Supreme Court: In a case wherein the appeal challenged the final judgment and order passed by the High Court of Madras (High Court) in writ petition, filed by the respondent seeking quashing of proceedings initiated against him under the provisions of Prevention of Money Laundering Act, 2002 (PML Act), the Division Bench of UU Lalit, CJ. and Bela M. Trivedi, J. held that the respondent was involved in the activity connected with proceeds of crime and hence, liable under the provisions of the PML Act.

Facts of the Case

Andasu (Appellant 1) was working as Additional Commissioner of Income Tax and on intelligence, the Central Bureau of Investigation (CBI) checked the car that was parked in front of the premises of the Andasu’s house and recovered Rs. 50,00,000 in cash. It was alleged that Andasu and Uttam (Appellant 3) were in that car at that time. During investigation, it was found that the sum of Rs. 50,00,000 was handed over to Andasu by Padmanabhan (Appellant 2/Respondent), whose income tax file was pending with Andasu for clearance and since Padmanabhan wanted certain benefits, he had paid Rs. 50,00,000 as bribe to Andasu.

CBI then registered an FIR and after the completion of the investigation, filed a charge sheet before the Special Court for the CBI Cases for the offences under Section 120-B of the Penal Code, 1860 (IPC) and Sections 7, 12 and 13(1)(d) read with Section 13(2) of the Prevention of Corruption Act, 1988 (PC Act) against the appellants. Since the case registered by CBI disclosed the commission of a ‘schedule offence’ under the PML Act, the Enforcement Directorate registered a case and after completing the investigation, filed a complaint against Everonn Education Limited and three others including Padmanabhan for the offences under Sections 3 read with Section 4 of the PML Act.

The respondent contended that the amount in question, till it was in the hands of the respondent, cannot be said to be tainted money and it assumed such character only after it was received by the public servant and therefore, respondent cannot have said to related to proceeds of crime and cannot be proceeded against the provisions of the PML Act.

Questions for Consideration

1. Whether the respondent can be proceeded against under the provisions of the PML Act?

2. Whether the role played by respondent could come within the purview of Section 3 and 4 of the PML Act?

Analysis, Law and Decision

The High Court accepted the contention of the respondent with the following observations:

“For attracting the penal provisions of the PML Act, the accused should have projected the proceeds of a crime as untainted money. The sum of Rs. 50,00,000 became the proceeds of a crime only when Andasu accepted it as a bribe. Even before Andasu could project the sum of Rs. 50,00,000 as untainted money, the CBI intervened and seized the money in the car. Therefore, the prosecution of Padmanabhan under the PML Act, is misconceived.”

The High Court thus allowed the writ petition and quashed the proceedings in PML Act against Padmanabhan. This decision was under challenge before this Court.

The definition of proceeds of crime under Section 2(1)(u) of the PML Act is as follows:

“2. Definitions. — (1) In this Act, unless the context otherwise requires, —

xxx xxx xxx

(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 or where such property is taken or held outside the country, then the property equivalent in value held within the country or abroad;

Explanation. — For the removal of doubts, it is hereby clarified that “proceeds of crime” include property not only derived or obtained from the scheduled offence but also any property which may directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offence;”

Paragraph 8 of Part-A of the Schedule to the PML Act deals with offences under the PC Act. Sections 7, 12 and 13 of which are stated as follows:

“Section 7 – Offence relating to public servant being bribed.

Section 12 – Punishment for abetment of offences.

Section 13 – Criminal misconduct by a public servant.”

The definition of “proceeds of crime” in PML Act means any property derived or obtained by any person as a result of criminal activity relating to a scheduled offence. The offences punishable under Sections 7, 12 and 13 are scheduled offences, as is evident from paragraph 8 of part-A of the Schedule to the PML Act. Thus, any property derived as a result of criminal activity relating to the offence mentioned in said paragraph 8 of Part-A of the Schedule would certainly be “proceeds of crime”.

Further, Section 3 of the PML Act states that whoever knowingly assists or knowingly is a party or is actually involved in any process or activity connected with proceeds of crime including its concealment, possession, acquisition, or use shall be guilty of the offence of money laundering.

The Court opined that “It is true that so long as the amount is in the hands of a bribe giver and till it does not get impressed with the requisite intent and is actually handed over as a bribe, it would definitely be untainted money. If the money is handed over without such intent, it would be a mere entrustment. If it is thereafter appropriated by the public servant, the offence would be of misappropriation or species thereof but certainly not of bribe. The crucial part therefore is the requisite intent to hand over the amount as bribe and normally such intent must necessarily be antecedent or prior to the moment the amount is handed over. Thus, the requisite intent would always be at the core before the amount is handed over. Such intent having been entertained well before the amount is actually handed over, the person concerned would certainly be involved in the process or activity connected with “proceeds of crime” including inter alia the aspects of possession or acquisition thereof. By handing over money with the intent of giving bribe, such person will be assisting or will knowingly be a party to an activity connected with the proceeds of crime. Without such active participation on the part of the person concerned, the money would not assume the character of being proceeds of crime. The relevant expressions from Section 3 of the PML Act are thus wide enough to cover the role played by such person”.

Therefore, it was quite clear that the respondent was prima facie involved in the activity connected with the proceeds of crime and the view taken by the High Court that the respondent could not be held liable for the offence under the PML Act was completely incorrect. Thus, the Court allowed the appeal and set aside the judgment and order passed by the High Court.

[Directorate of Enforcement v. Padmanabhan Kishore, 2022 SCC OnLine SC 1490, decided on 31-10-2022]

Advocates who appeared in this case :

Balbir Singh, Additional Solicitor General, for the Appellant(s);

S. Nagamuthu, Senior Advocate, for the Respondent(s).

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