Karnataka High Court
Jsw Steel Ltd vs Assistant Director on 13 June, 2022
Bench: M.Nagaprasanna
1
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 13TH DAY OF JUNE, 2022
BEFORE
THE HON'BLE MR. JUSTICE M. NAGAPRASANNA
WRIT PETITION No.7499 OF 2022 (GM-RES)
C/W
WRIT PETITION No.11399 OF 2022 (GM-RES)
IN WRIT PETITION No.7499 OF 2022 (GM-RES)
BETWEEN:
JSW STEEL LIMITED
BRANCH OFFICE AT:
6TH FLOOR, EAST WING
RAHEJA TOWERS, M.G.ROAD
BENGALURU - 560 001.
REGISTERED OFFICE:
JSW CENTRE
BANDRA KURLA COMPLEX
BANDRA (EAST)
MUMBAI - 400 051.
... PETITIONER
(BY SRI SIDHARTH LUTHRA, SR.ADVOCATE A/W
SRI MRINAL SHANKAR, SRI DHARMA TEJ AND
SRI PRATEEK GUJJAR, ADVOCATES)
AND:
DEPUTY DIRECTOR
DIRECTORATE OF ENFORCEMENT
DEPARTMENT OF REVENUE
MINISTRY OF FINANCE
2
GOVERNMENT OF INDIA, 3RD FLOOR
B.BLOCK, BMTC, SHANTINAGAR TTMC
KH ROAD, BENGALURU - 56 0027.
... RESPONDENT
(BY SRI MADHUKAR DESHPANDE, ADVOCATE)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND
227 OF THE CONSTITUTION OF INDIA READ WITH SECTION 482 OF
CR.P.C., PRAYING TO ALLOW THE WRIT PETITION FILED BY THE
PETITIONER AND ISSUE A WRIT OF CERTIORARI OR ANY OTHER
APPROPRIATE WRIT, ORDER OR DIRECTION QUASHING ALL
ACTION BEING UNDERTAKEN BY THE RESPONDENT INCLUDING
INVESTIGATION AND ANY PROCEEDINGS AGAINST THE
PETITIONER AND ITS OFFICIALS EMANATING FROM OR ARISING
OUT OF THE ECIR/09/BZ/2012 AS ILLEGAL AND VOID AB INITION
ANNEXURE-E AND ETC.,
IN WRIT PETITION No.11399 OF 2022 (GM-RES)
BETWEEN:
1. JSW STEEL LIMITED
(COMPANY INCOPORATED
UNDER COMPANIES ACT, 1956)
BANDRA KURLA COMPLEX
BANDRA (EAST)
MUMBAI - 400 051
REPRESENTED BY
ITS AUTHORISED SIGNATORY.
2. MR.PRAVIN JOHN SEQUEIRA
AGED ABOUT 55 YEARS
S/O MR.MARSHAL SEQUEIRA
WORKING AS DEPUTY
GENERAL MANAGER, COMPLIANCE
JSW STEEL LIMITED, JSW CENTER
BANDRA KURLA COMPLEX
BANDRA (EAST)
MUMBAI - 400 051. ... PETITIONERS
3
(BY SRI C.V.NAGESH, SR.ADVOCATE A/W
SRI MRINAL SHANKAR, SRI DHARMA TEJ AND
SRI PRATEEK GUJJAR, ADVOCATES)
AND:
ASSISTANT DIRECTOR
DIRECTORATE OF ENFORCEMENT
DEPARTMENT OF REVENUE
MINISTRY OF FINANCE
GOVERNMENT OF INDIA
3RD FLOOR, B BLOCK, BMTC
SHANTINAGAR TTMC
KH ROAD, BENGALURU - 560 027.
... RESPONDENT
(BY SRI MADHUKAR DESHPANDE, ADVOCATE)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND
227 OF THE CONSTITUTION OF INDIA READ WITH SECTION 482 OF
CR.P.C., PRAYING TO ALLOW THE WRIT PETITION FILED BY THE
PETITIONERS AND ISSUE A WRIT OF CERTIORARI OR ANY OTHER
APPROPRIATE WRIT OR ORDERS/DIRECTIONS SETTING ASIDE
THE IMPUGNED ORDER DATED APRIL 11, 2022 PASSED BY THE
SPECIAL COURT IN SPECIAL CASE NO.872 OF 2022 WHEREBY
COGNIZANCE OF THE IMPUGNED COMPLAINT HAS BEEN TAKEN
AND SUMMONS ISSUED TO THE PETITIONERS ((ANNEXURE - B).
THESE WRIT PETITIONS HAVING BEEN HEARD AND
RESERVED FOR ORDERS, COMING ON FOR PRONOUNCEMENT
THIS DAY, THE COURT MADE THE FOLLOWING:-
ORDER
1st petitioner common in both the petitions and petitioner
No.2 in Writ Petition No.11399 of 2022, a representative of the
1st petitioner in the writ petition, who will be for the sake of
convenience referred to as 'either the petitioner or the Company',
are before this court in the subject petitions.
2. Petitioner in W.P.No.7499 of 2022 seeks quashment of
all proceedings including investigation or any other proceedings
taken against it and its officials emanating from
ECIR/09/BZ/2012 and the petitioners in W.P.No.11399 of 2022
call in question an order dated 11-04-2022 by which the
concerned Court takes cognizance of the offences against the
petitioners and issues summons. In effect both these petitions
arise out of common facts and grounds except a subsequent
event dated 11-04-2022 being called in question in the latter
petition. Therefore, both these petitions are taken together and
considered by this common order.
3. Brief facts leading to the filing of the present petitions,
as projected by the prosecution, are as follows:-
1st Petitioner is a public limited company registered under
the provisions of the Companies Act, 1956 ('the Act' for short)
and is in the business of manufacture of steel and has plant in
several locations including the one at Vijayanagar in the name
and style of JSW Steel Limited. The petitioner claims to be in
the ordinary course of business having entered into a contract
with M/s Obulapuram Mining Company Private Limited ('OMC'
for short) owned by Mr. G.Janardhana Reddy who was one of the
Directors and owners of the said Company. The said contract
was entered into between the OMC and the petitioner for supply
of 1.5 million tons of iron ore, fines and lumps to the plant of the
petitioner at Vijayanagar. The contract was signed on
16-11-2009. The petitioner claims to have made a payment of
Rs.130/- crores as advance towards the supply by way of bank
transfer.
4. On and after March 2010 the OMC failed to supply iron
ore to the petitioner in breach of the contract. The petitioner
claims to have requested the said company for supply and on
several requests supplies were made through its sister concerns
and certain supplies of iron ore still remain due to the petitioner
which the petitioner claims to be to the tune of Rs.35.45 crores.
It is therefore, contended by the petitioner that the petitioner is a
creditor of Mr. G.Janardhan Reddy, OMC and all its group
companies/sister concerns. Several correspondences are
produced to demonstrate the said aspect.
5. On 23-09-2011 the Apex Court in S.L.P.(Civil) Nos.
7366-7367 of 2010 ordered investigation by the CBI into the
illegal mining and export of iron ore by the Associated Mining
Company ('AMC' for short), a partnership concern of Mr.
G.Janardhan Reddy. In compliance with the direction of the
Apex Court, the CBI registered a FIR against 21 accused
including AMC, its partners G.Janardhan Reddy, Smt. Lakshmi
Aruna and others. The petitioner was nowhere in the picture at
that juncture. On 30-05-2012 the CBI filed a charge sheet in RC
18(A)/2011 against Mr. G.Janardhan Reddy, Smt. Lakshmi
Aruna and 5 other accused for offences punishable under the
IPC and the Prevention of Corruption Act, 1988. The petitioner
again was not in the picture in the charge sheet filed by the CBI.
Things standing thus, in view of the supplies not being made by
OMC or AMC, arbitration proceedings were initiated by the
petitioner/company against OMC for recovery of outstanding
amount of Rs.35.44 crores and other damages. During the
pendency of those proceedings on 25-09-2012 the respondent
registered Enforcement Case Information Report ('ECIR') against
Mr. G.Janardhan Reddy and Smt. Lakshmi Aruna and the
competent Court took cognizance of the aforesaid charge sheet
filed by the CBI. The petitioner again was not named in any of
these proceedings.
6. On 06-09-2013, the CBI filed a supplementary report
in RC18(A)/2011-CBI/BLR. It is here the name of the
petitioner figures. After filing the charge sheet by way of
supplementary report against the petitioner, the Arbitral
Tribunal allowed the application for arbitration granting all the
reliefs that had been sought by the petitioner. The petitioner has
emphasized on the fact of arbitration to contend that it was a
pure contract between the petitioner and the AMC or OMC, as
the case would be, for supply of iron ore and this cannot be
made into an offence by dragging the name of the petitioner in
the aforesaid ECIR and the charge sheet filed. On 4-05-2016 an
execution application was filed by the petitioner to enforce the
award of the Arbitrator (supra) against the OMC in the Bombay
High Court which is pending consideration before the said
Court. OMC also had preferred an application challenging the
very award in Commercial Arbitration Petition No.454 of 2019,
which came to be dismissed for its non-prosecution. Therefore,
the contention of the petitioner is that it is a creditor and not a
debtor of OMC and its group of companies or its sister concerns
and, therefore, there can be no question of the
petitioner/company in possession of any of the proceeds of
crime under the PMLA and as such, the investigation or the
charge sheet filed against the petitioner is totally misconceived.
Several attachment orders came to be issued against the
petitioner/Company which were all challenged and several
proceedings were initiated by the petitioner against the present
respondent/ Enforcement Directorate.
7. On 29-02-2016 Writ Petition Nos.11440-11441 of 2016
were filed by Mr. G.Janardhan Reddy and Smt. Lakshmi Aruna
before this Court seeking quashing of PMLA proceedings
initiated against them by the present respondent including
various attachment orders pursuant to registration of the said
crime. By order dated 13-3-2017, a Division Bench of this Court
in Writ Petition No.5962 of 2016 and Writ Petition Nos. 11440-
11441 of 2016 all filed by Mr. Janardhan Reddy on actions
initiated by the respondent against Mr. G.Janardhan Reddy and
Smt. Lakshmi Aruna including ECIR attachment orders etc.
were quashed on the sole ground that the provisions of PMLA
did not have retrospective effect and on the date on which the
contract had been entered into, the offence so alleged was not an
offence that was enumerated in the Act. The attachments orders
that were challenged by Mr. G. Janardhan Reddy before the
Appellate Tribunal, PMLA allowed those proceedings and
quashed all the attachment orders. Thus the averment is, none
of the allegations that were levelled against Mr. G.Janardhana
Reddy were present as on 05-05-2017.
8. The State preferred a Special Leave Petition against the
order of the Division Bench in S.L.P. (Crime) No. 4472-4473 of
2017. The Apex Court by its order dated 24-07-2017 admitted
the special leave petition but did not grant an interim order of
stay of the order but clarified that the judgment of the Division
Bench will not operate as a precedent. In the light of no stay
being granted to the judgment of the Division Bench which had
declared that PMLA could not be operated retrospectively to
invoke predicate offences which are not included in the schedule
to the PMLA, as on the date of the transaction, the entire
premise of the petitioner is based upon the judgment rendered
by the Division Bench to hold that predicate offences that were
not scheduled in the schedule appended to PMLA are sought to
be invoked against the petitioner. To draw sustenance, the
petitioner contends that there is no stay of the judgment, as it is
only that it shall not be treated as a precedent. What is quashed
by this Court is entire ECIR pursuant to which, the
supplementary report is filed by the Enforcement Directorate in
which the name of the petitioner figures. It is, therefore,
contended that when the foundation itself has gone, the
superstructure cannot remain. It is on this premise that the
present writ petition in W.P.No.7499 of 2022 is filed by the
petitioner.
9. The matter was heard on 19.04.2022 at which point in
time, the respondent produced before the Court a charge sheet
filed in the matter before the competent Court on 18-04-2022.
The matter was then heard and reserved for orders. Challenging
filing of the charge sheet and subsequent order of the concerned
Court taking cognizance of the offence and issuing of summons,
the companion petition in W.P.No.11399 of 2022 is filed.
10. Heard the learned senior counsel Sri.Sidharth Luthra
representing the petitioner in W. P. No.7499 of 2022, learned
senior counsel Sri C.V.Nagesh representing the petitioners in
W.P.No.11399 of 2022 and the learned counsel Sri Madhukar
Deshpande representing the Enforcement Directorate in both the
cases.
11. The learned senior counsel representing the petitioner
in W.P.No.7499 of 2022 would contend that the very initiation of
proceedings against the petitioner is illegal as on the date of
registration of crime in ECIR/09/BGZO/2012 the offences so
alleged were not scheduled offences under the PMLA. He would
further contend that on the very basis, registration of crime is
quashed by the Division Bench of this Court in Writ Petition
No.11440-11441 of 2016. The Apex Court having not stayed the
judgment and only treated it not to be a precedent in any case,
the quashment should enure to the benefit of the petitioner.
Since ECIR itself is quashed by the Division Bench holding that
a non-scheduled offence cannot be alleged against the accused,
the very foundation is obliterated and any report filed on the
report of the said ECIR is a nullity in law. He would further
contend that the petitioner has never been in possession of any
proceeds of crime in relation to ECIR but in fact is a creditor
where OMC and AMC owe several crores even in terms of
arbitration award and would contend that the very initiation or
continuation of proceedings against the petitioner is contrary to
law.
12. Sri C.V.Nagesh, learned senior counsel representing
the very petitioner in Writ Petition No.11399 of 2022 would
submit, in addition to what has been already submitted with
regard to the manner in which the competent Court has taken
cognizance of the offences and has issued summons, that very
issuance of process would not stand the scrutiny of law as it
does not bear reasons to indicate that there exists sufficient
ground to proceed against the petitioner and would contend that
the order of the learned Special Judge taking cognizance runs
counter to several judgments of the Apex Court.
13. On the other hand, Sri Madhukar Deshpande, learned
counsel representing the respondent refuting the submissions
made by the respective learned senior counsel would contend
that the Apex Court though admitted the S.L.P. against the
order passed by the Division Bench did not stay it, but
nonetheless directed that it shall not be treated as a precedent
which would clearly indicate that the petitioner cannot draw any
benefit from the order passed by the Division Bench. The matter
pending before the Apex Court not being in dispute, judicial
discipline requires that this Court would not pass any conflicting
order till the Apex Court would decide the issue.
14. Apart from the aforesaid submission, the learned
counsel takes this Court to a judgment rendered by a
Co-ordinate Bench in which the very petitioners were parties
and all the submissions which are now being made were made
and were rejected by the Co-ordinate Bench in Writ Petition
No.38642 of 2016 and connected cases decided on 11-12-2020
in which the present petitioners were also parties in the
connected petitions viz., Writ Petition No.17894 of 2015, Writ
Petition No.24444 of 2015 and Writ Petition No.19313 of 2016.
The said petitions were filed by the very petitioners herein urging
the very same grounds that are now being urged in the present
petitions and therefore, would seek dismissal of the petitions.
15. I have given my anxious consideration to the
submissions made by the respective learned senior counsel and
the learned counsel representing the Enforcement Directorate
and perused the material on record.
16. The afore-narrated facts, dates and events are not in
dispute and are, therefore, not reiterated. The contract between
the petitioner and the OMC takes place in the years 2009 and an
ECIR was registered against Mr. G.Janardhan Reddy and
Smt. Lakshmi Aruna on 25-09-2012. The Division Bench by its
order dated 13-03-2017 in Writ Petition No.5962 of 2016 and
Writ Petition Nos. 11440 and 11441 of 2016 quashed the
proceedings against Mr. G.Janardhan Reddy and Smt. Lakshmi
Aruna in ECIR/09/BZ/2012. It is germane to notice the
judgment rendered by the Division Bench dated 13-03-2017.
The Division Bench holds as follows:
"9. We have bestowed our attention to the submissions
made by the learned senior counsel appearing for the writ
petitioner and the learned assistant solicitor general
appearing for the respondent-authorities.
10. It can be seen from the records that all the
offences allegedly committed by the writ petitioner
were earlier to the insertion of the provision in the
schedule of the Prevention of Money Laundering
(Amendment) Act, 2009, and as such, they have no
application.
11. Therefore, the Enforcement Case Information Report
and the order of attachment are without jurisdiction and
are liable to be quashed. As we have, already, held that
the writ petitioner cannot be prosecuted for the offences
alleged, as they are not the scheduled offences under the
PML Act. Those offences under the Mines and Geology
(Development and Regulation) Act, 1957, the Forest
(Conservation) Act, 1980, the Indian Penal Code and the
Prevention of Corruption Act, 1988, were included in the
PML Act declaring them as scheduled offences only with
effect from June 1, 2009. Hence, the Enforcement
Directorate could not have invoked the provisions of the
PML Act with retrospective effect.
12. The petitioner cannot be tried and punished for the
offences under the PML Act when the offences were not
inserted in the schedule of offences under the PML Act.
This would deny the writ petitioner the protection provided
under clause (1) of Article 20 of the Constitution of India.
Article 20(1) of the Constitution of India prohibits the
conviction of a person or his being subjected to penalty for
ex-post facto laws.
Consequently, the order of attachment is, also, liable to be
set aside.
Re: Writ Petition Nos. 11440-11441 of 2016:
13. However, there is a slight difference in the case of
writ petitioners in these writ petitions. Here, the first
petitioner has, since, been discharged and, therefore, the
writ petition as against the first petitioner has become
infructuous.
14. In so far as the second petitioner is concerned, the
allegation is that he has committed theft of 24,00,000 MT
of iron ore by illegal mining, when his own quarry was not
under operation. It is, also, alleged against this writ
petitioner that he had sold the iron ore outside and
thereby illegally acquired a sum of ` 480 crore [Rupees four
hundred and eighty crore] only.
15. Mr Sudhir Nandrajog, learned senior advocate,
appearing in support of the writ petitioners, has taken a
short point, contending that the allegation of theft or illegal
mining is not a scheduled offence under the PML Act.
16. As the offence of theft is not a scheduled
offence under the PML Act, by applying the same
principles as we have taken above, we find no merit
in the initiation of proceedings against the
petitioners in these writ petitions under the amended
PML Act. Hence, the action taken against them under
the said Act is, also, liable to be quashed.
17. In addition to the aforesaid submissions, Mr
Nandrajog, learned senior advocate appearing for the writ
petitioners in all these writ petitions, submits that till date,
no proceeding was advanced against the writ petitioners
far less to say about any conviction against the writ
petitioners He submits that in the absence of conviction,
there could not have been a final order of attachment.
*18. Once an FIR or a report is filed in the predicate
offence, an ECIR can be registered and a provisional
attachment order can be passed by the enforcement
department. However, without the conviction/judicial
conclusion of the trial proceedings, any order confirming
the attachment and confiscation could not be passed.*
19. We, therefore, allow all these writ petitions and
quash the action initiated against all these writ petitioners
by the enforcement authorities. We, also, quash the
attachment orders passed against the writ petitioners."
(Emphasis supplied)
This was called in question before the Apex Court in S.L.P.No.
4472-4473 of 2017. The Apex Court after hearing the parties
granted leave and directed that the impugned judgment and
order will not operate as a precedent. The entire premise on
which the present petitions are preferred are that the Division
Bench has quashed identical offences against Mr. G.Janardhan
Reddy and the Apex Court has not stayed the matter.
Interregnum development is germane to be noticed.
17. Yet another factor that requires to be noticed and
considered is that the petitioners herein had preferred writ
petitions along with others before this Court in Writ Petition Nos.
38642 of 2016 and connected matters in the case of DYANI
ANTONY PAUL V. UNION OF INDIA, in which three of the writ
petitions were filed by the present petitioners as stated supra.
The Co-ordinate Bench in extenso dealt with the very issue also
considering the purport of the judgment of the Division Bench
and the interim order so granted therein and dismissed the
petitions. The Co-ordinate Bench inter-parties has held as
follows:
"30. Having heard the learned Advocates appearing
for parties, I am of the considered view that following points
would arise for my consideration:
(i) .... .... .... ....
(ii) Whether the proceedings initiated under the
PML Act by the authorities would be bad in law or
without jurisdiction for want of existence of predicate
offence or offence prescribed under the Schedule to the
PML Act not being in existence on the date of initiation
of proceedings under PML Act?
OR
Whether the offence of money laundering
under Section 3 of PML Act is a stand alone offence?"
... ... ...
RE. POINT Nos.(ii) & (iii):
65. It takes me to the next contention raised by the
learned Advocates appearing for the petitioners namely, as to
whether proceedings under the PML Act can be initiated by
the authorities even though offence specified under the
Schedule not being in existence or in other words, even though
FIR is not registered for the offences specified in the schedule
to the PML Act, against such person who is facing the
proceedings under the PML Act? Point Nos.(ii) & (iii) are
interlinked. Hence, they are taken up together for
consideration, adjudication and being answered, since any
opinion expressed on either of them is likely to overlap.
... ... ...
67. The main thrust of the arguments advanced by
the learned Advocates appearing for the parties is that the
provisions of The Prevention of Corruption Act, 1988 (for short
'PC Act') did not find a place in the Schedule to the PML Act or
in other words, Section 13 of PC Act came to be added to the
Schedule of the PML Act with effect from 01.06.2009 by Act 21
of 2009 and as such the offences which had occurred prior to
01.06.2009 cannot be brought under the sweep of the PML Act
or it cannot be made applicable retrospectively. It has been
further contended that for invoking the provisions of PML Act,
a person must have committed a schedule offence; there must
be proceeds of crime; either accused or a third party must be
in possession of such proceeds of crime; must be projecting
that money or property as untainted; and there must be
reasonable belief or apprehension in the mind of the authority
that such property will be concealed, transferred or dealt with,
resulting in frustrating the confiscation proceedings and only
when these ingredients are present, the proceedings under the
PML Act can continue and not otherwise.
68. The PML Act is a special enactment having been
enacted to deal with ever increasing menace of money
laundering. The provisions of the PML Act have over-riding
effect over provisions in other statutes or in other words, the
provisions of PML Act prevail over anything inconsistent
contained in any other law. It is trite law that when two Acts
are Special Acts, in such an event it is the later act which will
prevail. Hon'ble Apex Court in SOLIDAIRE INDIA LIMITED
vs FAIRGROWTH FINANCIAL SERVICES reported in JT
2001(2) SC 642 and in BANK OF INDIA VS. KETHAN
PAREKH reported in (2008) 8 SCC 148 has held when both
Acts are Special Acts, it is subsequent legislation which will
have a over-riding effect. It was further observed by Hon'ble
Apex Court that cases might arise where both the enactments
have the non-obstante clause, then in that event the proper
perspective would be that one has to see the subject and
dominant purpose for which the special enactment was made
and in case the dominant purpose is covered by that
contingencies, then notwithstanding that the act might have
come at a later point of time, the earlier enactment prevails
and the intention of law makers can be ascertained by looking
to the objects and reasons.
69. In RAMA RAJU's case referred to supra, it has
been further held that "unit of interpretation is the Act as a
whole and such of those provisions which are considered for
interpretation but in the context of the provisions of the Act." It
is also held that the words of a statute, passed after the date
of a treaty and dealing with the same subject-matter, are to be
construed, if they are reasonably capable of bearing such a
meaning, as intended to carry out the treaty obligation and
not to be inconsistent with it.
70. The said order passed by the High Court of
Andhra Pradesh is a subject matter of challenge before the
Hon'ble Apex Court and that there is no interim order against
the order passed by the Andhra Pradesh High Court. This
Court is in full agreement with the views expressed by the
High Court of Andhra Pradesh and do not find any good and
valid ground to take any view contrary to the view expressed
by High Court of Andhra Pradesh.
71. In fact, the High Court of Gujarat in the matter of
ALIVE HOSPITALITY AND FOOD PRIVATE LIMITED VS.
UNION OF INDIA AND OTHERS, 2013 SCC OnLine Guj
3909, has expressed its view that it is in agreement with the
views expressed by the Andhra Pradesh High Court in
B.RAMA RAJU's case including the conclusions drawn
thereunder. It has been further held:
"10. Upon threadbare analysis and consideration
of contentions of law viz. jurisdiction and powers under
Sections 5 and 8 of the PML Act, violation of rights of the
petitioners under Articles 14, 19 and 21 of the
Constitution of India, inapplicability of provisions of penal
nature with retrospective effect in the facts and
circumstances of the case and absence of any ingredients
to bring the alleged transaction about subject property
within the definition of 'criminal proceeds', property' and
'value of the property', etc. a complete answer is given by
a Division Bench of the Andhra Pradesh High Court in the
case of B. Rama Raju.
11. In view of the above, I am in complete
agreement with the conclusions drawn by the Division
Bench of Andhra Pradesh High Court in the case of B.
Rama Raju [supra] whereby the contention that the
definition of "proceeds of crime" [Section 2(1)(u)] is too
broad and is therefore arbitrary and invalid since it
subjects even property acquired, derived or in the
possession of a person not accused, connected or
associated in any manner with a crime and thus places
innocent persons in jeopardy, does not merit acceptance."
72. Section 2(p) defines "money laundering" and it
has the same meaning as assigned to it in Section 3. A plain
reading of Section 3 of PML Act would indicate that whosoever
directly or indirectly attempts to indulge or knowingly assists
or knowingly is a party or is actually involved in any process
or activity connected with the "proceeds of crime" including
its concealment, possession, acquisition or use and projecting
or claiming it as untainted property would be guilty of the
offence of money laundering. The punishment for money
laundering is prescribed under Section 4, which shall not be
less than three (3) years, but may extend upto 7 years and
shall also be liable to fine. The proviso to Section 4 would also
indicate that if the proceeds of crime involved in money
laundering relates to any offence specified under paragraph 2
of Part A of the schedule, the punishment can extend upto 10
years.
73. Section 2(u) defines the term "proceeds of
crime" meaning any property derived or obtained, directly or
indirectly by any person as a result of criminal activity
relating to a scheduled offence or the value of any such
property or where such property is taken or held outside the
country, then the property equivalent in value held within the
country. By Finance Act, 28 of 2016 the words "or where
such property is taken or held outside the country, then
the property equivalent in value held within the
country" came to be inserted. By Act 13 of 2018, after the
words "within the country" the words "or abroad" came to
be added. Thus, the definition of "proceeds of crime" as
amended give a wider ambit to include value of specific
property equivalent in value held outside the country as well.
For instance, if a person in India is being labeled for having
proceeds of crime in a country outside India, then, in such a
scenario, his property situated in India shall be attached even
though it may not have a relation to the proceeds of crime.
The 2018 amendment has extended the ambit, wherein, the
authorities can now proceed against such property equivalent
to proceeds of crime held outside the country.
74. Thus, the expression "proceeds of crime" means
any property derived or obtained directly or indirectly by any
person, as a result of criminal activity, related to a scheduled
offence or the value of such property. The expression 'property'
is elucidated in Clause (v) of Section 2, as any property or
assets of every description, whether corporeal or incorporeal,
movable or immovable, tangible or intangible and includes
deeds and instruments evidencing title to, or interest in, such
property or assets, wherever located. Section 2 (u), therefore,
does not envisage either mens rea or knowledge that the
property is a result of criminal activity. If any property, which
includes value of the property, is "proceeds of crime" then any
transfer in terms of Section 2(za) requires examination to
verify as to whether it is by way of a money-laundering
operation involving the process of placement, layering or
integration. Such property could be subjected to attachment
and confiscation. The Section, however, does not presuppose
knowledge of the proceeds being of criminal activity.
Properties apart from the "proceeds of crime" are not liable to
attachment, neither is it included in the ambit of the Act. All
that the Section is concerned with is the "proceeds of crime"
and does not extend to property not so involved.
75. A plain reading of the definition of "money
laundering" as indicated in Section 2(p) would indicate, it
has not undergone any change and it has the same meaning
as assigned to it under Section 3. Whereas, Section 2(y)
which defines "schedule offence" has undergone
amendment namely, sub-clause (ii) was substituted by Act
No.21 of 2009. For the words "thirty lakh rupees or more"
was substituted by the words "one crore rupees or more".
76. The expression "schedule offence" is defined
under Section 2(y), which means - (i) the offences specified in
Part-A of the Schedule; or (ii) the offences specified under Part-
B of the Schedule if the total value involved in such offences is
one crore rupees or more; or (iii) the offences specified under
Part-C of the Schedule. Section 5 relates to attachment of the
property involved in money laundering. Thus, it is evident
from the aforesaid provision of the PML Act that commission of
a schedule offence is not a fundamental precondition for
initiating proceedings under the PML Act, since the offence of
money laundering is independent of schedule offence. From a
plain reading of the PML Act or on a conjoint reading of the
provisions of the PML Act, it would leave no manner of doubt
that it deals only with laundering of money acquired by
committing the scheduled offence. To put it differently, the
PML Act deals only with the process or activity with the
proceeds of crime including its concealment, possession or
use. The PML Act has been enacted to prevent money
laundering and to provide for confiscation of property derived
from or involved in, money laundering.
77. Article 20 of the Constitution prohibits conviction
except for violation of a law in force at the time of commission
of an offence. In other words, there cannot be prosecution
under the PML Act for laundering of money acquired by
committing the schedule offences prior to the introduction of
the PML Act. Therefore, the time of commission of scheduled
offences would not be relevant in the context of the
prosecution under the PML Act. What would be relevant in the
context of prosecution is the time of commission of the act of
money laundering. The question would be, whether a person
involved in money laundering as provided under Section 3 of
the PML Act has indulged in the said act or not has to be
decided by the competent authority. What is the date of
laundering of money will have to be decided on facts of each
case and there cannot be any prescribed straight jacket
formula. This is an important fact which the authority will
have to examine and it is a mixed question of law and fact.
78. A person acquiring assets through illegal means
who comes before the society and claims that said money was
acquired by proper means, then he would be guilty of the
offence of money laundering. A person might have committed
an offence long back and the proceeds of it is being placed,
layered or sought to be integrated to the main stream of
economy, then also, he is said to have committed the offence
of money laundering. Incorporation of certain offences in the
Schedule is to bring it within the net of PML Act namely,
proceeds of that crime within the provisions of the Act. For
constituting an offence under Section 3 of PML Act, it is the
connection of transaction to proceeds of crime which is
sufficient and not the crime.
79. The main object of PML Act is to ascertain the
proceeds of crime which involved in money laundering and
attachment, confirmation and confiscation of the proceeds of
crime in the form of properties and also to punish the
offenders of money laundering. The date of acquisition of
properties is immaterial but the date of projecting the proceeds
of crime as untainted properties would only have to be
ascertained by conducting investigation.
80. What is targeted by Section 3 is 'laundering of
money' and therefore, the date of 'laundering' would be
relevant. The expression 'laundering' as found in Section 3
comprises of involvement in any process or activity by which
the illicit money is being projected as untainted. Thus, the
relevant date is not the date of acquisition of illicit money but
the dates on which such money is being processed by
projecting it as untainted.
81. The offence of money laundering is not covered
under any other provisions of law. This Court in
W.P.No.5299/2019 & connected matters disposed of on
29.08.2019 has held that a reference to criminal activity
relating to a scheduled offence has wider connotation and it
may extend to a person who may not be the offender but may
be connected with criminal activity. It has been further held:
"25. The PML Act being a special enactment
contemplates a distinct procedure at the initial stage and
thereafter provide for initiation of prosecution in order to
achieve the special purpose envisaged under the Act and
as such, it cannot be construed that proceedings under
the PML Act is to be equated with prosecution initiated
under the criminal proceedings for the offence punishable
under the Indian Penal Code. Thus, initiation of action
under the PML Act cannot have any implication or impact
in respect of registration of other cases either under the
Indian Penal Code or any other penal laws.
26. The offence of money laundering
under Section 3 of the Act is an independent offence. A
reference to criminal activity relating to a schedule offence
has wider connotation and it may extend to a person,
who is connected with criminal activity relating to
schedule offence, but may not be the offender of schedule
offence. It is in this background, it has to be necessarily
held that money laundering is a stand alone offence
under the PML Act. In this background, when Section 44
of the PML Act is perused, it would clearly indicate that
special court may take cognizance of the offence upon a
complaint by authorized signatory, which means
cognizance will be taken of an offence which is separate
and independent. The object of issuance of summons is
to trace or ascertain the proceeds of crime if any and to
take steps in that regard like attaching the proceeds of
crime if proved in a given case.
27. Even in case of a person who is not
booked for a scheduled offence but is later booked and
subsequently acquitted for the offences punishable under
different enactments, prescribed under Part 'A' to Part 'C'
of the Schedule, still such person can be proceeded under
PML Act. In other words, proceedings can be against
persons who are accused of a scheduled offence or
against persons who are accused of having committed an
offence of money laundering and also persons who are
found to be in possession of the "proceeds of crime". It is
not necessary that a person has to be prosecuted under
the PML Act only in the event of such person having
committed schedule offence. The prosecution can be
independently initiated only for the offence of money
laundering as defined under Section 3 read with section
2(p) which provides that "money laundering" having the
meaning assigned to it under Section 3 of the Act."
"23. In other words, the proceedings under PML
Act are independent, separate, distinct and different from
the proceedings initiated for scheduled offences by other
law enforcement agencies. PML Act is a stand alone
enactment which differentiates the Schedule offence and
the money laundering offence separately. To put it
differently, if the investigation for the predicate offence is
conducted by the authorities so empowered under the
enactments and if for various reasons such proceedings
were to be closed or dropped, then, proceedings under
PML Act would not automatically disappear or is not
required to be dropped.
24. Even in case of proceeds of crime not being
in possession of the alleged offenders, but if it is sought
to be projected as an untainted money and sought to be
ploughed into the economy, which ultimately derails the
economy of the country, then, authorities under the PML
Act would be empowered to proceed under the provisions
of PML Act. As to whether it is proceeds of crime or its
use or concealment or acquisition is to be decided only by
the adjudicating authority after verifying the facts and
circumstances that would be unraveled by verifying the
relevant records and documents during the course of
investigation. The mere suspicion of the authorities that
proceeds of crime is being ploughed into main stream of
the economy as untainted money is sufficient enough for
the authorities to investigate and examine and this can
be done only by collecting the information, recording the
statements who might not be the offender also."
82. In the light of aforestated analysis, this Court is
of the considered view that existence of a predicate offence for
initiation of proceedings under the PML Act is not a condition
precedent or in other words, the offence under Section 3 of the
PML Act is a stand alone offence. Hence, the presence of a
schedule offence as prescribed under the PML Act would not
be condition precedent for proceeding against such person
under the PML Act.
83. A plain reading of Section 5 of the PML Act would
indicate where the Director or any other officer not below the
rank of Deputy Director authorized by the Director for the
purposes of said section has reason to believe, to be recorded
in writing, on the basis of material in his possession would
proceed to pass an order in writing provisionally attaching
such property of any person who is in possession of any
proceeds of crime and if such proceeds of crime are likely to be
concealed, transferred or dealt with any manner which may
result in frustrating any proceedings relating to confiscation of
such proceeds of crime. Every order of attachment made
under sub-section (1) of Section 5 shall cease to have effect
after the expiry of the period specified in that said sub-section
(i.e., 180 days) or on the date of an order made under sub-
section (2) of Section 8, whichever is earlier. The first proviso
to sub-section (1) would indicate that no such order of
attachment can be made unless, in relation to the schedule
offence, a report of which has been forwarded to a Magistrate
under Section 173 of Code of Criminal Procedure or a
complaint has been filed by a person authorized to investigate
the offence mentioned in that schedule as indicated
thereunder. However, second proviso to Section 5(1) would
indicate that notwithstanding anything contained in first
proviso, any property of any person may be attached under
Section 5 if the authorities specified in sub-section (1) has
reason to believe that such property involved in money
laundering if not attached immediately is likely to frustrate the
proceedings under the PML Act. Section 5 mandates that the
officers specified thereunder should forward a copy of the
order of provisional attachment immediately along with the
material in his possession to the adjudicating authority in a
sealed envelope in the manner prescribed and the
adjudicating authority is required to keep such order and
material for such period as may be prescribed. Sub-section (3)
of Section 5 would indicate that order of attachment made
under sub-section (1) shall cease to have effect after the expiry
of the period specified thereunder or on the date of an order
made under sub-section (2) of Section 8, whichever is earlier.
Sub-section (4) of Section 5 entitles the person interested in
the property to enjoy the said property which has been
attached under sub-section (1). The authorities specified
under sub-section (5) of Section 5 are required to file a
complaint stating the facts of such attachment before the
adjudicating authority.
84. It is contended that clause (b) of Section 5(1) of
PML Act would indicate the legislative intent is that
attachment, adjudication and confiscation proceedings are to
be initiated only against such person who having been
charged of/having committed a scheduled offence is in
possession of proceeds of any crime, which are likely to be
concealed, transferred or dealt with etc., is an argument
which requires to be considered for the purposes of rejection,
inasmuch as, the second proviso to sub-section (1) of Section 5
enables the authority referred to in sub-section (1) of Section 5
to attach any property of any person, in the event of such
property involved in money laundering, if not attached or the
non-attachment is likely to frustrate any proceedings that may
be initiated under the PML Act. Second proviso to clause (b) of
sub-section (1) of Section 5 would indicate that
notwithstanding anything contained in Clause (b), "any
property" of "any person" may be attached. This provision
came into force by Act 21 of 2009 with effect from 06.03.2009.
The second proviso to Section 5(1) enjoins that any property of
any person may be attached if the specified authority therein
has reason to believe on the basis of material in his
possession that if such property is not attached, it is likely to
frustrate any proceedings under the PML Act. Thus, non-
obstante clause in second proviso clearly excludes clause (b)
of Section 5(1). It is this clause (b) that incorporates or
mandates the requirement that the proceeds of crime should
be in possession of a person who is charged of having
committed a schedule offence, for initiating proceedings for
attachment and confiscation. Thus, reading of second proviso
to clause (b) would clearly indicate that it excludes clause (b)
of Section 5(1). In other words, the legislative intent to exclude
clause (b) of Section 5(1) in the circumstances provided under
the second proviso, is clear and unambiguous. To put it
differently, if other conditions set out in Section 5 of the PML
Act are satisfied, any property of any person could be
proceeded against for attachment, adjudication and
confiscation. In fact, the definition of the expression "person"
under Section 2(s) is not restrictive definition limited to a
person charged of having committed a schedule offence only
and it includes "any other person" also.
85. The adjudicating authority on being satisfied and
having reason to believe that any person has committed an
offence under Section 3 or in possession of proceeds of crime,
would serve a notice under Section 8(1) of not less than 30
days on such person by calling upon him to indicate the
sources of his income, earning or assets, out of which or by
means of which he has acquired the property attached. The
adjudicating authority would thereafter pass an order by
recording a finding whether all or any of the properties
referred to in the notice under sub-section (1) or involved in
money laundering. Thereafter the adjudicating authority
would confirm or annul the provisional order of attachment.
86. Thus, on a conspectus reading of Section 8(1), (2)
and (3) it would emerge therefrom that on an provisional order
of attachment being passed under Section 5(1), such person
would receive the notice of not less than 30 days under sub-
section (1) of Section 8 calling upon him to indicate the sources
of his income, earning or assets, out of which or by means of
which he has acquired the property attached. Such person is
required to demonstrate before the adjudicating authority as
to why the said order of attachment should not be continued
or confirmed. The adjudicating authority on consideration of
the reply, would arrive at a conclusion either confirming the
provisional order of attachment or annul the same. Sub-
section (4) of Section 8 authorizes the authorities specified
thereunder to take possession of the property attached under
Section 5 and on conclusion of trial of an offence under the
PML Act, such property would stand confiscated to the Central
Government if the Special Court finds that the offence of
money laundering has been committed vide Section 8(5). In
the event of the Special Court arriving at a conclusion that
money laundering has not taken place or the property is not
involved in money laundering, it would order release of such
property to the person entitled to receive it as indicated under
Section 8(6). In the event of trial not being proceeded for the
reason of death of accused or the accused being declared a
proclaimed offender or for any other reason or having
commenced trial, it could not be concluded, the Special Court
on an application filed by the Director or a person claiming to
be entitled for possession of a property can pass appropriate
orders regarding confiscation or release of such property
involved in the money laundering after having regard to the
material before it. Section 8(8) prescribes that where property
has been confiscated to the Central Government under sub-
section (5) the Special Court can also direct the Central
Government to restore such confiscated property or part
thereof of a claimant with a legitimate interest in the property,
who may have suffered a quantifiable loss as a result of
money laundering.
87. Yet another contention raised in
W.P.No.24444/2015 is that, amendment made to Section 8(3)
to 8(6) has resulted in substantial rights accrued to the
petitioner being extinguished. In other words, petitioner has
prayed for unamended provisions of Section 8(3) to 8(6) being
applied.
88. By amending Act 2 of 2013, Section 2(1)(ia) was
inserted and the expression "scheduled offence before a
court and" found in clause (a) of sub-section (3) of Section 8
was substituted by the expression "any offence under this
act before a court or under the corresponding law of
any other country before the competent court of
criminal jurisdiction outside India, as the case may
be;". The said amendment came into force from 15.02.2013.
89. As could be seen from clause (2)(1)(ia) the
expression "corresponding law" has been defined indicating
the offences alleged to have been committed in any foreign
country, should be corresponding to the scheduled offence
under the PML Act. A plain reading of this provision would
indicate that the parliament has only envisaged or has
thought fit in its wisdom to rely on the scheduled offences of
the PMLA for holding person guilty in foreign jurisdictions and
not leave out the persons, who have committed the scheduled
offences in India, by considering them as not guilty, when
both have indulged in money laundering activity. On an
harmonious reading of both provisions would imply that "any
offence under this act before a court" would include any of the
scheduled offences, named under the act in terms of Section
2(1)(y) of the PML Act. Thus, intention of the parliament by
bringing an amendment to Section 8(3)(a), is to include the
offenders who are charged of scheduled offences committed in
foreign jurisdictions, and have either laundered money in
India or have ploughed the proceed of crime in India. Thus,
when the intention of the parliament is gathered from this
amended section, it would leave no manner of doubt, that
intention of the parliament was not to leave out the domestic
offenders out of the ambit of scheduled offences, and to bring
only those charged under Section 8(3)(a) as amended.
90. The amended provision of Section 8(3)(a) uses the
phrase "any offence under this act before a court", and
the use of expression "any offence" pre-supposes more than
one offence which means the scheduled offence defined under
Section 2(1)(y) and not narrowly to mean only the offence of
money laundering as defined under Section 3 which is
punishable under Section 4 as speciously contended by the
petitioners.
91. The proper and rational meaning to be attached
to clause (a) in sub-section (3) of Section 8 is, that once the
provisional attachment order passed under Section 5, is
confirmed by the adjudicating authority under Section 8(3),
the attachment would continue till the conclusion of
proceedings relating to any offence under PML Act. It does not
mean that confirmation of provisional attachment will not have
any force if no proceedings relating to the offence of money
laundering are pending before Special Court on the date of
confirmation.
92. The Finance Minister while introducing Bill
No.133 of the Prevention of Money Laundering (Amendment)
Bill, 2011 in his notes on clause relating to Section 8 has
made the following explanation at clause (6):
"This clause seeks to amend section 8 of the Act
relating to adjudication to delink the attachment from of
the property to the pendency of the proceedings relating
to the Scheduled offence and link it to the money
laundering offence. It further seeks to delink the
attachment to conviction. It also seeks to broaden the
scope of seizing by also enabling freezing of property and
documents which cannot be seized. It also seeks to take
away the powers of the adjudicating authority to release
the attached properties, where the scheduled offence
itself is found not to have been committed or the attached
property is not involved in money-laundering and vest the
same with the Special Court."
93. In the light of the aforestated analysis, this court
is of the considered view that contention of the petitioners
with regard to applicability of unamended Section 8(3)(a)
would not hold water and it is liable to be rejected and
accordingly it stands rejected.
94. The Division Bench of Andhra Pradesh High Court
in the matter of B RAMA RAJU vs UNION OF INDIA reported
in (2011) 3 ALD 443 (DB) having examined as to whether the
provision of Sections 5 and 8 of PML Act is in violation of
Articles 14, 21 & 300A of the Constitution of India, has held in
the negative. It came to be held:
"25. In our considered view the petitioners'
contention proceeds on a misconception of the relevant
provisions of the Act. Against transactions constituting
money-laundering, the provisions of the Act contemplate
two sets of proceedings; (a) prosecution for the offence of
money-laundering defined in Section 3 with the
punishment provided in Section 4; and (b) attachment,
adjudication and confiscation in the sequential steps and
subject to the conditions and procedures enumerated in
Chapter 111 of the Act. Section 2 (p) defines the
expression "money-laundering" as ascribed in Section 3.
Section 3 defines the offence of Money-Laundering in an
expansive locus as comprehending direct or indirect
attempt to indulge; assist, be a party to or actually
involved knowingly in any process or activity connected
with the proceeds of the crime and projecting it as
untainted property. On proof of guilt and conviction of the
offence of Money-Laundering, the punishment provided in
Section 4 of the Act would follow after a due trial by the
Special Court; which is conferred exclusive
jurisdiction qua Section 44, Chapter VII of the Act. The
prosecution, trial and conviction for the offence of money-
laundering are the criminal sanction administered by the
Legislation and effectuated by a deprivation of personal
liberty as a disincentive to a malfeasant. The second
matrix of proceedings targets the "proceeds of crime"
defined in Section 2(u); as any property derived or
obtained, directly or indirectly, by any person as a result
of criminal activity relating to a scheduled offence or the
value of any such property, for initial attachment and
eventual confiscation.
26. Chapter III of the Act enables the specified
authority, if he has reasons to believe (the reasons to be
recorded in writing), on the basis of material in
possession of the authority that any person charged of
having committed a scheduled offence (Section 5(1)(b)) or
even if not so charged (second proviso to Section 5(1)) is in
possession of proceeds of crime and such proceeds are
likely to be concealed, transferred etc., in a manner as
may frustrate any proceedings relating to confiscation of
such proceeds of crime under Chapter III, to provisionally
attach (Section 5(1)); confirm an order of provisional
attachment after a process of adjudication (Section 8(3));
and eventually pass an order confiscating such property
(Section 8(6)).
27. On the afore-stated scheme the provisions of
the Act, the prosecution under the Act; and attachment
and eventual confiscation proceedings are distinct
proceedings. These two sets of proceedings may be
initiated against the same person if he is accused of the
offence of money-laundering. Even when a person is not
so accused, the property in his possession may be
proceeded against for attachment and confiscation, on a
satisfaction by the appropriate and competent authority
that such property constitutes proceeds of crime.
28. In our considered view, the provisions of the
Act which clearly and unambiguously enable initiation of
proceedings for attachment and eventual confiscation of
property in possession of a person not accused of having
committed an offence under Section 3 as well, do not
violate the provisions of the Constitution including Articles
14, 21 and 300-A and are operative proprio vigore."
95. The offence of money laundering under Section 3
of the PML Act is an offence independent of predicate offence
and to launch prosecution under Section 3 of the PML Act, it is
not necessary that a predicate offence should also have been
committed. In fact, Section 3 criminalizes the possession or
the conversion of the proceeds of crime, which includes
projecting or claiming the proceeds of crime as untainted
property. The element of mens-rea is inherent in the section
as against the provision of Section 2(u), thereby preventing
prosecution of any innocent person.
96. The expression "proceeds of crime" as defined
under Section 2(u) would not merely include the property
derived or obtained as a result of criminal activity relating to a
scheduled offence but also the value of any such property.
Thus, contention of the petitioners that where proceeds of
crime has been transferred by virtue of several transactions
and thereby several persons having absolutely no knowledge
or information as to the previous knowledge of criminality
attached to the property cannot be proceeded is an argument
which cannot be accepted inasmuch as, the authorities under
the Act are empowered to proceed against each and all of
such consequential transactions, thus, bringing within the
scope of Chapter III of the Act, all the properties involved in
the transactions.
97. It would not be out of context to refer at this
juncture itself Sections 23 and 24 of the PML Act. For the
purposes of convenience, said provisions are extracted herein
below:
"23. Presumption in inter-connected transaction.-
- Where money laundering involves two or more inter-
connected transactions and one or more such
transactions is or are proved to be involved in money-
laundering, then for the purposes of adjudication or
confiscation [under section 8 or for the trial or the money-
laundering offence, it shall unless otherwise proved to the
satisfaction of the Adjudicating Authority or the Special
Court], be presumed that the remaining transactions form
part of such inter-connected transactions.
24. Burden of Proof.--In any proceeding relating
to proceeds of crime under this Act,--
(a) in the case of a person charged with the
offence of money-laundering under section 3, the
authority or Court shall, unless the contrary is proved,
presume that such proceeds of crime are involved in
money laundering; and
(b) in the case of any other person the
Authority or Court, may presume that such proceeds of
crime are involved in money-laundering."
98. The Hon'ble Apex Court in the case of
ATTORNEY GENERAL FOR INDIA vs AMRATHLAL
PRAJIVANDAS reported in (1994)5 SCC 54 while
considering the validity of provisions of the Smugglers and
Foreign Exchange Manipulators (Forfeiture of Property) Act,
1976 (SAFEMA) has observed:
"The relatives and associates are brought in only
for the purpose of ensuring that the illegally acquired
properties of the convict or detenu, acquired or kept in
their names, do not escape the net of the Act. It is a well-
known fact that persons indulging in illegal activities
screen the properties acquired from such illegal activity in
the names of their relatives and associates. Sometimes
they transfer such properties to them, may be, with an
intent to transfer the ownership and title. In fact, it is
immaterial how such relative or associate holds the
properties of convict/detenu - whether as a benami or as
a mere name-lender or as a bona fide transferee for value
or in any other manner. He cannot claim those properties
and must surrender them to the State under the Act.
Since he is a relative or associate, as defined by the Act,
he cannot put forward any defence once it is proved that
that property was acquired by the detenu whether in his
own name or in the name of his relatives and associates."
In fact, the aforesaid judgment has been referred to in RAMA
RAJU's case referred to supra and concluded as under:
"46. The object of the Act is to prevent money-
laundering and connected activities and confiscation of
"proceeds of crime" and preventing legitimizing of the
money earned through illegal and criminal activities by
investments in movable and immovable properties often
involving layering of the money generated through illegal
activities, i.e., by inducting and integrating the money
with legitimate money and the expression "proceeds of
crime" expansively to sub-serve the broad objectives of
the Act. We thus do not find any infirmity in the
provisions of the Act."
99. The expression "proceeds of crime" covers any
property derived or obtained directly or indirectly by any
person, as a result of criminal activity, related to a scheduled
offence or the value of such property. The expression
'property' is elucidated in Clause (v) of Section 2, as any
property or assets of every description, whether corporeal or
incorporeal, movable or immovable, tangible or intangible and
includes deeds and instruments evidencing title to, or interest
in, such property or assets, wherever located. Section 2(u),
therefore, does not envisage either mens rea or knowledge
that the property acquired is a result of criminal activity.
100. The Hon'ble Apex Court in the matter of KARTAR
SINGH vs STATE OF PUNJAB, reported 1994 SCC (Cri) 899
has held that in a criminal action, the general conditions of
penal liabilities are indicated in the word maxim "actus non
facit reum, nisi mens sit rea" i.e., the act alone does not
amount to guilt, it must be accompanied by a guilty mind. But
there are exceptions to this Rule and the reason for this is that
the legislature, under certain situations and circumstances, in
its wisdom, may think it so important, in order to prevent a
particular act from being committed to forbid or rule out the
element of mens rea as a constituent part of a crime or of
adequate proof of intention or actual knowledge. It has been
further held that unless a statute either expressly or by
necessary implication rules out mens rea in cases of this kind,
the element of mens rea must be read into the provisions of
the statute itself.
101. An argument is also canvassed on behalf of the
respondents - revenue that the offence of money laundering is
a continuing offence, since it also punishes possession of
property acquired from crime and therefore, there is no
question of retrospective criminalization.
102. In the case of STATE OF BIHAR vs. DEOKARAN
NENSHI reported in (1972) 2 SCC 890 the Apex Court has
distinguished as to what constitutes a continuing offence
which is distinguishable from the offence which is committed
once and for all. It has been held:
"5. A continuing offence is one which is
susceptible of continuance and is distinguishable from
the one which is committed once and for all. It is one of
those offences which arises out of a failure to obey or
comply with a rule or its requirement and which involves
a penalty, the liability for which continues until the rule of
it requirement is obeyed or complied with. On every
occurs and reoccurs, there is the offence committed. The
distinction between the two kinds of offences is between
an act or omission which constitutes an offence once and
for all and an act of omission which continues and
therefore, constitutes a fresh offence every time or
occasion on which it continues. In the case of a
continuing offence, there is thus the ingredient of
continuance of the offence which is absent in the case of
an offence which takes place when an act or omission if
committed once and for all."
103. Having regard to the aforesaid authoritative
pronouncement of the Hon'ble Supreme Court, when the
scheme of PML Act is seen that money laundering is a
continuing offence and as such question of it being made
retrospective effect does not arise.
104. The process of money laundering involves three
(3) stages namely, placement, layering, integration. In the
case of a continuing offence the ingredient of the offence
continued i.e., endure even after the period of consummation,
whereas in a instantaneous offence, the offence takes place
once and for all, when the same actually takes place. In such
cases, there is no continuing offence even though the damage
resulting from injury may itself continue. The amendments
brought about under the PML Act by Act 20 of 2005, 21 of
2009, 2 of 2013, 28 of 2016 and 13 of 2018 neither create the
new offence nor enhance the punishment nor they have
changed the procedure or forum of trial to prejudice of the
accused and it is only procedural in nature and as such it
would have retrospective effect as the offence is continuing
one. In other words, the money laundering offence is a
continuing offence.
105. Thus, in case of the proceeds of crime are being
projected as being untainted and thereby ploughing such
tainted money to the economy of the country, it would
definitely have delirious effect and impact on the economy and
as such the offence which has been committed and continuing
would not wipe-out the offence committed on the premise that
act is prospective and cannot have retrospective effect. It
would be that date when a person is found involved in any
process or activity connected with the proceeds of crime and
projecting as untainted property, which would be the relevant
date for the purposes of prosecution under Section 3 of the
PML Act and not the date when the scheduled offence was
committed. What is being targeted by Section 3 is the
"laundering" of money which would be relevant. The
expression "laundering" as used in Section 3 comprises of
involvement in any process of activity by which the illicit
money is being projected as untainted. In that view of the
matter, the relevant date is not the date of acquisition of illicit
money but the dates on which such money is being processed
and projected it as untainted.
106. The High Court of Mumbai, in the matter of
RADHA MOHAN LAKHOTIA vs. DEPUTY DIRECTOR PMLA,
reported in 2010 SCC OnLine Bom 1116, while examining
the question as to whether Section 5 can be invoked against a
person who is not named as an accused in the commission of
a scheduled offence?, has discussed the definition of the
expression "person" occurring in Section 2(s) and held that on
conjoint reading with Section 5(1), wherein the expression
"any person" is referred that proceeds of crime may be or can
be in possession of "any person", be it a person charged of
having committed a scheduled offence "or otherwise". It has
been further held:
"11. The question is whether section 5 can be
invoked against a person who is not named as an
accused in the commission of a scheduled offence? Sub-
section (1) of Section 5 will have to be read as a whole
conjointly with the other provisions of the Act already
referred to hitherto, including section 8 thereof. Section 5
authorises the Director or any other officer not below the
rank of Deputy Director authorised by Director for the
purposes of the said section to resort to action of
"attachment of property" if he has reason to believe and
the reason of such belief has been recorded in writing
arrived at on the basis of material in his possession. That
action is intended to freeze the proceeds of crime, which
property, is derived or obtained directly or indirectly as a
result of criminal activity relating to a scheduled offence
or value of any such property until the criminal action for
the scheduled offence is taken to its logical end against
the accused named therein. The proceeds of crime means
any property or assets of every description, whether
corporeal or incorporeal, movable or immovable, tangible
or intangible and includes deeds and instruments
evidencing title to, or interest in, such property or assets,
wherever located -- which has been derived or obtained,
directly or indirectly, as a result of criminal activity
relating to a scheduled offence or the value of such
property. The proceeds of crime may be or can be in
possession of "any person" Be it a person charged of
having committed a scheduled offence "or otherwise" In
the case of any other person in possession of proceeds of
crime, if it is also found that he has directly or indirectly
attempted to indulge or knowingly assisted or knowingly
is a party or is actually involved in any process or activity
connected with the proceeds of crime and projecting it as
untainted property, he shall be liable to be prosecuted for
offence under section 3 read with section 4 of the Act of
2002 -- in addition to suffering the action of attachment
of the proceeds of crime in his possession. Attachment of
proceeds of crime in possession of any person (other than
the person charged of having committed a scheduled
offence) will, therefore, be legitimate within the sweep of
Section 5 of the Act of 2002. In our opinion, the thrust of
section 5 is to attach every property involved in money-
laundering irrespective of whether it is in possession of
the person charged of having committed a scheduled
offence or any other person- provided however it must be
shown to be proceeds of crime and further, that proceeds
of crime are likely to be concealed, transferred or dealt
with in any manner, which may result in frustrating any
proceedings relating to confiscation of such proceeds of
crime under the Act.
12. Going by the definition of "person" occurring in
Section 2(s) and on conjoint reading of section 2(u), which
also refers to "any person" coupled with the purpose and
intent for which the enactment has been brought into
force, accepting the argument of the appellants would
result in a pedantic approach and limiting the plenitude of
action of attachment and confiscation of proceeds of
crimes only in the hands of the persons who have been
charged of having committed a scheduled offence and
none else. Whereas, the Act has come into being 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.
It is the outcome of the Political Declaration and Global
Programme of Action, as annexed to the resolution S-17/2
adopted by the General Assembly of the United Nations
at its seventeenth special session on the twenty-third day
of February, 1990. It has come into being also on account
of the Political Declaration adopted by the Special Session
of the United Nations General Assembly held on 8th to
10th June, 1998 which called upon the Members States to
adopt national money-laundering legislation and
programme. The term "money-laundering" has the same
meaning assigned to it in Section 3 of the Act of 2002. It
essentially refers to the tainted property which is derived
from criminal activity relating to a scheduled offence.
Such tainted property may travel at different levels or by
way of circular transactions for being eventually projected
as untainted property in the hands of or possession of
person other than the person charged of having
committed a scheduled offence. That involves direct or
indirect involvement of person or persons other than the
person(s) accused of having committed a scheduled
offence. Such other person(s) may directly or indirectly
attempt to indulge or knowingly assist or knowingly is a
party or is actually involved in any process or activities
connected with the proceeds of crime and projecting it as
untainted property. If such is the nature of activity, the
Act of 2002 is intended to deal with the same sternly. In
a given case a person can be in possession of any
proceeds of crime without his knowledge that the
property held by him is tainted. That person may not face
prosecution under section 3 of the Act of 2002. But even
in his case, an order of attachment of the proceeds of
crime can be invoked and later end up with confiscation
thereof depending on the outcome of the criminal action
against the person charged of having committed a
scheduled offence. The action of attachment is not in
relation to a person as such but essentially to freeze the
proceeds of crime. The interpretation given by the
Appellants, if accepted would be destructive of the said
legislative intent. Suffice it to observe that the term
"person" appearing in clause (a) of Section 5(1) of the Act
cannot be limited to the person who has been charged of
having committed a scheduled offence. If that was the
intent of the legislature, there was no reason to insert
clause (a). In that case, the Legislature would have
simply provided for any person who has been charged of
having committed a scheduled offence and in possession
of any proceed of crime, such proceeds of crime can be
attached and confiscated, subject to fulfillment of the
specified conditions."
107. Hence, this Court is of the considered view that
contentions raised by the petitioners to quash the proceedings
on the ground of the proceedings initiated against them is
without jurisdiction for want of either there being no predicate
offence or on the date of launch of proceedings under the PML
Act, the predicate offence referred to in the schedule was not
incorporated in the schedule and as such, there would be
retrospective application of law cannot be accepted, inasmuch
as, the offence of money laundering as indicated under
Section 3 of PML Act is a stand-alone offence. It is to be further
noticed that the proceedings initiated by the authorities by
passing an order of provisional attachment and its
confirmation thereof would not fail or lapse on account of any
procedural irregularity for the reasons indicated herein above.
Hence, this court holds that point Nos.(ii) and (iii) are to
be answered against the petitioners and they are
accordingly answered."
Against the dismissal of the petitions, the petitioners
herein preferred writ appeals along with others. The Division
Bench though did not disturb the findings rendered in the
aforesaid judgment, passed the following order:
"4. A co-ordinate Bench of this Court while dealing
with the said two appeals, taking into consideration
that the appellants in those matters have already
approached the Appellate Tribunal, disposed of the
Writ Appeals reserving liberty to the appellants
therein to press for interim/protective orders before
the Appellate Tribunal and further directed the
respondents not to take any precipitative action,
pending such a decision by the Appellate Tribunal.
5. In view of the aforesaid order passed in
W.A.No.107/2021 by the Co-Ordinate Bench of this Court,
the Co-ordinate Bench of this Court having already refused
to interfere in the matter and having permitted the
appellants therein to agitate all their contentions before the
Appellate Tribunal, we are of the considered view that the
same would be applicable to the present proceedings.
Hence, we deem it appropriate to dispose of the aforesaid
appeals by relegating the appellants to the Appellate
Tribunal reserving liberty to press for interim/protective
orders pending disposal of the appeal by the Appellate
Tribunal.
6. Pending disposal of the appeal to be filed by the
appellants and consideration of any interlocutory
application to be filed by the appellants, we restrain the
respondents from taking any precipitative action against
the appellants. If no appeal is filed by the appellants
before the Appellate Tribunal within a period of 30 days
from the date of receipt of certified copy of this order, the
above interim protection would stand vacated
automatically.
7. Accordingly, Writ Appeals are disposed of."
(Emphasis supplied)
Therefore, the very contentions that are now advanced by the
petitioner have all been answered by the Co-ordinate Bench
which finding this Court is bound to follow as it is rendered
between the same parties.
18. Above all, the another factor that would stall the hands
of this Court as per submissions made by the learned senior
counsel and the pendency of the issue before the Apex Court as
the primary ground on which the present petitions are preferred
is that the offence so alleged against the petitioner was not a
scheduled offence as on the date of its alleged commission. The
matter pending before the Apex Court if considered by this Court
at this juncture would be violative of judicial discipline. In the
said context, it is germane to notice judgments rendered by the
Apex Court from time to time wherein the Apex Court has clearly
cautioned the High Courts for entertaining petitions delivering
conflicting views.
19. The Apex Court in the case of D.K. TRIVEDI & SONS
v. STATE OF GUJARAT1 holds as follows:
"83. Civil Appeals Nos. 1525 and 1526 of 1982 are
directed against the order of the Gujarat High Court
dismissing the writ petitions filed by the appellants
challenging the constitutionality of Section 15 of the Mines
and Minerals (Regulation and Development) Act, 1957, and
the validity of Notification No. GU-81/75/MCR 2181/(168)-
4536-CHH dated June 18, 1981, and directing the
appellants to approach the Supreme Court as similar
matters were pending there. In our opinion, the course
adopted by the High Court was not correct. If the
High Court thought that the point raised by the
appellants was the same as was pending in this
1986 Supp.SCC 20
Court, it ought to have stayed the hearing of the writ
petitions until this Court disposed of the other
matters. As we have, however, held Section 15 and the
amendments made by the said notification dated June 18,
1981, to be valid and constitutional, both these appeals
are, therefore, dismissed."
(Emphasis supplied)
In the case of CHHAVI MEHROTRA v. DIRECTOR
GENERAL, HEALTH SERVICES2 the Apex Court holds as
follows:
"IA No. 1 of 1993 (For Stay and Direction) in WP No. 370 of
1. The petitioner, Miss Chhavi Mehrotra, has moved
this writ petition before this Court under Article 32 of the
Constitution of India for directions for consideration of her
admission to the MBBS course against the 15% all-India
quota of 1992. This writ petition along with other
similar petitions came for consideration and certain
comprehensive directions were issued in matters for
admission of students in the waiting list to various
colleges in the country. In obedience to the orders of
this Court a notification dated 28-5-1993 was issued
by the Director General of Health Services calling
upon the candidates to signify their willingness to be
considered for admission under the scheme evolved
by the court. Despite the whole matter being seized of
by the court, the petitioner moved -- and what is
disturbing us is that the learned Judge of the High
Court entertained -- an independent Writ Petition
No. 1508(M/S) of 1993 before the Lucknow Bench of
the High Court and obtained certain directions which
would not only be consistent with the consequences
1995 Supp (3) SCC 434
of the implementation of this Court's order but would
also interfere and detract from it. Learned counsel
would say that it was a direct interference with the
proceedings before this Court. It is a clear case where
the High Court ought not to have exercised
jurisdiction under Article 226 where the matter was
clearly seized of by this Court in a petition under
Article 32. The petitioner was eonomine a party to
the proceedings before this Court. It is an unhappy
situation that the learned Judge of the High Court
permitted himself to issue certain directions which,
if implemented, would detract from the plenitude of
the orders of this Court. The learned Single Judge's
perception of justice of the matter might have been
different and the abstinence that the observance of
judicial propriety, counsels might be unsatisfactory;
but judicial discipline would require that in a
hierarchical system it is imperative that such
conflicting exercise of jurisdiction should strictly be
avoided. We restrain ourselves from saying anything
more."
(Emphasis supplied)
In UNION OF INDIA v. JAISWAL COAL CO.LTD.3, the
Apex Court holds as follows:
"4. We are rather concerned to note that Writ Petition
No. 823 of 1999 [Krishna Kumar Tiwari v. Civil Judge
(S.D.) Mohanlalganj] has been entertained by the Lucknow
Bench of the Allahabad High Court. That writ petition is
directed against the auction-sale of House No. 546-547,
Sector E, Hind Nagar, Kanpur Road, Lucknow and seeks
an order to the effect that the auction-sale be not
confirmed. The learned Single Judge of the High Court
has noticed, in the interim order made on 30-3-1999,
that auction was being conducted under orders of
this Court and that the matter concerning auction of
(1999) 5 SCC 733
the house was pending in this Court. How then a writ
petition could be entertained in the High Court is not
understandable. Judicial discipline required the
High Court not to entertain any such petition, when
the proceedings were pending in this Court in respect
of the subject-matter of the case. The parties should
have been asked to approach this Court, if so
advised. The High Court had no jurisdiction to
entertain the writ petition in the fact situation. We
need say nothing further on this aspect except to
record our displeasure. This order shall be brought
to the notice of the High Court."
(Emphasis supplied)
In MOHINDER KUMAR v. STATE OF HARYANA4 the Apex
Court holds as follows:
"2. A petition was filed before the High Court under Section
482 of the Code of Criminal Procedure for quashing the complaint
dated 3-2-1999 under Section 7 of the Essential Commodities Act
read with clause 19 of the Fertilizer Control Order.
3. On an earlier occasion, in a similar matter the
High Court doubting the correctness of the decision of the
Division Bench, the matter had been referred to the Full
Bench. On behalf of the appellant, it was brought to the
notice of the High Court that when the matter was still
under consideration, it would be in the fitness of things to
await the outcome of the decision in that matter by the
Full Bench. However, without awaiting for the outcome of
the decision in that matter by the Full Bench, the High
Court proceeded to state that so long as ruling of the
Division Bench holds the field, the learned Single Judge
proposed to follow the same decision and decide the
matter. We do not think that was the right course adopted
by the High Court. We, therefore, set aside the order
passed by the High Court and remit the matter to the High
(2001) 10 SCC 605
Court for fresh consideration in accordance with law. It
has also been brought to our notice that the Full Bench
decision has now been rendered. Appeal is allowed
accordingly."
(Emphasis supplied)
Later, a three Judge Bench of the Apex Court in the case of
KALYAN CHANDRA SARKAR v. RAJESH RANJAN5 the Apex
Court holds as follows:-
"19. The principles of res judicata and such
analogous principles although are not applicable in
a criminal proceeding, still the courts are bound by
the doctrine of judicial discipline having regard to
the hierarchical system prevailing in our country.
The findings of a higher court or a coordinate Bench
must receive serious consideration at the hands of
the court entertaining a bail application at a later
stage when the same had been rejected earlier. In
such an event, the courts must give due weight to the
grounds which weighed with the former or higher
court in rejecting the bail application. Ordinarily,
the issues which had been canvassed earlier would
not be permitted to be reagitated on the same
grounds, as the same would lead to a speculation
and uncertainty in the administration of justice and
may lead to forum hunting."
(Emphasis supplied)
The Apex Court, in the aforesaid judgment, holds that though
principle of res judicata and such analogous principles are not
applicable to criminal proceedings, still the Courts are bound by
(2005) 2 SCC 42
the doctrine of judicial discipline having regard to hierarchical
system prevailing in the country.
20. When the matter is seized by the higher forum it would
be for the Courts of lower strength to hold their hands. On a
coalesce of the judgments quoted (supra) with regard to
adherence of judicial discipline what would unmistakably
emerge is that this Court will have to await the decision of the
Apex Court with regard to the kernel of the issue as to whether
the offences alleged were scheduled offences as on the date of
transaction. It is yet another aspect that the very contentions
were advanced and answered by the Co-ordinate Bench in the
aforesaid judgment against the petitioner. Since a decision is to
be arrived at by the Apex Court, this Court would not pronounce
upon repeated contentions advanced by the petitioner in these
petitions.
21. It is time in the journey of this judgment to consider
the judgments relied on by the learned senior counsel
representing the petitioner in Writ Petition No.7499 of 2022.
Case of ARUN KUMAR v. UNION OF INDIA - (2007) 1 SCC 732
is relied on to contend that a jurisdictional fact when brought
before the Court, the same would not tie the hands of the Court
in a proceeding under certiorari as the authority cannot assume
such jurisdictional fact nor can it be conferred which it
otherwise does not possess. The jurisdictional fact that is
contended by the learned senior counsel is with regard to PML
Act being invoked without it having a retrospective effect insofar
as it concerns the scheduled offences to the PMLA. There can no
qualm about the principle enunciated by the Apex Court but its
applicability to the facts of the case at hand is what is not in
favour of the petitioner only because the Apex Court directing
the judgment of the Division Bench not to be treated as a
precedent and a Co-ordinate Bench of this Court answering an
identical issue rejecting an identical argument qua these very
parties.
22. The other judgment relied on in the case of SHAUQIN
SINGH v. DESA SINGH - (1970) 3 SCC 881 is to the same
effect. Several other judgments are also relied on to contend that
if the initial action is not in consonance with law, then all
subsequent and consequential proceedings would fall in the case
of STATE OF PUNJAB v. DAVINDER PALSINGH BHULLAR -
(2011) 14 SCC 770. Here again it can be deviated though from
what the Apex Court has enunciated. But, the facts of the case
at hand make the said judgment distinguishable without much
ado. The Apex Court is yet to hold that the initial action under
the PML Act is contrary to law. Several judgments relied on to
buttress the very submission made reiterating them would only
increase the length of the judgment as the principles laid down
by the Apex Court in every one of those cases would not be
applicable to the case at hand as inter-parties there is
determination by a Co-ordinate Bench of this Court which
considered the purport of the order of the Division Bench and
the matter is now pending before the Apex Court. Therefore,
while finding no qualm with the principles enunciated by the
Apex Court, I decline to consider those judgments owing to
peculiarity of the facts of the case at hand as is narrated
hereinabove. It is not for this Court to now pronounce with
regard to whether on the date of the transaction the offence
alleged against the petitioner was a scheduled offence or
otherwise as judicial discipline guides this Court to hold its
hands to answer any such plea reiterated. Therefore, Writ
Petition No7499 of 2022 is to be rejected.
23. Writ Petition No.11399 of 2022 is filed on verbatim
similar grounds with an added feather in the very same cup.
The added feather is filing of the final report before the
concerned Court and the concerned Court taking cognizance of
the offence. The learned senior counsel Sri C.V.Nagesh who
represents the petitioners in Writ Petition 11399 of 2022 would
vehemently argue and contend with regard to the added feather -
that is cognizance taken by the learned Special Judge. According
to the learned senior counsel, the order taking cognizance bears
no application of mind to the extent of sufficient ground as
required under Section 204 of the Cr.P.C. It is the contention of
the learned senior counsel that if the order does not
demonstrate existence of sufficient ground, it would become an
order contrary to law and will have to be obliterated by this
Court. To consider this submission of the learned senior
counsel, it is germane to notice the order taking cognizance and
issuing of summons by the learned Special Judge. The order
taking cognizance dated 11-04-2022 reads as follows:-
"ORDER
The Director of Enforcement, Government of India,
represented by complainant N.Somashekar Assistant
Director has filed the present complaint under Section 200
of Cr.P.C. for the offence punishable under Section 4 of
Prevention of Money Laundering Act, 2002.
2. The Complaint is filed by the public servant i.e.,
Assistant Director of Directorate of Enforcement,
Government of India and he is authorized by the
government to file the complaint by virtue of the
Notification. The complainant being public servant and by
acting in discharging of his official duty has filed the
complaint. Hence, in terms of Section 200(a) of Cr.P.C. the
recording of sworn statement is dispensed with.
3. Perused the complaint averments and the
documents in two volumes produced along with the
complaint. There is sufficient prima-facie material evidence
against accused Nos.1 to 5 for the offence punishable
under Section 4 of Prevention of Money Laundering Act,
2002 and accordingly, the cognizance is taken against
accused No.1 to 5 for the offence punishable under Section
4 of Prevention of Money Laundering Act, 2002.
Register the case as Special criminal case against
the above referred accused.
Issue summons to A.1 to A.5, returnable by
13.06.2022."
The learned Special Judge observes that the complaint being
filed by the Assistant Director of the Directorate of Enforcement,
Government of India and therefore in terms of Section 200(a) of
the Cr.P.C. recording of sworn statement is dispensed with and
considers the complaint averments and the documents produced
in two volumes and holds that there is sufficient prima facie
material evidence against accused No.5 for offences punishable
under Section 4 of the Act and accordingly takes cognizance of
the offence under Section 4 of the Act and issues summons to
accused Nos. 1 to 5 to be returnable by 13-06-2022. Before
embarking upon consideration of the impugned order, it is
germane to notice the judgments of the Apex Court holding
application of mind to be imperative and to what extent in
several judgments rendered from time to time. Section 204 of the
Cr.P.C. mandates existence of sufficient ground to be the reason
for issuance of process by a competent Court. The judgment,
that the learned senior counsel would place reliance upon to
buttress the submission that the order does not bear application
of mind, is in the case of SUNIL BHARTI MITTAL v. CBI -
(2015) 4 SCC 609 and several other judgments rendered by the
Apex Court concerning application of mind with regard to
sanction. SUNIL BHARATI MITTAL is a judgment rendered by a
Bench of three Judges. The said judgment is considered in a
subsequent judgment again by a Bench of three Judges in the
case of PRADEEP S.WODEYAR v. STATE OF KARNATAKA6.
The three Judge Bench of the Apex Court considers the entire
spectrum of law with regard to the concerned Court taking
cognizance on a police report/charge sheet. In the case at hand
the concerned Court considers a report by the respondent
Enforcement Directorate and considers whether application of
mind is sine quo non to an order taking cognizance and if it is to
what extent. A specific issue is framed by the Apex Court with
regard to cognizance. The Apex Court holds that cognizance is
(2021) SCC Online SC 1140
taken of the offence and not the offender. The finding of the Apex
Court from paragraphs 49-57 reads as follows:
"C.3 Cognizance of the offence and not the offender
49. It is a well settled principle of law that
cognizance as envisaged in Section 190 of the CrPC
is of the offence and not of the offender. The
expression "cognizance of any offence" is
consistently used in the provisions of Sections 190,
191, 192 and 193.
50. Section 193 of the old CrPC Code (of 1898) stated
that Court of Session shall not take cognizance of any
offence unless the 'accused has been committed' to it by
the Magistrate. However, Section 193 of the CrPC 1973
states that cognizance of an offence shall be taken after
the 'case has been committed' to it by the Magistrate. A
comparison of the provisions in the Old and New Code is
tabulated below:
Old Code (1898) New Code (1973)
193. Cognizance of offences by 193. Cognizance of offences by
Courts of Session.--Except as Courts of Session.-- Except as
otherwise expressly provided by this otherwise expressly provided by this
Code or by any other law for the time Code or by any other law for the time
being in force, no Court of Session shall being in force, no Court of Session shall
take cognizance of any offence as a Court take cognizance of any offence as a
of original jurisdiction unless the Court of original jurisdiction unless the
accused has been committed to it by a case has been committed to it by a
Magistrate duly empowered in that Magistrate under this Code.
behalf.
(emphasis supplied)
51. In Kishun Singh v. State of Bihar, the question
before the Court was whether the Court of Sessions to which
a case has been committed to for trial by the Magistrate, can
without recording evidence, summon a person not named in
the police report by exercise of its power under Section 319
CrPC. The two judge Bench held that when a case is
committed to the Court of Sessions by the Magistrate under
Section 209 on the ground that it is exclusively triable by it,
the Sessions Court would have the power to take cognizance
of the offence. It was thus held that since cognizance is
taken of the offence and not the accused, if any material
suggests the complicity of other persons in the offence, the
Court of Sessions can summon such other persons. The
court, by drawing a comparison between Section 193 of the
Code of 1973 and the Code of 1898, and on a reading of
Section 209 CrPC held that both the committal and
cognizance is of the offence and not the
accused/offender. Justice AM Ahmadi (as the learned Chief
Justice then was) summarized the position in law in the
following observations:
"7. [...] Section 190 of the Code sets out the
different ways in which a Magistrate can take
cognizance of an offence, that is to say, take notice of
an allegation disclosing commission of a crime with a
view to setting the law in motion to bring the offender
to book. Under this provision cognizance can be taken
in three ways enumerated in clauses (a), (b) and (c) of
the offence alleged to have been committed. The object
is to ensure the safety of a citizen against the vagaries
of the police by giving him the right to approach the
Magistrate directly if the police does not take action or
he has reason to believe that no such action will be
taken by the police. Even though the expression 'take
cognizance' is not defined, it is well settled by a
catena of decisions of this Court that when the
Magistrate takes notice of the accusations and applies
his mind to the allegations made in the complaint or
police report or information and on being satisfied that
the allegations, if proved, would constitute an offence
decides to initiate judicial proceedings against the
alleged offender he is said to have taken cognizance of
the offence. It is essential to bear in mind the fact that
cognizance is in regard to the offence and not the
offender.
[...]
It may immediately be noticed that under the
old provision a Court of Session could not take
cognizance of an offence as a court of original
jurisdiction unless the accused was committed to it
whereas under the recast section as it presently
stands the expression the accused has been replaced
by the words the case. As has been pointed out
earlier, under Section 190 cognizance has to be taken
for the offence and not the offender; so also under
Section 193 the emphasis now is to the committal
of the case and no more on the offender. So also
Section 209 speaks of committing the case to the Court
of Session. On a conjoint reading of these provisions it
becomes clear that while under the old Code in view of
the language of Section 193 unless an accused was
committed to the Court of Session the said court could
not take cognizance of an offence as a court of original
jurisdiction; now under Section 193 as it presently
stands once the case is committed the restriction
disappears."
"16...Thus, on a plain reading of Section 193, as
it presently stands once the case is committed to the
Court of Session by a Magistrate under the Code, the
restriction placed on the power of the Court of Session
to take cognizance of an offence as a court of original
jurisdiction gets lifted. On the Magistrate committing
the case under Section 209 to the Court of Session the
bar of Section 193 is lifted thereby investing the Court
of Session complete and unfettered jurisdiction of the
court of original jurisdiction to take cognizance of the
offence which would include the summoning of the
person or persons whose complicity in the commission
of the crime can prima facie be gathered from the
material available on record."
52. In other words, upon the committal by the
Magistrate, the Court of Sessions is empowered to take
cognizance of the whole of the incident constituting the
offence. The Court of Sessions is thus invested with the
complete jurisdiction to summon any individual accused of
the crime. The above principles were reiterated in a two
judge Bench decision in State of W.B. v. Mohd. Khalid
Justice S Mohan speaking for the Court observed:
"43.[...] Section 190 of the Code talks of
cognizance of offences by Magistrates. This expression
has not been defined in the Code. In its broad and
literal sense, it means taking notice of an offence. This
would include the intention of initiating judicial
proceedings against the offender in respect of that
offence or taking steps to see whether there is any
basis for initiating judicial proceedings or for other
purposes. The word 'cognizance' indicates the point
when a Magistrate or a Judge first takes judicial
notice of an offence. It is entirely a different thing from
initiation of proceedings; rather it is the condition
precedent to the initiation of proceedings by the
Magistrate or the Judge. Cognizance is taken of cases
and not of persons."
53. In Dharam Pal (supra), a Constitution Bench was
deciding on whether the Court of Sessions has the power
under Section 193 CrPC to take cognizance of the offence
and then summon other persons not mentioned as accused
in the police report. The issue was referred to a five-judge
Bench in view of the conflicting decisions in Kishun
Singh (supra) and Ranjit Singh v. State of Punjab. As
discussed above, while in Kishun Singh (supra), it was held
that the Sessions Court held such a power under Section
193 CrPC, it was held in Ranjit Singh (supra) that from the
stage of committal till the Sessions Court reaches the stage
indicated in Section 230 CrPC, the Court could not arraign
any other person as the accused. Chief Justice Altamas
Kabir, speaking for the Constitution Bench affirmed the view
in Kishun Singh (supra) on the ground that the Magistrate
before whom the final report is submitted has ample powers
to disagree with the report filed by the police under Section
173(2) and to proceed against the accused persons de
hors the police report. However, if the interpretation in Ranjit
Singh (supra) were to be followed, it would lead to an
anomaly where the Sessions Court would not have this
power till the Section 319 stage is reached, which the
Magistrate would otherwise have. In that context, the
Constitution Bench observed:
"35. In our view, the Magistrate has a role to
play while committing the case to the Court of Session
upon taking cognizance on the police report submitted
before him under Section 173(2) CrPC. In the event the
Magistrate disagrees with the police report, he has
two choices. He may act on the basis of a protest
petition that may be filed, or he may, while
disagreeing with the police report, issue process and
summon the accused. Thereafter, if on being satisfied
that a case had been made out to proceed against the
persons named in column 2 of the report, proceed to
try the said persons or if he was satisfied that a case
had been made out which was triable by the Court of
Session, he may commit the case to the Court of
Session to proceed further in the matter."
54. In RN Agarwal v. RC Bansal, a Special Judge took
cognizance of the offences punishable under Sections 120-B,
420, 468 and 471 IPC as well as Section 13(1)(d) of the
Prevention of Corruption Act. The Special Judge however,
summoned the prosecution witnesses. The prosecution
witnesses approached the High Court under Section 482
CrPC seeking to quash the summons issued against them.
The High Court quashed the summons order passed by the
Special Judge. This Court allowed the appeal holding that
the Special Judge in view of Sections 193 and 209, took
cognizance of the offence and therefore had the power to
arraign other accused in the case based on the material
available before it at that stage.
55. It is evident from the discussion in Kishun
Singh (supra) and Dharam Pal (supra) that in view of
the provisions of Section 193 CrPC, cognizance is
taken of the offence and not the offender. Thus, the
Magistrate or the Special Judge does not have the
power to take cognizance of the accused. The purpose
of taking cognizance of the offence instead of the
accused is because the crime is committed against the
society at large. Therefore, the grievance of the State
is against the commission of the offence and not the
offender. The offender as an actor is targeted in the
criminal procedure to provide punishments so as to
prevent or reduce the crime through different methods
such as reformation, retribution and deterrence.
Cognizance is thus taken against the offence and not
the accused since the legislative intent is to prevent
crime. The accused is a means to reach the end of
preventing and addressing the commission of crime.
56. In the factual matrix before us, the Special
Judge by an order dated 30 December 2015 referred to
all the relevant material before him, including the FIR
and witness statements, before taking cognizance. The
question that arises is whether merely because the
cognizance order mentions that cognizance is taken
against the 'accused', the entire proceedings would be
vitiated. The order taking cognizance inadvertently
mentioned that the Special Judge has taken
cognizance against the accused instead of the offence.
This would not vitiate the entire proceedings,
particularly where material information on the
commission of the offence had been brought to the
notice of and had been perused by the Special Judge.
57. In order to prove that the irregularity vitiates the
proceeding, the accused must prove a 'failure of justice' as
prescribed under Section 465 CrPC. In view of the discussion
in the previous section on the applicability of Section 465
CrPC (and the inability to prove failure of justice) to the
cognizance order, the irregularity would not vitiate the
proceedings. Moreover, bearing in mind the objective behind
prescribing that cognizance has to be taken of the offence
and not the offender, a mere change in the form of the
cognizance order would not alter the effect of the order for
any injustice to be meted out."
(Emphasis supplied)
The Apex Court from paragraphs 76 onwards considers
cognizance and application of mind and holds as follows:
"C.5 Cognizance order and non-application of mind
76. The counsel for the appellant has contended that
the order of the Special Judge taking cognizance has not
sufficiently demonstrated application of mind to the
material placed before him. To substantiate this contention,
the appellant relied on the decisions in Pepsi Foods
Ltd. v. Special Judicial Magistrate, Fakhruddin
Ahmad v. State of Uttaranchal Mehmood Ul
Rehman v. Khazir Mohammad Tunda, Sunil Bharti
Mittal v. CBI and RavindranathaBajpe v. Bangalore Special
Economic Zone Ltd. The respondent argued that this Court
has made a distinction on application of mind by the judge
for the purpose of taking cognizance based on a police
report on the one hand and a private complaint under
Section 200 CrPC on the other, and that the requirement of
a demonstrable application of mind in the latter case is
higher. For this purpose, the counsel relied on this Court's
decisions in Bhushan Kumar v. State (NCT of
Delhi) and State of Gujarat v. Afroz Mohammed
Hasanafatta.
77. The decision of this Court in Pepsi Foods
Ltd. (supra), arose out of the institution of a complaint filed
against the appellants under Section 7 read with Section
16 of the Prevention of Food Adulteration Act 1964. The
allegation in the complaint was that the appellants sold a
bottle of beverage which was adulterated. After recording
primary evidence, the Magistrate passed orders
summoning the appellants. The appellants instituted
proceedings before the High Court under Section 482 CrPC
for quashing the summoning order and the proceedings. It
was in this backdrop, that while adverting to the procedure
envisaged in Chapter XV of the CrPC more particularly the
provisions of Section 200, Justice DP Wadhwa speaking for
a two judge Bench held:
"12. [...] One of the modes by which a court
can take cognizance of an offence is on filing of a
complaint containing facts which constitutes such
offence. A Magistrate taking cognizance of an offence
on complaint shall examine upon oath the
complainant and the witnesses present, if any, and
the substance of such examination shall be reduced
to writing and shall be signed by the complainant
and the witnesses, and also by the Magistrate
(Sections 190 and 200 of the Code)."
78. Having noticed that proceeding had been
initiated on the basis of a complaint, this Court held:
"28. Summoning of an accused in a criminal
case is a serious matter. Criminal law cannot be set
into motion as a matter of course. It is not that the
complainant has to bring only two witnesses to
support his allegations in the complaint to have the
criminal law set into motion. The order of the
Magistrate summoning the accused must reflect that
he has applied his mind to the facts of the case and
the law applicable thereto. He has to examine the
nature of allegations made in the complaint and the
evidence both oral and documentary in support
thereof and would that be sufficient for the
complainant to succeed in bringing charge home to
the accused. It is not that the Magistrate is a silent
spectator at the time of recording of preliminary
evidence before summoning of the accused. The
Magistrate has to carefully scrutinize the evidence
brought on record and may even himself put
questions to the complainant and his witnesses to
elicit answers to find out the truthfulness of the
allegations or otherwise and then examine if any
offence is prima facie committed by all or any of the
accused."
79. On the facts, the Court held that the allegations
against the appellants did not establish any offence under
Section 7 of the Prevention of Food Adulteration Act and
there was no basis in the complaint to make such
allegation. Setting aside the order of the High Court, this
Court accordingly quashed the complaint. The genesis of
the decision in Pepsi Foods Ltd. is founded on a complaint
made to the Magistrate upon which steps had been
initiated pursuant to the provision of Section 200 of the
CrPC.
80. In Sunil Bharti Mittal (supra), the case
before this Court arose out of alleged irregularities
in the grant of an additional Spectrum in 2002. The
case was being monitored by this Court. The CBI
registered a case and after completion of the
investigation filed a charge-sheet in the court of the
Special Judge. The CBI, among others, mentioned
three telecom companies as accused persons in
respect of offences under Section 13(2) read with
13(1)(d) of the PC Act and allied offences. When the
matter was taken up for the issuance of summons to
the accused persons, the Special Judge while
recording satisfaction that there was enough
incriminating material to proceed against the
accused named in the charge-sheet also found that
three individuals, namely, the CMD, MD and Director
of the three telecom companies were an alter ego of
the respective companies. While taking cognizance of
the cases, summons were issued not only to the
accused in the charge-sheet but to the aforesaid
three persons as well. Two of them moved this Court.
Justice A K Sikri, while speaking for the three judge
Bench, held that before taking cognizance of an
offence, the Magistrate should have applied his mind
to the case to satisfy himself that the allegations
would constitute an offence:
"48. Sine qua non for taking cognizance of the
offence is the application of mind by the Magistrate
and his satisfaction that the allegations, if proved,
would constitute an offence. It is, therefore,
imperative that on a complaint or on a police report,
the Magistrate is bound to consider the question as
to whether the same discloses commission of an
offence and is required to form such an opinion in
this respect. When he does so and decides to issue
process, he shall be said to have taken cognizance.
At the stage of taking cognizance, the only
consideration before the court remains to consider
judiciously whether the material on which the
prosecution proposes to prosecute the accused brings
out a prima facie case or not."
81. Justice Sikri observed that while the Magistrate
is empowered to issue process against a person who has
not been charge-sheeted, there has to be sufficient material
in the police report showing his involvement. The Court
held that no such exercise was carried out by the Special
Judge and in its absence, the order summoning the
appellants could not be sustained. The decision in Sunil
Bharti Mittal (supra) arose out of a police report but clearly
involved a situation where appellants had not been
arraigned as accused in the charge-sheet. The Magistrate
had issued summons to them merely treating them to be an
alter ego of the company. This Court held that it was a
wrong (and a 'reverse') application of the principle of alter
ego and that the order summoning them could not be
sustained.
82. In Mehmood Ul Rehman (supra), a complaint was
filed by the Respondent under Section 500 of the Ranbir
Penal Code (in parimateria to Section 500 of the IPC). The
Magistrate passed the following order:
"4. [...] Perused the complaint, and the
statements recorded. In the first instance of
proceedings, let bail warrant to the tune of Rs.
15,000/- be issued against the alleged accused
persons, with direction to the accused persons to
cause their appearance before this Court on 22-4-
2007, to answer the material questions."
83. The Respondent filed a petition before the High
Court seeking to quash the proceedings initiated by the
Magistrate. The High Court rejected the petition. Before this
Court, a contention was raised that the Magistrate had not
applied his mind to the complaint to form an opinion on
whether the allegations would constitute an offence.
Relying on Pepsi Foods Ltd. (supra), it was observed that
the Magistrate ought to have applied his mind to the
allegations and must be satisfied that the facts alleged
would constitute an offence. The order of the Magistrate
was set aside by this Court on the ground that the order
did not indicate an application of mind by the Magistrate.
The facts in this case fall squarely within Section 190(1)(a)
CrPC since the Magistrate was only guided by the
complaint before him. Moreover, Justice Kurian Joseph,
writing for the two-judge Bench has clearly taken note of
the difference between Section 190(1)(a) and 190(1)(b):
"21. Under Section 190(1)(b) CrPC, the
Magistrate has the advantage of a police report and
under Section 190(1)(c) CrPC, he has the information
or knowledge of commission of an offence. But under
Section 190(1)(a) CrPC, he has only a complaint
before him. The Code hence specifies that "a
complaint of facts which constitute such offence".
Therefore, if the complaint, on the face of it, does not
disclose the commission of any offence, the
Magistrate shall not take cognizance under Section
190(1)(a) CrPC. The complaint is simply to be
rejected."
84. In Fakruddin Ahmed (supra), a complaint was
lodged before the Judicial Magistrate alleging commission
of offences under Sections 240, 467, 468 and 471 IPC. The
Magistrate directed the police to register the case and
investigate it. The Magistrate thus, instead of following the
procedure laid down under Section 200 or 202 CrPC,
ordered that the matter be investigated and a report be
submitted under Section 173(2) of the Code. Based on the
police report, cognizance was taken by the Magistrate. A
two-judge Bench of this Court observed that the Magistrate
must apply his mind before taking cognizance of the
offence. However, no observation was made that the
cognizance order based on a police report needs to be
'well-reasoned'. On the facts of the case, the Court held
that since the cognizance order was not placed before the
High Court, it did not have the opportunity to review if the
Magistrate had applied his mind while taking cognizance.
The matter was thus remanded back to the High Court for
it to peruse the documents and then decide the Section 482
petition afresh.
85. It must be noted that the decisions in Pepsi
Foods Ltd. (supra) and Mehmood Ul Rehman (supra) arose
in the context of a private complaint. Though the decision
in Sunil Bharti Mittal (supra) arose from a police report, it is
evident from the narration of facts in the earlier part of this
judgment that in that case, the charge-sheet had not
named the Chief Executive Officers of the Telecom
Companies as accused. The Magistrate, however,
furnished the reason that the CEO was an alter ego of the
Telecom Company which, as this Court noted in its
judgment was a "reverse application" of the alter ego
doctrine. Similarly, the cognizance order in Fakruddin
Ahmed (supra) was based on a police report. However, this
Court remanded the case back to the High Court for fresh
consideration of the validity of the cognizance order and
did not review the Magistrate's satisfaction before issuing
the cognizance order. Therefore, none of the above
judgments referred to support the contention of the
appellant. Though all the above judgments mention that
the Magistrate needs to apply his mind to the materials
placed before him before taking cognizance, they have
been differentiated on facts from the present case as unlike
the present case where cognizance was taken based on
the SIT report, in those cases cognizance was taken based
on a complaint. The difference in the standard of proof for
application of mind with reference to cognizance based on
a complaint and police report has been briefly discussed
in Mehmood Ul Rehman (supra) and Fakruddin
Ahmed (supra). A two-judge Bench of this Court in Afroz
Mohammed Hasanfatta (supra) laid down the law on the
difference of the standard of review of the application of
mind by the Judge while taking cognizance based on a
police report and a private complaint.
86. In Afroz Mohammed Hasanfatta (supra), a
complaint was filed by the Manager of a Bank
against a Private Limited Company alleging that in
pursuance of a conspiracy, the Company was
importing rough and polished diamonds from the
foreign market and selling them in the local market.
On verification, the bills of entry were found to be
bogus. Based on the complaint, an FIR was
registered for offences under Sections 420, 465, 467,
468, 471, 477A and 120B of the Penal Code. A
charge-sheet was submitted under Section 173 CrPC
against two persons and the respondent was referred
to as a suspect. A supplementary charge-sheet was
submitted inter alia against the respondent and
based on it, cognizance was taken by the Magistrate.
The High Court set aside the order of the Chief
Judicial Magistrate taking cognizance. Justice
Banumathi speaking for the two judge Bench dealt
with the issue as to whether while taking cognizance
of an offence under Section 190(1)(b) CrPC, the Court
has to record reasons for its satisfaction before the
issuance of summons. Relying upon the decision
in Pepsi Foods Ltd. (supra), it was urged by the
accused that the order for the issuance of process
without recording reasons was correctly set aside by
the High Court. Moreover, it was urged that there
was no application of mind by the Magistrate. While
distinguishing the decision in Pepsi Foods
Ltd. (supra) on the ground that it related to taking of
cognizance in a complaint case, the court held since
in a case of cognizance based on a police report, the
Magistrate has the advantage of perusing the
materials, he is not required to record reasons:
"23. Insofar as taking cognizance based on the
police report is concerned, the Magistrate has the
advantage of the charge-sheet, statement of
witnesses and other evidence collected by the police
during the investigation. Investigating officer/SHO
collects the necessary evidence during the
investigation conducted in compliance with the
provisions of the Criminal Procedure Code and in
accordance with the rules of investigation. Evidence
and materials so collected are sifted at the level of
the investigating officer and thereafter, charge-sheet
was filed. In appropriate cases, opinion of the Public
Prosecutor is also obtained before filing the charge-
sheet. The court thus has the advantage of the police
report along with the materials placed before it by
the police. Under Section 190(1)(b) CrPC, where
the Magistrate has taken cognizance of an
offence upon a police report and the Magistrate
is satisfied that there is sufficient ground for
proceeding, the Magistrate directs issuance of
process. In case of taking cognizance of an
offence based upon the police report, the
Magistrate is not required to record reasons for
issuing the process. In cases instituted on a
police report, the Magistrate is only required to
pass an order issuing summons to the
accused. Such an order of issuing summons to the
accused is based upon satisfaction of the Magistrate
considering the police report and other documents
and satisfying himself that there is sufficient ground
for proceeding against the accused. In a case based
upon the police report, at the stage of issuing the
summons to the accused, the Magistrate is not
required to record any reason. In case, if the charge-
sheet is barred by law or where there is lack of
jurisdiction or when the charge-sheet is rejected or
not taken on file, then the Magistrate is required to
record his reasons for rejection of the charge-sheet
and for not taking it on file."
(emphasis supplied)
87. The Special Judge, it must be noted, took
cognizance on the basis of a report submitted under
Section 173 CrPC and not on the basis of a private
complaint. Therefore, the case is squarely covered by
the decision in Afroz Mohammed Hasanfatta (supra).
The Special Judge took note of the FIR, the witness
statements, and connected documents before taking
cognizance of the offence. In this backdrop, it would
be far-fetched to fault the order of the Special Judge
on the ground that it does not adduce detailed
reasons for taking cognizance or that it does not
indicate that an application of mind. In the facts of
this case, therefore, the order taking cognizance is
not erroneous."
(Emphasis supplied)
The Apex Court holds that it must be noted that the
Special Judge therein took cognizance on the basis of a report
submitted under Section 173 of the Cr.P.C. and not on the basis
of a private complaint. Therefore, the case would squarely be
covered by the decision in STATE OF GUJARAT v. AFROZ
MOHAMMED HASANFATTA - (2019) 20 SCC 539 and the order
taking cognizance did bear application of mind. The Apex Court
at paragraph 101 draws up conclusion of its findings which also
notices application of mind. Paragraph 101 reads as follows:
"D. The Conclusion
101. In view of the discussion above, we summarise
our findings below:
(i) The Special Court does not have, in the absence of a
specific provision to that effect, the power to take
cognizance of an offence under the MMDR Act without
the case being committed to it by the Magistrate under
Section 209 CrPC. The order of the Special Judge
dated 30 December 2015 taking cognizance is
therefore irregular;
(ii) The objective of Section 465 is to prevent the delay in
the commencement and completion of trial. Section
465 CrPC is applicable to interlocutory orders such as
an order taking cognizance and summons order as
well. Therefore, even if the order taking cognizance is
irregular, it would not vitiate the proceedings in view
of Section 465 CrPC;
(iii) The decision in Gangula Ashok (supra) was
distinguished in Rattiram (supra) based on the stage
of trial. This differentiation based on the stage of trial
must be read with reference to Section 465(2) CrPC.
Section 465(2) does not indicate that it only covers
challenges to pre-trial orders after the conclusion of
the trial. The cardinal principle that guides Section
465(2) CrPC is that the challenge to an irregular order
must be urged at the earliest. While determining if
there was a failure of justice, the Courts ought to
address it with reference to the stage of challenge, the
seriousness of the offence and the apparent intention
to prolong proceedings, among others;
(iv) In the instant case, the cognizance order was
challenged by the appellant two years after
cognizance was taken. No reason was given to
explain the inordinate delay. Moreover, in view
of the diminished role of the committal court
under Section 209 of the Code of 1973 as
compared to the role of the committal court
under the erstwhile Code of 1898, the gradation
of irregularity in a cognizance order made in
Sections 460 and 461 and the seriousness of the
offence, no failure of justice has been
demonstrated;
(v) It is a settled principle of law that cognizance is
taken of the offence and not the offender.
However, the cognizance order indicates that the
Special Judge has perused all the relevant
material relating to the case before cognizance
was taken. The change in the form of the order
would not alter its effect. Therefore, no 'failure
of justice' under Section 465 CrPC is proved.
This irregularity would thus not vitiate the
proceedings in view of Section 465 CrPC;
(vi) The Special Court has the power to take cognizance of
offences under MMDR Act and conduct a joint trial
with other offences if permissible under Section 220
CrPC. There is no express provision in the MMDR Act
which indicates that Section 220 CrPC does not apply
to proceedings under the MMDR Act;
(vii) Section 30B of the MMDR Act does not impliedly
repeal Section 220 CrPC. Both the provisions can be
read harmoniously and such an interpretation furthers
justice and prevents hardship since it prevents a
multiplicity of proceedings;
(viii) Since cognizance was taken by the Special
Judge based on a police report and not a private
complaint, it is not obligatory for the Special
Judge to issue a fully reasoned order if it
otherwise appears that the Special Judge has
applied his mind to the material;
(ix) A combined reading of the notifications dated 29 May
2014 and 21 January 2014 indicate that the Sub-
Inspector of Lokayukta is an authorized person for the
purpose of Section 22 of the MMDR Act. The FIR that
was filed to overcome the bar under Section 22 has
been signed by the Sub-Inspector of Lokayukta Police
and the information was given by the SIT. Therefore,
the respondent has complied with Section 22 CrPC;
and
(x) The question of whether A-1 was in-charge of and
responsible for the affairs of the company during the
commission of the alleged offence as required under
the proviso to Section 23(1) of the MMDR Act is a
matter for trial. There appears to be a prima facie case
against A-1, which is sufficient to arraign him as an
accused at this stage."
(Emphasis supplied)
If clause (iv), (v) and (viii) of the concluding findings of the Apex
Court is taken note of, what becomes unmistakably clear is,
irregularity in a cognizance order becomes curable in Section
460 or 461 of the IPC, unless failure of justice has been
demonstrated; cognizance is taken of the offence and not the
offender. The Special Judge observing that he has perused all
relevant material relating to the case before cognizance was
taken cannot result in failure of justice; since cognizance is
taken on a police report and not on a private complaint it is not
obligatory for the Judge to issue a fully reasoned order, if it
otherwise appears that the Special Judge had applied his mind
to the material. The afore-extracted order taking cognizance, in
the considered view of this Court, is in consonance with the
afore-quoted principles laid down by the Apex Court.
24. The judgment that was tossed by the appellant therein
- PRADEEP S.WODEYAR was against the judgment rendered by
a Co-ordinate Bench of this Court in PRADEEP S.WODEYAR v.
STATE OF KARNATAKA7. The Co-ordinate Bench recorded the
order of the Special Judge taking cognizance. The Co-ordinate
Bench had held as follows:
"13. As per the said clause, the first party namely
accused No. 3 was responsible to obtain the mineral
dispatch permit. But, the allegations in the charge sheet
proceed on the basis that accused No. 2 herein transported
the alleged minerals without obtaining the permit which
presupposes that accused No. 2 transported the said
minerals without insisting accused No. 3 from obtaining the
prior permit. Therefore, even this contention does not come
to the aid of the petitioner/accused No. 2 to come clear of
the charges leveled against him.
14. In so far as the validity of the order of cognizance
and the summons issued to the petitioners is concerned, on
perusal of the order sheet it is noticed that a brief order is
made by the learned Special Judge, which is extracted
here below:
2020 SCC OnLine Kar 3416
"Perused the final report Cognizance is
taken against accused no. 1 to 5, Register the
case against the accused no. 1 to 5, Register
the case and issue summons to accused no. 1 to
5 returnable by 16-01-2016."
15. As rightly submitted by the learned counsel
appearing for the petitioners/accused, this order does not
specify the offences in respect of which cognizance has
been taken by the Special Court. It is also not forthcoming
in this order as to whether cognizance has been taken in
respect of the offences under IPC or under the provisions of
MMDR Act or Forest Rules. In other cases, a detailed order
has been passed taking cognizance of specific offences and
accordingly, summons have been issued to the petitioners.
Nonetheless, it is submitted at the Bar that the summons
issued to the respective accused contained the details of
the offences for which the summons were issued. Records
also indicate that on appearing before the learned Special
Judge, the petitioners moved for bail based on the offences
mentioned in the summons. Therefore, it is clear that right
from the inception, the petitioners were aware of the
offences for which summons were issued to them. It is in
this background, the objection raised by the
petitioners/accused questioning the correctness and
legality of the order of cognizance and the consequent
summoning order issued by the Special Court requires to
be considered.
16. What is taking cognizance is not defined in
the Criminal Procedure Code. But, it is now well
settled that any Magistrate who takes cognizance of
an offence must apply his mind to the facts of the
case for the purpose of proceedings in a particular
way. In R.R. CHARI v. STATE OF UTTAR
PRADESH, AIR 1951 SC 207, the Hon'ble Supreme
Court relying on the dicta on GOPAL
MARWARI v. EMPEROR, AIR 1943 Pat 245, has
observed that, "the word 'cognizance' was used in
the Code to indicate the point when the Magistrate or
a Judge first takes judicial notice of an offence. It is
a different thing from the initiation of proceedings".
Section 209 of the Code also provides for taking
cognizance of the offence by the Magistrate while
committing the case to the Sessions Court for trial
but, the cognizance taken by the Magistrate under
Section 209 is quite different from the cognizance
taken by the Magistrate under Section 190(1)(a) of
the Code or the cognizance taken by the Sessions
Court before commencing the trial after committal.
In the instant case, undisputediy, the learned
Special Judge has proceeded to take cognizance of
the alleged offences after the submission of the final
report by SIT.
17. The reading of the cognizance order passed by
the learned Special Judge clearly indicates that on perusal
of the charge sheet submitted by the SIT, learned Special
Judge has taken cognizance of the alleged offences
purportedly under Section 190(1)(a) of the Code and has
proceeded to issue summons to the petitioners/accused, as
such, there cannot be any difficulty in holding that by
considering the facts of the case as borne on the final
report, the learned Special Judge has taken cognizance of
IPC offences as well as the offences under the provisions of
Forest Rules and MMDR Act.
18. It is trite law that while taking cognizance
and issuing summons in respect of IPC offences,
based on the report under Section 173 of the Code,
law does not require the Magistrate to pass elaborate
order recording reasons for issuance of summons;
though the order must reflect that he has considered
the final report and satisfied himself that there is
sufficient ground for proceeding against the accused
named in the final report.
19. In BHUSHAN KUMAR v. STATE OF (NCT OF
DELHI), (2012) 5 SCC 424, the Hon'ble Supreme Court has
reiterated the requirement of application of mind in the
process of taking cognizance and following the decision
in CHIEF ENFORCEMENT OFFICER v. VIDEOCON INTER-
NATIONAL LIMITED, (2008) 2 SCC 492, has held that in
the process thus issued, the Magistrate need not explicitly
state the reasons. Paragraphs 12 and 13 of the decision
in CHIEF ENFORCEMENT OFFICER, read as under:--
"12. A "summons" is a process issued by a
court calling upon a person to appear before a
Magistrate, It is used for the purpose of notifying an
individual of his legal obligation to appear before the
Magistrate as a response to violation of law. In other
words, the summons will anrounce to the person to
whom it is directed that a legal proceeding has been
started against that person and the date and time on
which the person must appear in court. A person
who is summoned is legally bound to appear before
the court on the given date and time. Wilful
disobedience is liable to be punished under Section
174 IPC. It is a ground for contempt of court.
13. Section 204 of the Code does not mandate
the Magistrate to explicitly state the reasons for
issuance of summons. It clearly states that if in the
opinion of a Magistrate taking cognizance of an
offence, there is sufficient ground for proceeding,
then the summons may be issued. This section
mandates the Magistrate to form an opinion as to
whether there exists a sufficient ground for
summons to be issued but it is nowhere mentioned
in the section that the explicit narration of the same
is mandatory, meaning thereby that it is not a
prerequisite for deciding the validity of the summons
issued."
20. In the backdrop of the above principle, if
the order of cognizance and the summons issued by
the learned Magistrate in the instant cases is
analyzed, it is clear from the above order that on
consideration of the final report submitted by SIT,
the learned Special Judge has taken cognizance of
the alleged offences and has issued summons to the
petitioners. Therefore, there can be no difficulty in
upholding the validity of the cognizance taken by the
learned Special Judge and the summons issued to
the petitioners insofar as the IPC and Forest offences
are concerned.
.... .... .... ....
30. As a result, I hold that the impugned order
of cognizance and summons issued by the learned
Special Judge do not suffer from any error or
illegality vitiating the proceedings pending against
the petitioners. For the reasons discussed above,
impugned order shall be construed as the orders
passed by the learned Special Judge on the
complaint filed by the authorized officer insofar as
the allegations constituting the offences falling
under the provisions of the MMDR Act are
concerned."
(Emphasis supplied)
It is the afore-quoted judgment of the Co-ordinate Bench that is
affirmed by the Apex Court in the case of
PRADEEP S.WODEYAR. Therefore, if the order taking
cognizance which is extracted supra is affirmed by the Apex
Court in PRADEEP S.WODEYAR, the present impugned order
taking cognizance as quoted hereinabove would definitely
demonstrates application of mind on the part of the learned
Special Judge.
25. Therefore, the contention that there is no application of
mind in the case at hand as is urged by the learned senior
counsel is repelled. This Court has come across plethora of
orders taking cognizance which demonstrate non-application of
mind as sometimes there are one line orders of taking
cognizance not noticing even the offence or recording minimum
necessary reason of application of mind. Even jurisdictional
facts while taking cognizance are ignored in several cases. It is
those cases which would become cases where interference was
called at the hands of this Court qua order taking cognizance as
the Apex Court in PRADEEP S.WODEYAR (supra) holds that
elaborate reasons are not required to be given by the concerned
Court while taking cognizance but it should bear application of
mind. In my considered view, the order taking cognizance by the
Special Judge does bear application of mind and the fact that
the report is filed by a public servant cannot be ignored, as filing
of a false report or a wrong report, the public servant becomes
accountable for the same and liable for action to be taken
against him. Wherefore, finding the order taking cognizance
being in consonance with the principles enunciated by the Apex
Court in the case of PRADEEP S.WODEYAR, the solitary
submission on the added feather in Writ Petition No.11399 of
2022 is also rendered unacceptable.
26. For the aforesaid reasons, I decline to interfere with the
action impugned or the order impugned as the case may be, in
both these cases. Finding no merit to entertain the petitions at
this juncture, the petitions stand dismissed.
Consequently, pending I.A.No.1/2022 in
W.P.No.11399/2022 stands disposed.
Sd/-
JUDGE
bkp
CT:MJ
