Supreme Court: In batch of appeals by the Enforcement Directorate(‘ED’) against two independent orders, one passed by Single Judge Bench of Madras High Court disposing of a batch of criminal petitions and the other passed by the Division Bench of the Madras High Court holding an investigation by the Enforcement Directorate, the division bench of Krishna Murari and V. Ramasubramanian*, JJ. has allowed the appeals arising out of the order for de novo investigation and set aside the directions issued in the original petition for de novo investigation.
Further, while allowing the appeals, set aside the order of the Division Bench of the High Court. Also dismissed the three writ petitions challenging the initiation of proceedings by ED.
Apart from these appeals, there are also two contempt petitions and an application seeking the constitution of a Special Investigation Team.
This case is related to the cash-for-jobs scam, in which the Tamil Nadu minister and DMK MLA V Senthil Balaji, among others, has been accused of accepting bribes from candidates in exchange of appointment to the State Transportation Corporation.
The Court divided the s Judgment into four parts, like this:
Challenge to the order for de novo investigation
The Court said that de novo investigation has been ordered by the Madras High Court by its decision dated 31-10-2022 at the instance of the first complainant who alleged that an employee of Transport Corporation received a payment for securing the job of a Conductor for his son. The Court said that while the complainant was happy about paying illegal gratification for procuring employment for his son, he was unhappy about the Police not including the offences under the Prevention of Corruption Act, 1988 (‘PC Act’) in FIR.
The Court said that the grounds on which the first complainant sought de novo investigation were quite strange. He originally seemed to have had a genuine grievance against the culprits at the bottom of the layer, but he later turned out to be a Trojan horse, willing to sabotage the investigation against influential persons.
Further, the Bench said that if the first complainant jumped several miles to protect the actual culprits, the High Court seems to have gone one step further by ordering de novo investigation on a point not canvassed in the petition filed by the complainant.
The Court further said that the order directing de novo investigation in all three cases, has actually inured to the benefit of the accused, but the High Court put it on the ground that the credibility of the investigation should not be eroded. In fact, the accused did not seek de novo investigation on the ground of slackness on the part of the Investigating Officer, but it was the complainant who sought it, with the able assistance of the Investigating Officer.
The Court was shocked that the High Court directed reinvestigation to be started ab initio, wiping out the earlier investigation altogether. Further, it said that by issuing the aforesaid direction, the High Court not only directed the wiping out of the investigation carried out so far, but virtually wiped out even the judgment of this Court dated 08-09-2022 passed in Criminal Appeal.
The Bench remarked that it is an irony that persons who are victims of a huge jobs-for-cash scam are alleged to have come to Court with unclean hands by persons whose hands were allegedly tainted with corruption money.
The Court directed the Transport Corporation to initiate disciplinary action against one of the employees of the corporation, for not only being party to a job-for-cash scam, but also for supporting the accused and thereafter coming to the Court to assail the order of de novo investigation, despite being an employee of the Corporation. His attack on the order of de novo investigation is not to achieve the same purpose as the victims want to achieve, that is for the purpose of ensuring that the offences under the PC Act are properly investigated and tried.
Thus, the Court allowed the appeals arising out of the order and set aside the directions issued in the original petition for de novo investigation. Further, it directed the Investigation Officer to proceed with further investigation in all cases by including the offences under the PC Act. Moreover, the Court said that any let-up on the part of the Investigation Officer in this regard will pave the way for the Court to consider appointing a Special Investigation Team in future.
Concerning proceedings by Enforcement Directorate
The Court noted that the final report accused Tamil Nadu Electricity & Prohibition and Excise Minister V. Senthil Balaji for offences under Sections 406, 419, 420 read with Section 34 and 120-B, 465, 467, 471 and 201 of the Penal Code, 1860 (‘IPC’) read with Sections 7, 12, 13(2) read with Section 13(1)(d) of the PC Act and Section 109 of IPC.
Further, the Court said that, as the offences under Sections 120-B, 419, 420, 467 and 471 of IPC and Sections 7 and 13 of the PC Act are included in the Schedule to the Prevention of Money-laundering Act, 2002 (‘PMLA’) the registration of the Information Report by ED on 29-07-2021 cannot be faulted.
The Court said that the High Court has not quashed the summons issued by ED. The High Court had merely injuncted ED from proceeding further till the clog on the cases relating to the predicate offences is removed.
(i) Whether without identifying the proceeds of crime or a property representing the proceeds of crime and without identifying any process or activity connected to proceeds of crime as required by Section 3 PMLA, which constitute the foundational/ jurisdictional fact, ED can initiate an investigation and issue summons?
The Court after interpreting Section 3 PMLA, said that the offences under Sections 120-B, 419, 420, 467 and 471 IPC are scheduled offences included in paragraph 1 of the Schedule; and that the offences under Sections 7 and 13 of the PC Act are included in paragraph 8 of the Schedule. All the three FIRs allege that the Senthil Balaji had committed offences included in the Schedule by taking illegal gratification for providing appointment to several persons in the Public Transport Corporation. Further, the Court remarked that it is no rocket science to know that a public servant receiving illegal gratification is in possession of proceeds of crime. Thus, the Bench finds the argument that the mere generation of proceeds of crime is not sufficient to constitute the offence of money-laundering, preposterous.
The Court noted that there are six processes or activities identified under Section 3. They are, (i) concealment; (ii) possession; (iii) acquisition; (iv) use; (v) projecting as untainted property; and (vi) claiming as untainted property. Thus, if a person takes a bribe, he acquires proceeds of crime. So, the activity of “acquisition” takes place. Even if he does not retain it but “uses” it, he will be guilty of the offence of money-laundering.
The Court said that there are some offences, which, though scheduled offences, may or may not generate proceeds of crime. For instance, the offence of murder, unless it is a murder for gain or murder by a hired assassin, the same may or may not generate proceeds of crime. In respect of such types of offences, the mere commission of the crime is not sufficient but the generation of proceeds of crime is necessary. In the case of an offence of corruption, the criminal activity and the generation of the proceeds of crime go hand in hand. Therefore, even if an intangible property is derived because of criminal activity relating to a scheduled offence, it becomes proceeds of crime under Section 2(1)(u).
The Court viewed that the allegations in the FIR point out to (i) involvement of persons in criminal activity relating to scheduled offences; (ii) the generation as well as (iii) laundering of the proceeds of crime within the meaning of Section 3, as wherever there are allegations of corruption, there is acquisition of proceeds of crime which itself tantamount to money-laundering. Thus, the Court rejected the contention that the investigation by ED was triggered without any foundational/jurisdictional facts.
The Bench also said that the information about all complaints, the nature of the complaints, the amount of money allegedly collected towards illegal gratification had all come into public domain. Further, to say that the ED should have adopted an Ostrich like approach, without trying to find out where and to whom the huge money generated in the scam had gone, is something unheard of.
(ii) Whether in the light of the fact that notice has been ordered in the review petition and a few interim orders have been passed in some proceedings, it is necessary for this Court to tag these appeals along with a review petition or defer the hearing of these matters until a decision is rendered in the review petition and other petitions?
The Court said that a notice ordered in the review petition will not destroy or diminish the precedential value of Vijay Madanlal Choudhary v. Union of India, 2022 SCC OnLine SC 929. This argument of Senthil Balaji will not only destroy the principles of judicial discipline and the doctrine of stare decisis, but also bring to a grinding halt all pending investigation in the country. In fact, the order passed in the Review Petition discloses that prima facie the Court was of the view that at least two of the issues raised in the review petition require consideration, (i) not providing the accused with a copy of the Enforcement Case Information Report (‘ECIR’); and (ii) reversal of the burden of proof and presumption of innocence. The points that the respondents are canvasing in this case have nothing to do with those two issues. Therefore, the accused cannot have a piggyback ride on the review petition.
Therefore, the Court held that Senthil Balaji is not entitled to either seek a reference to a larger Bench or to seek to defer the matter till a decision is rendered in the matters involving larger issues. Thus, allowed the appeals and set aside the order of the Division Bench of the Madras High Court. Further, allowed the ED to proceed further from the stage at which their hands were tied by the impugned order.
Permission to ED to inspect the records of the Special Court trying the predicate offences
ED filed applications before the Special Court seeking certified copies of the FIR, statements of witnesses, etc. the Special Court allowed the application partly and directed the issue of certified copies of FIR, complaint etc., but refused to provide certified copies of unmarked documents.
The Court, while dismissing the appeal challenging the order of the High Court dated 30-03-2022, said that Rule 231 primarily deals with the grant of certified copies of certain other documents to the accused, before filing of the Final Report. Rule 231(3) states that certified copies of unmarked documents shall not be given. The High Court has not passed any order directing the grant of certified copies of unmarked documents and has only permitted the ED to have an inspection of the documents under Rule 237 and thereafter to file a proper copy application. Thus, it is not contrary to Rule 231(3).
Extension of time to complete further investigation
The Court said that merely because the High Court has not granted extension of time, it does not mean that the direction to conduct further investigation has become infructuous. Therefore, the appeals were dismissed.
Anti-Corruption Movement has filed petitions seeking the initiation of contempt proceedings against the Police Officials who are in-charge of the investigation, on the ground (i) that the offences under the PC Act have not been included (ii) that steps were not taken to have the interim stay vacated in two criminal cases; and (iii) that a misleading picture was projected before the High Court as though the investigation was incomplete.
The Bench accepted the explanation offered by the Police, as they alone are not to be blamed. The entire case turned out to be a match where it became impossible to identify who was playing for which team. The High Court passed the order dated 31-10-2022, which has the effect of wiping out the directions issued by Supreme Court. Therefore, the Police Officers alone cannot be held guilty of willful disobedience. Hence, the Court dismissed the contempt petitions.
The Court while dealing with the application seeking the constitution of a Special Investigation Team and the appointment of a Special Public Prosecutor, said that the entire blame for this fiasco cannot be laid at the doorstep of the Police alone, as there were several coparceners. Hence, the Court rejected the said application, but gave liberty to the applicant to come back with a substantial petition seeking such a prayer, in future, when a foul play is suspected.
[Y. Balaji v. Karthik Desari, 2023 SCC OnLine SC 645, decided on 16-05-2023]
*Judgment by: Justice V. Ramasubramanian