SUPREME COURT REITERATES THAT ONLY ON THE COMMISSION OF SCHEDULED OFFENCE UNDER PREVENTION OF MONEY LAUNDERING ACT CAN CONSPIRACY BE APPLIED

A  two-judge bench of the Supreme Court comprising of Justice Abhay S. Oka and Pankaj Mithal passed a Judgment dated 29-11-2023 in the matter of Pavana Dibbur vs. The Directorate of Enforcement Criminal Appeal No. 2779 / 2023 and clarified that the offence of criminal conspiracy, as defined in Section 120B (Criminal Conspiracy) of the Indian Penal Code, 1860 will be considered as a scheduled offence under the Prevention of Money Laundering Act 2002 (PMLA) if the alleged conspiracy aims to commit a specific offence mentioned in the PMLA  Schedule.

FACTS:

i) That the aforesaid Appeal filed before the Supreme Court by one, Pavana Dibbur (Appellant) against The Directorate Of Enforcement (ED), (Respondent), challenged the Order of the Hon’ble High Court of Karnataka, Bengaluru (High Court) which dismissed the Petition under section 482 of Code of Criminal Procedure, 1973 (pc)[1] filed by the Appellant for quashing the Complaint under the Prevention of Money Laundering Act, 2002.

ii) In the year of 2011, Alliance Business School (ABS) acquired a property known as the First Property in Gollahalli Village, Jigani Hobli, Anekal Taluk, Bengaluru, covering approximately five acres, for Rs.13.05 crores. On 01.07.2013, the Appellant purchased the First Property from ABS for Rs.13.5 crores. Additionally, the Appellant acquired the Second Property, a four-acre property in Karpur Village, Anekal Taluk, Bengaluru, from Accused no.1, Madhukar Angur, through a registered sale deed on 29.06.2019, for a consideration of Rs.2.47 crores.

iii) Later, during the period of 2010 to 2015, the Appellant’s husband, Dr. Ayyappa Dore, served as the Vice-Chancellor of Alliance University, and the Appellant briefly assumed the role of Vice-Chancellor as well. On 11.11.2017, an FIR was registered against Accused no.1, Madhukar Angur, based on the Complaint of the Registrar of Alliance University, alleging the collection of Rs.107 crores from students between January 2017 and November 2017. This amount was purportedly deposited in the account of Srivari Education Services, with subsequent transfers to Accused no.1’s account.

iv) An Enforcement Case Information Report (ECIR) was registered on 16.10.2020 by the ED against Accused nos.1, 2, and 3, alleging money laundering under Section 3 of the PMLA[2]. The ECIR was based on four FIRs, with various charges filed against the Accused. On 27.09.2021, the ED issued an order under Section 5 of the PMLA of 2002,[3] attaching the First and Second Properties. A subsequent Complaint was filed before the Adjudicating Authority on 13.10.2021, naming the Appellant as the fifth defendant.

v) The Respondent, initiated proceedings by filing a Complaint under the second proviso to Section 45(1) of the PMLA of 2002[4], before the Special Court for PMLA Cases in Bengaluru. Further, the Complaint, dated 17.03.2022, led to the Special Court taking cognizance of the matter in which the Appellant, was named as Accused no.6 in the said Complaint. The core allegation against the Appellant in the PMLA Complaint is her purported involvement in a conspiracy with Accused no.1, Madhukar Angur. The ED contends that the Appellant facilitated Accused no.1 by executing nominal sale deeds for the First and Second Properties in her name, thereby assisting in the misuse of university funds and the siphoning of proceeds of crime through her bank accounts.

vi) Further, the Appellant filed a Petition (e. CRLP No. 3542 / 2022) under Section 482 of the Code of Criminal Procedure, 1973 (Cr.pc) before the High Court of Karnataka at Bengaluru, seeking the quashing of the Complaint. However, the High Court, through its Judgment and Order dated 27.09.2022, dismissed the Petition for quashing the Complaint. The High Court, in the impugned judgment, upheld the dismissal of the Appellant’s Petition.

SUPREME COURT:

Aggrieved by the Order dated 27.09.2022 of the High Court, the Appellant filed Criminal Appeal No. 2779 / 2023 which was registered on 23-12-2022, thereby challenging the dismissal as decided by the High Court.

ISSUES:

The issue before the Supreme Court appears to be the interpretation of Section 3 of the PMLA, 2002 in the context of the Appellant’s involvement in a case related to the acquisition of properties and allegations of money laundering.

INTERPRETATION:

I) Section 3 of the PMLA is examined, emphasizing that an offence under this section can only be committed if there are proceeds of crime. The definition of “proceeds of crime” is outlined in Clause (u) of subsection (1) of Section 2[5], indicating that it involves property derived or obtained directly or indirectly as a result of criminal activity related to a scheduled offence.

II) The text delves into the definition of “scheduled offence” as per Clause (y) of subsection (1) of Section 2[6]. Further, the court considers the requirement that the existence of a scheduled offence is a condition precedent for the offence under Section 3.

III) It has been argued whether the Appellant should be named as an Accused in the charge sheets filed for the scheduled offences. However, the court dismissed this argument, stating that even if the Appellant is not named as an Accused in the scheduled offence, they can still be Accused in the PMLA case if they become involved after the scheduled offence has been committed.

IV) The court addresses allegations against the Appellant regarding the acquisition of properties using proceeds of crime and emphasizes that a concrete determination can only be made after evidence is presented.

V) The court discusses the interpretation of Section 120B of the Indian Penal Code (IPC) being included in the Schedule to the PMLA, considering whether a conspiracy to commit an offence not listed in the Schedule can still be treated as a scheduled offence.

OBSERVATIONS:

1) The Apex Court held that it is not necessary that a person Accused under Section 3 of the PMLA must have been Accused in the scheduled offence. Further, Bench said even if an Accused in a PMLA Complaint is not Accused in the scheduled offence, they benefit from the acquittal or discharge of all Accused in the scheduled offence.

2) The Supreme Court said that the first property cannot be considered connected to the proceeds of the crime, as the acts constituting the scheduled offence were committed after the property was acquired and the issue of whether the Appellant used tainted money for acquiring the second property can be decided only at the time of trial.

3) The Bench further observed that an offence under Section 120B of the IPC becomes a scheduled offence only if the conspiracy alleged is to commit an offence specifically included in the Schedule. Hence, the impugned order is quashed and set aside, and the Complaint pending before the Special Court for PMLA cases is quashed only insofar as the present Appellant is concerned.

CONCLUSION:

Based on aforesaid mentioned facts the Supreme Court has quashed and set aside the Order of the High Court dated 27.09.2022. The Complaint, which is Special C.C no. 781 of 2022 pending before the Special Court for PMLA cases in Bengaluru, is quashed only insofar as the present Appellant is concerned. The court reached several key conclusions during its analysis of the case, including the interpretation of the relationship between offences under Section 3 of the PMLA and scheduled offences, the connection of properties to the proceeds of crime, and the specific conditions under which an offence under Section 120B of the IPC becomes a scheduled offence.

 

Sakshi Raghuvanshi

Legal Associate

The Indian Lawyer

 

[1] Section 482 CrPC.   Saving of inherent power of High Court.

Nothing in this Code shall be deemed to limit or affect the inherent powers of the High Court to make such orders as may be necessary to give effect to any order under this Code, or to prevent abuse of the process of any Court or otherwise to secure the ends of justice.

[2] Section 3 of PMLA. 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 1[proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming] it as untainted property shall be guilty of offence of money-laundering.

2[Explanation.–For the removal of doubts, it is hereby clarified that,–

(i) a person shall be guilty of offence of money-laundering if such person is found to have directly or indirectly attempted to indulge or knowingly assisted or knowingly is a party or is actually involved in one or more of the following processes or activities connected with proceeds of crime, namely:–

(a) concealment; or

(b) possession; or

(c) acquisition; or

(d) use; or

(e) projecting as untainted property; or

(f) claiming as untainted property,

in any manner whatsoever;

(ii) the process or activity connected with proceeds of crime is a continuing activity and continues till such time a person is directly or indirectly enjoying the proceeds of crime by its concealment or possession or acquisition or use or projecting it as untainted property or claiming it as untainted property in any manner whatsoever.]

[3] Section 5 of PMLA. Attachment of property involved in money-laundering.

(1)Where the Director or any other officer not below the rank of Deputy Director authorised by the Director for the purposes of this section, has reason to believe (the reason for such belief to be recorded in writing), on the basis of material in his possession, that–

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

(b) such proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime under this Chapter,

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

Provided that no such order of attachment shall be made unless, in relation to the scheduled offence, a report has been forwarded to a Magistrate under section 173 of the Code of Criminal Procedure, 1973 (2 of 1974), or a Complaint has been filed by a person authorised to investigate the offence mentioned in that Schedule, before a Magistrate or court for taking cognizance of the scheduled offence, as the case may be, or a similar report or Complaint has been made or filed under the corresponding law of any other country:

Provided further that, notwithstanding anything contained in 2[first proviso], any property of any person may be attached under this section if the Director or any other officer not below the rank of Deputy Director authorised by him for the purposes of this section has reason to believe (the reasons for such belief to be recorded in writing), on the basis of material in his possession, that if such property involved in money-laundering is not attached immediately under this Chapter, the non-attachment of the property is likely to frustrate any proceeding under this Act.]

3 Provided also that for the purposes of computing the period of one hundred and eighty days, the period during which the proceedings under this section is stayed by the High Court, shall be excluded and a further period not exceeding thirty days from the date of order of vacation of such stay order shall be counted.];

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

(3) Every order of attachment made under sub-section (1) shall cease to have effect after the expiry of the period specified in that sub-section or on the date of an order made under 4[sub-section (3)] of section 8, whichever is earlier.

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

Explanation.–For the purposes of this sub-section, “person interested”, in relation to any immovable property, includes all persons claiming or entitled to claim any interest in the property.

(5) The Director or any other officer who provisionally attaches any property under sub-section (1) shall, within a period of thirty days from such attachment, file a Complaint stating the facts of such attachment before the Adjudicating Authority.

[4] Section 45 of PMLA. Offences to be cognizable and non-bailable.

(1) [Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), no person Accused of an offence [under this Act] shall be released on bail or on his own bond unless–]

(i) the Public Prosecutor has been given a opportunity to oppose the application for such release; and

(ii) where the Public Prosecutor opposes the application, the court is satisfied that there are reasonable grounds for believing that he is not guilty of such offence and that he is not likely to commit any offence while on bail:

Provided that a person, who, is under the age of sixteen years, or is a woman or is sick or infirm, [or is Accused either on his own or along with other co-Accused of money-laundering a sum of less than one crore rupees] may be released on bail, if the Special Court so directs:

Provided further that the Special Court shall not take cognizance of any offence punishable under section 4 except upon a Complaint in writing made by–

(i) the Director; or

(ii) any officer of the Central Government or a State Government authorised in writing in this behalf by the Central Government by a general or special order made in this behalf by that Government.

4[(1A) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), or any other provision of this Act, no police officer shall investigate into an offence under this Act unless specifically authorised, by the Central Government by a general or special order, and, subject to such conditions as may be prescribed.]

(2) The limitation on granting of bail specified in 5*** sub-section (1) is in addition to the limitations under the Code of Criminal Procedure, 1973 (2 of 1974) or any other law for the time being in force on granting of bail.

6[Explanation.–For the removal of doubts, it is clarified that the expression “Offences to be cognizable and non-bailable” shall mean and shall be deemed to have always meant that all offences under this Act shall be cognizable offences and non-bailable offences notwithstanding anything to the contrary contained in the Code of Criminal Procedure, 1973 (2 of 1974), and accordingly the officers authorised under this Act are empowered to arrest an Accused without warrant, subject to the fulfillment of conditions under section 19 and subject to the conditions enshrined under this section.]

[5]Section 2 (1) of PMLA: Definitions

(u) “proceeds of crime” means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property [or where such property is taken or held outside the country, then the property equivalent in value held within the country] 16[or abroad];

17[Explanation.–For the removal of doubts, it is hereby clarified that “proceeds of crime” include property not only derived or obtained from the scheduled offence but also any property which may directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offence;]

[6] Section 2 (1)of PMLA: Definitions

(y) “scheduled offence” means–

(i) the offences specified under Part A of the Schedule; or

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

(iii) the offences specified under Part C of the Schedule.]