VIJAY MADANLAL CHOUDHARY & ORS. versus UNION OF INDIA & ORS.

[2022] 6 S.C.R.

VIJAY MADANLAL CHOUDHARY & ORS.

UNION OF INDIA & ORS.

(Special Leave Petition (Criminal) No. 4634 of 2014)

JULY 27, 2022

[A. M. KHANWILKAR, DINESH MAHESHWARI AND

C. T. RAVIKUMAR, JJ.]

Prevention of Money Laundering Act, 2002 – s.2(1), Clause(na) – Expression “proceedings” therein – Held: The expression“proceedings” occurring in Clause (na) of s.2(1) is contextual andis required to be given expansive meaning to include inquiryprocedure followed by the Authorities of ED, the AdjudicatingAuthority, and the Special Court.

Prevention of Money Laundering Act, 2002 – s.2(1), Clause(na) –Expression “investigation” therein – Held: The expression“investigation” in Clause (na) of s.2(1) does not limit itself to thematter of investigation concerning the offence under the Act and isinterchangeable with the function of “inquiry” to be undertakenby the Authorities under the Act.

Prevention of Money Laundering Act, 2002 – s.2(1), Clause(u), Explanation – Held: Explanation inserted to Clause (u) of s.2(1)does not travel beyond the main provision predicating tracking andreaching upto the property derived or obtained directly or indirectlyas result of criminal activity relating to scheduled offence.

Prevention of Money Laundering Act, 2002 – s.3 – Ambit of– Held: s.3 has wider reach and captures every process andactivity, direct or indirect, in dealing with the proceeds of crime andis not limited to the happening of the final act of integration oftainted property in the formal economy – Explanation inserted tos.3 by way of amendment of 2019 does not expand the purport ofs.3 but is only clarificatory in nature – The expression “and”occurring in s.3 has to be construed as “or”, to give full play to thesaid provision so as to include “every” process or activity indulgedinto by anyone – The interpretation suggested, that only upon

projecting or claiming the property in question as untainted propertythat the offence of s.3 would be complete, is rejected.

Prevention of Money Laundering Act, 2002 – Prosecution onnotional basis or assumption – If permissible – Held: The Authoritiesunder the Act cannot prosecute any person on notional basis or onthe assumption that scheduled offence has been committed, unlessit is so registered with the jurisdictional police and/or pendingenquiry/trial including by way of criminal complaint before thecompetent forum.

Prevention of Money Laundering Act, 2002 – s.5 – Validityof – Held: s.5 is constitutionally valid – It provides for balancingarrangement to secure the interests of the person as also ensuresthat the proceeds of crime remain available to be dealt with in themanner provided by the Act.

Prevention of Money Laundering Act, 2002 – s.8(4) –Challenge to the validity of sub-section (4) of s.8 – Held: Is rejectedsubject to s.8 being invoked and operated in accordance with themeaning assigned to it – Direction u/s.8(4) for taking possession ofthe property in question before formal order of confiscation ispassed merely on the basis of confirmation of provisional attachmentorder, should be an exception and not rule – That issue will haveto be considered on case-to-case basis.

Prevention of Money Laundering Act, 2002 – s.17 – Challengeto deletion of proviso to sub-section (1) of s.17 – Rejected – Held:There are stringent safeguards provided in s.17 and Rules framedthereunder – Moreover, the pre-condition in the proviso to Rule3(2) of the 2005 Rules cannot be read into s.17 after its amendment.

Prevention of Money Laundering Act, 2002 – s.18 – Challengeto deletion of proviso to sub-section (1) of s.18 – Rejected – Held:Safeguards are provided in s.18 – Amended provision does not sufferfrom the vice of arbitrariness.

Prevention of Money Laundering Act, 2002 – s.19 – Challengeto the constitutional validity of s.19 – Rejected – Held: There arestringent safeguards provided in s.19 – The provision does not sufferfrom the vice of arbitrariness.

APrevention of Money Laundering Act, 2002 – s.24 – Validity– Held: s.24 has reasonable nexus with the purposes and objectssought to be achieved by the Act and cannot be regarded asmanifestly arbitrary or unconstitutional.

Prevention of Money Laundering Act, 2002 – s.44 – ProvisoBin Clause (a) of sub-section (1) of s.44 – Held: Is to be regarded asdirectory in nature and this provision is also read down to meanthat the Special Court may exercise judicial discretion on case-to-case basis.

Prevention of Money Laundering Act, 2002 – s.44 – ChallengeCto – Held: No merit in the challenge to s.44 being arbitrary orunconstitutional – However, the eventualities referred to in thissection shall be dealt with by the Court concerned and by theAuthority concerned in accordance with the interpretation given.

Prevention of Money Laundering Act, 2002 – s.45(1) –DRelease on bail – Twin conditions in s.45(1) – Held: Reasons whichweighed with this Court in Nikesh Tarachand Shah case for declaringthe twin conditions in s.45(1), as it stood at the relevant time, asunconstitutional in no way obliterated the provision from the statutebook – It was open to the Parliament to cure the defect noted bythis Court so as to revive the same provision in the existing form.E

Prevention of Money Laundering Act, 2002 – s.45 – Validity– The provision in the form of s.45, as applicable post amendmentof 2018, is reasonable and has direct nexus with the purposes andobjects sought to be achieved by the 2002 Act and does not sufferfrom the vice of arbitrariness or unreasonableness.F

Prevention of Money Laundering Act, 2002 – s.45 –Applicability – Prayer for bail – Held: As regards the prayer forgrant of bail, irrespective of the nature of proceedings, includingthose under s.438 CrPC or even upon invoking the jurisdiction ofConstitutional Courts, the underlying principles and rigours of s.45Gmay apply – Code of Criminal Procedure, 1973 – s.438.

Prevention of Money Laundering Act, 2002 – Invocation ofs.436A CrPC – Permissibility – Held: Beneficial provision of s.436ACrPC could be invoked by the accused arrested for offencepunishable under the Act – CrPC – s.436A.

Prevention of Money Laundering Act, 2002 – s.50 – Processenvisaged by s.50 – Held: Is in the nature of an inquiry against theproceeds of crime and is not “investigation” in strict sense of theterm for initiating prosecution.

Prevention of Money Laundering Act, 2002 – s.48 –Authorities under the Act (referred to in s.48) – Held: They are notpolice officers as such.

Prevention of Money Laundering Act, 2002 – Statementsrecorded by Authorities under the Act – Held: They are not hit byArt.20(3) or Art.21 of the Constitution – Constitution of India, 1950– Arts. 20(3) and 21.

Prevention of Money Laundering Act, 2002 – s.63 – Validity– Held: s.63 providing for punishment regarding false informationor failure to give information does not suffer from any vice ofarbitrariness.

Prevention of Money Laundering Act, 2002 – Schedule tothe Act – Inclusion or exclusion of any particular offence – Held:The inclusion or exclusion of any particular offence in the Scheduleto the Act is matter of legislative policy –The nature or class ofany predicate offence has no bearing on the validity of the Scheduleor any prescription thereunder.

Prevention of Money Laundering Act, 2002 – s.48 –Enforcement Case Information Report (ECIR) – Held: ECIR cannotbe equated with an FIR under CrPC – ECIR is an internal documentof the Enforcement Directorate (ED) – Fact that FIR in respect ofscheduled offence has not been recorded does not come in the wayof the Authorities referred to in s.48 to commence inquiry/investigation for initiating “civil action” of “provisional attachment”of property being proceeds of crime – FIR.

Prevention of Money Laundering Act, 2002 – EnforcementCase Information Report (ECIR) – Held: Supply of copy of ECIRin every case to the person concerned is not mandatory, it is enoughif Enforcement Directorate (ED) at the time of arrest, discloses thegrounds of such arrest – However, when the arrested person isproduced before the Special Court, it is open to the Special Courtto look into the relevant records presented by the authorised

Arepresentative of ED for answering the issue of need for his/hercontinued detention in connection with the offence of money-laundering.

Prevention of Money Laundering Act, 2002 – EnforcementDirectorate (ED) Manual – Held: Even when ED manual is not toBbe published being an internal departmental document issued forthe guidance of the Authorities (ED officials), the department oughtto explore the desirability of placing information on its website whichmay broadly outline the scope of the authority of the functionariesunder the Act and measures to be adopted by them as also the options/remedies available to the person concerned before the AuthorityCand before the Special Court.

Prevention of Money Laundering Act, 2002 – Vacancies inAppellate Tribunal – Executive to take corrective measures in thisregard expeditiously.DPrevention of Money Laundering Act, 2002 – Argument aboutproportionality of punishment with reference to the nature ofscheduled offence – Held: Is wholly unfounded.

Answering issues regarding the validity and interpretationof the provisions of the 2002 Act, the CourtE

HELD:

(i) The question as to whether some of the amendments tothe Prevention of Money-laundering Act, 2002 could not havebeen enacted by the Parliament by way of Finance Act has notFbeen examined in this judgment. The same is left open for beingexamined along with or after the decision of the Larger Bench(seven Judges) of this Court in the case of Rojer Mathew.

(ii) The expression “proceedings” occurring in Clause (na)of Section 2(1) of the 2002 Act is contextual and is required to beGgiven expansive meaning to include inquiry procedure followedby the Authorities of ED, the Adjudicating Authority, and theSpecial Court.

(iii) The expression “investigation” in Clause (na) of Section2(1) of the 2002 Act does not limit itself to the matter ofH

investigation concerning the offence under the Act and isinterchangeable with the function of “inquiry” to be undertakenby 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 provisionpredicating tracking and reaching upto the property derived orobtained directly or indirectly as result of criminal activityrelating to scheduled offence.

(v) (a) Section 3 of the 2002 Act has wider reach andcaptures every process and activity, direct or indirect, in dealingwith the proceeds of crime and is not limited to the happening ofthe final act of integration of tainted property in the formaleconomy. The Explanation inserted to Section 3 by way ofamendment of 2019 does not expand the purport of Section 3 butis only clarificatory in nature. It clarifies the word “and” precedingthe expression projecting or claiming as “or”; and being aclarificatory amendment, it would make no difference even if it isintroduced by way of Finance Act or otherwise.

(b) Independent of the above, the expression “and”occurring in Section 3 has to be construed as “or”, to give fullplay to the said provision so as to include “every” process oractivity indulged into by anyone. Projecting or claiming theproperty as untainted property would constitute an offence ofmoney-laundering on its own, being an independent process oractivity.

(c) The interpretation suggested by the petitioners, thatonly upon projecting or claiming the property in question asuntainted property that the offence of Section 3 would be complete,stands rejected.

(d) The offence under Section 3 of the 2002 Act is dependenton illegal gain of property as result of criminal activity relatingto scheduled offence. It is concerning the process or activityconnected with such property, which constitutes the offence ofmoney-laundering. The Authorities under the 2002 Act cannotprosecute any person on notional basis or on the assumption thata scheduled offence has been committed, unless it is so registeredwith the jurisdictional police and/or pending enquiry/trial including

Aby way of criminal complaint before the competent forum. If theperson is finally discharged/acquitted of the scheduled offenceor the criminal case against him is quashed by the Court ofcompetent jurisdiction, there can be no offence of money-laundering against him or any one claiming such property beingthe property linked to stated scheduled offence through him.B

(vi) Section 5 of the 2002 Act is constitutionally valid. Itprovides for balancing arrangement to secure the interests ofthe person as also ensures that the proceeds of crime remainavailable to be dealt with in the manner provided by the 2002Act. The procedural safeguards as delineated are effectiveCmeasures to protect the interests of person concerned.

(vii) The challenge to the validity of sub-section (4) ofSection 8 of the 2002 Act is also rejected subject to Section 8being invoked and operated in accordance with the meaningassigned to it.D

(viii) The challenge to deletion of proviso to sub-section(1) of Section 17 of the 2002 Act stands rejected. There arestringent safeguards provided in Section 17 and Rules framedthereunder. Moreover, the pre-condition in the proviso to Rule3(2) of the 2005 Rules cannot be read into Section 17 after itsEamendment. The Central Government may take necessarycorrective 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 aresimilar safeguards provided in Section 18. The amended provisionFdoes not suffer from the vice of arbitrariness.

(x) The challenge to the constitutional validity of Section19 of the 2002 Act is also rejected. There are stringent safeguardsprovided in Section 19. The provision does not suffer from thevice of arbitrariness.

(xi) Section 24 of the 2002 Act has reasonable nexus withthe purposes and objects sought to be achieved by the 2002 Actand cannot be regarded as manifestly arbitrary or unconstitutional.

(xii) (a) The proviso in Clause (a) of sub-section (1) ofSection 44 of the 2002 Act is to be regarded as directory in nature

and this provision is also read down to mean that the SpecialCourt may exercise judicial discretion on case-to-case basis.

(b) There is no merit in the challenge to Section 44 beingarbitrary or unconstitutional. However, the eventualities referredto in this section shall be dealt with by the Court concerned andby the Authority concerned in accordance with the interpretationgiven.

(xiii) (a) The reasons which weighed with this Court inNikesh Tarachand Shah for declaring the twin conditions in Section45(1) of the 2002 Act, as it stood at the relevant time, asunconstitutional in no way obliterated the provision from thestatute book; and it was open to the Parliament to cure the defectnoted by this Court so as to revive the same provision in theexisting form.

(b) This Court is unable to agree with the observations inNikesh Tarachand Shah distinguishing the enunciation of theConstitution Bench decision in Kartar Singh; and otherobservations suggestive of doubting the perception of Parliamentin regard to the seriousness of the offence of money-laundering,including about it posing serious threat to the sovereignty andintegrity 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 directnexus with the purposes and objects sought to be achieved bythe 2002 Act and does not suffer from the vice of arbitrariness orunreasonableness.

(d) As regards the prayer for grant of bail, irrespective ofthe nature of proceedings, including those under Section 438 ofthe 1973 Code or even upon invoking the jurisdiction ofConstitutional Courts, the underlying principles and rigours ofSection 45 may apply.

(xiv) The beneficial provision of Section 436A of the 1973Code could be invoked by the accused arrested for offencepunishable under the 2002 Act.

(xv) (a) The process envisaged by Section 50 of the 2002Act is in the nature of an inquiry against the proceeds of crime

Aand is not “investigation” in strict sense of the term for initiatingprosecution; and the Authorities under the 2002 Act (referred toin Section 48), are not police officers as such.

(b) The statements recorded by the Authorities under the2002 Act are not hit by Article 20(3) or Article 21 of theBConstitution of India.

(xvi) Section 63 of the 2002 Act providing for punishmentregarding false information or failure to give information doesnot suffer from any vice of arbitrariness.

(xvii) The inclusion or exclusion of any particular offenceCin the Schedule to the 2002 Act is matter of legislative policy;and the nature or class of any predicate offence has no bearingon the validity of the Schedule or any prescription thereunder.

(xviii) (a) In view of special mechanism envisaged by the2002 Act, ECIR cannot be equated with an FIR under the 1973DCode. ECIR is an internal document of the ED and the fact thatFIR in respect of scheduled offence has not been recorded doesnot come in the way of the Authorities referred to in Section 48to commence inquiry/investigation for initiating “civil action” of“provisional attachment” of property being proceeds of crime.

E(b) Supply of copy of ECIR in every case to the personconcerned is not mandatory, it is enough if ED at the time ofarrest, discloses the grounds of such arrest.

(c) However, when the arrested person is produced beforethe Special Court, it is open to the Special Court to look into theFrelevant records presented by the authorised representative ofED for answering the issue of need for his/her continued detentionin connection with the offence of money-laundering.

(xix) Even when ED manual is not to be published being aninternal departmental document issued for the guidance of theGAuthorities (ED officials), the department ought to explore thedesirability of placing information on its website which may broadlyoutline the scope of the authority of the functionaries under theAct and measures to be adopted by them as also the options/remedies available to the person concerned before the Authorityand before the Special Court.H

(xx)The petitioners are justified in expressing seriousconcern bordering on causing injustice owing to the vacancies inthe Appellate Tribunal. It is deemed necessary to impress uponthe executive to take corrective measures in this regardexpeditiously.

(xxi) The argument about proportionality of punishment withreference to the nature of scheduled offence is wholly unfoundedand stands rejected.[Para 187][719-B-H; 720-A-H; 721-A-H; 722-A-H; 723-A-C]

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of Madhya Pradesh & Ors. (2008) 3 SCC 602 : [2008]4 SCR 783; State of Maharashtra v. Chief InformationCommissioner & Anr., (2018) SCC OnLine Bom 1199;Vineet Narain & Ors. v. Union of India & Anr., (1998)1 SCC 226 : [1997] 6 Suppl. SCR 595 ; Shashikant v.Central Bureau of Investigation & Ors., (2007) 1 SCC630 : [2006] 8 Suppl. SCR 474; Central Bureau ofInvestigation v. Ashok Kumar Aggarwal, (2014) 14 SCC295 : [2013] 14 SCR 983; State of Jharkhand throughSP, Central Bureau of Investigation v. Lalu Prasad Yadavalias Lalu Prasad, (2017) 8 SCC 1 : [2017] 3 SCR 630;State of Rajasthan, Jaipur v. Balchandalia Baliay (1977)4 SCC 308 : [1978] 1 SCR 535; Sanjay Chandra v.Central Bureau of Investigation, (2012) 1 SCC 40 :[2011] 13 SCR 309; State of Kerela v. Raneef (2011) 1SCC 784 : [2011] 1 SCR 590; Romesh Chandra Mehtav. State of West Bengal [1969] 2 SCR 461 : AIR 1970SC 940; Balkishan A. Devidayal v. State ofMaharashtra (1980) 4 SCC 600 : [1981] 1 SCR 175;Ramanlal Bhogilal Shah & Anr. v. D.K. Guha & Ors.(1973) 1 SCC 696 : [1973] 3 SCR 438; Poolpandi &Ors. v. Superintendent, Central Excise and Ors. (1992)3 SCC 259 : [1992] 3 SCR 247; State of Gujarat v.Shyamlal Mohanlal Choksi AIR 1965 SC 1251 : [1965]2 SCR 457; Keshavan Madhava Menon v. The State ofBombay AIR 1951 SC 128 : [1951] SCR 228; RiteshAgarwal & Anr. v. Securities and Exchange Board ofIndia & Ors. (2008) 8 SCC 205 : [2008] 8 SCR 553;Harjit Singh v. State of Punjab (2011) 4 SCC 441 :[2011] 5 SCR 691; Varinder Singh v. State of Punjab& Anr. (2014) 3 SCC 151 : [2014] 1 SCR 496;Commissioner of Income Tax (Central)-I, New Delhi v.Vatika Township Private Limited (2015) 1 SCC 1 :[2014] 12 SCR 1037; Bihta Co-operative Developmentand Cane Marketing Union Ltd. & Anr. v. Bank of Bihar& Ors. AIR 1967 SC 389 : [1967] 1 SCR 848;Dattatraya Govind Mahajan & Ors. v. State ofMaharashtra & Anr. (1977) 2 SCC 548 : [1977] 2 SCR 790; S. Sundaram Pillai & Ors. v. V. R. Pattabiraman &

Ors., (1985) 1 SCC 591 : [1985] 2 SCR 643; JaganM. Seshadri v. State of T.N., (2002) 9 SCC 639; HardevMotor Transport v. State of M.P. & Ors. (2006) 8 SCC613 : [2006] 7 Suppl. SCR 766; Obulapuram MiningCompany Pvt. Ltd. v. Joint Director, Directorate ofEnforcement, Government of India, ILR 2017 Kar 1846;Ajay Kumar Gupta & Ors. v. Adjudicating Authority(PMLA) & Ors. (2017) 2 LW (Cri) 252; State of Biharv. Deokaran Nenshi & Anr. (1972) 2 SCC 890 : [1973]1 SCR 1004; Commissioner of Wealth Tax, Amritsar v.Suresh Seth, (1981) 2 SCC 790 : [1981] 3 SCR 419;Smt. Maya Rani Punj (Smt.) v. Commissioner of IncomeTax, Delhi (1986) 1 SCC 445 : [1985] 3 Suppl. SCR 827; A.R. Antulay v. R.S. Nayak & Anr. AIR 1988SC 1531 : [1988] 1 Suppl. SCR 1 (para 59) : (1988) 2SCC 602 : [1988] 1 Suppl. SCR 1; Directorate ofEnforcement v. Surajpal & Ors. (2018) SCC OnLineDel 10472; Inspector of Police, CBI v. AssistantDirectorate, Directorate of Enforcement (PMLA) & Anr.(2019) SCC OnLine Ker 4546; Sou. Vijaya Alias Babyv. State of Maharashtra, (2003) 8 SCC 296 : [2003]3 Suppl. SCR 340; State of Karnataka v. Madesha &Ors. (2007) 7 SCC 35 : [2007] 8 SCR 757; In ReKuttayan alias Nambi Thevar AIR 1960 Mad 9; NagarPalika Nigam v. Krishi Upaj Mandi Samiti & Ors., AIR2009 SC 187 : [2008] 14 SCR 419; Rohitash Kumar &Ors. v. Om Prakash Sharma & Ors., AIR 2013 SC 30 :[2012] 13 SCR 47; Abdullah Ali Balsharaf & Anr. v.Directorate of Enforcement & Ors. (2019) SCC OnlineDel 6428; Seema Garg v. Deputy Director, Directorateof Enforcement, (2020) SCC Online P&H 738; A.Kamarunnisa Ghori v. The Chairperson, Prevention ofMoney Laundering, Union of India, 2012 (4) CTC 608: 2012 Writ LR 719; Mahendra Lal Jaini v. State ofUttar Pradesh & Ors., AIR 1963 SC 1019 : [1963]1 Suppl. SCR 912; G. Mohan Rao v. State of TamilNadu & Ors. (2021) SCC OnLine SC 440; State ofGujarat & Anr. v. Shri Ambica Mills Ltd., Ahmedabad& Anr. (1974) 4 SCC 656 : [1974] 3 SCR 760; State of

Manipur & Ors. v. Surajkumar Okram & Ors. (2022)SCC OnLine SC 130; M.K. Ayoob & Ors. v.Superintendent, Customs Intelligence Unit, Cochin &Anr., 1984 Crl.L.J. 949; The Senior Intelligence Officer,Directorate of Revenue, Madras v. M.K.S. Abu Bucker,1990 Cri.L.J 704; A.R. Antulay v. Ramdas SriniwasNayak & Anr. (1984) 2 SCC 500 : [1984] 2 SCR 914;Om Prakash & Anr. v. Union of India & Anr. (2011) 14SCC 1 : [2011] 14 SCR 240; Union of India v.Thamisharasi & Ors. (1995) 4 SCC 190 : [1995] 3 SCR 905; Gorav Kathuria v. Union of India & Ors.(2016) SCC OnLine P&H 3428 D.K. Basu v. State ofW.B. (1997) 1 SCC 416 : [1996] 10 Suppl. SCR 284;Union of India v. Ashok Kumar Sharma & Ors., (2020)SCC OnLine SC 683; Canon India Private Limited v.Commissioner of Customs, (2021) SCC OnLine SC 200;Adjudicating Authority (PMLA) and Ors. v. Ajay KumarGupta and Ors. Criminal Appeal Nos. 391-392/2018;Attorney General for India & Ors. v. AmratlalPrajivandas & Ors. (1994) 5 SCC 54 : [1994] 1 Suppl. SCR 1; Sanjay Dutt v. State through C.B.I., Bombay(1994) 6 SCC 86; The State of Bombay v. S.L. Apte &Anr. AIR 1961 SC 578 : [1961] 3 SCR 107; ThomasDana v. State of Punjab, AIR 1959 SC 375 : [1959]1 Suppl. SCR 274; Hira H. Advani etc. v. State ofMaharashtra, (1969) 2 SCC 662; R. Dineshkumar aliasDeena v. State represented by Inspector of Police &Ors. (2015) 7 SCC 497 : [2015] 5 SCR 605; ShriBalaganesan Metals v. M.N. Shanmugham Chetty &Ors. (1987) 2 SCC 707 : [1987] 2 SCR 1173;M/s. Doypack Systems Pvt. Ltd. v. Union of India &Ors. (1988) 2 SCC 299 : [1988] 2 SCR 962; MunicipalCorporation of Greater Bombay & Ors. v. Indian OilCorporation Ltd. (1991) 2 Suppl. SCC 18 : [1990]3 Suppl. SCR 365; Regional Director, Employees’ StateInsurance Corporation v. High Land Coffee Works ofP.F.X. Saldanha and Sons & Anr., (1991) 3 SCC 617 :[1991] 3 SCR 307; Forest Range Officer & Ors. v.P. Mohammed Ali & Ors., (1993) 3 Suppl. SCC 627 :

[1993] 3 SCR 497; Commercial Taxation Officer,Udaipur v. Rajasthan Taxchem Ltd., (2007) 3 SCC 124: [2007] 1 SCR 855; Associated Indem Mechanical (P)Ltd. v. W.B. Small Industries Development Corpn. Ltd.,& Ors. (2007) 3 SCC 607 : [2007] 1 SCR 174; N.D.P.Namboodripad (Dead) by LRs. v. Union of India & Ors.,(2007) 4 SCC 502 : [2007] 3 SCR 769; Oswal Fatsand Oils Limited v. Additional Commissioner(Administration), Bareilly Division, Bareilly & Ors.(2010) 4 SCC 728 : [2010] 5 SCR 927; Mamta SurgicalCotton Industries, Rajasthan v. Assistant Commissioner(Anti-Evasion), Bhilwara, Rajasthan, (2014) 4 SCC 87: [2014] 2 SCR 589; Rohit Tandon v. Directorate ofEnforcement (2018) 11 SCC 46 : [2017] 13 SCR 156;Kartar Singh v. State of Punjab (1994) 3 SCC 569 :[1994] 2 SCR 375; R. Sai Bharathi v. J. Jayalalitha &Ors. (2004) 2 SCC 9 : [2003] 6 Suppl. SCR 85;Subramanian Swamy v. Union of India, Ministry of Law& Ors. (2016) 7 SCC 221 : [2016] 3 SCR 865; SanjayDutt v. State through C.B.I., Bombay (II) (1994) 5 SCC410 : [1994] 3 Suppl. SCR 263; Joint Directors of MinesSafety v. M/s Tandur and Nayandgi Stone Quarries (P)Ltd. (1987) 3 SCC 208 : [1987] 2 SCR 800; Regina v.Oakes 1959 (2) QB 350; Ishwar Singh Bindra & Ors.v. The State of U.P. [1969] 1 SCR 219; Gujarat UrjaVikas Nigam Ltd. v. Essar Power Ltd. (2008) 4 SCC755 : [2008] 4 SCR 822; Pratap Singh v. State ofJharkhand & Anr. (2005) 3 SCC 551 : [2005]1 SCR 1019; National Legal Services Authority v. Unionof India & Ors. (2014) 5 SCC 438 : [2014] 5 SCR 119;People’s Union for Civil Liberties v. Union of India &Anr. (2005) 2 SCC 436 : [2005] 1 SCR 494; GithaHariharan & Anr. v. Reserve Bank of India & Anr.(1999) 2 SCC 228 : [1999] 1 SCR 669; Rohtas v. Stateof Haryana & Anr. (1979) 4 SCC 229 : [1980] 1 SCR 151; Ajmer Singh & Ors. v. Union of India & Ors. (1987)3 SCC 340 : [1987] 3 SCR 84; Usmanbhai DawoodbhaiMemon & Ors. v. State of Gujarat (1988) 2 SCC 271 :[1988] 3 SCR 225; Central Bureau of Investigation v.

State of Rajasthan & Ors. (1996) 9 SCC 735 : [1996]3 Suppl. SCR 127; State (Union of India) v. Ram Saran(2003) 12 SCC 578 : [2003] 6 Suppl. SCR 476;Mahmadhusen Abdulrahim Kalota Shaikh (2) v. Unionof India & Ors. (2009) 2 SCC 1 : [2008] 14 SCR 889;Gautam Kundu v. Directorate of Enforcement(Prevention of Money-Laundering Act), Government ofIndia (2015) 16 SCC 1 : [2015] 15 SCR 499; Union ofIndia & Ors. v. Chandra Bhushan Yadav (2020) 2 SCC747; Aswini Kumar Ghose & Anr. v. Arabinda Bose &Anr. AIR 1952 SC 369 : [1953] SCR 1; Central Bankof India v. State of Kerala & Ors. (2009) 4 SCC 94 :[ 2009] 3 SCR 735; Kishorebhai Khamanchand Goyalv. State of Gujarat & Anr. (2003) 12 SCC 274 : [2003]5 Suppl. SCR 1; Innoventive Industries Limited v. ICICIBank & Ors. (2018) 1 SCC 407 : [2017] 8 SCR 33;Patna Improvement Trust v. Smt. Lakshmi Devi & Ors.[1963] 2 Suppl. SCR 812; The South India Corporation(P) Ltd. v. The Secretary, Board of Revenue, Trivandrum& Anr. [1964] 4 SCR 280; Anandji Haridas and Co.(P) Ltd. v. S.P. Kasture & Ors. AIR 1968 SC 565 : [1968]1 SCR 661; Maharashtra State Board of Secondary andHigher Secondary Education & Anr. v. ParitoshBhupeshkumar Seth & Ors. (1984) 4 SCC 27 : [1985]1 SCR 29; Ethiopian Airlines v. Ganesh Narain Saboo(2011) 8 SCC 539 : [2011] 9 SCR 936; Bhagirath v.Delhi Administration, (1985) 2 SCC 580 : [1985]3 SCR 743; Eastern Coalfields Limited v. SanjayTransport Agency & Anr., (2009) 7 SCC 345 : [2009]9 SCR 690; Hari Narayan Rai v. Union of India & Anr.(2010) SCC OnLine Jhar 475; Karam Singh & Ors. v.Union of India & Ors., (2015) SCC OnLine P&H19739; Chhagan Chandrakant Bhujbal v. Union ofIndia & Ors. (2016) SCC OnLine Bom 9938;Vakamulla Chandrashekhar v. Enforcement Directorate& Anr. (2017) SCC OnLine Del 12810; VirbhadraSingh & Anr. v. Enforcement Directorate & Anr. (2017)SCC OnLine Del 8930; Moin Akhtar Qureshi v. Unionof India & Ors. vide order dated 01.12.2017 in W.P.

(Crl.) No.2465/2017; Directorate of Enforcement v.Vakamulla Chandrashekhar Order dated 04.01.2018in SLP (Crl.) Diary No. 36918/2017; RajbhushanOmprakash Dixit v. Union of India & Anr., SeriousFraud Investigation Office v. Rahul Modi & Anr. (2019)5 SCC 266 : [2019] 5 SCR 91; K.I. Pavunny v. AssistantCollector (HQ), Central Excise Collectorate, Cochin(1997) 3 SCC 721 : [1997] 1 SCR 797; Dalmia Cement(Bharat) Limited & Anr. v. Assistant Director ofEnforcement Directorate (2016) SCC OnLine Hyd 64;Zile Singh v. State of Haryana & Ors. (2004) 8 SCC 1: [2004] 5 Suppl. SCR 272; Commissioner of IncomeTax I, Ahmedabad v. Gold Coin Health Food PrivateLimited (2008) 9 SCC 622 : [2008] 12 SCR 179;Commissioner of Income Tax, Bhopal v. Shelly Products& Anr. (2003) 5 SCC 461 : [2003] 1 Suppl. SCR 79;Gurcharan Singh v. Directorate of Revenue Intelligence(2008) 17 SCC 28; [2008] 5 SCR 856; AssistantElectrical Engineer v. Satyendra Rai & Anr. (2014) 4SCC 513; State Bank of India v. V. Ramakrishnan &Anr. (2018) 17 SCC 394 : [2018] 10 SCR 974; Unionof India & Ors. v. Mudrika Singh (2021) SCC OnLineSC 1173; Arnesh Kumar v. State of Bihar & Anr. (2014)8 SCC 273 : [2014] 8 SCR 128; Union of India v.Padam Narain Aggarwal & Ors. (2008) 13 SCC 305 :[2008] 14 SCR 179; Premium Granites & Anr. v. Stateof T.N. & Ors. (1994) 2 SCC 691 : [1994] 1 SCR 579;M/s. Sukhwinder Pal Bipan Kumar & Ors. v. State ofPunjab & Ors. (1982) 1 SCC 31 : [1982] 2 SCR 31;Ahmed Noormohmed Bhatti v. State of Gujarat & Ors.(2005) 3 SCC 647 : [2005] 2 SCR 879; Manzoor AliKhan v. Union of India & Ors. (2015) 2 SCC 33 :[ 2014] 7 SCR 569 ; A.K. Roy v. Union of India & Ors.(1982) 1 SCC 271 : [1982] 2 SCR 272; State of Gujaratv. Mohanlal Jitamalji Porwal & Anr. (1987) 2 SCC 364: [1987] 2 SCR 677; Y.S. Jagan Mohan Reddy v. CentralBureau of Investigation (2013) 7 SCC 439 : [2013]3 SCR 547; Nimmagadda Prasad v. Central Bureau ofInvestigation (2013) 7 SCC 466 : [2013] 3 SCR 493;

State of Bihar & Anr. v. Amit Kumar alias Bachcha Rai(2017) 13 SCC 751 : [2017] 4 SCR 503; Mohd. HanifQuareshi & Ors. v. State of Bihar & Ors. AIR 1958 SC731 : [1959] SCR 629; Talab Haji Hussain v. MadhukarPurshottam Mondkar & Anr. [1958] SCR 1226; KathiRaning Rawat v. State of Saurashtra AIR 1952 SC 123:[1952] SCR 435; Kedar Nath Bajoria & Anr. v. TheState of West Bengal AIR 1953 SC 404 : [1954] SCR 30; Special Reference No.1 of 1978 (1979) 1 SCC 380: [1979] 2 SCR 476; Asbury Hospital v. Cass County326 US 207 [1945]; Chiranjit Lal Chowdhuri v. TheUnion of India & Ors. [1950] SCR 869; The State ofBombay & Anr. v. F.N. Balsara [1951] SCR 682;Workmen of Meenakshi Mills Limited & Ors. v.Meenakshi Mills Ltd. & Anr. (1992) 3 SCC 336; [1992]3 SCR 409; Papnasam Labour Union v. Madura CoatsLtd. & Anr. (1995) 1 SCC 501 : [1994] 6 Suppl. SCR 369; M.R.F. Ltd. v. Inspector Kerala Govt. & Ors. (1998)8 SCC 227 : [1998] 2 Suppl. SCR 632; State ofKarnataka & Anr. v. Shri Ranganatha Reddy & Anr.(1977) 4 SCC 471 : [1978] 1 SCR 641; State of TamilNadu and Ors. v. L. Abu Kavur Bai and Ors.(1984) 1 SCC 515 : [1984] 1 SCR 725; RanjitsingBrahmajeetsing Sharma v. State of Maharashtra andAnr. (2005) 5 SCC 294 : [2005] 3 SCR 345; Collectorof Customs, New Delhi v. Ahmadalieva Nodira (2004)3 SCC 549 : [2004] 2 SCR 1092; Supdt., NarcoticsControl Bureau, Chennai v. R. Paulsamy (2000) 9 SCC549; Union of India v. Gurcharan Singh (2003) 11 SCC764; Union of India v. Abdulla (2004) 13 SCC 504;Narcotics Control Bureau v. Karma Phuntsok & Ors.(2005) 12 SCC 480; Chenna Boyanna Krishna Yadavv. State of Maharashtra & Anr. (2007) 1 SCC 242 :[2006] 10 Suppl. SCR 381; N.R. Mon v. Mohd.Nasimuddin (2008) 6 SCC 721 : [2008] 8 SCR 1159;State of Maharashtra v. Bharat Shanti Lal Shah andOrs. (2008) 13 SCC 5 : [2008] 12 SCR 1083; Unionof India v. Rattan Mallik alias Habul (2009) 2 SCC624 : [2009] 1 SCR 533; The State of Maharashtra v.

Vishwanath Maranna Shetty (2012) 10 SCC 561 :[2012] 9 SCR 873; Union of India v. Niyazuddin Sk.& Anr. (2018) 13 SCC 738 : [2017] 6 SCR 513; SatpalSingh v. State of Punjab (2018) 13 SCC 813 : [2018]3 SCR 739; National Investigation Agency v. ZahoorAhmad Shah Watali (2019) 5 SCC 1 : [2019]5 SCR 1060; Serious Fraud Investigation Office v.Nittin Johari & Anr. (2019) 9 SCC 165; Modern DentalCollege and Research Centre & Ors. v. State of MadhyaPradesh & Ors. (2016) 7 SCC 353 : [2016] 3 SCR 579;Patel Gordhandas Hargovindas & Ors. v. The MunicipalCommissioner, Ahmedabad & Anr. AIR 1963 SC 1742: [1964] 2 SCR 608; Shri Prithvi Cotton Mills Ltd. &Anr. v. Broach Borough Municipality & Ors. (1969) 2SCC 283 : [1970] 1 SCR 388; Bhubaneshwar Singh& Anr. v. Union of India & Ors. (1994) 6 SCC 77 :[1994] 1 Suppl. SCR 639; Comorin Match Industries(P) Ltd. v. State of T.N. (1996) 4 SCC 281 : [1996]1 Suppl. SCR 349; Indian Aluminium Co. & Ors. v. Stateof Kerala & Ors. (1996) 7 SCC 637; Bakhtawar Trust& Ors. v. M.D. Narayan & Ors. (2003) 5 SCC 298 :[2003] 1 Suppl. SCR 1; State of Himachal Pradesh v.Narain Singh (2009) 13 SCC 165 : [2009] 10 SCR 821;Goa Foundation & Anr. v. State of Goa & Anr. (2016) 6SCC 602 : [2016] 1 SCR 1025; Cheviti VenkannaYadav v. State of Telangana & Ors. (2017) 1 SCC 283: [2016] 7 SCR 689; Behram Khurshed Pesikaka v. TheState of Bombay [1955] 1 SCR 613; M.P.V.Sundararamier & Co. v. The State of Andhra Pradesh& Anr. [1958] SCR 1422; Jagannath, Etc. Etc. v.Authorised Officer, Land Reforms & Ors. Etc. (1971) 2SCC 893 : [1972] 1 SCR 105; Sushila Aggarwal & Ors.v. State (NCT of Delhi) & Anr. (2020) 5 SCC 1 : [2020]2 SCR 1; Municipal Corporation of Delhi v. GurnamKaur (1989) 1 SCC 101 : [1988] 2 Suppl. SCR 929;Hema Mishra v. State of Uttar Pradesh & Ors. (2014) 4SCC 453 : [2014] 1 SCR 465; Mohammed Dastagir v.The State of Madras AIR 1960 SC 756 : [1960] 3 SCR 116; Raja Narayanlal Bansilal v. Maneck Phiroz Mistry

& Anr. AIR 1961 SC 9 : [1961] 3 SCR 592; K. JosephAugusthi v. M.A. Narayanan AIR 1964 SC 1552 :[1964] SCR 137; Collector of Customs, Madras v.Kotumal Bhirumal Pihlajani & Ors. (1966) SCC OnLineMad 145; Laxman Padma Bhagat v. The State (1964)SCC OnLine Bom 59; Calcutta Motor Cycle Co. v.Collector of Customs & Ors. (1955) SCC OnLine Cal275; Harbansingh Sardar Lenasingh & Anr. v. The Stateof Maharashtra & Ors. (1972) 3 SCC 775; C. SampathKumar v. Enforcement Officer, Enforcement Directorate,Madras (1997) 8 SCC 358 : [1997] 4 Suppl. SCR 142;Aghnoo Nagesia v. State of Bihar AIR 1966 SC 119 :[1966] 1 SCR 134; Central Bureau of Investigation v.V.C. Shukla & Ors. (1998) 3 SCC 410 : [1998]1 SCR 1153; Badaku Joti Svant v. State of Mysore AIR1966 SC 1746 : [1966] 3 SCR 698; Illias v. TheCollector of Customs, Madras AIR 1970 SC 1065; Stateof U.P. v. Durga Prasad (1975) 3 SCC 210 : [1975]1 SCR 881; Commissioner of Income Tax, West Bengalv. Calcutta Stock Exchange Association Ltd. AIR 1959SC 763 : [1959] 2 Suppl. SCR 459; Lajpat Rai Sehgal& Ors. v. State 1983 (5) DRJ 1 : 23 (1983) DLT 314;Narain Singh v. The State 1986 (10) DRJ 109 : 30(1986) DLT 118; Pareena Swarup v. Union of India(2008) 14 SCC 107 : [2008] 13 SCR 1217; BaleshwarRai & Ors. v. The State of Bihar [1963] 2 SCR 433;Dipakbhai Jagdishchandra Patel v. State of Gujarat &Anr. (2019) 16 SCC 547 : [2019] 6 SCR 701; NarendraSingh & Anr. v. State of M.P. (2004) 10 SCC 699 :[2004] 3 SCR 1148; Hiten P. Dalal v. BratindranathBanerjee (2001) 6 SCC 16 : [2001] 3 SCR 900; KrishnaJanardhan Bhat v. Dattatraya G. Hegde (2008) 4 SCC54 : [2008] 1 SCR 605; Sucha Singh v. State of Punjab(2001) 4 SCC 375 : [2001] 2 SCR 644; P.N. KrishnaLal & Ors. v. Govt. of Kerala & Anr. (1995) 2 Suppl.SCC 187 : [1994] 5 Suppl. SCR 526; Mukesh Singh v.State (Narcotic Branch of Delhi) (2020) 10 SCC 120;Seema Silk & Sarees & Anr. v. Directorate ofEnforcement & Ors. (2008) 5 SCC 580 : [2008]

VIJAY MADANLAL CHOUDHARY & ORS. v. UNION OFINDIA & ORS.

8 SCR 201; Transport Co. & Ors. v. State of U.P. &Ors. (1986) 2 SCC 486 : [1986] 1 SCR 939; Union ofIndia v. Prafulla Kumar Samal & Anr. (1979) 3 SCC 4: [1979] 2 SCR 229; Dilawar Balu Kurane v. State ofMaharashtra, (2002) 2 SCC 135 : [2002] 1 SCR 75;Yogesh alias Sachin Jagdish Joshi v. State ofMaharashtra, (2008) 10 SCC 394 : [2008]6 SCR 1116; P. Vijayan v. State of Kerala & Anr., (2010)2 SCC 398 : [2010] 2 SCR 78; Sajjan Kumar v. CentralBureau of Investigation, (2010) 9 SCC 368 : [2010]11 SCR 669; Sheoraj Singh Ahlawat and Ors. v. Stateof Uttar Pradesh & Anr. (2013) 11 SCC 476 : [2012]10 SCR 1034; Sarbananda Sonowal v. Union of India& Anr. (2005) 5 SCC 665 : [2005] 1 Suppl. SCR 472;State of Madras v. A. Vaidyanatha Iyer, AIR 1958 SC61; M. Narsinga Rao v. State of A.P. (2001) 1 SCC 691: [2000] 5 Suppl. SCR 584; Madras Bar Association v.Union of India & Anr. (2021) 7 SCC 369; Rao ShivBahadur Singh & Anr. v. The State of Vindhya PradeshAIR 1953 SCC 394; Mohan Lal v. State of Rajasthan(2015) 6 SCC 222 : [2015] 5 SCR 435; Gokak PatelVolkart Ltd. v. Dundayya Gurushiddaiah Hiremath &Ors. (1991) 2 SCC 141 : [1991] 1 SCR 396;Gunwantlal v. The State of Madhya Pradesh (1972) 2SCC 194 : [1973] 1 SCR 508; H.N. Rishbud and InderSingh v. The State of Delhi [1955] 1 SCR 1150; Unionof India v. Prakash P. Hinduja & Anr. (2003) 6 SCC195 : [2003] 1 Suppl. SCR 307; Manubhai Ratilal Patelthrough Ushaben v. State of Gujarat & Ors. (2013) 1SCC 314 : [2012] 8 SCR 993; State of West Bengal &Ors. v. Swapan Kumar Guha & Ors. (1982) 1 SCC 561: [1982] 3 SCR 121; Shri Gurbaksh Singh Sibbia &Ors. v. State of Punjab (1980) 2 SCC 565 : [1980]3 SCR 383; Superintendent of Police, CBI & Ors. v.Tapan Kumar Singh (2003) 6 SCC 175 : [2003]3 SCR 485; Pooran Mal v. The Director of Inspection(Investigation), New Delhi & Ors. (1974) 1 SCC 345 :[1974] 2 SCR 704; R.S. Seth Gopikrishan Agarwal v.R.N. Sen, Assistant Collector of Customs & Ors. [1967]

2 SCR 340; State of Punjab v. Baldev Singh (1999) 6SCC 172 : [1999] 3 SCR 977; Special InvestigationCircle-B, Meerut v. Messrs Seth Brothers & Ors. Etc.(1969) 2 SCC 324 : [1970] 1 SCR 601; Dr. PartapSingh & Anr. v. Director of Enforcement, ForeignExchange Regulation Act & Ors. (1985) 3 SCC 72 :[1985] 3 SCR 969; Union of India & Anr. v.Purushottam (2015) 3 SCC 779 : [2015] 1 SCR 849;Raman Tech. & Process Engg. Co. & Anr. v. SolankiTraders (2008) 2 SCC 302 : [2007] 12 SCR 409; RadhaMohan Lakhotia, Indian National and Citizen v. DeputyDirector, PMLA, Directorate of Enforcement, Ministryof Finance, Department of Revenue (2010) SCCOnLine Bom 1116; B. Rama Raju v. Union of India &Ors. (2011) SCC OnLine AP 152; Alive Hospitality andFood Private Limited v. Union of India & Ors. (2013)SCC OnLine Guj 3909; K. Sowbaghya v. Union ofIndia & Ors. (2016) SCC OnLine Kar 282; UshaAgarwal v. Union of India & Ors. (2017) SCC OnLineSikk 146; J. Sekar v. Union of India & Ors. (2018)SCC OnLine Del 6523; Kamlapati Trivedi v. State ofWest Bengal (1980) 2 SCC 91 : [1979] 2 SCR 717;Apparel Export Promotion Council v. A.K. Chopra(1999) 1 SCC 759 : [1999] 1 SCR 117; State of W.B. v.Mir Mohammad Omar & Ors. (2000) 8 SCC 382 :[2000] 2 Suppl. SCR 712; Shambhu Nath Mehra v. TheState of Ajmer AIR 1956 SC 404 : [1956] SCR 199;State (Through Central Bureau of Investigation) v.Kalyan Singh (Former Chief Minister of Uttar Pradesh)& Ors. (2017) 7 SCC 444 : [2017] 6 SCR 946; RamJethmalani & Ors. v. Union of India & Ors. (2011) 8SCC 1; The Asst. Director Enforcement Directorate v.Dr. V.C. MohanCriminal Appeal No.21 of 2022, decidedon 4.1.2022; State rep. by the C.B.I. v. Anil Sharma,(1997) 7 SCC 187 : [2011] 8 SCR 725; P.Chidambaram v. Central Bureau of Investigation (2019)SCC OnLine Del 9703; Hussainara Khatoon &Ors.v. Home Secretary, State of Bihar, Patna (1980) 1SCC 98 : [1979] 3 SCR 532; Supreme Court Legal Aid

Committee Representing Undertrial Prisoners v. Unionof India & Ors. (1994) 6 SCC 731 : [1994] 4 Suppl.SCR 386 – referred to.

Thakurain Balraj Kunwar & Anr. v. Rae Jagatpal Singh(1904) SCC OnLine PC 9 : (1904) 1 All LJ 384;Nalinakhya Bysack v. Shyam Sunder Haldar & Ors.AIR 1953 SC 148 : [1953] SCR 533; Chandroji Raov. Commissioner of Income Tax, M.P., Nagpur (1970) 2SCC 23 : [1971] 1 SCR 422; Board of Muslim Wakfs,Rajasthan v. Radha Kishan & Ors. (1979) 2 SCC 468 :[1979] 2 SCR 148; Tara Prasad Singh & Ors. v. Unionof India & Ors. (1980) 4 SCC 179 : [1980]3 SCR 1042; Sakshi v. Union of India & Ors. (2004) 5SCC 518 : [2004] 2 Suppl. SCR 723; Guntaiah & Ors.v. Hambamma & Ors. (2005) 6 SCC 228 : [2005]1 Suppl. SCR 770; C. Gupta v. Glaxo-SmithklinePharmaceuticals Ltd. (2007) 7 SCC 171 : [2007]7 SCR 800; D.R. Fraser & Co. Ltd. v. The Minister ofNational Revenue (1948) SCC OnLine PC 65 : AIR1949 PC 120; Tofan Singh v. State of Tamil Nadu (2020)SCC OnLine SC 882; Ashok Munilal Jain & Anr. v.Assistant Director, Directorate of Enforcement, (2018)16 SCC 158; Divisional Forest Officer & Anr. v. G.V.Sudhakar Rao & Ors. (1985) 4 SCC 573 : [1985]3 Suppl. SCR 680; Biswanath Bhattacharya v. Unionof India and Ors. (2014) 4 SCC 392 : [2014]1 SCR 885; and Yogendra Kumar Jaiswal & Ors. v.State of Bihar & Ors. (2016) 3 SCC 183 : [2015]14 SCR 1037 – held inapplicable.

Attygalle & Anr. v. The King AIR 1936 PC 169; UnitedStates v. Anthony Salerno 107 S.Ct. 2095 (1987); UnitedStates of America v. Renee Armstrong Sanders, 929 F.2d1466 (10th Cir. 1991); United States of America v. PaulJohnson, 440 F.3d 1286, 1293 (11th Cir. 2006); UnitedStates of America v Roger Faulkenberry, 614 F.3d 573(6th Cir. 2010); The Impact of Cuellar on ConcealmentMoney Laundering Case Law, 18 J Bus L 255 (2015);Regina v. Cuthbertson & Ors. [1981] A.C. 470;

AElizabeth Warburton v. James Loveland (1831) 2 Dow& Cl 480; Bell, Attorney General v. Wolfish Schall v.Martin 467 US 253 (1984); Gifford v. Kelson (1943)51 Man. R 120; R v. Ahmad, [2012] 2 All ER 1137; R v.James, [2012] 2 Cr App R (S) 253; Samuels v. McCurdy,Sheriff (1925) SCC OnLine US SC 42; Chicago &BAlton Railroad Company v. Henry A. Tranbarger 238U.S. 67; Seaford Court Estates Ld. v. Asher [1949] 2K.B. 481; The Georgia Railroad and Banking Companyv. James M. Smith 128 US 174 (1888); andCommissioner of Stamp Duties v. Atwill & Ors. (1973) 1CAll ER 576; Norton v. Shelby County 118 US 425(1886) – referred to.

Case Law Reference

VIJAY MADANLAL CHOUDHARY & ORS. v. UNION OFINDIA & ORS.

[2010] 5 SCR 381[1962] 3 SCR 10[1954] SCR 1077[1991] 1 SCR 126[1978] 2 SCR 371 [2005] 3 SCR 345[2008] 10 SCR 379 [2010] 2 SCR 979 [2007] 12 SCR 1100 [1996] 10 Suppl. SCR 284 [1994] 1 SCR 445[1956] SCR 267 [1957] SCR 970[1967] 3 SCR 636[1986] 3 SCR 518 [2014] 6 SCR 873[1955] 1 SCR 707[1959] 2 Suppl. SCR 8[2010] 9 SCR 1039(2021) 10 SCC 773[1988] 3 Suppl. SCR 967(2021) 3 SCC 713(2021) 5 SCC 435[2017] 9 SCR 797[2018] 11 SCR 765[1976] 1 SCR 277[1997] 1 SCR 1038(2020) 3 SCC 637

410SUPREME COURT REPORTS

[2022] 6 S.C.R.

A[1991] 3 SCR 307[1993] 3 SCR 497 [2007] 1 SCR 855 [2007] 1 SCR 174 B[2007] 3 SCR 769[2010] 5 SCR 927[2014] 2 SCR 589[2017] 13 SCR 156C[1994] 2 SCR 375[2003] 6 Suppl. SCR 85[2016] 3 SCR 865[1994] 3 Suppl. SCR 263D[1987] 2 SCR 800[1969] 1 SCR 219[2008] 4 SCR 822[2005] 1 SCR 1019E[2014] 5 SCR 119 [2005] 1 SCR 494[1999] 1 SCR 669F[1980] 1 SCR 151[1987] 3 SCR 84[1988] 3 SCR 225[1996] 3 Suppl. SCR 127G[2003] 6 Suppl. SCR 476 [2008] 14 SCR 889[2015] 15 SCR 499(2020) 2 SCC 747H[1953] SCR 1

referred toPara 16(xxxv)referred toPara 16(xxxv)referred toPara 16(xxxv)referred toPara 16(xxxv)referred toPara 16(xxxv)referred toPara 16(xxxv)referred toPara 16(xxxv)referred toPara 16(xxxvi)referred toPara 16(xxxvii)referred toPara 16(xxxvii)referred toPara 16(xxxvii)referred toPara 16(xxxviii)referred toPara 16(xxxviii)referred toPara 16(xxxviii)referred toPara 16(xxxviii)referred toPara 16(xxxix)referred toPara 16(xxxix)referred toPara 16(xxxix)referred toPara 16(xxxix)referred toPara 16(xli)referred toPara 16(xli)referred toPara 16(xli)referred toPara 16(xli)referred toPara 16(xli)referred toPara 16(xli)referred toPara 16(xli)referred toPara 16(xli)referred toPara 16(xlii)

VIJAY MADANLAL CHOUDHARY & ORS. v. UNION OFINDIA & ORS.

[2009] 3 SCR 735[2003] 5 Suppl. SCR 1[2017] 8 SCR 33[1963] 2 Suppl. SCR 812[1964] 4 SCR 280[1968] 1 SCR 661[1985] 1 SCR 29[2011] 9 SCR 936 [1985] 3 SCR 743[2009] 9 SCR 690[2019] 5 SCR 91 [1997] 1 SCR 797[2004] 5 Suppl. SCR 272[2008] 12 SCR 179 [2003] 1 Suppl. SCR 79[2008] 5 SCR 856(2014) 4 SCC 513[2018] 10 SCR 974[2014] 8 SCR 128[2008] 14 SCR 179[1994] 1 SCR 579[1982] 2 SCR 31[2005] 2 SCR 879[ 2014] 7 SCR 569 [1982] 2 SCR 272[1987] 2 SCR 677[2013] 3 SCR 547[2013] 3 SCR 493

referred toPara 16(xlii)referred toPara 16(xliii)referred toPara 16(xliv)referred toPara 16(xliv)referred toPara 16(xliv)referred toPara 16(xliv)referred toPara 16(xliv)referred toPara 16(xliv)referred toPara 16 (xlvii)referred toPara 16 (xlvii)referred toPara 16(xlvii)referred toPara 16(xlix)referred toPara 16(li)referred toPara 16(li)referred toPara 16 (lii)referred toPara 16 (lii)referred toPara 16 (lii)referred toPara 16 (lii)referred toPara 16(lv)referred toPara 16(lix)referred toPara 16(lx)referred toPara 16(lx)referred toPara 16(lx)referred toPara 16(lx)referred toPara 16(lxiii)referred toPara 16(lxiii)referred toPara 16(lxiii)referred toPara 16(lxiii)

412SUPREME COURT REPORTS

[2022] 6 S.C.R.

referred toPara 16(lxiii)referred toPara 16(lxiii)referred toPara 16(lxiv)referred toPara 16(lxvii)referred toPara 16(lxvii)referred toPara 16(lxvii)referred toPara 16(lxviii)referred toPara 16(lxviii)referred toPara 16(lxix)referred toPara 16(lxix)referred toPara 16(lxix)referred toPara 16(lxix)referred toPara 16(lxix)referred toPara 16(lxx)referred toPara 16(lxxi)referred toPara 16(lxxi)referred toPara 16(lxxi)referred toPara 16(lxxi)referred toPara 16(lxxi)referred toPara 16(lxxi)referred toPara 16(lxxi)referred toPara 16(lxxi)referred toPara 16(lxxi)referred toPara 16(lxxi)referred toPara 16(lxxi)referred toPara 16(lxxi)referred toPara 16(lxxi)referred toPara 16(lxxii)

413referred toPara 16(lxxiv)Areferred toPara 16(lxxiv)referred toPara 16(lxxiv)referred toPara 16(lxxiv)referred toPara 16(lxxiv)Breferred toPara 16(lxxiv)referred toPara 16(lxxiv)referred toPara 16(lxxiv)Creferred toPara 16(lxxiv)referred toPara 16(lxxv)referred toPara 16(lxxv)referred toPara 16(lxxv)Dreferred toPara 16(lxxvii)referred toPara 16(lxxvii)referred toPara 6(lxxix)referred toPara 17(i)Ereferred toPara 17(i)referred toPara 17(i)referred toPara 17(ii)referred toPara 17(iv)Freferred toPara 17(v)referred toPara 17(v)referred toPara 17(ix)referred toPara 17(ix)Greferred toPara 17(ix)referred toPara 17(xi)referred toPara 17(xii)

VIJAY MADANLAL CHOUDHARY & ORS. v. UNION OFINDIA & ORS.

[1964] 2 SCR 608[1970] 1 SCR 388[1994] 1 Suppl. SCR 639[1996] 1 Suppl. SCR 349(1996) 7 SCC 637[2003] 1 Suppl. SCR 1[2009] 10 SCR 821[2016] 1 SCR 1025[ 2016] 7 SCR 689[1955] 1 SCR 613[1958] SCR 1422[1972] 1 SCR 105[2020] 2 SCR 1 [1988] 2 Suppl. SCR 929[2014] 1 SCR 465[1960] 3 SCR 116[1961] 3 SCR 592[1964] 7 SCR 137(1972) 3 SCC 775[1997] 4 Suppl. SCR 142 [1966] 1 SCR 134[1998] 1 SCR 1153[1966] 3 SCR 698AIR 1970 SC 1065[1975] 1 SCR 881[1959] 2 Suppl. SCR 459[2008] 13 SCR 1217

A[1963] 2 SCR 433[2019] 6 SCR 701 [2004] 3 SCR 1148 [2001] 3 SCR 900B[2008] 1 SCR 605[2001] 2 SCR 644[1994] 5 Suppl. SCR 526 (2020) 10 SCC 120C[2008] 8 SCR 201[1986] 1 SCR 939[1979] 2 SCR 229[2002] 1 SCR 75D[2008] 6 SCR 1116[2010] 2 SCR 78[2010] 11 SCR 669[2012] 10 SCR 1034E[2005] 1 Suppl. SCR 472AIR 1958 SC 61[2000] 5 Suppl. SCR 584 F(2021) 7 SCC 369AIR 1953 SCC 394[2015] 5 SCR 435[1991] 1 SCR 396G[1973] 1 SCR 508[1955] 1 SCR 1150[2003] 1 Suppl. SCR 307 [2012] 8 SCR 993

referred toreferred toreferred toreferred toreferred toreferred toreferred toreferred toreferred toreferred toreferred toreferred toreferred toreferred toreferred toreferred toreferred toreferred toreferred toreferred toreferred toreferred toreferred toreferred toreferred toreferred to

Para 17(xiv)Para 17(xiv)Para 17(xxiv)Para 17(xxiv)Para 17(xxiv)Para 17(xxiv)Para 17(xxiv)Para 17(xxiv)Para 17(xxv)Para 17(xxv)Para 17(xxvii)Para 17(xxvii)Para 17(xxvii)Para 17(xxvii)Para 17(xxvii)Para 17(xxvii)Para 17(xxviii)Para 17(xxx)Para 17(xxx)Para 17(xxxii)Para 17(xxxiii)Para 17(xxxv)Para 17(xxxv)Para 17(xxxvi)Para 17(xxxvii)Para 17(xxxvii)Para 17(xxxvii)

VIJAY MADANLAL CHOUDHARY & ORS. v. UNION OFINDIA & ORS.

[1982] 3 SCR 121 [1980] 3 SCR 383 [2003] 3 SCR 485[1974] 2 SCR 704[1967] 2 SCR 340[1999] 3 SCR 977 [1970] 1 SCR 601[1985] 3 SCR 969 [2015] 1 SCR 849[2007] 12 SCR 409[2014] 1 SCR 885[1985] 3 Suppl. SCR 680 [1953] SCR 533[2015] 14 SCR 1037[1979] 2 SCR 717 [1999] 1 SCR 117 [1971] 1 SCR 422 [1979] 2 SCR 148[1980] 3 SCR 1042[ 2004] 2 Suppl. SCR 723 [2005] 1 Suppl. SCR 770[2007] 7 SCR 800[2000] 2 Suppl. SCR 712[1956] SCR 199[2017] 6 SCR 946(2011) 8 SCC 1[2011] 8 SCR 725

[2022] 6 S.C.R.

A[1979] 3 SCR 532

[1979] 3 SCR 532referred toPara 143[1994] 4 Suppl. SCR 386referred toPara 143

CRIMINAL APPELLATE JURISDICTION: Special LeavePetition (Criminal) No. 4634 of 2014.

BFrom the Judgment and Order dated 30.04.2014 of the High Courtof Judicature at Bombay in Criminal Application No. 1132 of 2012.

With

SLP(C) NOS. 28394, 28922, 29273 OF 2011, SLP(CRL.) DIARYNO. 41063 OF 2015, SLP(CRL.) NOS. 9987, 10018, 10019 OF 2015,CSLP(CRL.) NO. 993 OF 2016, T.P. (CRL.) NOS. 150, 151-157 OF2016, WP(CRL.) NO. 152 OF 2016, SLP(CRL.) NO. 11839 OF 2019,SLP(CRL.) NOS. 2890, 5487 OF 2017, CRL. APPEAL NOS. 1269,1270 OF 2017, 1271-1272 OF 2017, WP(CRL.) NO. 202 OF 2017,SLP(CRL.) DIARY NOS. 9360, 9365, 17000, 17462, 20250, 22529 OFD2018, SLP(CRL.) NOS. 1534, 1701-1703, 1705, 2971, 4078, 5444, 6922,7408, 8156, 11049 OF 2018, CRL. APPEAL NOS. 223, 391-392, 793-794, 1114, 1115, 1210 OF 2018, WP (CRL.) NOS. 26, 33, 75, 117, 173,175, 184, 226, 251, 309, 333, 336 OF 2018, TRANSFERRED CASE(CRIMINAL) NOS. 3, 4, 5 OF 2018, TRANSFER PETITION (CIVIL)NO. 1583 OF 2018, SLP(CRL.) NOS. 244, 3647, 4322-4324, 4546,E5153, 5350, 6834, 8111, 8174, 9541, 9652, 10627 OF 2019, W.P. (CRL.)NOS. 9 , 16, 49, 118, 119, 122, 127, 139, 147, 173, 205, 212, 217, 239, 244,253, 261, 263, 266, 267, 272, 273, 283, 285, 286, 287, 288, 289, 298, 299,300, 303, 305, 306, 308, 309, 313, 326, 346, 365, 367 OF 2019, SLP(CRL.)NOS. 647, 260, 618, 1732, 2023, 2814, 3366, 3474, 5536, 6128, 6172,F6303, 6456, 6660 OF 2020, W.P. (CRL.) NOS. 5, 9, 28, 35, 36, 39, 49, 52,60, 61, 89, 90, 91, 93, 124, 137, 140, 142, 145, 169, 184, 221, 223, 228,239, 240, 259, 267, 285, 286, 311, 329, 366, 380, 385, 387, 404, 410, 411,429 OF 2020, W.P. (C) NO. 1401 OF 2020, SLP(CRL.) DIARY NOS.8626, 31616, 11605 OF 2021, SLP(CRL.) NOS. 609, 734, 1031, 1072,1073, 1107, 1355, 1440, 1403, 1586, 1855, 1920, 2050-2054, 2237, 2250,G2435, 2818, 3228, 3274, 3439, 3514, 3629, 3769, 3813, 3921, 4024, 4834,5156, 5174, 5252, 5457, 5652, 5696-5697, 6189, 6338, 6847, 7021-7023,8429 OF 2021, SLP(C) NOS. 8764-8767, 20310 OF 2021, TRANSFERPETITION (CRIMINAL) No. 435 OF 2021, WP (C) No. 56 OF 2021,WP (CRIMINAL) NOS. 4, 6, 11, 18, 19, 21, 27, 33, 40, 47, 66, 69, 144,179, 199, 207, 239, 263, 268, 282, 301, 323, 359, 370, 303, 305, 453, 454,H475, 520, 532 OF OF 2021.Tushar Mehta, SG, Suryaprakash V. Raju, Aman Lekhi, K MNataraj, S.V. Raju, Ms.Aishwarya Bhati, Jayant Kr. Sud, VikramjitBanerjee, S. V. Raju, Sanjay Jain, ASGs, B.K. Satija, Samar Vijay Singh,Ms.Ruchi Kohli, Vishal Mahajan, AAGs, Kapil Sibal, Dr. Abhishek ManuSinghvi, Sidharth Luthra, Mukul Rohatgi, Vivek Reddy, Vikram Chaudhari,Suryanarayana Singh, A. Mariarputham, Maninder Singh, S.B. Upadhyay,S. Niranjan Reddy, Siddharth Aggarwal, Pramod K. Dubey, JagmohanBansal, Amit K Desai, Dr.Menaka Guruswamy, Aabad Ponda, MaheshJethmalani, Vikas Singh, N. Hariharan, Sr. Advs., Mahesh Agarwal,Anshuman Srivastava, Prasouk Jawin, Ms.Rabiya Thakur, Nishant Rao,E.C. Agrawala, Arshdeep Singh Khurana, Prateek Chadha, Adit S. Pujari,Amit Bhandari, Akshat Gupta, Ms.Madhavi Agrawal, Ms.Ambika Mathur,Shreedhar Kale, Raghav Tankha, Harsh Mittal, Mrs. Shally Bhasin, BalajiSubramanian, Ms.Ishani Banerjee, SCV Vimal Pani, Ms.L Maheswari,A. Lakshminarayanan, Tarun Dua, Anant Garg, Asif Ahmad, AdityaaRaju, Suhaan Mukerji, Shri Singh, Aditya Dewan, Vishal Prasad,Ms.Chitralekha Das, Nikhil Parikshith, Dewang Singh Chauhan, AbhishekManchanda, Chirag Madan, Ms.Shubhangini Jain, Sayandeep Pahari,Ms.Padma Venkataraman, M/S. Plr Chambers And Co., Pratik Reddy,Victor Das, Ms.Anwesha Padhi, Mohit Rai, Atul Agarwal, SourabhKumar Mishra, Kumar Dushyant Singh, Keshavam Chaudhari, Amit K.Nain, Harshit Sethi, Rishi Sehgal, Ms.Ria Khanna, Devanshu Yadav,Kapil Dahiya, Raktim Gogoi, Varun Shekhar, Kartikeya Singh, SamarthShandilya, Gautam Awasthi, Ms.Anzu K. Varkey, Nikhil Jain, HemantShah, Sangram S. Saron, Vinod Kumar Jain, Satya Prakash, Ms. PragatiNeekhra, Avadh Bihari Kaushik, Anand Dilip Dagga, Rajat Nair, SairicaRaju, Ms.Sharadha Deshmukh, Neela Kedar Gokhale, Ritwiz Rishabh,Sharath Nambiyar, k Sharma, Ms.Nisha Bagchi, Binu Tamta, ArvindKumar Sharma, K.M. Nataraj, Ms.Zoheb Hussain, Ms.Sairica Raju,Ms.Shradha Deshmukh, Ms.Neela Kedar Gokhale, Sharath Nambiar,Mukesh Kumar Maroria, Raj Bahadur Yadav, Anshuman Singh, AnkitBhatia, Arpit Goel, Om Prakash Shukla, Sanjay Kumar Tyagi, KanuAgarwal, Zoheb Hossain, Ms. Aastha Mehta, Ms.Deepanwita Priyanka,Ms.Archana Pathak Dave, Sughosh Subramanium, Ms.SwarupamaChaturvedi, B. V. Balaram Das, G.S Makker, Avneesh Arputham,M/S. Arputham Aruna And Co, Syed Abdul Haseeb, Adit Khorana,Mayank Pandey, Deepbali Datta, Rajan Kr. Chourasia, Ms.Deepabali

ADuttai, M.K. Maroria, B. Vinodh Kanna, Vansaja Shukla, Gurmeet SinghMakker, Ms.Monika Gusain, Varun Shankar, Lakshman RS, AtharvaKoppal, Divyanshu Jain, Arnav Narain, Pawan R. Upadhyay,Mrs. Sharmila Upadhyay, Ms.Anisha Upadhyay, Sarvjit Pratap Singh,Gaurav Prakash Pathak, Nishant Kumar, Raghenth Basant, YogeshBRaavi, Anirudh Reddy, Ms. Liz Mathew, Shishir Mathur, Shohit Chaudhry,Mukul Singh, D.L. Chidnanad, Amit Sharma, Ms.Rukhimini Bobde, A.K.Sharma, Vivek Jain, Ms.Suchitra Kumbhat, Prithveesh MK, GurpreetS. Parwanda, Nishanth Patil, Ms.Malvika Kala, Adarsh Aggarwal, AjayAggarwal, Aman Garg, Mohinder Singh, Suresh Jhunthra, Rajan Narain,CMs.Deepabali Datta, S. Hari Haran, Ms.Sairica S Raju, NaveenMalhotra, S. Mahesh Sahasranaman, Gopalkrishna Shenoy, Ms.PraptiAllagh, Prateek K Chadha, Ms.Ayushi Rajput, Ms.Radhika Dhanotia,Yash S. Vijay, Shaffi Mather, Parmatma Singh, Mayank Jain, MadhurJain, Ms. Neha Sharma, Ms.Binu Tamta, Dr. (Mrs.) Vipin Gupta, NeerajKumar Sharma, Subhash Jadhav, Chandan Singh Shekhawat, PranavDSarthi, Ms.Natabrata Bhattacharya, Ms. Awantika Manohar, Ms.NatashaVinayak, Ms. Jaikriti S. Jadeja, Rajiv Shankar Dvivedi, Rishabh Jain,Sushant Kr. Sarkar, Ms.Arti Dvivedi, Saurabh Mishra, Sunil Fernandes,Swaroop Anand, Ms.Nupur Kumar, Prastut Dalvi, Nagendra R. Naik,Pai Amit, Ms.Pankhuri Bhardwaj, Ms.Bhavana Duhoon, Ms. Christi Jain,EHitesh Jain, Ms.Gunjan Mangla, Chadan Singh Shekhawat, Nikhil Ahuja,Tawanji Shukla, Ms. Malvika Kapila, Ms. Anjali Jha, Ms.Anjali JhaManish, Priyadarshi Manish, Ms.Divyanshee Singh, Shivam Sharma, RajKishor Choudhary, Varun Raghavan, Shakeel Ahmed, Ms.MalvikaRaghavan, Satish Pandey, Salim Ansari, Rajesh Pandey, Akbar Ali, VikasFGupta, S. K. Verma, Narender Hooda, Dr. Surender Singh Hooda,Ms. Preeti Singh, Mrs. Malbika Sarkar, Devanshu Yadav, Dr. G.K. Sarkar,Prashant Srivatav, Ayush Choudhary, Sameer Pandey, Omar Ahmed,Malak Manish Bhatt, Ms. Neeha Nagpal, Aditya Gupta, Jaspal Singh,Vijay Aggarwal, Mudit Jain, Yugant Sharma, Ms. Astha Sharma,GMs. Mantika Haryani, Ajit Sharma, Prithvees MK, Nishanth Patil,Ms. Shubhika Saluja, Vivek Jain, Zulfiquar Memom, Mrinal Bharti, ParvezMemom, Chirag Naik, Ms.Vaijayanti Sharma, Nirvikar Singh, ManishShekhari, Palash Bhatkoti, Nitin Sharma, Karan Bharihoke, Kunal Verma,E. M. S. Anam, Vishnu Shanker, Ms. Ranjana Roy Gawai, Ms. VasudhaSen, Ujjawal Jain, Ms. Divya Roy, Sunil Kumar Jain, Fuzail Ahmad Ayyubi,HIrshad Ahmad, Shailesh Madiyal, Sudhanshu Prakash, Vaibhav Sabhrawal,Ms.Rakhi M., Ms.Neha Jain, Sruthi Iyer, Neha Jain, Ms.Kanishka Prasad,Abbula kalam, Ibad Mushtaq, Ms.Akanksha Rai, Pawan Upadhyay,S. S. Sastry, Rajender Vats, Vipul Srivastav, M/S. Unuc Legal Llp,M/S. Ap & J Chambers, Bharadwaj S., Ranjit Kumar Sharma,Mrs. Priya Puri, Arshdeep, Sharad Puri, Ranjay Dubey, Yati Sharma,G.Sivabalamurugan, Aljo K. Joseph, Ranjan Kumar, Mrs. Shelna K.,Nikilesh Ramachandran, Manish Pratap Singh, Ms. Mahima Bhardwaj,Vivek Narayan Sharma, Tushar Kumar, Rajeev Kumar Jha, PranshuKaushal, Shubham Awasthi, Ajay Singh, Braj K. Mishara, Vijay Kumar,Arun Raghavender, Ms.Bharti Tyagi, Shantanu M. Adkar,R. Lakshmishankar, S. Udaya Kumar Sagar, Ms.Bina Madhavan, SanjayIndukuri, R. Narayan Kumar, Ms.Akansha Mehra, M/S. Lawyer’s SKnit & Co., Akshay Nagarajan, Rishi Malhotra, Ms.Sonia Dube, ShatadruChakraborty, Ms.Kanchan Yadav, Surbhi Anand, M/S. Legal Options,Tanveer Ahmed Mir, Arjun Singh Bhati, Dhruv Gupta, Vaibhav Suri,Prabhav Ralli, Ms.Urja Pandey, Amit Gupta, Akhilesh Dubey, DharmeshJoshi, Uttam Dubey, Hari Sankar Mahaptra, Bhavini Sribastava,M/S. Mitter & Mitter Co., Gursharan S. Virk, Nakul Mohta, Ms. MishaRohatgi, Devansh Shrivastava, Johnson Subba, Deepak Prakash,Abhishek A. Rastogi, Pratushpava Saha, Mahir Chablani, Rohit Ghosh,Ms.Kanika Sharma, M/S. Khaitan & Co., M. T. George, Ms.Susy, JohnsGeorge, Ms. Rashi Bansal, Shekhar Devasa, Manish Tiwari, ShashiBhushan Nagar, Ramesh Jadhav, M/S. Devasa & Co., Namit Saxena,Awnish Maithani, Ms.Arushi Dhawan, M.K. Subramanian, VinodhKanna B., Ritesh Patil, Shamik Shirishbhai Sanjanwala, Ms.Diksha Rai,Ankit Agarwal, Prateek Bhardwaj, Mahfooz Ahsan Nazki, PolankiGowtham, Shaik Mohamad Haneef, T. Vijaya Bhaskar Reddy, K.V. GirishChowdary, Ms. Rajeswari Mukherjee, Devendra Kumar Singh,Karunakar Mahalik, Mrs. Anil Katiyar, Syed Ahmed Saud, DaanishAhmad Syed, Mohd. Parvez Dabas, Uzmi Jameel Husain, Aqib Baig,Mohd. Shahib, Sunil Sarogi, M/S. Shakil Ahmad Syed, Dr.SujayKantawala, Azmat Hayat Amanullah, Nishant Awana, Sagar Chauhan,Ms.Nitya Sharma, Devansh Malhotra, Sujit Sahoo, Aditya Talpade,Divyesh Pratap Singh, Ms.Srishti Singh, Gautam Talukdar, A.P. Singh,Shreyansh Rathi, M/S. M. V. Kini & Associates, Sarvesh Singh Baghel,Mukhtar Alam, Ms.Natasha, B. Krishna Prasad, Balaji Srinivasan, M

ABC

AR S Raju, Mrs. Lakshmi Rao, Prateek Yadav, Mohammad Shahrukh,Ms.Pallavi Sengupta, Ms.Garima Jain, Ms.Aakriti Priya, Suhail Ahmed,V. Shyamohan, Ms.Jaspreet Gogia, Ms.Mandakini Singh, Karanvir Gogia,Ms.Shivangi Singhal, Ms.Ashima Mandla, O. P. Gaggar, Ashoka KumarThakur, Imran Khan, Anil K. Chopra, Shreeyash U. Lalit, Mahesh Kumar,BVishal Sharma, Ms.Devika Khanna, Mrs. V. D. Khanna, Aniruddha P.Mayee, Chirag M. Shroff, Amandeep Mehta, Gaurav Malhotra, SamirAli Khan, Rahul Chitnis, Sachin Patil, Aaditya A. Pande, Geo Joseph,Ms.Shwetal Shepal, V. N. Raghupathy, Nishe Rajen Shonker, Ms.AnuK. Joy, Alim Anvar, Akash Kakade, Somanatha Padhan, Swetab Kumar,Sukhada Kakade, Dr.Monika Gusain, Dinesh Kumar Sabharwal, SameerCBhatnagar, Syed Mehdi Imam, V. Vasudevan, Aswathi M.K., Birj KantMishra, Hitesh Kumar Sharma, S.K. Rajora, Akhileshwar Jha,Ms.Maneesha Kongovi, R. Sudhinder, Ms.Prerana Amitabh,Shivabhushan Hatti, Shashank Dixit, R Gopalakrishan, V. Vasudev,Awasthi M.K., Gautam Khazanchi, Anshuman Sinha, Vijay Pande,DMs.Jaikriti S Jadeja, Ms.Pragya Sharma, Vinay Prakash, Amit, ManeeshSaxena, Vipin Kumar Saxena, Ms.Kajal Rani, Ms. Natasha Dalmia,Anand Varma, Mayank Jain, Madhur Jain, A. Selvin Raja, Dhruv Gupta,Prabhav Ralli, Ms.Kartika Sharma, Shreyansh Agrawal, Ms.Rooh-e-Hina Dua, Rajive Bhalla, Rajiv Malhotra, Yajur Bhalla, Deepak Samota,ESumeir Ahuja, Shubham Bhalla, V. Purushothaman Reddy, Ms.MishaRohatgi Mohta, Johnson Subba, Somanath Padhan, Swetab Kumar,Rishabh Jain, Jyoti Kumar Singh, Saurabh Mishra, Sachin Jolly, AkshayAnand, Ms.Maneesha Kongovi, R Sudhinder, Ms.Prerana Amitabh,Shivabhushan Hatti, R Gopalakrishnan, Vishal Gosain, Nagarkatti KartikFUday, Ms.Deepika Kalia, Ms.Adya Rajkotia Luthra, Sandeep Sharma,Sunny Choudhary, E. C. Agrawala, Raj Kamal, Abhimanyu Bhandari,Ms.Kartika Sharma, Arav Pandit, Shreyansh Agrawal, Ms.Roohe HinaDua, Wills Mathews, Mathen Joseph, Devendra Kumar Tiwari, PaulJohn Edison, Rakesh Garg, Ashish Gopal Garg, Ms.Shweta Garg,GNavanjay Mahapatra, S.A. Haseeb, Adit Khorana, Ankur Chawla,V.K.Biju, Ms.Ria Sachthey, Chetanya Singh, Amlendu Kumar AkhileshKumar Jha, Abhay Pratap Singh, Shaji George, Ms.Vijay Laxmi, T. G.Narayanan Nair, Ms. Shweta Garg, G. Prakash, D.Kumanan, NarenderKumar Verma, Pranav Sachdeva, K. Paari Vendhan, Ms. Uma Devi.M, Advs. for the appearing parties.H

VIJAY MADANLAL CHOUDHARY & ORS. v. UNION OFINDIA & ORS.

The Judgment of the Court was delivered by

A. M. KHANWILKAR, J.

Table of Contents

APREFACE

1. In the present batch of petition(s)/appeal(s)/case(s), we arecalled upon to deal with the pleas concerning validity and interpretationof certain provisions of the Prevention of Money-Laundering Act, 2002[1]and the procedure followed by the Enforcement Directorate[2] whileBinquiring into/investigating offences under the PMLA, being violative ofthe constitutional mandate.

(a) It is relevant to mention at the outset that after the decision ofthis Court in Nikesh Tarachand Shah vs. Union of India & Anr.[3], theParliament amended Section 45 of the 2002 Act vide Act 13 of 2018, soCas to remove the defect noted in the said decision and to revive theeffect of twin conditions specified in Section 45 to offences under the2002 Act. This amendment came to be challenged before different HighCourts including this Court by way of writ petitions. In some cases whererelief of bail was prayed, the efficacy of amended Section 45 of the2002 Act was put in issue and answered by the concerned High Court.DThose decision(s) have been assailed before this Court and the same isforming part of this batch of cases. At the same time, separate writpetitions have been filed to challenge several other provisions of the2002 Act and all those cases have been tagged and heard together asoverlapping issues have been raised by the parties.

(b) We have various other civil and criminal writ petitions, appeals,special leave petitions, transferred petitions and transferred cases beforeus, raising similar questions of law pertaining to constitutional validityand interpretation of certain provisions of the other statutes including theCustoms Act, 1962[4], the Central Goods and Services Tax Act, 2017[5],Fthe Companies Act, 2013[6], the Prevention of Corruption Act, 1988[7], theIndian Penal Code, 1860[8] and the Code of Criminal Procedure, 1973[9]which are also under challenge. However, we are confining ourselvesonly with challenge to the provisions of PMLA.

1 For short, “PMLA” or “the 2002 Act”

2 For short, “ED”

3 (2018) 11 SCC 1

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”

(c) As aforementioned, besides challenge to constitutional validityand interpretation of provisions under the PMLA, there are special leavepetitions filed against various orders of High Courts/subordinate Courtsacross the country, whereby prayer for grant of bail/quashing/dischargestood rejected, as also, special leave petitions concerned with issuesother than constitutional validity and interpretation. Union of India hasalso filed appeals/special leave petitions; and there are few transferpetitions filed under Article 139A(1) of the Constitution of India.

(d) Instead of dealing with facts and issues in each case, we willbe confining ourselves to examining the challenge to the relevantprovisions of PMLA, being question of law raised by parties.

SUBMISSIONS OF THE PRIVATE PARTIES

2. Mr. Kapil Sibal, learned senior counsel appearing for the privateparties/petitioners in the concerned matter(s) submitted that the procedurefollowed by the ED in registering the Enforcement Case InformationReport[10] is opaque, arbitrary and violative of the constitutional rights ofan accused. It was submitted that the procedure being followed underthe PMLA is draconian as it violates the basic tenets of the criminaljustice system and the rights enshrined in Part III of the Constitution ofIndia, in particular Articles 14, 20 and 21 thereof.

(i) question was raised as to whether there can be procedurein law, where penal proceedings can be started against an individual,without informing him of the charges? It was contended that as perpresent situation, the ED can arrest an individual on the basis of anECIR without informing him of its contents, which is per se arbitraryand violative of the constitutional rights of an accused. The right of anaccused to get copy of the First Information Report[10A] at an earlystage and also the right to know the allegations as an inherent part ofArticle 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, theagencies investigating crimes need to provide list of all the documentsand materials seized to the accused in order to be consistent with the

10 For short, “ECIR”

10A For short, “FIR”

11 (2016) 9 SCC 473 (Para 11.1); and Court on its Own Motion vs. State, 2010 SCCOnLine Del 4309 (Paras 39 & 54)

Aprinciples of transparency and openness[12]. It was also submitted thatunder the Cr.P.C., every FIR registered by an officer under Section 154thereof is to be forwarded to the jurisdictional Magistrate. However, thisprocedure is not being followed in ECIR cases. Further, violation ofSection 157 of the Cr.P.C. was also alleged and it was submitted thatthis has led to non-compliance with the procedure prescribed under theBlaw (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 voluntarilyprovided, while in others it is not, which is completely arbitrary anddiscriminatory.(ii) It was argued that as per definition of Section 3 of the PMLA,Cthe accused can either directly or indirectly commit money-laundering ifhe is connected by way of any process or activity with the proceeds ofcrime and has projected or claimed such proceeds as untainted property.In light of this, it was suggested that the investigation may shed somelight on such alleged proceeds of crime, for which, facts must first beDcollected and there should be definitive determination whether suchproceeds of crime have actually been generated from the scheduledoffence. Thus, there must be at least prima facie quantification toensure that the threshold of the PMLA is met and it cannot be urged thatthe ECIR is an internal document. Therefore, in the absence of adherenceto the requirements of the Cr.P.C. and the procedure established by law,Ethese are being violated blatantly[13].

(iii) An anomalous situation is created where based on such ECIR,the ED can summon accused persons and seek details of financialtransactions. The accused is summoned under Section 50 of the PMLAto make such statements which are treated as admissible in evidence.FThroughout the process, the accused might well be unaware of theallegations against him. It is clear that Cr.P.C. has separate provisionsfor summoning of the accused under Section 41A and for witnessesunder 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,Gas such, there are no governing principles of investigation, no legal criteria

12 Criminal Trials Guidelines Regarding Inadequacies and Deficiencies, In re, vs. Stateof 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).

13 Lalita Kumari vs. Government of Uttar Pradesh and Ors., (2014) 2 SCC 1 (Para120.1)H

and guiding principles which are required to be followed. As such, theinitiation of investigation by the ED, which can potentially curtail theliberty of the individual, would suffer from the vice of Article 14 of theConstitution of India[14].

(iv) Mr. Sibal, while referring to the definition of “money-laundering” under Section 3 of the PMLA, submitted that the ED mustsatisfy itself that the proceeds of crime have been projected as untaintedproperty for the registration of an ECIR or the application of the PMLA.It has been vehemently argued that the offence of money-launderingrequires the proceeds of crime to be mandatorily ‘projected or claimed’as ‘untainted property’. Meaning thereby that Section 3 is applicableonly to the generation of proceeds of crime, such proceeds being projectedor claimed as untainted property. It is stated that the pertinent conditionof ‘and’ projecting or claiming cannot be ousted and made or interpretedto be ‘or’ by the Explanation that has been brought about by way of theamendment made vide Finance (No.2) Act, 2019. It has been submittedthat such an act would also be unconstitutional, as being enlarging theambit of principal section by way of adding an Explanation.(v) It is also stated that the general practice is that the ED registersan ECIR immediately upon an FIR of predicate offence beingregistered. The cause of action being entirely different from the predicateoffence, as such, can lead to situation where there is no differencebetween the predicate offence and money-laundering. In support of thesaid argument, reliance was placed on the Article 3 of the ViennaConvention[15], where words like “conversion or transfer of property”,“for the purpose of concealing or disguising the illicit origin of the propertyor of assisting any person who is involved in the commission of such anoffence or offences to evade the legal consequences of his actions”,have been used. It is urged that what was sought to be criminalised wasnot the mere acquisition and use of proceeds of crime, but it was theconversion or transfer for the purpose of either concealing or disguisingthe illicit origin of the property to evade the legal consequences of one’sactions. Reference was also made to the Preamble of the PMLA which

14 E.P. Royappa vs. State of Tamil Nadu & Anr., (1974) 4 SCC 3; also see: S.G. Jaisinghanivs. Union of India and Ors, (1967) 2 SCR 703 and Nikesh Tarachand Shah, (supra atFootnote No.3) (Paras 21-23).

15 United Nations adopted and signed the Convention against Illicit Traffic in NarcoticDrugs and Psychotropic Substances (hereinafter referred to as “Vienna Convention” or“the 1988 Convention” or “the UN Drugs Convention”, as the case may be)

Arefers to India’s global commitments to combat the menace of money-laundering. Learned counsel has then referred to the definition of “money-laundering” as per the Prevention of Money-Laundering Bill, 1999[16] toshow how upon reference to the Select Committee of the Rajya Sabha,certain observations were made and, hence, the amendment waseffected, wherein the words “and projecting it as untainted property”Bwere added to the definition which was finally passed in the form ofPMLA. We have reproduced the relevant sections/provisions hereinbelowat the appropriate place. Reliance has also been placed on the decisionof Nikesh Tarachand Shah[17].

(vi) The safeguard provided by Section 173 of the Cr.P.C., it isCargued, was present in the original enactment of 2002 (PMLA). Thesame has now supposedly been whittled down by various amendmentsover the years. It has been submitted that by way of amendments in2009, proviso have been added to Sections 5 and 17, which have dilutedcertain safeguards. Further, it is submitted that the safeguard under SectionD17(1) has been totally done away with in the amendment made in 2019.To further this argument, it has been suggested that the filing ofchargesheet in respect of predicate offence was impliedly there inSection 19 of the PMLA, since there is requirement which cannot befulfilled sans an investigation, to record reasons to believe that ‘anyperson has been guilty of an offence punishable under this Act’. In respectEof Section 50, it is urged that though there is no threshold mentioned inthe Act, yet the persons concerned should be summoned only after theregistration of the ECIR. It is, thus, submitted that any attempt to prosecuteunder the PMLA without prima facie recordings would be inconsistentwith the Act itself and violative of the fundamental rights.F

(vii) It is urged that the derivate Act cannot be more onerousthan the original. It is suggested that the proceeds of crime and thepredicate offence are entwined inextricably. Further, the punishment forgeneration of the proceeds of crime cannot be disproportionate to thepunishment for the underlying predicate offence. The same analogy oughtGto apply to the procedural protections, such as those provided underSection 41A of the Cr.P.C., which otherwise would be foul of theconstitutional protections under Article 21.

16 For short, “1999 Bill”H17 Supra at Footnote No.3 (Para 11)

(viii) Learned counsel has also challenged the aspect of theSchedule being overbroad and inconsistent with the PMLA and thepredicate offences. It is argued that even in the Statements of Objectsand Reasons of the 1999 Bill, it has been stated that the Act was broughtin to curb the laundering stemming from trade in narcotics and drugrelated crimes. Reference is also made to the various conventions thatare part of the jurisprudence behind the PMLA[18]. It was to be seen inlight of organised crime, unlike its application today to less heinous crimessuch as theft. It is submitted that there was no intention or purpose tocover offences under the PMLA so widely. It is also submitted thatthere are certain offences which are less severe and heinous than money-laundering itself and that the inclusion of such offences in the Scheduledoes not have rational nexus with the objects and reasons of the PMLAand the same is unreasonable, arbitrary and violative of Articles 14 and21 of the Constitution of India.

(ix) It has been submitted that the PMLA cannot be standalonestatute. To bolster this claim, reliance has been placed on speeches madeby Ministers in the Parliament. Further reliance has been placed on K.P.Varghese vs. Income Tax Officer, Ernakulum & Anr.[19], Union ofIndia & Anr. vs. Martin Lottery Agencies Limited[20] andP. Chidambaram vs. Directorate of Enforcement[21].

(x) Our attention is also drawn to the provisions which have nowbeen replaced in the statute. Prior to 2013 amendment, Section 8(5) ofthe PMLA was to the following effect: -

“8. Adjudication—

(5) Whereon conclusion of trial for any scheduled offence,the person concerned is acquitted, the attachment of the

18 United Nations Convention Against Illicit Traffic in Narcotic Drugs and PsychotropicSubstances, 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 NationsGeneral Assembly on 23.02.1990; and Resolution passed at the UN Special Session oncountering World Drug Problem Together – 8th to 10th June 1998.19 (1981) 4 SCC 173 (Para 8)20 (2009) 12 SCC 209 (Para 38)21 (2019) 9 SCC 24 (Para 25)

Aproperty 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 anyscheduled offence’ were replaced with the words ‘trial of an offenceunder this Act’. It is urged that for the property to qualify as proceeds ofBcrime, it must be connected in some way with the activity related to thescheduled offence. Meaning thereby that if there is no scheduled offence,there can be no property derived directly or indirectly; thus, an irrefutableconclusion that scheduled offence is pre-requisite for generation ofproceeds of crime.

C(xi) It is further argued that an Explanation has been added toSection 44(1)(d) of the PMLA by way of Finance (No. 2) Act, 2019,which posits that trial under the PMLA can proceed independent ofthe trial of scheduled offence. It is submitted that the Explanation isbeing given mischievous interpretation when it ought to be read plainlyand simply. It is stated that the Explanation relates only to the SpecialDCourt and not the trial of the scheduled offence. It is submitted that aSpecial Court can never convict person under the PMLA withoutreturning finding that scheduled offence has been committed.(xii) It is submitted that the application of Cr.P.C. is necessarysince it is procedure established by law and there cannot be anEinvestigation outside the purview of Section 154 or 155 of the Cr.P.C.Reference is made to the constitutional safeguards of reasonability andfairness. It is submitted that the Act itself, under Section 65, provides forthe applicability of the Cr.P.C.[22] It is pointed out that several safeguards,procedural in nature are being violated. To illustrate few - nonFregistration of FIR, lack of case diary, restricted access to the ECIR,violation of Section 161 of the Cr.P.C., Section 41A of the Cr.P.C., lackof magisterial permission under Section 155 of the Cr.P.C. Such unguideduse of power to investigate and prosecute any person violates Articles14 and 21 of the Constitution.

G(xiii) Another argument raised by the learned counsel is that theED officers are police officers. It is submitted that the determination ofthe same depends on: (1) what is the object and purpose of the specialstatute and (2) the nature of power exercised by such officers? The first

22 Ashok Munilal Jain & Anr. vs. Assistant Director, Directorate of Enforcement, (2018)H16 SCC 158 (Paras 3-5)

argument in this regard is that if it can be shown that in order to achievethe objectives of the special statute - preventive and detection steps tocurb crime are permitted and coercive powers are vested, then such anofficer is police officer. Further, such an officer is covered within theambit of Sections 25 and 26 of the Indian Evidence Act, 1872[23]. In supportof the test to gauge the objective of the statute, reference has beenmade to State of Punjab vs. Barkat Ram[24], wherein it was held —acustoms officer is not police officer within the meaning of Section 25of the 1872 Act. It is also stated that police officers had to be construednot in narrow way but in wide and popular sense. Reference is madeto Sections 17 and 18 of the Police Act, 1861[25], whereunder anappointment of special police officers can be made. Thus, it is statedthat it is not necessary to be enrolled under the 1861 Act, but if one isinvested with the same powers i.e., the powers for prevention anddetection of crime, one will be police officer. Then, the PMLA isdistinguished from the 1962 Act, Sea Customs Act, 1878[26], Central ExciseAct, 1944[27] and the CGST Act. The dissenting opinion of Subba Rao, J.in Barkat Ram[28] is also relied upon. Thereafter, it is stated that PMLA,being purely penal statute, one needs to look at the Statement of Objectsand Reasons of the 1999 Bill and the Financial Action Task Force[29]recommendations.

(xiv) Reliance was also placed on Raja Ram Jaiswal vs. Stateof Bihar[30]. Further, it has been stated that even in Tofan Singh vs.State of Tamil Nadu[31], the case of Raja Ram Jaiswal[32] has beenrelied upon and it is concluded that when person is vested with thepowers of investigation, he is said to be police officer, as he preventsand detects crime. Further, the powers under Section 50 of the PMLA

for the purpose of investigation are in consonance with what has been

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 OnLineSC 882 (Para 88)

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 launderingand terrorist financing watchdog.

30 AIR 1964 SC 828

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

32 Supra at Footnote No.30

Aheld in Tofan Singh[33] and establishes direct relationship with theprohibition under Section 25 of the 1872 Act. Another crucial point raisedis that most statutes where officers have not passed the muster of ‘policeofficers’ in the eyes of law, contain the term “enquiry” in contrast withthe term “investigation” used in Section 50 of the PMLA. parallel hasalso been drawn between the definition of “investigation” under theBPMLA in Section 2(1)(na) and Section 2(h) of the Cr.P.C. Further, it isurged that the test of power to file ‘chargesheet’ is not determinative ofbeing police officer.

(xv) It is then urged that Section 44(1)(b) of the PMLA stipulatesthat cognizance can be taken only on complaint being made by theCAuthority under the PMLA. Whereas, in originally enacted Section44(1)(b), both the conditions i.e., ‘filing of police report’, as well as, ‘acomplaint made by an authority’ were covered. Learned counsel alsoreminisces of the speech of the then Finance Minister on the Preventionof Money-Laundering (Amendment) Bill, 2005[34] in the Lok Sabha onD06.05.2005. However, it was also conceded that the amendment ofSection 44(1)(b) of the PMLA removed the words, “upon perusal ofpolice report of the facts which constitute an offence under this Act or”.Next amendment made was insertion of Section 45(1A) and Section73(2)(ua), by which the right of police officers to investigate the offenceunder Section 3 was restricted unless authorised by the CentralEGovernment by way of general or special authorisation. Furtheramendment was deletion of Section 45(1)(a) of the PMLA, making theoffence of money-laundering under the PMLA non-cognizable offence.Further, it is submitted that amendment to Section 44(1)(b) has beenmade as consequence for making the offence under the PMLA non-Fcognizable. It is stated that even today if investigation is done by policeofficer or another, he can only file complaint and not police report.Therefore, the above-mentioned test is irrelevant and inapplicable.Absurdity that arises is due to two investigations being conducted, oneby police officer and the other by the authorities specified under Section

48. An additional point has been raised that the difference between aGcomplaint under the PMLA and chargesheet under the Cr.P.C. is onlya nomenclature norm and they are essentially the same thing. Thus,basing the determination of whether one is police officer or not, on thenomenclature, is not proper.

33 Supra at Footnote No.31 (also at Footnote No.24)H34 For short, “2005 Amendment Bill”

(xvi) In respect of interpretation and constitutionality of Section50 of the PMLA, our attention is drawn to Section 50(2) which pertainsto recording of statement of person summoned during the course of aninvestigation. In that, Section 50(3) posits that such person needs tostate the truth. Further, he has to sign such statement and suffer theconsequences for incorrect version under Section 63(2)(b); and the threatof penalty under Section 63(2) or arrest under Section 19.

(xvii) It is urged that in comparison to the constitutional law, theCr.P.C. and the 1872 Act, the provisions under the PMLA are draconianand, thus, violative of Articles 20(3) and 21 of the Constitution. Ourattention is drawn to Section 160 of the Cr.P.C. when person is summonedas witness or under Section 41A as an accused or suspect. In eithercase, 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) isrelied on. Thus, based on Sections 161 and 162, it is submitted that suchevidence is inadmissible in the trial of an offence, unless it is used onlyfor the purpose of contradiction as stipulated in Section 145 of the 1872Act. Further, it is stated that proof of contradiction is materially differentfrom and does not amount to the proof of the matter asserted[36] and canonly be used to cast doubt or discredit the testimony of the witness whois testifying before Court[37]. The legislative intent behind Section 162 ofthe Cr.P.C. is also relied 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 issuch that it violates all these statutory and constitutional protections byimplicating an accused by procuring signed statements under threat oflegal penalty. The protection under Section 25 of the 1872 Act is alsopressed into service.

(xix) To make good the point, learned counsel proceeded todelineate the legislative history of Section 25 of the 1872 Act. He referred

35 (1978) 2 SCC 424

36 Tahsildar Singh & Anr. vs. State of U.P., AIR 1959 SC 1012 (paras 16-17, 42); Alsosee: 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 ofPolice, (2020) 7 SCC 722 (para 24)

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

Ato 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 extractingconfessions.[39] Further, this protection was transplanted into the 1872Act[40], where on the presumption that confession made to policeofficer was obtained through force or coercion was fortified[41]. It waspointed out that recommendations of three Law Commissions – 14[th],B48[th] and 69[th] which advocated for allowance of such confessions to beadmissible, were vehemently rejected in the 185[th] Law CommissionReport. Thus, relying on Raja Ram Jaiswal[42] where substantial linkbetween Section 25 of the 1872 Act, police officer and confession hasbeen settled. Therefore, the present situation where prosecution can beCmounted under Section 63 for failing to give such confessions is said tobe contrary to procedure established by law interlinked with the right toa fair trial under Article 21. Reliance has also been placed on Selvi &Ors. vs. State of Karnataka[43], the 180[th] Law Commission Report andSection 313 of the Cr.P.C. as being subsidiaries of right against self-incrimination and right to silence, not being read against him.D(xx) Learned counsel then delineated on the preconditions forprotection of Article 20(3). First, the person standing in the character ofan accused, as laid down in State of Bombay vs. Kathi Kalu Oghad[44],has been referred to. In this regard, it is submitted that the term may begiven wide connotation and an inclusion in the FIR, ECIR, chargesheetEor complaint is not necessary and can be availed even by suspects at thetime of interrogation. It is urged that both the position of law standsclarified in Nandini Satpathy[45] and Selvi[46] — even to the extent whereanswering certain questions can incriminate person in other offencesor where links are furnished in chain of evidence required for prosecution.FIt is then urged that the expression ‘shall be compelled’ is not restrictedto physical state, but also mental state of mind and it is argued thatnevertheless broad interpretation must be given to the circumstancesin which person can be so compelled for recording of statement.Additionally, the term ‘to be witness’ would take within its fold ‘to

G39 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)42 Supra at Footnote No.3043 (2010) 7 SCC 263 (paras 87-89)44 AIR 1961 SC 1808

45 Supra at Footnote No.35H46 Supra at Footnote No.43

appear as witness’ and it is said that it must encompass protectioneven outside Court in investigations conducted by authorities such as theED[47]. It was also argued that this protection should extend beyondstatements that are confession, such as incriminating statements whichwould furnish link in the chain of evidence against the person.

(xxi) It is submitted that the test which this Court ought to considerfor determination of the vires of Section 50 of the PMLA is: whether apolice officer is in position to compel person to render confessiongiving incriminating statement against himself under threat of legalsanction and arrest? It is further pointed out that the ED as matter ofcourse records statement even when the accused person is in custody.In some circumstances, person is not even informed of the capacity inwhich he/she is being summoned. What makes it worse is the fact thatthe ED claims the non-application of Chapter XII of the Cr.P.C. It doesnot register FIR and keeps the ECIR as an internal document. All theabove-mentioned circumstances are said to render the questioning bythe ED, which might not be restricted to the offence of money-launderingalone, as testimonial compulsion[48]. Hence, advocating the protectionof Article 20(3) of the Constitution, it is submitted that all safeguards andprotections are rendered illusionary.

(xxii) Finally, an argument is raised that Section 50 of the PMLAis much worse than Section 67 of the Narcotic Drugs and PsychotropicSubstance Act, 1985[49]. Further, the NDPS Act is the underlying reasonfor the PMLA and this Court in Tofan Singh[50], in no uncertain terms,has given protection in respect of confessional statement even in theNDPS Act. The much harder and harsher punishment of death in theNDPS Act is also contrasted against the PMLA. It is also submittedthat constitutional safeguards cannot be undermined by the usage of theterm ‘judicial proceedings’. The term has been defined in Section 2(i) ofthe Cr.P.C. which includes any proceeding in the course of which evidence

47 M.P. Sharma & Ors. vs. Satish Chandra, District Magistrate, Delhi & Ors., (1954)SCR 1077 (para 10).

48 Even the applicability of Prevention of Money-Laundering (Forms, Search and Seizureor Freezing and the Manner of Forwarding the Reasons and Material to the AdjudicatingAuthority, Impounding and Custody of Records and the Period of Retention) Rules,2005.

49 For short, “NDPS Act”

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

Ais or may be legally ‘taken on oath’[51]. Section 50(1) has beendistinguished for being in respect of only Section 13 of the PMLA. It isalso submitted that the enforcement authority is not deemed to be civilCourt; it can be easily concluded that an investigation done by theenforcement authority is not judicial proceeding and Section 50 of thePMLA falls foul of the constitutional safeguards.B

(xxiii) Pertinently, arguments have also been advanced in respectof the implication of laws relating to money bills and their application tothe Amendment Acts to the PMLA. However, at the outset, we hadmentioned that this issue is not part of the ongoing discourse in thismatter and we refrain from referring to the arguments raised in thatCregard.

3. Next submissions were advanced by Mr. Sidharth Luthra,learned senior counsel on the same lines. He argued that the currentprocedure envisaged under the PMLA is violative of Article 21 of theConstitution of India. The procedure established by law has to be in theDform of statute or delegated legislation and pass the muster of theconstitutional protections.[52 ]The Cr.P.C. has several safeguards in respectof 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 usedEfor the curtailment of an individual liberty. Under the PMLA, there is novisible sign of these protections against police’s power of search andarrest; it is in stark contrast with the constitutional protections given alsothe reverse presumption against innocence at stage of bail under Section45 of the PMLA. Further, the destruction of the presumption of innocenceunder Sections 22, 23 and 45 cannot even meet the test at the pre-Fcomplaint and pre-cognizance stage[53] and the accused cannot escapethe rigors of custody as per Section 167 of the Cr.P.C. As such, theseconditions of reverse burden are in violation of Articles 14 and 21 of theConstitution. Presumption of innocence even in the pre-constitutionalera has been part of the right to fair trial.[54] After the Constitution

G51 Assistant Collector of Central Excise, Guntur vs. Ramdev Tobacco Company, (1991)2 SCC 119 (para 6)

52 Gudikanti Narasimhulu & Ors. vs. Public Prosecutor, High Court of Andhra Pradesh,

(1978) 1 SCC 240 (paras 1, 2, 10)

53 Ranjitsing Brahmajeetsing Sharma vs. State of Maharashtra & Anr., (2005) 5 SCC294 (paras 10, 11 and 21).

H54 Attygalle & Anr. vs. The King, AIR 1936 PC 169

came into existence, it has formed part of human right and procedureestablished by law.[55] Lack of oversight in an investigation under thePMLA is said to be in gross violation of justice, fairness andreasonableness. It is also pointed out that while the predicate offencemight 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 Section17, vests the executive with the supervisory power in an investigation.The same is anathema to the rule of law and the magisterial supervisionof an investigation is an integral part and is necessity for ensuring freeand fair investigation.[57](i) It is further submitted that not supplying of the ECIR to theaccused is in gross violation of Article 21 of the Constitution, the ECIRbeing equivalent to an FIR instituted by the ED. It contains the groundsof arrest, details of the offences; and as such, without the knowledge ofthe ingredients of such document the ability of the accused to defendhimself at the stage of bail cannot be fully realized. It may also hamperthe ability to prepare for the trial at later stage[58]. Further, it is submittedthat even under the 1962 Act and the Foreign Exchange Regulation Act,1973[59], Section 167 of the Cr.P.C. has been held to be applicable andalso found to be human right[60]. Further, it is argued that there is norational basis for search or seizure to be reported to the AdjudicatingAuthority, as they have no control. Further, the PMLA has two sets ofprocesses for attachment and confiscation which is subject to finaldetermination. Hence, lack of judicial oversight is irrational, as attachmentis step-in aid for final adjudication. In absence of safeguards and supplyof ECIR, fair investigation is not statutory obligation. This is contraryto the Constitution and the Cr.P.C. Further, it is submitted that personalliberty under Article 21 cannot be curtailed as the ED manuals, circularsand guidelines are administrative directions and cannot be regarded aslaw under Article 13 of the Constitution. Such restrictions on personalliberty based on administrative directions are neither reasonable

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

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

Arestrictions nor law under Articles 13 and 19(2) of the Constitution.Reliance has been placed on plethora of cases, such as Bidi SupplyCo. vs. Union of India & Ors.[61], Collector of Malabar & Anr. vs.Erimmal Ebrahim Hajee[62], G.J. Fernandes vs. The State of Mysore& Ors.[63] and Bijoe Emmanuel & Ors. vs. State of Kerala & Ors.[64] toshow that the inapplicability of Chapter XII of the Cr.P.C. cannot beBcountenanced.

(ii) It is also argued that the PMLA has inadequate safeguardsfor guaranteeing fair investigation. For, there are no safeguards akin toSections 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 toCSections 16 to 19 and 50. The onerous bail conditions under Section 45are in the nature of jurisdiction of suspicion that is preventive detentionunder Article 22(3) to 22(7), which in itself has various safeguards whichare absent in the PMLA. Further, post 2019 amendment, making money-laundering cognizable and non-bailable offence, there are no moreDchecks and balances present against the exercise of discretion by theED. Magisterial oversight has been revoked; also, supervision envisagedunder Section 17 is that of the executive which is against the rule of lawand right of fair trial[65]. It is also stated that under the current scheme, anaccused will be subject to two different procedures which is under thepredicate offence and under the PMLA. To illustrate, Sections 410 andE411 of the IPC are scheduled offences overlapping with Sections 3 and4 of the PMLA. However, the safeguards provided are nowhere uniform.The same is unreasonable and manifestly arbitrary[66]. It is also to benoted that the PMLA does not expressly exclude the application ofChapter XII of the Cr.P.C. and as such, ambiguity must be interpreted inFa way that protects fundamental rights of the people[67].

(iii) The next leg of the argument is to the effect that subsequentamendment cannot revive Section 45, which was struck down as

61 AIR 1956 SC 479 (para 9)G62 AIR 1957 SC 688 (paras 8,9)

63 AIR 1967 SC 1753 (para 12)

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

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

66 Subramanian Swamy vs. Director, Central Bureau of Investigation & Anr., (2014) 8SCC 682 (paras 49, 70).67 Tofan Singh (supra at Footnote Nos. 24 and 31) (para 4.10)H

unconstitutional by the decision in Nikesh Tarachand Shah[68]. The samecould have not been revived by the 2018 and 2019 amendments. Aprovision or statute held to be unconstitutional must be consideredstillborn and void, and it cannot be brought back to life by subsequentamendment that seeks to remove the constitutional objection. It must beimperatively re-enacted[69]. Further, even in arguendo, the twin conditionsare manifestly arbitrary as it is against the basic criminal law jurisprudenceof the right of presumption of innocence. This right has been recognizedunder International Covenant on Civil and Political Rights[70], as well as,by this Court in Babu vs. State of Kerala[71]. It is also contended thatsubjecting an accused person not arrested during investigation to onerousbail conditions under Section 45 is contrary to the decision of this Court[72].It was urged that even other statutes have such twin conditions for bailsuch as Terrorist and Disruptive Activities (Prevention) Act, 1987[73], theMaharashtra Control of Organised Crime Act, 1999[74] and the NDPSAct. However, it is pointed out that it has been held that such onerousconditions were necessary only in certain kinds of cases - for example,terrorist offences, which are clearly distinct and incompatible offencein the face of PMLA. Further, it is argued that even under the UnlawfulActivities (Prevention) Act, 1967[75], the Court has to examine only whetherthe allegation is prima facie true while granting bail, but in case of PMLA,the Court has to reach finding that there are reasonable grounds forbelieving that the accused is not guilty before granting bail. Thus, assoon as charges are framed, person is disentitled to apply for bail asprima facie case is made out, which helps in achieving the purpose ofpreventive detention without procedure established by law[76]. Further,these deep restrictive conditions even under the UAPA and the NDPSAct are restricted only to parts of these Acts and not to the whole ofthem. However, the same is not the case under the PMLA, as it is

68 Supra at Footnote No.3

69 Saghir Ahmad vs. State of U.P. & Ors., AIR 1954 SC 728 (para 23); Also see: DeepChand vs. The State of Uttar Pradesh & Ors., (1959) Supp. 2 SCR 8 (para 21)

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 773and clarificatory order dated 16.12.2021 in MA No. 1849/2021

73 For short, “TADA Act”

74 For short, “MCOCA”

75 For short, “UAPA”

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

Aapplicable to all predicate offences. Such an approach ignores crucialdistinctions such as nature, gravity and punishment of different offencesin the Schedule of PMLA and treats unequals as equals. This is in violationof Article 14 of the Constitution of India. Reliance is also placed onUnited States vs. Anthony Salerno[77], where restrictive bail provisionsare permitted in pre-trial detention because of the presence of detailedBprocedural safeguards. Still, it is argued, that such restrictive bail provisionscannot oust the ability of Constitutional Court to grant bail on the groundof violation of Part III of the Constitution[78]. Further, it has been held thatMagistrate must ensure that frivolous prosecution is weeded out.Provisions such as Sections 21, 22, 23 and 45 of the PMLA reverse theCburden and curtail the jurisdiction of the trial Court arbitrarily in violationof the findings of this Court[79]. Thus, various counts that have been arguedherein point out that the PMLA suffers from manifest arbitrariness inlight of Shayara Bano vs. Union of India & Ors.[80]and Joseph Shinevs. Union of India[81].

D4. Next in line for submissions on behalf of private parties isDr. Abhishek Manu Singhvi, learned senior counsel. He firstly arguedthe point of burden of proof under Section 24 of the PMLA. He haspointed out that prior to amendment, the entire burden of proof rightfrom investigation till the judgment was on the accused. Even thoughthis has changed post 2013 amendment and some balance has beenErestored, it has not fully cured this section of its unconstitutional nature.He has gone into the legislative history of the Act and stated that originallythe presumption was raised even prior to the trial and state of charge,this was diluted by the amendment of 2013 thereafter the presumptionwould only apply after the framing of charges.F

(i) Learned senior counsel submits that the wording of Section 24refers to formal framing of charges under Section 211 of the Cr.P.C.For this submission, he relies on the speech of the Minister introducingthe amendment in the Parliament. It has been stated that presumption israised in relation to the fact of money-laundering. Such presumptionGcannot be raised in relation to an essential ingredient of an offence. The

77 107 S.Ct. 2095 (1987)

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)H

commission of an offence, as such, cannot be presumed. In reference toSection 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 requirementfor 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 ofproof of foundational facts, as is seen in other legislations. Such aninversion is not present in any other statute. It is stated that even in theNDPS Act, where no requirement of foundational facts was provided,this Court has read such necessity into the Act. As for sub-section (b), itis pointed out that the ‘may presume’ provision eliminates the safeguardsof sub-section (a) and provides no guidance as to when presumption isto be invoked. The learned counsel also points the discrepancy that theword ‘authority’ appearing in Section 24, which also appears in Section48, is distinctive in nature and that Section 24 absurdly allows aninvestigator to presume the commission of an offence. This is clearlyarbitrary and de hors logic. In light of the same, the constitutional viresof the section are challenged or reading down to fulfil the constitutionalmandate is pressed for.

(iii) The next point of attack for Dr. Singhvi, learned senior counselis the constitutionality of Sections 17 and 18. The absence of safeguardsin lieu of searches and seizures is canvassed. It has been pointed outthat such searches or seizures can take place even without an FIR havingbeen registered or complaint being filed before competent Court.Foremost, the legislative history of these two Sections is pointed out. Itis shown that originally the search and seizure was to be conductedafter the filing of chargesheet or complaint in the predicate offence.Thereafter, the protection was diluted by the 2009 amendment, whereinit was provided that the search and seizure operations would take placeonly after forwarding report to the Magistrate under Section 157 ofthe Cr.P.C. It was only in 2019 that these final safeguards were alsocompletely removed by the Finance (No. 2) Act, 2019. The effect, it isargued, is such that the ED has unfettered powers to commit searchesand seizures without any investigation having been done in the predicateoffence, and sometimes even without an FIR being registered. Thereare no prerequisites or safeguards as the ED can now simply walk into

Aa premises. Even for non-cognizable offences, the ED need not wait forthe filing of complaint before Court. In this way, in the absence ofany credible information to investigate, the ED cannot be allowed to usesuch uncanalized power. The magisterial oversight cannot be replacedby the limited oversight of the Adjudicating Authority, as they have noreal control over the ED, especially in case of criminal investigations.BThus, it is submitted that such lack of effective checks and balances isunreasonable and violative of Articles 14 and 21 of the Constitution.

(iv) Our attention is also drawn to the Prevention of Money-Laundering (Forms, Search and Seizure or Freezing and the Manner ofForwarding the Reasons and Material to the Adjudicating Authority,CImpounding and Custody of Records and the Period of Retention) Rules,2005[82], and it is prayed that this Court must clarify that these rules arenot ultra vires Sections 17 and 18 of the PMLA. Pertinently, they relateto the provisions of Cr.P.C. being applicable to searches under the Act.

(v) Next leg of submissions challenges the vires of the secondDproviso of Section 5(1), as it allows for attachment independent of theexistence of predicate offence, given that such property might noteven be proceeds of crime. Though an emergency procedure, nothreshold had to be met and the first proviso has no application. It is alsosubmitted that the proviso cannot travel beyond the scope of the mainEprovision. Our attention is drawn to the legislative history; it is statedthat the PMLA did not originally contain the second proviso. Attachmentwas 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 ofthe proceedings. It is submitted that this proviso has no anchor to eitherthe scheduled offence or the proceeds of crime. It is at the mereFsatisfaction of the officer. In this way, it is submitted, attachment ofproperty of any person can be made, with no fetters. Our attention isalso drawn to the use of word ‘any’ for person and property and itsdistinction from the term ‘proceeds of crime’, having direct nexus withthe ambit of the main Section. It is argued that it is not to be mixed withGany offence but only scheduled offences. The ED is alleged to employthis language in attaching property purchased much before thecommission of scheduled offences, to the extent not having any nexus.It is submitted that there has to be link between the second proviso to

the proceeds of crime and scheduled offence being investigated under aspecific ECIR before the ED.[83]

(vi) Submissions with respect to Section 8 of the PMLA maintainthat Section 8(4) allows the ED to take possession of the attachedproperty at the stage of confirmation of provisional attachment made bythe Adjudicating Authority. It is submitted that this deprivation of person’sright to property at such an early stage without the due process of law, isunconstitutional. Further the period of attachment under Section 8(3)(a)of the PMLA is also arbitrary and unreasonable. To make good thepoint, the relevant legislative history is pointed out. The original enactmentwhere provisional attachment would continue during the pendency ofproceedings related to ‘any scheduled offence’. Thereafter in 2012, thesame was changed to ‘any offence under the PMLA’, followed by 2018amendment – ‘a period of ninety days during investigation of the offenceor during pendency of proceedings under the PMLA’, and finally by2019 amendment the increase from ‘ninety days’ to ‘three hundred andsixty-five days’. We are also taken through the elaborate process ofattachment of property. Thereby, it is highlighted that the ED can takepossession of property after single adjudicatory process, wherein thereis no oversight over the ED. It is stated that such alienation of propertywithout any proceedings having been brought before the Court isundoubtedly an unconstitutional act. As for Section 8(3)(a) clarificationis sought in light of the confusion that it allows for continuation of theconfirmed provisional attachment for three hundred and sixty-five daysor during the pendency of proceedings under the PMLA. This mightlead to reading where the ED has period of three hundred and sixty-five days to file its complaint.(vii) Learned counsel then referred to the Prevention of Money-Laundering (Taking Possession of Attached or Frozen PropertiesConfirmed by the Adjudicating Authority) Rules, 2013[84] wherein specificchallenge is raised against Rules 4(4), 5(3), 5(4) and 5(6). The mainground of challenge is disproportionality, similar to the attachment issue,transfer of attached shares and mutual funds, depressing of value ofproperty, eviction of owners of movable property, possession ofproductive assets along with gross income, all monetary benefit is stated

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

84 For short, “Taking Possession Rules, 2013”

Ato be arbitrary, reasonable, absurd and disproportionate. Herein, it ishighlighted that various anomalies may crop up, such as taking of theshares and the ED becoming the majority shareholder in corporations,attachment of properties worth far more than the value of proceeds ofcrime. Under Section 2(1)(zb), the expression “value” is defined as fairmarket value on the date of acquisition and not fair market value on dateBof attachment. Arguably, property bought years ago is thereby undervaluedby the ED. Attachment of immovable property and eviction in case ofunregistered leases is also challenged. To challenge this disproportionateimposition and restrictions, reliance is placed on Shayara Bano[85]and

Anuradha Bhasin vs. Union of India & Ors.[86].C(viii) It is then urged by the learned counsel that Section 45(1) ofthe PMLA, reverses the presumption of innocence at the stage of bailas an accused. According to him, the accused at this stage can nevershow that he is not guilty. It is also maintained that these aredisproportionate and excessive conditions for bail. Reference is alsoDmade to Nikesh Tarachand Shah[87] to the limited extent that the 2018amendment has not removed invalidity, pointed out in the aforesaidjudgment of this Court. It is also stated that regardless of the amendment,the twin condition is in violation of Article 21 of the Constitution by virtueof the nature of the offence under PMLA. It is stated that presumptionof innocence is cardinal principle of Indian criminal jurisprudence.[88]EReference is also made to Kiran Prakash Kulkarni vs. TheEnforcement Directorate and Anr.[89] Arguments have also been raisedagainst an amendment through Money Bill being violative of Article110 of the Constitution. The need for interpretation by Rojer Mathewvs. South Indian Bank Limited and Ors.[90] has also been asserted.FThe 2018 amendment is also challenged by referring to the notes onClauses of the Finance Bill, 2018. It is also pointed out that similaramendments were proposed for the 1962 Act in the year 2012 and, yet,the same were dropped at the insistence of members of the Parliament[91].

85 Supra at Footnote No.80 (paras 101-102)G86 2020 (3) SCC 637

87 Supra at Footnote No.3

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 SabhaH

(ix) Further, given the maximum punishment of seven (7) yearsunder PMLA, it was argued that it is disproportionate when comparingthe same to other offences under the IPC which are far more serious innature and are punishable with death. In light of the same, it is highlyquestionable as to how such an onerous condition can be imposed on anaccused. It is also pointed out that several scheduled offences are bailable.Further, the anomaly that at the time of arrest under Section 19 nodocuments are provided in certain cases, has also been highlighted. Itwas also stated that it is near impossibility to get bail as under theUAPA, TADA Act, or the Prevention of Terrorism Act, 2002[92].5. Mr. Mukul Rohatgi, learned senior counsel was next to argueon behalf of private parties. He urged that the Explanation to Section 44is contrary to Section 3 read with Section 2(1)(u), hence, the same isunsustainable and arbitrary in the eyes of law. Special emphasis waslaid on the expression “shall not be dependent upon any order by theTrial Court in the scheduled offence”. It was argued that both trials maybe tried by the same Court. In such case, Section 3 offence cannot begiven pre-eminence, as that would run contrary to Section 3 and wouldbe manifestly arbitrary, given the fact that an acquittal in the scheduledoffence cannot lead to one being found guilty for the derivative offenceof money-laundering. direct link between the proceeds of crime andSection 3 offence was also highlighted. It was submitted that the SpecialCourt cannot continue with the trial for Section 3 offence once acquittalin the predicate offence takes place. Section 44 unmistakably providesfor the Special Court trial of money-laundering. It was pointed out that itis normal that if one is acquitted for the predicate offence, the money-laundering procedure could still go on. This is contrary to the definitionunder Section 3, which states that money-laundering is inextricably linkedto the predicate offence.

(i) It was also pointed out that the usual practice is of filing anECIR on the same day or right after the FIR has been filed by replicatingit almost verbatim. Canvassing for proper procedure and investigationbefore filing of the ECIR and initiation of the process under the PMLA,reference was also made to other Acts, such as Smugglers and ForeignExchange Manipulators Act, 1976[93], FERA or Conservation of ForeignExchange and Prevention of Smuggling Activities Act, 1974[94] and the

92 For short, “POTA”

93 For short, “SAFEMA”

94 For short, “COFEPOSA”

A1962 Act, being Acts which would not subsist alone or by themselveswithout the predicate offences[95].

(ii) It was also argued that often the ED widens the investigationbeyond what is contained in the chargesheet. This is contrary to theintentions of the Act. The true meaning of the definition under Section 3Bof the PMLA was proposed to be divided into three components ofpredicate offence, proceeds of crime and projecting/claiming as untainted.It was conceded that even abetment would form part of the offenceand as consequence, whoever attempts, assists, abets, incites - are allcovered by the same. For predicate offence and Section 3, it was statedthat if the former is gone, the latter cannot subsist.C

(iii) Next argument raised pertained to the ambit and meaning ofSection 3. It was submitted that mere possession or concealment ofproceeds of crime will not constitute money-laundering and this wasbolstered by the phrase ‘projecting or claiming as untainted property’.The “and” was stated to be watertight compartment. The FinanceDMinister’s 2012 Rajya Sabha Speech was also relied upon to showcasehow “and projecting” was an essential element.

6. Mr. Amit Desai, learned senior counsel also advancedsubmissions on behalf of private parties. He also took us through thehistory of money-laundering, starting from the Conventions to the FATFEand UN General Assembly Resolution[96], which led to the 1999 Bill tohelp combat and prevent money-laundering. He relies on the Statementof Objects and Reasons of the Act[97], followed by the initial ambit ofSections 2(1)(p), 2(1)(u) and 3, which were amended by the 2013amendment. It is stated that the Act presupposes the commission of aFcrime which is the predicate offence; hence the questions to be answeredby this Court are related to retrospectivity. Firstly - whether authoritiescan proceed against an accused when commission of the predicate

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

96 Special Session of the United Nations held for ‘Countering World Drug ProblemGTogether’ held in June 1998.

97 “objective was to enact comprehensive legislation inter alia for preventing moneylaundering and connected activities confiscation of proceeds of crime, setting up ofagencies 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,Hmoney-laundering and for matters connected therewith or incidental thereto”.

offence predates the addition of the said offences to the Schedule of thePMLA? Secondly - whether the authorities can proceed against theproperties obtained or projected prior to the commission of an offenceunder this Act? Thirdly - whether authorities can proceed when thepredicate offence and the projecting predate the commencement of thisAct? Fourthly - whether jurisdiction subsists under the Act when nocognizance has been taken, the accused has been discharged or acquittedor the offence compounded? Lastly, learned counsel also challenges therigors of the twin conditions for being incongruent with general bailprovisions under Sections 437 and 439 of the Cr.P.C. as being ultravires.

(i) Learned counsel refers to one of the cases in this batch,wherein the properties sought to be acquired by the ED were obtainedby the petitioner prior to 2009, while the commission of offence was in2013 and Section 13 of the PC Act was inserted into the PMLA Schedulefor 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 doneprior to 2009. It has also been submitted that for the determination ofmoney-laundering under Section 3 or any other provision of the Act, therelevant time has to be the time of the commission of the scheduledoffence. The rationale being that only the presence of scheduled offencecan lead to the generation of proceeds of crime and, hence, in return theoffence of money-laundering can be committed. Thus, in way it issuggested that the starting point for conviction for Section 3 might bethe commission of scheduled offence. The argument in respect of theprotections provided by the Constitution under Article 20(1), as per whichingredients for an offence must exist on the day the crime is committedor detected, have also been impressed in opposition of any retrospectiveor retroactive application of the Act. To bolster the arguments, reliancehas been placed on the decisions of this Court in Soni DevrajbhaiBabubhai vs. State of Gujarat and Ors.[98], Mahipal Singh vs. CentralBureau of Investigation & Anr.[99], Tech Mahindra Limited vs. JointDirector, Directorate of Enforcement, Hyderabad & Ors.[100], andGadi Nagavekata Satyanarayana vs. Deputy Director Directorateof Enforcement[101] and that of Delhi High Court in Arun Kumar Mishra

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 Pradesh101 2017 SCC Online ATPMLA 2

Avs. Directorate of Enforcement[102], M/s. Ajanta Merchants Pvt. Ltd.vs. Directorate of Enforcement[103]and M/s. Mahanivesh Oils & FoodsPvt. Ltd. vs. Directorate of Enforcement[104].

(ii) The argument that to qualify for the offence of money-laundering, the essential ingredient of ‘projection’ or ‘claiming’ it asB‘untainted property’ is imperative, has also been pressed into service. Itis also urged that proceeds of crime can only be generated from thecommission of predicate offence and the commencement ofinvestigation arises only if predicate offence has generated suchproceeds of crime only subsequent to the inclusion of the predicateoffence to the Schedule of the PMLA. Another point that has beenChighlighted is that the projecting, if done prior to the date of inclusion ofthe 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 lawthat offences punishable for less than seven years allows person to beDset free on bail. As such, the liberty as enunciated by Article 21 of theConstitution cannot be defeated by such an Act. Thus, Section 45(2) ofthe PMLA is contrary to general principles of bail and the Constitutionof India. It is also pointed out that Section 437 of the Cr.P.C. imposingsimilar conditions as Section 45(2) restricts it to offences punishableEwith either life imprisonment or death. Under no condition can it be saidthat the bail conditions under the PMLA, imposing maximum seven years,are reasonable. Without prejudice to the aforementioned argument, itwas stated that Section 45(2) could only be applicable to bail applicationsbefore 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 theFSpecial 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 theabove. Further, unless Section 3 was to be restricted to organised crimesyndicate, which was in fact the real intent, the bail provisions are liableGto be struck down.102 2015 SCC OnLine Del 8658

103 2015 SCC OnLine Del 8659. The decision was assailed by ED before this Court inSLP (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 LPAbefore the Division Bench wherein it was held that the same shall not be treated asHprecedent.

7. Mr. S. Niranjan Reddy, learned senior counsel contends that itis essential to first understand as to whether money-laundering is astandalone offence or dependent on the scheduled offence? He pointsout that the ED has maintained the former stance. It has been pointedout that this view has been rejected by the High Courts of Delhi, Allahabadand Telangana. On the contrary, the High Courts of Madras and Bombayhave accepted such view. It has been added that the ED’s contentionis based on the Explanation added to Section 44(1)(d) by the 2019amendment. Concededly, though there are certain exemptions in Section8(7), it is contended, that the same are only for special circumstances.Learned counsel then refers to the sequence of conducting the mattersand points out Sections 43(2) and 44(1), whereby the Special Court cantry 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 saidtwo cases. The High Courts of Jharkhand and Kerala have taken aview that both matters can be tried simultaneously; there is no necessityto hold back the trial of money-laundering until the scheduled offencehas been tried. It has been submitted that the High Court of Kerala findsthat the offence of money-laundering is dependent on the scheduledoffence. 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 theIPC, where the High Courts have taken view that unless the originaloffence is proved, the person harbouring the accused cannot besentenced. However, it is also pointed out that Section 212 can be triedsimultaneously with the original offence.

(i) Additionally, it has been submitted that Section 2(1)(u) andSection 3 of the PMLA have been given 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 theinvestigations. The culpability has to be maintained. Wrong interpretationis given to proceeds of crime to be any property even obtained or derivedindirectly. Persons who have not committed the scheduled offencederiving certain indirect benefits, even without knowledge, based onSection 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

CDE

Aa continuing offence connected with the proceeds of crime. It is urgedthat the ED contends that prosecution or attachment can take placeirrespective of whether the alleged offence was committed even priorto enactment in 2002, irrespective of the addition of the predicate offencein the PMLA Schedule. It is submitted that there are various amendmentswhich are substantive in nature, being given retrospective effect, suchBas Sections 2(1)(u), 3, 8, 24, 44, etc. It has also been brought to ournotice that prior to the 2013 amendment in the context of Section 8, theHigh Court of Andhra Pradesh, the Madras High Court and the HighCourt of Gujarat have held that attachment causes civil consequencesof confiscation. Meaning that in case scheduled offence is committedCprior to the enactment of the PMLA or inclusion of certain offences inits Schedule, attachment or confiscation can go on. However, since then,the amendment has brought about new legal question. Today, the linebetween civil and criminal consequences has changed, since Section 8now is dependent upon one being held guilty for money-laundering.Hence, it cannot be applied retrospectively for predicate offences orDscheduled offences committed prior to the PMLA enactment. Referencehas also been made to the finding of the Hyderabad High Court whereSection 8(5) being quasi criminal, has been found to be prospective.

8. Dr. Menaka Guruswamy, learned senior counsel urged thatsubstantive due process has replaced procedure established by law[105].ELearned counsel has also pointed out aspects of substantive due processand the procedure of mandatory open Court review. In the context ofright of accused during interrogation, it was submitted that this Courtdealt with ‘due process’ rights in the Mohammed Ajmal MohammadAmir Kasab alias Abu Mujahid vs. State of Maharashtra[106], whereFthe use of Miranda rights has been rejected. Learned counsel has alsogone into the facts of the case, where it is stated that there has been asix year long pre-trial procedure in both the predicate offence andlaundering offence with limited right of participation and reverse burdenof proof.

G(i) It has also been argued that Section 50 infringes upon the rightto liberty of person summoned under the Act and violates the rightagainst self-incrimination. The non-compliance with Section 53 is

105 Mohd. Arif alias Ashfaq vs. Registrar, Supreme Court of India & Ors., (2014) 9 SCC737 (para 28); Also see: Sunil Batra vs. Delhi Administration & Ors., (1978) 4 SCC494; Mithu vs. State of Punjab, (1983) 2 SCC 277.H106 (2012) 9 SCC 1

penalized through Section 63 of the PMLA. The learned counsel hasadopted the arguments made by other learned counsel in reference toTofan Singh[107]. It is argued that the use of the term “any person” withoutexclusion of the accused under Section 50 is in violation of the dueprocess. No safeguards provided under the Cr.P.C. and the 1872 Actare extended to person proceeded for PMLA offence. It is stated thatthe stage at which person is guaranteed the constitutional right underArticle 20(3), cannot be made malleable through legislation. It is statedthat even though the PMLA is complaint-based procedure, by way ofSection 50, one cannot ignore the pre-complaint stage. As such, Section50 must be rendered unconstitutional. Further, it is argued that the EDpractice is perverse incentive structure for constitutional infringementwhere an accused is trapped and sweeping interrogations are conductedaimed at justifying the summons issued. In respect of Section 44(1)(d), itis stated that the right to fair trial is taken away and this provisionirreversibly prejudices the accused in the trial adjudicating the predicateoffence.[108](ii) Further, the Explanation to Section 44(1)(d) requires the twotrials to be conducted before the Special Court, but as separate trials, issaid to render the requirement of fair trial impossible. To bolster thisground, it is said that when judge receives evidence under Section 50of the PMLA in case of money-laundering, he cannot remain anindependent authority when deciding the predicate offence based on thematerial placed before him. Thus, this paradoxical provision forms acomplete absurdity for judge dealing with two different sets of rightsfor the same accused regarding the connected facts. That is for everypredicate offence which would have otherwise been tried by Magistrate,the investigation by the ED will tend to influence the mind of the judge[109].Further, reliance has also been placed on Suo Motu Writ (Crl.) No. 1 of2017 in Re: To issue certain guidelines regarding inadequacies anddeficiencies in criminal trials[110]. The Court has incorporated the DraftRules of Criminal Practice, 2021 which have been circulated for adoption

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

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

109 Hanumant Govind Nargundkar & Anr. vs. State of Madhya Pradesh, AIR 1952 SC343 (para 10)

110 Criminal Trials Guidelines Regarding Inadequacies and Deficiencies, In re, vs. Stateof Andhra Pradesh & Ors., (supra at Footnote No.12)

Aby all High Courts. It is also argued that Section 44 takes away the rightof appeal from the predicate offences triable by the Magistrate’s Court[111].

(iii) It is urged that the PMLA creates an overbroad frame withno fetters on investigation. The refusal to provide copy of the ECIRcreating an opacity surrounding the usage of the ED Manual is alsoBunder challenge. Section 4(b)(v) of the Right to Information Act, 2005[112]is pressed into service to showcase that every public authority is obligatedto publish within 120 days of enactment of the Act - the rules, regulations,instructions, manuals and records held by it or its employees for dischargeof its functions. Contrary to the above-mentioned provisions, the EDManual is said to be mystery for the general public. Reference is alsoCmade to the decision of the Bombay High Court, wherein the MaharashtraPolice was asked to provide copy of the police manual in response toan RTI application[113]. It is submitted that such non-disclosure of the EDManual is unsustainable in law. It makes the securing of pre-trial rightsof an accused difficult. Even the CBI manual which is based on statutoryDprovision of the Cr.P.C., has been found by this Court to be necessaryand to be adhered scrupulously by the CBI[114].Similarly, other authorities,such as the Central Vigilance Commission, Income Tax authorities,authorities under the 1962 Act, police authorities, jail authorities, are allgoverned by manual published by them. Thus, it is only the ED whichfollows distinct approach of non-disclosure.E

(iv) It has also been argued that the Schedule of the PMLA rendersseveral bailable offences as non-bailable when this Court has repeatedlyheld that bail is the rule and jail is the exception[115]. Predicate offenceswhich under their original act such as the Bonded Labour System(Abolition) Act, 1976[116], are bailable but on the application of the PMLA,F

111 Himanshu Singh Sabharwal vs. State of Madhya Pradesh & Ors., (2008) 3 SCC 602112 For short, “RTI Act”

113 State of Maharashtra vs. Chief Information Commissioner & Anr., 2018 SCC OnLineBom 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; CentralGBureau of Investigation vs. Ashok Kumar Aggarwal, (2014) 14 SCC 295; and State ofJharkhand through SP, Central Bureau of Investigation vs. Lalu Prasad Yadav aliasLalu 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 Kerelavs. Raneef, (2011) 1 SCC 784 (para 15).H116 For short, “1976 Act”

become non-bailable. The intention and provision of the underlying specialAct, hence, becomes otiose by the overbroad provisions of the PMLA.In another breath, it is argued that the attachment procedure under thePMLA runs contrary to the provisions contained in the predicate offence.It is also perplexing, as the underlying statute itself contain the procedureto attach illegal proceeds of crime. Aid of the UAPA and Securities andExchange Board of India Act, 1992[117] is taken to buttress that whileunder the predicate offence, attachment can take place only after theconviction, Section 5 of the PMLA enables attachment of property priorto conviction. This creates two different standards and two differentcriminal attachment proceedings for essentially the same offence. Eventhe Cr.P.C. provides for depriving criminals of the fruit of the crimes andallows for the true owner of the property to be restored with the positionthereof by way of Section 452(5).

(v) The next point argued is in respect of the adjudicatory paralysisin the Appellate Tribunal. It is submitted that it is one of the onlysafeguards in this draconian law to provide an oversight to prevent abuseof mechanism of attachment. Even this oversight has been renderedredundant since there has been no appointment of chairperson ormembers of the said Tribunal since 21.09.2019. Thus, making the Tribunalredundant. Further, it is stated that taking the possession at the stagewhen only provisional attachment has been made, can cause greathardship and financial ruin, amounting to virtually declaring personguilty and is avoidable. Further, certain official data has been brought toour attention to demonstrate the ineffectiveness of the unconstitutionallegislations, where raids have increased each financial year and, yet,since 2005 the number of convictions till 2015-16 has remained zeroand, thereafter, reached maximum of four in 2018-19.

9. Then, Mr. Aabad Ponda, learned senior counsel contended thatwithout prejudice to all the submissions, Section 50(3) and Section63(2)(a) and (c) of the PMLA, insofar as they relate to the accusedpersons, are ultra vires being violative of Articles 20(3) and 21 of theConstitution of India. He submitted that under the current scheme of theAct, scheduled offence requires prior FIR. person so named in theFIR would stand in the character of an accused person, and as such, hecannot be compelled to incriminate himself or produce documentsincriminating himself under Section 50(3) of the PMLA. The next leg of

117 For short, “SEBI Act”

Athe argument is to the extent that Section 63(2)(c), which mandatorilypenalises person for disobedience of Section 50, cannot be applicable toan accused person given the constitutional protections of Articles 20(3)and 21, whereby he has the right to exercise his fundamental right tosilence. We are also shown the analogous provisions similar to Section50(3) and 50(4) of the PMLA in other statutes, such as Section 171A ofBthe 1878 Act, inserted by Section 12 of the Sea Customs (Amendment)Act, 1955; Section 108 of the 1962 Act; Section 14 of the Central Excisesand Salt Act, 1944[118] and Section 40 of the FERA. Learned counselfurther argued and distinguished custom officers and other above referredofficers from the ED officers to the effect that they only recover dutyCand do not investigate crimes like the ED officials. Even otherwise, it isto be noted that even though Section 50 of the PMLA may appear to beakin to summons issued under Section 18 of 1962 Act and other above-mentioned statutes, however, there is deep differentiation. For, when aperson is summoned under the above-mentioned Acts, such as the 1962Act, he is not in the shoes of an accused. He only becomes an accusedDonce an FIR or complaint has been filed before Magistrate. This,however, he states, is not the case under the PMLA. To drive home thepoint as to who stands in the character of an accused, reference hasbeen made to certain Constitution Bench decisions of this Court, whichhave already been referred to by the previous learned counsel. To wit,ERomesh Chandra Mehta vs. State of West Bengal[119], Balkishan A.Devidayal vs. State of Maharashtra[120] and Selvi[121].

(i) Similarly, Mr. Ponda, learned senior counsel also relied on thedecision in Ramanlal Bhogilal Shah & Anr. vs. D.K. Guha & Ors.[122]and pointed out that even in cases of FERA, person stands in theFcharacter of an accused in separate FIR for the same transaction. Hecannot be compelled to incriminate himself. He maintains that this is acase wherein the ED itself had investigated the accused under the FERA.It was found that even though ordinarily under the FERA person is notan accused, however, in this particular case, an FIR had been registeredagainst the said person and he, being an accused, could not be compelledG

118 For short, “CESA 1944 Act”119 (1969) 2 SCR 461 : AIR 1970 SC 940120 (1980) 4 SCC 600 (also at Footnote No.41)121 Supra at Footnote No.43H122 (1973) 1 SCC 696 (paras 2, 3, 4, 5, 11, 12, 17, 18-25)

to answer questions that would incriminate him. The same plea has alsobeen upheld in Poolpandi & Ors. vs. Superintendent, Central Exciseand Ors.[123]. It was urged that an accused cannot be compelled to produceany incriminating documents which he does not want to produce. Reliancewas placed on State of Gujarat vs. Shyamlal Mohanlal Choksi[124].Moreover, it is reiterated that the protection against self-incriminationapplies not only in Court proceedings, but also at the stage ofinvestigation[125].

(ii) Further, it was urged that Section 2(1)(na) of the PMLA defines“investigation”. As such, proceedings under Section 50 is clearly partof investigation for the collection of evidence. The summons under Section50(2) is to give evidence or produce records during the course ofinvestigation under the Act, thus, protected by Article 20(3). Section50(4) of the PMLA also stipulates that they are judicial proceedings,therefore, person accused will be protected under Article 20(3). Section63(2)(a) and 63(2)(c) inflict grave prejudice upon the accused, as he isliable to be further prosecuted for the failure to give information andprovide documents which will incriminate him. Our attention is also drawnto the usual practice wherein persons are labelled as non-cooperativeduring the proceedings which are judicial in nature and used as pretextto arrest or extend remand under the PMLA. It is direct affront tofundamental rights and travesty of justice.10. Mr. Siddharth Aggarwal, learned senior counsel, also appearedfor the private parties. His main opposition is to the retrospectiveapplication of the PMLA. Certain questions are raised with respect towhether prosecution for money-laundering is permissible if the commissionof scheduled offence and proceeds of crime takes place prior to thePMLA coming into force; and, similarly, in situation when it is committedprior to the offence being made part of the Schedule of the PMLA. It issubmitted that the prohibition against retrospective operation of substantialcriminal statutes is constitutional imperative which needs to be givenits fullest interpretation in purposive manner. He highlights the three

123 (1992) 3 SCC 259

124 AIR 1965 SC 1251 (and the Majority view from paras 23 onwards, relevant paras32, 34 and 41)

125 Relied on Kathi Kalu Oghad (supra at Footnote No. 44), Nandini Satpathy (supra atFootnote No.35), Selvi (supra at Footnote No.43) and Tofan Singh (supra at FootnoteNos.24 and 31)

Asituations where interpretation is warranted. One, where transactionswere concluded prior to the enforcement of PMLA; two, prior to theoffences being added to the Schedule of the PMLA; and three, whetheramendment is applied with retrospective effect couched in the guise ofan Explanation introduced by the 2019 amendment.

B(i) It is urged that no person can be convicted for criminal offenceunless it has been specifically given retrospective effect, given theessential ingredient of ‘knowledge’ of the person for taking such anaction and exposing himself to criminal liability. In line with the protectionunder Article 20(1) and the maxim of ‘nova constitutio futuris formamimponere debet non praeteritis’[126], judgments of this Court were reliedCto urge that the general rule is applicable when the purpose of the statutein question is to affect vested rights/impose new burdens/impair existingobligations[127].

(ii) To make good the submission on retrospectivity, it is pointedout that as per the definition, money-laundering is dependent on proceedsDof crime, which in turn depends on criminal activity relating to scheduledoffence. As such, it is stated that no proceeds of crime can exist to begenerated from criminal activity unless the PMLA comes into force.That too, it has to be connected to the date when the Schedule hasaccepted the new predicate offence. It only means that property whichEis not “proceeds of crime”, cannot by virtue of PMLA, retrospectivelycharacterised as such in true sense. Further, prior to the enactment ofthe PMLA, there was no similar offence dealing in proceeds of crime oreconomic advantages derived from criminal offences. He points out thatthere were various enactments which dealt with the illegal fruits of criminalactivity. Thus, the PMLA cannot be added to the list of disabilities in lawFto illegal monies in retrospective manner. He was critical about manyamendments taken place over the years and especially the fact that thetrue import of Section 3 is being expanded by mere addition of anExplanation in 2019. As such the purport of the main, much narrow

G126 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); RiteshAgarwal & 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); VarinderSingh vs. State of Punjab & Anr., (2014) 3 SCC 151 (para 10); and Commissioner ofIncome Tax (Central)-I, New Delhi vs. Vatika Township Private Limited, (2015) 1 SCC1 (paras 27-31)H

provision, cannot be changed[128]. None of the amendments to Section 3or changes in Schedule have language bearing retrospective effect.Section 3 amendment was only “for removal of doubts” in contrast withthe amendment of Section 45 which was “deemed to have always meant”.Several judgments of the High Courts, pending adjudication before thisCourt, holding that the PMLA cannot be applied retrospectively, werealso referred[129].

(iii) Additionally, the impact of insertion of Clause (ii) of theExplanation to Section 3 vide the 2019 amendment, is also questioned.It is stated that continuing offence is not defined in any statute. Someoffences are described in way that make it clear that the offendingactivity is continuing one, some illustrations are in Section 281 in theCantonments Act, 2006[130]; Section 36(1)(iii)(d) in the Pharmacy Act,1948[131] and Sections 162(1) & 220(3) in the Companies Act. Hence, acontinuing offence is one which can be distinguished from an offencewhich is committed once and for all. It is submitted that it is an offencewhere until the obeying or compliance of rule or requirement iseffectuated, every subsequent non-compliance leads to the commissionof the offence again and again[132]. In case of money-laundering, it is

128 Bihta Co-operative Development and Cane Marketing Union Ltd. & Anr. vs. Bank ofBihar & 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 ofM.P. & Ors., (2006) 8 SCC 613 (para 31)

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. 08.12.2017passed 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 atFootnote No. 102 – paras 19-21 & 27-28); Mahanivesh Oils & Foods Pvt. Ltd. (supraat Footnote no. 104 – paras 25-27, 33-35, 37 & 38-39]; Obulapuram Mining CompanyPvt. Ltd. vs. Joint Director, Directorate of Enforcement, Government of India, ILR2017 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 theHigh Court of Telangana (paras 31-32).

130 For short, “2006 Act”

131 For short, “1948 Act”

132 State of Bihar vs. Deokaran Nenshi & Anr., (1972) 2 SCC 890 (para 5); Commissionerof 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)]

Aurged that there is clear starting point and an end point to the same,where the generation of proceeds of crime starts and ends in theintegration of proceeds of crime into the financial bloodstream as untaintedmoney. Thus, though it may take place over time but it cannot beconsidered as continuing offence. Further, for the purpose of substantiveinterpretation, no reference can be made to the Explanation added byBthe 2019 amendment, since it is mere explanation which cannot widenthe ambit of the main section itself[133].11. Mr. Mahesh Jethmalani, learned senior counsel was next inline to advance submissions on behalf of the private parties. He submittedthat Section 44(1)(a) of the PMLA is unconstitutional and violative ofCArticles 14 and 21 of the Constitution. He contends that there is nonexus of the said Section with the object of the PMLA. This sectiondoes not contemplate joint trial of the offence under Section 3 and thescheduled offence. Further, he interprets Section 44(1)(a) to mean thatthe Special Court can only try the scheduled offence, but not together; itDhas to be separately tried as per the provisions of the Cr.P.C. It is alsosaid that the rationale behind this change is difficult to fathom. On theother hand, it is pointed out that the accused’s right of being tried as perthe Cr.P.C., for scheduled offence is being violated, at least in respect of37 out of 58 scheduled offences of the IPC noted in the Schedule to the2002 Act, are triable exclusively by Magistrate of the First Class orEany Magistrate. In support of this argument, reliance has been placed onA.R. Antulay vs. R.S. Nayak & Anr.[134]. It is submitted that the presentinterpretation of this section leads to the violation of the right to be triedby Magistrate First Class, the right of first appeal to Sessions Courtunder Section 374(3) and the right of revision to the High Court underFSection 401 of the Cr.P.C. from the appellate judgment of the SessionsCourt. This leads to rather oppressive interpretation where an accusedwho is not charged under the PMLA offence but only under the predicateoffence is also tried by the Special Court. This is also hit by the fact thatseveral of the scheduled offences within the PMLA are themselves part

of special statutes which prescribe that they shall be tried by the SpecialGCourt established under those special statutes exclusively. For example,the PC Act, the NDPS Act and the National Investigation Agency Act,2008[135]. Thus, in such case the PMLA Special Court cannot have133 M/s. Ajanta Merchants Pvt. Ltd. (supra at Footnote No.103) (para 37)134 AIR 1988 SC 1531 (para 59): (1988) 2 SCC 602H135 For short, “NIA Act”

power to try offences punishable under those Acts. The phrase ‘anyscheduled offences’ as contemplated under Section 44(1)(a) of the PMLAis in manifest conflict with these three statutes and, hence, liable to bestruck down. Learned counsel also submits that the Section is legalabsurdity as to how Special Court could try scheduled offence beforethe commencement of the Act without which commencement of theSpecial Court has no existence. It is also stated the discretion to choosewhich issue or scheduled offence to try before the Special Court liesonly with the authority authorised to file complaint under the PMLA,which is discretionary and unfettered arbitrary power.(i) As regards Section 44(1)(c), it is urged that the same does notmandate disclosure of any reason for filing the application. Further, suchan application can be moved at any stage of the proceedings for theinquiry or trial of scheduled offence. Such provision cannot be readto allow committal at stage when the trial is over and only the judgmentremains to be delivered. This tantamounts to authorising exercise ofadministrative fiat in respect of subject matter, which is in fact quasi-judicial act. Similarly, even the Magistrate is not obligated to state reasonswhile deciding the application and as such his order, if not reasoned, willbe nullity. The interpretation of the words ‘commit’ and ‘committed’ issaid to be misconceived under Section 44(1)(c). It is urged that the useof the word ‘committal’ is inappropriate and the real intention of thepresent Section is mere transfer of the case to the PMLA SpecialCourt. As such, it is submitted that the case be sent to the Special Courtwhich has already taken cognizance of the complaint under the PMLAand not any other Special Court. Reliance has been placed on the decisionof the Delhi High Court in Directorate of Enforcement vs. Surajpal &Ors.[136] and on the other hand, the decision of the High Court of Keralain Inspector of Police, CBI vs. Assistant Directorate, Directorate ofEnforcement (PMLA) & Anr.[137], wherein it is observed that it is notmandatory to make an application for committal to Special Court in everycase and, similarly, not mandatory for the Court to allow every suchapplication without application of mind and dehors the merits of thecase. Hence, the conflict of view between the two High Courts needs tobe resolved.

136 2018 SCC OnLine Del 10472 (Paras 15-16)

137 2019 SCC OnLine Ker 4546

A(ii) Referring to Section 45, it is argued that Sections 201 and 212of the IPC provide for graded punishment or in line with the principle ofan accessory after the fact. Attention has been drawn to few cases toshow that these Sections prescribe gradation of punishment dependingon the nature of offence which the principal offender has committed[138].It is stated that Section 3 of the PMLA offence also is one kind of anBaccessory after the fact offence. It is also maintained that in certaincases the proceeds of crime or the scheduled offence may be committedby some person and the laundering might be done by completelydifferent person. In such case, where money-laundering is not directlyconnected with the scheduled offence, the laundering is merely anCaccessory after the fact. He submits that even though the offence ofmoney-laundering is serious offence, however, the severest punishmentis only seven years. Thus, twin conditions under Section 45 are grosslydisproportionate and illogical for the crimes provided under the PMLA.It is also stated that the equation of the bail provisions under the PMLAcannot be made to the NDPS Act or UAPA. Further, even serialDmurderer who may be liable for capital punishment is not subjected tosuch stringent condition, as under Section 45 of the PMLA. Irrespectiveof the deleterious impact on the economy of country, it does not shockthe conscience of the society as much as the conduct of the serialmurderer. Reliance is also placed upon Nikesh Tarachand Shah[139]inEsupport of the argument that even if the amendment to Section 45 (whichwas struck down in the aforementioned case) saves the conditions fromthe vices on which it was struck down, the vice of Article 21 persistsowing to the presumption of innocence having been turned on its head.It is also said that the current provision has no compelling State interestfor tackling serious crime and we must be doubly sure to allow suchFattack on the fundamental right of personal liberty.(iii) As for Section 24 and the burden of proof which is reversedwithin this Act, it is stated that Section 24(a) applies only after chargeshave been framed by the Special Court. Section 24(b) refers to personsnot charged with the offence of money-laundering under Section 3 andGit is further contended that Section 24(a) and (b) have no application toproceedings for bail. Furthermore, it is stated that presumption of

138 Sou. Vijaya Alias Baby vs. State of Maharashtra, (2003) 8 SCC 296 (Para 6); Alsosee: State of Karnataka vs. Madesha & Ors, (2007) 7 SCC 35 and In Re Kuttayan aliasNambi Thevar, AIR 1960 Mad 9H139 Supra at Footnote No.3

innocence is golden thread running through all criminal proceedings.This can apply only in cases of extremely serious offences on the groundof compelling State interest. It is submitted that in such case where themaximum sentence is of seven years, such provision is ultra viresArticle 21 of the Constitution. It is argued that in special statutes likeUAPA, MCOCA and the PC Act, the reverse burden of proof has onlybeen upheld due to the compelling State interest, such as security andpublic order. Thus, it is agreed that in cases of narco terrorism,underworld, gangs the undoubted evils may prosper; hence, Section 24(a)can accordingly be read down so as to apply to cases of launderingwhere the predicate offence seeks to punish nefarious activities.

12. Mr. Abhimanyu Bhandari, learned counsel also argued on behalfof private parties. His foremost challenge is to the interpretation of Section3, post addition of the Explanation vide the 2019 amendment. He hasmore or less reiterated the same arguments as advanced by the previouslearned counsel that by way of Explanation, the ingredient of offenceunder Section 3 is sought to be altered by reading “and” as “or”. He hasrelied upon the reports and speeches of the Minister in the Parliament.Additionally, he has placed reliance on the Vienna Convention and UnitedNations Convention Against Transnational Organized Crime, 2000[140],which state that money-laundering is only committed if the ‘use’ and/or‘concealment’ is ‘for the purposes of concealing or disguising the illicitorigin of the property’ or ‘helping any person who has been involved inthe commission of the predicate offence to evade the legal consequencesof his/her action’[141]. Reliance is also placed on Nikesh TarachandShah[142], wherein it has been held that it is the concealing or disguisingby projecting tainted monies as untainted money and not their spendingthat is prohibited.

(i) Thus, exception is taken that the Explanation as added by the2019 amendment has wholly changed the scope of the main provisionwhich is the definition. It is contrary to the concerns of the SelectCommittee and subsequent to this Explanation, person would nowcommit the offence of money-laundering the minute proceeds of crimeare generated. similarity is drawn with Section 1956 of the UnitedStates Code[143] where money-laundering is to conceal the illicit

140 For short, “Palermo Convention” or “the 2000 UN Convention”

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

Abackground of the source of the money. Further, reliance is also placedon American decisions where the Circuit Courts have held that it is notspending or using of proceeds of crime that amounts to the offence ofmoney-laundering, but laundering of such proceeds of crime[144]. Further,it has been stated that this Court in catena of decisions, held that newlyadded Explanations must be read so as to harmonise and clear of ambiguityBin the main Section and cannot be construed to widen the ambit of theprevious state of the Section[145].(ii) The next contention is regarding the definition of “proceeds ofcrime” and use of value thereof, defined under Section 2(1)(u) of thePMLA. It is argued that it can be categorised into three types namely:Cone - property derived or obtained, directly or indirectly, by any personas result of criminal activity relating to scheduled offence; or, two -the value of such property that is property derived or obtained, directlyor indirectly, by any person as result of criminal activity relating to ascheduled offence; and third - where such property is taken on fieldDoutside the country, then the property equivalent in value held within thecountry or abroad.

(iii) It is submitted that by reason of the Explanation(s) added in2019, it cannot be interpreted to include property not only derived orobtained from the scheduled offence but also any property which mayEdirectly or indirectly be derived or obtained as result of any criminalactivity relatable to the scheduled offence. Further, the Explanation tothe term “property”, also would now include property “used in thecommission of an offence”. To this, reference is made to Articles 1 and5 of the Vienna Convention and Article 12 of the Palermo Convention toshow that if the criminal activity does not generate any proceeds, thenFthere cannot be any ‘proceeds of crime’. Further, the ambit of propertyalso is said to have been enlarged disproportionately. As such, proceedsof crime need to be generated from the scheduled offence alone and notany criminal activity. To demonstrate the vice, various illustrations werealso pointed out to us. It is imperative that Courts can differentiateG144 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 Money Laundering. Oh Wait, It’s Not: The Impact ofCuellar 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 andHRohitash Kumar & Ors. vs. Om Prakash Sharma & Ors., AIR 2013 SC 30.

between property being used to commit an offence and property derivedfrom the commission of an offence, as is already accepted in othercommon law countries[146]. Thus, it is submitted that such an amendmentby way of Explanation cannot expand the scope of section. Referenceis also made to the fact that attachment of property of an equivalentvalue where the actual proceeds are no longer available, is similar toother Acts, such as the UAPA, the NDPS Act, the Prohibition of BenamiProperty Transactions Act, 1988[147] and the Fugitive Economic OffendersAct, 2018[148], all having similar definition of proceeds of crime. Objectionis taken to term “property equivalent in value”, where properties areattached which have been derived from proceeds of crime even if theyare different from the original form when the proceeds were generated[149].Further, for the interpretation of ‘value thereof’, it is said that broaderinterpretation would be contrary to Sections 8(5) and 8(6) of the PMLA.Hence, by way of illustration, where the original proceeds of crime areinterchanged and mixed with legitimate money, it is argued that giving abroad interpretation to ‘value thereof’ would be unreasonable[150].(iv) In respect of Section 8, it is argued that the true meaning ofthe words “take possession” of property under Section 8(4) should beconstructive possession instead of physical possession since it is highlyprejudicial for the accused during the pendency of the trial. Reliance isplaced on decision that has been stayed by the Division Bench of theMadras High Court which had originally held it to be symbolic possessioninstead of actual[151]. It is urged that Article 300A is not only constitutionalright but also human right. Further, confiscation is only subject toconviction and such disposition in all practical sense, leads to confiscationprior to such conviction. Further, since there is no compensation in casea person is eventually acquitted, this would be disproportionate action.As such, the argument that one needs to be restrained from selling orcreating encumbrance is valid, the dispossession is not.

146 R v Ahmad, [2012] 2 All ER 1137; Also see: R v James, [2012] 2 Cr App R (S) 253147 For short, “1988 Act”148 For short, “2018 Act”

149 Abdullah Ali Balsharaf & Anr. vs. Directorate of Enforcement & Ors., 2019 SCCOnline 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)

151 A. Kamarunnisa Ghori vs. The Chairperson, Prevention of Money Laundering,Union of India, 2012 (4) CTC 608 : 2012 Writ LR 719

A13. Mr. N. Hariharan, learned senior counsel, who argued next,referred to Nikesh Tarachand Shah[152]. Vide this decision, twinconditions in Section 45(1)(ii) of the PMLA, came to be struck downbeing violative of Articles 13(2), 14 and 21 of the Constitution. He submitsthat post Constitution laws declared unconstitutional for violation of PartIII as void ab initio cannot be revived by amendments[153], as such lawsBare void since inception. Further, he relied upon State of Gujarat &Anr. vs. Shri Ambica Mills Ltd., Ahmedabad & Anr.[154], to contendthat Section 45(1) cannot survive on the statute books[155]. Referencehas also been made to G. Mohan Rao vs. State of Tamil Nadu &Ors.[156]. In his argument, two situations evolving from the decision ofCNikesh Tarachand Shah[157]have been put forth. One, where only thetwin conditions were stuck down and the remaining provision remaineduntouched. Second, where classification based on Part of the Schedulewas also struck down in addition to striking down of the twin conditions.The second situation is said to be even more damaging given that thesubstitution by the Finance Act, 2018 is targeted only to this classificationDof Part-A of the Schedule, since the Court in the reported decision foundthis classification to be manifestly arbitrary, as it bore no rational relationto the object of the Act. Hence, the substitution by the Finance Act,2018 cannot be justified, as the substitution of this pre-existing term cannotappear on the statute book due to the striking down. It also remindedEthat this submission was made without prejudice to the contention thatthe twin conditions themselves need to be enacted separately since theyhave been struck down. Further, even if the violation of Article 14 hasbeen cured, such amendments cannot go on to cure the defect of violationof Article 21.F14. Mr. Vikram Chaudhari, learned senior counsel also representingprivate parties, raised challenge against the twin conditions of Section45(1) which were held unconstitutional in Nikesh Tarachand Shah[158].Relying on the dictum of this Court in State of Manipur & Ors. vs.

152 Supra at Footnote No. 3G153 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 1019154 (1974) 4 SCC 656

155 Supra at Footnote No.154

156 2021 SCC OnLine SC 440

157 Supra at Footnote No. 3H158 Supra at Footnote No. 3

Surajkumar Okram & Ors.[159], he submitted that once heldunconstitutional, statute is obliterated entirely, as if it had never beenpassed, non-est for all purposes. He has also relied on his owninterpretation of how Section 45(1) is to be read post Nikesh TarachandShah[160]. He has also pointed out that despite this decision an editorialerror where bare acts, post the judgment, did not remove the offending(void) provision. It is, therefore, submitted that issue is not whether twinconditions under Section 45(1) would apply or not or of their constitutionalvalidity, but would be as to their existence. He also referred to Clauses204 and 205 of the Bill which amended Section 45 in 2018.[161 ]The intentionwas 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 soughtby the State is said to be ill-founded and untenable since there is noreference to the pronouncement of Nikesh Tarachand Shah[162] andwas 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 Jain &Anr. vs. Assistant Director, Directorate of Enforcement[163], whereinit had been noted that Section 4(2) of the Cr.P.C. prescribes mandatoryapplication even in respect to special statutes unless expressly barred[164].Thus, the dictum is that the provisions of the Cr.P.C. would be applicableto the extent in the absence of any contrary provision in the special Act

159 2022 SCC OnLine SC 130

160 Supra at Footnote No. 3

161 Which states that “(v) to amend section 45 of the Act relating to offences to becognizable and non-bailable and to amend sub-section (1) of section 45 to substitute thewords “punishable for term of imprisonment of more than three years under Part ofthe Schedule” by words “under this Act” so as to take step further towardsdelinking the Scheduled offence and money laundering offence. Further, it seeksto amend the proviso in subsection (1) by inserting the words “or is accused either onhis own or along with other co-accused of money laundering sum of less than Rupeesone crore”, after the words “sick or infirm” to allow the Court to apply lenient bailprovisions in case of money laundering offence is not grave in nature.”

(emphasis supplied)

162 Supra at Footnote No. 3

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, Madrasvs. M.K.S. Abu Bucker, 1990 Cri.L.J 704.

Aor any special provision excluding the jurisdiction or applicability of theCr.P.C. The point of admissibility of statement made to customs officersand Section 25 of the 1872 Act is also touched again[165]. Relying uponOm Prakash & Anr. vs. Union of India & Anr.[166], it is argued that inthe absence of procedure to investigate irrespective of cognizability,no investigation can be permitted in law. And in respect of cognizableBoffence, the investigation cannot go on without recording informationunder Section 154 or 155 of the Cr.P.C., forwarding of report or FIR tocompetent Magistrate under Section 157 of Cr.P.C., maintaining apaginated case diary as under Section 172 of the Cr.P.C., as also, itsproduction before the Magistrate, as provided by Section 167.C(ii) passing reference is also made to the Railway Property(Unlawful Possession) Act, 1966[167], whereby vide Section 6, theapplication 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 non-cognizable offence, all these protections must come intoDplay. In contradistinction, if it is found to be cognizable offence, allprotections including under Sections 154, 157, 167 and 172 Cr.P.C., willprevail.

(iii) Reliance was also placed on Union of India vs.Thamisharasi & Ors.[168] with respect to the NDPS Act and theEapplication of the provisions of the Cr.P.C. For our perusal, comparativechart 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 safeguardsof the Cr.P.C. were applicable being mandatory, to the extent of theMagistrate being part of all stages of investigation, commencementand closure of investigation, maintenance of case diary, adherence toFSections 154, 155 and 157, ability to pursue anticipatory bail, bail underSections 437 and 439, inherent jurisdiction under Section 482 and Article226 of the Constitution and other records or information which helps tocurb fishing and roving enquiries.

(iv) Reliance is placed on the decision of Punjab & Haryana HighGCourt at Chandigarh in Gorav Kathuria vs. Union of India & Ors.[169],

165 A.R. Antulay vs. Ramdas Sriniwas Nayak & Anr. (1984) 2 SCC 500166 (2011) 14 SCC 1167 For short, “1966 Act”168 (1995) 4 SCC 190H169 2016 SCC OnLine P&H 3428

which has attained finality, as this Court has declined to interfere in theorder of the High Court. Reliance is also placed on the decision of thisCourt in D.K. Basu vs. State of W.B.[170]. It is urged that in case underthe Drugs and Cosmetics Act, 1940[171] where police officers could nolonger investigate, FIRs were made over to the Drug Inspectors. This isindicative of the correct procedure to be followed, unless otherwiseprovided, even investigation of offences under the special Acts will begoverned by Cr.P.C. alone.[172]

(v) It is then argued that an umbilical cord connection existsbetween the scheduled offence and the money-laundering offence. TheExplanation of Section 44 is to disconnect the link between the two,since the findings recorded in the trial of the scheduled offence wouldnot have bearing on the case under the PMLA. Again, reference ismade to Nikesh Tarachand Shah[173]. It is urged that the proceeds ofcrime under Section 2(1)(u) are relatable to specific scheduled orpredicate offence due to the insertion of the word ‘the’ instead of ‘any’and, as such, the ambit cannot be broadened to ‘any’ scheduled orpredicate offence[174]. He submits that certain conclusions are inevitable.Before the ED starts investigation, there must be some commencementunder the scheduled or predicate offence. The trials for the specificallyconnected proceeds of crime and scheduled or predicate offence mustbe tried together. Finding showing no involvement of accused to theproceeds of crime or criminal activity must cease the proceedings underthe PMLA. Non-compliance of Section 44(1)(c) will vitiate the PMLAproceedings. Further, it is submitted that the scope of money-launderingis limited to projecting and claiming as untainted property, that too relatableto the scheduled offence[175]. In light of the said argument, it is said thatthe projecting of such proceeds of crime as untainted can be termed asa standalone offence. In furtherance of same, certain facts of the casebeing Criminal Appeal Nos. 391-392/2018 titled Adjudicating Authority(PMLA) and Ors. vs. Ajay Kumar Gupta and Ors., were also referred

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

173 Supra at Footnote No. 3

174 Canon India Private Limited vs. Commissioner of Customs, 2021 SCC OnLine SC

175 Attorney General for India & Ors. vs. Amratlal Prajivandas & Ors., (1994) 5 SCC54

Ato, where the FIR and scheduled offence are both prior to the cominginto force of the PMLA and, yet, an ECIR was filed in 2015 after adelay of about 10 years.

15. Mr. Akshay Nagarajan was the last learned counsel to argueon behalf of the private parties. He contended that even though theBdefinitions under Section 3 read with Section 2(1)(u), two conjunctiveparts, are meant to cover scheduled offences, they are being used tobring within its sweep even non-scheduled offences. He has contendedthat the present definition of Section 3 is wide enough to take within itssweep any non-scheduled offence due to the first part of the definition,“acquisition, use, concealment, possession is capable”. However, thisCcontrast is impermissible in law[176]. To buttress this plea, provision ofSection 71 of the IPC and Article 20(2) are invoked[177]. He has alsosubmitted that for the purpose of Section 50(3), any statement recordedand deemed to be judicial proceeding, cannot be used in light of Section132 of the 1872 Act[178].DSUBMISSIONS OF THE UNION OF INDIA

16. Mr. Tushar Mehta, learned Solicitor General led the argumentson behalf of the Union of India, followed by Mr. S.V. Raju, learnedAdditional Solicitor General.

E(i) At the outset, it is submitted by the learned Solicitor Generalthat as on date, around 4,700 cases are being investigated by the ED,which is small number as compared to annual registration of the casesunder 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 investigation in lastFfive years under the PMLA out of registration of approximately 33 lakhFIRs relating to predicate offences by police and other enforcementagencies.

(ii) It is asserted that the validity of the PMLA shall have to bejudged in the background of international development and obligation of

176 Sanjay Dutt vs. State through C.B.I., Bombay, (1994) 6 SCC 86177 The State of Bombay vs. S.L. Apte & Anr., AIR 1961 SC 578; Also see: Thomas Danavs. 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)

India to prevent money-laundering, as money-laundering impacts notonly the country in which the predicate offence takes place, but also theeconomy of other countries where “proceeds of crime” is laundered.

(iii) It is submitted that the object of the PMLA which affect theeconomic fabric of the nation, is to prevent money-laundering, regulatecertain activities relatable to money-laundering, confiscate the “proceedsof crime” and the property derived therefrom and punish the offenders.The development of international consensus towards the offence ofmoney-laundering has been highlighted. It is submitted that prior to 1988,there was no concept of “proceeds of crime” and the same wasrecognized for the first time in Regina vs. Cuthbertson & Ors.[179]bythe House of Lords. England was one of the first countries to takelegislative action against proceeds of crime on the recommendations ofthe Hodgson Committee by enacting Drug Trafficking Offences Act,1986 (later replaced by the Drug Trafficking Act, 1994) whichempowered the Courts to confiscate the proceeds of drug trafficking.

(iv) Later, the Vienna Convention imposed obligation on eachparticipating country to criminalize offences related to drug traffickingand money-laundering[180], to which India is party.

(v) It is submitted that the provisions of the Palermo Conventionwere delineated to ensure that participating countries should haveappropriate legislation to prevent money-laundering and further, theConvention also placed obligation on the participating nations to utilizerelevant international anti-money laundering initiatives in establishing theirdomestic regulatory and supervisory regimes.

(vi) Further, it is submitted that on 31.10.2003, the UN GeneralAssembly adopted United Nations Convention Against Corruption, whosePreamble recognized the importance of preventing, detecting and deterringinternational transfers of illicitly acquired assets, and strengtheninginternational cooperation in asset recovery. The Convention mandatedthe participating States to conduct enhanced scrutiny of accounts soughtor maintained by politically exposed persons and their associates and toimplement measures to monitor the movement of cash and otherinstruments across their borders so that ‘paper trail’ be created whichcould assist law enforcement authorities in investigating the transfers ofillicit assets.

179 [1981] A.C. 470

180 Article 3(1)(a)&(b) of the Vienna Convention, 1988

A(vii) Thus, relying on the international Conventions, the Union ofIndia has submitted that it is the international obligations of the State tonot only recognize the crime of money-laundering but also to take stepsfor preventing the same.

(viii) To highlight the role played by the FATF in combating theBmenace of money-laundering, the respondent has traced the origin ofFATF and stated its process of reviewing the compliance with itsrecommendations by every State and the consequences of non-compliance. It is submitted that the FATF was established by the Headsof State or Government of the seven major industrial nations (Group ofSeven, G-7) joined by the President of the European Commission in aCsummit in Paris in July, 1989 which is famous for its ‘FortyRecommendations’ to combat money-laundering and, hence, carry outits own evaluation and enforcement on the issue of money-launderingacross the world. Thus, it acts as dedicated body dealing with thisissue. It is submitted that FATF has recognized dynamic nature of money-Dlaundering and thus attempted to respond to the money-launderingtechniques that are constantly evolving, by reviewing its recommendations.Further, the FATF has adopted its Non-Cooperative Countries orTerritories (“NCCT”) initiative in report issued on 14.2.2020, accordingto which 25 points criteria was recognized which is consistent with theForty Recommendations of the FATF and which identified ‘detrimentalErules and practices’ in the international effort to combat laundering. Itthus established review process to target delinquent countries andterritories where the anti-laundering regime is ineffective in practiceand to take steps against those countries. The steps which FATF maytake against non-compliant nation include ‘conditioning, restricting,Ftargeting or even prohibiting financial transactions with non-cooperativejurisdictions’.

(ix) It is submitted that the measures against money-launderinghave evolved over the period of time. Further, FATF has taken preventive,regulatory and monitoring steps through keeping watch on suspiciousGor doubtful transactions by amending its Forty Recommendations in 2003and 2012.

(x) It is further submitted that FATF assess the progress of itsmembers in complying with the FATF recommendations throughassessments performed annually by the individual members and throughHmutual evaluations which provides an in-depth description and analysis

of country’s system for preventing criminal abuse of the financial system,as well as, by focused recommendations to the country to furtherstrengthen its system.

(xi) It is submitted that upon evaluation, country will be placedimmediately into enhanced follow-up if it does not comply with the FATFtechnical and “big six” recommendations or has low effectivenessoutcome[181].

(xii) It is further submitted that jurisdictions under monitoring then,based on their commitments and compliances, are put in two types of listviz., grey list and black list, which serve as signal to the global financialand banking system about heightened risks in transactions with the countryin question which not only severely affect its international reputation butalso impose economic challenges, such as impacting the bond/creditmarket of the country, impacting the banking and financial sector of thecountry, affecting cross-border capital flows, especially for the tradesector, documentary requirements for export and import payments, suchas letters of credit may become more challenging to fulfil, potentiallyraising costs and hampering business for companies engaged in trade,adversely affecting the economy due to lack of investment opportunitieswhich may further deteriorate the financial health of the country and thecountry may also be deemed as ‘high-risk country’.

(xiii) Further, the learned Solicitor General has relied on reportby the International Monetary Fund[182] (IMF) - Anti-Money Launderingand Combating the Financing of Terrorism (AML/CFT) Report onthe Effectiveness of the Program to state the potential economic effectsthat may arise from such financial crimes, such as destabilizing capitalinflows and outflows, loss of access to international financial markets asa result of deterioration in the country’s reputation, difficulty in supervisingfinancial institutions, undermining of the stability of country’s financialsystem and adverse effect on growth of the country.

(xiv) The respondent has further relied on Council of EuropeConvention on Laundering, Search, Seizure and Confiscation ofthe Proceeds from Crime and on the Financing of Terrorism (2005)

181 (i) It has 8 or more Non-compliant NC/ Partially Compliant (PC) ratings for technicalcompliance; (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 low level of effectiveness for 4 or more of the 11effectiveness outcomes.182 For short, “IMF”

Ato state that nations are free to choose the definition of ‘predicateoffences’ for money-laundering purposes from the list of offences givenunder the Convention, for example, by providing list of those offences,a category offences, or by reference to offences that have maximumterm of imprisonment of one year or more (or, for states that haveminimum thresholds for offences, those with imprisonment of minimumBof six months) and to take measures which are preventive in nature.

(xv) To illustrate the global development of the approach againstmoney-laundering, 1991 Money Laundering Directive (‘First Directive’)adopted by the European Union is cited which imposed obligations oncredit institutions and financial institutions in relation to customerCidentification and record-keeping, internal controls and training of staffand mandatory reporting of suspicious transactions. The Second Directive(2001) widened the number of institutions that fell within the scope ofreporting obligations and also expanded the range of predicate offencesfor the purpose of money-laundering. EU Third Directive (2005) wasDdirected to bring the EU legislation into line with the revisions to theFATF Recommendations and further expanded the range of institutionswithin its scope to include life insurance intermediaries and widened thedefinition of high value dealers to capture those who accept cash paymentsof €15,000 or more. definition of ‘serious crimes’ was included thatconstituted ‘predicate offences’, including all offences punishable by aEmaximum sentence of one year or more, or minimum sentence of sixmonths 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 intoFaccount new FATF recommendations published in 2012.

(xvi) It is further submitted that the purpose of December 1988Statement on Prevention of Criminal Use of the Banking System for thePurpose of Money-Laundering issued by the Basel Committee was toensure that banks are not used to hide or launder funds acquired throughGcriminal activities.

(xvii) To emphasize on the role of international cooperation tocombat money-laundering, it has been stated that the Financial IntelligenceUnit created by the Egmont Group, which is an international forum tocombat money-laundering, should serve as national centre for receiving,

analyzing and disseminating suspicious transaction reports, and shouldhave access on timely basis to the financial, administrative and lawenforcement information that it requires to properly undertake its functionsas per the revised FATF Recommendations.

(xviii) The Union of India has further traced the origin of theterm “money-laundering” and stated that the term arose in United Statesin 1920s, which was used by the American Police Officers with referenceto the ownership and use of launderettes by mafia groups as thelaunderettes gave them means of giving legitimate appearance tomoney derived from criminal activities. The profits gained through theselaunderettes were thus termed ‘laundered’. Further, the term ‘money-laundering’ was first used with legal meaning in an American judgmentof 1982 concerning the confiscation of laundered Columbian drugproceeds.

(xix) It is further submitted that the goal of money-laundering isto conceal the predicate offences and to ensure that the criminals ‘enjoy’their proceeds. Further, the money-laundering takes place through ‘acomplex process often using the latest technology, of sanitizing money insuch manner that its true nature, source or use is concealed, therebycreating an apparent justification for controlling or possessing the launderedmoney’ in 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 proceedsof predicate criminal activities so as to undermine organized crime bytaking away the incentive for these criminal activities relatable to offences.Secondly, to apprehend high level criminals as they themselves stay alooffrom criminal activities but do come into contact with the proceeds ofthese activities, thereby creating ‘paper trail’. Thirdly, to preventcriminals from destabilizing the national economy because of its corruptiveinfluence on financial markets and the reduction of the public’s confidencein the international financial system and lastly to deter the moneylaunderers from impacting the growth rate of the world economies.

(xxi) It is stated that the principal sources of illegal proceeds arecollar crimes (tax, fraud, corporate crimes, embezzlement and intellectualproperty crimes), drug related crimes and smuggling of goods, evasionof excise duties, corruption and bribery (and the embezzlement of publicfunds).

A(xxii) To show the global impact of money-laundering, it issubmitted that the IMF and the FATF have estimated that the scale ofmoney-laundering transactions is between 2% and 5% of the global GDP.It is also stated that the United Nations has recently put the figure ofmoney-laundering at USD 2.1 trillion or 3.6% of global GDP. Thus, theoperation of money-laundering has international dimension. It is submittedBthat measures being taken at the national level would be inadequate,which made it necessary to establish effective international co-operationmechanisms to allow national authorities to co-operate in the preventionand prosecution of money-laundering and in international ‘proceeds-hunting’.

(xxiii) Further, it is submitted that the measures to combat money-laundering have evolved from post facto criminalization to preventiveapproach with its stress on the reporting obligations. The definition of“money-laundering” is now no more restricted to the elements of projectionand untainted property.

(xxiv) It is stated that India, and its version of the PMLA, is‘merely cog in this international vehicle’ and as India is signatory tothese treaties, therefore, is bound legally and morally, to adopt the bestglobal practices and respond to the changing needs of the times. It is,therefore, submitted that the constitutionality of the PMLA has to beEadjudicated from the stand point of the country’s obligations and evolvingresponsibilities internationally.

(xxv) The learned Solicitor General invited our attention to theintroduction to the PMLA. Making reference to the Statement of Objectsand Reasons of the Act, he submits that the Act was enacted with theFintent of establishing strict and stringent framework to address theglobal menace of money-laundering. Refuting the private parties’ attemptto classify the Act as being purely penal statute, he submits that thePMLA is an amorphous or hybrid statute, which has regulatory, preventiveand penal aspects. Learned Solicitor General then walked us throughthe various provisions of the PMLA, and submitted that categorizing theGAct as being merely penal in nature, would not only defeat the purposeof the Act, but would also be against the express provisions enshrinedtherein.

(xxvi) It is further submitted by the Union of India that the PMLAis complete Code in itself, and establishes specific separate procedure

to the extent necessary and to be followed in proceedings under the Act.Laying down brief summary of the legislative scheme of the Act, therespondent submits that there has been conscious legislative departurefrom conventional penal law in India. Considering the peculiar nature ofmoney-laundering – which requires prevention, regulation and prosecution,a completely different scheme is framed by the Legislature. The newscheme introduced for dealing with the money-laundering is as part ofIndia’s global responsibility in international law. While complying withthe mandate of FATF, the Legislature has very consciously ensured thatthe Act becomes compliant with the Constitution of India. Referring tothe rules formulated under the PMLA, it is also submitted that the schemeof the Act and rules framed thereunder prescribe an elaborate procedureto ensure complete confidentiality, and place sufficient inbuilt checksand balances to prevent potential abuse.

(xxvii) The respondent then sheds some light on the offencesbeing investigated by the Directorate of Enforcement. It is submittedthat the number of cases taken up for investigation each year has risenfrom 111 cases in 2015-16 to 981 in 2020-21. Comparing the number ofcases registered annually under money-laundering legislations, it issubmitted that the low registration of cases in India is due to the robustmechanism for risk-based selection of cases for investigation. The EDis focusing its attention on cases involving high value of proceeds ofcrime and cases involving serious predicate offence involving terrorfinancing, narcotics, corruption, offence involving national security, etc.To that effect, it is highlighted that attachment proceedings concerningsome of the fugitives, who are facing action, were done and assets worthRs.19,111.20 crores out of total fraud of Rs.22,585.83 crores wereattached. Furthermore, the investigation in 57 cases of terror and Naxalfinancing has resulted in identification of proceeds of crime worth overRs.1,249 crores and attachment of proceeds of crime of Rs.982 crores(256 properties) and filing of 37 prosecution complaints and convictionof two terrorists under PMLA. Lastly, it is stated that the quantum ofproceeds of crime involved in the bunch cases under the PMLA whichare under consideration in these matters is Rs.67,104 crores.

(xxviii) Having laid down the basic scheme of the PMLA, learnedSolicitor General proceeded to discuss the definition of “money-laundering” as per Section 3 of the Act. Tracing its origin, it is submittedthat the term “money-laundering” finds its initial definition in Article

A3.1(b)(i)(ii) and (c)(i) of the Vienna Convention. However, the ViennaConvention limited the predicate offences to drug trafficking offences,and, consequently, led to the adoption of an expansive definition coveringthe widest range of predicate offences under the Palermo Convention.Building upon the definitions contained in the Vienna Convention and thePalermo Convention, the FATF recommended member countries toBexpand the predicate offences to include serious crimes. The same wasmade binding on the member countries by way of Recommendation No.1 and Recommendation No. 3 of the FATF. Subsequent to its enactment,the PMLA became subject to evaluation by the FATF based on theForty Recommendations formulated by the FATF. In 2010, the FATFCadopted the ‘Mutual Evaluation of the Anti-Money Laundering (AML)and Combating the Financing of Terrorism (CFT) Regime of IndiaReport’[183]. As per Recommendation No. 1 of the Mutual EvaluationReport, the concealment, possession, disposition and use of proceeds ofcrime were not criminalized by PMLA, and India was, thus, held to benot fully compliant. Thus, with view to address the legal deficiency asDpointed out by FATF and to make it globally compliant, the Prevention ofMoney-Laundering (Amendment) Act, 2012 amended Section 3 to includethese activities. In support of his argument, learned Solicitor Generaldraws our attention to the Statement of Object and Reasons of Preventionof Money Laundering (Amendment) Bill, 2011[184], and the parliamentaryEdebates surrounding the amendment.

(xxix) Summing up the recommendations of the FATF, it is clarifiedby the learned Solicitor General that even in an act of mere concealment,mere possession or mere use of “proceeds of crime” or “activity”connected with the proceeds of crime, per se, is an offence. In otherFwords, if person conceals the proceeds of crime, keeps it in hispossession or uses it, he is guilty of money-laundering irrespective of asto whether he is projecting it as untainted or not. This is for the simplereason that if person conceals something (proceeds of crime), it is anact committed knowingly and, thus, the question of that person projecting

that very thing either as tainted or untainted does not arise.G

(xxx) It is further explained that the anomaly resulting from anerroneous drafting was successfully explained during the 2013 reviewof FATF by categorically contending that all expressions following the

183 For short, “Mutual Evaluation Report”184 For short, “2011 Bill”H

term “including” are mere illustrative and independently constitute anoffence of money-laundering without being dependent upon each other.Thus, so long as person knowingly becomes party or is actuallyinvolved in any process or activity connected with proceeds of crime,such person is guilty of money-laundering.

(xxxi) In order to lend further credibility to the sanctity of theFATF Mutual Evaluation Report and the recommendations containedtherein, the learned Solicitor General took us through the numerousamendments incorporated in the PMLA by way of the 2012 AmendmentAct which was largely based on the recommendation of the FATF.Special emphasis is laid on the amendments carried out in Sections 5and 8 of the Act pursuant to FATF recommendations. It is further submittedthat apart from the PMLA, corresponding amendments to the UAPA,the NDPS Act and the Companies Act have been also made as sequelto the FATF recommendation during the Mutual Evaluation of India.(xxxii) Learned Solicitor General submitted that the interpretationput forth by the other side, would effectively result in granting the accuseda license to commit the offence of money-laundering and thereaftereither conceal the proceeds of crime, or keep them in his possession, oruse them and thereby wriggle out of the legislative intent of preventingmoney-laundering by raising plea that the same were never claimed/projected as being untainted property. Reliance is placed on SeafordCourt Estates Ld. vs. Asher[185], to point out that principles of statutoryinterpretation dictate that any interpretation which leads to mischief shouldbe avoided and the statute should be so construed that the legislativeintent is not defeated. It is submitted that the limitations of traditionalapproach to crime and in fact, highlights the importance of the evolvedapproach 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 3inserted vide Finance (No.2) Act, 2019, is merely clarificatory in natureand elucidates the legislative intent behind the provision. Reliance is placedon the background/justification of the amendments to PMLA as containedin the debate on the Finance Bill, 2019[186].

185 [1949] 2 K.B. 481.

186 For short, “2019 Bill”

A(xxxiv) Strong emphasis is laid on the use of the word ‘any’ inthe phrase ‘any process or activity’. careful reading of Section 3 ofthe PMLA clearly provides that any process or activity which itself hasa wider meaning also includes the process or activity of concealment,possession, acquisition, use and/or projecting, claiming it as untaintedproperty. Placing reliance on Shri Balaganesan Metals vs. M.N.BShanmugham Chetty & Ors.[187], it is submitted that all or every type/species of process or activity connected with proceeds of crime shall beincluded while interpreting the nature of process or activities connectedwith the proceeds of crime.

(xxxv) It is further submitted that all and any activities relating toCproceeds of crime including solitary – possession, concealment, use oracquisition, constitute and offence of money-laundering, independent ofthe final projection. It is submitted that such an interpretation is necessaryto effectively implement the Act in its true spirit. It is submitted thatconsidering the definition prevailing in India, it is necessary that any andDall 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 judgements[188] to show that the use ofthe term ‘including’ is not restrictive, but rather further enlarges thescope of the definition.

E(xxxvi) Depending upon the facts of the case, he submits that itis quite likely that accused of money-laundering may fall in more thanone of the above categories. Therefore, the focus of investigation shouldbe on identification of all the process or activity connected with proceedsof crime including the specific processes and activities, which have beenincluded as illustrations in Section 3. Reliance is placed on Rohit TandonF

187 (1987) 2 SCC 707

188 M/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; ForestGRange Officer & Ors. vs. P. Mohammed Ali & Ors., 1993 Supp (3) SCC 627; CommercialTaxation Officer, Udaipur vs. Rajasthan Taxchem Ltd., (2007) 3 SCC 124; AssociatedIndem 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 MamtaSurgical Cotton Industries, Rajasthan vs. Assistant Commissioner (Anti-Evasion),HBhilwara, Rajasthan, (2014) 4 SCC 87.

vs. Directorate of Enforcement[189], to bring forth the interplay betweenvarious aspects of Section 3 of the PMLA.

(xxxvii) The learned Solicitor General has also cited otherauthorities including the observations made by this Court in Kartar Singhvs. State of Punjab[190], 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 Legislature to definea “crime”, and it is this definition that should be at the center of anychallenge to criminal provision.

(xxxviii) It is urged that the ‘projection’ of proceeds of crimecannot be held as mandatory requirement under Section 3 of the Act;otherwise, it will become impossible to punish person for the offenceof money-laundering who “knowingly assists” or who is “knowingly aparty” or who is “actually involved” in any process or activity connectedwith the proceeds of crime. It is, therefore, submitted that the correctinterpretation of the word “and” should be “or” as it was always intendedby the legislature. Further, it is stated that any interpretation contrary tothis will render the provision meaningless. To bolster this argument,reliance is placed on the decision of this Court in Sanjay Dutt vs. Statethrough C.B.I., Bombay (II)[193]. In that case the Court held that theword ‘and’ should be interpreted as ‘or’ and the words “arms andammunition” should not be read conjunctively; otherwise, the object ofthe Act will be defeated. Therefore, on similar line, it is argued thatmere concealment or use or possession of the proceeds of crime wouldamount to an offence of money-laundering and any other interpretationof the Section would be contrary to the India’s international obligationand FATF recommendations. It is submitted that such interpretation ofthe word “and” would not amount to judicial legislation, as such exerciseis only done to give effect to the legislative intent by correcting ‘faultinessof 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

189 (2018) 11 SCC 46190 (1994) 3 SCC 569191 (2004) 2 SCC 9

192 (2016) 7 SCC 221

193 (1994) 5 SCC 410

194 Regina vs. Oakes 1959 (2) QB 350, Ishwar Singh Bindra & Ors. vs. The State ofU.P., (1969) 1 SCR 219 and Gujarat Urja Vikas Nigam Ltd. vs. Essar Power Ltd.,(2008) 4 SCC 755

195 (1987) 3 SCC 208

Athe word “and” was interpreted as “or” by the Court to give effect tothe legislative intent of the Mines Act, 1952[196].

(xxxix) Emphasis is also laid on the application of internationallaw while interpreting domestic law and it is stated that the domesticCourts are under an obligation to give due regard to the internationalBConventions for construing domestic laws[197]. The learned SolicitorGeneral has further placed reliance on People’s Union for Civil Liberties

vs. Union of India & Anr.[198]and Githa Hariharan & Anr. vs. ReserveBank of India & Anr.[199]to submit that the international Treaties andConventions may be relied on by the domestic Courts so as to giveeffect to the international law, if such law is not inconsistent with anyCdomestic law.

(xl) While referring to Sections 4 and 5 of the Cr.P.C., it is urgedthat Cr.P.C is generic procedural law with no universal applicationover any other special criminal or penal legislations. It is stated that theLegislature is competent to provide different procedure than that ofDCr.P.C, provided that the special procedure has adequate constitutionalsafeguards. Therefore, it is submitted that the Parliament has provided adistinct procedure under the PMLA which is also manifested from Sections65 and 71 of the PMLA. It is stated that due to the peculiar nature of theoffence of money-laundering, the Legislature in its wisdom has providedEa special procedure for investigation and trial of the offence under theAct. However, it is submitted that where the application of Cr.P.C is notexpressly or by necessary implication excluded, the provisions of Cr.P.Cwill apply in light of Section 65 of PMLA as well.

(xli) It is argued that the PMLA is complete Code in itself,Fwhich creates new offence and provides separate machinery to theextent necessary for dealing with it. Therefore, the provisions of PMLAwould override the provisions of the Cr.P.C. in relation to such expressdispensation in view of Section 71 of this (PMLA) Act. In support ofthis argument, reliance is placed on Rohtas vs. State of Haryana &Anr.[200], Ajmer Singh & Ors. vs. Union of India & Ors.[201], UsmanbhaiG196 For short, “Mines Act”197 Pratap Singh vs. State of Jharkhand & Anr., (2005) 3 SCC 551 and National LegalServices Authority vs. Union of India & Ors., (2014) 5 SCC 438198 (2005) 2 SCC 436199 (1999) 2 SCC 228

200 (1979) 4 SCC 229H201 (1987) 3 SCC 340

Dawoodbhai Memon & Ors. vs. State of Gujarat[202], Central Bureauof Investigation vs. State of Rajasthan & Ors.[203], State (Union ofIndia) vs. Ram Saran[204], Mahmadhusen Abdulrahim Kalota Shaikh(2) vs. Union of India & Ors.[205], Lalita Kumari vs. Govt. of UttarPradesh & Ors.[206], Gautam Kundu vs. Directorate of Enforcement(Prevention of Money-Laundering Act), Government of India[207]andUnion of India & Ors. vs. Chandra Bhushan Yadav[208].

(xlii) Next, it is argued that wording of Section 71 must be giveneffect to. It is asserted that the insertion of non-obstante clause in astatute has the effect of overriding anything inconsistent or repugnantthereto[209]. It is stated that this Court in Deep Chand vs. The State ofUttar Pradesh & Ors.[210]laid down some tests for determining whetherany inconsistency or repugnancy exists between two statutes. The Courtheld that it has to be seen whether the provisions are in direct conflictwith each other; whether the legislative intent was to lay down anexhaustive Code on the subject matter and thereby replace the previouslaw and whether the two legislations operate in the same field.(xliii) It is argued that when statute has expressly provided arepealing section then the maxim ‘est exclusio alterius’ (the expressintention of one person or thing is the exclusion of another) will apply,thereby application of existing statute is excluded in case of anyinconsistency between the two[211].

(xliv) Reliance has also been placed on Innoventive IndustriesLimited vs. ICICI Bank & Ors.[212], wherein in respect of similarprovision in the Insolvency and Bankruptcy Code, 2016[213], it was heldthat the provisions of the stated Code ought to be given primacy overother statutes. It is, therefore, submitted that the procedure under the

202 (1988) 2 SCC 271203 (1996) 9 SCC 735204 (2003) 12 SCC 578205 (2009) 2 SCC 1206 (2014) 2 SCC 1 (also at Footnote No.13)207 (2015) 16 SCC 1208 (2020) 2 SCC 747

209 Aswini Kumar Ghose & Anr. vs. Arabinda Bose & Anr, AIR 1952 SC 369 andCentral 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)

211 Kishorebhai Khamanchand Goyal vs. State of Gujarat & Anr., (2003) 12 SCC 274212 (2018) 1 SCC 407

213 For short, “IBC”

ACr.P.C to the extent of inconsistent proviso in PMLA, stands excludedby way of Section 71 of the Act by necessary implication. The doctrineof ‘generalia specialibus non derogant’, has also been invoked, whichmeans that general law yields to special law. Reliance is placed on thedecision of House of Lords in Elizabeth Warburton vs. JamesLoveland[214]. It is submitted that the said decision has been followed inBPatna Improvement Trust vs. Smt. Lakshmi Devi & Ors.[215], TheSouth India Corporation (P) Ltd. vs. The Secretary, Board ofRevenue, Trivandrum & Anr.[216], Anandji Haridas and Co. (P) Ltd.vs. S.P. Kasture & Ors.[217], Maharashtra State Board of Secondaryand Higher Secondary Education & Anr. vs. ParitoshCBhupeshkumar Seth & Ors.[218], Usmanbhai Dawoodbhai Memon[219]and Ethiopian Airlines vs. Ganesh Narain Saboo[220].

(xlv) It is then submitted that the controversies regarding offenceunder the Act being cognizable or non-cognizable is irrelevant becausethe definitions of the cognizable offence under Section 2(c) and non-Dcognizable offence under Section 2(l) of the Cr.P.C. are clearlyinapplicable in the case of ED officers who are not police officers[221], asthese two definitions only apply to “police officer”. Secondly, theapplication of these two definitions is restricted to the offences mentionedunder 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 thatEeven under Part II of the First Schedule, the offence under the Actwould be cognizable. Further, the purpose of categorizing an offence onthe basis of cognizable and non-cognizable offence is to indicate whethera police officer can arrest person without warrant. The Act underSection 19 confers unequivocal power of arrest without warrant.

FTherefore, the question as to whether an offence of money-launderingis 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

G214 (1831) 2 Dow & Cl 480215 1963 (Supp.) 2 SCR 812216 (1964) 4 SCR 280217 AIR 1968 SC 565218 (1984) 4 SCC 27

219 Supra at Footnote No.202H220 (2011) 8 SCC 539

it seemed that offence being cognizable, the jurisdictional police officersare also empowered to investigate the offence and submit chargesheetafter the investigation. Although such confusion had no basis as only theED officers have been empowered to conduct investigation, who arenot police officers under the Act, and after the investigation only acomplaint could be filed by him before the Special Court. To remove thisanomaly, the word ‘cognizable’ was deleted and the definition ofinvestigation was inserted under Section 2(1)(na) of the Act. In thisregard, the learned Solicitor General has cited relevant extracts of speechof then Finance Minister while introducing 2019 amendment.

(xlvii)It is submitted that the Legislature had no intention to makethe offence under the PMLA to be non-cognizable which is manifestfrom the unamended marginal note[222] of Sections 19 and 45 of the Act.It is further stated that Section 19 of the PMLA has special purposewith regard to the peculiar nature of the offence. It is then submittedthat the Legislature has deliberately avoided the provision of registrationof FIR, supplying the copy of FIR to the Magistrate and requiring theauthorities to obtain arrest warrant because due to the nature of offence,there are high chances that the accused may eliminate the traces ofoffence if he had any prior notice of the investigation. The same viewhas been taken by the Jharkhand High Court in Hari Narayan Rai vs.Union of India & Anr.[223], Punjab & Haryana High Court at Chandigarhin Karam Singh & Ors. vs. Union of India & Ors.[224], Bombay HighCourt in Chhagan Chandrakant Bhujbal vs. Union of India & Ors.[225],Delhi High Court in Vakamulla Chandrashekhar vs. EnforcementDirectorate & Anr.[226], Virbhadra Singh & Anr. vs. EnforcementDirectorate & Anr.[227], Moin Akhtar Qureshi vs. Union of India &Ors.[228]and this Court in Directorate of Enforcement vs. VakamullaChandrashekhar[229]. However, in W.P. (Crl.) No. 363 of 2018 and Crl.M.A. No. 2151 of 2018 i.e., Rajbhushan Omprakash Dixit vs. Union

221 Romesh Chandra Mehta (supra at Footnote No.119)

222 Bhagirath vs. Delhi Administration, (1985) 2 SCC 580 and Eastern Coalfields Limitedvs. Sanjay Transport Agency & Anr., (2009) 7 SCC 345223 2010 SCC OnLine Jhar 475224 2015 SCC OnLine P&H 19739225 2016 SCC OnLine Bom 9938226 2017 SCC OnLine Del 12810227 2017 SCC OnLine Del 8930228 vide order dated 01.12.2017 in W.P. (Crl.) No.2465/2017229 Order dated 04.01.2018 in SLP (Crl.) Diary No. 36918/2017

Aof India & Anr., the Division Bench of the High Court took differentview and referred the matter to larger bench. It is submitted that thesaid order is contrary to the decisions of this Court in Serious FraudInvestigation Office vs. Rahul Modi & Anr.[230] and of the High Courts.

(xlviii) Further, the binary created by the private parties of anBoffence being cognizable or non-cognizable is immaterial in the case ofPMLA, which is Code in itself and provides special procedure forinvestigation. It is argued that the compartmentalization of the offenceunder the Act is pointless because if the offence is held to be cognizable,then it will be mandatory to register an FIR. However, under the schemeof the PMLA, only an ECIR is registered, which cannot be equated withCan 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. Pavunnyvs. Assistant Collector (HQ), Central Excise Collectorate, Cochin[231],squarely applies to the present case, wherein it had been held that ChapterDXII of the Cr.P.C will not apply during the investigations under the 1962Act.

(l) It is submitted that various High Courts have already answeredthe question under consideration and held that the offence under the Actis cognizable, so far as power of arrest without warrant is concernedEand the ECIR registered under the Act cannot be equated with an FIR.[232]Strong reliance has been placed upon the decisions in Virbhadra Singh[233]and Dalmia Cement (Bharat) Limited & Anr. vs. Assistant Directorof Enforcement Directorate[234].

(li) It is submitted that the nature of the amendment can only beFinferred from the scheme of the Act prior to the amendment andsubsequent to the amendment, and it is the substance rather than theform which determines the nature of the Act. To lend support to hissubmissions, learned Solicitor General has relied on Zile Singh vs. State

230 (2019) 5 SCC 266231 (1997) 3 SCC 721

232 Karam Singh (supra at Footnote No.224) and Chhagan Chandrakant Bhujbal (supraat Footnote No.225)

233 Supra at Footnote No.227

H234 2016 SCC OnLine Hyd 64

of Haryana & Ors.[235] and Commissioner of Income Tax I,Ahmedabad vs. Gold Coin Health Food Private Limited[236].

(lii) It is argued that the amendment of Section 45 only clarifiesthat the offence under the Act is cognizable in nature so far as thepower of arrest without warrant is concerned. It is further submittedthat the amendment being clarificatory in nature would operateretrospectively. To bolster this argument, reliance has been placed onCommissioner of Income Tax, Bhopal vs. Shelly Products & Anr.[237],Gurcharan Singh vs. Directorate of Revenue Intelligence[238],Assistant Electrical Engineer vs. Satyendra Rai & Anr.[239],Commissioner of Income Tax (Central)-I, New Delhi vs. VatikaTownship Private Limited[240], State Bank of India vs. V.Ramakrishnan & Anr.[241], and Union of India & Ors. vs. MudrikaSingh[242].

(liii) It is then submitted that there are adequate safeguards underSection 19 of the PMLA, which makes the provision Constitution-compliant. It is submitted that firstly, the power of arrest under Section19 can be exercised only by Director, Deputy Director, AssistantDirector or any other police officer authorized in this behalf by the CentralGovernment as opposed to Cr.P.C., where the power of arrest can beexercised by any police officer without warrant even on the basis ofreasonable suspicion, as per Section 41 of the Cr.P.C. The Director,who is the head of ED, is appointed by neutral process mentionedunder Section 25 of Central Vigilance Commission Act, 2003[243].Therefore, only persons of particular rank who are appointed by statutehave the power to arrest any person under Section 19 of the PMLA.Secondly, there must be material in possession with the Authority beforethe power of arrest can be exercised as opposed to Cr.P.C which givesthe power of arrest to any police officer and the officer can arrest anyperson merely on the basis of complaint, credible information or

235 (2004) 8 SCC 1236 (2008) 9 SCC 622237 (2003) 5 SCC 461238 (2008) 17 SCC 28239 (2014) 4 SCC 513240 (2015) 1 SCC 1 (also at Footnote No.127)241 (2018) 17 SCC 394242 2021 SCC OnLine SC 1173243 For short, “CVC Act”

DEF

Areasonable suspicion against such person. Thirdly, there should be reasonto believe that the person being arrested is guilty of the offence punishableunder PMLA in contrast to the provision in Cr.P.C., which mainly requiresreasonable apprehension/suspicion of commission of offence. Also, suchreasons to believe must be reduced in writing. Fifthly, as per theconstitutional mandate of Article 22(1), the person arrested is requiredBto be informed of the grounds of his arrest. It is submitted that theargument of the other side that the accused or arrested persons are noteven informed of the case against them, is contrary to the plain languageof the Act, as the Act itself mandates that the person arrested is to beinformed of the ground of his arrest. Sixthly, the Authority arresting theCperson is required to forward copy of the order of arrest and materialin its possession to the Adjudicatory Authority in sealed envelope, whichis required to be retained for period of ten (10) years as per thePrevention of Money Laundering [the Forms and Manner of Forwardinga Copy of Order of Arrest of Person along with the Material to theAdjudicating Authority and its Period of Retention] Rules, 2005.DSeventhly, it is stated that the person arrested is required to be producedbefore the Special Court or the Magistrate within twenty-four hours ofhis arrest. Thus, the competent Court can look at the material inpossession of the Director and the reasons formed by him to believe thatthe person is guilty of the offence under the PMLA, so as to satisfyEitself of the legality of his arrest.

(liv) It is submitted that as there is nothing contrary in the PMLAto Section 167 of Cr.P.C., therefore, the provisions of remand underSection 167 Cr.P.C. would also apply and any further detention of thearrested person would only be allowed by the competent Court and, forFthe same reasons, Chapter V of the Cr.P.C. would also apply in case ofarrest made under the PMLA.

(lv) Further, it is submitted that the guidelines issued in ArneshKumar vs. State of Bihar & Anr.[244]will have no application for thepurpose of arrest under PMLA. The guidelines in the said decision wereGissued to avoid misuse of the provision of arrest, while in the case of thePMLA, there is already higher threshold specified for arresting anyperson. Therefore, there is no possibility of arbitrary arrest under thePMLA. Whereas, since the decision to arrest is taken by high official

after complying with threshold requirements in law, there will bepresumption that he has acted bona fide.

(lvi) It is stated that considering the nature and gravity of theoffence, the serving of notice to person as prescribed under Section41A of Cr.P.C. would materially interfere with fair investigation beingdone by high official bestowed with such responsibility and make theinvestigation redundant.

(lvii) Further, it is submitted that the contention of the privateparties that the power under Section 19 of PMLA can only be invokedafter complaint is filed, is devoid of any merits. It is submitted that in acomplaint case under the PMLA, complaint is similar to the policereport filed under Section 173 of the Cr.P.C, which makes the arrest apart of investigation which would always be prior to filing of the complaintunder Section 44 or further complaint as contemplated in Explanation inSection 44. Further, the proviso to Section 44(1)(b) which provides forfiling of closure report before the Special Court, if after investigationno offence of money-laundering is made out, makes it absolutely clearthat the complaint is to be filed after the conclusion of investigation.(lviii) It is submitted that Section 19 of PMLA is pari materia toSection 35 of the FERA and Section 103 of the 1962 Act and theirvalidity has been upheld by this Court. Reliance is placed on RomeshChandra Mehta[245]to urge that the filing of complaint, after theinvestigation, is not necessary prerequisite before arresting the person.

(lix) Reliance is then placed on the decision of this Court in Unionof India vs. Padam Narain Aggarwal & Ors.[246], wherein the Courtexamined the power to arrest under Section 104 of 1962 Act. Relying onthe decision, it was stated that the power to arrest is statutory in characterand cannot be interfered with and can only be exercised on objectiveconsiderations free from whims, caprice or fancy of the officer. Thelaw takes due care to ensure individual freedom and liberty by layingdown norms and providing safeguards so that the authorities may notmisuse such power. It is submitted that the requirement of “reason tobelieve” and “recording of such reasons in writing” prevent arbitrarinessand makes the provision compliant with Article 14. This is reinforcedfrom the fact that only 313 arrests have been made under the PMLA in17 years of operations of the PMLA.

245 Supra at Footnote No.119

246 (2008) 13 SCC 305

A(lx) Canadian judgment in Gifford vs. Kelson[247]was also reliedon to state that “reason to believe” conveys conviction of the mind foundedon evidence regarding the existence of fact or the doing of an act,therefore, is of higher standard than mere suspicion. Reliance hasbeen further placed on Premium Granites & Anr. vs. State of T.N. &Ors.[248]to urge that the requirement of giving reasons for exercise of theBpower by itself excludes chances of arbitrariness. The learned SolicitorGeneral has further relied on the decision in M/s. Sukhwinder Pal BipanKumar & Ors. vs. State of Punjab & Ors.[249]to state that there is apresumption that the discretion will not be abused where the discretionis vested with high-ranking officer. Lastly, reliance was placed onCAhmed Noormohmed Bhatti vs. State of Gujarat & Ors.[250] andManzoor Ali Khan vs. Union of India & Ors.[251]to urge that merepossibility of abuse by the authority, which is vested with the discretionto exercise the power, cannot be ground to render the provisionunconstitutional.

D(lxi) It is then submitted that the quantum of punishment cannotbe the sole basis for determining the gravity of offence. The Legislaturehas several statutory mechanisms to bring about deterrence effect so asto prevent the commission of an offence and the quantum of punishmentis only one such mechanism. It is further submitted that stringentcondition of bail is relatable to the object of creating deterrent effectEon persons who may commit the offence of money-laundering which isalso manifest in the Preamble of the Act. To give effect to the internationalstandards of preventing money-laundering prescribed by FATF and otherinternational treaties, stringent bail conditions are necessary and theLegislature has provided enough safeguards under Section 19 so as toFbalance the rights of the accused and to protect the interest of theinvestigation as well. It is urged that the legislative policy of the countryhas consistently treated money-laundering as serious offence affectingthe microeconomic strength of the country. Further, it is stated that thetwin conditions under Section 45 of the PMLA are reasonable from the

stand point of the accused and his rights under Article 21 of theGConstitution, which provides an objective criteria and intelligible differentia,

247 (1943) 51 Man. R 120248 (1994) 2 SCC 691249 (1982) 1 SCC 31250 (2005) 3 SCC 647H251 (2015) 2 SCC 33

hence, does not violate Article 14 of the Constitution. Further it is submittedthat there are only some issues on which the international community isbuilding consensus and money-laundering is one of them, others beingterrorism, drug related offences and organized crime and the twinconditions are provided in all three categories of laws by the Legislature.

(lxii) Relying on international Conventions, such as ViennaConvention, Palermo Convention and FATF Recommendations, it is urgedthat the same concern has been expressed by the global community,which is reflected in all the above-mentioned Conventions. It is furthersubmitted that Section 45 of the PMLA fulfils the mandate of internationalConventions as the implementation of the PMLA is monitoredinternationally and is linked to India’s international obligations.

(lxiii) It is submitted that in furtherance of the legitimate Stateinterest, departure from ordinary criminal procedure has been made underthe 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 besubordinated, within reasonable bounds, to the good of the people’.Further, the twin conditions are not novel or draconian in nature as theyare also present in other numerous special enactments for the welfareof the people and they not only provide deterrent effect but also tacklethe offence of money-laundering. It is submitted that this Court in NikeshTarachand Shah[253] has not reckoned this crucial aspect. It is submittedthat the length of punishment is not the only indicator of the gravity ofthe offence and private parties have wrongly argued that the twinconditions cannot be made applicable in legislation which carry apunishment of only seven (7) years. Gravity of offence is to be judgedon totality of factors, especially keeping in mind the background inwhich the offence came to be recognized by the Legislature in the specificinternational context. To buttress this submission, the learned SolicitorGeneral has relied on State of Gujarat vs. Mohanlal Jitamalji Porwal& Anr.[254], Y.S. Jagan Mohan Reddy vs. Central Bureau ofInvestigation[255], Nimmagadda Prasad vs. Central Bureau ofInvestigation[256], Gautam Kundu[257], and State of Bihar & Anr. vs.

252 (1982) 1 SCC 271

253 Supra at Footnote No. 3

254 (1987) 2 SCC 364

255 (2013) 7 SCC 439

256 (2013) 7 SCC 466

257 Supra at Footnote No.207

DEFG

AAmit Kumar alias Bachcha Rai[258]. Further, reliance has been placedon Mohd. Hanif Quareshi & Ors. vs. State of Bihar & Ors.[259]tostate that the seriousness of an offence and its impact on society is thesubject matter of legislative wisdom and Legislature understands andcorrectly appreciates the needs of its own people.

B(lxiv) It is submitted that persons involved in the offence of money-laundering are influential, intelligent and resourceful and the crime iscommitted with full pre-meditation, which ensures that the offence isnot detected and even if it is detected, investigation agency cannot tracethe evidence. Further, it is stated that the offence is committed with thehelp of advanced technology so as to conceal the transaction, whichCmakes the stringent bail conditions justified. Twin conditions of bail underSection 45 protect the interests of the accused as well as that of theprosecution. Reliance has been placed on Talab Haji Hussain vs.Madhukar Purshottam Mondkar & Anr.[260], to state that the fair trialmust not only be fair to the accused but also be fair to the prosecution,Dso that 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 duringtrial or protect the evidence, are not enough because of the trans-bordernature of the offence of money-laundering and influence which may beEexercised by the accused. An accused can anonymously remove themoney trail using the technology, which is available today so as to makethe investigation infructuous. Therefore, even deposit of the passport ofthe accused may not deter the accused from fleeing the course of justiceor to eliminate the evidence.

F(lxvi) It is submitted that economic offences constitute classapart and need to be visited with different approach in the matter of bail.Further, the fact that the economic offences are considered as differentclass of offences, recognizes the grave and serious nature of the offencewith deep rooted conspiracy, as they involve huge loss of public funds,thus, affecting the economy of the country as whole. It is submittedGthat the Court while granting bail must keep in mind the nature ofaccusations, the nature of evidence in support thereof, the severity ofthe punishment which conviction will entail, the character of the accused,

258 (2017) 13 SCC 751259 AIR 1958 SC 731H260 (1958) SCR 1226

circumstances which are peculiar to the accused, reasonable possibilityof securing the presence of the accused, reasonable apprehension ofthe witnesses being tampered with and the larger interests of the public/State. It is submitted that granting or refusal to grant bail depends on thenature of offence, needs of investigation, status of the accused and otherfactors. The Legislature, being aware of the need of the day, is competentto provide special procedure for grant of bail. It would be wrong to saythat the Court has unfettered discretion in granting or refusal to grantthe bail. It is true that the Court exercises discretion while granting orrefusing bail, but that exercise of power has to be within the legislativeframework. It is stated that the requirement of the Court being satisfiedthat the “accused is not guilty of an offence” is not novel legislativedevice. Section 437 of Cr.P.C. also imposes similar condition[261].Moreover, the twin conditions have been provided for by the Parliamentin numerous other enactments as well. It is submitted that the Parliamentis competent to classify offences and offenders in different categories.The Parliament has classified the offence of money-laundering as aseparate class of offence from ordinary criminal laws. The saidclassification was necessary because the PMLA was framed in specificinternational context, providing for separate and special architecture forinvestigation.

(lxvii) The offence of money-laundering is new offence createdby the PMLA, which has high threshold of arrest as given under Section19, which itself justifies high threshold for grant of bail. Nature of theoffence being peculiar, makes manner of investigation far more difficultthan in ordinary penal offences. The PMLA is complete Code in itself,which creates separate machinery to tackle the social menace, havingadequate safeguards. It is submitted that Legislature has on numerousoccasions made departures from the ordinary penal and procedural lawsas and when the situation arrived. The classification of the offence on

261 437. When bail may be taken in case of non- bailable offence.— (1) When anyperson accused of, or suspected of, the commission of any non-bailable offence isarrested or detained without warrant by an officer in charge of police station orappears or is brought before Court other than the High Court or Court of Session, hemay be released on bail, but—

(i) such person shall not be so released if there appear reasonable grounds forbelieving that he has been guilty of an offence punishable with death orimprisonment for life;

(emphasis supplied)

Athe basis of public policy and underlying purpose of the Act cannot besaid to be unreasonable or arbitrary. Therefore, the Parliament is fullycompetent to deal with special type of cases by providing distinct anddifferent procedure which in the circumstances, cannot be said to beunreasonable. Therefore, it is submitted that different standard for bailcan be provided in an offence which serves special purpose. To buttressBthese submissions, reliance has been placed on Kathi Raning Rawatvs. State of Saurashtra[262], Kedar Nath Bajoria & Anr. vs. The Stateof West Bengal[263], Special Reference No.1 of 1978[264]and KartarSingh[265].

(lxviii) Further reliance has been placed on Asbury Hospital vs.CCass County[266], Chiranjit Lal Chowdhuri vs. The Union of India &Ors.[267]and The State of Bombay & Anr. vs. F.N. Balsara[268]to urgethat ‘the principle of equality does not mean that every law must haveuniversal application for all persons who are not by nature, attainment orcircumstances in the same position and the varying needs of differentDclasses of persons often require separate treatment’. Therefore, theState has power to classify persons on the basis of intelligible differentiaand object which the legislation seeks to achieve. It is submitted that theclassification of the offence of PMLA and the stringent conditions ofbail under Section 45 are, therefore, not arbitrary and are based onintelligible differentia in line with the object of the Act which is to bringEabout 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 theobjective of the Act is to fulfil the mandate of the Constitution, enshrinedin the Directive Principles of State Policy. Reliance has been furtherFplaced 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

262 AIR 1952 SC 123263 AIR 1953 SC 404G264 (1979) 1 SCC 380265 Supra at Footnote No.190266 326 US 207 [1945]267 (1950) SCR 869268 (1951) SCR 682

269 (1992) 3 SCC 336H270 (1995) 1 SCC 501

Govt. & Ors.[271]to state that the Parliament can impose restriction whichhas the effect of promoting or effectuating directive principle and suchrestriction can be safely presumed to be reasonable restriction in publicinterest. Reliance has also been placed on State of Karnataka & Anr.vs. Shri Ranganatha Reddy & Anr.[272]and State of Tamil Nadu andOrs. vs. L. Abu Kavur Bai and Ors.[273], to state that the Article 39(b)of the Constitution shall be given broad meaning.

(lxx) It is submitted that the mandatory twin conditions of bailcontained in Section 45 of the PMLA prescribe reasonable restrictionwhich has reasonable nexus with the object sought to be achieved viz.,creating deterrence from committing the offence of money-launderingand, therefore, cannot be treated as arbitrary or unreasonable or violativeof Article 14 or 21 of the Constitution. Reliance has been placed onKartar Singh[274] and Ranjitsing Brahmajeetsing Sharma vs. State ofMaharashtra and Anr.[275], wherein the similar twin conditions wereupheld by this Court in TADA Act and MCOCA respectively, to contendthat the twin conditions provided under PMLA are not unreasonable soas to violate Article 21 of the Constitution.(lxxi) It is submitted that the limitations on the grant of bail is inaddition to those provided under Cr.P.C. Reliance has also been placedon Collector of Customs, New Delhi vs. Ahmadalieva Nodira[276]tourge that the satisfaction contemplated under Section 45 regarding theaccused being not guilty has to be based upon “reasonable grounds”,which means something more than prima facie grounds. Further reliancehas been placed on Supdt., Narcotics Control Bureau, Chennai vs.R. Paulsamy[277], Union of India vs. Gurcharan Singh[278],Ahmadalieva Nodira[279], Union of India vs. Abdulla[280], RanjitsingBrahmajeetsing Sharma[281], Narcotics Control Bureau vs. Karma

271 (1998) 8 SCC 227272 (1977) 4 SCC 471273 (1984) 1 SCC 515274 Supra at Footnote No.190275 (2005) 5 SCC 294 (also at Footnote No.53)276 (2004) 3 SCC 549277 (2000) 9 SCC 549

278 (2003) 11 SCC 764

279 Supra at Footnote No.276280 (2004) 13 SCC 504281 Supra at Footnote No.275 (also at Footnote No.53)

APhuntsok & Ors.[282], Chenna Boyanna Krishna Yadav vs. State ofMaharashtra & Anr.[283], N.R. Mon vs. Mohd. Nasimuddin[284], Stateof Maharashtra vs. Bharat Shanti Lal Shah and Ors.[285], Union ofIndia vs. Rattan Mallik alias Habul[286], The State of Maharashtravs. Vishwanath Maranna Shetty[287], Union of India vs. NiyazuddinSk. & Anr.[288], Satpal Singh vs. State of Punjab[289], NationalBInvestigation Agency vs. Zahoor Ahmad Shah Watali[290]and SeriousFraud Investigation Office vs. Nittin Johari & Anr.[291]to urge thatthe twin conditions with regard to the grant of bail are mandatory innature, as has already been held by the Courts in aforementioned cases.

(lxxii) Reliance has also been placed on Modern Dental CollegeCand Research Centre & Ors. vs. State of Madhya Pradesh & Ors.[292]to urge that the reasonability of statute should be seen from the pointof view of general public and not from the point of view of person onwhom the restrictions are imposed. Reliance has also been placed onBell, Attorney General vs. Wolfish[293] to argue that detention of person

Ddoes not mean that he has been punished by the government. Decisionin Schall vs. Martin[294], to state that the legislative intent must be lookedat in order to determine whether the restriction on liberty constitutes‘impermissible punishment or permissible regulation’.

(lxxiii) Learned Solicitor General has argued that the decision inNikesh Tarachand Shah[295]was based on the fact that the twinEconditions of bail, as per the unamended provision, would apply to casesof bail in respect of both the predicate offence and also the offence ofmoney-laundering. It is submitted that the reasons due to which the Courtin Nikesh Tarachand Shah[296]held the twin conditions to be

282 (2005) 12 SCC 480F283 (2007) 1 SCC 242284 (2008) 6 SCC 721285 (2008) 13 SCC 5286 (2009) 2 SCC 624287 (2012) 10 SCC 561288 (2018) 13 SCC 738G289 (2018) 13 SCC 813290 (2019) 5 SCC 1291 (2019) 9 SCC 165292 (2016) 7 SCC 353293 441 US 520 (1979)294 467 US 253 (1984)

295 Supra at Footnote No. 3H296 Supra at Footnote No. 3

unconstitutional, are firstly because the unamended provision had aclassification which was based on sentencing of the scheduled offence,and secondly, because the applicability of the twin conditions wasrestricted only to particular class of offences within the PMLA i.e.,offences punishable for term of imprisonment of more than three (3)years under Part of the Schedule and not to all the offences under thePMLA. It is stated that both the above defects have been removed bythe amendment post Nikesh Tarachand Shah[297]. Therefore, the basisand the element of arbitrariness, as pointed out by the Court in NikeshTarachand Shah[298], has been taken away by the Parliament so as tocure the defect.(lxxiv) It is submitted that, concededly, law which is struckdown by the Court due to legislative incompetence can never be madeoperative by the logic of curing the defect. However, if law has beenstruck 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 whichpersuaded the Constitutional Court to hold it to be violative of Part III ofthe Constitution and, thereafter, the provision will be back in its full force,as the declaration by the Constitutional Court of the provision beingunconstitutional mainly results in making the provision inoperative andunenforceable while the provision remains on the statute book. To buttressthis submission reliance has been placed on Patel GordhandasHargovindas & Ors. vs. The Municipal Commissioner, Ahmedabad& Anr.[299], Shri Prithvi Cotton Mills Ltd. & Anr. vs. Broach BoroughMunicipality & Ors.[300], Bhubaneshwar Singh & Anr. vs. Union ofIndia & Ors.[301], Comorin Match Industries (P) Ltd. vs. State ofT.N.[302], Indian Aluminium Co. & Ors. vs. State of Kerala & Ors.[303],Bakhtawar Trust & Ors. vs. M.D. Narayan & Ors.[304], State ofHimachal Pradesh vs. Narain Singh[305], Goa Foundation & Anr. vs.State of Goa & Anr.[306] and Cheviti Venkanna Yadav vs. State ofTelangana & Ors.[307].

297 Supra at Footnote No. 3298 Supra at Footnote No. 3299 AIR 1963 SC 1742300 (1969) 2 SCC 283301 (1994) 6 SCC 77302 (1996) 4 SCC 281303 (1996) 7 SCC 637304 (2003) 5 SCC 298305 (2009) 13 SCC 165306 (2016) 6 SCC 602307 (2017) 1 SCC 283

A(lxxv) It is further submitted that the judgment of this Court inNikesh Tarachand Shah[308]is per incuriam, as the Court failed totake note of the judgment of larger Bench in Rohit Tandon[309], whichclearly indicated the mandatory nature and reasonability of twinconditions. Reliance has been placed on Behram Khurshed Pesikakavs. The State of Bombay[310], M.P.V. Sundararamier & Co. vs. TheBState of Andhra Pradesh & Anr.[311] and F.N. Balsara[312]to state that alaw which is not within the competence of the Legislature is nullity.However, law which is within the competence of the Legislature butrepugnant to the constitutional prohibitions, is only unenforceable and ifthe prohibitions are removed, then the law will become effective withoutCany need of re-enactment of the provision. It is submitted that the Courtin Deep Chand[313]was concerned with the doctrine of eclipse and theobservation of the Court that such eclipse cannot operate retrospectivelyand cannot save the validity of the law, was said in different context.Further reference has been laid on Jagannath, etc. etc. vs. AuthorisedOfficer, Land Reforms & Ors. etc.[314], to submit that the Court in thisDcase negated similar argument made on the basis of Deep Chand[315].It is submitted that the contentions of the private parties based on thedecision in State of Manipur[316]are totally misconceived, as the Courtin that case neither had the intent nor had the occasion to decide theissue of taking away the basis after declaration of unconstitutionality.

(lxxvi) It is, thus, submitted that the law laid down in NikeshTarachand Shah[317] is per incuriam. For, it failed to take notice of theinternational background of the PMLA. Further, the judgment completelyignores the fact that economic offences form separate class and thetwin conditions for money-laundering is reasonable classification. The

FCourt had no occasion to consider the question of ‘legitimate Stateinterest’ in providing for twin conditions for separate class of offences.

308 Supra at Footnote No.3

309 Supra at Footnote No.189

G310 (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

315 Supra at Footnote No.210 (also at Footnote No.69)

316 Supra at Footnote No.159

H317 Supra at Footnote No.3

(lxxvii) Further, it is submitted that the Court was in error tomake distinction between anticipatory bail and regular bail and wronglyrestricted the operation of Section 45 to post-arrest bail. It is stated thatif it is held that the twin conditions under Section 45 are only applicableto regular bail and not to anticipatory bail, then the provision may notstand the scrutiny on the touchstone of Article 14 of the Constitution.Thus, the finding of the Court in paragraph 42 of the reported decisionneeds to be overruled. It is submitted that there is no conceptual differencebetween anticipatory bail and regular bail and to substantiate thisargument, reliance has been placed on the Sushila Aggarwal & Ors.vs. State (NCT of Delhi) & Anr.[318]. It is urged that the observation ofthis Court in Nikesh Tarachand Shah[319] about non-applicability of thetwin conditions for bail in case of anticipatory bail should be consideredas an obiter dicta. Reliance has been placed on Municipal Corporationof Delhi vs. Gurnam Kaur[320]to state that the casual expressions of aJudge in the judgment carry no weight at all.

(lxxviii) It is further submitted that the interpretation of the Courtin Nikesh Tarachand Shah[321]is erroneous, because it ignores the non-obstante clause under Section 45 which ousts the applicability of Section438 Cr.P.C. The words ‘anticipatory bail’ are not used separately in theCr.P.C and pre-arrest bail is mainly species of bail in the Cr.P.C.Therefore, it is submitted that Section 45 of the PMLA and the conditionsmentioned therein govern the entire subject of bail under PMLA. It isfurther submitted that even the Constitutional Courts should be loath toignore the express mandate of the statute which imposes stringentconditions of bail on person accused of an offence under the PMLA.

(lxxix) Further it is argued that the reliance of the private partieson the decision in Hema Mishra vs. State of Uttar Pradesh & Ors.[322]is completely misplaced, as the Court in that case was dealing with thesituation wherein the provision concerning anticipatory bail had beendeleted by local State enactment, and even in that case, the Court heldthat the power under Article 226 of the Constitution to grant anticipatorybail ought to be exercised in extremely rare circumstances. Therefore,the said judgment has no applicability in the present case.

318 (2020) 5 SCC 1

319 Supra at Footnote No. 3

320 (1989) 1 SCC 101

321 Supra at Footnote No. 3

322 (2014) 4 SCC 453

A(lxxx) It is submitted that the argument of the private partieswhich was based on the Section 44(2) of the PMLA, that the twinconditions in Section 45 are applicable only to the Special Court and notto the High Court, is totally erroneous. Clarification under Section 44was required, as similar provision in special enactments have beeninterpreted to oust the maintainability of bail application directly to theBHigh Court[323]. Thus, Section 44 mainly deals with the issue of jurisdiction.Further, it is submitted that if the twin conditions for bail are held to beapplicable only when the application of bail is filed in the Special Courtand not when the application for bail is filed before the High Court, thensuch interpretation would completely render the provision arbitrary.C

17. At the outset, it is submitted by Mr S.V. Raju, Additional SolicitorGeneral of India that for attracting Article 20(3) of the Constitution,three things should be established. Firstly, the person should be accusedof an offence; secondly, such person should be compelled to make thestatement; and thirdly, such compulsion should be for the purpose ofDbeing 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 anoffence”, it is submitted that there has to be formal accusation againstsuch person, which should either be in the form of FIR or complaintEfiled before the Court. It is urged that for Article 20(3) of the Constitutionto apply, the concerned person should be an accused at the time whenthe statement was made by him and not because the person concernedis accused of offence at the time of trial. Therefore, the thrust of theplea is that statement recorded under Section 50(2) of the PMLAwould not violate Article 20(3) of the Constitution, if the person makingFthe statement is not an accused of or named in money-laundering offenceat the time when the statement under Section 50(2) was made. Reliancehas been placed on M.P. Sharma & Ors. vs. Satish Chandra, DistrictMagistrate & Ors.[324]to state that ‘formal accusation’ relating to thecommission of the offence is pre-requisite condition for the applicabilityGof Article 20(3). Reliance has also been placed on Mohammed Dastagirvs. The State of Madras[325], wherein Constitution Bench of this Courtobserved that Article 20(3) would be available only to those personsagainst whom FIR has been registered. Therefore, it is contended that

323 Usmanbhai Dawoodbhai Memon (supra at Footnote No.202)

324 (1954) SCR 1077 (also at Footnote No.47)H325 AIR 1960 SC 756

necessity of formal accusation can only be met by the registration ofan FIR or submission of complaint against the concerned person, inorder to make him an accused for the purpose of Article 20(3) of theConstitution. Further reliance has been made on Kathi Kalu Oghad[326],wherein an eleven-Judge Bench of this Court held that the person whomade the statement must stand in the character of accused at the timewhen the statement was made in order to attract Article 20(3). Thedecision of five-Judge Bench of this Court in Raja Narayanlal Bansilalvs. Maneck Phiroz Mistry & Anr.[327] has also been relied upon. It isurged that the examination of person cannot be regarded as proceedingstarted against him, as it is only after gathering information against aperson through examination, it may be concluded that there is acommission of an offence or not. Accusation of an offence is, therefore,a condition precedent for the application of Article 20(3) of theConstitution[328]. Reliance has also been placed on Romesh ChandraMehta[329]to state that lodging of an FIR or complaint is the essentialrequirement of formal accusation, as person stands in the character ofan accused only when FIR is lodged against him in respect of anoffence or when complaint is made against him relating to thecommission of an offence. It is stated that the Court in Romesh ChandraMehta[330] has further approved the view of the Madras High Court inCollector of Customs, Madras vs. Kotumal Bhirumal Pihlajani &Ors.[331], wherein the Court held that when the statements are recordedby customs officers under Section 108 of 1962 Act, the maker of thestatement do not stand in the position of an accused. Similar view of theBombay High Court in the case of Laxman Padma Bhagat vs. TheState[332]was also approved and the contrary view of the Calcutta HighCourt 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 statement

326 Supra at Footnote No.44

327 AIR 1961 SC 29

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

333 1955 SCC OnLine Cal 275

334 (1972) 3 SCC 775

CDEF

Arecorded by customs officer under Section 108 of the 1962 Act isadmissible evidence and is not hit by Section 25 of 1872 Act or Article20(3) of the Constitution, as the same has been concluded by the decisionof this Court in Romesh Chandra Mehta[335]. It is further submitted thatthe Court in Nandini Satpathy[336]was not concerned with Article 20(3)of the Constitution and accepted the view of this Court in RomeshBChandra Mehta[337] as correct. Therefore, it is submitted that at thestage of recording of statements under Section 50(2) of the PMLA, onlyinformation is being collected for deciding as to whether the attachmentof the property has to take place and at that stage there is no accusationagainst any person. Reliance has also been placed on Balkishan A.CDevidayal[338]and Poolpandi[339]to state that only person against whomany formal accusation of the commission of an offence has been made,can be person accused of an offence within the meaning of Article20(3)[340] of the Constitution, which may be specifically made against himin an FIR or formal document resulting in the prosecution in Court.Further, reliance has been made on Poolpandi[341]to state that the ratioDof Romesh Chandra Mehta[342] cannot be ignored because ofobservations made in Nandini Satpathy[343]. Therefore, it is submittedthat when statements under Section 50(2) of the PMLA are made by aperson, then at that stage such person does not stand in the character ofan accused, as there is no formal accusation against him by way of aEcomplaint or an FIR and thus, there is no violation of Article 20(3) of theConstitution.

(iii) With regard to the issue of ‘compulsion’, it is submitted thatthis issue will arise only when the person concerned is held to be ‘accused’of an offence. Reliance has been further placed on M.P. Sharma[344] andFNandini Satpathy[345] to state that compelled testimony can be ‘procured

335 Supra at Footnote No.119

336 Supra at Footnote No.35

337 Supra at Footnote No.119

338 Supra at Footnote Nos.120 (also at Footnote No.41)339 Supra at Footnote No.123G340 K.I. Pavunny (supra at Footnote No.231) and Tofan Singh (supra at Footnote Nos.24and 31)

341 Supra at Footnote No.123

342 Supra at Footnote No.119

343 Supra at Footnote No.35

344 Supra at Footnote No.324 (also at Footnote No.47)H345 Supra at Footnote No.35

not merely by physical threats or violence but by psychic torture,atmospheric pressure, environmental coercion, tiring interrogativeprolixity, overbearing and intimidatory methods and the like, not legalpenalty’. Therefore, it is submitted that ‘compulsion’ is question offact, to be decided at the stage of trial and cannot be generalized anddecided in the present case.

(iv) Relying on the case of Nandini Satpathy[346] and C. SampathKumar vs. Enforcement Officer, Enforcement Directorate,Madras[347], it is submitted that the legal penalties imposed on personon his refusal to answer truthfully, cannot be regarded as compulsionwithin the meaning of Article 20(3) of the Constitution. Therefore, it issubmitted that the contentions of the private parties that provisionscontained in Sections 50(3), 50(4) and 63(2) amount to legal compulsionviolating the fundamental right under Article 20(3) of the Constitution, isdevoid of any merit.(v) With regard to the issue of ‘being 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 Satpathy[348], it is submitted that Article20(3) applies to confessions and self-incriminations, but leaves untouchedother relevant facts. Therefore, unless there is an admission of an offencein clear terms, the statement even if it is gravely incriminatory in nature,will not amount to confession[349]. It is further submitted that apart fromabove four categories of witnesses, there can be two other categories,namely, witness who makes an admission not amounting to confessionand witness whose statement comprises both exculpatory andinculpatory statements. Reliance has been placed on the case of CentralBureau of Investigation vs. V.C. Shukla & Ors.[350], to state that astatement made by an accused is admissible in evidence under Section21 of the 1872 Act, if it falls short of confession. It is, therefore,submitted that the question whether statement is confession or not, isessentially question of fact, which cannot be decided in the presentcase.

346 Supra at Footnote No.35

347 (1997) 8 SCC 358

348 Supra at Footnote No.35

349 Aghnoo Nagesia vs. State of Bihar, AIR 1966 SC 119

350 (1998) 3 SCC 410

A(vi) The respondent has further relied on the judgment of AndhraPradesh High Court in Dalmia Cement (Bharat) Limited[351], whereinit was held that an ECIR cannot be equated with an FIR. Therefore, theperson against whom the summons has been issued under Section 50(2)read with Section 50(3), is not person accused of an offence. Hence,Section 50 does not violate Article 20(3) of the Constitution. RelianceBhas been placed on the decision of the Delhi High Court in VirbhadraSingh[352]to state that mere registration of an ECIR would not renderany person an accused of the offence of money-laundering. Reliancehas also been placed on Vakamulla Chandrashekhar[353], wherein it isstated that Division Bench of the Delhi High Court held that the personCagainst whom summons has been issued under Section 50 of the PMLAcannot be construed as person accused of an offence, unless complaintis filed before the Special Court.

(vii) Replying to the submissions of Mr. Aabad Ponda, learnedsenior counsel, it is submitted by the learned Additional Solicitor GeneralDthat in Ramanlal Bhogilal Shah[354], there was already an FIR registeredagainst the accused under the FERA Act, therefore, he stood in thecharacter of accused person. Whereas, in the case of PMLA, the FIRis registered for the predicate offence and not for the offence of money-laundering. Therefore, the ratio of Ramanlal Bhogilal Shah[355] cannotbe applied in the present case as the two offences - predicate offenceEand the offence of money-laundering are different.

(viii) With regard to Section 25 of the 1872 Act, it is submittedthat for the bar contained under Section 25 of the 1872 Act to apply,three things need to be established – (i) confession; (ii) such concessionis made to police officer; and (iii) the person should be an accused. ItFis submitted that the officers who record statements under Section 50 ofthe PMLA are not police officers; therefore, Section 25 of the 1872 Actwill not apply in case the statement is made to ED officers. It is statedthat the statements recorded by police under Section 161 of the Cr.P.C.are different than the statement recorded by the ED officer under SectionG50(2) of the PMLA. As such, statements are treated as ‘evidence’ inthe proceedings under the Act. It is further stated that Section 108 of the

351 Supra at Footnote No.234

352 Supra at Footnote No.227

353 Supra at Footnote No.226

354 Supra at Footnote No.122

H355 Supra at Footnote No.122

1962 Act is pari materia to Section 50 of the PMLA and the statementsrecorded therein are considered as evidence. Reliance has been placedon Tofan Singh[356], wherein it was held that Section 67 of the NDPSAct is different from Section 108 of the 1962 Act, insofar as the statementsmade 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 andas the statements recorded under Section 50(2) are considered asevidence, the ED officer cannot be termed as ‘police officer’.

(ix) Further, reliance has been placed on Section 45(1A) of thePMLA to submit that the Section bars investigation of an offence bypolice officers into the offence of money-laundering and if the ED officersare held to be police officers, then they would become incompetent toinvestigate the offence of money-laundering under the PMLA. It issubmitted that in various decisions of this Court, it has been held that theofficers who are not empowered to file chargesheet are not policeofficers. To buttress this submission, the reliance has been placed onBadaku Joti Svant vs. State of Mysore[357], Romesh ChandraMehta[358], Illias vs. The Collector of Customs, Madras[359], State ofU.P. vs. Durga Prasad[360]and Balkishan A. Devidayal[361].

(x) It is urged that as the officers of the ED are not empoweredto file chargesheet and consequently, they cannot be regarded as policeofficer. After investigation, the ED officers can only file complaintbefore the Special Court under Section 44(1)(b) of the PMLA. Further,it is stated that as per the definition of “complaint” under Section 2(d) ofthe Cr.P.C., ‘police report’ cannot be regarded as ‘complaint’, asthey are both mutually exclusive terms. It is further submitted that apolice officer cannot submit complaint and an ED officer cannot file achargesheet. Otherwise, Section 155(4) and Section 155(2) would berendered otiose, as in 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 situation he is required to filea police report in view of provision of Section 155(4), but due to theoperation of Section 2(d), the same will be treated as complaint and

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

Athe police officer would be treated as complainant. Also, in casewhere Magistrate orders the police officer to investigate non-cognizableoffence under Section 155(2) of the Cr.P.C., then in view of operation ofSection 155(3) of the Cr.P.C., the police officer would necessarily file achargesheet. However, due to the operation of Section 2(d), thechargesheet will be treated as complaint and he will be treated as aBcomplainant. It is submitted that in case where police officer investigatesa non-cognizable offence, the Legislature has, by way of deemingfiction, treated the chargesheet as ‘complaint’, whereas no such fictionapplies in the case of officer investigating PMLA offence, as he canonly file complaint which does not require any fiction or deemingCprovision. Therefore, even in case of non-cognizable offence, the policeofficer is only empowered to file police report, whereas in case of thePMLA offence, the ED officers are only required to file complaintwhich is not to be treated as chargesheet, otherwise the Legislaturewould have provided for reverse deeming fiction of treating thecomplaint as chargesheet.D(xi) Reliance has been placed on Commissioner of Income Tax,West Bengal vs. Calcutta Stock Exchange Association Ltd.[362]to statethat the word “deemed” shows that the Legislature was deliberatelyusing the fiction of treating something as something else. Reliance hasbeen placed on the decision of the Delhi High Court in Lajpat Rai SehgalE& Ors. vs. State[363], to state that after investigation of non-cognizableoffence the police officer has to submit report which is deemed to bea complaint. Reliance has also been placed on the decision of the DelhiHigh Court in Narain Singh vs. The State[364], wherein similar viewhas been taken. It is submitted that this Court in several cases, has heldFthat the function of police officers are prevention and detection of acrime. Reliance has been placed on the decision in Barkat Ram[365]tourge that the primary function of police officers is to maintain law andorder. The Authority empowered to investigate the offence in abovementioned case was not concerned with the maintenance of law andorder and detection and prevention of crime, but with some other functionGsuch as collection and levy of duty on goods or detection and preventionof smuggling of goods. Notwithstanding the fact that some incidental

362 AIR 1959 SC 763363 1983 (5) DRJ 1 : 23 (1983) DLT 314364 1986 (10) DRJ 109 : 30 (1986) DLT 118H365 Supra at Footnote No.24

powers of search, seizure, arrest and investigation of an offence arealso conferred on such officer, he cannot be termed as police officeras his primary function is to detect and prevent smuggling of goods so asto protect the state exchequer. Therefore, it is submitted that the dominantpurpose is to be seen. In case of the PMLA, the dominant purpose isprevention of money-laundering, attachment and confiscation of propertyinvolved in money-laundering, whereas all other matters with which theED officers are involved, are only incidental matters. Therefore, assubmitted, the ED officers cannot be termed as police officers. ThePreamble of the Act and Statement of Objects and Reasons of the Acthave been relied upon to state that the officers of the ED are primarilyconcerned with the prevention of money-laundering and for confiscationof property derived from or involved in money-laundering.

(xii) Reliance has been placed on Pareena Swarup vs. Union ofIndia[366]to state that the object of the PMLA is to bring the proceeds ofcrime back into the economy. Reliance has also been placed on thedecision of the Delhi High Court in Vakamulla Chandrashekhar[367]tostate that the offence of money-laundering has both, civil and criminalconsequences and the Act empowers the Adjudicating Authority withthe powers of civil Court, so as to adjudicate on the issue of whether anyproperty is involved in money-laundering and to attach and ultimatelyconfiscate such property.

(xiii) Relying on Section 50(4), it is stated that ED officers actjudicially under Section 50(2), whereas police officer recording astatement under Section 161 of the Cr.P.C. does not act judicially. Tosubstantiate the argument, reliance has been placed on Balkishan A.Devidayal[368].

(xiv) It is further stated that the proceedings under the PMLAare judicial proceedings, similar to the proceedings under the 1962 Actunder Section 108. Therefore, on parity of reasoning, the ED officialsare not police officers, as held in Balkishan A. Devidayal[369]. It is furthersubmitted that under Section 63(2) of the PMLA, the ED officials areempowered to impose penalty which is judicial function, whereas thepolice officials have no such power. It is also submitted that the

366 (2008) 14 SCC 107

367 Supra at Footnote No.226

368 Supra at Footnote Nos.120 (also at Footnote No.41)

369 Supra at Footnote Nos.120 (also at Footnote No.41)

Acontentions of the private parties that the statement recorded under Section50(2) will have to comply with the requirements of Section 162 of theCr.P.C., is devoid of any substance, as the statements recorded underSection 50(2) of the PMLA are not statements recorded under Section161 of the Cr.P.C. Under Section 50(2) of PMLA, the ED officer is nota police officer as he is acting judicially under the provision. The statementBrecorded under Section 50(2) is treated as evidence, whereas such isnot 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 suchis not the case with statements recorded under Section 161 of the Cr.P.C.Further, the investigation under the PMLA is different from theCinvestigation under the Cr.P.C. It is then submitted that as the statementsgiven under Section 50 of the PMLA are required to be signed and aregiven in the judicial proceeding within the meaning of Sections 193 and228 of the IPC, therefore, the presumption under Section 80 of the 1872Act 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,Dstatement or confession was duly taken. Whereas, Section 80 of the1872 Act cannot have any application under the statements made underSection 161 of the Cr.P.C. To buttress the submission, reliance was placedon the decisions of this Court in Baleshwar Rai & Ors. vs. The Stateof Bihar[370]and Dipakbhai Jagdishchandra Patel vs. State of GujaratE& Anr.[371]. Even by applying Section 65 of the PMLA, it is stated thatthe bar of Section 162 of the Cr.P.C. cannot be applied to statementsmade under Section 50(2) of the PMLA because of the inconsistenciesshown above. Further, if the Legislature had intended to apply Section162 of the Cr.P.C., then it would have done so in the Act itself, as it hasbeen done under the Bihar and Orissa Excise Act, 1915[372].F

(xv) It is submitted that the ratio of Tofan Singh[373], where it washeld that the statement recorded under Section 67 of the NDPS Actcannot be used as confessional statement for the trial of an offenceunder 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 differentGfrom that of the NDPS Act. In the case of NDPS Act, regular policeofficer, as well as, designated officer, both are permitted to investigate

370 (1963) 2 SCR 433

371 (2019) 16 SCC 547

372 For short, “1915 Act”H373 Supra at Footnote No.31 (also at Footnote No.24)

the offence under the NDPS Act. Whereas, in the case of the PMLA,there is bar contained in Section 45(1A) of the PMLA which prohibitsa police officer from investigating the offence under the PMLA. In theNDPS 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 therecorded statement inadmissible, in case the statements are recorded bya police officer. However, if the same investigation is conducted by adesignated officer other than the police officer, then such provisions willnot apply, making the procedure discriminatory and in violation of Article14 of the Constitution, which is not the case under the PMLA.(xvi) It is submitted that in case of the NDPS Act, there is noprovision of further investigation by the designated officer. However, ifthe investigation is made by police officer, then in that case he has thepower to further investigate under Section 173(8) of the Cr.P.C. Suchinconsistency 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 arenot entitled to investigate the offence of money-laundering. And further,the Explanation (ii) to Section 44 of the PMLA contemplates filing ofsubsequent complaint in case any further investigation is conducted.

(xvii) Another anomaly noted by this Court in Tofan Singh[374]isthat when such designated officer is investigating the offence under theNDPS Act, then he has no power to file closure report. However, thereis no such anomaly present in the PMLA Act because the investigatingauthority can file closure report under the proviso to Section 44(1)(b)of the PMLA.

(xviii) It is further submitted that in Tofan Singh[375], it was heldthat if the statement recorded under Section 67 of the NDPS Act is heldto be admissible in all situations, then it will render Section 53A of theNDPS Act otiose, whereas the PMLA does not contain any provisionsimilar to Section 53A of the NDPS Act.

(xix) Further, in the case of the NDPS Act, prevention, detectionand punishment of crime was not held to be ancillary function of theAct. However, in the case of the PMLA, the main purpose is preventionof money-laundering and confiscation of property derived from or involvedin money-laundering.

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

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

(xx) Further, the PMLA does not contain any provision whichinvest the power of an officer in-charge of police station, including thepower to file chargesheet, in the investigating officer as contained inthe NDPS Act. Moreover, in case of the NDPS Act, the investigatingauthority is required to file chargesheet. However, in case of the PMLA,cognizance is taken on complaint.

(xxi) Lastly, it is contended that Section 50 of the PMLA is almostidentical to Section 108 of the 1962 Act. Therefore, the statements madeunder Section 50 are evidence as opposed to Section 67 of the NDPSAct. Hence, Section 50(2) of the PMLA cannot be read down as donein Tofan Singh[376], in case of Section 67 of the NDPS Act.

(xxii) The respondent has demonstrated the legislative history ofSection 24 of the PMLA and cited Recommendation 3 of the FATF(2003)/ Recommendation 4 of FATF (2012) to state that the FATF hadstipulated that the burden of proving the lawful origin of the propertyshall be on the accused. In view of the FATF recommendations and theDrecommendations of the Standing Committee of Finance (2011-12),comprehensive amendments were made to the provisions of the PMLA.It is submitted that the Standing Committee of Finance recommendedthat there should be adequate safeguards for persons not charged withthe offence of money-laundering; therefore Section 24 was amended inEits present form. It is submitted that the concerns of the StandingCommittee have been incorporated under the provision by using the word“may” in case of any other person and the word “shall” in case of aperson charged with the offence of money-laundering under Section 24of the PMLA. Therefore, it would be wrong to say that the provision isnot constitutionally valid, as the provision itself contains safeguard forFthe person not charged with the offence of money-laundering.(xxiii) It is submitted that in criminal trials the standard of proof isbeyond reasonable doubt. However, such rule of evidence is neitherfound in Section 101 nor in Section 3 of the 1872 Act, which defines theword “proved”. Therefore, it cannot be said that this principle is principleGof universal application and, therefore, Legislature in appropriate classesof legislations would be competent to take departure from this principle.It is submitted that when Legislature enacts provision which statesthat the burden of proof is shifted to the accused then what is actually

done is that standard of proof beyond reasonable doubt is lowered. It issubmitted that Professor Glanville Williams in his book - The Proof ofGuilt has also criticized the doctrine of proving the guilt of the accusedbeyond reasonable doubt. It is stated that this principle generally entailsthe acquittal of the guilty person which frustrate the investigation of thepolice, as result of which they may resort to improper methods ofobtaining convictions, also the law and order gets into the turmoil.

(xxiv) Respondent admits that the principle of innocence is ahuman right and forms the basis of criminal jurisprudence[377]. Reliancehas been placed on Hiten P. Dalal vs. Bratindranath Banerjee[378],which dealt with an offence under Section 138 of the NegotiableInstruments Act, 1881[379] and considered the effect of presumption raisedunder Section 139 thereof, to urge that the presumptions are rule ofevidence and do not conflict with the presumption of innocence. Theprosecution is obliged to prove the case against the accused beyondreasonable doubt. However, such obligation may be discharged with thehelp of presumptions of law or fact unless the accused rebut thepresumption by showing the reasonable possibility of non-existence ofthe presumed fact. It is stated that there is need to balance the rightsof the accused with the interest of the society. Reliance is placed onKrishna Janardhan Bhat vs. Dattatraya G. Hegde[380]to urge that thenature of offence, seriousness and gravity thereof may be taken intoconsideration in interdicting the presumption of innocence. Reliance hasalso been placed on Sucha Singh vs. State of Punjab[381]to state thatdeparture from traditional rule relating to the burden of proof is imperative;otherwise, the offenders in serious offences would be the majorbeneficiaries and the society would be the casualty. It is submitted thatthe PMLA is an Act which tackles social evil and does require departurefrom normal criminal jurisprudence. Reliance has been placed on P.N.Krishna Lal & Ors. vs. Govt. of Kerala & Anr.[382]to state that thepurpose of law should be taken into consideration while interpreting thelaw. It is submitted that sometimes harsh remedies are required, whichtakes departure from normal criminal jurisprudence to tackle new and

377 Narendra Singh & Anr. vs. State of M.P., (2004) 10 SCC 699378 (2001) 6 SCC 16

379 For short, “1881 Act”

380 (2008) 4 SCC 54

381 (2001) 4 SCC 375382 1995 Supp (2) SCC 187

Aemerging situations. Further reliance has been placed on the 47[th] Reportof the Law Commission, 1972, which observed that special efforts arenecessary to eliminate the effect of socio-economic offences andstringent provisions are essential to safeguard the national wealth andwelfare. It is submitted that the PMLA seeks to achieve the goal ofdeterrence and also confiscation of proceeds of crime and, therefore,Bthe provision is in line with the 47th Law Commission report. It is pointedout that even the general statutes such as the IPC and the 1872 Act alsoprovide for the reverse burden of proof[383]. It is, therefore, submittedthat the shifting of burden of proof which is nothing but departure fromordinary criminal jurisprudence of proving the case beyond reasonableCdoubt, is not only contained in the special statutes, which tends to preventserious crime against the society at large, but is also contained in theprovisions of the IPC and the 1872 Act. Thus, it cannot be said thatpresumption of innocence is constitutional guarantee.

(xxv) It is submitted that to give effect to the object of the NDPSDAct, the Court in Noor Aga vs. State of Punjab & Anr.[384], upheld theconstitutional validity of Sections 35 and 54 of the NDPS Act, whichprovides 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 thechallenge to the constitutional validity of Section 18 of the FERA, whichEprovides for reverse burden of proof, to state that legal provision doesnot become unconstitutional merely because it provides for reverse burdenof proof. Further Reliance is placed on Sodhi Transport Co. & Ors. vs.State of U.P. & Ors.[386]to state that rebuttable presumption, which isa rule of evidence, cannot be said to be unconstitutional because theFperson concerned has the opportunity to displace the presumption byleading evidence. It is submitted that Section 24 of the PMLA alsoprovides for rebuttable presumption and, therefore, the accused has theopportunity to lead evidence so as to displace the presumption againsthim. Thus, it cannot be said that Section 24 is unreasonable, arbitrary orunconstitutional.G

(xxvi) With regard to Section 24(a) of the PMLA, it is submittedthat two conditions are required to be satisfied for the presumption under

383 Mukesh Singh vs. State (Narcotic Branch of Delhi), (2020) 10 SCC 120384 (2008) 16 SCC 417 (also at Footnote No.55)385 (2008) 5 SCC 580H386 (1986) 2 SCC 486

Section 24(a) to apply. Firstly, person should be ‘charged’ with the offenceof money-laundering and secondly, there should be ‘proceeds of crime’.It is only when both the conditions are satisfied, it can be said that thepresumption will operate against the accused.

(xxvii) Reliance has been placed on Union of India vs. PrafullaKumar Samal & Anr.[387]to state that for framing of charges, primafacie case against the accused has to be made out by the prosecution[388],which means that grave suspicion should be there against the accused.Therefore, the requirement of framing of charges against the accusedunder Section 3 of the PMLA itself acts as safeguard against thearbitrary exercise of the provision. Secondly, it is stated that the existenceof proceeds of crime will be the foundational fact under Section 24(a) ofthe Act. It is further submitted by the learned Additional Solicitor Generalthat even when the presumption against the accused is applied then alsothe accused will have the opportunity to rebut the same by leadingevidence or by replying adequately under Section 313 of the Cr.P.C. orby cross examining the prosecution witness.(xxviii) comparison is drawn between Section 24 of the PMLAand Section 106 of the 1872 Act to submit that similar results wouldappear even if the provision like Section 24(a) of the PMLA was notthere 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 case where money is lying in house whereincidentally person is found, then the burden of proving that the personhas nothing to do with the proceeds of crime is on that person itselfbecause of Section 106 of the 1872 Act, which states that when any factis especially within the knowledge of any person, the burden of provingthat fact is upon him. Reliance has been placed on the SarbanandaSonowal vs. Union of India & Anr.[389], wherein it was held that thefacts regarding date of birth, place of birth, name of parents, place ofcitizenship and birth, are all facts within the special personal knowledgeof the concerned person and it will be impossible for the State to lead

387 (1979) 3 SCC 4

388 Dilawar Balu Kurane vs. State of Maharashtra, (2002) 2 SCC 135, Yogesh aliasSachin Jagdish Joshi vs. State of Maharashtra, (2008) 10 SCC 394, P. Vijayan vs. Stateof 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)389 (2005) 5 SCC 665

Aevidence on aforesaid points. Therefore, any fact which would beimpossible for the prosecution to establish, as is specially and exceptionallywithin the exclusive knowledge of the accused, would have to be provedby the accused himself. Therefore, it is submitted that the shifting ofburden of proof under Section 24(a) of the PMLA is not violative ofArticle 14 or 21 of the Constitution of India.B

(xxix) It is further pointed out that the contentions of the privateparties that the Court in Noor Aga[390] and Tofan Singh[391]has read intoSection 54 of the NDPS Act the requirement of proving foundationalfact of possession, is wholly incorrect and misplaced, as it would beclear from the bare language of Section 54 itself that the possession isCthe foundational fact which has to be established and only then thepresumption under Section 54 of the NDPS Act will apply.

(xxx) With regard to Section 24(b) of the PMLA, it is submittedthat it applies to person who is not charged with the offence of money-laundering and uses the word ‘may’ instead of ‘shall’. It is submittedDthat presumptions falling under the category of ‘may presume’ does notmake it obligatory on the Court to regard such fact as proved and it isthe discretion of the Court to either regard such fact as proved or maycall proof of it. Whereas, presumptions falling under the category of‘shall presume’ are mandatory in nature, also known as legalEpresumptions, and the Court has to regard such fact as proved unlessand until it is disproved[392]. It is, therefore, submitted that presumptioncontained under Section 24(b) is discretionary in nature. It is submittedthat the presumption under Section 24(b) can be raised at the stage ofbail and other proceedings, prior to the stage of framing of charges. Asbefore granting bail under the PMLA, the Court has to be satisfied thatFthe accused is not guilty of the offence; therefore, the Court may resortto Section 24(b) in exercise of its discretion.

(xxxi) Further, it is submitted that the word “Authority” under thePMLA refers to the Adjudicating Authority and not authority under Section48 of the PMLA. It is further submitted that the arguments of the privateGparties that Section 24(b) of the PMLA is draconian in nature, is whollyincorrect, as the presumption is discretionary in nature. Foundational

390 Supra at Footnote No.384 (also at Footnote No.55)

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

392 State of Madras vs. A. Vaidyanatha Iyer, AIR 1958 SC 61 and M. Narsinga Rao vs.HState of A.P., (2001) 1 SCC 691

fact of proceeds of crime is condition precedent to the application of theprovision and the presumptions can only be raised before the Court orAdjudicating Authority.

(xxxii) Further, while relying on the decision in PareenaSwarup[393]and Madras Bar Association vs. Union of India & Anr.[394]and Section 6 of the PMLA, it is stated that Adjudicating Authority is anindependent Authority, without prejudice to the fact that the functions ofAuthority is civil in nature and standard of proof would be preponderanceof probabilities and not proof beyond reasonable doubt in proceedingbefore it.

(xxxiii) Repelling the challenge under Article 20(1) of theConstitution with regard to the retrospective applicability of the Act, it issubmitted that the Act does not punish or seek to punish person for anyact committed prior to the PMLA or prior to the addition of the concernedoffence in the Schedule to the PMLA coming into force. It is submittedthat Article 20(1) of the Constitution prohibits the making of an ex postfacto criminal law i.e., making an act crime for the first time andmaking that law retrospective. It also prohibits infliction of penaltygreater than that which might have been inflicted under the law in forcewhen the act was committed. Reference has been made to Rao ShivBahadur Singh & Anr. vs. The State of Vindhya Pradesh[395] to urgethat what is prohibited under Article 20(1) is only the conviction orsentence and not trial thereof. It has been further emphasized that theexpression ‘law in force’ used in Article 20(1), refers to the law in factin existence and in operation at the time of the commission of the offence,as distinct from the law “deemed” to have become operative by virtueof the power of Legislature to pass retrospective law.

(xxxiv) In light of the said principles, it is submitted that an offencemight be either ‘single act’ i.e., an offence which is terminated by asingle act, or ‘continuing offence’ i.e., an act which does not terminateby single act, but rather continues to subsist over period of time. It issubmitted that the offence of money-laundering, as described underSection 3 of the PMLA, in given case would be continuing offence,and, thus, cannot be labelled as having retrospective operation. It issubmitted that the objective of the PMLA is not to punish the accused

393 Supra at Footnote No.366394 (2021) 7 SCC 369

395 AIR 1953 SCC 394

Afor the scheduled offence, but rather for the independent offence ofmoney-laundering committed under Section 3 of the Act. The argumentproceeds that an Act cannot be said to be retrospective just because apart of the requisites for its action is drawn from time antecedent to itspassing[396].

B(xxxv) The respondent has placed reliance on Mohan Lal vs.State of Rajasthan[397]. In this case, theft of 10 kgs of opium had takenplace prior to the coming into force of the NDPS Act, but opium wassubsequently recovered after the commencement of the NDPS Act.Inter alia, the conviction under the NDPS Act was challenged on theground that there can be ex post facto application of the NDPS Act.CThis Court, while upholding the conviction and rejecting the plea of Article20(1), observed that what is punishable is the possession of the prohibitedarticle on or after particular date when the statute was enacted, makingthe offence punishable or enhancing the punishment. It is, thus, submittedthat in the case of an offence under the PMLA, the date of coming intoDforce of the PMLA i.e., 01.07.2005 or the date when the predicateoffence was committed, is irrelevant if the PMLA offence is committedon date subsequent to both the above date. Similarly, reliance is alsoplaced on the decisions of the Supreme Court of the United States inSamuels vs. McCurdy, Sheriff[398]and Chicago & Alton RailroadCompany vs. Henry A. Tranbarger[399] to restate the aforementionedEprinciples of law. Additionally, our attention was drawn to the provisionsgoverning period of limitation, namely Sections 469[400 ]and 472[401] of the

396 The State of Maharashtra vs. Vishnu Ramchandra, (1961) 2 SCR 26 and SajjanSingh vs. The State of Punjab, (1964) 4 SCR 630397 (2015) 6 SCC 222.

398 1925 SCC OnLine US SC 42.F399 238 U.S. 67.

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 theoffence or to any police officer, the first day on which such offence comes to theknowledge of such person or to any police officer, whichever is earlier; orG(c) where it is not known by whom the offence was committed, the first day on whichthe identity of the offender is known to the person aggrieved by the offence or to thepolice officer making investigation into the offence, whichever is earlier.(2) In computing the said period, the day from which such period is to be computedshall be excluded.

401 472. Continuing offence.—In the case of continuing offence, fresh period oflimitation shall begin to run at every moment of the time during which the offenceHcontinues.

Cr.P.C. It is submitted that as per Section 469, in case of single act, thedate of commencement of the limitation period is the date on which theoffence was committed. However, the position is different for acontinuing offence, in as much as, the date of commencement of thelimitation period in such case would be the date on which the continuingoffence ended[402]. Reliance has been placed on Gokak Patel VolkartLtd. vs. Dundayya Gurushiddaiah Hiremath & Ors.[403], wherein thisCourt while dealing with Section 630 of the Companies Act, held thatthe offence of wrongful possession is recurring and continues until thewrongful possession is put to an end. This Court further held that suchan offence is committed over span of time and the last act of theoffence will control or amount to the commencement of the period oflimitation. Thus, the offences involving possession are continuing in nature,and the period of limitation for such offences would start from the dateof cessation of the possession.(xxxvi)It is then submitted that the concept of possession iscentral to the offence of money-laundering. Inasmuch as, all the sixactivities recognized under Section 3 of the Act involve an element ofpossession of proceeds of crime. He further goes on to state that suchpossession need not necessarily be actual physical possession, but alsomay be legal or constructive possession. To this effect, reliance is placedon Gunwantlal vs. The State of Madhya Pradesh[404], wherein theconcept of constructive possession was recognized by this Court. Strongemphasis has been laid on Section 2(1)(fa)[405] of the Act, which definesthe term “beneficial owner”, to urge that the concept of constructivepossession is recognized under the Act as well. It is submitted thatpossession of proceeds of crime being key to the offence of money, allactivities having an element of possession after 01.07.2005 shall fallwithin the ambit of the Act irrespective of the date on which the scheduledoffence was committed. For, the offence of money-laundering is acontinuing offence, the cause of action for which renews with every

402 Section 472 of the Cr.P.C.403 (1991) 2 SCC 141.404 (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 client ofa reporting entity or the person on whose behalf transaction is being conducted andincludes person who exercises ultimate effective control over juridical person.

Aday of possession. Thus, it is submitted that the argument of the privateparties claiming protection of Article 20(1) is devoid of merit.

(xxxvii) At the outset, it is submitted that an ECIR under thePMLA 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., policeBofficer is mandatorily required to register an FIR under Section 154upon receipt of information regarding commission of cognizable offence.However, the PMLA contains no such provision regarding receipt ofinformation or registration[406]. To lend support to his arguments, thelearned Additional Solicitor General points out certain differences betweeninvestigation under the Cr.P.C. and the PMLA. Firstly, the nature ofC“investigation”, as envisaged under Section 2(h)[407] of the Cr.P.C. isdifferent 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 aproceeding for collection of evidence. Therefore, any proceeding thatdoes not amount to collection of evidence, cannot amount to investigation,Dand only upon the registration of the FIR, can the police officer startinvestigation. Secondly, it is submitted that an investigation under theCr.P.C. is ordinarily required to be conducted by police officer, or anyperson so authorized by Magistrate. In contrast, Section 45(1A)[409] ofthe PMLA explicitly bars investigation by police officer, save for caseswhen the officer is specifically authorized by the Central Government.EThirdly, investigation under the Cr.P.C. necessarily needs to be for purpose

406 Lalita Kumari (supra at Footnote Nos.13 and 206)407 2. Definitions.—(1) In this Code, unless the context otherwise requires,—

(h) “investigation” includes all the proceedings under this Code for the collection ofevidence conducted by police officer or by any person (other than Magistrate) whoFis authorised by 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 Directoror by an authority authorised by the Central Government under this Act for the collectionof evidence;]G409 45. Offences to be cognizable and non-bailable.—(1) Notwithstanding anythingcontained in the Code of Criminal Procedure, 1973 (2 of 1974), no person accused of anoffence 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 (2of 1974), or any other provision of this Act, no police officer shall investigate into anoffence under this Act unless specifically authorised, by the Central Government by aHgeneral or special order, and, subject to such conditions as may be prescribed.

of collecting evidence in relation to cognizable offences for which anFIR under Section 154 has been registered[410]. On the contrary,investigation i.e., collection of evidence under the PMLA need notnecessarily be in relation to the cognizable offence of money-laundering,but it can also be for the purposes of attachment, confiscation, formulationof reasons to conduct search or seizure under Section 17, or personalsearch under Section 18, etc. This further implies that unlike theprocedure under the Cr.P.C., where the registration of an FIR is acondition precedent to initiation of investigation[411], in such cases, theinvestigation can commence even prior to the receipt of informationpertaining to commission of money-laundering. In this regard, the learnedAdditional Solicitor General draws our attention to Section 17(1)(iv) andSection 5(1) of the PMLA which empower the Director to collectevidence by way of search and seizure, and attachment of propertyrespectively. It is submitted that this power to investigate, conferredupon the Director by these provisions, is based on ‘reason to believe’that person may be in possession of property related to crime[412] orproceeds of crime[413], and can be exercised at stage preceding thereceipt of information regarding commission of cognizable offence.

(xxxviii) It is then submitted that the provisions of the Cr.P.C.have limited applicability to the proceedings under the PMLA. Accordingto Section 65 of the PMLA, the provisions of the Cr.P.C. shall apply toarrest, search and seizure, attachment, confiscation, investigation,prosecution and all other proceedings under the Act, so long as the sameare not inconsistent with the provisions of the Act. It is the case of therespondents that registration of an FIR does not amount to collection ofevidence, and, thus, is outside the purview of “investigation”, as definedunder Section 2(1)(na) of the PMLA. Consequently, it is submitted thatsince the registration of an FIR does not fall into any of seven categoriescontemplated under Section 65, Section 154 of the Cr.P.C. will not applyto proceedings under the PMLA.

410 H.N. Rishbud and Inder Singh vs. The State of Delhi, (1955) 1 SCR 1150; Union ofIndia vs. Prakash P. Hinduja & Anr., (2003) 6 SCC 195; and Manubhai Ratilal Patelthrough 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 andShashikant (supra at Footnote No.114).

412 Section 17(1)(iv) of the PMLA

413 Section 5(1)(a) of the PMLA

A(xxxix) As regards the provision of copy of the ECIR to theaccused, it is submitted that unlike an FIR which is statutory mandate,an ECIR is an internal document and, thus, need not be supplied to theaccused. In response to the argument of the private parties that thefailure to supply copy of the ECIR prejudices the rights of an accused,it is stated that revealing copy of the ECIR would defeat the purposeBof the Act and would frustrate recovery provisions like attachment ofproperty. The learned Additional Solicitor General also refutes thesubmission of the private parties that copy of the ECIR would beuseful for grant of anticipatory bail. It is submitted that in cases of offencesunder the IPC, anticipatory bail can be applied for even prior to theCregistration of an FIR[414]. Moreover, it is often the case that the FIR isregistered against unknown persons, and the FIR, therefore, cannot besaid to be an encyclopaedia of all the facts[415].

(xl) Next, learned Additional Solicitor General made submissionson the challenge to constitutionality of Sections 17 and 18 of the PMLAD(i.e., the provisions relating to the power of search and seizure). Accordingto him, Section 17 in itself contains sufficient safeguards. Reference ismade to Section 17(1), to highlight that only the Director or any otherofficer not below the rank of Deputy Director, who are high rankingofficials, can authorise search and that too only on the basis of reasonto believe of the existence of conditions laid down therein. It is submittedEthat the vesting of the power to authorise search and seizure underSection 17 with the highest responsible authority prevents misuse of theprovision. Reliance is placed on Pooran Mal vs. The Director ofInspection (Investigation), New Delhi & Ors.[416], to that effect. Thisis yet bolstered by the mandate of having to record the reasons to believeFin writing. It is further pointed out that in terms of Section 17(2), theofficer conducting the search shall forward copy of the reasons recordedand material in his possession to the Adjudicating Authority in sealedenvelope immediately after the search and seizure. It is submitted thatthis safeguard ensures that the reasons so recorded upon search and

seizure and the material in the possession of the concerned officer is notGtampered with. It is also submitted that in terms of Section 17(4), theAuthority seizing the records or property shall, within period of thirty

414 Shri Gurbaksh Singh Sibbia & Ors. vs. State of Punjab, (1980) 2 SCC 565; DeepakMahajan (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 175H416 (1974) 1 SCC 345.

days from the date of such seizure, file an application with the AdjudicatingAuthority for the retention of the said records. Pursuant to suchapplication, the Adjudicating Authority, in terms of Section 8, then issuesa show cause notice to the concerned person whose records or propertyare seized. Thus, the concerned person is given ample opportunity to beheard and show cause as to why such records or property should not beretained.

(xli) Emphasis is laid on Section 62 of the PMLA, which providesfor punishment of imprisonment of up to period of two years or fineup to fifty thousand rupees or both for vexatious search made withoutrecording reasons in writing. It is submitted that providing punishmentfor vexatious search is sufficient safeguard against the arbitrary exerciseof power of search by the concerned Authority[417].

(xlii) He then went on to illustrate various safeguards containedin Section 18 of the Act. It is submitted that in terms of Section 18(2),the Authority shall forward copy of the reasons recorded to theAdjudicating Authority in sealed envelope to ensure that the records ofsearch and seizure are not tampered with. Other safeguards include theright of the person to be searched to be taken to Gazetted Officer orMagistrate before the search, if such person so requires[418]; and theright of the person to be searched to be released if there are no reasonablegrounds for search are found after the person is taken to GazettedOfficer or Magistrate[419]. The PMLA also mandates the Authority tocall at least two witnesses before search and conduct the search beforesuch witnesses.[420] The Authority seizing any property during the searchof person is mandated to prepare list of the record or the propertyseized and get the same signed by the witnesses[421]. female shall besearched only by female[422]. Similar to the mandate of Section 17(4),the provisions of Section 18(10) also provide the concerned person whoserecords or property are seized, an opportunity to show cause as to whysuch records or property should not be retained.

417 R.S. Seth Gopikrishan Agarwal vs. R.N. Sen, Assistant Collector of Customs & Ors.,

(1967) 2 SCR 340.

418 Section 18(3). The inherent value of such right has been recognised by this Courtin 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

A(xliii) Lack of safeguards in the Cr.P.C. are also highlighted. Withrespect to seizures, it is submitted that the same is governed by Section102 of the Cr.P.C., and empowers police officer to seize any propertyupon mere suspicion. This is in stark contrast to Section 17(1) of thePMLA which permits seizure only when there is reason to believe,and such reason is recorded in writing. With respect to search, it isBsubmitted that Section 165 of the Cr.P.C. practically permits any officerabove the rank of Constable to exercise such power, as opposed toSection 17 of the PMLA, which confers such power only upon theDirector or any other officer not below the rank of Deputy Director.(xliv) In an attempt to establish that the power of search andCseizure is not arbitrary, our attention has been drawn to the decisions ofthis Court in Pooran Mal[423]; Income-Tax Officer, SpecialInvestigation Circle-B, Meerut vs. Messrs Seth Brothers & Ors.etc.[424] and Dr. Partap Singh & Anr. vs. Director of Enforcement,Foreign Exchange Regulation Act & Ors.[425]The learned AdditionalDSolicitor General further defends the power of the Authority to searchthe place of person without an FIR. It is submitted that the PMLAserves two-fold purpose of not only being penal, but also preventive innature. In order to avoid situation where the property involved in money-laundering disappears or is disposed of before an FIR is filed in respectof predicate offence, the PMLA empowers seizure without an FIR.EAttention is invited to Section 17(1)(iv) of the PMLA, which uses thephrase ‘related to crime’, and it is submitted that the use of these wordsshow that the Authority is empowered to seize such properties withoutan FIR in order to ascertain whether such properties pertain to scheduledoffence or whether such properties are proceeds of crime. The argumentFof the private parties that the Authority under the PMLA cannot conducta search on the same day without conducting any investigation, is alsorebutted by the learned Additional Solicitor General. It is submitted thatin light of the mandate to record the reasons to conduct the search/seizure in writing, such an apprehension is ill-founded. Rather, party

aggrieved by the sufficiency or lack of such reasons, always has theGoption to agitate the same before the Adjudicating Authority, when anapplication for the retention of the records seized or frozen is filed.

423 Supra at Footnote No.416424 (1969) 2 SCC 324H425 (1985) 3 SCC 72

(xlv) Lastly, it is submitted that by virtue of Section 65 of thePMLA, the provisions of the Cr.P.C. relating to search and seizure cannotbe applied to proceedings under the Act. Section 65 of the PMLA statesthat the provisions of Cr.P.C. shall apply subject to the condition that thesame are not inconsistent with those of the PMLA. It is submitted thatthe provisions contained in Sections 17 and 18 are self-contained withadequate safeguards, and will override the provisions of the Cr.P.C. whichare at variance.

(xlvi) In reply to the challenge of the private parties to theapplicability of the proviso to Rule 3 of the Seizure Rules, 2005, learnedAdditional Solicitor General submits that the rules framed under statutecannot be ultra vires the statute. Prior to the amendment of Section 17,the proviso to the Section required that report be forwarded to theMagistrate under Section 157 of the Cr.P.C. prior to the conduct of asearch under Section 17. After the amendment, the proviso was removed,but similar proviso continues to exists under Rule 3 of theaforementioned rules. Placing reliance on Union of India & Anr. vs.Purushottam[426], it is submitted that rules must be interpreted in mannerwhich would be in harmony with the parent statute, and, therefore, eventhough the rules are unamended, the proviso to Rule 3 cannot be readinto the Act and is ultra vires the Act.

(xlvii) The respondent has highlighted the legislative history ofSections 5 and 8 of the PMLA. It is submitted that sub-section (1) ofSection 5 has been amended four times in the years 2009, 2013, 2015and 2018 respectively. It is stated that Section 5(1) was amended videPrevention of Money-Laundering (Amendment) Act, 2009 and secondproviso 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 theFATF and the Asia Pacific Group that the confiscation of criminalproceeds depends on conviction of the accused under the scheduledoffence, which gives rise to an apprehension of confiscation proceedingsbecoming infructuous if the accused dies during the pendency of criminalproceedings. This technical irregularity has negative impact on theeffectiveness of the confiscation regime; therefore, FATF recommendedcorrective steps to remove this irregularity. Accordingly, Sections 5 and8 were amended on the recommendation of FATF, as pointed out above.426 (2015) 3 SCC 779.

A(xlix) It is submitted that in the Fifty Sixth Report of the StandingCommittee on Finance relating to the 2011 Bill published by the LokSabha Secretariat on 08.05.2012, it was proposed to delete therequirement of framing of charge under the scheduled offence against aperson before property can be attached from such person, as in agiven case property may come to rest with someone who has nothingBto do with the scheduled offence or even with the offence of money-laundering.

(l) It was further proposed to make confiscation of propertyindependent of conviction of an accused under the scheduled offence,as in given case money-laundering may be done by person who hasCnot committed the scheduled offence or property may come to rest withsomeone who has not committed any offence. Therefore, to avoid suchsituations, Section 8(5) was proposed to be amended so as to provide forattachment and confiscation of the proceeds of crime independent ofconviction, so long as the predicate offence and the offence of money-Dlaundering have taken place and the property in question is involved inmoney-laundering. The Parliament acting on such recommendationsamended sub-section (1) of Section 5 vide Prevention of Money-Laundering (Amendment) Act, 2012 and deleted the requirement thatattachment can be made only qua the person who has been charged forcommitting the scheduled offence. Further, Section 8(3)(a) of the PMLAEwas also amended to provide that on confirmation, the attachment wouldcontinue during the pendency of proceedings related to an offence underthe PMLA or under the corresponding law of any other country.Therefore, it is averred that Sections 5 and 8 of the PMLA, as they nowstand, enable the attachment and dispossession of the persons from theFproceeds of crime without being dependent on the proceedings of thescheduled offence, in consonance with the recommendations of the FATFand global standards.

(li) Further to show the link between second proviso to Section 5and the scheduled offence, it is submitted that the prerequisite for theGapplication of ‘emergency attachment’ provision under second provisoto Section 5 of the PMLA is that the Authority concerned must havesome material in its possession showing that such property is involved inmoney-laundering, which clearly establishes the link of second provisowith the scheduled offence. Relying on sub-section (5) of Section 8, it isaverred that the properties which can be confiscated are propertiesHinvolved in money-laundering and also the properties used for thecommission of the offence of money-laundering. It is submitted that theambit of sub-section (1) of Section 5 is very wide, which not only coverspersons who are involved in the commission of scheduled offence, butalso any person in possession of the proceeds of crime, who need not bethe person accused of PMLA offence or who is being tried for thescheduled offence. It is further submitted that it would not be correct tosay that ‘any property’ of ‘any person’ can be attached by invoking thesecond proviso to Section 5, as the proviso only deals with the propertywhich is involved in money-laundering. Further, it is stated that the personwhose property is sought to be attached may not be charged under thescheduled offence. Therefore, it is urged that the scheme of secondproviso is consistent with Section 5(1) of PMLA. It is also submittedthat under the second proviso the Parliament has provided varioussafeguards in the form of conditions that have to be satisfied before thepower under the proviso can be invoked. It is stated that firstly, thepower of provisional attachment can only be exercised by high-rankingofficer; secondly, such officer has to record the ‘reasons to believe’ thatthe property is proceeds of crime or involved in money-laundering andlastly, he should be satisfied that if the property is not attachedimmediately, the confiscation proceedings under the PMLA will getfrustrated. Further, it is submitted that such belief must be formed on thebasis of material in the possession of the officer. It is then submitted thatthe expression ‘property involved in money-laundering’ under the secondproviso to Section 5 is wide enough to cover the proceeds of crime aswell. Therefore, it is submitted that only the property that is involved inthe money-laundering can be attached under the second proviso and not‘any property’. It is urged that the ambit of second proviso to Section 5is wider than that of main provision of Section 5 itself, as second provisoenables the attachment of ‘any property involved in money-laundering’,whereas the main provision only allows the attachment of ‘proceeds ofcrime’.

(lii) It is contended that although the function of proviso is toadd something or to carve out an exception on subject not covered bythe main Section, however, in many cases, Courts have treated even aproviso as ‘a substantive provision conferring substantive powers’[427]. It

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

DEF

Ais further submitted that even Section 8(5), on the conclusion of the trial,not only permits confiscation of property involved in money-launderingbut also the property used for the commission of the offence of money-laundering. Therefore, such interpretation of the second proviso toSection 5 of the PMLA is consistent with the entire scheme of the Act.

B(liii) Learned Additional Solicitor General has further refuted theargument of the private parties that the attachment of property equivalentin value of the proceeds of crime can only be done if the proceeds ofcrime are situated outside India. It is stated that it is manifest from thedefinition of “proceeds of crime” under Section 2(1)(u) of the PMLAthat the proceeds of crime would not only cover the concerned property,Cbut also the value of such property. It is further submitted that theattachment of property under second proviso is in consonance with theobject of the PMLA. Reliance has been placed on Attorney Generalfor India & Ors. vs. Amratlal Prajivandas & Ors.[428], wherein theCourt upheld the constitutionality of definition of “illegally acquiredDproperty” and application of SAFEMA to the relatives and associates ofdetenues. Further, Order 38 Rule 5 of the Code of Civil Procedure,1908[429] has also been relied upon to state that the attachment of propertycan also be done before judgment, so as to secure the subject matter ofthe suit during the pendency of the suit[430]. It is submitted that the objectof Section 5(1) is similar to that of Order 38 Rule 5 which is to secure

Ethe properties from getting disposed of before the confiscation of suchproperty.

(liv) The respondent has further highlighted the proceduralsafeguards given under second proviso to Section 5(1) of the PMLA. Itis submitted that the Authority under the Act will have to first apply itsFmind to the materials on record and record its reasons to believe inwriting before taking any further action. Secondly, the Authority must besatisfied that if property will not be immediately attached, the confiscationproceedings might get frustrated. Thirdly, it is stated that order underSection 5(1) is only provisional order which is valid only for 180 days,Gsubject to the confirmation of Adjudicating Authority. Fourthly, copy ofthe order of provisional attachment is to be forwarded to the AdjudicatingAuthority in sealed envelope. Fifthly, the Authority is mandated to file

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

complaint before the Adjudicating Authority within 30 days of the orderof the provisional attachment. Sixthly, it is stated that the life of aprovisional attachment order is 180 days or the date when the AdjudicatingAuthority makes an order under Section 8(2) PMLA, whichever is earlier.Seventhly, show cause notice is served on the aggrieved person, callingupon such person to indicate the sources of his income, earning or assetsor by means of which he has acquired the property attached under Section5(1) PMLA. Therefore, it is submitted that the PMLA ensures that theprinciples of natural justice do not get violated. Eighthly, the noticee willhave the opportunity to produce evidence on which he relies before theAdjudicating Authority. Ninthly, it is stated that due procedure is followedby the Adjudicating Authority which hear both the parties before passingany order

(lv) Further, under Section 8(6) of the PMLA, the Special Courtis empowered to release the property if after the conclusion of the trialit is found that no offence of money-laundering has taken place or theproperty is not involved in money-laundering.

(lvi)Next, learned Additional Solicitor General highlights theprovisions for challenging the orders passed by the Adjudicating Authority.It is submitted that the order passed by the Adjudicating Authority issubject to appeal before the Appellate Tribunal. Also, the order passedby the Tribunal is appealable under Section 42 of the PMLA before theHigh Court on any question of fact or question of law. Therefore, it issubmitted that the ED cannot attach any property on its whims andfancies. Further, PMLA ensures ample judicial scrutiny of the order ofattachment.

(lvii) It is submitted that even third party has the right to challengethe provisional attachment order under Section 8(2) of the PMLA and ifthe Adjudicating Authority is satisfied that the property is not involved inmoney-laundering and the claim of the third party is legitimate one, thenit may release such property from attachment. Reliance has been placedon Radha Mohan Lakhotia, Indian National and Citizen vs. DeputyDirector, PMLA, Directorate of Enforcement, Ministry of Finance,Department of Revenue[431]to state that the Bombay High Court haseven before the amendment of Section 5(1), held that provisionalattachment order can even be passed against the person who is notnamed as an accused in the commission of scheduled offence. Further it

431 2010 SCC OnLine Bom 1116

Ais stated that the High Courts in the following cases, while relying onRadha Mohan Lakhotia[432], have upheld the validity of Section 5(1) ofthe PMLA: B. Rama Raju vs. Union of India & Ors.[433], AliveHospitality and Food Private Limited vs. Union of India & Ors.[434],K. Sowbaghya vs. Union of India & Ors.[435], Usha Agarwal vs. Unionof India & Ors.[436]and J. Sekar vs. Union of India & Ors.[437].B

(lviii) With regard to the constitutional validity of Section 8, it issubmitted that ‘no person has right to enjoy the fruits of propertywhich is the product of crime’.

(lix) It is submitted that the possession of the property involved inCmoney-laundering can be validly taken before the conviction of personfor the offence of money-laundering, as the non-conviction-based assetforfeiture model, also known as civil forfeiture legislation, is prevalenteven in countries such as United States of America, Italy, Ireland, SouthAfrica, UK, Australia and certain provinces of Canada. Further, it isstated that the confiscation of property without conviction under SectionD8(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 attachmentand taking possession of property cannot be considered as unconstitutional,since such property can only be confiscated upon conclusion of trialEleading to conviction, as provided under Section 8(5) of the PMLA. It isaverred that the judicial oversight of Adjudicating Authority is an adequatesafeguard provided under the Act.

(lxi) The respondent has relied on Biswanath Bhattacharya vs.Union of India and Ors.[438] to urge that the sovereign would beFcompletely justified in confiscating property which is obtained by aperson through illegal means[439]. It is further submitted that the TakingPossession Rules, 2013 provides that before eviction of person from

432 Supra at Footnote No.431433 2011 SCC OnLine AP 152G434 2013 SCC OnLine Guj 3909435 2016 SCC OnLine Kar 282436 2017 SCC OnLine Sikk 146437 2018 SCC OnLine Del 6523438 (2014) 4 SCC 392439 Divisional Forest Officer & Anr. vs. G.V. Sudhakar Rao & Ors., (1985) 4 SCC 573Hand Yogendra Kumar Jaiswal & Ors. vs. State of Bihar & Ors., (2016) 3 SCC 183

the concerned property notice of 10 days’ time has to be served uponhim, which is an adequate safeguard provided under the Act as it enablesthe aggrieved person to take suitable action under Section 26 of thePMLA.

(lxii) It is further pointed out that before the confirmation of theattachment order, any person having an interest in the property have theopportunity of being heard by the Adjudicating Authority. Therefore, it issubmitted that the power conferred by Section 8(4) of the PMLA todispossess person in possession of ‘proceeds of crime’ or ‘the propertyinvolved in money-laundering’ even before the conviction is perfectlyvalid, reasonable and justified.

(lxiii) To counter the argument of the private parties that theattachment of the property will lapse if no proceedings is initiated underthe Act by way of filing complaint before the Special Court before theexpiry of three hundred and sixty-five days of the attachment, it issubmitted that the period of attachment under Section 8(3) of the PMLAwill be three hundred and sixty-five days or during the pendency of ‘anyproceedings’ which includes any proceeding including of bail, quashingetc.

(lxiv) It is submitted that the expression ‘pendency of proceedings’relating to an offence under the PMLA before Court is broad enoughto mean any pending proceedings relating to an offence under the Act[440].Therefore, it is stated that even if for some reason complaint has notbeen filed after three hundred and sixty-five days from the date ofattachment then such attachment should not lapse.

(lxv) It is submitted that when provisional attachment order isfinally confirmed, then no person can claim any right, title or interest tothe proceeds of crime or property involved in money-laundering.Therefore, only on conclusion of trial under the Act and upon findingby the Special Court that the offence of money-laundering has not takenplace or the property is not involved in money-laundering, an order forrelease of such property can be made.

(lxvi) Further, it is stated person may file frivolous litigations soas to prolong the proceedings. Therefore, Section 8(3)(a) requires abroad construction so as to deny the money launderer from enjoying the

Aproceeds of crime. It is stated that the object of the Act is also manifestfrom Section 8(7) where even after the death of the accused the proceedsof crime or property involved in money-laundering can be confiscatedupon an order of the Special Court. Therefore, for the abovementionedreasons, it is stated that the expression “during the pendency of theproceedings” requires broad construction.B

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,CMr. Siddharth Aggarwal, Mr. Aabad Ponda, Mr. N. Hariharan andMr. Mahesh Jethmalani, learned senior counsel appearing for privateparties and Mr. Tushar Mehta, learned Solicitor General of India andMr. S.V. Raju, learned Additional Solicitor General of India, appearingfor the Union of India.

THE 2002 ACTD

19. The Act was enacted to address the urgent need to have acomprehensive legislation inter alia for preventing money-laundering,attachment of proceeds of crime, adjudication and confiscation thereofincluding vesting of it in the Central Government, setting up of agenciesEand mechanisms for coordinating measures for combating money-laundering and also to prosecute the persons indulging in the process oractivity connected with the proceeds of crime. This need was felt worldover 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 beFprovided to address the serious threat posed by the process and activitiesconnected with the proceeds of crime and integrating it with formalfinancial systems of the countries. The issues were debated threadbarein the United Nation Convention Against Illicit Traffic in Narcotic Drugsand Psychotropic Substances, Basle Statement of Principles enunciatedGin 1989, the FATF established at the summit of seven major industrialnations held in Paris from 14[th] to 16[th] July, 1989, the Political Declarationand Noble Programme of Action adopted by United Nations GeneralAssembly vide its Resolution No.S-17/2 of 23.2.1990, the United Nationsin the Special Session on countering World Drug Problem Togetherconcluded on the 8[th] to the 10[th] June, 1998, urging the State parties to

enact comprehensive legislation. This is evident from the introductionand Statement of Objects and Reasons accompanying the Bill whichbecame the 2002 Act. The same reads thus:

“INTRODUCTION

Money-laundering poses serious threat not only tothe financial systems of countries, but also to their integrityand sovereignty. To obviate such threats international communityhas taken some initiatives. It has been felt that to prevent money-laundering and connected activities comprehensive legislation isurgently needed. To achieve this objective the Prevention ofMoney-laundering Bill, 1998 was introduced in the Parliament.The Bill was referred to the Standing Committee on Finance, whichpresented its report on 4th March, 1999 to the Lok Sabha. TheCentral Government broadly accepted the recommendation of theStanding Committee and incorporated them in the said Bill alongwith some other desired changes.

STATEMENT OF OBJECTS AND REASONS

It is being realised, world over, that money-launderingposes serious threat not only to the financial systems ofcountries, but also to their integrity and sovereignty. Someof the initiatives taken by the international community to obviatesuch threat are outlined below:—

(a) the United Nations Convention Against Illicit Trafficin Narcotic Drugs and Psychotropic Substances, to whichIndia is party, calls for prevention of laundering ofproceeds of drug crimes and other connected activitiesand confiscation of proceeds derived from such offence.

(b) the Basle Statement of Principles, enunciated in 1989,outlined basic policies and procedures that banks shouldfollow in order to assist the law enforcement agencies intackling the problem of money-laundering.

(c) the Financial Action Task Force established at thesummit of seven major industrial nations, held in Parisfrom 14th to 16th July, 1989, to examine the problem ofmoney-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 variousheads. Some of the important heads are—

(i) declaration of laundering of monies carried throughserious crimes criminal offence;

(ii) to work out modalities of disclosure by financialinstitutions regarding reportable transactions;

(iii) confiscation of the proceeds of crime;

(iv) declaring money-laundering to be an extraditableoffence; and

(v) promoting international co-operation ininvestigation of money-laundering.

(d) the Political Declaration and Global Programme ofAction adopted by United Nations General Assembly byits Resolution No. S-17/2 of 23rd February, 1990, interalia, calls upon the member States to develop mechanismto prevent financial institutions from being used forlaundering of drug related money and enactment oflegislation to prevent such laundering.

(e) the United Nations in the Special Session oncountering World Drug Problem Together concluded onthe 8th to the 10th June, 1998 has made anotherdeclaration regarding the need to combat money-laundering. India is signatory to this declaration.

2. In view of an urgent need for the enactment or comprehensivelegislation inter alia for preventing money-laundering andconnected activities confiscation of proceeds of crime, setting upof agencies and mechanisms for coordinating measures forcombating money-laundering, etc., the Prevention of Money-Laundering Bill, 1998 was introduced in the Lok Sabha on the 4thAugust, 1998. The Bill was referred to the Standing Committeeon Finance, which presented its report on the 4th March, 1999 tothe Lok Sabha. The recommendations of the Standing Committeeaccepted by the Central Government are that (a) the expressions“banking company” and “person” may be defined; (b) in Part I ofthe Schedule under Indian Penal Code the word offence undersection 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 financialinstitutions and intermediaries should be required to furnishinformation of transactions to the Director instead of Commissionerof Income-tax (e) the banking companies should also be broughtwithin the ambit of clause II relating to obligations of financialinstitutions and intermediaries; (f) definite time-limit of 24 hoursshould be provided for producing person about to be searchedor arrested person before the Gazetted Officer or Magistrate; (g)the words “unless otherwise proved to the satisfaction of theauthority concerned” may be inserted in clause 22 relating topresumption on inter-connected transactions; (h) vacancy in theoffice of the Chairperson of an Appellate Tribunal, by reason ofhis death, resignation or otherwise, the senior-most member shallact as the Chairperson till the date on which new Chairpersonappointed in accordance with the provisions of this Act to fill thevacancy, enters upon his office; (i) the appellant before theAppellate Tribunal may be authorised to engage any authorisedrepresentative as defined under section 288 of the Income-taxAct, 1961, (j) the punishment for vexatious search and for falseinformation may be enhanced from three months imprisonment totwo years imprisonment, or fine of rupees ten thousand to fine ofrupees fifty thousand or both; (k) the word ‘good faith’ may beincorporated in the clause relating to Bar of legal proceedings.The Central Government have broadly accepted the aboverecommendations and made provisions of the saidrecommendations in the Bill.3. In addition to above recommendations of the standing committeethe Central Government proposes to (a) relax the conditionsprescribed for grant of bail so that the Court may grant bail to aperson who is below sixteen years of age, or woman, or sick orinfirm, (b) levy of fine for default of non-compliance of the issueof summons, etc. (c) make provisions for having reciprocalarrangement for assistance in certain matters and procedure forattachment and confiscation of property so as to facilitate thetransfer of funds involved in money-laundering kept outside thecountry and extradition of the accused persons from abroad.

4. The Bill seeks to achieve the above objects.”

(emphasis supplied)

ANotably, before coming into force of the 2002 Act, various otherlegislations were already in vogue to deal with attachment andconfiscation/forfeiture of the proceeds of crime linked to concernedoffences 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 inC2003];

e) The Code of Criminal Procedure, 1973 [Chapter XXXIV –Disposal of Property];

f) The Smugglers and Foreign Exchange Manipulators (Forfeitureof Property) Act, 1976;D

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, 1999E[Section 20] [While this is State law, it has been adopted byseveral States, or has served as model law for other States];and

j) The Anti-Hijacking Act, 2016 [Section 19].

As aforesaid, notwithstanding the existing dispensation to dealFwith proceeds of crime, the Parliament enacted the Act as result ofinternational commitment to sternly deal with the menace of money-laundering of proceeds of crime having transnational consequences andon the financial systems of the countries. The Prevention of Money-laundering Bill was passed by both the Houses of Parliament and receivedthe assent of President on 17.1.2003. It came into force on 1.7.2005Gtitled “The Prevention of Money-Laundering Act, 2002 (15 of 2003)”.

20. The broad framework of the 2002 Act is that it consists of tenchapters. Chapter I deals with the short title, extent and commencementand definitions. Chapter II deals with offence of money-laundering.Chapter III deals with the mechanism of attachment, adjudication andH

confiscation. Chapter IV deals with obligations of the banking companies,financial institutions and intermediaries. Chapter V is in respect of stepsand safeguards to be taken for issuing summons, carrying out searchesand seizures including power to arrest, presumptions and burden of proof.Chapter VI deals with the matters concerning Appellate Tribunal. ChapterVII deals with matters concerning Special Courts, Chapter VIII isregarding the Authorities under the Act and their jurisdiction and powers.Chapter IX deals with reciprocal arrangement for assistance in certainmatters and procedure for attachment and confiscation of property.Chapter X deals with miscellaneous and incidental matters. In terms ofSection 73 in this Chapter, the Central Government has made rules forcarrying out the provisions of the Act. The said rules deal with differentaspects namely:

a)The Prevention of Money-laundering (the Manner ofForwarding Copy of the Order of Provisional Attachmentof Property along with the Material, and Copy of theReasons along with the Material in respect of Survey, toDthe Adjudicating Authority and its period of Retention) Rules,2005;

b)The Prevention of Money-laundering (Receipt andManagement of Confiscated Properties) Rules, 2005;

c)The Prevention of Money-laundering (Maintenance ofRecords) Rules, 2005 as amended by (Fifth Amendment)Rules, 2019;

d)The Prevention of Money-laundering (Forms, Search andSeizure or Freezing & the Manner of Forwarding theReasons and Material to the Adjudicating Authority,Impounding and Custody of Records and the Period ofRetention) Rules, 2005;

e)The Prevention of Money-laundering (the Forms and theManner of Forwarding Copy of Order of Arrest of aPerson along with the Material to the Adjudicating Authorityand its Period of Retention) Rules, 2005;

f)The Prevention of Money-laundering (the Manner ofForwarding Copy of the Order of Retention of SeizedProperty along with the Material to the AdjudicatingAuthority and the period of its Retention) Rules, 2005;

Ag)The Prevention of Money-laundering (Manner of Receivingthe Records Authenticated Outside India) Rules, 2005;

h)The Prevention of Money-laundering (Appeal) Rules, 2005;

i)The Prevention of Money-laundering (Appointment andConditions of Service of Chairperson and Members ofBAdjudicating Authorities) Rules, 2007;

j)The Adjudicating Authority (Procedure) Regulations, 2013;

k)The Prevention of Money-laundering (Issuance ofProvisional Attachment Order) Rules, 2013;

l)The Prevention of Money-laundering (Taking Possessionof Attached or Frozen Properties Confirmed by theAdjudicating Authority) Rules, 2013;

m)The Prevention of Money-laundering (Restoration ofProperty) Rules, 2016 as amended by (Amendment) Rules,D2019.

We may further note that the 2002 Act has been amended fromtime to time to address the exigencies and for the need to strengthen themechanisms as per the recommendations made by the international bodyto address the scourge of laundering of proceeds of crime affecting theEfinancial systems and also integrity and sovereignty of the country. Thelist 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,F2009 (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);A

h)The Prevention of Corruption (Amendment) Act, 2018 (16of 2018) (w.e.f. 26-7-2018);

i)The Finance Act, 2019 (7 of 2019) (w.e.f. 20-3-2019);

j)The Aadhaar and other Laws (Amendment) Act, 2019 (14Bof 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 aboutby the Parliament by taking recourse to Finance Bill/Money Bill. At theoutset, it was made clear to all concerned that the said ground of challengewill not be examined in the present proceedings as it is pending forconsideration before the Larger Bench of this Court (seven Judges) inview of the reference order passed in Rojer Mathew[441]. We areconscious of the fact that if that ground of challenge is to be accepted, itmay go to the root of the matter and amendments effected vide FinanceAct would become unconstitutional or ineffective. Despite that, it hadbecome necessary to answer the other contentions which may otherwiserequire consideration in the event of the principal ground of challenge isanswered against the petitioners. In any case, until the larger Benchdecides that issue authoritatively, the authorities and the AdjudicatingAuthority as well as the Courts are obliged to give effect to the amendedprovisions. Resultantly, the other issues raised in this batch of casesbeing recurring and as are involved in large number of cases to be dealtwith by the authorities and the Adjudicating Authority under the Act andthe concerned Courts on daily basis, including the Constitutional Courts,it has become necessary to answer the other grounds of challenge in themeantime. On that understanding, we proceeded with the hearing of thebatch of cases before us to deal with the other challenges regarding theconcerned provision(s) being otherwise unconstitutional and ultra vires.

22. We do not deem it necessary to deal with the factual matrixinvolved in the concerned case. For, after answering the issues regardingthe validity as dealt with herein, including interpretation of the concernedprovision(s), the petitioners can be relegated to pursue their other remedies(such as for bail, quashing, discharge, etc.), before the appropriate forum.

APREAMBLE OF THE 2002 ACT

23. The Preamble of the 2002 Act reads thus:

“An Act to prevent money-laundering and to providefor confiscation of property derived from, or involved in,money-laundering and for matters connected therewith orincidental thereto.

WHEREAS the Political Declaration and GlobalProgramme of Action, annexed to the resolution S-17/2 wasadopted by the General Assembly of the United Nations at itsseventeenth special session on the twenty-third day of February,1990;

AND WHEREAS the Political Declaration adopted by theSpecial Session of the United Nations General Assembly held on8th to 10th June, 1998 calls upon the Member States to adoptnational money-laundering legislation and programme;

AND WHEREAS it is considered necessary to implementthe aforesaid resolution and the Declaration.”

Even the Preamble of the Act reinforces the background in which theAct has been enacted by the Parliament being commitment of the countryto the international community. It is crystal clear from the Preamble thatEthe Act has been enacted to prevent money-laundering and to providefor confiscation of property derived from or involved in money-launderingand for matters connected therewith or incidental thereto. It is neither apure regulatory legislation nor pure penal legislation. It is amalgam ofseveral facets essential to address the scourge of money-laundering asFsuch. In one sense, it is sui generis legislation.

24. As aforesaid, it is comprehensive legislation dealing with allthe related issues concerning prevention of money-laundering, attachmentof proceeds of crime, adjudication and confiscation thereof includingvesting of it in the Central Government, setting up of agencies andGmechanisms for coordinating measures for combating money-launderingand also to prosecute the persons indulging in the process or activityconnected with the proceeds of crime. While considering the challengeto the relevant provision(s) of the 2002 Act, we cannot be oblivious tothe objects and reasons for enacting such special legislation and theseriousness of the issues to be dealt with thereunder including having

transnational implications. Every provision in the 2002 Act will have tobe given its due significance while keeping in mind the legislative intentfor providing special mechanism to deal with the scrouge of money-laundering recognised world over and with the need to deal with it sternly.

DEFINITION CLAUSE

25. Section 2 defines some of the expressions used in the relevantprovision(s) of the 2002 Act. We may usefully refer to some of theexpressions 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 otherwiserequires,—

(a) “Adjudicating Authority” means an Adjudicating Authorityappointed under sub-section (1) of section 6;

(b) “Appellate Tribunal” means the Appellate Tribunal [442][referredto in] section 25;

(c) “Assistant Director” means an Assistant Director appointedunder sub-section (1) of section 49;

(d) “attachment” means prohibition of transfer, conversion,disposition or movement of property by an order issued underChapter III;

*** *** ***

(j) “Deputy Director” means Deputy Director appointed undersub-section (1) of section 49;

(k) “Director” or “Additional Director” or “Joint Director” meansa Director or Additional Director or Joint Director, as the casemay be, appointed under sub-section (1) of section 49;

*** *** ***

443[(na)”investigation” includes all the proceedings under this Actconducted by the Director or by an authority authorised by theCentral 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)

(p) “money-laundering” has the meaning assigned to it in section3;

*** *** ***

(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 result of criminal activityrelating to scheduled offence or the value of any such property444[or where such property is taken or held outside the country,then the property equivalent in value held within the country] [445][orabroad];

446[Explanation.—For the removal of doubts, it is herebyclarified that “proceeds of crime” include property not only derivedor obtained from the scheduled offence but also any propertywhich may directly or indirectly be derived or obtained as resultof 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, tangibleor intangible and includes deeds and instruments evidencing titleto, or interest in, such property or assets, wherever located;

447[Explanation.—For the removal of doubts, it is herebyclarified that the term “property” includes property of any kindused in the commission of an offence under this Act or any of thescheduled offences];

*** *** ***

(x) “Schedule” means the Schedule to this Act;

(y) “scheduled offence” means—

(i) the offences specified under Part 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 19thApril, 2018)

446 Ins. by the Finance (No.2) Act, 2019, sec. 192(iii) (w.e.f. 1-8-2019)

H447 Ins. by Act 2 of 2013, sec. 2(x) (w.e.f. 15-2-2013, vide S.O. 343(E), dated 8.2.2013).

448[(ii) the offences specified under Part of the Schedule ifthe total value involved in such offences is [449][one crore rupees]or more; or]

450[(iii) the offences specified under Part of the Schedule;]

(z) “Special Court” means Court of Session designated as SpecialCourt under sub-section (1) of section 43;

(za) “transfer” includes sale, purchase, mortgage, pledge, gift, loanor any other form of transfer of right, title, possession or lien;

(zb) “value” means the fair market value of any property on thedate of its acquisition by any person, or if such date cannot bedetermined, the date on which such property is possessed by suchperson”

26. We would now elaborate upon the meaning of “investigation”in Clause (na) of Section 2(1). It includes all proceedings under the Actconducted by the Director or an authority authorised by the CentralGovernment under this Act for collection of evidence. The expression“all the proceedings under this Act” unquestionably refers to the actionof attachment, adjudication and confiscation, as well as actions undertakenby the designated authorities mentioned in Chapter VIII of the Act, underChapter V of the Act, and for facilitating the adjudication by theAdjudicating Authority referred to in Chapter III to adjudicate the mattersin issue, including until the filing of the complaint by the authority authorisedin that behalf before the Special Courts constituted under Chapter VIIof the Act. The expression “proceedings”, therefore, need not be givena narrow meaning only to limit it to proceedings before the Court orbefore the Adjudicating Authority as is contended but must be understoodcontextually. This is reinforced from the scheme of the Act as it recognisesthat the statement recorded by the Director in the course of inquiry, tobe deemed to be judicial proceedings in terms of Section 50(4) of the2002 Act. Needless to underscore that the authorities referred to inSection 48 of the Act are distinct from the Adjudicating Authority referred

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 of the Schedule if the total valueinvolved 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)

Ato in Section 6 of the 2002 Act. The Adjudicating Authority referred to inSection 6 is entrusted with the task of adjudicating the matters in issuefor confirmation of the provisional attachment order issued under Section5 of the 2002 Act, passed by the Authority referred to in Section 48 ofthe Act. The confirmation of provisional attachment order is done by theAdjudicating Authority under Section 8 of the 2002 Act, and if confirmed,Bthe property in question is ordered to be confiscated and then it wouldvest in the Central Government as per Section 9 of the 2002 Act subjectto the outcome of the trial of the offence under the 2002 Act (i.e., Section3 of offence of money-laundering punishable under Section 4). Suffice itto observe that the expression “proceedings” must be given expansiveCmeaning to include actions of the authorities (i.e., Section 48) and of theAdjudicating 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 theCentral Government under the 2002 Act for the collection of evidence isDthe intrinsic process of adjudication proceedings. In that, the evidenceso collected by the authorities is placed before the Adjudicating Authorityfor determination of the issue as to whether the provisional attachmentorder issued under Section 5 deserves to be confirmed and to directconfiscation of the property in question. The expression “investigation”,therefore, must be regarded as interchangeable with the function ofE“inquiry” to be undertaken by the authorities for submitting such evidencebefore the Adjudicating Authority.

28. In other words, merely because the expression used is“investigation” — which is similar to the one noted in Section 2(h) of the1973 Code, it does not limit itself to matter of investigation concerningFthe offence under the Act and Section 3 in particular. It is differentmatter that the material collected during the inquiry by the authorities isutilised to bolster the allegation in the complaint to be filed against theperson from whom the property has been recovered, being the proceedsof crime. Further, the expression “investigation” used in the 2002 Act isGinterchangeable with the function of “inquiry” to be undertaken by theAuthorities under the Act, including collection of evidence for beingpresented to the Adjudicating Authority for its consideration forconfirmation of provisional attachment order. We need to keep in mindthat the expanse of the provisions of the 2002 Act is of prevention ofmoney-laundering, attachment of proceeds of crime, adjudication andH

confiscation thereof, including vesting of it in the Central Governmentand also setting up of agency and mechanism for coordinating measuresfor combating money-laundering.

29. Coming to the next relevant definition is expression “money-laundering”, it has the meaning assigned to it in Section 3 of the Act. Wewould dilate on this aspect while dealing with the purport of Section 3 ofthe Act little later.

30. The other relevant definition is “proceeds of crime” in Section2(1)(u) of the 2002 Act. This definition is common to all actions underthe Act, namely, attachment, adjudication and confiscation being civil innature as well as prosecution or criminal action. The original provisionprior 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 “asa result of” criminal activity “relating to” scheduled offence (mentionedin Section 2(1)(y) read with Schedule to the Act) or the value of anysuch 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 byfurther amendment vide Act 13 of 2018, it also added property which isabroad. By further amendment vide Finance (No.2) Act, 2019, Explanationhas been added which is obviously clarificatory amendment. That isevident from the plain language of the inserted Explanation itself. Thefact that it also includes any property which may, directly or indirectly,be derived as result of any criminal activity relatable to scheduledoffence does not transcend beyond the original provision. In that, theword “relating to” (associated with/has to do with) used in the mainprovision is present participle of word “relate” and the word “relatable”is only an adjective. The thrust of the original provision itself is to indicatethat any property is derived or obtained, directly or indirectly, as resultof criminal activity concerning the scheduled offence, the same beregarded as proceeds of crime. In other words, property in whateverform mentioned in Section 2(1)(v), is or can be linked to criminal activityrelating to or relatable to scheduled offence, must be regarded as proceedsof crime for the purpose of the 2002 Act. It must follow that theExplanation inserted in 2019 is merely clarificatory and restatement ofthe position emerging from the principal provision [i.e., Section 2(1)(u)].

EFG

A31. The “proceeds of crime” being the core of the ingredientsconstituting the offence of money-laundering, that expression needs tobe construed strictly. In that, all properties recovered or attached by theinvestigating agency in connection with the criminal activity relating toa scheduled offence under the general law cannot be regarded asproceeds of crime. There may be cases where the property involved inBthe commission of scheduled offence attached by the investigating agencydealing with that offence, cannot be wholly or partly regarded as proceedsof crime within the meaning of Section 2(1)(u) of the 2002 Act — solong as the whole or some portion of the property has been derived orobtained by any person “as result of” criminal activity relating to theCstated scheduled offence. To be proceeds of crime, therefore, the propertymust be derived or obtained, directly or indirectly, “as result of” criminalactivity relating to scheduled offence. To put it differently, the vehicleused in commission of scheduled offence may be attached as propertyin the concerned case (crime), it may still not be proceeds of crimewithin the meaning of Section 2(1)(u) of the 2002 Act. Similarly,Dpossession of unaccounted property acquired by legal means may beactionable for tax violation and yet, will not be regarded as proceeds ofcrime unless the concerned tax legislation prescribes such violation asan offence and such offence is included in the Schedule of the 2002 Act.For being regarded as proceeds of crime, the property associated withEthe scheduled offence must have been derived or obtained by person“as result of” criminal activity relating to the concerned scheduledoffence. This distinction must be borne in mind while reckoning anyproperty referred to in the scheduled offence as proceeds of crime forthe purpose of the 2002 Act. Dealing with proceeds of crime by way ofany process or activity constitutes offence of money-laundering underFSection 3 of the Act.

32. Be it noted that the definition clause includes any propertyderived or obtained “indirectly” as well. This would include propertyderived or obtained from the sale proceeds or in given case in lieu of orin exchange of the “property” which had been directly derived or obtainedGas result of criminal activity relating to scheduled offence. In thecontext of Explanation added in 2019 to the definition of expression“proceeds of crime”, it would inevitably include other property whichmay not have been derived or obtained as result of any criminal activityrelatable to the scheduled offence. As noticed from the definition, itHessentially refers to “any property” including abroad derived or obtained

directly or indirectly. The Explanation added in 2019 in no way travelsbeyond that intent of tracking and reaching upto the property derived orobtained directly or indirectly as result of criminal activity relating to ascheduled offence. Therefore, the Explanation is in the nature ofclarification and not to increase the width of the main definition “proceedsof crime”. The definition of “property” also contains Explanation whichis for the removal of doubts and to clarify that the term property includesproperty of any kind used in the commission of an offence under the2002 Act or any of the scheduled offences. In the earlier part of thisjudgment, we have already noted that every crime property need not betermed as proceeds of crime but the converse may be true. Additionally,some other property is purchased or derived from the proceeds of crimeeven such subsequently acquired property must be regarded as taintedproperty and actionable under the Act. For, it would become propertyfor the purpose of taking action under the 2002 Act which is being usedin the commission of offence of money-laundering. Such purposiveinterpretation would be necessary to uphold the purposes and objectsfor enactment of 2002 Act.33. Tersely put, it is only such property which is derived or obtained,directly or indirectly, as result of criminal activity relating to scheduledoffence can be regarded as proceeds of crime. The authorities underthe 2002 Act cannot resort to action against any person for money-laundering on an assumption that the property recovered by them mustbe proceeds of crime and that scheduled offence has been committed,unless the same is registered with the jurisdictional police or pendinginquiry by way of complaint before the competent forum. For, theexpression “derived or obtained” is indicative of criminal activity relatingto scheduled offence already accomplished. Similarly, in the event theperson named in the criminal activity relating to scheduled offence isfinally absolved by Court of competent jurisdiction owing to an orderof 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 person or person claiming through him in relationto the property linked to the stated scheduled offence. This interpretationalone can be countenanced on the basis of the provisions of the 2002Act, in particular Section 2(1)(u) read with Section 3. Taking any otherview would be rewriting of these provisions and disregarding the expresslanguage of definition clause “proceeds of crime”, as it obtains as ofnow.

A34. By and large the debate today is restricted to the discrepancybetween the word ‘and’, which features in the original definition, againstthe ‘or’ in the newly inserted Explanation in Section 3. While the standof the Government is that there is no requirement under Section 3 toproject or claim the proceeds of crime as untainted property. Thepetitioners have claimed that said interpretation will be unconstitutional.BFor, the requirement is that not only does predicate crime need to becommitted, it in turn needs to generate proceeds of crime and it mustalso then be projected as untainted property to qualify for the crime ofmoney-laundering. The general scheme of the law of this land is thatany law which is questioned is presumed to be unblemished and withinCthe confines of the Constitutional principles so laid down within theConstitution. Yet, as the arguments, challenges laid against theinterpretation of the impugned section are so many we find it necessaryto 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 suggestionsDfrom the outside world, notably the FATF. Thus, in seriatim we endeavourto see the international Conventions which led to the evolution of money-laundering, based on which the Government decided to enact the law,followed by the FATF recommendations which have led to theamendments, then the debates in the Parliament of India followed by theElaw of the land as laid down by this Court.

35. For untying the knot, how money-laundering evolved — it istrite to refer to the tenets that have been laid down in what are commonlyreferred to as the Palermo and Vienna Conventions. The first step evertaken towards ridding the world of money-laundering were made in the

FVienna 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

G1. Each Party shall adopt such measures as may be necessary toestablish as criminal offences under its domestic law, whencommitted intentionally:

a)(i) to (v) ….

b) i) The conversion or transfer of property, knowing thatHsuch 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 originof the property or of assisting any person who is involved inthe commission of such an offence or offences to evade the legalconsequences of his actions;

ii) The concealment or disguise of the true nature, source,location, disposition, movement, rights with respect to, orownership of property, knowing that such property isderived from an offence or offences established in accordancewith subparagraph a) of this paragraph or from an act ofparticipation in such an offence or offences;

c) Subject to its constitutional principles and the basicconcepts of its legal system:

i) The acquisition, possession or use of property, knowing, atthe time of receipt, that such property was derived from anoffence or offences established in accordance with subparagrapha) of this paragraph or from an act of participation in such offenceor offences;

ii) The possession of equipment or materials or substanceslisted in Table I and Table II, knowing that they are being orare to be used in or for the illicit cultivation, production or

iii) Publicly inciting or inducing others, by any means, tocommit any of the offences established in accordance withthis article or to use narcotic drugs or psychotropic substancesillicitly;

iv) Participation in, association or conspiracy to commit,attempts to commit and aiding, abetting, facilitating and counsellingthe commission of any of the offences established in accordancewith this article.

2. Subject to its constitutional principles and the basicconcepts of its legal system, each Party shall adopt such measuresas may be necessary to establish as criminal offence under itsdomestic law, when committed intentionally, the possession,purchase or cultivation of narcotic drugs or psychotropic substancesfor personal consumption contrary to the provisions of the 1961

Convention, the 1961 Convention as amended or the 1971Convention.

3. Knowledge, intent or purpose required as an element ofan offence set forth in paragraph 1 of this article may be inferredfrom objective factual circumstances.”

(emphasis supplied)

Similarly, the next important Convention which bolstered the fightagainst money-laundering was the Palermo Convention wherein in AnnexI it is stated that:

“Article 2. Use of terms

(a) to (d) …..

(e) “Proceeds of crime” shall mean any property derived from orobtained, directly or indirectly, through the commission of anoffence;

(h) “Predicate offence” shall mean any offence as result ofwhich proceeds have been generated that may become the subjectof 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 fundamentalprinciples of its domestic law, such legislative and othermeasures as may be necessary to establish as criminal offences,when committed intentionally:

(a) (i) The conversion or transfer of property, knowing thatsuch property is the proceeds of crime, for the purpose ofconcealing or disguising the illicit origin of the property orof helping any person who is involved in the commission ofthe predicate offence to evade the legal consequences ofhis 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 theproceeds of crime;

(b) Subject to the basic concepts of its legal system:

(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 counsellingthe commission of any of the offences established in accordancewith this article.

2. For purposes of implementing or applying paragraph 1 ofthis article:

(a) Each State Party shall seek to apply paragraph 1 of thisarticle to the widest range of predicate offences;

(b) Each State Party shall include as predicate offences allserious crime as defined in article 2 of this Convention and theoffences established in accordance with articles 5, 8 and 23 ofthis Convention. In the case of States Parties whoselegislation sets out list of specific predicate offences, theyshall, at minimum, include in such list comprehensiverange of offences associated with organized criminal groups;

(c) For the purposes of subparagraph (b), predicate offences shallinclude offences committed both within and outside the jurisdictionof the State Party in question. However, offences committedoutside the jurisdiction of State Party shall constitute predicateoffences only when the relevant conduct is criminal offenceunder the domestic law of the State where it is committed andwould be criminal offence under the domestic law of the StateParty implementing or applying this article had it been committedthere;

(d) Each State Party shall furnish copies of its laws that giveeffect to this article and of any subsequent changes to such lawsor description thereof to the Secretary-General of the UnitedNations;

(e) If required by fundamental principles of the domestic law ofa State Party, it may be provided that the offences set forth in

Aparagraph 1 of this article do not apply to the persons whocommitted the predicate offence;

(f) Knowledge, intent or purpose required as an element ofan offence set forth in paragraph 1 of this article may beinferred from objective factual circumstances.”

(emphasis supplied)

Thus, it is clear from bare reading of two very initial internationalConventions attempting to establish world order to curb money-laundering, gave very wide interpretation to the concept of money-laundering. There has been consensus that acquisition, possession,Cuse, concealing or disguising the illicit origin of illegitimately obtainedmoney to evade legal consequences would be money-laundering. Further,concealing and disguising too were clearly part of money-launderingand as such there was no bar or understating that pointed to the fact thatthere was need to project the monies as untainted. This was obviouslyDsubject to the fundamental principles of the domestic law of the countries.However, the growth of the jurisprudence in this law did not stop or endthere. As we progressed into world equipped with the internet and intoa digital age, criminals found new ways to launder and the law foundnew ways to tackle them. In the meanwhile, the FATF was establishedand it started working towards goal of preventing money-laundering.EIt has since its inception been aimed towards reducing cross border andintra State money-laundering activities. In this endeavour, it has mademany concerted efforts to study, understand, develop and mutuallyevaluate the state of the compliance in countries towards reducing money-laundering. Today, as we will see, many of the amendments in the 2002FAct are in response to the recommendations of the FATF. Thereafter,forty recommendations dated 20.6.2003, were made by the FATF whichhad led to much deliberations go on to show that all endeavours were tobe Vienna and Palermo Conventions compliant. During the evolution ofthe jurisprudence on money-laundering, it was found that India was infact lacking in some aspects of curbing money-laundering. Hence, theGrecommendations were made to India time and again. It is pertinent alsoto reproduce the Mutual Evaluation of the Anti-Money Laundering(AML) and Combating the Financing of Terrorism (CFT) regime ofIndia as adopted on 24.06.2010 in its recommendations, as it has beenshown that it is based on these observations that the amendment haveHbeen made, herein it has been observed thus:

“Recommendation 1

Consistency with the United Nations Conventions

137. The Vienna and Palermo Conventions require countriesto establish criminal offence for the following knowing/intentional acts: conversion or transfer of proceeds forspecific purposes; concealment or disguise of the truenature, source, location, disposition, movement orownership of or rights with respect to proceeds; and -subject to the fundamental/constitutional principles or basicconcepts of the country‘s legal system - the sole acquisition,possession or use of proceeds (Art. 3(1)(b)&(c) of theVienna Convention; and Art. 6(1) of the PalermoConvention against Transnational Organised Crime – theTOC Convention).

138. Section 8A of the NDPS Act offence is an almost faithfultransposition of the Vienna Convention ML provisions. The PMLAtakes different approach by using terminology that by its broadwording is intended to generally correspond with the criminalactivity targeted by both the Vienna and Palermo Conventions.

139. As said, the PMLA (s.3) provides that money laundering iscommitted where someone “directly or indirectly attempts toindulge, knowingly assists or knowingly is party or is actuallyinvolved in any process or activity connected with the proceedsof crime and projecting it as untainted property”. The section 3mens rea threshold is lower than the Art. 6.1(a) of the TOCConvention in that no specific purpose or intention is required.The substantive element of “projecting it as untaintedproperty” carries the notion of knowing disguise, asrequired by the Conventions, but does not appear to coverall concealment activity, such as the physical hiding of theassets.

Recommendation 2Scope of liability

Implementation and effectiveness

164. When the PMLA was enacted on 1 July 2005 implementingthe Palermo TOC Convention, it was already clear that the scopeof the law was too restrictive to withstand the test of the relevantinternational standards. With the extension of the list of predicateoffences under Schedule and B, and the addition of Schedule Coffences since 1 June 2009, India has made serious effort tobring the ML criminalisation of the PMLA in line with theFATF criteria in this respect. It did not do away with allshortcomings, however.

165. Firstly, it is not clear why the legislator abandoned theNDPS Act approach to define the ML activity by simplyincorporating the relevant Convention language in thedomestic law. With the section 3 of the PMLA money launderingprovision, newly defined ML offence was introduced differingfrom the comprehensive qualification of section 8A of the NDPSAct that was not repealed, resulting in the coexistence of twodivergent drug related ML offences.

166. The new definition of the ML offence in section 3 of thePMLA tries to capture all requisite mental and physical elementsof the Convention’s ML provision in one overarching sentence.The mens rea element is the “knowledge” standard as minimallyrequired by the Conventions. Section 3 of the PMLA does notrequire specific intention or purpose, and as such itsthreshold is lower than that of Art. 6.1(a)(i) of the TOCConvention. The provision however falls short on thefollowing actus reus aspects:

a. The physical element in all cases includes thesubstantive condition of “projecting (the proceeds ofcrime) as untainted property”, so although the broadformulation of “any process or activity” covers anyconduct involving criminal proceeds, such conduct isonly criminalised as money laundering when the propertyis concurrently projected as untainted. While this“projection” circumstance may correspond with thenotion of “disguise” as in Art. 6.1(a)(ii) of the TOC

Convention, it does not cover acts of physicalconcealment without any “projecting” (such as depositin safe), even if – as was argued - this act is seen as anattempt to “project”, quod non.

b. With the imposition of the “projecting” condition thePMLA offence does not extend to the activity of soleB“acquisition, possession or use” of criminal proceedsas stated in Article 6(1)(b)(i) of the TOC Convention,although this would not be contrary to the basic conceptsof the Indian legal system. Only the offences of “holding”drug proceeds (NDPS Act s.68C) or “proceeds ofCterrorism” (UAPA s.21) are unconditional and may beconsidered to cover “possession” situations in thesespecific circumstances. Also, the sections 410 and 411IPC “receiving” offence may cover acts of “acquisition”,but these provisions fall short in respect of the scope ofpredicate offences, as they only apply to stolen (orDequivalent[451]) property.

Table 2: Recommended Action Plan to Improve the AML/CFTSystem

451 “Stolen” property includes property derived from extortion, robbery,misappropriation or breach of trust (IPC s.410)

(emphasis supplied)

Thus, it is clear that certain recommendations were made by theFATF concerning the definition of money-laundering. It is also clear frompublic records that India has time and again, since the inception of theAct, made active efforts to follow and evolve its own laws in line withFthe mandates and recommendations of the FATF. Furthermore, it isnoteworthy that even in other jurisdictions; the above-mentioned definitionhas gained more holistic approach which is not per se the same as thecolloquial term, “money launder” or simply turning black money intowhite. In the UK and Spain, possession of criminal proceeds is coveredunder money-laundering, similarly by way of interpretation, the same isGthe case in Germany and Italy[452]. Following these recommendations,amendments were brought about in India. This in turn led to debates ascan be seen from the following speeches which were made in theParliament. We first note the speech of the then Finance Minister made

452 National and International Anti-Money Laundering Law, Benjamin vogel and Jean-HBaptiste Maillart, Max Planck Institute, 2020 ed. Pg. 798.

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 primarilymade compensatory transactions (known as Havala) illegal. Thebasic aim was to ensure that no one contravenes the exchangecontrol regulations through unofficial channels. The emphasis was,therefore, on violation of foreign exchange regulations rather thanon “money-laundering”. Money-laundering, that is thecleansing of proceeds of crimes such as extortion, treason,drug trafficking, gun running etc. poses serious threat tothe integrity and sovereignty of country and also to itsfinancial systems. This threat to the nation and its economyhas been recognised the world over and several UN andother international conventions have called upon membercountries to take legislative and other preventive measuresto combat the menace of money-laundering. As India is asignatory to some of these conventions, committee wasset up to examine and suggest draft legislation for thispurpose. Based on their report, separate legislation has beenintroduced with stringent penal provisions. At the same time, thereis need to consolidate and amend the law relating to foreignexchange consistent with the liberalisation policies pursued duringthe last eight years. While the provisions of Foreign ExchangeManagement Bill make foreign exchange contraventions civilwrongs, the offences under the prevention of Money-LaunderingBill have been made criminal and will attract stringent punishment.

The point I am making is that we have picked up certainoffences which are heinous, as I said in the beginning, whichare of very serious nature. We are bringing this legislationon money- laundering so that receipts from those crimesand properties acquired as result thereof, are dealt withunder this Act. At the present moment, we have no legislationwhich will deal exclusively with this particular subject. So, we arebringing this Bill.”

(emphasis supplied)

This speech, thus, set the tone for the years to come in our fightagainst money-laundering. This law was enacted in 2002 yet broughtinto force in 2005. Later, 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 amgrateful to the hon. Members, especially ten hon. Members whohave spoken on this Bill and supported the Bill. Naturally, somequestions will arise; they have arisen. It is my duty to clarify thosematters. Sir, firstly, we must remember that money-laundering is very technically-defined offence. It is notthe way we understand ‘money-laundering’ in colloquialsense. It is technically-defined offence. It postulates thatthere must be predicate offence and it is dealing with theproceeds of crime. That is the offence of money-laundering.It is more than simply converting black-money into whiteor white money into black. That is an offence under the IncomeTax Act. There must be crime as defined in the Schedule. As aresult of that crime, there must be certain proceeds — It could becash; it could be property. And anyone who directly or indirectlyindulges or assists or is involved in any process or activityconnected with the proceeds of crime and projects it asuntainted property is guilty of offence of money-laundering.So, it is very technical offence. The predicate offencesare all listed in the Schedule. Unless there is predicateoffence, there cannot be an offence of money-laundering.Initially the thinking was unless person was convicted ofthe predicate offence, you cannot convict him of money-laundering. But that thinking is evolved now. The FinancialAction Task Force has now come around to the view that ifthe predicate offence has thrown up certain proceeds andyou dealt with those proceeds, you could be found guilty ofoffence of money-laundering. What we are trying to do is tobring this law on lines of laws that are commended by FATFand all countries have obliged to bring their laws on thesame lines. I just want to point to some of my friends that thisBill was passed in 2002. In 2002, we felt that these provisions aresufficient. In the working of the law, we found that the provisionshave certain problems. We amended it in 2005. We amended it in

2009. We still find that there are some problems. The FATF haspointed out some problems. And, we are amending it in2012. It is not finding fault with anyone. All I am trying tosay is that this is an evolutionary process. Laws will evolvein this way, and we are amending it again in 2012.”

(emphasis supplied)

36. It is seen that there is clear inclination to follow therecommendations of the FATF, made from time to time. Yet, before wemove forward, we must note other statements that were made beforethe latest amendment was made. In the Statement RE: Amendment/Background/Justification for amendments to the 2002 Act – Pg 226 235of the Debate on the Finance Bill, 2019 it was noted that:

4. It has been experienced that certain doubts are alsoraised as regards definition of ‘Offence of money laundering’included in section 3 of the Act of 2002. It is observed thatthe legislative intent and object of the Act of 2002 is wronglyconstrued as if all the activities as mentioned therein arerequired to be present together to constitute the offenceof Money Laundering. The intention of the legislature hadalways been that person shall be held to be guilty of offenceof money-laundering if he is found to have directly orindirectly attempted to indulge or knowingly assisted orknowingly is party or is actually involved in any one ormore of the process of activity included in section 3 of theAct of 2002. It is also observed that the original intentionof the legislature is wrongly construed to interpret as if theoffence of money laundering is one time instantaneousoffence and finishes with its concealment or possession oracquisition or use of projecting it as untainted property orclaiming it as untainted property. The intention of thelegislature had always been that person will be held to beguilty of offence of money-laundering and will be punishedas long as person is enjoying the “proceeds of crime” byits concealment or possession or acquisition or use orprojecting it as untainted property or claiming it as untaintedproperty or in any manner whatsoever. Accordingly, an

DEF

554SUPREME COURT REPORTS

AExplanation is proposed to be inserted in section 3 of theAct of 2002 to clarify the above legislative intent.”

(emphasis supplied)

Thereafter, the following statement was made on two differentoccasions[453]:B

“SHRIMATI NIRMALA SITHARAMAN: The otheramendments are into the PMLA, the Act relating to black money.On that, I would like to assure the Members regarding the kind ofamendments. In fact, I would like to mention, well before that, thenumber of amendments, which are coming through for the PMLA,Cwhich is of 2002 vintage. Eight are being proposed by us. Of theeight, six are only explanations to the existing clause. The clauseitself is not being changed. We are only coming with explanations.These explanations are being brought into the Act becauseof pleading in the courts by some of those who are accusedDand because of some kind of confusion or grey area oran ambiguity which might exist. Therefore, the amendmentis not amendment of the clause itself. It is more explainingthe clause. …

ESHRIMATI NIRMALA SITHARAMAN: More important is theamendment to the PMLA; The Prevention of Money LaunderingAct. There are, one or two, couple of amendments which arebeing made to the PMLA, which I just want to elaborate bit sothat the hon. Members know what is that we are doing to theFPMLA. 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 caseshappening–try to club both the cases although they may bematerially different and seek of bail. Therefore, what happensGis, case which has different procedural matter is also clubbedtogether with the case which is not procedural and at the end ofthe day, the law does not get invoked in its true letter and spirit.So, such changes in the definition and explanatory matters

453 Seventeenth Series, Vol. III, First Session, 2019/1941 (Saka) No. 24, Thursday, JulyH18, 2019 / Ashadha 27, 1941 (Saka)

have been done in the PMLA. One little proviso which wasnot really relevant has been removed and another which isbeing brought in again is more to make it clearer so thatPMLA, when invoked, becomes far more effective. So,these are the points on the PMLA-related matters.”[454]

(emphasis supplied)

It is seen that even though there were multiple arguments in respectof the definition of Section 3[455], yet we chose to implement the saiddefinition in particular way. Later it was realised by the Governmentand the Parliament that with the passage of time and the development ofanti-money laundering jurisprudence world over, certain changes wereto be made in the definition of money-laundering. We do not find it prudentor necessary to run into arguments of application of international law, asit is clear that the intentions of the successive Governments have beenthe same since day one of signing the international Conventions. It isonly in light of this perception and understanding of the legislation thatwe have been implementing the recommendations of the FATF.However, we note that there has been constant flow of thought fromthe FATF recommendations, directly into our polity, which has pushedthe money-laundering legislation forward. Thus, there can be no doubtas to the bona fides of the Legislature in implementing an understatingof Section 3 that will help not only stop but prevent money-laundering bynipping it in the bud.

SECTION 3 OF THE 2002 ACT

37. Coming to Section 3 of the 2002 Act, the same defines theoffence of money-laundering. The expression “money-laundering”,ordinarily, means the process or activity of placement, layering and finallyintegrating the tainted property in the formal economy of the country.However, Section 3 has wider reach. The offence, as defined, capturesevery process and activity in dealing with the proceeds of crime, directlyor indirectly, and not limited to the happening of the final act of integrationof tainted property in the formal economy to constitute an act of money-laundering. This is amply clear from the original provision, which has

454 GOVERNMENT BILLS — Contd. The Appropriation (No. 2) Bill, 2019 And TheFinance (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

Abeen 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 orindirectly attempts to indulge or knowingly assists or knowingly isa party or is actually involved in any process or activity connectedBwith the [456][proceeds of crime including its concealment,possession, acquisition or use and projecting or claiming] it asuntainted property shall be guilty of offence of money-laundering.

457[Explanation.—For the removal of doubts, it is herebyclarified that,—

(i) person shall be guilty of offence of money-launderingif such person is found to have directly or indirectlyattempted to indulge or knowingly assisted or knowingly isa party or is actually involved in one or more of the followingprocesses 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 crimeis continuing activity and continues till such time personis directly or indirectly enjoying the proceeds of crime byits concealment or possession or acquisition or use orprojecting it as untainted property or claiming it as untaintedproperty 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

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)

“proceeds of crime including its concealment, possession, acquisition oruse and projecting or claiming”. We are not so much concerned withthis change introduced vide Act 2 of 2013. In other words, the provisionas it stood prior to amendment vide Finance (No.2) Act, 2019 remainedas it is. Upon breaking-up of this provision, it would clearly indicate that— it is an offence of money-laundering, in the event of direct or indirectattempt to indulge or knowingly assist or being knowingly party or beingactually involved in “any process or activity” connected with the proceedsof crime. The latter part of the provision is only an elaboration of thedifferent process or activity connected with the proceeds of crime, suchas its concealment, possession, acquisition, use, or projecting it asuntainted property or claiming it to be as untainted property. This positionstands clarified by way of Explanation inserted in 2019. If the argumentof the petitioners is to be accepted, that projecting or claiming the propertyas untainted property is the quintessential ingredient of the offence ofmoney-laundering, that would whittle down the sweep of Section 3.Whereas, the expression “including” is pointer to the preceding part ofthe section which refers to the essential ingredient of “process or activity”connected with the proceeds of crime. The Explanation inserted by wayof amendment of 2019, therefore, has clarified the word “and” precedingthe expression “projecting or claiming” as “or”. That being onlyclarificatory, whether introduced by way of Finance Bill or otherwise,would make no difference to the main original provision as it existedprior to 2019 amendment. Indeed, there has been some debate in theParliament about the need to retain the clause of projecting or claimingthe property as untainted property. However, the Explanation insertedby way of amendment of 2019 was only to restate the stand taken byIndia in the proceedings before the FATF, as recorded in its 8[th] Follow-Up Report Mutual Evaluation of India June 2013 under heading “CoreRecommendations”. This stand had to be taken by India notwithstandingthe amendment of 2013 vide Act 2 of 2013 (w.e.f. 15.2.2013) andexplanation offered by the then Minister of Finance during his address inthe Parliament on 17.12.2012 as noted above[458]. Suffice it to note thatthe municipal law (Act of 2002) had been amended from time to time toincorporate the concerns and recommendations noted by the internationalbody. We may usefully refer to the Core Recommendations of the FATFconcerning India of June 2013, which reads thus:

CDE

[2022] 6 S.C.R.

A“Core Recommendations

(emphasis supplied)

38. To put it differently, the section as it stood prior to 2019 haditself incorporated the expression “including”, which is indicative ofreference made to the different process or activity connected with theH

proceeds of crime. Thus, the principal provision (as also the Explanation)predicates that if person is found to be directly or indirectly involved inany process or activity connected with the proceeds of crime must beheld guilty of offence of money-laundering. If the interpretation set forthby the petitioners was to be accepted, it would follow that it is only uponprojecting or claiming the property in question as untainted property, theoffence would be complete. This would undermine the efficacy of thelegislative intent behind Section 3 of the Act and also will be in disregardof the view expressed by the FATF in connection with the occurrence ofthe 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 conventionsalthough may not be part of municipal law, the same be referred to andfollowed by the Courts having regard to the fact that India is party tothe said treaties. This Court went on to observe that the Constitution ofIndia and other ongoing statutes have been read consistently with therules of international law. It is also observed that the Constitution ofIndia and the enactments made by Parliament must necessarily beunderstood in the context of the present-day scenario and having regardto the international treaties and convention as our constitution takes noteof the institutions of the world community which had been created. InApparel Export Promotion Council vs. A.K. Chopra[460], the Courtobserved that domestic Courts are under an obligation to give due regardto the international conventions and norms for construing the domesticlaws, more so, when there is no inconsistency between them and thereis void in domestic law. This view has been restated in GithaHariharan[461], as also in People’s Union for Civil Liberties[462], andNational Legal Services Authority vs. Union of India & Ors.[463].

39. In the Core Recommendations of the FATF referred to above,the same clearly mention that the word “and” in Section 3 of the 2002Act would not be fully in line with the Vienna and Palermo Conventions.This doubt has been ably responded and elucidated by India to theinternational body by referring to the jurisprudence as evolved in India tointerpret the word “and” as “or” in the context of the legislative intent

459 (2005) 3 SCC 551 (also at Footnote No.197)

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)

A— to reckon any (every) process or activity connected with the proceedsof crime constituting offence of money-laundering. To buttress the standtaken by India before the FATF, reliance has been justly placed on reporteddecisions of this Court amongst other Sanjay Dutt[464], which had occasionto deal with the expression “arms and ammunition” occurring in Section5 of the TADA Act. The Court noted that if it is to be read conjunctivelyBbecause of word “and”, the object of prohibiting unauthorised possessionof the forbidden arms and ammunition would be easily frustrated by thesimple device of one person carrying the forbidden arms and hisaccomplice carrying its ammunition so that neither is covered underSection 5 when any one of them carrying more would be so liable. TheCprinciple underlying this analysis by the Constitution Bench must applyproprio vigore to the interpretation of Section 3 of the 2002 Act. To thesame end, this Court in the case of Ishwar Singh Bindra & Ors. vs.The State of U.P.[465], Joint Director of Mines Safety[466]and GujaratUrja Vikas Nigam Ltd. vs. Essar Power Ltd.[467], interpreted the word“and” in the concerned legislation(s) as word “or” to give full effect toDthe legislative intent.

40. The Explanation as inserted in 2019, therefore, does not entailin expanding the purport of Section 3 as it stood prior to 2019, but is onlyclarificatory in nature. Inasmuch as Section 3 is widely worded with aview to not only investigate the offence of money-laundering but also toEprevent and regulate that offence. This provision plainly indicates thatany (every) process or activity connected with the proceeds of crimeresults in offence of money-laundering. Projecting or claiming theproceeds of crime as untainted property, in itself, is an attempt to indulgein or being involved in money-laundering, just as knowingly concealing,

Fpossessing, acquiring or using of proceeds of crime, directly or indirectly.This is reinforced by the statement presented along with the FinanceBill, 2019 before the Parliament on 18.7.2019 as noted above[468].

41. Independent of the above, we have no hesitation in construingthe expression “and” in Section 3 as “or”, to give full play to the saidGprovision so as to include “every” process or activity indulged into byanyone, including projecting or claiming the property as untainted property

464 Supra at Footnote No.193

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)

H468 See paragraph 36 of this judgment

to constitute an offence of money-laundering on its own. The act ofprojecting or claiming proceeds of crime to be untainted propertypresupposes that the person is in possession of or is using the same(proceeds of crime), also an independent activity constituting offence ofmoney-laundering. In other words, it is not open to read the differentactivities conjunctively because of the word “and”. If that interpretationis accepted, the effectiveness of Section 3 of the 2002 Act can be easilyfrustrated by the simple device of one person possessing proceeds ofcrime and his accomplice would indulge in projecting or claiming it to beuntainted property so that neither is covered under Section 3 of the 2002Act.42. From the bare language of Section 3 of the 2002 Act, it isamply clear that the offence of money-laundering is an independentoffence regarding the process or activity connected with the proceedsof crime which had been derived or obtained as result of criminalactivity relating to or in relation to scheduled offence. The process oractivity can be in any form — be it one of concealment, possession,acquisition, use of proceeds of crime as much as projecting it as untaintedproperty or claiming it to be so. Thus, involvement in any one of suchprocess or activity connected with the proceeds of crime would constituteoffence of money-laundering. This offence otherwise has nothing to dowith the criminal activity relating to scheduled offence — except theproceeds of crime derived or obtained as result of that crime.

43. Needless to mention that such process or activity can beindulged in only after the property is derived or obtained as result ofcriminal activity (a scheduled offence). It would be an offence of money-laundering to indulge in or to assist or being party to the process oractivity connected with the proceeds of crime; and such process or activityin given fact situation may be continuing offence, irrespective of thedate and time of commission of the scheduled offence. In other words,the criminal activity may have been committed before the same hadbeen notified as scheduled offence for the purpose of the 2002 Act, butif person has indulged in or continues to indulge directly or indirectly indealing with proceeds of crime, derived or obtained from such criminalactivity even after it has been notified as scheduled offence, may beliable to be prosecuted for offence of money-laundering under the 2002Act — for continuing to possess or conceal the proceeds of crime (fullyor in part) or retaining possession thereof or uses it in trenches until fully

Aexhausted. The offence of money-laundering is not dependent on orlinked to the date on which the scheduled offence or if we may say sothe predicate offence has been committed. The relevant date is the dateon which the person indulges in the process or activity connected withsuch proceeds of crime. These ingredients are intrinsic in the originalprovision (Section 3, as amended until 2013 and were in force tillB31.7.2019); and the same has been merely explained and clarified byway of Explanation vide Finance (No.2) Act, 2019. Thus understood,inclusion of Clause (ii) in Explanation inserted in 2019 is of noconsequence as it does not alter or enlarge the scope of Section 3 at all.

44. As mentioned earlier, the rudimentary understanding ofC‘money-laundering’ is that there are three generally accepted stages tomoney-laundering, they are:

(a) Placement: which is to move the funds from direct associationof the crime.

D(b) Layering: which is disguising the trail to foil pursuit.(c) Integration: which is making the money available to the criminalfrom what seem to be legitimate sources.

45. It is common experience world over that money-launderingcan be threat to the good functioning of financial system. However,Eit 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 criminalsand so on. Tainted money breeds discontent in any society and in turnleads to more crime and civil unrest. Thus, the onus on the Governmentand the people to identify and seize such money is heavy. If there areFany proactive steps towards such cause, we cannot but facilitate thegood steps. However, passions aside we must first balance the law to beable to save the basic tenets of the fundamental rights and laws of thiscountry. After all, condemning an innocent man is bigger misfortunethan letting criminal go.46. On bare reading of Section 3, we find no difficulty inGencapsulating the true ambit, given the various arguments advanced.Thus, in the conspectus of things it must follow that the interpretationput forth by the respondent will further the purposes and objectives behindthe 2002 Act and also adequately address the recommendations anddoubts of the international body whilst keeping in mind the constitutionalHlimits. It would, therefore, be just to sustain the argument that the

amendment by way of the Explanation has been brought about only toclarify the already present words, “any” and “including” which manifeststhe true meaning of the definition and clarifies the mist around its truenature.

47. We may profitably advert to the judgment in Seaford CourtEstates ld.[469], which states:

“The question for decision in this case is whether we are at libertyto extend the ordinary meaning of “burden” so as to include acontingent burden of the kind I have described. Now this courthas already held that this sub-section is to be liberally construedso as to give effect to the governing principles embodied in thelegislation (Winchester Court Ld. v. Miller[470]); and I think weshould do the same. Whenever statute comes up forconsideration it must be remembered that it is not withinhuman powers to foresee the manifold sets of facts whichmay arise, and, even if it were, it is not possible to providefor them in terms free from all ambiguity. The Englishlanguage is not an instrument of mathematical precision.Our literature would be much the poorer if it were. This iswhere the draftsmen of Acts of Parliament have often beenunfairly criticized. judge, believing himself to be fetteredby the supposed rule that he must look to the language andnothing else, laments that the draftsmen have not providedfor this or that, or have been guilty of some or otherambiguity. It would certainly save the judges trouble if Actsof Parliament were drafted with divine prescience andperfect clarity. In the absence of it, when defect appears ajudge cannot simply fold his hands and blame the draftsman.He must set to work on the constructive task of finding theintention of Parliament, and he must do this not only fromthe language of the statute, but also from considerationof the social conditions which gave rise to it, and of themischief which it was passed to remedy, and then he mustsupplement the written word so as to give “force and life”to the intention of the legislature. That was clearly laid downby the resolution of the judges in Heydon’s case[471], and it

469 Supra at Footnote No.185

470 [1944] K.B. 734

471 (1584) 3 Co. Rep. 7a

CDEFG

Ais the safest guide today. Good practical advice on thesubject was given about the same time by Plowden in hissecond volume Eyston v. Studd[472]. Put into homely metaphorit is this: judge should ask himself the question: If themakers of the Act had themselves come across this ruckin the texture of it, how would they have straightened itBout? He must then do as they would have done. judgemust not alter the material of which it is woven, but he canand should iron out the creases.”

(emphasis supplied)

C48. Let us now also refer to the various cases that have beenpressed into service by the petitioners. The same deal with the propositionas to the scope of an Explanation and the limits upto which it can stretch.Yet given the present scenario, we cannot find strong footing to rely onthe same in understating Section 3 of the 2002 Act as it stands today.Reference has been made to K.P. Varghese[473] wherein the Court notedDthe Heydon Case and to the fact that the speech of the mover of the billcan explain the reason for introduction of the bill and help ascertain themischief 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 Limited[475], whichEstates that the role of an Explanation in the Schedule of the Act cannotdefeat the main provision of the Act. Even otherwise, an Explanationcannot enlarge the scope and effect of provision. Reference is alsomade to S. Sundaram Pillai & Ors. vs. V.R. Pattabiraman & Ors.[476],which reads thus:

F“50. In Bihta Cooperative Development Cane MarketingUnion Ltd. v. Bank of Bihar[477] this Court observed thus:

The Explanation must be read so as to harmonise with andclear up any ambiguity in the main section. It should not be soconstrued as to widen the ambit of the section.

*********

472 (1574) 2 Plowden, 465473 Supra at Footnote No.19

474 (2006) 8 SCC 613 (also at Footnote No.128)

475 Supra at Footnote No.20

476 (1985) 1 SCC 591 (also at Footnote No.128)

H477 (1967) 1 SCR 848 : AIR 1967 SC 389 : 37 Com Cas 98 (also at Footnote No.128)

53. Thus, from conspectus of the authorities referred to above,it is manifest that the object of an Explanation to statutory provisionis—

(a) to explain the meaning and intendment of the Act itself,

(b) where there is any obscurity or vagueness in the mainenactment, to clarify the same so as to make it consistentwith the dominant object which it seems to subserve,

(c) to provide an additional support to the dominant object ofthe Act in order to make it meaningful and purposeful,

(d) an Explanation cannot in any way interfere with orchange the enactment or any part thereof but where somegap is left which is relevant for the purpose of theExplanation, in order to suppress the mischief andadvance the object of the Act it can help or assist theCourt in interpreting the true purport and intendmentof the enactment, and

(e) it cannot, however, take away statutory right with whichany person under statute has been clothed or set at naughtthe working of an Act by becoming an hindrance in theinterpretation of the same.”

(emphasis supplied)

However, in the present case we find that the Explanation onlysets forth in motion to clear the mist around the main definition, if any. Itis 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 inconsonance with the contemporary thinking of the internationalcommunity and in consonance with the Vienna and Palermo Conventions.

49. Reference has also been made to judgments which refer tothe purport of side notes in the interpretation of statute in ThakurainBalraj Kunwar & Anr. vs. Rae Jagatpal Singh[478], NalinakhyaBysack vs. Shyam Sunder Haldar & Ors.[479], Chandroji Rao vs.Commissioner of Income Tax, M.P., Nagpur[480], Board of Muslim

480 (1970) 2 SCC 23

AWakfs, Rajasthan vs. Radha Kishan & Ors.[481], Tara Prasad Singh& Ors. vs. Union of India & Ors.[482], Sakshi vs. Union of India &Ors.[483], Guntaiah & Ors. vs. Hambamma & Ors.[484] and C. Guptavs. Glaxo-Smithkline Pharmaceuticals Ltd.[485]. However, we find themof no use in the present case as we have already held that the Explanationonly goes on to clarify the main or original provision. Other cases, whichBare of no help to the present issue, are the cases of D.R. Fraser & Co.Ltd. vs. The Minister of National Revenue[486], Tofan Singh[487] andAshok Munilal Jain[488]. Reference has also been made to NikeshTarachand Shah[489]. However, there the questions raised were not inrespect of the meaning of money-laundering and pertinently theCamendment has come post the judgment, hence, will have no real bearing,unless it can be shown that the amendment is in some other way contraryto the Indian law.50. We also cannot countenance the argument made in light ofpossible harassment of innocent persons. It is noted that to the 1999 Bill,Dthe Select Committee of the Rajya Sabha had pointed out that if evenmere possession of money/property out of proceeds of crime were to bepunishable then:

“The Committee finds that sub-clauses (a) and (c) viewed ·in thecontext of the provisions contained in clause 23 of the Bill maylead to harassment of innocent persons who bona fide andEunknowingly deal with the persons who have committedthe offence of money laundering and enter into transactionswith them. Such persons purchasing property born out of proceedsof crime without having any inkling whatsoever about that areliable to be prosecuted if the sub-Clauses (a) & (c) remain in theFBill in the existing form.The fact of the matter is that these sub-clauses do not provideany protection or defence to this category of persons.”

(emphasis supplied)

481 (1979) 2 SCC 468482 (1980) 4 SCC 179G483 (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)H489 Supra at Footnote No.3

Accordingly, the phrase “and projecting it as untainted property”was added the initial definition in the 2002 Act. However, it can also beinferred from here that since the initial strokes of drafting the Act, theintention was always to have preventive Act and not simply money-laundering (penal) Act. Today, if one dives deep into the financial systems,anywhere in the world, it is seen that once financial mastermind canintegrate the illegitimate money into the bloodstream of an economy, it isalmost indistinguishable. In fact, the money can be simply wired abroadat one click of the mouse. It is also well known that once this moneyleaves the country, it is almost impossible to get it back. Hence, simplisticargument or the view that Section 3 should only find force once themoney has been laundered, does not commend to us. That has neverbeen the intention of the Parliament nor the international Conventions.

51. We may also note that argument that removing the necessityof projection from the definition will render the predicate offence andmoney-laundering indistinguishable. This, in our view, is ill founded andfallacious. This plea cannot hold water for the simple reason that thescheduled offences in the 2002 Act as it stands (amended upto date) areindependent criminal acts. It is only when money is generated as resultof such acts that the 2002 Act steps in as soon as proceeds of crime areinvolved in any process or activity. Dealing with such proceeds of crimecan be in any form —being process or activity. Thus, even assisting inthe process or activity is part of the crime of money-laundering. Wemust keep in mind that for being liable to suffer legal consequences ofones action of indulging in the process or activity, is sufficient and notonly upon projection of the ill-gotten money as untainted money. Manymembers of crime syndicate could then simply keep the money withthem for years to come, the hands of the law in such situation cannotbe bound and stopped from proceeding against such person, if informationof such illegitimate monies is revealed even from an unknown source.

52. The next question is: whether the offence under Section 3 is astandalone offence? Indeed, it is dependent on the wrongful and illegalgain of property as result of criminal activity relating to scheduledoffence. Nevertheless, it is concerning the process or activity connectedwith such property, which constitutes offence of money-laundering. Theproperty must qualify the definition of “proceeds of crime” under Section2(1)(u) of the 2002 Act. As observed earlier, all or whole of the crimeproperty linked to scheduled offence need not be regarded as proceeds

Aof crime, but all properties qualifying the definition of “proceeds of crime”under Section 2(1)(u) will necessarily be crime properties. Indeed, in theevent of acquittal of the person concerned or being absolved fromallegation of criminal activity relating to scheduled offence, and if it isestablished in the court of law that the crime property in the concernedcase has been rightfully owned and possessed by him, such propertyBby 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 thescheduled offence, the Court would be obliged to direct return of suchproperty as belonging to him. It would be then paradoxical to still regardCsuch property as proceeds of crime despite such adjudication by Courtof competent jurisdiction. It is well within the jurisdiction of the concernedCourt trying the scheduled offence to pronounce on that matter.

53. Be it noted that the authority of the Authorised Officer underthe 2002 Act to prosecute any person for offence of money-launderingDgets triggered only if there exists proceeds of crime within the meaningof Section 2(1)(u) of the 2002 Act and further it is involved in any processor activity. Not even in case of existence of undisclosed income andirrespective of its volume, the definition of “proceeds of crime” underSection 2(1)(u) will get attracted, unless the property has been derivedor obtained as result of criminal activity relating to scheduled offence.EIt is possible that in given case after the discovery of huge volume ofundisclosed property, the authorised officer may be advised to sendinformation to the jurisdictional police (under Section 66(2) of the 2002Act) for registration of scheduled offence contemporaneously, includingfor further investigation in pending case, if any. On receipt of such

Finformation, the jurisdictional police would be obliged to register the caseby way of FIR if it is cognizable offence or as non-cognizable offence(NC case), as the case may be. If the offence so reported is scheduledoffence, only in that eventuality, the property recovered by the authorisedofficer would partake the colour of proceeds of crime under Section2(1)(u) of the 2002 Act, enabling him to take further action under theGAct in that regard.

54. Even though, the 2002 Act is complete Code in itself, it isonly in respect of matters connected with offence of money-laundering,and for that, existence of proceeds of crime within the meaning of Section2(1)(u) of the Act is quintessential. Absent existence of proceeds ofH

crime, as aforesaid, the authorities under the 2002 Act cannot step in orinitiate any prosecution.

55. In other words, the Authority under the 2002 Act, is to prosecutea person for offence of money-laundering only if it has reason to believe,which is required to be recorded in writing that the person is in possessionof “proceeds of crime”. Only if that belief is further supported by tangibleand credible evidence indicative of involvement of the person concernedin any process or activity connected with the proceeds of crime, actionunder the Act can be taken forward for attachment and confiscation ofproceeds of crime and until vesting thereof in the Central Government,such process initiated would be 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 orofficer not below the rank of Deputy Director authorised by the Directorfor the purposes of attachment of property involved in money-laundering.Such authorised officer is expected to act only if he has reason to believethat any person is in possession of proceeds of crime. This belief has tobe formed on the basis of material in his possession and the reasonstherefor are required to be recorded in writing. In addition, he must beconvinced that such proceeds of crime are likely to be concealed,transferred or dealt with in any manner which is likely to result infrustrating any proceedings concerning confiscation thereof under the2002 Act. The Section 5 as amended reads thus:

“CHAPTER III

ATTACHMENT, ADJUDICATION AND CONFISCATION

—5. Attachment of property involved in money-laundering.490[(1)Where the Director or any other officer not below the rank

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 asunder:

“(1) Where the Director, or any other officer not below the rank of DeputyDirector authorised by him for the purposes of this section, has reason tobelieve (the reason for such belief to be recorded in writing), on the basis ofmaterial in his possession, that—

(a) any person is in possession of any proceeds of crime;

(b) such person has been charged of having committed scheduled offence; and

of Deputy Director authorised by the Director for the purposes ofthis section, has reason to believe (the reason for such belief to berecorded 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, transferredor dealt with in any manner

which may result in frustrating any proceedings relating toconfiscation of such proceeds of crime under this Chapter,

he may, by order in writing, provisionally attach such property fora period not exceeding one hundred and eighty days from thedate of the order, in such manner as may be prescribed:

Provided that no such order of attachment shall be madeunless, in relation to the scheduled offence, report has beenforwarded to Magistrate under section 173 of the Code ofCriminal Procedure, 1973 (2 of 1974), or complaint has beenfiled by person authorised to investigate the offence mentionedin that Schedule, before Magistrate or court for taking

(c) such proceeds of crime are likely to be concealed, transferred or dealt within any manner which may result in frustrating any proceedings relating toconfiscation of such proceeds of crime under this Chapter,he may, by order in writing, provisionally attach such property for period notexceeding one hundred and fifty days from the date of the order, in the mannerprovided in the Second Schedule to the Income-tax Act, 1961 (43 of 1961) andthe Director or the other office so authorised by him, as the case may be, shallbe 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, inrelation to the scheduled offence, report has been forwarded to Magistrateunder section 173 of the Code of Criminal Procedure, 1973 (2 of 1974), or acomplaint has been filed by person authorised to investigate the offencementioned in the Schedule, before Magistrate or court for taking cognizanceof 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 theDirector or any other officer not below the rank of Deputy Director authorisedby him for the purposes of this section has reason to believe (the reasons forsuch belief to be recorded in writing), on the basis of material in his possession,that if such property involved in money-laundering is not attached immediatelyunder this Chapter, the non-attachment of the property is likely to frustrateany proceeding under this Act.”

cognizance of the scheduled offence, as the case may be, or asimilar report or complaint has been made or filed under thecorresponding law of any other country:

Provided further that, notwithstanding anything containedin [491][first proviso], any property of any person may be attachedunder this section if the Director or any other officer not belowthe rank of Deputy Director authorised by him for the purposesof this section has reason to believe (the reasons for such beliefto be recorded in writing), on the basis of material in his possession,that if such property involved in money-laundering is not attachedimmediately under this Chapter, the non-attachment of the propertyis likely to frustrate any proceeding under this Act.].

492[Provided also that for the purposes of computing theperiod of one hundred and eighty days, the period during whichthe proceedings under this section is stayed by the High Court,shall be excluded and further period not exceeding thirty daysfrom the date of order of vacation of such stay order shall becounted.]

(2) The Director, or any other officer not below the rank of DeputyDirector, shall, immediately after attachment under sub-section(1), forward copy of the order, along with the material in hispossession, referred to in that sub-section, to the AdjudicatingAuthority, in sealed envelope, in the manner as may be prescribedand such Adjudicating Authority shall keep such order and materialfor such period as may be prescribed.

(3) Every order of attachment made under sub-section (1) shallcease to have effect after the expiry of the period specified inthat sub-section or on the date of an order made under [493 ][sub-section (3)] of section 8, whichever is earlier.

491 Subs. by the Finance Act, 2015 (20 of 2015), sec. 146, for “clause (b)” (w.e.f. 14-

5-2015).

492 Ins. by Act 13 of 2018, sec. 208(b)(i) (w.e.f. 19-4-2018 vide G.S.R. 383(E), dated19[th] April, 2018).

493 Subs. by Act 13 of 2018, sec. 208(b)(ii), for “sub-section (2)” (w.e.f. 19-4-2018 videG.S.R. 383(E), dated 19[th] April, 2018).

Section 5 as it stood originally reads thus:

“5. Attachment of property involved in money laundering. – (1) Where theDirector, or any other officer not below the rank of Deputy Director authorised

A(4) Nothing in this section shall prevent the person interested inthe enjoyment of the immovable property attached under sub-section (1) from such enjoyment.

by him for the purposes of this section, has reason to believe (the reason forsuch belief to be recorded in writing), on the basis of material in his possession,Bthat—

(a) any person is in possession of any proceeds of crime;(b) such person has been charged of having committed scheduled offence;and

(c) such proceeds of crime are likely to be concealed, transferred or dealtwith in any manner which may result in frustrating any proceedings relatingto confiscation of such proceeds of crime under this chapter,

Che may, by order in writing, provisionally attach such property for period notexceeding ninety days from the date of the order, in the manner provided in the SecondSchedule to the Income-tax Act, 1961 (43 of 1961) and the Director or the other officerso 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 anoffence under—D(i) Paragraph 1 of Part and Part of the Schedule, report has beenforwarded to Magistrate under Section 173 of the Code of CriminalProcedure, 1973 (2 of 1974); or

(ii) Paragraph 2 of Part of the Schedule, police report or complaint hasbeen filed for taking cognizance of an offence by the Special Court constitutedunder sub-section (1) of Section 36 of the Narcotic Drugs and PsychotropicSubstances Act, 1985 (61 of 1985).E

(2) The Director, or any other officer not below the rank of Deputy Director,shall, immediately after attachment under sub-section (1), forward copy ofthe order, along with the material in his possession, referred to in that sub-section, to the Adjudicating Authority, in sealed envelope, in the manner asmay be prescribed and such Adjudicating Authority shall keep such order andFmaterial for such period as may be prescribed.

(3) Every order of attachment made under sub-section (1) shall cease to haveeffect after the expiry of the period specified in that sub-section or on the dateof 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 enjoymentGof the immovable property attached under sub-section (1) from such enjoyment.Explanation.—For the purposes of this sub-section, “person interested”, inrelation to any immovable property, includes all persons claiming or entitled toclaim any interest in the property.

(5) The Director or any other officer who provisionally attaches any propertyunder sub-section (1) shall, within period of thirty days from such attachment,Hfile complaint stating the facts of such attachment before the AdjudicatingAuthority.”

Explanation.—For the purposes of this sub-section, “personinterested”, in relation to any immovable property, includes allpersons claiming or entitled to claim any interest in the property.

(5) The Director or any other officer who provisionally attachesany property under sub-section (1) shall, within period of thirtydays from such attachment, file complaint stating the facts ofsuch attachment before the Adjudicating Authority.”

From the plain language of this provision, it is evident that severalinbuilt safeguards have been provided by the Parliament while enactingthe 2002 Act. This provision has been amended vide Act 21 of 2009, Act2 of 2013, Finance Act, 2015 and Act 13 of 2018, to strengthen themechanism keeping in mind the scheme of the 2002 Act and the need toprevent and regulate the activity of money-laundering. As regards theamendments made vide Act 21 of 2009 and Act 2 of 2013, the same arenot matters in issue in these cases. The challenge is essentially to theamendment effected in the second proviso in sub-section (1), vide FinanceAct, 2015.

57. Be that as it may, as aforesaid, sub-section (1) delineatessufficient safeguards to be adhered to by the authorised officer beforeissuing provisional attachment order in respect of proceeds of crime. Itis only upon recording satisfaction regarding the twin requirementsreferred to in sub-section (1), the authorised officer can proceed to issueorder of provisional attachment of such proceeds of crime. Before issuinga formal order, the authorised officer has to form his opinion and delineatethe reasons for such belief to be recorded in writing, which indeed is noton the basis of assumption, but on the basis of material in his possession.The order of provisional attachment is, thus, the outcome of suchsatisfaction already recorded by the authorised officer. Notably, theprovisional order of attachment operates for fixed duration notexceeding one hundred and eighty days from the date of the order. Thisis yet another safeguard provisioned in the 2002 Act itself.

58. As per the first proviso, in ordinary situation, no order ofprovisional attachment can be issued until report has been forwardedto Magistrate under Section 173 of the 1973 Code in relation to thescheduled offence, or complaint has been filed by person authorisedto investigate the offence mentioned in that Schedule, before Magistrateor Court for taking cognizance of the scheduled offence, as the case

Amay be. It further provides that similar report or complaint has beenmade or filed under the corresponding law of any other country. In otherwords, filing of police report or private complaint in relation to thescheduled offence had been made precondition for issuing an order ofprovisional attachment.B59. The second proviso, as it existed prior to Finance Act, 2015,had predicated that notwithstanding anything contained in Clause (b) ofsub-section (1) any property of any person may be attached in the samemanner and satisfaction to be recorded that non-attachment of propertylikely to frustrate any proceeding under the 2002 Act. By amendmentvide Finance Act, 2015, the words “clause (b)” occurring in the secondCproviso came to be substituted to read words “first proviso”. This is thelimited change, but an effective one to give full play to the legislativeintent regarding prevention and regulation of process or activityconcerning proceeds of crime entailing in offence of money-laundering.Prior to the amendment, the first proviso was rightly perceived as anDimpediment. In that, to invoke the action of even provisional attachmentorder, registration of scheduled offence and completion or substantialprogress in investigation thereof were made essential. This wasnotwithstanding the urgency involved in securing the proceeds of crimefor being eventually confiscated and vesting in the Central Government.Because of the time lag and the advantage or opportunities available toEthe person concerned to manipulate the proceeds of crime, the amendmentof 2015 had been brought about to overcome the impediment andempower the Director or any other officer not below the rank of DeputyDirector authorised by him to proceed to issue provisional attachmentorder. In terms of the second proviso, the authorised officer has to record

Fsatisfaction and reason for his belief in writing on the basis of material inhis possession that the property (proceeds of crime) involved in money-laundering if not attached “immediately”, would frustrate proceedingsunder the 2002 Act. This is further safeguard provided in view of theurgency felt by the competent authority to secure the property to

effectively prevent and regulate the offence of money-laundering. InGother words, the authorised officer cannot resort to action of provisionalattachment of property (proceeds of crime) mechanically. Thus, thereare inbuilt safeguards provided in the main provision as well as the secondproviso to be fulfilled upto the highest ranking ED official, before invokingsuch urgent or “immediate” action. We fail to understand as to howHsuch provision can be said to be irrelevant much less manifestly arbitrary,

in the context of the purposes and objects behind the enactment of the2002 Act. Such provision would strengthen the mechanism of preventionand regulation of process or activity resulting into commission of money-laundering offence; and also, to ensure that the proceeds of crime areproperly dealt with as ordained by the 2002 Act, including for vesting inthe Central Government.

60. As matter of fact, prior to amendment of 2015, the firstproviso acted as an impediment for taking such urgent measure even bythe 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 mindthat to initiate “prosecution” for offence under Section 3 of the Actregistration of scheduled offence is prerequisite, but for initiating actionof “provisional attachment” under Section 5 there need not be pre-registered criminal case in connection with scheduled offence. This isbecause the machinery provisions cannot be construed in manner whichwould eventually frustrate the proceedings under the 2002 Act. Suchdispensation alone can secure the proceeds of crime including preventand regulate the commission of offence of money-laundering. Theauthorised officer would, thus, be expected to and, also in given case,justified in acting with utmost speed to ensure that the proceeds of crime/property is available for being proceeded with appropriately under the2002 Act so as not to frustrate any proceedings envisaged by the 2002Act. In case the scheduled offence is not already registered by thejurisdictional police or complaint filed before the Magistrate, it is open tothe authorised officer to still proceed under Section 5 of the 2002 Actwhilst contemporaneously sending information to the jurisdictional policeunder Section 66(2) of the 2002 Act for registering FIR in respect ofcognizable offence or report regarding non-cognizable offence and ifthe jurisdictional police fails to respond appropriately to such information,the authorised officer under the 2002 Act can take recourse to appropriateremedy, as may be permissible in law to ensure that the culprits do notgo unpunished and the proceeds of crime are secured and dealt with asper the dispensation provided for in the 2002 Act. Suffice it to observethat the amendment effected in 2015 in the second proviso has reasonablenexus with the object sought to be achieved by the 2002 Act.

61. The third proviso in Section 5(1) of the 2002 Act is anothersafeguard introduced vide Act 13 of 2018 about the manner in whichperiod of one hundred and eighty days need to be reckoned thereby

Aproviding for fixed tenure of the provisional attachment order. Beforethe expiry of the statutory period relating to the provisional attachmentorder, the Director or any other officer not below the rank of DeputyDirector immediately after attachment under sub-section (1) is obligedto forward copy of the provisional attachment order to the three-member Adjudicating Authority (appointed under Section 6(1) of theB2002 Act, headed by, amongst other, person qualified for appointment asDistrict Judge), in sealed envelope under Section 5(2), which is requiredto be retained by the Adjudicating Authority for the period as prescribedunder the rules framed in that regard. This ensures the fairness in theaction as also accountability of the Authority passing provisionalCattachment order. Further, in terms of Section 5(3), the provisionalattachment order ceases to operate on the date of an order passed bythe Adjudicating Authority under Section 8(3) or the expiry of the periodspecified in sub-section (1), whichever is earlier. In addition, under Section5(5) the authorised officer is obliged to file complaint before theAdjudicating Authority within period of thirty days from such provisionalDattachment. Going by the scheme of the 2002 Act and Section 5 thereofin particular, it is amply clear that sufficient safeguards have beenprovided for as preconditions for invoking the powers of emergencyattachment in the form of provisional attachment.

62. The background in which the amendment of 2013 becameEnecessary can be culled out from the Report titled “Anti-MoneyLaundering 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 convictionfor the predicate offence is required as precondition to prosecuteFmoney laundering, although some practitioners the assessmentteam met with felt that only conviction would satisfactorily meetthe evidentiary requirements. The definition of property in thePMLA (see supra) however requires property to be —related toa scheduled offence. Consequently, the section 3 ML offence notGbeing an —all crimes offence, in the absence of case law, it isgenerally interpreted as requiring at the very minimum positiveproof of the specific predicate offence before conviction formoney laundering can be obtained, be it for third party or self-laundering.

144.Similarly, under section 8A of the NDPS Act, although it isdebatable that the person charged with money laundering needsto have been convicted of predicate offence, the positive andformal proof of nexus with drug related predicate offence isessential.

168.The linkage and interaction of the ML offence with specificpredicate criminality is historically very tight in the Indian AMLregime. The concept of stand-alone money laundering is quitestrange to the practitioners, who cannot conceive pursuing moneylaundering as sui generis autonomous offence. Some interlocutorswere even of the (arguably erroneous) opinion that only aconviction for the predicate criminality would effectively satisfythe evidential requirements. As said, this attitude is largely due tothe general practice in India to start ML investigation only onthe basis of predicate offence case. Even if the ML investigationsince recently can run concurrently with the predicate offenceenquiry, there is no inter-agency MOU or arrangement to dealwith evidentiary issues between the various agencies ininvestigating predicates and ML offences. Also, the way theinteraction between the law enforcement agencies is presentlystructured carries the risk that ML prosecutions could be delayedwhile the other predicate offence investigation agencies try tosecure convictions.175.Although recently an increased focus on the ML aspect anduse of the ML provisions is to be acknowledged, there are stillsome 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 theSchedule Part predicate offences should be abolished.

- The section 3 PMLA definition of the ML offence should bebrought in line with the Vienna and Palermo Conventions so as toalso 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 evidentiaryrequirements in respect of the proof of the predicate offence shouldbe put to the test of the courts to develop case law and receivedirection on this fundamental legal issue.

- The level of the maximum fine imposable on legal persons shouldbe raised or left at the discretion of the court to ensure moredissuasive effect.

- The practice of making conviction of legal persons contingenton the concurrent prosecution/conviction of (responsible) naturalperson should be abandoned.

- Consider the abolishment of the redundant section 8A NDPSAct drug-related ML offence or, if maintained, bring the sanctionsat level comparable to that of the PMLA offence.

233.Confiscation under Chapter III of the PMLA is only possiblewhen it relates to —proceeds of crime as defined in s. 2(1)(u),i.e. resulting from scheduled offence, and when there is aconviction of such scheduled (predicate) offence. In addition, insuch cases, only proceeds of the predicate offence can beconfiscated and not the proceeds of the ML offence itself.

234.The predicate offence conviction condition createsfundamental difficulties when trying to confiscate the proceedsof crime in the absence of conviction of predicate offence,particularly in stand-alone ML case, where the laundered assetsbecome the corpus delicti and should be forfeitable as such. Inthe international context, the predicate conviction requirement alsoseriously affects the capacity to recover criminal assets wherethe predicate offence has occurred outside India and the proceedsare subsequently laundered in India (see also comments in Section2.1 above).

235. The definition of proceeds of crime and property in the PMLAare broad enough to allow for confiscation of property deriveddirectly or indirectly from proceeds of crime relating to scheduled(predicate) offence, including income, profits and other benefitsfrom the proceeds of crime. These definitions also allow for valueconfiscation, regardless of whether the property is held or owned

by criminal or third party. As section 65 of the PMLA refersto the rules in CrPC, instrumentalities and intended instrumentalitiescan be confiscated in accordance with section 102 and 451 of theCrPC. However, there is no case law in this respect.

236. Also, the procedural provisions of Chapter III makeconfiscation of the proceeds of crime contingent on prior seizureof attachment of the property by the Adjudicating Authority, andconsequently substantially limit the possibilities for confiscationunder the PMLA.”

*********

“General comments”

244. Since confiscation is linked to conviction it is not possible toconfiscate criminal proceeds when the defendant has died duringthe criminal proceedings. However, it is possible to attach anddispose of any property of proclaimed offender when that personhas absconded. The absence of regulation when the defendanthas died may have negative impact on the effectiveness of theconfiscation regime in place in India.”

63. In view of the observations made in said Report, the FATFmade recommendations as follows:

“2.3.3 Compliance with Recommendations 3

64. As sequel to these recommendations of FATF and theobservations in the stated Report, Section 5 came to be amended videAct 2 of 2013. In this connection, it may be useful to refer to the Fifty

ASixth Report of the Standing Committee on Finance relating to the 2011Bill, which reads thus:

“5. Amendment in provisions implemented by EnforcementDirectorate:

(i)Attachment of property: The present Act in section 5stipulates that the person from whom property is attachedmust “have been charged of having committed scheduledoffence”. It is proposed to be deleted as property may cometo rest with someone, who has nothing to do with thescheduled offence or even the money-laundering offence.Procedure for attachment is at present done as provided in theSecond Schedule to the Income Tax Act, 196. Now it is proposedin section 5(1) that the procedure will be prescribed separately.Time for Adjudicating Authority to confirm attachment of propertyby ED has been proposed to be increased from 150 days to 180days.

(ii) ****

(iii) Making confiscation independent of conviction: Atpresent attachment of property becomes final under section8(3) “after the guilt of the person is proved in the trial courtand order of such trial court becomes final”. Problems areEfaced in such cases where money-laundering has been doneby person who has not committed the scheduled offenceor where property has come to rest with someone who hasnot committed any offence. Therefore, it is proposed toamend section 8(5) to provide for attachment andFconfiscation of the proceeds of crime, even if there is noconviction, so long as it is proved that predicate offenceand money laundering offence have taken place and theproperty in question (i.e. the proceeds of crime) is involvedin money laundering.”

*********

However, the MER 2010 highlighted certain deficienciesin the AML legislation which adversely affected the ratingson few FATF recommendations. The areas are broadlysummarized below:—

a) Commodities market out of the ambit of PMLA.

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 legalpersons.

e) Ineffective sanctions regime for non-compliance. India hassuggested an Action Plan with short, medium and long termobjectives to address the specific issues raised in the MER 2010that includes proposed amendments in the PMLA.”

(emphasis supplied)

65. As aforesaid, in this backdrop the amendment Act 2 of 2013came into being. Considering the purport of the amended provisions andthe experience of implementing/enforcement agencies, further changesbecame necessary to strengthen the mechanism regarding preventionof money-laundering. It is not right in assuming that the attachment ofproperty (provisional) under the second proviso, as amended, has no linkwith the scheduled offence. Inasmuch as Section 5(1) envisages thatsuch an action can be initiated only on the basis of material in possessionof the authorised officer indicative of any person being in possession ofproceeds of crime. The precondition for being proceeds of crime is thatthe property has been derived or obtained, directly or indirectly, by anyperson as result of criminal activity relating to scheduled offence.The sweep of Section 5(1) is not limited to the accused named in thecriminal activity relating to scheduled offence. It would apply to anyperson (not necessarily being accused in the scheduled offence), if he isinvolved in any process or activity connected with the proceeds of crime.Such person besides facing the consequence of provisional attachmentorder, may end up in being named as accused in the complaint to be filedby the authorised officer concerning offence under Section 3 of the2002 Act.66. Be it noted that the attachment must be only in respect ofproperty which appears to be proceeds of crime and not all the propertiesbelonging to concerned person who would eventually face the action ofconfiscation of proceeds of crime, including prosecution for offence ofmoney-laundering. As mentioned earlier, the relevant date for initiatingaction under the 2002 Act — be it of attachment and confiscation or

Aprosecution, is linked to the inclusion of the offence as scheduled offenceand of carrying on the process or activity in connection with the proceedsof crime after such date. The pivot moves around the date of carryingon the process and activity connected with the proceeds of crime; andnot the date on which the property has been derived or obtained by theperson concerned as result of any criminal activity relating to or relatableBto the scheduled offence.

67. The argument of the petitioners that the second proviso permitsemergency attachment in disregard of the safeguard provided in thefirst proviso regarding filing of report (chargesheet) clearly overlooksthat the second proviso contains non-obstante clause and, being anCexceptional situation, warrants “immediate” action so that the propertyis not likely to frustrate any proceeding under the 2002 Act. Concededly,there is stipulation fastened upon the authorised officer to record in writingreasons for his belief on the basis of material in his possession that such“immediate” action is indispensable. This stipulation has reasonable nexusDwith the purposes and objects sought to be achieved by the 2002 Act.

68. It was also urged before us that the attachment of propertymust be equivalent in value of the proceeds of crime only if the proceedsof crime are situated outside India. This argument, in our opinion, istenuous. For, the definition of “proceeds of crime” is wide enough to notEonly refer to the property derived or obtained as result of criminalactivity relating to scheduled offence, but also of the value of any suchproperty. If the property is taken or held outside the country, even insuch case, the property equivalent in value held within the country orabroad can be proceeded with. The definition of “property” as in Section2(1)(v) is equally wide enough to encompass the value of the propertyFof proceeds of crime. Such interpretation would further the legislativeintent in recovery of the proceeds of crime and vesting it in the CentralGovernment for effective prevention of money-laundering.

69. We find force in the stand taken by the Union of India that theobjectives of enacting the 2002 Act was the attachment and confiscationGof proceeds of crime which is the quintessence so as to combat the evilof money-laundering. The second proviso, therefore, addresses the broadobjectives of the 2002 Act to reach the proceeds of crime in whosoever’sname they are kept or by whosoever they are held. To buttress thisargument, reliance has been placed on the dictum in Attorney General

for India[494]and Raman Tech. & Process Engg. Co. & Anr. vs. SolankiTraders[495].

70. The procedural safeguards provided in respect of provisionalattachment are effective measures to protect the interest of the personconcerned who is being proceeded with under the 2002 Act, in thefollowing manner as rightly indicated by the Union of India:

i. For invoking the second proviso, the Director or any officer notbelow the rank of Deputy Director will have to first apply hismind to the materials on record before recording in writing hisreasons to believe is certainly sufficient safeguard to theinvocation of the powers under the second proviso to Section 5(1)of the 2002 Act.

ii. There has to be satisfaction that if the property involved inmoney-laundering or ‘proceeds of crime’ are not attached“immediately”, such non-attachment might frustrate theconfiscation proceedings under the 2002 Act.

iii. The order passed under Section 5(1) of the 2002 Act is onlyprovisional in nature. The life of this provisional attachment orderpassed under Section 5(1) of the 2002 Act is only for 180 days,subject to confirmation by an independent Adjudicating Authority.

iv. Under Section 5(2) officer passing provisional attachment orderhas to immediately forward copy of this order to the AdjudicatingAuthority in sealed envelope.

v. Under Section 5(5) of the 2002 Act, the officer making suchorder must file complaint before the Adjudicating Authority within30 days of the order of provisional attachment being made.

vi. Section 5(3) of the 2002 Act provides that the provisionalattachment order shall cease to have effect on the expiry of theperiod specified in Section 5(1) i.e. 180 days or on the date whenthe Adjudicating Authority makes an order under Section 8(2),whichever is earlier.

vii. Under Section 8(1), once the officer making the provisionalattachment order files complaint and if the Adjudicating Authority

494 Supra at Footnote No.428 (also at Footnote No.175)

495 (2008) 2 SCC 302 (also at Footnote No.430)

A“has reason to believe that any person has committed an offenceunder Section 3 or is in possession of the proceeds of crime”, theAdjudicating Authority may serve show cause notice of not lessthan 30 days on such person calling upon him to indicate thesources of his income, earning or assets or by means of which hehas acquired the property attached under Section 5(1) of the 2002BAct.

viii. The above SCN would require the noticee to produce evidenceon which he relies and other relevant information and particularsto show cause why all or any of the property “should not bedeclared to be the properties involved in money-laundering andCconfiscated by the Central Government”.

ix. Section 8(2) requires the Adjudicating Authority to considerthe reply to the SCN issued under Section 8(1) of the 2002 Act.The Section further provides to hear the aggrieved person as wellas the officer issuing the order of provisional attachment and alsoDtake into account “all relevant materials placed on record beforethe Adjudicating Authority”. After following the above procedure,the Adjudicating Authority will record its finding whether all theproperties referred to in the SCN are involved in money-launderingor not.

x. While passing order under Section 8(2) read with Section 8(3)Ethere are two possibilities which might happen:

a. the Adjudicating Authority may confirm the order of provisionalattachment, in which case again, the confirmation will continue only up

i. the period of investigation not exceeding 365 days, orF

ii. till the pendency of any proceedings relating to any offenceunder the 2002 Act or under the corresponding law of any othercountry before the competent Court of criminal jurisdiction outsideIndia.

b. Adjudicating Authority may disagree and not confirm theGprovisional attachment, in which case attachment over the propertyceases.

xi. Under Section 8(4) of the 2002 Act, upon confirmation of theorder of provisional attachment, the Director or other officer authorizedby him shall take the possession of property attached.H

xii. Under Section 8(5) of the 2002 Act, on the conclusion of atrial for an offence under the 2002 Act if the Special Court finds that theoffence of money-laundering has been committed it will order that theproperty involved in money-laundering or the property which has beeninvolved in the commission of the offence of money-laundering shallstand confiscated to the Central Government.

xiii. However, under Section 8(6) if the Special Court on theconclusion of the trial finds that no offence of money-laundering hastaken place or the property is not involved in money-laundering it willrelease the property which has been attached to the person entitled toreceive it.

xiv. Under Section 8(7), if the trial before the Special Court cannotbe conducted because of the death of the accused or because the accusedis declared proclaimed offender, then the Special Court on an applicationof the Director or person claiming to be entitled to possession of aproperty in respect of which an order under Section 8(3) is passed eitherto confiscate the property or release the property to the claimant, afterconsidering the material before it.

xv. Under Section 8(8), when property is confiscated, SpecialCourt may direct the central government to restore the propertyto person with the legitimate interest in the property, who mayhave suffered quantifiable loss as result of money-laundering.Provided that the person must not have been involved in money-laundering and must have acted in good faith and has suffered aconsiderable loss despite taking all reasonable precautions.

xvi. The order passed by the Adjudicating Authority is also subjectto appeal before the Appellate Tribunal which is constituted underSection 25 of the 2002 Act. Thus, the Adjudicating Authority isnot the final authority under the 2002 Act as far as the attachmentof proceeds of crime or property involved in money-laundering isconcerned.

xvii. Any person aggrieved of an order confirming the provisionalattachment order can file an appeal before the Appellate Tribunalunder Section 26(1) of the 2002 Act. The Appellate Tribunal onreceipt of an appeal after giving the parties an opportunity of beingheard will pass an order as it thinks fit either confirming or

Amodifying or setting aside the provisional attachment orderappealed against.

xviii. Further, the order passed by the Appellate Tribunal is furtherappealable before the High Court under Section 42 of the 2002Act on any question of fact or question of law arising out of theBorder passed by the Appellate Tribunal.

It is, thus, clear that the provision in the form of Section 5 providesfor balancing arrangement to secure the interest of the person as wellas to ensure that the proceeds of crime remain available for being dealtwith in the manner provided by the 2002 Act. This provision, in ourCopinion, has reasonable nexus with the objects sought to be achieved bythe 2002 Act in preventing and regulating money-laundering effectively.The constitutional validity including interpretation of Section 5 has alreadybeen answered against the petitioners by different High Courts[496]. Wedo not wish to dilate on those decisions for the view already expressedhitherto.D

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 andsafeguards to be adhered to by the Authorities referred to in Section 48Eand in particular the Adjudicating Authority appointed by the CentralGovernment under Section 6, for dealing with the complaint filed by theauthorised officer under Section 5(5) of the 2002 Act or applicationsmade under Section 17(4) or 18(10) of the 2002 Act. This is wholesomeprovision, not only protecting the interest of the person concerned, butaffording him/her fair opportunity during the adjudication process. ThisFsection, as amended from time to time and as applicable to the presentcases, reads thus:“8. Adjudication.—(1) On receipt of 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 theGAdjudicating Authority has reason to believe that any person has

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) HighCourt of Gujarat in J Alive Hospitality and Food Private Limited (supra at FootnoteNo.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); andHDelhi High Court in J. Sekar (supra at Footnote No.437).

committed an [497][offence under section 3 or is in possession ofproceeds of crime], he may serve notice of not less than thirtydays on such person calling upon him to indicate the sources ofhis income, earning or assets, out of which or by means of whichhe has acquired the property attached under sub-section (1) ofsection 5, or, seized [498][or frozen] under section 17 or section 18,the evidence on which he relies and other relevant informationand particulars, and to show cause why all or any of such propertiesshould not be declared to be the properties involved in money-laundering and confiscated by the Central Government:

Provided that where notice under this sub-section specifiesany property as being held by person on behalf of any otherperson, copy of such notice shall also be served upon such otherperson:

Provided further that where such property is held jointly bymore than one person, such notice shall be served to all personsholding 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 otherofficer authorised by him in this behalf; and

(c) taking into account all relevant materials placed on recordbefore him,

by an order, record finding whether all or any of the propertiesreferred to in the notice issued under sub-section (1) are involvedin money-laundering:

Provided that if the property is claimed by person, otherthan person to whom the notice had been issued, such personshall also be given an opportunity of being heard to prove that theproperty is not involved in money-laundering.

(3) Where the Adjudicating Authority decides under sub-section

(2) that any property is involved in money-laundering, he shall, by

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).

Aan order in writing, confirm the attachment of the property madeunder sub-section (1) of section 5 or retention of property or499[record seized or frozen under section 17 or section 18 andrecord finding to that effect, whereupon such attachment orretention or freezing of the seized or frozen property] or recordshall—

(a) continue during [500][investigation for period not exceeding501[three hundred and sixty-five days] or] the pendency of theproceedings relating to any [502][offence under this Act before acourt or under the corresponding law of any other country,before the competent court of criminal jurisdiction outside India,Cas the case may be; and]

503[(b) become final after an order of confiscation is passedunder sub-section (5) or sub-section (7) of section 8 or section58B or sub-section (2A) of section 60 by the [504][Special Court];]

D505[Explanation.—For the purposes of computing the period ofthree hundred and sixty-five days under clause (a), the periodduring which the investigation is stayed by any court under anylaw for the time being in force shall be excluded.]

(4) Where the provisional order of attachment made under sub-Esection (1) of section 5 has been confirmed under sub-section (3),the Director or any other officer authorised by him in this behalf

499 Subs. by Act 2 of 2013, sec. 6(ii)(a), for “record seized under section 17 or section18 and record finding to that effect, such attachment or retention of the seizedproperty” (w.e.f. 15-2-2013), vide S.O. 343(E), dated 8-2-2013.F500 Ins. by Act 13 of 2018, sec. 208(c)(i) (w.e.f. 19-4-2018, vide G.S.R. 383(E), dated19[th] 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 19[th] March, 2019).

502 Subs. by Act 2 of 2013, sec. 6(ii)(b), for “Scheduled offence before Court and”(w.e.f. 15-2-2013, vide S.O. 343(E), dated 8-2-2013).

G503 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 andorder 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 19thHMarch, 2019).

shall forthwith take the [506][possession of the property attachedunder section 5 or frozen under sub-section (1A) of section 17, insuch manner as may be prescribed:

Provided that if it is not practicable to take possession of aproperty frozen under sub-section (1A) of section 17, the order ofconfiscation shall have the same effect as if the property hadbeen taken possession of.]

507[(5) Where on conclusion of trial of an offence under thisAct, the Special Court finds that the offence of money-launderinghas been committed, it shall order that such property involved inthe money-laundering or which has been used for commission ofthe offence of money-laundering shall stand confiscated to theCentral Government.

(6) Where on conclusion of trial under this Act, the SpecialCourt finds that the offence of money-laundering has not takenplace or the property is not involved in money-laundering, it shallorder release of such property to the person entitled to receive it.

(7) Where the trial under this Act cannot be conducted by reasonof the death of the accused or the accused being declared aproclaimed offender or for any other reason or having commencedbut could not be concluded, the Special Court shall, on an applicationmoved by the Director or person claiming to be entitled topossession of property in respect of which an order has beenpassed under sub-section (3) of section 8, pass appropriate ordersregarding confiscation or release of the property, as the case maybe, involved in the offence of money-laundering after having regardto the material before it.]

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).

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, stoodas under:

“(5) Where on conclusion of trial for any scheduled offence, the personconcerned is acquitted, the attachment of the property or retention of theseized property or record under sub-section (3) and net income, if any, shallcease to have effect.

(6) Where the attachment of any property or retention of the seized propertyor record becomes final under clause (b) of sub-section (3), the AdjudicatingAuthority shall, after giving an opportunity of being heard to the personconcerned, make an order confiscating such property.”

A508[(8) Where property stands confiscated to the CentralGovernment under sub-section (5), the Special Court, in suchmanner as may be prescribed, may also direct the CentralGovernment to restore such confiscated property or part thereofof claimant with legitimate interest in the property, who mayhave suffered quantifiable loss as result of the offence ofBmoney laundering:

Provided that the Special Court shall not consider such claimunless it is satisfied that the claimant has acted in good faith andhas suffered the loss despite having taken all reasonableprecautions and is not involved in the offence of money laundering:]

509[Provided further that the Special Court may, if it thinksfit, consider the claim of the claimant for the purposes of restorationof such properties during the trial of the case in such manner asmay be prescribed.]”

D72. The grievance of the petitioners in respect of this provision isbroadly 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 result, we will confine our discussion to thedispensation provided in the stated sub-sections. Reverting to sub-section(3), it postulates that where the Adjudicating Authority records findingEwhether all or any of the properties referred to in the show cause noticeissued under sub-section (1) by the Adjudicating Authority consequentto receipt of complaint/application that the property in question isinvolved in money-laundering, he shall, by an order in writing confirmthe attachment (provisional) of property made under Section 5(1) orFretention of property or record seized or frozen under Section 17 orSection 18, and direct continuation of the attachment or retention orfreezing of the concerned property for period not exceeding threehundred and sixty-five days or the pendency of the proceedings relatingto any offence under the 2002 Act before Court or under thecorresponding law of any country outside India and become final afterGan order of confiscation is passed under sub-section (5) or sub-section(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

508 Ins. by the Finance Act, 2015 (20 of 2015), sec. 147(ii) (w.e.f. 14-5-2015).509 Ins. by Act 13 of 2018, sec. 208(c)(ii) (w.e.f. 19-4-2018, vide G.S.R. 383(E), dated

19[th] April, 2018).

of computing the period of three hundred and sixty-five days afterreckoning the stay order of the Court, if any. The argument proceedsthat the period of attachment mentioned in Section 8(3)(a) of the 2002Act does not clearly provide for the consequence of non-filing of thecomplaint within three hundred and sixty-five days from the date ofattachment (provisional). This argument clearly overlooks the obligationon the Director or any other officer who provisionally attaches anyproperty under Section 5(1), to file complaint stating the fact of suchattachment before the Adjudicating Authority within thirty days in termsof Section 5(5) of the 2002 Act. Concededly, filing of complaint beforethe Adjudicating Authority in terms of Section 5(5) within thirty daysfrom the provisional attachment for confirmation of such order ofprovisional attachment is different than the complaint to be filed beforethe Special Court under Section 44(1)(b) for initiating criminal actionregarding offence of money-laundering punishable under Section 4 ofthe 2002 Act. Furthermore, the provisional attachment would operateonly for period of one hundred and eighty days from the date of orderpassed 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 sub-section (2) of Section8 by the Adjudicating Authority and confirming the provisional attachmentorder and the order of confirmation of attachment operates until theconfiscation order is passed or becomes final in terms of order passedunder Section 8(5) or 8(7) or 58B or 60(2A) by the Special Court. Theorder of confirmation of attachment could also last during the pendencyof the proceedings relating to the offence of money-laundering underthe 2002 Act, or before the competent Court of criminal jurisdiction outsideIndia, as the case may be. We need not elaborate on this aspect anyfurther and leave the parties to agitate this aspect in appropriateproceedings as it is not about the constitutional validity of the provisionas such.

73. The other grievance of the petitioners is in reference to thestipulation in sub-section (4) of Section 8 providing for taking possessionof the property. This provision ought to be invoked only in exceptionalsituation keeping in mind the peculiar facts of the case. In that, merelybecause the provisional attachment order passed under Section 5(1) isconfirmed, it does not follow that the property stands confiscated; anduntil an order of confiscation is formally passed, there is no reason tohasten the process of taking possession of such property. The principle

CDEF

Aset out in Section 5(4) of the 2002 Act needs to be extended even afterconfirmation of provisional attachment order until formal confiscationorder is passed. Section 5(4) clearly states that nothing in Section 5including the order of provisional attachment shall prevent the personinterested in the enjoyment of immovable property attached under sub-section (1) from such enjoyment. The need to take possession of theBattached property would arise only for giving effect to the order ofconfiscation. This is also because sub-section (6) of Section 8 postulatesthat where on conclusion of trial under the 2002 Act which is obviouslyin respect of offence of money-laundering, the Special Court finds thatthe offence of money-laundering has not taken place or the property isCnot involved in money-laundering, it shall order release of such propertyto the person entitled to receive it. Once the possession of the propertyis taken in terms of sub-section (4) and the finding in favour of theperson is rendered by the Special Court thereafter and during theinterregnum if the property changes hands and title vest in some thirdparty, it would result in civil consequences even to third party. That isDcertainly avoidable unless it is absolutely necessary in the peculiar factsof 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 CentralGovernment in exercise of powers under Section 73 of the 2002 ActEregarding the manner of taking possession of attached or frozen propertiesconfirmed by the Adjudicating Authority in 2013, and also regardingrestoration of confiscated property in 2019. Suffice it to observe thatdirection under Section 8(4) for taking possession of the property inquestion before formal order of confiscation is passed merely on theFbasis of confirmation of provisional attachment order, should be anexception and not rule. That issue will have to be considered on case-to-case basis. Upon such harmonious construction of the relevantprovisions, it is not possible to countenance challenge to the validity ofsub-section (4) of Section 8 of the 2002 Act.G75. The learned counsel appearing for the Union of India, hadinvited our attention to the recommendations made by FATF in 2003 and2012 to justify the provision under consideration. The fact that non-conviction based confiscation model is permissible, it does not warrantan extreme and drastic action of physical dispossession of the personfrom the property in every case — which can be industrial/commercial/H

business and also residential property, until formal order of confiscationis passed under Section 8(5) or 8(7) of the 2002 Act. As demonstratedearlier, it is possible that the Special Court in the trial concerning money-laundering offence may eventually decide the issue in favour of the personin possession of the property as not being proceeds of crime or for anyother valid ground. Before such order is passed by the Special Court, itwould be case of serious miscarriage of justice, if not abuse of processto take physical possession of the property held by such person. Further,it would serve no purpose by hastening the process of taking possessionof the property and then returning the same back to the same person ata later date pursuant to the order passed by the Court of competentjurisdiction. Moreover, for the view taken by us while interpretatingSection 3 of the 2002 Act regarding the offence of money-laundering, itcan proceed only if it is established that the person has directly orindirectly derived or obtained proceeds of crime as result of criminalactivity relating to or relatable to scheduled offence or was involved inany process or activity connected with proceeds of crime.76. It is unfathomable as to how the action of confiscation can beresorted to in respect of property in the event of his acquittal or dischargein connection with the scheduled offence. Resultantly, we would sum upby observing that the provision in the form of Section 8(4) can be resortedto only by way of an exception and not as rule. The analogy drawn bythe Union of India on the basis of decisions of this Court in DivisionalForest Officer & Anr. vs. G.V. Sudhakar Rao & Ors.[510], BiswanathBhattacharya[511], 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 Governmentprovided for in the 2002 Act.

SEARCHES AND SEIZURES

77. After having traversed through the provisions of Chapter I toIII, we may now turn to other contentious provision in Chapter V of the2002 Act, dealing with summons, searches and seizures, etc. Section 16provides for power of survey bestowed upon the Authorities under the2002 Act. They have been empowered to enter upon any place withinthe limits of the area assigned to them or in respect of which, has been

510 (1985) 4 SCC 573 (also at Footnote No.439)511 Supra at Footnote No.438512 (2016) 3 SCC 183 (also at Footnote No.448)

Aspecifically authorised for the purposes of Section 16 by the competentauthority, for inspection of records or other matters, in the event, it hasreason to believe on the basis of material in possession that an offenceunder Section 3 of the 2002 Act has been committed. However, when itcomes to search and seizure, Section 17 of the 2002 Act permits onlythe Director or any other officer not below the rank of Deputy DirectorBauthorised by him to exercise that power on the basis of information inhis possession and having reason to believe that any person has committedsome act which constitutes money-laundering or is in possession ofproceeds of crime involved in money-laundering, including the recordsand property relating to money-laundering. Section 17 of the 2002 Act,Cas amended, reads thus:

“17. Search and seizure.—(1) Where [513][the Director or anyother officer not below the rank of Deputy Director authorised byhim for the purposes of this section,] on the basis of information inhis possession, has reason to believe (the reason for such belief toDbe recorded in writing) that any person—

(i) has committed any act which constitutes money-laundering, or

(ii) is in possession of any proceeds of crime involved inmoney-laundering, or

(iii) is in possession of any records relating to money-laundering, [514][or]

515[(iv) is in possession of any property related to crime,]

then, subject to the rules made in this behalf, he may authoriseFany officer subordinate to him to—

(a) enter and search any building, place, vessel, vehicle oraircraft where he has reason to suspect that such records orproceeds of crime are kept;

513 Subs. by Act 21 of 2009, sec. 7(i), for “the Director” (w.e.f. 1-6-2009)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-H2013)

(b) break open the lock of any door, box, locker, safe, almirahor other receptacle for exercising the powers conferred byclause (a) where the keys thereof are not available;

(c) seize any record or property found as 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 copiestherefrom;

(e) make note or an inventory of such record or property;

(f) examine on oath any person, who is found to be in possessionor control of any record or property, in respect of all mattersrelevant for the purposes of any investigation under this Act:

517[***]

518[(1A) Where it is not practicable to seize such record orproperty, the officer authorised under sub-section (1), may makean order to freeze such property whereupon the property shallnot be transferred or otherwise dealt with, except with the priorpermission of the officer making such order, and copy of suchorder shall be served on the person concerned:

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 scheduledoffence, report has been forwarded to Magistrate under section 157 of theCode of Criminal Procedure, 1973 (2 of 1974) or complaint has been filed bya person, authorised to investigate the offence mentioned in the Schedule,before Magistrate or court for taking cognizance of the scheduled offence, asthe 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 anofficer authorised to investigate scheduled offence to an officer not below therank of Additional Secretary to the Government of India or equivalent beinghead of the office or Ministry or Department or Unit, as the case may be, orany other officer who may be authorised by the Central Government, bynotification, 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).

Provided that if, at any time before its confiscation undersub-section (5) or sub-section (7) of section 8 or section 58B orsub-section (2A) of section 60, it becomes practical to seize afrozen property, the officer authorised under sub-section (1) mayseize such property.]

B(2) The authority, who has been authorised under sub-section (1)shall, immediately after search and seizure[519][or upon issuance ofa freezing order], forward copy of the reasons so recordedalong with material in his possession, referred to in that sub-section,to the Adjudicating Authority in sealed envelope, in the manner,as may be prescribed and such Adjudicating Authority shall keepCsuch reasons and material for such period, as may be prescribed.

(3) Where an authority, upon information obtained during surveyunder section 16, is satisfied that any evidence shall be or is likelyto be concealed or tampered with, he may, for reasons to berecorded in writing, enter and search the building or place whereDsuch evidence is located and seize that evidence:

Provided that no authorisation referred to in sub-section(1) shall be required for search under this sub-section.

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 period of thirty days from such seizure orfreezing, as the case may be, file an application, requesting forretention 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 amendedvide 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 videFinance (No.2) Act, 2019 — which provides that no search shall beconducted unless, in relation to the scheduled offence, report has beenforwarded to Magistrate under Section 157 of the 1973 Code or

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 period of thirty days from such seizure, file an application, requestingHfor retention of such record or property, before the Adjudicating Authority.”

complaint has been filed by person, authorised to investigate the offencementioned in the Schedule, before Magistrate or Court for takingcognizance of the scheduled offence, as the case may be, or in caseswhere such report is not required to be forwarded, similar report ofinformation received or otherwise has been submitted by an officerauthorised to investigate scheduled offence to an officer not below therank of Additional Secretary to the Government of India or equivalentbeing Head of the Office or Ministry or Department or Unit, as the casemay be, or any other officer who may be authorised by the CentralGovernment, by notification, for this purpose. Further, the challenge isabout no safeguards, as provided under the 1973 Code regarding searchesand seizures, have been envisaged and that such drastic power is beingexercised without formal FIR registered or complaint filed in respectof scheduled offence. The provision is, therefore, unconstitutional.

78. These challenges have been rightly refuted by the Union ofIndia on the argument that the 2002 Act is self-contained Code and thedispensation envisaged thereunder, must prevail in terms of Section 71[520A]of the 2002 Act, which predicates that the provisions of the 2002 Acthave effect notwithstanding anything inconsistent therewith containedin any other law for the time being in force, which includes the provisionsof the 1973 Code. Even Section 65[520B] of the 2002 Act predicates thatthe provisions of the 1973 Code shall apply, insofar as they are notinconsistent with the provisions of the 2002 Act in respect of arrest,search and seizure, attachment, confiscation, investigation, prosecutionand all other proceedings under the 2002 Act. To bolster this submission,reliance is also placed on Sections 4[521] and 5[522] of the 1973 Code. Section

520A 71. Act to have overriding effect.—The provisions of this Act shall have effectnotwithstanding anything inconsistent therewith contained in any other law for thetime being in force.

520B 65. Code of Criminal Procedure, 1973 to apply.—The provisions of the Code ofCriminal Procedure, 1973 (2 of 1974) shall apply, insofar as they are not inconsistentwith the provisions of this Act, to arrest, search and seizure, attachment, confiscationinvestigation, prosecution and all other proceedings under this Act.

521 4. Trial of offences under the Indian Penal Code and other laws.—(1) Alloffences 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, andotherwise dealt with according to the same provisions, but subject to any enactment forthe 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 specificprovision to the contrary, affect any special or local law for the time being in force, orany special jurisdiction or power conferred, or any special from of procedure prescribed,by any other law for the time being in force.

A4(2) pertains to offences under other laws (other than IPC) which arerequired to be investigated, inquired into, tried, and otherwise dealt withaccording to the same provisions, but subject to any enactment for thetime being in force regulating the manner or place of investigating, inquiringinto, trying or otherwise dealing with such offences. Similarly, Section 5of the 1973 Code envisages that nothing in the 1973 Code shall, in theBabsence of specific provision to the contrary, affect any special orlocal law for the time being in force, or any special jurisdiction or powerconferred, or any special form of procedure prescribed, by any otherlaw for the time being in force.

79. Undoubtedly, the 2002 Act is special self-contained law;Cand Section 17 is provision, specifically dealing with the mattersconcerning searches and seizures in connection with the offence ofmoney-laundering to be inquired into and the proceeds of crime dealtwith under the 2002 Act. We have already noted in the earlier part ofthis judgment that before resorting to action of provisional attachment,Dregistration of scheduled offence or complaint filed in that regard, is nota precondition. The authorised officer can still invoke power of issuingorder of provisional attachment and contemporaneously send informationto the jurisdictional police about the commission of scheduled offenceand generation of property as result of criminal activity relating to ascheduled offence, which is being made subject matter of provisionalEattachment. Even in the matter of searches and seizures under the 2002Act, that power can be exercised only by the Director or any otherofficer not below the rank of Deputy Director authorised by him. Theyare not only high-ranking officials, but have to be fully satisfied thatthere is reason to believe on the basis of information in their possessionFabout commission of offence of money-laundering or possession ofproceeds of crime involved in money-laundering. Such reason(s) tobelieve is required to be recorded in writing and contemporaneouslyforwarded to the Adjudicating Authority along with the material in hispossession in sealed envelope to be preserved by the AdjudicatingAuthority for period as is prescribed under the Rules framed in thatGregard. Such are the inbuilt safeguards provided in the 2002 Act. Theproviso as it existed prior to 2019 was obviously corresponding to thestipulation in the first proviso in Section 5. However, for strengtheningthe mechanism, including regarding prevention of money-laundering, theParliament in its wisdom deemed it appropriate to drop the proviso inHsub-section (1) of Section 17 of the 2002 Act, thereby dispensing withthe condition that no search shall be conducted unless in relation to thescheduled offence report has been forwarded to Magistrate underSection 157 of the 1973 Code or complaint has been filed before aMagistrate in regard to such offence. As it is indisputable that the 2002Act is special Act and is self-contained Code regarding the subjectof searches and seizures in connection with the offence of money-laundering under the 2002 Act, coupled with the fact that the purposeand object of the 2002 Act is prevention of money-laundering; and theoffence of money-laundering being an independent offence concerningthe process and activity connected with the proceeds of crime, the deletionof the first proviso has reasonable nexus with the objects sought to beachieved by the 2002 Act for strengthening the mechanism of preventionof money-laundering and to secure the proceeds of crime for being dealtwith 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 therank of Director (not below the rank of Additional Secretary to theGovernment of India who is appointed by Committee chaired by theCentral Vigilance Commissioner in terms of Section 25 of the CVC Act)or Deputy Director authorised by the Director in that regard, but also toadhere to other stipulations of recording of reasons regarding the beliefformed on the basis of information in his possession about commission

of offence of money-laundering and possession of proceeds of crimeinvolved in money-laundering. Further, such recorded reasons along withthe materials is required to be forwarded to the three-member AdjudicatingAuthority (appointed under Section 6 of the 2002 Act headed by personqualified for appointment as District Judge) in sealed cover to bepreserved for specified period, thus, guaranteeing fairness, transparencyand accountability regarding the entire process of search and seizure.This is unlike the provision in the 1973 Code where any police officerincluding the Head Constable can proceed to search and seize recordsor property merely on the basis of allegation or suspicion of commissionof scheduled offence.

81. Concededly, the 2002 Act provides for an inquiry to beconducted by the Authorities and with power to collect evidence forbeing submitted to the Adjudicating Authority for consideration ofconfirmation of provisional attachment order passed by the Authoritiesin respect of properties being proceeds of crime involved in the offence

Aof money-laundering. In that sense, the provisions in 2002 Act are notonly to investigate into the offence of money-laundering, but moreimportantly to prevent money-laundering and to provide for confiscationof property related to money-laundering and matters connected therewithand incidental thereto.

B82. 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-laundering.This is markedly distinct from the process of investigating into scheduledoffence.

C83. It is pertinent to note that if the action taken by the Authorityunder the 2002 Act, including regarding searches and seizures, iseventually found to be without reasons recorded in writing, would entailpunishment for vexatious search under Section 62 of the 2002 Act. Suchbeing the stringent safeguards provided under Section 17 of the 2002Act and Rules framed regarding the process of searches and seizuresDconcerning the offence of money-laundering and for prevention ofmoney-laundering including attachment of proceeds of crime, it isunfathomable as to how the challenge under consideration can becountenanced. We may usefully advert to the decision of ConstitutionBench of this Court in Pooran Mal[523], which had dealt with similarEpower entrusted to the Director of Inspection or the Commissioner underthe Income-tax Act, 1961 (also see Income-Tax Officer, SpecialInvestigation Circle-B, Meerut[524]). To the same end is the decision inR.S. Seth Gopikrishan Agarwal vs. R.N. Sen, Assistant Collector ofCustoms & Ors.[525], dealing with Sections 105 and 136 of the CustomsAct. In the case of Dr. Partap Singh[526], this Court upheld theFdispensation provided in Section 37 of the FERA by adopting purposiveinterpretation to give full play to the legislative intent and negating theargument regarding incorporation of the provisions of the 1973 Code bypen 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 ActGimmediately after the search and seizure, the Authority conducting thesearch is obliged to forward copy of the reasons recorded and materials

523 Supra at Footnote No.416

524 Supra at Footnote No.424

525 (1967) 2 SCR 340 (also at Footnote No.417)H526 Supra at Footnote No.425

in his possession to the Adjudicating Authority in sealed envelope.This sealed envelope is required to be preserved for period as specifiedunder the Rules framed in that regard so that it is not tempered with inany manner and to ensure fairness of the procedure includingaccountability of the Authority. Not only that, in terms of Section 17(4)of the 2002 Act the Authority seizing the record or property is obliged tosubmit an application before the Adjudicating Authority within periodof thirty days therefrom for the retention of the said record andAdjudicating Authority in turn gives opportunity to be heard by issuingshow cause notice to the person concerned before passing order ofretention of record or property, as the case may be, under the 2002 Actand the Rules framed therefor. The Authorities carrying out search andseizure is also made accountable by providing for punishment underSection 62 of the 2002 Act for vexatious search and giving falseinformation. All these inbuilt safeguards prevent arbitrary exercise ormisuse of power by the authorities appointed under the 2002 Act.85. The emphasis placed on Section 102 of the 1973 Coderegarding seizure procedure by the petitioners, is of no avail. That provisiondoes not provide for any safeguard prior to seizure as is providedunder Section 17 of the 2002 Act and the Rules framed thereunder. Asnoted earlier, it can be made even by Head Constable as the expressionused is “any police officer” that too merely on the basis of an allegationor suspicion of commission of an offence. In case of search, Section165 of the 1973 Code empowers the officer in-charge of police stationor police officer making an investigation to take recourse to that in theevent he has reasonable grounds for believing that it would be necessaryto do so for investigating into any offence. This power can be exercisedby any police officer (irrespective of his rank) investigating into anoffence. Suffice it to observe that the power of search and seizureentrusted to the Authorities under Section 17 of the 2002 Act, is specialself-contained provision and is different from the general provisions inthe 1973 Code, which, therefore, ought to prevail in terms of Section 71of the 2002 Act. Further, in view of the inbuilt safeguards and stringentstipulations to be adhered to by the Authorities under the 2002 Act, itought to be regarded as reasonable provision having nexus with thepurposes and objects sought to be achieved by the 2002 Act. It is certainlynot an arbitrary power at all.

A86. It was urged that the Rule 3(2) proviso in the 2005 Rulesregarding forms, search and seizure or freezing and the manner offorwarding the reasons and material to the Adjudicating Authority,impounding and custody of records and the period of retention, remainedunamended despite deletion of the proviso in Section 17(1) of the 2002Act vide Finance (No.2) Act, 2019. In the first place, it is unfathomableBthat the effect of amending Act is being questioned on the basis ofunamended Rule. It is well-settled that if the Rule is not consistent withthe provisions of the Act, the amended provisions in the Act must prevail.The statute cannot be declared ultra vires on the basis of Rule framedunder the statute. The precondition in the proviso in Rule 3(2) cannot beCread into Section 17 of the 2002 Act, more so contrary to the legislativeintent in deleting the proviso in Section 17(1) of the 2002 Act. In anycase, it is open to the Central Government to take necessary correctivesteps to obviate confusion caused on account of the subject proviso, ifany.

DSEARCH OF PERSONS

87. The subject of search of persons is dealt with in Section 18 ofthe 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 pariEmateria with the proviso in Section 17(1) of the 2002 Act — stipulatingthat no search of any person shall be made unless in relation to thescheduled offence report has been forwarded to Magistrate underSection 157 of the 1973 Code, etc. The Section 18, as amended readsthus:

F“18. Search of persons.—(1) If an authority, authorised in thisbehalf by the Central Government by general or special order,has reason to believe (the reason for such belief to be recorded inwriting) that any person has secreted about his person or in anythingunder his possession, ownership or control, any record or proceedsof crime which may be useful for or relevant to any proceedingsGunder this Act, he may search that person and seize such recordor property which may be useful for or relevant to any proceedingsunder this Act:

527 [***]

527 Proviso omitted by the Finance (No.2) Act, 2019, sec. 198 (w.e.f. 1-8-2019).HEarlier the proviso was inserted by Act 21 of 2009, sec. 8(i) (w.e.f. 1-6-2009) and

(2) The authority, who has been authorised under sub-section (1)shall, immediately after search and seizure, forward copy of thereasons so recorded along with material in his possession, referredto in that sub-section, to the Adjudicating Authority in sealedenvelope, in the manner, as may be prescribed and suchAdjudicating Authority shall keep such reasons and material forsuch period, as may be prescribed.

(3) Where an authority is about to search any person, he shall, ifsuch person so requires, take such person within twenty-four hoursto the nearest gazetted officer, superior in rank to him, or aMagistrate:

Provided that the period of twenty-four hours shall excludethe time necessary for the journey undertaken to take such personto the nearest gazetted officer, superior in rank to him, orMagistrate’s Court.

(4) If the requisition under sub-section (3) is made, the authorityshall not detain the person for more than twenty-four hours priorto 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 excludethe time necessary for the journey from the place of detention tothe office of the Gazetted Officer, superior in rank to him, or theMagistrate’s Court.

(5) The Gazetted Officer or the Magistrate before whom anysuch person is brought shall, if he sees no reasonable ground for

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 thescheduled offence, report has been forwarded to Magistrate under section157 of the Code of Criminal Procedure, 1973 (2 of 1974) or complaint hasbeen filed by person, authorised to investigate the offence mentioned in theSchedule, before Magistrate or court for taking cognizance of the scheduledoffence, as the case may be, or in cases where such report is not required to beforwarded, similar report of information received or otherwise has beensubmitted by an officer authorised to investigate scheduled offence to anofficer not below the rank of Additional Secretary to the Government of Indiaor equivalent being head of the office or Ministry or Department or Unit, as thecase may be, or any other officer who may be authorised by the CentralGovernment, by notification, for this purpose”

[2022] 6 S.C.R.

Asearch, forthwith discharge such person but otherwise shall directthat 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 attendand witness the search, and the search shall be made in theBpresence of such persons.

(7) The authority shall prepare list of record or property seizedin the course of the search and obtain the signatures of thewitnesses on the list.

(8) No female shall be searched by any one except female.

(9) The authority shall record the statement of the person searchedunder sub-section (1) or sub-section (5) in respect of the recordsor proceeds of crime found or seized in the course of the search:528[***]

(10) The authority, seizing any record or property under sub-section(1) shall, within period of thirty days from such seizure, file anapplication requesting for retention of such record or property,before the Adjudicating Authority.”

For the reasons noted to negate the challenge to the deletion ofEproviso in Section 17(1) of the 2002 Act, the same would apply with fullforce for rejecting the same argument in respect of deletion of proviso inSection 18(1) of the 2002 Act. Suffice it to observe that even underSection 18 of the 2002 Act, the Authority authorised to exercise powerof search of person is obliged to adhere to identical inbuilt safeguards asin the case of exercise of power under Section 17 of the 2002 Act. InF

528 Proviso omitted by Act 21 of 2009, sec. 8(ii) (w.e.f. 1-6-2009). Proviso, beforeomission, stood as under:

“Provided that no search of any person shall be made unless, in relation to anoffence under:

(a) Paragraph 1 of Part or Paragraph 1 or Paragraph 2 or Paragraph 3 orGParagraph 4 or Paragraph 5 of Part of the Schedule, report has been forwardedto Magistrate under section 173 of the Code of Criminal Procedure, 1973 (2of 1974); or

(b) Paragraph 2 of Part of the Schedule, police report or complaint hasbeen filed for taking cognizance of an offence by the Special Court constitutedunder sub-section (1) of section 36 of the Narcotic Drugs and PsychotropicSubstances Act, 1985 (61 of 1985).”H

addition to the similar safeguards in terms of Section 18(3) of the 2002Act, the Authority is obliged to take the person who is about to be searchedto Gazetted Officer or Magistrate before the search of such personis carried out. The Constitution Bench of this Court while dealing withsimilar provisions of NDPS Act in State of Punjab vs. Baldev Singh[529]upheld the search of person procedure being fair and reasonableprocedure. In paragraph 25 of the said decision, this Court observed asfollows:

“25. To be searched before gazetted officer or Magistrate, ifthe suspect so requires, is an extremely valuable right which thelegislature has given to the person concerned having regard to thegrave consequences that may entail the possession of illicit articlesunder the NDPS Act. It appears to have been incorporated in theAct keeping in view the severity of the punishment. The rationalebehind the provision is even otherwise manifest. The search beforea gazetted officer or Magistrate would impart much moreauthenticity and creditworthiness to the search and seizureproceeding. It would also verily strengthen the prosecution case.There is, thus, no justification for the empowered officer, whogoes to search the person, on prior information, to effect the search,of not informing the person concerned of the existence of hisright to have his search conducted before gazetted officer or aMagistrate, so as to enable him to avail of that right. It is, however,not necessary to give the information to the person to be searchedabout his right in writing. It is sufficient if such information iscommunicated to the person concerned orally and as far aspossible in the presence of some independent and respectablepersons witnessing the arrest and search. The prosecution must,however, at the trial, establish that the empowered officer hadconveyed the information to the person concerned of his right ofbeing searched in the presence of Magistrate or gazettedofficer, at the time of the intended search. Courts have to besatisfied at the trial of the case about due compliance with therequirements provided in Section 50. No presumption underSection 54 of the Act can be raised against an accused, unless theprosecution establishes it to the satisfaction of the court, that therequirements of Section 50 were duly complied with.”

AAdditionally, under Section 18(5) of the 2002 Act, if the person tobe searched is taken to Gazetted Officer or the Magistrate, then suchOfficer or Magistrate may release the person if there is no ground forsearch and under Section 18(6), the Authority is obliged to call at leasttwo witnesses to attend to witness the search, in whose presence, thesearch is to be carried out. In terms of Section 18(7), the AuthorityBseizing any property during the search of such person has to prepare alist of the record or the property seized which is required to be signed bythe witnesses to ensure that no tempering thereof takes place later on.In case, search of female is to be carried out, in terms of Section18(8), it could be done only by female. Significantly, the AuthorityCseizing any record or property during the search of the person, is obligedto submit an application to the Adjudicating Authority within thirty daysfor permitting retention of record or property. On such application, theAdjudicating Authority gives opportunity of hearing to the personconcerned as to why record or property should not be retained in termsof Section 18(10). Such inbuilt safeguards are provided to secure theDinterest of the person being subjected to search, at the same time forstrengthening the mechanism regarding prevention of money-launderingand attachment of proceeds of crime. Merely because Section 165 ofthe 1973 Code provides for different mechanism regarding search bythe police officer, that will be of no consequence for dealing with theEinquiry/investigation and adjudication including prosecution under the 2002Act. Suffice it to observe that the provision in the form of Section 18, asamended, is special provision and is certainly not arbitrary much lessmanifestly arbitrary. Instead, we hold that the amended provision in Section18 has reasonable nexus with the purposes and objects sought to beachieved by the 2002 Act of prevention of money-laundering andFattachment and confiscation of property (proceeds of crime) involved inmoney-laundering, as also prosecution against the person concerned foroffence of money-laundering under Section 3 of the 2002 Act.

ARREST

G88. Section 19 of the 2002 Act postulates the manner in whicharrest of person involved in money-laundering can be effected. Sub-section (1) of Section 19 envisages that the Director, Deputy Director,Assistant Director, or any other officer authorised in this behalf by theCentral Government, if has material in his possession giving rise to reasonto believe that any person has been guilty of an offence punishable underH

the 2002 Act, he may arrest such person. Besides the power being investedin high-ranking officials, Section 19 provides for inbuilt safeguards to beadhered to by the authorised officers, such as of recording reasons forthe belief regarding the involvement of person in the offence of money-laundering. That has to be recorded in writing and while effecting arrestof the person, the grounds for such arrest are informed to that person.Further, the authorised officer has to forward copy of the order, alongwith the material in his possession, in sealed cover to the AdjudicatingAuthority, who in turn is obliged to preserve the same for the prescribedperiod as per the Rules. This safeguard is to ensure fairness, objectivityand accountability of the authorised officer in forming opinion as recordedin writing regarding the necessity to arrest the person being involved inoffence of money-laundering. Not only that, it is also the obligation ofthe authorised officer to produce the person so arrested before the SpecialCourt or Judicial Magistrate or Metropolitan Magistrate, as the casemay be, within twenty-four hours. This production is also to comply withthe requirement of Section 167 of the 1973 Code. There is nothing inSection 19, which is contrary to the requirement of production underSection 167 of the 1973 Code, but being an express statutory requirementunder the 2002 Act in terms of Section 19(3), it has to be complied bythe authorised officer. Section 19, as amended from time to time, readsthus:

“19. Power to arrest.—(1) If the Director, Deputy Director,Assistant Director or any other officer authorised in this behalfby the Central Government by general or special order, has on thebasis of material in his possession, reason to believe (the reasonfor such belief to be recorded in writing) that any person has beenguilty of an offence punishable under this Act, he may arrest suchperson and shall, as soon as may be, inform him of the groundsfor such arrest.

(2) The Director, Deputy Director, Assistant Director or any otherofficer shall, immediately after arrest of such person under sub-section (1), forward copy of the order along with the material inhis possession, referred to in that sub-section, to the AdjudicatingAuthority in sealed envelope, in the manner, as may be prescribedand such Adjudicating Authority shall keep such order and materialfor such period, as may be prescribed.

A(3) Every person arrested under sub-section (1) shall, withintwenty-four hours, be taken to [530][Special Court or] JudicialMagistrate or Metropolitan Magistrate, as the case may be,having jurisdiction:

Provided that the period of twenty-four hours shall excludeBthe time necessary for the journey from the place of arrest to the531[Special Court or] Magistrate’s Court.”

In the context of this provision, the challenge is that in absence ofany formal complaint being filed, arrest under Section 19 is beingmade by the authorised officers. Whereas, the purport of SectionC167 of the 1973 Code would suggest that the person can be arrestedby the jurisdictional police without warrant under Section 41 ofthe 1973 Code only upon registration of complaint under Section154 of the 1973 Code in connection with cognizable offence orpursuant to the order of the Court. Even, in case of arrest pursuantto the order of the Court, formal complaint against such personDaccusing him of being involved in commission of an offence isessential. Moreover, the person produced before the Court wouldbe at loss to know the grounds for arrest unless formal FIR orcomplaint is filed accusing him about his involvement in thecommission of an offence. The provision if interpreted to permitEthe authorised officer to arrest someone being involved in thecommission of offence of money-laundering without formalcomplaint against him, would be ex facie manifestly arbitrary andunconstitutional.

89. This argument clearly overlooks the overall scheme of theF2002 Act. As noticed earlier, it is comprehensive legislation, not limitedto provide for prosecution of person involved in the offence of money-laundering, but mainly intended to prevent money-laundering activity andconfiscate the proceeds of crime involved in money-laundering. It alsoprovides for prosecuting the person involved in such activity constitutingoffence of money-laundering. In other words, this legislation is anGamalgam of different facets including setting up of agencies andmechanisms for coordinating measures for combating money-laundering.

530 Ins. by Act 13 of 2018, sec. 208 (d)(i) (w.e.f. 19-4-2018, vide G.S.R. 383(E), dated19[th] 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), dated19[th] April, 2018).H

Chapter III is provision to effectuate these purposes and objectives byattachment, adjudication and confiscation. The adjudication is done bythe Adjudicating Authority to confirm the order of provisional attachmentin respect of proceeds of crime involved in money-laundering. Foraccomplishing that objective, the authorities appointed under ChapterVIII have been authorised to make inquiry into all matters by way ofsurvey, searches and seizures of records and property. These provisionsin no way invest power in the Authorities referred to in Chapter VIII ofthe 2002 Act to maintain law and order or for that matter, purelyinvestigating into criminal offence. The inquiry preceding filing of thecomplaint by the authorities under the 2002 Act, may have the semblanceof an investigation conducted by them. However, it is essentially an inquiryto collect evidence to facilitate the Adjudicating Authority to decide onthe confirmation of provisional attachment order, including to pass orderof confiscation, as result of which, the proceeds of crime would vest inthe Central Government in terms of Section 9 of the 2002 Act. In otherwords, the role of the Authorities appointed under Chapter VIII of the2002 Act is such that they are tasked with dual role of conducting inquiryand collect evidence to facilitate adjudication proceedings before theAdjudicating Authority in exercise of powers conferred upon them underChapters III and V of the 2002 Act and also to use the same materials tobolster the allegation against the person concerned by way of formalcomplaint to be filed for offence of money-laundering under the 2002Act before the Special Court, if the fact situation so warrant. It is not asif after every inquiry prosecution is launched against all persons found tobe involved in the commission of offence of money-laundering. It is alsonot unusual to provide for arrest of person during such inquiry beforefiling of complaint for indulging in alleged criminal activity. Therespondent has rightly adverted to somewhat similar provisions in otherlegislations, such as Section 35 of FERA and Section 102 of CustomsAct including the decisions of this Court upholding such power of arrestat the inquiry stage bestowed in the Authorities in the respectivelegislations. In Romesh Chandra Mehta[532], the Constitution Bench ofthis Court enunciated that Section 104 of the Customs Act confers powerto arrest upon the Custom Officer if he has reason to believe that anyperson in India or within the Indian Customs waters has been guilty ofan offence punishable under Section 135 of that Act. Again, in the caseof Padam Narain Aggarwal[533], while dealing with the provisions of

532 Supra at Footnote No.119

533 Supra at Footnote No.246

CDEFG

Athe Customs Act, it noted that the term “arrest” has neither been definedin the 1973 Code nor in the Indian Penal Code, 1860 nor in any otherenactment dealing with offences. This word has been derived from theFrench word “arrater” meaning “to stop or stay”. It signifies restraintof person. It is, thus, obliging the person to be obedient to law. Further,arrest may be defined as “the execution of the command of court ofBlaw or of duly authorised officer”. Even, this decision recognises thepower of the authorised officer to cause arrest during the inquiry to beconducted under the concerned legislations. While adverting to thesafeguards provided under that legislation before effecting such arrest,the Court noted as follows:C“Safeguards against abuse of power36. From the above discussion, it is amply clear that powerto arrest person by Customs Officer is statutory incharacter and cannot be interfered with. Such power of arrestcan be exercised only in those cases where the CustomsDOfficer has “reason to believe” that person has been guiltyof an offence punishable under Sections 132, 133, 135, 135-A or 136 of the Act. Thus, the power must be exercised onobjective facts of commission of an offence enumerated andthe Customs Officer has reason to believe that personEsought to be arrested has been guilty of commission of suchoffence. The power to arrest thus is circumscribed byobjective considerations and cannot be exercised on whims,caprice or fancy of the officer.

37. The section[534] also obliges the Customs Officer to inform theFperson arrested of the grounds of arrest as soon as may be. Thelaw requires such person to be produced before aMagistrate without unnecessary delay.

38. The law thus, on the one hand, allows Customs Officerto exercise power to arrest person who has committedGcertain offences, and on the other hand, takes due care toensure individual freedom and liberty by laying down normsand providing safeguards so that the power of arrest is notabused or misused by the authorities. ….”

(emphasis supplied)

The safeguards provided in the 2002 Act and the preconditions tobe fulfilled by the authorised officer before effecting arrest, as containedin Section 19 of the 2002 Act, are equally stringent and of higher standard.Those safeguards ensure that the authorised officers do not act arbitrarily,but make them accountable for their judgment about the necessity toarrest any person as being involved in the commission of offence ofmoney-laundering even before filing of the complaint before the SpecialCourt under Section 44(1)(b) of the 2002 Act in that regard. If the actionof the authorised officer is found to be vexatious, he can be proceededwith and inflicted with punishment specified under Section 62 of the2002 Act. The safeguards to be adhered to by the jurisdictional policeofficer before effecting arrest as stipulated in the 1973 Code, are certainlynot comparable. Suffice it to observe that this power has been given tothe high-ranking officials with further conditions to ensure that there isobjectivity and their own accountability in resorting to arrest of personeven before formal complaint is filed under Section 44(1)(b) of the2002 Act. Investing of power in the high-ranking officials in this regardhas stood the test of reasonableness in Premium Granites[535], whereinthe Court restated the position that requirement of giving reasons forexercise of power by itself excludes chances of arbitrariness. Further, inM/s. Sukhwinder Pal Bipan Kumar[536], the Court restated the positionthat where the discretion to apply the provisions of particular statute isleft with the Government or one of the highest officers, it will be presumedthat the discretion vested in such highest authority will not be abused.Additionally, the Central Government has framed Rules under Section73 in 2005, regarding the forms and the manner of forwarding copy oforder of arrest of person along with the material to the AdjudicatingAuthority and the period of its retention. In yet another decision in AhmedNoormohmed Bhatti[537], this Court opined that the provision cannot beheld to be unreasonable or arbitrary and, therefore, unconstitutional merelybecause the authority vested with the power may abuse his authority.(Also see Manzoor Ali Khan[538]).

90. Considering the above, we have no hesitation in upholding thevalidity of Section 19 of the 2002 Act. We reject the grounds pressedinto service to declare Section 19 of the 2002 Act as unconstitutional.

535 Supra at Footnote No.248

536 Supra at Footnote No.249

537 Supra at Footnote No.250

538 Supra at Footnote No.251

CDEF

AOn the other hand, we hold that such provision has reasonable nexuswith the purposes and objects sought to be achieved by the 2002 Act ofprevention of money-laundering and confiscation of proceeds of crimeinvolved in money-laundering, including to prosecute persons involved inthe process or activity connected with the proceeds of crime so as toensure that the proceeds of crime are not dealt with in any mannerBwhich may result in frustrating any proceedings relating to confiscationthereof.

BURDEN OF PROOF

91. The validity of Section 24 of the 2002 Act has been assailed.CThis section has been amended in 2013 vide Act 2 of 2013. Before thatamendment, it read thus:

“24. Burden of Proof.— When person is accused of havingcommitted the offence under section 3, the burden of provingthat proceeds of crime are untainted property shall be on theaccused.”D

The amendment of 2013 was necessitated because of therecommendations made by FATF in 2012, wherein it was noted that thecountries should adopt measures similar to those set forth in the ViennaConvention, Palermo Convention and Terrorist Financing Convention.EThe Objects and Reasons for effecting amendment as appended to theAmendment Bill read thus:

“The Prevention of Money Laundering Act, 2002 wasenacted to prevent money-laundering and to provide forconfiscation of property derived from, or involved in, money-Flaundering and for matters connected therewith or incidentalthereto. The aforesaid Act also addresses the internationalobligations under the Political Declaration and Global Programmeof Action adopted by General Assembly of the United Nations toprevent money-laundering. The Act was amended in the year2005 and 2009 to remove the difficulties arisen in implementationGof the Act.

The problem of money-laundering is no longer restricted tothe geo-political boundaries of any country. It is global menacethat cannot be contained by any nation alone. In view of this,India has become member of the Financial Action Task Force

and Asia Pacific Group on money-laundering, which are committedto the effective implementation and enforcement of internationallyaccepted standards against money-laundering and the financingof terrorism. Consequent to the submission of an action plan tothe Financial Action Task Force to bring anti money-launderinglegislation of India at par with the international standards and toobviate some of the deficiencies in the Act that have beenexperienced by the implementing agencies, the need to amendthe Prevention of Money-Laundering Act, 2002 becamenecessary.”

The Amendment Bill had proposed substitution of Section 24 asunder:

“24. In any proceedings relating to proceeds of crime under thisAct, unless the contrary is proved, it shall be presumed that suchproceeds of crime is involved in money-laundering.”

The Standing Committee of Finance then made somerecommendations as follows:

“The Committee recommend that the prescribed onus of proofthat the property in question is not out of proceeds of money-laundering crime, being not only on the accused but also on anyonewho is in possession of the proceeds of crime, should be subjectto adequate safeguards to protect the innocent.”

Finally, the provision came to be amended by Act 2 of 2013 whichcame into force with effect from 15.2.2013 and reads thus:

“[539][24. Burden of proof.— In any proceeding relating toproceeds of crime under this Act,—

(a) in the case of person charged with the offence of money-laundering under section 3, the Authority or Court shall, unlessthe contrary is proved, presume that such proceeds of crimeare involved in money-laundering; and

(b) in the case of any other person the Authority or Court, maypresume that such proceeds of crime are involved in money-laundering.]”

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).

AFrom the plain language of the amended provision, which is subjectmatter of assail in these cases being unconstitutional, clearly indicatesthat it concerns (all) proceeding(s) relating to proceeds of crime underthe 2002 Act. The expression “proceeding” has not been defined in the2002 Act or the 1973 Code. However, in the setting in which it has beenplaced in this provision, as rightly argued by the learned Additional SolicitorBGeneral for the Union of India, it must relate to the proceeding beforethe Adjudicating Authority or the Special Court. The proceeding beforethe authorities (referred to in Chapter VIII) relates to action takenregarding prevention of offence of money-laundering and ordering

provisional attachment of property derived or obtained, directly orCindirectly, by any person as result of criminal activity relating to ascheduled offence; and to inquire into all matters connected therewithand collect evidence to be presented before the Adjudicating Authorityfor consideration of application regarding confirmation of provisionalattachment order as per Section 8 of the 2002 Act. This provision (Section

24) must, however, apply to proceeding before the Adjudicating AuthorityDregarding confirmation of provisional attachment order and eventuallyfor ordering confiscation of the attached property for vesting in the CentralGovernment under Section 9 of the 2002 Act. This is reinforced fromthe purport of Section 23 of the 2002 Act. Further, it would also apply toproceeding before the Special Court empowered to try the offence ofEmoney-laundering under Section 3 of the 2002 Act upon presentation ofa complaint by the authority authorised as per Section 44(1)(b) of the2002 Act.

92. It is, thus, clear that this special provision regarding burden ofproof in any proceeding relating to proceeds of crime under this ActFwould apply to stated proceeding before the Adjudicating Authority andnot limited to the proceeding before the Special Court. That is evidentfrom 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 theG2002 Act to adjudicate on matters concerning confirmation of provisionalattachment order and eventual confiscation and vesting of the property,if the fact situation so warrant. It is an independent body, free from thecontrol of the Executive[540]. It is ordained to deal with civil aspects of theH540 See Pareena Swarup (supra at Footnote No.366)

action of attachment and confiscation of the proceeds of crime and notabout the criminality of the offence under Section 3 of the 2002 Act.When this provision is made applicable to the proceeding before theAuthority, it would not be necessary to follow the strict principle ofstandard of proof beyond reasonable doubt, as applicable in criminaltrials. That principle will have no bearing on the proceeding before theAuthority. However, when the same evidence and provision is reliedupon in the proceeding before the Special Court regarding trial of offenceof money-laundering under Section 3 of the 2002 Act, it would have adifferent connotation in the context of 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 anyother person. Taking the second part first, such other person wouldobviously mean 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 person is charged with the offence of money-laundering under Section 3 of the 2002 Act owing to complaint filed bythe authority authorised before the Special Court, Clause (a) would triggerin. As regards the second category [Clause (b)] of person, the expressionused is “may presume”. Whereas, qua the first category [covered underClause (a)] the expression used is “shall, unless the contrary is proved,presume”. In this category, if charge is already framed against theperson for having committed offence of money-laundering, it wouldpresuppose that the Court framing charge against him was prima facieconvinced that the materials placed before it had disclosed grave suspicionagainst such person. In such case, once the issue of admissibility ofmaterials supporting the factum of grave suspicion about the involvementof 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 thatsuspicion. It would then not be case of reversal of burden of proof assuch, but one of shifting of burden on him to show that no offence ofmoney-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 ofthe 2002 Act, it may be appropriate to visit the definition of expressionsin the Evidence Act, relevant to answer the issue of standard of proof inany proceeding. In the interpretation clause, Section 3 of the EvidenceAct, expression “fact” has been defined as follows:

A“3. Interpretation clause.—In this Act the following words andexpressions are used in the following senses, unless contraryintention appears from the context:—

“Fact”.––”Fact” means and includes––B(1) any thing, state of things, or relation of things, capable of beingperceived by the senses;

(2) any mental condition of which any person is conscious.”

We need not dilate on the expression “relevant”, “facts in issue”Cand “document”. We may usefully advert to the definition of “evidence”,which reads thus:

“3. Interpretation clause.—In this Act the following words andexpressions are used in the following senses, unless contraryintention appears from the context:—

“Evidence”. ––”Evidence” means and includes––

(1) all statements which the Court permits or requires to bemade before it by witnesses, in relation to matters of fact underEinquiry,

such statements are called oral evidence;

(2) [541][all documents including electronic records produced forthe inspection of the Court],

Fsuch documents are called documentary evidence.”The other relevant definitions are:

“3. Interpretation clause.—In this Act the following wordsand expressions are used in the following senses, unless acontrary intention appears from the context:—

“Proved”.––A fact is said to be proved when, afterconsidering the matters before it, the Court either believes it to

541 Subs. by Act 21 of 2000, sec. 92 and Sch.II-1(a), for “all documents produced for theHinspection of the Court” (w.e.f. 17-10-2000)

exist, or considers its existence so probable that prudent manought, under the circumstances of the particular case, to actupon the supposition that it exists.

“Disproved”.––A fact is said to be disproved when, afterconsidering the matters before it, the Court either believes thatit does not exist, or considers its non-existence so probablethat prudent man ought, under the circumstances of theparticular case, to act upon the supposition that it does notexist.

“Not proved”. –– fact is said not to be proved when it isneither proved nor disproved.

4. “May presume”.––Whenever it is provided by this Actthat the Court may presume fact, it may either regard suchfact as proved, unless and until it is disproved, or may call forproof of it.

“Shall presume”.––Whenever it is directed by this Act thatthe Court shall presume fact, it shall regard such fact asproved, unless and until it is disproved.

“Conclusive proof”.––When one fact is declared by thisAct to be conclusive proof of another, the Court shall, on proofof the one fact, regard the other as proved, and shall not allowevidence to be given for the purpose of disproving it.”

As aforementioned, standard of proof varies depending on thenature of proceedings. In civil actions, it can be preponderance ofprobability but in criminal actions, unless the law provides to the contrary,the onus is on the prosecution to establish the allegations and facts inissue beyond reasonable doubt. Furthermore, the burden or onus ofestablishing the facts in issue, keeps on shifting and is on the party whoasserts particular fact.

95. Indeed, in criminal trial, the principle of innocence of theaccused/offender is regarded as human right — as held by this Courtin Narendra Singh & Anr. vs. State of M.P.[542]. However, thatpresumption can be interdicted by law made by the Parliament/

ALegislature. It is well-settled that statutory provisions regardingpresumptions are nothing but rule of evidence. As observed by this Courtin State of W.B. vs. Mir Mohammad Omar & Ors.[543], the pristine rulethat the burden of proof is on the prosecution to prove the guilt of theaccused should not be taken as fossilised doctrine as though it admitsno process of intelligent reasoning. The Court went on to observe thatBthe doctrine of presumption is not alien to such rule, nor would it impairthe temper of the rule. On the other hand, if the traditional Rule relatingto burden of proof of the prosecution is allowed to be wrapped in pedanticcoverage, the offenders in serious offences would be the majorbeneficiaries and the society would be the casualty. This observationChas been quoted with approval in Sucha Singh[544]. In the latter judgment,the Court relying upon other decisions including in Shambhu Nath Mehravs. The State of Ajmer[545], noted that the provisions, such as Section106[546] of the Evidence Act, is not intended to relieve the prosecution ofits burden to prove the guilt of the accused beyond reasonable doubt, but

the Section would apply to cases where the prosecution has succeededDin proving facts for which reasonable inference can be drawn regardingthe existence of certain other facts, unless the accused by virtue ofspecial knowledge regarding such facts failed to offer any explanationwhich might drive the Court to draw different inference. The Courtquoted with approval paragraph 33 of the decision in Shambhu NathEMehra[547], which reads thus:

“33. Presumption of fact is an inference as to the existenceof one fact from the existence of some other facts, unlessthe truth of such inference is disproved. Presumption offact is rule in law of evidence that fact otherwise doubtfulFmay be inferred from certain other proved facts. Wheninferring the existence of fact from other set of provedfacts, the court exercises process of reasoning and reachesa logical conclusion as the most probable position. Theabove principle has gained legislative recognition in India

G543 (2000) 8 SCC 382

544 Supra at Footnote No.381

545 AIR 1956 SC 404

546 106. Burden of proving fact especially within knowledge. –– When any fact isespecially within the knowledge of any person, the burden of proving that fact is uponhim.H547 Supra at Footnote No.545

when Section 114 is incorporated in the Evidence Act. Itempowers the court to presume the existence of any factwhich it thinks likely to have happened. In that processthe court shall have regard to the common course of naturalevents, human conduct etc. in relation to the facts of thecase.”

(emphasis supplied)

On similar lines, this Court in Hiten P. Dalal[548], in paragraphs 22and 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 theamounts for which the cheques are drawn, as noted in State ofMadras v. A. Vaidyanatha Iyer[549]it is obligatory on the court toraise this presumption in every case where the factual basis forthe raising of the presumption had been established. “It introducesan exception to the general rule as to the burden of proof in criminalcases and shifts the onus on to the accused.” (Ibid. at p. 65, para14.) Such presumption is presumption of law, asdistinguished from presumption of fact which describesprovisions by which the court “may presume” certain stateof affairs. Presumptions are rules of evidence and do notconflict with the presumption of innocence, because by thelatter, all that is meant is that the prosecution is obliged toprove the case against the accused beyond reasonabledoubt. The obligation on the prosecution may be dischargedwith the help of presumptions of law or fact unless theaccused adduces evidence showing the reasonablepossibility of the non-existence of the presumed fact.

23. In other words, provided the facts required to form the basisof presumption of law exist, no discretion is left with the courtbut to draw the statutory conclusion, but this does not precludethe person against whom the presumption is drawn from rebuttingit and proving the contrary. fact is said to be proved when,

“after considering the matters before it, the court either believesit to exist, or considers its existence so probable that prudent

548 Supra at Footnote No.378

549 AIR 1958 SC 61 (also at Footnote No.392)

CDEFG

Aman ought, under the circumstances of the particular case, toact upon the supposition that it exists”[550].

Therefore, the rebuttal does not have to be conclusively establishedbut such evidence must be adduced before the court in support ofthe defence that the court must either believe the defence to existBor consider its existence to be reasonably probable, the standardof reasonability being that of the “prudent man”.”

(emphasis supplied)

The respondents have rightly invited our attention to several otherstatutes[551] providing for shifting of the burden of proof on the accused,Cas in the case of Section 24 of the 2002 Act. The constitutional validityof similar provisions has been upheld by this Court from time to time. Inthe case of Noor Aga[552], it has been observed that the Court whileinterpreting the provision, such as Section 24 of the 2002 Act, must keepin mind that the concerned Act has been the outcome of the mandateDcontained in the international convention, as is the case on hand. Further,only because the burden of proof under certain circumstances is placedon the accused, the same, by itself would not render the legal provisionunconstitutional. The question whether the burden on the accused is alegal burden or an evidentiary burden, would depend on the statute andits purport and object. Indeed, it must pass the test of the doctrine ofEproportionality. In any case, as the burden on the accused would be onlyan evidentiary burden, it can be discharged by the accused by producingevidence regarding the facts within his personal knowledge. Again, inthe case of Seema Silk & Sarees[553], this Court restated that legal550 Section 3, Evidence ActF551 (i) Section 57A of the (Kerala) Abkari Act, I of 1077; (ii) Sections 105, 106, 113A and113B of the Indian Evidence Act, 1872; (iii) Section 139 of the Negotiable InstrumentsAct, 1881; (iv) Section 9 of the Opium Act, 1878; (v) Section 9B of the Explosives Act1884; (vi) Section 7 of the Prevention of Food Adulteration Act, 1954; (vii) Section 10Cof 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 ofthe Gold (Control) Act, 1968; (xi) Section 57 of the Wild Life (Protection) Act, 1972;G(xii) Section 18 of the Foreign Exchange Regulation Act, 1973; (xiii) Sections 35 and 54of the Narcotic Drugs and Psychotropic Substances Act, 1985; (xiv) Sections 3C and3D of the Epidemic Diseases Act, 1897; (xv) Section 21 of the Terrorist and DisruptiveActivities (Prevention) Act, 1987; (xvi) Section 20 of the Prevention of CorruptionAct, 1988; and (xvii) Sections 29 and 30 of the Protection of Children from SexualOffences Act, 2012.552 Supra at Footnote No.384 (also at Footnote No.55)H553 Supra at Footnote No.385

provision does not become unconstitutional only because it provides forreverse burden as it is only rule of evidence. So long as the accused isentitled to show that he has not violated the provisions of the Act, such alegal provision cannot be regarded as unconstitutional. For, the accusedis then entitled to rebut the presumption.

96. Suffice it to observe that the change effected in Section 24 ofthe 2002 Act is the outcome of the mandate of international Conventionsand recommendations made in that regard. Further, keeping in mind thelegislative scheme and the purposes and objects sought to be achievedby the 2002 Act coupled with the fact that the person charged or anyother person involved in money-laundering, would get opportunity todisclose information and evidence to rebut the legal presumption in respectof facts within his personal knowledge during the proceeding before theAuthority or the Special Court, by no stretch of imagination, provision inthe form of Section 24 of the 2002 Act, can be regarded as unconstitutional.It has reasonable nexus with the purposes and objects sought to beachieved by the 2002 Act. In any case, it cannot be perceived as manifestlyarbitrary as is sought to be urged before us.

97. Be that as it may, we may now proceed to decipher the purportof Section 24 of the 2002 Act. In the first place, it must be noticed thatthe legal presumption in either case is about the involvement of proceedsof crime in money-laundering. This fact becomes relevant, only if, theprosecution or the authorities have succeeded in establishing at leastthree basic or foundational facts. First, that the criminal activity relatingto scheduled offence has been committed. Second, that the property inquestion has been derived or obtained, directly or indirectly, by any personas result of that criminal activity. Third, the person concerned is, directlyor indirectly, involved in any process or activity connected with the saidproperty being proceeds of crime. On establishing the fact that thereexisted proceeds of crime and the person concerned was involved inany process or activity connected therewith, itself, constitutes offenceof money-laundering. The nature of process or activity has now beenelaborated in the form of Explanation inserted vide Finance (No.2) Act,2019. On establishing these foundational facts in terms of Section 24 ofthe 2002 Act, legal presumption would arise that such proceeds ofcrime are involved in money-laundering. The fact that the personconcerned had no causal connection with such proceeds of crime andhe is able to disprove the fact about his involvement in any process or

Aactivity connected therewith, by producing evidence in that regard, thelegal presumption would stand rebutted.

98. The person falling under the first category being person chargedwith the offence of money-laundering, presupposes that formalcomplaint has already been filed against him by the authority authorisedBnaming him as an accused in the commission of offence of money-laundering. As observed in P.N. Krishna Lal[554], the Court cannot beoblivious about the purpose of the law. Further, the special provisions orthe special enactments as in this case is required to tackle new situationscreated by human proclivity to amass wealth at the altar of formalfinancial system of the country including its sovereignty and integrity.CWhile dealing with such provision, reading it down would also defeat thelegislative intent.99. Be it noted that the legal presumption under Section 24(a) ofthe 2002 Act, would apply when the person is charged with the offenceof money-laundering and his direct or indirect involvement in any processDor activity connected with the proceeds of crime, is established. Theexistence of proceeds of crime is, therefore, foundational fact, to beestablished by the prosecution, including the involvement of the personin any process or activity connected therewith. Once these foundationalfacts are established by the prosecution, the onus must then shift on theEperson facing charge of offence of money-laundering — to rebut thelegal 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 doesnot follow that the legal presumption that the proceeds of crime areinvolved in money-laundering is to be invoked by the Authority or theFCourt, without providing an opportunity to the person to rebut the sameby leading evidence within his personal knowledge[555].

100. Such onus also flows from the purport of Section 106 of theEvidence Act. Whereby, he must rebut the legal presumption in the mannerhe chooses to do and as is permissible in law, including by replying underGSection 313 of the 1973 Code or even by cross-examining prosecutionwitnesses. The person would get enough opportunity in the proceedingbefore the Authority or the Court, as the case may be. He may be ableto discharge his burden by showing that he is not involved in any process

554 Supra at Footnote No.382

555 See Sarbananda Sonowal (supra at Footnote No.389)

or activity connected with the proceeds of crime. In any case, in termsof Section 114[556] of the Evidence Act, it is open to the Court to presumethe existence of any fact which it thinks likely to have happened, regardbeing had to the common course of natural events, human conduct, andpublic and private business, in their relation to the facts of the particularcase. Considering the above, the provision under consideration [Section24(a)] by no standards can be said to be unreasonable much lessmanifestly arbitrary and unconstitutional.

101. Reverting to Section 24(b) of the 2002 Act, that concernsperson other than the person charged with the offence of money-laundering under Section 3 of the 2002 Act. In his case, the expressionused in Clause (b) is “may presume”. This is essentially factualpresumption or discretionary presumption as expounded by this Court inA. Vaidyanatha Iyer[557]. In paragraph 14 of the decision, the Courtnoted the marked distinction between the words “shall presume” and“may presume” as follows:

“(14). …… Therefore where it is proved that gratificationhas been accepted, then the presumption shall at once ariseunder the section. It introduces an exception to the generalrule as to the burden of proof in criminal cases and shifts theonus on to the accused. It may here be mentioned that thelegislature has chosen to use the words ‘shall presume’and not ‘may presume’, the former presumption of lawand latter of fact. Both these phrases have been definedin the Indian Evidence Act, no doubt for the purpose ofthat Act, but S. 4 of the Prevention of Corruption Act isin pari materia with the Evidence Act because it dealswith branch of law of evidence e.g., presumptions, andtherefore should have the same meaning. “Shallpresume” has been defined in the Evidence Act asfollows:

“Whenever it is directed by this Act that theCourt shall presume fact, it shall regard such fact asproved unless and until it is disproved.”

556 114. Court may presume existence of certain facts.–– The Court may presumethe existence of any fact which it thinks likely to have happened, regard being had tothe 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)

624SUPREME COURT REPORTS

It is presumption of law and therefore it is obligatoryon the court to raise this presumption in every casebrought under S. 4 of the Prevention of CorruptionAct because unlike the case of presumption of fact,presumptions of law constitute branch ofjurisprudence. …...”

(emphasis supplied)

Again, in the case of M. Narsinga Rao vs. State of A.P.[558], theCourt observed in paragraphs 13 and 17 as follows:

“13. Before proceeding further, we may point out that theCexpressions “may presume” and “shall presume” aredefined in Section 4 of the Evidence Act. The presumptionsfalling under the former category are compendiously knownas “factual presumptions” or “discretionary presumptions”and those falling under the latter as “legal presumptions”Dor “compulsory presumptions”. When the expression “shallbe presumed” is employed in Section 20(1) of the Act itmust have the same import of compulsion.

17. Presumption is an inference of certain fact drawn fromEother proved facts. While inferring the existence of fact fromanother, the court is only applying process of intelligent reasoningwhich the mind of prudent man would do under similarcircumstances. Presumption is not the final conclusion to bedrawn from other facts. But it could as well be final if itFremains undisturbed later. Presumption in law of evidenceis rule indicating the stage of shifting the burden of proof.From certain fact or facts the court can draw an inference andthat would remain until such inference is either disproved ordispelled.”

(emphasis supplied)

Notably, the legal presumption in the context of Section 24(b) ofthe 2002 Act is attracted once the foundational fact of existence ofproceeds of crime and the link of such person therewith in the processor activity is established by the prosecution. The stated legal presumption

can be invoked in the proceeding before the Adjudicating Authority orthe Court, as the case may be. The legal presumption is about the factthat the proceeds of crime are involved in money-laundering which,however, can be rebutted by the person by producing evidence withinhis personal knowledge.

102. Be it noted that the presumption under Section 24(b) of the2002 Act is not mandatory legal presumption, unlike in the case fallingunder the other category, namely Section 24(a). If the person has notbeen charged with the offence of money-laundering, the legalpresumption under Section 24(b) can be invoked by the AdjudicatingAuthority or the Court, as the case may be. More or less, same logic asalready noted while dealing with the efficacy of Section 24(a) of the2002 Act, would apply even to the category of person covered by Section24(b), in equal measure.

103. We, therefore, hold that the provision under considerationnamely Section 24 has reasonable nexus with the purposes and objectssought to be achieved by the 2002 Act and cannot be regarded asmanifestly arbitrary or unconstitutional.

SPECIAL COURTS

104. The expression “Special Court” has been defined in Section2(1)(z), which in turn refers to Section 43. Section 43 reads thus:

“CHAPTER VII

SPECIAL COURTS

43. Special Courts.—(1) The Central Government, inconsultation with the Chief Justice of the High Court, shall, fortrial of offence punishable under section 4, by notification, designateone or more Courts of Session as Special Court or Special Courtsfor such area or areas or for such case or class or group of casesas may be specified in the notification.

Explanation.—In this sub-section, “High Court” means theHigh Court of the State in which Sessions Court designated asSpecial Court was functioning immediately before such designation.

(2) While trying an offence under this Act, Special Court shallalso try an offence, other than an offence referred to in sub-section (1), with which the accused may, under the Code of

[2022] 6 S.C.R.

ACriminal Procedure, 1973 (2 of 1974), be charged at the sametrial.”

The Special Courts established under Section 43 of the 2002 Actare empowered to try the offences under the 2002 Act. Section 44 bestowsthat power in the Special Courts. The same reads thus:B“44. Offences triable by Special Courts.—(1) Notwithstandinganything contained in the Code of Criminal Procedure, 1973 (2 of1974),—

559[(a) an offence punishable under section 4 and any scheduledoffence connected to the offence under that section shall be triableCby the Special Court constituted for the area in which the offencehas been committed:

Provided that the Special Court, trying scheduled offence beforethe commencement of this Act, shall continue to try such scheduledoffence; or]

D(b) Special Court may, [560][***] upon complaint made by anauthority authorised in this behalf under this Act take [561][cognizanceof offence under section 3, without the accused being committedto it for trial].

562[Provided that after conclusion of investigation, if no offenceEof money-laundering is made out requiring filing of such complaint,the said authority shall submit closure report before the SpecialCourt; or]

559Subs. by Act 2 of 2013, sec. 21(i), for clause (a) (w.e.f. 15-2-2013, vide S.O. 343(E),Fdated 8-2-2013). Clause (a) before substitution, stood as under:

“(a) the scheduled offence and offence punishable under section 4 shall betriable only by the Special Court constituted for the area in which the offencehas been committed:

Provided that the Special Court, trying scheduled offence before thecommencement of this Act, shall continue to try such scheduled offence; or”

G560 The words “upon perusal of police report of the facts which constitute an offenceunder 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 theaccused 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)H

563[(c) if the court which has taken cognizance of the scheduledoffence is other than the Special Court which has taken cognizanceof the complaint of the offence of money-laundering under sub-clause (b), it shall, on an application by the authority authorised tofile complaint under this Act, commit the case relating to thescheduled offence to the Special Court and the Special Courtshall, on receipt of such case proceed to deal with it from thestage at which it is committed.

(d) Special Court while trying the scheduled offence or theoffence of money-laundering shall hold trial in accordance withthe provisions of the Code of Criminal Procedure, 1973 (2 of 1974)as it applies to trial before Court of Session.]

564[Explanation.—For the removal of doubts, it is clarified that,—

(i) the jurisdiction of the Special Court while dealing with theoffence under this Act, during investigation, enquiry or trialunder this Act, shall not be dependent upon any orders passedin respect of the scheduled offence, and the trial of both setsof offences by the same court shall not be construed as jointtrial;

(ii) the complaint shall be deemed to include any subsequentcomplaint in respect of further investigation that may beconducted 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 inthe original complaint or not.]

(2) Nothing contained in this section shall be deemed to affect thespecial powers of the High Court regarding bail under section 439of the Code of Criminal Procedure, 1973 (2 of 1974) and the HighCourt may exercise such powers including the power under clause(b) of sub-section (1) of that section as if the reference to“Magistrate” in that section includes also reference to “SpecialCourt” designated under section 43.”

This provision opens with non-obstante clause making it clearthat the dispensation provided therein is notwithstanding anything

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)

Acontained in the 1973 Code regarding the matters provided therein inrelation to trials concerning offence of money-laundering to be conductedby the Special Court. This provision has undergone amendment vide Act20 of 2005, Act 2 of 2013 and Finance (No.2) Act, 2019. In the presentset of matters, we are essentially concerned with the provision as obtainingafter Act 2 of 2013 and the subsequent amendment vide Finance (No.2)BAct, 2019. To begin with, Clause (a) in sub-section (1) of Section 44, asexisted prior to amendment Act 2 of 2013, stood thus:

“44. Offences triable by Special Courts.—(1) Notwithstandinganything contained in the Code of Criminal Procedure, 1973 (2 of1974),—C

(a) the scheduled offence and offence punishable under Section4 shall be triable only by the Special Court constituted for the areain which the offence has been committed:

Provided that the Special Court, trying scheduled offenceDbefore the commencement of this Act, shall continue to try suchscheduled offence; or.”

Post amendment of 2013 and as applicable to this date, Clause(a) reads thus:

“44. Offences triable by Special Courts.—(1) NotwithstandingEanything contained in the Code of Criminal Procedure, 1973 (2 of1974),—

565[(a) an offence punishable under section 4 and any scheduledoffence connected to the offence under that section shall be triableby the Special Court constituted for the area in which the offenceFhas been committed:

Provided that the Special Court, trying scheduled offence beforethe commencement of this Act, shall continue to try such scheduledoffence; or];

….”GThe amendment of 2013 in fact clarifies the dispensation to befollowed in regard to trials concerning offence of money-laundering underthis Act and the trial in relation to scheduled offence including before the

565 Subs. by Act 2 of 2013, sec. 21(i), for clause (a) (w.e.f. 15-2-2013, vide S.O. 343(E),Hdated 8-2-2013).

Special Court trying such (scheduled) offence. By virtue of this clause,the trials regarding the offence of money-laundering need to proceedbefore the Special Court constituted for the area in which the offence ofmoney-laundering has been committed. In case the scheduled offenceis triable by Special Court under the special enactment elsewhere, theprovision, as amended, makes it amply clear that both the trials aftercoming into effect of this Act need to proceed independently, but in thearea where the offence of money-laundering has been committed.105. In that, the offence of money-laundering ought to proceedfor trial only before the Special Court designated to try money-launderingoffences where the offence of money-laundering has been committed.This is special enactment and being later law, would prevail over anyother law for the time being in force in terms of Section 71 of the 2002Act.

106. The proviso in Clause (a) of sub-section (1) of Section 44, isin the nature of an exception. It predicates that before the commencementof this Act, if the Special Court elsewhere was already trying thescheduled offence, shall continue to try the same. Prima facie, it ispossible to take the view that the effect of this proviso, which has comein 2013, may have retrospective effect. However, no specific case hasbeen brought to our notice wherein the effect of such amendment isrequired to be examined. Accordingly, it is not necessary to dilate on thisaspect any further.

107. This stipulation, however, will have to be regarded as directoryprovision. We say so because in given case, the offence of money-laundering may have been committed at place x, which may be in oneState, but the property which is subject matter of money-laundering mayhave been derived or obtained, directly or indirectly, as result of criminalactivity relating to scheduled offence committed at more than oneplace including in multiple States throughout the country. In such case,it will not be open to the Special Court at place x to transfer all othercases in the area (even outside the State). If the provision is to beinterpreted otherwise, it would have serious consequences on the trialswhich are pending in connection with the scheduled offences includingbefore the Special Court elsewhere. This provision, therefore, needs tobe read down to mean that as far as possible, the trial of scheduledoffence before the Special Court under the concerned law, if in differentarea, that Special Court may continue to try such scheduled offence.

AFor, the trial of the scheduled offence and the trial in connection with themoney-laundering are in any way required to proceed independently.That is because, the offence of money-laundering by itself is anindependent offence in respect of the process and activity connectedwith the proceeds of crime which may have been derived or obtained,directly or indirectly, by any person as result of criminal activity relatingBto scheduled offence.

108. The stipulation in Clause (b) of sub-section (1) of Section 44has 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:C

“44. Offences triable by Special Courts.—(1) Notwithstandinganything contained in the Code of Criminal Procedure, 1973 (2 of1974),—

D(b) Special Court may, [566][***] upon complaint made by anauthority authorised in this behalf under this Act take [567][cognizanceof offence under section 3, without the accused being committedto it for trial];

ELater, proviso came to be inserted vide Finance (No.2) Act,2019, which reads thus:

“44. Offences triable by Special Courts.—(1) Notwithstandinganything contained in the Code of Criminal Procedure, 1973 (2 of1974),—F

568[Provided that after conclusion of investigation, if no offenceof money-laundering is made out requiring filing of such complaint,G

566 The words “upon perusal of police report of the facts which constitute an offenceunder 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 theaccused is committed to it for trial” (w.e.f. 15-2-2013, vide S.O. 343(E), dated 8-2-2013).H568 Ins. by the Finance (No.2) Act, 2019, sec. 199(i) (w.e.f. 1-8-2019).

the said authority shall submit closure report before the SpecialCourt; or]

Clause (b) of sub-section (1) of Section 44 before amendment of2019 envisaged that the Special Court upon complaint made by anyauthority authorised in this behalf under this Act, could take cognizanceof offence of money-laundering under Section 3 of the 2002 Act withoutthe accused being committed to it for trial. This would mean that if theaccused was already in custody and facing trial in respect of scheduledoffence elsewhere and is not required to be produced before the SpecialCourt (PMLA) at the time of taking cognizance on the complaint filedby the authority authorised. This provision again must be regarded asdirectory or discretionary provision and the Special Court trying theoffence of money-laundering need not insist for producing the accusedbefore 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 violatesany 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 permitsthe Authority authorised to file closure report before the Special Courtin case it is of the opinion that no offence of money-laundering has beenmade out, requiring filing of such complaint. This provision is only todispel the doubt that in the event the person has been arrested by theofficer authorised under Section 19 of this Act on the basis of material inhis possession and having reason to believe and recorded in writing ofbeing guilty of an offence punishable under this Act, but after the inquirydone by him in exercise of powers under Chapters V and VIII of the2002 Act, he forms an opinion that no offence of money-laundering ismade out, requiring filing of complaint, it is open to him to file closurereport before the Special Court disclosing that position. The provisowould, thus, come into play in such cases where the complaint is yet tobe filed owing to the pendency of inquiry before the authorities, underChapters V and VIII of the 2002 Act. In that view of the matter andmore so keeping in mind the purposes and objects behind the enactmentof 2002 Act, such provision must be regarded as having reasonablenexus with the purposes and objects sought to be achieved by the 2002

AAct. Accordingly, for the view taken by us, we do not find any dichotomyin these provisions, much less being manifestly arbitrary orunconstitutional.

110. We now revert to Clause (c) of sub-section (1) of Section 44of the 2002 Act. The same has undergone amendment vide Act 2 ofB2013 and post that amendment, it reads thus:

“44. Offences triable by Special Courts.—(1) Notwithstandinganything contained in the Code of Criminal Procedure, 1973 (2 of1974),—

(a)***C

569[(c) if the court which has taken cognizance of the scheduledoffence is other than the Special Court which has taken cognizanceof the complaint of the offence of money-laundering under sub-Dclause (b), it shall, on an application by the authority authorised tofile complaint under this Act, commit the case relating to thescheduled offence to the Special Court and the Special Courtshall, on receipt of such case proceed to deal with it from thestage at which it is committed.]”

We must reconcile this provision with Clause (a) of sub-sectionE(1) of Section 44. That provision has already been elaborated in theearlier part of this judgment and read down to mean that it is an enablingand discretionary provision. The same consideration must be kept inmind by the Special Court while considering the application filed in termsof this clause. For, this clause also recognises that the trial of scheduledFoffence and the trial concerning offence of money-laundering need toproceed independently, even though it may be tried by the same SpecialCourt as both are distinct and independent offences. In that, the offenceof money-laundering is and can be only in relation to the process oractivity connected with proceeds of crime and has nothing to do with thecriminal activity relating to scheduled offence as such.G

111. In the context of this provision, it was emphatically arguedbefore us by the petitioners that it would take away one right of appeal,otherwise available under the 1973 Code. Resultantly, Section 44(1)(c)

569 Ins. by Act 2 of 2013, sec. 21(iii) (w.e.f. 15-2-2013, vide S.O. 343(E), dated 8-2-H2013)

of the 2002 Act in particular, is unconstitutional. To buttress this submission,reliance has been placed on the dictum in A.R. Antulay[570]. However,this ground need not detain us in view of the just stand taken by thelearned Additional Solicitor General appearing for Union of India relyingon the decision of this Court in State (Through Central Bureau ofInvestigation) vs. Kalyan Singh (Former Chief Minister of UttarPradesh) & Ors.[571], which has considered similar challenge. The latterdecision has distinguished the exposition in A.R. Antulay[572]. In that, thecore issue considered in A.R. Antulay[573]was whether the High Courtwas competent to transfer the criminal trial pending before the SpecialCourt dealing with the offence of PC Act, to itself by invoking powersunder Section 407 of the 1973 Code. The Court answered the same inthe negative and held that such power does not exist in the High Courtand it would inevitably violate Article 21 of the Constitution. However,we are dealing with the dispensation provided by the law made by theParliament in the form of 2002 Act. This being special legislation andkeeping in view the purport of Sections 65 and 71 of the 2002 Act, it isnot possible to countenance the ground of challenge under consideration.We may usefully refer to paragraph 28 of Kalyan Singh[574], which readsthus:

“28. In the present case, the power of transfer is beingexercised to transfer case from one Special Judge toanother Special Judge, and not to the High Court. The factthat one Special Judge happens to be Magistrate, whereasthe other Special Judge has committed the case to Courtof Session would not make any difference as, as has beenstated hereinabove, even right of appeal from aMagistrate to the Sessions Court, and from the SessionsCourt to the High Court could be taken away under theprocedure established by law i.e. by virtue of Sections 407(1)and (8) if the case is required to be transferred from theMagistrate at Rae Bareilly to the High Court itself. Hence,under Section 407, even if 2 tiers of appeal are done awaywith, there is no infraction of Article 21 as such taking away

570 Supra at Footnote No.134

571 (2017) 7 SCC 444

572 Supra at Footnote No.134

573 Supra at Footnote No.134

574 Supra at Footnote No.571

EFG

Aof the right of appeal is expressly contemplated by Section407(1)(iv) read with Section 407(8). In the circumstances,Antulay[575]judgment which dealt with the right of asubstantive appeal from Special Judge to the High Courtbeing taken away by an order of transfer contrary to thenon obstante clause in Section 7(1) of the Criminal LawBAmendment Act, 1952 would not apply in the facts andcircumstances before us.”

(emphasis supplied)

Applying the principle underlying this decision, we have noChesitation in rejecting the challenge to Section 44 as unconstitutionalbeing violative of Articles 14, 20(3) and 21 of the Constitution.

112. Reverting to Clause (d) of sub-section (1) of Section 44, itpostulates that Special Court while trying the scheduled offence oroffence of money-laundering shall hold trial in accordance with theDprovisions of the 1973 Code as it applies to trial before Court ofSessions. Going by the plain language of this provision, no fault can befound for conducting trial in the respective cases in the same manner asprovided in the 1973 Code. However, the grievance is about the insertionof Explanation vide Finance (No.2) Act, 2019. As matter of fact, thisinsertion is only clarificatory provision, as is evident from the openingEstatement of the provision which says that “for the removal of doubts, itis clarified that”. None of the clauses inserted by this amendment travelbeyond the principal provision contained in Clause (d). Clause (i) of theExplanation enunciates that the jurisdiction of the Special Court whiledealing with the offence being tried under this Act, shall not be dependentFupon any orders passed in respect of the scheduled offence, and the trialof both sets of offences by the same Court shall not be construed asjoint trials. This, in fact, is reiteration of the earlier part of the samesection, which envisages that even though both the trials may proceedbefore the same Special Court, it must be tried separately as per theprovisions of the 1973 Code. Insofar as Clause (ii) of the Explanation, atGthe first glance, it does give an impression that the same is unconnectedwith the earlier part of the section. However, on closer scrutiny of thisprovision, it is noted that the same is only an enabling provision permittingto take on record material regarding further investigation against any

accused person involved in respect of offence of money-laundering forwhich complaint has already been filed, whether he has been named inthe complaint or not. Such provision, in fact, is wholesome provisionto ensure that no person involved in the commission of offence of money-laundering must go unpunished. It is always open to the Authorityauthorised to seek permission of the Court during the trial of the complaintin respect of which cognizance has already been taken by the Court tobring on record further evidence which request can be dealt with by theSpecial Court in accordance with law keeping in mind the provisions ofthe 1973 Code as well. It is also open to the Authority authorised to filea fresh complaint against the person who has not been named as accusedin the complaint already filed in respect of same offence of money-laundering, including to request the Court to proceed against such otherperson appearing to be guilty of offence under Section 319 of the 1973Code, which otherwise would apply to such trial.113. The petitioners may be justified in making grievance that theprovision though permits the Special Court to proceed with the trial inrespect of scheduled offence, yet it may be oppressive as against theaccused who is not charged with the offence of money-laundering butonly scheduled offence. For, he may be denied of opportunity of oneappeal or revision, as the case may be before the higher forum. Such agrievance can certainly be looked into by the Special Court if an applicationis moved by the Authority authorised. Since we have held that theprovision is only to bestow enabling power in the Special Court, it mustfollow that the Special Court will examine the request of the Authorityauthorised for transfer of trial of predicate offence to itself on case-to-case basis. Similarly, request for trial of offence under another specialstatute, such as PC Act, NDPS Act, etc. can also be considered by theSpecial Court on case-to-case basis after examining all aspects of thematter.

114. In view of the above discussion, we do not find merit in thechallenge to Section 44 being arbitrary or unconstitutional. We hold thatthe same is consistent with the legislative scheme and the purposes andobjects behind the enactment of the 2002 Act to ensure that the proceedsof crime involved in money-laundering are dealt with appropriately asper the special Act and all concerned involved in the process or activityconnected with such proceeds of crime are prosecuted for offence ofmoney-laundering.

ABAIL

115. The relevant provisions regarding bail in the 2002 Act can betraced to Sections 44(2), 45 and 46 in Chapter VII concerning the offenceunder this Act. The principal grievance is about the twin conditionsspecified in Section 45 of the 2002 Act. Before we elaborate further, itBwould be apposite to reproduce Section 45, as amended. The same readsthus:

“45. Offences to be cognizable and non-bailable.—(1)576[Notwithstanding anything contained in the Code of CriminalProcedure, 1973 (2 of 1974), no person accused of an offence577[under this Act] shall be released on bail or on his own bondunless—]

(i) the Public Prosecutor has been given an opportunity to opposethe application for such release; and

(ii) where the Public Prosecutor opposes the application, thecourt is satisfied that there are reasonable grounds for believingthat he is not guilty of such offence and that he is not likely tocommit any offence while on bail:

Provided that person who is under the age of sixteenyears, or is woman or is sick or infirm, [578][or is accused eitheron his own or along with other co-accused of money-laundering asum of less than one crore rupees], may be released on bail, if theSpecial Court so directs:

Provided further that the Special Court shall not takecognizance of any offence punishable under section 4 except uponFa complaint in writing made by—

576 Subs. by Act 20 of 2005, sec. 7, for “Notwithstanding anything contained in theCode 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 term of imprisonment ofmore than three years under Part of the Schedule shall be released on bail oron his own bond unless” (w.e.f. 1-7-2005).

577Subs. by Act 13 of 2018, sec. 208(e)(i), for “punishable for term of imprisonmentof more than three years under Part of the Schedule” (w.e.f. 19-4-2018, vide G.S.R.383(E), dated 19[th] April, 2018).

578Ins. by Act 13 of 2018, s. 208(e)(ii) (w.e.f. 19-4-2018, vide G.S.R. 383(E), dated 19thHApril, 2018).

(i) the Director; or

(ii) any officer of the Central Government or StateGovernment authorised in writing in this behalf by the CentralGovernment by general or special order made in this behalfby that Government.

579[(1A) Notwithstanding anything contained in the Code ofCriminal Procedure, 1973 (2 of 1974), or any other provision ofthis Act, no police officer shall investigate into an offence underthis Act unless specifically authorised, by the Central Governmentby general or special order, and, subject to such conditions asmay 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 CriminalProcedure, 1973 (2 of 1974) or any other law for the time being inforce on granting of bail.

581[Explanation.—For the removal of doubts, it is clarified thatthe expression “Offences to be cognizable and non-bailable” shallmean and shall be deemed to have always meant that all offencesunder this Act shall be cognizable offences and non-bailableoffences notwithstanding anything to the contrary contained inthe Code of Criminal Procedure, 1973 (2 of 1974), and accordinglythe officers authorised under this Act are empowered to arrest anaccused without warrant, subject to the fulfilment of conditionsunder section 19 and subject to the conditions enshrined underthis section.]”

Section 45 has been amended vide Act 20 of 2005, Act 13 of 2018and Finance (No.2) Act, 2019. The provision as it obtained prior to23.11.2017 read somewhat differently. The constitutional validity of Sub-section (1) of Section 45, as it stood then, was considered in NikeshTarachand Shah[582]. This Court declared Section 45(1) of the 2002Act, as it stood then, insofar as it imposed two further conditions forrelease on bail, to be unconstitutional being violative of Articles 14 and21 of the Constitution. The two conditions which have been mentionedas twin conditions are:

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).

582 Supra at Footnote No.3

[2022] 6 S.C.R.

A(i) that there are reasonable grounds for believing that he is notguilty 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 beendeclared to be void and unconstitutional by this Court, the same stoodBobliterated. To buttress this argument, reliance has been placed on thedictum in State of Manipur[583].

116. The first issue to be answered by us is: whether the twinconditions, in law, continued to remain on the statute book post decisionof this Court in Nikesh Tarachand Shah[584]and if yes, in view of theCamendment effected to Section 45(1) of the 2002 Act vide Act 13 of2018, the declaration by this Court will be of no consequence. Thisargument need not detain us for long. We say so because the observationin State of Manipur[585] in paragraph 29 of the judgment that owing tothe declaration by Court that the statute is unconstitutional obliteratesDthe statute entirely as though it had never been passed, is contextual. Inthis case, the Court was dealing with the efficacy of the repealing Act.While doing so, the Court had adverted to the repealing Act and madethe stated observation in the context of lack of legislative power. In theprocess of reasoning, it did advert to the exposition in Behram KhurshidPesikaka[586]and Deep Chand[587] including American jurisprudenceEexpounded in Cooley on Constitutional Limitations[588] and Norton vs.Shelby County[589].117. In the present case, however, there is no issue of lack oflegislative power of the Parliament to enact law on the subject ofmoney-laundering. In such situation, the enunciation of the ConstitutionFBench of this Court, including seven-Judge Bench, may have direct bearingfor answering the argument under consideration. We may usefully referto the dictum of the Constitution Bench of five-Judges of this Court inM.P.V. Sundararamier & Co.[590]. It had noted the distinction between

583 Supra at Footnote No.159G584 Supra at Footnote No.3

585 Supra at Footnote No.159

586 Supra at Footnote No.310

587 Supra at Footnote No. 210 (also at Footnote No.69)

588Vol.1, page 382

589 118 US 425 (1886)H590 Supra at Footnote No.311

the effect of unconstitutionality of statute arising either because thelaw is in respect of matter not within the competence of the Legislature,or because the matter itself being within its competence, its provisionsoffend some constitutional restrictions. It went on to observe that if alaw is on field not within the domain of the Legislature, it is absolutelynull and void, and subsequent cession of that field to or by the Legislaturewill not have the effect of breathing life into what was still born pieceof legislation. At the same time, it noted that if the law is in respect of amatter assigned to the Legislature but its provisions disregard constitutionalprohibitions, though the law would be unenforceable by reason of thoseprohibitions, when once they are removed, the law will become effectivewithout re-enactment. After discussing the American decisions andjurisprudence, 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 asto the rest, assuming of course that the two portions areseverable, it cannot be held to have been wiped out of thestatute book as it admittedly must remain there for thepurpose of enforcement of the valid portion thereof, andbeing on the statute book, even that portion which isunenforceable on the ground that it is unconstitutional willoperate Proprio vigore when the Constitutional bar isremoved, and there is no need for fresh legislation togive effect thereto. On this view, the contention of the petitionerswith reference to the Explanation in s. 22 of the Madras Act mustfail. That Explanation operates, as already stated, on two classesof transactions. It renders taxation of sales in which the propertyin the goods passes in Madras but delivery takes place outsideMadras illegal on the ground that they are outside sales fallingwithin Art. 286(1)(a). It also authorises the imposition of tax onthe sales in which the property in the goods passes outside Madrasbut goods are delivered for consumption within Madras. It is validin so far as it prohibits tax on outside sales, but invalid in so far assales in which goods are delivered inside the State are concerned,because such sales are hit by Art. 286(2). The fact that it is invalidas to part has not the effect of obliterating it out of the statutebook, because it is valid as to part and has to remain in thestatute book for being enforced as to that part. The result of theenactment of the impugned Act is to lift the ban under Article

A286(2), and the consequence of it is that that portion of theExplanation which relates to sales in which property passes outsideMadras but the goods are delivered inside Madras and whichwas unenforceable before, became valid and enforceable. In thisview, we do not feel called upon to express any opinion as towhether it would make any difference in the result if the impugnedBprovision was unconstitutional in its entirety.”

(emphasis supplied)

118. No doubt Deep Chand[591] is subsequent judgment as hasbeen noticed in the State of Manipur[592]. However, in the later judgmentCof the Constitution Bench of seven-Judges of this Court in Jagannath[593],the legal position has been reviewed and answered. This decision hasnot only adverted to two earlier Constitution Bench decisions referred toand relied upon in State of Manipur[594](i.e., Behram KhurshidPesikaka[595]and Deep Chand[596]), including American jurisprudenceand decision in Norton[597], but to hosts of other decisions. The first pointDnoted in paragraph 9 of this decision is that when this Court has declaredthe concerned legislation void under the provisions of Article 13 sub-clause (2) of the Constitution, should the Court proceed on the basis thatthe legislation was void ab initio and non est or still born and, thus, anyvalidating measure could not instil life therein. After having analysed allEthe relevant decisions, the Court went on to observe in paragraphs 22and 23, as follows:

“22. In our view, although decisions of the AmericanSupreme Court and the comments of well knowncommentators like Willoughby and Cooley have greatFpersuasive force, we need not interpret our Constitutionby too much reliance on them. Nor is it necessary toscrutinise too closely the decisions wherein views appearto have been expressed that law which is void underArticle 13(2) is to be treated as still-born. Equally unfruitfulwould it be to consider the doctrine of eclipse.G591 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)

H597 Supra at Footnote No.589

23. Apart from the question as to whether fundamental rightsoriginally enshrined in the Constitution were subject to theamendatory process of Article 368 it must now be held that Article31-B and the Ninth Schedule have cured the defect, if any, in thevarious Acts mentioned in the said Schedule as regards anyunconstitutionality alleged on the ground of infringement offundamental rights, and by the express words of Article 31-Bsuch curing of the defect took place with retrospective operationfrom the dates on which the Acts were put on the statute book.These Acts even if void or inoperative at the time whenthey were enacted by reason of infringement of Article 13(2)of the Constitution, assumed full force and vigour from therespective dates of their enactment after their inclusion inthe Ninth Schedule, read with Article 31-B of theConstitution. The States could not, at any time, cure any defectarising from the violation of the provisions of Part III of theConstitution and therefore the objection that the Madras CeilingsAct should have been re-enacted by the Madras legislature afterthe Seventeenth Constitutional Amendment came into force cannotbe accepted.”

(emphasis supplied)

Thus, where the defect as pointed out by the Court has beenremoved by virtue of the validating Act retrospectively, then the provisioncan be held to be intra vires provided that it does not transgress anyother constitutional limitation. It is, therefore, clear from above that if byamending the provision retrospectively, the Parliament has removed thedefect or has taken away the basis on which the provision was declaredvoid then the provision cannot be said to be in conflict with Article 13 ofthe Constitution. In other words, if the very premise on which the judgmentof the Court declaring the provision to be void has been uprooted by theParliament, thereby resulting in the change of circumstances, the judgmentcould not be given effect to in the altered circumstances, then the provisioncannot be held to be void. In this case, as has been stated above, theanomalies noted in Nikesh Tarachand Shah[598] have been removed byway of Act No. 13 of 2018. Further, it has been clarified by way ofFinance (No.2) Act, 2019 that amendment shall operate retrospectively.

AThus, it cannot be said that twin conditions under Section 45 of the 2002Act does not get revived.

119. priori, it is not open to argue that Section 45 of the 2002Act post decision in Nikesh Tarachand Shah[599]stood obliterated fromthe statute book as such. Indubitably, it is not unknown that even afterBdeclaration of unconstitutionality by the Court owing to violation of rightsguaranteed under Part III of the Constitution, it is open to the Parliament/Legislature to cure the defect reckoned by the Constitutional Court inrelation to the concerned provision whilst declaring it as unconstitutional.

120. In the case of Nikesh Tarachand Shah[600], as aforesaid,Cthis Court declared the twin conditions in Section 45(1) of the 2002 Actas unconstitutional being violative of Articles 14 and 21 of the Constitution.That conclusion reached by this Court is essentially on account of twobasic reasons. The first being that the provision, as it existed at therelevant time, was founded on classification based on sentencing ofthe scheduled offence and it had no nexus with objectives of the 2002DAct; and secondly, because the twin conditions were restricted only to aparticular class of offences within the 2002 Act, such as offencespunishable for term of imprisonment for more than three years underPart 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 theEchallenge set forth in the writ petition was limited to imposing twoconditions for grant of bail wherein an offence punishable for term ofimprisonment for more than three years under Part of the Schedule tothe Act is involved. This aspect has been thoroughly analysed by theCourt in the said decision. The Court also noted the legislative historyfor enacting such law and other relevant material from paragraph 11Fonwards upto paragraph 43. It adverted to several circumstances andillustrations to conclude that the provision, as it stood then, on the face ofit, was discriminatory and manifestly arbitrary. Eventually in the operativeorder, being paragraph 54 of the decision, the Court declared that Section45(1) of the 2002 Act, as it stood then, insofar as it imposes two furtherGconditions for release on bail, to be unconstitutional as it violated Articles14 and 21 of the Constitution.

121. By the amendment vide Act 13 of 2018, the defects noted bythis Court in the aforementioned decision have been duly cured by deleting

599 Supra at Footnote No.3H600 Supra at Footnote No.3

the words “punishable for term of imprisonment of more than threeyears under Part of the Schedule” in Section 45(1) of the 2002 Actand substituted by words “under this Act”. The question is: whether itwas open to the Parliament to undo the effect of the judgment of thisCourt declaring the twin conditions unconstitutional? On fair readingof the judgment, we must observe that although the Court declared thetwin conditions as unconstitutional, but it was in the context of the openingpart of the sub-section (1) of Section 45, as it stood then, which resultedin discrimination and arbitrariness as noticed in the judgment. But thatopening part referring to class of offences, namely punishable for termof imprisonment of more than three years under Part of the Schedulehaving been deleted and, instead, the twin conditions have now beenassociated with all the offences under the 2002 Act, the defect pointedout in the stated decision, stands cured. To answer the question posedabove, we may also usefully refer to the enunciation of the ConstitutionBench of this Court, which recognises power of the Legislature to curethe defect when the law is struck down by the Constitutional Court asviolative of some fundamental rights traceable to Part-III of theConstitution. It has been consistently held that such declaration does nothave the effect of repealing the relevant provision as such. For, thepower to repeal vests only in the Parliament and none else. Only uponsuch repeal by the Parliament, the provision would become non est forall purposes until re-enacted, but it is open to the Parliament to cure thedefect noticed by the Constitutional Court so that the provision, asamended by removing such defect gets revived. This is so because, thedeclaration by the Constitutional Court and striking down of legalprovision being violative of fundamental rights traceable to Part III ofthe Constitution, merely results in the provision, as it existed then,becoming inoperative and unenforceable, even though it may continueto remain on the statute book.

122. The decision of the Constitution Bench of this Court in ShriPrithvi Cotton Mills Ltd.[601] recognises this doctrine of taking away asthe basis or validating acts thereby removing the causes for ineffectivenessor invalidity of actions or proceedings which are validated by legislativemeasure and, then by fiction, it becomes re-enacted law. We may usefullyrefer to the decision in Bhubaneshwar Singh[602], wherein in paragraph11, the Court noted as follows:

601 Supra at Footnote No.300

602 Supra at Footnote No.301

DEF

A“11. From time to time controversy has arisen as to whetherthe effect of judicial pronouncements of the High Court orthe Supreme Court can be wiped out by amending thelegislation with retrospective effect. Many such AmendingActs are called Validating Acts, validating the action takenunder the particular enactments by removing the defect inBthe statute retrospectively because of which the statute orthe part of it had been declared ultra vires. Such exercisehas been held by this Court as not to amount toencroachment on the judicial power of the courts. Theexercise of rendering ineffective the judgments or ordersCof competent courts by changing the very basis bylegislation is well-known device of validating legislation.This Court has repeatedly pointed out that such validatinglegislation which removes the cause of the invalidity cannotbe considered to be an encroachment on judicial power. Atthe same time, any action in exercise of the power underDany enactment which has been declared to be invalid by acourt cannot be made valid by Validating Act by merelysaying so unless the defect which has been pointed out bythe court is removed with retrospective effect. Thevalidating legislation must remove the cause of invalidity.ETill such defect or the lack of authority pointed out by thecourt under statute is removed by the subsequentenactment with retrospective effect, the binding nature ofthe judgment of the court cannot be ignored.”

(emphasis supplied)

F123. Again, in the case of Comorin Match Industries (P) Ltd.[603],this Court after adverting to earlier decisions, including Shri PrithviCotton Mills Ltd.[604]observed in paragraph 24 as follows:

“24. This case does not lay down that after judgment hasbeen pronounced on the basis of an Act, the provisions ofGthat Act cannot be amended so as to cure the defect pointedout in the judgment retrospectively. The effect of theamending Act of 1969 is not to overrule judgment passedby court of law, which the legislature cannot do. What the

603 Supra at Footnote No.302H604 Supra at Footnote No.300

legislature can do is to change the law on the basis of whichthe judgment was pronounced retrospectively and therebynullify the effect of the judgment. When the legislatureenacts that notwithstanding any judgment or order the newlaw will operate retrospectively and the assessments shallbe deemed to be validly made on the basis of the amendedlaw, the legislature is not declaring the judgment to be voidbut rendering things or acts deemed to have been doneunder amended statute valid notwithstanding any judgmentor order on the basis of the unamended law to the contrary.The validity to the assessment orders which had beenstruck down by the Court, is imparted by the amending Actby changing the law retrospectively.”

(emphasis supplied)

124. The legal principles have been recapitulated by this Courtonce again in Indian Aluminium Co.[605], in paragraph 56, it was observedas under:

“56. From resume of the above decisions the following principleswould emerge:

(1) The adjudication of the rights of the parties is the essentialjudicial function. Legislature has to lay down the norms of conductor rules which will govern the parties and the transactions andrequire the court to give effect to them;

(2) The Constitution delineated delicate balance in the exercise ofthe sovereign power by the legislature, executive and judiciary;

(3) In democracy governed by rule of law, the legislature exercisesthe power under Articles 245 and 246 and other companion articlesread with the entries in the respective lists in the Seventh Scheduleto make the law which includes power to amend the law.

(4) Courts in their concern and endeavour to preservejudicial power equally must be guarded to maintain thedelicate balance devised by the Constitution between thethree sovereign functionaries. In order that rule of lawpermeates to fulfil constitutional objectives of establishingan egalitarian social order, the respective sovereign

functionaries need free play in their joints so that the marchof social progress and order remains unimpeded. Thesmooth balance built with delicacy must always bemaintained.

(5) In its anxiety to safeguard judicial power, it isunnecessary to be overzealous and conjure up incursioninto the judicial preserve invalidating the valid lawcompetently made;

(6) The court, therefore, needs to carefully scan the law tofind out: (a) whether the vice pointed out by the court andinvalidity suffered by previous law is cured complying withthe legal and constitutional requirements; (b) whether thelegislature has competence to validate the law; (c) whethersuch validation is consistent with the rights guaranteed inPart III of the Constitution.

(7) The court does not have the power to validate an invalidlaw or to legalise impost of tax illegally made and collectedor to remove the norm of invalidation or provide remedy.These are not judicial functions but the exclusive provinceof the legislature. Therefore, they are not encroachmenton judicial power.

E(8) In exercising legislative power, the legislature by meredeclaration, without anything more, cannot directlyoverrule, revise or override judicial decision. It can renderjudicial decision ineffective by enacting valid law on thetopic within its legislative field fundamentally altering orchanging its character retrospectively. The changed orFaltered conditions are such that the previous decision wouldnot have been rendered by the court, if those conditionshad existed at the time of declaring the law as invalid. It isalso empowered to give effect to retrospective legislationwith deeming date or with effect from particular date.GThe legislature can change the character of the tax or dutyfrom impermissible to permissible tax but the tax or levyshould answer such character and the legislature iscompetent to recover the invalid tax validating such taxon removing the invalid base for recovery from the subjector render the recovery from the State ineffectual. It isHcompetent for the legislature to enact the law with

retrospective effect and authorise its agencies to levy andcollect the tax on that basis, make the imposition of levycollected and recovery of the tax made valid,notwithstanding the declaration by the court or the directiongiven for recovery thereof.

(9) The consistent thread that runs through all the decisionsof this Court is that the legislature cannot directly overrulethe decision or make direction as not binding on it buthas power to make the decision ineffective by removingthe base on which the decision was rendered, consistentwith the law of the Constitution and the legislature musthave competence to do the same.”

(emphasis supplied)

125. We may also usefully refer to the dictum in Narain Singh[606],it was held as under:

“21. The power of the sovereign legislature to legislate within itsfield, 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 BhubaneshwarSingh v. Union of India[607] the Court expressly approved theaforesaid position in para 9 at pp. 82-83. Insofar as the validatingActs are concerned, this Court in Bhubaneshwar Singh[608] alsoconsidered the question in para 11 and held that the Court has thepowers by virtue of such validating legislation, to “wipe out” judicialpronouncements of the High Court and the Supreme Court byremoving the defects in the statute retrospectively when suchstatutes had been declared ultra vires by Courts in view of itsdefects.22. This Court in Bhubaneshwar Singh[609] has held that suchlegislative exercise will not amount to encroachment on the judicialpower. This Court has accepted that such legislative device whichremoves the vice in previous legislation is not considered anencroachment on judicial power. In support of the aforesaidproposition, this Court in Bhubaneshwar Singh[610] relied on the

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

proposition laid down by Hidayatullah, C.J. speaking for theConstitution Bench in Shri Prithvi Cotton Mills Ltd. v. BroachBorough Municipality[611].

23. Again in Indian Aluminium Co. v. State of Kerala[612] thisCourt while summarising the principle held that legislature cannotdirectly overrule judicial decision but it has the power to makethe decision ineffective by removing the basis on which the decisionis rendered, while at the same time adhering to the constitutionalimperatives and the legislature is competent to do so [see para 56sub-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 CentralSales Tax Act were set aside by the High Court and the Statewas directed to refund the amount to the assessee. As the Statefailed to carry it out, contempt petitions were filed but theassessment orders were validated by passing the Amendment Actof 1969 with retrospective effect and the Court held that the taxdemanded became valid and enforceable.

25. The Court in Comorin Match case[614] held that in such asituation the State will not be precluded from realising the tax dueas subsequently the assessment order was validated by theEamending Act of 1969 and the order passed in the contemptproceeding will not have the effect of the writing off the debtwhich is statutorily owed by the assessee to the State. The learnedJudges held that the effect of the amending Act is retrospectivevalidation of the assessment orders which were struck down byFthe High Court. Therefore, the assessment order is legislativelyvalid and the tax demands are also enforceable.

26. It is therefore clear where there is competentlegislative provision which retrospectively removes thesubstratum of foundation of judgment, the said exerciseis valid legislative exercise provided it does nottransgress any other constitutional limitation. Therefore,this Court cannot uphold the reasoning in the High Court

611 Supra at Footnote No.300

612 Supra at Footnote No.303

613 Supra at Footnote No.302

H614 Supra at Footnote No.302

judgment that the impugned amendment is invalid justbecause it nullifies some provisions of the earlier Act.”

(emphasis supplied)

There are long line of decisions restating the above position andthe recent being Cheviti Venkanna Yadav[615], which after analysing allthe relevant authorities on the point, noted in paragraph 30 as follows:

“30. From the aforesaid authorities, it is settled that thereis demarcation between the legislative and judicialfunctions predicated on the theory of separation of powers.The legislature has the power to enact laws including thepower to retrospectively amend laws and thereby removecauses of ineffectiveness or invalidity. When law is enactedwith retrospective effect, it is not considered as anencroachment upon judicial power when the legislaturedoes not directly overrule or reverse judicial dictum. Thelegislature cannot, by way of an enactment, declare adecision of the court as erroneous or nullity, but can amendthe statute or the provision so as to make it applicable tothe past. The legislature has the power to rectify, throughan amendment, defect in law noticed in the enactmentand even highlighted in the decision of the court. Thisplenary power to bring the statute in conformity with thelegislative intent and correct the flaw pointed out by thecourt, can have curative and neutralising effect. Whensuch correction is made, the purpose behind the same isnot to overrule the decision of the court or encroach uponthe judicial turf, but simply enact fresh law withretrospective effect to alter the foundation and meaning ofthe legislation and to remove the base on which thejudgment is founded. This does not amount to statutoryoverruling by the legislature. In this manner, the earlierdecision of the court becomes non-existent andunenforceable for interpretation of the new legislation. Nodoubt, the new legislation can be tested and challenged onits own merits and on the question whether the legislaturepossesses the competence to legislate on the subject-

CDEFG

Amatter in question, but not on the ground of overreach orcolourable legislation.”

(emphasis supplied)

From the above discussion, it is amply clear that the twin conditionsdeclared as unconstitutional by this Court in Nikesh Tarachand Shah[616]Bwas in reference to the provision, as it existed at the relevant time,predicating application of Section 45 of the 2002 Act to only offencespunishable for term of imprisonment of more than three years underPart of the Schedule of the 2002 Act and not even linked to the offencesof money-laundering under the 2002 Act. The reasons which weighedCwith this Court for declaring the twin conditions in Section 45(1), as itstood at the relevant time, unconstitutional in no way obliterated theprovision from the statute book. Therefore, it was open to the Parliamentto cure the defect noted by this Court and to revive the same provisionas in the present form, post amendment Act 13 of 2018 with effect form19.4.2018.

126. Having said thus, we must now address the challenge to thetwin conditions as applicable post amendment of 2018. That challengewill have to be tested on its own merits and not in reference to thereasons weighed with this Court in declaring the provision, (as it existedat the relevant time), applicable only to offences punishable for termEof imprisonment of more than three years under Part of the Scheduleto the 2002 Act. Now, the provision (Section 45) including twin conditionswould apply to the offence(s) under the 2002 Act itself. The provisionpost 2018 amendment, is in the nature of no bail in relation to the offenceof money-laundering unless the twin conditions are fulfilled. The twinFconditions are that there are reasonable grounds for believing that theaccused is not guilty of offence of money-laundering and that he is notlikely to commit any offence while on bail. Considering the purposes andobjects of the legislation in the form of 2002 Act and the background inwhich it had been enacted owing to the commitment made to theinternational bodies and on their recommendations, it is plainly clear thatGit is special legislation to deal with the subject of money-launderingactivities having transnational impact on the financial systems includingsovereignty and integrity of the countries. This is not an ordinary offence.To deal with such serious offence, stringent measures are provided inthe 2002 Act for prevention of money-laundering and combating menace

H616 Supra at Footnote No.3

of money-laundering, including for attachment and confiscation ofproceeds of crime and to prosecute persons involved in the process oractivity connected with the proceeds of crime. In view of the gravity ofthe fallout of money-laundering activities having transnational impact, aspecial procedural law for prevention and regulation, including toprosecute the person involved, has been enacted, grouping the offendersinvolved in the process or activity connected with the proceeds of crimeas separate class from ordinary criminals. The offence of money-laundering has been regarded as an aggravated form of crime “worldover”. It is, therefore, separate class of offence requiring effectiveand stringent measures to combat the menace of money-laundering.

127. There is no challenge to the provision on the ground oflegislative competence. The question, therefore, is: whether suchclassification of offenders involved in the offence of money-launderingis reasonable? Considering the concern expressed by the internationalcommunity regarding the money-laundering activities world over andthe transnational impact thereof, coupled with the fact that the presumptionthat the Parliament understands and reacts to the needs of its own peopleas per the exigency and experience gained in the implementation of thelaw, the same must stand the test of fairness, reasonableness and havingnexus with the purposes and objects sought to be achieved by the 2002Act. Notably, there are several other legislations where such twinconditions have been provided for[617]. Such twin conditions in theconcerned provisions have been tested from time to time and have stoodthe challenge of the constitutional validity thereof. The successivedecisions of this Court dealing with analogous provision have stated that617 Central Legislations:- Section 36AC of Drugs and Cosmetics Act, 1940; Section51A of the Wild Life (Protection) Act, 1972; Section 6A of the Suppression of UnlawfulActs against Safety of Civil Aviation Act, 1982; Section 15 Terrorist Affected Areas Act(Special Courts), 1984; Section 37 of the Narcotic Drugs and Psychotropic SubstancesAct, 1985; Section 20 of the Terrorist and Disruptive Activities (Prevention) Act,1987; Section 8 of the Suppression Of Unlawful Acts Against Safety Of MaritimeNavigation and Fixed Platforms On Continental Shelf Act, 2002; Section 212 of theCompanies Act, 2013; and Section 12 of the Anti-Hijacking Act, 2016.State Legislations:- Section 19 of the Uttar Pradesh Gangsters and Anti-SocialActivities (Prevention) Act, 1986; Section 21 of the Maharashtra Control of OrganisedCrime 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 fromAndhra Pradesh COCA, 2001); Section 18 of the Sikkim Anti-Drugs Act, 2006; Section20 of the Gujrat Control of Terrorism and Organised Crime Act, 2015; Section 19 of theMizoram Drug (Controlled Substances) Act, 2016; and Section 18 of the HaryanaControl of Organised Crime Act, 2020.

Athe Court at the stage of considering the application for grant of bail, isexpected to consider the question from the angle as to whether theaccused was possessed of the requisite mens rea. The Court is notrequired to record positive finding that the accused had not committedan offence under the Act. The Court ought to maintain delicate balancebetween judgment of acquittal and conviction and an order grantingBbail much before commencement of trial. The duty of the Court at thisstage is not to weigh the evidence meticulously but to arrive at findingon the basis of broad probabilities. Further, the Court is required to recorda finding as to the possibility of the accused committing crime which isan offence under the Act after grant of bail.

128. For understanding whether such twin conditions can beregarded as reasonable condition, we may usefully refer to the decisionof the Constitution Bench of this Court in Kartar Singh[618]. While dealingwith the challenge to Section 20(8) of TADA Act, the Court rejected theargument that such provision results in deprivation of liberty and violatesDArticles 14 and 21 of the Constitution. It noted that such provision imposescomplete ban on release of accused on bail involved in the stated offenceunder the special legislation, but that ban stands diluted by virtue of twinconditions. It noted that rest of the provision, as in the case of the Section45 of the 2002 Act, is comparable with the conditions specified in the1973 Code for release of accused on bail concerning ordinary offenceEunder general law. The Constitution Bench approved the dictum inUsmanbhai Dawoodbhai Memon[619] and in paragraph 349 noted thus:

“349. The conditions imposed under Section 20(8)(b), asrightly pointed out by the Additional Solicitor General, arein consonance with the conditions prescribed under clausesF(i) and (ii) of sub-section (1) of Section 437 and clause (b) ofsub-section (3) of that section. Similar to the conditions inclause (b) of sub-section (8), there are provisions in variousother enactments — such as Section 35(1) of ForeignExchange Regulation Act and Section 104(1) of the CustomsGAct to the effect that any authorised or empowered officerunder the respective Acts, if, has got reason to believe thatany person in India or within the Indian customs watershas been guilty of an offence punishable under the respective

618 Supra at Footnote No.190H619 Supra at Footnote No.202

Acts, may arrest such person. Therefore, the condition that“there are grounds for believing that he is not guilty of anoffence”, which condition in different form is incorporatedin other Acts such as clause (i) of Section 437(1) of theCode and Section 35(1) of FERA and 104(1) of the CustomsAct, cannot be said to be an unreasonable conditioninfringing the principle of Article 21 of the Constitution.”

(emphasis supplied)

Again, in paragraph 351, the Constitution Bench observed thus:

“351. No doubt, liberty of citizen must be zealouslysafeguarded by the courts; nonetheless the courts whiledispensing justice in cases like the one under the TADAAct, should keep in mind not only the liberty of the accusedbut also the interest of the victim and their near and dearand above all the collective interest of the community andthe safety of the nation so that the public may not lose faithin the system of judicial administration and indulge in privateretribution.”

(emphasis supplied)

We may immediately note that this judgment has been consideredby the two-Judge Bench of this Court in Nikesh Tarachand Shah[620]inparagraph 47 and distinguished in the following words:

“47. ….

It is clear that this Court upheld such condition only because theoffence under TADA was most heinous offence in which thevice of terrorism is sought to be tackled. Given the heinousnature of the offence which is punishable by death or lifeimprisonment, and given the fact that the Special Court inthat case was Magistrate and not Sessions Court, unlikethe present case, Section 20(8) of TADA was upheld as beingin consonance with conditions prescribed under Section 437of the Code of Criminal Procedure. In the present case, itis Section 439 and not Section 437 of the Code of CriminalProcedure that applies. Also, the offence that is spoken of inSection 20(8) is an offence under TADA itself and not an offence

654SUPREME COURT REPORTS

[2022] 6 S.C.R.

Aunder some other Act. For all these reasons, the judgment in KartarSingh[621] cannot apply to Section 45 of the present Act.”

(emphasis supplied)

129. With utmost humility at our command, we do not agree withthis (highlighted) observation. The reason for distinguishing the enunciationBof the Constitution Bench noted above, is not only inapposite, but it is notconsistent with the provisions in both the Acts. Even the TADA Act, theappointment of Designated Court is from amongst the Sessions Judge orAdditional Sessions Judge in any State and the offences under that Actwere made exclusively triable before such Designated Court and notCthe Magistrate. The powers of the Magistrate were required to bebestowed on the Designated Court being the Sessions Judge for thelimited purpose of proceeding with the case directly before it. This isamply 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 thelogic adopted under Chapter VII of the 2002 Act in constituting theDSpecial Courts and empowering the Sessions Judge appointed as SpecialCourt with the powers of the Magistrate. That aspect has been dealt

621 Supra at Footnote No.190622 20. Modified application of certain provisions of the Code .- (1) …..

(3) Section 164 of the Code shall apply in relation to case involving an offenceEpunishable under this Act or any rule made thereunder, subject to the modification thatthe reference in sub-section (1) thereof to “Metropolitan Magistrate or JudicialMagistrate” shall be construed as reference to “Metropolitan Magistrate”, “JudicialMagistrate, 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 case involving an offenceFpunishable under this Act or any rule made thereunder subject to the modificationsthat—

(a) the reference in sub-section (1) thereof to “Judicial Magistrate” shall beconstrued as reference to “Judicial Magistrate or Executive Magistrate or SpecialExecutive Magistrate”;

(b) the reference in sub-section (2) thereof the “fifteen days”, “ninety days”Gand “sixty days”, wherever they occur, shall be construed as references to“sixty days”, one hundred and eighty days and one hundred and eighty daysrespectively; 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 investigationwithin the said period of one hundred and eighty days, the Designated CourtH

with by the Constitution Bench in paragraphs 342 to 344, while approvingthe exposition in Usmanbhai Dawoodbhai Memon[624]. The same readsthus:

“342. Sub-section (8) which imposes complete ban on releaseon bail against the accused of an offence punishable under thisAct minimises or dilutes that ban under two conditions, those being(1) the Public Prosecutor must be given an opportunity to opposethe bail application for such release; and (2) where the PublicProsecutor opposes the bail application the court must be satisfiedthat the two conditions, namely, (a) there are reasonable groundsfor believing that the person accused is not guilty of such offenceand (b) he is not likely to commit any offence while on bail. Sub-section (9) qualifies sub-section (8) to the effect that the abovetwo limitations imposed on grant of bail specified in sub-section(8) are in addition to the limitations under the Code or any otherlaw for the time being in force on granting of bail. Section 436 ofthe Code provides for grant of bail to person accused of bailableoffence, while Section 437 provides for grant of bail to any accusedof, or suspected of, the commission of any non-bailable offence.Nonetheless, sub-section (1) of Section 437 imposes certain fetterson the exercise of the powers of granting bail on fulfilment of twoconditions, namely (1) if there appear reasonable grounds forbelieving that he has been guilty of an offence punishable withdeath or imprisonment for life; and (2) if the offence complainedof is cognizable offence and that the accused had been previouslyconvicted of an offence punishable with death, imprisonment forlife or imprisonment for seven years or more or he had previouslyconvicted on two or more occasions of nonbailable andcognizable offence. Of course, these two conditions are subjectto three provisos attached to sub-section (1) of Section 437. Butwe are not very much concerned about the provisos. However,sub-section (3) of Section 437 gives discretion to the court togrant bail attached with some conditions if it considers necessary

shall extend the said period up to one year, on the report of the Public Prosecutorindicating the progress of the investigation and the specific reasons for thedetention of the accused beyond the said period of one hundred and eightydays; and.

(c) sub-section (2-A) thereof shall be deemed to have been omitted.

624 Supra at Footnote No.202

BCDEF

or in the interest of justice. For proper understanding of thoseconditions or limitations to which two other conditions under clauses(a) and (b) of sub-section (8) of Section 20 of the TADA Act areattached, we reproduce those conditions in Section 437(3)hereunder:

B“437. (3) *

(a) in order to ensure that such person shall attend inaccordance with the conditions of the bond executed underthis Chapter, or

(b) in order to ensure that such person shall not commit anoffence similar to the offence of which he is accused or of thecommission 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 dealsDwith the special powers of High Court or Court of Sessionregarding bail. It will be relevant to cite Section 439(1)(a) also, inthis connection, which reads as follows:

“439. Special powers of High Court or Court of Sessionregarding bail.— (1) High Court or Court of Session maydirect—

(a) that any person accused of an offence and in custody bereleased on bail, and if the offence is of the nature specified insub-section (3) of Section 437, may impose any condition whichit considers necessary for the purposes mentioned in that sub-section;

344. In this connection, we would like to quote the followingobservation of this Court in Usmanbhai Dawoodbhai Memon v.State of Gujarat[625], with which we are in agreement : (SCC pp.286-287, para 19)

“Though there is no express provision excluding the applicabilityof Section 439 of the Code similar to the one contained inSection 20(7) of the Act in relation to case involving thearrest 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 truethat the source of power of Designated Court to grant bail isnot Section 20(8) of the Act as it only places limitations onsuch power. This is made explicit by Section 20(9) which enactsthat the limitations on granting of bail specified in Section 20(8)are ‘in addition to the limitations under the Code or any otherlaw for the time being in force’. But it does not necessarilyfollow that the power of Designated Court to grant bail isrelatable to Section 439 of the Code. It cannot be doubted thata Designated Court is ‘a court other than the High Court orthe Court of Session’ within the meaning of Section 437 of theCode. The exercise of the power to grant bail by DesignatedCourt is not only subject to the limitations contained therein,but is also subject to the limitations placed by Section 20(8) ofthe Act.””

This portion of the judgment of the Constitution Bench has notbeen noticed in Nikesh Tarachand Shah[626]. Further, we do not agreewith the observations suggestive of that the offence of money-launderingis less heinous offence than the offence of terrorism sought to be tackledunder TADA Act or that there is no compelling State interest in tacklingoffence of money-laundering. The international bodies have beendiscussing the menace of money-laundering on regular basis for quitesome time; and strongly recommended enactment of stringent legislationfor prevention of money-laundering and combating with the menacethereof including to prosecute the offenders and for attachment andconfiscation of the proceeds of crime having direct impact on the financialsystems and sovereignty and integrity of the countries. That concernhas been duly noted even in the opening part of the introduction andStatement of Objects and Reasons, for which the 2002 Act came intobeing. This declaration by the Parliament itself is testimony of compellingnecessity to have stringent regime (enactment) for prevention and controlof the menace of money-laundering. Be it noted that under Article 38 ofthe Constitution of India, it is the duty of the State to secure social,economic and political justice and minimize income inequalities. Article39 of the Constitution mandates the State to prevent concentration ofwealth, thus, to realize its socialist goal, it becomes imperative for the

AState to make such laws, which not only ensure that the unaccountedmoney is infused back in the economic system of the country, but alsoprevent any activity which damages the economic fabric of the nation.It cannot be gainsaid that social and economic offences stand on graverfooting as they not only involve an individual direct victim, but harm thesociety as whole[627]. Thus, the Law Commission also in its 47[th] reportBrecommended an increase in punishment for most of the offencesconsidered therein. Further, the quantum of punishment for money-laundering offence, being only seven years, cannot be the basis toundermine the seriousness and gravity of this offence. The quantum ofsentence is matter of legislative policy. The punishment provided forCthe offence is certainly one of the principles in deciding the gravity ofthe offence, however, it cannot be said that it is the sole factor in decidingthe severity of offence as contended by the petitioners. Money-launderingis one of the heinous crimes, which not only affects the social andeconomic fabric of the nation, but also tends to promote other heinousoffences, such as terrorism, offences related to NDPS Act, etc. It is aDproven fact that international criminal network that support home grownextremist groups relies on transfer of unaccounted money across nationStates[628], thus, by any stretch of imagination, it cannot be said that thereis no compelling State interest in providing stringent conditions of bail forthe offence of money-laundering. In Ram Jethmalani & Ors. vs. Union

Eof India & Ors.[629], the Court expounded the theory of “soft state”which is used to describe nation which is not capable of preventing theoffence of money-laundering. The Court held thus:

“13. The concept of “soft state” was famously articulated bythe Nobel Laureate, Gunnar Myrdal. It is broad-basedFassessment of the degree to which the State, and its machinery, isequipped to deal with its responsibilities of governance. The moresoft the State is, greater the likelihood that there is an unholynexus between the law maker, the law keeper, and the lawbreaker.”G

(emphasis supplied)

627 47th Law Commission Report

628 Ram Jethmalani & Ors. vs. Union of India & Ors., (2011) 8 SCC 1629 (2011) 8 SCC 1 (also at Footnote No.628)H

In Mohanlal Jitamalji Porwal[630], while explaining the impact ofeconomic offences on the community, the Court observed that usuallythe community view the economic offender with permissive eye,although the impact of the offence is way greater than that of offence ofmurder. The Court held thus:

“5..…The entire Community is aggrieved if the economic offenderswho ruin the economy of the State are not brought to books. Amurder may be committed in the heat of moment upon passionsbeing aroused. An economic offence is committed with coolcalculation and deliberate design with an eye on personal profitregardless of the consequence to the Community. disregardfor the interest of the Community can be manifested onlyat the cost of forfeiting the trust and faith of the Communityin the system to administer justice in an even handedmanner without fear of criticism from the quarters whichview white collar crimes with permissive eye unmindfulof the damage done to the National Economy and NationalInterest. ……”

(emphasis supplied)

In Rohit Tandon[631][&632], this Court observed as follows:-

“21. The consistent view taken by this Court is thateconomic offences having deep-rooted conspiracies andinvolving huge loss of public funds need to be viewedseriously and considered as grave offences affecting theeconomy of the country as whole and thereby posingserious threat to the financial health of the country. Further,when attempt is made to project the proceeds of crime as untaintedmoney and also that the allegations may not ultimately beestablished, but having been made, the burden of proof that themonies were not the proceeds of crime and were not, therefore,tainted shifts on the accused persons under Section 24of the 2002Act.”

(emphasis supplied)

630 Supra at Footnote No.254

631 Supra at Footnote No.189

632 Supra at Footnote No.189

AThus, it is well settled by the various decisions of this Court andpolicy of the State as also the view of international community that theoffence of money-laundering is committed by an individual with adeliberate design with the motive to enhance his gains, disregarding theinterests of nation and society as whole and which by no stretch ofimagination can be termed as offence of trivial nature. Thus, it is in theBinterest of the State that law enforcement agencies should be providedwith proportionate effective mechanism so as to deal with these typesof offences as the wealth of the nation is to be safeguarded from thesedreaded criminals. As discussed above, the conspiracy of money-laundering, which is three-staged process, is hatched in secrecy andCexecuted in darkness, thus, it becomes imperative for the State to framesuch stringent law, which not only punishes the offender proportionately,but also helps in preventing the offence and creating deterrent effect.

130. In the case of the 2002 Act, the Parliament had no reservationto reckon the offence of money-laundering as serious threat to theDfinancial systems of our country, including to its sovereignty and integrity.Therefore, the observations and in particular in paragraph 47 of NikeshTarachand Shah[633], are in the nature of doubting the perception of theParliament in that regard, which is beyond the scope of judicial review.That cannot be the basis to declare the law manifestly arbitrary.

E131. It is important to note that the twin conditions provided underSection 45 of the 2002 Act, though restrict the right of the accused togrant of bail, but it cannot be said that the conditions provided underSection 45 impose absolute restraint on the grant of bail. The discretionvests in the Court which is not arbitrary or irrational but judicial, guidedby the principles of law as provided under Section 45 of the 2002 Act.FWhile dealing with similar provision prescribing twin conditions inMCOCA, this Court in Ranjitsing Brahmajeetsing Sharma[634], heldas under:

“44. The wording of Section 21(4), in our opinion, does notlead to the conclusion that the court must arrive at aGpositive finding that the applicant for bail has not committedan offence under the Act. If such construction is placed, thecourt intending to grant bail must arrive at finding that the applicant

633 Supra at Footnote No.3H634 Supra at Footnote No.275 (also at Footnote No.53)

has not committed such an offence. In such an event, it will beimpossible for the prosecution to obtain judgment of convictionof the applicant. Such cannot be the intention of the legislature.Section 21(4) of MCOCA, therefore, must be construedreasonably. It must be so construed that the court is ableto maintain delicate balance between judgment ofacquittal and conviction and an order granting bail muchbefore commencement of trial. Similarly, the Court will berequired to record finding as to the possibility of his committinga crime after grant of bail. However, such an offence in futuromust be an offence under the Act and not any other offence.Since it is difficult to predict the future conduct of an accused, thecourt must necessarily consider this aspect of the matter havingregard to the antecedents of the accused, his propensities and thenature and manner in which he is alleged to have committed theoffence.

45. It is, furthermore, trite that for the purpose ofconsidering an application for grant of bail, although detailedreasons are not necessary to be assigned, the order grantingbail must demonstrate application of mind at least in seriouscases as to why the applicant has been granted or deniedthe privilege of bail.

46. The duty of the court at this stage is not to weigh theevidence meticulously but to arrive at finding on the basisof broad probabilities. However, while dealing with specialstatute like MCOCA having regard to the provisionscontained in sub-section (4) of Section 21 of the Act, thecourt may have to probe into the matter deeper so as toenable it to arrive at finding that the materials collectedagainst the accused during the investigation may not justifya judgment of conviction. The findings recorded by the courtwhile granting or refusing bail undoubtedly would betentative in nature, which may not have any bearing on themerit of the case and the trial court would, thus, be free todecide the case on the basis of evidence adduced at thetrial, without in any manner being prejudiced thereby”

(emphasis supplied)

AWe are in agreement with the observation made by the Court inRanjitsing Brahmajeetsing Sharma[635]. The Court while dealing withthe application for grant of bail need not delve deep into the merits of thecase and only view of the Court based on available material on recordis required. The Court will not weigh the evidence to find the guilt of theaccused which is, of course, the work of Trial Court. The Court is onlyBrequired to place its view based on probability on the basis of reasonablematerial collected during investigation and the said view will not be takeninto consideration by the Trial Court in recording its finding of the guilt oracquittal during trial which is based on the evidence adduced during thetrial. As explained by this Court in Nimmagadda Prasad[636], the wordsCused in Section 45 of the 2002 Act are “reasonable grounds for believing”which means the Court has to see only if there is genuine case againstthe accused and the prosecution is not required to prove the chargebeyond reasonable doubt.

132. Sub-section (6) of Section 212 of the Companies Act imposesDsimilar twin conditions, as envisaged under Section 45 of the 2002 Acton the grant of bail, when person is accused of offence under Section447 of the Companies Act which punishes fraud, with punishment ofimprisonment not less than six months and extending up to 10 years,with fine not less than the amount involved in the fraud, and extendingup to 3 times the fraud. The Court in Nittin Johari[637], while justifyingEthe stringent view towards grant of bail with respect to economic offencesheld that-

“24. At this juncture, it must be noted that even as per Section212(7) of the Companies Act, the limitation under Section212(6) with respect to grant of bail is in addition to those alreadyFprovided in the CrPC. Thus, it is necessary to advert to theprinciples governing the grant of bail under Section 439 of theCrPC. Specifically, heed must be paid to the stringent viewtaken by this Court towards grant of bail with respect ofeconomic offences. In this regard, it is pertinent to refer toGthe following observations of this Court in Y.S. Jagan MohanReddy[638]: (SCC p.449, paras 34-35)

635 Supra at Footnote No.275 (also at Footnote No.53)

636 Supra at Footnote No.256

637 Supra at Footnote No.291

H638 Supra at Footnote No.255

“34. Economic offences constitute class apart andneed to be visited with different approach in the matter ofbail. The economic offences having deep--rooted conspiraciesand involving huge loss of public funds need to be viewed seriouslyand considered as grave offences affecting the economy of thecountry as whole and thereby posing serious threat to thefinancial health of the country.

35. While granting bail, the court has to keep in mind thenature of accusations, the nature of evidence in supportthereof, the severity of the punishment which convictionwill entail, the character of the accused, circumstanceswhich are peculiar to the accused, reasonable possibility ofsecuring the presence of the accused at the trial, reasonableapprehension of the witnesses being tampered with, thelarger interests of the public/State and other similarconsiderations.”

(emphasis supplied)

133. This Court has been restating this position in several decisions,including Gautam Kundu[639] and Amit Kumar[640]. Thus, whileconsidering the application for bail under Section 45 of the 2002 Act, theCourt should keep in mind the abovementioned principles governing thegrant of bail. The limitations on granting bail as prescribed under Section45 of the 2002 Act are in addition to the limitations under the 1973 Code.

134. As aforementioned, similar twin conditions have beenprovided in several other special legislations[641] validity whereof has been

639 Supra at Footnote No.207

640 Supra at Footnote No.258

641 (i) Section 43D(5) of the UAPA [Zahoor Ahmad Shah Watali (supra at FootnoteNo.290)]; (ii) Section 21(4) of the MCOCA [Vishwanath Maranna Shetty (supra atFootnote No.287); Chenna Boyanna Krishna Yadav (supra at Footnote No.283) andRanjitsing Brahmajeetsing Sharma (supra at Footnote Nos.53 and 275)]; (iii) Section21(5) of the MCOCA [Bharat Shanti Lal Shah (supra at Footnote No.285); (iv) Section37 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 FootnoteNo.288); and (v) Section 212(6) of the Companies Act [Nittin Johari (supra at FootnoteNo.291)].

Aupheld by this Court being reasonable and having nexus with the purposesand 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 releasingthe accused on bail. The grant of bail, even though regarded as animportant right of the accused, is not mechanical order to be passed byBthe Courts. The prayer for grant of bail even in respect of generaloffences, have to be considered on the basis of objective discerniblejudicial parameters as delineated by this Court from time to time, oncase-to-case basis.135. We are conscious of the fact that in paragraph 53 of theCNikesh Tarachand Shah[642], the Court noted that it had struck downSection 45 of the 2002 as whole. However, in paragraph 54, thedeclaration is only in respect of further (two) conditions for release onbail as contained in Section 45(1), being unconstitutional as the sameviolated Articles 14 and 21 of the Constitution. Be that as it may, nothingDwould remain in that observation or for that matter, the declaration asthe defect in the provision [Section 45(1)], as existed then, and noticedby this Court has been cured by the Parliament by enacting amendmentAct 13 of 2018 which has come into force with effect from 19.4.2018.We, therefore, confined ourselves to the challenge to the twin conditionsin the provision, as it stands to this date post amendment of 2018 andEwhich, on analysis of the decisions referred to above dealing withconcerned enactments having similar twin conditions as valid, we mustreject the challenge. Instead, we hold that the provision in the form ofSection 45 of the 2002 Act, as applicable post amendment of 2018, isreasonable and has direct nexus with the purposes and objects sought toFbe achieved by the 2002 Act to combat the menace of money-launderinghaving transnational consequences including impacting the financialsystems and sovereignty and integrity of the countries.

136. It was urged that the scheduled offence in given case maybe non-cognizable offence and yet rigors of Section 45 of the 2002 ActGwould result in denial of bail even to such accused. This argument isfounded on clear misunderstanding of the scheme of the 2002 Act. Aswe have repeatedly mentioned in the earlier part of this judgment thatthe offence of money-laundering is one wherein person, directly orindirectly, attempts to indulge or knowingly assists or knowingly is

party or is actually involved in any process or activity connected withthe proceeds of crime. The fact that the proceeds of crime have beengenerated as result of criminal activity relating to scheduled offence,which incidentally happens to be non-cognizable offence, would makeno difference. The person is not prosecuted for the scheduled offenceby invoking provisions of the 2002 Act, but only when he has derived orobtained property as result of criminal activity relating to or in relationto scheduled offence and then indulges in process or activity connectedwith such proceeds of crime. Suffice it to observe that the argumentunder consideration is completely misplaced and needs to be rejected.137. Another incidental issue that had been raised is about thenon-application of rigors of Section 45 of the 2002 Act in respect ofanticipatory bail filed under Section 438 of the 1973 Code. This submissionpresumably is linked to the observation in paragraph 42 in the case ofNikesh Tarachand Shah[643]. Similar argument was considered in TheAsst. Director Enforcement Directorate vs. Dr. V.C. Mohan[644]. Weare in agreement with the observation in this decision that it is one thingto say that Section 45 of the 2002 Act refers to scheduled offenceunder the general law, but, as noted earlier, the offence under this Act interms of Section 3 is specific to involvement in any process or activityconnected with the proceeds of crime which is generated as result ofcriminal activity relating to scheduled offence. It is also true that Section45 does not make specific reference to Section 438 of the 1973 Code,but it cannot be overlooked that sub-section (1) opens with non-obstante clause and clearly provides that anything contained in the 1973Code (2 of 1974), no person accused of an offence under this Act shallbe released on bail or on his own bond, unless the stipulations providedtherein are fulfilled. On account of the non-obstante clause in Section45(1) of the 2002 Act, the sweep of that provision must prevail in termsof 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 interms of Section 438 of the 1973 Code is one of directing release of theperson on “bail” in case of his arrest; and such relief has been describedin judicial pronouncements as anticipatory bail. Section 45(1) uses genericexpression “bail” without reference to any provision of the 1973 Code,such as Sections 437, 438 and 439 of the 1973 Code. Concededly, Section65 of the 2002 Act states that the provisions of the 1973 Code shall

643 Supra at Footnote No.3

644 Criminal Appeal No.21 of 2022, decided on 4.1.2022

Aapply to the provisions under the Act insofar as they are not inconsistentwith the provisions of the 2002 Act. Further, Section 71 of the Act givesoverriding effect to the Act. Section 45 of the Act begins with non-obstante clause, thus excluding the application of the 1973 Code in mattersrelated to “bail”. The word “anticipatory bail” has not been defined underthe 1973 Code. In Sushila Aggarwal[645], it was held as under:B

“7.1. At the outset, it is required to be noted that as suchthe expression “anticipatory bail” has not been defined inthe Code. As observed by this Court in Balchand Jain[646],“anticipatory bail” means “bail in anticipation of arrest”.As held by this Court, the expression “anticipatory bail” isa misnomer inasmuch as it is not as if bail is presentlygranted by the court in anticipation of arrest. An applicationfor “anticipatory bail” in anticipation of arrest could be moved bythe accused at stage before an FIR is filed or at stage whenFIR is registered but the charge sheet has not been filed and theinvestigation is in progress or at stage after the investigation isconcluded. Power to grant “anticipatory bail” under Section 438of the CrPC vests only with the Court of Session or the HighCourt. Therefore, ultimately it is for the court concerned to considerthe application for “anticipatory bail” and while granting the“anticipatory bail” it is ultimately for the court concerned to imposeconditions including the limited period of “anticipatory bail”,depends upon the stages at which the application for anticipatorybail is moved. person in whose favour pre-arrest bail order ismade 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 bailorder under Section 438 and the bail order under Section 437 &439 CrPC. The only difference between the pre-arrest bail orderunder Section 438 and the bail order under Sections 437 and 439is the stages at which the bail order is passed. The bail orderunder Section 438 CrPC is prior to his arrest and in anticipation ofhis arrest and the order of bail under Sections 437 and 439 is aftera person is arrested. bare reading of Section 438 CrPC showsthat there is nothing in the language of the Section which goes to

645 Supra at Footnote No.318

646Balchand Jain (Shri) vs. State of Madhya Pradesh, (1976) 4 SCC 572

show that the pre-arrest bail granted under Section 438 has to betime-bound. The position is the same as in Section 437 and Section439 CrPC.”

(emphasis supplied)

Thus, anticipatory bail is nothing but bail granted in anticipationof arrest, hence, it has been held in various judgments by this Court thatthe principles governing the grant of bail in both cases are more or lesson the same footing, except that in case of anticipatory bail theinvestigation is still underway requiring the presence of the accused beforeinvestigation authority. Thus, ordinarily, anticipatory bail is granted inexceptional cases where the accused has been falsely implicated in anoffence with view to harass and humiliate him. Therefore, it would notbe logical to disregard the limitations imposed on granting bail underSection 45 of the 2002 Act, in the case of anticipatory bail as well.

138. In P. Chidambaram[647], this Court observed that the powerof anticipatory bail should be sparingly exercised in economic offencesand held thus:

“77. After referring to Siddharam Satlingappa Mhetre[648] andother judgments and observing that anticipatory bail can be grantedonly in exceptional circumstances, in Jai Prakash Singh v. Stateof Bihar[649] , the Supreme Court held as under: (SCC p.386, para19)

“19. Parameters for grant of anticipatory bail in seriousoffence are required to be satisfied and further while grantingsuch relief, the court must record the reasons therefor.Anticipatory bail can be granted only in exceptionalcircumstances where the court is prima facie of the view thatthe applicant has falsely been enroped in the crime and wouldnot misuse his liberty. (See D.K. Ganesh Babu v. P.T.Manokaran650 , State of Maharashtra v. Mohd. SajidHusain Mohd. S. Husain651 and Union of India v. PadamNarain Aggarwal652)

647 Supra at Footnote No.21

648Siddharam Satlingappa Mhetre vs. State of Maharashtra & Ors., (2011) 1 SCC 694649 (2012) 4 SCC 379

650 (2007) 4 SCC 434

651 (2008) 1 SCC 213

652 Supra at Footnote No.246

Economic Offences

78. Power under Section 438CrPC being an extraordinaryremedy, has to be exercised sparingly; more so, in cases ofeconomic offences. Economic offences stand as different classas they affect the economic fabric of the society. In Directorateof Enforcement v. Ashok Kumar Jain653, it was held that ineconomic offences, the accused is not entitled to anticipatory bail.

83. Grant of anticipatory bail at the stage of investigationmay frustrate the investigating agency in interrogating theaccused and in collecting the useful information and alsothe materials which might have been concealed. Successin such interrogation would elude if the accused knows thathe is protected by the order of the court. Grant ofanticipatory bail, particularly in economic offences woulddefinitely hamper the effective investigation. Having regardto the materials said to have been collected by the respondentEnforcement Directorate and considering the stage of theinvestigation, we are of the view that it is not fit case to grantanticipatory bail.84. In case of money-laundering where it involves manystages of “placement”, “layering i.e. funds moved to otherinstitutions to conceal origin” and “interrogation i.e. fundsused to acquire various assets”, it requires systematic andanalysed investigation which would be of great advantage.As held in Anil Sharma[654], success in such interrogationwould elude if the accused knows that he is protected by apre-arrest bail order. Section 438 CrPC is to be invokedonly in exceptional cases where the case alleged is frivolousor groundless. In the case in hand, there are allegations oflaundering the proceeds of the crime. The Enforcement Directorateclaims to have certain specific inputs from various sources,including overseas banks. Letter rogatory is also said to have beenissued and some response have been received by the Department.

654State rep. by the C.B.I. vs. Anil Sharma, (1997) 7 SCC 187

Having regard to the nature of allegations and the stage of theinvestigation, in our view, the investigating agency has to be givensufficient freedom in the process of investigation. Though we donot endorse the approach of the learned Single Judge in extractingthe note produced by the Enforcement Directorate, we do notfind any ground warranting interference with the impugnedorder[655]. Considering the facts and circumstances of the case, inour view, grant of anticipatory bail to the appellant will hamperthe investigation and this is not fit case for exercise of discretionto grant anticipatory bail to the appellant.”

(emphasis supplied)

139. Therefore, as noted above, investigation in an economicoffence, more so in case of money-laundering, requires systematicapproach. Further, it can never be the intention of the Parliament toexclude the operation of Section 45 of 2002 Act in the case of anticipatorybail, otherwise, it will create an unnecessary dichotomy between bailand anticipatory bail which not only will be irrational but also discriminatoryand arbitrary. Thus, it is totally misconceived that the rigors of Section45 of the 2002 Act will not apply in the case of anticipatory bail.

140. Suffice it to observe that it would be preposterous and illogicalto hold that if person applies for bail after arrest, he/she can be grantedthat relief only if the twin conditions are fulfilled in addition to otherstipulations predicated in the 1973 Code; but another person, who is yetto be arrested in connection with the same offence of money-laundering,will not be required to fulfil such twin conditions whilst consideringapplication for grant of bail under Section 438 of the 1973 Code. Therelief of bail, be it in the nature of regular bail or anticipatory bail, iscircumscribed by the stipulations predicated in Section 45 of the 2002Act. The underlying principles of Section 45 of the 2002 Act would gettriggered in either case before the relief of bail in connection with theoffence of money-laundering is taken forward. Any other view wouldbe counterproductive and defeat the purposes and objects behind thestringent provision enacted by the Parliament for prevention of money-laundering and to combat the menace on account of such activity whichdirectly impacts the financial systems, including the sovereignty andintegrity of the country.

A141. As result, we have no hesitation in observing that inwhatever form the relief is couched including the nature of proceedings,be it under Section 438 of the 1973 Code or for that matter, by invokingthe jurisdiction of the Constitutional Court, the underlying principles andrigors of Section 45 of the 2002 must come into play and withoutexception ought to be reckoned to uphold the objectives of the 2002 Act,Bwhich is special legislation providing for stringent regulatory measuresfor combating the menace of money-laundering.

142. There is, however, an exception carved out to the strictcompliance of the twin conditions in the form of Section 436A of the1973 Code, which has come into being on 23.6.2006 vide Act 25 ofC2005. This, being the subsequent law enacted by the Parliament, mustprevail. Section 436A of the 1973 Code reads as under:

“[656][436A. Maximum period for which an undertrial prisonercan be detained.— Where person has, during the period ofinvestigation, inquiry or trial under this Code of an offence underany law (not being an offence for which the punishment of deathhas been specified as one of the punishments under that law)undergone detention for period extending up to one-half of themaximum period of imprisonment specified for that offence underthat law, he shall be released by the Court on his personal bondwith or without sureties:

Provided that the Court may, after hearing the PublicProsecutor and for reasons to be recorded by it in writing, orderthe continued detention of such person for period longer thanone-half of the said period or release him on bail instead of thepersonal bond with or without sureties:

Provided further that no such person shall in any case bedetained during the period of investigation, inquiry or trial for morethan the maximum period of imprisonment provided for the saidoffence under that law.

Explanation.—In computing the period of detention underthis section for granting bail, the period of detention passed due todelay 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 weredetained in jail for periods beyond the maximum period ofimprisonment provided for the alleged offence. As remedialmeasure section 436A has been inserted to provide that where anunder-trial prisoner other than the one accused of an offence forwhich death has been prescribed as one of the punishments, hasbeen under detention for period extending to one-half of themaximum 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 prisonerbe detained beyond the maximum period of imprisonment for whichhe can be convicted for the alleged offence.”

143. In Hussainara Khatoon & Ors. vs. Home Secretary, Stateof Bihar, Patna[657], this Court stated that the right to speedy trial is oneof the facets of Article 21 and recognized the right to speedy trial as afundamental right. This dictum has been consistently followed by thisCourt in several cases. The Parliament in its wisdom inserted Section436A under the 1973 Code recognizing the deteriorating state of undertrialprisoners so as to provide them with remedy in case of unjustifieddetention. In Supreme Court Legal Aid Committee RepresentingUndertrial Prisoners vs. Union of India & Ors.[658], the Court, relyingon Hussainara Khatoon[659], directed the release of prisoners chargedunder the Narcotic Drugs and Psychotropic Act after completion ofone-half of the maximum term prescribed under the Act. The Courtissued such direction after taking into account the non obstante provisionof Section 37 of the NDPS Act, which imposed the rigors of twin conditionsfor release on bail. It was observed:

“15. ….We are conscious of the statutory provision finding placein Section 37 of the Act prescribing the conditions which have tobe satisfied before person accused of an offence under the Actcan be released. Indeed we have adverted to this section in theearlier part of the judgment. We have also kept in mind theinterpretation placed on similar provision in Section 20 of theTADA Act by the Constitution Bench in Kartar Singh v. Stateof Punjab[660]. Despite this provision, we have directed as above

657 (1980) 1 SCC 98

658 (1994) 6 SCC 731

659 Supra at Footnote No.657

660 Supra at Footnote No.190

Amainly at the call of Article 21 as the right to speedy trial mayeven require in some cases quashing of criminal proceedingaltogether, as held by Constitution Bench of this Court in A.R.Antulay v. R.S. Nayak[661], release on bail, which can be taken tobe embedded in the right of speedy trial, may, in some cases bethe demand of Article 21. As we have not felt inclined to acceptBthe extreme submission of quashing the proceedings and settingfree the accused whose trials have been delayed beyondreasonable time for reasons already alluded to, we have felt thatdeprivation of the personal liberty without ensuring speedy trialwould also not be in consonance with the right guaranteed byCArticle 21. Of course, some amount of deprivation of personalliberty cannot be avoided in such cases; but if the period ofdeprivation pending trial becomes unduly long, the fairness assuredby Article 21 would receive jolt. It is because of this that wehave felt that after the accused persons have sufferedimprisonment which is half of the maximum punishment providedDfor the offence, any further deprivation of personal liberty wouldbe violative of the fundamental right visualised by Article 21, whichhas to be telescoped with the right guaranteed by Article 14 whichalso promises justness, fairness and reasonableness in proceduralmatters. …”

144. The Union of India also recognized the right to speedy trialand access to justice as fundamental right in their written submissionsand, thus, submitted that in limited situation right of bail can be grantedin case of violation of Article 21 of the Constitution. Further, it is to benoted that the Section 436A of the 1973 Code was inserted after the

Fenactment of the 2002 Act. Thus, it would not be appropriate to deny therelief of Section 436A of the 1973 Code which is wholesome provisionbeneficial to person accused under the 2002 Act. However, Section436A of the 1973 Code, does not provide for an absolute right of bail asin the case of default bail under Section 167 of the 1973 Code. For, in thefact situation of case, the Court may still deny the relief owing toGground, such as where the trial was delayed at the instance of accusedhimself.

145. Be that as it may, in our opinion, this provision is comparablewith the statutory bail provision or, so to say, the default bail, to be granted

H661 (1992) 1 SCC 225

in terms of Section 167 of the 1973 Code consequent to failure of theinvestigating agency to file the chargesheet within the statutory periodand, in the context of the 2002 Act, complaint within the specified periodafter arrest of the person concerned. In the case of Section 167 of the1973 Code, an indefeasible right is triggered in favour of the accused themoment the investigating agency commits default in filing thechargesheet/complaint within the statutory period. The provision in theform of Section 436A of the 1973 Code, as has now come into being isin recognition of the constitutional right of the accused regarding speedytrial under Article 21 of the Constitution. For, it is sanguine hope ofevery accused, who is in custody in particular, that he/she should betried expeditiously — so as to uphold the tenets of speedy justice. If thetrial cannot proceed even after the accused has undergone one-half ofthe maximum period of imprisonment provided by law, there is no reasonto deny him this lesser relief of considering his prayer for release on bailor bond, as the case may be, with appropriate conditions, including tosecure his/her presence during the trial.146. Learned Solicitor General was at pains to persuade us thatthis view would impact the objectives of the 2002 Act and is in thenature of super imposition of Section 436A of the 1973 Code over Section45 of the 2002 Act. He has also expressed concern that the same logicmay be invoked in respect of other serious offences, including terroristoffences which would be counterproductive. So be it. We are notimpressed by this submission. For, it is the constitutional obligation of theState to ensure that trials are concluded expeditiously and at least withina reasonable time where strict bail provisions apply. If person is detainedfor period extending up to one-half of the maximum period ofimprisonment specified by law and is still facing trial, it is nothing shortof 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 wholesome beneficialprovision, which is for effectuating the right of speedy trial guaranteedby Article 21 of the Constitution and which merely specifies the outerlimits within which the trial is expected to be concluded, failing which,the accused ought not to be detained further. Indeed, Section 436A ofthe 1973 Code also contemplates that the relief under this provision cannotbe granted mechanically. It is still within the discretion of the Court,unlike the default bail under Section 167 of the 1973 Code. Under Section

A436A of the 1973 Code, however, the Court is required to consider therelief on case-to-case basis. As the proviso therein itself recognises that,in given case, the detention can be continued by the Court even longerthan one-half of the period, for which, reasons are to be recorded by it inwriting and also by imposing such terms and conditions so as to ensurethat after release, the accused makes himself/herself available forBexpeditious completion of the trial.

148. However, that does not mean that the principle enunciatedby this Court in Supreme Court Legal Aid Committee RepresentingUndertrial Prisoners[662], to ameliorate the agony and pain of personskept in jail for unreasonably long time, even without trial, can be whittledCdown on such specious plea of the State. If the Parliament/Legislatureprovides for stringent provision of no bail, unless the stringent conditionsare fulfilled, it is the bounden duty of the State to ensure that such trialsget precedence and are concluded within reasonable time, at leastbefore the accused undergoes detention for period extending up toDone-half of the maximum period of imprisonment specified for theconcerned offence by law. [Be it noted, this provision (Section 436A ofthe 1973 Code) is not available to accused who is facing trial for offencespunishable with death sentence].

149. In our opinion, therefore, Section 436A needs to be construedEas statutory bail provision and akin to Section 167 of the 1973 Code.Notably, learned Solicitor General has fairly accepted during the argumentsand also restated in the written notes that the mandate of Section 167 ofthe 1973 Code would apply with full force even to cases falling underSection 3 of the 2002 Act, regarding money-laundering offences. On thesame logic, we must hold that Section 436A of the 1973 Code could beFinvoked by accused arrested for offence punishable under the 2002 Act,being statutory bail.

SECTION 50 OF THE 2002 ACT

150. The validity of this provision has been challenged on theGground of being violative of Articles 20(3) and 21 of the Constitution.For, it allows the authorised officer under the 2002 Act to summon anyperson and record his statement during the course of investigation.Further, the provision mandates that the person should disclose true andcorrect facts known to his personal knowledge in connection with the

subject matter of investigation. The person is also obliged to sign thestatement so given with the threat of being punished for the falsity orincorrectness thereof in terms of Section 63 of the 2002 Act. Before weproceed to analyse the matter further, it is apposite to reproduce Section50 of the 2002 Act, as amended. The same reads thus:

“50. Powers of authorities regarding summons, productionof documents and to give evidence, etc.—(1) The Directorshall, for the purposes of section 13, have the same powers as arevested in civil court under the Code of Civil Procedure, 1908(5 of 1908) while trying suit in respect of the following matters,namely:—

(a) discovery and inspection;

(b) enforcing the attendance of any person, including any officerof [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 anddocuments; and

(f) any other matter which may be prescribed.

(2) The Director, Additional Director, Joint Director, DeputyDirector or Assistant Director shall have power to summon anyperson whose attendance he considers necessary whether to giveevidence or to produce any records during the course of anyinvestigation or proceeding under this Act.

(3) All the persons so summoned shall be bound to attend in personor through authorised agents, as such officer may direct, and shallbe bound to state the truth upon any subject respecting whichthey are examined or make statements, and produce suchdocuments as may be required.

(4) Every proceeding under sub-sections (2) and (3) shall bedeemed to be judicial proceeding within the meaning of section193 and section 228 of the Indian Penal Code (45 of 1860).

(5) Subject to any rules made in this behalf by the CentralGovernment, any officer referred to in sub-section (2) may impoundand retain in his custody for such period, as he thinks fit, anyrecords produced before him in any proceedings under this Act:

Provided that an Assistant Director or Deputy Directorshall not—

(a) impound any records without recording his reasons for sodoing; or

(b) retain in his custody any such records for period exceedingthree months, without obtaining the previous approval of theC664[Joint Director].”

151. Section 50 forms part of Chapter VIII of the 2002 Act whichdeals with matters connected with authorities referred to in Section 48in the same Chapter. Section 50 has been amended vide Act 2 of 2013and again, by Act 13 of 2018. Nothing much would turn on theseDamendments.

152. By this provision, the Director has been empowered toexercise the same powers as are vested in civil Court under the 1908Code while trying suit in respect of matters specified in sub-section(1). This is in reference to Section 13 of the 2002 Act dealing withEpowers of Director to impose fine in respect of acts of commission andomission by the banking companies, financial institutions andintermediaries. From the setting in which Section 50 has been placedand the expanse of empowering the Director with same powers as arevested in civil Court for the purposes of imposing fine under SectionF13, 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 Directorto issue summon to any person whose attendance he considers necessaryfor giving evidence or to produce any records during the course of anyinvestigation or proceeding under this Act. We have already highlightedGthe width of expression “proceeding” in the earlier part of this judgmentand held that it applies to proceeding before the Adjudicating Authorityor the Special Court, as the case may be. Nevertheless, sub-section (2)

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 19[th] April, 2018).H

empowers the authorised officials to issue summon to any person. Wefail to understand as to how Article 20(3) would come into play in respectof process of recording statement pursuant to such summon which isonly for the purpose of collecting information or evidence in respect ofproceeding under this Act. Indeed, the person so summoned, is bound toattend in person or through authorised agent and to state truth upon anysubject concerning which he is being examined or is expected to makestatement and produce documents as may be required by virtue of sub-section (3) of Section 50 of the 2002 Act. The criticism is essentiallybecause of sub-section (4) which provides that every proceeding undersub-sections (2) and (3) shall be deemed to be judicial proceedingwithin the meaning of Sections 193 and 228 of the IPC. Even so, thefact remains that Article 20(3) or for that matter Section 25 of theEvidence Act, would come into play only when the person so summonedis an accused of any offence at the relevant time and is being compelledto be witness against himself. This position is well-established. TheConstitution Bench of this Court in M.P. Sharma[665] had dealt with asimilar challenge wherein warrants to obtain documents required forinvestigation were issued by the Magistrate being violative of Article20(3) of the Constitution. This Court opined that the guarantee in Article20(3) is against “testimonial compulsion” and is not limited to oral evidence.Not only that, it gets triggered if the person is compelled to be witnessagainst himself, which may not happen merely because of issuance ofsummons for giving oral evidence or producing documents. Further, tobe witness is nothing more than to furnish evidence and such evidencecan be furnished by different modes. The Court went on to observe asfollows:

“Broadly stated the guarantee in article 20(3) is against “testimonialcompulsion”. It is suggested that this is confined to the oral evidenceof person standing his trial for an offence when called to thewitness-stand. We can see no reason to confine the content ofthe constitutional guarantee to this barely literal import. So to limitit would be to rob the guarantee of its substantial purpose and tomiss the substance for the sound as stated in certain Americandecisions. The phrase used in Article 20(3) is “to be witness”. Aperson can “be witness” not merely by giving oral evidence butalso by producing documents or making intelligible gestures as in

Athe case of dumb witness (See section 119 of the Evidence Act)or the like. “To be witness” is nothing more than “to furnishevidence”, and such evidence can be furnished through the lips orby production of thing or of document or in other modes. Sofar as production of documents is concerned, no doubt Section139 of the Evidence Act says that person producing documentBon summons is not witness. But that section is meant to regulatethe right of cross-examination. It is not guide to the connotationof the word “witness”, which must be understood in its naturalsense, i.e., as referring to person who furnishes evidence. Indeed,every positive volitional act which furnishes evidence is testimony,Cand testimonial compulsion connotes coercion which procures thepositive volitional evidentiary acts of the person, as opposed tothe negative attitude of silence or submission on his part. Nor isthere any reason to think that the protection in respect of theevidence so procured is confined to what transpires at the trial inthe court room. The phrase used in article 20(3) is “to be witness”Dand not to “appear as witness”. It follows that the protectionafforded to an accused in so far as it is related to the phrase “tobe witness” is not merely in respect of testimonial compulsion inthe court room but may well extend to compelled testimonypreviously obtained from him. It is available therefore to aEperson against whom formal accusation relating to thecommission of an offence has been levelled which in thenormal course may result in prosecution. Whether it isavailable to other persons in other situations does not call fordecision in this case.”

(emphasis supplied)

154. In the case of Mohammed Dastagir[666], the Court restatedthat the requirement to invoke the protection under Article 20(3) is thatthe person must be formally accused of the offence and observed thus:

“(9) …G

“Considered in this light, the guarantee under Art.20(3) would be available in the present cases thesepetitioners against whom First Information Report hasbeen recorded as accused therein. It would extend to any

compulsory process for production of evidentiary documentswhich are reasonably likely to support prosecution againstthem.”

These observations were unnecessary in Sharma’s case[667], havingregard to the fact that this Court held that the seizure of documentson search warrant was not unconstitutional as that would notamount to compulsory production of incriminating evidence. Inthe present case, even on what was stated in Sharma’s case[668],there was no formal accusation against the appellant relating tothe commission of an offence. Mr. Kaliyappan had clearly statedthat he was not doing any investigation. It does not appear fromhis evidence that he had even accused the appellant of havingcommitted any offence. Even if it were to be assumed that theappellant was person accused of an offence the circumstancesdo not establish that he was compelled to produce the moneywhich he had on his person. No doubt he was asked to do so.It was, however, within his power to refuse to comply withMr. Kaliyappan’s request. In our opinion, the facts established inthe present case show that the appellant was not compelled toproduce the currency notes and therefore do not attract theprovisions of Art. 20(3) of the Constitution.”

(emphasis supplied)

155. In yet another case in Raja Narayanlal Bansilal[669], theConstitution Bench dealt with the challenge to the validity of the noticeserved on the appellant for asking the appellant to attend the office ofthe Inspector appointed by the Central Government to investigate intothe affairs of the company and for giving statement and producing booksof accounts and other documents. The Court repelled the said challengein the following words:

“(23)…….Similarly, for invoking the constitutional rightagainst testimonial compulsion guaranteed under Art. 20(3)it must appear that formal accusation has been madeagainst the party pleading the guarantee and that it relatesto the commission of an offence which in the normal coursemay result in prosecution.… .

667 Supra at Footnote No.324 (also at Footnote No.47)

668 Supra at Footnote No.324 (also at Footnote No.47)

669 Supra at Footnote No.327

(25) ……The cardinal words of the section are those whichempower the Commissioner or his inspector to examine into andreport on the affairs of the society”. Thus it is clear that theexamination of, or investigation into, the affairs of thecompany cannot be regarded as proceeding startedagainst any individual after framing an accusation againsthim. Besides it is quite likely that in some casesinvestigation may disclose that there are no irregularities,or if there are they do not amount to the commission of anyoffence; in such cases there would obviously be no occasionfor the Central Government to institute criminalproceedings under S. 242(1). Therefore, in our opinion, theHigh Court was right in holding that when the inspectorissued the impugned notices against the appellant he cannotbe said to have been accused of any offence; and so thefirst essential condition for the application of Art. 20(3) isabsent. We ought to add that in the present case the sameconclusion would follow even if the clause “accused of anyoffence” is interpreted more liberally than was done in the caseof M.P. Sharma[670] because even if the expression “accused ofany offence” is interpreted in very broad and liberal way it isclear that at the relevant stage the appellant has not been, and inlaw cannot be, accused of any offence. ….”

(emphasis supplied)

156. Again, the question came up for consideration before theeleven Judges of this Court in Kathi Kalu Oghad[671], wherein the Courtnoted that the person on whom summon has been served, must fulfil theFcharacter of an accused person at the time of making the statement.The Court expounded thus:

“(15) In order to bring the evidence within the inhibitionsof cl. (3) of Art. 20 it is must be shown not only that theperson making the statement was an accused at the timehe made it and that it had material bearing on the criminality ofthe maker of the statement, but also that he was compelled tomake that statement. ‘Compulsion’ in the context, must mean what

670 Supra at Footnote No.324 (also at Footnote No.47)

671 Supra at Footnote No.44

in law is called ‘duress’. In the Dictionary of English Law by EarlJowitt, ‘duress’ is explained as follows:

“Duress is where man is compelled to do an act by injury,beating or unlawful imprisonment (sometimes called duress instrict sense) or by the threat of being killed, suffering somegrievous bodily harm, or being unlawfully imprisoned(sometimes called menace, or duress per mines). Duress alsoincludes threatening, beating or imprisonment of the wife, parentor child of person.”

(emphasis supplied)

157. In another celebrated decision of this Court in RomeshChandra Mehta[672], while following the earlier decisions and dealingwith the challenge in reference to the provisions of the Sea CustomsAct, the Court noted thus:

“In the two earlier cases M.P. Sharma’s case[673] and RajaNarayanlal Bansilal Case[674] this Court in describing personaccused used the expression “against whom formal accusationhad been made”, and in Kathi Kalu Oghad’s case[675] this Courtused the expression “the person accused must have stood in thecharacter of an accused person”. Counsel for Mehta urged thatthe earlier authorities were superseded in Kathi Kalu Oghad’scase[676] and it was ruled that statement made by personstanding in the character of person accused of an offence isinadmissible by virtue of Art. 20(3) of the Constitution. But theCourt in Kathi Kalu Oghad’s case[677] has not set out differenttest for determining the stage when person may be said to beaccused of an offence. In Kathi Kalu Oghad’s case[678] the Courtmerely set out the principles in the light of the effect of formalaccusation on person, viz., that he stands in the character of anaccused person at the time when he makes the statement.

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

676 Supra at Footnote No.44

677 Supra at Footnote No.44

678 Supra at Footnote No.44

ANormally person stands in the character of an accusedwhen First Information Report is lodged against him inrespect of an offence before an Officer competent toinvestigate it, or when complaint is made relating to thecommission of an offence before Magistrate competentto try or send to another Magistrate for trial the offence.BWhere Customs Officer arrests person and informs thatperson of the grounds of his arrest, (which he is bound todo under Art. 22(1) of the Constitution) for the purposes ofholding an enquiry into the infringement of the provisionsof the Sea Customs Act which he has reason to believe hasCtaken place, there is no formal accusation of an offence. Inthe case of an offence by infringement of the Sea Customs Actand punishable at the trial before Magistrate there is anaccusation when complaint is lodged by an officer competent inthat behalf before the Magistrate.”

(emphasis supplied)

158. Relying on the exposition in Nandini Satpathy[679], it wasurged that it is not necessary that formal accusation is made againstthe person in the form of FIR/ECIR/chargesheet/complaint to invokeprotection under Article 20(3) of the Constitution and that protection isEavailable even to suspect at the time of interrogation. (See alsoBalkishan A. Devidayal[680]and Selvi[681]).

159. In the context of the 2002 Act, it must be remembered thatthe summon is issued by the Authority under Section 50 in connectionwith the inquiry regarding proceeds of crime which may have beenFattached and pending adjudication before the Adjudicating Authority. Inrespect of such action, the designated officials have been empowered tosummon any person for collection of information and evidence to bepresented before the Adjudicating Authority. It is not necessarily forinitiating prosecution against the noticee as such. The power entrustedto the designated officials under this Act, though couched as investigationGin real sense, is to undertake inquiry to ascertain relevant facts to facilitateinitiation of or pursuing with an action regarding proceeds of crime, ifthe situation so warrants and for being presented before the Adjudicating

679 Supra at Footnote No.35

680 Supra at Footnote Nos.120 (also at Footnote No.41)

681 Supra at Footnote No.43

Authority. It is different matter that the information and evidence socollated during the inquiry made, may disclose commission of offence ofmoney-laundering and the involvement of the person, who has beensummoned for making disclosures pursuant to the summons issued bythe Authority. At this stage, there would be no formal document indicativeof likelihood of involvement of such person as an accused of offence ofmoney-laundering. If the statement made by him reveals the offence ofmoney-laundering or the existence of proceeds of crime, that becomesactionable under the Act itself. To put it differently, at the stage ofrecording of statement for the purpose of inquiring into the relevant factsin connection with the property being proceeds of crime is, in that sense,not an investigation for prosecution as such; and in any case, there wouldbe no formal accusation against the noticee. Such summons can be issuedeven 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 authorisedofficials can certainly proceed against him for his acts of commission oromission. In such situation, at the stage of issue of summons, the personcannot claim protection under Article 20(3) of the Constitution. However,if his/her statement is recorded after formal arrest by the ED official,the consequences of Article 20(3) or Section 25 of the Evidence Actmay 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 theprosecution from proceeding against such person including forconsequences under Section 63 of the 2002 Act on the basis of othertangible material to indicate the falsity of his claim. That would be amatter of rule of evidence.

160. The Andhra Pradesh High Court in Dalmia Cement (Bharat)Limited[682], while dealing with the purpose of investigation under Section50(2) noted that it is essentially for collecting evidence with regard tothe involvement of person or about existence of certain facts concerningproceeds of crime or process or activity connected with proceeds ofcrime, such inquiry or investigation could be commenced on the basis ofinformation to be recorded in the internal document maintained by theauthority authorised also described as ECIR. The High Court noted asfollows:

“33. In the light of the detailed submissions of the learned seniorcounsel on either side, the point for consideration is: Whether thesummons issued to the second petitioner under Section 50(2) and(3) of PMLA is violative of the Constitutional protection andguarantee under Article 20(3) of the Constitution of India.

47. At this stage, therefore, investigation is only for thepurpose of collecting evidence with regard to proceeds ofcrime in the hands of the persons suspected and theirinvolvement, if any, in the offence under Section 3 of PMLA.I am, therefore, unable to equate ECIR registered by thefirst respondent to an FIR under Section 154 Cr.P.C andconsequently, I agree with the learned Additional SolicitorGeneral that under PMLA the petitioners are not accusedat present. Consequently, therefore, the submission on behalf ofthe petitioners on the assumption that petitioners are accused underPMLA is liable to be rejected.”

(emphasis supplied)

161. The Delhi High Court also had occasion to examine theprovisions of the 2002 Act in Vakamulla Chandrashekhar[683] and notedEthe special feature of the 2002 Act which deals with both civil and criminalconsequences as against the offender. Having so noted, the High Courtobserved as follows:

“11. The act of money laundering has both civil and criminalconsequences for the perpetrator. To deal with the civilFconsequences, the Act creates, and empowers the adjudicatingauthority (under Section 2(1)(a) read with Section 6) with powersof Civil Court to summon, direct production of documents andevidence (see Section 11), and adjudicate on the issue whetherany property is involved in money laundering (Section 8). It alsocreates the right of appeal from orders of the AdjudicatingGAuthority (Section 26), and designates the Appellate Tribunalauthorized to hear appeals (Section 2(b) read with Section 25). Italso creates right of further appeal before the High Court (Section42).”

162. It is, thus, clear that the power invested in the officials is onefor conducting inquiry into the matters relevant for ascertainingexistence of proceeds of crime and the involvement of persons inthe process or activity connected therewith so as to initiateappropriate action against such person including of seizure,attachment and confiscation of the property eventually vesting inthe Central Government.

163. We are conscious of the fact that the expression used inSection 2(1)(na) of the 2002 Act is “investigation”, but there is obviousdistinction 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 Magistrate) who isauthorised by Magistrate thereby to collect the evidence regarding thecrime in question. Whereas, the investigation under Section 2(1)(na) ofthe 2002 Act is conducted by the Director or by an authority authorisedby the Central Government under the 2002 Act for the collection ofevidence for the purpose of proceeding under this Act. Obviously, thisinvestigation is in the nature of inquiry to initiate action against the proceedsof crime and prevent activity of money-laundering. In the process ofsuch investigation, the Director or the authority authorised by the CentralGovernment referred to in Section 48 of the 2002 Act is empowered toresort to attachment of the proceeds of crime and for that purpose, alsoto do search and seizure and to arrest the person involved in the offenceof 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 hisstatement and production of documents as may be necessary by virtueof Section 50 of the 2002 Act. Sensu stricto, at this stage (of issuingsummon), it is not an investigation for initiating prosecution in respect ofcrime of money-laundering as such. That is only an incidental matterand may be the consequence of existence of proceeds of crime andidentification of persons involved in money-laundering thereof. Thelegislative scheme makes it amply clear that the authority authorisedunder this Act is not police officer as such. This becomes amply clearfrom the speech of the then Finance Minister delivered in 2005, whichreads thus:

“Sir, the Money-Laundering Act was passed by this House in theyear 2002, and number of steps have to be taken to implement it.

Sir, two kinds of steps were required. One was to appoint anauthority who will gather intelligence and information, and theother was an authority to investigate and prosecute. This Act wasmade to implement the political declaration adopted by the SpecialSession of the UN General Assembly in 1999. Section 1(3) of theAct stipulates that the Act will come into force on such date asthe Central Government may by notification appoint. While wewere examining the question of notifying the Act, I found thatthere was certain lacunae in the Act. I regret to say that notenough homework had been done in the definitions, and in thedivision of responsibility and authority. So, in consultation with theMinistry of Law, we came to the conclusion that these lacunaehad to be removed. Broadly, the reasons for the amendment arethe following.

Under the existing provisions in Section 45 of the Act, everyoffence is cognizable. If an offence is cognizable, then anypolice officer in India can arrest an offender without warrant.At the same time, under Section 19 of the Act, only aDirector or Deputy Director or an Assistant Director orany other officer authorised, may arrest an offender. Clearly,there was conflict between these two provisions. UnderSection 45(1)(b) of the Act, the Special Court shall not takecognizance of any offence punishable under Section 4 except upona complaint made in writing by the Director or any other officerauthorised by the Central Government. So, what would happen toan arrest made by any police officer in the case of cognizableoffence? 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 onlythe Director or an officer authorised by him to investigate offences.Of course, we would, by rule, set up threshold; and, below thatthreshold, we would allow State police officers also to take action.

The second anomaly that we found was that theexpression “investigation officer” and the word“investigation” occur in number of sections but they werenot defined in the Act. Consequently, one has to go to thedefinition in the Criminal Procedure Code and that Codeprovides only “investigation by police officer or by an

officer authorised by magistrate”. So, clearly, there was alacuna in not enabling the Director or the Assistant Directorunder this Act to investigate offences. That has been curednow.

What we are doing is, we are inserting new Section, 2(n)(a)defining the term, ‘investigation’; making an amendment to Sections28, 29 and 30, dealing with tribunals; amending Sections 44 and45 of the Act to make the offence non-cognisable so that only theDirector could take action; and also making consequential changesin Section 73. I request hon. Members to kindly approve of theseamendments so that the Act could be amended quickly and wecould bring it into force.”

(emphasis supplied)

From this speech, it is more than clear that the intention of theParliament was to empower the prescribed Authority under Section 48including the class of officers appointed for the purposes of this Act toinvestigate the matters falling within the purview of the Act and in themanner specified in that regard. By inserting Section 45(1A) in the 2002Act vide amendment Act 20 of 2005, was essentially to restrict andexplicitly disable the police officer from taking cognizance of the offenceof money-laundering much less investigating the same. It is provisionto restate that only the Authority (Section 48) under this Act is competentto do investigation in respect of matters specified under the 2002 Actand none else. This provision rules out coextensive power to local policeas well as the authority authorised. As aforementioned, the officerspecifically authorised is also expected to confine the inquiry/investigationonly in respect of matters under this Act and in the manner specifiedtherein.

164. The purposes and objects of the 2002 Act for which it hasbeen enacted, is not limited to punishment for offence of money-laundering, but also to provide measures for prevention of money-laundering. It is also to provide for attachment of proceeds of crime,which are likely to be concealed, transferred or dealt with in any mannerwhich may result in frustrating any proceeding relating to confiscationof such proceeds under the 2002 Act. This Act is also to compel thebanking companies, financial institutions and intermediaries to maintain

Arecords of the transactions, to furnish information of such transactionswithin the prescribed time in terms of Chapter IV of the 2002 Act[684].

164A. Considering the above, it is unfathomable as to how theauthorities referred to in Section 48 can be described as police officer.The word “police” in common parlance means civil force whose mainBaim is to prevent and detect crimes and to maintain law and order of thenation as expounded in Barkat Ram[685]. In this decision, while dealingwith the role of Customs Officer under the Land Customs Act, 1924[686],the Court opined as follows:

“The Police Act, 1861 (Act V of 1861), is described as an Act forCthe regulation of police, and is thus an Act for the regulation ofthat group of officers who come within the word ‘police’ whatevermeaning be given to that word. The preamble of the Act furthersays: ‘whereas it is expedient to re-organise the police and tomake it more efficient instrument for the prevention and detectionof crime, it is enacted as follows’. This indicates that the policeDis the instrument for the prevention and detection of crimewhich can be said to be the main object and purpose ofhaving the police. Sections 23 and 25 lay down the duties of thepolice officers and s. 20 deals with the authority they can exercise.They can exercise such authority as is provided for police officerEunder the Police Act and any Act for regulating criminal procedure.The authority given to police officers must naturally be to enablethem to discharge their duties efficiently. Of the various dutiesmentioned in s. 23, the more important duties are to collectand communicate intelligence affecting the public peace,to prevent the commission of offences and public nuisancesFand to detect and bring offenders to justice and to apprehendall persons whom the police officer is legally authorised toapprehend. It is clear, therefore, in view of the nature of theduties imposed on the police officers, the nature of the authorityconferred and the purpose of the police Act, that the powers whichGthe police officers enjoy are powers for the effective preventionand detection of crime in order to maintain law and order.”

(emphasis supplied)

684 See Pareena Swarup (supra at Footnote No.366)685 Supra at Footnote No.24H686 For short, “Land Customs Act”

And again, opined thus:

“….The Customs Officer, therefore, is not primarily concernedwith the detection and punishment of crime committed bya person, but is mainly interested in the detection and preventionof smuggling of goods and safeguarding the recovery of customsduties. He is more concerned with the goods and customs duty,than with the offender.”

Thus, this Court concluded that the Customs Officer under theLand Customs Act is not police officer within the meaning of Section25 of the Evidence Act. In that, the main object of the Customs Officeris to safeguard goods and customs duty and detection and prevention ofcrime is an ancillary function.

165. On similar lines, in the case of Raja Ram Jaiswal[687], whileexamining the efficacy of confession made to an Excise Inspector underthe 1915 Act, the Court held as follows:

“(10). …Thus he can exercise all the powers which an officer incharge of police station can exercise under Chapter XIV of theCode of Criminal Procedure. He can investigate into offences,record statements of the persons questioned by him, makesearches, seize any articles connected with an offence underthe Excise Act, arrest an accused person, grant him bail,send him up for trial before Magistrate, file charge-sheet and so on. Thus his position in so far as offencesunder the Excise Act committed within the area to whichhis appointment extends are concerned is not different fromthat of an officer in charge of police station. As regardsthese offences not only is he charged with the duty of preventingtheir commission but also with their detection and is for thesepurposes empowered to act in all respects as an officer in chargeof police station. No doubt unlike an officer in charge of policestation he is not charged with the duty of the maintenance of lawand order nor can he exercise the powers of such officer withrespect to offences under the general law or under any otherspecial laws. But all the same, in so far as offences under theExcise Act are concerned, there is no distinction whatsoever inthe nature of the powers he exercises and those which police

DEFG

officer exercises in relation to offences which it is his duty toprevent and bring to light. It would be logical, therefore, tohold that confession recorded by him during aninvestigation into an excise offence cannot reasonably beregarded as anything different from confession to policeofficer. For, in conducting the investigation he exercisesthe powers of police officer and the act itself deems himto be police officer, even though he does not belong tothe police force constituted under the Police Act. It has beenheld by this court that the expression “police officer” in S. 25 ofthe Evidence Act is not confined to persons who are members ofthe regularly constituted police force. The position of an ExciseOfficer empowered under S. 77(2) of the Bihar and Orissa ExciseAct is not analogous to that of Customs Officer for two reasons.One is that the Excise Officer, does not exercise any judicialpowers just as the Customs Officer does under the Sea CustomsAct, 1878. Secondly, the Customs Officer is not deemed to be anofficer in charge of police station and therefore can exercise nopowers under the Code of Criminal Procedure and certainly notthose of an officer in charge of police station. No doubt, he toohas the power to make search, to seize articles suspected tohave been smuggled and arrest persons suspected of havingcommitted an offence under the Sea Customs Act. But that is all.Though he can make an enquiry, he has no power to investigateinto an offence under S. 156 of the Code of Criminal Procedure.Whatever powers he exercises are expressly set out in the SeaCustoms Act. Though some of those set out in Ch. XVII may beanalogous to those of Police Officer under the Code of CriminalProcedure they are not identical with those of police officer andare not derived from or by reference to the Code. In regard tocertain matters, he does not possess powers even analogous tothose of Police Officer. Thus he is not entitled to submit reportto Magistrate under S. 190 of the Code of Criminal Procedurewith view that cognizance of the offence be taken by theMagistrate. Section 187(A) of the Sea Customs Act specificallyprovides that cognizance of an offence under the Sea CustomsAct can be taken only upon complaint in writing made by theCustoms Officers or other officer of the customs not below the

rank of an Assistant Collector of Customs authorised in this behalfby the Chief Customs Officer.

(11) It may well be that statute confers powers and imposesduties on public servant, some of which are analogous to thoseof police officer. But by reason of the nature of other dutieswhich he is required to perform he may be exercising variousother powers also. It is argued on behalf of the State that wheresuch is the case the mere conferral of some only of the powers ofa police officer on such person would not make him policeofficer and, therefore, what must be borne in mind is the sum totalof the powers which he enjoys by virtue of his office as also thedominant purpose for which he is appointed. The contention thusis that when an officer has to perform wide range of duties andexercise correspondingly wide range of powers, the mere factthat some of the powers which the statute confers upon him areanalogous to or even identical with those of police officer wouldnot make him police officer and, therefore, if such an officerrecords confession it would not be hit by S. 25 of the EvidenceAct. In our judgment what is pertinent to bear in mind for thepurpose of determining as to who can be regarded ‘police officer’for the purpose of this provision is not the totality of the powerswhich an officer enjoys but the kind of powers which the lawenables him to exercise. The test for determining whether such aperson is “police officer” for the purpose of S. 25 of the EvidenceAct would, in our judgment, be whether the powers of policeofficer which are conferred on him or which are exercisable byhim because he is deemed to be an officer in charge of policestation establish direct or substantial relationship with theprohibition enacted by S. 25, that is, the recording of confession.In other words, the test would be whether the powers aresuch as would tend to facilitate the obtaining by him of aconfession from suspect or delinquent. If they do, then it

is unnecessary to consider the dominant purpose for whichhe is appointed or the question as to what other powers heenjoys. These questions may perhaps be relevant forconsideration where the powers of the police officer conferredupon him are of very limited character and are not by themselvessufficient to facilitate the obtaining by him of confession.”

(emphasis supplied)

166. Again, in the case of Badaku Joti Svant[688], the ConstitutionBench of this Court held that Central Excise Officer exercising powerunder Central Excise and Salt Act, 1944 is not police officer as hedoes not possess the power to submit charge-sheet under Section 173of the 1973 Code. The Court noted thus:

“(9) …..It is urged that under sub-s. (2) of S. 21 Central ExciseOfficer under the Act has all the powers of an officer-in-chargeof police station under Chap. XIV of the Cr.P.C. and, therefore,he must be deemed to be police officer within the meaning ofthose 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 samepowers as an officer-in-charge of police station has wheninvestigating cognizable case; but this power is conferred forthe purpose of sub-s. (1) which gives power to Central ExciseOfficer to whom any arrested person is forwarded to inquire intothe charge against him. Thus under S. 21 it is the duty of theCentral Excise Officer to whom an arrested person is forwardedto inquire into the charge made against such person. Further underproviso (a) to sub-s. (2) of S. 21 if the Central Excise Officer is ofopinion that there is sufficient evidence or reasonable ground ofsuspicion against the accused person, he shall either admit him tobail to appear before Magistrate having jurisdiction in the case,or forward him in custody to such Magistrate. It does not,however, appear that Central Excise Officer under theAct has power to submit charge-sheet under S. 173 of theCr.P.C. Under S. 190 of the Cr.P.C. Magistrate can takecognizance of any offence either (a) upon receiving complaintof facts which constitute such offence, or (b) upon report inwriting of such facts made by any police officer, or (c) uponinformation received from any person other than police officer,or upon his own knowledge or suspicion, that such offence hasbeen committed. police officer for purposes of Cl. (b) abovecan in our opinion only be police officer properly so-calledas the scheme of the Code of Criminal Procedure showsand it seems therefore that Central Excise Officer willhave to make complaint under Cl. (a) above if he wantsthe 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 powersof an officer-in-charge of police station when investigating acognizable 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 theBihar and Orissa Excise Act, 1915 which came to be consideredin Raja Ram Jaiswal’s case[689] and which provided in terms that“for the purposes of S. 156 of the Cr.P.C., 1898, the area to whichan excise officer empowered under S. 77, sub-s. (2), is appointedshall be deemed to be police-station, and such officer shall bedeemed to be the officer-in-charge of such station”. It cannottherefore be said that the provision in S. 21 is on par with theprovision in S. 78(3) of the Bihar and Orissa Excise Act. All thatS. 21 provides is that for the purpose of his enquiry, CentralExcise Officer shall have the powers of an officer-in-charge of apolice station when investigating cognizable case. But even so itappears that these powers do not include the power to submit acharge-sheet under S. 173 of the Cr.P.C., for unlike the Bihar andOrissa Excise Act, the Central Excise Officer is not deemed tobe an officer in charge of police station.”

167. Another Constitution Bench of this Court in Romesh ChandraMehta[690]concluded that Customs Officer under the Sea CustomsAct, 1878 could not be coined as police officer and noted thus:

“…..The Customs Officer does not exercise, when enquiring intoa suspected infringement of the Sea Customs Act, powers ofinvestigation which police-officer may in investigating thecommission of an offence. He is invested with the power to enquireinto infringements of the Act primarily for the purpose ofadjudicating forfeiture and penalty. He has no power toinvestigate an offence triable by Magistrate, nor has hethe power to submit report under s. 173 of the Code ofCriminal Procedure. He can only make complaint in writingbefore competent Magistrate.”

689 Supra at Footnote No.30

690 Supra at Footnote No.119

A“…..But the test for determining whether an officer of customs isto be deemed police officer is whether he is invested withall the powers of police officer qua investigation of anoffence, including the power to submit report under s.173 of the Code of Criminal Procedure. It is not claimed thata Customs Officer exercising power to make an enquiry mayBsubmit report under s. 173 of the Code of Criminal Procedure.”

(emphasis supplied)

168. The petitioners, however, have pressed into service expositionof this Court in the recent decision in Tofan Singh[691], which had occasionCto deal with the provisions of the NDPS Act wherein the Court held thatthe designated officer under that Act must be regarded as police officer.The Court opined that the statement made before him would be violativeof protection guaranteed under Article 20(3) of the Constitution. Thisdecision has been rightly distinguished by the learned Additional SolicitorGeneral on the argument that the conclusion reached in that judgment isDon the basis of the legislative scheme of the NDPS Act, which permittedthat interpretation. However, it is not possible to reach at the sameconclusion in respect of the 2002 Act for more than one reason. In thisdecision, the Court first noted that the Act (NDPS Act) underconsideration was penal statute. In the case of 2002 Act, however,Esuch view is not possible. The second aspect which we have repeatedlyadverted to, is the special purposes and objects behind the enactment ofthe 2002 Act. As per the provisions of the NDPS Act, it permitted botha regular police officer as well as designated officer, who is not adefined police officer, to investigate the offence under that Act. This hasresulted in discrimination. Such situation does not emerge from theFprovisions of the 2002 Act. The 2002 Act, on the other hand, authorisesonly the authorities referred to in Section 48 to investigate/inquire intothe matters under the Act in the manner prescribed therein. The provisioninserted in 2005 as Section 45(1A) is not to empower the regular policeofficers to take cognizance of the offence. On the other hand, it is aGprovision to declare that the regular police officer is not competentto take cognizance of offence of money-laundering, as it can beinvestigated only by the authorities referred to in Section 48 of the2002 Act. The third aspect which had weighed with the Court inTofan Singh[692]is that the police officer investigating an offence under

691 Supra at Footnote No.31 (also at Footnote No.24)H692 Supra at Footnote No.31 (also at Footnote No.24)

the NDPS Act, the provisions of Sections 161 to 164 of the 1973 Codeas also Section 25 of the Evidence Act, would come into play making thestatement made before them by the accused as inadmissible. Whereas,the investigation into the same offence was to be done by the designatedofficer under the NDPS Act, the safeguards contained in Sections 161to 164 of the 1973 Code and Section 25 of the Evidence Act, will haveno application and the statement made before them would be inadmissiblein evidence. This had resulted in discrimination. No such situationemerges from the provisions of the 2002 Act. Whereas, the 2002 Actclearly authorises only the authorities under the 2002 Act referred to inSection 48 to step in and summon the person when occasion arises andproceed to record the statement and take relevant documents on record.For that, express provision has been made authorising them to do so andby legal fiction, deemed it to be statement recorded in judicialproceeding by virtue of Section 50(4) of the 2002 Act. regular policeofficer will neither be in position to take cognizance of the offence ofmoney-laundering, much less be permitted to record the statement whichis to be made part of the proceeding before the Adjudicating Authorityunder the 2002 Act for confirmation of the provisional attachment orderand confiscation of the proceeds of crime for eventual vesting in theCentral Government. That may entail in civil consequences. It is differentmatter that some material or evidence is made part of the complaint ifrequired to be filed against the person involved in the process or activityconnected with money-laundering so as to prosecute him for offencepunishable under Section 3 of the 2002 Act. The next point which hasbeen reckoned by this Court in the said decision is that in the provisionsof NDPS Act, upon culmination of investigation of crime by designatedofficer under that Act (other than Police Officer), he proceeds to filea complaint; but has no authority to further investigate the offence, ifrequired. Whereas, if the same offence was investigated by regularPolice Officer after filing of the police report under Section 173(2) ofthe 1973 Code, he could still do further investigation by invoking Section173(8) of the 1973 Code. This, on the face of it, was discriminatory.

169. Notably, this dichotomy does not exist in the 2002 Act formore 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 Actand upon culmination of the investigation, to file complaint before theSpecial Court. Moreover, by virtue of Clause (ii) of Explanation in Section44(1) of the 2002 Act, it is open to the authorities under this Act to bring

DEF

Aany further evidence, oral or documentary, against any accused personinvolved in respect of offence of money-laundering, for which, complainthas already been filed by him or against person not named in the complaintand by legal fiction, such further complaint is deemed to be part of thecomplaint originally filed. Strikingly, in Tofan Singh[692A]the Court alsonoted that, while dealing with the provisions of the NDPS Act, theBdesignated officer has no express power to file closure report unlikethe power bestowed on the police officer, if he had investigated thesame crime under the NDPS Act. Once again, this lack of authority tofile closure report is not there in the 2002 Act. For, by the virtue ofproviso in Section 44(1)(b), after conclusion of investigation, if no offenceCof money-laundering is made out requiring filing of complaint, theAuthority under the Act expected to file such complaint, is permitted tofile closure report before the Special Court in that regard. In thatdecision, while analysing the provisions of the Section 67 of the NDPSAct, the Court noted that the statement recorded under Section 67 ofthat Act was to be held as inadmissible in all situations. That rendersDSection 53A of the same Act otiose. Section 53A of the NDPS Act isabout relevancy of statement made under certain circumstances.Realising the conflicting position emerging in the two provisions, the issuecame to be answered.

170. However, in the case of provisions of the 2002 Act, there isEno similar provision as Section 53A of the NDPS Act. As result, eventhis deficiency noticed in that judgment has no application to the provisionsof the 2002 Act. The Court also noted in that decision that unlike theprovisions of in the Customs Acts, 1962, Central Excise Act, 1944 andRailway Property (Unlawful Possession) Act, 1966, in the case of NDPSFAct prevention, detection and punishment of crime cannot be said to beancillary to the purpose of regulating and exercising of control overnarcotic drugs and psychotropic substances.

171. We have already adverted to the purposes and objects forenacting the 2002 Act. It is sui generis legislation, not only dealingGwith the prevention, detection, attachment, confiscation, vesting andmaking it obligatory for the banking companies, financial institutions andintermediaries to comply with certain essential formalities and make themaccountable for failure thereof, and also permits prosecution of the personsfound involved in the money-laundering activity. Keeping in mind the

H692A Supra at Footnote No.31 (also at Footnote No.24)

sweep of the purposes and objectives of the 2002 Act, the reason weighedwith this Court while dealing with the provisions of the NDPS Act, willhave no bearing whatsoever. In that decision, this Court also noted thatthe offences under the NDPS Act are cognizable as opposed to otherstatutes referred to above. The scheme of the NDPS Act, includingregarding making offences under that Act as cognizable by the designatedofficer as well as the local police, and the scheme of the 2002 Act isentirely different.

171A. Indeed, in the original 2002 Act, as enacted, the offence ofmoney-laundering was made cognizable as result of which confusionhad prevailed in dealing with the said crime when the legislative intentwas only to authorise the Authority under the 2002 Act to deal with suchcases. That position stood corrected in 2005, as noticed earlier. The factthat the marginal note of Section 45 retains marginal note that offencesto be cognizable and non-bailable, however, does not mean that the regularPolice Officer is competent to take cognizance of the offence of money-laundering. Whereas, that description has been retained for the limitedpurpose of understanding that the offence of money-laundering iscognizable and non-bailable and can be inquired into and investigated bythe Authority under the 2002 Act alone.

172. In other words, there is stark distinction between the schemeof the NDPS Act dealt with by this Court in Tofan Singh[693]and that inthe provisions of the 2002 Act under consideration. Thus, it must followthat the authorities under the 2002 Act are not Police Officers. Ex-consequenti, the statements recorded by authorities under the 2002Act, 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 thatmatter, Article 21 being procedure established by law. In given case,whether the protection given to the accused who is being prosecuted forthe offence of money-laundering, of Section 25 of the Evidence Act isavailable or not, may have to be considered on case-to-case basis beingrule of evidence.

173. We may note that the learned Additional Solicitor Generalwas at pains to persuade us to take the view that the decision in TofanSingh[694]is per incuriam. For the reasons already noted, we do notdeem it necessary to examine that argument.

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

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

698SUPREME COURT REPORTS

ASECTION 63 OF THE 2002 ACT

174. By this provision, penal consequences are provided in respectof acts of commission and omission by any person who wilfully andmaliciously gives false information and so causing an arrest or searchunder this Act; also against the person legally bound to state the truth ofBany matter relating to an offence under Section 3, but refuses to answersuch any question put to him by the Authority under the 2002 Act orrefuses to sign any statement made by him in the course of anyproceedings under the Act including failure to attend or produce booksof account or documents when called upon to do so. Section 63 readsthus:

“63. Punishment for false information or failure to giveinformation, etc.—(1) Any person wilfully and maliciously givingfalse information and so causing an arrest or search to be madeunder this Act shall on conviction be liable for imprisonment for aterm which may extend to two years or with fine which mayextend to fifty thousand rupees or both.

(2) If any person,—

(a) being legally bound to state the truth of any matter relating toan offence under section 3, refuses to answer any question put tohim 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 ofany proceedings under this Act, which an authority may legallyrequire to sign; or

(c) to whom summon is issued under section 50 either to attendto give evidence or produce books of account or other documentsat certain place and time, omits to attend or produce books ofaccount or documents at the place or time,

he shall pay, by way of penalty, sum which shall not be less thanfive hundred rupees but which may extend to ten thousand rupeesfor each such default or failure.

(3) No order under this section shall be passed by an authorityreferred to in sub-section (2) unless the person on whom the penaltyis proposed to be imposed is given an opportunity of being heardin the matter by such authority.

695[(4) Notwithstanding anything contained in clause (c) of sub-section (2), person who intentionally disobeys any direction issuedunder section 50 shall also be liable to be proceeded against undersection 174 of the Indian Penal Code (45 of 1860).]”

This provision is only an enabling provision and applies to situationsreferred to therein. It is in the nature of providing consequences for notdischarging the burden or cooperating with the authorities during theproceedings before the Authority and pursuant to summons, productionof documents and to give evidence is issued by such Authority in exerciseof power under Section 50 of the 2002 Act. The power exercised by theAuthority is analogous to power vested in civil Court under the 1908Code while trying suit in respect of matters referred to in Section 50 ofthe 2002 Act. This is in the nature of deeming provision empowering theconcerned Authority to ensure prevention of money-laundering and alsoto take consequential steps for attachment and confiscation of theproperty involved in such money-laundering to be vested in the CentralGovernment. Absent such authority given to the Director under the 2002Act, the inquiry or investigation required to be done for fulfilling themandate predicated under the 2002 Act, would eventually result in paperinquiry and no meaningful purpose would be served much less to combatthe menace of money-laundering. In such inquiry if misleading revelationsare made by any person or for that matter fails to cooperate, is requiredto be proceeded in accordance with law. In that sense, Section 63 is theprocedure established by law. It is unfathomable to countenance theargument that such provision must be regarded as unreasonable ormanifestly arbitrary. It has clear nexus with the purposes and objectssought to be achieved by the 2002 Act.

SCHEDULE OF THE 2002 ACT

175. The expression “scheduled offence” has been defined inSection 2(1)(y). This provision assumes significance as it has direct linkwith the definition of “proceeds of crime”. In that, the property derivedor obtained as result of criminal activity relating to notified offences,termed as scheduled offence, is regarded as tainted property and dealingwith such property in any manner is an offence of money-laundering.The Schedule is in three parts, namely Part A, and C. Part of theSchedule consists of 29 paragraphs. These paragraphs deal withrespective enactments and the offences specified thereunder which are

695 Ins. by Act 2 of 2013, sec.26 (w.e.f. 15-2-2013, vide S.O. 343(E), dated 8-2-2013)

700SUPREME COURT REPORTS

Aregarded as scheduled offences. Similarly, Part deals with offenceunder the Customs Act specifically and Part is in relation to offenceof cross border implications. The Schedule reads thus:

BCDEFG

696 Subs. by Act 2 of 2013, Sec. 30(i), for Part (w.e.f. 15-2-2013, vide S.O. 343(E),dated 8-2-2013). Earlier Part was amended by Act 21 of 2009, sec. 13 (w.e.f. 1-6-H2009).

PARAGRAPH 2

OFFENCES UNDER THE NARCOTIC DRUGS ANDPSYCHOTROPIC SUBSTANCES ACT, 1985(61 of 1985)

ABPARAGRAPH 3OFFENCES UNDER THE EXPLOSIVE SUBSTANCESACT, 1908(6 of 1908)CPARAGRAPH 4DOFFENCES UNDER THE UNLAWFUL ACTIVITIES(PREVENTION) ACT, 1967(37 of 1967)EFG

VIJAY MADANLAL CHOUDHARY & ORS. v. UNION OF703INDIA & ORS. [A. M. KHANWILKAR, J.]APARAGRAPH 5OFFENCES UNDER THE ARMS ACT, 1959B(54 of 1959)CDEFGH

704SUPREME COURT REPORTS

APARAGRAPH 6OFFENCES UNDER THE WILD LIFE (PROTECTION) ACT,1972(53 of 1972)

EPARAGRAPH 7OFFENCES UNDER THE IMMORAL TRAFFIC(PREVENTION) ACT, 1956(104 of 1956)

697[PARAGRAPH 8OFFENCES UNDER THE PREVENTION OFCORRUPTION ACT, 1988(49 of 1988)

PARAGRAPH 9OFFENCES UNDER THE EXPLOSIVES ACT, 1884(4 of 1884)

APARAGRAPH 10OFFENCES UNDER THE ANTIQUITIES AND ARTSTREASURES ACT, 1972(52 of 1972)

PARAGRAPH 11

OFFENCES UNDER THE SECURITIES AND EXCHANGECBOARD OF INDIA ACT, 1992(15 of 1992)

PARAGRAPH 12DOFFENCES UNDER THE CUSTOMS ACT, 1962(52 of 1962)

PARAGRAPH 13EOFFENCES UNDER THE BONDED LABOUR SYSTEM(ABOLITION) ACT, 1976(19 of 1976)

PARAGRAPH 14

OFFENCES UNDER THE CHILD LABOUR (PROHIBITIONAND REGULATION) ACT, 1986G(61 of 1986)

PARAGRAPH 15OFFENCES UNDER THE TRANSPLANTATION OFHUMAN ORGANS ACT, 1994

(42 of 1994)

PARAGRAPH 16

OFFENCES UNDER THE JUVENILE JUSTICE (CARE ANDPROTECTION OF CHILDREN) ACT, 2000(56 of 2000)

PARAGRAPH 17

OFFENCES UNDER THE EMIGRATION ACT, 1983(31 of 1983)

PARAGRAPH 18OFFENCES UNDER THE PASSPORTS ACT, 1967

(15 of 1967)

PARAGRAPH 19OFFENCES UNDER THE FOREIGNERS ACT, 1946

(31 of 1946)

708SUPREME COURT REPORTS

[2022] 6 S.C.R.

APARAGRAPH 20OFFENCES UNDER THE COPYRIGHT ACT, 1957(14 of 1957)

PARAGRAPH 21COFFENCES UNDER THE TRADE MARKS ACT, 1999(47 of 1999)

PARAGRAPH 22

EOFFENCES UNDER THE INFORMATION TECHNOLOGYACT, 2000(21 of 2000)

PARAGRAPH 23

OFFENCES UNDER THE BIOLOGICAL DIVERSITY ACT,

(18 of 2003)G

PARAGRAPH 24OFFENCES UNDER THE PROTECTION OF PLANTVARIETIES AND FARMERS’ RIGHTS ACT, 2001(53 of 2001)

PARAGRAPH 25

OFFENCES UNDER THE ENVIRONMENT PROTECTION

ACT, 1986(29 of 1986)

PARAGRAPH 26OFFENCES UNDER THE WATER (PREVENTION ANDCONTROL OF POLLUTION) ACT, 1974(6 of 1974)

PARAGRAPH 27OFFENCES UNDER THE AIR (PREVENTION ANDCONTROL OF POLLUTION) ACT, 1981(14 of 1981)

[2022] 6 S.C.R.

APARAGRAPH 28OFFENCES UNDER THE SUPPRESSION OF UNLAWFULACTS AGAINST SAFETY OF MARITIME NAVIGATIONAND FIXED PLATFORMS ON CONTINENTAL SHELF ACT,

2002(69 of 2002)

698[PARAGRAPH 29

OFFENCE UNDER THE COMPANIES ACT, 2013C(18 of 2013)

699[PART BOFFENCE UNDER THE CUSTOMS ACT, 1962

700[PART

An offence which is the offence of cross border implications andEis specified in,—

(1) Part A; or

701[***]

(3) the offences against property under Chapter XVII of the IndianFPenal Code.]

702[(4) The offence of wilful attempt to evade any tax, penalty orinterest referred to in section 51 of the Black Money (UndisclosedForeign Income and Assets) and Imposition of Tax Act, 2015.]”

698 Ins. by Act 13 of 2018, sec. 208(h) (w.e.f. 19-4-2018, vide G.S.R. 383(E), dated 19thGApril, 2018).699Ins. by the Finance Act, 2015 (20 of 2015), sec. 151 (w.e.f. 14-5-2015). Earlier PartB was amended by Act 21 of 2009, sec. 13 (w.e.f. 1-6-2009) and was omitted by Act 2of 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).

701Omitted by Act 2 of 2013, sec. 30(iii) (w.e.f. 15-2-2013, vide S.O. 343(E), dated 8-2-2013).

H702 Ins. by Act 22 of 2015, sec. 88 (w.e.f. 1-7-2015, vide S.O. 1790(E), dated 1st July,2015).

This Schedule has been amended by Act 21 of 2009, Act 2 of2013, Act 22 of 2015, Act 13 of 2018 and Act 16 of 2018, thereby insertingnew offences to be regarded as scheduled offence. The challenge is noton the basis of legislative competence in respect of enactment ofSchedule and the amendments thereto from time to time. However, ithad been urged before us that there is no consistency in the approach asit includes even minor offences as scheduled offence for the purposesof offence of money-laundering, more so even offences which have notrans-border implications and are compoundable between the parties.The classification or grouping of offences for treating the same as relevantfor constituting offence of money-laundering is matter of legislativepolicy. The Parliament in its wisdom has regarded the property derivedor obtained as result of specified criminal activity, being an offenceunder the concerned legislation mentioned in the Schedule. The fact thatsome of the offences may be non-cognizable offences under theconcerned legislation or regarded as minor and compoundable offences,yet, the Parliament in its wisdom having perceived the cumulative effectof the process or activity concerning the proceeds of crime generatedfrom such criminal activities as being likely to pose threat to the economicstability, sovereignty and integrity of the country and thus, grouped themtogether for reckoning it as an offence of money-laundering, is matterof legislative policy. It is not open to the Court to have second guess atsuch policy.

175A. Needless to underscore that the 2002 Act is intended toinitiate action in respect of money-laundering activity which necessarilyis associated with the property derived or obtained by any person, directlyor indirectly, as result of specified criminal activity. The prosecutionunder this Act is not in relation to the criminal activity per se but limitedto property derived or obtained from specified criminal activity.Resultantly, the inclusion of criminal activity which has been regardedas non-cognizable, compoundable or minor offence under the concernedlegislation, should have no bearing to answer the matter in issue. In that,the offence of money-laundering is an independent offence and thepersons involved in the commission of such offence are grouped togetheras offenders under this Act. There is no reason to make distinctionbetween them insofar as the offence of money-laundering is concerned.In our opinion, therefore, there is no merit in the argument underconsideration.

712SUPREME COURT REPORTS

AECIR VIS--VIS FIR

176. As per the procedure prescribed by the 1973 Code, the officerin-charge of police station is under an obligation to record theinformation relating to the commission of cognizable offence, in termsof Section 154 of the 1973 Code[703]. There is no corresponding provisionBin the 2002 Act requiring registration of offence of money-laundering.As noticed earlier, the mechanism for proceeding against the propertybeing proceeds of crime predicated in the 2002 Act is sui generisprocedure. No comparison can be drawn between the mechanismregarding prevention, investigation or trial in connection with the scheduledoffence governed by the provisions of the 1973 Code. In the scheme ofC2002 Act upon identification of existence of property being proceeds ofcrime, the Authority under this Act is expected to inquire into relevantaspects in relation to such property and take measures as may benecessary and specified in the 2002 Act including to attach the propertyfor being dealt with as per the provisions of the 2002 Act. We haveDelaborately adverted to the procedure to be followed by the authoritiesfor such attachment of the property being proceeds of crime and thefollow-up steps of confiscation upon confirmation of the provisionalattachment order by the Adjudicating Authority. For facilitating theAdjudicating Authority to confirm the provisional attachment order anddirect confiscation, the authorities under the 2002 Act (i.e., Section 48)Eare expected to make an inquiry and investigate. Incidentally, whensufficient credible information is gathered by the authorities during suchinquiry/investigation indicative of involvement of any person in anyprocess or activity connected with the proceeds of crime, it is open tosuch authorities to file formal complaint before the Special Court namingFthe concerned person for offence of money-laundering under Section 3of this Act. Considering the scheme of the 2002 Act, though the offenceof money-laundering is otherwise regarded as cognizable offence(cognizance whereof can be taken only by the authorities referred to inSection 48 of this Act and not by jurisdictional police) and punishable

under Section 4 of the 2002 Act, special complaint procedure is prescribedGby law. This procedure overrides the procedure prescribed under 1973Code 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 2002Act and also keeping in mind Section 65 of the same Act. In other words,H703 Lalita Kumari (supra at Footnote Nos.13 and 206)

the offence of money-laundering cannot be registered by the jurisdictionalpolice who is governed by the regime under Chapter XII of the 1973Code. The provisions of Chapter XII of the 1973 Code do not apply in allrespects to deal with information derived relating to commission of money-laundering offence much less investigation thereof. The dispensationregarding prevention of money-laundering, attachment of proceeds ofcrime and inquiry/investigation of offence of money-laundering upto filingof the complaint in respect of offence under Section 3 of the 2002 Act isfully governed by the provisions of the 2002 Act itself. To wit, regardingsurvey, searches, seizures, issuing summons, recording of statements ofconcerned 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 ofproperty being proceeds of crime. Indeed, after arrest, the manner ofdealing with such offender involved in offence of money-laundering wouldthen be governed by the provisions of the 1973 Code - as there are noinconsistent provisions in the 2002 Act in regard to production of thearrested person before the jurisdictional Magistrate within twenty-fourhours and also filing of the complaint before the Special Court within thestatutory period prescribed in the 1973 Code for filing of police report, ifnot released on bail before expiry thereof.

177. Suffice it to observe that being special legislation providingfor special mechanism regarding inquiry/investigation of offence ofmoney-laundering, analogy cannot be drawn from the provisions of 1973Code, in regard to registration of offence of money-laundering and moreso being complaint procedure prescribed under the 2002 Act. Further,the authorities referred to in Section 48 of the 2002 Act alone arecompetent to file such complaint. It is different matter that the materials/evidence collected by the same authorities for the purpose of civil actionof attachment of proceeds of crime and confiscation thereof may beused to prosecute the person involved in the process or activity connectedwith the proceeds of crime for offence of money-laundering. Consideringthe mechanism of inquiry/investigation for proceeding against the property(being proceeds of crime) under this Act by way of civil action (attachmentand confiscation), there is no need to formally register an ECIR, unlikeregistration of an FIR by the jurisdictional police in respect of cognizableoffence under the ordinary law. There is force in the stand taken by theED that ECIR is an internal document created by the department beforeinitiating penal action or prosecution against the person involved with

Aprocess or activity connected with proceeds of crime. Thus, ECIR is nota statutory document, nor there is any provision in 2002 Act requiringAuthority referred to in Section 48 to record ECIR or to furnish copythereof to the accused unlike Section 154 of the 1973 Code. The factthat such ECIR has not been recorded, does not come in the way of theauthorities referred to in Section 48 of the 2002 Act to commence inquiry/Binvestigation for initiating civil action of attachment of property beingproceeds of crime by following prescribed procedure in that regard.178. The next issue is: whether it is necessary to furnish copy ofECIR to the person concerned apprehending arrest or at least after hisarrest? Section 19(1) of the 2002 Act postulates that after arrest, asCsoon as may be, the person should be informed about the grounds forsuch arrest. This stipulation is compliant with the mandate of Article22(1) of the Constitution. Being special legislation and considering thecomplexity of the inquiry/investigation both for the purposes of initiatingcivil action as well as prosecution, non-supply of ECIR in given caseDcannot be faulted. The ECIR may contain details of the material inpossession of the Authority and recording satisfaction of reason to believethat the person is guilty of money-laundering offence, if revealed beforethe inquiry/investigation required to proceed against the property beingproceeds of crime including to the person involved in the process oractivity connected therewith, may have deleterious impact on the finalEoutcome of the inquiry/investigation. So long as the person has beeninformed about grounds of his arrest that is sufficient compliance ofmandate of Article 22(1) of the Constitution. Moreover, the arrestedperson before being produced before the Special Court within twenty-four hours or for that purposes of remand on each occasion, the Court

Fis free to look into the relevant records made available by the Authorityabout the involvement of the arrested person in the offence of money-laundering. In any case, upon filing of the complaint before the statutoryperiod provided in 1973 Code, after arrest, the person would get all relevantmaterials forming part of the complaint filed by the Authority underSection 44(1)(b) of the 2002 Act before the Special Court.G

179. Viewed thus, supply of ECIR in every case to personconcerned is not mandatory. From the submissions made across theBar, it is noticed that in some cases ED has furnished copy of ECIR tothe person before filing of the complaint. That does not mean that inevery case same procedure must be followed. It is enough, if ED at theH

time of arrest, contemporaneously discloses the grounds of such arrestto such person. Suffice it to observe that ECIR cannot be equated withan FIR which is mandatorily required to be recorded and supplied to theaccused as per the provisions of 1973 Code. Revealing copy of anECIR, if made mandatory, may defeat the purpose sought to be achievedby the 2002 Act including frustrating the attachment of property (proceedsof crime). Non-supply of ECIR, which is essentially an internal documentof ED, cannot be cited as violation of constitutional right. Concededly,the person arrested, in terms of Section 19 of the 2002 Act, iscontemporaneously made aware about the grounds of his arrest. This iscompliant with the mandate of Article 22(1) of the Constitution. It is notunknown that at times FIR does not reveal all aspects of the offence inquestion. In several cases, even the names of persons actually involvedin the commission of offence are not mentioned in the FIR and describedas unknown accused. Even, the particulars as unfolded are not fullyrecorded in the FIR. Despite that, the accused named in any ordinaryoffence is able to apply for anticipatory bail or regular bail, in whichproceeding, the police papers are normally perused by the concernedCourt. On the same analogy, the argument of prejudice pressed intoservice by the petitioners for non-supply of ECIR deserves to be answeredagainst 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 SpecialCourt to call upon the representative of ED to produce relevant recordconcerning the case of the accused before him and look into the samefor answering the need for his continued detention. Taking any view ofthe matter, therefore, the argument under consideration does not takethe matter any further.

ED MANUAL

180. It had been urged that the 2002 Act creates an overbroadframe with no fetters on investigation. Besides questioning the refusal tofurnish copy of ECIR, grievance is also made about the opacitysurrounding the usage of ED Manual. Relying on Section 4(b)(v) of theRTI Act, it was urged that it was obligatory on the part of the PublicAuthority to publish the stated Manual within 120 days of the enactmentof RTI Act. All other authorities including the Central VigilanceCommission, Income-tax Authorities, Authorities under 1962 Act, PoliceAuthorities, Jail Authorities have adhered to this statutory compliance,

Aexcept the ED. In response, it is submitted by the learned AdditionalSolicitor General that ED Manual is an internal departmental documentonly for the use of officers of the ED. It is to give them guidance onproper enforcement of 2002 Act and outlines the procedure forimplementation of the provisions of this Act. In addition, reliance is placedon the exposition of the Constitution Bench of this Court in LalitaBKumari[704]. In paragraph 89 of this decision, the Court observed thus:

“89. Besides, the learned Senior Counsel relied on the specialprocedures prescribed under the CBI Manual to be read intoSection 154. It is true that the concept of “preliminary inquiry” iscontained in Chapter IX of the Crime Manual of CBI. However,Cthis Crime Manual is not statute and has not been enacted bythe legislature. It is set of administrative orders issued for internalguidance of the CBI officers. It cannot supersede the Code.Moreover, in the absence of any indication to the contrary in theCode itself, the provisions of the CBI Crime Manual cannot beDrelied upon to import the concept of holding of preliminary inquiryin the scheme of the Code of Criminal Procedure. At this juncture,it is also pertinent to submit that CBI is constituted under specialAct, namely, the Delhi Special Police Establishment Act, 1946and it derives its power to investigate from this Act.”

E181. It is true that the ED Manual may be an internal documentfor departmental use and in the nature of set of administrative orders. Itis equally true that the accused or for that matter common public maynot be entitled to have access to such administrative instructions beinghighly confidential and dealing with complex issues concerning modeand manner of investigation, for internal guidance of officers of ED. ItFis also correct to say that there is no such requirement under the 2002Act or for that matter, that there is nothing like investigation of crimeof money-laundering as per the scheme of 2002 Act. The investigation,however, is to track the property being proceeds of crime and to attachthe same for being dealt with under the 2002 Act. Stricto sensu, it is inGthe nature of an inquiry in respect of civil action of attachment.Nevertheless, since the inquiry in due course ends in identifying theoffender who is involved in the process or activity connected with theproceeds of crime and then to prosecute him, it is possible for thedepartment to outline the situations in which that course could be adopted

in reference to specific provisions of 2002 Act or the Rules framedthereunder; and in which event, what are the options available to suchperson before the Authority or the Special Court, as the case may be.Such document may come handy and disseminate information to allconcerned. At least the feasibility of placing such document on the officialwebsite of ED may be explored.

APPELLATE TRIBUNAL

182. Serious grievance has been made about the vacancies in theAppellate Tribunal despite the serious prejudice being caused on accountof provisional attachment order and, in some cases, taking over possessionof the property so attached. This grievance, even though genuine, cannotbe the basis to test the validity of the provisions of the 2002 Act or toquestion the efficacy of those provisions on that account. The Parliamentby this special legislation having created an expert body being AppellateTribunal to deal with matters concerning attachment, possession andconfiscation and vesting of property in the Central Government, it is, butnecessary, that the forum should be functional and accessible to theaggrieved persons uninterruptedly. We need to impress upon theExecutive to take necessary corrective measures in this regard. Absentsuch forum, the aggrieved persons have to rush to the High Court onevery occasion which indeed is avoidable.

PUNISHMENT UNDER SECTION 4 OF THE 2002 ACT

183. It is urged that there is no gradation of punishment dependingon the nature of offence which may be committed by the principaloffender and other offenders. Section 4[704A ]of the 2002 Act makes nodistinction between person directly involved in the process or activityconnected with the proceeds of crime and the other not so directlyinvolved. Further, the scheduled offence may have been committed by

704A 4. Punishment for money-laundering.—Whoever commits the offence of money-laundering shall be punishable with rigorous imprisonment for term which shall not beless 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 relatesto any offence specified under paragraph 2 of Part of the Schedule, the provisions ofthis section shall have effect as if for the words “which may extend to seven years”, thewords “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).

Asomeone else and the offence of money-laundering by third person owingto being involved in the process or activity connected with the proceedsof crime. The petitioners have relied on Section 201 and 212 of IPC. Itis their case that this distinction is absent in Section 4 of the 2002 Actwhich provides that the term of rigorous imprisonment shall not be lessthan three years and extend upto seven years or ten years, as the caseBmay 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 predicateoffence, but offence of money-laundering under Section 3 of the 2002Act. The person may be involved in any one or more than one processor activity connected with the proceeds of crime. All of them are treatedCas one class of offender involved in money-laundering. The proceeds ofcrime may be derived or obtained as result of criminal activity withwhich the offender involved in money-laundering offence may not bedirectly concerned at all. Even so, he becomes liable to be proceededunder Section 3 and punished under Section 4 of the 2002 Act. The

principle of an accessory after the fact will have no application to theDoffence of money-laundering. Suffice it to observe that the argumentunder consideration is devoid of merit.

184. On the basis of same analogy, it was argued that the twinconditions of bail contained in Section 45 of the 2002 Act would actEgrossly disproportionate and illogical qua person who is not directlyconnected with the scheduled offence but merely an accessory afterthe fact. Even this argument needs to be stated to be rejected for thesame reason.

185. The above analysis, in our view, is sufficient to answer theFdiverse issues canvassed before us. We have attempted to extensivelydeal with the essential aspects to record our conclusion issue-wise.Further, we do not wish to dissect every reported decision cited beforeus to obviate prolixity.

186. We once again clarify that in this judgment, we have confinedGour analysis only to the issues regarding the validity and interpretation ofthe provisions of the 2002 Act, referred to above. We have not dealtwith any other issue involved in individual cases concerning 2002 Act asthe parties have been given liberty to pursue their other remedies beforeappropriate forum. Furthermore, we have delinked the matters pertainingH

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 summariseour conclusion on seminal points in issue in the following terms: -

(i) The question as to whether some of the amendments to thePrevention of Money-laundering Act, 2002 could not have been enactedby the Parliament by way of Finance Act has not been examined inthis judgment. The same is left open for being examined along with orafter the decision of the Larger Bench (seven Judges) of this Court inthe case of Rojer Mathew[705].

(ii) The expression “proceedings” occurring in Clause (na) ofSection 2(1) of the 2002 Act is contextual and is required to be givenexpansive meaning to include inquiry procedure followed by theAuthorities 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 investigationconcerning the offence under the Act and is interchangeable with thefunction of “inquiry” to be undertaken by the Authorities under the Act.

(iv) The Explanation inserted to Clause (u) of Section 2(1) of the2002 Act does not travel beyond the main provision predicating trackingand reaching upto the property derived or obtained directly or indirectlyas result of criminal activity relating to scheduled offence.

(v) (a) Section 3 of the 2002 Act has wider reach and capturesevery process and activity, direct or indirect, in dealing with the proceedsof crime and is not limited to the happening of the final act of integrationof tainted property in the formal economy. The Explanation inserted toSection 3 by way of amendment of 2019 does not expand the purport ofSection 3 but is only clarificatory in nature. It clarifies the word “and”preceding the expression projecting or claiming as “or”; and being aclarificatory amendment, it would make no difference even if it isintroduced by way of Finance Act or otherwise.

(b) Independent of the above, we are clearly of the view that theexpression “and” occurring in Section 3 has to be construed as “or”, to

705 Supra at Footnote No.90

Agive full play to the said provision so as to include “every” process oractivity indulged into by anyone. Projecting or claiming the property asuntainted property would constitute an offence of money-laundering onits own, being an independent process or activity.

(c) The interpretation suggested by the petitioners, that only uponBprojecting or claiming the property in question as untainted property thatthe offence of Section 3 would be complete, stands rejected.

(d) The offence under Section 3 of the 2002 Act is dependent onillegal gain of property as result of criminal activity relating to ascheduled offence. It is concerning the process or activity connectedCwith such property, which constitutes the offence of money-laundering.The Authorities under the 2002 Act cannot prosecute any person onnotional basis or on the assumption that scheduled offence has beencommitted, unless it is so registered with the jurisdictional police and/orpending enquiry/trial including by way of criminal complaint before thecompetent forum. If the person is finally discharged/acquitted of theDscheduled offence or the criminal case against him is quashed by theCourt of competent jurisdiction, there can be no offence of money-laundering against him or any one claiming such property being theproperty linked to stated scheduled offence through him.

(vi) Section 5 of the 2002 Act is constitutionally valid. It providesEfor balancing arrangement to secure the interests of the person as alsoensures that the proceeds of crime remain available to be dealt with inthe manner provided by the 2002 Act. The procedural safeguards asdelineated by us hereinabove are effective measures to protect theinterests of person concerned.

F(vii) The challenge to the validity of sub-section (4) of Section 8of the 2002 Act is also rejected subject to Section 8 being invoked andoperated in accordance with the meaning assigned to it hereinabove.

(viii) The challenge to deletion of proviso to sub-section (1) ofSection 17 of the 2002 Act stands rejected. There are stringent safeguardsGprovided in Section 17 and Rules framed thereunder. Moreover, the pre-condition in the proviso to Rule 3(2) of the 2005 Rules cannot be readinto Section 17 after its amendment. The Central Government may takenecessary corrective steps to obviate confusion caused in that regard.

(ix) The challenge to deletion of proviso to sub-section (1) ofHSection 18 of the 2002 Act also stands rejected. There are similar

safeguards provided in Section 18. We hold that the amended provisiondoes not suffer from the vice of arbitrariness.

(x) The challenge to the constitutional validity of Section 19 of the2002 Act is also rejected. There are stringent safeguards provided inSection 19. The provision does not suffer from the vice of arbitrariness.

(xi) Section 24 of the 2002 Act has reasonable nexus with thepurposes and objects sought to be achieved by the 2002 Act and cannotbe regarded as manifestly arbitrary or unconstitutional.

(xii) (a) The proviso in Clause (a) of sub-section (1) of Section44 of the 2002 Act is to be regarded as directory in nature and thisprovision is also read down to mean that the Special Court may exercisejudicial discretion on case-to-case basis.

(b) We do not find merit in the challenge to Section 44 beingarbitrary or unconstitutional. However, the eventualities referred to inthis section shall be dealt with by the Court concerned and by theAuthority concerned in accordance with the interpretation given in thisjudgment.

(xiii) (a) The reasons which weighed with this Court in NikeshTarachand Shah[706] for declaring the twin conditions in Section 45(1)of the 2002 Act, as it stood at the relevant time, as unconstitutional in noway obliterated the provision from the statute book; and it was open tothe Parliament to cure the defect noted by this Court so as to revive thesame provision in the existing form.

(b) We are unable to agree with the observations in NikeshTarachand Shah[707] distinguishing the enunciation of the ConstitutionBench decision in Kartar Singh[708]; and other observations suggestiveof doubting the perception of Parliament in regard to the seriousness ofthe offence of money-laundering, including about it posing serious threatto the sovereignty and integrity of the country.

(c) The provision in the form of Section 45 of the 2002 Act, asapplicable post amendment of 2018, is reasonable and has direct nexuswith the purposes and objects sought to be achieved by the 2002 Actand does not suffer from the vice of arbitrariness or unreasonableness.

706 Supra at Footnote No.3

707 Supra at Footnote No.3

708 Supra at Footnote No.190

A(d) As regards the prayer for grant of bail, irrespective of thenature of proceedings, including those under Section 438 of the 1973Code or even upon invoking the jurisdiction of Constitutional Courts, theunderlying principles and rigours of Section 45 may apply.

(xiv) The beneficial provision of Section 436A of the 1973 CodeBcould be invoked by the accused arrested for offence punishable underthe 2002 Act.

(xv) (a) The process envisaged by Section 50 of the 2002 Act isin the nature of an inquiry against the proceeds of crime and is not“investigation” in strict sense of the term for initiating prosecution; andCthe Authorities under the 2002 Act (referred to in Section 48), are notpolice officers as such.

(b) The statements recorded by the Authorities under the 2002Act are not hit by Article 20(3) or Article 21 of the Constitution of India.

(xvi) Section 63 of the 2002 Act providing for punishmentDregarding false information or failure to give information does not sufferfrom any vice of arbitrariness.

(xvii) The inclusion or exclusion of any particular offence in theSchedule to the 2002 Act is matter of legislative policy; and the natureor class of any predicate offence has no bearing on the validity of theESchedule or any prescription thereunder.

(xviii) (a) In view of special mechanism envisaged by the 2002Act, ECIR cannot be equated with an FIR under the 1973 Code. ECIRis an internal document of the ED and the fact that FIR in respect ofscheduled offence has not been recorded does not come in the way ofFthe Authorities referred to in Section 48 to commence inquiry/investigationfor initiating “civil action” of “provisional attachment” of property beingproceeds of crime.

(b) Supply of copy of ECIR in every case to the person concernedis not mandatory, it is enough if ED at the time of arrest, discloses theGgrounds of such arrest.

(c) However, when the arrested person is produced before theSpecial Court, it is open to the Special Court to look into the relevantrecords presented by the authorised representative of ED for answeringthe issue of need for his/her continued detention in connection with theHoffence of money-laundering.

(xix) Even when ED manual is not to be published being an internaldepartmental document issued for the guidance of the Authorities (EDofficials), the department ought to explore the desirability of placinginformation on its website which may broadly outline the scope of theauthority of the functionaries under the Act and measures to be adoptedby them as also the options/remedies available to the person concernedbefore the Authority and before the Special Court.

(xx) The petitioners are justified in expressing serious concernbordering on causing injustice owing to the vacancies in the AppellateTribunal. We deem it necessary to impress upon the executive to takecorrective measures in this regard expeditiously.

(xxi) The argument about proportionality of punishment withreference to the nature of scheduled offence is wholly unfounded andstands rejected.

ORDER

-T.P. (Crl.) No. 150/2016, T.P. (Crl.) Nos. 151157/2016,T.P. (C) No. 1583/2018 and T.P. (Crl.) No. 435/2021

1. These transfer petitions are disposed of with liberty to the privateparties to pursue the proceedings pending before the High Court. Thecontentions, other than dealt with in this judgment, are kept open, to bedecided in those proceedings on its own merits. It would be open to theparties to pursue all (other) contentions in those proceedings, except thequestion 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 theHigh Court by restoring the concerned writ petition(s) to the file of theconcerned High Court to its original number limited to consider relief ofdischarge/bail/quashing, as the case may be, on its own merits and inaccordance with law. It would be open to the parties to pursue all (other)contentions in those proceedings, except the question of validity andinterpretation of the concerned provision(s) already dealt with in thisjudgment. 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

AAppeal No.8588 of 2019 titled ‘Rojer Mathew vs. South Indian BankLtd. & Ors.’.

W.P. (Crl.) Nos. 251/2018 and 532/2021

(b) In these writ petitions, as the relief claimed was only regardingthe validity and interpretation of the provisions of the 2002 Act, the sameBare 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/C2019, 272/2019, 283/2019, 289/2019, 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/D2021, 282/2021, 303/2021, 305/2021, 323/2021 and 453/2021

(c) In these writ petitions as further relief of bail/discharge/quashinghas been prayed, the same are disposed of in terms of this judgmentwith liberty to the private parties to pursue further reliefs before theEappropriate forum, leaving all contentions in that regard open, to bedecided on its own merits.

Crl. A. Nos. 1269/2017, 1270/2017, 223/2018, 391-392/-2018, 793794/2018, 1210/2018 and 682/2019

SLP (Crl.) Nos. 4634/2014, 9987/2015, 10018/2015, 10019/F2015, 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/G2021, 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, 569697/2021, 6189/2021, 7021-23/2021 and 8429/2021

SLP (C) Nos. 28394/2011, 28922/2011, 29273/2011 and8764-67/2021

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 listedseparately before appropriate Bench as the impugned judgment in theconcerned case deals with the prayer for bail/discharge/quashing. Thisrelief will have to be decided on case-to-case basis. Accordingly, thesematters be listed separately before appropriate Bench. The Registry todo 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;

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, 432224/2019, 4546/2019, 5153/2019, 9541/2019, 647/2020, 3366/2020, 5536/-2020, 1031/2021, 1072/2021, 1073/2021, 1107/2021, 205054/2021 and 6834/2019

SLP (C) No. 20310/2021

Diary No. 31616/2021;

709 These matters relate to the Customs Act, 1962

710 These matters relate to the Companies Act, 2013

711 These matters relate to Central Goods and Services Tax Act, 2017

A712WP (Crl.) Nos. 05/2020, 311/2020, 380/2020, 387/2020and 11/2021

SLP (Crl.) Nos. 4078/2018, 8111/2019 and 6172/2020

Transferred Case (Crl.) No. 5/2018

BDiary No. 41063/2015

5. In these cases, the challenge is regarding the validity andinterpretation of other statutes (other than 2002 Act), such as IndianPenal Code, 1860, Code of Criminal Procedure, 1973, Customs Act,1962, Prevention of Corruption Act, 1988, Companies Act, 2013, CentralCGoods & Services Act, 2017, etc. Hence, the same are delinked and beplaced before the appropriate Bench “group-wise/Act-wise” as indicatedabove. The Registry to do the needful in that regard.

6. The interim relief granted in the petitions/appeals which aredisposed of in terms of this order, to continue for period of four weeksDfrom today, to enable the private parties to take recourse to appropriateremedies before the concerned forum, if so advised.

7. The interim relief granted in petitions/appeals, which are delinkedand ordered to be listed separately or otherwise, shall continue for fourweeks from today, with liberty to the parties to mention for early listingof the concerned case including for continuation/vacation of the interimErelief.

Bibhuti Bhushan Bose

Issues Answered.

712 These matters relate to Indian Penal Code, 1860, Prevention of Corruption Act,1988, Information Technology Act, 2000, Foreign Contribution (Regulation) Act, 2010,Hetc.