INTRODUCTION
In a recent judgement of Pavana Dibbur v. The Directorate of Enforcement[1], the Hon’ble Supreme Court has held that the offence of criminal conspiracy punishable under Section 120B of the Indian Penal Code, 1860 (“IPC”), will be attributed as a scheduled offence under the Prevention of Money Laundering Act, 2002 (“PMLA / Act”), only if the alleged criminal conspiracy is associated with committing of a scheduled offence, i.e. an offence specifically included in the Schedule to the PMLA. The Hon’ble Court held that if the offence of alleged criminal conspiracy is related to any other offence, which does not form a part of the Schedule to the PMLA, then the alleged criminal conspiracy by itself shall not be considered as a “scheduled offence” under the regime of the PMLA and hence, no person can be held liable and be prosecuted for it.[2]
FACTUAL OVERVIEW
- On July 1, 2013, Pavana Dibbur (“Appellant”) purchased a property (“First Property”) from Alliance Business School, affiliated with Alliance University, for INR 13.5 crore. Thereafter, the Appellant purchased another property (“Second Property”) from Madhukar Angur (“Accused No. 1”) for INR 2.47 crore.
- On November 11, 2017, a First Information Report was registered against Accused No. 1 for collecting INR 107 crore from the students by claiming to be the Chancellor of Alliance University. Subsequently, the Directorate of Enforcement (“ED”) passed an order under Section 5 of the PMLA, attaching both the First and Second Properties.
- On October 13, 2021, a complaint was filed by the ED against the Appellant under the second proviso of Section 45(1) of the PMLA, alleging that she had conspired with Accused No. 1 by executing nominal sale deeds for the First and Second Properties in her name for the benefit of Accused No. 1. Further, it was also alleged that the Appellant had used her bank accounts to siphon off the university funds, thus facilitating Accused No. 1 in handling the proceeds of crime. The Appellant was arraigned as Accused No. 6 in the said complaint.
- The Appellant filed a petition under Section 482 of the Code of Criminal Procedure, 1973, for quashing of the said complaint. However, the Hon’ble High Court of Karnataka at Bangalore had dismissed the said petition. Hence, the Appellant preferred the instant appeal.
SUBMISSIONS ON BEHALF OF THE APPELLANT:
- It was submitted that the properties i.e., First and Second Properties, acquired by the Appellant could not be treated as “proceeds of crime”, as the same were not tainted properties and had no nexus with the scheduled offences. Further, the First Property was acquired by the appellant way before the commission of the alleged scheduled offence. In reference to the Second property, the Appellant submitted that the same was acquired by using her own resources.
- Moreover, relying on the judgment of the Hon’ble Supreme Court in Vijay Madanlal Choudhary & Ors. v. Union of India & Ors.[3] (“Vijay Madanlal Choudhary”), it was submitted that the appellant had not been arraigned as an accused in any scheduled/ predicate offences and thus, no action could be sought against the Appellant under Section 3 of the PMLA.
- The offence under Section 120B of IPC, as specified under Paragraph 1 of the Schedule to PMLA, cannot be treated as a standalone offence, in the absence of any other scheduled offence being committed, for the purposes of prosecution under the PMLA.
SUBMISSIONS ON BEHALF OF THE RESPONDENT:
- Whether or not the Second Property was acquired through proceeds of crime can be delved into only during the process of trial.
- A reading of Section 3 of PMLA suggests that a person not accused in any predicate/ scheduled offence can also be accused of having committed an offence of money laundering under Section 3 of the Act.
- The scheduled offence as specified in the Schedule must be read as it is and wherever it is needed that two offences are to be read together, the legislator has duly specified the same in the Schedule to the Act.
ISSUE
Whether the offence under Section 120B of IPC can be treated as a scheduled offence even if the alleged criminal conspiracy is to commit an offence that does not form a part of the Schedule to PMLA?
JUDGEMENT OF THE HON’BLE SUPREME COURT
- On the issue of connection between the acquisition of the First and Second Property with the proceeds of crime, the Hon’ble Court observed that since the scheduled offence took place after the date of acquiring the First Property, it is ex facie that the First Property is not connected with the proceeds of crime. As far as the acquisition of the Second Property is concerned, the Hon’ble Court observed that the Appellant has not adduced sufficient evidence to prove that the said property was not acquired by utilising the proceeds of crime, therefore the Hon’ble Supreme Court has directed that the said issue be decided only at the time of trial.
- On the issue of the Appellant not being arrayed as an accused in the scheduled/predicate offence, the Hon’ble Supreme Court while relying on its judgement in Vijay Madanlal Choudhary[4] held that it is not necessary for the person who has been alleged to have committed an offence under Section 3 of PMLA to be arraigned as an accused in the scheduled offence. The Court held that there are two conditions necessary for an offence to be covered under Section 3 of PMLA, which are as follows:
- There must be a scheduled offence.
- There must be proceeds of crime in relation to the scheduled offence as per the definition provided under Section 2(1)(u) of PMLA.
- Further, the court reiterated its stance in the Vijay Madanalal Choudhary[5] case on the line that under Section 3 of PMLA, even those accused who may not have committed a scheduled offence but have assisted in concealing or using the proceeds of crime after the commission of the scheduled offence will also be prosecuted under the PMLA, as long as the scheduled offence exists, thereby, rejecting the second contention/ submission made on behalf of the Appellant.
- The most crucial issue before the bench was to interpret the treatment of offence under Section 120B of IPC, as mentioned in the first entry in Paragraph 1 of the Schedule to PMLA. The court had to decide whether the offence of criminal conspiracy under Section 120B of IPC will be treated as a scheduled offence if the alleged criminal conspiracy is for an offence that is not in itself a part of the Schedule. In other words, whether the offence of criminal conspiracy under Section 120B of IPC can on a standalone basis be treated as an offence for prosecution under Section 3 of PMLA, irrespective of the offence for which such conspiracy has been executed.
The Court observed that if such an interpretation is allowed, then any offence that is not included in the Schedule to the PMLA, will attract the rigours of Section 3 of PMLA by simply applying Section 120B. The Court further observed that accepting such a contention or interpretation of the PMLA would attract the vice of unconstitutionality for being patently arbitrary as the same would render the Schedule to PMLA redundant.
In support of this ruling, the court delved into the principles of statutory interpretation. The court held that the penal statutes are to be strictly construed as per the legislative intent expressed in the enactment. However, if there are two reasonable interpretations to a particular provision of a penal statute, the interpretation which avoids the imposition of penal consequences is to be adopted by the courts.
The court also referred to Section 2(1)(y) of PMLA, which defines “scheduled offence” as the offences mentioned under Part A, Part B and Part C of the Schedule to PMLA, subject to the conditions provided in the said Section. Thus, the court held that from a bare perusal of Section 2(1)(y), it is ascertained that the intention of the legislature was not that all offences which generate proceeds of crime will amount to scheduled offence, rather only those offences which are included in the schedule to PMLA would be termed as scheduled offences. Thus, the court rejected the submission that Section 120B standalone can invoke Section 3 of PMLA even when criminal conspiracy is committed in relation to an offence not included under the schedule to PMLA.
The court upheld the third submission/ contention of the Appellant and ruled that “Therefore, in our view, the offence under Section 120B of IPC included in Part A of the Schedule will become a scheduled offence only if the criminal conspiracy is to commit any offence already included in Parts A, B or C of the Schedule”. In the instant case, as there was no allegation of commission of criminal conspiracy in respect of any offences included in the Schedule, the Court held that scheduled offence does not exist and hence, the appellant cannot be prosecuted under Section 3 of PMLA.
CONCLUSION
The judgement of the Hon’ble Supreme Court serves as a guiding light with respect to understanding whether the offence of criminal conspiracy under Section 120B of IPC can standalone be considered a scheduled offence for initiating requisite actions under the scheme of PMLA. While the Schedule to the PMLA specifies the offences that would amount to a scheduled offence under Section 2(1)(y) of PMLA, if the offence of criminal conspiracy, as enshrined under Paragraph 1 of the Schedule to PMLA, is allowed to be considered as a stand-alone scheduled offence, it would open a floodgate of cases under the PMLA.
The Hon’ble Supreme Court has precisely explained this issue with the help of various illustrations, one of them being Section 263A of IPC, which deals with the offence of making or possessing fictitious stamp, which has not been included in the Schedule. But if the criminal conspiracy is considered to be a “scheduled offence” on its own, then by virtue of this interpretation, the offence of criminal conspiracy to make fictitious stamp would also be considered a “scheduled offence”. However, this interpretation cannot be permitted because the Schedule does not include the offence under Section 263A of IPC as a scheduled offence. Thus, it is evident that allowing the interpretation that Section 120B of IPC is a scheduled offence, independent of the offence for which conspiracy has been executed, would defeat the objective of the legislature of providing a Schedule (enlisting the offences) to PMLA for “scheduled offences” to be made punishable under the provisions of PMLA.
Hence, the Hon’ble Supreme Court, by relying on the intention of the legislature and the principles of statutory interpretation, has correctly held that the offence of criminal conspiracy under Section 120B of the IPC will be treated as a “scheduled offence” only if the conspiracy is for an offence that has been specified in the Schedule to PMLA.
For further information, please contact:
Sumit Attri, Partner, Cyril Amarchand Mangaldas
sumit.attri@cyrilshroff.com
[1] Pavana Dibbur v. Enforcement Directorate, 2023 SCC OnLine SC 1586.
[2] Ibid.
[3] Vijay Madanlal Choudhary & Ors. v. Union of India & Ors., 2022 SCC OnLine SC 929.
[4] Ibid.
[5] Ibid.
