the

Parliament over the years responded to changes and suggestions

from the outside world, notably the FATF. Thus, in seriatim we

endeavour to see the international Conventions which led to the

258

evolution of money-laundering, based on which the Government

decided to enact the law, followed by the FATF recommendations

which have led to the amendments, then the debates in the

Parliament of India followed by the law of the land as laid down by

this Court.

35. For untying the knot, how money-laundering evolved — it is

trite to refer to the tenets that have been laid down in what are

commonly referred to as the Palermo and Vienna Conventions. The

first step ever taken towards ridding the world of money-laundering

were made in the Vienna Convention, 1988 wherein under Articles

3.1(b)(i),(ii),(c)(i) to (iv), 3.2 and 3.3, it was held as follows:

“Article 3

OFFENCES AND SANCTIONS

1. Each Party shall adopt such measures as may be

necessary to establish as criminal offences under its

domestic law, when committed intentionally:

a)(i) to (v) ….

b) i) The conversion or transfer of property, knowing

that such property is derived from any offence or

offences established in accordance with subparagraph a)

of this paragraph, or from an act of participation in such

offence or offences, for the purpose of concealing or

disguising the illicit origin of the property or of

assisting any person who is involved in the commission of

such an offence or offences to evade the legal consequences

of his actions;

259

ii) The concealment or disguise of the true nature,

source, location, disposition, movement, rights with

respect to, or ownership of property, knowing that such

property is derived from an offence or offences

established in accordance with subparagraph a) of this

paragraph or from an act of participation in such an offence

or offences;

c) Subject to its constitutional principles and the

basic concepts of its legal system:

i) The acquisition, possession or use of property,

knowing, at the time of receipt, that such property was

derived from an offence or offences established in

accordance with subparagraph a) of this paragraph or from

an act of participation in such offence or offences;

ii) The possession of equipment or materials or

substances listed in Table I and Table II, knowing that

they are being or are to be used in or for the illicit

cultivation, production or

iii) Publicly inciting or inducing others, by any means,

to commit any of the offences established in accordance

with this article or to use narcotic drugs or psychotropic

substances illicitly;

iv) Participation in, association or conspiracy to

commit, attempts to commit and aiding, abetting,

facilitating and counselling the commission of any of the

offences established in accordance with this article.

2. Subject to its constitutional principles and the basic

concepts of its legal system, each Party shall adopt such

measures as may be necessary to establish as a criminal

offence under its domestic law, when committed

intentionally, the possession, purchase or cultivation of

narcotic drugs or psychotropic substances for personal

consumption contrary to the provisions of the 1961

Convention, the 1961 Convention as amended or the 1971

Convention.

3. Knowledge, intent or purpose required as an element

of an offence set forth in paragraph 1 of this article may be

inferred from objective factual circumstances.”

(emphasis supplied)

260

Similarly, the next important Convention which bolstered the fight

against money-laundering was the Palermo Convention wherein in

Annex I it is stated that:

“Article 2. Use of terms

(a) to (d) …..

(e) “Proceeds of crime” shall mean any property derived from

or obtained, directly or indirectly, through the commission

of an offence;

…….

(h) “Predicate offence” shall mean any offence as a result of

which proceeds have been generated that may become the

subject of an offence as defined in article 6 of this

Convention;

………

*** *** ***

Article 6. Criminalization of the laundering of proceeds of

crime

1. Each State Party shall adopt, in accordance with

fundamental principles of its domestic law, such

legislative and other measures as may be necessary to

establish as criminal offences, when committed

intentionally:

(a) (i) The conversion or transfer of property, knowing

that such property is the proceeds of crime, for the

purpose of concealing or disguising the illicit origin of

the property or of helping any person who is involved

in the commission of the predicate offence to evade the

legal consequences of his or her action;

(ii) The concealment or disguise of the true nature,

source, location, disposition, movement or ownership of or

rights with respect to property, knowing that such

property is the proceeds of crime;

(b) Subject to the basic concepts of its legal system:

261

(i) The acquisition, possession or use of property, knowing,

at the time of receipt, that such property is the proceeds of

crime;

(ii) Participation in, association with or conspiracy to

commit, attempts to commit and aiding, abetting,

facilitating and counselling the commission of any of the

offences established in accordance with this article.

2. For purposes of implementing or applying paragraph 1

of this article:

(a) Each State Party shall seek to apply paragraph 1 of

this article to the widest range of predicate offences;

(b) Each State Party shall include as predicate offences

all serious crime as defined in article 2 of this Convention

and the offences established in accordance with articles 5,

8 and 23 of this Convention. In the case of States Parties

whose legislation sets out a list of specific predicate

offences, they shall, at a minimum, include in such list

a comprehensive range of offences associated with

organized criminal groups;

shall include offences committed both within and outside

the jurisdiction of the State Party in question. However,

offences committed outside the jurisdiction of a State Party

shall constitute predicate offences only when the relevant

conduct is a criminal offence under the domestic law of the

State where it is committed and would be a criminal offence

under the domestic law of the State Party implementing or

applying this article had it been committed there;

(d) Each State Party shall furnish copies of its laws that

give effect to this article and of any subsequent changes to

such laws or a description thereof to the Secretary-General

of the United Nations;

(e) If required by fundamental principles of the domestic

law of a State Party, it may be provided that the offences set

forth in paragraph 1 of this article do not apply to the

persons who committed the predicate offence;

(f) Knowledge, intent or purpose required as an element

of an offence set forth in paragraph 1 of this article may

be inferred from objective factual circumstances.”

(emphasis supplied)

262

Thus, it is clear from a bare reading of two very initial international

Conventions attempting to establish a world order to curb moneylaundering, gave a very wide interpretation to the concept of moneylaundering. There has been a consensus that acquisition,

possession, use, concealing or disguising the illicit origin of

illegitimately obtained money to evade legal consequences would be

money-laundering. Further, concealing and disguising too were

clearly a part of money-laundering and as such there was no bar or

understating that pointed to the fact that there was a need to project

the monies as untainted. This was obviously subject to the

fundamental principles of the domestic law of the countries.

However, the growth of the jurisprudence in this law did not stop or

end there. As we progressed into a world equipped with the internet

and into a digital age, criminals found new ways to launder and the

law found new ways to tackle them. In the meanwhile, the FATF was

established and it started working towards a goal of preventing

money-laundering. It has since its inception been aimed towards

reducing cross border and intra State money-laundering activities.

In this endeavour, it has made many concerted efforts to study,

understand, develop and mutually evaluate the state of the

263

compliance in countries towards reducing money-laundering.

Today, as we will see, many of the amendments in the 2002 Act are

in response to the recommendations of the FATF. Thereafter, forty

recommendations dated 20.6.2003, were made by the FATF which

had led to much deliberations go on to show that all endeavours

were to be Vienna and Palermo Conventions compliant. During the

evolution of the jurisprudence on money-laundering, it was found

that India was in fact lacking in some aspects of curbing moneylaundering. Hence, the recommendations were made to India time

and again. It is pertinent also to reproduce the Mutual Evaluation of

the Anti-Money Laundering (AML) and Combating the Financing of

Terrorism (CFT) regime of India as adopted on 24.06.2010 in its

recommendations, as it has been shown that it is based on these

observations that the amendment have been made, herein it has

been observed thus:

“Recommendation 1

….

Consistency with the United Nations Conventions

137. The Vienna and Palermo Conventions require

countries to establish a criminal offence for the

following knowing/intentional acts: conversion or

transfer of proceeds for specific purposes; concealment

or disguise of the true nature, source, location,

disposition, movement or ownership of or rights with

264

respect to proceeds; and - subject to the

fundamental/constitutional principles or basic

concepts of the country‘s legal system - the sole

acquisition, possession or use of proceeds (Art.

3(1)(b)&(c) of the Vienna Convention; and Art. 6(1) of

the Palermo Convention against Transnational

Organised Crime – the TOC Convention).

138. Section 8A of the NDPS Act offence is an almost

faithful transposition of the Vienna Convention ML

provisions. The PMLA takes a different approach by using

a terminology that by its broad wording is intended to

generally correspond with the criminal activity targeted by

both the Vienna and Palermo Conventions.

139. As said, the PMLA (s.3) provides that money

laundering is committed where someone “directly or

indirectly attempts to indulge, knowingly assists or

knowingly is a party or is actually involved in any process

or activity connected with the proceeds of crime and

projecting it as untainted property”. The section 3 mens rea

threshold is lower than the Art. 6.1(a) of the TOC

Convention in that no specific purpose or intention is

required. The substantive element of “projecting it as

untainted property” carries the notion of knowing

disguise, as required by the Conventions, but does not

appear to cover all concealment activity, such as the

physical hiding of the assets.

……

Recommendation 2

Scope of liability

……

Implementation and effectiveness

164. When the PMLA was enacted on 1 July 2005

implementing the Palermo TOC Convention, it was already

clear that the scope of the law was too restrictive to

withstand the test of the relevant international standards.

With the extension of the list of predicate offences under

Schedule A and B, and the addition of Schedule C offences

since 1 June 2009, India has made a serious effort to

bring the ML criminalisation of the PMLA in line with

the FATF criteria in this respect. It did not do away

with all shortcomings, however.

265

165. Firstly, it is not clear why the legislator abandoned

the NDPS Act approach to define the ML activity by

simply incorporating the relevant Convention language

in the domestic law. With the section 3 of the PMLA money

laundering provision, a newly defined ML offence was

introduced differing from the comprehensive qualification

of section 8A of the NDPS Act that was not repealed,

resulting in the coexistence of two divergent drug related

ML offences.

166. The new definition of the ML offence in section 3 of the

PMLA tries to capture all requisite mental and physical

elements of the Convention’s ML provision in one

overarching sentence. The mens rea element is the

“knowledge” standard as minimally required by the

Conventions. Section 3 of the PMLA does not require a

specific intention or purpose, and as such its threshold

is lower than that of Art. 6.1(a)(i) of the TOC

Convention. The provision however falls short on the

following actus reus aspects:

a. The physical element in all cases includes the

substantive condition of “projecting (the proceeds

of crime) as untainted property”, so although the

broad formulation of “any process or activity”

covers any conduct involving criminal proceeds,

such conduct is only criminalised as money

laundering when the property is concurrently

projected as untainted. While this “projection”

circumstance may correspond with the notion of

“disguise” as in Art. 6.1(a)(ii) of the TOC

Convention, it does not cover acts of physical

concealment without any “projecting” (such as

deposit in a safe), even if – as was argued - this act

is seen as an attempt to “project”, quod non.

b. With the imposition of the “projecting”

condition the PMLA offence does not extend to the

activity of sole “acquisition, possession or use” of

criminal proceeds as stated in Article 6(1)(b)(i) of

the TOC Convention, although this would not be

contrary to the basic concepts of the Indian legal

system. Only the offences of “holding” drug

proceeds (NDPS Act s.68C) or “proceeds of

terrorism” (UAPA s.21) are unconditional and may

be considered to cover “possession” situations in

these specific circumstances. Also, the sections

266

410 and 411 IPC “receiving” offence may cover

acts of “acquisition”, but these provisions fall short

in respect of the scope of predicate offences, as

they only apply to stolen (or equivalent451)

property.

*** *** ***

Table 2: Recommended Action Plan to Improve the

AML/CFT System

AML/CFT system Recommended Action

1. General No text required

2. Legal System and

Institutional

2.1 Criminalisation of

Money laundering

Measures (R.1 & R.2)

Although recently an

increased focus on the ML

aspect and use of the ML

provisions is to be

acknowledged, there are

still some important and

often long-standing legal

issues to be resolved. To

that end following

measures

should be taken:

• The monetary

threshold limitation of

INR 3 million for the

Schedule Part B

predicate offences

should be abolished.

• The section 3 PMLA

definition of the ML

offence should be

brought in line with

the Vienna and

Palermo Conventions

so as to also fully

cover the physical

concealment and the

sole acquisition,

451 “Stolen” property includes property derived from extortion, robbery, misappropriation or

breach of trust (IPC s.410)

267

possession and use of

all relevant proceeds

of crime.

• The present strict and

formalistic

interpretation of the

evidentiary

requirements in

respect of the proof of

the predicate offence

should be put to the

test of the courts to

develop case law and

receive direction on

this fundamental legal

issue.

• The level of the

maximum fine

imposable on legal

persons should be

raised or left at the

discretion of the court

to ensure a more

dissuasive effect.

• The practice of making

a conviction of legal

persons contingent on

the concurrent

prosecution/conviction

of a (responsible)

natural person should

be abandoned.”

(emphasis supplied)

Thus, it is clear that certain recommendations were made by the

FATF concerning the definition of money-laundering. It is also clear

from public records that India has time and again, since the

inception of the Act, made active efforts to follow and evolve its own

laws in line with the mandates and recommendations of the

268

FATF. Furthermore, it is noteworthy that even in other jurisdictions;

the above-mentioned definition has gained a more holistic approach

which is not per se the same as the colloquial term, “money launder”

or simply turning black money into white. In the UK and Spain,

possession of criminal proceeds is covered under money-laundering,

similarly by way of interpretation, the same is the case in Germany

and Italy452

. Following these recommendations, amendments were

brought about in India. This in turn led to debates as can be seen

from the following speeches which were made in the Parliament. We

first note the speech of the then Finance Minister made on

02.12.1999 in the Lok Sabha at the time of introducing the 1999

Bill, it is as follows:

“………The Foreign Exchange Regulation Act, 1973

primarily made compensatory transactions (known as

Havala) illegal. The basic aim was to ensure that no one

contravenes the exchange control regulations through

unofficial channels. The emphasis was, therefore, on

violation of foreign exchange regulations rather than on

“money-laundering”. Money-laundering, that is the

cleansing of proceeds of crimes such as extortion,

treason, drug trafficking, gun running etc. poses a

serious threat to the integrity and sovereignty of a

country and also to its financial systems. This threat to

the nation and its economy has been recognised the

world over and several UN and other international

conventions have called upon member countries to

take legislative and other preventive measures to

452 National and International Anti-Money Laundering Law, Benjamin vogel and Jean-Baptiste

Maillart, Max Planck Institute, 2020 ed. Pg. 798.

269

combat the menace of money-laundering. As India is a

signatory to some of these conventions, a committee

was set up to examine and suggest a draft legislation for

this purpose. Based on their report, a separate legislation

has been introduced with stringent penal provisions. At the

same time, there is a need to consolidate and amend the

law relating to foreign exchange consistent with the

liberalisation policies pursued during the last eight years.

While the provisions of Foreign Exchange Management Bill

make foreign exchange contraventions civil wrongs, the

offences under the prevention of Money-Laundering Bill

have been made criminal and will attract stringent

punishment.

….

The point I am making is that we have picked up certain

offences which are heinous, as I said in the beginning,

which are of very serious nature. We are bringing this

legislation on money- laundering so that receipts from

those crimes and properties acquired as a result

thereof, are dealt with under this Act. At the present

moment, we have no legislation which will deal exclusively

with this particular subject. So, we are bringing this Bill.”

(emphasis supplied)

This speech, thus, set the tone for the years to come in our fight

against money-laundering. This law was enacted in 2002 yet

brought into force in 2005. Later, a speech was made by the then

Finance Minister, who had introduced the Prevention of Money

Laundering (Amendment) Bill, 2012 in the Rajya Sabha on

17.12.2012

“SHRI P. CHIDAMBARAM: Mr. Deputy Chairman, Sir, I am

grateful to the hon. Members, especially ten hon. Members

who have spoken on this Bill and supported the Bill.

Naturally, some questions will arise; they have arisen. It is

my duty to clarify those matters. Sir, firstly, we must

270

remember that money-laundering is a very technicallydefined offence. It is not the way we understand

‘money-laundering’ in a colloquial sense. It is a

technically-defined offence. It postulates that there

must be a predicate offence and it is dealing with the

proceeds of a crime. That is the offence of moneylaundering. It is more than simply converting blackmoney into white or white money into black. That is an

offence under the Income Tax Act. There must be a crime

as defined in the Schedule. As a result of that crime, there

must be certain proceeds — It could be cash; it could be

property. And anyone who directly or indirectly indulges

or assists or is involved in any process or activity

connected with the proceeds of crime and projects it as

untainted property is guilty of offence of moneylaundering. So, it is a very technical offence. The

predicate offences are all listed in the Schedule. Unless

there is a predicate offence, there cannot be an offence

of money-laundering. Initially the thinking was unless

a person was convicted of the predicate offence, you

cannot convict him of money-laundering. But that

thinking is evolved now. The Financial Action Task

Force has now come around to the view that if the

predicate offence has thrown up certain proceeds and

you dealt with those proceeds, you could be found

guilty of offence of money-laundering. What we are

trying to do is to bring this law on lines of laws that are

commended by FATF and all countries have obliged to

bring their laws on the same lines. I just want to point to

some of my friends that this Bill was passed in 2002. In

2002, we felt that these provisions are sufficient. In the

working of the law, we found that the provisions have

certain problems. We amended it in 2005. We amended it

in 2009. We still find that there are some problems. The

FATF has pointed out some problems. And, we are

amending it in 2012. It is not finding fault with anyone.

All I am trying to say is that this is an evolutionary

process. Laws will evolve in this way, and we are amending

it again in 2012.”

(emphasis supplied)

36. It is seen that there is clear inclination to follow the

recommendations of the FATF, made from time to time. Yet, before

271

we move forward, we must note other statements that were made

before the latest amendment was made. In the Statement RE:

Amendment/Background/Justification for amendments to the 2002

Act – Pg 226‐235 of the Debate on the Finance Bill, 2019 it was noted

that:

“….

4. It has been experienced that certain doubts are also

raised as regards definition of ‘Offence of money

laundering’ included in section 3 of the Act of 2002. It

is observed that the legislative intent and object of the

Act of 2002 is wrongly construed as if all the activities

as mentioned therein are required to be present

together to constitute the offence of Money

Laundering. The intention of the legislature had always

been that a person shall be held to be guilty of offence

of money-laundering if he is found to have directly or

indirectly attempted to indulge or knowingly assisted

or knowingly is a party or is actually involved in any

one or more of the process of activity included in

section 3 of the Act of 2002. It is also observed that the

original intention of the legislature is wrongly

construed to interpret as if the offence of money

laundering is a one time instantaneous offence and

finishes with its concealment or possession or

acquisition or use of projecting it as untainted property

or claiming it as untainted property. The intention of

the legislature had always been that a person will be

held to be guilty of offence of money-laundering and

will be punished as long as person is enjoying the

“proceeds of crime” by its concealment or possession

or acquisition or use or projecting it as untainted

property or claiming it as untainted property or in any

manner whatsoever. Accordingly, an Explanation is

proposed to be inserted in section 3 of the Act of 2002

to clarify the above legislative intent.”

(emphasis supplied)

272

Thereafter, the following statement was made on two different

occasions453:

“SHRIMATI NIRMALA SITHARAMAN: The other

amendments are into the PMLA, the Act relating to black

money. On that, I would like to assure the Members

regarding the kind of amendments. In fact, I would like to

mention, well before that, the number of amendments,

which are coming through for the PMLA, which is of 2002

vintage. Eight are being proposed by us. Of the eight, six

are only explanations to the existing clause. The clause

itself is not being changed. We are only coming with

explanations. These explanations are being brought into

the Act because of pleading in the courts by some of

those who are accused and because of some kind of a

confusion or a grey area or an ambiguity which might

exist. Therefore, the amendment is not amendment of

the clause itself. It is more explaining the clause. …

*** *** ***

SHRIMATI NIRMALA SITHARAMAN: More important is the

amendment to the PMLA; The Prevention of Money

Laundering Act. There are, one or two, a couple of

amendments which are being made to the PMLA, which I

just want to elaborate a bit so that the hon. Members know

what is that we are doing to the PMLA. They are all

explanatory changes that we are bringing in. Of the eight

different changes that we are bringing into the PMLA, six

relate to explanatory notes because we find that in the

courts, many of those offenders under the PMLA–if there

are two cases happening–try to club both the cases

although they may be materially different and seek of a bail.

Therefore, what happens is, a case which has a different

procedural matter is also clubbed together with the case

which is not procedural and at the end of the day, the law

does not get invoked in its true letter and spirit. So, such

changes in the definition and explanatory matters have

been done in the PMLA. One little proviso which was

not really relevant has been removed and another which

is being brought in again is more to make it clearer so

that PMLA, when invoked, becomes far more effective.

453 Seventeenth Series, Vol. III, First Session, 2019/1941 (Saka) No. 24, Thursday, July 18,

2019 / Ashadha 27, 1941 (Saka)

273

So, these are the points on the PMLA-related

matters.”454

(emphasis supplied)

It is seen that even though there were multiple arguments in respect

of the definition of Section 3455, yet we chose to implement the said

definition in a particular way. Later it was realised by the

Government and the Parliament that with the passage of time and

the development of anti-money laundering jurisprudence world over,

certain changes were to be made in the definition of moneylaundering. We do not find it prudent or necessary to run into

arguments of application of international law, as it is clear that the

intentions of the successive Governments have been the same since

day one of signing the international Conventions. It is only in light

of this perception and understanding of the legislation that we have

been implementing the recommendations of the FATF. However, we

note that there has been a constant flow of thought from the FATF

recommendations, directly into our polity, which has pushed the

454 GOVERNMENT BILLS — Contd. The Appropriation (No. 2) Bill, 2019 And The Finance (No.

2) Bill, 2019 [23 July, 2019]

455 See debate of 25 July, 2002- RAJYA SABHA; available at:

https://rsdebate.nic.in/bitstream/123456789/100942/1/PD_196_25072002_9_p237_p288_

21.pdf

274

money-laundering legislation forward. Thus, there can be no doubt

as to the bona fides of the Legislature in implementing an

understating of Section 3 that will help not only stop but prevent

money-laundering by nipping it in the bud.

SECTION 3 OF THE 2002 ACT

37. Coming to Section 3 of the 2002 Act, the same defines the

offence of money-laundering. The expression “money-laundering”,

ordinarily, means the process or activity of placement, layering and

finally integrating the tainted property in the formal economy of the

country. However, Section 3 has a wider reach. The offence, as

defined, captures every process and activity in dealing with the

proceeds of crime, directly or indirectly, and not 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

275

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.

457[Explanation.—For the removal of doubts, it is

hereby clarified that,—

(i) a person shall be guilty of offence of moneylaundering 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

(d) use; or

(e) projecting as untainted property; or

(f) claiming as untainted property,

in any manner whatsoever;

(ii) the process or activity connected with proceeds of

crime is a continuing activity and continues till such

time a person is directly or indirectly enjoying the

proceeds of crime by its concealment or possession or

acquisition or use or projecting it as untainted

property or claiming it as untainted property in any

manner whatsoever.]”

This section was first amended vide Act 2 of 2013. The

expression “proceeds of crime and projecting” was substituted by

expression “proceeds of crime including its concealment, possession,

acquisition or use and projecting 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

456 Subs. by Act 2 of 2013, sec. 3, for “proceeds of crime and projecting” (w.e.f. 15-2-2013, vide

S.O. 343(E), dated 8-2-2013)

457 Ins. by the Finance (No.2) Act, 2019, sec. 193 (w.e.f. 1-8-2019)

276

(No.2) Act, 2019 remained as it is. Upon breaking-up of this

provision, it would clearly indicate that — it is an offence of moneylaundering, 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 refers to the

essential ingredient of “process or activity” connected with the

proceeds of crime. The Explanation inserted by way of amendment

of 2019, therefore, has clarified the word “and” preceding the

expression “projecting or claiming” as “or”. That being only

clarificatory, whether introduced by way of Finance Bill or otherwise,

277

would make no difference to the main original provision as it existed

prior to 2019 amendment. Indeed, there has been some debate in

the Parliament about the need to retain the clause of projecting or

claiming the property as untainted property. However, the

Explanation inserted by way of amendment 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 above458. 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

Amendments to India’s

Prevention of Money

458 See paragraph 35 of this judgment

278

threshold

condition for

most ML

predicates.

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 (“30

lakh rupees” of USD 60

000) were added in Part A

without a threshold value.

Part C of the Schedule now

includes all offences listed

in Part A, supplemented

by all offences covered by

Chapter XVII of the Indian

Penal Code, when these

offences have cross-border

implications. All in all, the

list of predicate offences

continues to include 156

offences under 28 different

statutes but without any

monetary threshold. As

result, the major technical

deficiency identified in

relation 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

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

279

proceeds 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 basis, it

can be concluded that

the scope of these

technical deficiencies is

relatively minor. It is not

expected that there will

be any impact on the

effectiveness of India’s

AML regime. The

deficiency is mostly

addressed.”

(emphasis supplied)

280

38. To put it differently, the section as it stood prior to 2019 had

itself incorporated the expression “including”, which is indicative of

reference made to the different process or activity connected with the

proceeds of crime. Thus, the principal provision (as also the

Explanation) predicates that if a person is found to be directly or

indirectly involved in any process or activity connected with the

proceeds of crime must be held guilty of offence of moneylaundering. If the interpretation 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 vs. State of

Jharkhand & Anr.459, 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

459 (2005) 3 SCC 551 (also at Footnote No.197)

281

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 been created.

In Apparel Export Promotion Council vs. A.K. Chopra460, the

Court observed that domestic Courts are under an obligation to give

due regard to the international conventions and norms for

construing the domestic laws, more so, when there is no

inconsistency between them and there is a void in domestic law.

This view has been restated in Githa Hariharan461, as also in

People’s Union for Civil Liberties462, and National Legal

Services Authority vs. Union of India & Ors.463.

460 (1999) 1 SCC 759

461 Supra at Footnote No.199

462 Supra at Footnote No.198

463 (2014) 5 SCC 438 (also at Footnote No.197)

282

39. 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 moneylaundering. To buttress the stand taken by India before the FATF,

reliance has been justly placed on reported decisions of this Court

amongst other Sanjay Dutt464, 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 ammunition so that neither is

covered under Section 5 when any one of them carrying more would

464 Supra at Footnote No.193

283

be so liable. The principle underlying this analysis by the

Constitution Bench must apply proprio vigore to the interpretation

of Section 3 of the 2002 Act. To the same end, this Court in the case

of Ishwar Singh Bindra & Ors. vs. The State of U.P.465

, Joint

Director of Mines Safety466 and Gujarat Urja Vikas Nigam Ltd.

vs. Essar Power Ltd.

467, interpreted the word “and” in the

concerned legislation(s) as word “or” to give full effect to the

legislative intent.

40. The Explanation as inserted in 2019, therefore, does not entail

in expanding the purport of Section 3 as it stood prior to 2019, but

is only clarificatory in nature. Inasmuch as Section 3 is widely

worded with a view to not only investigate the offence of moneylaundering but also to prevent and regulate that offence. This

provision plainly indicates that any (every) process or activity

connected with the proceeds of crime results in offence of moneylaundering. Projecting or claiming the proceeds of crime as

untainted property, in itself, is an attempt to indulge in or being

465 (1969) 1 SCR 219 (also at Footnote No.194)

466 Supra at Footnote No.195

467 (2008) 4 SCC 755 (also at Footnote No.194)

284

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

above468.

41. 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 because of the word

“and”. If that interpretation is accepted, the effectiveness of Section

3 of the 2002 Act can be easily frustrated by the simple device of one

person possessing proceeds of crime and his accomplice would

468 See paragraph 36 of this judgment

285

indulge in projecting or claiming it to be untainted property so that

neither is covered under Section 3 of the 2002 Act.

42. 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.

43. 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

286

process or activity connected with the proceeds of crime; and such

process or activity in a given fact situation may be a continuing

offence, irrespective of the date and time of commission of the

scheduled offence. In other words, the criminal activity may have

been committed before the same had been notified as scheduled

offence for the purpose of the 2002 Act, but if a person has indulged

in or continues to indulge directly or indirectly in dealing with

proceeds of crime, derived or obtained from such criminal activity

even after it has been notified as scheduled offence, may be liable to

be prosecuted for offence of money-laundering under the 2002 Act

— for continuing to possess or conceal the proceeds of crime (fully

or in part) or retaining possession thereof or uses it in trenches until

fully exhausted. The offence of money-laundering is not dependent

on or linked to the date on which the scheduled offence or if we may

say so the predicate 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)

287

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.

44. 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.

criminal from what seem to be legitimate sources.

45. 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 to

deal in such money. It is the means of livelihood of drug dealers,

terrorist, white collar criminals and so on. Tainted money breeds

discontent in any society and in turn leads to more crime and civil

unrest. Thus, the onus on the Government and the people to identify

and seize such money is heavy. If there are any proactive

288

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.

46. 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.

289

47. We may profitably advert to the judgment in Seaford Court

Estates ld.469, which states:

“The question for decision in this case is whether we are at

liberty to extend the ordinary meaning of “burden” so as to

include a contingent burden of the kind I have described.

Now this court has already held that this sub-section is to

be liberally construed so as to give effect to the governing

principles embodied in the legislation (Winchester Court Ld.

v. Miller470); and I think we should do the same. Whenever

a statute comes up for consideration it must be

remembered that it is not within human powers to

foresee the manifold sets of facts which may arise, and,

even if it were, it is not possible to provide for them in

terms free from all ambiguity. The English language is

not an instrument of mathematical precision. Our

literature would be much the poorer if it were. This is

where the draftsmen of Acts of Parliament have often

been unfairly criticized. A judge, believing himself to be

fettered by the supposed rule that he must look to the

language and nothing else, laments that the draftsmen

have not provided 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 case471, 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.

469 Supra at Footnote No.185

470 [1944] K.B. 734

471 (1584) 3 Co. Rep. 7a

290

Studd472. 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 which it is woven, but he can

and should iron out the creases.”

(emphasis supplied)

48. Let us now also refer to the various cases that have been

pressed into service by the petitioners. 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.

Varghese473 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 vs. State of

M.P. & Ors.474 and Martin Lottery Agencies Limited475, which

states that the role of an Explanation in the Schedule of the Act

472 (1574) 2 Plowden, 465

473 Supra at Footnote No.19

474 (2006) 8 SCC 613 (also at Footnote No.128)

475 Supra at Footnote No.20

291

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 & Ors. vs. V.R.

Pattabiraman & Ors.476, which reads thus:

“50. In Bihta Cooperative Development Cane Marketing

Union Ltd. v. Bank of Bihar477 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 to widen the ambit

of the section.

*** *** ***

53. Thus, from a conspectus of the authorities referred to

above, it is manifest that the object of an Explanation to a

statutory provision is—

(a) to explain the meaning and intendment of the Act

itself,

(b) where there is any obscurity or vagueness in the

main enactment, to clarify the same so as to make

it consistent with the dominant object which it seems

to subserve,

object of the Act in order to make it meaningful and

purposeful,

(d) an Explanation cannot in any way interfere with

or change the enactment or any part thereof but

where some gap is left which is relevant for the

purpose of the Explanation, in order to suppress

the mischief and advance the object of the Act it

can help or assist the Court in interpreting the true

purport and intendment of the enactment, and

(e) it cannot, however, take away a statutory right with

which any person under a statute has been clothed or

476 (1985) 1 SCC 591 (also at Footnote No.128)

477 (1967) 1 SCR 848 : AIR 1967 SC 389 : 37 Com Cas 98 (also at Footnote No.128)

292

set at naught the working of an Act by becoming an

hindrance in the interpretation of the same.”

(emphasis supplied)

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.

49. 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 & Anr. vs. Rae Jagatpal Singh478

, Nalinakhya

Bysack vs. Shyam Sunder Haldar & Ors.479

, Chandroji Rao vs.

Commissioner of Income Tax, M.P., Nagpur480

, Board of Muslim

Wakfs, Rajasthan vs. Radha Kishan & Ors.481

, Tara Prasad

478 1904 SCC OnLine PC 9: (1904) 1 All LJ 384

479 AIR 1953 SC 148

480 (1970) 2 SCC 23

481 (1979) 2 SCC 468

293

Singh & Ors. vs. Union of India & Ors.482

, Sakshi vs. Union of

India & Ors.483, Guntaiah & Ors. vs. Hambamma & Ors.484 and

C. Gupta vs. Glaxo-Smithkline Pharmaceuticals Ltd.

485

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 of no help to the present

issue, are the cases of D.R. Fraser & Co. Ltd. vs. The Minister of

National Revenue486

, Tofan Singh487 and Ashok Munilal Jain488

Reference has also been made to Nikesh Tarachand Shah489

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.

482 (1980) 4 SCC 179

483 (2004) 5 SCC 518

484 (2005) 6 SCC 228

485 (2007) 7 SCC 171

486 1948 SCC OnLine PC 65 : AIR 1949 PC 120

487 Supra at Footnote No.31 (also at Footnote No.24)

488 Supra at Footnote No.163 (also at Footnote No.22)

489 Supra at Footnote No.3

294

50. 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 is that these sub-clauses do not

provide any protection or defence to this category of

persons.”

(emphasis supplied)

Accordingly, the phrase “and projecting it as untainted property”

was added the initial definition in the 2002 Act. However, it can also

be inferred from here that since the initial strokes of drafting the Act,

the intention was always to have a preventive Act and not simply a

money-laundering (penal) Act. Today, if one dives deep into the

financial systems, anywhere in the world, it is seen that once a

financial mastermind can integrate the illegitimate money into the

bloodstream of an economy, it is almost indistinguishable. In fact,

295

the money can be simply wired abroad at one click of the mouse. It

is also well known that once this money leaves the country, it is

almost impossible to get it back. Hence, a simplistic argument or the

view that Section 3 should only find force once the money has been

laundered, does not commend to us. That has never been the

intention of the Parliament nor the international Conventions.

51. We may also note that argument that 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

upto 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

296

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.

52. 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 relating to a

scheduled offence. Nevertheless, it is concerning the process or

activity connected with such property, which constitutes offence of

money-laundering. The property must qualify the definition of

“proceeds of crime” under Section 2(1)(u) of the 2002 Act. As

observed earlier, all or whole of the crime property linked to

scheduled offence need not be regarded as proceeds of crime, but all

properties qualifying the definition of “proceeds of crime” under

Section 2(1)(u) will necessarily be crime properties. Indeed, in the

event of acquittal of the person concerned or being absolved from

allegation of criminal activity relating to scheduled offence, and if it

is established in the court of law that the crime property in the

concerned case has been rightfully owned and possessed by him,

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such a property by no stretch of imagination can be termed as crime

property and ex-consequenti proceeds of crime within the meaning

of Section 2(1)(u) as it stands today. On the other hand, in the trial

in connection with the scheduled offence, the Court would be obliged

to direct return of such property as belonging to him. It would be

then paradoxical to still regard such property as proceeds of crime

despite such adjudication by a Court of competent jurisdiction. It is

well within the jurisdiction of the concerned Court trying the

scheduled offence to pronounce on that matter.

53. Be it noted that the authority of the Authorised Officer under

the 2002 Act to prosecute any person for offence of moneylaundering gets triggered only if there exists proceeds of crime within

the meaning of Section 2(1)(u) of the 2002 Act and further it is

involved in any process or activity. Not even in a case of existence

of undisclosed income and irrespective of its volume, the definition

of “proceeds of crime” under Section 2(1)(u) will get attracted, unless

the property has been derived or obtained as a result of criminal

activity relating to a scheduled offence. It is possible that in a given

case after the discovery of huge volume of undisclosed property, the

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authorised officer may be advised to send information to the

jurisdictional police (under Section 66(2) of the 2002 Act) for

registration of a scheduled offence contemporaneously, including for

further investigation in a pending case, if any. On receipt of such

information, the jurisdictional police would be obliged to register the

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.

54. Even though, the 2002 Act is a complete Code in itself, it is

only in respect of matters connected with offence of moneylaundering, 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.

55. In other words, the Authority under the 2002 Act, is to

prosecute a person for offence of money-laundering only if it has

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reason to believe, which is required to be recorded in writing that the

person is in possession of “proceeds of crime”. Only if that belief is

further supported by tangible and credible evidence indicative of

involvement of the person concerned in any process or activity

connected with the proceeds of crime, action under the Act can be

taken forward for attachment and confiscation of proceeds of crime

and until vesting thereof in the Central Government, such process

initiated would be a standalone process.

SECTION 5 OF THE 2002 ACT

56. Section 5 forms part of Chapter III dealing with attachment,

adjudication and confiscation. This provision empowers the Director

or officer not below the rank of Deputy Director authorised by the

Director for the purposes of attachment of property involved in

money-laundering. Such authorised officer is expected to act only if

he has reason to believe that any person is in possession of proceeds

of crime. This belief has to be formed on the basis of material in his

possession and the reasons therefor are required to be recorded in

writing. In addition, he must be convinced that such proceeds of

crime are likely to be concealed, transferred or dealt with in any

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manner which is likely to result in frustrating any proceedings

concerning confiscation thereof under the 2002 Act. The Section 5

as amended reads thus:

“CHAPTER III

ATTACHMENT, ADJUDICATION AND CONFISCATION

5. Attachment of property involved in moneylaundering.— 490[(1)Where the Director or any other

officer not below the rank of Deputy Director authorised

by the Director for the purposes of this section, has

reason to believe (the reason for such belief to be recorded

490 Subs. by Act 2 of 2013, sec. 5, for sub-section (1) (w.e.f. 15-2-2013 vide S.O. 343(E), dated

8-2-2013). Earlier sub-section (1) was amended by Act 21 of 2009, sec. 3(a) (w.e.f. 1-6-2009).

Sub-section (1), before substitution by Act 2 of 2013, stood as under:

“(1) Where the Director, or any other officer not below the rank of Deputy Director

authorised by him for the purposes of this section, has reason to believe (the reason for

such belief to be recorded in writing), on the basis of material in his possession, that—

(a) any person is in possession of any proceeds of crime;

(b) such person has been charged of having committed a scheduled offence; and

manner which may result in frustrating any proceedings relating to confiscation of such

proceeds of crime under this Chapter,

he may, by order in writing, provisionally attach such property for a period not exceeding

one hundred and fifty days from the date of the order, in the manner provided in the

Second Schedule to the Income-tax Act, 1961 (43 of 1961) and the Director or the other

office so authorised by him, as the case may be, shall be deemed to be an officer under

sub-rule (e) of rule 1 of that Schedule:

Provided that no such order of attachment shall be made unless, in relation to

the scheduled offence, a report has been forwarded to a Magistrate under section 173 of

the Code of Criminal Procedure, 1973 (2 of 1974), or a complaint has been filed by a

person authorised to investigate the offence mentioned in the Schedule, before a

Magistrate or court for taking cognizance of the scheduled offence, as the case may be:

Provided further that, notwithstanding anything contained in clause (b), any

property of any person may be attached under this section if the Director or any other

officer not below the rank of Deputy Director authorised by him for the purposes of this

section has reason to believe (the reasons for such belief to be recorded in writing), on

the basis of material in his possession, that if such property involved in moneylaundering is not attached immediately under this Chapter, the non-attachment of the

property is likely to frustrate any proceeding under this Act.”

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in writing), on the basis of material in his possession,

that—

(a) any person is in possession of any proceeds of crime;

and

(b) such proceeds of crime are likely to be concealed,

transferred or dealt with in any manner

which may result in frustrating any proceedings relating

to confiscation of such proceeds of crime under this

Chapter,

he may, by order in writing, provisionally attach such

property for a period not exceeding one hundred and

eighty days from the date of the order, in such manner as

may be prescribed:

Provided that no such order of attachment shall be

made unless, in relation to the scheduled offence, a

report has been forwarded to a Magistrate under section

173 of the Code of Criminal Procedure, 1973 (2 of 1974),

or a complaint has been filed by a person authorised to

investigate the offence mentioned in that Schedule,

before a Magistrate or court for taking cognizance of the

scheduled offence, as the case may be, or a similar report

or complaint has been made or filed under the

corresponding law of any other country:

Provided further that, notwithstanding anything

contained in 491[first proviso], any property of any person

may be attached under this section if the Director or any

other officer not below the rank of Deputy Director

authorised by him for the purposes of this section has

reason to believe (the reasons for such belief to be

recorded in writing), on the basis of material in his

possession, that if such property involved in moneylaundering is not attached immediately under this

Chapter, the non-attachment of the property is likely to

frustrate any proceeding under this Act.].

491 Subs. by the Finance Act, 2015 (20 of 2015), sec. 146, for “clause (b)” (w.e.f. 14-5-2015).

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492[Provided also that for the purposes of

computing the period of one hundred and eighty days,

the period during which the proceedings under this

section is stayed by the High Court, shall be excluded and

a further period not exceeding thirty days from the date

of order of vacation of such stay order shall be counted.]

(2) The Director, or any other officer not below the rank

of Deputy Director, shall, immediately after attachment

under sub-section (1), forward a copy of the order, along

with the material in his possession, referred to in that

sub-section, to the Adjudicating Authority, in a sealed

envelope, in the manner as may be prescribed and such

Adjudicating Authority shall keep such order and

material for such period as may be prescribed.

(3) Every order of attachment made under sub-section (1)

shall cease to have effect after the expiry of the period

specified in that sub-section or on the date of an order

made under 493[sub-section (3)] of section 8, whichever is

earlier.

492 Ins. by Act 13 of 2018, sec. 208(b)(i) (w.e.f. 19-4-2018 vide G.S.R. 383(E), dated 19th April,

2018).

493 Subs. by Act 13 of 2018, sec. 208(b)(ii), for “sub-section (2)” (w.e.f. 19-4-2018 vide G.S.R.

383(E), dated 19th April, 2018).

Section 5 as it stood originally reads thus:

“5. Attachment of property involved in money laundering. – (1) Where the Director,

or any other officer not below the rank of Deputy Director authorised by him for the

purposes of this section, has reason to believe (the reason for such belief to be recorded

in writing), on the basis of material in his possession, that—

(a) any person is in possession of any proceeds of crime;

(b) such person has been charged of having committed a scheduled offence; and

any manner which may result in frustrating any proceedings relating to

confiscation of such proceeds of crime under this chapter,

he may, by order in writing, provisionally attach such property for a period not exceeding

ninety days from the date of the order, in the manner provided in the Second Schedule

to the Income-tax Act, 1961 (43 of 1961) and the Director or the other officer so

authorised by him, as the case may be, shall be deemed to be an officer under sub-rule

(e) of Rule 1 of that Schedule:

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(4) Nothing in this section shall prevent the person

interested in the enjoyment of the immovable property

attached under sub-section (1) from such enjoyment.

Explanation.—For the purposes of this subsection, “person interested”, in relation to any immovable

property, includes all persons claiming or entitled to

claim any interest in the property.

Provided that no such order of attachment shall be made unless, in relation to

an offence under—

(i) Paragraph 1 of Part A and Part B of the Schedule, a report has been forwarded

to a Magistrate under Section 173 of the Code of Criminal Procedure, 1973 (2 of

1974); or

(ii) Paragraph 2 of Part A of the Schedule, a police report or a complaint has been

filed for taking cognizance of an offence by the Special Court constituted under

sub-section (1) of Section 36 of the Narcotic Drugs and Psychotropic Substances

Act, 1985 (61 of 1985).

(2) The Director, or any other officer not below the rank of Deputy Director, shall,

immediately after attachment under sub-section (1), forward a copy of the order, along

with the material in his possession, referred to in that sub-section, to the Adjudicating

Authority, in a sealed envelope, in the manner as may be prescribed and such

Adjudicating Authority shall keep such order and material for such period as may be

prescribed.

(3) Every order of attachment made under sub-section (1) shall cease to have effect after

the expiry of the period specified in that sub-section or on the date of an order made

under sub-section (2) of Section 8, whichever is earlier.

(4) Nothing in this section shall prevent the person interested in the enjoyment of the

immovable property attached under sub-section (1) from such enjoyment.

Explanation.—For the purposes of this sub-section, “person interested”, in relation to

any immovable property, includes all persons claiming or entitled to claim any interest

in the property.

(5) The Director or any other officer who provisionally attaches any property under subsection (1) shall, within a period of thirty days from such attachment, file a complaint

stating the facts of such attachment before the Adjudicating Authority.”

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(5) The Director or any other officer who provisionally

attaches any property under sub-section (1) shall, within

a period of thirty days from such attachment, file a

complaint stating the facts of such attachment before the

Adjudicating Authority.”

From the plain language of this provision, it is evident that several

inbuilt safeguards have been provided by the Parliament while

enacting the 2002 Act. This provision has been amended vide Act

21 of 2009, Act 2 of 2013, Finance Act, 2015 and Act 13 of 2018, to

strengthen the mechanism keeping in mind the scheme of the 2002

Act and the need to prevent and regulate the activity of moneylaundering. As regards the amendments made vide Act 21 of 2009

and Act 2 of 2013, the same are not matters in issue in these cases.

The challenge is essentially to the amendment effected in the second

proviso in sub-section (1), vide Finance Act, 2015.

57. Be that as it may, as aforesaid, sub-section (1) delineates

sufficient safeguards to be adhered to by the authorised officer

before issuing provisional attachment order in respect of proceeds of

crime. It is only upon recording satisfaction regarding the twin

requirements referred to in sub-section (1), the authorised officer

can proceed to issue order of provisional attachment of such

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proceeds of crime. Before issuing a formal order, the authorised

officer has to form his opinion and delineate the reasons for such

belief to be recorded in writing, which indeed is not on the basis of

assumption, but on the basis of material in his possession. The

order of provisional attachment is, thus, the outcome of such

satisfaction already recorded by the authorised officer. Notably, the

provisional order of attachment operates for a fixed duration not

exceeding one hundred and eighty days from the date of the order.

This is yet another safeguard provisioned in the 2002 Act itself.

58. As per the first proviso, in ordinary situation, no order of

provisional attachment can be issued until a report has been

forwarded to a Magistrate under Section 173 of the 1973 Code in

relation to the scheduled offence, or a complaint has been filed by a

person authorised to investigate the offence mentioned in that

Schedule, before a Magistrate or Court for taking cognizance of the

scheduled offence, as the case may be. It further provides that a

similar report or complaint has been made or filed under the

corresponding law of any other country. In other words, filing of

police report or a private complaint in relation to the scheduled

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offence had been made a precondition for issuing an order of

provisional attachment.

59. The second proviso, as it existed prior to Finance Act, 2015,

had predicated that notwithstanding anything contained in Clause

(b) of sub-section (1) any property of any person may be attached in

the same manner and satisfaction to be recorded that nonattachment of property likely to frustrate any proceeding under the

2002 Act. By amendment vide Finance Act, 2015, the words “clause

(b)” occurring in the second proviso came to be substituted to read

words “first proviso”. This is the limited change, but an effective one

to give full play to the legislative intent regarding prevention and

regulation of process or activity concerning proceeds of crime

entailing in offence of money-laundering. Prior to the amendment,

the first proviso was rightly perceived as an impediment. In that, to

invoke the action of even provisional attachment order, registration

of scheduled offence and completion or substantial progress in

investigation thereof were made essential. This was notwithstanding

the urgency involved in securing the proceeds of crime for being

eventually confiscated and vesting in the Central Government.

307

Because of the time lag and the advantage or opportunities available

to the person concerned to manipulate the proceeds of crime, the

amendment of 2015 had been brought about to overcome the

impediment and empower the Director or any other officer not below

the rank of Deputy Director authorised by him to proceed to issue

provisional attachment order. In terms of the second proviso, the

authorised officer has to record satisfaction and reason for his belief

in writing on the basis of material in his possession that the property

(proceeds of crime) involved in money-laundering if not attached

“immediately”, would frustrate proceedings under the 2002 Act.

This is a further safeguard provided in view of the urgency felt by the

competent authority to secure the property to effectively prevent and

regulate the offence of money-laundering. In other words, the

authorised officer cannot resort to action of provisional attachment

of property (proceeds of crime) mechanically. Thus, there are inbuilt

safeguards provided in the main provision as well as the second

proviso to be fulfilled upto the highest ranking ED official, before

invoking such urgent or “immediate” action. We fail to understand

as to how such a provision can be said to be irrelevant much less

manifestly arbitrary, in the context of the purposes and objects

308

behind the enactment of the 2002 Act. Such provision would

strengthen the mechanism of prevention and regulation of process

or activity resulting into commission of money-laundering offence;

and also, to ensure that the proceeds of crime are properly dealt with

as ordained by the 2002 Act, including for vesting in the Central

Government.

60. As a matter of fact, prior to amendment of 2015, the first

proviso acted as an impediment for taking such urgent measure even

by the authorised officer, who is no less than the rank of Deputy

Director. We must hasten to add that the nuanced distinction must

be kept in mind that to initiate “prosecution” for offence under

Section 3 of the Act registration of scheduled offence is a

prerequisite, but for initiating action of “provisional attachment”

under Section 5 there need not be a pre-registered criminal case in

connection with scheduled offence. This is because the machinery

provisions cannot be construed in a manner which would eventually

frustrate the proceedings under the 2002 Act. Such dispensation

alone can secure the proceeds of crime including prevent and

regulate the commission of offence of money-laundering. The

309

authorised officer would, thus, be expected to and, also in a given

case, justified in acting with utmost speed to ensure that the

proceeds of crime/property is available for being proceeded with

appropriately under the 2002 Act so as not to frustrate any

proceedings envisaged by the 2002 Act. 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 2002 Act for registering FIR in respect of

cognizable offence or report regarding non-cognizable offence and if

the jurisdictional police fails to respond appropriately to such

information, the authorised officer under the 2002 Act can take

recourse to appropriate remedy, as may be permissible in law to

ensure that the culprits do not go unpunished and the proceeds of

crime are secured and dealt with as per the dispensation provided

for in the 2002 Act. Suffice it to observe that the amendment effected

in 2015 in the second proviso has reasonable nexus with the object

sought to be achieved by the 2002 Act.

310

61. The third proviso in Section 5(1) of the 2002 Act is another

safeguard introduced vide Act 13 of 2018 about the manner in which

period of one hundred and eighty days need to be reckoned thereby

providing for fixed tenure of the provisional attachment order.

Before the expiry of the statutory period relating to the provisional

attachment order, the Director or any other officer not below the

rank of Deputy Director immediately after attachment under subsection (1) is obliged to forward a copy of the provisional attachment

order to the three-member Adjudicating Authority (appointed under

Section 6(1) of the 2002 Act, headed by, amongst other, person

qualified for appointment as District Judge), in a sealed envelope

under Section 5(2), which is required to be retained by the

Adjudicating Authority for the period as prescribed under the rules

framed in that regard. This ensures the fairness in the action as

also accountability of the Authority passing provisional attachment

order. Further, in terms of Section 5(3), the provisional attachment

order ceases to operate on the date of an order passed by the

Adjudicating Authority under Section 8(3) or the expiry of the period

specified in sub-section (1), whichever is earlier. In addition, under

Section 5(5) the authorised officer is obliged to file a complaint before

311

the Adjudicating Authority within a period of thirty days from such

provisional attachment. Going by the scheme of the 2002 Act and

Section 5 thereof in particular, it is amply clear that sufficient

safeguards have been provided for as preconditions for invoking the

powers of emergency attachment in the form of provisional

attachment.

62. The background in which the amendment of 2013 became

necessary can be culled out from the Report titled “Anti-Money

Laundering and Combating the Financing of Terrorism” dated

25.6.2010. The relevant paragraphs of the said report read thus:

“143. It is no formal and express legal condition that a

conviction for the predicate offence is required as a

precondition to prosecute money laundering, although

some practitioners the assessment team met with felt

that only a conviction would satisfactorily meet the

evidentiary requirements. The definition of property in

the PMLA (see supra) however requires property to

be ―related to a scheduled offence. Consequently, the

section 3 ML offence not being an ―all crimes offence, in

the absence of case law, it is generally interpreted as

requiring at the very minimum positive proof of the

specific predicate offence before a conviction for money

laundering can be obtained, be it for third party or selflaundering.

144.Similarly, under section 8A of the NDPS Act,

although it is debatable that the person charged with

money laundering needs to have been convicted of a

predicate offence, the positive and formal proof of a nexus

with a drug related predicate offence is essential.

*** *** ***

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168.The linkage and interaction of the ML offence with a

specific predicate criminality is historically very tight in

the Indian AML regime. The concept of stand-alone

money laundering is quite strange to the practitioners,

who cannot conceive pursuing money laundering as a sui

generis autonomous offence. Some interlocutors were

even of the (arguably erroneous) opinion that only a

conviction for the predicate criminality would effectively

satisfy the evidential requirements. As said, this attitude

is largely due to the general practice in India to start a

ML investigation only on the basis of a predicate offence

case. Even if the ML investigation since recently can run

concurrently with the predicate offence enquiry, there is

no inter-agency MOU or arrangement to deal with

evidentiary issues between the various agencies in

investigating predicates and ML offences. Also, the way

the interaction between the law enforcement agencies is

presently structured carries the risk that ML

prosecutions could be delayed while the other predicate

offence investigation agencies try to secure convictions.

*** *** ***

175.Although recently an increased focus on the ML

aspect and use of the ML provisions is to be

acknowledged, there are still some important and often

long-standing legal issues to be resolved. To that end

following measures should be taken:

- The monetary threshold limitation of INR 3 million for

the Schedule Part B predicate offences should be

abolished.

- The section 3 PMLA definition of the ML offence should

be brought in line with the Vienna and Palermo

Conventions so as to also fully cover the physical

concealment and the sole acquisition, possession and use

of all relevant proceeds of crime.

- The present strict and formalistic interpretation of the

evidentiary requirements in respect of the proof of the

predicate offence should be put to the test of the courts

to develop case law and receive direction on this

fundamental legal issue.

- The level of the maximum fine imposable on legal

persons should be raised or left at the discretion of the

court to ensure a more dissuasive effect.

- The practice of making a conviction of legal persons

contingent on the concurrent prosecution/conviction of a

(responsible) natural person should be abandoned.

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- Consider the abolishment of the redundant section 8A

NDPS Act drug-related ML offence or, if maintained, bring

the sanctions at a level comparable to that of the PMLA

offence.

*** *** ***

233.Confiscation under Chapter III of the PMLA is only

possible when it relates to ―proceeds of crime as defined

in s. 2(1)(u), i.e. resulting from a scheduled offence, and

when there is a conviction of such scheduled (predicate)

offence. In addition, in such cases, only proceeds of the

predicate offence can be confiscated and not the proceeds

of the ML offence itself.

234.The predicate offence conviction condition creates

fundamental difficulties when trying to confiscate the

proceeds of crime in the absence of a conviction of a

predicate offence, particularly in a stand-alone ML case,

where the laundered assets become the corpus delicti

and should be forfeitable as such. In the international

context, the predicate conviction requirement also

seriously affects the capacity to recover criminal assets

where the predicate offence has occurred outside India

and the proceeds are subsequently laundered in India

(see also comments in Section 2.1 above).

235. The definition of proceeds of crime and property in

the PMLA are broad enough to allow for confiscation of

property derived directly or indirectly from proceeds of

crime relating to a scheduled (predicate) offence,

including income, profits and other benefits from the

proceeds of crime. These definitions also allow for value

confiscation, regardless of whether the property is held or

owned by a criminal or a third party. As section 65 of the

PMLA refers to the rules in CrPC, instrumentalities and

intended instrumentalities can be confiscated in

accordance with section 102 and 451 of the CrPC.

However, there is no case law in this respect.

236. Also, the procedural provisions of Chapter III make

confiscation of the proceeds of crime contingent on a prior

seizure of attachment of the property by the Adjudicating

Authority, and consequently substantially limit the

possibilities for confiscation under the PMLA.”

*** *** ***

“General comments”

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244. Since confiscation is linked to a conviction it is not

possible to confiscate criminal proceeds when the

defendant has died during the criminal proceedings.

However, it is possible to attach and dispose of any

property of a proclaimed offender when that person has

absconded. The absence of a regulation when the

defendant has died may have a negative impact on the

effectiveness of the confiscation regime in place in India.”

63. In view of the observations made in said Report, the FATF made

recommendations as follows:

“2.3.3 Compliance with Recommendations 3

Rating Summary of factors relative to s.2.3 underlying

overall rating

R.3 PC • Confiscation of property laundered is not covered

in the relevant legislation and depends on a

conviction for a scheduled predicate offence.

• The UAPA does not allow for confiscation of

intended instrumentalities used in terrorist acts or

funds collected to be used by terrorist individuals.

• The UAPA and NDPS Act do not allow for property

of corresponding value to be confiscated.

• There are no clear provisions and procedures on

how to deal with the assets in the case of criminal

proceedings when the suspect died.

• Concerns based on the limited number of

confiscations in relation to ML/FT offences.”

64. As a sequel to these recommendations of FATF and the

observations in the stated Report, Section 5 came to be amended

vide Act 2 of 2013. In this connection, it may be useful to refer to

315

the Fifty Sixth Report of the Standing Committee on Finance relating

to the 2011 Bill, which reads thus:

“5. Amendment in provisions implemented by

Enforcement Directorate:

(i)Attachment of property: The present Act in section 5

stipulates that the person from whom property is

attached must “have been charged of having

committed a scheduled offence”. It is proposed to be

deleted as property may come to rest with someone,

who has nothing to do with the scheduled offence or

even the money-laundering offence. Procedure for

attachment is at present done as provided in the Second

Schedule to the Income Tax Act, 196. Now it is proposed

in section 5(1) that the procedure will be prescribed

separately. Time for Adjudicating Authority to confirm

attachment of property by ED has been proposed to be

increased from 150 days to 180 days.

(ii)****

(iii) Making confiscation independent of conviction:

At present attachment of property becomes final

under section 8(3) “after the guilt of the person is

proved in the trial court and order of such trial court

becomes final”. Problems are faced in such cases

where money-laundering has been done by a person

who has not committed the scheduled offence or

where property has come to rest with someone who

has not committed any offence. Therefore, it is

proposed to amend section 8(5) to provide for

attachment and confiscation of the proceeds of

crime, even if there is no conviction, so long as it is

proved that predicate offence and money laundering

offence have taken place and the property in question

(i.e. the proceeds of crime) is involved in money

laundering.”

*** *** ***

However, the MER 2010 highlighted certain

deficiencies in the AML legislation which adversely

affected the ratings on a few FATF recommendations.

The areas are broadly summarized below:—

a) Commodities market out of the ambit of PMLA.

316

b) DNFBP sector not subjected to PMLA (except Casino).

c) Effectiveness concerns due to absence of ML

conviction.

d) Identification and verification of beneficial ownership

of legal persons.

e) Ineffective sanctions regime for non-compliance. India

has suggested an Action Plan with short, medium and

long term objectives to address the specific issues raised

in the MER 2010 that includes proposed amendments in

the PMLA.”

(emphasis supplied)

65. As aforesaid, in this backdrop the amendment Act 2 of 2013

came into being. Considering the purport of the amended provisions

and the experience of implementing/enforcement agencies, further

changes became necessary to strengthen the mechanism regarding

prevention of money-laundering. It is not right in assuming that the

attachment of property (provisional) under the second proviso, as

amended, has no link with the scheduled offence. Inasmuch as

Section 5(1) envisages that such an action can be initiated only on

the basis of material in possession of the authorised officer indicative

of any person being in possession of proceeds of crime. The

precondition for being proceeds of crime is that the property has

been derived or obtained, directly or indirectly, by any person as a

result of criminal activity relating to a scheduled offence. The sweep

of Section 5(1) is not limited to the accused named in the criminal

317

activity relating to a scheduled offence. It would apply to any person

(not necessarily being accused in the scheduled offence), if he is

involved in any process or activity connected with the proceeds of

crime. Such a person besides facing the consequence of provisional

attachment order, may end up in being named as accused in the

complaint to be filed by the authorised officer concerning offence

under Section 3 of the 2002 Act.

66. Be it noted that the attachment must be only in respect of

property which appears to be proceeds of crime and not all the

properties belonging to concerned person who would eventually face

the action of confiscation of proceeds of crime, including prosecution

for offence of money-laundering. As mentioned earlier, the relevant

date for initiating action under the 2002 Act — be it of attachment

and confiscation or prosecution, is linked to the inclusion of the

offence as scheduled offence and of carrying on the process or

activity in connection with the proceeds of crime after such date.

The pivot moves around the date of carrying on the process and

activity connected with the proceeds of crime; and not the date on

which the property has been derived or obtained by the person

318

concerned as a result of any criminal activity relating to or relatable

to the scheduled offence.

67. The argument of the petitioners that the second proviso

permits emergency attachment in disregard of the safeguard

provided in the first proviso regarding filing of report (chargesheet)

clearly overlooks that the second proviso contains non-obstante

clause and, being an exceptional situation, warrants “immediate”

action so that the property is not likely to frustrate any proceeding

under the 2002 Act. Concededly, there is stipulation fastened upon

the authorised officer to record in writing reasons for his belief on

the basis of material in his possession that such “immediate” action

is indispensable. This stipulation has reasonable nexus with the

purposes and objects sought to be achieved by the 2002 Act.

68. It was also urged before us that the attachment of property

must be equivalent in value of the proceeds of crime only if the

proceeds of crime are situated outside India. This argument, in our

opinion, is tenuous. For, the definition of “proceeds of crime” is

wide enough to not only refer to the property derived or obtained as

a result of criminal activity relating to a scheduled offence, but also

319

of the value of any such property. If the property is taken or held

outside the country, even in such a case, the property equivalent in

value held within the country or abroad can be proceeded with. The

definition of “property” as in Section 2(1)(v) is equally wide enough

to encompass the value of the property of proceeds of crime. Such

interpretation would further the legislative intent in recovery of the

proceeds of crime and vesting it in the Central Government for

effective prevention of money-laundering.

69. We find force in the stand taken by the Union of India that the

objectives of enacting the 2002 Act was the attachment and

confiscation of proceeds of crime which is the quintessence so as to

combat the evil of money-laundering. The second proviso, therefore,

addresses the broad objectives of the 2002 Act to reach the proceeds

of crime in whosoever’s name they are kept or by whosoever they are

held. To buttress this argument, reliance has been placed on the

dictum in Attorney General for India494 and Raman Tech. &

Process Engg. Co. & Anr. vs. Solanki Traders495.

494 Supra at Footnote No.428 (also at Footnote No.175)

495 (2008) 2 SCC 302 (also at Footnote No.430)

320

70. The procedural safeguards provided in respect of provisional

attachment are effective measures to protect the interest of the

person concerned who is being proceeded with under the 2002 Act,

in the following manner as rightly indicated by the Union of India:

i. For invoking the second proviso, the Director or any officer

not below the rank of Deputy Director will have to first apply

his mind to the materials on record before recording in writing

his reasons to believe is certainly a sufficient safeguard to the

invocation of the powers under the second proviso to Section

5(1) of the 2002 Act.

ii. There has to be a satisfaction that if the property involved in

money-laundering or ‘proceeds of crime’ are not attached

“immediately”, such non-attachment might frustrate the

confiscation proceedings under the 2002 Act.

iii. The order passed under Section 5(1) of the 2002 Act is only

provisional in nature. The life of this provisional attachment

order passed under Section 5(1) of the 2002 Act is only for 180

days, subject to confirmation by an independent Adjudicating

Authority.

321

iv. Under Section 5(2) officer passing provisional attachment

order has to immediately forward a copy of this order to the

Adjudicating Authority in a sealed envelope.

v. Under Section 5(5) of the 2002 Act, the officer making such

order must file a complaint before the Adjudicating Authority

within 30 days of the order of provisional attachment being

made.

vi. Section 5(3) of the 2002 Act provides that the provisional

attachment order shall cease to have effect on the expiry of the

period specified in Section 5(1) i.e. 180 days or on the date

when the Adjudicating Authority makes an order under Section

8(2), whichever is earlier.

vii. Under Section 8(1), once the officer making the provisional

attachment order files a complaint and if the Adjudicating

Authority “has a reason to believe that any person has

committed an offence under Section 3 or is in possession of the

proceeds of crime”, the Adjudicating Authority may serve a

show cause notice of not less than 30 days on such person

calling upon him to indicate the sources of his income, earning

322

or assets or by means of which he has acquired the property

attached under Section 5(1) of the 2002 Act.

viii. The above SCN would require the noticee to produce

evidence on which he relies and other relevant information and

particulars to show cause why all or any of the property “should

not be declared to be the properties involved in moneylaundering and confiscated by the Central Government”.

ix. Section 8(2) requires the Adjudicating Authority to consider

the reply to the SCN issued under Section 8(1) of the 2002 Act.

The Section further provides to hear the aggrieved person as

well as the officer issuing the order of provisional attachment

and also take into account “all relevant materials placed on

record before the Adjudicating Authority”. After following the

above procedure, the Adjudicating Authority will record its

finding whether all the properties referred to in the SCN are

involved in money-laundering or not.

x. While passing order under Section 8(2) read with Section 8(3)

there are two possibilities which might happen:

323

a. the Adjudicating Authority may confirm the order of

provisional attachment, in which case again, the confirmation

will continue only up to

i. the period of investigation not exceeding 365 days, or

ii. till the pendency of any proceedings relating to any

offence under the 2002 Act or under the corresponding

law of any other country before the competent Court of

criminal jurisdiction outside India.

b. Adjudicating Authority may disagree and not confirm the

provisional attachment, in which case attachment over the

property ceases.

xi. Under Section 8(4) of the 2002 Act, upon confirmation of the

order of provisional attachment, the Director or other officer

authorized by him shall take the possession of property

attached.

xii. Under Section 8(5) of the 2002 Act, on the conclusion of a

trial for an offence under the 2002 Act if the Special Court finds

that the offence of money-laundering has been committed it

will order that the property involved in money-laundering or

324

the property which has been involved in the commission of the

offence of money-laundering shall stand confiscated to the

Central Government.

xiii. However, under Section 8(6) if the Special Court on the

conclusion of the trial finds that no offence of moneylaundering has taken place or the property is not involved in

money-laundering it will release the property which has been

attached to the person entitled to receive it.

xiv. Under Section 8(7), if the trial before the Special Court

cannot be conducted because of the death of the accused or

because the accused is declared proclaimed offender, then the

Special Court on an application of the Director or a person

claiming to be entitled to possession of a property in respect of

which an order under Section 8(3) is passed either to confiscate

the property or release the property to the claimant, after

considering the material before it.

xv. Under Section 8(8), when a property is confiscated, Special

Court may direct the central government to restore the property

to a person with the legitimate interest in the property, who

325

may have suffered a quantifiable loss as a result of moneylaundering. Provided that the person must not have been

involved in money-laundering and must have acted in a good

faith and has suffered a considerable loss despite taking all

reasonable precautions.

xvi. The order passed by the Adjudicating Authority is also

subject to appeal before the Appellate Tribunal which is

constituted under Section 25 of the 2002 Act. Thus, the

Adjudicating Authority is not the final authority under the

2002 Act as far as the attachment of proceeds of crime or

property involved in money-laundering is concerned.

xvii. Any person aggrieved of an order confirming the

provisional attachment order can file an appeal before the

Appellate Tribunal under Section 26(1) of the 2002 Act. The

Appellate Tribunal on receipt of an appeal after giving the

parties an opportunity of being heard will pass an order as it

thinks fit either confirming or modifying or setting aside the

provisional attachment order appealed against.

326

xviii. Further, the order passed by the Appellate Tribunal is

further appealable before the High Court under Section 42 of

the 2002 Act on any question of fact or question of law arising

out of the order passed by the Appellate Tribunal.

It is, thus, clear that the provision in the form of Section 5 provides

for a balancing arrangement to secure the interest of the person as

well as to ensure that the proceeds of crime remain available for

being dealt with in the manner provided by the 2002 Act. This

provision, in our opinion, has reasonable nexus with the objects

sought to be achieved by the 2002 Act in preventing and regulating

money-laundering effectively. The constitutional validity including

interpretation of Section 5 has already been answered against the

petitioners by different High Courts496. We do not wish to dilate on

those decisions for the view already expressed hitherto.

496 (1) Bombay High Court in Radha Mohan Lakhotia (supra at Footnote No.431); (2) High Court

of Andhra Pradesh in B. Rama Raju (supra at Footnote No.433); (3) High Court of Gujarat in J

Alive Hospitality and Food Private Limited (supra at Footnote No.434); (4) High Court of

Karnataka in K. Sowbaghya (supra at Footnote No.435); (5) High Court of Sikkim at Gangtok in

Usha Agarwal (supra at Footnote No.436); and Delhi High Court in J. Sekar (supra at Footnote

No.437).

327

SECTION 8 OF THE 2002 ACT

71. This section is part of Chapter III dealing with attachment,

adjudication and confiscation. It provides for the procedure and

safeguards to be adhered to by the Authorities referred to in Section

48 and in particular the Adjudicating Authority appointed by the

Central Government under Section 6, for dealing with the complaint

filed by the authorised officer under Section 5(5) of the 2002 Act or

applications made under Section 17(4) or 18(10) of the 2002 Act.

This is a wholesome provision, not only protecting the interest of the

person concerned, but affording him/her fair opportunity during the

adjudication process. This section, as amended from time to time

and as applicable to the present cases, reads thus:

“8. Adjudication.—(1) On receipt of a complaint under

sub-section (5) of section 5, or applications made under

sub-section (4) of section 17 or under sub-section (10) of

section 18, if the Adjudicating Authority has reason to

believe that any person has committed an 497[offence

under section 3 or is in possession of proceeds of crime],

he may serve a notice of not less than thirty days on such

person calling upon him to indicate the sources of his

income, earning or assets, out of which or by means of

which he has acquired the property attached under subsection (1) of section 5, or, seized 498[or frozen] under

section 17 or section 18, the evidence on which he relies

and other relevant information and particulars, and to

show cause why all or any of such properties should not

497 Subs. by Act 21 of 2009, sec. 5, for “offence under section 3” (w.e.f. 1-6-2009).

498 Ins. by Act 2 of 2013, sec. 6(i) (w.e.f. 15-2-2013, vide S.O. 343(E), dated 8-2-2013).

328

be declared to be the properties involved in moneylaundering and confiscated by the Central Government:

Provided that where a notice under this subsection specifies any property as being held by a person

on behalf of any other person, a copy of such notice shall

also be served upon such other person:

Provided further that where such property is held

jointly by more than one person, such notice shall be

served to all persons holding such property.

(2) The Adjudicating Authority shall, after—

(a) considering the reply, if any, to the notice

issued under sub-section (1);

(b) hearing the aggrieved person and the Director

or any other officer authorised by him in this

behalf; and

placed on record before him,

by an order, record a finding whether all or any of the

properties referred to in the notice issued under subsection (1) are involved in money-laundering:

Provided that if the property is claimed by a person,

other than a person to whom the notice had been issued,

such person shall also be given an opportunity of being

heard to prove that the property is not involved in moneylaundering.

(3) Where the Adjudicating Authority decides under subsection (2) that any property is involved in moneylaundering, he shall, by an order in writing, confirm the

attachment of the property made under sub-section (1) of

section 5 or retention of property or 499[record seized or

frozen under section 17 or section 18 and record a finding

to that effect, whereupon such attachment or retention

or freezing of the seized or frozen property] or record

shall—

499 Subs. by Act 2 of 2013, sec. 6(ii)(a), for “record seized under section 17 or section 18 and

record a finding to that effect, such attachment or retention of the seized property” (w.e.f. 15-2-

2013), vide S.O. 343(E), dated 8-2-2013.

329

(a) continue during 500[investigation for a period

not exceeding 501[three hundred and sixty-five

days] or] the pendency of the proceedings relating

to any 502[offence under this Act before a court or

under the corresponding law of any other

country, before the competent court of criminal

jurisdiction outside India, as the case may be;

and]

503[(b) become final after an order of confiscation

is passed under sub-section (5) or sub-section (7)

of section 8 or section 58B or sub-section (2A) of

section 60 by the 504[Special Court];]

505[Explanation.—For the purposes of computing the

period of three hundred and sixty-five days under clause

(a), the period during which the investigation is stayed by

any court under any law for the time being in force shall

be excluded.]

(4) Where the provisional order of attachment made

under sub-section (1) of section 5 has been confirmed

under sub-section (3), the Director or any other officer

authorised by him in this behalf shall forthwith take the

506[possession of the property attached under section 5

or frozen under sub-section (1A) of section 17, in such

manner as may be prescribed:

Provided that if it is not practicable to take

possession of a property frozen under sub-section

500 Ins. by Act 13 of 2018, sec. 208(c)(i) (w.e.f. 19-4-2018, vide G.S.R. 383(E), dated 19th April,

2018).

501 Subs. by Act 7 of 2019, sec. 22(i), for “ninety days” (w.e.f. 20-3-2019, vide G.S.R. 225(E),

dated 19th March, 2019).

502 Subs. by Act 2 of 2013, sec. 6(ii)(b), for “Scheduled offence before a Court and” (w.e.f. 15-2-

2013, vide S.O. 343(E), dated 8-2-2013).

503 Subs. by Act 2 of 2013, sec. 6(ii)(c), for clause (b) (w.e.f. 15-2-2013, vide S.O. 343(E), dated

8-2-2013). Clause (b), before substitution, stood as under:

“(b) become final after the guilt of the person is proved in the trial court and order of

such trial court becomes final”.

504 Subs. by the Finance Act, 2015 (20 of 2015), sec. 147(i), for “Adjudicating Authority” (w.e.f.

14-5-2015).

505 Ins. by Act 7 of 2019, sec. 22(ii) (w.e.f. 20-3-2019, vide G.S.R. 225(E), dated 19th March,

2019).

506 Subs. by Act 2 of 2013, sec. 6(iii), for “possession of the attached property” (w.e.f. 15-2-2013,

vide S.O. 343(E), dated 8-2-2013).

330

(1A) of section 17, the order of confiscation shall

have the same effect as if the property had been

taken possession of.]

507[(5) Where on conclusion of a trial of an offence under

this Act, the Special Court finds that the offence of

money-laundering has been committed, it shall order

that such property involved in the money-laundering or

which has been used for commission of the offence of

money-laundering shall stand confiscated to the Central

Government.

(6) Where on conclusion of a trial under this Act, the

Special Court finds that the offence of money-laundering

has not taken place or the property is not involved in

money-laundering, it shall order release of such property

to the person entitled to receive it.

(7) Where the trial under this Act cannot be conducted by

reason of the death of the accused or the accused being

declared a proclaimed offender or for any other reason or

having commenced but could not be concluded, the

Special Court shall, on an application moved by the

Director or a person claiming to be entitled to possession

of a property in respect of which an order has been

passed under sub-section (3) of section 8, pass

appropriate orders regarding confiscation or release of

the property, as the case may be, involved in the offence

of money-laundering after having regard to the material

before it.]

508[(8) Where a property stands confiscated to the Central

Government under sub-section (5), the Special Court, in

such manner as may be prescribed, may also direct the

Central Government to restore such confiscated property

or part thereof of a claimant with a legitimate interest in

507 Subs. by Act 2 of 2013, sec. 6(iv), for sub-sections (5) and (6) (w.e.f. 15-2-2013, vide S.O.

343(E), dated 8-2-2013). Sub-sections (5) and (6), before substitution, stood as under:

“(5) Where on conclusion of a trial for any scheduled offence, the person concerned is

acquitted, the attachment of the property or retention of the seized property or record

under sub-section (3) and net income, if any, shall cease to have effect.

(6) Where the attachment of any property or retention of the seized property or record

becomes final under clause (b) of sub-section (3), the Adjudicating Authority shall, after

giving an opportunity of being heard to the person concerned, make an order

confiscating such property.”

508 Ins. by the Finance Act, 2015 (20 of 2015), sec. 147(ii) (w.e.f. 14-5-2015).

331

the property, who may have suffered a quantifiable loss

as a result of the offence of money laundering:

Provided that the Special Court shall not consider

such claim unless it is satisfied that the claimant has

acted in good faith and has suffered the loss despite

having taken all reasonable precautions and is not

involved in the offence of money laundering:]

509[Provided further that the Special Court may, if

it thinks fit, consider the claim of the claimant for the

purposes of restoration of such properties during the trial

of the case in such manner as may be prescribed.]”

72. The grievance of the petitioners in respect of this provision is

broadly about the period of attachment specified under Section

8(3)(a) and the modality of taking possession of the property under

Section 8(4) of the 2002 Act. As a result, we will confine our

discussion to the dispensation provided in the stated sub-sections.

Reverting to sub-section (3), it postulates that where the

Adjudicating Authority records a finding whether all or any of the

properties referred to in the show cause notice issued under subsection (1) by the Adjudicating Authority consequent to receipt of a

complaint/application that the property in question is involved in

money-laundering, he shall, by an order in writing confirm the

attachment (provisional) of property made under Section 5(1) or

509 Ins. by Act 13 of 2018, sec. 208(c)(ii) (w.e.f. 19-4-2018, vide G.S.R. 383(E), dated 19th April,

2018).

332

retention of property or record seized or frozen under Section 17 or

Section 18, and direct continuation of the attachment or retention

or freezing of the concerned property for a period not exceeding three

hundred and sixty-five days or the pendency of the proceedings

relating to any offence under the 2002 Act before a Court or under

the corresponding law of any country outside India and become final

after an order of confiscation is passed under sub-section (5) or subsection (7) of Section 8 or Section 58B or Section 60(2A) by the

Special Court. The Explanation added thereat vide Act 7 of 2019

stipulates the method of computing the period of three hundred and

sixty-five days after reckoning the stay order of the Court, if any.

The argument proceeds that the period of attachment mentioned in

Section 8(3)(a) of the 2002 Act does not clearly provide for the

consequence of non-filing of the complaint within three hundred and

sixty-five days from the date of attachment (provisional). This

argument clearly overlooks the obligation on the Director or any

other officer who provisionally attaches any property under Section

5(1), to file a complaint stating the fact of such attachment before

the Adjudicating Authority within thirty days in terms of Section 5(5)

of the 2002 Act. Concededly, filing of complaint before the

333

Adjudicating Authority in terms of Section 5(5) within thirty days

from the provisional attachment for confirmation of such order of

provisional attachment is different than the complaint to be filed

before the Special Court under Section 44(1)(b) for initiating criminal

action regarding offence of money-laundering punishable under

Section 4 of the 2002 Act. Furthermore, the provisional attachment

would operate only for a period of one hundred and eighty days from

the date of order passed under Section 5(1) of the 2002 Act in terms

of that provision. Whereas, Section 8(3) refers to the period of three

hundred and sixty-five days from the passing of the order under subsection (2) of Section 8 by the Adjudicating Authority and confirming

the provisional attachment order and the order of confirmation of

attachment operates until the confiscation order is passed or

becomes final in terms of order passed under Section 8(5) or 8(7) or

58B or 60(2A) by the Special Court. The order of confirmation of

attachment could also last during the pendency of the proceedings

relating to the offence of money-laundering under the

2002 Act, or before the competent Court of criminal jurisdiction

334

outside India, as the case may be. We need not elaborate on this

aspect any further and leave the parties to agitate this aspect in

appropriate proceedings as it is not about the constitutional validity

of the provision as such.

73. The other grievance of the petitioners is in reference to the

stipulation in sub-section (4) of Section 8 providing for taking

possession of the property. This provision ought to be invoked only

in exceptional situation keeping in mind the peculiar facts of the

case. In that, merely because the provisional attachment order

passed under Section 5(1) is confirmed, it does not follow that the

property stands confiscated; and until an order of confiscation is

formally passed, there is no reason to hasten the process of taking

possession of such property. The principle set out in Section 5(4) of

the 2002 Act needs to be extended even after confirmation of

provisional attachment order until a formal confiscation order is

passed. Section 5(4) clearly states that nothing in Section 5

including the order of provisional attachment shall prevent the

person interested in the enjoyment of immovable property attached

under sub-section (1) from such enjoyment. The need to take

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possession of the attached property would arise only for giving effect

to the order of confiscation. This is also because sub-section (6) of

Section 8 postulates that where on conclusion of a trial under the

2002 Act which is obviously in respect of offence of moneylaundering, the Special Court finds that the offence of moneylaundering has not taken place or the property is not involved in

money-laundering, it shall order release of such property to the

person entitled to receive it. Once the possession of the property is

taken in terms of sub-section (4) and the finding in favour of the

person is rendered by the Special Court thereafter and during the

interregnum if the property changes hands and title vest in some

third party, it would result in civil consequences even to third party.

That is certainly avoidable unless it is absolutely necessary in the

peculiar facts of a particular case so as to invoke the option available

under sub-section (4) of Section 8.

74. Indisputably, statutory Rules have been framed by the Central

Government in exercise of powers under Section 73 of the 2002 Act

336

regarding the manner of taking possession of attached or frozen

properties confirmed by the Adjudicating Authority in 2013, and also

regarding restoration of confiscated property in 2019. Suffice it to

observe that direction under Section 8(4) for taking possession of the

property in question before a formal order of confiscation is passed

merely on the basis of confirmation of provisional attachment order,

should be an exception and not a rule. That issue will have to be

considered on case-to-case basis. Upon such harmonious

construction of the relevant provisions, it is not possible to

countenance challenge to the validity of sub-section (4) of Section 8

of the 2002 Act.

75. The learned counsel appearing for the Union of India, had

invited our attention to the recommendations made by FATF in 2003

and 2012 to justify the provision under consideration. The fact that

non-conviction based confiscation model is permissible, it does not

warrant an extreme and drastic action of physical dispossession of

the person from the property in every case — which can be

industrial/commercial/business and also residential property, until

a formal order of confiscation is passed under Section 8(5) or 8(7) of

337

the 2002 Act. As demonstrated earlier, it is possible that the Special

Court in the trial concerning money-laundering offence may

eventually decide the issue in favour of the person in possession of

the property as not being proceeds of crime or for any other valid

ground. Before such order is passed by the Special Court, it would

be a case of serious miscarriage of justice, if not abuse of process to

take physical possession of the property held by such person.

Further, it would serve no purpose by hastening the process of

taking possession of the property and then returning the same back

to the same person at a later date pursuant to the order passed by

the Court of competent jurisdiction. Moreover, for the view taken by

us while interpretating Section 3 of the 2002 Act regarding the

offence of money-laundering, it can proceed only if it is established

that the person has directly or indirectly derived or obtained

proceeds of crime as a result of criminal activity relating to or

relatable to a scheduled offence or was involved in any process or

activity connected with proceeds of crime.

76. It is unfathomable as to how the action of confiscation can be

resorted to in respect of property in the event of his acquittal or

338

discharge in connection with the scheduled offence. Resultantly, we

would sum up by observing that the provision in the form of Section

8(4) can be resorted to only by way of an exception and not as a rule.

The analogy drawn by the Union of India on the basis of decisions of

this Court in Divisional Forest Officer & Anr. vs. G.V. Sudhakar

Rao & Ors.510

, Biswanath Bhattacharya511

, Yogendra Kumar

Jaiswal & Ors. vs. State of Bihar & Ors.512, will be of no avail in

the context of the scheme of attachment, confiscation and vesting of

proceeds of crime in the Central Government provided for in the

2002 Act.

SEARCHES AND SEIZURES

77. After having traversed through the provisions of Chapter I to

III, we may now turn to other contentious provision in Chapter V of

the 2002 Act, dealing with summons, searches and seizures, etc.

Section 16 provides for power of survey bestowed upon the

Authorities under the 2002 Act. They have been empowered to enter

510 (1985) 4 SCC 573 (also at Footnote No.439)

511 Supra at Footnote No.438

512 (2016) 3 SCC 183 (also at Footnote No.448)

339

upon any place within the limits of the area assigned to them or in

respect of which, has been specifically authorised for the purposes

of Section 16 by the competent authority, for inspection of records

or other matters, in the event, it has reason to believe on the basis

of material in possession that an offence under Section 3 of the 2002

Act has been committed. However, when it comes to search and

seizure, Section 17 of the 2002 Act permits only the Director or any

other officer not below the rank of Deputy Director authorised by

him to exercise that power on the basis of information in his

possession and having reason to believe that any person has

committed some act which constitutes money-laundering or is in

possession of proceeds of crime involved in money-laundering,

including the records and property relating to money-laundering.

Section 17 of the 2002 Act, as amended, reads thus:

“17. Search and seizure.—(1) Where 513[the Director or

any other officer not below the rank of Deputy Director

authorised by him for the purposes of this section,] on

the basis of information in his possession, has reason to

believe (the reason for such belief to be recorded in

writing) that any person—

(i) has committed any act which constitutes moneylaundering, or

(ii) is in possession of any proceeds of crime involved

in money-laundering, or

513 Subs. by Act 21 of 2009, sec. 7(i), for “the Director” (w.e.f. 1-6-2009)

340

(iii) is in possession of any records relating to moneylaundering, 514[or]

515[(iv) is in possession of any property related to

crime,]

then, subject to the rules made in this behalf, he may

authorise any officer subordinate to him to—

(a) enter and search any building, place, vessel, vehicle

or aircraft where he has reason to suspect that such

records or proceeds of crime are kept;

(b) break open the lock of any door, box, locker, safe,

almirah or other receptacle for exercising the powers

conferred by clause (a) where the keys thereof are not

available;

search;

(d) place marks of identification on such record or

516[property, if required or] make or cause to be made

extracts or copies therefrom;

(e) make a note or an inventory of such record or

property;

(f) examine on oath any person, who is found to be in

possession or control of any record or property, in

respect of all matters relevant for the purposes of any

investigation under this Act:

517[***]

514 Ins. by Act 2 of 2013, sec. 14(i)(a) (w.e.f. 15-2-2013, vide S.O. 343(E), dated 8-2-2013)

515 Ins. by Act 2 of 2013, sec. 14(i)(b) (w.e.f. 15-2-2013, vide S.O. 343(E), dated 8-2-2013)

516 Ins. by Act 2 of 2013, sec. 14(i)(c) (w.e.f. 15-2-2013, vide S.O. 343(E), dated 8-2-2013)

517 Proviso omitted by the Finance (No.2) Act, 2019, sec. 197 (w.e.f. 1-8-2019). Earlier the

proviso was substituted by Act 2 of 2013, sec. 14(i)(d) (w.e.f. 15-2-2013, vide S.O. 343(E), dated

8-2-2013) and by Act 21 of 2009, sec. 7(ii) (w.e.f. 1-6-2009). The Proviso, before omission, stood

as under:

“Provided that no search shall be conducted unless, in relation to the scheduled offence,

a report has been forwarded to a Magistrate under section 157 of the Code of Criminal

Procedure, 1973 (2 of 1974) or a complaint has been filed by a person, authorised to

investigate the offence mentioned in the Schedule, before a Magistrate or court for taking

cognizance of the scheduled offence, as the case may be, or in cases where such report

is not required to be forwarded, a similar report of information received or otherwise has

been submitted by an officer authorised to investigate a scheduled offence to an officer

not below the rank of Additional Secretary to the Government of India or equivalent being

head of the office or Ministry or Department or Unit, as the case may be, or any other

341

518[(1A) Where it is not practicable to seize such record or

property, the officer authorised under sub-section (1),

may make an order to freeze such property whereupon

the property shall not be transferred or otherwise dealt

with, except with the prior permission of the officer

making such order, and a copy of such order shall be

served on the person concerned:

Provided that if, at any time before its confiscation

under sub-section (5) or sub-section (7) of section 8 or

section 58B or sub-section (2A) of section 60, it becomes

practical to seize a frozen property, the officer authorised

under sub-section (1) may seize such property.]

(2) The authority, who has been authorised under subsection (1) shall, immediately after search and seizure

519[or upon issuance of a freezing order], forward a copy

of the reasons so recorded along with material in his

possession, referred to in that sub-section, to the

Adjudicating Authority in a sealed envelope, in the

manner, as may be prescribed and such Adjudicating

Authority shall keep such reasons and material for such

period, as may be prescribed.

(3) Where an authority, upon information obtained

during survey under section 16, is satisfied that any

evidence shall be or is likely to be concealed or tampered

with, he may, for reasons to be recorded in writing, enter

and search the building or place where such evidence is

located and seize that evidence:

Provided that no authorisation referred to in subsection (1) shall be required for search under this subsection.

520[(4) The authority seizing any record or property under

sub-section (1) or freezing any record or property under

sub-section (1A) shall, within a period of thirty days from

such seizure or freezing, as the case may be, file an

officer who may be authorised by the Central Government, by notification, for this

purpose”

518 Ins. by Act 2 of 2013, sec. 14(ii) (w.e.f. 15-2-2013, vide S.O. 343(E), dated 8-2-2013).

519 Ins. by Act 2 of 2013, sec. 14(iii) (w.e.f. 15-2-2013, vide S.O. 343(E), dated 8-2-2013).

520 Subs. by Act 2 of 2013, sec. 14(iv), for sub-section (14) (w.e.f. 15-2-2013, vide S.O. 343(E),

dated 8.2.2013). Sub-section (14), before substitution, stood as under:

“(4) The authority, seizing any record or property under this section shall, within a period

of thirty days from such seizure, file an application, requesting for retention of such

record or property, before the Adjudicating Authority.”

342

application, requesting for retention of such record or

property seized under sub-section (1) or for continuation

of the order of freezing served under sub-section (1A),

before the Adjudicating Authority.]”

As noticed from the amended provision, it has been amended vide

Act 21 of 2009, Act 2 of 2013 and finally by the Finance (No.2) Act,

2019. The challenge is essentially in respect of deletion of proviso

vide Finance (No.2) Act, 2019 — which provides that no search shall

be conducted unless, in relation to the scheduled offence, a report

has been forwarded to a Magistrate under Section 157 of the 1973

Code or a complaint has been filed by a person, authorised to

investigate the offence mentioned in the Schedule, before a

Magistrate or Court for taking cognizance of the scheduled offence,

as the case may be, or in cases where such report is not required to

be forwarded, a similar report of information received or otherwise

has been submitted by an officer authorised to investigate a

scheduled offence to an officer not below the rank of Additional

Secretary to the Government of India or equivalent being Head of the

Office or Ministry or Department or Unit, as the case may be, or any

other officer who may be authorised by the Central Government, by

notification, for this purpose. Further, the challenge is about no

343

safeguards, as provided under the 1973 Code regarding searches

and seizures, have been envisaged and that such drastic power is

being exercised without a formal FIR registered or complaint filed in

respect of scheduled offence. The provision is, therefore,

unconstitutional.

78. These challenges have been rightly refuted by the Union of

India on the argument that the 2002 Act is a self-contained Code

and the dispensation envisaged thereunder, must prevail in terms of

Section 71520A of the 2002 Act, which predicates that the provisions

of the 2002 Act have effect notwithstanding anything inconsistent

therewith contained in any other law for the time being in force,

which includes the provisions of the 1973 Code. Even Section 65520B

of the 2002 Act predicates that the provisions of the 1973 Code shall

apply, insofar as they are not inconsistent with the provisions of the

2002 Act in respect of arrest, search and seizure, attachment,

confiscation, investigation, prosecution and all other proceedings

under the 2002 Act. To bolster this submission, reliance is also

520A 71. Act to have overriding effect.—The provisions of this Act shall have effect notwithstanding

anything inconsistent therewith contained in any other law for the time being in force.

520B 65. Code of Criminal Procedure, 1973 to apply.—The provisions of the Code of Criminal Procedure,

1973 (2 of 1974) shall apply, insofar as they are not inconsistent with the provisions of this Act, to arrest,

search and seizure, attachment, confiscation investigation, prosecution and all other proceedings under

this Act.

344

placed on Sections 4521 and 5522 of the 1973 Code. Section 4(2)

pertains to offences under other laws (other than IPC) which are

required to be investigated, inquired into, tried, and otherwise dealt

with according to the same provisions, but subject to any enactment

for the time being in force regulating the manner or place of

investigating, inquiring into, trying or otherwise dealing with such

offences. Similarly, Section 5 of the 1973 Code envisages that

nothing in the 1973 Code shall, in the absence of a specific provision

to the contrary, affect any special or local law for the time being in

force, or any special jurisdiction or power conferred, or any special

form of procedure prescribed, by any other law for the time being in

force.

79. Undoubtedly, the 2002 Act is a special self-contained law; and

Section 17 is a provision, specifically dealing with the matters

521 4. Trial of offences under the Indian Penal Code and other laws.—(1) All offences under

the India Penal Code (45 of 1860) shall be investigated, inquired into, tried, and otherwise dealt

with according to the provisions hereinafter contained.

(2) All offences under any other law shall be investigated, inquired into, tried, and otherwise

dealt with according to the same provisions, but subject to any enactment for the time being in

force regulating the manner or place of investigating, inquiring into, trying or otherwise dealing

with such offences.

522 5. Saving.—Nothing contained in this Code shall, in the absence of a specific provision to

the contrary, affect any special or local law for the time being in force, or any special jurisdiction

or power conferred, or any special from of procedure prescribed, by any other law for the time

being in force.

345

concerning searches and seizures in connection with the offence of

money-laundering to be inquired into and the proceeds of crime

dealt with under the 2002 Act. We have already noted in the earlier

part of this judgment that before resorting to action of provisional

attachment, registration of scheduled offence or complaint filed in

that regard, is not a precondition. The authorised officer can still

invoke power of issuing order of provisional attachment and

contemporaneously send information to the jurisdictional police

about the commission of scheduled offence and generation of

property as a result of criminal activity relating to a scheduled

offence, which is being made subject matter of provisional

attachment. Even in the matter of searches and seizures under the

2002 Act, that power can be exercised only by the Director or any

other officer not below the rank of Deputy Director authorised by

him. They are not only high-ranking officials, but have to be fully

satisfied that there is reason to believe on the basis of information

in their possession about commission of offence of moneylaundering or possession of proceeds of crime involved in moneylaundering. Such reason(s) to believe is required to be recorded in

writing and contemporaneously forwarded to the Adjudicating

346

Authority along with the material in his possession in a sealed

envelope to be preserved by the Adjudicating Authority for period as

is prescribed under the Rules framed in that regard. Such are the

inbuilt safeguards provided in the 2002 Act. The proviso as it existed

prior to 2019 was obviously corresponding to the stipulation in the

first proviso in Section 5. However, for strengthening the

mechanism, including regarding prevention of money-laundering,

the Parliament in its wisdom deemed it appropriate to drop the

proviso in sub-section (1) of Section 17 of the 2002 Act, thereby

dispensing with the condition that no search shall be conducted

unless in relation to the scheduled offence a report has been

forwarded to a Magistrate under Section 157 of the 1973 Code or a

complaint has been filed before a Magistrate in regard to such

offence. As it is indisputable that the 2002 Act is a special Act and

is a self-contained Code regarding the subject of searches and

seizures in connection with the offence of money-laundering under

the 2002 Act, coupled with the fact that the purpose and object of

the 2002 Act is prevention of money-laundering; and the offence of

money-laundering being an independent offence concerning the

process and activity connected with the proceeds of crime, the

347

deletion of the first proviso has reasonable nexus with the objects

sought to be achieved by the 2002 Act for strengthening the

mechanism of prevention of money-laundering and to secure the

proceeds of crime for being dealt with appropriately under the 2002

Act.

80. As aforementioned, Section 17 provides for inbuilt safeguards,

not only mandating exercise of power by high ranking officials, of the

rank of Director (not below the rank of Additional Secretary to the

Government of India who is appointed by a Committee chaired by

the Central Vigilance Commissioner in terms of Section 25 of the

CVC Act) or Deputy Director authorised by the Director in that

regard, but also to adhere to other stipulations of recording of

reasons regarding the belief formed on the basis of information in

his possession about commission of offence of money-laundering

and possession of proceeds of crime involved in money-laundering.

Further, such recorded reasons along with the materials is required

to be forwarded to the three-member Adjudicating Authority

(appointed under Section 6 of the 2002 Act headed by a person

qualified for appointment as District Judge) in a sealed cover to be

348

preserved for specified period, thus, guaranteeing fairness,

transparency and accountability regarding the entire process of

search and seizure. This is unlike the provision in the 1973 Code

where any police officer including the Head Constable can proceed

to search and seize records or property merely on the basis of

allegation or suspicion of commission of a scheduled offence.

81. Concededly, the 2002 Act provides for an inquiry to be

conducted by the Authorities and with power to collect evidence for

being submitted to the Adjudicating Authority for consideration of

confirmation of provisional attachment order passed by the

Authorities in respect of properties being proceeds of crime involved

in the offence of money-laundering. In that sense, the provisions in

2002 Act are not only to investigate into the offence of moneylaundering, but more importantly to prevent money-laundering and

to provide for confiscation of property related to money-laundering

and matters connected therewith and incidental thereto.

82. The process of searches and seizures under the 2002 Act are,

therefore, not only for the purposes of inquiring into the offence of

money-laundering, but also for the purposes of prevention of money-

349

laundering. This is markedly distinct from the process of

investigating into a scheduled offence.

83. It is pertinent to note that if the action taken by the Authority

under the 2002 Act, including regarding searches and seizures, is

eventually found to be without reasons recorded in writing, would

entail punishment for vexatious search under Section 62 of the 2002

Act. Such being the stringent safeguards provided under Section 17

of the 2002 Act and Rules framed regarding the process of searches

and seizures concerning the offence of money-laundering and for

prevention of money-laundering including attachment of proceeds of

crime, it is unfathomable as to how the challenge under

consideration can be countenanced. We may usefully advert to the

decision of Constitution Bench of this Court in Pooran Mal523,

which had dealt with similar power entrusted to the Director of

Inspection or the Commissioner under the Income-tax Act, 1961

(also see Income-Tax Officer, Special Investigation Circle-B,

Meerut524). To the same end is the decision in R.S. Seth

523 Supra at Footnote No.416

524 Supra at Footnote No.424

350

Gopikrishan Agarwal vs. R.N. Sen, Assistant Collector of

Customs & Ors.525, dealing with Sections 105 and 136 of the

Customs Act. In the case of Dr. Partap Singh526, this Court upheld

the dispensation provided in Section 37 of the FERA by adopting

purposive interpretation to give full play to the legislative intent and

negating the argument regarding incorporation of the provisions of

the 1973 Code by pen and ink in that section, as is the argument

advanced before us.

84. As noticed earlier, in terms of Section 17(2) of the 2002 Act

immediately after the search and seizure, the Authority conducting

the search is obliged to forward a copy of the reasons recorded and

materials in his possession to the Adjudicating Authority in a sealed

envelope. This sealed envelope is required to be preserved for period

as specified under the Rules framed in that regard so that it is not

tempered with in any manner and to ensure fairness of the

procedure including accountability of the Authority. Not only that,

in terms of Section 17(4) of the 2002 Act the Authority seizing the

525 (1967) 2 SCR 340 (also at Footnote No.417)

526 Supra at Footnote No.425

351

record or property is obliged to submit an application before the

Adjudicating Authority within a period of thirty days therefrom for

the retention of the said record and Adjudicating Authority in turn

gives opportunity to be heard by issuing show cause notice to the

person concerned before passing order of retention of record or

property, as the case may be, under the 2002 Act and the Rules

framed therefor. The Authorities carrying out search and seizure is

also made accountable by providing for punishment under Section

62 of the 2002 Act for vexatious search and giving false information.

All these inbuilt safeguards prevent arbitrary exercise or misuse of

power by the authorities appointed under the 2002 Act.

85. The emphasis placed on Section 102 of the 1973 Code

regarding seizure procedure by the petitioners, is of no avail. That

provision does not provide for any safeguard prior to a seizure as is

provided under Section 17 of the 2002 Act and the Rules framed

thereunder. As noted earlier, it can be made even by a Head

Constable as the expression used is “any police officer” that too

merely on the basis of an allegation or suspicion of commission of

an offence. In case of search, Section 165 of the 1973 Code

352

empowers the officer in-charge of a police station or a police officer

making an investigation to take recourse to that in the event he has

reasonable grounds for believing that it would be necessary to do so

for investigating into any offence. This power can be exercised by any

police officer (irrespective of his rank) investigating into an offence.

Suffice it to observe that the power of search and seizure entrusted

to the Authorities under Section 17 of the 2002 Act, is a special selfcontained provision and is different from the general provisions in

the 1973 Code, which, therefore, ought to prevail in terms of Section

71 of the 2002 Act. Further, in view of the inbuilt safeguards and

stringent stipulations to be adhered to by the Authorities under the

2002 Act, it ought to be regarded as reasonable provision having

nexus with the purposes and objects sought to be achieved by the

2002 Act. It is certainly not an arbitrary power at all.

86. It was urged that the Rule 3(2) proviso in the 2005 Rules

regarding forms, search and seizure or freezing and the manner of

forwarding the reasons and material to the Adjudicating Authority,

impounding and custody of records and the period of retention,

remained unamended despite deletion of the proviso in Section 17(1)

353

of the 2002 Act vide Finance (No.2) Act, 2019. In the first place, it

is unfathomable that the effect of amending Act is being questioned

on the basis of unamended Rule. It is well-settled that if the Rule is

not consistent with the provisions of the Act, the amended provisions

in the Act must prevail. The statute cannot be declared ultra vires

on the basis of Rule framed under the statute. The precondition in

the proviso in Rule 3(2) cannot be read into Section 17 of the 2002

Act, more so contrary to the legislative intent in deleting the proviso

in Section 17(1) of the 2002 Act. In any case, it is open to the Central

Government to take necessary corrective steps to obviate confusion

caused on account of the subject proviso, if any.

SEARCH OF PERSONS

87. The subject of search of persons is dealt with in Section 18 of

the 2002 Act forming part of Chapter V. Even in respect of this

provision, the challenge is essentially founded on the deletion of

proviso in sub-section (1) of Section 18 vide Finance (No.2) Act, 2019

which was pari materia with the proviso in Section 17(1) of the 2002

Act — stipulating that no search of any person shall be made unless

in relation to the scheduled offence a report has been forwarded to

354

a Magistrate under Section 157 of the 1973 Code, etc. The Section

18, as amended reads thus:

“18. Search of persons.—(1) If an authority, authorised

in this behalf by the Central Government by general or

special order, has reason to believe (the reason for such

belief to be recorded in writing) that any person has

secreted about his person or in anything under his

possession, ownership or control, any record or proceeds

of crime which may be useful for or relevant to any

proceedings under this Act, he may search that person

and seize such record or property which may be useful

for or relevant to any proceedings under this Act:

527[***]

(2) The authority, who has been authorised under subsection (1) shall, immediately after search and seizure,

forward a copy of the reasons so recorded along with

material in his possession, referred to in that subsection, to the Adjudicating Authority in a sealed

envelope, in the manner, as may be prescribed and such

Adjudicating Authority shall keep such reasons and

material for such period, as may be prescribed.

(3) Where an authority is about to search any person, he

shall, if such person so requires, take such person within

twenty-four hours to the nearest gazetted officer,

superior in rank to him, or a Magistrate:

Provided that the period of twenty-four hours shall

exclude the time necessary for the journey undertaken to

527 Proviso omitted by the Finance (No.2) Act, 2019, sec. 198 (w.e.f. 1-8-2019). Earlier the

proviso was inserted by Act 21 of 2009, sec. 8(i) (w.e.f. 1-6-2009) and substituted by Act 2 of

2013, sec. 15 (w.e.f. 15-2-2013, vide S.O. 343(E), dated 8-2-2013). The proviso, before omission,

stood as under:

“Provided that no search of any person shall be made unless, in relation to the scheduled

offence, a report has been forwarded to a Magistrate under section 157 of the Code of

Criminal Procedure, 1973 (2 of 1974) or a complaint has been filed by a person,

authorised to investigate the offence mentioned in the Schedule, before a Magistrate or

court for taking cognizance of the scheduled offence, as the case may be, or in cases

where such report is not required to be forwarded, a similar report of information

received or otherwise has been submitted by an officer authorised to investigate a

scheduled offence to an officer not below the rank of Additional Secretary to the

Government of India or equivalent being head of the office or Ministry or Department or

Unit, as the case may be, or any other officer who may be authorised by the Central

Government, by notification, for this purpose”

355

take such person to the nearest gazetted officer, superior

in rank to him, or Magistrate’s Court.

(4) If the requisition under sub-section (3) is made, the

authority shall not detain the person for more than

twenty-four hours prior to taking him before the Gazetted

Officer, superior in rank to him, or the Magistrate

referred to in that sub-section:

Provided that the period of twenty-four hours shall

exclude the time necessary for the journey from the place

of detention to the office of the Gazetted Officer, superior

in rank to him, or the Magistrate’s Court.

(5) The Gazetted Officer or the Magistrate before whom

any such person is brought shall, if he sees no reasonable

ground for search, forthwith discharge such person but

otherwise shall direct that search be made.

(6) Before making the search under sub-section (1) or

sub-section (5), the authority shall call upon two or more

persons to attend and witness the search, and the search

shall be made in the presence of such persons.

(7) The authority shall prepare a list of record or property

seized in the course of the search and obtain the

signatures of the witnesses on the list.

(8) No female shall be searched by any one except a

female.

(9) The authority shall record the statement of the person

searched under sub-section (1) or sub-section (5) in

respect of the records or proceeds of crime found or seized

in the course of the search:

528[***]

528 Proviso omitted by Act 21 of 2009, sec. 8(ii) (w.e.f. 1-6-2009). Proviso, before omission, stood

as under:

“Provided that no search of any person shall be made unless, in relation to an offence

under:

(a) Paragraph 1 of Part A or Paragraph 1 or Paragraph 2 or Paragraph 3 or Paragraph 4

or Paragraph 5 of Part B of the Schedule, a report has been forwarded to a Magistrate

under section 173 of the Code of Criminal Procedure, 1973 (2 of 1974); or

(b) Paragraph 2 of Part A of the Schedule, a police report or a complaint has been filed

for taking cognizance of an offence by the Special Court constituted under sub-section

(1) of section 36 of the Narcotic Drugs and Psychotropic Substances Act, 1985 (61 of

1985).”

356

(10) The authority, seizing any record or property under

sub-section (1) shall, within a period of thirty days from

such seizure, file an application requesting for retention

of such record or property, before the Adjudicating

Authority.”

For the reasons noted to negate the challenge to the deletion of

proviso in Section 17(1) of the 2002 Act, the same would apply with

full force for rejecting the same argument in respect of deletion of

proviso in Section 18(1) of the 2002 Act. Suffice it to observe that

even under Section 18 of the 2002 Act, the Authority authorised to

exercise power of search of person is obliged to adhere to identical

inbuilt safeguards as in the case of exercise of power under Section

17 of the 2002 Act. In addition to the similar safeguards in terms of

Section 18(3) of the 2002 Act, the Authority is obliged to take the

person who is about to be searched to a Gazetted Officer or a

Magistrate before the search of such person is carried out. The

Constitution Bench of this Court while dealing with similar

provisions of NDPS Act in State of Punjab vs. Baldev Singh529

upheld the search of person procedure being a fair and reasonable

529 (1999) 6 SCC 172 (also at Footnote No.418)

357

procedure. In paragraph 25 of the said decision, this Court observed

as follows:

“25. To be searched before a gazetted officer or a

Magistrate, if the suspect so requires, is an extremely

valuable right which the legislature has given to the

person concerned having regard to the grave

consequences that may entail the possession of illicit

articles under the NDPS Act. It appears to have been

incorporated in the Act keeping in view the severity of the

punishment. The rationale behind the provision is even

otherwise manifest. The search before a gazetted officer

or a Magistrate would impart much more authenticity

and creditworthiness to the search and seizure

proceeding. It would also verily strengthen the

prosecution case. There is, thus, no justification for the

empowered officer, who goes to search the person, on

prior information, to effect the search, of not informing

the person concerned of the existence of his right to have

his search conducted before a gazetted officer or a

Magistrate, so as to enable him to avail of that right. It is,

however, not necessary to give the information to the

person to be searched about his right in writing. It is

sufficient if such information is communicated to the

person concerned orally and as far as possible in the

presence of some independent and respectable persons

witnessing the arrest and search. The prosecution must,

however, at the trial, establish that the empowered officer

had conveyed the information to the person concerned of

his right of being searched in the presence of a Magistrate

or a gazetted officer, at the time of the intended search.

Courts have to be satisfied at the trial of the case about

due compliance with the requirements provided in

Section 50. No presumption under Section 54 of the Act

can be raised against an accused, unless the prosecution

establishes it to the satisfaction of the court, that the

requirements of Section 50 were duly complied with.”

Additionally, under Section 18(5) of the 2002 Act, if the person to be

searched is taken to a Gazetted Officer or the Magistrate, then such

358

Officer or Magistrate may release the person if there is no ground for

search and under Section 18(6), the Authority is obliged to call at

least two witnesses to attend to witness the search, in whose

presence, the search is to be carried out. In terms of Section 18(7),

the Authority seizing any property during the search of such a

person has to prepare a list of the record or the property seized which

is required to be signed by the witnesses to ensure that no tempering

thereof takes place later on. In case, search of a female is to be

carried out, in terms of Section 18(8), it could be done only by a

female. Significantly, the Authority seizing any record or property

during the search of the person, is obliged to submit an application

to the Adjudicating Authority within thirty days for permitting

retention of record or property. On such application, the

Adjudicating Authority gives opportunity of hearing to the person

concerned as to why record or property should not be retained in

terms of Section 18(10). Such inbuilt safeguards are provided to

secure the interest of the person being subjected to search, at the

same time for strengthening the mechanism regarding prevention of

money-laundering and attachment of proceeds of crime. Merely

because Section 165 of the 1973 Code provides for a different

359

mechanism regarding search by the police officer, that will be of no

consequence for dealing with the inquiry/investigation and

adjudication including prosecution under the 2002 Act. Suffice it to

observe that the provision in the form of Section 18, as amended, is

a special provision and is certainly not arbitrary much less

manifestly arbitrary. Instead, we hold that the amended provision

in Section 18 has reasonable nexus with the purposes and objects

sought to be achieved by the 2002 Act of prevention of moneylaundering and attachment and confiscation of property (proceeds

of crime) involved in money-laundering, as also prosecution against

the person concerned for offence of money-laundering under Section

3 of the 2002 Act.

ARREST

88. Section 19 of the 2002 Act postulates the manner in which

arrest of person involved in money-laundering can be effected. Subsection (1) of Section 19 envisages that the Director, Deputy

Director, Assistant Director, or any other officer authorised in this

behalf by the Central Government, if has material in his possession

giving rise to reason to believe that any person has been guilty of an

360

offence punishable under the 2002 Act, he may arrest such person.

Besides the power being invested in high-ranking officials, Section

19 provides for inbuilt safeguards to be adhered to by the authorised

officers, such as of recording reasons for the belief regarding the

involvement of person in the offence of money-laundering. That has

to be recorded in writing and while effecting arrest of the person, the

grounds for such arrest are informed to that person. Further, the

authorised officer has to forward a copy of the order, along with the

material in his possession, in a sealed cover to the Adjudicating

Authority, who in turn is obliged to preserve the same for the

prescribed period as per the Rules. This safeguard is to ensure

fairness, objectivity and accountability of the authorised officer in

forming opinion as recorded in writing regarding the necessity to

arrest the person being involved in offence of money-laundering. Not

only that, it is also the obligation of the authorised officer to produce

the person so arrested before the Special Court or Judicial

Magistrate or a Metropolitan Magistrate, as the case may be, within

twenty-four hours. This production is also to comply with the

requirement of Section 167 of the 1973 Code. There is nothing in

Section 19, which is contrary to the requirement of production under

361

Section 167 of the 1973 Code, but being an express statutory

requirement under the 2002 Act in terms of Section 19(3), it has to

be complied by the authorised officer. Section 19, as amended from

time to time, reads thus:

“19. Power to arrest.—(1) If the Director, Deputy

Director, Assistant Director or any other officer

authorised in this behalf by the Central Government by

general or special order, has on the basis of material in

his possession, reason to believe (the reason for such

belief to be recorded in writing) that any person has been

guilty of an offence punishable under this Act, he may

arrest such person and shall, as soon as may be, inform

him of the grounds for such arrest.

(2) The Director, Deputy Director, Assistant Director or

any other officer shall, immediately after arrest of such

person under sub-section (1), forward a copy of the order

along with the material in his possession, referred to in

that sub-section, to the Adjudicating Authority in a

sealed envelope, in the manner, as may be prescribed and

such Adjudicating Authority shall keep such order and

material for such period, as may be prescribed.

(3) Every person arrested under sub-section (1) shall,

within twenty-four hours, be taken to a 530[Special Court

or] Judicial Magistrate or a Metropolitan Magistrate, as

the case may be, having jurisdiction:

Provided that the period of twenty-four hours shall

exclude the time necessary for the journey from the place

of arrest to the 531[Special Court or] Magistrate’s Court.”

530 Ins. by Act 13 of 2018, sec. 208 (d)(i) (w.e.f. 19-4-2018, vide G.S.R. 383(E), dated 19th April,

2018).

531 Ins. by Act 13 of 2018, sec. 208 (d)(ii) (w.e.f. 19-4-2018, vide G.S.R. 383(E), dated 19th April,

2018).

362

In the context of this provision, the challenge is that in absence of

any formal complaint being filed, arrest under Section 19 is being

made by the authorised officers. Whereas, the purport of Section

167 of the 1973 Code would suggest that the person can be arrested

by the jurisdictional police without warrant under Section 41 of the

1973 Code only upon registration of a complaint under Section 154

of the 1973 Code in connection with cognizable offence or pursuant

to the order of the Court. Even, in case of arrest pursuant to the

order of the Court, a formal complaint against such person accusing

him of being involved in commission of an offence is essential.

Moreover, the person produced before the Court would be at a loss

to know the grounds for arrest unless a formal FIR or complaint is

filed accusing him about his involvement in the commission of an

offence. The provision if interpreted to permit the authorised officer

to arrest someone being involved in the commission of offence of

money-laundering without a formal complaint against him, would

be ex facie manifestly arbitrary and unconstitutional.

89. This argument clearly overlooks the overall scheme of the 2002

Act. As noticed earlier, it is a comprehensive legislation, not limited

363

to provide for prosecution of person involved in the offence of moneylaundering, but mainly intended to prevent money-laundering

activity and confiscate the proceeds of crime involved in moneylaundering. It also provides for prosecuting the person involved in

such activity constituting offence of money-laundering. In other

words, this legislation is an amalgam of different facets including

setting up of agencies and mechanisms for coordinating measures

for combating money-laundering. Chapter III is a provision to

effectuate these purposes and objectives by attachment, adjudication

and confiscation. The adjudication is done by the Adjudicating

Authority to confirm the order of provisional attachment in respect

of proceeds of crime involved in money-laundering. For

accomplishing that objective, the authorities appointed under

Chapter VIII have been authorised to make inquiry into all matters

by way of survey, searches and seizures of records and property.

These provisions in no way invest power in the Authorities referred

to in Chapter VIII of the 2002 Act to maintain law and order or for

that matter, purely investigating into a criminal offence. The inquiry

preceding filing of the complaint by the authorities under the 2002

Act, may have the semblance of an investigation conducted by them.

364

However, it is essentially an inquiry to collect evidence to facilitate

the Adjudicating Authority to decide on the confirmation of

provisional attachment order, including to pass order of

confiscation, as a result of which, the proceeds of crime would vest

in the Central Government in terms of Section 9 of the 2002 Act. In

other words, the role of the Authorities appointed under Chapter VIII

of the 2002 Act is such that they are tasked with dual role of

conducting inquiry and collect evidence to facilitate adjudication

proceedings before the Adjudicating Authority in exercise of powers

conferred upon them under Chapters III and V of the 2002 Act and

also to use the same materials to bolster the allegation against the

person concerned by way of a formal complaint to be filed for offence

of money-laundering under the 2002 Act before the Special Court, if

the fact situation so warrant. It is not as if after every inquiry

prosecution is launched against all persons found to be involved in

the commission of offence of money-laundering. It is also not

unusual to provide for arrest of a person during such inquiry before

filing of a complaint for indulging in alleged criminal activity. The

respondent has rightly adverted to somewhat similar provisions in

other legislations, such as Section 35 of FERA and Section 102 of

365

Customs Act including the decisions of this Court upholding such

power of arrest at the inquiry stage bestowed in the Authorities in

the respective legislations. In Romesh Chandra Mehta532, the

Constitution Bench of this Court enunciated that Section 104 of the

Customs Act confers power to arrest upon the Custom Officer if he

has reason to believe that any person in India or within the Indian

Customs waters has been guilty of an offence punishable under

Section 135 of that Act. Again, in the case of Padam Narain

Aggarwal533, while dealing with the provisions of the Customs Act,

it noted that the term “arrest” has neither been defined in the 1973

Code nor in the Indian Penal Code, 1860 nor in any other enactment

dealing with offences. This word has been derived from the French

word “arrater” meaning “to stop or stay”. It signifies a restraint of a

person. It is, thus, obliging the person to be obedient to law.

Further, arrest may be defined as “the execution of the command of

a court of law or of a duly authorised officer”. Even, this decision

recognises the power of the authorised officer to cause arrest during

the inquiry to be conducted under the concerned legislations. While

532 Supra at Footnote No.119

533 Supra at Footnote No.246

366

adverting to the safeguards provided under that legislation before

effecting such arrest, the Court noted as follows:

“Safeguards against abuse of power

36. From the above discussion, it is amply clear that

power to arrest a person by a Customs Officer is

statutory in character and cannot be interfered with.

Such power of arrest can be exercised only in those

cases where the Customs Officer has “reason to

believe” that a person has been guilty of an offence

punishable under Sections 132, 133, 135, 135-A or

136 of the Act. Thus, the power must be exercised on

objective facts of commission of an offence

enumerated and the Customs Officer has reason to

believe that a person sought to be arrested has been

guilty of commission of such offence. The power to

arrest thus is circumscribed by objective

considerations and cannot be exercised on whims,

caprice or fancy of the officer.

37. The section534 also obliges the Customs Officer to

inform the person arrested of the grounds of arrest as

soon as may be. The law requires such person to be

produced before a Magistrate without unnecessary

delay.

38. The law thus, on the one hand, allows a Customs

Officer to exercise power to arrest a person who has

committed certain offences, and on the other hand,

takes due care to ensure individual freedom and

liberty by laying down norms and providing

safeguards so that the power of arrest is not abused

or misused by the authorities. ….”

(emphasis supplied)

The safeguards provided in the 2002 Act and the preconditions to be

fulfilled by the authorised officer before effecting arrest, as contained

in Section 19 of the 2002 Act, are equally stringent and of higher

534 Ed.: Section 104 of the Customs Act, 1962.

367

standard. Those safeguards ensure that the authorised officers do

not act arbitrarily, but make them accountable for their judgment

about the necessity to arrest any person as being involved in the

commission of offence of money-laundering even before filing of the

complaint before the Special Court under Section 44(1)(b) of the

2002 Act in that regard. If the action of the authorised officer is

found to be vexatious, he can be proceeded with and inflicted with

punishment specified under Section 62 of the 2002 Act. The

safeguards to be adhered to by the jurisdictional police officer before

effecting arrest as stipulated in the 1973 Code, are certainly not

comparable. Suffice it to observe that this power has been given to

the high-ranking officials with further conditions to ensure that

there is objectivity and their own accountability in resorting to arrest

of a person even before a formal complaint is filed under Section

44(1)(b) of the 2002 Act. Investing of power in the high-ranking

officials in this regard has stood the test of reasonableness in

Premium Granites535, wherein the Court restated the position that

requirement of giving reasons for exercise of power by itself excludes

535 Supra at Footnote No.248

368

chances of arbitrariness. Further, in M/s. Sukhwinder Pal Bipan

Kumar536, the Court restated the position that where the discretion

to apply the provisions of a particular statute is left with the

Government or one of the highest officers, it will be presumed that

the discretion vested in such highest authority will not be abused.

Additionally, the Central Government has framed Rules under

Section 73 in 2005, regarding the forms and the manner of

forwarding a copy of order of arrest of a person along with the

material to the Adjudicating Authority and the period of its retention.

In yet another decision in Ahmed Noormohmed Bhatti537, this

Court opined that the provision cannot be held to be unreasonable

or arbitrary and, therefore, unconstitutional merely because the

authority vested with the power may abuse his authority. (Also see

Manzoor Ali Khan538).

90. Considering the above, we have no hesitation in upholding the

validity of Section 19 of the 2002 Act. We reject the grounds pressed

into service to declare Section 19 of the 2002 Act as

536 Supra at Footnote No.249

537 Supra at Footnote No.250

538 Supra at Footnote No.251

369

unconstitutional. On the other hand, we hold that such a provision

has reasonable nexus with the purposes and objects sought to be

achieved by the 2002 Act of prevention of money-laundering and

confiscation of proceeds of crime involved in money-laundering,

including to prosecute persons involved in the process or activity

connected with the proceeds of crime so as to ensure that the

proceeds of crime are not dealt with in any manner which may result

in frustrating any proceedings relating to confiscation thereof.

BURDEN OF PROOF

91. The validity of Section 24 of the 2002 Act has been assailed.

This section has been amended in 2013 vide Act 2 of 2013. Before

that amendment, it read thus:

“24. Burden of Proof.— When a person is accused of

having committed the offence under section 3, the

burden of proving that proceeds of crime are untainted

property shall be on the accused.”

The amendment of 2013 was necessitated because of the

recommendations made by FATF in 2012, wherein it was noted that

the countries should adopt measures similar to those set forth in the

Vienna Convention, Palermo Convention and Terrorist Financing

370

Convention. The Objects and Reasons for effecting amendment as

appended to the Amendment Bill read thus:

“The Prevention of Money Laundering Act, 2002 was

enacted to prevent money-laundering and to provide for

confiscation of property derived from, or involved in,

money-laundering and for matters connected therewith

or incidental thereto. The aforesaid Act also addresses

the international obligations under the Political

Declaration and Global Programme of Action adopted by

General Assembly of the United Nations to prevent

money-laundering. The Act was amended in the year

2005 and 2009 to remove the difficulties arisen in

implementation of the Act.

The problem of money-laundering is no longer

restricted to the geo-political boundaries of any country.

It is a global menace that cannot be contained by any

nation alone. In view of this, India has become a member

of the Financial Action Task Force and Asia Pacific Group

on money-laundering, which are committed to the

effective implementation and enforcement of

internationally accepted standards against moneylaundering and the financing of terrorism. Consequent to

the submission of an action plan to the Financial Action

Task Force to bring anti money-laundering legislation of

India at par with the international standards and to

obviate some of the deficiencies in the Act that have been

experienced by the implementing agencies, the need to

amend the Prevention of Money-Laundering Act, 2002

became necessary.”

The Amendment Bill had proposed substitution of Section 24 as

under:

“24. In any proceedings relating to proceeds of crime

under this Act, unless the contrary is proved, it shall be

presumed that such proceeds of crime is involved in

money-laundering.”

371

The Standing Committee of Finance then made some

recommendations as follows:

“The Committee recommend that the prescribed onus of

proof that the property in question is not out of proceeds

of money-laundering crime, being not only on the

accused but also on anyone who is in possession of the

proceeds of crime, should be subject to adequate

safeguards to protect the innocent.”

Finally, the provision came to be amended by Act 2 of 2013 which

came into force with effect from 15.2.2013 and reads thus:

“

539[24. Burden of proof.— In any proceeding relating to

proceeds of crime under this Act,—

(a) in the case of a person charged with the offence

of money-laundering under section 3, the Authority

or Court shall, unless the contrary is proved,

presume that such proceeds of crime are involved in

money-laundering; and

(b) in the case of any other person the Authority or

Court, may presume that such proceeds of crime are

involved in money-laundering.]”

From the plain language of the amended provision, which is subject

matter of assail in these cases being unconstitutional, clearly

indicates that it concerns (all) proceeding(s) relating to proceeds of

crime under the 2002 Act. The expression “proceeding” has not been

defined in the 2002 Act or the 1973 Code. However, in the setting

in which it has been placed in this provision, as rightly argued by

539 Subs. By Act 2 of 2013, sec. 19, for section 24 (w.e.f. 15-2-2013, vide S.O. 343(E), dated 8-

2-2013).

372

the learned Additional Solicitor General for the Union of India, it

must relate to the proceeding before the Adjudicating Authority or

the Special Court. The proceeding before the authorities (referred to

in Chapter VIII) relates to action taken regarding prevention of

offence of money-laundering and ordering provisional attachment of

property derived or obtained, directly or indirectly, by any person

as a result of criminal activity relating to a scheduled offence; and to

inquire into all matters connected therewith and collect evidence to

be presented before the Adjudicating Authority for consideration of

application regarding confirmation of provisional attachment order

as per Section 8 of the 2002 Act. This provision (Section 24) must,

however, apply to proceeding before the Adjudicating Authority

regarding confirmation of provisional attachment order and

eventually for ordering confiscation of the attached property for

vesting in the Central Government under Section 9 of the 2002 Act.

This is reinforced from the purport of Section 23 of the 2002 Act.

Further, it would also apply to proceeding before the Special Court

empowered to try the offence of money-laundering under Section 3

of the 2002 Act upon presentation of a complaint by the authority

authorised as per Section 44(1)(b) of the 2002 Act.

373

92. It is, thus, clear that this special provision regarding burden of

proof in any proceeding relating to proceeds of crime under this Act

would apply to stated proceeding before the Adjudicating Authority

and not limited to the proceeding before the Special Court. That is

evident from the plain language, indicative of applicability of the

provision to “any” proceeding before the “Authority” or the “Court”.

The expression “Authority” occurring in this provision must be given

its proper meaning indicative of the Adjudicating Authority

appointed under Section 6 of the 2002 Act to adjudicate on matters

concerning confirmation of provisional attachment order and

eventual confiscation and vesting of the property, if the fact situation

so warrant. It is an independent body, free from the control of the

Executive540. It is ordained to deal with civil aspects of the action of

attachment and confiscation of the proceeds of crime and not about

the criminality of the offence under Section 3 of the 2002 Act. When

this provision is made applicable to the proceeding before the

Authority, it would not be necessary to follow the strict principle of

standard of proof beyond reasonable doubt, as applicable in criminal

540 See Pareena Swarup (supra at Footnote No.366)

374

trials. That principle will have no bearing on the proceeding before

the Authority. However, when the same evidence and provision is

relied upon in the proceeding before the Special Court regarding trial

of offence of money-laundering under Section 3 of the 2002 Act, it

would have a different connotation in the context of a criminal trial.

93. Be that as it may, this Section 24 deals with two situations.

The first part concerns the person charged with the offence of

money-laundering under Section 3. The second part [Clause (b)]

concerns any other person. Taking the second part first, such other

person would obviously mean a person not charged with the offence

of money-laundering under Section 3 of the 2002 Act. The two parts,

in one sense, are mutually exclusive. If a person is charged with the

offence of money-laundering under Section 3 of the 2002 Act owing

to a complaint filed by the authority authorised before the Special

Court, Clause (a) would trigger in. As regards the second category

[Clause (b)] of person, the expression used is “may presume”.

Whereas, qua the first category [covered under Clause (a)] the

expression used is “shall, unless the contrary is proved, presume”.

In this category, if a charge is already framed against the person for

375

having committed offence of money-laundering, it would presuppose

that the Court framing charge against him was prima facie convinced

that the materials placed before it had disclosed grave suspicion

against such person. In such a case, once the issue of admissibility

of materials supporting the factum of grave suspicion about the

involvement of the person in the commission of crime under the

2002 Act, is accepted, in law, the burden must shift on the person

concerned to dispel that suspicion. It would then not be a case of

reversal of burden of proof as such, but one of shifting of burden on

him to show that no offence of money-laundering had been

committed and, in any case, the property (proceeds of crime) was not

involved in money-laundering.

94. Before we proceed to analyse the efficacy of Section 24 of the

2002 Act, it may be appropriate to visit the definition of expressions

in the Evidence Act, relevant to answer the issue of standard of proof

in any proceeding. In the interpretation clause, Section 3 of the

Evidence Act, expression “fact” has been defined as follows:

“3. Interpretation clause.—In this Act the following

words and expressions are used in the following senses,

unless a contrary intention appears from the context:—

….

376

“Fact”.––“Fact” means and includes––

(1) any thing, state of things, or relation of things, capable

of being perceived by the senses;

(2) any mental condition of which any person is

conscious.”

We need not dilate on the expression “relevant”, “facts in issue” and

“document”. We may usefully advert to the definition of “evidence”,

which reads thus:

“3. Interpretation clause.—In this Act the following

words and expressions are used in the following senses,

unless a contrary intention appears from the context:—

…..

“Evidence”. ––“Evidence” means and includes––

(1) all statements which the Court permits or

requires to be made before it by witnesses, in relation

to matters of fact under inquiry,

such statements are called oral evidence;

(2) 541[all documents including electronic records

produced for the inspection of the Court],

such documents are called documentary evidence.”

The other relevant definitions are:

“3. Interpretation clause.—In this Act the following

words and expressions are used in the following

senses, unless a contrary intention appears from the

context:—

……

“Proved”.––A fact is said to be proved when, after

considering the matters before it, the Court either

believes it to exist, or considers its existence so

probable that a prudent man ought, under the

541 Subs. by Act 21 of 2000, sec. 92 and Sch.II-1(a), for “all documents produced for the

inspection of the Court” (w.e.f. 17-10-2000)

377

circumstances of the particular case, to act upon the

supposition that it exists.

“Disproved”.––A fact is said to be disproved when,

after considering the matters before it, the Court

either believes that it does not exist, or considers its

non-existence so probable that a prudent man

ought, under the circumstances of the particular

case, to act upon the supposition that it does not

exist.

“Not proved”. –– A fact is said not to be proved when

it is neither proved nor disproved.

*** *** ***

4. “May presume”.––Whenever it is provided by this

Act that the Court may presume a fact, it may either

regard such fact as proved, unless and until it is

disproved, or may call for proof of it.

“Shall presume”.––Whenever it is directed by this

Act that the Court shall presume a fact, it shall

regard such fact as proved, unless and until it is

disproved.

“Conclusive proof”.––When one fact is declared by

this Act to be conclusive proof of another, the Court

shall, on proof of the one fact, regard the other as

proved, and shall not allow evidence to be given for

the purpose of disproving it.”

As aforementioned, standard of proof varies depending on the nature

of proceedings. In civil actions, it can be preponderance of

probability but in criminal actions, unless the law provides to the

contrary, the onus is on the prosecution to establish the allegations

and facts in issue beyond reasonable doubt. Furthermore, the

burden or onus of establishing the facts in issue, keeps on shifting

and is on the party who asserts a particular fact.

378

95. Indeed, in a criminal trial, the principle of innocence of the

accused/offender is regarded as a human right — as held by this

Court in Narendra Singh & Anr. vs. State of M.P.

542. However,

that presumption can be interdicted by a law made by the

Parliament/Legislature. It is well-settled that statutory provisions

regarding presumptions are nothing but rule of evidence. As

observed by this Court in State of W.B. vs. Mir Mohammad Omar

& Ors.543, the pristine rule that the burden of proof is on the

prosecution to prove the guilt of the accused should not be taken as

a fossilised doctrine as though it admits no process of intelligent

reasoning. The Court went on to observe that the doctrine of

presumption is not alien to such a rule, nor would it impair the

temper of the rule. On the other hand, if the traditional Rule relating

to burden of proof of the prosecution is allowed to be wrapped in

pedantic coverage, the offenders in serious offences would be the

major beneficiaries and the society would be the casualty. This

observation has been quoted with approval in Sucha Singh544. In

542 (2004) 10 SCC 699 (also at Footnote No.377)

543 (2000) 8 SCC 382

544 Supra at Footnote No.381

379

the latter judgment, the Court relying upon other decisions

including in Shambhu Nath Mehra vs. The State of Ajmer545,

noted that the provisions, such as Section 106546 of the Evidence

Act, is not intended to relieve the prosecution of its burden to prove

the guilt of the accused beyond reasonable doubt, but the Section

would apply to cases where the prosecution has succeeded in

proving facts for which a reasonable inference can be drawn

regarding the existence of certain other facts, unless the accused by

virtue of special knowledge regarding such facts failed to offer any

explanation which might drive the Court to draw a different

inference. The Court quoted with approval paragraph 33 of the

decision in Shambhu Nath Mehra547, which reads thus:

“33. Presumption of fact is an inference as to the

existence of one fact from the existence of some

other facts, unless the truth of such inference is

disproved. Presumption of fact is a rule in law of

evidence that a fact otherwise doubtful may be

inferred from certain other proved facts. When

inferring the existence of a fact from other set of

proved facts, the court exercises a process of

reasoning and reaches a logical conclusion as the

most probable position. The above principle has

gained legislative recognition in India when Section

114 is incorporated in the Evidence Act. It empowers

545 AIR 1956 SC 404

546 106. Burden of proving fact especially within knowledge. –– When any fact is especially

within the knowledge of any person, the burden of proving that fact is upon him.

547 Supra at Footnote No.545

380

the court to presume the existence of any fact which

it thinks likely to have happened. In that process the

court shall have regard to the common course of

natural events, human conduct etc. in relation to the

facts of the case.”

(emphasis supplied)

On similar lines, this Court in Hiten P. Dalal548, in paragraphs 22

and 23 observed thus:

“22. Because both Sections 138 and 139 require that the

court “shall presume” the liability of the drawer of the

cheques for the amounts for which the cheques are

drawn, as noted in State of Madras v. A. Vaidyanatha

Iyer549 it is obligatory on the court to raise this

presumption in every case where the factual basis for the

raising of the presumption had been established. “It

introduces an exception to the general rule as to the

burden of proof in criminal cases and shifts the onus on

to the accused.” (Ibid. at p. 65, para 14.) Such a

presumption is a presumption of law, as distinguished

from a presumption of fact which describes

provisions by which the court “may presume” a

certain state of affairs. Presumptions are rules of

evidence and do not conflict with the presumption of

innocence, because by the latter, all that is meant is

that the prosecution is obliged to prove the case

against the accused beyond reasonable doubt. The

obligation on the prosecution may be discharged with

the help of presumptions of law or fact unless the

accused adduces evidence showing the reasonable

possibility of the non-existence of the presumed fact.

23. In other words, provided the facts required to form

the basis of a presumption of law exist, no discretion is

left with the court but to draw the statutory conclusion,

but this does not preclude the person against whom the

presumption is drawn from rebutting it and proving the

contrary. A fact is said to be proved when,

548 Supra at Footnote No.378

549 AIR 1958 SC 61 (also at Footnote No.392)

381

“after considering the matters before it, the court

either believes it to exist, or considers its existence

so probable that a prudent man ought, under the

circumstances of the particular case, to act upon the

supposition that it exists”550.

Therefore, the rebuttal does not have to be conclusively

established but such evidence must be adduced before

the court in support of the defence that the court must

either believe the defence to exist or consider its existence

to be reasonably probable, the standard of reasonability

being that of the “prudent man”.”

(emphasis supplied)

The respondents have rightly invited our attention to several other

statutes551 providing for shifting of the burden of proof on the

accused, as in the case of Section 24 of the 2002 Act. The

constitutional validity of similar provisions has been upheld by this

Court from time to time. In the case of Noor Aga552, it has been

observed that the Court while interpreting the provision, such as

Section 24 of the 2002 Act, must keep in mind that the concerned

550 Section 3, Evidence Act

551 (i) Section 57A of the (Kerala) Abkari Act, I of 1077; (ii) Sections 105, 106, 113A and 113B

of the Indian Evidence Act, 1872; (iii) Section 139 of the Negotiable Instruments Act, 1881; (iv)

Section 9 of the Opium Act, 1878; (v) Section 9B of the Explosives Act 1884; (vi) Section 7 of the

Prevention of Food Adulteration Act, 1954; (vii) Section 10C of the Essential Commodities Act,

1955; (viii) Section 138A of the Customs Act, 1962; (ix) Section 43E of the Unlawful Activities

(Prevention) Act, 1967; (x) Section 98-B of the Gold (Control) Act, 1968; (xi) Section 57 of the

Wild Life (Protection) Act, 1972; (xii) Section 18 of the Foreign Exchange Regulation Act, 1973;

(xiii) Sections 35 and 54 of the Narcotic Drugs and Psychotropic Substances Act, 1985; (xiv)

Sections 3C and 3D of the Epidemic Diseases Act, 1897; (xv) Section 21 of the Terrorist and

Disruptive Activities (Prevention) Act, 1987; (xvi) Section 20 of the Prevention of Corruption Act,

1988; and (xvii) Sections 29 and 30 of the Protection of Children from Sexual Offences Act,

2012.

552 Supra at Footnote No.384 (also at Footnote No.55)

382

Act has been the outcome of the mandate contained in the

international convention, as is the case on hand. Further, only

because the burden of proof under certain circumstances is placed

on the accused, the same, by itself would not render the legal

provision unconstitutional. The question whether the burden on the

accused is a legal burden or an evidentiary burden, would depend

on the statute and its purport and object. Indeed, it must pass the

test of the doctrine of proportionality. In any case, as the burden on

the accused would be only an evidentiary burden, it can be

discharged by the accused by producing evidence regarding the facts

within his personal knowledge. Again, in the case of Seema Silk &

Sarees553, this Court restated that a legal provision does not become

unconstitutional only because it provides for reverse burden as it is

only a rule of evidence. So long as the accused is entitled to show

that he has not violated the provisions of the Act, such a legal

provision cannot be regarded as unconstitutional. For, the accused

is then entitled to rebut the presumption.

553 Supra at Footnote No.385

383

96. Suffice it to observe that the change effected in Section 24 of

the 2002 Act is the outcome of the mandate of international

Conventions and recommendations made in that regard. Further,

keeping in mind the legislative scheme and the purposes and objects

sought to be achieved by the 2002 Act coupled with the fact that the

person charged or any other person involved in money-laundering,

would get opportunity to disclose information and evidence to rebut

the legal presumption in respect of facts within his personal

knowledge during the proceeding before the Authority or the Special

Court, by no stretch of imagination, provision in the form of Section

24 of the 2002 Act, can be regarded as unconstitutional. It has

reasonable nexus with the purposes and objects sought to be

achieved by the 2002 Act. In any case, it cannot be perceived as

manifestly arbitrary as is sought to be urged before us.

97. Be that as it may, we may now proceed to decipher the purport

of Section 24 of the 2002 Act. In the first place, it must be noticed

that the legal presumption in either case is about the involvement of

proceeds of crime in money-laundering. This fact becomes relevant,

only if, the prosecution or the authorities have succeeded in

384

establishing at least three basic or foundational facts. First, that the

criminal activity relating to a scheduled offence has been committed.

Second, that the property in question has been derived or obtained,

directly or indirectly, by any person as a result of that criminal

activity. Third, the person concerned is, directly or indirectly,

involved in any process or activity connected with the said property

being proceeds of crime. On establishing the fact that there existed

proceeds of crime and the person concerned was involved in any

process or activity connected therewith, itself, constitutes offence of

money-laundering. The nature of process or activity has now been

elaborated in the form of Explanation inserted vide Finance (No.2)

Act, 2019. On establishing these foundational facts in terms of

Section 24 of the 2002 Act, a legal presumption would arise that

such proceeds of crime are involved in money-laundering. The fact

that the person concerned had no causal connection with such

proceeds of crime and he is able to disprove the fact about his

involvement in any process or activity connected therewith, by

producing evidence in that regard, the legal presumption would

stand rebutted.

385

98. The person falling under the first category being person

charged with the offence of money-laundering, presupposes that a

formal complaint has already been filed against him by the authority

authorised naming him as an accused in the commission of offence

of money-laundering. As observed in P.N. Krishna Lal554, the

Court cannot be oblivious about the purpose of the law. Further,

the special provisions or the special enactments as in this case is

required to tackle new situations created by human proclivity to

amass wealth at the altar of formal financial system of the country

including its sovereignty and integrity. While dealing with such

provision, reading it down would also defeat the legislative intent.

99. Be it noted that the legal presumption under Section 24(a) of

the 2002 Act, would apply when the person is charged with the

offence of money-laundering and his direct or indirect involvement

in any process or activity connected with the proceeds of crime, is

established. The existence of proceeds of crime is, therefore, a

foundational fact, to be established by the prosecution, including the

involvement of the person in any process or activity connected

554 Supra at Footnote No.382

386

therewith. Once these foundational facts are established by the

prosecution, the onus must then shift on the person facing charge

of offence of money-laundering — to rebut the legal presumption

that the proceeds of crime are not involved in money-laundering, by

producing evidence which is within his personal knowledge. In other

words, the expression “presume” is not conclusive. It also does not

follow that the legal presumption that the proceeds of crime are

involved in money-laundering is to be invoked by the Authority or

the Court, without providing an opportunity to the person to rebut

the same by leading evidence within his personal knowledge555.

100. Such onus also flows from the purport of Section 106 of the

Evidence Act. Whereby, he must rebut the legal presumption in the

manner he chooses to do and as is permissible in law, including by

replying under Section 313 of the 1973 Code or even by crossexamining prosecution witnesses. The person would get enough

opportunity in the proceeding before the Authority or the Court, as

the case may be. He may be able to discharge his burden by showing

that he is not involved in any process or activity connected with the

555 See Sarbananda Sonowal (supra at Footnote No.389)

387

proceeds of crime. In any case, in terms of Section 114556 of the

Evidence Act, it is open to the Court to presume the existence of any

fact which it thinks likely to have happened, regard being had to the

common course of natural events, human conduct, and public and

private business, in their relation to the facts of the particular case.

Considering the above, the provision under consideration [Section

24(a)] by no standards can be said to be unreasonable much less

manifestly arbitrary and unconstitutional.

101. Reverting to Section 24(b) of the 2002 Act, that concerns

person other than the person charged with the offence of moneylaundering under Section 3 of the 2002 Act. In his case, the

expression used in Clause (b) is “may presume”. This is essentially

a factual presumption or discretionary presumption as expounded

by this Court in A. Vaidyanatha Iyer557. In paragraph 14 of the

decision, the Court noted the marked distinction between the words

“shall presume” and “may presume” as follows:

“(14). …… Therefore where it is proved that a gratification

has been accepted, then the presumption shall at once

556 114. Court may presume existence of certain facts.–– The Court may presume the

existence of any fact which it thinks likely to have happened, regard being had to the common

course of natural events, human conduct and public and private business, in their relation to

the facts of the particular case.

557 Supra at Footnote No.549 (also at Footnote No.392)

388

arise under the section. It introduces an exception to the

general rule as to the burden of proof in criminal cases

and shifts the onus on to the accused. It may here be

mentioned that the legislature has chosen to use the

words ‘shall presume’ and not ‘may presume’, the

former a presumption of law and latter of fact. Both

these phrases have been defined in the Indian

Evidence Act, no doubt for the purpose of that Act,

but S. 4 of the Prevention of Corruption Act is in pari

materia with the Evidence Act because it deals with a

branch of law of evidence e.g., presumptions, and

therefore should have the same meaning. “Shall

presume” has been defined in the Evidence Act as

follows:

“Whenever it is directed by this Act that the

Court shall presume a fact, it shall regard such fact

as proved unless and until it is disproved.”

It is a presumption of law and therefore it is

obligatory on the court to raise this presumption

in every case brought under S. 4 of the Prevention

of Corruption Act because unlike the case of

presumption of fact, presumptions of law

constitute a branch of jurisprudence. …...”

(emphasis supplied)

Again, in the case of M. Narsinga Rao vs. State of A.P.558, the

Court observed in paragraphs 13 and 17as follows:

“13. Before proceeding further, we may point out that

the expressions “may presume” and “shall presume”

are defined in Section 4 of the Evidence Act. The

presumptions falling under the former category are

compendiously known as “factual presumptions” or

“discretionary presumptions” and those falling under

the latter as “legal presumptions” or “compulsory

presumptions”. When the expression “shall be

presumed” is employed in Section 20(1) of the Act it

must have the same import of compulsion.

*** *** ***

558 (2001) 1 SCC 691 (also at Footnote No.392)

389

17. Presumption is an inference of a certain fact drawn

from other proved facts. While inferring the existence of a

fact from another, the court is only applying a process of

intelligent reasoning which the mind of a prudent man

would do under similar circumstances. Presumption is

not the final conclusion to be drawn from other facts.

But it could as well be final if it remains undisturbed

later. Presumption in law of evidence is a rule

indicating the stage of shifting the burden of proof.

From a certain fact or facts the court can draw an

inference and that would remain until such inference is

either disproved or dispelled.”

(emphasis supplied)

Notably, the legal presumption in the context of Section 24(b) of the

2002 Act is attracted once the foundational fact of existence of

proceeds of crime and the link of such person therewith in the

process or activity is established by the prosecution. The stated legal

presumption can be invoked in the proceeding before the

Adjudicating Authority or the Court, as the case may be. The legal

presumption is about the fact that the proceeds of crime are involved

in money-laundering which, however, can be rebutted by the person

by producing evidence within his personal knowledge.

102. Be it noted that the presumption under Section 24(b) of the

2002 Act is not a mandatory legal presumption, unlike in the case

falling under the other category, namely Section 24(a). If the person

has not been charged with the offence of money-laundering, the legal

390

presumption under Section 24(b) can be invoked by the Adjudicating

Authority or the Court, as the case may be. More or less, same logic

as already noted while dealing with the efficacy of Section 24(a) of

the 2002 Act, would apply even to the category of person covered by

Section 24(b), in equal measure.

103. We, therefore, hold that the provision under consideration

namely Section 24 has reasonable nexus with the purposes and

objects sought to be achieved by the 2002 Act and cannot be

regarded as manifestly arbitrary or unconstitutional.

SPECIAL COURTS

104. The expression “Special Court” has been defined in Section

2(1)(z), which in turn refers to Section 43. Section 43 reads thus:

“CHAPTER VII

SPECIAL COURTS

43. Special Courts.—(1) The Central Government, in

consultation with the Chief Justice of the High Court,

shall, for trial of offence punishable under section 4, by

notification, designate one or more Courts of Session as

Special Court or Special Courts for such area or areas or

for such case or class or group of cases as may be

specified in the notification.

Explanation.—In this sub-section, “High Court”

means the High Court of the State in which a Sessions

Court designated as Special Court was functioning

immediately before such designation.

391

(2) While trying an offence under this Act, a Special Court

shall also try an offence, other than an offence referred to

in sub-section (1), with which the accused may, under

the Code of Criminal Procedure, 1973 (2 of 1974), be

charged at the same trial.”

The Special Courts established under Section 43 of the 2002 Act are

empowered to try the offences under the 2002 Act. Section 44

bestows that power in the Special Courts. The same reads thus:

“44. Offences triable by Special Courts.—(1)

Notwithstanding anything contained in the Code of

Criminal Procedure, 1973 (2 of 1974),—

559[(a) an offence punishable under section 4 and any

scheduled offence connected to the offence under that

section shall be triable by the Special Court constituted

for the area in which the offence has been committed:

Provided that the Special Court, trying a scheduled

offence before the commencement of this Act, shall

continue to try such scheduled offence; or]

(b) a Special Court may, 560[***] upon a complaint made

by an authority authorised in this behalf under this Act

take 561[cognizance of offence under section 3, without

the accused being committed to it for trial].

562[Provided that after conclusion of investigation, if no

offence of money-laundering is made out requiring filing

559 Subs. by Act 2 of 2013, sec. 21(i), for clause (a) (w.e.f. 15-2-2013, vide S.O. 343(E), dated 8-

2-2013). Clause (a) before substitution, stood as under:

“(a) the scheduled offence and offence punishable under section 4 shall be triable only

by the Special Court constituted for the area in which the offence has been committed:

Provided that the Special Court, trying a scheduled offence before the

commencement of this Act, shall continue to try such scheduled offence; or”

560 The words “upon perusal of police report of the facts which constitute an offence under this

Act or” omitted by Act 20 of 2005, sec. 6 (w.e.f. 1-7-2005).

561 Subs. by Act 2 of 2013, sec. 21(ii), for “cognizance of the offence for which the accused is

committed to it for trial” (w.e.f. 15-2-2013, vide S.O. 343(E), dated 8-2-2013).

562 Ins. by the Finance (No.2) Act, 2019, sec. 199(i) (w.e.f. 1-8-2019)

392

of such complaint, the said authority shall submit a

closure report before the Special Court; or]

563[(c) if the court which has taken cognizance of the

scheduled offence is other than the Special Court which

has taken cognizance of the complaint of the offence of

money-laundering under sub-clause (b), it shall, on an

application by the authority authorised to file a complaint

under this Act, commit the case relating to the scheduled

offence to the Special Court and the Special Court shall,

on receipt of such case proceed to deal with it from the

stage at which it is committed.

(d) a Special Court while trying the scheduled offence or

the offence of money-laundering shall hold trial in

accordance with the provisions of the Code of Criminal

Procedure, 1973 (2 of 1974) as it applies to a trial before

a Court of Session.]

564[Explanation.—For the removal of doubts, it is clarified

that,—

(i) the jurisdiction of the Special Court while dealing

with the offence under this Act, during investigation,

enquiry or trial under this Act, shall not be

dependent upon any orders passed in respect of the

scheduled offence, and the trial of both sets of

offences by the same court shall not be construed as

joint trial;

(ii) the complaint shall be deemed to include any

subsequent complaint in respect of further

investigation that may be conducted to bring any

further evidence, oral or documentary, against any

accused person involved in respect of the offence, for

which complaint has already been filed, whether

named in the original complaint or not.]

(2) Nothing contained in this section shall be deemed to

affect the special powers of the High Court regarding bail

under section 439 of the Code of Criminal Procedure,

1973 (2 of 1974) and the High Court may exercise such

powers including the power under clause (b) of subsection (1) of that section as if the reference to

“Magistrate” in that section includes also a reference to a

“Special Court” designated under section 43.”

563 Ins. by Act 2 of 2013, sec. 21(iii) (w.e.f. 15-2-2013, vide S.O. 343(E), dated 8-2-2013)

564 Ins. by the Finance (No.2) Act, 2019, sec. 199(ii) (w.e.f. 1-8-2019)

393

This provision opens with a non-obstante clause making it clear that

the dispensation provided therein is notwithstanding anything

contained in the 1973 Code regarding the matters provided therein

in relation to trials concerning offence of money-laundering to be

conducted by the Special Court. This provision has undergone

amendment vide Act 20 of 2005, Act 2 of 2013 and Finance (No.2)

Act, 2019. In the present set of matters, we are essentially

concerned with the provision as obtaining after Act 2 of 2013 and

the subsequent amendment vide Finance (No.2) Act, 2019. To begin

with, Clause (a) in sub-section (1) of Section 44, as existed prior to

amendment Act 2 of 2013, stood thus:

“44. Offences triable by Special Courts.—(1)

Notwithstanding anything contained in the Code of

Criminal Procedure, 1973 (2 of 1974),—

(a) the scheduled offence and offence punishable under

Section 4 shall be triable only by the Special Court

constituted for the area in which the offence has been

committed:

Provided that the Special Court, trying a scheduled

offence before the commencement of this Act, shall

continue to try such scheduled offence; or.”

Post amendment of 2013 and as applicable to this date, Clause (a)

reads thus:

“44. Offences triable by Special Courts.—(1)

Notwithstanding anything contained in the Code of

Criminal Procedure, 1973 (2 of 1974),—

394

565[(a) an offence punishable under section 4 and any

scheduled offence connected to the offence under that

section shall be triable by the Special Court constituted

for the area in which the offence has been committed:

Provided that the Special Court, trying a scheduled

offence before the commencement of this Act, shall

continue to try such scheduled offence; or];

….”

The amendment of 2013 in fact clarifies the dispensation to be

followed in regard to trials concerning offence of money-laundering

under this Act and the trial in relation to scheduled offence including

before the Special Court trying such (scheduled) offence. By virtue

of this clause, the trials regarding the offence of money-laundering

need to proceed before the Special Court constituted for the area in

which the offence of money-laundering has been committed. In case

the scheduled offence is triable by Special Court under the special

enactment elsewhere, the provision, as amended, makes it amply

clear that both the trials after coming into effect of this Act need to

proceed independently, but in the area where the offence of moneylaundering has been committed.

565 Subs. by Act 2 of 2013, sec. 21(i), for clause (a) (w.e.f. 15-2-2013, vide S.O. 343(E), dated 8-

2-2013).

395

105. In that, the offence of money-laundering ought to proceed for

trial only before the Special Court designated to try moneylaundering offences where the offence of money-laundering has been

committed. This is a special enactment and being a later law, would

prevail over any other law for the time being in force in terms of

Section 71 of the 2002 Act.

106. The proviso in Clause (a) of sub-section (1) of Section 44, is in

the nature of an exception. It predicates that before the

commencement of this Act, if the Special Court elsewhere was

already trying the scheduled offence, shall continue to try the same.

Prima facie, it is possible to take the view that the effect of this

proviso, which has come in 2013, may have retrospective effect.

However, no specific case has been brought to our notice wherein

the effect of such amendment is required to be examined.

Accordingly, it is not necessary to dilate on this aspect any further.

107. This stipulation, however, will have to be regarded as directory

provision. We say so because in a given case, the offence of moneylaundering may have been committed at place x, which may be in

one State, but the property which is subject matter of money-

396

laundering may have been derived or obtained, directly or indirectly,

as a result of criminal activity relating to a scheduled offence

committed at more than one place including in multiple States

throughout the country. In such a case, it will not be open to the

Special Court at place x to transfer all other cases in the area (even

outside the State). If the provision is to be interpreted otherwise, it

would have serious consequences on the trials which are pending in

connection with the scheduled offences including before the Special

Court elsewhere. This provision, therefore, needs to be read down

to mean that as far as possible, the trial of scheduled offence before

the Special Court under the concerned law, if in different area, that

Special Court may continue to try such scheduled offence. For, the

trial of the scheduled offence and the trial in connection with the

money-laundering are in any way required to proceed independently.

That is because, the offence of money-laundering by itself is an

independent offence in respect of the process and activity connected

with the proceeds of crime which may have been derived or obtained,

directly or indirectly, by any person as a result of criminal activity

relating to a scheduled offence.

397

108. The stipulation in Clause (b) of sub-section (1) of Section 44

has been amended vide Act 20 of 2005, Act 2 of 2013 and the

Finance (No.2) Act, 2019. Consequent to amendment of 2013, the

Clause (b) read thus:

“44. Offences triable by Special Courts.—(1)

Notwithstanding anything contained in the Code of

Criminal Procedure, 1973 (2 of 1974),—

(a)***

(b) a Special Court may, 566[***] upon a complaint

made by an authority authorised in this behalf under

this Act take 567[cognizance of offence under section

3, without the accused being committed to it for

trial];

….”

Later, a proviso came to be inserted vide Finance (No.2) Act, 2019,

which reads thus:

“44. Offences triable by Special Courts.—(1)

Notwithstanding anything contained in the Code of

Criminal Procedure, 1973 (2 of 1974),—

(a)***

(b)***

568[Provided that after conclusion of investigation, if no

offence of money-laundering is made out requiring filing

of such complaint, the said authority shall submit a

closure report before the Special Court; or]

…”

566 The words “upon perusal of police report of the facts which constitute an offence under this

Act or” omitted by Act 20 of 2005, sec. 6 (w.e.f. 1-7-2005).

567 Subs. by Act 2 of 2013, sec. 21(ii), for “cognizance of the offence for which the accused is

committed to it for trial” (w.e.f. 15-2-2013, vide S.O. 343(E), dated 8-2-2013).

568 Ins. by the Finance (No.2) Act, 2019, sec. 199(i) (w.e.f. 1-8-2019).

398

Clause (b) of sub-section (1) of Section 44 before amendment of 2019

envisaged that the Special Court upon a complaint made by any

authority authorised in this behalf under this Act, could take

cognizance of offence of money-laundering under Section 3 of the

2002 Act without the accused being committed to it for trial. This

would mean that if the accused was already in custody and facing

trial in respect of a scheduled offence elsewhere and is not required

to be produced before the Special Court (PMLA) at the time of taking

cognizance on the complaint filed by the authority authorised. This

provision again must be regarded as directory or a discretionary

provision and the Special Court trying the offence of moneylaundering need not insist for producing the accused before it at the

time of taking cognizance of offence of money-laundering, provided

no prejudice is caused to such accused. The expression “committed”

occurring in this clause can be also construed as “produced”. If so

understood, we fail to comprehend as to how this provision violates

any right of the accused, much less constitutional rights.

109. Coming to the proviso inserted in this clause [Section 44(1)(b)]

vide Finance (No.2) Act, 2019, is, in fact, an enabling provision. It

399

permits the Authority authorised to file a closure report before the

Special Court in case it is of the opinion that no offence of moneylaundering has been made out, requiring filing of such complaint.

This provision is only to dispel the doubt that in the event the person

has been arrested by the officer authorised under Section 19 of this

Act on the basis of material in his possession and having reason to

believe and recorded in writing of being guilty of an offence

punishable under this Act, but after the inquiry done by him in

exercise of powers under Chapters V and VIII of the 2002 Act, he

forms an opinion that no offence of money-laundering is made out,

requiring filing of complaint, it is open to him to file a closure report

before the Special Court disclosing that position. The proviso would,

thus, come into play in such cases where the complaint is yet to be

filed owing to the pendency of inquiry before the authorities, under

Chapters V and VIII of the 2002 Act. In that view of the matter and

more so keeping in mind the purposes and objects behind the

enactment of 2002 Act, such a provision must be regarded as having

reasonable nexus with the purposes and objects sought to be

achieved by the 2002 Act. Accordingly, for the view taken by us, we do

400

not find any dichotomy in these provisions, much less being

manifestly arbitrary or unconstitutional.

110. We now revert to Clause (c) of sub-section (1) of Section 44 of

the 2002 Act. The same has undergone amendment vide Act 2 of

2013 and post that amendment, it reads thus:

“44. Offences triable by Special Courts.—(1) Notwithstanding anything

contained in the Code of Criminal Procedure, 1973 (2 of 1974),—

(a)***

(b)***

569[(c) if the court which has taken cognizance of the

scheduled offence is other than the Special Court which

has taken cognizance of the complaint of the offence of

money-laundering under sub-clause (b), it shall, on an

application by the authority authorised to file a complaint

under this Act, commit the case relating to the scheduled

offence to the Special Court and the Special Court shall,

on receipt of such case proceed to deal with it from the

stage at which it is committed.]”

We must reconcile this provision with Clause (a) of sub-section (1) of

Section 44. That provision has already been elaborated in the earlier

part of this judgment and read down to mean that it is an enabling

and discretionary provision. The same consideration must be kept

in mind by the Special Court while considering the application filed

in terms of this clause. For, this clause also recognises that the trial

569 Ins. by Act 2 of 2013, sec. 21(iii) (w.e.f. 15-2-2013, vide S.O. 343(E), dated 8-2-2013)

401

of scheduled offence and the trial concerning offence of moneylaundering need to proceed independently, even though it may be

tried by the same Special Court as both are distinct and independent

offences. In that, the offence of money-laundering is and can be only

in relation to the process or activity connected with proceeds of crime

and has nothing to do with the criminal activity relating to a

scheduled offence as such.

111. In the context of this provision, it was emphatically argued

before us by the petitioners that it would take away one right of

appeal, otherwise available under the 1973 Code. Resultantly,

Section 44(1)(c) of the 2002 Act in particular, is unconstitutional. To

buttress this submission, reliance has been placed on the dictum in

A.R. Antulay570. However, this ground need not detain us in view

of the just stand taken by the learned Additional Solicitor General

appearing for Union of India relying on the decision of this Court in

State (Through Central Bureau of Investigation) vs. Kalyan

Singh (Former Chief Minister of Uttar Pradesh) & Ors.571, which

570 Supra at Footnote No.134

571 (2017) 7 SCC 444

402

has considered similar challenge. The latter decision has

distinguished the exposition in A.R. Antulay572. In that, the core

issue considered in A.R. Antulay573 was whether the High Court

was competent to transfer the criminal trial pending before the

Special Court dealing with the offence of PC Act, to itself by invoking

powers under Section 407 of the 1973 Code. The Court answered

the same in the negative and held that such power does not exist in

the High Court and it would inevitably violate Article 21 of the

Constitution. However, we are dealing with the dispensation

provided by the law made by the Parliament in the form of 2002 Act.

This being a special legislation and keeping in view the purport of

Sections 65 and 71 of the 2002 Act, it is not possible to countenance

the ground of challenge under consideration. We may usefully refer

to paragraph 28 of Kalyan Singh574, which reads thus:

“28. In the present case, the power of transfer is being

exercised to transfer a case from one Special Judge to

another Special Judge, and not to the High Court. The

fact that one Special Judge happens to be a

Magistrate, whereas the other Special Judge has

committed the case to a Court of Session would not

make any difference as, as has been stated

hereinabove, even a right of appeal from a Magistrate

572 Supra at Footnote No.134

573 Supra at Footnote No.134

574 Supra at Footnote No.571

403

to the Sessions Court, and from the Sessions Court to

the High Court could be taken away under the

procedure established by law i.e. by virtue of Sections

407(1) and (8) if the case is required to be transferred

from the Magistrate at Rae Bareilly to the High Court

itself. Hence, under Section 407, even if 2 tiers of

appeal are done away with, there is no infraction of

Article 21 as such taking away of the right of appeal

is expressly contemplated by Section 407(1)(iv) read

with Section 407(8). In the circumstances, Antulay575

judgment which dealt with the right of a substantive

appeal from a Special Judge to the High Court being

taken away by an order of transfer contrary to the non

obstante clause in Section 7(1) of the Criminal Law

Amendment Act, 1952 would not apply in the facts

and circumstances before us.”

(emphasis supplied)

Applying the principle underlying this decision, we have no

hesitation in rejecting the challenge to Section 44 as

unconstitutional being violative of Articles 14, 20(3) and 21 of the

Constitution.

112. Reverting to Clause (d) of sub-section (1) of Section 44, it

postulates that a Special Court while trying the scheduled offence or

offence of money-laundering shall hold trial in accordance with the

provisions of the 1973 Code as it applies to a trial before a Court of

Sessions. Going by the plain language of this provision, no fault can

be found for conducting trial in the respective cases in the same

575 Supra at Footnote No.134

404

manner as provided in the 1973 Code. However, the grievance is

about the insertion of Explanation vide Finance (No.2) Act, 2019. As

a matter of fact, this insertion is only a clarificatory provision, as is

evident from the opening statement of the provision which says that

“for the removal of doubts, it is clarified that”. None of the clauses

inserted by this amendment travel beyond the principal provision

contained in Clause (d). Clause (i) of the Explanation enunciates

that the jurisdiction of the Special Court while dealing with the

offence being tried under this Act, shall not be dependent upon any

orders passed in respect of the scheduled offence, and the trial of

both sets of offences by the same Court shall not be construed as

joint trials. This, in fact, is reiteration of the earlier part of the same

section, which envisages that even though both the trials may

proceed before the same Special Court, it must be tried separately

as per the provisions of the 1973 Code. Insofar as Clause (ii) of the

Explanation, at the first glance, it does give an impression that the

same is unconnected with the earlier part of the section. However,

on closer scrutiny of this provision, it is noted that the same is only

an enabling provision permitting to take on record material

regarding further investigation against any accused person involved

405

in respect of offence of money-laundering for which complaint has

already been filed, whether he has been named in the complaint or

not. Such a provision, in fact, is a wholesome provision to ensure

that no person involved in the commission of offence of moneylaundering must go unpunished. It is always open to the Authority

authorised to seek permission of the Court during the trial of the

complaint in respect of which cognizance has already been taken by

the Court to bring on record further evidence which request can be

dealt with by the Special Court in accordance with law keeping in

mind the provisions of the 1973 Code as well. It is also open to the

Authority authorised to file a fresh complaint against the person who

has not been named as accused in the complaint already filed in

respect of same offence of money-laundering, including to request

the Court to proceed against such other person appearing to be

guilty of offence under Section 319 of the 1973 Code, which

otherwise would apply to such a trial.

113. The petitioners may be justified in making grievance that the

provision though permits the Special Court to proceed with the trial

in respect of scheduled offence, yet it may be oppressive as against

406

the accused who is not charged with the offence of moneylaundering but only scheduled offence. For, he may be denied of

opportunity of one appeal or revision, as the case may be before the

higher forum. Such a grievance can certainly be looked into by the

Special Court if an application is moved by the Authority authorised.

Since we have held that the provision is only to bestow enabling

power in the Special Court, it must follow that the Special Court will

examine the request of the Authority authorised for transfer of trial

of predicate offence to itself on case-to-case basis. Similarly, request

for trial of offence under another special statute, such as PC Act,

NDPS Act, etc. can also be considered by the Special Court on caseto-case basis after examining all aspects of the matter.

114. In view of the above discussion, we do not find merit in the

challenge to Section 44 being arbitrary or unconstitutional. We hold

that the same is consistent with the legislative scheme and the

purposes and objects behind the enactment of the 2002 Act to

ensure that the proceeds of crime involved in money-laundering are

dealt with appropriately as per the special Act and all concerned

407

involved in the process or activity connected with such proceeds of

crime are prosecuted for offence of money-laundering.

BAIL

115. The relevant provisions regarding bail in the 2002 Act can be

traced to Sections 44(2), 45 and 46 in Chapter VII concerning the

offence under this Act. The principal grievance is about the twin

conditions specified in Section 45 of the 2002 Act. Before we

elaborate further, it would be apposite to reproduce Section 45, as

amended. The same reads thus:

“45. Offences to be cognizable and non-bailable.—(1)

576[Notwithstanding anything contained in the Code of

Criminal Procedure, 1973 (2 of 1974), no person accused

of an offence 577[under this Act] shall be released on bail

or on his own bond unless—]

(i) the Public Prosecutor has been given an

opportunity to oppose the application for such

release; and

(ii) where the Public Prosecutor opposes the

application, the court is satisfied that there are

reasonable grounds for believing that he is not guilty

576 Subs. by Act 20 of 2005, sec. 7, for “Notwithstanding anything contained in the Code of

Criminal Procedure, 1973 (2 of 1974),—

(a) every offence punishable under this Act shall be cognizable;

(b) no person accused of an offence punishable for a term of imprisonment of more than

three years under Part A of the Schedule shall be released on bail or on his own bond

unless” (w.e.f. 1-7-2005).

577 Subs. by Act 13 of 2018, sec. 208(e)(i), for “punishable for a term of imprisonment of more

than three years under Part A of the Schedule” (w.e.f. 19-4-2018, vide G.S.R. 383(E), dated 19th

April, 2018).

408

of such offence and that he is not likely to commit

any offence while on bail:

Provided that a person who is under the age of

sixteen years, or is a woman or is sick or infirm, 578[or is

accused either on his own or along with other co-accused

of money-laundering a sum of less than one crore

rupees], may be released on bail, if the Special Court so

directs:

Provided further that the Special Court shall not take

cognizance of any offence punishable under section 4

except upon a complaint in writing made by—

(i) the Director; or

(ii) any officer of the Central Government or a State

Government authorised in writing in this behalf by

the Central Government by a general or special order

made in this behalf by that Government.

579[(1A) Notwithstanding anything contained in the Code

of Criminal Procedure, 1973 (2 of 1974), or any other

provision of this Act, no police officer shall investigate

into an offence under this Act unless specifically

authorised, by the Central Government by a general or

special order, and, subject to such conditions as may be

prescribed.]

(2) The limitation on granting of bail specified in 580[***]

sub-section (1) is in addition to the limitations under the

Code of Criminal Procedure, 1973 (2 of 1974) or any other

law for the time being in force on granting of bail.

581[Explanation.—For the removal of doubts, it is

clarified that the expression “Offences to be cognizable

and non-bailable” shall mean and shall be deemed to

have always meant that all offences under this Act shall

be cognizable offences and non-bailable offences

notwithstanding anything to the contrary contained in

the Code of Criminal Procedure, 1973 (2 of 1974), and

accordingly the officers authorised under this Act are

578 Ins. by Act 13 of 2018, s. 208(e)(ii) (w.e.f. 19-4-2018, vide G.S.R. 383(E), dated 19th April,

2018).

579 Ins. by Act 20 of 2005, sec. 7 (w.e.f. 1-7-2005).

580 The words “clause (b) of” omitted by Act 20 of 2005, sec. 7 (w.e.f. 1-7-2005).

581 Ins. by the Finance (No.2) Act, 2019, sec. 200 (w.e.f. 1-8-2019).

409

empowered to arrest an accused without warrant, subject

to the fulfilment of conditions under section 19 and

subject to the conditions enshrined under this section.]”

Section 45 has been amended vide Act 20 of 2005, Act 13 of 2018

and Finance (No.2) Act, 2019. The provision as it obtained prior to

23.11.2017 read somewhat differently. The constitutional validity of

Sub-section (1) of Section 45, as it stood then, was considered in

Nikesh Tarachand Shah582. This Court declared Section 45(1) of

the 2002 Act, as it stood then, insofar as it imposed two further

conditions for release on bail, to be unconstitutional being violative

of Articles 14 and 21 of the Constitution. The two conditions which

have been mentioned as twin conditions are:

(i) that there are reasonable grounds for believing that he is not

guilty of such offence; and

(ii) that he is not likely to commit any offence while on bail.

According to the petitioners, since the twin conditions have been

declared to be void and unconstitutional by this Court, the same

582 Supra at Footnote No.3

410

stood obliterated. To buttress this argument, reliance has been

placed on the dictum in State of Manipur583.

116. The first issue to be answered by us is: whether the twin

conditions, in law, continued to remain on the statute book post

decision of this Court in Nikesh Tarachand Shah584 and if yes, in

view of the amendment effected to Section 45(1) of the 2002 Act vide

Act 13 of 2018, the declaration by this Court will be of no

consequence. This argument need not detain us for long. We say

so because the observation in State of Manipur585 in paragraph 29

of the judgment that owing to the declaration by a Court that the

statute is unconstitutional obliterates the statute entirely as though

it had never been passed, is contextual. In this case, the Court was

dealing with the efficacy of the repealing Act. While doing so, the

Court had adverted to the repealing Act and made the stated

observation in the context of lack of legislative power. In the process

of reasoning, it did advert to the exposition in Behram Khurshid

583 Supra at Footnote No.159

584 Supra at Footnote No.3

585 Supra at Footnote No.159

411

Pesikaka586 and Deep Chand587 including American jurisprudence

expounded in Cooley on Constitutional Limitations588 and

Norton vs. Shelby County589.

117. In the present case, however, there is no issue of lack of

legislative power of the Parliament to enact a law on the subject of

money-laundering. In such a situation, the enunciation of the

Constitution Bench of this Court, including seven-Judge Bench,

may have direct bearing for answering the argument under

consideration. We may usefully refer to the dictum of the

Constitution Bench of five-Judges of this Court in M.P.V.

Sundararamier & Co.590. It had noted the distinction between the

effect of unconstitutionality of a statute arising either because the

law is in respect of a matter not within the competence of the

Legislature, or because the matter itself being within its competence,

its provisions offend some constitutional restrictions. It went on to

observe that if a law is on a field not within the domain of the

586 Supra at Footnote No.310

587 Supra at Footnote No. 210 (also at Footnote No.69)

588 Vol.1, page 382

589 118 US 425 (1886)

590 Supra at Footnote No.311

412

Legislature, it is absolutely null and void, and a subsequent cession

of that field to or by the Legislature will not have the effect of

breathing life into what was a still born piece of legislation. At the

same time, it noted that if the law is in respect of a matter assigned

to the Legislature but its provisions disregard constitutional

prohibitions, though the law would be unenforceable by reason of

those prohibitions, when once they are removed, the law will become

effective without re-enactment. After discussing the American

decisions and jurisprudence, it went on to sum up as follows:

“The result of the authorities may thus be summed

up: Where an enactment is unconstitutional in part

but valid as to the rest, assuming of course that the

two portions are severable, it cannot be held to have

been wiped out of the statute book as it admittedly

must remain there for the purpose of enforcement of

the valid portion thereof, and being on the statute

book, even that portion which is unenforceable on the

ground that it is unconstitutional will operate Proprio

vigore when the Constitutional bar is removed, and

there is no need for a fresh legislation to give effect

thereto. On this view, the contention of the petitioners

with reference to the Explanation in s. 22 of the Madras

Act must fail. That Explanation operates, as already

stated, on two classes of transactions. It renders taxation

of sales in which the property in the goods passes in

Madras but delivery takes place outside Madras illegal on

the ground that they are outside sales falling within Art.

286(1)(a). It also authorises the imposition of tax on the

sales in which the property in the goods passes outside

Madras but goods are delivered for consumption within

Madras. It is valid in so far as it prohibits tax on outside

sales, but invalid in so far as sales in which goods are

delivered inside the State are concerned, because such

sales are hit by Art. 286(2). The fact that it is invalid as

413

to a part has not the effect of obliterating it out of the

statute book, because it is valid as to a part and has to

remain in the statute book for being enforced as to that

part. The result of the enactment of the impugned Act is

to lift the ban under Article 286(2), and the consequence

of it is that that portion of the Explanation which relates

to sales in which property passes outside Madras but the

goods are delivered inside Madras and which was

unenforceable before, became valid and enforceable. In

this view, we do not feel called upon to express any

opinion as to whether it would make any difference in the

result if the impugned provision was unconstitutional in

its entirety.”

(emphasis supplied)

118. No doubt Deep Chand591 is a subsequent judgment as has

been noticed in the State of Manipur592. However, in the later

judgment of the Constitution Bench of seven-Judges of this Court in

Jagannath593, the legal position has been reviewed and answered.

This decision has not only adverted to two earlier Constitution Bench

decisions referred to and relied upon in State of Manipur594 (i.e.,

Behram Khurshid Pesikaka595 and Deep Chand596), including

American jurisprudence and decision in Norton597, but to hosts of

591 Supra at Footnote No. 210 (also at Footnote No.69)

592 Supra at Footnote No.159

593 Supra at Footnote No.314

594 Supra at Footnote No.159

595 Supra at Footnote No.310

596 Supra at Footnote No. 210 (also at Footnote No.69)

597 Supra at Footnote No.589

414

other decisions. The first point noted in paragraph 9 of this decision

is that when this Court has declared the concerned legislation void

under the provisions of Article 13 sub-clause (2) of the Constitution,

should the Court proceed on the basis that the legislation was void

ab initio and non est or still born and, thus, any validating measure

could not instil life therein. After having analysed all the relevant

decisions, the Court went on to observe in paragraphs 22 and 23, as

follows:

“22. In our view, although decisions of the American

Supreme Court and the comments of well known

commentators like Willoughby and Cooley have great

persuasive force, we need not interpret our

Constitution by too much reliance on them. Nor is it

necessary to scrutinise too closely the decisions

wherein views appear to have been expressed that a

law which is void under Article 13(2) is to be treated

as still-born. Equally unfruitful would it be to consider

the doctrine of eclipse.

23. Apart from the question as to whether fundamental

rights originally enshrined in the Constitution were

subject to the amendatory process of Article 368 it must

now be held that Article 31-B and the Ninth Schedule

have cured the defect, if any, in the various Acts

mentioned in the said Schedule as regards any

unconstitutionality alleged on the ground of infringement

of fundamental rights, and by the express words of Article

31-B such curing of the defect took place with

retrospective operation from the dates on which the Acts

were put on the statute book. These Acts even if void

or inoperative at the time when they were enacted by

reason of infringement of Article 13(2) of the

Constitution, assumed full force and vigour from the

respective dates of their enactment after their

inclusion in the Ninth Schedule, read with Article 31-

415

B of the Constitution. The States could not, at any time,

cure any defect arising from the violation of the provisions

of Part III of the Constitution and therefore the objection

that the Madras Ceilings Act should have been re-enacted

by the Madras legislature after the Seventeenth

Constitutional Amendment came into force cannot be

accepted.”

(emphasis supplied)

Thus, where the defect as pointed out by the Court has been

removed by virtue of the validating Act retrospectively, then the

provision can be held to be intra vires provided that it does not

transgress any other constitutional limitation. It is, therefore, clear

from above that if by amending the provision retrospectively, the

Parliament has removed the defect or has taken away the basis on

which the provision was declared void then the provision cannot be

said to be in conflict with Article 13 of the Constitution. In other

words, if the very premise on which the judgment of the Court

declaring the provision to be void has been uprooted by the

Parliament, thereby resulting in the change of circumstances, the

judgment could not be given effect to in the altered circumstances,

then the provision cannot be held to be void. In this case, as has

been stated above, the anomalies noted in Nikesh

416

Tarachand Shah598 have been removed by way of Act No. 13 of

2018. Further, it has been clarified by way of Finance (No.2) Act,

2019 that amendment shall operate retrospectively. Thus, it cannot

be said that twin conditions under Section 45 of the 2002 Act does

not get revived.

119. A priori, it is not open to argue that Section 45 of the 2002 Act

post decision in Nikesh Tarachand Shah599 stood obliterated from

the statute book as such. Indubitably, it is not unknown that even

after declaration of unconstitutionality by the Court owing to

violation of rights guaranteed under Part III of the Constitution, it is

open to the Parliament/Legislature to cure the defect reckoned by

the Constitutional Court in relation to the concerned provision

whilst declaring it as unconstitutional.

120. In the case of Nikesh Tarachand Shah600, as aforesaid, this

Court declared the twin conditions in Section 45(1) of the 2002 Act

as unconstitutional being violative of Articles 14 and 21 of the

598 Supra at Footnote No.3

599 Supra at Footnote No.3

600 Supra at Footnote No.3

417

Constitution. That conclusion reached by this Court is essentially

on account of two basic reasons. The first being that the provision,

as it existed at the relevant time, was founded on a classification

based on sentencing of the scheduled offence and it had no nexus

with objectives of the 2002 Act; and secondly, because the twin

conditions were restricted only to a particular class of offences

within the 2002 Act, such as offences punishable for a term of

imprisonment for more than three years under Part A of the

Schedule, and not to all the offences under the 2002 Act. In

paragraph 1 of the same decision, the Court had noted that the

challenge set forth in the writ petition was limited to imposing two

conditions for grant of bail wherein an offence punishable for a term

of imprisonment for more than three years under Part A of the

Schedule to the Act is involved. This aspect has been thoroughly

analysed by the Court in the said decision. The Court also noted the

legislative history for enacting such a law and other relevant material

from paragraph 11 onwards upto paragraph 43. It adverted to

several circumstances and illustrations to conclude that the

provision, as it stood then, on the face of it, was discriminatory and

manifestly arbitrary. Eventually in the operative order, being

418

paragraph 54 of the decision, the Court declared that Section 45(1)

of the 2002 Act, as it stood then, insofar as it imposes two further

conditions for release on bail, to be unconstitutional as it violated

Articles 14 and 21 of the Constitution.

121. By the amendment vide Act 13 of 2018, the defects noted by

this Court in the aforementioned decision have been duly cured by

deleting the words “punishable for a term of imprisonment of more

than three years under Part A of the Schedule” in Section 45(1) of

the 2002 Act and substituted by words “under this Act”. The

question is: whether it was open to the Parliament to undo the effect

of the judgment of this Court declaring the twin conditions

unconstitutional? On a fair reading of the judgment, we must

observe that although the Court declared the twin conditions as

unconstitutional, but it was in the context of the opening part of the

sub-section (1) of Section 45, as it stood then, which resulted in

discrimination and arbitrariness as noticed in the judgment. But

that opening part referring to class of offences, namely punishable

for a term of imprisonment of more than three years under Part A of

the Schedule having been deleted and, instead, the twin conditions

419

have now been associated with all the offences under the 2002 Act,

the defect pointed out in the stated decision, stands cured. To

answer the question posed above, we may also usefully refer to the

enunciation of the Constitution Bench of this Court, which

recognises power of the Legislature to cure the defect when the law

is struck down by the Constitutional Court as violative of some

fundamental rights traceable to Part-III of the Constitution. It has

been consistently held that such declaration does not have the effect

of repealing the relevant provision as such. For, the power to repeal

vests only in the Parliament and none else. Only upon such repeal

by the Parliament, the provision would become non est for all

purposes until re-enacted, but it is open to the Parliament to cure

the defect noticed by the Constitutional Court so that the provision,

as amended by removing such defect gets revived. This is so

because, the declaration by the Constitutional Court and striking

down of a legal provision being violative of fundamental rights

traceable to Part III of the Constitution, merely results in the

provision, as it existed then, becoming inoperative and

unenforceable, even though it may continue to remain on the statute

book.

420

122. The decision of the Constitution Bench of this Court in Shri

Prithvi Cotton Mills Ltd.601 recognises this doctrine of taking away

as the basis or validating acts thereby removing the causes for

ineffectiveness or invalidity of actions or proceedings which are

validated by a legislative measure and, then by fiction, it becomes

re-enacted law. We may usefully refer to the decision in

Bhubaneshwar Singh602, wherein in paragraph 11, the Court

noted as follows:

“11. From time to time controversy has arisen as to

whether the effect of judicial pronouncements of the

High Court or the Supreme Court can be wiped out by

amending the legislation with retrospective effect.

Many such Amending Acts are called Validating Acts,

validating the action taken under the particular

enactments by removing the defect in the statute

retrospectively because of which the statute or the

part of it had been declared ultra vires. Such exercise

has been held by this Court as not to amount to

encroachment on the judicial power of the courts.

The exercise of rendering ineffective the judgments

or orders of competent courts by changing the very

basis by legislation is a well-known device of

validating legislation. This Court has repeatedly

pointed out that such validating legislation which

removes the cause of the invalidity cannot be

considered to be an encroachment on judicial power.

At the same time, any action in exercise of the power

under any enactment which has been declared to be

invalid by a court cannot be made valid by a

Validating Act by merely saying so unless the defect

601 Supra at Footnote No.300

602 Supra at Footnote No.301

421

which has been pointed out by the court is removed

with retrospective effect. The validating legislation

must remove the cause of invalidity. Till such defect

or the lack of authority pointed out by the court

under a statute is removed by the subsequent

enactment with retrospective effect, the binding

nature of the judgment of the court cannot be

ignored.”

(emphasis supplied)

123. Again, in the case of Comorin Match Industries (P) Ltd.603

this Court after adverting to earlier decisions, including Shri Prithvi

Cotton Mills Ltd.604 observed in paragraph 24 as follows:

“24. This case does not lay down that after a

judgment has been pronounced on the basis of an Act,

the provisions of that Act cannot be amended so as to

cure the defect pointed out in the judgment

retrospectively. The effect of the amending Act of

1969 is not to overrule a judgment passed by a court

of law, which the legislature cannot do. What the

legislature can do is to change the law on the basis of

which the judgment was pronounced retrospectively

and thereby nullify the effect of the judgment. When

the legislature enacts that notwithstanding any

judgment or order the new law will operate

retrospectively and the assessments shall be deemed

to be validly made on the basis of the amended law,

the legislature is not declaring the judgment to be

void but rendering things or acts deemed to have been

done under amended statute valid notwithstanding

any judgment or order on the basis of the unamended

law to the contrary. The validity to the assessment

orders which had been struck down by the Court, is

imparted by the amending Act by changing the law

retrospectively.”

(emphasis supplied)

603 Supra at Footnote No.302

604 Supra at Footnote No.300

422

124. The legal principles have been recapitulated by this Court once

again in Indian Aluminium Co.605, in paragraph 56, it was

observed as under:

“56. From a resume of the above decisions the following

principles would emerge:

(1) The adjudication of the rights of the parties is the

essential judicial function. Legislature has to lay down

the norms of conduct or rules which will govern the

parties and the transactions and require the court to

give effect to them;

(2) The Constitution delineated delicate balance in the

exercise of the sovereign power by the legislature,

executive and judiciary;

(3) In a democracy governed by rule of law, the

legislature exercises the power under Articles 245 and

246 and other companion articles read with the entries

in the respective lists in the Seventh Schedule to make

the law which includes power to amend the law.

(4) Courts in their concern and endeavour to

preserve judicial power equally must be guarded to

maintain the delicate balance devised by the

Constitution between the three sovereign

functionaries. In order that rule of law permeates to

fulfil constitutional objectives of establishing an

egalitarian social order, the respective sovereign

functionaries need free play in their joints so that

the march of social progress and order remains

unimpeded. The smooth balance built with delicacy

must always be maintained.

(5) In its anxiety to safeguard judicial power, it is

unnecessary to be overzealous and conjure up

incursion into the judicial preserve invalidating the

valid law competently made;

(6) The court, therefore, needs to carefully scan the

law to find out: (a) whether the vice pointed out by

605 Supra at Footnote No.303

423

the court and invalidity suffered by previous law is

cured complying with the legal and constitutional

requirements; (b) whether the legislature has

competence to validate the law; (c) whether such

validation is consistent with the rights guaranteed

in Part III of the Constitution.

(7) The court does not have the power to validate an

invalid law or to legalise impost of tax illegally made

and collected or to remove the norm of invalidation

or provide a remedy. These are not judicial

functions but the exclusive province of the

legislature. Therefore, they are not encroachment

on judicial power.

(8) In exercising legislative power, the legislature by

mere declaration, without anything more, cannot

directly overrule, revise or override a judicial

decision. It can render judicial decision ineffective

by enacting valid law on the topic within its

legislative field fundamentally altering or changing

its character retrospectively. The changed or

altered conditions are such that the previous

decision would not have been rendered by the court,

if those conditions had existed at the time of

declaring the law as invalid. It is also empowered to

give effect to retrospective legislation with a

deeming date or with effect from a particular date.

The legislature can change the character of the tax

or duty from impermissible to permissible tax but

the tax or levy should answer such character and

the legislature is competent to recover the invalid

tax validating such a tax on removing the invalid

base for recovery from the subject or render the

recovery from the State ineffectual. It is competent

for the legislature to enact the law with

retrospective effect and authorise its agencies to

levy and collect the tax on that basis, make the

imposition of levy collected and recovery of the tax

made valid, notwithstanding the declaration by the

court or the direction given for recovery thereof.

(9) The consistent thread that runs through all the

decisions of this Court is that the legislature cannot

directly overrule the decision or make a direction as

not binding on it but has power to make the decision

ineffective by removing the base on which the

decision was rendered, consistent with the law of

424

the Constitution and the legislature must have

competence to do the same.”

(emphasis supplied)

125. We may also usefully refer to the dictum in Narain Singh606,

it was held as under:

“21. The power of the sovereign legislature to legislate

within its field, both prospectively and retrospectively

cannot be questioned. This position has been settled in

many judgments of this Court. Some of them may be

considered below. In Bhubaneshwar Singh v. Union of

India607 the Court expressly approved the aforesaid

position in para 9 at pp. 82-83. Insofar as the validating

Acts are concerned, this Court in Bhubaneshwar

Singh608 also considered the question in para 11 and

held that the Court has the powers by virtue of such

validating legislation, to “wipe out” judicial

pronouncements of the High Court and the Supreme

Court by removing the defects in the statute

retrospectively when such statutes had been declared

ultra vires by Courts in view of its defects.

22. This Court in Bhubaneshwar Singh609 has held that

such legislative exercise will not amount to

encroachment on the judicial power. This Court has

accepted that such legislative device which removes the

vice in previous legislation is not considered an

encroachment on judicial power. In support of the

aforesaid proposition, this Court in Bhubaneshwar

Singh610 relied on the proposition laid down by

Hidayatullah, C.J. speaking for the Constitution Bench

in Shri Prithvi Cotton Mills Ltd. v. Broach Borough

Municipality611.

606 Supra at Footnote No.305

607 Supra at Footnote No.301

608 Supra at Footnote No.301

609 Supra at Footnote No.301

610 Supra at Footnote No.301

611 Supra at Footnote No.300

425

23. Again in Indian Aluminium Co. v. State of Kerala612

this Court while summarising the principle held that a

legislature cannot directly overrule a judicial decision

but it has the power to make the decision ineffective by

removing the basis on which the decision is rendered,

while at the same time adhering to the constitutional

imperatives and the legislature is competent to do so [see

para 56 sub-para (9) at p. 1446].

24. In Comorin Match Industries (P) Ltd. v. State of

T.N.613, the facts were that the assessment orders

passed under the Central Sales Tax Act were set aside

by the High Court and the State was directed to refund

the amount to the assessee. As the State failed to carry

it out, contempt petitions were filed but the assessment

orders were validated by passing the Amendment Act of

1969 with retrospective effect and the Court held that

the tax demanded became valid and enforceable.

25. The Court in Comorin Match case614 held that in

such a situation the State will not be precluded from

realising the tax due as subsequently the assessment

order was validated by the amending Act of 1969 and the

order passed in the contempt proceeding will not have

the effect of the writing off the debt which is statutorily

owed by the assessee to the State. The learned Judges

held that the effect of the amending Act is retrospective

validation of the assessment orders which were struck

down by the High Court. Therefore, the assessment

order is legislatively valid and the tax demands are also

enforceable.

26. It is therefore clear where there is a competent

legislative provision which retrospectively removes

the substratum of foundation of a judgment, the said

exercise is a valid legislative exercise provided it

does not transgress any other constitutional

limitation. Therefore, this Court cannot uphold the

reasoning in the High Court judgment that the

612 Supra at Footnote No.303

613 Supra at Footnote No.302

614 Supra at Footnote No.302

426

impugned amendment is invalid just because it

nullifies some provisions of the earlier Act.”

(emphasis supplied)

There are long line of decisions restating the above position and the

recent being Cheviti Venkanna Yadav615, which after analysing all

the relevant authorities on the point, noted in paragraph 30 as

follows:

“30. From the aforesaid authorities, it is settled that

there is a demarcation between the legislative and

judicial functions predicated on the theory of

separation of powers. The legislature has the power to

enact laws including the power to retrospectively

amend laws and thereby remove causes of

ineffectiveness or invalidity. When a law is enacted

with retrospective effect, it is not considered as an

encroachment upon judicial power when the

legislature does not directly overrule or reverse a

judicial dictum. The legislature cannot, by way of an

enactment, declare a decision of the court as

erroneous or a nullity, but can amend the statute or

the provision so as to make it applicable to the past.

The legislature has the power to rectify, through an

amendment, a defect in law noticed in the enactment

and even highlighted in the decision of the court.

This plenary power to bring the statute in conformity

with the legislative intent and correct the flaw

pointed out by the court, can have a curative and

neutralising effect. When such a correction is made,

the purpose behind the same is not to overrule the

decision of the court or encroach upon the judicial

turf, but simply enact a fresh law with retrospective

effect to alter the foundation and meaning of the

legislation and to remove the base on which the

judgment is founded. This does not amount to

statutory overruling by the legislature. In this

manner, the earlier decision of the court becomes

615 Supra at Footnote No.307

427

non-existent and unenforceable for interpretation of

the new legislation. No doubt, the new legislation can

be tested and challenged on its own merits and on the

question whether the legislature possesses the

competence to legislate on the subject-matter in

question, but not on the ground of overreach or

colourable legislation.”

(emphasis supplied)

From the above discussion, it is amply clear that the twin conditions

declared as unconstitutional by this Court in Nikesh Tarachand

Shah616 was in reference to the provision, as it existed at the

relevant time, predicating application of Section 45 of the 2002 Act

to only offences punishable for a term of imprisonment of more than

three years under Part A of the Schedule of the 2002 Act and not

even linked to the offences of money-laundering under the 2002 Act.

The reasons which weighed with this Court for declaring the twin

conditions in Section 45(1), as it stood at the relevant time,

unconstitutional in no way obliterated the provision from the statute

book. Therefore, it was open to the Parliament to cure the defect

noted by this Court and to revive the same provision as in the

present form, post amendment Act 13 of 2018 with effect form

19.4.2018.

616 Supra at Footnote No.3

428

126. Having said thus, we must now address the challenge to the

twin conditions as applicable post amendment of 2018. That

challenge will have to be tested on its own merits and not in reference

to the reasons weighed with this Court in declaring the provision,

(as it existed at the relevant time), applicable only to offences

punishable for a term of imprisonment of more than three years

under Part A of the Schedule to the 2002 Act. Now, the provision

(Section 45) including twin conditions would apply to the offence(s)

under the 2002 Act itself. The provision post 2018 amendment, is

in the nature of no bail in relation to the offence of money-laundering

unless the twin conditions are fulfilled. The twin conditions are that

there are reasonable grounds for believing that the accused is not

guilty of offence of money-laundering and that he is not likely to

commit any offence while on bail. Considering the purposes and

objects of the legislation in the form of 2002 Act and the background

in which it had been enacted owing to the commitment made to the

international bodies and on their recommendations, it is plainly

clear that it is a special legislation to deal with the subject of moneylaundering activities having transnational impact on the financial

systems including sovereignty and integrity of the countries. This is

429

not an ordinary offence. To deal with such serious offence, stringent

measures are provided in the 2002 Act for prevention of moneylaundering and combating menace of money-laundering, including

for attachment and confiscation of proceeds of crime and to

prosecute persons involved in the process or activity connected with

the proceeds of crime. In view of the gravity of the fallout of moneylaundering activities having transnational impact, a special

procedural law for prevention and regulation, including to prosecute

the person involved, has been enacted, grouping the offenders

involved in the process or activity connected with the proceeds of

crime as a separate class from ordinary criminals. The offence of

money-laundering has been regarded as an aggravated form of crime

“world over”. It is, therefore, a separate class of offence requiring

effective and stringent measures to combat the menace of moneylaundering.

127. There is no challenge to the provision on the ground of

legislative competence. The question, therefore, is: whether such

classification of offenders involved in the offence of moneylaundering is reasonable? Considering the concern expressed by the

430

international community regarding the money-laundering activities

world over and the transnational impact thereof, coupled with the

fact that the presumption that the Parliament understands and

reacts to the needs of its own people as per the exigency and

experience gained in the implementation of the law, the same must

stand the test of fairness, reasonableness and having nexus with the

purposes and objects sought to be achieved by the 2002 Act.

Notably, there are several other legislations where such twin

conditions have been provided for617. Such twin conditions in the

concerned provisions have been tested from time to time and have

stood the challenge of the constitutional validity thereof. The

successive decisions of this Court dealing with analogous provision

617 Central Legislations:- Section 36AC of Drugs and Cosmetics Act, 1940; Section 51A of the

Wild Life (Protection) Act, 1972; Section 6A of the Suppression of Unlawful Acts against Safety

of Civil Aviation Act, 1982; Section 15 Terrorist Affected Areas Act (Special Courts), 1984;

Section 37 of the Narcotic Drugs and Psychotropic Substances Act, 1985; Section 20 of the

Terrorist and Disruptive Activities (Prevention) Act, 1987; Section 8 of the Suppression Of

Unlawful Acts Against Safety Of Maritime Navigation and Fixed Platforms On Continental Shelf

Act, 2002; Section 212 of the Companies Act, 2013; and Section 12 of the Anti-Hijacking Act,

2016.

State Legislations:- Section 19 of the Uttar Pradesh Gangsters and Anti-Social Activities

(Prevention) Act, 1986; Section 21 of the Maharashtra Control of Organised Crime Act, 1999;

Section 22 of the Karnataka Control of Organized Crime Act, 2000; Section 21 of the Telangana

Control of Organized Crime Act, 2001 (renamed from Andhra Pradesh COCA, 2001); Section 18

of the Sikkim Anti-Drugs Act, 2006; Section 20 of the Gujrat Control of Terrorism and Organised

Crime Act, 2015; Section 19 of the Mizoram Drug (Controlled Substances) Act, 2016; and

Section 18 of the Haryana Control of Organised Crime Act, 2020.

431

have stated that the Court at the stage of considering the application

for grant of bail, is expected to consider the question from the angle

as to whether the accused was possessed of the requisite mens rea.

The Court is not required to record a positive finding that the

accused had not committed an offence under the Act. The Court

ought to maintain a delicate balance between a judgment of acquittal

and conviction and an order granting bail much before

commencement of trial. The duty of the Court at this stage is not to

weigh the evidence meticulously but to arrive at a finding on the

basis of broad probabilities. Further, the Court is required to record

a finding as to the possibility of the accused committing a crime

which is an offence under the Act after grant of bail.

128. For understanding whether such twin conditions can be

regarded as reasonable condition, we may usefully refer to the

decision of the Constitution Bench of this Court in Kartar Singh618.

While dealing with the challenge to Section 20(8) of TADA Act, the

Court rejected the argument that such provision results in

deprivation of liberty and violates Articles 14 and 21 of the

618 Supra at Footnote No.190

432

Constitution. It noted that such provision imposes complete ban on

release of accused on bail involved in the stated offence under the

special legislation, but that ban stands diluted by virtue of twin

conditions. It noted that rest of the provision, as in the case of the

Section 45 of the 2002 Act, is comparable with the conditions

specified in the 1973 Code for release of accused on bail concerning

ordinary offence under general law. The Constitution Bench

approved the dictum in Usmanbhai Dawoodbhai Memon619 and in

paragraph 349 noted thus:

“349. The conditions imposed under Section 20(8)(b),

as rightly pointed out by the Additional Solicitor

General, are in consonance with the conditions

prescribed under clauses (i) and (ii) of sub-section (1)

of Section 437 and clause (b) of sub-section (3) of that

section. Similar to the conditions in clause (b) of subsection (8), there are provisions in various other

enactments — such as Section 35(1) of Foreign

Exchange Regulation Act and Section 104(1) of the

Customs Act to the effect that any authorised or

empowered officer under the respective Acts, if, has

got reason to believe that any person in India or

within the Indian customs waters has been guilty of

an offence punishable under the respective Acts, may

arrest such person. Therefore, the condition that

“there are grounds for believing that he is not guilty

of an offence”, which condition in different form is

incorporated in other Acts such as clause (i) of

Section 437(1) of the Code and Section 35(1) of FERA

and 104(1) of the Customs Act, cannot be said to be

an unreasonable condition infringing the principle of

Article 21 of the Constitution.”

(emphasis supplied)

619 Supra at Footnote No.202

433

Again, in paragraph 351, the Constitution Bench observed thus:

“351. No doubt, liberty of a citizen must be zealously

safeguarded by the courts; nonetheless the courts

while dispensing justice in cases like the one under

the TADA Act, should keep in mind not only the

liberty of the accused but also the interest of the

victim and their near and dear and above all the

collective interest of the community and the safety

of the nation so that the public may not lose faith in

the system of judicial administration and indulge in

private retribution.”

(emphasis supplied)

We may immediately note that this judgment has been considered

by the two-Judge Bench of this Court in Nikesh Tarachand

Shah620 in paragraph 47 and distinguished in the following words:

“47. ….

It is clear that this Court upheld such a condition only

because the offence under TADA was a most heinous

offence in which the vice of terrorism is sought to be

tackled. Given the heinous nature of the offence which

is punishable by death or life imprisonment, and

given the fact that the Special Court in that case was

a Magistrate and not a Sessions Court, unlike the

present case, Section 20(8) of TADA was upheld as

being in consonance with conditions prescribed

under Section 437 of the Code of Criminal Procedure.

In the present case, it is Section 439 and not Section

437 of the Code of Criminal Procedure that applies.

Also, the offence that is spoken of in Section 20(8) is an

offence under TADA itself and not an offence under some

other Act. For all these reasons, the judgment in Kartar

Singh621 cannot apply to Section 45 of the present Act.”

(emphasis supplied)

620 Supra at Footnote No.3

621 Supra at Footnote No.190

434

129. With utmost humility at our command, we do not agree with

this (highlighted) observation. The reason for distinguishing the

enunciation of the Constitution Bench noted above, is not only

inapposite, but it is not consistent with the provisions in both the

Acts. Even the TADA Act, the appointment of Designated Court is

from amongst the Sessions Judge or Additional Sessions Judge in

any State and the offences under that Act were made exclusively

triable before such Designated Court and not the Magistrate. The

powers of the Magistrate were required to be bestowed on the

Designated Court being the Sessions Judge for the limited purpose

of proceeding with the case directly before it. This is amply clear,

inter alia, from Section 9, in particular Clause (6) thereof, including

Sections 20(3)622 and 20(4)623 of the TADA Act. Same is the logic

622 20. Modified application of certain provisions of the Code .- (1) …..

….

(3) Section 164 of the Code shall apply in relation to a case involving an offence punishable

under this Act or any rule made thereunder, subject to the modification that the reference in

sub-section (1) thereof to “Metropolitan Magistrate or Judicial Magistrate” shall be construed as

a reference to “Metropolitan Magistrate”, “Judicial Magistrate, Executive Magistrate or Special

Executive Magistrate”.

623 20. Modified application of certain provisions of the Code .- (1) …..

…..

(4) Section 167 of the Code shall apply in relation to a case involving an offence punishable

under this Act or any rule made thereunder subject to the modifications that—

(a) the reference in sub-section (1) thereof to “Judicial Magistrate” shall be construed as

reference to “Judicial Magistrate or Executive Magistrate or Special Executive Magistrate”;

435

adopted under Chapter VII of the 2002 Act in constituting the

Special Courts and empowering the Sessions Judge appointed as

Special Court with the powers of the Magistrate. That aspect has

been dealt with by the Constitution Bench in paragraphs 342 to 344,

while approving the exposition in Usmanbhai Dawoodbhai

Memon624

. The same reads thus:

“342. Sub-section (8) which imposes a complete ban on

release on bail against the accused of an offence

punishable under this Act minimises or dilutes that ban

under two conditions, those being (1) the Public

Prosecutor must be given an opportunity to oppose the

bail application for such release; and (2) where the Public

Prosecutor opposes the bail application the court must

be satisfied that the two conditions, namely, (a) there are

reasonable grounds for believing that the person accused

is not guilty of such offence and (b) he is not likely to

commit any offence while on bail. Sub-section (9)

qualifies sub-section (8) to the effect that the above two

limitations imposed on grant of bail specified in subsection (8) are in addition to the limitations under the

Code or any other law for the time being in force on

granting of bail. Section 436 of the Code provides for

grant of bail to a person accused of a bailable offence,

while Section 437 provides for grant of bail to any

accused of, or suspected of, the commission of any non-

(b) the reference in sub-section (2) thereof the “fifteen days”, “ninety days” and “sixty days”,

wherever they occur, shall be construed as references to “sixty days”, one hundred and

eighty days and one hundred and eighty days respectively; and

(bb) sub-section (2), after the proviso, the following proviso shall be inserted, namely:

“Provided further that, if it is not possible to complete the investigation within the

said period of one hundred and eighty days, the Designated Court shall extend the said

period up to one year, on the report of the Public Prosecutor indicating the progress of

the investigation and the specific reasons for the detention of the accused beyond the

said period of one hundred and eighty days; and.

624 Supra at Footnote No.202

436

bailable offence. Nonetheless, sub-section (1) of Section

437 imposes certain fetters on the exercise of the powers

of granting bail on fulfilment of two conditions, namely

(1) if there appear reasonable grounds for believing that

he has been guilty of an offence punishable with death or

imprisonment for life; and (2) if the offence complained of

is a cognizable offence and that the accused had been

previously convicted of an offence punishable with death,

imprisonment for life or imprisonment for seven years or

more or he had previously convicted on two or more

occasions of a nonbailable and cognizable offence. Of

course, these two conditions are subject to three provisos

attached to sub-section (1) of Section 437. But we are not

very much concerned about the provisos. However, subsection (3) of Section 437 gives discretion to the court to

grant bail attached with some conditions if it considers

necessary or in the interest of justice. For proper

understanding of those conditions or limitations to which

two other conditions under clauses (a) and (b) of subsection (8) of Section 20 of the TADA Act are attached, we

reproduce those conditions in Section 437(3) hereunder:

“437. (3) * * *

(a) in order to ensure that such person shall attend

in accordance with the conditions of the bond

executed under this Chapter, or

(b) in order to ensure that such person shall not

commit an offence similar to the offence of which he

is accused or of the commission of which he is

suspected, or

343. Section 438 of the code speaks of bail and Section

439 deals with the special powers of High Court or Court

of Session regarding bail. It will be relevant to cite Section

439(1)(a) also, in this connection, which reads as follows:

“439. Special powers of High Court or Court of Session

regarding bail.— (1) A High Court or Court of Session

may direct—

(a) that any person accused of an offence and in

custody be released on bail, and if the offence is of

the nature specified in sub-section (3) of Section

437, may impose any condition which it considers

necessary for the purposes mentioned in that subsection;

437

(b) …”

344. In this connection, we would like to quote the

following observation of this Court in Usmanbhai

Dawoodbhai Memon v. State of Gujarat625, with which we

are in agreement : (SCC pp. 286-287, para 19)

“Though there is no express provision excluding the

applicability of Section 439 of the Code similar to the

one contained in Section 20(7) of the Act in relation

to a case involving the arrest of any person on an

accusation of having committed an offence

punishable under the Act or any rule made

thereunder, but that result must, by necessary

implication, follow. It is true that the source of power

of a Designated Court to grant bail is not Section

20(8) of the Act as it only places limitations on such

power. This is made explicit by Section 20(9) which

enacts that the limitations on granting of bail

specified in Section 20(8) are ‘in addition to the

limitations under the Code or any other law for the

time being in force’. But it does not necessarily follow

that the power of a Designated Court to grant bail is

relatable to Section 439 of the Code. It cannot be

doubted that a Designated Court is ‘a court other

than the High Court or the Court of Session’ within

the meaning of Section 437 of the Code. The exercise

of the power to grant bail by a Designated Court is

not only subject to the limitations contained therein,

but is also subject to the limitations placed by

Section 20(8) of the Act.””

This portion of the judgment of the Constitution Bench has not been

noticed in Nikesh Tarachand Shah626. Further, we do not agree

with the observations suggestive of that the offence of moneylaundering is less heinous offence than the offence of terrorism

625 Supra at Footnote No.202

626 Supra at Footnote No.3

438

sought to be tackled under TADA Act or that there is no compelling

State interest in tackling offence of money-laundering. The

international bodies have been discussing the menace of moneylaundering on regular basis for quite some time; and strongly

recommended enactment of stringent legislation for prevention of

money-laundering and combating with the menace thereof including

to prosecute the offenders and for attachment and confiscation of

the proceeds of crime having direct impact on the financial systems

and sovereignty and integrity of the countries. That concern has

been duly noted even in the opening part of the introduction and

Statement of Objects and Reasons, for which the 2002 Act came into

being. This declaration by the Parliament itself is testimony of

compelling necessity to have stringent regime (enactment) for

prevention and control of the menace of money-laundering. Be it

noted that under Article 38 of the Constitution of India, it is the duty

of the State to secure social, economic and political justice and

minimize income inequalities. Article 39 of the Constitution

mandates the State to prevent concentration of wealth, thus, to

realize its socialist goal, it becomes imperative for the State to make

such laws, which not only ensure that the unaccounted money is

439

infused back in the economic system of the country, but also prevent

any activity which damages the economic fabric of the nation. It

cannot be gainsaid that social and economic offences stand on a

graver footing as they not only involve an individual direct victim,

but harm the society as a whole627. Thus, the Law Commission also

in its 47th report recommended an increase in punishment for most

of the offences considered therein. Further, the quantum of

punishment for money-laundering offence, being only seven years,

cannot be the basis to undermine the seriousness and gravity of this

offence. The quantum of sentence is a matter of legislative policy.

The punishment provided for the offence is certainly one of the

principles in deciding the gravity of the offence, however, it cannot

be said that it is the sole factor in deciding the severity of offence as

contended by the petitioners. Money-laundering is one of the

heinous crimes, which not only affects the social and economic

fabric of the nation, but also tends to promote other heinous

offences, such as terrorism, offences related to NDPS Act, etc. It is a

proven fact that international criminal network that support home

grown extremist groups relies on transfer of unaccounted money

627 47th Law Commission Report

440

across nation States628, thus, by any stretch of imagination, it

cannot be said that there is no compelling State interest in providing

stringent conditions of bail for the offence of money-laundering. In

Ram Jethmalani & Ors. vs. Union of India & Ors.629, the Court

expounded the theory of “soft state” which is used to describe a

nation which is not capable of preventing the offence of moneylaundering. The Court held thus:

“13. The concept of a “soft state” was famously

articulated by the Nobel Laureate, Gunnar Myrdal. It is

a broad-based assessment of the degree to which the

State, and its machinery, is equipped to deal with its

responsibilities of governance. The more soft the State

is, greater the likelihood that there is an unholy

nexus between the law maker, the law keeper, and

the law breaker.”

(emphasis supplied)

In Mohanlal Jitamalji Porwal630, while explaining the impact of

economic offences on the community, the Court observed that

usually the community view the economic offender with a permissive

628 Ram Jethmalani & Ors. vs. Union of India & Ors., (2011) 8 SCC 1

629 (2011) 8 SCC 1 (also at Footnote No.628)

630 Supra at Footnote No.254

441

eye, although the impact of the offence is way greater than that of

offence of murder. The Court held thus:

“5..…The entire Community is aggrieved if the

economic offenders who ruin the economy of the State

are not brought to books. A murder may be committed

in the heat of moment upon passions being aroused.

An economic offence is committed with cool

calculation and deliberate design with an eye on

personal profit regardless of the consequence to the

Community. A disregard for the interest of the

Community can be manifested only at the cost of

forfeiting the trust and faith of the Community in

the system to administer justice in an even handed

manner without fear of criticism from the quarters

which view white collar crimes with a permissive

eye unmindful of the damage done to the National

Economy and National Interest. ……”

(emphasis supplied)

In Rohit Tandon631&632, this Court observed as follows:-

“21. The consistent view taken by this Court is

that economic offences having deep-rooted

conspiracies and involving huge loss of public

funds need to be viewed seriously and

considered as grave offences affecting the

economy of the country as a whole and

631 Supra at Footnote No.189

632 Supra at Footnote No.189

442

thereby posing serious threat to the financial

health of the country. Further, when attempt is

made to project the proceeds of crime as untainted

money and also that the allegations may not

ultimately be established, but having been made, the

burden of proof that the monies were not the proceeds

of crime and were not, therefore, tainted shifts on the

accused persons under Section 24 of the 2002 Act.”

(emphasis supplied)

Thus, it is well settled by the various decisions of this Court and

policy of the State as also the view of international community that

the offence of money-laundering is committed by an individual with

a deliberate design with the motive to enhance his gains,

disregarding the interests of nation and society as a whole and which

by no stretch of imagination can be termed as offence of trivial

nature. Thus, it is in the interest of the State that law enforcement

agencies should be provided with a proportionate effective

mechanism so as to deal with these types of offences as the wealth

of the nation is to be safeguarded from these dreaded criminals. As

discussed above, the conspiracy of money-laundering, which is a

three-staged process, is hatched in secrecy and executed in

darkness, thus, it becomes imperative for the State to frame such a

stringent law, which not only punishes the offender proportionately,

443

but also helps in preventing the offence and creating a deterrent

effect.

130. In the case of the 2002 Act, the Parliament had no reservation

to reckon the offence of money-laundering as a serious threat to the

financial systems of our country, including to its sovereignty and

integrity. Therefore, the observations and in particular in paragraph

47 of Nikesh Tarachand Shah633, are in the nature of doubting the

perception of the Parliament in that regard, which is beyond the

scope of judicial review. That cannot be the basis to declare the law

manifestly arbitrary.

131. It is important to note that the twin conditions provided under

Section 45 of the 2002 Act, though restrict the right of the accused

to grant of bail, but it cannot be said that the conditions provided

under Section 45 impose absolute restraint on the grant of bail. The

discretion vests in the Court which is not arbitrary or irrational but

judicial, guided by the principles of law as provided under Section

45 of the 2002 Act. While dealing with a similar provision

633 Supra at Footnote No.3

444

prescribing twin conditions in MCOCA, this Court in Ranjitsing

Brahmajeetsing Sharma634

, held as under:

“44. The wording of Section 21(4), in our opinion,

does not lead to the conclusion that the court must

arrive at a positive finding that the applicant for bail

has not committed an offence under the Act. If such

a construction is placed, the court intending to grant bail

must arrive at a finding that the applicant has not

committed such an offence. In such an event, it will be

impossible for the prosecution to obtain a judgment of

conviction of the applicant. Such cannot be the intention

of the legislature. Section 21(4) of MCOCA, therefore,

must be construed reasonably. It must be so

construed that the court is able to maintain a

delicate balance between a judgment of acquittal and

conviction and an order granting bail much before

commencement of trial. Similarly, the Court will be

required to record a finding as to the possibility of his

committing a crime after grant of bail. However, such an

offence in futuro must be an offence under the Act and

not any other offence. Since it is difficult to predict the

future conduct of an accused, the court must necessarily

consider this aspect of the matter having regard to the

antecedents of the accused, his propensities and the

nature and manner in which he is alleged to have

committed the offence.

45. It is, furthermore, trite that for the purpose of

considering an application for grant of bail, although

detailed reasons are not necessary to be assigned,

the order granting bail must demonstrate application

of mind at least in serious cases as to why the

applicant has been granted or denied the privilege of

bail.

46. The duty of the court at this stage is not to weigh

the evidence meticulously but to arrive at a finding

on the basis of broad probabilities. However, while

dealing with a special statute like MCOCA having

regard to the provisions contained in sub-section (4)

634 Supra at Footnote No.275 (also at Footnote No.53)

445

of Section 21 of the Act, the court may have to probe

into the matter deeper so as to enable it to arrive at

a finding that the materials collected against the

accused during the investigation may not justify a

judgment of conviction. The findings recorded by the

court while granting or refusing bail undoubtedly

would be tentative in nature, which may not have

any bearing on the merit of the case and the trial

court would, thus, be free to decide the case on the

basis of evidence adduced at the trial, without in any

manner being prejudiced thereby”

(emphasis supplied)

We are in agreement with the observation made by the Court in

Ranjitsing Brahmajeetsing Sharma635. The Court while dealing

with the application for grant of bail need not delve deep into the

merits of the case and only a view of the Court based on available

material on record is required. The Court will not weigh the evidence

to find the guilt of the accused which is, of course, the work of Trial

Court. The Court is only required to place its view based on

probability on the basis of reasonable material collected during

investigation and the said view will not be taken into consideration

by the Trial Court in recording its finding of the guilt or acquittal

during trial which is based on the evidence adduced during the trial.

As explained by this Court in Nimmagadda Prasad636

, the words

635 Supra at Footnote No.275 (also at Footnote No.53)

636 Supra at Footnote No.256

446

used in Section 45 of the 2002 Act are “reasonable grounds for

believing” which means the Court has to see only if there is a genuine

case against the accused and the prosecution is not required to

prove the charge beyond reasonable doubt.

132. Sub-section (6) of Section 212 of the Companies Act imposes

similar twin conditions, as envisaged under Section 45 of the 2002

Act on the grant of bail, when a person is accused of offence under

Section 447 of the Companies Act which punishes fraud, with

punishment of imprisonment not less than six months and

extending up to 10 years, with fine not less than the amount involved

in the fraud, and extending up to 3 times the fraud. The Court in

Nittin Johari637, while justifying the stringent view towards grant of

bail with respect to economic offences held that-

“24. At this juncture, it must be noted that even as

per Section 212(7) of the Companies Act, the limitation

under Section 212(6) with respect to grant of bail is in

addition to those already provided in the CrPC. Thus, it

is necessary to advert to the principles governing the

grant of bail under Section 439 of the CrPC.

Specifically, heed must be paid to the stringent view

taken by this Court towards grant of bail with respect

of economic offences. In this regard, it is pertinent to

637 Supra at Footnote No.291

447

refer to the following observations of this Court in Y.S.

Jagan Mohan Reddy638: (SCC p.449, paras 34-35)

“34. Economic offences constitute a class

apart and need to be visited with a different

approach in the matter of bail. The economic

offences having deep-rooted conspiracies and

involving huge loss of public funds need to be

viewed seriously and considered as grave offences

affecting the economy of the country as a whole and

thereby posing serious threat to the financial

health of the country.

35. While granting bail, the court has to keep in

mind the nature of accusations, the nature of

evidence in support thereof, the severity of the

punishment which conviction will entail, the

character of the accused, circumstances which

are peculiar to the accused, reasonable

possibility of securing the presence of the

accused at the trial, reasonable apprehension of

the witnesses being tampered with, the larger

interests of the public/State and other similar

considerations.”

(emphasis supplied)

133. This Court has been restating this position in several decisions,

including Gautam Kundu639 and Amit Kumar640. Thus, while

considering the application for bail under Section 45 of the 2002 Act,

the Court should keep in mind the abovementioned principles

governing the grant of bail. The limitations on granting bail as

638 Supra at Footnote No.255

639 Supra at Footnote No.207

640 Supra at Footnote No.258

448

prescribed under Section 45 of the 2002 Act are in addition to the

limitations under the 1973 Code.

134. As aforementioned, similar twin conditions have been provided

in several other special legislations641 validity whereof has been

upheld by this Court being reasonable and having nexus with the

purposes and objects sought to be achieved by the concerned special

legislations. Besides the special legislation, even the provisions in

the general law, such as 1973 Code stipulate compliance of

preconditions before releasing the accused on bail. The grant of bail,

even though regarded as an important right of the accused, is not a

mechanical order to be passed by the Courts. The prayer for grant

of bail even in respect of general offences, have to be considered on

the basis of objective discernible judicial parameters as delineated

by this Court from time to time, on case-to-case basis.

641 (i) Section 43D(5) of the UAPA [Zahoor Ahmad Shah Watali (supra at Footnote No.290)];

(ii) Section 21(4) of the MCOCA [Vishwanath Maranna Shetty (supra at Footnote No.287);

Chenna Boyanna Krishna Yadav (supra at Footnote No.283) and Ranjitsing Brahmajeetsing

Sharma (supra at Footnote Nos.53 and 275)]; (iii) Section 21(5) of the MCOCA [Bharat Shanti

Lal Shah (supra at Footnote No.285); (iv) Section 37 of the NDPS Act [R. Paulsamy (supra at

Footnote No.277); Gurcharan Singh (supra at Footnote No.278); Ahmadalieva Nodira (supra at

Footnote No.276); Abdulla (supra at Footnote No.280); Karma Phuntsok (supra at Footnote

No.282); N.R. Mon (supra at Footnote No.284); Rattan Mallik alias Habul (supra at Footnote

No.286); Satpal Singh (supra at Footnote No.289); and Niyazuddin Sk. (supra at Footnote

No.288); and (v) Section 212(6) of the Companies Act [Nittin Johari (supra at Footnote No.291)].

449

135. We are conscious of the fact that in paragraph 53 of the Nikesh

Tarachand Shah642, the Court noted that it had struck down

Section 45 of the 2002 as a whole. However, in paragraph 54, the

declaration is only in respect of further (two) conditions for release

on bail as contained in Section 45(1), being unconstitutional as the

same violated Articles 14 and 21 of the Constitution. Be that as it

may, nothing would remain in that observation or for that matter,

the declaration as the defect in the provision [Section 45(1)], as

existed then, and noticed by this Court has been cured by the

Parliament by enacting amendment Act 13 of 2018 which has come

into force with effect from 19.4.2018. We, therefore, confined

ourselves to the challenge to the twin conditions in the provision, as

it stands to this date post amendment of 2018 and which, on

analysis of the decisions referred to above dealing with concerned

enactments having similar twin conditions as valid, we must reject

the challenge. Instead, we hold that 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

642 Supra at Footnote No.3

450

sought to be achieved by the 2002 Act to combat the menace of

money-laundering having transnational consequences including

impacting the financial systems and sovereignty and integrity of the

countries.

136. It was urged that the scheduled offence in a given case may be

a non-cognizable offence and yet rigors of Section 45 of the 2002 Act

would result in denial of bail even to such accused. This argument

is founded on clear misunderstanding of the scheme of the 2002 Act.

As we have repeatedly mentioned in the earlier part of this judgment

that the offence of money-laundering is one wherein a person,

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. The fact that the proceeds of

crime have been generated as a result of criminal activity relating to

a scheduled offence, which incidentally happens to be a noncognizable offence, would make no difference. The person is not

prosecuted for the scheduled offence by invoking provisions of the

2002 Act, but only when he has derived or obtained property as a

result of criminal activity relating to or in relation to a scheduled

451

offence and then indulges in process or activity connected with such

proceeds of crime. Suffice it to observe that the argument under

consideration is completely misplaced and needs to be rejected.

137. Another incidental issue that had been raised is about the nonapplication of rigors of Section 45 of the 2002 Act in respect of

anticipatory bail filed under Section 438 of the 1973 Code. This

submission presumably is linked to the observation in paragraph 42

in the case of Nikesh Tarachand Shah643. Similar argument was

considered in The Asst. Director Enforcement Directorate vs. Dr.

V.C. Mohan644. We are in agreement with the observation in this

decision that it is one thing to say that Section 45 of the 2002 Act

refers to a scheduled offence under the general law, but, as noted

earlier, the offence under this Act in terms of Section 3 is specific to

involvement in any process or activity connected with the proceeds

of crime which is generated as a result of criminal activity relating

to a scheduled offence. It is also true that Section 45 does not make

specific reference to Section 438 of the 1973 Code, but it cannot be

overlooked that sub-section (1) opens with a non-obstante clause and

643 Supra at Footnote No.3

644 Criminal Appeal No.21 of 2022, decided on 4.1.2022

452

clearly provides that anything contained in the 1973 Code (2 of

1974), no person accused of an offence under this Act shall be

released on bail or on his own bond, unless the stipulations provided

therein are fulfilled. On account of the non-obstante clause in

Section 45(1) of the 2002 Act, the sweep of that provision must

prevail in terms of Section 71 of the 2002 Act. Further, the

expression “anticipatory bail” is not used either in the 1973 Code or

the 2002 Act. The relief granted in terms of Section 438 of the 1973

Code is one of directing release of the person on “bail” in case of his

arrest; and such a relief has been described in judicial

pronouncements as anticipatory bail. Section 45(1) uses generic

expression “bail” without reference to any provision of the 1973

Code, such as Sections 437, 438 and 439 of the 1973 Code.

Concededly, Section 65 of the 2002 Act states that the provisions of

the 1973 Code shall apply to the provisions under the Act insofar as

they are not inconsistent with the provisions of the 2002 Act.

Further, Section 71 of the Act gives overriding effect to the Act.

Section 45 of the Act begins with a non-obstante clause, thus

excluding the application of the 1973 Code in matters related to

453

“bail”. The word “anticipatory bail” has not been defined under the

1973 Code. In Sushila Aggarwal645, it was held as under:

“7.1. At the outset, it is required to be noted that as

such the expression “anticipatory bail” has not been

defined in the Code. As observed by this Court in

Balchand Jain646, “anticipatory bail” means “bail in

anticipation of arrest”. As held by this Court, the

expression “anticipatory bail” is a misnomer

inasmuch as it is not as if bail is presently granted by

the court in anticipation of arrest. An application for

“anticipatory bail” in anticipation of arrest could be

moved by the accused at a stage before an FIR is filed or

at a stage when FIR is registered but the charge sheet has

not been filed and the investigation is in progress or at a

stage after the investigation is concluded. Power to grant

“anticipatory bail” under Section 438 of the CrPC vests

only with the Court of Session or the High Court.

Therefore, ultimately it is for the court concerned to

consider the application for “anticipatory bail” and while

granting the “anticipatory bail” it is ultimately for the

court concerned to impose conditions including the

limited period of “anticipatory bail”, depends upon the

stages at which the application for anticipatory bail is

moved. A person in whose favour a pre-arrest bail order

is made under Section 438 of the CrPC has to be arrested.

However, once there is an order of pre-arrest

bail/anticipatory bail, as and when he is arrested he has

to be released on bail. Otherwise, there is no distinction

or difference between the pre-arrest bail order under

Section 438 and the bail order under Section 437 & 439

CrPC. The only difference between the pre-arrest bail

order under Section 438 and the bail order under

Sections 437 and 439 is the stages at which the bail order

is passed. The bail order under Section 438 CrPC is prior

to his arrest and in anticipation of his arrest and the

order of bail under Sections 437 and 439 is after a person

is arrested. A bare reading of Section 438 CrPC shows

that there is nothing in the language of the Section which

goes to show that the pre-arrest bail granted under

645 Supra at Footnote No.318

646 Balchand Jain (Shri) vs. State of Madhya Pradesh, (1976) 4 SCC 572

454

Section 438 has to be time-bound. The position is the

same as in Section 437 and Section 439 CrPC.”

(emphasis supplied)

Thus, anticipatory bail is nothing but a bail granted in anticipation

of arrest, hence, it has been held in various judgments by this Court

that the principles governing the grant of bail in both cases are more

or less on the same footing, except that in case of anticipatory bail

the investigation is still underway requiring the presence of the

accused before investigation authority. Thus, ordinarily,

anticipatory bail is granted in exceptional cases where the accused

has been falsely implicated in an offence with a view to harass and

humiliate him. Therefore, it would not be logical to disregard the

limitations imposed on granting bail under Section 45 of the 2002

Act, in the case of anticipatory bail as well.

138. In P. Chidambaram647, this Court observed that the power of

anticipatory bail should be sparingly exercised in economic offences

and held thus:

“77. After referring to Siddharam Satlingappa Mhetre648

and other judgments and observing that anticipatory

647 Supra at Footnote No.21

648 Siddharam Satlingappa Mhetre vs. State of Maharashtra & Ors., (2011) 1 SCC 694

455

bail can be granted only in exceptional circumstances,

in Jai Prakash Singh v. State of Bihar 649 , the Supreme

Court held as under: (SCC p.386, para 19)

“19. Parameters for grant of anticipatory bail in a

serious offence are required to be satisfied and

further while granting such relief, the court must

record the reasons therefor. Anticipatory bail can

be granted only in exceptional circumstances

where the court is prima facie of the view that the

applicant has falsely been enroped in the crime

and would not misuse his liberty. (See D.K.

Ganesh Babu v. P.T. Manokaran650 , State of

Maharashtra v. Mohd. Sajid Husain Mohd. S.

Husain651 and Union of India v. Padam Narain

Aggarwal652)

Economic Offences

78. Power under Section 438 CrPC being an

extraordinary remedy, has to be exercised sparingly;

more so, in cases of economic offences. Economic

offences stand as a different class as they affect the

economic fabric of the society. In Directorate of

Enforcement v. Ashok Kumar Jain653, it was held that in

economic offences, the accused is not entitled to

anticipatory bail.

*** *** ***

83. Grant of anticipatory bail at the stage of

investigation may frustrate the investigating agency

in interrogating the accused and in collecting the

useful information and also the materials which

might have been concealed. Success in such

interrogation would elude if the accused knows that

he is protected by the order of the court. Grant of

anticipatory bail, particularly in economic offences

649 (2012) 4 SCC 379

650 (2007) 4 SCC 434

651 (2008) 1 SCC 213

652 Supra at Footnote No.246

653 (1998) 2 SCC 105

456

would definitely hamper the effective investigation.

Having regard to the materials said to have been

collected by the respondent Enforcement Directorate

and considering the stage of the investigation, we are of

the view that it is not a fit case to grant anticipatory bail.

84. In a case of money-laundering where it involves

many stages of “placement”, “layering i.e. funds

moved to other institutions to conceal origin” and

“interrogation i.e. funds used to acquire various

assets”, it requires systematic and analysed

investigation which would be of great advantage. As

held in Anil Sharma654, success in such

interrogation would elude if the accused knows that

he is protected by a pre-arrest bail order. Section

438 CrPC is to be invoked only in exceptional cases

where the case alleged is frivolous or groundless. In

the case in hand, there are allegations of laundering the

proceeds of the crime. The Enforcement Directorate

claims to have certain specific inputs from various

sources, including overseas banks. Letter rogatory is

also said to have been issued and some response have

been received by the Department. Having regard to the

nature of allegations and the stage of the investigation,

in our view, the investigating agency has to be given

sufficient freedom in the process of investigation.

Though we do not endorse the approach of the learned

Single Judge in extracting the note produced by the

Enforcement Directorate, we do not find any ground

warranting interference with the impugned order655.

Considering the facts and circumstances of the case, in

our view, grant of anticipatory bail to the appellant will

hamper the investigation and this is not a fit case for

exercise of discretion to grant anticipatory bail to the

appellant.”

(emphasis supplied)

139. Therefore, as noted above, investigation in an economic

offence, more so in case of money-laundering, requires a systematic

654 State rep. by the C.B.I. vs. Anil Sharma, (1997) 7 SCC 187

655 P. Chidambaram vs. Central Bureau of Investigation, 2019 SCC OnLine Del 9703

457

approach. Further, it can never be the intention of the Parliament

to exclude the operation of Section 45 of 2002 Act in the case of

anticipatory bail, otherwise, it will create an unnecessary dichotomy

between bail and anticipatory bail which not only will be irrational

but also discriminatory and arbitrary. Thus, it is totally

misconceived that the rigors of Section 45 of the 2002 Act will not

apply in the case of anticipatory bail.

140. Suffice it to observe that it would be preposterous and illogical

to hold that if a person applies for bail after arrest, he/she can be

granted that relief only if the twin conditions are fulfilled in addition

to other stipulations predicated in the 1973 Code; but another

person, who is yet to be arrested in connection with the same offence

of money-laundering, will not be required to fulfil such twin

conditions whilst considering application for grant of bail under

Section 438 of the 1973 Code. The relief of bail, be it in the nature

of regular bail or anticipatory bail, is circumscribed by the

stipulations predicated in Section 45 of the 2002 Act. The

underlying principles of Section 45 of the 2002 Act would get

triggered in either case before the relief of bail in connection with the

458

offence of money-laundering is taken forward. Any other view would

be counterproductive and defeat the purposes and objects behind

the stringent provision enacted by the Parliament for prevention of

money-laundering and to combat the menace on account of such

activity which directly impacts the financial systems, including the

sovereignty and integrity of the country.

141. As a result, we have no hesitation in observing that in whatever

form the relief is couched including the nature of proceedings, be it

under Section 438 of the 1973 Code or for that matter, by invoking

the jurisdiction of the Constitutional Court, the underlying

principles and rigors of Section 45 of the 2002 must come into play

and without exception ought to be reckoned to uphold the objectives

of the 2002 Act, which is a special legislation providing for stringent

regulatory measures for combating the menace of moneylaundering.

142. There is, however, an exception carved out to the strict

compliance of the twin conditions in the form of Section 436A of the

1973 Code, which has come into being on 23.6.2006 vide Act 25 of

459

2005. This, being the subsequent law enacted by the Parliament,

must prevail. Section 436A of the 1973 Code reads as under:

“

656[436A. Maximum period for which an undertrial

prisoner can be detained.— Where a person has,

during the period of investigation, inquiry or trial under

this Code of an offence under any law (not being an

offence for which the punishment of death has been

specified as one of the punishments under that law)

undergone detention for a period extending up to onehalf of the maximum period of imprisonment specified

for that offence under that law, he shall be released by

the Court on his personal bond with or without sureties:

Provided that the Court may, after hearing the

Public Prosecutor and for reasons to be recorded by it in

writing, order the continued detention of such person for

a period longer than one-half of the said period or release

him on bail instead of the personal bond with or without

sureties:

Provided further that no such person shall in any

case be detained during the period of investigation,

inquiry or trial for more than the maximum period of

imprisonment provided for the said offence under that

law.

Explanation.—In computing the period of detention

under this section for granting bail, the period of

detention passed due to delay in proceeding caused by

the accused shall be excluded.]”

In the Statement of Objects and Reasons, it was stated thus:

“There had been instances, where under-trial prisoners

were detained in jail for periods beyond the maximum

period of imprisonment provided for the alleged offence.

As remedial measure section 436A has been inserted to

provide that where an under-trial prisoner other than

the one accused of an offence for which death has been

prescribed as one of the punishments, has been under

detention for a period extending to one-half of the

656 Ins. by Act 25 of 2005, sec. 36 (w.e.f. 23-6-2006)

460

maximum period of imprisonment provided for the

alleged offence, he should be released on his personal

bond, with or without sureties. It has also been provided

that in no case will an under-trial prisoner be detained

beyond the maximum period of imprisonment for which

he can be convicted for the alleged offence.”

143. In Hussainara Khatoon & Ors. vs. Home Secretary, State

of Bihar, Patna657, this Court stated that the right to speedy trial

is one of the facets of Article 21 and recognized the right to speedy

trial as a fundamental right. This dictum has been consistently

followed by this Court in several cases. The Parliament in its wisdom

inserted Section 436A under the 1973 Code recognizing the

deteriorating state of undertrial prisoners so as to provide them with

a remedy in case of unjustified detention. In Supreme Court Legal

Aid Committee Representing Undertrial Prisoners vs. Union of

India & Ors.658, the Court, relying on Hussainara Khatoon659,

directed the release of prisoners charged under the Narcotic Drugs

and Psychotropic Act after completion of one-half of the maximum

term prescribed under the Act. The Court issued such direction

after taking into account the non obstante provision of Section 37 of

657 (1980) 1 SCC 98

658 (1994) 6 SCC 731

659 Supra at Footnote No.657

461

the NDPS Act, which imposed the rigors of twin conditions for release

on bail. It was observed:

“15. ….We are conscious of the statutory provision

finding place in Section 37 of the Act prescribing the

conditions which have to be satisfied before a person

accused of an offence under the Act can be released.

Indeed we have adverted to this section in the earlier part

of the judgment. We have also kept in mind the

interpretation placed on a similar provision in Section 20

of the TADA Act by the Constitution Bench in Kartar

Singh v. State of Punjab660. Despite this provision, we

have directed as above mainly at the call of Article 21 as

the right to speedy trial may even require in some cases

quashing of a criminal proceeding altogether, as held by

a Constitution Bench of this Court in A.R. Antulay v. R.S.

Nayak661, release on bail, which can be taken to be

embedded in the right of speedy trial, may, in some cases

be the demand of Article 21. As we have not felt inclined

to accept the extreme submission of quashing the

proceedings and setting free the accused whose trials

have been delayed beyond reasonable time for reasons

already alluded to, we have felt that deprivation of the

personal liberty without ensuring speedy trial would also

not be in consonance with the right guaranteed by Article

21. Of course, some amount of deprivation of personal

liberty cannot be avoided in such cases; but if the period

of deprivation pending trial becomes unduly long, the

fairness assured by Article 21 would receive a jolt. It is

because of this that we have felt that after the accused

persons have suffered imprisonment which is half of the

maximum punishment provided for the offence, any

further deprivation of personal liberty would be violative

of the fundamental right visualised by Article 21, which

has to be telescoped with the right guaranteed by Article

14 which also promises justness, fairness and

reasonableness in procedural matters. …”

660 Supra at Footnote No.190

661 (1992) 1 SCC 225

462

144. The Union of India also recognized the right to speedy trial and

access to justice as fundamental right in their written submissions

and, thus, submitted that in a limited situation right of bail can be

granted in case of violation of Article 21 of the Constitution. Further,

it is to be noted that the Section 436A of the 1973 Code was inserted

after the enactment of the 2002 Act. Thus, it would not be

appropriate to deny the relief of Section 436A of the 1973 Code which

is a wholesome provision beneficial to a person accused under the

2002 Act. However, Section 436A of the 1973 Code, does not provide

for an absolute right of bail as in the case of default bail under

Section 167 of the 1973 Code. For, in the fact situation of a case,

the Court may still deny the relief owing to ground, such as where

the trial was delayed at the instance of accused himself.

145. Be that as it may, in our opinion, this provision is comparable

with the statutory bail provision or, so to say, the default bail, to be

granted in terms of Section 167 of the 1973 Code consequent to

failure of the investigating agency to file the chargesheet within the

statutory period and, in the context of the 2002 Act, complaint

463

within the specified period after arrest of the person concerned. In

the case of Section 167 of the 1973 Code, an indefeasible right is

triggered in favour of the accused the moment the investigating

agency commits default in filing the chargesheet/complaint within

the statutory period. The provision in the form of Section 436A of

the 1973 Code, as has now come into being is in recognition of the

constitutional right of the accused regarding speedy trial under

Article 21 of the Constitution. For, it is a sanguine hope of every

accused, who is in custody in particular, that he/she should be tried

expeditiously — so as to uphold the tenets of speedy justice. If the

trial cannot proceed even after the accused has undergone one-half

of the maximum period of imprisonment provided by law, there is no

reason to deny him this lesser relief of considering his prayer for

release on bail or bond, as the case may be, with appropriate

conditions, including to secure his/her presence during the trial.

146. Learned Solicitor General was at pains to persuade us that this

view would impact the objectives of the 2002 Act and is in the nature

of super imposition of Section 436A of the 1973 Code over Section

45 of the 2002 Act. He has also expressed concern that the same

464

logic may be invoked in respect of other serious offences, including

terrorist offences which would be counterproductive. So be it. We

are not impressed by this submission. For, it is the constitutional

obligation of the State to ensure that trials are concluded

expeditiously and at least within a reasonable time where strict bail

provisions apply. If a person is detained for a period extending up

to one-half of the maximum period of imprisonment specified by law

and is still facing trial, it is nothing short of failure of the State in

upholding the constitutional rights of the citizens, including person

accused of an offence.

147. Section 436A of the 1973 Code, is a wholesome beneficial

provision, which is for effectuating the right of speedy trial

guaranteed by Article 21 of the Constitution and which merely

specifies the outer limits within which the trial is expected to be

concluded, failing which, the accused ought not to be detained

further. Indeed, Section 436A of the 1973 Code also contemplates

that the relief under this provision cannot be granted mechanically.

It is still within the discretion of the Court, unlike the default bail

under Section 167 of the 1973 Code. Under Section 436A of the

1973 Code, however, the Court is required to consider the relief on

465

case-to-case basis. As the proviso therein itself recognises that, in

a given case, the detention can be continued by the Court even

longer than one-half of the period, for which, reasons are to be

recorded by it in writing and also by imposing such terms and

conditions so as to ensure that after release, the accused makes

himself/herself available for expeditious completion of the trial.

148. However, that does not mean that the principle enunciated by

this Court in Supreme Court Legal Aid Committee Representing

Undertrial Prisoners662, to ameliorate the agony and pain of

persons kept in jail for unreasonably long time, even without trial,

can be whittled down on such specious plea of the State. If the

Parliament/Legislature provides for stringent provision of no bail,

unless the stringent conditions are fulfilled, it is the bounden duty

of the State to ensure that such trials get precedence and are

concluded within a reasonable time, at least before the accused

undergoes detention for a period extending up to one-half of the

maximum period of imprisonment specified for the concerned

offence by law. [Be it noted, this provision (Section 436A of the 1973

662 Supra at Footnote No.658

466

Code) is not available to accused who is facing trial for offences

punishable with death sentence].

149. In our opinion, therefore, Section 436A needs to be construed

as a statutory bail provision and akin to Section 167 of the 1973

Code. Notably, learned Solicitor General has fairly accepted during

the arguments and also restated in the written notes that the

mandate of Section 167 of the 1973 Code would apply with full force

even to cases falling under Section 3 of the 2002 Act, regarding

money-laundering offences. On the same logic, we must hold that

Section 436A of the 1973 Code could be invoked by accused arrested

for offence punishable under the 2002 Act, being a statutory bail.

SECTION 50 OF THE 2002 ACT

150. The validity of this provision has been challenged on the

ground of being violative of Articles 20(3) and 21 of the Constitution.

For, it allows the authorised officer under the 2002 Act to summon

any person and record his statement during the course of

investigation. Further, the provision mandates that the person

should disclose true and correct facts known to his personal

467

knowledge in connection with the subject matter of investigation.

The person is also obliged to sign the statement so given with the

threat of being punished for the falsity or incorrectness thereof in

terms of Section 63 of the 2002 Act. Before we proceed to analyse

the matter further, it is apposite to reproduce Section 50 of the 2002

Act, as amended. The same reads thus:

“50. Powers of authorities regarding summons,

production of documents and to give evidence, etc.—

(1) The Director shall, for the purposes of section 13, have

the same powers as are vested in a civil court under the

Code of Civil Procedure, 1908 (5 of 1908) while trying a

suit in respect of the following matters, namely:—

(a) discovery and inspection;

(b) enforcing the attendance of any person, including

any officer of a 663[reporting entity], and examining

him on oath;

(d) receiving evidence on affidavits;

(e) issuing commissions for examination of witnesses

and documents; and

(f) any other matter which may be prescribed.

(2) The Director, Additional Director, Joint Director,

Deputy Director or Assistant Director shall have power to

summon any person whose attendance he considers

necessary whether to give evidence or to produce any

records during the course of any investigation or

proceeding under this Act.

(3) All the persons so summoned shall be bound to attend

in person or through authorised agents, as such officer

may direct, and shall be bound to state the truth upon

any subject respecting which they are examined or make

663 Subs. by Act 2 of 2013, sec. 22, for “banking company or a financial institution or a company”

(w.e.f. 15-2-2013, vide S.O. 343(E), dated 8-2-2013).

468

statements, and produce such documents as may be

required.

(4) Every proceeding under sub-sections (2) and (3) shall

be deemed to be a judicial proceeding within the meaning

of section 193 and section 228 of the Indian Penal Code

(45 of 1860).

(5) Subject to any rules made in this behalf by the Central

Government, any officer referred to in sub-section (2) may

impound and retain in his custody for such period, as he

thinks fit, any records produced before him in any

proceedings under this Act:

Provided that an Assistant Director or a Deputy

Director shall not—

(a) impound any records without recording his

reasons for so doing; or

(b) retain in his custody any such records for a

period exceeding three months, without obtaining

the previous approval of the 664[Joint Director].”

151. Section 50 forms part of Chapter VIII of the 2002 Act which

deals with matters connected with authorities referred to in Section

48 in the same Chapter. Section 50 has been amended vide Act 2 of

2013 and again, by Act 13 of 2018. Nothing much would turn on

these amendments.

152. By this provision, the Director has been empowered to exercise

the same powers as are vested in a civil Court under the 1908 Code

while trying a suit in respect of matters specified in sub-section (1).

This is in reference to Section 13 of the 2002 Act dealing with powers

664 Subs. by Act 13 of 2018, sec. 208(f), for “Director” (w.e.f. 19-4-2018, vide G.S.R. 383(E),

dated 19th April, 2018).

469

of Director to impose fine in respect of acts of commission and

omission by the banking companies, financial institutions and

intermediaries. From the setting in which Section 50 has been

placed and the expanse of empowering the Director with same

powers as are vested in a civil Court for the purposes of imposing

fine under Section 13, is obviously very specific and not otherwise.

153. Indeed, sub-section (2) of Section 50 enables the Director,

Additional Director, Joint Director, Deputy Director or Assistant

Director to issue summon to any person whose attendance he

considers necessary for giving evidence or to produce any records

during the course of any investigation or proceeding under this Act.

We have already highlighted the width of expression “proceeding” in

the earlier part of this judgment and held that it applies to

proceeding before the Adjudicating Authority or the Special Court,

as the case may be. Nevertheless, sub-section (2) empowers the

authorised officials to issue summon to any person. We fail to

understand as to how Article 20(3) would come into play in respect

of process of recording statement pursuant to such summon which

is only for the purpose of collecting information or evidence in

470

respect of proceeding under this Act. Indeed, the person so

summoned, is bound to attend in person or through authorised

agent and to state truth upon any subject concerning which he is

being examined or is expected to make statement and produce

documents as may be required by virtue of sub-section (3) of Section

50 of the 2002 Act. The criticism is essentially because of subsection (4) which provides that every proceeding under sub-sections

(2) and (3) shall be deemed to be a judicial proceeding within the

meaning of Sections 193 and 228 of the IPC. Even so, the fact

remains that Article 20(3) or for that matter Section 25 of the

Evidence Act, would come into play only when the person so

summoned is an accused of any offence at the relevant time and is

being compelled to be a witness against himself. This position is

well-established. The Constitution Bench of this Court in M.P.

Sharma665 had dealt with a similar challenge wherein warrants to

obtain documents required for investigation were issued by the

Magistrate being violative of Article 20(3) of the Constitution. This

Court opined that the guarantee in Article 20(3) is against

665 Supra at Footnote No.324 (also at Footnote No.47)

471

“testimonial compulsion” and is not limited to oral evidence. Not

only that, it gets triggered if the person is compelled to be a witness

against himself, which may not happen merely because of issuance

of summons for giving oral evidence or producing documents.

Further, to be a witness is nothing more than to furnish evidence

and such evidence can be furnished by different modes. The Court

went on to observe as follows:

“Broadly stated the guarantee in article 20(3) is against

“testimonial compulsion”. It is suggested that this is

confined to the oral evidence of a person standing his trial

for an offence when called to the witness-stand. We can

see no reason to confine the content of the constitutional

guarantee to this barely literal import. So to limit it would

be to rob the guarantee of its substantial purpose and to

miss the substance for the sound as stated in certain

American decisions. The phrase used in Article 20(3) is

“to be a witness”. A person can “be a witness” not merely

by giving oral evidence but also by producing documents

or making intelligible gestures as in the case of a dumb

witness (See section 119 of the Evidence Act) or the like.

“To be a witness” is nothing more than “to furnish

evidence”, and such evidence can be furnished through

the lips or by production of a thing or of a document or

in other modes. So far as production of documents is

concerned, no doubt Section 139 of the Evidence Act says

that a person producing a document on summons is not

a witness. But that section is meant to regulate the right

of cross-examination. It is not a guide to the connotation

of the word “witness”, which must be understood in its

natural sense, i.e., as referring to a person who furnishes

evidence. Indeed, every positive volitional act which

furnishes evidence is testimony, and testimonial

compulsion connotes coercion which procures the

positive volitional evidentiary acts of the person, as

opposed to the negative attitude of silence or submission

on his part. Nor is there any reason to think that the

protection in respect of the evidence so procured is

472

confined to what transpires at the trial in the court room.

The phrase used in article 20(3) is “to be a witness” and

not to “appear as a witness”. It follows that the protection

afforded to an accused in so far as it is related to the

phrase “to be a witness” is not merely in respect of

testimonial compulsion in the court room but may well

extend to compelled testimony previously obtained from

him. It is available therefore to a person against whom

a formal accusation relating to the commission of an

offence has been levelled which in the normal course

may result in prosecution. Whether it is available to

other persons in other situations does not call for

decision in this case.”

(emphasis supplied)

154. In the case of Mohammed Dastagir666

, the Court restated that

the requirement to invoke the protection under Article 20(3) is that

the person must be formally accused of the offence and observed

thus:

“(9) …

“Considered in this light, the guarantee under Art.

20(3) would be available in the present cases these

petitioners against whom a First Information

Report has been recorded as accused therein. It

would extend to any compulsory process for

production of evidentiary documents which are

reasonably likely to support a prosecution against

them.”

These observations were unnecessary in Sharma's

case667, having regard to the fact that this Court held

that the seizure of documents on a search warrant was

not unconstitutional as that would not amount to a

compulsory production of incriminating evidence. In the

present case, even on what was stated in Sharma's

666 Supra at Footnote No.325

667 Supra at Footnote No.324 (also at Footnote No.47)

473

case668, there was no formal accusation against the

appellant relating to the commission of an offence. Mr.

Kaliyappan had clearly stated that he was not doing any

investigation. It does not appear from his evidence that

he had even accused the appellant of having committed

any offence. Even if it were to be assumed that the

appellant was a person accused of an offence the

circumstances do not establish that he was compelled to

produce the money which he had on his person. No doubt

he was asked to do so. It was, however, within his power

to refuse to comply with Mr. Kaliyappan's request. In our

opinion, the facts established in the present case show

that the appellant was not compelled to produce the

currency notes and therefore do not attract the provisions

of Art. 20(3) of the Constitution.”

(emphasis supplied)

155. In yet another case in Raja Narayanlal Bansilal669, the

Constitution Bench dealt with the challenge to the validity of the

notice served on the appellant for asking the appellant to attend the

office of the Inspector appointed by the Central Government to

investigate into the affairs of the company and for giving statement

and producing books of accounts and other documents. The Court

repelled the said challenge in the following words:

“(23)…….Similarly, for invoking the constitutional

right against testimonial compulsion guaranteed

under Art. 20(3) it must appear that a formal

accusation has been made against the party pleading

the guarantee and that it relates to the commission

of an offence which in the normal course may result

in prosecution.… .

668 Supra at Footnote No.324 (also at Footnote No.47)

669 Supra at Footnote No.327

474

(25) ……The cardinal words of the section are those which

empower the Commissioner or his inspector to examine

into and report on the affairs of the society”. Thus it is

clear that the examination of, or investigation into,

the affairs of the company cannot be regarded as a

proceeding started against any individual after

framing an accusation against him. Besides it is quite

likely that in some cases investigation may disclose

that there are no irregularities, or if there are they do

not amount to the commission of any offence; in such

cases there would obviously be no occasion for the

Central Government to institute criminal

proceedings under S. 242(1). Therefore, in our

opinion, the High Court was right in holding that

when the inspector issued the impugned notices

against the appellant he cannot be said to have been

accused of any offence; and so the first essential

condition for the application of Art. 20(3) is absent.

We ought to add that in the present case the same

conclusion would follow even if the clause “accused of any

offence” is interpreted more liberally than was done in the

case of M.P. Sharma670 because even if the expression

“accused of any offence” is interpreted in a very broad and

liberal way it is clear that at the relevant stage the

appellant has not been, and in law cannot be, accused of

any offence. ….”

(emphasis supplied)

156. Again, the question came up for consideration before the eleven

Judges of this Court in Kathi Kalu Oghad671, wherein the Court

noted that the person on whom summon has been served, must fulfil

the character of an accused person at the time of making the

statement. The Court expounded thus:

670 Supra at Footnote No.324 (also at Footnote No.47)

671 Supra at Footnote No.44

475

“(15) In order to bring the evidence within the

inhibitions of cl. (3) of Art. 20 it is must be shown not

only that the person making the statement was an

accused at the time he made it and that it had a

material bearing on the criminality of the maker of the

statement, but also that he was compelled to make that

statement. ‘Compulsion’ in the context, must mean what

in law is called ‘duress’. In the Dictionary of English Law

by Earl Jowitt, ‘duress’ is explained as follows:

“Duress is where a man is compelled to do an act by

injury, beating or unlawful imprisonment

(sometimes called duress in strict sense) or by the

threat of being killed, suffering some grievous bodily

harm, or being unlawfully imprisoned (sometimes

called menace, or duress per mines). Duress also

includes threatening, beating or imprisonment of

the wife, parent or child of a person.”

….”

(emphasis supplied)

157. In another celebrated decision of this Court in Romesh

Chandra Mehta672, while following the earlier decisions and dealing

with the challenge in reference to the provisions of the Sea Customs

Act, the Court noted thus:

“In the two earlier cases M.P. Sharma’s case673 and Raja

Narayanlal Bansilal Case674 this Court in describing a

person accused used the expression “against whom a

formal accusation had been made”, and in Kathi Kalu

Oghad’s case675 this Court used the expression “the

person accused must have stood in the character of an

accused person”. Counsel for Mehta urged that the earlier

authorities were superseded in Kathi Kalu Oghad’s

672 Supra at Footnote No.119

673 Supra at Footnote No.324 (also at Footnote No.47)

674 Supra at Footnote No.327

675 Supra at Footnote No.44

476

case676 and it was ruled that a statement made by a

person standing in the character of a person accused of

an offence is inadmissible by virtue of Art. 20(3) of the

Constitution. But the Court in Kathi Kalu Oghad’s

case677 has not set out a different test for determining

the stage when a person may be said to be accused of an

offence. In Kathi Kalu Oghad’s case678 the Court merely

set out the principles in the light of the effect of a formal

accusation on a person, viz., that he stands in the

character of an accused person at the time when he

makes the statement. Normally a person stands in the

character of an accused when a First Information

Report is lodged against him in respect of an offence

before an Officer competent to investigate it, or when

a complaint is made relating to the commission of an

offence before a Magistrate competent to try or send

to another Magistrate for trial the offence. Where a

Customs Officer arrests a person and informs that

person of the grounds of his arrest, (which he is bound

to do under Art. 22(1) of the Constitution) for the

purposes of holding an enquiry into the infringement

of the provisions of the Sea Customs Act which he has

reason to believe has taken place, there is no formal

accusation of an offence. In the case of an offence by

infringement of the Sea Customs Act and punishable at

the trial before a Magistrate there is an accusation when

a complaint is lodged by an officer competent in that

behalf before the Magistrate.”

(emphasis supplied)

158. Relying on the exposition in Nandini Satpathy679, it was

urged that it is not necessary that a formal accusation is made

against the person in the form of FIR/ECIR/chargesheet/complaint

676 Supra at Footnote No.44

677 Supra at Footnote No.44

678 Supra at Footnote No.44

679 Supra at Footnote No.35

477

to invoke protection under Article 20(3) of the Constitution and that

protection is available even to a suspect at the time of interrogation.

(See also Balkishan A. Devidayal680 and Selvi681).

159. In the context of the 2002 Act, it must be remembered that

the summon is issued by the Authority under Section 50 in

connection with the inquiry regarding proceeds of crime which may

have been attached and pending adjudication before the

Adjudicating Authority. In respect of such action, the designated

officials have been empowered to summon any person for collection

of information and evidence to be presented before the Adjudicating

Authority. It is not necessarily for initiating a prosecution against

the noticee as such. The power entrusted to the designated officials

under this Act, though couched as investigation in real sense, is to

undertake inquiry to ascertain relevant facts to facilitate initiation of

or pursuing with an action regarding proceeds of crime, if the

situation so warrants and for being presented before the

Adjudicating Authority. It is a different matter that the information

680 Supra at Footnote Nos.120 (also at Footnote No.41)

681 Supra at Footnote No.43

478

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 moneylaundering. 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

officials can certainly proceed against him for his acts of commission

or omission. In such a situation, at the stage of issue of summons,

the person cannot claim protection under Article 20(3) of the

479

Constitution. However, if his/her statement is recorded after a

formal arrest by the ED official, the consequences of Article 20(3) or

Section 25 of the Evidence Act may come into play to urge that the

same being in the nature of confession, shall not be proved against

him. Further, it would not preclude the prosecution from proceeding

against such a person including for consequences under Section 63

of the 2002 Act on the basis of other tangible material to indicate the

falsity of his claim. That would be a matter of rule of evidence.

160. The Andhra Pradesh High Court in Dalmia Cement (Bharat)

Limited682, while dealing with the purpose of investigation under

Section 50(2) noted that it is essentially for collecting evidence with

regard to the involvement of a person or about existence of certain

facts concerning proceeds of crime or process or activity connected

with proceeds of crime, such inquiry or investigation could be

commenced on the basis of information to be recorded in the internal

document maintained by the authority authorised also described as

ECIR. The High Court noted as follows:

“33. In the light of the detailed submissions of the learned

senior counsel on either side, the point for consideration

is: Whether the summons issued to the second petitioner

under Section 50(2) and (3) of PMLA is violative of the

682 Supra at Footnote No.234

480

Constitutional protection and guarantee under Article

20(3) of the Constitution of India.

*** *** ***

47. At this stage, therefore, investigation is only for

the purpose of collecting evidence with regard to

proceeds of crime in the hands of the persons

suspected and their involvement, if any, in the

offence under Section 3 of PMLA. I am, therefore,

unable to equate ECIR registered by the first

respondent to an FIR under Section 154 Cr.P.C and

consequently, I agree with the learned Additional

Solicitor General that under PMLA the petitioners are

not accused at present. Consequently, therefore, the

submission on behalf of the petitioners on the

assumption that petitioners are accused under PMLA is

liable to be rejected.”

(emphasis supplied)

161. The Delhi High Court also had occasion to examine the

provisions of the 2002 Act in Vakamulla Chandrashekhar683 and

noted the special feature of the 2002 Act which deals with both civil

and criminal consequences as against the offender. Having so

noted, the High Court observed as follows:

“11. The act of money laundering has both civil and

criminal consequences for the perpetrator. To deal with

the civil consequences, the Act creates, and empowers

the adjudicating authority (under Section 2(1)(a) read

with Section 6) with powers of a Civil Court to summon,

direct production of documents and evidence (see Section

11), and adjudicate on the issue whether any property is

involved in money laundering (Section 8). It also creates

the right of appeal from orders of the Adjudicating

Authority (Section 26), and designates the Appellate

Tribunal authorized to hear appeals (Section 2(b) read

683 Supra at Footnote No.226

481

with Section 25). It also creates a right of further appeal

before the High Court (Section 42).”

162. It is, thus, clear that the power invested in the officials is one

for conducting inquiry into the matters relevant for ascertaining

existence of proceeds of crime and the involvement of persons in the

process or activity connected therewith so as to initiate appropriate

action against such person including of seizure, attachment and

confiscation of the property eventually vesting in the Central

Government.

163. We are conscious of the fact that the expression used in Section

2(1)(na) of the 2002 Act is “investigation”, but there is obvious

distinction in the expression “investigation” occurring in the 1973

Code. Under Section 2(h) of the 1973 Code, the investigation is done

by a “police officer” or by any person (other than a Magistrate) who

is authorised by a Magistrate thereby to collect the evidence

regarding the crime in question. Whereas, the investigation under

Section 2(1)(na) of the 2002 Act is conducted by the Director or by

an authority authorised by the Central Government under the 2002

Act for the collection of evidence for the purpose of proceeding under

this Act. Obviously, this investigation is in the nature of inquiry to

482

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

Act is not a police officer as such. This becomes amply clear from the

speech of the then Finance Minister delivered in 2005, which reads

thus:

“Sir, the Money-Laundering Act was passed by this House

in the year 2002, and number of steps have to be taken to

implement it. Sir, two kinds of steps were required. One was

to appoint an authority who will gather intelligence and

483

information, and the other was an authority to investigate

and prosecute. This Act was made to implement the political

declaration adopted by the Special Session of the UN

General Assembly in 1999. Section 1(3) of the Act stipulates

that the Act will come into force on such date as the Central

Government may by notification appoint. While we were

examining the question of notifying the Act, I found that

there was certain lacunae in the Act. I regret to say that not

enough homework had been done in the definitions, and in

the division of responsibility and authority. So, in

consultation with the Ministry of Law, we came to the

conclusion that these lacunae had to be removed. Broadly,

the reasons for the amendment are the following.

Under the existing provisions in Section 45 of the Act,

every offence is cognizable. If an offence is cognizable,

then any police officer in India can arrest an offender

without warrant. At the same time, under Section 19 of

the Act, only a Director or a Deputy Director or an

Assistant Director or any other officer authorised, may

arrest an offender. Clearly, there was a conflict between

these two provisions. Under Section 45(1)(b) of the Act, the

Special Court shall not take cognizance of any offence

punishable under Section 4 except upon a complaint made

in writing by the Director or any other officer authorised by

the Central Government. So, what would happen to an

arrest made by any police officer in the case of a cognizable

offence? Which is the court that will try the offence? Clearly,

there were inconsistencies in these provisions.

They have now been removed. We have now enabled

only the Director or an officer authorised by him to

investigate offences. Of course, we would, by rule, set up a

threshold; and, below that threshold, we would allow State

police officers also to take action.

The second anomaly that we found was that the

expression “investigation officer” and the word

“investigation” occur in a number of sections but they

were not defined in the Act. Consequently, 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

484

tribunals; amending Sections 44 and 45 of the Act to

make the offence non-cognisable 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.”

(emphasis supplied)

From this speech, it is more than clear that the intention of the

Parliament was to empower the prescribed Authority under Section

48 including the class of officers appointed for the purposes of this

Act to investigate the matters falling within the purview of the Act

and in the manner specified in that regard. By inserting Section

45(1A) in the 2002 Act vide amendment Act 20 of 2005, was

essentially to restrict and explicitly disable the police officer from

taking cognizance of the offence of money-laundering much less

investigating the same. It is a provision to restate that only the

Authority (Section 48) under this Act is competent to do investigation

in respect of matters specified under the 2002 Act and none else.

This provision rules out coextensive power to local police as well as

the authority authorised. As aforementioned, the officer specifically

authorised is also expected to confine the inquiry/investigation only

in respect of matters under this Act and in the manner specified

therein.

485

164. The purposes and objects of the 2002 Act for which it has been

enacted, is not limited to punishment for offence of moneylaundering, but also to provide measures for prevention of moneylaundering. It is also to provide for attachment of proceeds of crime,

which are likely to be concealed, transferred or dealt with in any

manner which may result in frustrating any proceeding relating to

confiscation of such proceeds under the 2002 Act. This Act is also

to compel the banking companies, financial institutions and

intermediaries to maintain records of the transactions, to furnish

information of such transactions within the prescribed time in terms

of Chapter IV of the 2002 Act684

164A. Considering the above, it is unfathomable as to how the

authorities referred to in Section 48 can be described as police

officer. The word “police” in common parlance means a civil force

whose main aim is to prevent and detect crimes and to maintain law

and order of the nation as expounded in Barkat Ram685. In this

decision, while dealing with the role of Customs Officer under the

Land Customs Act, 1924686, the Court opined as follows:

“The Police Act, 1861 (Act V of 1861), is described as an

Act for the regulation of police, and is thus an Act for the

684 See Pareena Swarup (supra at Footnote No.366)

685 Supra at Footnote No.24

686 For short, “Land Customs Act”

486

regulation of that group of officers who come within the

word ‘police’ whatever meaning be given to that word. The

preamble of the Act further says: ‘whereas it is expedient

to re-organise the police and to make it a more efficient

instrument for the prevention and detection of crime, it is

enacted as follows’. This indicates that the police is the

instrument for the prevention and detection of crime

which can be said to be the main object and purpose

of having the police. Sections 23 and 25 lay down the

duties of the police officers and s. 20 deals with the

authority they can exercise. They can exercise such

authority as is provided for a police officer under the

Police Act and any Act for regulating criminal procedure.

The authority given to police officers must naturally be to

enable them to discharge their duties efficiently. Of the

various duties mentioned in s. 23, the more

important duties are to collect and communicate

intelligence affecting the public peace, to prevent the

commission of offences and public nuisances and to

detect and bring offenders to justice and to

apprehend all persons whom the police officer is

legally authorised to apprehend. It is clear, therefore,

in view of the nature of the duties imposed on the police

officers, the nature of the authority conferred and the

purpose of the police Act, that the powers which the

police officers enjoy are powers for the effective

prevention and detection of crime in order to

maintain law and order.”

(emphasis supplied)

And again, opined thus:

“….The Customs Officer, therefore, is not primarily

concerned with the detection and punishment of

crime committed by a person, but is mainly interested

in the detection and prevention of smuggling of goods and

safeguarding the recovery of customs duties. He is more

concerned with the goods and customs duty, than with

the offender.”

Thus, this Court concluded that the Customs Officer under the Land

Customs Act is not a police officer within the meaning of Section 25

of the Evidence Act. In that, the main object of the Customs Officer

487

is to safeguard goods and customs duty and detection and

prevention of crime is an ancillary function.

165. On similar lines, in the case of Raja Ram Jaiswal687, while

examining the efficacy of confession made to an Excise Inspector

under the 1915 Act, the Court held as follows:

“(10). …Thus he can exercise all the powers which an

officer in charge of a police station can exercise under

Chapter XIV of the Code of Criminal Procedure. He can

investigate into offences, record statements of the

persons questioned by him, make searches, seize any

articles connected with an offence under the Excise

Act, arrest an accused person, grant him bail, send

him up for trial before a Magistrate, file a chargesheet and so on. Thus his position in so far as

offences under the Excise Act committed within the

area to which his appointment extends are concerned

is not different from that of an officer in charge of a

police station. As regards these offences not only is he

charged with the duty of preventing their commission but

also with their detection and is for these purposes

empowered to act in all respects as an officer in charge of

a police station. No doubt unlike an officer in charge of a

police station he is not charged with the duty of the

maintenance of law and order nor can he exercise the

powers of such officer with respect to offences under the

general law or under any other special laws. But all the

same, in so far as offences under the Excise Act are

concerned, there is no distinction whatsoever in the

nature of the powers he exercises and those which a

police officer exercises in relation to offences which it is

his duty to prevent and bring to light. It would be logical,

therefore, to hold that a confession recorded by him

during an investigation into an excise offence cannot

reasonably be regarded as anything different from a

confession to a police officer. For, in conducting the

687 Supra at Footnote No.30

488

investigation he exercises the powers of a police

officer and the act itself deems him to be a police

officer, even though he does not belong to the police

force constituted under the Police Act. It has been

held by this court that the expression “police officer” in

S. 25 of the Evidence Act is not confined to persons who

are members of the regularly constituted police force. The

position of an Excise Officer empowered under S. 77(2) of

the Bihar and Orissa Excise Act is not analogous to that

of a Customs Officer for two reasons. One is that the

Excise Officer, does not exercise any judicial powers just

as the Customs Officer does under the Sea Customs Act,

1878. Secondly, the Customs Officer is not deemed to be

an officer in charge of a police station and therefore can

exercise no powers under the Code of Criminal Procedure

and certainly not those of an officer in charge of a police

station. No doubt, he too has the power to make a search,

to seize articles suspected to have been smuggled and

arrest persons suspected of having committed an offence

under the Sea Customs Act. But that is all. Though he

can make an enquiry, he has no power to investigate into

an offence under S. 156 of the Code of Criminal

Procedure. Whatever powers he exercises are expressly

set out in the Sea Customs Act. Though some of those set

out in Ch. XVII may be analogous to those of a Police

Officer under the Code of Criminal Procedure they are not

identical with those of a police officer and are not derived

from or by reference to the Code. In regard to certain

matters, he does not possess powers even analogous to

those of a Police Officer. Thus he is not entitled to submit

a report to a Magistrate under S. 190 of the Code of

Criminal Procedure with a view that cognizance of the

offence be taken by the Magistrate. Section 187(A) of the

Sea Customs Act specifically provides that cognizance of

an offence under the Sea Customs Act can be taken only

upon a complaint in writing made by the Customs

Officers or other officer of the customs not below the rank

of an Assistant Collector of Customs authorised in this

behalf by the Chief Customs Officer.

(11) It may well be that a statute confers powers and

imposes duties on a public servant, some of which are

analogous to those of a police officer. But by reason of the

nature of other duties which he is required to perform he

may be exercising various other powers also. It is argued

on behalf of the State that where such is the case the

489

mere conferral of some only of the powers of a police

officer on such a person would not make him a police

officer and, therefore, what must be borne in mind is the

sum total of the powers which he enjoys by virtue of his

office as also the dominant purpose for which he is

appointed. The contention thus is that when an officer

has to perform a wide range of duties and exercise

correspondingly a wide range of powers, the mere fact

that some of the powers which the statute confers upon

him are analogous to or even identical with those of a

police officer would not make him a police officer and,

therefore, if such an officer records a confession it would

not be hit by S. 25 of the Evidence Act. In our judgment

what is pertinent to bear in mind for the purpose of

determining as to who can be regarded a ‘police officer’

for the purpose of this provision is not the totality of the

powers which an officer enjoys but the kind of powers

which the law enables him to exercise. The test for

determining whether such a person is a “police officer”

for the purpose of S. 25 of the Evidence Act would, in our

judgment, be whether the powers of a police officer which

are conferred on him or which are exercisable by him

because he is deemed to be an officer in charge of police

station establish a direct or substantial relationship with

the prohibition enacted by S. 25, that is, the recording of

a confession. In other words, the test would be

whether the powers are such as would tend to

facilitate the obtaining by him of a confession from a

suspect or delinquent. If they do, then it is

unnecessary to consider the dominant purpose for

which he is appointed or the question as to what

other powers he enjoys. These questions may perhaps

be relevant for consideration where the powers of the

police officer conferred upon him are of a very limited

character and are not by themselves sufficient to

facilitate the obtaining by him of a confession.”

(emphasis supplied)

166. Again, in the case of Badaku Joti Svant688, the Constitution

Bench of this Court held that a Central Excise Officer exercising

688 Supra at Footnote No.357

490

power under Central Excise and Salt Act, 1944 is not a police officer

as he does not possess the power to submit a charge-sheet under

Section 173 of the 1973 Code. The Court noted thus:

“(9) …..It is urged that under sub-s. (2) of S. 21 a Central

Excise Officer under the Act has all the powers of an

officer-in-charge of a police station under Chap. XIV of

the Cr.P.C. and, therefore, he must be deemed to be a

police officer within the meaning of those words in S. 25

of the Evidence Act. It is true that sub-s. (2) confers on

the Central Excise Officer under the Act the same powers

as an officer-in-charge of a police station has when

investigating a cognizable case; but this power is

conferred for the purpose of sub-s. (1) which gives power

to a Central Excise Officer to whom any arrested person

is forwarded to inquire into the charge against him. Thus

under S. 21 it is the duty of the Central Excise Officer to

whom an arrested person is forwarded to inquire into the

charge made against such person. Further under proviso

(a) to sub-s. (2) of S. 21 if the Central Excise Officer is of

opinion that there is sufficient evidence or reasonable

ground of suspicion against the accused person, he shall

either admit him to bail to appear before a Magistrate

having jurisdiction in the case, or forward him in custody

to such Magistrate. It does not, however, appear that a

Central Excise Officer under the Act has power to

submit a charge-sheet under S. 173 of the Cr.P.C.

Under S. 190 of the Cr.P.C. a Magistrate can take

cognizance of any offence either (a) upon receiving a

complaint of facts which constitute such offence, or (b)

upon a report in writing of such facts made by any police

officer, or (c) upon information received from any person

other than a police officer, or upon his own knowledge or

suspicion, that such offence has been committed. A

police officer for purposes of Cl. (b) above can in our

opinion only be a police officer properly so-called as

the scheme of the Code of Criminal Procedure shows

and it seems therefore that a Central Excise Officer

will have to make a complaint under Cl. (a) above if

he wants the Magistrate to take cognizance of an

offence, for example, under S. 9 of the Act. Thus

though under sub-s. (2) of S. 21 the Central Excise Officer

under the Act has the powers of an officer-in-charge of a

491

police station when investigating a cognizable case, that

is for the purpose of his inquiry under sub-s. (1) of S. 21.

Section 21 is in terms different from S. 78(3) of the Bihar

and Orissa Excise Act, 1915 which came to be considered

in Raja Ram Jaiswal’s case689 and which provided in

terms that “for the purposes of S. 156 of the Cr.P.C.,

1898, the area to which an excise officer empowered

under S. 77, sub-s. (2), is appointed shall be deemed to

be a police-station, and such officer shall be deemed to

be the officer-in-charge of such station”. It cannot

therefore be said that the provision in S. 21 is on par with

the provision in S. 78(3) of the Bihar and Orissa Excise

Act. All that S. 21 provides is that for the purpose of his

enquiry, a Central Excise Officer shall have the powers of

an officer-in-charge of a police station when investigating

a cognizable case. But even so it appears that these

powers do not include the power to submit a charge-sheet

under S. 173 of the Cr.P.C., for unlike the Bihar and

Orissa Excise Act, the Central Excise Officer is not

deemed to be an officer in charge of a police station.”

167. Another Constitution Bench of this Court in Romesh Chandra

Mehta690 concluded that a Customs Officer under the Sea Customs

Act, 1878 could not be coined as a police officer and noted thus:

“…..The Customs Officer does not exercise, when

enquiring into a suspected infringement of the Sea

Customs Act, powers of investigation which a policeofficer may in investigating the commission of an offence.

He is invested with the power to enquire into

infringements of the Act primarily for the purpose of

adjudicating forfeiture and penalty. He has no power to

investigate an offence triable by a Magistrate, nor has

he the power to submit a report under s. 173 of the

Code of Criminal Procedure. He can only make a

complaint in writing before a competent Magistrate.”

689 Supra at Footnote No.30

690 Supra at Footnote No.119

492

*** *** ***

“…..But the test for determining whether an officer of

customs is to be deemed a police officer is whether he is

invested with all the powers of a police officer qua

investigation of an offence, including the power to

submit a report under s. 173 of the Code of Criminal

Procedure. It is not claimed that a Customs Officer

exercising power to make an enquiry may submit a report

under s. 173 of the Code of Criminal Procedure.”

(emphasis supplied)

168. The petitioners, however, have pressed into service exposition

of this Court in the recent decision in Tofan Singh691, which had

occasion to deal with the provisions of the NDPS Act wherein the

Court held that the designated officer under that Act must be

regarded as a police officer. The Court opined that the statement

made before him would be violative of protection guaranteed under

Article 20(3) of the Constitution. This decision has been rightly

distinguished by the learned Additional Solicitor General on the

argument that the conclusion reached in that judgment is on the

basis of the legislative scheme of the NDPS Act, which permitted that

interpretation. However, it is not possible to reach at the same

conclusion in respect of the 2002 Act for more than one reason. In

this decision, the Court first noted that the Act (NDPS Act) under

691 Supra at Footnote No.31 (also at Footnote No.24)

493

consideration was a penal statute. In the case of 2002 Act, however,

such a view is not possible. The second aspect which we have

repeatedly adverted to, is the special purposes and objects behind

the enactment of the 2002 Act. As per the provisions of the NDPS

Act, it permitted both a regular police officer as well as a designated

officer, who is not a defined police officer, to investigate the offence

under that Act. This has resulted in discrimination. Such a

situation does not emerge from the provisions of the 2002 Act. The

2002 Act, on the other hand, authorises only the authorities referred

to in Section 48 to investigate/inquire into the matters under the

Act in the manner prescribed therein. The provision inserted in

2005 as Section 45(1A) is not to empower the regular police officers

to take cognizance of the offence. On the other hand, it is a

provision to declare that the regular police officer is not

competent to take cognizance of offence of money-laundering,

as it can be investigated only by the authorities referred to in

Section 48 of the 2002 Act. The third aspect which had

weighed with the Court in Tofan Singh692 is that the police

officer investigating an offence under the NDPS Act, the provisions

692 Supra at Footnote No.31 (also at Footnote No.24)

494

of Sections 161 to 164 of the 1973 Code as also Section 25 of the

Evidence Act, would come into play making the statement made

before them by the accused as inadmissible. Whereas, the

investigation into the same offence was to be done by the designated

officer under the NDPS Act, the safeguards contained in Sections

161 to 164 of the 1973 Code and Section 25 of the Evidence Act, will

have no application and the statement made before them would be

inadmissible in evidence. This had resulted in discrimination. No

such situation emerges from the provisions of the 2002 Act.

Whereas, the 2002 Act clearly authorises only the authorities under

the 2002 Act referred to in Section 48 to step in and summon the

person when occasion arises and proceed to record the statement

and take relevant documents on record. For that, express provision

has been made authorising them to do so and by a legal fiction,

deemed it to be a statement recorded in a judicial proceeding by

virtue of Section 50(4) of the 2002 Act. A regular police officer will

neither be in a position to take cognizance of the offence of moneylaundering, much less be permitted to record the statement which

is to be made part of the proceeding before the Adjudicating

Authority under the 2002 Act for confirmation of the provisional

495

attachment order and confiscation of the proceeds of crime for

eventual vesting in the Central Government. That may entail in civil

consequences. It is a different matter that some material or evidence

is made part of the complaint if required to be filed against the

person involved in the process or activity connected with moneylaundering so as to prosecute him for offence punishable under

Section 3 of the 2002 Act. The next point which has been reckoned

by this Court in the said decision is that in the provisions of NDPS

Act, upon culmination of investigation of crime by a designated

officer under that Act (other than a Police Officer), he proceeds to file

a complaint; but has no authority to further investigate the offence,

if required. Whereas, if the same offence was investigated by a

regular Police Officer after filing of the police report under Section

173(2) of the 1973 Code, he could still do further investigation by

invoking Section 173(8) of the 1973 Code. This, on the face of it,

was discriminatory.

169. Notably, this dichotomy does not exist in the 2002 Act for more

than one reason. For, there is no role for the regular Police Officer.

The investigation is to be done only by the authorities under the

2002 Act and upon culmination of the investigation, to file complaint

496

before the Special Court. Moreover, by virtue of Clause (ii) of

Explanation in Section 44(1) of the 2002 Act, it is open to the

authorities under this Act to bring any further evidence, oral or

documentary, against any accused person involved in respect of

offence of money-laundering, for which, a complaint has already

been filed by him or against person not named in the complaint and

by legal fiction, such further complaint is deemed to be part of the

complaint originally filed. Strikingly, in Tofan Singh692A the Court

also noted that, while dealing with the provisions of the NDPS Act,

the designated officer has no express power to file a closure report

unlike the power bestowed on the police officer, if he had

investigated the same crime under the NDPS Act. Once again, this

lack of authority to file closure report is not there in the 2002 Act.

For, by the virtue of proviso in Section 44(1)(b), after conclusion of

investigation, if no offence of money-laundering is made out

requiring filing of a complaint, the Authority under the Act expected

to file such complaint, is permitted to file a closure report before the

Special Court in that regard. In that decision, while analysing the

provisions of the Section 67 of the NDPS Act, the Court noted that

the statement recorded under Section 67 of that Act was to be held

692A Supra at Footnote No.31 (also at Footnote No.24)

497

as inadmissible in all situations. That renders Section 53A of the

same Act otiose. Section 53A of the NDPS Act is about relevancy of

statement made under certain circumstances. Realising the

conflicting position emerging in the two provisions, the issue came

to be answered.

170. However, in the case of provisions of the 2002 Act, there is no

similar provision as Section 53A of the NDPS Act. As a result, even

this deficiency noticed in that judgment has no application to the

provisions of the 2002 Act. The Court also noted in that decision

that unlike the provisions of in the Customs Acts, 1962, Central

Excise Act, 1944 and Railway Property (Unlawful Possession) Act,

1966, in the case of NDPS Act prevention, detection and punishment

of crime cannot be said to be ancillary to the purpose of regulating

and exercising of control over narcotic drugs and psychotropic

substances.

171. We have already adverted to the purposes and objects for

enacting the 2002 Act. It is a sui generis legislation, not only dealing

with the prevention, detection, attachment, confiscation, vesting and

making it obligatory for the banking companies, financial

498

institutions and intermediaries to comply with certain essential

formalities and make them accountable for failure thereof, and also

permits prosecution of the persons found involved in the moneylaundering activity. Keeping in mind the sweep of the purposes and

objectives of the 2002 Act, the reason weighed with this Court while

dealing with the provisions of the NDPS Act, will have no bearing

whatsoever. In that decision, this Court also noted that the offences

under the NDPS Act are cognizable as opposed to other statutes

referred to above. The scheme of the NDPS Act, including regarding

making offences under that Act as cognizable by the designated

officer as well as the local police, and the scheme of the 2002 Act is

entirely different.

171A. Indeed, in the original 2002 Act, as enacted, the offence of

money-laundering was made cognizable as a result of which

confusion had prevailed in dealing with the said crime when the

legislative intent was only to authorise the Authority under the 2002

Act to deal with such cases. That position stood corrected in 2005,

as noticed earlier. The fact that the marginal note of Section 45

retains marginal note that offences to be cognizable and non-

499

bailable, however, does not mean that the regular Police Officer is

competent to take cognizance of the offence of money-laundering.

Whereas, that description has been retained for the limited purpose

of understanding that the offence of money-laundering is cognizable

and non-bailable and can be inquired into and investigated by the

Authority under the 2002 Act alone.

172. In other words, there is stark distinction between the scheme

of the NDPS Act dealt with by this Court in Tofan Singh693 and that

in the provisions of the 2002 Act under consideration. Thus, it must

follow that the authorities under the 2002 Act are not Police Officers.

Ex-consequenti, the statements recorded by authorities under the

2002 Act, of persons involved in the commission of the offence of

money-laundering or the witnesses for the purposes of

inquiry/investigation, cannot be hit by the vice of Article 20(3) of the

Constitution or for that matter, Article 21 being procedure

established by law. In a given case, whether the protection given to

the accused who is being prosecuted for the offence of moneylaundering, of Section 25 of the Evidence Act is available or not, may

have to be considered on case-to-case basis being rule of evidence.

693 Supra at Footnote No.31 (also at Footnote No.24)

500

173. We may note that the learned Additional Solicitor General was

at pains to persuade us to take the view that the decision in Tofan

Singh694 is per incuriam. For the reasons already noted, we do not

deem it necessary to examine that argument.

SECTION 63 OF THE 2002 ACT

174. By this provision, penal consequences are provided in respect

of acts of commission and omission by any person who wilfully and

maliciously gives false information and so causing an arrest or a

search under this Act; also against the person legally bound to state

the truth of any matter relating to an offence under Section 3, but

refuses to answer such any question put to him by the Authority

under the 2002 Act or refuses to sign any statement made by him in

the course of any proceedings under the Act including failure to

attend or produce books of account or documents when called upon

to do so. Section 63 reads thus:

“63. Punishment for false information or failure to

give information, etc.—(1) Any person wilfully and

maliciously giving false information and so causing an

arrest or a search to be made under this Act shall on

conviction be liable for imprisonment for a term which

may extend to two years or with fine which may extend

to fifty thousand rupees or both.

694 Supra at Footnote No.31 (also at Footnote No.24)

501

(2) If any person,—

(a) being legally bound to state the truth of any

matter relating to an offence under section 3, refuses

to answer any question put to him by an authority

in the exercise of its powers under this Act; or

(b) refuses to sign any statement made by him in the

course of any proceedings under this Act, which an

authority may legally require to sign; or

either to attend to give evidence or produce books of

account or other documents at a certain place and

time, omits to attend or produce books of account or

documents at the place or time,

he shall pay, by way of penalty, a sum which shall not

be less than five hundred rupees but which may extend

to ten thousand rupees for each such default or failure.

(3) No order under this section shall be passed by an

authority referred to in sub-section (2) unless the person

on whom the penalty is proposed to be imposed is given

an opportunity of being heard in the matter by such

authority.

695[(4) Notwithstanding anything contained in clause (c)

of sub-section (2), a person who intentionally disobeys

any direction issued under section 50 shall also be liable

to be proceeded against under section 174 of the Indian

Penal Code (45 of 1860).]”

This provision is only an enabling provision and applies to situations

referred to therein. It is in the nature of providing consequences for

not discharging the burden or cooperating with the authorities

during the proceedings before the Authority and pursuant to

summons, production of documents and to give evidence is issued

by such Authority in exercise of power under Section 50 of the 2002

695 Ins. by Act 2 of 2013, sec.26 (w.e.f. 15-2-2013, vide S.O. 343(E), dated 8-2-2013)

502

Act. The power exercised by the Authority is analogous to power

vested in a civil Court under the 1908 Code while trying a suit in

respect of matters referred to in Section 50 of the 2002 Act. This is

in the nature of deeming provision empowering the concerned

Authority to ensure prevention of money-laundering and also to take

consequential steps for attachment and confiscation of the property

involved in such money-laundering to be vested in the Central

Government. Absent such authority given to the Director under the

2002 Act, the inquiry or investigation required to be done for

fulfilling the mandate predicated under the 2002 Act, would

eventually result in paper inquiry and no meaningful purpose would

be served much less to combat the menace of money-laundering. In

such inquiry if misleading revelations are made by any person or for

that matter fails to cooperate, is required to be proceeded in

accordance with law. In that sense, Section 63 is the procedure

established by law. It is unfathomable to countenance the argument

that such a provision must be regarded as unreasonable or

manifestly arbitrary. It has clear nexus with the purposes and

objects sought to be achieved by the 2002 Act.

503

SCHEDULE OF THE 2002 ACT

175. The expression “scheduled offence” has been defined in

Section 2(1)(y). This provision assumes significance as it has direct

link with the definition of “proceeds of crime”. In that, the property

derived or obtained as a result of criminal activity relating to notified

offences, termed as scheduled offence, is regarded as tainted

property and dealing with such property in any manner is an offence

of money-laundering. The Schedule is in three parts, namely Part

A, B and C. Part A of the Schedule consists of 29 paragraphs. These

paragraphs deal with respective enactments and the offences

specified thereunder which are regarded as scheduled offences.

Similarly, Part B deals with offence under the Customs Act

specifically and Part C is in relation to offence of cross border

implications. The Schedule reads thus:

“THE SCHEDULE

[See section 2(y)]

696[PART A

PARAGRAPH 1

OFFENCES UNDER THE INDIAN PENAL CODE

(45 of 1860)

Section Description of offence

120B Criminal conspiracy.

121 Waging or attempting to wage war or

abetting waging of war, against the

696Subs. by Act 2 of 2013, Sec. 30(i), for Part A (w.e.f. 15-2-2013, vide S.O. 343(E), dated 8-2-

2013). Earlier Part A was amended by Act 21 of 2009, sec. 13 (w.e.f. 1-6-2009).

504

Government of India.

121A Conspiracy to commit offences punishable

by section 121 against the State.

255 Counterfeiting Government stamp.

257 Making or selling instrument for

counterfeiting Government stamp.

258 Sale of counterfeit Government stamp.

259 Having possession of counterfeit

Government stamp.

260 Using as genuine a Government stamp

known to be counterfeit.

302 Murder.

304 Punishment for culpable homicide not

amounting to murder.

307 Attempt to murder.

308 Attempt to commit culpable homicide.

327 Voluntarily causing hurt to extort property,

or to constrain to an illegal act.

329 Voluntarily causing grievous hurt to extort

property, or to constrain to an illegal act.

364A Kidnapping for ransom, etc.

384 to 389 Offences relating to extortion.

392 to 402 Offences relating to robbery and dacoity.

411 Dishonestly receiving stolen property.

412 Dishonestly receiving property stolen in the

commission of a dacoity.

413 Habitually dealing in stolen property.

414 Assisting in concealment of stolen property.

417 Punishment for cheating.

418 Cheating with knowledge that wrongful loss

may ensue to person whose interest offender

is bound to protect.

419 Punishment for cheating by personation.

420 Cheating and dishonestly inducing delivery

of property.

421 Dishonest or fraudulent removal or

concealment of property to prevent

distribution among creditors.

422 Dishonestly or fraudulently preventing debt

being available for creditors.

423 Dishonest or fraudulent execution of deed of

transfer containing false statement of

505

consideration.

424 Dishonest or fraudulent removal or

concealment of property.

467 Forgery of valuable security, will, etc.

471 Using as genuine a forged document or

electronic record.

472 and 473 Making or possessing counterfeit seal, etc.,

with intent to commit forgery.

475 and 476 Counterfeiting device or mark.

481 Using a false property mark.

482 Punishment for using a false property mark.

483 Counterfeiting a property mark used by

another.

484 Counterfeiting a mark used by a public

servant.

485 Making or possession of any instrument for

counterfeiting a property mark.

486 Selling goods marked with a counterfeit

property mark.

487 Making a false mark upon any receptacle

containing goods.

488 Punishment for making use of any such false

mark.

489A Counterfeiting currency notes or bank notes.

489B Using as genuine, forged or counterfeit

currency notes or bank notes.

PARAGRAPH 2

OFFENCES UNDER THE NARCOTIC DRUGS AND

PSYCHOTROPIC SUBSTANCES ACT, 1985

(61 of 1985)

Section Description of offence

15 Contravention in relation to poppy straw.

16. Contravention in relation to coca plant and

coca leaves.

17. Contravention in relation to prepared opium.

18. Contravention in relation to opium poppy

and opium.

19. Embezzlement of opium by cultivator.

20. Contravention in relation to cannabis plant

and cannabis.

21. Contravention in relation to manufactured

drugs and preparations.

506

22. Contravention in relation to psychotropic

substances.

23. Illegal import into India, export from India to

transhipment of narcotic drugs and

psychotropic substances.

24. External dealings in narcotic drugs and

psychotropic substances in contravention of

section 12 of the Narcotic Drugs and

Psychotropic Substances Act, 1985.

25A Contravention of orders made under section

9A of the Narcotic Drugs and Psychotropic

Substances Act, 1985.

27A. Financing illicit traffic and harbouring

offenders.

29. Abetment and criminal conspiracy.

PARAGRAPH 3

OFFENCES UNDER THE EXPLOSIVE SUBSTANCES

ACT, 1908

(6 of 1908)

Section Description of offence

3 Causing explosion likely to endanger life or

property.

4 Attempt to cause explosion, or for making or

keeping explosives with intent to endanger

life or property.

5 Making or possessing explosives under

suspicious circumstances.

PARAGRAPH 4

OFFENCES UNDER THE UNLAWFUL ACTIVITIES

(PREVENTION) ACT, 1967

(37 of 1967)

Section Description of offence

10 read with

section 3

Penalty for being member of an unlawful

association, etc.

11 read with

section 3

Penalty for dealing with funds of an unlawful

association.

13 read with

section 3

Punishment for unlawful activities.

16 read with

section 15

Punishment for terrorist act.

16A Punishment for making demands of

507

radioactive substances, nuclear devices, etc.

17 Punishment for raising funds for terrorist

act.

18 Punishment for conspiracy, etc.

18A Punishment for organising of terrorist

camps.

18B Punishment for recruiting of any person or

persons for terrorist act.

19 Punishment for harbouring, etc.

20 Punishment for being member of terrorist

gang or organisation.

21 Punishment for holding proceeds of

terrorism.

38 Offence relating to membership of a terrorist

organisation.

39 Offence relating to support given to a

terrorist organisation.

40 Offence of raising fund for a terrorist

organisation.

PARAGRAPH 5

OFFENCES UNDER THE ARMS ACT, 1959

(54 of 1959)

Section Description of offence

25 To manufacture, sell, transfer, convert,

repair or test or prove or expose or offer for

sale or transfer or have in his possession for

sale, transfer, conversion, repair, test or

proof, any arms or ammunition in

contravention of section 5 of the Arms Act,

1959.

To acquire, have in possession or carry any

prohibited arms or prohibited ammunition

in contravention of section 7 of the Arms Act,

1959.

Contravention of section 24A of the Arms

Act, 1959 relating to prohibition as to

possession of notified arms in disturbed

areas, etc.

Contravention of section 24B of the Arms

Act, 1959 relating to prohibition as to

carrying of notified arms in or through

public places in disturbed areas.

508

Other offences specified in section 25.

26 To do any act in contravention of any

provisions of section 3, 4, 10 or section 12 of

the Arms Act, 1959 in such manner as

specified in sub-section (1) of section 26 of

the said Act.

To do any act in contravention of any

provisions of section 5, 6, 7 or section 11 of

the Arms Act, 1959 in such manner as

specified in sub-section (2) of section 26 of

the said Act.

Other offences specified in section 26.

27 Use of arms or ammunitions in

contravention of section 5 or use of any arms

or ammunition in contravention of section 7

of the Arms Act, 1959.

28 Use and possession of fire arms or imitation

fire arms in certain cases.

29 Knowingly purchasing arms from unlicensed

person or for delivering arms, etc., to person

not entitled to possess the same.

30 Contravention of any condition of a licence

or any provisions of the Arms Act, 1959 or

any rule made thereunder.

PARAGRAPH 6

OFFENCES UNDER THE WILD LIFE (PROTECTION)

ACT, 1972

(53 of 1972)

Section Description of offence

51 read with

section 9

Hunting of wild animals.

51 read with

section 17A

Contravention of provisions of section 17A

relating to prohibition of picking, uprooting,

etc., of specified plants.

51 read with

section 39

Contravention of provisions of section 39

relating to wild animals, etc., to be

Government property.

51 read with

section 44

Contravention of provisions of section 44

relating to dealings in trophy and animal

articles without licence prohibited.

51 read with

section 48

Contravention of provisions of section 48

relating to purchase of animal, etc., by

509

licensee.

51 read with

section 49B

Contravention of provisions of section 49B

relating to prohibition of dealings in

trophies, animals articles, etc., derived from

scheduled animals.

PARAGRAPH 7

OFFENCES UNDER THE IMMORAL TRAFFIC

(PREVENTION) ACT, 1956

(104 of 1956)

Section Description of offence

5. Procuring, inducing or taking person for the

sake of prostitution.

6. Detaining a person in premises where

prostitution is carried on.

8. Seducing or soliciting for purpose of

prostitution.

9. Seduction of a person in custody.

697[PARAGRAPH 8

OFFENCES UNDER THE PREVENTION OF CORRUPTION

ACT, 1988

(49 of 1988)

Section Description of offence

7. Offence relating to public servant being

bribed.

7A. Taking undue advantage to influence public

servant by corrupt or illegal means or by

exercise of personal influence.

697 Subs. by Act 16 of 2018, sec. 19, for Paragraph 8 (w.e.f. 26-7-2018, vide S.O. 3664 (E),

dated 26th July, 2018). Paragraph 8, before substitution, stood as under:

“PARAGRAPH 8

OFFENCES UNDER THE PREVENTION OF CORRUPTION ACT, 1988

(49 OF 1988)

Section Description of offence

7 Public servant taking gratification other than legal remuneration

in respect of an official act.

8 Taking gratification in order, by corrupt or illegal means, to

influence public servant.

9 Taking gratification for exercise of personal influence with public

servant.

10 Abetment by public servant of offences defined in section 8 or

section 9 of the Prevention of Corruption Act, 1988.

13 Criminal misconduct by a public servant.”.

510

8. Offence relating to bribing a public servant.

9. Offence relating to bribing a public servant

by a commercial organisation.

10. Person in charge of commercial organisation

to be guilty of offence.

11. Public servant obtaining undue advantage,

without consideration from person

concerned in proceeding or business

transacted by such public servant.

12. Punishment for abetment of offences.

13. Criminal misconduct by a public servant.

14 Punishment for habitual offender.]

PARAGRAPH 9

OFFENCES UNDER THE EXPLOSIVES ACT, 1884

(4 of 1884)

Section Description of offence

9B Punishment for certain offences.

9C Offences by companies.

PARAGRAPH 10

OFFENCES UNDER THE ANTIQUITIES AND ARTS

TREASURES ACT, 1972

(52 of 1972)

Section Description of offence

25 read with

section 3

Contravention of export trade in antiquities

and art treasures.

28 Offences by companies.

PARAGRAPH 11

OFFENCES UNDER THE SECURITIES AND EXCHANGE

BOARD OF INDIA ACT, 1992

(15 of 1992)

Section Description of offence

12A read

with section

Prohibition of manipulative and deceptive

devices, insider trading and substantial.

24 Acquisition of securities or control.

PARAGRAPH 12

OFFENCES UNDER THE CUSTOMS ACT, 1962

(52 of 1962)

Section Description of offence

511

135 Evasion of duty or prohibitions.

PARAGRAPH 13

OFFENCES UNDER THE BONDED LABOUR SYSTEM

(ABOLITION) ACT, 1976

(19 of 1976)

Section Description of offence

16 Punishment for enforcement of bonded

labour.

18 Punishment for extracting bonded labour

under the bonded labour system.

20 Abetment to be an offence.

PARAGRAPH 14

OFFENCES UNDER THE CHILD LABOUR (PROHIBITION

AND REGULATION) ACT, 1986

(61 of 1986)

Section Description of offence

14 Punishment for employment of any child to

work in contravention of the provisions of

section 3.

PARAGRAPH 15

OFFENCES UNDER THE TRANSPLANTATION OF

HUMAN ORGANS ACT, 1994

(42 of 1994)

Section Description of offence

18 Punishment for removal of human organ

without authority.

19 Punishment for commercial dealings in

human organs.

20 Punishment for contravention of any other

provision of this Act.

PARAGRAPH 16

OFFENCES UNDER THE JUVENILE JUSTICE (CARE

AND PROTECTION OF CHILDREN) ACT, 2000

(56 of 2000)

Section Description of offence

23 Punishment for cruelty to juvenile or child.

24 Employment of juvenile or child for begging.

25 Penalty for giving intoxicating liquor or

narcotic drug or psychotropic substance to

juvenile or child.

512

26 Exploitation of juvenile or child employee.

PARAGRAPH 17

OFFENCES UNDER THE EMIGRATION ACT, 1983

(31 of 1983)

Section Description of offence

24 Offences and penalties.

PARAGRAPH 18

OFFENCES UNDER THE PASSPORTS ACT, 1967

(15 of 1967)

Section Description of offence

12 Offences and penalties.

PARAGRAPH 19

OFFENCES UNDER THE FOREIGNERS ACT, 1946

(31 of 1946)

Section Description of offence

14 Penalty for contravention of provisions of the

Act, etc.

14B Penalty for using forged passport.

14C Penalty for abetment.

PARAGRAPH 20

OFFENCES UNDER THE COPYRIGHT ACT, 1957

(14 of 1957)

Section Description of offence

63 Offence of infringement of copyright or other

rights conferred by this Act.

63A. Enhanced penalty on second and

subsequent convictions.

63B. Knowing use of infringing copy of computer

programme.

68A. Penalty for contravention of section 52A.

PARAGRAPH 21

OFFENCES UNDER THE TRADE MARKS ACT, 1999

(47 of 1999)

Section Description of offence

103 Penalty for applying false trade marks, trade

descriptions, etc.

104 Penalty for selling goods or providing

services to which false trade mark or false

trade description is applied.

513

105 Enhanced penalty on second or subsequent

conviction.

107 Penalty for falsely representing a trade mark

as registered.

120 Punishment of abetment in India of acts

done out of India.

PARAGRAPH 22

OFFENCES UNDER THE INFORMATION TECHNOLOGY

ACT, 2000

(21 of 2000)

Section Description of offence

72 Penalty for breach of confidentiality and

privacy

75 Act to apply for offence or contravention

committed outside India.

PARAGRAPH 23

OFFENCES UNDER THE BIOLOGICAL DIVERSITY ACT,

2002

(18 of 2003)

Section Description of offence

55 read with

section 6.

Penalties for contravention of section 6, etc.

PARAGRAPH 24

OFFENCES UNDER THE PROTECTION OF PLANT

VARIETIES AND FARMERS’ RIGHTS ACT, 2001

(53 of 2001)

Section Description of offence

70 read with

section 68

Penalty for applying false denomination, etc.

71 read with

section 68

Penalty for selling varieties to which false

denomination is applied.

72 read with

section 68

Penalty for falsely representing a variety as

registered.

73 read with

section 68

Penalty for subsequent offence.

PARAGRAPH 25

OFFENCES UNDER THE ENVIRONMENT PROTECTION

ACT, 1986

(29 of 1986)

Section Description of offence

514

15 read with

section 7

Penalty for discharging environmental

pollutants, etc., in excess of prescribed

standards.

15 read with

section 8

Penalty for handling hazardous substances

without complying with procedural

safeguards.

PARAGRAPH 26

OFFENCES UNDER THE WATER (PREVENTION AND

CONTROL OF POLLUTION) ACT, 1974

(6 of 1974)

Section Description of offence

41(2) Penalty for pollution of stream or well.

43 Penalty for contravention of provisions of

section 24.

PARAGRAPH 27

OFFENCES UNDER THE AIR (PREVENTION AND

CONTROL OF POLLUTION) ACT, 1981

(14 of 1981)

Section Description of offence

37 Failure to comply with the provisions for

operating industrial plant.

PARAGRAPH 28

OFFENCES UNDER THE SUPPRESSION OF UNLAWFUL

ACTS AGAINST SAFETY OF MARITIME NAVIGATION

AND FIXED PLATFORMS ON CONTINENTAL SHELF

ACT, 2002

(69 of 2002)

Section Description of offence

3 Offences against ship, fixed platform, cargo

of a ship, maritime navigational facilities,

etc.]

698[PARAGRAPH 29

OFFENCE UNDER THE COMPANIES ACT, 2013

(18 of 2013)

Section Description of offence

447 Punishment for fraud.]

698 Ins. by Act 13 of 2018, sec. 208(h) (w.e.f. 19-4-2018, vide G.S.R. 383(E), dated 19th April,

2018).

515

699[PART B

OFFENCE UNDER THE CUSTOMS ACT, 1962

Section Description of offence

132 False declaration, false documents, etc.]

700[PART C

An offence which is the offence of cross border implications

and is specified in,—

(1) Part A; or

701[***]

(3) the offences against property under Chapter XVII of the

Indian Penal Code.]

702[(4) The offence of wilful attempt to evade any tax, penalty

or interest referred to in section 51 of the Black Money

(Undisclosed Foreign Income and Assets) and Imposition of

Tax Act, 2015.]”

This Schedule has been amended by Act 21 of 2009, Act 2 of 2013,

Act 22 of 2015, Act 13 of 2018 and Act 16 of 2018, thereby inserting

new offences to be regarded as scheduled offence. The challenge is

not on the basis of legislative competence in respect of enactment of

Schedule and the amendments thereto from time to time. However,

it had been urged before us that there is no consistency in the

approach as it includes even minor offences as scheduled offence for

699 Ins. by the Finance Act, 2015 (20 of 2015), sec. 151 (w.e.f. 14-5-2015). Earlier Part B was

amended by Act 21 of 2009, sec. 13 (w.e.f. 1-6-2009) and was omitted by Act 2 of 2013, sec.

30(ii) (w.e.f. 15-2-2013, vide S.O. 343(E), dated 8-2-2013).

700 Ins. by Act 21 of 2009, sec. 13(iii) (w.e.f. 1-6-2009).

701 Omitted by Act 2 of 2013, sec. 30(iii) (w.e.f. 15-2-2013, vide S.O. 343(E), dated 8-2-2013).

702 Ins. by Act 22 of 2015, sec. 88 (w.e.f. 1-7-2015, vide S.O. 1790(E), dated 1st July, 2015).

516

the purposes of offence of money-laundering, more so even offences

which have no trans-border implications and are compoundable

between the parties. The classification or grouping of offences for

treating the same as relevant for constituting offence of moneylaundering is a matter of legislative policy. The Parliament in its

wisdom has regarded the property derived or obtained as a result of

specified criminal activity, being an offence under the concerned

legislation mentioned in the Schedule. The fact that some of the

offences may be non-cognizable offences under the concerned

legislation or regarded as minor and compoundable offences, yet, the

Parliament in its wisdom having perceived the cumulative effect of

the process or activity concerning the proceeds of crime generated

from such criminal activities as being likely to pose threat to the

economic stability, sovereignty and integrity of the country and thus,

grouped them together for reckoning it as an offence of moneylaundering, is a matter of legislative policy. It is not open to the

Court to have a second guess at such a policy.

175A. Needless to underscore that the 2002 Act is intended to

initiate action in respect of money-laundering activity which

517

necessarily is associated with the property derived or obtained by

any person, directly or indirectly, as a result of specified criminal

activity. The prosecution under this Act is not in relation to the

criminal activity per se but limited to property derived or obtained

from specified criminal activity. Resultantly, the inclusion of

criminal activity which has been regarded as non-cognizable,

compoundable or minor offence under the concerned legislation,

should have no bearing to answer the matter in issue. In that, the

offence of money-laundering is an independent offence and the

persons involved in the commission of such offence are grouped

together as offenders under this Act. There is no reason to make

distinction between them insofar as the offence of money-laundering

is concerned. In our opinion, therefore, there is no merit in the

argument under consideration.

ECIR VIS-À-VIS FIR

176. As per the procedure prescribed by the 1973 Code, the officer

in-charge of a police station is under an obligation to record the

information relating to the commission of a cognizable offence, in

518

terms of Section 154 of the 1973 Code703. There is no corresponding

provision in the 2002 Act requiring registration of offence of moneylaundering. As noticed earlier, the mechanism for proceeding

against the property being proceeds of crime predicated in the 2002

Act is a sui generis procedure. No comparison can be drawn between

the mechanism regarding prevention, investigation or trial in

connection with the scheduled offence governed by the provisions of

the 1973 Code. In the scheme of 2002 Act upon identification of

existence of property being proceeds of crime, the Authority under

this Act is expected to inquire into relevant aspects in relation to such

property and take measures as may be necessary and specified in

the 2002 Act including to attach the property for being dealt with as

per the provisions of the 2002 Act. We have elaborately adverted to

the procedure to be followed by the authorities for such attachment

of the property being proceeds of crime and the follow-up steps of

confiscation upon confirmation of the provisional attachment order

by the Adjudicating Authority. For facilitating the Adjudicating

Authority to confirm the provisional attachment order and direct

confiscation, the authorities under the 2002 Act (i.e., Section 48) are

703 Lalita Kumari (supra at Footnote Nos.13 and 206)

519

expected to make an inquiry and investigate. Incidentally, when

sufficient credible information is gathered by the authorities during

such inquiry/investigation indicative of involvement of any person

in any process or activity connected with the proceeds of crime, it is

open to such authorities to file a formal complaint before the Special

Court naming the concerned person for offence of money-laundering

under Section 3 of this Act. Considering the scheme of the 2002 Act,

though the offence of money-laundering is otherwise regarded as

cognizable offence (cognizance whereof can be taken only by the

authorities referred to in Section 48 of this Act and not by

jurisdictional police) and punishable under Section 4 of the 2002

Act, special complaint procedure is prescribed by law. This

procedure overrides the procedure prescribed under 1973 Code to

deal with other offences (other than money-laundering offences) in

the matter of registration of offence and inquiry/investigation

thereof. This special procedure must prevail in terms of Section 71

of the 2002 Act and also keeping in mind Section 65 of the same Act.

In other words, the offence of money-laundering cannot be registered

by the jurisdictional police who is governed by the regime under

Chapter XII of the 1973 Code. The provisions of Chapter XII of the

520

1973 Code do not apply in all respects to deal with information

derived relating to commission of money-laundering offence much

less investigation thereof. The dispensation regarding prevention of

money-laundering, attachment of proceeds of crime and

inquiry/investigation of offence of money-laundering upto filing of

the complaint in respect of offence under Section 3 of the 2002 Act

is fully governed by the provisions of the 2002 Act itself. To wit,

regarding survey, searches, seizures, issuing summons, recording of

statements of concerned persons and calling upon production of

documents, inquiry/investigation, arrest of persons involved in the

offence of money-laundering including bail and attachment,

confiscation and vesting of property being proceeds of crime. Indeed,

after arrest, the manner of dealing with such offender involved in

offence of money-laundering would then be governed by the

provisions of the 1973 Code - as there are no inconsistent provisions

in the 2002 Act in regard to production of the arrested person before

the jurisdictional Magistrate within twenty-four hours and also filing

of the complaint before the Special Court within the statutory period

prescribed in the 1973 Code for filing of police report, if not released

on bail before expiry thereof.

521

177. Suffice it to observe that being a special legislation providing

for special mechanism regarding inquiry/investigation of offence of

money-laundering, analogy cannot be drawn from the provisions of

1973 Code, in regard to registration of offence of money-laundering

and more so being a complaint procedure prescribed under the 2002

Act. Further, the authorities referred to in Section 48 of the 2002

Act alone are competent to file such complaint. It is a different

matter that the materials/evidence collected by the same authorities

for the purpose of civil action of attachment of proceeds of crime and

confiscation thereof may be used to prosecute the person involved in

the process or activity connected with the proceeds of crime for

offence of money-laundering. Considering the mechanism of

inquiry/investigation for proceeding against the property (being

proceeds of crime) under this Act by way of civil action (attachment

and confiscation), there is no need to formally register an ECIR,

unlike registration of an FIR by the jurisdictional police in respect of

cognizable offence under the ordinary law. There is force in the

stand taken by the ED that ECIR is an internal document created

by the department before initiating penal action or prosecution

against the person involved with process or activity connected with

522

proceeds of crime. Thus, ECIR is not a statutory document, nor

there is any provision in 2002 Act requiring Authority referred to in

Section 48 to record ECIR or to furnish copy thereof to the accused

unlike Section 154 of the 1973 Code. The fact that such ECIR has

not been recorded, does not come in the way of the authorities

referred to in Section 48 of the 2002 Act to commence

inquiry/investigation for initiating civil action of attachment of

property being proceeds of crime by following prescribed procedure

in that regard.

178. The next issue is: whether it is necessary to furnish copy of

ECIR to the person concerned apprehending arrest or at least after

his arrest? Section 19(1) of the 2002 Act postulates that after arrest,

as soon as may be, the person should be informed about the grounds

for such arrest. This stipulation is compliant with the mandate of

Article 22(1) of the Constitution. Being a special legislation and

considering the complexity of the inquiry/investigation both for the

purposes of initiating civil action as well as prosecution, non-supply

of ECIR in a given case cannot be faulted. The ECIR may contain

details of the material in possession of the Authority and recording

523

satisfaction of reason to believe that the person is guilty of moneylaundering offence, if revealed before the inquiry/investigation

required to proceed against the property being proceeds of crime

including to the person involved in the process or activity connected

therewith, may have deleterious impact on the final outcome of the

inquiry/investigation. So long as the person has been informed

about grounds of his arrest that is sufficient compliance of mandate

of Article 22(1) of the Constitution. Moreover, the arrested person

before being produced before the Special Court within twenty-four

hours or for that purposes of remand on each occasion, the Court is

free to look into the relevant records made available by the Authority

about the involvement of the arrested person in the offence of

money-laundering. In any case, upon filing of the complaint before

the statutory period provided in 1973 Code, after arrest, the person

would get all relevant materials forming part of the complaint filed

by the Authority under Section 44(1)(b) of the 2002 Act before the

Special Court.

179. Viewed thus, supply of ECIR in every case to person concerned

is not mandatory. From the submissions made across the Bar, it is

noticed that in some cases ED has furnished copy of ECIR to the

524

person before filing of the complaint. That does not mean that in

every case same procedure must be followed. It is enough, if ED at

the time of arrest, contemporaneously discloses the grounds of such

arrest to such person. Suffice it to observe that ECIR cannot be

equated with an FIR which is mandatorily required to be recorded

and supplied to the accused as per the provisions of 1973 Code.

Revealing a copy of an ECIR, if made mandatory, may defeat the

purpose sought to be achieved by the 2002 Act including frustrating

the attachment of property (proceeds of crime). Non-supply of ECIR,

which is essentially an internal document of ED, cannot be cited as

violation of constitutional right. Concededly, the person arrested, in

terms of Section 19 of the 2002 Act, is contemporaneously made

aware about the grounds of his arrest. This is compliant with the

mandate of Article 22(1) of the Constitution. It is not unknown that

at times FIR does not reveal all aspects of the offence in question. In

several cases, even the names of persons actually involved in the

commission of offence are not mentioned in the FIR and described

as unknown accused. Even, the particulars as unfolded are not fully

recorded in the FIR. Despite that, the accused named in any

ordinary offence is able to apply for anticipatory bail or regular bail,

in which proceeding, the police papers are normally perused by the

concerned Court. On the same analogy, the argument of prejudice

525

pressed into service by the petitioners for non-supply of ECIR

deserves to be answered against the petitioners. For, the arrested

person for offence of money-laundering is contemporaneously

informed about the grounds of his arrest; and when produced before

the Special Court, it is open to the Special Court to call upon the

representative of ED to produce relevant record concerning the case

of the accused before him and look into the same for answering the

need for his continued detention. Taking any view of the matter,

therefore, the argument under consideration does not take the

matter any further.

ED MANUAL

180. It had been urged that the 2002 Act creates an overbroad

frame with no fetters on investigation. Besides questioning the

refusal to furnish copy of ECIR, grievance is also made about the

opacity surrounding the usage of ED Manual. Relying on Section

4(b)(v) of the RTI Act, it was urged that it was obligatory on the part

of the Public Authority to publish the stated Manual within 120 days

of the enactment of RTI Act. All other authorities including the

Central Vigilance Commission, Income-tax Authorities, Authorities

under 1962 Act, Police Authorities, Jail Authorities have adhered to

526

this statutory compliance, except the ED. In response, it is

submitted by the learned Additional Solicitor General that ED

Manual is an internal departmental document only for the use of

officers of the ED. It is to give them guidance on proper enforcement

of 2002 Act and outlines the procedure for implementation of the

provisions of this Act. In addition, reliance is placed on the

exposition of the Constitution Bench of this Court in Lalita

Kumari704. In paragraph 89 of this decision, the Court observed

thus:

“89. Besides, the learned Senior Counsel relied on

the special procedures prescribed under the CBI

Manual to be read into Section 154. It is true that

the concept of “preliminary inquiry” is contained in

Chapter IX of the Crime Manual of CBI. However,

this Crime Manual is not a statute and has not

been enacted by the legislature. It is a set of

administrative orders issued for internal guidance

of the CBI officers. It cannot supersede the Code.

Moreover, in the absence of any indication to the

contrary in the Code itself, the provisions of the CBI

Crime Manual cannot be relied upon to import the

concept of holding of preliminary inquiry in the

scheme of the Code of Criminal Procedure. At this

juncture, it is also pertinent to submit that CBI is

constituted under a special Act, namely, the Delhi

Special Police Establishment Act, 1946 and it

derives its power to investigate from this Act.”

704 Supra at Footnote No.206 (also at Footnote No.13)

527

181. It is true that the ED Manual may be an internal document for

departmental use and in the nature of set of administrative orders.

It is equally true that the accused or for that matter common public

may not be entitled to have access to such administrative

instructions being highly confidential and dealing with complex

issues concerning mode and manner of investigation, for internal

guidance of officers of ED. It is also correct to say that there is no

such requirement under the 2002 Act or for that matter, that there

is nothing like investigation of a crime of money-laundering as per

the scheme of 2002 Act. The investigation, however, is to track the

property being proceeds of crime and to attach the same for being

dealt with under the 2002 Act. Stricto sensu, it is in the nature of

an inquiry in respect of civil action of attachment. Nevertheless,

since the inquiry in due course ends in identifying the offender who

is involved in the process or activity connected with the proceeds of

crime and then to prosecute him, it is possible for the department to

outline the situations in which that course could be adopted in

reference to specific provisions of 2002 Act or the Rules framed

thereunder; and in which event, what are the options available to

such person before the Authority or the Special Court, as the case

528

may be. Such document may come handy and disseminate

information to all concerned. At least the feasibility of placing such

document on the official website of ED may be explored.

APPELLATE TRIBUNAL

182. Serious grievance has been made about the vacancies in the

Appellate Tribunal despite the serious prejudice being caused on

account of provisional attachment order and, in some cases, taking

over possession of the property so attached. This grievance, even

though genuine, cannot be the basis to test the validity of the

provisions of the 2002 Act or to question the efficacy of those

provisions on that account. The Parliament by this special

legislation having created an expert body being Appellate Tribunal

to deal with matters concerning attachment, possession and

confiscation and vesting of property in the Central Government, it

is, but necessary, that the forum should be functional and accessible

to the aggrieved persons uninterruptedly. We need to impress upon

the Executive to take necessary corrective measures in this regard.

Absent such forum, the aggrieved persons have to rush to the High

Court on every occasion which indeed is avoidable.

529

PUNISHMENT UNDER SECTION 4 OF THE 2002 ACT

183. It is urged that there is no gradation of punishment depending

on the nature of offence which may be committed by the principal

offender and other offenders. Section 4704A of the 2002 Act makes

no distinction between person directly involved in the process or

activity connected with the proceeds of crime and the other not so

directly involved. Further, the scheduled offence may have been

committed by someone else and the offence of money-laundering by

third person owing to being involved in the process or activity

connected with the proceeds of crime. The petitioners have relied on

Section 201 and 212 of IPC. It is their case that this distinction is

absent in Section 4 of the 2002 Act which provides that the term of

rigorous imprisonment shall not be less than three years and extend

upto seven years or ten years, as the case may be, with fine. This

argument to say the least is flimsy and tenuous. For, the

punishment under Section 4 is not in relation to the predicate

offence, but offence of money-laundering under Section 3 of the 2002

704A 4. Punishment for money-laundering.—Whoever commits the offence of moneylaundering shall be punishable with rigorous imprisonment for a term which shall not be less

than three years but which may extend to seven years and shall also be liable to fine [***]**:

Provided that where the proceeds of crime involved in money-laundering relates to any

offence specified under paragraph 2 of Part A of the Schedule, the provisions of this section

shall have effect as if for the words “which may extend to seven years”, the words “which may

extend to ten years” had been substituted.

**The words “which may extend to five lakh rupees” omitted by Act 2 of 2013, sec. 4 (w.e.f.

15-2-2013, vide S.O. 343(E), dated 8-2-2013).

530

Act. The person may be involved in any one or more than one

process or activity connected with the proceeds of crime. All of them

are treated as one class of offender involved in money-laundering.

The proceeds of crime may be derived or obtained as a result of

criminal activity with which the offender involved in moneylaundering offence may not be directly concerned at all. Even so, he

becomes liable to be proceeded under Section 3 and punished under

Section 4 of the 2002 Act. The principle of an accessory after the

fact will have no application to the offence of money-laundering.

Suffice it to observe that the argument under consideration is devoid

of merit.

184. On the basis of same analogy, it was argued that the twin

conditions of bail contained in Section 45 of the 2002 Act would act

grossly disproportionate and illogical qua a person who is not

directly connected with the scheduled offence but merely an

accessory after the fact. Even this argument needs to be stated to

be rejected for the same reason.

185. The above analysis, in our view, is sufficient to answer the

diverse issues canvassed before us. We have attempted to

extensively deal with the essential aspects to record our conclusion

531

issue-wise. Further, we do not wish to dissect every reported

decision cited before us to obviate prolixity.

186. We once again clarify that in this judgment, we have confined

our analysis only to the issues regarding the validity and

interpretation of the provisions of the 2002 Act, referred to above.

We have not dealt with any other issue involved in individual cases

concerning 2002 Act as the parties have been given liberty to pursue

their other remedies before appropriate forum. Furthermore, we have

delinked the matters pertaining to other legislations and issues arising

therefrom from this batch of cases, for being proceeded appropriately.

CONCLUSION

187. In light of the above analysis, we now proceed to summarise

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 Mathew705.

705 Supra at Footnote No.90

532

(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 and reaching upto the property derived or obtained directly

or indirectly as a result of criminal activity relating to a scheduled

offence.

(v) (a) Section 3 of the 2002 Act has a wider reach and captures

every process and activity, direct or indirect, in dealing with the

proceeds of crime 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

533

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.

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 moneylaundering. 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

534

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 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

535

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 to the constitutional validity of Section 19 of the

2002 Act is also rejected. There are stringent safeguards provided

in Section 19. The provision does not suffer from the vice of

arbitrariness.

(xi)Section 24 of the 2002 Act has reasonable nexus with the

purposes and objects sought to be achieved by the 2002 Act and

cannot be regarded as manifestly arbitrary 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.

536

(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 Shah706 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 Shah707 distinguishing the enunciation of the

Constitution Bench decision in Kartar Singh708; and other

observations suggestive of doubting the perception of Parliament in

regard to the seriousness of the offence of money-laundering,

706 Supra at Footnote No.3

707 Supra at Footnote No.3

708 Supra at Footnote No.190

537

including about it posing serious threat to the sovereignty and

integrity of the country.

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 of an inquiry against the proceeds of crime and is not

“investigation” in strict sense of the term for initiating prosecution;

538

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

inquiry/investigation for initiating “civil action” of “provisional

attachment” of property being proceeds of crime.

539

(b) Supply of a copy of ECIR in every case to the person concerned

is not mandatory, it is enough if ED at the time of arrest, discloses

the grounds of such arrest.

Special 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.

540

(xxi) The argument about proportionality of punishment with

reference to the nature of scheduled offence is wholly unfounded and

stands rejected.

ORDER

T.P. (Crl.) No. 150/2016, T.P. (Crl.) Nos. 151-157/2016,

T.P. (C) No. 1583/2018 and T.P. (Crl.) No. 435/2021

1. These transfer petitions are disposed of with liberty to the private

parties to pursue the proceedings pending before the High Court.

The contentions, other than dealt with in this judgment, are kept

open, to be decided in those proceedings on its own merits. It would

be open to the parties to pursue all (other) contentions in those

proceedings, except the question of validity and interpretation of the

concerned provision(s) already dealt with in this judgment.

T.C. (Crl.) Nos.3/2018 and 4/2018

2. In these transferred cases, the parties are relegated before the

High Court by restoring the concerned writ petition(s) to the file of

the concerned High Court to its original number limited to consider

relief of discharge/bail/quashing, as the case may be, on its own

541

merits and in accordance with law. It would be open to the parties

to pursue all (other) contentions in those proceedings, except the

question of validity and interpretation of the concerned provision(s)

already dealt with in this judgment. The transferred cases are

disposed of accordingly.

W.P. (Crl.) Nos. 169/2020, 370/2021, 454/2021 and 475/2021

3. (a) These writ petitions involve issues relating to Finance

Bill/Money Bill. Hence, the same are delinked, to be heard along

with Civil Appeal No.8588 of 2019 titled ‘Rojer Mathew vs. South

Indian Bank Ltd. & Ors.’.

W.P. (Crl.) Nos. 251/2018 and 532/2021

(b) In these writ petitions, as the relief claimed was only

regarding the validity and interpretation of the provisions of the 2002

Act, the same are disposed of in terms of this judgment.

W.P. (Crl.) Nos. 152/2016, 202/2017, 26/2018, 33/2018,

75/2018, 117/2018, 173/2018, 175/2018, 184/2018, 226 of

2018, 309/2018, 333/2018, 9/2019, 16/2019, 49/2019,

122/2019, 127/2019, 139/2019, 147/2019, 205/2019,

217/2019, 244/2019, 272/2019, 283/2019, 289/2019,

542

300/2019, 308/2019, 326/2019, 365/2019, 367/2019,

39/2020, 259/2020, 60/2020, 91/2020, 239/2020, 267/2020,

366/2020, 385/2020, 404/2020, 429/2020, 18/2021,

19/2021, 21/2021, 27/2021, 66/2021, 179/2021, 199/2021,

207/2021, 239/2021, 263 of 2021, 268/2021, 282/2021,

303/2021, 305/2021, 323/2021 and 453/2021

bail/discharge/quashing has been prayed, the same are disposed of

in terms of this judgment with liberty to the private parties to pursue

further reliefs before the appropriate forum, leaving all contentions

in that regard open, to be decided on its own merits.

Crl. A. Nos. 1269/2017, 1270/2017, 223/2018, 391-392/2018,

793-794/2018, 1210/2018 and 682/2019

SLP (Crl.) Nos. 4634/2014, 9987/2015, 10018/2015,

10019/2015, 993/2016, 1271-1272/2017, 2890/2017,

5487/2017, 1701-1703/2018, 1705/2018, 5444/2018,

6922/2018, 8156/2018, 5350/2019, 8174/2019, 9652/2019,

10627/2019, 260/2020, 3474/2020, 6128/2020, 609/2021,

734/2021, 1355/2021, 1403/2021, 1440/2021, 1586/2021,

1855/2021, 1920/2021, 2237/2021, 2250/2021, 2435/2021,

2818/2021, 3228/2021, 3274/2021, 3439/2021, 3514/2021,

3629/2021, 3769/2021, 3813/2021, 3921/2021, 4024/2021,

4834/2021, 5156/2021, 5174/2021, 5252/2021, 5457/2021,

5652/2021, 5696-97/2021, 6189/2021, 7021-23/2021 and

8429/2021

SLP (C) Nos. 28394/2011, 28922/2011, 29273/2011 and 8764-

67/2021

543

Diary Nos. 9360/2018, 9365/2018, 17000/2018, 17462/2018,

20250/2018 and 22529/2018, 8626/2021 and 11605/2021

4. These appeals/petitions are de-tagged and ordered to be listed

separately before appropriate Bench as the impugned judgment in

the concerned case deals with the prayer for

bail/discharge/quashing. This relief will have to be decided on caseto-case basis. Accordingly, these matters be listed separately before

appropriate Bench. The Registry to do the needful in this regard.

709WP (Crl.) Nos. 336/2018, 173/2019, 212/2019, 253/2019,

261/2019, 266/2019, 273/2019, 285/2019, 288/2019,

298/2019, 299/2019, 306/2019, 346/2019, 09/2020,

35/2020, 49/2020, 52/2020, 240/2020 and 329/2020

WP (C) Nos. 1401/2020 and 56/2021

SLP (Crl.) Nos. 1534/2018, 2971/2018, 7408/2018,

11049/2018, 11839/2019, 1732/2020, 2023/2020 and

6303/2020;

710WP (Crl.) Nos. 119/2019, 239/2019, 263/2019, 36/2020,

124/2020, 137/2020, 140/2020, 142/2020, 145/2020,

228/2020, 69/2021, 359/2021 and 520/2021

SLP (Crl.) Nos. 1114/2018, 1115/2018, 618/2020, 2814/2020,

6456/2020, 6660/2020, 6338/2021 and 6847/2021;

709 These matters relate to the Customs Act, 1962

710 These matters relate to the Companies Act, 2013

544

711WP (Crl.) Nos. 118/2019, 267/2019, 286/2019, 287/2019,

303/2019, 305/2019, 309/2019, 313/2019, 28/2020,

61/2020, 89/2020, 90/2020, 93/2020, 184/2020, 221/2020,

223/2020, 285/2020, 286/2020, 410/2020, 411/2020,

04/2021, 06/2021, 33/2021, 40/2021, 47/2021, 144/2021

and 301/2021

SLP (Crl.) Nos. 244/2019, 3647/2019, 4322-24/2019,

4546/2019, 5153/2019, 9541/2019, 647/2020, 3366/2020,

5536/2020, 1031/2021, 1072/2021, 1073/2021, 1107/2021,

2050-54/2021 and 6834/2019

SLP (C) No. 20310/2021

Diary No. 31616/2021;

712WP (Crl.) Nos. 05/2020, 311/2020, 380/2020, 387/2020 and

11/2021

SLP (Crl.) Nos. 4078/2018, 8111/2019 and 6172/2020

Transferred Case (Crl.) No. 5/2018

Diary No. 41063/2015

5. In these cases, the challenge is regarding the validity and

interpretation of other statutes (other than 2002 Act), such as Indian

Penal Code, 1860, Code of Criminal Procedure, 1973, Customs Act,

1962, Prevention of Corruption Act, 1988, Companies Act, 2013,

Central Goods & Services Act, 2017, etc. Hence, the same are

delinked and be placed before the appropriate Bench “groupwise/Act-wise” as indicated above. The Registry to do the needful in

that regard.

711 These matters relate to Central Goods and Services Tax Act, 2017

712 These matters relate to Indian Penal Code, 1860, Prevention of Corruption Act, 1988,

Information Technology Act, 2000, Foreign Contribution (Regulation) Act, 2010, etc.

545

6. The interim relief granted in the petitions/appeals which are

disposed of in terms of this order, to continue for a period of four

weeks from today, to enable the private parties to take recourse to

appropriate remedies before the concerned forum, if so advised.

7. The interim relief granted in petitions/appeals, which are

delinked and ordered to be listed separately or otherwise, shall

continue for four weeks from today, with liberty to the parties to

mention for early listing of the concerned case including for

continuation/vacation of the interim relief.

..……………………………J.

(A.M. Khanwilkar)

………………………………J.

(Dinesh Maheshwari)

………………………………J.

(C.T. Ravikumar)

New Delhi;

July 27, 2022.

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