The Prevention of Money-Laundering Act, 2002 (PMLA) is a pro-active legislation keen on curbing money-laundering and bringing violators to justice. Such a legislation is definitely the need of the hour considering the number of scams this country has seen in its past and a strong law securing the 4 walls of justice for offenders is welcomed by the people at large. However, off-late, criminal law practitioners (defense lawyers) have found it challenging to deal with PMLA for the fact that the 4 ends securing the 4 walls of ‘presumed’ justice is far too airtight even for genuine non-offenders to escape its clutches, if caught by sheer happenstance. This article deals with one such scenario.
PMLA punishes an individual for the offence of money-laundering under Sections 3 and 4 which read as follows:
“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] it as untainted property shall be guilty of offence of money-laundering.
[Explanation. – 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,
(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].
- Punishment for money-laundering.— Whoever commits the offence of money-laundering shall be punishable with rigorous imprisonment for a term which shall not be less than three years but which may extend to seven years and shall also be liable to fine:
Provided that where the proceeds of crime involved in money-laundering relates to any offence specified under paragraph 2 of Part A of the Schedule, the provisions of this section shall have effect as if for the words which may extend to seven years, the words which may extend to ten years had been substituted.”
On a bare reading of these two provisions, any money that is construed to be ‘proceeds of crime’ is liable to be punished under PMLA. ‘Proceeds of crime’ is defined under Section 2(1)(u) as any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence. It is my contention that an offence under the PMLA cannot be a stand-alone offence, as an offence is required to be committed (under the Schedule) for the monies/properties to be deemed ‘proceeds of crime’. Without commission of a crime, there exists no proceeds from crime.
The Karnataka High Court in K. Sowbaghya v. Union of India has observed that:
“having regard to the meaning attributed to ‘proceeds of crime’ under PMLA, whereby crime contemplated is the alleged scheduled offence, the ‘proceeds of crime’ contemplated under Sections 3 and 4 are clearly and inextricably linked to the scheduled offence and it is not possible to envision an offence under PMLA as a stand-alone offence without the guilt of the offender in the scheduled offence being established.”
Therefore, on a logical reasoning of the said proposition, only if an offence under the Schedule to PMLA is committed, then the question of proceeds of crime arises.
Coming to the thesis or central question for discussion in this article, there are various offences under various statutes that have been adduced as scheduled offences under the PMLA, and for the major part of the Schedule, I have no quarrel with the intention of the legislature. For example, an offence under Section 25 of the Arms Act (which is a scheduled offence under the PMLA) punishes the individual who possesses or sells unlicensed arms and ammunition. The PMLA, rightly so, punishes the individual for the proceeds he/she has made or property acquired through such possession or sale. Taking another example, certain offences under the Penal Code, 1860 such as Sections 364-A (kidnapping for ransom), 384 to 389 (extortion), 392 to 402 (robbery and dacoity) etc are also scheduled offences under the PMLA. Similar to the previous example, IPC punishes the accused for the offences of kidnapping, extortion or robbery/dacoity whereas the PMLA punishes the accused for the money made or property acquired from the commission of such crimes.
The problem arises when considering offences under the Prevention of Corruption Act, 1988 (the PC Act), particularly Section 13. Offences under Section 13 (criminal misconduct by a public servant), also a scheduled offence under PMLA, punishes a public servant for receiving illegal gratification by using his/her public office, misappropriating property or owning/possessing property worth beyond known sources of income or illicit enrichment of wealth (general overview). Contrary to the argument that the PC Act only punishes a person for being corrupt or misusing his public office and PMLA punishes the monies made or properties acquired from such misconduct, I argue that the PC Act collectively performs the functions of the PMLA as well.
The object of PMLA is to prevent money-laundering and to provide for confiscation of property derived from money-laundering. Therefore, the function of PMLA is to seize/confiscate the properties so enjoyed by individuals who have acquired such property by commission of one or more offences which can be acted upon under the Act, apart from punishment for holding such property. The PC Act on the other hand, not only punishes an individual for being corrupt and holding tainted property, it also takes away any property/money derived from such abuse of power/criminal misconduct for the same reason that such property was acquired through illegal means.
The Supreme Court while dealing with a case under the PC Act in Yogendra Kumar Jaiswal v. State of Bihar held that:
“If a person acquires property by means which are not legally approved, the State would be perfectly justified to deprive such person of the enjoyment of such ill-gotten wealth. There is a public interest in ensuring that persons who cannot establish that they have legitimate sources to acquire the assets held by them, do not enjoy such wealth. Such a deprivation would certainly be consistent with the requirement of Articles 300-A and 14 of the Constitution which prevent the State from arbitrarily depriving a person of his property.”
When the PC Act inclusively curbs and confiscates “proceeds of crime”, would prosecution for the same under PMLA not amount to double jeopardy?
Provisions of the PC Act examined
An analysis of Section 13 of the PC Act will shed further light on this theory. Section 13 reads as follows:
“13. Criminal Misconduct by a Public Servant. — [(1) A public servant is said to commit the offence of criminal misconduct,
(a) if he dishonestly or fraudulently misappropriates or otherwise converts for his own use any property entrusted to him or any property under his control as a public servant or allows any other person so to do; or
(b) if he intentionally enriches himself illicitly during the period of his office.
Explanation 1.- A person shall be presumed to have intentionally enriched himself illicitly if he or any person on his behalf, is in possession of or has, at any time during the period of his office, been in possession of pecuniary resources or property disproportionate to his known sources of income which the public servant cannot satisfactorily account for.
Explanation 2.- The expression known sources of income means income received from any lawful sources.]
(2) Any public servant who commits criminal misconduct shall be punishable with imprisonment for a term which shall be not less than [four years] but which may extend to [ten years] and shall also be liable to fine.”
Most cases pending or newly charged are predominantly under the provisions prior to the 2018 amendment due to the check period and hence, emphasis will also be placed on Sections 13(1)(a) to (e), as they were, prior to the amendment. However, the following explanation would be squarely applicable to Section 13 as it is subsequent to the amendment also.
|13(1)(a)||Gratification other than legal remuneration|
|13(1)(c)||Misappropriates property entrusted to him or under his control|
|13(1)(d)||Valuable thing or pecuniary advantage|
|13(1)(e)||Pecuniary resources or property disproportionate to known sources of income|
|(After amendment)||Key Word/Phrase|
|13(1)(a)||Misappropriates property entrusted to him or under his control|
|13(1)(b)||Intentionally enriches himself illicitly|
All these provisions have a key word or a phrase within which the alleged actions have to fit into for them to be charged with one of the above offences (all of which are scheduled offences under PMLA). At this point, it is also pertinent to examine the definition of ‘property’ as under Section 2(1)(v) of PMLA:
“(v) “property” means any property or asset of every description, whether corporeal or incorporeal, movable or immovable, tangible or intangible and includes deeds and instruments evidencing title to, or interest in, such property or assets, wherever located;
Explanation.– For the removal of doubts, it is hereby clarified that the term “property” includes property of any kind used in the commission of an offence under this Act or any of the scheduled offences;”
A bare reading of this definition would show that all keywords/phrases for making one liable under Section 13 of the PC Act also (on interpretation) fall under the definition of Section 2(1)(v) of PMLA. Apart from jail time, the objective of Sections 3 and 4 of PMLA are to confiscate any property that is construed to be from proceeds of crime as the person holding the said property has not obtained and enjoyed them through legal means. This, in its very essence is what Section 13 is also trying to accomplish. The Oxford English Dictionary defines the word “pecuniary” as “of or in money”, thereby making construction of the term ‘pecuniary advantage’ to also fall under the definition of property under Section 2(1)(v) of PMLA. This comparison is only to show that cumulatively, Section 13 of the PC Act and Sections 3 and 4 of PMLA are trying to achieve the same goal and have the same objectives. Therefore, initiating action against an individual under both the provisions of law for the same offence or transaction, would amount to double jeopardy.
It is agreed as stated by the Andhra Pradesh High Court in B. Rama Raju v. Union of India that punishment under Sections 3 and 4 of PMLA are distinct proceedings from Section 5 which is attachment of property and subsequent confiscation. However, in a PC Act case, the trial court (CBI Court in most jurisdictions) passes an order of attachment of tainted property or property under presumption that it is through illegal gratifications during the pendency of trial. This is where Section 5 of PMLA comes in conflict with the proceedings already pending before the trial court. Once the properties are already attached and since the PMLA also permits an order of attachment under Section 5, the Enforcement Directorate making an application to transfer all properties from CBI to ED is prima facie posing a direct threat to the investigation conducted by CBI. Both the agencies are looking into the same properties for offences committed and further, only if an offence is established by CBI can it be treated as ‘proceeds of crime’ by ED.
The Supreme Court in Kanhaiyalal v. D.R. Banaji had held that:
“If a court has exercised its power to appoint a receiver of a certain property, it has done so with a view to preserving the property for the benefit of the rightful owner as judicially determined. If other courts or tribunals of coordinate or exclusive jurisdiction were to permit proceedings to go independently of the court which was placed the custody of the property in the hands of the receiver, there was a likelihood of confusion in the administration of justice and possible conflict of jurisdiction.”
Even though the observations made therein were in a civil case, the same principles are to be applied to criminal cases also, as attachment of property in these matters are quasi civil in nature. If the Enforcement Directorate were to interfere with pending proceedings conducted by CBI, then there would arise a conflict of jurisdiction since both are on the basis of the same offence and properties possessed therein.
The most essential ingredient for an offence under Section 3 of PMLA is the existence of property that is deemed to be a proceed of crime and Section 13 of the PC Act, quintessentially performs the twin function by making the accused public servant liable for abusing his/her office, possessing such property as well as confiscating the said property since it is a proceed of a ‘crime’ committed by the public servant. To makes things more convincing, punishment under Section 13(2) of the PC Act is much more severe than Section 4 of PMLA, thereby justifying its twin purpose.
Double Jeopardy explained
The concept of double jeopardy has been known to mankind from time immemorial. Dating back to 355 BC in Athens, Greece, the law forbids the same man to be tried twice on the same issue. Double jeopardy or non bis in idem is a procedural defense that prevents a person from being tried again on the same or similar charges following a valid conviction or acquittal. The principle of double jeopardy in India existed prior to the drafting and enforcement of the Constitution. It was first enacted in Section 403(1) of the Criminal Procedure Code, 1898 which is now Section 300 of the amended Criminal Procedure Code, 1973. A partial protection against double jeopardy is a Fundamental Right guaranteed under Article 20 (2) of the Constitution of India, which states “No person shall be prosecuted and punished for the same offence more than once”.
In Thomas Dana v. State of Punjab, a Constitutional Bench of 5 Judges laid down 3 requirements for double jeopardy i.e. prosecution, punishment and same offence. If these 3 are complied with, then the protection under Article 20(2) is guaranteed.
Section 300 of the Code of Criminal Procedure also protects a person from being tried again where he/she has already been tried and acquitted/convicted for the same offence. Section 26 of the General Clauses Act states that:
“Where an act or omission constitutes an offence under two or more enactments, then the offender shall be liable to be prosecuted and punished under either or any of those enactments, but shall not be liable to be punished twice for the same offence.”
This is further enumerated by the Supreme Court in Manipur Administration v. Thokchom Bira Singh, that for Article 20(2) and Section 26 of the General Clauses Act to act as a bar for second prosecution and its consequential punishment thereunder, it must be for the same offence that is, an offence whose ingredients are the same. Applying the principles of Section 26 of the General Clauses Act, Article 20(2) and the above decision of the Supreme Court to the present question at hand, it can be stated that since the offence for which PMLA is invoked is essentially the same offence as under the PC Act, the above provisions will get attracted. Therefore, ingredients, occurrences and circumstances are the same for an offence under Section 13 of the PC Act and Sections 3 and 4 of PMLA (including evidence, both oral and documentary) i.e. money/properties acquired through commission of an offence, it is to be concluded that prosecution under PMLA is a second trial for the same offence when the PC Act proceedings are pending or have attained finality.
I have, in this article, tried to give an outline that prima facie, Section 13 of the PC Act and Sections 3 and 4 of PMLA do not harmoniously gel with each other. On the one hand, only if the primary or scheduled crime is made out can a prosecution under PMLA be maintainable (there are certain lines of thought which state, offence under PMLA is stand-alone and is not dependent on any other offence being proved/committed) and on the other hand, even on the existence of an offence under Section 13 of PC Act, the PC Act is a self-sufficient Act which punishes the accused for both abusing the position of being a public servant, as well as having acquired or being in possession of illegal gratification or property that is either misappropriated or disproportionate to known sources of income. Hence, a subsequent action under PMLA is nothing but a violation of the constitutionally protected fundamental right against double jeopardy. In concluding remarks, it would be pertinent to note that the Schedule to PMLA is to be revisited and pros and cons are to be considered by the Courts having jurisdiction as to whether the provisions of the PC Act (not restricted to Section 13) are to be considered scheduled offences under PMLA.
Prior to the 2018 amendment, Section 13(1) reads as follows;
- Criminal misconduct by a public servant.—(1) A public servant is said to commit the offence of criminal misconduct,—
(a) if he habitually accepts or obtains or agrees to accept or attempts to obtain from any person for himself or for any other person any gratification other than legal remuneration as a motive or reward such as is mentioned in section 7; or
(b) if he habitually accepts or obtains or agrees to accept or attempts to obtain for himself or for any other person, any valuable thing without consideration or for a consideration which he knows to be inadequate from any person whom he knows to have been, or to be, or to be likely to be concerned in any proceeding or business transacted or about to be transacted by him, or having any connection with the official functions of himself or of any public servant to whom he is subordinate, or from any person whom he knows to be interested in or related to the person so concerned; or
(c) if he dishonestly or fraudulently misappropriates or otherwise converts for his own use any property entrusted to him or under his control as a public servant or allows any other person so to do; or
(d) if he,—
(i) by corrupt or illegal means, obtains for himself or for any other person any valuable thing
or pecuniary advantage; or
(ii) by abusing his position as a public servant, obtains for himself or for any other person any valuable thing or pecuniary advantage; or
(iii) while holding office as a public servant, obtains for any person any valuable thing or pecuniary advantage without any public interest; or
(e) if he or any person on his behalf, is in possession or has, at any time during the period of his office, been in possession for which the public servant cannot satisfactorily account, of pecuniary resources or property disproportionate to his known sources of income.
Explanation.—For the purposes of this section, “known sources of income” means income received from any lawful source and such receipt has been intimated in accordance with the provisions of any law, rules or orders for the time being applicable to a public servant.
 I take this stand being fully aware of the fact that Section 18-A of the PC Act, pursuant to the 2018 amendment, has paved way and given priority to provisions of PMLA (with respect to attachment) over the Criminal Law (Amendment) Ordinance, 1944 under provisions of which attachment and confiscation are usually made under the PC Act. This bereft of the fact that if attachment in PMLA takes precedence over the PC Act, then the whole idea of establishing proceeds of crime would become null as the procedure for trial are different under both Acts and trial under PMLA is much more accelerated due to its narrow scope for the offence of proceeds of crime.