Paragraph numbers below are the court’s original numbering, recovered from the source text.
93. The common theme of the song of the learned counsel for the accused is that the mere registration of a FIR for a predicate offence, even if it is a scheduled offence, is not sufficient for the ED to register an Information Report and summon anyone. According to the learned counsel, the commission of the scheduled offence should have generated proceeds of crime and those proceeds of crime should have been laundered by someone, for the ED to step in. Going a step further, it was contended by the learned senior counsel that the ED should first identify some property as representing the proceeds of crime, before an Information Report is registered and a summon issued under Section 50(2).
94. These contentions, in our opinion, if accepted, would amount to putting the cart before the horse. Unfortunately for the accused, this is not the scheme of the Act.
95. Section 3 of the Act which defines the offence of money- laundering reads 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.” Y. BALAJI v. KARTHIK DESARI & ANR. ETC. [V. RAMASUBRAMANIAN, J.]
96. If the main part of Section 3 is dissected with forensic precision, it will be clear that Section 3 addresses itself to three things (we may call them 3 ‘P’s) namely, (i) person; (ii) process or activity; and (iii) product. Insofar as persons covered by Section 3 are concerned, they are, (i) those who directly or indirectly attempt to indulge; or (ii) those who knowingly assists; or (iii) those who are knowingly a party; or (iv) those who are actually involved. Insofar as process is concerned, the Section identifies six different activities, namely (i) concealment; (ii) possession; (iii) acquisition; (iv) use; (v) projecting; or (vi) claiming as untainted property, any one of which is sufficient to constitute the offence. Insofar as product is concerned, Section 3 identifies “proceeds of crime” or the property representing the proceeds of crime as the product of the process or activity.
97. Out of the three things that Section 3 addresses, namely (i) person; (ii) process; and (iii) product, the first two do not require any interpretation or definition. The third aspect namely “product”, which Section 3 refers to as “proceeds of crime” requires a definition and hence it is defined in Section 2(1)(u) 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” including 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;”
98. Keeping in mind these essential elements that make up the molecular structure of Section 3, if we go back to the case on hand, we will find (i) that the offences under Sections 120B, 419, 420, 467 and 471 IPC are scheduled offences included in paragraph 1 of the Schedule; and (ii) that the offences under Sections 7 and 13 of the PC Act are included in paragraph 8 of the Schedule.
99. All the three FIRs allege that the accused herein had committed offences included in the Schedule by taking illegal gratification for providing appointment to several persons in the Public Transport Corporation. In one case it is alleged that a sum of more than Rs.2 crores had been collected and in another case a sum of Rs.95 lakhs had been collected. It is this bribe money that constitutes the ‘proceeds of crime’ within the meaning of Section 2(1)(u). It is no rocket science to know that a public servant receiving illegal gratification is in possession of proceeds of crime. The argument that the mere generation of proceeds of crime is not sufficient to constitute the offence of money- laundering, is actually preposterous. As we could see from Section 3, there are six processes or activities identified therein. They are, (i) concealment; (ii) possession; (iii) acquisition; (iv) use; (v) projecting as untainted property; and (vi) claiming as untainted property. 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, since “use” is one of the six activities mentioned in Section 3.
100. The FIRs for the predicate offences identify all the three components of Section 3, namely, (i) persons; (ii) process; and (iii) product. Persons accused in the FIRs are those who have indulged in the process or activity. The illegal gratification that they have taken, represents the proceeds of crime. The (i) acquisition of such illegal gratification in the first instance; (ii) the possession of the tainted money before putting it to use; and (iii) today projecting it as untainted money, is the process or activity in which the accused have indulged. The corruption money represents the proceeds of crime.
101. Therefore, all the arguments as though there are no foundational facts or jurisdictional facts, are simply aimed at hoodwinking the Court.
102. It is true that there are some offences, which, though scheduled offences, may or may not generate proceeds of crime. For instance, the offence of murder punishable under Section 302 is a scheduled offence. Unless it is a murder for gain or murder by a hired assassin, the same may or may not generate proceeds of crime. It is in respect of such types of offences that one may possibly Y. BALAJI v. KARTHIK DESARI & ANR. ETC. [V. RAMASUBRAMANIAN, J.] argue that 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 are like Siamese twins.
103. In fact, PMLA defines the word “property” in Section 2(1)(v) as follows: “2. Definitions.—(1) In this Act, unless the context otherwise requires,— xxx xxx xxx (v) “property” means any property or assets 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;”
104. Therefore, even if an intangible property is derived as a result of criminal activity relating to a scheduled offence, it becomes proceeds of crime under Section 2(1)(u). In view of the above, we are not impressed with the contention that the investigation by ED was triggered without any foundational/jurisdictional facts. In our view, 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. This is in view of the fact that wherever there are allegations of corruption, there is acquisition of proceeds of crime which itself tantamount to money- laundering.
105. A lot of heat and dust was generated about the ED registering an Information Report on 29.07.2021 without any material whatsoever and thereafter indulging in a fishing expedition both by summoning the respondents and by seeking copies of various documents from the Special Court before which the complaints relating to the predicate offences are pending. But we do not see any substance in these arguments. The reason why we say so will be understood if we rewind and go back to a few facts.
106. On 29.10.2015, Devasagayam made a complaint. It was against ten different persons, but not against the Minister, his brother and his Secretary. But on 07/08.03.2016, one Gopi made a complaint naming the brother of the Minister and claimed that a total amount of more than Rs.2 crores was paid. Gopi then filed Criminal O.P. No.7503 of 2016 on the file of the High Court in which the High Court passed an order on 20.06.2016, to expand the investigation and go against the real culprits. But a Final Report under Section 173(2) of the Code was filed on 13.06.2017. This was followed by another complaint filed by V. Ganesh Kumar on 09.09.2017 in FIR No.298 of 2017. In this FIR, a Final Report was filed on 07.06.2018. Similarly, one Arulmani filed a complaint on 13.08.2018 in FIR No.344 of 2018 in which a Final Report was filed on 12.04.2019.
107. Subsequently, at the instance of one R.B. Arun Kumar, further investigation was ordered in FIR No.441 of 2015, by an order of the High Court dated 27.11.2019. Thereafter, a discharge petition was filed by the Minister in one of those cases and after the same was dismissed, he filed a revision before the High Court. During the pendency of the revision, a Final Report was filed under Section 173(8) in one of those cases.
108. Around the same time, writ petitions were filed pointing out that there was a huge jobs-for-cash scam. In those writ petitions, the Assistant Commissioner of Police filed counter affidavits.
109. Thus, 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. 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.
110. In fact, ED was not trying to access any document which was inaccessible. In several proceedings before the High Court, such as (i) petitions for further investigation; (ii) writ petitions; and (iii) quash petitions, some of the documents whose certified copies were sought by the ED were already annexed. All that the ED wanted was authenticated copies of those documents and nothing more.
111. In fact, the FIRs as well as Final Reports are now uploaded in the websites of the Police Department in some of the States. In the Y. BALAJI v. KARTHIK DESARI & ANR. ETC. [V. RAMASUBRAMANIAN, J.] State of Tamil Nadu, Police started uploading FIRs online, way back in 2016. In all Police Stations, a Crime and Criminal Tracking Network and Systems, popularly known as ‘CCTNS’ is installed. Therefore, the information relating to FIRs is in the public domain.
112. Once an information relating to the acquisition of huge amount of illegal gratification in the matter of public employment has come into the public domain, it is the duty of the ED to register an Information Report. This is because “acquisition” is an activity amounting to money-laundering and the illegal gratification acquiredby a public servant represents “proceeds of crime,” generated through a criminal activity in respect of a scheduled offence. Therefore, it does not require any expedition, much less a fishing expedition for someone to say that the receipt of bribe money is an act of money- laundering.
113. The contention of Shri Sidharth Luthra that there was no explanation for the delay on the part of the ED in registering the Information Report, is a self-serving argument. If the ED registers an Information Report immediately upon the registration of a FIR for a predicate offence, ED will be accused of acting in haste. If they wait until the drama unfolds up to a particular stage, ED will be attacked as guilty of delay. The accused should be thankful to ED for giving a long rope from 2016 till 2021.
114. Therefore, all the arguments on facts and all the legal contentions emanating from some portions of the judgment in Vijay Madanlal Choudhary, to challenge the validity of the proceedings initiated by ED are completely unsustainable. Question No. 2: 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?
115. Now let us come to the contention revolving around the correctness of some portions of the decision in Vijay Madanlal Choudhary.
116. First of all, we should point out that a notice ordered in the review petition being Review Petition (Crl.) No.219 of 2022, will not destroy or diminish the precedential value of Vijay Madanlal Choudhary. The argument of the learned counsel for the accused, if accepted, 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 dated 25.08.2022 passed in Review Petition (Crl.) No.219 of 2022 discloses that prima facie the Court was of the view that at least two of the issues raised in the review petition require consideration. Though it is not precisely spelt out in the order, those two issues relate to (i) not providing the accused with a copy of the 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.
117. In fact, as we have pointed out elsewhere, the accused have not come up with any appeal challenging the order of the High Court dated 01.09.2022. Therefore, they are entitled at the maximum, to argue only for the dismissal of the appeals filed by ED and others against the said decision. Suppose we agree with the learned counsel for the accused and dismiss the appeals filed by ED, even then they cannot have an escape route since the impugned order of the High Court protects them only till the other proceedings are kept at bay.
118. Therefore, the accused is not entitled at all either to 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.
119. In view of the above, the appeals arising out of the order of the Division Bench of the High Court are liable to be allowed. Accordingly, these appeals are allowed and the order of the Division Bench of the Madras High Court dated 01.09.2022 is set aside. ED will now be entitled to proceed further from the stage at which their hands were tied by the impugned order. PART-III (Permission to ED to inspect the records of the Special Court trying the predicate offences)
120. To recapitulate, ED registered an Information Report on 29.07.2021. Thereafter, ED filed applications before the Special Court seeking certified copies of the FIR, statements of witnesses, etc. By an order dated 09.11.2021, the Special Court allowed the application partly and directed the issue of certified copies of FIR, complaint, statements, etc., but refused to provide certified copies of unmarked documents. Y. BALAJI v. KARTHIK DESARI & ANR. ETC. [V. RAMASUBRAMANIAN, J.]
121. As against the said order, ED moved the High Court under Section 482 of the Code. These petitions were partly allowed by the High Court by an order dated 30.03.2022, permitting ED to have inspection of the documents under Rule 237 of the Rules, 2019 and thereafter, to file a fresh third party copy application. It is against this order that one of the accused by name M. Karthikeyan (Accused No.3) in the Final Report filed under Section 173(8) of the Code in CC No.24 of 2021 has come up with an appeal.
122. The grievance of the appellant in this appeal is that the High Court has overlooked the provisions of Rule 231(3) of the Rules, 2019 and also Section 65B of the Indian Evidence Act, 187235. But both the above contentions are without substance. 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. All that the High Court has done is permitting the ED to have an inspection of the documents under Rule 237 and thereafter to file a proper copy application. This is not contrary to Rule 231(3).
123. We do not know how an argument revolving around Section 65B of the Evidence Act is raised. Section 65B concerns the admissibility of electronic records. Without certification, ED may not be able to use those electronic records in evidence, in the prosecution under PMLA. But it does not mean that they cannot even have a look at the electronic record.
124. Therefore, we find no merits in the appeal. Hence, the appeal challenging the order of the High Court dated 30.03.2022 passed in Criminal O.P. No.5726 of 2022 is dismissed. PART – IV (Extension of time to complete further investigation)
125. There is one appeal filed by Y. Balaji, whose status is indicated by us in a tabular column elsewhere. His appeal challenges an order passed by the High Court originally on 27.11.2019 directing the prosecution to complete further investigation in CC No.3627 of 2017 within six months. When a petition for extension of time was moved, the Court rejected it by an order dated 01.11.2021 on the ground that the prayer 35 For short “the Evidence Act” had become infructuous. Therefore, worried about the fate of further investigation, the victim has come up with the above appeal. But the worry of the appellant is baseless. 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. On the contrary, a Final Report has already been filed under Section 173(8) of the Code on 08.03.2021 in CC No.3627 of 2017 and the same has now become CC No.24 of 2021.
126. Therefore, the appeal challenging the orders dated 27.11.2019 and 01.11.2021 is dismissed. Contempt Petitions
127. Anti Corruption Movement has come up with 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 in CC No.25 of 2021; (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.
128. Shri Ranjit Kumar, learned senior counsel appearing for the State and Shri Tiwari, learned AAG for the State submitted that there was no willful disobedience of the orders passed by this Court and that the State actually took steps to vacate the stay. According to the learned senior counsel, the hands of the investigating agency were tied due to the stay order and that once the appeals arising out of the two substantial orders of the High Court dated 01.09.2022 and 31.10.2022 are disposed of, the State will take expeditious steps.
129. For the present, we would accept the explanation offered by the alleged contemnors. This is for the reason that the alleged contemnors alone are not to be blamed for where we are. The entire case turned out to be a match where it became impossible to identify who was playing for which team. Despite this Court’s order dated 08.09.2022, the High Court passed the order dated 31.10.2022, which practically has the effect of wiping out the directions issued by this Court. In its order dated 31.10.2022, the High Court referred to our order at various places and eventually destroyed the effect of the order of this Court. Therefore, the Police Officers alone cannot be held guilty of wilful disobedience. Hence, the contempt petitions are dismissed. Y. BALAJI v. KARTHIK DESARI & ANR. ETC. [V. RAMASUBRAMANIAN, J.] However, if the future course of investigation shows any disobedience of the orders of this Court, it will always be open to the petitioner to come up again. With this observation, the contempt petitions are dismissed. I.A.No. 26257 of 2023
130. This is an application taken out by Y. Balaji, appellant in some of these appeals, seeking the constitution of a Special Investigation Team and the appointment of a Special Public Prosecutor. This application is filed on the ground that the hope expressed by this Court in its order dated 08.09.2022 that the State Police would do a proper job, has been belied by subsequent events. Therefore, the applicant prays that time is now ripe for the constitution of a Special Investigation Team.
131. The application is opposed on the ground, (i) that a prayer of this nature cannot be made by way of an interlocutory application; and (ii) that the allegation of the prosecution being influenced by the Minister does not stand substantiated.
132. As we have pointed out while dealing with the contempt petitions, the entire blame for this fiasco cannot be laid at the doorstep of the Police alone. We find several coparceners. Hence, we reject this I.A. at this stage with liberty to the applicant to come back with a substantial petition seeking such a prayer, at a later point of time, when a foul play is suspected. Accordingly, I.A. No.26257 of 2023 is dismissed with the above liberty. Results summed up
133. The result of the entire discussion is summed up as follows: (i) The appeals arising out of the order for de novo investigation are allowed. That portion of the order of the High Court dated 31.10.2022 passed in Criminal O.P. No. 15122 of 2021 is set aside. The directions issued in the said original petition for de novo investigation are set aside. The Investigation Officer shall proceed with further investigation in all cases by including the offences under the PC Act. Any let up on the part of the Investigation Officer in this regard will pave the way for this Court to consider appointing a Special Investigation Team in future. (ii) The appeals arising out of the order of the Division Bench of the High Court dated 01.09.2022 are allowed. The order dated 01.09.2022 is set aside. All the three writ petitions challenging the initiation of proceedings by ED shall stand dismissed. (iii) The appeal arising out of the order of the High Court dated 30.03.2022 is dismissed. (iv) The appeal challenging the orders dated 27.11.2019 and 01.11.2021 of the High Court relating to extension of time for completion of investigation is dismissed. The Investigation Officer shall proceed with further investigation and file Further/Final Reports within two months. (v) The Contempt Petitions and I.A. No. 26257 of 2023 are dismissed. Application for impleadment is dismissed. Pending application(s), if any, shall also stand disposed of. Divya Pandey Appeals disposed of. (Assisted by : Shevali Monga, LCRA) Y. BALAJI v. KARTHIK DESARI & ANR. ETC. [V. RAMASUBRAMANIAN, J.]