Disposed¶35

Daktar@ Doctor@Jatindra Sahu v. Directorate of Enforcement, Sub Zonal Office, Bbsr

Orissa HC22 Apr 2024CRLMC/2754/2023

Case brief

AI extract

What is this about?

Stay of PMLA proceeding pending scheduled offence trial; CTR No.8 of 2016; disproportionate assets; Vigilance; Section 482 Cr.P.C.; Special Judge (PMLA) Bhubaneswar; PMLA (Crl. Misc.) No.88 of 2020; simultaneous proceedings; proceeds of crime; Section 2(1)(u) and Section 3 PMLA; Section 45 PMLA twin conditions; Section 43(1) PMLA transfer; Bijaya Madan Lal Choudhury v. Union of India; Nikesh Tarachand Shah AIR 2017 SC 5500; V. Vijay Sai Reddy v. Enforcement Directorate (Telangana HC).

What did the court decide?

Petition disposed of with the direction that both proceedings continue simultaneously, with the learned Special Judge (PMLA), Bhubaneswar to wait for the decision in the scheduled-offence trial (CTR No.8 of 2016) before any pronouncement in the PMLA proceeding. ¶35

Daktar@ Doctor@Jatindra Sahu Vs Directorate of Enforcement… — Money Laundering | Orissa HC (2024)

What the court decided

AI extract

Outcome

¶35

Issue for consideration

Whether the PMLA proceeding in PMLA (Crl. Misc.) No.88 of 2020 before the Special Judge (PMLA), Bhubaneswar ought to be stayed till conclusion of trial of the scheduled offences in CTR No.8 of 2016.

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Court's answer

The offences under the PMLA and the scheduled offences are independent of each other, and the PMLA does not contemplate any joint trial, implying separate trial for the offence of money laundering.

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Ratio / Principle

Notwithstanding their independence, the outcome of the trial vis-à-vis the scheduled offences would determine the fate of the PMLA proceeding.

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Key takeaways

It is just and proper that both the PMLA proceeding and the scheduled-offence trial continue simultaneously.ratio¶34
The learned court below (Special Judge, PMLA) should wait for the decision in the scheduled-offence trial before any pronouncement in the PMLA proceeding, so as to avoid a paradoxical result as anticipated in Mr. V.Vijay Sai Reddy (supra).ratio¶34

Detailed headnote1 paragraphs

Criminal miscellaneous jurisdiction (S. 482 Cr.P.C.) - challenge to refusal by Special Judge (PMLA), Bhubaneswar (Annexure-4 in PMLA (Crl. Misc.) No.88 of 2020) to stay money-laundering proceedings till conclusion of trial of scheduled offences (disproportionate assets case arising out of Sambalpur Vigilance P.S. Case No.50 of 2013 / CTR No.8 of 2016). Held: offences under the PMLA and the scheduled offences are independent and no joint trial is contemplated, but the outcome of the scheduled-offence trial determines the fate of the PMLA proceeding; both may proceed simultaneously, yet the PMLA court must await the decision in the scheduled-offence trial before pronouncing in the PMLA case, to avoid the paradoxical result anticipated in V. Vijay Sai Reddy (Telangana HC), following the law laid down in Bijaya Madan Lal Choudhury (SC). Petition disposed of accordingly.

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IN THE HIGH COURT OF ORISSA AT CUTTACK

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CRLMC No.2754 of 2023

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Daktar@ Doctor@ Jatindra Sahu & another

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Petitioners

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Ms. Deepali Mahapatra, Advocate

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-Versus-

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Directorate of Enforcement, Government of India, Bhubaneswar Sub-Zonal Office, Nayapalli, Bhubaneswar

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…. Opposite Party

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Mr. Bibekananda Nayak, Advocate

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CORAM:

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JUSTICE R.K. PATTANAIK

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DATE OF JUDGMENT:22.04.2024

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Instant petition under Section 482 Cr.P.C. is filed by the petitioners challenging the impugned order under Annexure-4 passed in PMLA (Crl. Misc.) No.88 of 2020 by the learned Special Judge (PMLA), Bhubaneswar on the grounds inter alia that the same is not tenable in law and hence, therefore, liable to be interfered with and set aside with a direction to stay the further proceeding under the Prevention of Money Laundering Act (hereinafter referred to as „the PMLA‟) till conclusion of trial with respect to scheduled offences in CTR No.8 of 2016.

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Petitioner No.1 was working as a Cashier (contractual) in the office of the District Project Coordinator, Sarva Sikshya Abhiyan Office, Bolangir. On 7^th May, 2013 the Vigilance Department conducted a raid and upon such raid and inquiry, it was found him to be in possession of assets disproportionate to his known sources of income, whereafter, F.I.R. being lodged, Sambalpur Vigilance P.S. Case No.50 of 2013 was registered corresponding to G.R case No.10 of 2013 and finally on completion of investigation, chargesheet was filed against the CRLMC No. 2754 of 2023 Page 1 of 7

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petitioners for offences under Sections 13(2) read with 13(1)(e) of the Prevention of Corruption Act and Section 109 IPC.

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The contention of the petitioners is that the fate of the proceeding under the PMLA depends on result in CTR No.8 of 2016, therefore, the same should be stayed till conclusion of trial with respect to the scheduled offences. It is contended that there is no scope for the PMLA court to proceed with the trial and upon acquittal of the petitioners by the Vigilance court and therefore, learned Special Court without considering the same denied stay of the proceeding in PMLA (Crl. Misc.) No.88 of 2020 and rejected the request received in that regard with the impugned order under Annexure-4 and the same is, hence, not legally tenable in view of the settled law laid down by the Apex Court in Bijaya Madan Lal Choudhury Vrs. Union of India & others decided on 27^th July, 2022.

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Heard Ms. Mohapatra, learned counsel for the petitioners and Mr. Nayak, learned Counsel for the ED opposite party.

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5 . Ms. Mohapatra, learned counsel for the petitioners submits that the PMLA proceeding before the learned court below is required to be stayed in the interest of justice as the outcome of such an action under the PMLA is always subject to result with respect to the scheduled offences pending trial in CTR No.8 of 2016. Referring to the decision in Bijaya Madan Lal Choudhury (supra), Ms. Mohapatra would contend that the Apex Court clearly held that discharge or acquittal or exoneration from the schedule offences shall abate the PMLA proceeding and in such view of the matter, it was not justified for the learned court below to decline stay on the action till conclusion of trial in CTR No.8 of 2016. Ms. Mohapatra refers to a decision of the Telangana High Court in the case of Mr. V.Vijay Sai Reddy Vrs. Enforcement Directorate

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CRLMC No. 2754 of 2023 Page 2 of 7

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decided on 8^th September, 2022 to contend that the PMLA court shall have to await the ultimate decision of the court trying the scheduled offence. Hence, the contention of Ms. Mohapatra is that the learned PMLA court ought to have accepted the request from the petitioners not to proceed with the action awaiting result in CTR No.8 of 2016, which was declined by not keeping in view the spirit of law discussed and outlined by the Apex Court in Bijaya Madan Lal Choudhury (supra).

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6 . Mr. Nayak, learned counsel for the ED opposite party, on the other hand, justifies the impugned order under Annexure-4 and claimed that the petitioners are avoiding to appear before the PMLA court with such a plea. The contention of Mr. Nayak is that the offence under the PMLA is distinct and separate triable by the learned court below independent of the action with respect to the scheduled offences in CTR No.8 of 2016 and therefore, request to stay the proceeding in PMLA (Crl. Misc.) No.88 of 2020 was rightly refused. That apart, the second attempt of the petitioners, at present, after disposal of the matters in CRLMC No. 1984 of 2021 and CRLMC No. 1207 of 2022 is not maintainable.

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7 . In course of hearing, it is brought to the notice of the Court by Mr. Nayak, learned counsel for the ED opposite party that in the meantime, later to the judgment in CRLMC No. 1984 of 2021 and CRLMC No. 1207 of 2022 on 31^st March, 2023, on a request by the PMLA Authority, the proceeding before the Vigilance court was transmitted to the learned court below in view of Section 43(1) of the PMLA with a direction to the petitioners to appear before the Special court at Bhubaneswar. In fact, by order dated 18^th January, 2024 in CTR No.8 of 2016, the learned Special Judge (Vigilance), Bolangir allowed the transfer and commitment of the case to the PMLA court.

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CRLMC No. 2754 of 2023 Page 3 of 7

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8 . In Bijaya Madan Lal Choudhury (supra), the Supreme Court was dealing with validity and interpretation of some of the provisions of the PMLA and procedure to be followed by the ED during inquiry and investigation. Later to the decision of the Apex Court in Nikesh Tarachand Shah Vrs. Union of India and Another AIR 2017 SC 5500 , an amendment was brought in Section 45 of PMLA Act so as to revive the effect of twin conditions stipulated therein which was also challenged thereafter and while dealing with the matter and the definition of „money laundering‟ in juxtaposition to „proceeds of crime‟ in the context of PMLA was examined and it was thus held.

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“251. The „proceeds of crime‟ being the core of the ingredients constituting the offence of moneylaundering, the expression needs to be construed strictly. In that, all properties recovered or attached by the investigating agency in connection with the criminal activity relating to a scheduled offence under the general law cannot be regarded as proceeds of crime. There may be cases where the property involved in the commission of scheduled offence attached by the investigating agency dealing with that offence, cannot be wholly or partly regarded as proceeds of crime within the meaning of Section 2(1)(u) of the 2002 Act-so long as the whole or some portion of the property has been derived or obtained by any person „as a result of‟ criminal activity relating to the stated scheduled offence. To be proceeds of crime, therefore, the property must be derived or obtained, directly or indirectly, „as a result of‟ criminal activity relating to a scheduled offence. To put it differently, the vehicle used in commission of scheduled offence may be attached as property in the concerned case (crime), it may still not be proceeds of crime within the meaning of Section 1(1)(u) of the 2002 Act. Similarly, possession of unaccounted property acquired by legal means may be actionable for tax violation and yet, will not be regarded as proceeds of crime unless the concerned tax legislation prescribes such violation as an offence and such offence is included in the Schedule of the 2002 Act. For being regarded as proceeds of crime, the property

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CRLMC No. 2754 of 2023 Page 4 of 7

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associated with the scheduled offence must have been derived or obtained by a person „as a result of‟ criminal activity relating to the concerned scheduled offence. This distinction must be borne in mind while reckoning any property referred to in the scheduled offence as proceeds of crime for the purpose of the 2002 Act. Dealing with proceeds of crime by way of any process or activity constitutes offence of moneylaundering under Section 3 of the Act.

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XXX XXX XXX

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Tersely put, it is only such property which is derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence can be regarded as proceeds of crime. The authorities under the 2002 Act cannot resort to action against any person for money-laundering on an assumption that the property recovered by them must be proceeds of crime and that a scheduled offence has been committed, unless the same is registered with the jurisdictional police or pending inquiry by way of complaint before the competent forum. For, the expression „derived or obtained‟ is indicative of criminal activity relating to a scheduled offence already accomplished. Similarly, in the event the person named in the criminal activity relating to a scheduled offence is finally absolved by a Court of competent jurisdiction owing to an order of discharge, acquittal or because of quashing of the criminal case (scheduled offence) against him/her, there can be no action for money-laundering against such a person or person claiming through him in relation to the property linked to the stated scheduled offence. This interpretation alone can be countenanced on the basis of the provisions of the 2002 Act, in particular Section 2(1)(u) read with Section 3. Taking any other view would be rewriting of these provisions and disregarding the express language of definition clause „proceeds of crime‟, as it obtains as of now.”

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9 . In the aforesaid decision, the Supreme Court expressed the view that the „proceeds of crime‟ is the very essence of money laundering. It is held and observed therein that property which is derived or obtained directly or indirectly as a result of criminal activity relating to the scheduled offence can be regarded as CRLMC No. 2754 of 2023 Page 5 of 7

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„proceeds of crime‟. It is also held that in the event, the accused to the scheduled offence is finally absolved by a court of competent jurisdiction either on account of discharge or acquittal or quashment of the criminal action, there can be no further proceeding vis-à-vis money laundering against him or a person claiming through him and finally, answered the question, whether, the offence under Section 3 of the PMLA is a standalone offence by concluding that indeed, it is dependent on the wrongful and illegal gain of property as a result of criminal activities relating to the scheduled offence; nevertheless, it is concerning the process or activity connected with such property which constitutes offence of money laundering and the property must clarify the definition of „proceeds of crime‟. It is also observed therein by the Supreme Court that it is unfathomable as to how the action of confiscation can result in respect of property in the event of acquittal or discharge in connection with the scheduled offence.

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10 . In Mr. V.Vijay Sai Reddy (supra), the Telangana High Court taking note of the decision of Apex Court in Bijaya Madan Lal Choudhury and analyzing the provisions of the PMLA with reference to the scheduled offence concluded that the trial relating to the offence of money laundering may pause and wait the ultimate decision of the Special Court trying the scheduled offence and also observed that it may lead to an inconsistent result, if the accused later on is acquitted of the scheduled offence while convicted for the offence of money laundering under the PMLA at an earlier point of time which would rather be contrary to the well established cannons of law.

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11 . Considering the facts on record and as in the meantime, the proceeding in CTR No.8 of 2016 stands transferred to the PMLA court with an order dated 18^th January, 2024 of the Vigilance CRLMC No. 2754 of 2023 Page 6 of 7

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court and the matter to be sub-judice for trial with respect to the scheduled offences, the Court is of the view that the offences are independent of each other and the PMLA does not contemplate any such joint trial which, in other words, proposed separate trial in respect of the offence of money laundering, nonetheless, the outcome of trial vis-à-vis the scheduled offence would determine the fate of the PMLA proceeding. Thus, therefore, the Court is of the humble view that it would be just and proper to ensure both the proceedings to continue simultaneously, however, the learned court below should be advised to wait for the decision with respect to the scheduled offences before any such pronouncement in PMLA proceeding in order to avoid any such situation and a paradoxical result as anticipated in Mr. V.Vijay Sai Reddy (supra) and accordingly, it is ordered.

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12 . In the result, the petition stands disposed of with the direction as aforesaid.

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Balaram

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Signature Not Verified

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Digitally Signed Signed by: BALARAM BEHERA Designation: Personal Assistant Reason: Authentication Location: HIGH COURT OF ORISSA, C UTT ACK Date: 24-Apr-2024 10:38:17

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CRLMC No. 2754 of 2023 Page 7 of 7

Daktar@ Doctor@Jatindra Sahu v. Directorate of Enforcement, Sub Zonal Office, Bbsr

Case brief

What is this about?

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Daktar@ Doctor@Jatindra Sahu v. Directorate of Enforcement, Sub Zonal Office, Bbsr

Case brief

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What the court decided

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