Delhi High Court: Vibhu Bakhru, J., addressed a criminal appeal filed by Financial Intelligence Unit-IND, Ministry of Finance under Section 42 of Prevention of Money Laundering Act, 2002 impugning a judgment passed by Appellate Tribunal, Prevention of Money Laundering Act.

In accordance with the impugned order, Appellate Tribunal had modified the orders passed by Director, FIU under Section 13(2) of the Act.

Facts of the case

Director, FIU had imposed a maximum fine of Rs 1 lakh for thirteen instances of failure on part of the respondent banks in respect of the compliance with obligations set out in Section 12 of the Act read with Prevention of Money Laundering (Maintenance and Records) Rule, 2005.

The Appellate Tribunal’s modifying order held that the violation of the reporting obligations on part of the respondent banks warranted issuance of a warning in writing under Section 13(2)(a) of the Act, instead of a monetary penalty as imposed under Section 13(2)(d) of the Act.


Senior Standing Counsel appearing for the FIU, Satish Aggarwala, assailed the impugned order on a solitary ground. He submitted that Section 13(2) of the Act, prior to 15-02-2013 did not contemplate issuance of a warning for failure to comply with the provisions of Section 12 of the Act and failure to comply with Section 12 of the Act prior to 15-02-2013 required to be visited with fine not less than Rs 10,000 for each failure.


Question required to be considered in view of the above terms was:

Whether the Appellate Tribunal could modify the order passed by Director, FIU in terms of reducing the penalty imposed?

Background to the present matter

Controversy that arose in the present case is from a sting operation conducted by reporters of an online media portal named “”. The said sting operation was conducted during the year 2012-13.

The sting operation entailed undercover reporters approaching employees of various banks representing themselves to be customers who required to be open accounts to deposit black money belonging to “a Minister” and for laundering the same, and it was basically designed to expose the role of banks in money laundering.

Several conversations were recorded in the above terms and reported on the media portal, Cobrapost. The said conversations were indicating that the officials of the banks had expressed willingness to accept deposits of black money in accounts to be opened by the reporters posing as prospective customers.

Respondent-banks contended that the conversations placed on the public domain were incomplete, edited and extracted in a manner so as to feed the perception that the respondent banks are complicit in money laundering.

Once the conversations were in public domain, FIU issued letters to the respondent-banks and said proceedings culminated in orders imposing monetary fines under Section 13 of the Act.

Further, it has been stated that the reporters of Cobrapost had conducted the sting operation at 13 branches of Axis Bank Limited. Axis Bank appointed KPMG Private Limited to investigate allegations published on the Cobrapost website.

Thereafter, FIU issued a letter calling upon Axis Bank to provide certain intimation under Section 12(a) of the Act. It contended that the conversations recorded in the sting operation constituted ‘suspicious transactions’ within the meaning of Rule 2(g) of the Rules, and since Axis Bank had failed to file any Suspicious Transaction Reports (STRs) it was alleged that it had violated the provisions of Section 12 of the Act.

FIU further passed an order holding Axis Bank guilty of not complying with the provisions of Section 12 of the Act read with Rules 2,3,5 and 7 and imposing a fine of Rs 13 lakhs for 13 failure instances.

Aggrieved by the above, Axis Bank filed an appeal before the Appellate Tribunal. The said appeal was disposed of by the impugned order in which it was held that non-compliances did not warrant the imposition of the maximum penalty and this was a fit case where a penalty of warning, provided under Section 13(2)(a) of the Act, ought to have been issued.


Court noted that FIU’s contention that provisions of Section 13(2) prior to amendment on 15-02-2013 are applicable, is bereft of any factual foundation. Since there is no material on record to establish that the sting operation had been conducted prior to 15-02-2013, the said conversation is unfounded.

Court referred to Section 13 of the Act as was in force prior to 15-02-2013. Section 13 of the Act was amended by virtue of Section 11 of the Prevention of Money Laundering (Amendment) Act, 2012 with effect from 15-02-2013. Another point to be noted is that all the orders passed by the Director, FIU under Section 13(2) were after 15-02-2013.

Thus, the only question that falls for consideration is:

Whether the amended provisions of Section 13 of the Act, which provide for a lesser punitive measure, are applicable retrospectively?

Referring to the Case of T. Barai v. Henry Ah Hoe, (1983) 1 SCC 177, in which the Supreme Court had explained that,

“insofar as a new enactment creates new offences or enhances punishment for a particular type of offence, no person can be convicted by such ex post facto law nor can the enhanced punishment prescribed by the amendment, be imposed. However, if a punishment for an offence is reduced, there is no reason why the accused should not have the benefit of the reduced punishment. It was further explained that the rule of beneficial construction requires that even an ex post facto law should be applied to mitigate the rigors of the law.”

Counsel representing FIU, submitted that the respondent banks have suffered a civil liability and therefore the above decisions are inapplicable.

To the above contention, Court found no merit and stated that “even if it is assumed that the liability imposed on the respondent banks is a civil liability, no distinction can be drawn on the aforesaid ground so as to deprive the respondents of the “rule of beneficial construction”.

Further, the Court also referred to the Supreme Court judgment in CIT v. Vatika Township (P) Ltd., (2015) 1 SCC 1, in which again the point that is to be noted is that,

“Supreme Court had authoritatively held that if a  legislation confers the benefit on some persons without inflicting corresponding detriment on same other person or where it appears that the intention of legislature is to confer such benefit, the rule of purposive construction would be applicable and the said legislation would be construed as applicable with retrospective effect.”

Therefore, the Court in view of the below stated, held that

“The rule that the enactment must be construed as prospective is not applicable in cases of beneficial legislation. In such cases, the same must be construed retrospectively. It would be unfair to impose a higher punishment than as prescribed under a statute as currently in force, merely because the person visited with such punishment has committed the offence/default prior to the legislation being enacted.”

Even if it is assumed that the sting operation was conducted prior to 15-02-2013, there is no infirmity in the decision of the Appellate Tribunal to modify the punishment from a monetary fine to a warning in writing, in terms of Section 13(2)(a) of the Act as substituted with effect from 15-02-2013. [Financial Intelligence Unit-IND v. Corporation Bank, 2019 SCC OnLine Del 9950, decided on 04-09-2019]

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