New Delhi: The Enforcement Directorate (ED) can continue with its probe under the Prevention of Money Laundering Act (PMLA) even if the offences scheduled under the anti-money laundering law are dropped by the police in their chargesheet, the Supreme Court has said.
According to the top court’s ruling delivered on 14 December, the filing of a chargesheet cannot be said to be the final conclusion on whether the offences scheduled under PMLA did or did not exist. It is only the competent court before whom the chargesheet is filed that will decide whether the scheduled offences against the accused are valid, the order that was made public Friday said.
Predicate or scheduled offences are defined under Section 2(y) of the Prevention of Money Laundering Act (PMLA).
The ruling was delivered by a bench of justices Aniruddha Bose and Bela Trivedi in connection with civil servant Saumya Chaurasia’s bail petition. Chaurasia was posted as deputy secretary with the previous Bhupesh Baghel government in Chhattisgarh before she was arrested last year for her alleged involvement in the coal scam case. She approached the Supreme Court after the Chhattisgarh High Court denied her bail.
The SC’s order means that the ED can continue to investigate PMLA charges against a person until the court either discharges or sets them free of the scheduled offence.
Under the PMLA, the ED can undertake an inquiry only if there is a First Information Report (FIR) registered under those offences that are mentioned as predicate offences in the PMLA.
In July 2022, when the top court upheld the stringent provisions of the PMLA, it said that in the absence of a predicate offence there cannot be any inquiry under the anti-money laundering law.
The case pertains to ED’s investigation into allegations that a cartel involving senior civil servants, businessmen, politicians, and middlemen was extorting an illegal levy of Rs 25 per tonne for coal being transported in Chhattisgarh.
The case against Chaurasia emanated from a search and seizure action taken by the income tax department against an individual named Suryakant Tiwari. At the time of this action, Tiwari was found residing in a hotel in Bengaluru.
On 12 July 2022 — 12 days after the raid — the IT department lodged an FIR against Tiwari under various sections of the Indian Penal Code (IPC), including criminal conspiracy. Later, Section 384 of the IPC — which relates to extortion and punishment — was added in September 2022.
Since Section 384 of the IPC is a predicate offence under PMLA, the ED registered an Enforcement Case Information Report (ECIR) — a formal entry of the complaint lodged by the agency— immediately and launched its probe that led to Chaurasia’s arrest.
Meanwhile, on 8 June 2023, the Karnataka Police filed their chargesheet against Tiwari before the additional chief judicial magistrate, Bengaluru. In it, the police said that the accused had committed the offence of extortion in Chhattisgarh and that they would seek a report from the police there.
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What the court said
In its arguments before the SC, the ED alleged that Chaurasia was one of the key persons in the Rs 540-crore racket run by Suryakant Tiwari. However, the civil servant’s lawyers said that the ED arrested her despite her cooperation in the investigation.
Chaurasia’s lawyers also referred to the Karnataka Police chargesheet, saying that the sections of extortion and criminal conspiracy against Tiwari had been dropped, and that instead, the Bengaluru court had taken cognizance of the offences under sections 204 and 353 of the IPC, which were cited in the police’s final report.
Section 204 IPC deals with the destruction of documents, while Section 353 is using assault or criminal force to deter a public servant from discharging his/her duty.
According to Chaurasia’s lawyers, since no scheduled offence survived at the time of the Chhattisgarh HC’s order on Chaurasia’s bail petition, those proceedings were without jurisdiction.
“The proceedings under the PMLA are contingent on the existence of the scheduled offence, and no proceedings under the PMLA can be continued against the person in absence, or in isolation, of scheduled offence,” the court was told.
However, the top court rejected this contention. It also took note of the Karnataka Police’s observation to say that the charge of Section 384 IPC had not been dropped and that, instead, a report had been sought from the Chhattisgarh Police.
It then went on to say: “….when the FIR is registered under particular offences which include the offences mentioned in the schedule to the PMLA, it is the court of competent jurisdiction, which would decide whether the charge is required to be framed against the accused for the scheduled offence or not”.
It further said: “The offences mentioned in the chargesheet by the I.O. (investigating officer) could never be said to be the final conclusion as to whether the offences scheduled in PMLA existed or not, more particularly when the same were mentioned in the FIR registered against the accused”.
In the instant case, the bench said there was neither discharge nor acquittal nor quashing of the criminal case in the predicate/ scheduled offence.
Further, the bench declined to extend the benefit of Section 45 of the PMLA — a provision that gives the discretion to the court to take a benevolent view in cases where women, persons below 16 years, or a sick person is involved in a money-laundering case — to Chaurasia.
The enactment, by no stretch of the imagination, mandates the court to take a lenient view, the court said. But it gives the judge the discretion to be sensitive and sympathetic towards persons of tender age and women, who “are likely to more vulnerable, may sometimes be misused by the unscrupulous elements and made scapegoats for committing such crimes”, the court said.
In the instant case, the court said there is “sufficient evidence collected by the respondent (ED) to prima facie come to the conclusion that the appellant who was deputy secretary and OSD in the office of the Chief Minister, was actively involved in the offence of money laundering”.
“As against that there is nothing on record to satisfy the conscience of the court that the appellant is not guilty of the said offence and the special benefit as contemplated in the proviso to Section 45 should be granted to the appellant who is a lady,” the bench said.
(Edited by Uttara Ramaswamy)