2. Heard Sri. Anoop Haranahalli, learned counsel
appearing for the petitioners, Sri. Unnikrishnan M., learned
3. This Court, on 10.03.2025, had observed as
List the matter on 19.03.2025, in the `fresh
matters list'."
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4. It is clarified that the predicate offence was not
quashed, but the offences qua co-accused was quashed in
W.P.No.18217/2024 and connected cases dated 13.12.2024.
This Court in the aforesaid writ petitions has held as follows:
"10. The afore-narrated facts are a matter of
record. The only issue that falls for my consideration is:
"Whether the proceedings in Special
C.C.No.711 of 2023 as against the petitioners
should be permitted to be continued?"
11. It is not in dispute that predicate offence
relates to the period between 1985 and 12-12-2002. The
Act comes into force on 17.01.2003. But, the acts of the
petitioners are projected to be between the dates on
which the Act was not in force. Therefore, as on the date
of commission of offence, it was not an offence under the
Act, as it was not in force. Later on, when the Act comes
into force, the Directorate of Enforcement cannot exhume
and make all predicate offences which have taken place
prior to the Act coming into force to become an offence
under the Act. The issue need not detain this Court for
long or delve deep into the matter.
12. This Court while answering an identical
circumstance under the Black Money (Undisclosed Foreign
Income and Assets) Imposition of Tax Act, 2015 has in
the case of DHANASHREE RAVINDRA PANDIT v.
INCOME TAX DEPARTMENT1, held as follows:
".... .... ....
12. It becomes germane, at this juncture, to
consider where a legal fiction or a deeming fiction is
created under section 72(c) of the Act or criminal liability
under sections 50 and 52 could be imposed. The apex
court in the case of Kumaran v. State of Kerala [(2017)
7 SCC 471; (2017) 3 SCC (Cri) 431; 2017 SCC OnLine
SC 545.] considers what is deeming section or a legal
fiction that is created and holds as follows:
"27. These two judgments make it clear that
the deeming fiction of section 431 of the Criminal
2024 SCC OnLine Kar 58
NC: 2025:KHC:11309
Procedure Code extends not only to section 421, but
also to section 64 of the Penal Code, 1860. This being
the case, section 70 of the Penal Code, 1860, which is
the last in the group of sections dealing with sentence
of imprisonment for nonpayment of fine must also be
included as applying directly to compensation under
section 357(3) as well. The position in law now
becomes clear. The deeming provision in section 431
will apply to section 421(1) as well, despite the fact
that the last part of the proviso to section 421(1)
makes a reference only to an order for payment of
expenses or compensation out of a fine, which would
necessarily refer only to section 357(1) and not section
357(3). Despite this being so, so long as compensation
has been directed to be paid, albeit under section
357(3), section 431, section 70 of the Penal Code,
1860 and section 421(1) proviso would make it clear
that by a legal fiction, even though a default sentence
has been suffered, yet, compensation would be
recoverable in the manner provided under section
421(1). This would, however, be without the necessity
for recording any special reasons. This is because
section 421(1) proviso contains the disjunctive 'or'
following the recommendation of the Law Commission,
that the proviso to old section 386(1) should not be a
bar to the issue of a warrant for levy of fine, even
when a sentence of imprisonment for default has been
fully undergone. The last part inserted into the proviso
to section 421(1) as a result of this recommendation of
the Law Commission is a category by itself which
applies to compensation payable out of a fine under
section 357(1) and, by applying the fiction contained in
section 431, to compensation payable under section
357(3).
28. As is well known, a legal fiction is not to be
extended beyond the purpose for which it is created or
beyond the language of the section by which it is
created. For example, see Prakash H. Jain v. Ms. Marie
Fernandes [(2003) 8 SCC 431.] at p. 438. However,
once the purpose of the legal fiction is ascertained, full
effect must be given, and it should be carried to its
logical conclusion. This is clear from the celebrated
passage in East End Dwellings Co. Ltd. v. Finsbury
Borough Council [[1952] A.C. 109; [1951] 2 All ER
587.] : (AC pp. 132-33)
'If you are bidden to treat an imaginary state
of affairs as real, you must surely, unless prohibited
from doing so, also imagine as real the consequences
and incidents which, if the putative state of affairs had
in fact existed, must inevitably have flowed from or
accompanied it. One of those in this case is
emancipation from the 1939 level of rents. The statute
says that you must imagine a certain state of affairs; it
does not say that having done so, you must cause or
NC: 2025:KHC:11309
permit your imagination to boggle when it comes to
the inevitable corollaries of that state of affairs.'
29. The legal fiction enacted under section 431
is not limited to 'the purpose of this Act' unlike section
6A of the Central Sales tax Act, as was the case
in Ashok Leyland Ltd. v. State of T.N. [(2004) 134 STC
473 (SC); (2004) 3 SCC 1.] , paras 32 and 76. Thus it
is clear that the object of the legal fiction created by
section 431 is to extend for the purpose of recovery of
compensation until such recovery is completed -- and
this would necessarily take us not only to section 421
of the Criminal Procedure Code but also to section 70
of the Penal Code, 1860, a companion criminal statute,
as has been held above."
(emphasis supplied)
12.1. The apex court holds that a legal fiction or
a deeming fiction should not be extended beyond the
purpose of the Act for which it is created or beyond the
language deployed in the enactment. In the case at
hand what is given effect to under section 72(c) is a
deeming section which creates criminal liability. It is a
matter of record that all the facts that become the
offences are alleged to have happened five years prior to
the Act coming into force. It now becomes germane to
notice article 20 of the Constitution of India which
makes it a fundamental right to a person who would be
convicted for an offence except for violation of law in
force at the time of commission of the act charged as an
offence, nor be subjected to a penalty greater than that
which might have been inflicted under the law in force.
The first part of it is what becomes necessary to be
noticed to the facts obtaining in the case at hand.
13. It is apposite to refer to the Constitution
Bench judgment of the apex court in the case of Rao
Shiv Bahadur Singh v. State of Vindhya Pradesh [(1953)
2 SCC 111.] . In the said judgment the apex court
interprets article 20 of the Constitution of India. The
facts obtaining before the Supreme Court are noticed at
paragraphs 1 to 5. Based upon the said facts, the apex
court holds as follows:
"17. This article in its broad import has been
enacted to prohibit convictions and sentences under ex
post facto laws. The principle underlying such
prohibition has been very elaborately discussed and
pointed out in the very learned judgment of Willes, J.
in the well-known case of Phillips v. Eyre [[L.R.] 6 Q.B.
1.] at pp. 23 and 25 and also by the Supreme Court of
USA in Calder v. Bull [1 L.Ed. 648 at p. 649; 3 US 386
(1798); 3 Dall. 386.] . In the English case it is
NC: 2025:KHC:11309
explained that ex post facto laws are laws which voided
and punished what had been lawful when done. There
can be no doubt as to the paramount importance of
the principle that such ex post facto laws, which
retrospectively create offences and punish them are
bad as being highly inequitable and unjust. In the
English system of jurisprudence repugnance of such
laws to universal notions of fairness and justice is
treated as a ground not for invalidating the law itself
but as compelling a beneficent construction thereof
where the language of the statute by any means
permits it. In the American system, however, such ex
post facto laws are themselves rendered invalid by
virtue of article 1, sections 9 and 10 of its Constitution.
18. It is contended by the learned Attorney
General that article 20 of the Constitution was meant
to bring about nothing more than the invalidity of such
ex post facto laws in the post-Constitution period but
that the validity of the pre-Constitution laws in this
behalf was not intended to be affected in any way. The
case in Keshavan Madhava Menon v. State of
Bombay [1951 SCC 16; 1951 SCR 228] has been relied
on to show that the fundamental rights guaranteed
under the Constitution have no retrospective operation,
and that the invalidity of laws brought about by article
13(1) of the Constitution relates only to the future
operation of the pre-Constitution laws which are in
violation of the fundamental rights. On this footing it
was argued that even on the assumption of the
convictions in this case being in respect of new
offences created by Ordinance 48 of 1949 after the
commission of the offences charged, the fundamental
right guaranteed under article 20 is not attracted
thereto so as to invalidate such convictions. This
contention, however, cannot be upheld.
19. On a careful consideration of the respective
articles, one is struck by the marked difference in
language used in the Indian and American
Constitutions. Sections 9(3) and 10 of article 1 of the
American Constitution merely say that 'No ex post
facto law shall be passed...' and 'No State shall pass ex
post facto law.'. But in article 20 of the Constitution
the language used is in much wider terms, and what is
prohibited is the conviction of a person or his
subjection to a penalty under ex post facto laws. The
prohibition under the article is not confined to the
passing or the validity of the law, but extends to the
conviction or the sentence and is based on its
character as an ex post facto law. The fullest effect
must therefore be given to the act" actblocktype=""
sectionno="" doi="" match="no">Indian Constitution
the language used is in much wider terms, and what is
prohibited is the conviction of a person or his
subjection to a penalty under ex post facto laws. The
NC: 2025:KHC:11309
prohibition under the article is not confined to the
passing or the validity of the law, but extends to the
conviction or the sentence and is based on its
character as an ex post facto law. The fullest effect
must therefore be given to the act actual words used in
the article. Nor does such a construction of article 20
result in giving retrospective operation to the
fundamental right thereby recognised. All that it
amounts to is that the future operation of the
fundamental right declared in article 20 may also in
certain cases result from acts and situations which had
their commencement in the pre-Constitution period.
20. In R. v. St. Mary's, Whitechapel
Inhabitants [[1848] 12 Q.B. 120; 116 ER 811.] at p.
814 Lord Denman, C.J. pointed out that a statute
which in its direct operation is prospective cannot
properly be called a retrospective statute because a
part of the requisites for its action is drawn from a time
antecedent to its passing. The general principle
therefore that the fundamental rights have no
retrospective operation is not in any way affected by
giving the fullest effect to the wording of article 20.
This article must accordingly be taken to prohibit all
convictions or subjections to penalty after the
Constitution in respect of ex post facto laws whether
the same was a post-Constitution law or a pre-
Constitution law. That such is the intendment of the
wording used in article 20(1) is confirmed by the
similar wording used in articles 20(2) and 20(3). Under
article 20(2), for instance, it cannot be reasonably
urged that the prohibition of double jeopardy applies
only when both the occasions therefor arise after the
Constitution. Similarly, under article 20(3) it cannot be
suggested that a person accused before the
Constitution can be compelled to be a witness against
himself, if after the Constitution the case is pending."
(emphasis supplied)
13.1. The facts before the apex court were that
accused Nos. 1 and 2 were Minister for Industries and
Secretary of Commerce and Industries in the
Government of Vindhya Pradesh. An agreement had
been entered into on August 1, 1936 for carrying on
diamond mining operation for 15 years. Accused Nos. 1
and 2 therein are alleged to have obtained illegal
gratification in a sum of Rs. 25,000 on April 11, 1949
and had also indulged in certain forgery of documents to
favour the Syndicate. The allegations were the offences
punishable under sections 120B, 161, 465 and 466 of
the Penal Code, 1860. The trial court acquitted the
accused. The appellate court convicted accused Nos. 1
and 2 for offences punishable under sections 120B and
161 of the Penal Code, 1860 and in addition accused No.
NC: 2025:KHC:11309
1 was convicted for the offences punishable under
sections 465 and 466 of the Penal Code, 1860. The
foundation for the said charge was an Ordinance that
was brought into effect on September 11, 1949. The
contention before the apex court was that it violated
articles 14 and 21 of the Constitution of India as by the
time the matter was before the apex court, the
Constitution had come into force. The apex court holds
that the alleged date of illegal gratification was April 11,
1949 and the Ordinance based upon which the accused
were charged comes into effect as on September 11,
1949, five months after the alleged act. Therefore, the
apex court declined to accept the contention that the
Ordinance would be deemed to have come into effect
from August 9, 1948 as depicted therein and the
conviction must be sustained. The apex court holds that
law must actually be in force on the date of commission
of the offence and not deemed to be in force. It further
holds that the object of article 20 of the Constitution is
law in force, actually in force and not a law deemed to
be in force. The apex court further holds that, if the
deeming section is given credence and criminal law is
affirmed, it would defeat the tenor of article 20 of the
Constitution, as every post-facto law could be made
retrospective. Therefore, the Constitution Bench upturns
the conviction and acquits accused Nos. 1 and 2 on the
ground that the provision would not pass muster of
article 20 of the Constitution of India. The said judgment
has stood the test of time.
14. The apex court, after the Act coming into
force, in the case of Union of India v. Gautam
Khaitan [(2020) 420 ITR 140 (SC); (2019) 10 SCC 108;
(2019) 4 SCC (Cri) 26; 2019 SCC OnLine SC 1342.]
considering the tenor of the Act has held as follows
(page 146 of 420 ITR):
"It could therefore be seen, that where no
declaration in respect of the asset covered under the
Black Money Act is made, such asset would be deemed
to have been acquired or made in the year in which a
notice under section 10 is issued by the Assessing
Officer and the provisions of the Act shall apply
accordingly.
The offences in respect of which sanction has been granted are
under sections 50 and 51 of the Black Money Act, which read
thus:
'50. Punishment for failure to furnish in return
of income, any information about an asset (including
financial interest in any entity) located outside India.--
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NC: 2025:KHC:11309
If any person, being a resident other than not
ordinarily resident in India within the meaning of
clause (6) of section 6 of the Income-tax Act, who has
furnished the return of income for any previous year
under sub-section (1) or sub-section (4) or sub-section
(5) of section 139 of that Act, wilfully fails to furnish in
such return any information relating to an asset
(including financial interest in any entity) located
outside India, held by him, as a beneficial owner or
otherwise or in which he was a beneficiary, at any time
during such previous year, or disclose any income from
a source outside India, he shall be punishable with
rigorous imprisonment for a term which shall not be
less than six months but which may extend to seven
years and with fine.
51. Punishment for wilful attempt to evade
tax.--(1) If a person, being a resident other than not
ordinarily resident in India within the meaning of
clause (6) of section 6 of the Income-tax Act, wilfully
attempts in any manner whatsoever to evade any tax,
penalty or interest chargeable or imposable under this
Act, he shall be punishable with rigorous imprisonment
for a term which shall not be less than three years but
which may extend to ten years and with fine.
(2) If a person wilfully attempts in any manner
whatsoever to evade the payment of any tax, penalty
or interest under this Act, he shall, without prejudice to
any penalty that may be imposable on him under any
other provision of this Act, be punishable with rigorous
imprisonment for a term which shall not be less than
three months but which may extend to three years and
shall, in the discretion of the court, also be liable to
fine.
(3) For the purposes of this section, a wilful
attempt to evade any tax, penalty or interest
chargeable or imposable under this Act or the payment
thereof shall include a case where any person--
(i) has in his possession or control any books of
account or other documents (being books of
account or other documents relevant to any
proceeding under this Act) containing a false
entry or statement; or
(ii) makes or causes to be made any false entry or
statement in such books of account or other
documents; or
(iii) wilfully omits or causes to be omitted any
relevant entry or statement in such books of
account or other documents; or
- 11 -
NC: 2025:KHC:11309
(iv) causes any other circumstance to exist which
will have the effect of enabling such person to
evade any tax, penalty or interest chargeable
or imposable under this Act or the payment
thereof.'
Section 50 provides that if any person, being a
resident other than not ordinarily resident in India,
who has furnished the return of income for any
previous year under sub-section (1) or sub-section (4)
or sub-section (5) of section 139 of the Income-tax
Act, wilfully fails to furnish in such return any
information relating to an asset (including financial
interest in any entity) located outside India, held by a
beneficial owner or otherwise or in which he was a
beneficiary, at any time during such previous year, or
disclose any income from a source outside India, he
shall be punishable with rigorous imprisonment for a
term which shall not be less than six months but which
may extend to seven years and with fine.
The penalty of the offences under section 51 is
for wilful attempt in any manner whatsoever to evade
the payment of any tax, penalty or interest chargeable
or imposable under the Income-tax Act. The punishment
provided under sub-section (1) is for rigorous
imprisonment for a term which shall not be less than
three years but which may extend to ten years and with
fine. In respect to any other person not covered by sub-
section (1) of section 51, the punishment provided is
rigorous imprisonment for a term which shall not be less
than three months but which may extend to three years
and shall, in the discretion of the court, also be liable to
fine.
It could therefore be seen, that the scheme of the
Black Money Act is to provide stringent measures for
curbing the menace of black money. Various offences
have been defined and stringent punishments have also
been provided. However, the scheme of the Black Money
Act also provided one-time opportunity to make a
declaration in respect of any undisclosed asset located
outside India and acquired from income chargeable to
tax under the Income-tax Act. Section 59 of the Black
Money Act provided that such a declaration was to be
made on or after the date of commencement of the
Black Money Act, but on or before a date notified by the
Central Government in the Official Gazette. The date so
notified for making a declaration is September 30, 2015
whereas, the date for payment of tax and penalty was
notified to be December 31, 2015. As such, an
anomalous situation was arising if the date under sub-
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section (3) of section 1 of the Black Money Act was to be
retained as April 1, 2016, then the period for making a
declaration would have been lapsed by September 30,
2015 and the date for payment of tax and penalty would
have also been lapsed by December 31, 2015. However,
in view of the date originally prescribed by sub-section
(3) of section 1 of the Black Money Act, such a
declaration could have been made only after April 1,
2016. Therefore, in order to give the benefit to the
assessee(s) and to remove the anomalies the date July
1, 2015 has been substituted in sub-section (3) of
section 1 of the Black Money Act, in place of April 1,
2016. This is done, so as to enable the assessee desiring
to take benefit of section 59 of the Black Money Act. By
doing so, the assessees, who desired to take the benefit
of one-time opportunity, could have made declaration
prior to September 30, 2015 and paid the tax and
penalty prior to December 31, 2015.
It would further be relevant to note that sub-
section (3) of section 1 of the Black Money Act, itself
provides that save as otherwise provided in this Act, it
shall come into force on the 1st day of July, 2015. A
conjoint reading of the various provisions would reveal
that the Assessing Officer can charge the taxes only
from the assessment year commencing on or after April
1, 2016. However, the value of the said asset has to be
as per its valuation in the previous year. As such, even if
there was no change of date in sub-section (3) of section
1 of the Black Money Act, the value of the asset was to
be determined as per its valuation in the previous year.
The date has been changed only for the purpose of
enabling the assessee(s) to take benefit of section 59 of
the Black Money Act. The power has been exercised only
in order to remove difficulties. The penal provisions
under sections 50 and 51 of the Black Money Act would
come into play only when an assessee has failed to take
benefit of section 59 and neither disclosed assets
covered by the Black Money Act nor paid the tax and
penalty thereon. As such, we find that the High Court
was not right in holding that, by the notification/order
impugned before it, the penal provisions were made
retrospectively applicable."
14.1. The crux of the case before the apex court
or the finding as could be gathered from paragraph 20
supra is that an assessee if he fails to take benefit of
section 59 and it remains a fact that the assets are not
disclosed, penal provisions under sections 50 and 51 of
the Act would kick in. A reading of the afore-quoted
judgment of the apex court would make it clear that the
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question of retrospective applicability of sections 50 and
51 qua article 20 of the Constitution of India was not
even an issue in the case before the apex court, though
the apex court interprets all the sections that are quoted
hereinabove including section 72(c). Therefore, the said
judgment would not become completely applicable to
the issue brought up before the court in the subject lis.
15. In the considered view of the court, the
prosecution so initiated against these petitioners did not
and cannot pass constitutional muster under article 20 of
the Constitution of India. Non-disclosure of an
assessment of the tax return for the year 2007-2008 or
2009-2010 cannot be used to criminally prosecute these
petitioners, for an act that has come into force in the
year 2015. The law, as on the date alleged, was not the
law of such disclosure of assessment. Therefore, the
criminal law cannot be set into motion against the
petitioners in the aforesaid facts of the case, as it cannot
pass muster of article 20 of the Constitution of India. A
caveat, this court is considering the criminal liability
fastened upon the petitioners by the prosecution
including under section 72(c) of the Act and the
consideration has led to an unmistakable conclusion that
it falls foul of article 20 of the Constitution of India. The
Special enactment is a statute. Article 20 comes under
Chapter III of the Constitution of India, a fundamental
right. Constitution of India is not a statute. It is the
fountain head of all statutes including the special
statute. Therefore, the rigour of any provision of the Act
should pass muster of article 20 of the Constitution of
India and it fails to pass such muster in the case at hand
and the failure leads to obliteration of the crime against
the petitioners."
In the light of the admitted facts as quoted hereinabove
and the settled principle of law as considered by this
Court supra, the unmistakable inference would be
quashment of proceedings under the Act in the impugned
Special C.C.No.711 of 2023.
13. For the aforesaid reasons, the following:
ORDER
(i) Writ Petitions are allowed.
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NC: 2025:KHC:11309
(ii) Impugned proceedings in Special C.C.No.711
of 2023 pending before the Principal City
Civil and Sessions Judge and Special Judge
for Prevention of Money Laundering Act,
Bangalore stand quashed qua the
petitioners.
(iii) It is made clear that this quashment will not
come or aid the petitioners to claim
quashment of proceedings in the predicate
offence where trial is said to be in progress."
5. In the light of the quashment of the subject
proceedings qua the other accused in the aforesaid writ
petitions, the petitioners also become entitled for the same
relief.
6. For the aforesaid reasons, the following:
ORDER
(i) Writ petition is allowed.
(ii) Impugned proceedings in Special C.C.No.711/2023
pending before the Principal City Civil and Sessions
Judge, Bengaluru, stands quashed qua the
petitioners.
Sd/-
(M.NAGAPRASANNA)
JUDGE
SJK
List No.: 1 Sl No.: 23/CT: BHK
