Delhi High Court
Virbhadra Singh & Anr vs Enforcement Directorate & Anr on 3 July, 2017
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: 26th May, 2017
Pronounced on: 03rd July,2017
+ W.P.(CRL) 856/2016 & Crl.M.A. Nos. 4702/2016,
4704/2016, 10527/2016, 12181/2016
VIRBHADRA SINGH & ANR ..... Petitioners
Through: Mr. Dayan Krishnan, Sr.
Advocate with Mr. Mayank Jain, Mr.
Madhur Jain and Mr. Parmatma Singh,
Advocates
versus
ENFORCEMENT DIRECTORATE & ANR ..... Respondents
Through: Mr. Sanjay Jain, ASG with
Mr. Amit Mahajan, CGSC, Mr. Kunal
Dutt, Ms. Karnika Singh and Mr. Vignaraj
Pasayat, Advs.
+ W.P.(CRL) 2044/2016 & Crl.MA. Nos.10657-58/2016
CHUNNI LAL CHAUHAN ..... Petitioner
Through: Mr. Dayan Krishnan, Sr.
Advocate with Mr. Mayank Jain, Mr.
Madhur Jain and Mr. Parmatma Singh,
Advocates
versus
ASSISTANT DIRECTOR, ENFORCEMENT
DIRECTORATE & ANR. ..... Respondents
Through: Mr. Sanjay Jain, ASG with
Mr. Amit Mahajan, CGSC, Mr. Kunal
Dutt, Ms. Karnika Singh and Mr. Vignaraj
Pasayat, Advs.
WP(C) 856/2016 & connected matters Page 1 of 101
+ W.P.(CRL) 2862/2016 & Crl.M.A. Nos. 15292/2016.
18677/2016
VIKRAMADITYA SINGH ..... Petitioner
Through: Mr. Dayan Krishnan, Sr.
Advocate with Mr. Mayank Jain, Mr.
Madhur Jain and Mr. Parmatma Singh,
Advocates
Versus
ASSISTANT DIRECTOR, ENFORCEMENT
DIRECTORATE ..... Respondent
Through: Mr. Sanjay Jain, ASG with
Mr. Amit Mahajan, CGSC, Mr. Kunal
Dutt, Ms. Karnika Singh and Mr. Vignaraj
Pasayat, Advs.
+ W.P.(CRL) 245/2016 and Crl.M.A.1336/2016
PICHESWAR GADDE ..... Petitioner
Through: Mr. Kirti Uppal, Sr.
Advocate with Mr. L.M. Asthana, Mr.
Siddhant Asthana, Ms.Sahiba Pantel, Mr.
Raksh Kumar Bhardawaj and Mr.
Chhetarpal Singh, Advocates
versus
ENFORCEMENT DIRECTORATE MINISTRY OF
FINANCE & ORS ..... Respondents
Through: Mr. Sanjay Jain, ASG with
Mr. Anurag Ahluwalia, CGSC, Ms.
Karnika Singh, Mr. Vignaraj Pasayat and
Ms. Aastha Jain, Advocates
CORAM:
HON'BLE MR. JUSTICE R.K.GAUBA
WP(C) 856/2016 & connected matters Page 2 of 101
JUDGMENT
1. These writ petitions have raised common questions of law of
general interest involving provisions of Prevention of Money
Laundering Act, 2002 (for short, "PMLA") in the context of a case
under investigation with Enforcement Directorate of Ministry of
Finance in the Government of India (Headquarters Investigation), it
having been described as Enforcement Case Information Report
No.ECIR/HQ/02/HIU/2015 registered on 27.10.2015 (for short,
"ECIR") and, therefore, have been heard together and are being
decided through this common judgment.
THE PETITIONS
2. It may be mentioned at the outset that the first petitioner (Shri
Virbhadra Singh) in the first above captioned petition (the first
petition or case) has been in active political and public life for last
several decades, having been a member of the Union legislature or
the legislature of the State of Himachal Pradesh from where he
hails, and during such period having served as a Minister of the
Union of India or Minister in the cabinet in the Government of
Himachal Pradesh, he presently being the Chief Minister. The
second petitioner (Smt. Pratibha Singh) of the said first petition is
his wife.
3. The names of the other three petitioners (Shri Chunni Lal
Chauhan, Shri Vikramaditya Singh and Picheswar Gadde) in the
above captioned matters are stated to have figured during the course
of investigation, amongst others, into the ECIR thereby giving rise
to issuance of summons to them under Section 50(2) and (3) of
PMLA for appearing before the competent officer of the Directorate
of Enforcement for purposes of investigation. The petitioner (Shri
Vikramaditya Singh) of the third above captioned petition (the third
petition or case), it be noted, is the son of the petitioners of the first
petition.
4. It is claimed in the first petition that summons were issued
under Section 50(2) and (3) PMLA by the respondent on
16.11.2015 requiring presence of the petitioners for questioning.
Detailed averments have been made with regard to the response of
the petitioners pursuant to said summons, facts pertaining which
may be elaborated a little later. For the present, it needs to be only
noted that the trigger for filing the petition is indicated to be the
denial of extension of time for compliance with the summons on the
ground that the legislative assembly of the State of Himachal
Pradesh was in session till 06.04.2016 in spite of which, through the
summons issued by the respondents, it was being insisted that the
petitioners appeared on 17.03.2016.
5. The first petition invoking the jurisdiction of this court under
Article 226 of the Constitution of India read with Section 482 of the
Code of Criminal Procedure, 1973 (Cr.P.C.) prayed for the grant of
the following reliefs:
"i) pass a writ/order/direction in the nature of certiorari
thereby issuing direction to quash and set aside all
proceedings and actions taken pursuant to the
Enforcement Case Information Report bearing number
ECIR/HQ/02/HIU/2015 as the same are without
jurisdiction and authority of law;
ii) pending hearing and adjudication of the subject writ
petition, stay all and every proceedings initiated by
respondent no.1 in pursuance of the Enforcement Case
Information Report bearing number ECIR/HQ/02/HIU/
2015;
iii) pending hearing and final disposal restrain the
respondents from taking any coercive action against the
petitioners;
iv) issue such other orders/directions as this Hon‟ble
Court deed fit under the circumstances of the case"
6. Going by the averments in the counter affidavit of the
respondents, as submitted on the file of the first petition, the
petitioner (Shri Chunni Lal Chauhan) of the second above-
mentioned case (the second petition or case has been working for
gain as commission agent at Parwanoo Mandi in the State of
Himachal Pradesh, it being alleged that certain acts of commission
or omission committed by the petitioners of the first petition
constituting certain offences, inter alia, punishable under the
Prevention of Corruption Act, 1988 (for short, "POC Act"), as also
under PMLA, with his tacit help and support had necessitated
investigation into his role. After the registration of the ECIR,
summons were issued to this petitioner under Section 50(2) and (3)
of PMLA, the validity whereof is questioned by him through the
second petition pressed with the prayer for following reliefs:
"a) issue writ of certiorari or any other writ to quash the
ECIR/HQ/02/HIU/2015 dated 27.10.2015 registered by
the Enforcement Directorate and proceedings initiated
under PMLA against the petitioner; and
b) pass such other order or orders as this Hon‟ble Court
may deem fit and proper in the facts and circumstances
of the case."
7. In the counter affidavit filed by the respondents in the third
petition, it has been stated that the statement of second petitioner of
the first petition (Smt. Pratibha Singh) was recorded on 09.08.2016
which brought out that acquisition of certain assets (which include
property at Greater Kailash, New Delhi and Dera Mandi Farm
House at Mehrauli, New Delhi), seemingly done using the flow of
money received from certain suspect entities (including M/s. Maple
Destination & Dreambuild Pvt. Ltd.) is sought to be explained as
borrowings from the third petitioner, she allegedly being evasive
and taking the position that the facts could be disclosed only by Sh.
Vikramaditya Singh (i.e., her son), the petitioner of the third case,
thereby giving rise to the need to issue summons to him in the
course of ongoing investigation into the same ECIR under Section
50(2) and (3) PMLA on 23.08.2016. The petitioner of the said case
claims to have sent certain replies to the said summons which, in
turn, were renewed on 05.09.2016 and 19.09.2016. By his petition,
he prays for the following reliefs:
"a) issue writ of certiorari or any other writ to quash the
summons 23.08.2016, 05.09.2016 and 19.09.2016 issued
under sub section (2) and (3) of Section 50 of the PML
Act, 2002 in ECIR case no. ECIR/HQ/02/HIU/2015
against the petitioner by the respondent; and
b) direct the respondent not to take any coercive action
against the petitioner;
c) declare that the officers of the Enforcement
Directorate are police officers; and
d) read down the provisions contained in section 50(2)
and (3) of PMLA to the effect that the statements
recorded therein may not be used as an evidence to
incriminate the person giving the statement; and
e) pass such other order or orders as this Hon‟ble Court
may deem fit and proper in the facts and circumstances of
the case."
8. The petitioner (Shri Picheswar Gadde) of the fourth above
captioned petition (the fourth petition or case) claims to be a
businessman of repute being also involved in the running of various
educational institutions. From the averments made by him, it
appears that he concededly was joint owner (with his wife) of the
parcel of land described as farm house No.3-E, Dera Mandi,
Mehrauli, New Delhi-110074 which was sold by him (and his wife)
in August, 2011 to M/s. Maple Destination & Dreambuild Pvt. Ltd.,
an entity of the petitioner of the third case (Vikramaditya Singh), he
being the son of the petitioners of the first above captioned case
(Virbhadra Singh and Smt. Pratibha Singh) for the declared sale
consideration of Rs.1.2 crores by Sale Deed registered in the office
of Sub-Registrar Mehrauli on 27.08.2011. The said acquisition
being part of the subject matter of investigation, inter alia, of the
ECIR, summons were issued under Section 50(2) and (3) PMLA
requiring his presence for purposes of investigation on 07.01.2016.
Alleging that he was illegally detained and tortured so as to be
coerced to write or sign certain false statements during interrogation
on 07.01.2016, when he had appeared in compliance, he filed the
said petition seeking the following reliefs:
"I. issue a writ of mandamus directing the respondent
no.1 to supply a copy of the statements of the petitioner
recorded on 07.01.2016 so as to enable the petitioner to
contest the proceedings effectively;
II. issue a writ of mandamus directing the respondents to
not investigate/interrogate the petitioner without
informing the reasons for such interrogation /
investigation;
III. issue a writ of mandamus directing the respondents to
permit the petitioner to be accompanied with his
advocate or to be represented through his
advocate/representative in case of any further
investigation and the said investigation be undertaken in
normal timings and video recording of the same be done;
IV. Award costs in favour of the petitioner; and
V. Any other relief deemed fit and proper in the
circumstances of the case may be granted in favour of the
petitioner.
9. The last above captioned petition was filed in January, 2016,
ahead of the others they having been instituted in March, July and
September, 2016 respectively. Since all the four petitions arise from
the same investigative process, they were brought together for
consideration of the contentions urged by both sides they
necessarily overlapping each other.
BACKGROUND FACTS
10. The factual matrix of the case statedly registered for
investigation in terms of PMLA, as culled out from the counter
affidavits referred to above, may be summarized hereinafter.
11. The Central Bureau of Investigation (CBI) on the basis of
some inputs earlier received, had registered on 17.06.2015 a
Preliminary Enquiry (PE) vide no. AC-1-2015-A0002, against Shri
Virbhadra Singh, members of his family and others to inquire into
certain unexplained income from assets suspected to be
disproportionate and allegedly acquired during his tenure as a
Union Minister in 2009 to 2012. Sh. Vikramaditya Singh, by his
pleadings, refers to a public Interest Litigation (PIL) initiated by a
Non-Governmental Organization (NGO) "Common Cause", it being
Writ Petition (Civil) No.7240/2013 as the background of such
action.
12. On the basis of facts and materials gathered during such
preliminary enquiry, First Information Report (FIR) No.RC-AC-1-
2015-A0004 was registered on 23.09.2015 by CBI, ACB, New
Delhi for investigation into offences punishable under Section 13(2)
read with Section 13(1)(e) of POC Act. Since the facts on the basis
of which CBI had taken up investigation from the perspective of
offences punishable under POC Act also appeared to be indicative
of commission of the offence of money laundering punishable
under PMLA, the matter was referred by the former agency to the
Headquarter Investigation Unit (HIU) of the Directorate of
Enforcement of the Department of Revenue in the Ministry of
Finance, Govt. of India, New Delhi where, pursuant to the said
communication, the ECIR in question was registered on 27.10.2015
for action under the provisions of PMLA.
13. The allegations forming the basis of the investigation through
the ECIR have been set out in the counter-affidavits by the
respondents referring, in brief, to the role of various individuals
including Anand Chauhan, Joginder Singh Ghalta, Prem Raj,
Lawan Kumar Roach, Vakamulla Chandrashekar and Ram Prakash
Bhatia and certain others, besides the petitioners before this court,
the narration statedly revealing that in order to project the
disproportionate assets as untainted they have knowingly indulged
in certain transactions of money laundering. The allegations are
summarized thus:
(a) Shri Virbhadra Singh was Minister of Steel from
28.05.2009 to 18.01.2011 and Minister of Micro Small and
Medium Enterprises (MSME) from 19.01.2011 to 26.06.2012
in Govt. of India. Huge cash deposits were made in Bank
Accounts of Shri Anand Chauhan, an LIC agent, maintained
with Punjab National Bank and HDFC Bank, both located at
Sanjauli, Shimla during the period 2009-12. The said cash
deposits were utilized for purchasing LIC policies in the name
of Shri Virbhadra Singh and members of his family for a sum
of Rs.5,14,87,200/-.
(b) In the wake of assessment proceedings intitiated by the
Income Tax authorities against Shri Anand Chauhan, allegedly
as a cover-up to justify the source of money utilized for
purchase of LIC policies, Shri Virbhadra Singh (HUF) filed,
on 02-03-2012, revised returns of income for three years they
being the Assessment Years (AY) 2009-10, 2010-11 and 2011-
12.
(c) The income tax returns (ITR) originally filed for the above-
mentioned Assessment Years (i.e. 2009-10, 2010-11 and 2011-
12) had declared income from agriculture to be tune of
Rs.7,35,000/- Rs.15,00,000/- and Rs.25,00,000/- respectively.
In the revised returns, the income from agriculture was
declared to be to the tune of Rs.2,21,35,000/-, Rs.2,80,92,500/-
and Rs.1,55,00,000/- respectively. Thus, by the revised returns
of the income for the said three Assessment Years, the total
income from agriculture initially declared to be Rs.47.35 lacs
stood increased to Rs.6.56 crores.
(d) During the course of investigation, reliance has been
placed by Shri Virbhadra Singh and others on a Memorandum
of Understanding (MOU) dated 15.06.2008 whereby he (Shri
Virbhadra Singh) is stated to have entrusted unto the said
Anand Chauhan, an LIC agent, the responsibility of
management of Shrikhand Orchard at Village Damrali,
Rampur Bushar and for proceeds from the sale of apples to be
invested in LIC policies. It is stated that the investigation
conducted thus far has revealed that the said MOU prepared on
four sheets of paper (stamp papers one non-judicial and the
other three judicial, all of 2008) was ante-dated. The entry at
serial no.1284 dated 11.06.2008 in the register of the stamp
vendor respecting one of the said four stamp papers in the
name of Anand Chauhan was forged. Similarly, the entry nos.
1283 and 1284 in the register of the stamp vendor would
reveal corresponding sale of original stamp papers to have
been made to one Laiq Ram, a resident of Kotkhai, Shimla
who utilized the same for obtaining agricultural loans.
(e) The petitioner Shri Chunni Lal Chauhan, has been
working for gain as a commission agent at Parwanoo Mandi,
Himachal Pradesh. The income from sale of apples of Shri
Virbhadra Singh's Shrikhand orchard, Damrali in the year
2013, as declared in the revised returns filed by him is sought
to be substantiated by sale invoices connected to this petitioner
(Chunni Lal Chauhan). The said invoices have been found to
be fake, Chuni Lal Chauhan having assisted in and been
instrumental for their preparation. It is stated that the vehicle
numbers mentioned in the said documents were either non-
existent or not suitable for transporting such cargo (apples),
they being oil tanker, two-wheeler, open tipper or car.
(f) According to the assessment of the Director of
Horticulture of the State of Himachal Pradesh, the yield of
apple crop from the orchard admeasuring 105 bighas of land
during the financial years corresponding to the AYs mentioned
above would be approximately 112.812 metric tonnes, 55.860
metric tonnes and 191.604 metric tonnes which would
translate to 5500, 2700 and 9300 number of boxes of the fruit.
The total assessed harvest of apples during the relevant period
was much lower than what was claimed by inflated figures
reflected in the revised ITRs, the claim being false based on
fake sale proceeds vouchers provided by the petitioner Chuni
Lal Chauhan.
(g) On the basis, inter alia, of the statements of Ram
Prakash Bhatia and Vineet Mishra former HDFC Manager,
recorded under Section 50 of PMLA, it is stated that huge cash
amounts belonging to Shri Virbhadra Singh were adjusted with
various unrelated entities (entry operators), transferred to the
personal accounts of one Vakamulla Chandrashekar, Promoter
Tarini Group of Companies and subsequently transferred to the
accounts of Shri Virbhadra Singh, his wife Smt. Pratibha
Singh and son Sh. Vikramaditya Singh. The amounts of Rs.2.4
crores and Rs.1.5 crores were shown as loans advanced by Shri
Vakamulla Chandrashekar to Sh. Virbahdra Singh and to his
wife Smt. Pratibha Singh respectively. Further, Rs.2 crore was
passed on to Shri Vikramaditya Singh and shown as remittance
towards business collaboration with him. The source of said
total Rs.5.9 crores deposited in bank account of Vakamulla
Chandrashekar was through various entry operators and even a
fake bank account. Major entries were given to Shri
Vakamulla Chandrashekar by companies of Sh. Ram Prakash
Bhatia. i.e. Jai Durga Impex, Prakash Foods, Punjab Foods &
Shiva Store. Shri Vakamulla obtained fake sale proceed
invoices of agricultural products sold to Sh. Ram Prakash
Bhatia.
(h) It is stated that the amounts invested in twelve LIC
policies were out of laundered money. Five of the LIC policies
were prematurely surrendered, and the proceeds deposited in
the account of Vikramaditya Singh. According to the
respondents, the evidence gathered shows that the unaccounted
money in the accounts of Vikramaditya Singh found its way
into an immovable property and various bank accounts.
(i) A Provisional Attachment order No.1/16 dated 23.03.2016
was issued under second proviso of Section 5(1) of PMLA
attaching movable and immovable assets valued at
Rs.7,93,21,984/- of Shri Virbhadra Singh and his family
members. This included a immovable property at Greater
Kailash in name of Smt. Pratibha Singh. The Adjudicating
Authority, PMLA has confirmed the said attachment.
(j) An amount of Rs.90 lakhs from out of Rs.2.4 crores
alleged loan given to Shri Virbhadra Singh was utilized by
Shri Vikramaditya Singh to purchase a farm house at Dera
Mandi, New Delhi in the name of his company M/s. Maple
Destinations & Dreambuild Pvt. Ltd. for the purchase of the
said farm house. Another Rs.30 lakhs was paid by two
Cheques of Rs.15 lakh each given by a firm M/s. Jai Durga
Impex which has statedly been found to be indulging in
providing accommodation entries.
14. It is the case of the petitioners that the investigation carried
out by CBI in the above mentioned case under POC Act, and the
present investigation under PMLA, are actuated by political
motives and founded on false allegations and averments. The
petitioners themselves referred to the previous proceedings in the
courts primarily commencing with Writ Petition (Civil) No.4063 of
2015, filed on 29.09.2015, before the High Court of Himachal
Pradesh in the wake of search and seizure operation conducted by
CBI on 26.09.2015 wherein "interim protection" was granted to
Shri Virbhadra Singh and Smt. Pratibha Singh (the petitioners in the
first case). The said writ petition was transferred from the High
Court of Himachal Pradesh to this court, in terms of order dated
05.11.2015, by the Supreme Court of India on Transfer Petition
(Crl.) No.425 of 2015 and appears to have been registered in this
court as Writ Petition (Civil) No.2757/2015. The said writ petition
came up before a learned Single Judge of this Court on 06.04.2016
when directions were given to the petitioners to join investigation,
though taking note of the assurance held out earlier that they would
not be arrested when they so appear before the investigating agency
at that stage.
15. It appears that in response to the summons under PMLA
issued to Shri Virbhadra Singh and Smt. Pratibha Singh on
16.11.2015, by a reply dated 30.11.2015, request was made to CBI
for copies of documents seized during the searches to be made
available so that the same could be provided to the respondent in
the context of investigation under PMLA. Correspondingly, on
02.12.2015, when the representative of Shri Virbhadra Singh and
Smt. Pratibha Singh appeared before the Enforcement Directorate,
extended time for providing the documents was granted. On the
other hand, the representative of the respondent, in the course of
proceedings before the Adjudicating Authority under Section 17(4),
had sought liberty of retention of the documents and properties
seized. Against this backdrop, the first petitioner filed W.P.(Crl.)
No.3107/2015 before this Court which was disposed of by order
dated 07.01.2016 with direction for copy of ECIR to be supplied.
16. On 23.03.2016, the Adjudicating Authority under PMLA
passed Provisional Attachment order No.01/2016 under Section 5
PMLA against the petitioners and certain others, on the reference
made for such action on the basis primarily of above-noted facts,
circumstances and materials. The said Provisional Attachment
Order was challenged by Shri Virbhadra Singh and Smt. Pratibha
Singh by Writ Petition (Civil) No.4228/2016. Similarly, Shri
Vikramaditya Singh and Ms. Aparajita Kumari have also assailed
the adjudication proceedings resulting in provisional attachment by
W.P.(Civil) No.3008/2016. Both the said writ petitions are pending
in this court and interim orders granting some protection have been
issued.
17. It may be added that, as per the submissions of the
respondents, another Provisional Attachment order No.1/2017 was
passed by the competent authority on 31.03.2017 under Section
5(1) PMLA in respect of the farm house at Dera Mandi at Mehrauli.
The legality and validity of the said provisional attachment order
has been challenged by another W.P.(Civil) No. 3909/2017 which is
also pending in this court.
18. When the petitions at hand came up for hearing, questions
were raised initially as to the overlap of the contentions urged and
the prayers made in the above-mentioed three other pending writ
petitions,they also having been filed by the petitioners, they being
Writ Petition (Civil) No.4228/2016, Writ Petition (Civil)
No.3008/2016 and Writ Petition (Civil) No.3909/2017. It was
however, fairly conceded by the learned senior counsel appearing
for the petitioners that the challenge in the said other writ petitions
is from the perspective of the application primarily of Section 5 of
PMLA which is distinct from the investigative process taken up
under the ECIR as is statedly intended by the respondents to lead to
criminal prosecution, possibly of the petitioners, for offence under
Section 4 of PMLA, the questions raised in the present proceedings
being entirely distinct.
19. Shri Picheswar Gadde, in his pleadings, refers to certain
assessment proceedings of 2014-2015 by the authorities under the
Income Tax Act and Wealth Tax Act, 1957 leading, inter alia, to
writ proceedings taken out in this court in such context, his
contention also being that the dragging of his name in the present
case under investigation into suspected offence under PMLA
allegedly committed by the other petitioners is motivated, the
design being to coerce him into making false statements.
THE CONTENTIONS
20. The document in the nature of Enforcement Case Information
Report (ECIR) is concededly not prescribed by law contained in
PMLA or rules framed there under. The respondents, however, seek
to refer to it as "an internal document of Directorate of Enforcement
for proper identification of a particular case" . It was submitted at
the hearing that this document is official report of the Enforcement
Directorate setting the process of investigation under the special law
into motion. From this perspective, it appears, though not so
described explicitly or required under the law, to be akin to a First
Information Report (FIR) that is ordinarily registered by the police
respecting a cognizable offence under Section 154 Cr.P.C. or a non-
cognizable offence under Section 155 Cr.P.C.
21. For the present, it only needs to be noted that PMLA deals, as
criminal law, with a new offence thereby provided, it being the
"offence of Money-Laundering", defined by Section 3 as under:-
"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 (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."
22. The offence of money-laundering, defined in Section 3
quoted above, if proved to have been committed leads to
punishment which is provided by Section 4, the trial for such
purposes to be held in the court of Sessions which is designated, in
terms of Section 43 PMLA, as a Special Court, the procedure
thereof being regulated generally by the Code of Criminal
Procedure, 1973 (Cr.P.C.), as per Section 46, with certain
improvements or modifications in terms of Sections 44 and 45
PMLA, the remedies in the nature of appeal and revision being
guided by Section 47. As would be discussed at length later, the
conjoint effect of Sections 44 and 45 PMLA is that the Special
Court is empowered to take cognizance of the offence under
Section 3 PMLA without the accused being committed to the said
court for trial but this is conditional upon a complaint in writing
being made for such action by the "Director" (of Enforcement) or
any other officer of the Central or State Government specially
authorized in this behalf, such authority, as would eventually have
the competence in law to institute a criminal complaint seeking
prosecution, also having been authorized and conferred with the
jurisdiction and requisite power to undertake the investigation into
the offence of money laundering, the police officers having been
specially excluded from such role unless there is a specific
authorization by general or special order to that effect. It also needs
to be flagged here that the law confers, by Section 19 PMLA, on
the Director (or some other functionaries specified in the provision)
the power to arrest any person if on the basis of material in his
possession there is reason to believe that such person is guilty of the
offence of money-laundering.
23. These petitions were filed raising a number of contentions
but have been pressed primarily on the submission that the offence
of money-laundering, defined in Section 3 and made punishable
under Section 4 PMLA, is a "non-cognizable offence" and,
therefore, there cannot be an investigation undertaken without there
being an order of a court competent to try such case authorizing
such investigation. It is the contention of the petitioners that since
the Special Court under PMLA cannot take cognizance, except
upon a complaint in writing by the authority specified in the law,
there being no complaint submitted till date, adoption of "coercive
measures" under PMLA, merely on the basis of ECIR, was not
permissible in law, it being designed to circumvent the complaint
procedure mandatorily required to be followed for Section 45. It
has been argued that the general law contained in the Code of
Criminal Procedure, 1973 would not apply for purposes of
proceedings in the Special Court under PMLA, or investigative
process anterior thereto, and in absence of formal authorization by
the Special Court vis-a-vis a particular person, the authorities under
PMLA cannot proceed to cause arrest without warrant. The
submission, in nutshell, essentially is that the respondents under the
purported exercise of carrying out investigation of the offence under
PMLA have no power to issue summons, or to compel appearance
so as to record statement or the petitioners, as has been insisted
upon by the impugned processes, the obligation of the petitioners
thereunder being contingent only upon cognizance being taken by
the Special Court.
24. The submissions of the petitioners to above effect primarily
arise from amendment of the Prevention of Money-Laundering Act,
2002 by the Prevention of Money-Laundering (Amendment) Act,
2005 (Act 20 of 2005), particularly of the provision contained in
Section 45. Prior to the said amendment Section 45 (1)(a) declared
that every offence punishable under the law (PMLA) "shall be
cognizable". The amendment of 2005 brought in force w.e.f.
01.07.2005 deleted the siad clause of Section 45(1) declaring the
offence, inter alia, of money laundering, to be cognizable. The
prime submission of the petitioners is that this amendment was
clearly indicative of the intention of the legislature to take away the
power of arrest and consequently to make the offence of money-
laundering "non-cognizable".
25. Arguing that the intention of the proceedings taken out by the
respondents is void-ab-initio, it having been done without following
the due procedure of law founded, as it were, on a document
(ECIR) not contemplated by the statute, the curtailment of the rights
and liberty of the petitioners being impermissible except through
due process established by law and in line with the spirit of Article
21 of the Constitution of India, the reliefs as noted earlier are
pressed for.
26. Per contra, it is the submission of the respondents that these
petitions, brought at early stages of the investigation by the
authorities under PMLA, are abuse of the judicial process, designed
to stall the probe and to defeat the objectives of the special law and,
therefore, deserve outright rejection. It has been submitted that the
authorities under the PMLA, represented by the respondents, have
embarked upon the investigation bearing in mind the
circumspection within which they are expected under the law to
conduct themselves and that the arguments questioning the
investigative process are misconceived, there being no legal
requirement of authorization from the Special Court to be taken as a
condition precedent, the questioning of the validity of ECIR being
premature, the role of the Special Court to take over the criminal
action upon cognizance being taken in the event of complaint being
filed. It is the submission of the respondents that the offence of
money laundering continues to be a cognizable offence, even after
amendment of 2005, the only change thereby brought about being
the clarity that police officers cannot, unless specially authorized
for such purposes, cause an investigation into the offences under
PMLA nor have the power to arrest any person for such offence,
such power of arrest being restricted to the authorities specified by
the statute under Section 19. Taking this submission further, it was
argued that there is no requirement for the statutory authorities
under PMLA to take prior permission from the Special Court for
taking up an investigation. It was submitted that the intention of the
petitioners by raising these contentions is primarily to evade the
legal action envisaged under PMLA.
CRIMINAL LAW
27. The general criminal law in our country is codified, the
Indian Penal Code, 1860 (IPC) providing primarily the offences,
commission of which is proscribed and, if committed, attracts the
punishments thereby provided, the procedure for bringing to book
the offenders being laid down elaborately in the Code of Criminal
Procedure, 1973 (Cr.P.C.). The substantive law (IPC) deals with
major crimes including offence against human body, offences
against the property, offences against the State, offences against
public peace and tranquility, offences related to marriage, etc. The
procedural law (Cr.P.C.) lays down extensive and elaborate
provisions covering almost the entire spectrum of the action
required to be taken right from the stage of reporting of a crime
through the process of investigation leading to trial, if the offender
and the evidence supporting the accusations against him have been
found, till the stage of his guilt (or innocence) being determined
with consequences, inter alia, in the form of punishment, flowing
therefrom besides, of course, the remedies in the nature of revision
or appeal and post-conviction processes. Having regard to the
nature of offences specified in the general law (IPC), the procedural
law (Cr.P.C.) is designed generally with the thought that the crime
would ordinarily be reported to, and taken note of by, the police
which, given the nature of offence would embark upon
investigation - either within its own jurisdiction under the law or
with appropriate authorization by the competent criminal court.
Further, keeping in view their nature and effect on the individual
victim or the society at large or, to put it simply, bearing in mind
the gravity, the offences are also categorized so as to regulate the
power of (or amenability to) arrest, as indeed the right (if any) to be
released on bail, with or without conditions, and the circumspection
within which the investigating police officer would be obliged to
conduct, or continue, with the investigation (particularly, post-
arrest). Some offences, having regard to the gravity (e.g., culpable
homicide), when committed, have a deep impact on the general
feeling of well-being in the society at large, in addition to the
serious repercussions they have on the victim and his kin. In
contrast, some offences affect primarily the individual victim (e.g.
in the offence of cheating), he being, at times, open to forgive and
forget, inclined to bury the hatchet if suitable amends were to be
made. From these perspectives, the offences under IPC are
classified variously: cognizance or non-cognizable; bailable or non-
bailable; compoundable or non-compoundable, etc.
28. Under the general procedural law (Cr.P.C.), the police is duty
bound to initiate action, in the event of information related to
commission of a cognizable offence being made to it in terms of
Section 154 Cr.P.C. The police registers the First Information
Report (FIR) and is, thereafter, obliged in law to take up
investigation which must eventually culminate in report under
Section 173 Cr.P.C. being submitted. If the information about the
cognizable offence is substantiated by the evidence gathered during
investigation, such report under Section 173 Cr.P.C. may possibly
take the shape of a charge sheet wherein the persons who are found
to have committed the offence are properly identified and brought
before the court with the request for they to be tried. Conversely, if
the information reported under Section 154 Cr.P.C. is found to be
false, or if evidence were not to be forthcoming, or if the offenders
cannot possibly be identified or traced, such report under Section
173 Cr.P.C. may take the shape of a cancellation report or a closure
report, as the case may be. Need it be added that, the Magistrate,
before whom such report under Section 173 Cr.P.C. is to be
submitted (it being the court of cognizance under the general law),
is not bound by the conclusions reached by the police in its report
under Section 173 Cr.P.C. All course are open to the Magistrate
(the court of cognizance). He may take cognizance in exercise of
his power under Section 190 (1) (b) Cr.P.C. and issue process under
Section 204 Cr.P.C. against the persons mentioned in the police
report, or against others, if the evidence submitted by the police
justifies such action to be taken. The Magistrate may approve the
report and cancel or close the case. Or, the magistrate may record
reasons for not being satisfied with the investigation carried out and
issue necessary directions including for further investigation. [see
Chandra Babu v. State (2015) 8 SCC 774; Moti Lal Songara v.
Prem Prakash (2013) 9 SCC 199; Dharmatma Singh v. Harminder
Singh (2011) 6 SCC 102; Uma Shankar Singh v. State of
Bihar(2010) 9 SCC 479; Minu Kumari v. State of Bihar (2006) 4
SCC 359; Gangadhar Janardan Mhatre v. State of Maharashtra
(2004) 7 SCC 768; Jagdish Ram v. State of Rajasthan (2004) 4
SCC 432; State of Orissa v. Habibullah Khan (2003) 12 SCC 129;
State of Maharashtra v. Sharadchandra Vinayak Dongre (1995) 1
SCC 42; H.S. Bains v State (1980) 4 SCC 631; Abhinandan
Jha v. Dinesh Mishra (1967) 3 SCR 668 : AIR 1968 SC 117]
29. But, the above is the procedure, generally speaking, in
relation to the cognizable offences (say, those provided in IPC)
where there are no restrictions to taking of cognizance, including
such as those provided in the provisions contained in Section 195
(Prosecution for contempt of lawful authority of public servants for
offences against public justice and for offences relating to
documents given in evidence) Cr.P.C., Section 196 (Prosecution for
offences against the State and for criminal conspiracy to commit
such offence) Cr.P.C., Section 197 (Prosecution of Judges and
Public Servants) Cr.P.C, etc.
30. The procedure for dealing with non-cognizable offences
under the general criminal law is distinct from that of cognizable
offences. Such offences (non-cognizable) may or may not be
reported to the police. If information of a non-cognizable offence is
given to the police it is required by Section 155 Cr.P.C. to register
the same in the manner prescribed, the informant (who may or may
not be the victims) being referred to the Magistrate. Section 155 (2)
Cr.P.C., in clear terms, prohibits investigation into non-cognizable
offence by a police officer unless there is an order of a magistrate
having the power to try or commit such case for trial. Section 155
(3) Cr.P.C. , however, makes it clear that if such direction were to
be given to a police officer (by a magistrate) for investigation into a
non-cognizable offence, he would exercise all such power and
jurisdiction as would vest in him in law while causing investigation
into a cognizable offence, except, and this is to be marked, the
power to arrest without warrant.
31. The occasion for a magistrate to issue directions for
investigation into a non-cognizable offence would generally not
arise unless a complaint alleging such offence were to be laid before
him. The expression "complaint" is defined by Section 2(d) Cr.P.C.
thus:
"complaint" means any allegation made orally or in
writing to a Magistrate, with a view to his taking action
under this Code, that some person, whether known or
unknown, has committed an offence, but does not
include a police report.
32. It is clear from the above-said definition that a complaint
need not be in writing. It may be oral but, as the procedure
discussed hereinafter would show, it must eventually be formally
recorded in writing by the Magistrate. The action on a criminal
complaint is taken by the magistrate (as specified in law) by first
taking cognizance under Section 190(1)(a) Cr.P.C., provided the
conditions requisite for initiation of such proceedings (as envisaged,
generally speaking, in the provisions contained in Sections 195 to
Section 199 Cr.P.C.) are in position, by examining the complainant
and his witnesses, if any, in terms of Section 200 Cr.P.C. - except in
certain specified category of cases, illustratively complaint lodged
by a public servant acting or purporting to act in discharge of his
official duty. The Magistrate, having taken cognizance on a
complaint, and having proceeded to examine the complainant and
such of his witnesses as are immediately present under Section 200
Cr.P.C., is generally deemed to have embarked upon a pre-
summoning enquiry which is similar to the investigative process by
the police post-registration of FIR in cognizance offences. The
Magistrate, if he finds sufficient evidence to have come on record
during pre-summoning inquiry, may proceed to issue process under
Section 204 Cr.P.C. to call upon the accused to face the trial. In
contrast, if the facts and circumstances or nature of the case so
requires, he may postpone the issue of process and carry out further
inquiry (pre-summoning) which would be under Section 202
Cr.P.C. In certain fact-situations, such further inquiry under Section
202 Cr.P.C. is mandatory. Be that as it may, it is at the stage of
such further inquiry under Section 202 Cr.P.C. that the Magistrate
would have the possible occasion to issue a direction to the police
for carrying out an investigation into a non-cognizable offence
under Section 155 (2) Cr.P.C.
33. Even the general criminal law (substantive or procedural)
envisages criminal action being initiated not only by the police but
also by a complaint, as indeed by a complaint or information lodged
by a person other than a police officer. The simple illustration of
the last mentioned category would be a complaint by a public
servant respecting offence relating to contempt of lawful authority
or by a court for offences relating to evidence or documents given
in evidence (Section 195 Cr.P.C.) This last category is covered by
the provision contained in Section 190 (1) (c) Cr.P.C. - "own
knowledge" of the Magistrate being an additional facet of the said
provision - upon which a competent Magistrate "may take
cognizance of any offence".
MEANING OF "COGNIZABLE OFFENCE" - GENERAL LAW
34. The expressions "cognizance" and "cognizable offence" are
distinct from each other. While the word "cognizable", qualifying
the word "offence", relates to the classification in which the latter
would fall, the expression "cognizance" is defined to mean
"jurisdiction" or "the exercise of jurisdiction" or "power to try and
determine causes". [see Black's Law Dictionary]. In common
parlance, it simply means "taking notice of". The word
"cognizance" is generally applied with reference to the act of a
court taking judicial notice of a fact or cause and, therefore, is
expressed in the terms "taking cognizance". The judicial act of
"taking cognizance" denotes "judicial application of mind" and, in
the context of criminal law, this expression has come to be used or
applied at the stage when the investigative (or inquiry) process is
complete and the matter is brought before a Magistrate for initiation
of judicial proceedings against the person respecting whose
complicity in the alleged crime prima facie case is made out on the
basis of evidence gathered. The expression, noticeably, occurs
prominently in Section 204 Cr.P.C. leading to an opinion being
formed as to whether "there is sufficient ground for proceeding"
against an individual necessitating issue of process. As explained in
CREF Finance Ltd. Vs. Shree Shanthi Homes (P) Ltd., (2005) 7
SCC 467, the "taking of cognizance" is not to be confused with
"issuance of process". The cognizance is taken of the offence and
not of the offender.
35. The focus of discussion here is not on "taking cognizance"
but on "cognizable" character of an offence.
36. It is commonly understood that if an offence is classified in
law as "cognizable", it means a police officer has a right to arrest
the person responsible for such offence without the need of
obtaining a warrant. As the following discussion would demonstrate
this common understanding or, shall we say, assumption is based on
the conjoint reading of the definition of the expression "cognizable
offence" and the provision in the Code of Criminal Procedure, 1973
relating to powers of police to make arrest, as they stood till a few
years ago.
37. The general procedural law (Cr.P.C.) defines the expressions
"cognizable offence", and "non-cognizable offence", as indeed the
cases involving such offences, by Section 2(c) and Section 2(l) as
under:
"(c) "cognizable offence" means an offence for which,
and "cognizable case" means a case in which, a police
officer may, in accordance with the First Schedule or
under any other law for the time being in force, arrest
without warrant;
(l) "non-cognizable offence" means an offence for
which, and "non-cognizable case" means a case in
which, a police officer has no authority to arrest without
warrant;"
38. The definition of the expression "cognizable offence" refers
one to the First Schedule appended to the Code of Criminal
Procedure, 1973 (Cr.P.C.), its caption "Classification of Offences"
being indicative of its purpose. The First Schedule, it is of import
here, is in two parts, the first relating to offences under the Indian
Penal Code (for short, "the IPC offences") and the second relating
to offences against other laws (say, "special law offences"). The
fourth column of the tabulation indicates in the first part (IPC
offences) as to which offences are cognizable or non cognizable, the
fifth and sixth column indicating its nature (bailable or non-
bailable) and the court by which a particular offence is to be tried
respectively. The second part (Special Law Offences) of the first
schedule to Cr.P.C. is general in nature. It could not conceivably
refer to the offences by the name or label given to each of them by
the law. Therefore, it refers to them by the gravity seen from the
perspective of the punishment prescribed under the applicable law.
Such special law offences are put in three categories, the one of
least gravity being those punishable with imprisonment for less than
three years or with fine, all such least grave special law offences
having been classified as "non-cognizable", "bailable", and triable
by "any Magistrate". Noticeably, all special law offences which
attract imprisonment more than three years, divided further into two
categories, are classified as "cognizable" and "non-bailable". To
complete the narration, it may be added that such special law
offences as attract punishment of death, imprisonment for life or
imprisonment for more than seven years are specified to be tried by
a court of sessions, the remaining being triable by a Magistrate of
the First Class.
39. Though the Code of Criminal Procedure, 1973 was conceived
as the general procedural law for dealing with general penal
offences, it is intended to regulate the action under the criminal law
not merely for purpose of IPC offences but also vis-a-vis other laws
(Special Laws). This is declared, in no uncertain terms, not only by
such references in various provisions of Cr.P.C., including under
Section 2 (c) quoted above, but primarily by Section 4 which reads
thus:
"4. Trial of offences under the Indian Penal Code and
other laws. - (1) All offences under the Indian Penal
Code (45 of 1860) shall be investigated, inquired into,
tried, and otherwise dealt with according to the
provisions hereinafter contained.
(2) All offences under any other law shall be investigated,
inquired into, tried, and otherwise dealt with according
to the same provision, but subject to any enactment for
the time being in force regulating the manner or place of
investigating, inquiring into, trying or otherwise dealing
with such offences."
40. It is trite that the Code of Criminal Procedure, 1973 regulates
the procedure for the investigation, inquiry or trial not only of the
IPC offences but also of special law offences but, in the case of
latter (the Special Law Offences) application of Cr.P.C. provisions
is subject to specific provisions, (if any), of such special law
relating to, inter alia, the procedure for investigation, inquiry, trial
or otherwise dealing with offence thereby created. To put it simply,
if a special law creates any offence, it may create not only a special
forum for purposes of its trial but also a special procedure for
investigation thereinto, or the authorities vested with the power or
jurisdiction to deal with such processes and, further, the nature of
such special law offences (cognizable or non-cognizable, bailable or
non-bailable, etc.). Illustrations on the subject are far too many to
be of any doubt on this score; Official Secrets Act, 1923;
Prevention of Food Adulteration Act, 1954 (since replaced by Food
Safety and Standards Act, 2006); the Customs Act, 1962; Narcotics
Drugs and Psychotropic Substances Act, 1985; Prevention of
Corruption Act, 1988; Maharashtra Control of Organized Crime
Act, 1999; Prevention of Terrorism Act, 2002 and Protection of
Children from Sexual Offences Act, 2012, etc. Section 2(c) Cr.P.C.,
as extracted above, it is pertinent to highlight, therefore, refers not
merely to the First Schedule of Cr.P.C. but also, if need be, to the
provisions of "other law" for determining if the offence is to be
construed as "cognizable" or otherwise.
41. What, however, needs to marked for further discussion is the
fact the definitions of both cognizable offence or non-cognizable
offence, refer to the power or jurisdiction of a police officer "to
arrest without warrant" to be the crucial test. The provisions relating
to the action expected to be undertaken by the police, upon
information relating to a crime reaching its notice (the starting point
being the lodging of the FIR whether under Section 154 or under
Section 155 Cr.P.C.) do not control the meaning or import of the
expressions "cognizable" or "non-cognizable". They only guide
further action in law. From the general perspective of Cr.P.C., thus,
if the law confers on a police officer the power to arrest without
warrant, the offence would be treated as "cognizable" and, if not,
the offence would be a "non-cognizable" one, the procedure being
regulated accordingly.
42. The general procedural law (Cr.P.C.) makes detailed
provisions in Chapter V, relating to "arrest of persons" , and aside
from certain specific (or special) fact-situations leading to the arrest
(e.g. on account of refusal to give name or residence under Section
42), the very first provision in that Chapter, Section 41, being of
import, it indicating the cases or fact-situation(s) wherein a police
officer "may arrest without warrant". The provision needs to be
quoted in extenso (as it presently stands post-amendment brought
into effect from 01.11.2010) as under:
"41. When police may arrest without warrant.--(1) Any
police officer may without an order from a Magistrate
and without a warrant, arrest any person--
(a) who commits, in the presence of a police officer, a
cognizable offence;
(b) against whom a reasonable complaint has been
made, or credible information has been received, or a
reasonable suspicion exists that he has committed a
cognizable offence punishable with imprisonment for a
term which may be less than seven years or which may
extend to seven years whether with or without fine, if the
following conditions are satisfied, namely:--
(i) the police officer has reason to believe on the
basis of such complaint, information, or suspicion
that such person has committed the said offence;
(ii) the police office is satisfied that such arrest is
necessary--
(a) to prevent such person from committing any
further offence; or
(b) for proper investigation of the offence; or
(c) to prevent such person from causing the
evidence of the offence to disappear or
tampering with such evidence in any manner;
or
(d) to prevent such person from making any
inducement, threat or promise to any person
acquainted with the facts of the case so as to
dissuade him from disclosing such facts to the
Court or to the police officer; or
(e) as unless such person is arrested, his presence
in the Court whenever required cannot be
ensured,
and the police officer shall record while making such
arrest, his reasons in writing:
Provided that a police officer shall, in all cases
where the arrest of a person is not required
under the provisions of this sub-section,
record the reasons in writing for not making
the arrest.
(ba) against whom credible information has been
received that he has committed a cognizable offence
punishable with imprisonment for a term which may
extend to more than seven years whether with or
without fine or with death sentence and the police
officer has reason to believe on the basis of that
information that such person has committed the said
offence;
(c) who has been proclaimed as an offender either
under this Code or by order of the State
Government; or
(d) in whose possession anything is found which may
reasonably be suspected to be stolen property and
who may reasonably be suspected of having
committed an offence with reference to such thing; or
(e) who obstructs a police officer while in the execution
of his duty, or who has escaped, or attempts to
escape, from lawful custody; or
(f) who is reasonably suspected of being a deserter from
any of the Armed Forces of the Union; or
(g) who has been concerned in, or against whom a
reasonable complaint has been made, or credible
information has been received, or a reasonable
suspicion exists, of his having been concerned in, any
act committed at any place out of India which, if
committed in India, would have been punishable as
an offence, and for which he is, under any law
relating to extradition, or otherwise, liable to be
apprehended or detained in custody in India; or
(h) who, being a released convict, commits a breach of
any rule made under sub-section (5) of Section 356;
or
(i) for whose arrest any requisition, whether written or
oral, has been received from another police officer,
provided that the requisition specifies the person to
be arrested and the offence or other cause for which
the arrest is to be made and it appears therefrom that
the person might lawfully be arrested without a
warrant by the officer who issued the requisition.
(2) Subject to the provisions of Section 42, no person
concerned in a non-cognizable offence or against whom
a complaint has been made or credible information has
been received or reasonable suspicion exists of his
having so concerned, shall be arrested except under a
warrant or order of a Magistrate."
43. It is clear from bare reading of the various clauses of Section
41 quoted above that, even under the general law, a police officer
has no blanket power or jurisdiction to arrest a person only because
such offence (here, the IPC offence) is classified by the First
Schedule to Cr.P.C. as a cognizable offence. The situations covered
by clauses (c) to (i) of Section 41(1) are not of routine nature and,
therefore, would not assist in the present discussion. The first clause
(a) of Section 41(1) also deals with a special circumstance where
cognizable offence is committed "in the presence of a police
officer". Thus, the remaining two clauses of Section 41(1) provide
better guidance in comprehending the intention of the legislature.
Broadly put, the offences have been placed in two categories, one
those attracting punishment with imprisonment which may be less
than seven years and the other which may attract sentence more
severe than that (extending upto the sentence of death). It is in the
latter category alone, covered by Section 41 (1)(ba), that the police
officer has virtually a clear (unrestricted) power to arrest provided,
of course, he has "reason to believe" on the basis of "credible
information" about the complicity. In the crimes of lesser gravity,
those covered by Section 41(1)(b), in contrast, the police officer
does not have a blanket power of arrest. In order to cause arrest
without warrant in such cases, he must put on record the satisfaction
about the necessary criteria having been met which includes not
only credible information about complicity but also the need to do
so for preventing commission of further offences or for proper
investigation or for preventing tampering with or destruction of
evidence or influencing of witnesses or to ensure that the person in
question is brought to justice.
44. It needs to be remembered that the provision contained in
Section 41(1)(a) Cr.P.C. originally conferred a very wide power on
the police officer giving him authority in law to arrest a person
without warrant even on "reasonable suspicion" of his complicity in
the commission of a cognizable offence. The law was amended by
the Code of Criminal Procedure (Amendment) Act 2008 (Act 5 of
2009), coming into effect from 1.11.2000, it having taken the shape
quoted above. The broad meaning of the expression "cognizable
offence", as all along understood in relation to the power or
jurisdiction of a police officer to arrest "without warrant", guided
further by the definitions in clauses (c) and (l) of Section 2 Cr.P.C.
noted earlier can, thus, no longer hold good after the amendment of
Section 41 Cr.P.C. This thought needs some elaboration.
45. An offence may attract punishment with imprisonment for
term less than seven years and the pre-requisite spelt out in Section
41(1)(b)(ii) may not be available and, therefore, the police officer
may not have a power to arrest without warrant and, yet, the offence
involved may be "cognizable" (since so specified by the law),
respecting which the police may be duty bound to register an FIR
under Section 154 Cr.P.C. and embark upon investigation. This may
be illustrated by reference to all such IPC offences included in the
first part of the First Schedule to Cr.P.C. as attract punishment
which may be imprisonment for a term less than seven years but
may have been specified by the fourth column as cognizable, they
including, for example, the offences punishable under Sections 129
IPC (Public Servant negligently suffering prisoner to escape);
Section 133 IPC (Abetment of assault by soldier, sailor or airman
on his superior officer when in execution of his office); Section 148
IPC (Rioting, armed with deadly weapon); Section 160 IPC
(Punishment for committing affray); Section 212 IPC (Harbouring
an offender); Section 279 IPC (Rash driving or riding on a public
way); Section 304-A IPC (causing death by rash or negligent act);
Section 324 IPC (voluntarily causing hurt by dangerous weapons or
means). The list can be endless.
46. In view of the above, it would be wrong, if not naive, to
construe the expression "cognizable offence" so simplistically as to
connote an offence where the police officer has a power to arrest
without warrant. Whether or not the power vests in a police officer
to arrest a person without warrant in a particular case is to be seen
by the provisions of the law which regulates the investigation,
inquiry or trial for the offence involved in it. Mere classification of
an offence as cognizable or non-cognizable, would ipso facto, not
confer a general or unrestricted power to arrest, particularly on a
police officer.
47. It is one thing to say that a police officer has the power of
arrest and quite another to say that the power was properly or
justifiably exercised. It has been the consistent view of the courts in
India that power is not to be exercised merely because it exists. [see
Arnesh Kumar Vs. State of Bihar, (2014) 8 SCC 273 and Court on
its own motion Vs. Central Bureau of Investigation, ILR (2004) 1
Delhi 47]. By various pronouncements, guidelines have been given
by the courts to the law enforcement agencies as to the manner in,
or circumspection with, which a power of such import as of arrest
is to be exercised. The amended provision of Section 41 Cr.P.C.
incorporates some of such guidelines putting certain restrictions on
the general power of police officer to arrest in the case of a
cognizable offence, thereby seeking to regulate (if not minimize) its
use. The objective of the amendment brought into force by Act
no.5 of 2009 referred to above was primarily to check abuse of the
power of arrest vested in a police officer.
48. Thus, the power to arrest a person involved in a cognizable
offence still vests in a police officer but he is inhibited by law from
exercising it except in cases or situations, where he is permitted to
do so by the amended provision of Section 41 Cr.P.C., though only
by scrupulously following its requirements. This, however, does not
mean that such offences as have been specified to be "cognizable"
cease to be in that category because the police officer cannot arrest
without warrant (for want of specified conditions). The
classifications of each offence in terms of the general law, as
reflected by the First Schedule appended to Cr.P.C., or as specified
by the special law creating the offence, would continue to hold
good - notwithstanding the restrictions on the power of the police
officer to cause arrest.
49. In view of the above, the general meaning and import of the
expression "cognizable offence" must now be re-understood in light
of conjoint effect of Section 2 (c) read with amended provision of
Section 41 Cr.P.C., so as to denote an offence in connection with
which a police officer may arrest a person (respecting whose
complicity there is credible information or reasonable suspicion)
without warrant, such authority being subject to restrictions in law.
50. Since classification of the offence - cognizable or non-
cognizable - has also some connection with the investigative
process, it is necessary to mention here another argument of the
petitioners based on the ruling in State of Haryana and Ors. Vs.
Bhajan Lal and Ors., 1992 Suppl. (1) SCC 335 wherein the court
had observed that "(w)here 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
order of a Magistrate as contemplated under Section 55 (2) of the
Code." Similar view was taken in Om Prakash and Anr. Vs. Union
of India and Anr., (2011) 14 SCC 1. The submission of the
petitioners is that if the contention that the offence is non-
cognizable were to be upheld, any investigation without
authorization from the court of Magistrate (or Special Court) would
be impermissible.
51. But the fundamental error in this line of argument is that the
observations in Bhajan Lal (supra) and other similar line of
precedents are in the context of general criminal law where the
investigation is in the hands of the police controlled by the Code of
Criminal Procedure. These submissions may not hold good if the
special law has its own dispensation vis-a-vis the investigation and
cognizance by the court. As held in Board of Muslim Wakfs,
Rajasthan Vs. Radha Kishan and Ors., (1979) 2 SCC 468, "it is not
a sound principle of construction to interpret expressions used in
one Act with reference to their use in another Act, and decisions
rendered with reference to construction of one Act cannot apply
with reference to the provisions of another Act unless the two Acts
are in pari materia".
52. For the foregoing reasons, comment on the issue as to
whether the offence of money-laundering is cognizable or as to
whether authorization from the court is a pre-requisite to
investigation or arrest in its relation is presently reserved till the
scheme and the provisions of the law have been properly
understood. Before one proceeds in that direction, however, the
meaning of "cognizable offence" in the context of some other
criminal statutes may also be noted.
MEANING OF "COGNIZABLE OFFENCE" - SPECIAL LAW(S)
53. The general substantive law providing for offences
punishable in India is supplemented by numerous enactments which
create subject-specific offences, they including, as mentioned
earlier, Official Secrets Act, 1923; Prevention of Food Adulteration
Act, 1954 (since replaced by Food Safety and Standards Act, 2006);
the Customs Act, 1962; Narcotics Drugs and Psychotropic
Substances Act, 1985; Prevention of Corruption Act, 1988;
Maharashtra Control of Organized Crime Act, 1999; Prevention of
Terrorism Act, 2002 and Protection of Children from Sexual
Offences Act, 2012; et al. This list of special laws, of course, is not
exhaustive. These enactments are being referred here by way of
illustration to bring out the fact that the legislature, at times, refers
one to the general prescription in the First Schedule appended to
Cr.P.C. to ascertain if the special law offence is cognizable or non-
cognizable as also for purposes of regulating the process of inquiry
or investigation and the procedure for taking of cognizance, etc.
54. To quickly expound on the above, it may be mentioned that
the provisions of Prevention of Terrorism Act, 2002 (since
repealed) created new offences (Sections 3, 4 and 6) which were
classified by Section 49 to be cognizable and non-bailable, the
forum for trial being Special Court established in terms of Section
23. Similar is the dispensation under Narcotics Drugs and
Psychotropic Substances Act, 1985, Prevention of Corruption Act,
1988, Maharashtra Control of Organized Crime Act, 1999 and
Protection of Children from Sexual Offences Act, 2012. Noticeably,
however, the authorities vested with the power to investigate and
bring the offenders to justice in all these special laws continues (or
continued) to be police, the agency generally entrusted with the
responsibility of investigation of crimes. By and large, the offences
under these enactments have been "cognizable" and the cognizance
by the specified court is upon report (under Section 173 Cr.P.C.) of
the police officer on completion of investigation, as envisaged in
Section 190(1)(b) Cr.P.C.
55. To the above list, one may add the special law known as
Official Secrets Act, 1923. Though the offences created by this
legislation (Sections 3, 5, 6) are also deemed, by virtue of the
Second Part of the First Schedule appended to Cr. P.C., to be
"cognizable", and consequently the police is obliged by law not
only to register the crime (under Section 154 Cr.P.C.) but also to
investigate - and this would eventually lead to a report (under
Section 173 Cr.P.C.) being submitted - the cognizance of the
offences under this law is not on police report under Section
190(1)(b) but upon a complaint of the authorized officer in terms of
Section 13(3), the cognizance in such case thus being under Section
190(1)(c) Cr.P.C. Because the offences under this special law are
cognizable and since the police is empowered to investigate, there
being no provision to such effect, only because the cognizance by
the court would eventually be on a complaint rather than a police
report it cannot be said that arrest cannot be effected without proper
authorization from the court.
56. The special law on food adulteration provides a slightly
different dispensation. The erstwhile enactment, the Prevention of
Food Adulteration Act, 1954, was primarily a criminal law which
created offences defined and provided for by various clauses of
Section 16. Section 20(3) classified one of them, the one specified
in Section 16(1AA), to be "cognizable" and "non-bailable", making
it clear that such special stipulation was necessary because under
the ordinary law governed by the Section Part of First Schedule of
Cr.P.C. it would be otherwise have been a non-cognizable and
bailable offence, in as much as the maximum punishment would be
imprisonment for a term upto two years with fine. The rest of the
offences under the old law on food adulteration were clearly non-
cognizable and bailable. The law conferred the power for
investigation and launching of prosecution for such offences
generally on the local health authorities, the cognizance by the court
of Magistrate empowered to deal with such offences summarily
being upon a complaint by such empowered functionaries.
57. The Prevention of Food Adulteration Act, 1954 was repealed
by the Food Safety and Standards Act, 2006, some of the provisions
of which came into effect from 2007 onwards. The new law is a
mixed dispensation. It seeks to meet the challenge of food
adulteration by imposition of penalties (civil action) or by making
certain acts penal offences (criminal action). There are authorities
established for dealing with the civil action. For trial of the
offenders for the penal offences (Sections 59 to 64), the court of
Magistrate of the First Class is generally the forum specified
(Section 73), save for graver offences punishable under Section 59
(iii) and (iv), which are to be tried by the special courts established
under Section 74. The law establishes authorities responsible for
enforcement of its various provisions, they including the Food
Authority, at the apex, and other functionaries like Food Safety
Officer, Designated Officer, Food Analyst etc. A conjoint reading
of Sections 41, 42 and 47, besides others, would show that the
Food Safety Officer and the Designated Officer are generally
responsible for detection of crimes under this law, the investigation
required in such wake and for bringing the offenders to justice and,
for such purposes, they have been vested with the requisite powers
of search, seizure, summoning, investigation and prosecution. The
Commissioner of Food Safety is vested with the discretion, by
Section 69, to supervise and control the compounding of such
offences as are not punishable with imprisonment, subject to
certain restrictions. Pertinent to mention here that though the Food
Safety and Standards Act, 2006 does refer by its various provisions
to the Code of Criminal Procedure, 1973, modifying some in its
relation, it scrupulously avoids classifying any of the offences as
cognizable, bailable or otherwise.
58. In above view, the question as to whether an offence under
Food Safety and Standards Act, 2006 is cognizable (or bailable) or
not would have to be regulated by the Second Part of the First
Schedule appended to the Code of Criminal Procedure, 1973, thus
guided by the maximum punishment prescribed. Generally
speaking, all offences other than those prescribed in Section 59(iii)
and (iv) attract punishment which falls in the least grave category of
the Second Part of the First Schedule to Cr.P.C., and consequently
they would have to be treated as non-cognizable and bailable. But,
keeping in view the punishment prescribed (imprisonment for term
which may extend to six years) therefor, the offence (manufacture,
sale, distribution etc. of food articles resulting in grievous injury)
under Section 59(iii) would be cognizable and non-bailable and, by
virtue of Section 74 triable by the special court. In contrast, the
offence (manufacture, sale, distribution etc. of food articles
resulting in death) under Section 59(iv) which attracts
imprisonment which shall not be less than seven years but may
extend to imprisonment for life would fall in the most grave
category of Second Part of the First Schedule to Cr.P.C. and thus
also be cognizable and non-bailable, but triable by the special court
under Section 74.
59. The Food Safety and Standards Act, 2006 does not modify
the Code of Criminal Procedure, 1973 to such effect as to
independently specify the classification of offences different from
the general prescription or the powers of the police to investigate
(or cause arrest of persons found complicit) generally in relation to
the cognizable offences. What stands out, however, is the conjoint
effect of Sections 41 and 42 that confers the power to "launch
prosecution" on the Food Safety Officer. In the opinion of this
court, therefore, for dealing with an offence under Section 59(iii) or
(iv) of the Food Safety and Standard Act, 2006, a police officer
would be obliged in law not only to take note of such cognizable
offence in accordance with Section 154 Cr.P.C. but also to cause
arrest, if the need arises to do so, in exercise of the power regulated
by Section 41 Cr.P.C. But, upon completion of investigation, the
police officer would have the criminal action initiated in the court
by calling upon the enforcement authorities under the special law to
launch prosecution by filing a complaint before the competent court
and consequently, the cognizance would be, not on the police report
under Section 190(1)(b) but, on such complaint under Section
190(1)(a) Cr.P.C.
60. The Customs Act, 1962 provides a study in sharp contrast to
the above mentioned special enactments but, as we shall see in due
course, this law, the Customs Act, is nearest home as equivalent to
the one which is the subject matter of the present proceedings,
namely, the PMLA.
61. The Customs Act, 1962 was enacted to consolidate and
modify the then existing law so as to sternly and expeditiously deal
with smuggled goods and curb the loss to the revenue. The
legislation contains detailed provisions pertaining to prohibition on
importation or exportation of goods, levy of duty upon such
transactions, assessment of the revenue payable, realization thereof,
etc. It establishes its own machinery known as "officers of
customs", specifying the powers or functions entrusted to different
classes thereof. The officers of customs have the power not only to
search or seize goods which are exported or imported in
contravention of the restrictions thereby imposed but also to detain
any person for detection, or for questioning, for such breaches. The
said authority of customs officers extends to the power of arrest
(under Section 104) in cases where there is reason to believe
commission of certain specified offences under the special law,
such power being akin to that of a police officer and mandatorily
required to be subject to the provisions of Code of Criminal
Procedure, 1973. The enactment creates special offences (Sections
132 to 135-A and Section 136) and directs, by Section 138, all such
offences to be triable by a Magistrate following the summary
procedure. A customs officers, duly empowered or authorized, is
entitled to examine any person acquainted with the facts and
circumstances of the case and, for such purposes, may compel
appearance by issuing summons either to give evidence or to
produce documents in terms of Section 107 and 108.
62. Having regard to the overall scheme of the Customs Act the
investigation carried out by the authorities under the law results in
the prosecution in the court of a Magistrate, it taking cognizance,
subject to appropriate sanction where required, in terms of Section
137, the nature of the smuggled goods "prohibited goods" or the
value of the duty thereby evaded (Rs.50 lacs or more) controlling
the classification of the offence as "cognizable" or otherwise, in
terms of Section 104(4), the clause immediately following
clarifying that all other offences under the Customs Act shall be
"non-cognizable". It needs to be noted for clarity that an
enforcement of the Customs Act resulting in criminal prosecution is
through officers of the customs and not by police. It is well settled
that officers of the customs are not police officers and that the
statements recorded by them in the course of inquiry or
investigation undertaken in terms of this special law, particularly
statements under Section 108, are not akin to the statements
recorded by the police under Section 161 Cr.P.C. and, therefore, the
same are not hit by the rules of admissibility of evidence, Section
138-B further clarifying the position as to their relevancy under
certain circumstances.
63. In above context, reference may be made to Ramesh
Chandra Mehta v. State of W.B., (1969) 2 SCR 461, wherein a
Constitution bench ruled thus :
"25. ... a Customs Officer is under the Act of 1962 not a
police officer within the meaning of Section 25 of the
Evidence Act and the statements made before him by a
person who is arrested or against whom an inquiry is
made are not covered by Section 25 of the Indian
Evidence Act."
64. The above view was reiterated in Illias v. Collector of
Customs, (1969) 2 SCR 613; State of Punjab v. Barkat Ram, (1962)
3 SCR 338; and Om Prakash v. Union of India, (2011) 14 SCC 1.
65. Thus, similar to the provisions of PMLA, the scheme of the
Customs Act, 1962, while creating penal offences, establishes its
own machinery for investigation and prosecution. The officers of
the customs are empowered by the law to arrest the persons
respecting whose complicity there is reason to believe. It is on the
complaint of the empowered officer that the court takes cognizance.
Some of the offences are classified as cognizable, the others being
non-cognizable. Obviously, therefore, there would be no power of
arrest vesting in customs officers vis-a-vis the non-cognizable
offence. This, however, does not mean that a Customs officers will
have to seek authorization to exercise the power of arrest in cases
where law confers on him such jurisdiction. Further, the fact that
the offence is non-cognizable only means that the customs officer
has no power of arrest. It does not lead to the conclusion that he has
no power to investigate into a non-cognizable offence under the
Customs Act, it being a special law not controlled, for such
purposes by the general law relating to the powers of police to
investigate, as stipulated in Chapter XII of the Code of Criminal
Procedure, 1973 (Sections 154 to 176).
66. In summing up on this issue, it may be observed that the
expression "cognizable" in relation to an offence cannot have a
uniform or static meaning. Its connotation may differ from one law
to the other. Further, only because there are restrictions regulating
the power of arrest in a cognizable case, or because there are certain
pre-requisites to the taking of cognizance - say, filing of a
complaint - it does not necessarily lead to the inference, unless there
is a statutory provision to such effect, that the empowered agency
cannot investigate or arrest without authorization from the court.
67. The above conclusion emerging from the scheme and plain
language of the law is reinforced by the fact that the marginal
heading of Section 45 PMLA continues to remain unamended, it
declaring that the offences under this special law are cognizable.
The speeches (and the intervention) of the mover(s) of the
amending bill in each House of the Parliament, as one shall see in
due course, also did not state that the offences were to be declared
as non-cognizable. They only clarified that the amendment was
necessary so as to ensure that police did not exercise the general
power of arrest in such cases.
PREVENTION OF MONEY-LAUNDERING ACT - AN OVERVIEW
68. The malaise of money-laundering has posed a serious threat,
particularly in recent times, not only to the financial systems of the
civilized world but also to the integrity and sovereignty of the
member States. The United Nations Convention Against Illicit
Traffic in Narcotic Drugs and Psychotropic Substances to which
India is a party called for prevention of laundering of proceeds of
drug crimes and other connected activities and confiscation of
proceeds derived from such offences. The Basic Statement of
Principles, enunciated in 1989, outlined basic policies and
procedures that banks should follow in order to assist the law
enforcement agencies in tackling the problem of money-laundering.
In the wake of obligations emanating, inter alia, from the adoption
of the recommendations of Financial Action Task Force established
at the summit of seven major industrial nations, held in Paris from
14th to 16th July 1989, followed by the adoption of the Political
Declaration and Global Programme of Action by the United Nations
General Assembly through its Resolution No.S-17/2 of 23rd
February 1990 and the Declaration made in June 1998 by the
United Nations in the Special Session on Countering World Drug
Problem Together, on the basis of report of the Standing Committee
submitted on 4th March 1999, the Parliament enacted the
Prevention of Money-Laundering Act, 2002 with the avowed
objective "to prevent money-laundering and to provide for
confiscation of property derived from, or involved in, money-
laundering and for matters connected therewith or incidental
thereto." The law (PMLA) has been amended several times, lastly
by the Finance Act, 2016 (Act No.28 of 2016). It is a measure to
deal with "money-laundering", the definition of which expression
by Section 3, making it a penal offence, has already been taken note
of. What is crucial is the fact that the money thereby targeted must
represent "proceeds of crime", the infringing process or activity
being in the nature of its concealment, possession or acquisition or
leading to its use in such a manner so as to facilitate the party
involved (or complicit) to be in a position to project or claim it to be
an "untainted" asset. To put it simply, the money or the asset should
be "tainted" (say, undeclared or result of criminal activity) but being
shown as legitimate by being routed through (the impugned)
transactions meant to give it the colour of legitimacy.
69. As in the case of Customs Act, PMLA seeks to deal with the
scourge of money-laundering both by civil action (attachment,
adjudication and confiscation) and criminal action (prosecution for
the offence of money-laundering leading to punishment), the former
by special machinery (Adjudicating Authorities) created for such
purposes (Section 6), the remedies being available initially before
an Appellate Tribunal (established under Section 25), and the latter
before the Special Courts (under Section 43).
70. Section 48 of PMLA specifies the authorities specially
created for its purposes, the highest being the Director (generally
known as Director of Enforcement), an appointee of the Central
Government, the other authorities (Additional Director, Joint
Director, Deputy Director, Assistant Director and other class of
officers) being appointed by the Central Government for aiding and
assisting. The said Authorities, appointed for purposes of PMLA,
are conferred with the responsibility of initiating all action leading,
inter alia, to proceedings for attachment, adjudication or
confiscation of the tainted money or property or for prosecution for
the offence under Section 4.
71. The procedure for attachment, adjudication and confiscation
is governed by the third chapter (Sections 5 to 11), it commencing
with the Director or the Deputy Director (authorized by the former)
recording "in writing", the "reason to believe" that any person is in
possession of any proceeds of crimes, such proceeds being likely to
be concealed, transferred or dealt with in a manner as to frustrate
the objectives of the law, the basis for such action being "material"
in the possession of such authority. The Director, or the Deputy
Director, having recorded such belief in writing is empowered, by
Section 5(1), to direct provisional attachment of the suspect asset
(money or property) which, it must be added, is subject to
appropriate further proceedings before the Adjudicating Authority
constituted under Section 6, it being a high powered body
consisting of the Chairperson and two Members, the detailed
provisions conferring upon such Authority all trappings of an
independent Tribunal, the orders passed thereby being amenable to
appeal before the Appellate Tribunal established under Section 25.
72. The special legislation (PMLA) seeks to focus, generally
speaking, on "proceeds of crime" and, particularly, on certain
specified offences each being referred in the law as "scheduled
offence", an expression defined in Section 2(y), taking one to the
Schedule appended to the enactment. The Schedule is divided
broadly into three parts, the first (Part A) including certain offences
under Indian Penal Code and certain offences under special laws
like Narcotic Drugs and Psychotropic Substances Act, 1985,
Explosive Substances Act, 1908, Unlawful Activities (Prevention)
Act, 1967, Arms Act, 1959, Prevention of Corruption Act, 1988,
Customs Act, 1962, etc. The next part (Part B) of the Schedule
specifies the offence under Section 132 of the Customs Act, 1962 as
a scheduled offence while the last (Part C) includes some such
offences as have "cross border implications".
73. The first proviso to Section 5(1) clarifies that the Director (of
Enforcement) cannot proceed to order provisional attachment of a
tainted property unless, in relation to the scheduled offence, a report
has been forwarded to a Magistrate under Section 173 Cr.P.C. or a
complaint has been filed by person duly authorized to do so under
the law, the second proviso creating an exception in case the wait
for the submission of such police report or filing of complaint may
lead to frustration of the proceedings.
74. The Authorities under the PMLA have been vested with the
powers and jurisdiction, inter alia, for gathering of evidence, if
required by search and seizure, summoning and enforcing the
attendance of any person acquainted with facts or for production of
records, examination of witnesses and documents including by
issuance of commission etc. While the powers of survey, seizure,
search, etc. conferred on the enforcement authorities are spelt out in
various provisions of the fifth chapter, some such powers (as of the
civil courts) are vested in the Adjudicating Authority by Section 11.
The fourth chapter creates certain obligations of Banking
Companies, Financial Institutions and Intermediaries to share
information, the ninth chapter dealing with reciprocal arrangement
for mutual assistance requisite with authorities in foreign countries.
75. It is primarily the action that begins with recording in writing
under Section 5 the reasons for belief of a person being in
possession of proceeds of crime and such asset being subjected to
process or activity resulting in it being in the nature of money-
laundering that leads not only to the proceedings for attachment and
confiscation but also the criminal action in the special court
established under Section 43. It is the result of the investigative
process undertaken by the same authority as leads to the two actions
including, what is relevant here, the prosecution in the special court
for offence under Section 4 PMLA. It is from this perspective that it
is important to note that the enforcement officers are conferred by
Section 19 PMLA with the power of arrest.
76. This provision must be quoted verbatim as under:
"19. Power to arrest.--(1) If the Director, Deputy
Director, Assistant Director or any other officer
authorised in this behalf by the Central Government by
general or special order, has on the basis of material in
his possession, reason to believe (the reason for such
belief to be recorded in writing) that any person has
been guilty of an offence punishable under this Act, he
may arrest such person and shall, as soon as may be,
inform him of the grounds for such arrest.
(2) The Director, Deputy Director, Assistant Director or
any other officer shall, immediately after arrest of such
person under sub-section (1), forward a copy of the
order along with the material in his possession, referred
to in that sub-section, to the Adjudicating Authority, in a
sealed envelope, in the manner as may be prescribed
and such Adjudicating Authority shall keep such order
and material for such period, as may be prescribed.
(3) Every person arrested under sub-section (1) shall,
within twenty-four hours, be taken to a Judicial
Magistrate or a Metropolitan Magistrate, as the case
may be, having jurisdiction:
Provided that the period of twenty-four hours shall
exclude the time necessary for the journey from the
place of arrest to the Magistrate's Court."
77. Pertinent to observe here that it is essential that the
authorized officer of Enforcement must have in his possession such
material as on the basis of which he may entertain "reason to
believe" that the person being arrested is guilty of the offence of
money-laundering (or some other offence under the special law,
such as those provided in Section 62 and 63). The pre-requisite for
a lawful arrest in terms of Section 19(1) PMLA is recording of the
reasons for such belief "in writing" and after effecting arrest the
person so arrested to be informed of the "grounds of such arrest".
That the two actions, one for attachment leading to confiscation of
the tainted asset and the other leading to criminal prosecution, are
inter-connected is brought out vividly by Section 19(2) obliging the
arresting officer to forward a copy of the order (including of
authorization) setting out the reasons for belief of complicity of the
arrestee, along with copy of the material on the basis of which such
belief was drawn, to the Adjudicating Authority which, in normal
course, would be already privy to the ongoing investigation in terms
of similar submission made under Section 5(2). The Adjudicating
Authority is obliged by the law to keep in its safe custody and
control such submission concerning the arrest during investigation
under PMLA "in a sealed envelope". Both the report under Section
5(2) to the Adjudicating Authority immediately after the
provisional attachment of the tainted (or suspect) property and the
grounds of arrest in terms of Section 19(2), along with the material
on the basis of which each such action has been taken, are
safeguards put in position by the law which are similar to, but not
same as, the requirement of Section 157(1) Cr.P.C. wherein a police
officer makes a report to the Magistrate empowered to take
cognizance of an offence before embarking on the process of
investigation; one distinction here, of course, being that under the
general criminal law, all investigative steps, including the arrest,
search, seizure, etc. would be reported from time to time to the
Magistrate with whom the report under Section 157 Cr.P.C. has
already been submitted, in terms of the special law, the
Adjudicating Authority, though the repository of both reports (of
provisional attachment and arrest) deals eventually only with the
civil action, the authorization for detention in custody being granted
by the judicial magistrate, under Section 19(3), for which purposes,
a general reading of the law would confirm, Section 167 Cr.P.C.
would apply.
78. The trial for the offences created by PMLA is held in the
court of sessions designated as Special Court in terms of Section 43.
It is necessary to take note of Section 44 in this regard, which reads
thus:
"44. Offences triable by Special Courts.--(1)
Notwithstanding anything contained in the Code of Criminal
Procedure, 1973 (2 of 1974),--
(a) an offence punishable under Section 4 and any scheduled
offence connected to the offence under that section shall be
triable by the Special Court constituted for the area in
which the offence has been committed:
Provided that the Special Court, trying a scheduled offence
before the commencement of this Act, shall continue to try
such scheduled offence; or
(b) a Special Court may, upon a complaint made by an
authority authorised in this behalf under this Act take
cognizance of offence under Section 3, without the accused
being committed to it for trial.
(c) if the court which has taken cognizance of the scheduled
offence is other than the Special Court which has taken
cognizance of the complaint of the offence of money-
laundering under sub-clause (b), it shall, on an application
by the authority authorised to file a complaint under this Act,
commit the case relating to the scheduled offence to the
Special Court and the Special Court shall, on receipt of such
case proceed to deal with it from the stage at which it is
committed.
(d) a Special Court while trying the scheduled offence or the
offence of money-laundering shall hold trial in accordance
with the provisions of the Code of Criminal Procedure, 1973
(2 of 1974), as it applies to a trial before a Court of Session.
(2) Nothing contained in this section shall be deemed to
affect the special powers of the High Court regarding bail
under Section 439 of the Code of Criminal Procedure, 1973
(2 of 1974) and the High Court may exercise such powers
including the power under clause (b) of sub-section (1) of
that section as if the reference to "Magistrate" in that section
includes also a reference to a "Special Court" designated
under Section 43."
79. Though Section 71 declares unequivocally that provisions of
PMLA "shall have effect notwithstanding anything inconsistent
therewith contained in any other law for the time being in force"
which resonates what in effect is the import of Section 4(2) Cr.P.C.
which has already been taken note of, at the same time it further
brings out, for clarity, by Sections 46 and 65 that the provisions of
the Code of Criminal Procedure, 1973 shall apply, in so far as they
are not inconsistent with the provisions of this law, to the
proceedings before the special court and in the matters relating to
"arrest, search and seizure, attachment, confiscation, investigation,
prosecution" and all other proceedings. Perhaps in order to allay
further doubts, if any entertained in this regard, various other
provisions of this special legislation make it abundantly clear that
the Code of Criminal Procedure, 1973 would regulate the criminal
action unless there is a special provision in PMLA to the contrary or
inconsistent with the general procedural law, such clauses including
Section 43(2), Section 44(1)(d), Section 44(2), Section 45(1)(1a)(2)
and Section 47.
80. What merits particular note is the fact that the Special Court
which is empowered to take cognizance of the offence of money-
laundering under Section 4 or any scheduled offence connected
thereto acts, in terms of Section 44(1)(b), upon a complaint by the
competent authority (specified under Section 45), the judicial act of
taking cognizance thus being under Section 190(1)(a).
81. It is apposite to add here that Section 45 (1-A) of PMLA
declares in clear terms that notwithstanding anything contained in
the Code of Criminal Procedure or any other provisions of PMLA
"no police officer shall investigate into an offence under this Act
unless specially authorized (to do so)", the special authorization vis-
a-vis the police officer by the Central Government and subject to
such conditions as may be prescribed. The PMLA, by Section
2(1)(na), defines the term "investigation" as including "all the
proceedings under this Act conducted by the Director or by an
authority authorised by the Central Government under this Act for
the collection of evidence." Noticeably, there is no reference to
investigation by the police.
82. It is clear from the overview of the law thus far that the
investigative process under PMLA is entrusted by the legislature in
the hands of the authorities thereby created (generally speaking, the
officers of the Directorate of Enforcement) and that police officers
are generally inhibited from embarking upon investigations into the
matters (or offences) relating to money-laundering, the only
exception being where there is a special authorization. At the cost
of repetition it needs to be recalled that the power of arrest in terms
of Section 19 is also conferred generally on the senior officers of
Enforcement Department (Director, Deputy Director or Assistant
Director), though provision is made for authorization of other
officers as well.
83. The moot question raised in these proceedings is as to
whether the offence of money-laundering punishable under Section
4 PMLA is cognizable or not. The law, as it presently stands
amended, contains the following provision in Section 45:
"45. Offences to be cognizable and non-bailable.--(1)
Notwithstanding anything contained in the Code of
Criminal Procedure, 1973 (2 of 1974), no person
accused of an offence punishable for a term of
imprisonment of more than three years under Part-A of
the Schedule shall be released on bail or on his own
bond unless--
(i) the Public Prosecutor has been given an opportunity
to oppose the application for such release; and
(ii) where the Public Prosecutor opposes the
application, the court is satisfied that there are
reasonable grounds for believing that he is not guilty 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, 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.
(1-A) 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 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."
84. It was pointed out by the learned counsel for the petitioners
that though the heading of Section 45 does seem to indicate the
offences under this law are "cognizable", there is no provision on
the statute book declaring any offence of PMLA to be cognizable.
It is further pointed out that Section 45(1-A) makes it clear that
police officers do not have the authority in law to investigate into
PMLA offences (unless there is special authorization to such effect)
and that the power of arrest in terms of Section 19 is restricted to
the enforcement officers, the cognizance required to be taken by the
Special Court being contingent upon a complaint in writing being
made by such functionaries only. It was also pointed out that prior
to the amendment of 2005, there was a clear stipulation in law, by
Section 45(1)(a) that every offence under PMLA was "cognizable",
such clause having been omitted. On the basis of these submissions,
it was argued that the offences under PMLA are to be treated as
non-cognizable and since cognizance thereof is to be taken not on a
police report but on a complaint by the Enforcement Officers, who
only are empowered to investigate, any action without formal
authorization from the court is incompetent.
85. The above aspect would need consideration of the effect of
amendment.
CONSTRUING THE AMENDED SECTION 45 PMLA
86. The law contained in PMLA, as originally enacted, declared
by Section 45 that every offence under this special enactment would
be cognizable. The original provision of Section 45 (prior to
amendment of 2005) must be quoted here:
"45. Offences to be cognizable and non-bailable.--
(1) Notwithstanding anything contained in the Code of
Criminal Procedure, 1973 (2 of 1974),--
(a) every offence punishable under this Act shall be
cognizable;
(b) no person accused of an offence punishable for a
term of imprisonment of more than three years under
Part A of the Schedule shall be released on bail or on
his own bond unless--
(i) the Public Prosecutor has been given an opportunity
to oppose the application for such release; and
(ii) where the Public Prosecutor opposes the
application, the court is satisfied that there are
reasonable grounds for believing that he is not guilty 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, 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.
(2) The limitation on granting of bail specified in clause
(b) of 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."
(emphasis supplied)
87. By the Prevention of Money-Laundering (Amendment) Act,
2005 (Act No.20 of 2005), the clause contained in Section 45(1)(a)
quoted above was deleted. The clause (b) of Section 45(1), thus,
merged with the remaining phraseology employed in the existing
provision so as to become Section 45(1), now a provision intended
to regulate primarily the issue of release on bail and the mode of
taking cognizance, the pre-requisite being a complaint in writing by
the Director or other authorized officer. The existing sub-Section
(2) of Section 45 quoted above, by this amendment, was
accordingly modified so as to remove reference to clause (b) of sub-
Section (1). A new sub-Section (1-A) was inserted which contains
the general restrictions against a police officer investigating into an
offence under PMLA.
88. The submissions of the petitioners are that the legislature
took a conscious decision of omitting Section 45(1)(a) and the only
intendment thereof could be that the offences under PMLA are to be
treated as non-cognizable. It was argued that the heading of the
provision contained in Section 45 is not part of the legislation and
cannot control its interpretation. It was submitted that the
introductory speeches and the answers given during the debate at
the time of consideration (and passage) of the amending Bill by the
two Houses of Parliament confirm this to be the intention of the
legislature, the insertion of sub-Section (1-A) to Section 45, as
noted earlier, making it even more clear that the police officers have
no connection with the investigation of the crimes under this special
enactment, the necessary corollary whereof, as per the argument,
would be that the offence of money-laundering under Section 4
PMLA is non-cognizable and consequently, it is urged, any arrest
without authorization from the competent court, or even
investigation by summoning any person under Section 50 PMLA
should be taboo.
89. Per contra, it is the argument of the respondents that the
heading of Section 45 remains un-amended and that the changes
brought about by Act No.20 of 2005 have the effect only of
clarifying that the investigation of PMLA offences is entrusted to
the Enforcement officers and not to the police at large which,
consequently, cannot embark upon such probes or exercise their
power of arrest under the general law. It is the argument of the
respondents that the Parliament debates cannot be used for
construing the intention of the legislature since the provisions of the
law are clear and unambiguous.
Relevance of marginal head
90. The petitioners rely on Dr. Sham Lal Narula vs. CIT, 53 ITR
151 (SC); Chandroji Rao vs. Commissioner of Income Tax, M.P.
Nagpur, (970) 2 SCC 23; Thakurain Balraj Kunwar & Anr. vs. Rae
Jagatpal Singh, 1904 Indian Appeals (Volume XXXI) 132; Prakash
Nath Khanna vs. CIT, (2004) 9 SCC 686; Guntaiah & Ors. vs.
Hambamma & Ors., (2005) 6 SCC 228 ; and Union of India & Anr.
vs. National Federation of the Blind & Ors., (2013) 10 SCC 772 to
argue that the marginal heading cannot control the interpretation of
the words of the section particularly when the language of the
section is clear and unambiguous. It was pointed out that in
Guntaiah (supra) a bench of two Hon'ble Judges of the Supreme
Court went to the extent of observing that the marginal notes "are
not considered as legitimate aid to construction of any section or
rule", or even further that the said "side notes are not considered as
part of the Act".
91. The Supreme Court of South Australia in the case of Ragless
vs. District Council of Prospect, 1922 South Australia 299, way
back explained the rules of interpretation with reference to marginal
heads thus:
"1. If the language of the sections is clear and is
actually inconsistent with the headings, the headings
must give way.
2. If the language of the section is clear, but, although
more general, is not inconsistent with the headings, the
sections must be read subject to the headings.
3. If the language of the sections is doubtful or
ambiguous, the meaning which is consistent with the
headings must be adopted."
92. In Bhinka & Ors. vs. Charan Singh, 1959 Supp (2) SCR 798,
a bench of three Hon'ble Judges of the Supreme Court quoted, with
approval, Maxwell on Interpretation of Statutes, (10th Edition, page
50), as under:
"The headings prefixed to sections or sets of sections in
some modern statutes are regarded as preambles to
those sections. They cannot control the plain words of
the statute but they may explain ambiguous words."
(emphasis supplied)
93. The court in Bhinka & Ors. (supra) observed that "if there is
any doubt in the interpretation of the words in the section, the
heading certainly helps us to resolve that doubt". In K.P. Varghese
vs. Income Tax Officer, Ernakulam & Anr., (1981) 4 SCC 173, it
was similarly held that though the marginal note cannot control the
interpretation, "it prima facie furnishes some clue as to the meaning
and purpose of the section". In M/s. H.M. Kamaluddin Ansari and
Co. vs. Union of India & Ors., (1983) 4 SCC 417, while enjoining
upon the courts to follow the golden rule of giving effect to the
meaning derivable from clear, plain and unambiguous words of a
statute, it was noted as a well settled view that "the headings or
titles prefixed to a section or a group of sections can be referred to
in determining the meaning of doubtful expressions", such headings
or title of a section, however, being "very broad and general
indicators of the nature of the subject matter dealt with thereunder"
and consequently having "a limited role to play in the construction
of statutes", as held by a bench of three Hon'ble Judges in Forage &
Co. (of Ushala) vs. Municipal Corporation of Greater Bombay &
Ors., (1999) 8 SCC 577 and by a Constitution Bench of the
Supreme Court in Sarah Mathew vs. Institute of Cardio Vascular
Diseases & Ors., (2014) 2 SCC 62.
94. The view that marginal headings of different sections of a
legislation are not part of the statute has been junked over the years.
In Bhagirath vs. Delhi Administration, (1985)2 SCC 580, it was
held by a Constitution bench that "marginal notes are now
legislative and not editorial exercises". Similar view was earlier
expressed in K.P. Varghese Vs. Income Tax Officer, Ernakulam and
Anr., AIR 1981 SC 1922. Instances are galore of amendment Acts
modifying, altering, substituting, deleting or making some changes
even in the marginal headings of the existing law thereby affected.
It would not be wrong to say that marginal headings are internal
aids available for interpretation, should a recourse thereto become
necessary in the event of some ambiguity in the language of the
provisions or scheme of the law.
95. In view of the above authoritative pronouncements of the
Supreme Court, including by a Constitution Bench as recently as in
2014, the arguments of the petitioners that the marginal heads of a
statutory provisions are to be ignored cannot be accepted.
Undoubtedly, if the statutory provisions are clear and unambiguous,
the plain meaning derived there from will have to be given effect to
but the broad indication given by the heading does assist, if the need
arises, to understand the true import of the statutory clause.
Relevance of deletion
96. The petitioners argument, however, also revolves around the
fact that clause (a) of Section 45(1) was deleted by the Parliament
while amending the law in 2005. One may recall it is the said clause
which declared the offence under PMLA to be "cognizable". In the
submission of the learned counsel for petitioners, the omission is
indicative of the intention. Reliance is placed on Bhagat Ram
Sharma vs. Union of India & Ors., 1988 (Supp) SCC 30; D.R.
Fraser & Co. Ltd. vs. The Minister of National Revenue, 1948 SCC
OnLine PC 65; and Commissioner of Central Excise, Trichy vs.
Dalmia Cement (Bharat) Ltd., (2006) 126 DLT 597 (DB).
97. In Bhagat Ram Sharma (supra) it was observed that when
the legislature enacts an amending law deleting the existing
provision, substituting it by a new provision it has the effect of
"repeal of the existing provision", the withdrawal of the existing
provision being also called an amendment. In Dalmia Cement
(Bharat) Ltd., (supra), a division bench of this Court quoted, with
approval, the observations of the Privy Council in the case of D.R.
Fraser (supra) to the effect that "when an amending Act alters the
language of the principal statute, the alteration must be taken to
have been made deliberately".
98. There can be no quarrel with the above propositions of law.
The amendments to an existing law by the legislature are to be
accepted as a decision consciously and deliberately taken to
remove, as further observed in Dalima Cement (supra), "the
mischief in the old law". Thus, in order to comprehend the effect of
the amendment, the court must apply the Heydon's Mischief Rule
and find out as to what was the mischief which the legislature wants
to remove by the amendment.
Relevance of legislative debate
99. The learned counsel for the petitioners relied upon the
speeches of the Union Ministers who piloted the amendment Bill in
the two Houses of Parliament, it being the Minister of Finance
introducing the amendment Bill in the Lok Sabha (on 06.05.2005)
and, after its passage in the said House, it being the Minister of
Home Affairs in Rajya Sabha (on 11.05.2005). From the copies of
the said speeches and the report of debates that followed, as
submitted at the hearing, it appears the speeches of both the
Ministers were verbatim the same. The said speeches, may be
quoted (as taken from Lok Sabha reports) as under:
"Sir, the Money-Laundering Act was passed by this
House in the year 2002, and number of steps have to be
taken to implement it. Sir, two kinds of steps were
required. One was to appoint an authority who will
gather intelligence and information, and the other was
an authority to investigate and prosecute. This Act was
made to implement the political declaration adopted by
the Special Session of the UN General Assembly in
1999. Section 1 (3) of the Act stipulates that the Act will
come into force on such date as the Central Government
may by notification appoint. While we were examining
the question of notifying the Act, I found that there was
certain lacunae in the Act. I regret to say that not
enough homework had been done in the definitions, and
in the division of responsibility and authority. So, in
consultation with the Ministry of Law, we came to the
conclusion that these lacunae had to be removed.
Broadly, the reasons for the amendment are the
following.
Under the existing provisions in Section 45 of the Act,
every offence is cognizable. If an offence is cognizable,
then any police officer in India can arrest an offender
without warrant. At the same time, under Section 19 of
the Act, only a Director or a Deputy Director or an
Assistant Director or any other officer authorised, may
arrest an offender. Clearly, there was a conflict between
these two provisions. Under Section 45(1)(b) of the Act,
the Special Court shall not take cognizance of any
offence punishable under Section 4 except upon a
complaint made in writing by the Director or any other
officer authorised by the Central Government. So, what
would happen to an arrest made by any police officer in
the case of a cognizable offence? Which is the court that
will try the offence? Clearly, there were inconsistencies
in these provisions.
They have now been removed. We have now enabled
only the Director or an officer authorised by him to
investigate offences. Of course, we would, by rule, set
up a threshold; and, below that threshold, we would
allow State police officers also to take action.
The second anomaly that we found was that the
expression "investigation officer" and the word
"investigation" occur in a number of sections but they
were not defined in the Act. Consequently, one has to go
to the definition in the Criminal Procedure Code and
that Code provides only "investigation by a police
officer or by an officer authorised by a magistrate". So,
clearly, there was a lacuna in not enabling the Director
or the Assistant Director under this Act to investigate
offences. That has been cured now.
The third difficulty that I found was that the Act
contemplates an Appellate Tribunal under Section 25
but there might not be enough cases for a full-time
Appellate Tribunal. An Appellate Tribunal means a lot
of money. There are other Appellate Tribunals in
similar Acts. So, we could authorise those Appellate
Tribunals to function as Appellate Tribunal under this
Act. After all, it is the same retired High Court Judge or
a serving High Court Judge who is going to be there.
So, part of the time, he would devote to dealing with
appeals arising under some other Acts; and, part of the
time, he would deal with appeals arising under this Act.
At least in the initial years, we do not think, there would
be enough work for a full-time Appeallate Tribunal.
What we are doing is, we are inserting a new Section, 2
(n) (a) defining the term, 'investigation'; making an
amendment to Sections 28, 29 and 30, dealing with
tribunals; amending Sections 44 and 45 of the Act to
make the offence non-cognizable so that only the
Director could take action; and also making
consequential changes in Section 73. I request hon.
Members to kindly approve of these amendments so that
the Act could be amended quickly and we could bring it
into force."
(emphasis supplied)
100. It was further pointed out during the arguments that in the
course of the debate that followed in Lok Sabha, in answer to a
query of an Hon'ble Member, the Minister explained the
amendment as under:-
"Sir, first to answer Mr. Sudhakar Reddy, Section
45(1)(a) is being omitted because, if the offence is
cognizable, then any police officer in this country can
arrest without a warrant. Section 19 says, only the
Director or Assistant Director should investigate the
offence. There is a conflict. Therefore, we are making it
non-cognizable. But, investigation will be by the
Director. We will authorise, up to a threshold, State
police officers also to investigate offences. That is why
Section 45(1) (a) is being omitted."
(emphasis supplied)
101. The petitioners rely on Union of India & Ors. vs. Martin
Lottery Agencies Limited, (2009) 12 SCC 209, to submit that speech
of the Hon'ble Ministers in the Houses of Parliament may be taken
to be a valid tool for interpretation of the statute.
102. In A.K. Gopalan vs. State of Madras, 1950 SCR 88, it was
observed thus:-
"112. ... A speech made in the course of the debate on a
Bill could at best be indicative of the subjective intent of
the Speaker, but it could not reflect the inarticulate
mental processes lying behind the majority vote which
carried the Bill. Nor is it reasonable to assume that the
minds of all those legislators were in accord."
(emphasis supplied)
103. In State of Travancore-Cochin v. Bombay Co. Ltd. [AIR
1952 SC 366], the court ruled:
"16. ... the use made by the learned Judges below of the
speeches made by the members of the Constituent
Assembly in the course of the debates on the Draft
Constitution is unwarranted. That this form of extrinsic
aid to the interpretation of statutes is not admissible has
been generally accepted in England, and the same rule
has been observed in the construction of Indian
statutes"
(emphasis supplied)
104. In State of Mysore vs. R.V. Bidap, (1974) 3 SCC 337, it was
observed:
"5. Anglo-American jurisprudence, unlike other
systems, has generally frowned upon the use of
parliamentary debates and press discussions as
throwing light upon the meaning of statutory
provisions."
105. In K.P. Varghese v. ITO, (1981) 4 SCC 173, referring to a
Minister's speech piloting a Finance Bill, it was observed:-
"8. ... Now it is true that the speeches made by the
Members of the legislature on the floor of the House
when a Bill for enacting a statutory provision is being
debated are inadmissible for the purpose of interpreting
the statutory provision but the speech made by the
Mover of the Bill explaining the reason for the
introduction of the Bill can certainly be referred to for
the purpose of ascertaining the mischief sought to be
remedied by the legislation and the object and purpose
for which the legislation is enacted. This is in accord
with the recent trend in juristic thought not only in
western countries but also in India that interpretation of
a statute being an exercise in the ascertainment of
meaning, everything which is logically relevant should
be admissible."
(emphasis supplied)
106. In Kesavananda Bharati vs. State of Kerala, (1973) 4 SCC
225, it was concluded that:
"2140. It is hazardous to rely upon Parliamentary
Debates as aids to statutory construction. Different
Speakers have different motives and the system of „Party
Whip‟ leaves no warrant for assuming that those who
voted but did not speak were of identical persuasion.
That assumption may be difficult to make even in regard
to those who speak. The safest course is to gather the
intention of the legislature from the language it uses.
Therefore, parliamentary proceedings can be used only
for a limited purpose as explained in Gopalan case."
107. In Ashoka Kumar Thakur v. Union of India, (2008) 6 SCC 1,
another Constitution Bench while holding that "reference to
Parliamentary Debates can only be made for a limited purpose",
observed:
"9.3 Thus, it is clear that debates in Parliament are not
usually relevant for construction of the provisions of an
Act. Even when they are relied on, it is only as a
secondary means of interpretation to help remove any
ambiguities; and never considered to be binding as to
the true object or intent of a provision or an Act. In light
of such limited importance attached to Parliamentary
Debates in statutory interpretation, assailing an Act on
the ground of insufficiency of Parliamentary Debates is
an unheard of and unsustainable proposition in law."
(emphasis supplied)
108. Another Constitution Bench in Supreme Court Advocates-
on-Record Assn. v. Union of India, (2016) 5 SCC 1, has reiterated
the consistent view of the court observing that "Parliamentary
Debates ought not to be relied upon to interpret the provisions of
the Constitution or the statute if there is no ambiguity in the
language used", since such provisions "ought to be interpreted
independently", the court not to be "unduly influenced by the
speeches made", and that confirmation of the interpretation "may be
sought" from "the Parliamentary Debates but not vice versa".
109. Thus, it would not be correct to say that the speeches made in
the legislature at the time of consideration and passage of an
enactment reflect the legislative intent. Such speeches are at best
indicator of what may have been the intent behind the introduction
of the Bill in the legislature that eventually became a law. If the
language of the legislation is clear and unambiguous, the external
tool of reference to debate in the legislature is wholly unnecessary.
110. This special law (PMLA), even as originally enacted, was
not designed to confer an additional responsibility or jurisdiction on
the police. The broad structure of the law clearly indicated that the
legislature intended to deal with the menace of money-laundering
outside the general regime for dealing with the crimes. The acts
constituting money-laundering generally have the facade of
ordinary business transactions. These are economic offences
indulged in secrecy and stealth and their detection requires expertise
and specially trained personnel. A general power of scrutiny of
business transactions at large cannot be allowed to be undertaken
for unearthing such activity. A probe of this nature requires due
circumspection in as much as the initial suspicions may not
necessarily be correct. A probe on the lines of investigative process
by the police would perhaps generally not suit the special demands
of an investigation qua money-laundering.
111. The provision contained in Section 45(1)(a), as appearing in
the original enactment, seemingly was in conflict with the overall
scheme of the law wherein the police had been kept out of the
investigative process which was placed, instead, in the hands of a
special machinery created by the legislation for its purposes. It
appears the legislature was concerned that the layperson's
perspective and understanding of the expression "cognizable
offence" - which was perhaps correct in the light of the provisions
of the Code of Criminal Procedure as they stood prior to the
amendment of 2010 - would create confusion and might result in
police also exercising jurisdiction in relation to PMLA offences by
registering the same. Since this would not have fit in within the
scheme of law, given the fact that PMLA requires launching of
prosecution by submission of a complaint by the Director
(Enforcement), it appears the legislature wanted to preclude all
possibility of meddling by the police.
112. This court need not consider or decide whether the possible
conflict or confusion required the above-mentioned amendment or
not. The fact remains that both under the post-amendment law, as
also the originally enacted PMLA, the power of arrest had been
conferred not on the police but only on the authorities specially
created by the law.
113. The continued use of the expression "cognizable" in relation
to the offences under PMLA, in the marginal head of Section 45
cannot be wished away. It is part of the law as originally enacted
and remains unamended. Of course, the marginal head cannot
control the meaning of the main provisions. It is only a broad
indicator of the content of each section. After the amendment, there
is no clause appearing in Section 45 or, for that matter, in any other
provision of PMLA, declaring the classification (cognizable or non-
cognizable) of the offences created by the special statute. In this
view, the continued use of the expression "cognizable" in the
heading of Section 45, which cannot be unintended, will have to be
comprehended and construed in the light of overall scheme of the
law.
Precedents
114. This court is not the first one called upon to interpret the
provisions of PMLA. There have been cases where the courts have
addressed such or similar arguments in the context of the same
legislation and, therefore, one has the advantage of judicial view
taken in such previous cases.
115. The matter involved in Gautam Kundu Vs. Directorate of
Enforcement, (2015) 16 SCC 1, arose out of judgment of the High
Court of Calcutta declining the release on bail to the appellant, he
having been arrested in a case under PMLA. The issue revolved
around the application of the restrictions vis-a-vis release on bail as
envisaged in Section 45. The court declined to interfere, inter alia,
observing that PMLA is a special statute, its provisions prevailing
over the general provisions of the Code of Criminal Procedure in
case of any conflict, this being clear from the non-obstante clause
with which Section 45 begins, as further reinforced by the
declaration in Sections 65 and 71, concluding that the conditions for
release on bail imposed by Section 45 are "mandatory and need to
be complied with", particularly in view of the presumption under
Section 24 shifting the onus to prove to the contrary on the accused.
116. The case reported as Hari Narayan Rai Vs. Union of India
and Anr., 2010 SCC Online Jhar 475, is one of the early cases
dealing with the subject. A complaint under PMLA had been filed
in that case. The challenge against the proceedings taken out in its
wake was repelled by the Jharkhand High Court, inter alia,
observing that the right to investigate under this special law was
part of its scheme, it having the overriding effect and consequently,
rendering the provision contained in Section 167(2) Cr. P.C.
inapplicable. Since the issues presently raised here have no
connection with the effect of Section 167(2) Cr. P.C., this court
refrains from making any observations on that subject. What needs
to be picked up from this ruling, however, is the finding that the
special law (PMLA) has its own scheme for investigation.
117. The case of Karam Singh and Ors. Vs. Union of India and
Anr., 2015 SCC Online P&H 19739, had come up before a division
bench of the High Court of Punjab and Haryana with similar
challenge to the registration of ECIR under PMLA and to the
summons issued to the petitioners under Section 50(2) and (3). The
court repelled the said challenge and dismissed the petitions, inter
alia, rejecting the contentions that the offence of money-laundering
is non-cognizable and therefore, investigation carried out in absence
of prior sanction by a Magistrate is not justified. Noticeably, the
court concluded that the offence is cognizable bearing in mind,
amongst others, the plain language of the provisions conferring the
power of arrest and the punishment prescribed by the law. It
rejected the other argument based on the assumption that the
offence is non-cognizable holding the special law confers the
jurisdiction upon the Special Court to take cognizance which by
itself cannot take away the powers of the authorities to investigate
and arrest. The petitioners had also argued in that case that the
authorities under PMLA were not scrupulously following the
prescription of Chapter XII of the Code of Criminal Procedure
(relating to the information to the police and their powers to
investigate) which was causing prejudice. The learned division
bench noted that the special law prescribed its own procedure. It
noted, inter alia, the various provisions of PMLA and the rules
framed thereunder, particularly the Prevention of Money-
Laundering (the forms and manner of forwarding a copy of order of
arrest of a person alongwith the Material to the Adjudicating
Authority and its period of Retention) Rules, 2005. The contentions
were rejected with observations that the law has prescribed a
complete procedure giving ample power to the authorities
prescribing the methodology of its exercise and thereby putting in
position "sufficient safeguards".
118. The case of Mukesh Kumar Jai Kishan Sharma Vs. State of
Gujarat and Ors., Manu/GJ/1828/2016, also involved persons
arrested during the investigation of a case under PMLA. The
investigative process having been completed, a complaint had also
been filed in the Special Court. Challenge was brought to the said
proceedings primarily on the grounds that the procedure of
investigation by police as contained in Chapter XII of the Code of
Criminal Procedure had not been followed, particular reference in
this regard being made to the provisions contained in Sections 154
and 157 relating to a cognizable offence and Section 155 relating to
a non-cognizable offence (that being an argument in the
alternative), as indeed the requirements of Sections 167 and 172 Cr.
P.C. regarding entering of the proceedings relating to investigation
in a case diary and its production at the time of seeking remand of
the person arrested. A learned single judge of the High Court of
Gujarat found no merit in the petitions holding, inter alia, that there
was nothing shown on which it could be said that such procedure of
investigation applicable to the police is required to be followed by
the investigating agency under the special law referring in this
context to the decisions of the Supreme Court in Gautam Kundu
(supra), of Punjab and Haryana High Court in Karam Singh (supra)
and of Jharkhand High Court in Hari Narayan Rai (supra),
eventually concluding that PMLA is a complete code and its
provisions would override the general law.
119. The case Dalmia Cement (Bharat) Ltd. and Ors., Vs.
Assistant Director of Enforcement Directorate and Ors., 2016 (4)
ALD 47, had also come up against the backdrop of summons issued
under Sections 50(2) and (3) of PMLA in an ongoing investigation.
The validity of the said summons had been questioned invoking the
jurisdiction of the High Court of Judicature at Hyderabad. The
petitions were dismissed finding no good case made out for reading
down Section 50 of PMLA observing, inter alia, that mere
registration of ECIR would not render any person an accused of the
offence of money-laundering, the purpose of investigation being to
collect evidence, issuance of summons requiring a person to appear
and make a statement not being violative of the Constitutional
protection and guarantee under Article 20 (3). It may be added that
the court held that investigation, adjudication and criminal
prosecution under PMLA were separate stages and the case was still
at the initial stage of investigation, the petitioners being obliged
under the law to appear in compliance with the summons.
120. The decision in Chhagan Chandrakant Bhujbal Vs. Union of
India, 2016 SCC Online Bom 9938, was rendered by a division
bench of the High Court of Bombay on a petition seeking issuance
of writ of Habeas Corpus against the backdrop of investigation
undertaken for offence of money-laundering. The petitioner had
been arrested in the said case, the prime contentions raised by him
being that the action taken was impermissible since the offence
punishable under Section 4 PMLA is a non-cognizable offence, the
arrest could not be effected without permission of the competent
court, the other grounds concerning grievances that the arrest had
been effected by an officer who was not duly authorised and who
had not followed the procedural safeguards. The learned division
bench dismissed the petition holding, inter alia, that PMLA is a
complete Code which overrides the general law while rejecting the
contention that by the amendment of 2005, the offence of money-
laundering had been rendered non-cognizable. The court, in fact,
also observed that there was no need to enter into the question as to
whether offences under PMLA are cognizable or non-cognizable
because Section 19 clearly confers on the authorised officer the
power to arrest any person, the exercise of which power would not
depend upon the issue as to whether the offence is cognizable or
non-cognizable, there being no restrictions placed on such power
even under the amended law. It was further held that Section 19 of
PMLA does not contemplate either the registration of FIR (under
Section 154 Cr.P.C.) or of obtaining permission of a Magistrate (or
of Court) before effecting arrest of an accused, the power of arrest
in terms of Section 19 being not subject to any such restrictions. It
may be added that the contentions about the authorization of the
arresting officer in that case and the procedure followed by him
were also rejected on the basis of material placed before the court.
121. A division bench of this court has also had the occasion to
hear and form opinion vis-a-vis similar contentions in the context of
PMLA in a batch of writ petitions led by Gurucharan Singh Vs.
Union of India and Ors. WP (Crl.) 307/2016 in which the
applications for bail pending consideration of the main petitions
were decided by order dated 27.04.2016. The learned division
bench noted the contentions that the provisions of the Code of
Criminal Procedure governing the investigation by police,
particularly those contained in Sections 154, 155, 157, 167 and 172
had not been followed. It observed that "prima facie ... it was
mandatory" for the respondents to do so and on the basis of such
tentative conclusion the directions for release of the petitioners were
issued.
122. With due deference to the learned division bench, it may be
observed here that the views expressed in the order dated
27.04.2016 on the applications for bail in the aforesaid writ
petitions do not bind this court for the simple reason such
observations were of prima facie nature and only interim. It is trite
that interim orders of this nature are not to be treated as binding
precedents since there has to be a final decision for the precedent to
be binding. One may quote the Supreme Court in State of Assam
Vs. Barak Upatyaka D.U. Karamchari Sanstha, (2009) 5 SCC 694,
as under:
"21. A precedent is a judicial decision containing a
principle, which forms an authoritative element
termed as ratio decidendi. An interim order which
does not finally and conclusively decide an issue
cannot be a precedent. Any reasons assigned in
support of such non-final interim order containing
prima facie findings are only tentative. Any interim
directions issued on the basis of such prima facie
findings are temporary arrangements to preserve the
status quo till the matter is finally decided, to ensure
that the matter does not become either infructuous or
a fait accompli before the final hearing..."
Whether PMLA offences are cognizable?
123. It is clear from the above discussion that this court has to find
from the overall scheme and plain meaning of the language
employed in the law as to whether the offences under PMLA are
cognizable or not and if so, to what effect.
124. It must be recapitulated here that the scheme of PMLA, as
may be gathered from the plain meaning of the language of the
various provisions of the statute, is to create a machinery for
investigation and enforcement outside the general system of
investigation of crimes by police agencies. The police officers are
explicitly kept out, unless there is a specific authorisation in their
behalf. The information of a crime punishable under PMLA is taken
note of by the Director (Enforcement) or the officers aiding or
assisting him in the task and the investigative process taken up
thereupon. If there are grounds to initiate such action, the Director
(or the empowered officer) records the reasons in writing for the
belief, noticing and adding thereto the material already collected, on
which such belief is founded and proceeds to provisionally attach
such property as, in his opinion, may be prima facie tainted.
Further, if during the course of investigation, on the basis of
material in his possession, he has reason to believe the complicity
of a person in an offence under PMLA, he is authorised by the law
to proceed to arrest him, after recording reasons for such belief in
writing. Both recorded reasons, one leading to the attachment of the
suspect property and the other leading to the arrest, are to be made
over to the Adjudicating Authority with copies of the material from
which inferences or conclusions had been drawn. The powers of
survey, search and seizure, search of persons, retention of property
or of records, to issue summons to enforce attendance of any person
and compel him to give evidence or produce records, discovery or
inspection, as indeed the power to arrest, as conferred by various
provisions of PMLA on the investigative agency created by the law
equip such agency with all the necessary tools to conduct an
effective investigation without the aid or assistance of police. For
purposes of criminal prosecution, the initiative is placed in the
hands of the authorities established by PMLA, the cognizance by
the court mandatorily required to be on their complaint.
125. From the above, it is clear, that the Enforcement officers
under PMLA do not require the powers of police for investigation
as granted by the general law contained in Chapter XII of the Code
of Criminal Procedure. On the contrary, to hold that the said part of
Code of Criminal Procedure applies to PMLA investigations or
proceedings would bring in inconsistency - in breach of the
mandate of Section 65 PMLA. There is nothing in PMLA to
indicate that the power to arrest conferred on the Director or the
other specified officers is contingent upon formal authorisation by
the court. Further, the law does not contain any clause from which it
could be deduced that the authorization to the Director or other
specified officers to take up the investigation or exercise any of the
powers thereby conferred requires prior approval from the court in
each case.
126. In view of the above, it must be concluded that
notwithstanding the deletion of clause (a) of the then existing sub-
section (1) of Section 45 PMLA, by the amendment of 2005, the
offences under PMLA continue to be "cognizable" in the sense that
a person respecting whom there is a reason to believe to be guilty
for such offence may be arrested by the officer empowered by the
law in terms of Section 19 without the need of obtaining warrant of
arrest from the court. Thus, the use of the expression "cognizable"
in relation to PMLA offences would be different from the one
applied for general law offences (say, IPC offences) and
consequently, the definition of the expressions "cognizable offence"
and "cognizable case" as appearing in Section 2(c) Cr. P.C. would
have to be read and applied mutatis mutandis with suitable
modification - that is to say, by substituting the words "a police
officer" and instead referring to the officers mentioned in Section
19 PMLA.
SAFEGUARDS
127. As in the cases of Karam Singh (supra) and Chhagan
Chandrakant Bhujbal (supra), brought before the Punjab & Haryana
High Court and Bombay High Court respectively, substantial focus
of arguments of the petitioners here was to bring home that the
general procedural law, as contained in the Code of Criminal
Procedure, and the authoritative pronouncements of the Supreme
Court and various High Courts prescribe safeguards against the
misuse of authority by the agencies investigating crimes,
particularly in the context of possibility of abuse vis-a-vis the power
of arrest and interrogation having a bearing on the fundamental
rights of freedom and rule against self-incrimination. It was
submitted that the procedure must be regulated according to the
classification under which the PMLA offences would fall, the
investigation being impermissible in absence of registration of an
FIR if the nature of the crimes is taken as cognizable, such
conclusion obliging the investigating agency to abide by the
requirements of Chapter XII of Cr. P.C. Conversely, it was urged
that if the offences are non-cognizable, the investigating agency
must take prior approval from the court (the Magistrate) before
commencing the probe or exercising the power of arrest.
128. In the above context, reliance has been placed on the cases of
Madhu Limaye Vs. State of Maharashtra, (1969) 1 SCC 292;
Bhajan Lal (supra); D.K. Basu Vs. State of West Bengal, (1997) 1
SCC 416 and Joginder Kumar Vs. State of U.P. and Ors., (1994)
SCC 260, reference being made to the guidelines regulating the
power of arrest.
129. There can be no doubt as to the fact that the law declared by
the Supreme Court, and the various pronouncements of the High
Courts touching upon the circumspection with which the power of
arrest is to be exercised by the authorities that be, as indeed the
safeguards created by the guidelines generally set out in the Code of
Criminal Procedure, and supplemented by judicial dicta controls
and regulates the arrest procedures and the detention that follows in
such wake, irrespective of the fact whether it concerns an
investigation into an IPC offence or a crime under special laws.
The arrest of a person entails serious implications since it deprives
him of personal liberty touching upon his fundamental rights as
guaranteed under the Constitution which, it is trite, cannot be taken
away except by following, and in accordance with, due procedure
of law. The obligations under the relevant provisions of law as
enacted by the legislature or as declared by the Constitutional courts
regulate the conduct not only of police but also other investigative
agencies under special legislations. This undoubtedly holds good
qua the investigating machinery under PMLA as well. Nothing said
heretofore or hereinafter in this judgment, therefore, is to be
construed as in any manner diluting the rights of every person
guaranteed under the law of the land to the fair procedure in the
matter of investigation or arrest.
130. The Code of Criminal Procedure does not define the
expression "accused". The term is generally understood to connote
a person suspected of having infringed the law for which he is liable
to be convicted and subjected to punishment. In contrast to a person
who stands convicted (upon his guilt having been proved), a person
referred to as an accused is one against whom accusations have
been made, the effort of the proceedings taken out being to prove
and substantiate the same. It is this endeavour which is undertaken
in two stages, the first being of investigation and the second, being
of trial. In H.N. Rishbud Vs. State of Delhi, (1955) 1 SCR 1150, in
the context of general criminal law, it was explained that:
"...under the Code investigation consists generally of
the following steps: (1) Proceeding to the spot, (2)
Ascertainment of the facts and circumstances of the
case, (3) Discovery and arrest of the suspected
offender, (4) Collection of evidence relating to the
commission of the offence which may consist of (a) the
examination of various persons (including the accused)
and the reduction of their statements into writing, if the
officer thinks fit, (b) the search of places or seizure of
things considered necessary for the investigation and
to be produced at the trial, and (5) Formation of the
opinion as to whether on the material collected there is
a case to place the accused before a Magistrate for
trial and if so taking the necessary steps for the same
by the filing of a charge-sheet under Section 173..."
131. The above observations hold good qua all criminal
investigations though, it must be added in the context of special
law offences the same will have to be read mutatis mutandis. Thus,
in special legislations if the cognizance is to be taken not on a
police report but on a complaint, there would be no occasion for
filing of chargesheet under Section 173 Cr. PC. Necessarily, the
same would apply to a prosecution even for IPC offence, if initiated
through the complaint mechanism.
132. Article 20 of the Constitution of India guarantees certain
protections in respect of conviction for offences including against
double jeopardy. Article 20(3) guarantees that "(n)o person accused
of any offence shall be compelled to be a witness against himself".
These fundamental rights including against self-incrimination are
available to all persons facing criminal charge, whether under the
general law represented by IPC or under the special statutes. But, it
is well settled that to claim protection of Article 20(3), the person
should be an accused of an offence. Formal accusation of a person
is generally necessary to make him an accused. Whether or not a
person is an accused depends on the facts and circumstances of the
case and the stage of the process of investigation or the law
governing the same.
133. In Ramesh Chandra Mehta (supra), decided by a
Constitution bench, the case pertained to offences, inter alia,
punishable under Sea Customs Act, 1878 which was later repealed
and replaced by the Customs Act, 1962. Under some provisions
similar to those of the Customs Act, certain statements had been
recorded by the Customs officer which were sought to be tendered
in evidence in the court, their admissibility having been questioned
on the ground the officer of customs was a police officer within the
meaning of Section 25 of the Evidence Act, rendering such
statement to be unavailable. The contentions were rejected with the
observations that the Customs officer was not a police officer nor
was he empowered to do or had undertaken investigation into an
offence, the purpose of inquiry embarked upon by him being to
prevent smuggling and at the stage of collecting evidence in the
course of such probe he was not accusing the person of any offence.
It is on this reasoning that the statement recorded by such officer of
the Customs was held to be admissible on the ground that the law
permitted him to examine "any person" who is suspected or
believed to be concerned in such activity. Reference has already
been made to the cases reported as Illias (supra); State of Punjab v.
Barkat Ram (supra); and Om Prakash v. Union of India (supra)
where similar views were taken.
134. The decision in Poolpandi and Ors. Vs. Superintendent,
Central Excise and Ors., (1992) 3 SCC 259, rendered by a bench of
three Hon'ble Judges concerned investigation undertaken in terms
of the provisions of the Customs Act, 1962 and the Foreign
Exchange Regulation Act, 1973 ("FERA"), the last legislation
having since been repealed and replaced by Foreign Exchange
Management Act, 1999 ("FEMA"). Questions were raised
concerning violation of Constitutional protection under Article
20(3) vis-a-vis the mandate in Section 108(3) of the Customs Act.
The court rejected the contentions in the light of decisions in
Ramesh Chandra Mehta (supra), Illias (supra) and Nandini
Satpathy Vs. P. L. Dani, (1978) 2 SCC 424. It was observed that
the protection against self-incrimination in Article 20(3) would not
inure vis-a-vis a "hypothetical person who may in the future be
discovered to have been guilty of some offence".
135. Noticeably, in Poolbandi (supra) exception was also taken to
the summoning of a person by the Customs officer for recording his
statement during the inquiry under the law, the contention being
that this was violative of the Constitutional right guaranteed under
Article 21 and amounted to mental torture. Similar submissions
have been made by the petitioners before this court on the ground
they apprehend harassment or unlawful detention. Rejecting the
plea that the petitioner at the time of his appearance for statement
before the Customs officer be given the liberty of having company
of his choice during questioning, the court observed thus:
"...The purpose of the enquiry under the Customs Act
and the other similar statutes will be completely
frustrated if the whims of the persons in possession of
useful information for the departments are allowed to
prevail. For achieving the object of such an enquiry if
the appropriate authorities be of the view that such
persons should be dissociated from the atmosphere and
the company of persons who provide encouragement to
them in adopting a non-cooperative attitude to the
machineries of law, there cannot be any legitimate
objection in depriving them of such company. The
relevant provisions of the Constitution in this regard
have to be construed in the spirit they were made and
the benefits thereunder should not be "expanded" to
favour exploiters engaged in tax evasion at the cost of
public exchequer. Applying the „just, fair and
reasonable test‟ we hold that there is no merit in the
stand of appellant before us."
136. In Central Bureau of Investigation Vs. State of Rajasthan and
Ors., (1996) 9 SCC 735, the prime contentions were that the offence
under FERA which was subject matter of investigation was non-
cognizable and there was a need for formal permission under
Section 155(2) Cr.P.C. to be obtained from the court of Magistrate.
This contention and request having been rejected by the Chief
Judicial Magistrate, a view upheld by the High Court in the
challenge brought before it, was reiterated before the Supreme
Court. While dismissing the appeal, the court ruled thus:
"28. FERA is a special legislation relating to
regulation of foreign exchange. FERA is also a Central
legislation enacted at a later point of time than the
DSPE Act which was enacted in 1946. In our view,
Sections 4 and 5 of the Code of Criminal Procedure will
not come in aid of the investigation of the offences under
FERA by a member of police force like an officer of
DSPE in accordance of the Criminal Procedure Code.
Sections 4 and 5 of the Code of Criminal Procedure
provide that in the absence of any provision regulating
investigation, inquiry or trial of non-IPC offences i.e.
offences under any other law, the investigation, inquiry
and trial shall be in accordance with the Code of
Criminal Procedure. But FERA is a self-contained code
containing comprehensive provisions of investigation,
inquiry and trial for the offences under that Act. The
provisions under FERA gives power to the officers of the
Directorate of Enforcement or other officers duly
authorised by the Central Government under FERA to
search, confiscate, recover, arrest, record statements of
witnesses, etc. FERA contains provisions for trial of the
offences under FERA and imposition of punishment for
such offences. FERA, being a special law, containing
provisions for investigation, enquiry, search, seizure,
trial and imposition of punishment for offences under
FERA, Section 5 of the Code of Criminal Procedure is
not applicable in respect of offences under FERA..."
137. The decision in Directorate of Enforcement Vs. Deepak
Mahajan and Anr., (1994) 3 SCC 440, also concerned the procedure
governing a person arrested under Section 35(1) FERA which was
in pari materia with Section 104(1) of the Customs Act. The court
noted that the scheme of both the legislations was more or less the
same, the provisions relating to arrest and production of the arrestee
before Magistrate identical. It was observed that the "proper
officer" referred in various provisions of the Customs Act denoted
an officer of the Customs assigned to perform the functions under
the law and would not include officers of the police and, therefore,
the police officers had no independent role to play in exercise of
powers under the Customs Act as in Sections 45 and 46 of FERA.
While observing that "conclusions (had) to be drawn which are in
the tenor of the law though not within the letter of the law" and for
this the matter required to be considered "by ascertaining the
purposeful meaning of the language deployed, the spirit and sense
which the legislature has aimed and intended to convey", and while
rejecting the argument of possible breach of fundamental right
under Article 20(3), this with reference to decisions in Ramesh
Chandra Mehta (supra), Poolbandi (supra) and Veera Ibrahim Vs.
State of Maharashtra, 1976 Crl. L.J. 860, it was held that the
procedural requirements of the Code of Criminal Procedure
particularly under Section 167 (2) or under Section 173 Cr.P.C were
not applicable and that, under the provisions of the said special
laws "it cannot be said that either the Officer of Enforcement or the
Customs Officer is not empowered with the power of investigation
though not with the power of filing a final report as in the case of a
police officer".
138. The case of Nandini Satpathy (supra) referred to in the
decision of Poolbandi (supra) is locus classicus in which the
expression "any person" as appearing in Section 161 Cr. P.C. came
to be construed, in the context, inter alia, of the guarantee under
Article 20(3) against self-incrimination. The procedural law, by
Section 160 Cr. P.C., empowers a police officer making an
investigation, to require the attendance of any such person as
appears to be acquainted with the facts and circumstances of the
case making it obligatory for such person to attend upon being so
required. Section 161 Cr. P.C. which falls in the Chapter XII of Cr.
P.C. relating to the powers of police to investigate reads, to the
extent relevant here, as under:
"161. Examination of witnesses by police - (1) Any
police officer making an investigation under this
Chapter, or any police officer not below such rank as
the State Government may, by general or special order,
prescribe in this behalf, acting on the requisition of
such officer, may examine orally any person supposed
to be acquainted with the facts and circumstances of
the case".
139. The moot question considered by the court was as to whether
the police have the power under Sections 160 and 161 Cr. P.C. "to
question a person who, then was or, in the future may incarnate as,
an accused person". Referring to earlier decisions reported as
Pakala Narayana Swami Vs. Emperor, AIR 1939 PC 47 and
Mahabir Mandal Vs. State of Bihar, (1972) 1 SCC 748, the court
ruled thus:
"36. ... We hold that "any person supposed to be
acquainted with the facts and circumstances of the case"
includes an accused person who fills that role because the
police suppose him to have committed the crime and must,
therefore, be familiar with the facts. The supposition may
later prove a fiction but that does not repel the section. ...
Moreover, the suppositions accused figures functionally as
a witness. "To be a witness", from a functional angle, is to
impart knowledge in respect of a relevant fact, and that is
precisely the purpose of questioning the accused under
Section 161 CrPC. The dichotomy between "witnesses"
and "accused" used as terms of art, does not hold good
here ... The appellant squarely fell within the
interrogational ring. To hold otherwise is to hold up
investigative exercise, since questioning suspects is
desirable for detection of crime and even protection of the
accused. Extreme positions may boomerang in law as in
politics."
(emphasis supplied)
140. It is not correct to contend that investigation under PMLA
dehors the procedure prescribed for police investigation under the
general criminal law (Chapter XII of Cr.P.C.) would denude the
process of crucial safeguards rendering it unfair or prone to misuse.
References made particularly to the need for registration of FIR
(under Section 154 in the case of cognizable offence and under
Section 155 in case of non-cognizable offence), communication of
copy of FIR to the Magistrate (under Section 157) or obtaining of
his authorization for investigation (under Section 155), besides
mandatory maintenance of investigation file (case diary) in the
prescribed format and its production at the time of seeking remand
of a person arrested (under Section 167) with filing of a formal
report on completion of investigation (under Section 173) are
irrelevant in the case of investigation by empowered officers under
PMLA. Same is the case of provisions contained in Section 162
Cr.P.C. or Section 25 of the Evidence Act generally prohibiting use
as evidence of statements made by an accused (or a suspect) to the
police.
141. The Enforcement officers empowered by PMLA to make
investigation into the offences under the said law are not to be
equated with police officers. The law confers upon them requisite
powers to carry out investigation and collect evidence. The said
power includes the power to issue summons to "any person" whose
attendance is considered "necessary" and compelling his
attendance, whether to "give evidence" or to "produce any records"
and to examine him "on oath", in terms of Section 50(2) and (3), or
to put any person under arrest (without warrant) upon satisfaction as
to his complicity. These powers necessary for investigation do not
render the authorities under PMLA same as police. The general
guidelines governing the arrest procedure, as envisaged in the Code
of Criminal Procedure or in terms of judicial dicta, control the
exercise of such power by them. The fundamental rights relating to
criminal prosecutions, in general, and against self-incrimination, in
particular, are not denied here. Similarly, the rights guaranteed to an
arrestee including for authorization for continued detention as per
the general criminal law continue to regulate and, for this purpose,
Section 167 Cr.P.C. continues to apply mutatis mutandis, all
references pertaining to the police or their procedure for
investigation to be read appropriately modified in relation to
officers empowered by PMLA to investigate.
142. There are safeguards available under this special law
(PMLA) which correspond in equal measure to the safeguards
under the general law some of which are represented by the above
quoted provisions of Cr.P.C. Some of the safeguards under PMLA
may be highlighted as under:
(i) No action affecting the rights of any person to property may
be initiated on unfounded suspicion. The Director (or Deputy
Director) must have "material in his possession" and must
record reasons "in writing" for forming belief about a person
having in his possession proceeds of crime or about their
possible use or retention before he can lawfully proceed to
have such property attached for adjudication or confiscation.
[Section 5 (1)]
(ii) A provisional attachment order of property cannot generally
be ordered in case it is suspected to be proceeds of a
scheduled offence unless the police investigation in such
regard has been concluded and a report already submitted.
[first proviso to Section 5(1)]
(iii) The officer directing provisional attachment of a property is
obliged by the law to report the fact to a superior independent
statutory authority (Adjudicating Authority) by making over
to it, in confidence, copy of the material, the recorded reasons
and connected proceedings, such authority, in turn, being
obliged by law to retain the said record in its safe custody,
the procedure and period prescribed by the Rules being such
as to ensure transparency and accountability. [Section 5(2)
read with corresponding Rules]
(iv) No action affecting the rights of any person to personal
liberty may be initiated on unfounded suspicion. Before
making arrest of any person, the Director (or other specified
officer) must have "material in his possession" and must
record reasons "in writing" for forming belief about such
person being guilty of an offence under PMLA. [Section
19(1)]
(v) The fundamental right guaranteed by Article 22(1) is ensured
as the person arrested under PMLA investigation is entitled
in law to be informed of "the grounds for such arrest".
[Section 19(1)]
(vi) The arresting officer is obliged by the law to report the fact to
the superior independent statutory authority (Adjudicating
Authority) by making over to it, in confidence, copy of the
material, the recorded reasons and connected proceedings,
such authority, in turn, being obliged by law to retain the said
record in its safe custody, the procedure and period
prescribed by the Rules being such as to ensure transparency
and accountability. [Section 19(2) read with corresponding
Rules]
(vii) The fundamental right guaranteed by Article 22(2) is ensured
since the arresting officer is obliged by the law not to detain
the arrestee for more than twenty-four hours, that being the
period within which he must be taken before the
jurisdictional Judicial Magistrate. [Section 19(3)]
(viii) The proceedings before the Judicial Magistrate upon the
arrestee being produced in terms of Section 19(3) place the
issue of continued detention beyond twenty-four hours, or
entitlement to release on bail, in the hands of a judicial
authority, such proceedings being guided generally by
Section 167 Cr.P.C., to be applied to the extent not
inconsistent with PMLA, and the restrictions against such
release on bail. [Sections 19(3) & 45(1)]
(ix) It is inherent in what has been last observed above that while
applying mind to the justification for continued detention,
and consequent denial of release on bail, the judicial
authority would have regard to the considerations on which
such further detention is permitted under the general criminal
procedure, such scrutiny including the issue as to whether
"the accusation or information is well founded" and
"adequate grounds exist" for authorizing such continued
detention for completion of investigation, satisfaction in such
regard being upon perusal of the record of investigation, it
always being mandatory for the person arrested to be
physically brought before such Magistrate. [Section 167
Cr.P.C.]
CONCLUSIONS
143. It is clear from the above discussion that the Prevention of
Money-Laundering Act, 2002 is a complete Code which overrides
the general criminal law to the extent of inconsistency. This law
establishes its own enforcement machinery and other authorities
with adjudicatory powers and jurisdiction. The enforcement
machinery is conferred with the power and jurisdiction for
investigation, such powers being quite exhaustive to assure
effective investigation and with built-in safeguards to ensure
fairness, transparency and accountability at all stages. The powers
conferred on the enforcement officers for purposes of complete and
effective investigation include the power to summon and examine
"any person". The law declares that every such person who is
summoned is bound to state the truth. At the time of such
investigative process, the person summoned is not an accused.
Mere registration of ECIR does not make a person an accused. He
may eventually turn out to be an accused upon being arrested or
upon being prosecuted. No person is entitled in law to evade the
command of the summons issued under Section 50 PMLA on the
ground that there is a possibility that he may be prosecuted in the
future. The law declared in Nandini Satpathy (supra) concerning the
statements under Section 161 Cr.P.C. recorded by the police, and in
other pronouncements concerning similar powers of officers of the
Customs Department, as noted earlier, provide a complete answer to
the apprehensions that have been expressed.
144. There is no requirement in law that an officer empowered by
PMLA may not take up investigation of a PMLA offence or may
not arrest any person as permitted by its provisions without
obtaining authorization from the court. Such inhibitions cannot be
read into the law by the court.
145. The prime argument of the petitioners is of political vendetta.
This argument is not supported by any material. These proceedings
are not the appropriate forum for the court to examine such plea
which, in the interest of the petitioners themselves, must be left for
it to be pressed, if they were so advised and if they have material to
substantiate the same, at some appropriate stage in future. Suffice it
to observe in this context, and at this stage, that those in public life
are expected to be open to probity. Higher the position in life (or
polity), higher the obligation (moral, if not legal) to be accountable.
Endeavours to stall investigation into their affairs by the law
enforcement agencies, particularly on technical grounds, have the
potency of giving the impression that there is something to hide.
146. There is nothing shown to the court from which it could be
inferred that the issuance of summons by the respondents to the
petitioners for investigation into the ECIR, in exercise of statutory
powers, has caused, or has the effect of causing, any prejudice to
any of them.
147. The petitions are found devoid of substance and,
consequently, dismissed with all pending applications.
(R.K. GAUBA)
JUDGE
JULY 03, 2017
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