OPTO CIRCUIT INDIA LTD vs. AXIS BANK

IN THE HIGH COURT OF KARNATAKA, BENGALURU

DATED THIS THE 13TH DAY OF AUGUST, 2020

BEFORE

THE HON'BLE MR. JUSTICE KRISHNA S.DIXIT

WRIT PETITION NO. 244 OF 2020 (GM-RES) C/W WRIT PETITION NO.8031 OF 2020 (GM-RES)

IN W.P. NO. 244/2020:

BETWEEN:

(BY SRI. SHASHI KIRAN SHETTY, SENIOR COUNSEL FOR SRI. KIRAN J, ADVOCATE)

AND:

REPRESENTED BY ITS ASSISTANT GENERAL MANAGER, M. RAMAKRISHNA SHENOY AGED ABOUT MAJOR, FATHERS NAME NOT KNOWN TO PETITIONER.

… RESPONDENTS

(BY SRI. P PRASANNA KUMAR, ADVOCATE FOR R1; SRI. B N TULSI KUMAR, ADVOCATE FOR R2)

THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA READ WITH SECTION 482 OF CR.P.C, 1973, PRAYING TO QUASH THE COMPLAINT DATED 02.11.2019 GIVEN BY THE R-2 TO THE R- 1 FOR OFFENCES PUNISHABLE US 420, 468,471 R/W SECTION 120B OF THE INDIAN PENAL CODE, 1860 AND SECTION 13(1)(d) R/W 13(2) OF THE PREVENTION OF CORRUPTION ACT 1988 ANNEXURE-A AND ETC.,

IN W.P. NO. 8031/2020:

BETWEEN:

OPTO CIRCUIT INDIA LTD, COMPANY, REGISTERED UNDER THE COMPANIES ACT, 1956, HAVING ITS CORPORATE OFFICE IS SITUATED ELECTRONIC CITY, BANGALORE 100, REP BY ITS CHAIRMAN, SRI. VINOD RAMNANI, AGE 65 YEARS, (SENIOR CITIZEN BENEFIT NOT CALMED). …PETITIONER

(BY SRI. SHASHI KIRAN SHETTY, SENIOR COUNSEL FOR SRI. KIRAN J, ADVOCATE)

AND:

(BY SRI. GANESH BHAT, ADVOCATE FOR R1; SRI. B N TULSI KUMAR, ADVOCATE FOR R3; SRI. H JAYAKAR SHETTY, ADVOCATE FOR R4; R2 SERVED AND UNREPRESENTED)

THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH COMMUNICATION DATED 15.05.2020 FOR DEBIT FREEZING OF THE COMPANY ACCOUNT NO.914020014786978 MAINTAINED WITH THE R-1 ACCOUNT NO.200006044354 MAINTAINED WITH THE R-2; ACCOUNT NO.39305709999 MAINTAINED WITH THE R-3 BANKS ANNEXURE-A AND ETC.,

THESE PETITIONS HAVING BEEN HEARD AND RESERVED FOR ORDER, THIS DAY, THE COURT PRONOUNCED THE FOLLOWING:

ORDER In W.P.No.244/2020, petitioners being second & third accused in the registered crime in question, are knocking at the doors of writ court seeking the quashment of criminal proceedings initiated pursuant to FIR No.CBI/ACB/BLR 2019 RC 18(A)/2019 that is now pending on the file of learned XXI Addl. City Civil & Sessions Judge cum Spl. Judge for CBI cases, Bangalore City, for the offences punishable under sections 420, 468 & 471 r/w section 120B of IPC, 1860 & section 13(1)(d) r/w section 13(2) of Prevention of Corruption Act, 1988; the respondent-CBI after service of notice, having entered appearance through its Sr. Panel Counsel, has filed a Statement of Objections resisting the writ petition.

writ petition; the respondent-Directorate of Enforcement after service of notice, having entered appearance through the learned CGC, opposes the writ petition; since both the writ petitions are structured on a common fact matrix and involve common questions of law, the same are taken up for hearing together, as consensually suggested at the Bar.

First petitioner is the husband of second petitioner; he was the Promoter, Chairman & Director of M/s Opto Circuits India Ltd (OCIL) which happens to be the first accused (hereafter "Company"); both the petitioners being US citizens, were carrying on business in India; the Company had been availing the cash credit facilities from the second respondent Bank (hereafter "Bank") since 2004, and from other banks as well; the Forensic Audit Report for the subject period mentions about fraud, fabrication of records, falsification of data concerning the accused Company, for the purpose of availing huge loans allegedly with the active involvement of bank officials; it is also complained that the accused persons have fraudulently gifted certain properties that were furnished by way of securities with intent to defraud the Bank, even after declaration of the Account as NPA on 31.03.2013; all this

allegedly resulted into swindling away of 354.32 crore of public money, eventually Bank setting the criminal law in motion by lodging the FIR/complaint; the same is put in challenge in the first Writ Petition.

(i) The Company had availed multiple credit facilities from the Bank under Loan Agreement and vide sanction letter dated 16.08.2012; first petitioner defaulted in making repayment of debts quantified at Rs.227.65 crore as on 31.03.2013; the Bank has initiated recovery action under SARFAESI Act, 2002; the Bank having filed O.A.No.1497/2015, has obtained the Recovery Certificate dated 10.10.2016 at the hands of DRT.

(ii) The petitioners vide letter dated 12.03.2018 has given a One Time Settlement proposal of Rs.66 crore payable in 18 months; the Bank has replied vide letter dated 21.03.2018 asking the petitioners to submit a revised proposal cutting short repayment term to 12 months, with a suggestion for the payment of 20% of the

offer amount as “upfront money” for showing bona fide of the offer.

(iii) The Company vide letter dated 10.4.2018 requested the Bank to consider the initial OTS offer itself since it has already deposited a sum of Rs.3.5 crore as upfront money; the Bank vide reply dated 11.06.2018 declined the offer on the ground that the outstanding amount was huge and the OTS offer was inadequate; the Company vide proposal dated 20.12.2018 escalated the amount in OTS offer to Rs.83 crore, however seeking relaxation as to the quantum of upfront money.

(iv) The Bank vide letter dated 18.1.2019 asked the Company to pay 15% of the upfront money as a pre- condition for considering the latest OTS offer; the Company vide letter dated 24.1.2019 having agreed to the said proposal, clarifying that it had already paid Rs.7.5 crore and therefore, it would pay the remainder i.e., Rs.4.95 crore which together constitute 15%; the Bank vide e-mail dated 23.10.2019 asked the Company to submit OTS proposal in the standard format and accordingly, the Company has submitted one on 9.11.2019, which is pending consideration by the Bank.

(v) The second petitioner as on the date the Company was declared to be a willful defaulter and its account was branded as NPA, was no longer a director, she having resigned to the post a bit before and her resignation having been approved on 1.3.2013; that being the position, there was absolutely no justification for subjecting her to the criminal investigation at the hands of CBI.

(vi) The Forensic Audit for the period between 1.4.2010 & 31.03.2016 having been accomplished vide report dated 27.6.2016, the criminal proceedings now initiated after long lapse of time sans any plausible explanation for the delay brooked, are marred by delay & latches; initiation of criminal proceedings being a serious matter, cannot be casually permitted vide Pepsi Foods Ltd Vs. Special Judicial Magistrate, (1998) SCC (CRI) 1400.

Company has been declared “fraud based” acting on the Special Audit Report dated 27.6.2016; the Fraud Identification Committee too after due examination of the records has branded the account as "Fraud"; the loss of public funds is estimated to be Rs.354.32 crore as on 30.6.2019; (iii) there is a prima facie case for investigation by the CBI; merely because the Bank has resorted to civil action for recovery, the criminality of the acts does not wither away; in law, there is no prohibition for both civil & criminal proceedings to go on concurrently; (iv) there is sufficient material to proceed against second petitioner who is none other than first petitioner even if her resignation is assumed; and, (v) the case of the petitioners does not fit into the parameters laid down in State of Haryana Vs. Bhajan Lal, 1992 Supp (1) SCC 335; learned CGC appearing for the respondents in the connected writ petition, also makes submission placing reliance upon certain decisions.

Bar, this court declines to grant indulgence in the matter for the following discussion:

(a) Admittedly, petitioners were running affairs of management of accused Company when it had entered into loan transactions with the complainant Bank during the relevant period between 1.4.2010 and 31.3.2016; the outstanding loan amount as per the Book Entries itself is quantified at Rs.155.44 crore as on 30.6.2019 and the total loss is stated to be Rs.354.32 crore; all this is a public money, is not in dispute; there is no merit in the argument of the petitioners that the loan transaction in question from the stage of applying for the loan to the stage of offering of final OTS, has only elements of civil dispute and therefore, initiation of criminal proceedings is unsustainable; it need not be stated that a same set of facts may constitute a civil wrong like a breach of contract and a crime, as well and that the legal proceedings concerning them may run concurrently, the nature, scope & object of one being miles away from the other; whether one should be halted till the other is accomplished because of the arguable prejudice that may be occasioned by the parallel process, has not fallen for consideration here; it is profitable to see the observations of the Apex Court in Vesa

Holdings Pvt Ltd Vs. State of Kerala, (2015) 8 SCC 293, para 13: "it is true that a given set of facts may make out a civil wrong as also a criminal offence and only because a civil remedy may be available to the complainant, that itself cannot be a ground to quash a criminal proceeding. The real test is whether the allegations in the complaint disclose the criminal offence of cheating or not." The Apex Court granted relief to the accused stating "In our view the complaint does not disclose any criminal offence at all. The criminal proceedings should not be encouraged when it is found to be malafide or otherwise an abuse of the process of the court..." What this court has to see is not what the Apex Court did in a given case but what is said as a proposition of law, ordinarily regardless of the grant or refusal of relief since Article 141 of our Constitution mandates obedience to the law declared.

(b) The submission that the proceedings that are being investigated by the CBI have substantial elements of only a civil dispute apart from being not true, does not merit countenance even otherwise; the reliance by the petitioners on the decision of the Apex Court in Parbatbhai Aahir Vs. State of Gujarat, (2017) 9 SCC 641 is misplaced; what has been observed in the two paragraphs

namely 16.8 & 16.9 need to be construed in the light of para 16.10 of the said Ruling, since they constitute one integral substratum from which the ratio decidendi emerges; it is a settled principle of law of precedent that for discerning the ratio of a decision, regardless of the test employed for such discerning, all essential factors that contributed to the making of the said ratio, need to be ascertained; the said paragraphs in the decision read as under:

"16.8. Criminal cases involving offences which arise from commercial, financial, mercantile, partnership or similar transactions with an essentially civil flavour may in appropriate situations fall for quashing where parties have settled the dispute;

16.9. In such a case, the High Court may quash the criminal proceeding if in view of the compromise between the disputants, the possibility of a conviction is remote and the continuation of a criminal proceeding would cause oppression and prejudice; and

16.10. There is yet an exception to the principle set out in propositions 16.8 and 16.9 above. Economic offences involving the financial and economic well-being of the state have implications which lie beyond the domain of a mere dispute between private disputants. The High Court would be justified in declining to quash where the offender is involved in an activity akin to a financial or economic fraud or misdemeanour. The consequences of the act complained of upon the financial or economic system will weigh in the balance."

(underlining is mine)

Learned Sr. Counsel Mr.Shetty, appearing for the petitioners is not right in selectively banking upon only two paragraphs i.e., 16.8 & 16.9 that broadly lay down the general principle; para 16.10 is carved out as an exception to the said principle; case of the petitioners squarely fits into this exception as rightly contended by learned CBI counsel; he has some justification for putting forth a passionate submission that swindling of public money at times in astronomical values, in the guise of serial borrowing from the banks & financial institutions has become rampant in the country and that the writ court should not readily interdict or interfere with the criminal investigation.

(c) There is a lot of force in the vehement submission of the learned CBI counsel that the case of the petitioners does not fit into any of the seven broad parameters delineated by the Apex Court vide Bhajan Lal supra and therefore, there is no warrant for quashing the impugned proceedings; following are the two of them that are pressed into service by the learned counsel for the petitioners: "(2) Where the allegations in the first information report and other materials, if any, accompanying the FIR do not disclose a cognizable offence,

justifying an investigation by police officers under Section 156(1) of the Code except under an order of a Magistrate within the purview of Section 155(2) of the Code. (4) Where the allegations in the FIR do not constitute a cognizable offence but constitute only a non-cognizable offence, no investigation is permitted by a police officer without an order of a Magistrate as contemplated under Section 155(2) of the Code.

Going by the allegations in the FIR and the documents like the Forensic Audit Report dated 27.6.2016 for the period between 1.4.2010 & 31.3.2016, the resolution dated 1.4.2019 of the 'Fraud Identification Committee', etc, it cannot be gainfully argued that, no offence is made out against the petitioners, warranting CBI investigation of the kind in question; at this stage, what the court needs to look at is, whether the allegations in the complaint/FIR per se exhibit all the ingredients of the offences stated, and not whether there is prima facie evidentiary material for substantiating the said allegations. (d) The Apex Court in Md. Allauddin Khan Vs. State of Bihar, (2019) 6 SCC 107 found fault with the Hon'ble Patna High Court in quashing the criminal proceedings wrongly invoking Bhajan Lal, with the following observations:

"... On perusal of the impugned order, we find that it suffers from two errors...The first error is that the High Court did not examine the case with a view to find out as to whether the allegations made in the complaint prima facie make out the offences … or not. Instead the High Court … gave importance to the fact that since there was a dispute pending between the parties in the Civil Court in relation to a shop … it is essentially a civil dispute...It is on this ground, the High Court proceeded to quash the complaint. This approach of the High Court, in our view, is faulty. Though the High Court referred to the law laid down by this Court in the case of State of Haryana & Ors. vs. Ch. Bhajan Lal & Ors. (AIR 1992 SC 604) but failed to apply the principle laid down therein to the facts of this case...The High Court failed to see that mere pendency of a civil suit is not an answer to the question as to whether a case u/ss 323, 379 r/w Section 34 IPC is made out against respondent …or not... The High Court should have seen that when a specific grievance of the appellant in his complaint was that respondents … have committed the offences punishable under Sections 323, 379 read with Section 34 IPC, then the question to be examined is as to whether there are allegations of commission of these two offences in the complaint or not. In other words, in order to see whether any prima facie case against the accused for taking its cognizable is made out or not, the Court is only required to see the allegations made in the complaint.... In our view, the High Court had no jurisdiction to appreciate the evidence of the proceedings under Section 482 of the Code."

Similarly, what the Apex Court in the case of Mohd. Ibrahim Vs. State of Bihar, (2009) 8 SCC 751 observed, is also relevant: "8. This Court has time and again drawn attention to the growing tendency of

complainants attempting to give the cloak of a criminal offence to matters which are essentially and purely civil in nature, obviously either to apply pressure on the accused, or out of enmity towards the accused, or to subject the accused to harassment. Criminal courts should ensure that proceedings before it are not used for settling scores or to pressurise parties to settle civil disputes. But at the same, it should be noted that several disputes of a civil nature may also contain the ingredients of criminal offences and if so, will have to be tried as criminal offences, even if they also amount to civil disputes."

(e) The decision in Devendra Vs. State of UP, (2009) 7 SCC 495, heavily banked upon by the learned counsel for the petitioners, does not much enure to their benefit; the criminal proceedings were quashed in the said case, is true; a perusal of the decision shows that it was a case involving commercial disputes between the parties which had an overwhelming civil nature sans any elements of crime unlike the petition at hands; after all, more than a century ago, Lord Halsbury in Quinn Vs. Leathem, (1901) UKHL 2, settled a principle in the doctrine of precedent that a case is an authority only for the proposition that it lays down, and not for all that, that logically follows from what is so laid down; for the same reason, the Rulings in Pepsi Foods, supra and Paramjeet Batra Vs. Uttarakhand (2013) 11 SCC 673, do not yield much milk to the petitioners.

(f) Learned CBI counsel is justified in distinguishing the Apex Court decision in CBI Vs. Sadhu Ram Singla, 2017 CRL.L.J 2269 that was pressed into service on behalf of the petitioners; it was a case wherein the bank and the borrower having entered into a One Time Settlement, the entire outstanding amount was cleared; the bank had discharged the debtors once for all having released all securities & guarantees; even it had withdrawn the recovery proceedings then pending before the DRT stating that the lis had been finally settled; further, the application filed u/s 320(2) of Cr.P.C seeking leave to compound the offence came to be favoured by the High Court for giving a decent burial to the dispute; these essential facts which are militantly lacking in the present petitions, resulted into relieving the parties therein from the criminal action; here is a case involving the allegations of fraud, fabrication & duplicity; the outstanding is hugely quantified at Rs.354.32 crore as on 30.6.2019; the petitioners are only dillydallying with submission and resubmission of OTS proposals that are apparently structured on frugal monetary values and the claim for long repayment tenures; the OTS proposal has not resulted into any settlement and that the entire amount is

outstanding due till date, payment of some frugal sum, notwithstanding; thus, case of the petitioners stands in bitter contrast with the one cited at the Bar.

(g) The submission of learned Sr. Advocate Mr.Shetty that a mere failure to repay the debts does not justify initiation of criminal proceedings vide Sushil Sethi Vs. State of Arunachal Pradesh, (2020) 3 SCC 240, as a legal proposition is true; but the facts of these petitions repel the invocation of the said proposition; the case of the petitioners is not a mere non-payment of debts; there is a whole range of things that are allegedly perpetrated by them during the period between availing of huge loans and the same remaining as outstanding dues till date; there is sufficient material too accompanying the FIR namely Forensic Audit Report, the Resolution of Fraud Identification Committee, etc., which specifically mention fraudulent deals and fabrication of records; it is also alleged that the properties furnished by way of security having been gifted away by registered instruments, there are ingredients of offence of cheating, in addition to other; all this merits investigation at the hands of CBI.

(h) The argument of the petitioners that the Bank came to know of alleged commission of fraud way back in

June 2016 even going by the Forensic Audit Report and the Resolution passed by the Fraud Identification Committee, and that the complaint having been lodged three years thereafter is hit by delay & latches, is bit difficult to countenance; the offences alleged against the petitioners are punishable under sections 420, 468 & 471 r/w section 120B of IPC and under section 13(1)(d) r/w section 13(2) of P.C. Act; the punishment prescribed for each of these offences is more than three year imprisonment; section 468 of Cr.P.C stipulates periods of limitation after the expiry of which no court shall take cognizance of an offence; sub-sections (1) & (2) being relevant are reproduced hereunder:

" 468. Bar to taking cognizance after lapse of the period of limitation.

(1) Except as otherwise provided elsewhere in this Code, no Court shall take cognizance of an offence of the category specified in sub-

section (2), after the expiry of the period of limitation.

(2) The period of limitation shall be-

(a) six months, if the offence is punishable with fine only;

(b) one year, if the offence is punishable with imprisonment for a term not exceeding one year;

(c) three years, if the offence is punishable with imprisonment for term exceeding one year but not exceeding three years."

The Parliament has not prescribed any period of limitation for the offences for which the prescribed punishment exceeds three year imprisonment; this apart, section 473 of the Code vests discretion in the court to take cognizance of an offence even after the lapse of limitation period if delay has been properly explained or that it is necessary to take cognizance in the interests of justice; added to this, section 472 mentions of continuing offences that shun the contention of limitation; that being the legal position, the submission of the petitioners as to delay & latches do not merit consideration, at the stage of investigation; even otherwise, whether there is delay/latches per se is not a sufficient ground for quashing the criminal proceedings which allegedly involve swindling of a huge sum of Rs.354.32 crore of public funds. (i) The submission of Mr.Shashikiran Shetty that, the second petitioner herein was no longer a director of the Company at the relevant period, again cannot be examined by this court in its restrictive jurisdiction since it is a fact to be probed into; the transactions as appearing from the records are allegedly spread over for a long period between 01.04.2010 and 31.03.2016; even going by the version of the counsel, the second petitioner who is none other than

the spouse of the first, continued to be a Director of the accused company till March 2013 which falls within the Forensic Audit period; under the scheme of law relating to companies, a Director continues to be liable for the past acts as well, subject to all just exceptions; however, it is open to the second petitioner to seek her exculpation from the offence in the course of investigation, by showing the circumstances that may render her involvement improbable.

submission is liable to be rejected because of the following discussion:

(a) The PML Act has been enacted by the Parliament to give effect to the International Conventions to which India is a signatory; the Act has been brought into force in 2005 for the purpose of preventing money- laundering and for providing for the confiscation of property/profits derived from, or involved in, money- laundering; the Act addresses the international obligations under the Political Declaration and Global Programme of Action adopted by the General Assembly of the United Nations to prevent money-laundering; it has undergone a couple of amendments with a view to keep pace with the marching times and for addressing some judicial concerns; the Act has a laudable object to achieve, when the black money has been badly affecting the national economy, and posing threat to the unity & integrity of the country. (b) A Co-ordinate Bench of this court having extensively examined the scheme of the Act in W.P.No.5299/2019 between Sri. Sachin Narayan Vs. The Income Tax Department and others, decided on 29.08.2019, held that: the proceedings under PML Act are independent, separate, distinct and different from the

proceedings initiated for scheduled offences by other law enforcement agencies; PML Act is a stand alone enactment which differentiates between scheduled offences and money laundering offences; if the investigation for the predicate offence is conducted by the authorities empowered under the enactments and if for any reason, the same is closed/dropped, the proceedings under the Act in other stream would not, thereby, automatically wither away, the offence of money laundering u/s 3 of the Act being an independent offence; this fairly happens to be the unanimous view of several High Courts in the country vide: Bombay High Court in First Appeal No.527/2010 between Radha Mohan Lakhotia Vs. Deputy Director, PMLA, decided on 5.8.2010; Delhi High Court in APRAJITA vs. JOINT DIRECTOR, ENFORCEMENT DIRECTORATE, MANU/DE/0106/2018; Madras High Court in VGN DEVELOPERS P LTD. Vs. DEPUTY DIRECTOR, DIRECTORATE OF ENFORCEMENT, MANU/TN/6120/2019; Mr.Prasanna Kumar appearing for the CBI is justified in submitting that the decision in "Sri.Sachin Narayan" having been affirmed by the Division Bench of this Court in W.A.No.3611/2019, disposed off on

17.9.2019, the judicial propriety & discipline require the Co-ordinate Benches to follow the same.

(c) Petitioner's argument that both the provisions of sections 3 & 5 of the Act employ the expression "proceeds of crime" and therefore, conviction of the offender is a sine qua non for invoking the same, again does not gain countenance; relevant parts of the said sections, are as under: Section "3. Offence of money-laundering.— Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime and projecting it as untainted property shall be guilty of offence of money-laundering."

Section "5. Attachment of property involved in money-laundering— (1) Where the Director, or any other officer not below the rank of Deputy Director authorised by him for the purposes of this section, has reason to believe (the reason for such belief to be recorded in writing), on the basis of material in his possession, that— (a) any person is in possession of any proceeds of crime..."

These provisions amongst others are structured on the UN Conventions inter alia relating to money laundering, which the Objects & Reasons that prelude the Act prominently refer to; it is pertinent to refer to the recommendations of UN-constituted Financial Action Task Force [FATF] which is designated as "global money laundering and terrorist

financing watchdog"; out of 40 recommendations, the following being relevant for our purpose, are reproduced: Paras 4, 5 & 6: "Scope of the Criminal Offence of Money Laundering: 4. Each country should take such measures as may be necessary, including legislative ones, to enable it to criminalise money laundering as set forth in the Vienna Convention. Each country should extend the offence of drug money laundering to one based on serious offences. Each country would determine which serious crimes would be designated as money laundering predicate offences. As provided in the Vienna Convention, the offence of money laundering should apply at least to knowing money laundering activity, including the concept that knowledge may be inferred from objective factual circumstances. Where possible, corporations themselves - not only their employees - should be subject to criminal liability."

Para 7: "Provisional Measures and Confiscation: Countries should adopt measures similar to those set forth in the Vienna Convention, as may be necessary, including legislative ones, to enable their competent authorities to confiscate property laundered, proceeds from, instrumentalities used in or intended for use in the commission of any money laundering offence, or property of corresponding value, without prejudicing the rights of bona fide third parties. Such measures should include the authority to : (1) identify, trace and evaluate property which is subject to confiscation; (2) carry out provisional measures, such as freezing and seizing, to prevent any dealing, transfer or disposal of such property; and (3) take any appropriate investigative measures. In addition to confiscation and criminal sanctions, countries also should consider monetary and civil penalties, and/or proceedings including civil proceedings, to void contracts entered into by

parties, where parties knew or should have known that as a result of the contract, the State would be prejudiced in its ability to recover financial claims, e.g. through confiscation or collection of fines and penalties."

(d) Under our constitutional scheme, the power to legislate in respect of matters concerning International Conventions/Conferences is exclusively vested with the Parliament vide Article 253 which has the following text: "253. Legislation for giving effect to international agreements Notwithstanding anything in the foregoing provisions of this Chapter, Parliament has power to make any law for the whole or any part of the territory of India for implementing any treaty, agreement or convention with any other country or countries or any decision made at any international conference, association or other body."

The gist of Article 51 of the Constitution is succinctly put by the jurist, Mr.H.M. Seervai in his “Constitutional Law of India” Volume 2, 4th Edition; para 17.162 at page 2017, he writes: “Article 51 directs that the State shall endeavour to promote international peace and security, maintain just and honourable relations between nations, foster respect for international law and treaty obligations in the dealings of organized peoples with one another, and encourage the settlement of international disputes by arbitration. But in considering any conflict between municipal and international law, it is well settled that: ‘every statute is to be interpreted and applied, as far as its language admits, as not

to be inconsistent with the comity of nations or with established principles of international law; the judges may not pronounce, an Act ultra vires as contravening international law but may recoil, in cases of ambiguity, from a construction which would involve a breach of the ascertained and accepted rules of international law’...Craies on Statute Law”

d-1) It has been a settled legal position that statutes enacted for giving effect to the decisions/resolutions made in International Conventions should be interpreted in the light of and in conformity with such decisions/resolutions vide State of WB Vs. Kesoram Industries Ltd, AIR 2005 SC 1646; the stream of action in the form of criminal proceedings envisaged in Chapter VII of the Act, is relatable to the above paras 4, 5 & 6 of the FATF recommendations; the other stream of action namely the confiscatory proceedings contemplated under Chapter III of the Act, is relatable to para 7 of the said recommendations; neither in these recommendations nor in the text of the said Chapters, there is any room for the contention that the initiation & accomplishment of confiscatory proceedings are pre-conditioned or post-conditioned with the criminal proceedings that may or may not culminate in the conviction of the offender, as rightly contended by Mr.Prasanna Kumar & Mr.Jayakar Shetty; if the

Parliament intended it to be otherwise, the text of the provisions of sections 3 & 5, amongst others, would have been much different; thus, the contention to the contrary advanced on behalf of the petitioners cannot be countenanced without manhandling at least these two provisions, if not other as well.

(e) Going by the text & context of the provisions of PML Act and the construction placed thereon by the Co- ordinate Bench of this court coupled with a broad consensual view emerging from the aforesaid decisions of other High Courts in the country, some lone voices in variance notwithstanding, the legal position can be concised thus: the scheme of the Act envisages two parallel streams of action which are distinguishable by their nature, scope & object; one stream is the criminal proceedings before the Special Courts for the trial of offences u/s.3 r/w Sec.4, that are governed by the provisions of Chapter VII, and the other stream is the departmental proceedings apparently civil in nature, instituted by the competent authorities, that are governed by the provisions of Chapter III; the object of former is punitive, whereas that of the latter is confiscatory; obviously, the proceedings under one chapter are

independent of those under the other, and therefore, the determination of proceedings under one stream does not ipso facto affect or influence those in the other; thus, even the closure of criminal proceedings would not determine the departmental proceedings, the offence of money laundering u/s.3 being completely a stand alone event; in other words, the departmental proceedings for the purpose of confiscating the proceeds of crime and the criminal proceedings for punishing the offender, can run concurrently and that they need not converge at any point.

(f) "Offence of money laundering" is expansively defined u/s. 3 and the Explanation inserted by amendment 2019 to this section & to section 44, being clarificatory of the legal position ab inceptio, applies to the case of the petitioner, contend Mr.Prasanna Kumar & Mr.Jayakar Shetty; they justified this submission through interpretative process by placing reliance on the observations of a Five Judge Bench of the Apex Court in CIT Vs. Vatika Township, (2015) 1 SCC 1, wherein para 32 quotes the rule of interpretation as stated by G.P. Singh in "Principles of Statutory Interpretation, 13th Edition, Lexis Nexis Butterworths Wadhwa, which reads as under:

"... If a new Act is 'to explain' an earlier Act, it would be without object unless construed retrospective. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act. It is well settled that if a statute is curative or merely declaratory of the previous law retrospective operation is generally intended. The language 'shall be deemed always to have meant' is declaratory, and is in plain terms retrospective. In the absence of clear words indicating that the amending Act is declaratory, it would not be so construed when the pre-amended provision was clear and unambiguous. An amending Act may be purely clarificatory to clear a meaning of a provision of the principal Act which was already implicit. A clarificatory amendment of this nature will have retrospective effect and, therefore, if the principal Act was existing law which the Constitution came into force, the amending Act also will be part of the existing law.” The above summing up is factually based on the judgments of this Court as well as English decisions."

Arguably, the counsel for the respondents are right; even otherwise, the expansive definition of the "offence of Money-Laundering" as it existed prior to insertion of aforesaid Explanation also covers the case of petitioner; now that, the challenge to the CBI investigation is held to be unsustainable, petitioner's case has been rendered worse; therefore, the submission that the impugned communication is without competence or justification, does not merit acceptance.

In the above circumstances, no other ground having been urged and both the writ petitions being devoid of merits, are liable to be dismissed and accordingly they are, costs, in the circumstances, having been made easy.

Sd/- JUDGE

Snb/