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| Money Laundering |
Introduction:
Section 120A of the India Penal Code,
1860 defines ‘criminal conspiracy’ and section 120B provides its punishment.
Enforcement Directorate has invoked 120B in many cases where other offences
were not scheduled offences. PMLA
was enacted in India in the year 2002. The main object of this Act is to rest
the integration of the proceeds of crime with the mainstream economy. The
proceeds of crime has been defined under Section 2(i)(u) of PMLA. Section 2(y) of the Prevention of Money Laundering Act,
2002 (PMLA) defines the 'schedule offence'. A bare
perusal of very definition of 'proceeds of crime' shows that it is very much
interlinked with the existence of scheduled offence.
Offence of Criminal Conspiracy and PMLA:
PMLA has
been amended time to time and more offences have been included in the category
of scheduled offence to widen the scope of PMLA to meet out its main aims and
objects.
There
have been instances wherein provisions of PMLA have been invoked retrospectively
on the offences which were not scheduled offences at the time of its
occurrence.
This
issue came before the High Court of Karnataka. The allegation was that the
accused therein committed the offences under Sections 120-B, 420 and 411
of the IPC and Sections 13(2) read with Sections
13(1)(d) and 13(1)(e) of the PC Act, 1988. The petitioner therein
contended that the alleged offences were included as scheduled offences only on
01.06.2009 whereas the alleged offences were allegedly committed between June,
2007 and May, 2009. The Petitioner further contended that the said offences
were allegedly committed prior to the coming into operation of the amendment to
the PMLA.
The Karnataka
High Court was of the view that the offenses alleged against the petitioner therein
are not scheduled offenses under PMLA.
Therefore, the petitioners therein could not be prosecuted under the provisions
of PMLA.
Relevant
paras of the Judgment dated 22.03.2017 titled as Obulapuram Mining Company
Pvt. Ltd. & Ors. v. Joint Director Directorate of Enforcement Government of
India and Ors. reported as MANU/KA/0545/2017, (passed by the High
Court of Karnataka) are reproduced herein below:
"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."
The
Enforcement Directorate challenged the above-said judgment of the Karnataka
High Court before the Hon'ble Supreme Court of India. The Hon’ble Supreme Court
vide its order dated 24.07.2017 passed in Special Leave to Appeal Crl. No.
4466/2017 matter titled as 'Directorate of Enforcement Vs. Obulapuram Mining
Company Pvt Ltd., held that-
"Leave granted. In the meantime, the impugned judgment
and order will not operate as a precedent. Liberty is granted to file Rejoinder
Affidavit within a period of 4 weeks from today."
The High Court of Madras dealt with the
retrospective effect of PMLA and vide its Judgment dated 13.07.2017 in a
case titled as Ajay Kumar Gupta v. Adjudicating Authority (PMLA)
reported as MANU/TN/2654/2017, held that-
"12. Similarly, the charge
sheet was filed on 13.1.2009 under Section 13 of Prevention of Corruption Act, but this
section was included in the list of Scheduled Offences under Prevention of Money
Laundering Act is only on
1.6.2009. Therefore subsequent amendment cannot be
given any retrospective effect…"
The above-said SLP pertaining to the judgment
dated 22.03.3017 of Karnataka High Court (Obulapuram Mining Company Pvt.
Ltd. & Ors. Vs. Joint Director Directorate of Enforcement Government of
India and Ors.) is pending and as such final view of the Supreme Court is
awaited on this important aspects of PMLA.
Invoking Section 120-B IPC when offences were not scheduled
offences:
Section 120-B IPC defines meaning of criminal
conspiracy. Enforcement Directorate has added 120-B in in many cases where
other offences were not scheduled offences before the amendment of PMLA.
By adding Section 120-B IPC, provisions of PMLA
have been invoked in such cases as well wherein the offences at the time of
their occurrence were not including under PMLA as scheduled offences. Thus,
with the aid of Section 120B IPC, the PMLA has been invoked retrospectively.
This issue came before various High Courts.
High Court of Jammu & Kashmir and The High Court of Jammu
& Kashmir in Ahsan Ahmad Mirza & Others v. Enforcement Directorate [WP(C)
No. 2780/2019] , decided on 15.10.2019,
held as under:
"29 I am persuaded to take the view which has been taken by the
Karnataka High Court in the judgment supra, for, the view taken by the Karnataka High Court is the only correct view
having regard to the settled legal position enumerated extensively in the
several judgments of the Apex Court. It is beyond the pale of any doubt that
offence of criminal conspiracy punishable under Section 120-B
IPC is a stand alone offence and figures on top of Part A of the Schedule of
PMLA. That being the position, it is difficult to accept the plea that unless
the offence of criminal conspiracy is committed in conjunction with a scheduled
offence, it cannot be taken to be a scheduled offence for the purpose of Section 3 read
with clause (u) of Sub- section 1 of Section 2 of PMLA. Undoubtedly, the
offence of money- laundering relates to the process or activity connected with
the proceeds of the crime including its concealment possession, acquisition
etcetra and 'proceeds of crime' would mean any property derived or obtained
directly or indirectly as a result of criminal activity relating to scheduled
offence. Once Section 120-B is held to be a distinct, independent and stand
alone offence and is one of the scheduled offences under PMLA, any property
derived or obtained by any person directly or indirectly as a result of criminal
activity relating to the offence of conspiracy would come within the definition
of 'proceeds of crime'. A fortiori, any process or activity connected with
'proceeds of crime' including its concealment, possession, acquisition etcetra
as untainted property, shall come within the purview of offence of
money-laundering as defined under Section 3 of
PMLA. That being the position of law, no fault could be found with the
investigation or action initiated by the respondents including issuance of
summons in exercise of powers conferred by Section 50(2) and
(50(3) of PMLA."
The
Karnataka High Court in Sachin Narayan and Ors. v. The Income Tax Department
and Ors. [MANU/KA/6286/2019], vide its judgment dated 29.08.2019, held as under:
"39. As to whether by a criminal conspiracy the offences
indicated in the schedule to PML Act is made out or not would be an issue which
can be unearthed only after investigation. During the course of investigation,
the authorities may arrive at a conclusion that there is no necessity to
further investigate the matter and it may drop the investigation or in the
event of authorities finding there is some material, it may then proceed to
adjudicate. It all depends on circumstances emerging from investigation in a
given case.
40. If principles of interpretation is adopted, then, there
was no necessity for the expression "conspiracy" being indicated in
several enactments as found in the schedule to the PML Act. Section 120-B of
IPC found in part-A of the schedule to PML Act refers to IPC offences only and
if it was referable to other offences, the framers of law would not have
incorporated the expression "conspiracy" under Part-A Paragraph -1 as
defined under other enactments. Section 120-B is a predicate, distinct and
stand alone offence. The inclusion of said offence under the schedule is not
under challenge in these writ petitions."
Offence of Criminal
Conspiracy cannot be alleged on mere suspicion:
The Hon’ble Supreme
Court Judgment in CBI v. K. Narayana Rao [(2012) 9 SCC 512], held that-
“24.
The ingredients of the offence of criminal conspiracy are that there should be
an agreement between the persons who are alleged to conspire and the said
agreement should be for doing of an illegal act or for doing, by illegal means,
an act which by itself may not be illegal. In other words, the essence of
criminal conspiracy is an agreement to do an illegal act and such an agreement
can be proved either by direct evidence or by circumstantial evidence or by
both and in a matter of common experience that direct evidence to prove
conspiracy is rarely available. Accordingly, the circumstances proved before
and after the occurrence have to be considered to decide about the complicity
of the accused. Even if some acts are proved to have been committed, it must be
clear that they were so committed in pursuance of an agreement made between the
accused persons who were parties to the alleged conspiracy. Inferences from
such proved circumstances regarding the guilt may be drawn only when such
circumstances are incapable of any other reasonable explanation. In other
words, an offence of conspiracy cannot be deemed to have been established on
mere suspicion and surmises or inference which are not supported by cogent and
acceptable evidence”.
Conclusion:
The very definition
of conspiracy is very extensive. Offence of criminal conspiract under section
120B of IPC can be easily invoked where two or more persons are involved in a
crime. In its plain reading, section 120B of IPC can be added to bring any
offence (which was not the scheduled offence at the time of its occurrence)
under the scope and ambit of the PMLA. In a way, by aiding Section 120B IPC,
PMLA can be invoked retrospectively.
Final findings of the Hon'ble Supreme Court of
India are awaited on this issue.
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