DIRECTORATE OF ENFORCEMENT versus PADMANABHAN KISHORE on 31 October 2022

[2022] 13 S.C.R.

ADIRECTORATE OF ENFORCEMENT

v.

PADMANABHAN KISHORE

(Criminal Appeal No. 1864 of 2022)

October 31, 2022

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[UDAY UMESH LALIT, CJI AND BELA M. TRIVEDI, J.]

Prevention of Money Laundering Act, 2002 – ss. 2(1)(u), 3,and 4 – Prosecution case was that A-1 was Additional Commissionerof Income Tax – On intelligence, the CBI checked a car that wasCparked in front of the house of A1 and recovered a sum ofRs.50,00,000/- in cash – It is alleged that A1 and A3 were in thatcar at that time – During investigation, it came to light that the sumof Rs.50,00,000/- was handed over to A-1 by A-2 whose income taxfile was pending with A1 for clearance – Since A-2 wanted certainbenefits, he had allegedly paid the sum of Rs.50,00,000/- as bribeDto A1 – In connection with this seizure, case was registered unders.120- B IPC and ss.7, 12, 13(1)(d) r/w s.13(2) of the Prevention ofCorruption Act, 1988, s.3 of the Prevention of Money LaunderingAct, 2002 against A-1, A-2, A-3, A-4, A-5 and A6 – A-2 filed writpetition before High Court for quashing the proceedings on theground that the amount in question as long as it was in the hands ofErespondent could not be said to be tainted money; that it assumedsuch character only after it was received by the public servant andas such respondent could not be proceeded against under theprovisions of PML Act – High Court allowed writ petition andquashed the proceedings in PML Act against the respondent – OnFState’s appeal, held: The definition of “proceeds of crime” in PMLAct, inter alia, means any property derived or obtained by any personas a result of criminal activity relating to a scheduled offence – Theoffences punishable under ss.7, 12 and 13 are scheduled offences– Any property thus derived as a result of criminal activity relatingto offence mentioned in paragraph 8 of Part-A of the ScheduleGwould certainly be “proceeds of crime” – It is true that so long asthe amount is in the hands of a bribe giver, and till it does not getimpressed with the requisite intent and is actually handed over as abribe, it would definitely be untainted money – If the money is handedover without such intent, it would be a mere entrustment – If it isHthereafter 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 theamount as bribe and normally such intent must necessarily beantecedent or prior to the moment the amount is handed over –Thus, the requisite intent would always be at the core before theamount is handed over – Such intent having been entertained wellbefore the amount is actually handed over, the person concernedwould certainly be involved in the process or activity connectedwith “proceeds of crime” including inter alia, the aspects ofpossession or acquisition thereof – By handing over money withthe intent of giving bribe, such person will be assisting or willknowingly be a party to an activity connected with the proceeds ofcrime – Without such active participation on part of the personconcerned, the money would not assume the character of beingproceeds of crime – The relevant expressions from s.3 of the PMLAct are thus wide enough to cover the role played by such person –A bare perusal of complaint made by the Enforcement Directorateshowed that the respondent was prima facie involved in the activityconnected with the proceeds of crime.

Allowing the appeal, the Court

Conclusion

Allowing the appeal, the Court

HELD: 1. The definition of “proceeds of crime” in PMLAct, inter alia, means any property derived or obtained by anyperson as a result of criminal activity relating to a scheduledoffence. The offences punishable under Sections 7, 12 and 13 arescheduled offences, as is evident from paragraph 8 of Part-A ofthe Schedule to the PML Act. Any property thus derived as aresult of criminal activity relating to offence mentioned in saidparagraph 8 of Part-A of the Schedule would certainly be “proceedsof crime”. [Para 13][1071-B-C]

2. It is true that so long as the amount is in the hands of abribe giver, and till it does not get impressed with the requisiteintent and is actually handed over as a bribe, it would definitelybe untainted money. If the money is handed over without suchintent, it would be a mere entrustment. If it is thereafterappropriated by the public servant, the offence would be ofmisappropriation or species thereof but certainly not of bribe.The crucial part therefore is the requisite intent to hand over the ABC

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Aamount as bribe and normally such intent must necessarily beantecedent or prior to the moment the amount is handed over.Thus, the requisite intent would always be at the core before theamount is handed over. Such intent having been entertained wellbefore the amount is actually handed over, the person concernedwould certainly be involved in the process or activity connectedBwith “proceeds of crime” including inter alia, the aspects ofpossession or acquisition thereof. By handing over money withthe intent of giving bribe, such person will be assisting or willknowingly be a party to an activity connected with the proceedsof crime. Without such active participation on part of the personCconcerned, the money would not assume the character of beingproceeds of crime. The relevant expressions from Section 3 ofthe PML Act are thus wide enough to cover the role played bysuch person. On a bare perusal of the complaint made by theEnforcement Directorate, it is quite clear that the respondentwas prima facie involved in the activity connected with theDproceeds of crime. [Paras 16 and 17][1071-E-H; 1072-A-B]CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No.1864 of 2022.

From the Judgment and Order dated 01.03.2021 of the High CourtEof Judicature at Madras in WP No.25670 of 2019.

Balbir Singh, ASG, Mukesh Kumar Maroria, Ms. Alka Agarwal,Ms. Snehashish Mukerjee, Naman Tondan, Digvijay Dam, VishalAgarwal, Advs. for the Appellant.

S. Nagamuthu, Sr. Adv., Y. Arunagiri, Ashok Kumar, Rajagopal,FA. S. Vairawan, R. Sudhakaran, G. R. Vikash, D. Subrahmanya Bhanu,Rohan, T. Hari Hara Sudhan, P. Soma Sundaram, Advs. for theRespondent.

The Judgment of the Court was delivered by UDAY UMESH LALIT, CJIG

1. Leave granted.

2. This appeal challenges the final judgment and order dated1.3.2021 passed by the High Court of Judicature at Madras in Writ PetitionNo. 25670/2019.H

3. The aforestated writ petition was filed by the respondent hereinseeking quashing of proceedings initiated against him under the provisionsof the Prevention of Money Laundering Act, 2002 (“PML Act”, forshort).

4. The basic facts which led to the filing of said writ petition standcaptured in paragraphs 2.1 to 2.3 of the judgment under appeal, as under:- “2.1 One Andasu Ravinder (A1), IRS, was working as AdditionalCommissioner of Income Tax, Chennai. On intelligence, theCentral Bureau of Investigation (for brevity “the CBI”) checkeda car that was parked in front of the premises of the said AndasuRavinder’s (A1) house on 29.08.2011 and recovered a sum ofRs.50,00,000/- in cash. It is alleged that Andasu Ravinder (A1)and one Uttam Chand Bohra (A3) were in that car at that time.

2.2 During investigation, it came to light that the sum ofRs.50,00,000/- was handed over to the said Andasu Ravinder (A1)by one Padmanabhan Kishore (A2), petitioner herein, whoseincome tax file was pending with Andasu Ravinder (A1) forclearance. Since Padmanabhan Kishore (A2) wanted certainbenefits, he had allegedly paid the sum of Rs.50,00,000/- as bribeto Andasu Ravinder (A1).

2.3 In connection with this seizure, the CBI registered an FIR inR.C.No.MA1 2011 A 0033 on 29.08.2011 and after completingthe investigation, filed charge sheet in C.C.No.3 of 2013 beforethe Special Court for the CBI Cases, Chennai, for the offencesunder Section 120-B IPC and Sections 7, 12, 13(1)(d) r/w 13(2)of the Prevention of Corruption Act, 1988, against AndasuRavinder (A1), Padmanabhan Kishore (A2), Uttam Chand Bohra(A3), Ramakrishnan (A4), T.Banusekar (A5) andP.Chandrasekaran (A6). Since the case registered by the CBIdisclosed the commission of a ‘schedule offence’ underthe Prevention of Money Laundering Act, 2002 (for brevity “thePML Act”), the Enforcement Directorate registered a case inE.C.I.R.No.13 of 2016 and after completing the investigation, fileda complaint in C.C.No.60 of 2018 against Everonn EducationLimited and three others including Padmanabhan Kishore (A2)for the offences under Section 3 r/w 4 of the PML Act, for quashingwhich, Padmanabhan Kishore (A2) is before this Court.”

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A5. As is evident from the quoted portion, the respondent hadallegedly handed over a sum of Rs.50,00,000/- (Rupees fifty lakhs only)to a public servant, which transaction and the surrounding circumstanceswere projected in FIR dated 29.8.2011, leading to registration of crimeunder Section 120B, Indian Penal Code, 1860 (“IPC”, for short) andSections 7, 12, 13(1)(d) read with Section 13(2) of the Prevention ofBCorruption Act, 1988 (“PC Act”, for short). Later, a case was registeredby the Enforcement Directorate against the accused including therespondent under Sections 3 and 4 of the PML Act.

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6. The basic submission advanced on behalf of the respondentwas that the amount in question, as long as it was in the hands ofCrespondent, could not be said to be tainted money; that it assumed suchcharacter only after it was received by the public servant; and as suchthe respondent could not be said to be connected with proceeds of crimeand could not be proceeded against under the provisions of the PMLAct. The submission was accepted by the High Court with the followingDobservations: - “7. For attracting the penal provisions of the PML Act, the accusedshould have projected the proceeds of a crime as untainted money.In this case, the sum of Rs.50,00,000/- as long as it was in thehands of Padmanabhan Kishore (A2) could not have been statedEas a tainted money because it is not the case of the CBI inC.C.No.3 of 2013 that Padmanabhan Kishore (A2) had mobilisedRs.50,00,000/- via a criminal activity. The sum of Rs.50,00,000/-became the proceeds of a crime only when Andasu Ravinder(A1) accepted it as a bribe. Even before Andasu Ravinder(A1) could project the sum of Rs.50,00,000/- as untainted money,Fthe CBI intervened and seized the money in the car on 29.08.2011.

8. Therefore, the prosecution of Padmanabhan Kishore (A2)under the PML Act, in our considered opinion, is misconceived.

7. The High Court thus allowed the writ petition and quashed theGproceedings in PML Act against the respondent, which decision ispresently under challenge before us.

8. We have heard Mr. Balbir Singh, learned Additional SolicitorGeneral of India in support of appeal and Mr. S. Nagamuthu, learnedsenior counsel for the respondent.H

9. The definition of proceeds of crime, as appearing in Section2(1)(u) of the PML Act is as under: - “2. Definitions. — (1) In this Act, unless the context otherwiserequires,—

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(u) “proceeds of crime” means any property derived or obtained,directly or indirectly, by any person as a result of criminal activityrelating to a scheduled offence or the value of any such propertyor where such property is taken or held outside the country, thenthe property equivalent in value held within the countryor abroad; Explanation.—For the removal of doubts, it is hereby clarifiedthat “proceeds of crime” include property not only derived orobtained from the scheduled offence but also any property whichmay directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offence;”

10. Sections 3 and 4 of the PML Act which are the principalsections for the present purposes, are as under: - “3. Offence of money-laundering.—Whosoever directly orindirectly attempts to indulge or knowingly assists or knowingly isa party or is actually involved in any process or activity connectedproceeds of crime including its concealment, possession, acquisitionor use and projecting or claiming] it as untainted property shall beguilty 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 suchperson is found to have directly or indirectly attempted to indulgeor knowingly assisted or knowingly is a party or is actually involvedin one or more of the following processes or activities connectedwith 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; A

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1070SUPREME COURT REPORTS

A(ii) the process or activity connected with proceeds of crime is acontinuing activity and continues till such time a person is directlyor indirectly enjoying the proceeds of crime by its concealment orpossession or acquisition or use or projecting it as untaintedproperty or claiming it as untainted property in any mannerwhatsoever.

B4. Punishment for money-laundering.—Whoever commits theoffence of money-laundering shall be punishable with rigorousimprisonment for a term which shall not be less than three yearsbut which may extend to seven years and shall also be liable to fine:

Provided that where the proceeds of crime involved in money-Claundering relates to any offence specified under paragraph 2 ofPart A of the Schedule, the provisions of this section shall haveeffect as if for the words “which may extend to seven years”, thewords “which may extend to ten years” had been substituted.”

11. Paragraph 8 of the Part-A of the Schedule to the PML ActDdeals with offences under the PC Act and said paragraph is to thefollowing effect: - “PARAGRAPH 8

OFFENCES UNDER THE PREVENTION OF CORRUPTIONACT, 1988

E(49 of 1988)

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12. The respondent stands charged for having committed offenceof conspiracy to commit offences punishable under Sections 7, 12, 13(1)(d)read with Section 13(2) of the PC Act. The controversy in the instantmatter is not with regard to his involvement in the offence punishableunder the PC Act, but raises a question whether the respondent can beproceeded against under the provisions of the PML Act.

13. The definition of “proceeds of crime” in PML Act, inter alia,means any property derived or obtained by any person as a result ofcriminal activity relating to a scheduled offence. The offences punishableunder Sections 7, 12 and 13 are scheduled offences, as is evident fromparagraph 8 of Part-A of the Schedule to the PML Act. Any propertythus derived as a result of criminal activity relating to offence mentionedin said paragraph 8 of Part-A of the Schedule would certainly be“proceeds of crime”.

14. The further question to be answered is: whether the role playedby respondent could come within the purview of Section 3 of the PMLAct?

15. Said Section 3 states, inter alia, that whoever knowingly assistsor knowingly is a partyor is actually involved in any processor activityconnected with proceeds of crime including its concealment, possession,acquisitionor use shall be guilty of offence of money-laundering(emphasis added by us).

16. It is true that so long as the amount is in the hands of a bribegiver, and till it does not get impressed with the requisite intent and isactually handed over as a bribe, it would definitely be untainted money.If the money is handed over without such intent, it would be a mereentrustment. If it is thereafter appropriated by the public servant, theoffence would be of misappropriation or species thereof but certainlynot of bribe. The crucial part therefore is the requisite intent to handover the amount as bribe and normally such intent must necessarily beantecedent or prior to the moment the amount is handed over. Thus, therequisite intent would always be at the core before the amount is handedover.Such intent having been entertained well before the amount is actuallyhanded over,the person concerned would certainly be involved in theprocess or activity connected with “proceeds of crime” including interalia, the aspects of possession or acquisition thereof. By handing overmoney with the intent of giving bribe, such person will be assisting or will A

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Aknowingly be aparty to an activity connected with the proceeds of crime.Without such active participation on part of the person concerned, themoney would not assume the character of being proceeds of crime.Therelevant expressions from Section 3 of the PML Act are thus wide enoughto cover the role played by such person.

B17. On a bare perusal of the complaint made by the EnforcementDirectorate, it is quite clear that the respondent was prima facie involvedin the activity connected with the proceeds of crime.

18. The view taken by the High Court that the respondent cannotbe held liable for the offence under the PML Act isthus completelyCincorrect.

19. The observations made by us regarding involvement of therespondent are prima facie in nature and for considering whether theallegations made by the prosecution if accepted to be true at this stage,would make out an offence or not. Needless to say that, on facts, theDmatter shall be considered purely on merits at the appropriate stage(s).

20. We therefore allow this appeal and set aside the judgment andorder passed by the High Court.Consequently, the respondent shallcontinue to be arrayed and proceeded against in accordance with law inE.C.I.R. No. 13 of 2016 registered by the Enforcement Directorate.

E21. The appeal is thus allowed.