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- 1 - IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 17TH DAY OF DECEMBER 2020
BEFORE
THE HON’BLE MR. JUSTICE JOHN MICHAEL CUNHA
WRIT PETITION NO.18442 OF 2017 (GM-RES)
BETWEEN
SRI S.C. JAYACHANDRA S/O CHIKKABORAIAH AGED ABOUT 57 YEARS R/A NO.150, 6TH CROSS BAPUJI LAYOUT CHANDRA LAYOUT BANGALORE-560040 ...PETITIONER
(BY SRI: A.S. PONNANNA, SR. ADVOCATE A/W SRI: SANDEEP PATIL, ADVOCATE)
AND
ENFORCEMENT DIRECTORATE 3RD FLOOR, ‘B’ BLOCK BMTC, SHANTHINAGAR BANGALORE-560025 REP BY DEPUTY DIRECTOR ...RESPONDENT
(BY SRI: M.B. NARGUND, ASG A/W SRI: P. PRASANNA KUMAR, SPL. PP)
- 2 -
THIS WRIT PETITION IS FILED UNDER ARTICLE 226 AND 227 OF THE CONSTITUTION OF INDIA R/W SECTION 482 CODE OF CRIMINAL PROCEDURE PRAYING TO QUASH THE PRIVATE COMPLAINT DATED 31.01.2017 FILED ON 1.2.2017 REGISTERED AS SPL.C.C.NO.68/2017 BY RESPONDENT PENDING BEFORE THE PRINCIPAL CITY CIVIL AND SESSIONS JUDGE AT BANGALORE AT ANNEXURE-A; AND QUASH THE ORDER OF TAKING COGNIZANCE AND ISSUANCE OF SUMMONS DATED 6.2.2017 REGISTERED AS SPL.C.C.NO.68/2017 PENDING BEFORE THE PRINCIPAL CITY CIVIL AND SESSIONS JUDGE AT BANGALORE AT ANNEXURE-B; AND QUASH THE REGISTRATION DATED 3.12.2016 AGAINST THE PETITINER BEFORE THE XXXII ADDITIONAL CITY CIVIL AND SESSION JUDGE AT BANGALORE AT ANNEXURE-C; AND QUASH THE UNNUMBERED ORIGINAL COMPLAINT IN PAO NO.2/2017 DATED 26.01.2017 FILED BY THE RESPONDENT BEFORE THE ADJUDICATING AUTHORITY UNDER THE PML ACT, 2002 AT ANNEXURE-D; AND QUASH THE PROVISIONAL ATTACHMENT ORDER NO.2/2017 DATED 26.01.2017 PASSED BY RESPONDENT AT ANNEXURE-E.
THIS WRIT PETITION COMING ON FOR DICTATING ORDERS, THIS DAY, THROUGH PHYSICAL HEARING / VIDEO CONFERENCING HEARING, THE COURT MADE THE FOLLOWING:
- 3 - O R D E R
The prayers sought for in the petition are as follows:
I. Issue writ of certiorari and quash the private complaint dated 31.01.2017 filed on 01.02.2017 in ECIR/BGZO/13/2016 registered as Spl.C.C.No.68/2017 by the Respondent – Enforcement Directorate pending before the Principal City Civil & Sessions Judge at Bangalore (Annexure-A);
II. Issue writ of certiorari and quash the order of taking cognizance and issuance of summons dated 06.02.2017 in ECIR/BGZO/13/2016 registered as Spl.C.C.No.68/2017 pending before the Principal City Civil & Sessions Judge at Bangalore (Annexure-B);
III. Issue writ of certiorari and quash the registration of ECIR/BGZO/13/2016 dated 03.12.2016 against the petitioner before the XXXII Additional City Civil & Session Judge at Bangalore (Annexure-C);
IV. Issue writ of certiorari and quash the Unnumbered Original Complaint in PAO No.2/2017 dated 26.01.2017 filed by the
- 4 - respondent – Enforcement Directorate before the Adjudicating Authority under the PML Act, 2002 (Annexure-D); and
V. Issue writ of certiorari and quash the Provisional Attachment Order No.02/2017 dated 26.01.2017 passed by the respondent – Enforcement Directorate (Annexure-E).
Insofar as the order of taking cognizance is concerned, learned Senior Counsel appearing for petitioner Sri.A.S.Ponnanna, placing reliance on the decision of the Hon’ble Supreme Court in SUNIL BHARTI MITTAL Vs. CENTRAL BUREAU OF INVESTIGATION reported in (2015) 4 SCC 609 and the decision of the High Court of Telangana in Mr.BIBHU PRASAD ACHARYA vs. THE DIRECTORATE OF ENFORCEMENT, 2019 SCC OnLine TS 287, would submit that the cognizance order has been passed without application of mind. It is a bald order wherein the learned Special Judge has mechanically reproduced the provisions of law quoted by the respondent without even considering the allegations constituting the alleged offences. In view of Section 65 of the PML Act, petitioner being a public servant, no cognizance could have been taken by the learned
- 5 - Special Judge without prior sanction under Section 197 of Cr.P.C. Therefore, the very initiation of proceedings against the petitioner being illegal and without jurisdiction, the entire proceedings initiated against the petitioner are vitiated and are liable to be quashed solely on that ground.
With regard to the third relief claimed in the petition, the learned Senior Counsel would submit that the proceedings in ECIR/BGZO/13/2016 dated 03.12.2016 were initiated against the petitioner based on the FIR No.RC 23(A)/2016. In the Enforcement Case Information Report (ECIR), it was specifically stated that the source from which information was gathered was the case registered by the Central Bureau of Investigation (CBI), ACB, Bengaluru in FIR No.RC 23(A)/2016 dated 03.12.2016. The allegations in the said case proceeded on the basis that accused No.1 and accused No.2 entered into criminal conspiracy in connivance with accused Nos.3 to 7 by dishonestly and fraudulently facilitating exchange of several crores of de- monetized currency notes of Rs.500/- and Rs.1000/- which ceased to be legal tender, with new currency notes of Rs.2000/-
- 6 - and Rs.500/- denomination in gross violation of GOI, Gazette Notification No.2652/08.11.2016 and RBI Circulars issued in this regard. In the said proceedings, petitioner was shown as accused No.4. However, after investigation, ‘B’ summary report was submitted by the CBI on the ground that no evidence was available establishing the fact that the alleged offences were within the exclusive knowledge of accused Nos.3 to 6. This ‘B’ summary report has been accepted by the Court vide order dated 04.02.2019. In the said circumstances, FIR No.RC 23(A)/2016 itself having been closed, there was no basis whatsoever for the respondent to proceed against the petitioner on the assumption that the properties in possession of the petitioner were “proceeds of crime”.
It is the further submission of the learned Senior Counsel for petitioner that the details furnished in the complaint in Crime No.91/2008 would indicate that the properties were acquired by the petitioner between 01.02.1985 and 18.12.2008. The PML Act came into force only on 01.07.2005. Thus, it is the submission of the learned Senior Counsel that the
- 7 - attachment proceedings initiated against the petitioner as well as subsequent prosecution instituted against him are against the provisions of the PML Act and settled canons of justice. It is also contended that since the properties were acquired prior to the PML Act came into force, the same do not fall within the ambit of Section 2(v) of the PML Act.
Insofar as the provisional attachment order is concerned, the learned Senior Counsel pointed out that the order passed by the Adjudicating Authority does not meet the requirements of Section 5 of the PML Act. In the absence of there being any crime in existence, the Director/Deputy Director did not derive jurisdiction to attach the immovable properties which were acquired prior to coming into force of the PML Act. Further, in view of the closure of the criminal proceedings initiated by the CBI in RC 23(A)/2016 and there being no finding by any of the criminal courts to the effect that the properties found in possession of the petitioner were proceeds of the predicate crime, the provisional attachment order passed by the
- 8 - respondent and the subsequent confirmation thereof is illegal and cannot be sustained.
In support of his submission, the learned Senior Counsel has placed reliance on the following decisions: 1. Mahanivesh Oils & Foods Pvt. Ltd. Vs. Directorate of Enforcement
2016 SCC Online Del 475 2. M/s. Ajanta Merchants Pvt. Ltd. Vs. Directorate of Enforcement Crl.M.C.No.5581/2014 (D.D. 09.04.2015)
(High Court of Delhi) 3. Arun Kumar Mishra Vs. Directorate of Enforcement 2015 SCC Online Del. 8658 4. Rajiv Chanana Vs. Deputy Director, Directorate of Enforcement WP(C) 6293/2014 (D.D.19.09.2014)
(High Court of Delhi) 5. VGN Developers P. Ltd. Vs. Deputy Director, Directorate of Enforcement 2019 SCC Online Mad. 13270 6. Sunil Bharti Mittal Vs. Central Bureau of Investigation (2015) 4 SCC 609 7. Bibhu Prasad Acharya Vs. Directorate of Enforcement 2019 SCC Online TS 287
- 9 -
In the statement of objections filed on behalf of respondent, it is stated that the legality of the complaint filed against the petitioner in ECIR/BGZO/13/2016 has already been considered by this court in Criminal Petition No.366/2017 and it has been held that PMLA provisions have been rightly invoked by respondent authorities against the petitioner. In para 42 of the said order, while noting that there was an earlier raid in the year 2008 and Lokayukta was awaiting approval for prosecution of the petitioner, current income tax raid was conducted and it transpired that even after the raid in the year 2008, the petitioner has again indulged in the alleged offences, it has resulted in filing the FIR by the CBI on 03.12.2016.
Insofar as the contention urged by the petitioner that the alleged offence was committed prior to the Amended Act 2 of 2013 of the PML Act is concerned, it is contended in the objection statement that by the PML (Amendment) Act, 2013, Part A of the Schedule to the PML Act, 2002 was substituted. The amendment relates back to the date of enactment of the principal Act. Even otherwise, it is contended that the offences
- 10 - under the PML Act are continuing offences. The object of PML Act has always been to prevent money laundering and to provide for confiscation of property derived from the involvement in money laundering and therefore, the contention urged by the petitioner cannot furnish a ground to quash either the complaint or the provisional attachment order passed by the respondent / Enforcement Directorate.
Considered the submissions in the light of the pleadings and the documents produced by the parties.
The reliefs claimed in the petition relate to registration of ECIR/BGZO/13/2016 dated 03.12.2016; unnumbered original complaint in PAO.No.2/2017 dated 26.01.2017, provisional order of attachment bearing No.02/2017 dated 26.01.2017, private complaint dated 31.01.2017 and order of taking cognizance and issuance of summons dated 06.02.2017.
Petitioner has challenged the above orders/proceedings on the supposition that without considering
- 11 - the fact that the properties in question were acquired much prior to the PML Act came into force, the petitioner is sought to be proceeded under the provisions of the PML Act. It is specifically contended that the properties mentioned in the table produced along with the complaint were acquired during the check period between 01.02.1985 to 18.12.2008 and therefore, the respondent has no jurisdiction over the subject property and therefore, the action initiated against the petitioner is without authority of law, inasmuch as, it is based on ex post facto penal laws which are not permissible under the scheme of the Constitution of India.
The above contention is already answered by me in Criminal Petition No.5698/2019 and connected matters, disposed of on 14.12.2020 and as such, I do not find it necessary to burden the records by reproducing the very same reasons and the judicial precedents which are relied by me to arrive at the conclusion that what is made punishable under section 3 of the PML Act is the activity connected with the proceeds of crime either by getting oneself involved in the process or activity
- 12 - connected thereto or directly or indirectly attempting to indulge or knowingly assist or knowingly be a party to the alleged activities and projecting it as untainted property. The prosecution under section 3 of the PML Act is not based on the outcome of the predicate offences. What is necessary to constitute the offence of money laundering is the existence of proceeds of crime and not the pendency of the predicate offence as contended by learned counsel for petitioner. A reading of section 3 of the PML Act would clearly indicate that even without there being any conviction of the accused in a predicate offence and even if the offender under section 3 of the PML Act is not a party to the predicate offence, still the prosecution could be launched against him and the property held by him could be attached if found involved in any process or activity connected with the ‘proceeds of crime’. Therefore, there is absolutely no illegality whatsoever in initiating the prosecution and the attachment proceedings against the petitioner. Article 20(1) of the Constitution of India would get attracted only when any penal law penalises with retrospective effect. When no penal action is initiated against the petitioner based on the offences
- 13 - inserted in the Schedule to the PML Act, the question of Article 20(1) of the Constitution of India getting attracted does not arise at all. Therefore, the challenge laid by the petitioner based on violation of Article 20(1) of the Constitution of India is liable to be rejected and is accordingly rejected.
Coming to the action initiated against the petitioner for attachment and consequent adjudication of the properties involved in the money laundering is concerned, section 5 of the PML Act deals with the procedure as to the attachment of the properties. As per the said provision, the Director or any other officer not below the rank of Deputy Director authorized by the Director for the said purpose is entitled to make an order in writing, provisionally attaching such property for a period not exceeding 180 days when he has reason to believe (the reason for such belief to be recorded in writing), on the basis of material in his possession, that – (a) any person is in possession of any proceeds of crime;
- 14 - (b) such person has been charged of having committed a scheduled offence; and (c) such proceeds of crime are likely to be concealed, transferred to be dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime under this Chapter.
The petitioner does not dispute the authority of the Deputy Director to pass the impugned provisional order of attachment. The constitutional validity of the above provision is also not under challenge. The said order as well as the records indicate that a report has been forwarded to the Magistrate under section 173 of Cr.P.C. in relation to the scheduled offences i.e., under section 13(1)(e) read with 13(2) of the PC Act on 28.02.2013. The order reflects the application of mind and also the elaborate reasons to arrive at the conclusion that the property in question was the proceeds of crime within the meaning of section 2(1)(u) of the PML Act. The said order therefore is beyond challenge in a writ proceeding as no error of
- 15 - law and fact is reflected in the impugned order. Even otherwise, the PML Act has provided for adequate safeguards to protect the rights of the accused by providing that the order of attachment shall cease to have effect after the expiry of the period specified in the said section or the date of order made under sub-section (3) of section 8 of PML Act.
More importantly, an adjudicatory mechanism is provided under section 8 of the PML Act and the petitioner has availed the said remedy and has participated in the proceedings before the Adjudicating Authority. Considering the contentions urged by the petitioner, the Adjudicating Authority has come to the conclusion that the petitioner has committed the scheduled offences, generated proceeds of crime and laundered them vide Annexure-‘E’. As adequate and efficacious remedy is available to the petitioner against the said order, petitioner is not entitled for the relief (v) claimed in the petition.
Coming to the prayer made in the petition for quashing the proceedings in Spl.C.C.No.68/2017 on the ground
- 16 - of defect in the order of cognizance is concerned, I find merit in the submission made in this regard for the following reasons:
The copy of the order sheet maintained by learned Principal City Civil & Sessions Judge, Bengaluru in Spl.C.C.No.68/2017 indicates that the complaint filed by the Assistant Director, Directorate of Enforcement, Bangalore was placed before the Court on 06.02.2017. On that day, the Presiding Officer passed the following order:- “Complainant has filed the case against the accused under sections 45(1), (3) and (4) of Prevention of Money Laundering Act, 2002. Both complainant and SPP were present.
Perused the averments made in the complaint and the materials placed by the complainant authority with regard to the offences. On perusal, there are sufficient materials against the accused prima facie for the offences.
Hence, cognizance is taken.
The office is directed to register the case as a Special Case in accordance with law and issue summons against the accused Nos.1 to 4 returnable by 07.03.2017.”
This order, apart from being bald and unreasoned, does not disclose application of mind to the facts of the case nor does it
- 17 - indicate the offences in respect of which the cognizance is taken by learned Presiding Officer.
A reading of the complaint (Annexure-A) indicates that it was filed under section 45(1), 3 and 4 of the PML Act. It is alleged therein that accused Nos.1 to 4 have committed offence under section 3 of the PML Act and liable to be punished under section 4 of the PML Act. But the impugned order does not reveal as to the offences for which the accused have been summoned to appear before the court. In this context, it may be apt to refer to the observations of the Apex Court in the Case Sunil Bharti Mittal vs. CBI in (2015) 4 SCC 609.
“48. Sine qua non for taking cognizance of the offence is the application of mind by the Magistrate and his satisfaction that the allegations, if proved, would constitute an offence. It is, therefore, imperative that on a complaint or on a police report, the Magistrate is bound to consider the question as to whether the same discloses commission of an offence and is required to form such an opinion in this respect. When he does so and decides to issue process, he shall be said to have taken cognizance. At the stage of taking cognizance, the only consideration before the Court remains to consider judiciously whether the material on which the prosecution proposes to prosecute the accused brings out a prima facie case or not.
- 18 -
Cognizance of an offence and prosecution of an offender are two different things. Section 190 of the Code empowered taking cognizance of an offence and not to deal with offenders. Therefore, cognizance can be taken even if offender is not known or named when the complaint is filed or FIR registered. Their names may transpire during investigation or afterwards.
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A wide discretion has been given as to grant or refusal of process and it must be judicially exercised. A person ought not to be dragged into Court merely because a complaint has been filed. If a prima facie case has been made out, the Magistrate ought to issue process and it cannot be refused merely because he thinks that it is unlikely to result in a conviction.
However, the words "sufficient grounds for proceeding" appearing in the Section 204 are of immense importance. It is these words which amply suggest that an opinion is to be formed only after due application of mind that there is sufficient basis for proceeding against the said accused and formation of such an opinion is to be stated in the order itself. The order is liable to be set aside if no reason is given therein while coming to the conclusion that there is prima facie case against accused, though the order need not contain detailed reasons. A fortiori, the order would be bad in law if the reason given turns out to be ex facie incorrect.”
- 19 -
As the order passed by the learned Special Judge taking cognizance and issuing summons to the petitioner does not satisfy the basic legal requirements, the impugned order to that extent has turned out to be ex-facie perverse and bad in law. To this extent, petitioner is entitled for the relief claimed in the petition.
Accordingly, petition is allowed-in-part.
The prayer sought for by the petitioner for quashing (i) the registration of ECIR/BGZO/13/2016 on 03.12.2016 (Annexure-‘C’); (ii) private complaint dated 31.01.2017 filed on 01.02.2017 in ECIR/BGZO/13/2016 (Annexure-‘A’); (iii) unnumbered original complaint in PAO.2/2017 dt.26.1.2017 (Annexure-‘D’) and (iv) provisional order of attachment bearing No.02/2017 dated 26.01.2017 (Annexure-‘E’) are rejected.
The order taking cognizance and issuance of summons dated 06.02.2017 in ECIR/BGZO/13/2016 registered as Spl.C.C.No.68/2017 (Annexure-‘B’) is set aside. The matter is
- 20 - remanded to the Principal City Civil & Sessions Judge at Bangalore to consider the complaint filed under sections 45(1), 3 and 4 of the PML Act by the respondent - Enforcement Directorate afresh in accordance with law.
Sd/-
JUDGE
Bss.