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

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

Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले



1
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
2
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)
3
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
4
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
5
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
6
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
7
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
8
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
9
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
10
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
11
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
12
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
13
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
14
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
15
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
16
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
17
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
18
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)
19
• 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
20
• 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”
21
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
22
(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.
(c) As aforementioned, besides challenge to constitutional validity
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”
23
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”
24
(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).
25
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
26
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).
27
(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
28
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”
29
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)
30
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
31
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)
32
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)
33
(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)
34
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)
35
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.
36
(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)
37
(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”
38
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.
39
(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)
40
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)
41
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
42
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).
43
(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.
44
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’
51
. 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)
45
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)
46
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)
47
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
48
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)
49
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)
50
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)
51
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”
52
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)
53
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)
54
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
55
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
56
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
57
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”
58
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
59
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
60
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”
61
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
62
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.
89
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
63
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”
64
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
65
(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
66
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”.
67
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
68
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.
69
(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.
70
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
71
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,
72
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
73
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
74
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)
75
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
76
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
77
(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.
78
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”
79
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”
80
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
81
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”
82
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
83
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)
84
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
85
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)
86
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)
87
“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”
88
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)
89
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
90
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”
91
(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)
92
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
93
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
94
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
95
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”
96
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
97
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.
98
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
99
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,
113
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
114
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
117
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
120
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
121
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
122
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
(c) where it is not known by whom the offence was committed, the first day on which the
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.
228
(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
230
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
231
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
232
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
233
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.
(c) the Financial Action Task Force established at
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
234
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
235
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];
236
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
238
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;
239
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.
240
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);
241
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
242
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.
243
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
244
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.
245
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;
(c) “Assistant Director” means an Assistant Director
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)
246
(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;
or
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).
247
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)
248
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.
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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.
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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;
(c) For the purposes of subparagraph (b), predicate offences
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
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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
Related
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
(c) acquisition; 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.
(c) Integration: which is making the money available to the
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,
(c) to provide an additional support to the dominant
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,
297
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
298
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
299
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
300
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
(c) 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 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).
302
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
(c) 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
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
305
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.
*** *** ***
312
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.
313
- 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”
314
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
(c) taking into account all relevant materials
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
335
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;
(c) seize any record or property found as a result of such
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.
 (c) sub-section (2-A) thereof shall be deemed to have been omitted.
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
(c) otherwise in the interests of justice.”
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;
(c) compelling the production of records;
(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
(c) to whom a summon is issued under section 50
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
24
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.
(c) The interpretation suggested by the petitioners, that only upon
projecting or claiming the property in question as untainted property
that the offence of Section 3 would be complete, stands rejected.
(d) The offence under Section 3 of the 2002 Act is dependent on
illegal gain of property as a result of criminal activity 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.
(c) The provision in the form of Section 45 of the 2002 Act, as
applicable post amendment of 2018, is reasonable and has direct
nexus with the purposes and objects sought to be achieved by the
2002 Act and does not suffer from the vice of arbitrariness or
unreasonableness.
(d) As regards the prayer for grant of bail, irrespective of the nature
of proceedings, including those under Section 438 of the 1973 Code
or even upon invoking the jurisdiction of Constitutional Courts, the
underlying principles and rigours of Section 45 may apply.
(xiv) The beneficial provision of Section 436A of the 1973 Code
could be invoked by the accused arrested for offence punishable
under the 2002 Act.
(xv) (a) The process envisaged by Section 50 of the 2002 Act is in
the nature 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.
(c) However, when the arrested person is produced before the
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
(c) In these writ petitions as further relief of
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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