Telangana High Court

Mr. Madhu Koneru vs The Director Of Enforcement on 2 June, 2021

Bench: G Sri Devi

              HONOURABLE JUSTICE G. SRI DEVI

                       CRL. P.No.4130 of 2019

ORDER:

The petitioner, who is Accused No.12, in S.C.No.1 of 2019 on

the file of the Principal Special Judge for C.B.I. Cases-cum-Special

Court under the Prevention of Money Laundering Act, 2002 at

Nampally, Hyderabad, filed this Criminal Petition under Section 482

Cr.P.C. to quash the proceedings against him in the above S.C,

arising out of E.C.I.R.No.08/HZO/2011.

The facts which led to filing of the present Criminal Petition

are that in compliance to the orders, dated 10.08.2011 passed by the

High Court of Andhra Pradesh in W.P.No.29358 of 2010, the C.B.I.,

Hyderabad, registered a regular case vide RC-35-A-2011-0018, dated

17.08.2011 under Section 120-B read with Sections 420, 409, 420 and

477-A of I.P.C. and Section 13 (2) read with Section 13 (1) (c) and (d)

of the Prevention of Corruption Act, 1988 against the petitioner and

others. After completion of investigation, the C.B.I., Hyderabad,

filed charge sheet for the aforesaid offences. On receipt of

documents from C.B.I. like F.I.R., charge sheet etc., the respondent

authorities made enquiries and having found that there is a prima

facie case under the Prevention of Money Laundering Act, 2002 (for

short "the P.M.L. Act") and as Section 120-B read with Section 420 of

I.P.C. and Section 13 of the Prevention of Corruption Act are the

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scheduled offences under P.M.L. Act, the respondent authorities

have registered Enforcement Case Information Report (ECIR)

No.08/HZO/2011, dated 30.08.2011 and took up the investigation.

During the course of investigation, summons were issued under

Section 50 of the P.M.L. Act to several persons and recorded their

depositions, obtained financial accounts and bank statements of

M/s. Stylish Holmes, Tirumala Ranga Rao, M/s. Southend Projects

and Foundations Private Limited, N.Sunil Ressy and Koneru

Rajendra Prasad and also from other persons, who were associated

with the transactions and their voluntary statements. From the

statements of the accused and the documents collected during the

course of investigation under P.M.L. Act, according to the

respondent authorities, it is well established that A-1 to A-13 have

committed the offences under P.M.L. Act. As such, the respondent

herein had filed a complaint under Section 200 of Cr.P.C. read with

Section 45 (1), 3, 4 and 8 (5) of the Prevention of Money Laundering

Act, 2002 (for short "the P.M.L. Act") punishable under Section 4 of

the Act and Section 70 of the said Act, against the petitioner and

others. The role of the petitioner as alleged in the complaint is that

he is an N.R.I. and his father Koneru Rajendra Prasad was a Director

of M/s. Emaar Hills Township Private Limited. He received an

amount of USD 1,40,000 from one Challa Suresh and USD 2,50,000

from P.S.Parthasarathy, who have purchased villa plots in Emaar

Hills Township Private Limited, as part of excess amount received

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from villa plot buyers. Later, the petitioner returned the amount of

USD 2,50,000 to P.S.Parthasarathi in the guise of investment colour

to the amount received from him. However, USD 1,40,000 received

from Challa Suresh was still lying with him. Hence, he is the

recipient of part of proceeds of crime and still holding some of it

knowingly. Thus, the petitioner knowingly received USD 3,90,000

and involved in the process of acquisition, possession of proceeds of

crime and as such directly involved in the offence of Money

Laundering in terms of Section 3 of the P.M.L. Act. The said

complaint was taken cognizance as S.C.No.1 of 2019 and the

petitioner herein is arrayed as accused No.12 in the above S.C. The

present Criminal Petition is filed to quash the proceedings against

the petitioner in the above S.C.

Heard Sri Mukul Rohatgi, learned Attorney General of India/

Senior Counsel, assisted by Sri Avinash Desai, learned Counsel

appearing for the petitioner, Sri Namavarapu Rajeswara Rao,

learned Assistant Solicitor General of India, for the respondent and

perused the record.

It is submitted by the learned Senior Counsel for the petitioner

that the C.B.I. filed a charge sheet dated 01.02.2012 against the

petitioner and others, which was taken cognizance as C.C.No.6 of

2012 on the file of the Special Judge for CBI Cases, Hyderabad. The

petitioner was arrayed as A-13 in the said C.C. and was charged

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under section 120-B read with Sections 409 and 420 of I.P.C. He

further submits that this Court vide order dated 05.01.2018 in

Criminal Petition No.3935 of 2016, was pleased to quash the

proceedings against the petitioner in C.C.No.6 of 2012. Against the

orders passed in Criminal Petition No.3935 of 2016, a Special Leave

Petition (SLP (Crl.) No.8186 of 2018) has been filed and same is

pending before the Apex Court, but no stay has been granted. He

also submits that the allegations against the petitioner are materially

the same as in the C.B.I. charge sheet filed in C.C.No.6 of 2012. The

allegations against the petitioner are that he received USD 1,40,000

from Challa Suresh and USD 2,50,000 from P.S.Parthasarathy, who

have purchased villa plots as part of excess amount received. It is

alleged that the petitioner knowingly received proceeds of crime

and is still holding some of it. He further submits that the petitioner

is a resident of Dubai since 1992 and is engaged in the business of

real estate, trading and mining in the UAE and he has no business

with any companies based in India or with M/s. Emaar PJSC, Dubai.

The petitioner received the amounts from Parthasarathy and Challa

Suresh for investment in the Dubai real estate market and thereafter

returned the said amounts subsequently. The fact that the money

was received for investment in the real estate market is clear from

the statement of Challa Suresh under Section 50 of the P.M.L. Act.

He further submits that the amount received from Parthasarathy

was returned on 14.10.2011, which is evident from the documents

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filed along with the complaint itself. He also submits that the

amount from Challa Suresh was received on 12.04.2005 pursuant to

an Investment Agreement dated 14.03.2015 and a copy of the

agreement was submitted by the petitioner at the time of recording

his statement under Section 50 of the P.M.L. Act, but the same was

not made as part of the documents filed along with the complaint.

The petitioner has subsequently refunded the amount to Challa

Suresh, along with a profit on investment on 09.04.2015. He further

submits that in order to sustain a charge under Section 3 of the

P.M.L. Act, it is essential to establish that the petitioner had

'knowledge' of the proceeds of the Crime. The Apex Court

explained the meaning of the word 'knowledge' in Joti Prashad v.

State of Haryana1; Nikesh Tarachand Shah v. Union of India2 and in

Tech Mahindra Limited v. Joint Director, ED3. He also submits that

the allegations against the petitioner under the C.B.I. charge sheet

also require the component of 'knowledge' for constitution of the

offence. The genesis of the complaint filed under Section 45 of the

P.M.L. Act is admittedly the charge sheet filed by C.B.I. as

mentioned in the complaint itself. The allegations against the

petitioner in the complaint filed under P.M.L Act are identical to the

allegations against the petitioner made by C.B.I., in respect of the

same incident. A comparative chart of the allegations in the

1993 Suppl.(3) SCC 497

(2018) 11 SCC 1

Manu/AP/2921/2014

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complaint made under P.M.L. Act and in the charge sheet filed by

the C.B.I. has been filed by the petitioner. The complaint made

under P.M.L. Act does not have any statement of fact which is

different from that contained in the charge sheet filed by C.B.I. He

further submits that this Court vide order, dated 05.01.2018 in

Criminal Petition No.3935 of 2016, quashed the C.B.I. proceedings as

against the petitioner and has recorded a specific finding that the

allegations against the petitioner do not show that the petitioner had

any knowledge of the nature of amount deposited in his account.

The relevant findings are in paragraph No.15 (c) and 15 (i) of the

said order. He also submits that in paragraph No.17 of the order,

this Court specifically recorded a finding that the petitioner had no

knowledge of the alleged offence. The order of this Court passed in

Criminal Petition No.3935 of 2016, has been challenged before the

Apex Court and no stay of any nature has been granted, as such the

findings of this Court in Criminal Petition No.3935 of 2016 are still in

force. In view of the fact that the allegations against the petitioner in

the C.B.I. charge sheet and the allegations against the petitioner in

the complaint made under P.M.L. Act are identical and the

complaint under P.M.L. Act is ought to be quashed as this Court has

clearly recorded a finding that the allegations do not show that the

petitioner had any knowledge of the nature of amount deposited in

his account. He also submits that the contention of the respondent

that the offence under P.M.L. Act is a distinct offence from the

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predicate offence does not support the case of the respondent in any

manner. The contention that the offence under P.M.L. Act is an

independent offence cannot take away from the fact that this Court

vide order, dated 05.01.2018 in Criminal Petition No.3935 of 2016 has

specifically recorded a finding that the allegations and material

against the petitioner do not in any manner show his knowledge.

The judgments relied upon by the respondent in Neeharika

Infrastructure Private Limited v. State of Maharashtra and others4;

Gautam Kundu v. Directorate of Enforcement5; M/s.

V.G.N.Developers v. The Deputy Director, Directorate of

Enforcement6; Radha Mohan Lakhotia v. Deputy Director, P.M.L.A.,

Directorate of Enforcement, Ministry of Finance7; Sachin Narayan v.

Income Tax Department and another8 and Babulal Verma v.

Enforcement Directorate9 are not applicable to the present case and

are clearly distinguishable from the facts of the present case.

He further submits that since the allegations in the made in

the complaint under P.M.L. Act are identical to the allegations in the

C.B.I. charge sheet that has been quashed by this Court, the

proceedings against the petitioner cannot be sustained and are liable

to be quashed. The proceedings against the petitioner cannot be

sustained in view of the categorical findings of this Court,

Crl.A.No.330 of 2021 (SC)

(2015) 15 SCC 1

(2019) SCC Online Mad. 13270

(2010) SCC Online Bom.116

(2019) SCC Online Kar. 1726

Crl.Appln.No.201 of 2021, Bombay HC

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particularly in the light of the fact that no separate factual allegation

or material has been filed along with the complaint, which is distinct

from the C.B.I. charge sheet. He also submits that the respondent

has deliberately suppressed the fact that the C.B.I. charge sheet has

been quashed by this Court vide order, dated 05.01.2018 in

Crl.P.No.3935 of 2016. In the complaint made under P.M.L.Act, the

respondent has specifically stated that the case in C.C.No.6 of 2012 is

pending before the trial Court. In its counter affidavit, the

respondent does not deny having knowledge of the quashing of the

C.B.I. charge sheet but attempts to justify the suppression by merely

stating that the complaint was originally filed on 28.12.2017 and re-

submitted on 12.04.2019 after making corrections. It is an admitted

fact within the knowledge of the respondent that as on 12.04.2019

the C.B.I. charge sheet has been quashed by this Court and the

respondent was duty bound to bring the said fact to the notice of the

Special Judge. The respondent has withheld the above material fact

from the Special Judge and has consequently misled the Special

Judge to issue process against the petitioner vide order, dated

15.06.2019 in S.C.No.1 of 2019.

He also submits that the complaint made under P.M.L. Act,

taken at its face value, shows that the petitioner had no knowledge

of the money deposited in his account to be the proceeds of crime.

Assuming the allegations in the complaint to be true, no offence

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under the P.M.L. Act is made out against the petitioner. It is further

submitted that there are no new factual allegations in the complaint

made under P.M.L. Act that are different from the allegations in the

C.B.I. charge sheet that has been quashed by this Court. In the

complaint made under P.M.L. Act only a bare allegation is added

that the petitioner is the recipient of proceeds of crime 'knowingly'.

Mere usage of the word 'knowingly' is not sufficient to attribute

knowledge to the petitioner in the absence of any statement or

material in the complaint made under P.M.L. Act that shows as to

how the petitioner is alleged to have knowledge of receipt of

proceeds of crime. In the absence of such allegations and material

attributing knowledge to the petitioner, the proceedings against the

petitioner are liable to be quashed and the petitioner ought not to be

forced to undergo the rigmarole of a long criminal trial.

He further submits that the complaint made under P.M.L. Act

does not allege that the petitioner was directly involved in the

sale/purchase of plots or that he had any knowledge whatsoever of

the sale of plots to Challa Suresh and Parthasarthy. The petitioner is

not alleged to be in any manner connected to the companies/entities

that are alleged to have engaged in sale/purchase of plots leading to

generation of proceeds of crime. It is not even alleged in the

complaint that the petitioner had asked Challa Suresh or

Parthasarathy to deposit the amounts in his account or that there

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was any interaction of the petitioner with Challa Suresh and

Parthasarathy suggesting that the amount is being deposited for

sale/purchase of plots. The money received from Challa Suresh and

Parthasarathy was in the normal course of business from their

respective American Bank Accounts to the account of the petitioner

in Dubai for the purpose of investment in the real estate market.

The same has absolutely no connection to the sale/purchase of plots

that is the subject matter of the P.M.L. Act complaint. Further, the

money was duly returned by the petitioner to both Challa Suresh

and Parthasarathy and no money is lying with the petitioner. It is

evident that there is no basis in the complaint to allege that the

money received by the petitioner is proceeds of crime and the

petitioner has been roped in as an accused merely as he is the son of

A-7 (Koneru Rajendraprasad). He also submits that as per the

statement of Challa Suresh recorded under Section 50 of the P.M.L.

Act and which is reproduced in paragraph No.18 of the complaint, it

is clear that the amount of USD 1,40,000 was paid to the petitioner

towards investment in the property market in Dubai and is in no

manner related to the alleged proceeds of crime. Further, Challa

Suresh, in his statement also specifically stated that he has been

investing with the petitioner from earlier i.e., before any plot sought

to be sold/purchased. The allegation in the complaint that the

petitioner received USD 2,50,000 from Parthasarathy, but his

statement has not been recorded by the respondent authorities. In

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the complaint, it is also alleged that the deposits in the account of the

petitioner were made at the instance of Koneru Rajendra Prasad

(father of the petitioner) on the basis of the statement of Tummala

Ranga Rao under Section 164 of Cr.P.C. in the C.B.I. case. It is

submitted that even the aforesaid statements do not attribute any

knowledge to the petitioner regarding the alleged proceeds of crime

and cannot form the basis of proceeding against the petitioner for

the offence of money laundering. Further, this Court, while

quashing the C.B.I. proceedings against the petitioner, specifically

dealt with the aforesaid allegations and statements made by

Parthasarathy, Challa Suresh and Tummala Ranga Rao under

section 164 of Cr.P.C., and gave a categorical finding that the same

would not be sufficient to say that the petitioner was privy to any

such transaction. Therefore, it is not open for the respondent to rely

on 164 Cr.P.C. statements recorded by C.B.I. Further, the very fact

that Challa Suresh and Parthasarathy, who are alleged to have paid

proceeds of crime to the petitioner, have not been implicated as

accused in the complaint shows that the petitioner has been wrongly

implicated as an accused without any basis and for the sole reason

that he is the son of accused No.7.

It is further submitted that the sole basis for the respondent

authorities to raise allegations with respect to the aforesaid amount

is the bank account statement of the petitioner shows receipt and

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return of the amount. Mere entries in the bank statement can never

show knowledge of the petitioner or establish the purpose for which

the money was given to the petitioner. In view of the above, even

from the allegations in the complaint, no knowledge can be

attributed to the petitioner that the amounts received by him were

proceeds of crime. There is no statement or material to show that

the money received by the petitioner was tainted and it was

proceeds of crime. Even if it is assumed that the money received by

the petitioner was tainted, there is nothing in the complaint to show

that the petitioner had knowledge that the money was proceeds of

crime. Therefore, it cannot be said that the petitioner had

knowledge that the said amount being proceeds of crime. It is also

submitted that the complaint under P.M.L. Act is contrary to law

and is liable to be quashed as it seeks to apply a criminal provision

retrospectively. The E.C.I.R. in the present case was registered by

the respondent on 30.08.2011 on the basis of the C.B.I. charge sheet,

according to which Section 120-B read with Section 420 of I.P.C. are

scheduled offences under the P.M.L.Act. However, the aforesaid

offences were included as scheduled offences in Part-A of the

Schedule only in 2009 through Act 21 of 2009. Even as per the

P.M.L. complaint, the petitioner received amounts from

Parthasarathy on 09.08.2007 and from Suresh on 12.04.2005 and,

therefore, the offence is alleged to have been committed before 2009

at the time when Section 120-B read with Section 420 of I.P.C. and

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Section 13 of the Prevention of Corruption Act, were not scheduled

offences under the P.M.L. Act. In support of the said contention, he

relied upon the judgment of the Delhi High Court in Arun Kumar

Mishra v. Directorate of Enforcement10. The contention of the

respondent that the question of retrospective application of the

provisions of P.M.L. Act are pending adjudication before the Apex

Court and the Apex Court had passed interim orders in favour of

the respondent in S.L.P.(Cri) No.10018 of 2015 (Arun Kumar

Mishra's case) does not in any manner impact the law declared by

this Court and the Delhi High Court. It is submitted that the Apex

Court vide order, dated 23.11.2015 in SLP (Cri) No.10018 of 2015 has

directed the parties to maintain status quo. This Court in M/s. Tata

Coffee Limited v. Government of Andhra Pradesh11 held that mere

granting of an interim stay order by the appellate Court would not

wipe out the ratio/law declared by the High Court. Therefore, the

alleged offence took place before 2009 at which time Section 120-B

read with Section 420 of I.P.C. were not scheduled offences under

the P.M.L. Act, the offences cannot be retrospectively applied to the

petitioner. It is further submitted that the contention of the

respondent that the offences under P.M.L. Act are continuing and

hence ought to be applied retrospectively is entirely misinterpreted

and contrary to the law declared by this Court in Tech Mahindra v.

Manu/DE/1095/2015

Manu/AP/1477/2013

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Joint Director, E.D.12. The aforesaid decision of this Court has

become final as the Special Leave Petition (SLP(Crl) No.010250 of

2017) has been dismissed by the Apex Court, vide order dated

08.12.2017. In view of the judgment of the Apex Court in S.Kasi v.

State13, the decision of the coordinate Bench of the High Court

would be binding on another coordinate bench.

Reiterating the allegations made against the petitioner in the

complaint made under P.M.L. Act, learned Assistant Solicitor

General of India, appearing for the respondent would submit that

the petitioner is guilty of the offence of money laundering. In view

of amended Sections 8 (5) and 8 (6) of the P.M.L. Act, the

confiscation of property and commission of offence of money

laundering has to be decided by the trial Court and, therefore, filing

of prosecution complaint before the Special Court is mandatory and

the trial proceedings are standalone proceedings. It is further

submitted that in his deposition given under Section 50 (2) and (3) of

the P.M.L. Act, the petitioner had admitted that he has received USD

2,50,000 from Parthasarathi and USD 1,40,000 from Challa Suresh,

towards real estate business investment in Dubai. It is further stated

in his statement that he received the said amount from Parthasarathi

during 2007 and later as per his request returned the same during

the year 2011. It is also submitted that T.Ranga Rao, who is sole

Manu/AP/2921/2014

2020 SCC Online SC 529

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selling agent of Villa plots in EHTPL, in his statement, stated that

they have sold villa plot to Parthasarathy for an excess price of

Rs.45,000/- per square yard, which is not reflected in the books of

accounts of EHTPL. As per the instructions of Koneru Rajendra

Prasad (A-7), foreign bank account of the petitioner was given to

Parthasarathy and Challa Suresh and they were informed to deposit

the excess amount into the account of the petitioner. Further, Challa

Suresh, one of the buyers of a villa, in his statement, stated that he

purchased villa plot @ Rs.5,000/- per square yard and Koneru

Rajendra Prasad and T.Ranga Rao, asked for excess amount of

Rs.5,000/- per square yards equivalent to Rs.72.50 lakhs. He knows

Rajendra Prasad and he had already made some investment with the

petitioner USD 1,40,000 and to meet demand in India, he asked his

funds in Dubai, which were not returned till now. Thus, it is evident

that the amount of USD 1,40,000 available with the petitioner was to

be adjusted towards excess payment of villa plot purchased by

Challa Suresh. He further submits that the petitioner had received

the amount from Parthasarathy during the year 2007 and returned

the same in the year 2011 i.e., after registration of case by C.B.I.

Therefore, remittance of USD 3,90,000 into the account of the

petitioner cannot be said to be without his knowledge, as such, the

petitioner is arrayed as an accused in the prosecution complaint

under P.M.L. Act. Further, the association of the petitioner with

T.Ranga Rao of M/s. Stylish Homes Private Limited is well

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established and accepted by the petitioner too. The provisions of

P.M.L. Act are independent and having self-contained code, which

has been strengthened by catena of decisions pronounced by various

Courts of law. In support of his contentions, he relied on the

following judgments:-

1. Smt. Soodamani Dorai v. The Joint Director of Enforcement, Chennai and others14

2. J.Sekhar v. The Directorate of Enforcement15

3. Neeharika Infrastructure Private Limited v. State of Maharashtra and others (4 supra)

4. Gautam Kundu v. Directorate of Enforcement (5 supra)

5. M/s. V.G.N.Developers v. The Deputy Director, Directorate of Enforcement (6 supra)

6. Radha Mohan Lakhotia v. Deputy Director, P.M.L.A., Directorate of Enforcement, Ministry of Finance (7 supra)

7. Sachin Narayan v. Income Tax Department and another (8 supra)

8. Babulal Verma v. Enforcement Directorate (9 supra.

This Court has given fastidious consideration to the points

raised by both sides and verified the material documents in order to

appreciate the contentions raised by both sides. In short, the

following points are surfaced before this Court for consideration.

W.P.No.8383 of 2013 of Madras HC

Crl.O.P.Nos.24200 of 2017 of Madras HC

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1) Whether there is material to constitute the offence amounting 'money laundering' under the PML Act against the Petitioner (Accused No. 12)?

2) Whether there is 'schedule offence' to be proceeded with against the Petitioner under the provisions of Prevention of Money Laundering Act in view of the Order of this Court in Crl. Petition 3935 of 2016 dated 05.01.2018?

3) Whether the amendment of PML Act in the year 2009 so far as 'schedule offences' is concerned, can be applied to an act committed prior to amendment?

Point Nos.1 & 2: The accusation made against the petitioner

in the Complaint filed before the Special Court by the ED in S.C.No.

01 of 2019 is seen as below (Vide: Para L)

"L. Role of Sri Koneru Madhu (Accused No. 12) S/o Sri Koneru Rajendra Prasad in Money Laundering Offence:

i) He is an NRI and his father Sri Koneru Rajendra Prasad was a Director in EHTPL. He received an amount of USD 1, 40, 000 from Sri Challa Suresh and USD 2, 50, 000 from Sri PS Parthasarathy, who have purchased villa plots in EHTPL, as part of excess amount received from villa plot buyers.

ii) Later he returned the amount of USD 2, 50,000 to Sri PS Parthasarathy in the guise of investment colour to the amount received by him.

iii) However, USD 1, 40,000 received from Sri Challa Suresh is still lying with him

iv) Hence, he is the recipient of part of proceeds of crime and still holding some of it knowingly.

v) Thus, Sri Koneru Madhu knowingly received USD 3, 90, 000 and involved in the process of acquisition, possession of PoC thus directly involved in the offence of 'Money Launder' in terms of Sec. 3 of PMLA, 2002 for which Shri Koneru Madhu shall be guilty of offence of money laundering under sec. 3 and punishable under sec. 4 of the Act."

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In the light of the above allegations, rather accusations made

against the petitioner, the learned Senior Counsel, Sri Mukul

Rohatgi, argued that necessary elements to attract the offence of

money laundering are absent and, therefore, the Complaint is liable

to be quashed. In the Complaint, as against the petitioner, the ED

has alleged the offences under Section 3 punishable under Section 4

of the P.M.L.Act. For this purpose, a close look at the meaning and

import of the expression 'money laundering' has to be referred.

According to Section 2 (p), 'money laundering' has the

meaning assigned to it in section 3. Section 3 of the PML Act, 2002

reads as under:-

Section 3 - Offence of money-laundering: Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the [proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming]16 it as untainted property shall be guilty of offence of money-laundering.

[Explanation17: For the removal of doubts, it is hereby clarified that--

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

16 1. Substituted by the Prevention of Money-laundering (Amendment) Act, 2012 (No. 2 of 2013) w.e.f. 15.02.2013 for the following: - "proceeds of crime and projecting."

17 2. Inserted by Finance (no. 2) Act, 2019.

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(a) concealment; or

(b) possession; or

(c) acquisition; or

(d) use; or

(e) projecting as untainted property; or

(f) claiming as untainted property, in any manner whatsoever;

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

The term "proceeds of crime" has been defined in Section 2

(u) of P.M.L. Act, which reads as under: -

"2. (u) "proceeds of crime" means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property 11[or where such property is taken or held outside the country, then the property equivalent in value held within the country 14[or abroad]];

(y) "scheduled offence" means--

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

4[(ii) the offences specified under Part B of the Schedule if the total value involved in such offences is 12 [one crore rupees] or more; or

(iii) the offences specified under Part C of the Schedule.] offence are sought to be projected as untainted.

Part B of the Schedule provides that in Paragraph one, besides

several offences under the Indian Penal Code, Sections 120-B, 419

and 420 are included vide Section 13 of the Prevention of Money

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Laundering (amendment) Act, 2009 (since repealed by Repealing

and Amending Act, 2019 (31 of 2019).

It is apt to note that the Complaint of the ED in S.C.No.1 of

2019 impugned and is challenged under Section 482 of the Cr.P.C.,

simply adopts the Charge Sheet contents/accusations against the

Accused No. 13 therein who is the Petitioner/Accused No. 12 in this

Criminal Petition. There was a Charge Sheet and Supplementary

Charge Sheet filed by the CBI. The offences cited against the

Petitioner herein (A13 in that charge sheet) in that original Charge

Sheet are Sections 120B, 420, 409 and 477-A IPC. Interestingly, the

accusations made in that charge sheet against A-13 therein

(petitioner herein) are replica of the allegations made in the

impugned complaint filed before the Special Court by the ED under

the PML Act. It is also important to note that in the Complaint itself

the ED has asserted that a detailed reference is made to the Charge

sheet filed by CBI at various places and at paragraph No. 10 a

reference is made to the 'investigation under PMLA, 2002' as below:

"11. It is humbly submitted that on receiving documents from CBI like FIR, Charge Sheet etc., the Directorate of Enforcement, Hyderabad made enquiries and having found that there is a prima facie case under PMLA, 2002 and as Sec. 120B read with Sec. 420 of IPC and Sec. 13 of PC Act are the Scheduled offences under PMLA, 2002, Directorate of Enforcement has registered ENFORCEMENT CASE INFORMATION REPORT (ECIR) No. 08/HZO/2011

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dt. 30.08.2011 (Annexure-A4) and took up the investigation."

12. During the investigation summonses were issued under Section 50 of the Act to several persons and recorded their depositions, obtained Financial Accounts and Bank statements of M/s Stylish Holmes, Shri Tummala Ranga Rao, M/s Southend Projects & Foundations Pvt. Ltd. Sri N. Sunil Reddy, Sri Koneru Rajendra Prasad and also from other persons who were associated with the transactions and their voluntary statements ..."

It is therefore, as rightly contended by the Learned Senior

Counsel for the Petitioner, other than the material collected by the

CBI, the ED did not collect, nor did any further investigation to

collect some more material to charge the petitioner with the offence

under sec. 120B and Sec. 420 IPC. This Court in Crl.P.No 3935 of

2016, wherein the present petitioner was figured as Accused No. 13

made a clear observation vide Para 17 at page 40 as below:

"From the above, when it is not a case of the Petitioner-A13 was privy to any conspiracy with M/s Emmar Properties, Public Joint Stock Company (PJSC), Dubai, from the time of their entering the MOU, much less even party to agreement between M/s Emmar and its subsidiaries and M/s Stylish Homes and not even privy with Ranga Rao-Director of M/s Stylish Homes and nothing even of any material with substance to say any privy between A6-Rajendra Prasad and the Petitioner-A13, leave apart as discussed supra even any ting to infer between father and son of any knowledge of the son about his father was privy with

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others in any offence and not prevented, that no way establish any criminal conspiracy to mulct the petitioner as A13 with other of them, even taken for arguments sake of his version of the amount remitted by Parthasarathy was a loan and the amount remitted by Suresh was investment in any business are untrue, that by itself but for one of several circumstances to infer no way suffice to charge him with accusation of criminal conspiracy..."

At paragraphs 18 and 19 of the Order, this Court made further

observations that the offence of Criminal Conspiracy is not made out

from the material provided by the CBI in their Charge Sheet. The

relevant observations are extracted below for instant reference:

"18. Thus, there is nothing to implicate him with criminal conspiracy, if there is nothing to show any circumstances give rise to a conclusive or irresistible inference of an agreement between him and one or more other persons to commit an offence leave apart a few bits here and a few bits there on which the prosecution relies, if any, cannot be held to be adequate for connecting him with the commission of the crime of criminal conspiracy as held by the Apex court...

19. The respondent-CBI even alleged in the charge sheet that the petitioner-A13 is also a party to the so- called criminal conspiracy, but on the evaluation of the entire subject matter, there is nothing for what is discussed supra. The learned Special Judge also did not go through and evaluate the prosecution material covered by the final report in taking cognizance for respective offences against him as A-13."

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So far as the other offences of Criminal breach of trust and

cheating (sections 409 and 420 IPC) is concerned, this Court has

recorded the following observations:

"14. From reading of the material supra, there is thus no offence of criminal breach of trust and cheating much less with any proof of entrustment and any deception since inception of any contract between M/s Emaar and M/s Stylish Holmes in so far as against the petitioner-A13 separately concerned, but for subject to offence of criminal conspiracy made out if any with other accused under sections 120B & 107 (2) IPC r/w 10 Evidence Act to petitioner A13 as privy for their committing those offences alleged from any agreement or abetment/instigation from the allegations in the charge sheet that though rate of selling the villa plots was fixed by M/s Emaar at Rs. 5, 000/ per sq. yd. as per the instructions of Shri Koneru Rajendra Prasad -A6, Shri T. Ranga Rao-A14 as Director of M/s Stylish Holmes Real Estates Pvt. Ltd., sold the villa plots by collecting excess amounts from the buyers...."

Thus, this Court upheld the contentions of the Petitioner

herein who is the Petitioner-A13 in Charge sheet filed by CBI that no

offences are made out under sec. 120B, 409 and 420 IPC and quashed

the charge sheet against him. This Court is called to examine the

same facts which were considered by this Court in Crl P. No.3935 of

2016, in this case which are arisen out of the Complaint filed by the

ED under PML Act. The contention of the learned Standing Counsel

for the Respondent is that this case is independent and has no

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relevance with the result of Crl.P.No. 3935 of 2016 is lacking force

and logic because the ED can proceed only for those offences which

are 'scheduled offences' under the IPC. This Court, on facts cannot

take a different opinion from the one taken by another co-ordinate

bench of this Court.

In Arun Kumar Mishra vs. Directorate of Enforcement (10

supra) the Delhi High Court considered the similar question. In that

case, CBI closed the investigation on the ground that no material is

available to charge the accused for the schedule offences. At

paragraphs 27 and 28 of the report, the High Court dealt with this

issue and held that the impugned ECIR filed by the ED shall be

quashed.

Therefore, as rightly argued by the learned Senior Counsel for

the Petitioner, it is redundant for this court to discuss the facts and

law on the same points once again in this petition. Therefore, this

Court finds reasons to accept the contentions of Sri Mukul Rohatgi,

learned Senior Counsel for the Petitioner that according to the

findings in Crl.P. No. 3995 of 2016, the scheduled offences are not

made out and the Charge Sheet is quashed against the Petitioner and

therefore, and in consequence thereof, there cannot exist any more

scheduled offences for the purpose of prosecution under Sections 3

and 4 of PML Act, 2002 (as amended).

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In view of the above discussion, I find that there is no material

to proceed against the petitioner under Sections 3 and 4 of

Prevention of Money Laundering Act, 2002 and that there are no

'schedule offences' committed by him to proceed under the

provisions of PML Act in view of the Order of this Court in Crl.P.

No. 3935 of 2016 dated 5.1.2018.

Point No. 3:- Whether the amendment of PML Act in the year

2009 so far as 'schedule offences' is concerned, can be applied to an

act committed prior to amendment?

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".

It is the case of ED as set out in the impugned Complaint that

the money was remitted to the account of the petitioner in Dubai, on

12.4.2005 and 9.8.2007 from Mr. Suresh and Mr. Parthasarathy

respectively and therefore, the offence of money laundering, so far

as the petitioner is concerned was committed prior to the year 2009.

Sec. 120 B, sec. 409 and 420 I.P.C are made 'scheduled offences' for

the purpose of Section 3, only from the year 2009. The question

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whether for the acts amounting to offences punishable under sec.

120B, 409 and 420 I.P.C prior to 2009, the PML Act that was

amended in 2009 can be applied. This question was dealt with by the

Delhi High Court in Arun Kumar Mishra vs. Directorate of

Enforcement (10 supra) in detail. It is held by the Ld. Single Judge of

Delhi High Court that :-

"19. At the outset it may be mentioned that the ECIR discloses the commission of the alleged offences during the period from November 2005 to December 2006. Section 3 of the PMLA specifically mandates that the act of money laundering should be intentional, therefore, it has to be traced to the point of time when the actual transaction took place. The offence punishable under Section 120B IPC and Section 13 of the PC Act were inserted in the schedule of PMLA w.e.f. 01.06.2009 i.e. after the period in which the alleged offences have been committed." (Emphasis is mine)

20. In 'Tech Mahindra's case' (supra) it was observed as under: -

"70. It is settled principle of law that no person can be prosecuted on the allegation which occurred earlier by applying the provision of law which has come into force after the alleged incident. In other words, there can be no retrospective application of criminal liability for the incident occurred prior to introduction of such liability in the statute book.

71. Admittedly, prior to Amendment Act, 2009, none of the provisions which are now invoked by the Enforcement Directorate were on the statute book

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except Section 467 IPC. Thus, the petitioner cannot be prosecuted by invoking those provisions.

21. It is settled principle of law that the provisions of law cannot be retrospectively applied, as Article 20(1) of the Constitution bars the ex-post facto penal laws and no person can be prosecuted for an alleged offence which occurred earlier, by applying the provisions of law which have come into force after the alleged offence."

Madras High Court in recent judgment Smt.Soodamani Dorai

vs. The Joint Director Of Enforcement (16 supra) made reference to

this aspect. It is stated:

"In respect of retrospective effect of the provisions of the Prevention of Money Laundering Act, 2002 is pending before the Hon'ble Supreme Court of India and the Hon'ble Division Bench of High Court of Delhi. However, the Hon'ble Supreme Court of India has granted interim order in favour of the Directorate of Enforcement on the said issue of irrespective effect of the Prevention of Money Laundering Act, 2002, in the case of Directorate of Enforcement vs. Obulapuram Mining Company Pvt. Ltd in SLP (Crl.) No.4466 of 2017 dated 22.3.2017 and in the case of Directorate of Enforcement vs. Arun Kumar Mishra in SLP (Crl.) Nos.10018 and 10019 of 2015 dated 11.1.2016 and in the case of Adjudicating Authority (PMLA) and others vs. Ajay Kumar Gupta and others in SLP (Crl.) Diary No.4968 of 2018 (arising out of impugned final judgment and order dated 13.7.2017 in Crl.OP Nos.10500 of 2017 and 10497 of 2017 passed by this Court and also the judgment of Hon'ble Division

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Bench of High Court of Delhi in the case of Directorate of enforcement vs. Mahanivesh Oils and Foods Pvt Ltd (LPA No.144 of 2016) and C.M. No.8046 of 2016 dated 30.11.2016."

In the case of Prahlad Krishna vs. The State of Bombay,18 the

court observed that immunity is supposed to be provided to a

person from being accused of the offence laid down under the

present law which had been committed by him before such

enactment. Clause 1 of Article 20 of the Constitution of India

guarantees right against the operation of ex post facto laws. A seven

Judges' Bench of the Supreme Court in the case of Jawala Ram vs.

The State of Pepsu19 made it clear that it is only in case of criminal

laws that there lies a prohibition of the application of retrospective

laws whereas civil liabilities have been given the authority to be

imposed by retrospective effect. Therefore, laws which make an

activity offensive which were initially innocent when the same was

committed will not be declared as valid.

The above view is fortified from the spirit of Article 20 of the

Constitution. In Biswanath Bhattacharya vs. Union of India20, the

Supreme Court, in paragraph 25, held as under:-

18AIR 1952 Bom 1 (DB) 191962 SCR (2) 503 (CB)

(2014) 4 SCC 392

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"25. Article 20 contains one of the most basic guarantees to the subjects of the Republic of India. The Article insofar as is relevant for our purpose stipulates two things:

(i) That no person shall be convicted of any offence except for violation of the law in force at the time of the commission of the act charged as an offence; and

(ii) That no person shall be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offence.

It is a well-settled principle of constitutional law that sovereign legislative bodies can make laws with retrospective operation; and can make laws whose operation is dependent upon facts or events anterior to the making of the law. However, criminal law is excepted from such general rule, under another equally well-settled principle of constitutional law i.e. no ex post facto legislation is permissible with respect to criminal law. Article 20 contains such exception to the general authority of the sovereign legislature functioning under the Constitution to make retrospective or retroactive laws." (Emphasized by me)

In view of the above position, it can be concluded that the

amendment of P.M.L. Act in 2009 will not be applied to the offences

committed prior to amendment, to initiate proceedings under the

PML Act. It is not brought to the notice of this Court by the learned

Standing Counsel for the Respondent that the Supreme Court or any

other High Court have taken a different opinion about the position

of law pronounced by the learned. Single Judge of the Delhi High

Court in Arun Kumar Mishra case (10 supra). Inasmuch as the

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reasoning given by the Ld. Judge of Delhi High Court in Arun

Kumar Mishra (10 supra) is sound and acceptable, this Court also

adopts the same view.

It is clear from the above discussion, that certain High Courts

have already taken a view that the amendment to PML Act in 2009

has no retrospective effect. Those decisions are challenged by the ED

before the Supreme Court and an interim order has been passed by

the Supreme Court in favour of the ED. According to Article 20 of

the Constitution of India, as observed by the Supreme Court

referred to above, the general power of legislature to make law with

retrospective effect is not available in case of criminal law. These

conflicting views are yet to be finally decided by the Apex Court.

The argument advanced by the learned Senior Counsel for the

Petitioner that there is no commission of 'schedule offence' by the

petitioner to proceed under Sections 3 and 4 of P.M.L. Act and the

Complaint filed by the Respondent against the petitioner, being

Accused No. 12 does not indicate any material to prosecute him for

the offences under the Prevention of Money Laundering Act, 2002

(as amended) is accepted. But whether the amendment in 2009

would make the acts committed in the period earlier to amendment

falls within the purview of the PML Act or not cannot be answered

because the question is pending for final decision before the Apex

Court.

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The learned Assistant Solicitor General for the Respondent

contends that invocation of powers under sec. 482 Cr.P.C by this

Court is highly unwarranted. The power vested in this Court by Sec.

482 Cr.P.C is to prevent abuse of process of criminal law. Where it

appears from the record that there is no reason and material to

charge the petitioner for the offences under the PML Act, the

Complaint is evidently vexatious. The principles relating to exercise

of jurisdiction under Section 482 of the Code of Criminal Procedure

to quash complaints and criminal proceedings have been stated and

reiterated by Supreme Court in several decisions. In Indian Oil

Corporation. vs. NEPC India Ltd. and others,21 the Court laid down

the following principles, among others in this regard:

"(i) A complaint can be quashed where the allegations made in the complaint, even if they are taken at their face value and accepted in their entirety, do not prima facie constitute any offence or make out the case alleged against the accused.

For this purpose, the complaint has to be examined as a whole, but without examining the merits of the allegations. Neither a detailed inquiry nor a meticulous analysis of the material nor an assessment of the reliability or genuineness of the allegations in the complaint, is warranted while examining prayer for quashing of a complaint.

(ii) A complaint may also be quashed where it is a clear abuse of the process of the court, as when the criminal proceeding is found to have been initiated

21(2006) 6 SCC 736

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with mala fides/malice for wreaking vengeance or to cause harm, or where the allegations are absurd and inherently improbable.

(iii) The power to quash shall not, however, be used to stifle or scuttle a legitimate prosecution. The power should be used sparingly and with abundant caution.

(iv) The complaint is not required to verbatim reproduce the legal ingredients of the offence alleged. If the necessary factual foundation is laid in the complaint, merely on the ground that a few ingredients have not been stated in detail, the proceedings should not be quashed. Quashing of the complaint is warranted only where the complaint is so bereft of even the basic facts which are absolutely necessary for making out the offence."

The Supreme Court in Anand Kumar Mohatta and another vs.

State (Govt., of NCT of Delhi), Department of Home and another,22

has held that the High Court should quash the proceedings if it

comes to the conclusion that allowing the proceedings to continue,

would be an abuse of the process of the Court and that the ends of

justice require that the proceedings be required to be quashed.

In view of the judgments referred to above and for the

aforesaid reasons, this Court is of the opinion that the proceedings

against the petitioner in S.C.No.1 of 2019 on the file of the Principal

Special Judge for C.B.I. Cases-cum-Special Court under the

22 AIR 2019 SC 210

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