Debendra Kumar Panda V. Union of India and Others

CRLMC/3059/2019

AI Insights

The case revolves around Debendra Kumar Panda, who challenged the proceedings under the PMLA initiated against him, following the quashing of related criminal conspiracy charges under the Prevention of Corruption Act and IPC. The Enforcement Directorate (ED) had accused Panda of money laundering, linking it to the alleged distribution of coal to fake MSMEs. However, the primary charges were quashed, leading Panda to seek the closure of the PMLA proceedings, which was initially denied by the PMLA court. The High Court, referencing the Supreme Court's precedent, found that the money laundering charges could not be sustained without the underlying scheduled offence.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 811439 (HC-MISC)
• Appeal Type: Others
• Pronouncement Date: 13-01-2023
• Assessment Year: misc
• Other Referred Cases: Vijay Madanlal Choudhury and others Vrs. Union of India and others, Smt. Janata Jha and Another Vrs. Assistant Director, Directorate of Enforcement, Radha Mohan Lakhotia Vrs. Deputy Director, PMLA, Directorate of Enforcement, VGN Developers Private Limited and Others Vrs. The Deputy Director, Directorate of Enforcement, Babulal Verma and Another Vrs. Enforcement Directorate and Another, Indrani Pattnaik and Others Vrs. Enforcement Directorate, Sachin Narain Vrs. Income Tax Department, Usha Agarwal Vrs. Union of India, Mahanivesh Oils and Foods Pvt. Ltd. Vrs. Directorate of Enforcement, Rajib Chanana Vrs. Deputy Director, Directorate of Enforcement, Sushil Kumar Katiyar Vrs. Union of India, Prakash Industries Vrs. Directorate of Encroachment, Directorate of Enforcement Vrs. Gagandeep Singh
• Laws Referred To: Prevention of Money Laundering Act, 2002, Prevention of Corruption Act, 1988, Indian Penal Code
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: BIBEKANANDA NAYAK
• Assessee Lawyers: ASOK MOHANTY
• Keywords: Coal Distribution; Criminal conspiracy; Money laundering; PMLA; Quashing of proceedings; Scheduled Offence; Vigilance Department
• Section: 13(2); 3; 13(1)(d); 45; 468; 120-B; 120-B; 420; 471

Judgement Text

" CRLMC No.3059 of 2019 Page 1 of 10 IN THE HIGH COURT OF ORISSA AT CUTTACK CRLMC No.3059 of 2019 Debendra Kumar Panda …. Petitioner Mr. Asok Mohanty, Senior Advocate Mr. Gouri Mohan Rath & Associates -Versus- Union of India and Others …. Opposite Parties Mr. Bibekananda Nayak, Advocate for ED CORAM: JUSTICE R.K. PATTANAIK DATE OF JUDGMENT:13.01.2023 1. By invoking this Court’s inherent jurisdiction, the legality of the proceeding vis-a-vis Criminal Misc. Case (PMLA) No.40 of 2017 set in motion in terms of Section 45 of the Prevention of Money Laundering Act, 2002 (hereinafter referred as ‘the PMLA’) for commission of offence under Section 3 thereof pending in the file of learned District and Sessions Judge-cum-Special Judge (PMLA Act), Khurda at Bhubaneswar is sought to be challenged at the behest of the petitioner on the grounds inter alia that the same is not sustainable in law. 2. According to the petitioner, the schedule offence in relation to the impugned proceeding under Section of the 3 of the PMLA Act which was initiated against him was quashed by this Court in CRLREV No.596 of 2018 vide judgment dated 27th March, 2019, whereafter, he approached the PMLA court for closure of the prosecution in view of such quashing of the proceeding in connection with T.R. No.35 of 2017 pending in the court of learned Special Judge (Vigilance), Cuttack, however, the same was rejected by order dated 23rd October, 2019 on the ground that the offence under Section 3 of PMLA is a distinct offence in respect of which cognizance has already been taken earlier. The petitioner pleads that when the Vigilance proceeding vis-à-vis the schedule offence was quashed in CRLREV AFR Debendra Kumar Panda Vrs. Union of India and Others CRLMC No.3059 of 2019 Page 2 of 10 No.596 of 2018 attributing no role played by him in the distribution of coal allegedly to the non-existent or non-functional or fake functional MSMEs, nothing was left to sustain a prosecution under Section 3 of the PMLA Act. 3. Elaborating the facts pleaded, it is made to appear that the Vigilance Department initiated an action and registered Cuttack Vigilance P.S. Case No.37 dated 2nd June, 2010 under Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988 besides Sections 420, 468, 471 and 120-B IPC as well as Cuttack Vigilance P.S. Case No.36 dated 2nd June, 2010 under the selfsame offences against the petitioner and others with the allegation that there has been a criminal conspiracy in the distribution of coal to the fake MSMEs in connivance with the officials of DIC and Odisha Co- operative Consumer Federation (OCCF) which is the Nodal Agency for distribution of coal to the MSMEs within the State. It is claimed that the petitioner was the Power of Attorney holder of the Marketing Agent of M/s. Vinayak Mineral which was responsible for lifting coal on behalf of OCCF and to supply it to the MSMEs. However at the end, on completion of investigation, chargesheets were filed in connection with both the cases against the Government officers and the petitioner under the alleged offences. It is submitted that after lodging of the Vigilance cases, the ED launched prosecution vide ECIR/22/BSZO/2010 in Vigilance Case No.37 of 2010 and ECIR/23/BSZO/2010 vis-à-vis Vigilance Case No.36 of 2010 under the PMLA, subsequently, however later the cases stood merged with the on 30th March, 2017 for the purpose of investigation with the initiation of a single proceeding in ECIR/23/BSZO/2010 dated 2nd December, 2010. 4. Heard Mr. Asok Mohanty, learned Senior Advocate for the petitioner and Mr. Bibekananda Nayak, learned counsel for ED. 5. Mr. Mohanty, learned Senior Advocate submits that the ED treated the offences under Section 13(2) read with Section 13(1)(d) of the Debendra Kumar Panda Vrs. Union of India and Others CRLMC No.3059 of 2019 Page 3 of 10 Prevention of Corruption Act, 1988 besides Sections 420, 468, 471 and 120-B IPC as the ‘scheduled offence’ alleging that the offence of money laundering is based on the chargesheets filed in the Vigilance court in VGR No.37 of 2010 corresponding to T.R. No.35 of 2017 and the same having been quashed in CRLREV No.596 of 2008, the impugned proceeding vide Complaint Case (PMLA) No.40 of 2017 pending in the PMLA court cannot stand since because the laundering relates to ‘the proceeds of crime’ derived from or obtained directly or indirectly through the commission of scheduled/predicate offence in respect of which the Vigilance prosecution has been terminated. While contending so, Mr. Mohanty, learned Senior Advocate refers to the decision of the Apex Court in Vijay Madanlal Choudhury and others Vrs. Union of India and others decided in Special Leave Petition (Criminal) No.4634 of 2014 with batch of cases and further submitted that it has been held and observed therein that the offence under Section 3 of the PMLA Act is dependent on gain of property as a result of criminal activity relating to a schedule offences and it is concerning the process or activity connected with such property which constitutes the offence of money laundering and the authorities under the said Act cannot prosecute any person on notional basis or on the assumption that a scheduled offence has been committed unless it is so registered with the jurisdictional police and/or pending enquiry/trial including by way of criminal complaint before the competent forum. It is contended by Mr. Mohanty, learned Senior Advocate that in the said decision it has been clearly held that if the person is finally discharged/acquitted of the scheduled offence or the criminal case against him is quashed by a court of competent jurisdiction, there can be no offence of money laundering against him or any one claiming such property being the property linked to the scheduled offence through him. By placing reliance on said authority of the Apex Court, Mr. Mohanty, learned Senior Advocate would contend that the prosecution which has been launched under the PMLA before the Special court cannot be allowed to continue and any such Debendra Kumar Panda Vrs. Union of India and Others CRLMC No.3059 of 2019 Page 4 of 10 continuation would be a futile exercise besides being an abuse of process of law and hence the proceeding deserves to be quashed. 6. By filing a counter affidavit, the opposite parties sought to justify the prosecution under the PMLA. Mr. Nayak, learned counsel for the ED submits that the PMLA is enacted to prevent money laundering and to pave the way for confiscation of property derived from or involved in money laundering and for matters connected therewith or incidental thereto which is in consonance with the International obligations under the Political Declaration and Global Programme of Action adopted by the General Assembly of the United Nations to curve the illicit activities of money laundering and the said Act has been amended from time to time in 2005, 2009, 2013 and 2019 to obviate the difficulties in its due implementation. It is further contended that the PMLA is a special law which contemplates distinct procedure and also provides initiation of prosecution in order to achieve the object of the law which cannot be equated with the regular criminal prosecution and such an action under the said Act cannot have any implication or impact on the outcome of other cases registered under the general law. So the essence of the argument of Mr. Nayak, learned counsel for the ED is that offence under Section 3 of the PMLA Act is independent and it has only a reference to the criminal activity relating to the scheduled offence which has wider connotation and it may extend to any person who is connected with the criminal activity relating to the scheduled offence not necessarily an offender of the said offence and in the aforesaid background, any money laundering is a standalone offence under the PMLA and notwithstanding the quashing of the Vigilance proceeding in CRLREV No.596 of 2018, the prosecution under the Special Act shall continue. While contending so Mr. Nayak, learned counsel for the ED refers to Explanation appended to Section 44 of the PMLA Act which was introduced by the Legislature vide Finance (No.2) Act, 2019 (23 of 2019) and submits that it was brought into force with a purpose to clarify and remove doubts vis-a-vis the jurisdiction of the Special Court Debendra Kumar Panda Vrs. Union of India and Others CRLMC No.3059 of 2019 Page 5 of 10 dealing with such offences not to be dependent on any orders passed in respect of the scheduled offences clarifying that the trial for both sets of offences by the same court not be construed as joint trial. So the contention that when the offence of money laundering is a distinct and independent offence, irrespective of quashing of the Vigilance prosecution, the complaint which is filed under Section 45 of the PMLA shall remain. While advancing such an argument, Mr.Nayak, learned counsel for the ED cited the following decisions, such as, Smt. Janata Jha and Another Vrs. Assistant Director, Directorate of Enforcement 2014 Crl.LJ 2006; Radha Mohan Lakhotia Vrs. Deputy Director, PMLA, Directorate of Enforcement 2010 SCC OnLine Bom 1116; VGN Developers Private Limited and Others Vrs. The Deputy Director, Directorate of Enforcement AIR Online 2019 Mad 844; and Babulal Verma and Another Vrs. Enforcement Directorate and Another decided in Criminal Application Nos.201 and 974 of 2021. It is contended that in Smt. Janata Jha (supra), this Court declined to quash the proceeding while considering a similar question with the conclusion that the ambit and scope of trial under the PMLA is totally different from that of the Indian Penal Code, wherein, the prosecution is to prove the guilt of the accused beyond reasonable doubt whereas in the former, the onus rests on the accused to prove that the properties seized are not tainted and not the proceeds of the crime. In VGN Developers Private Limited (supra), the Madras High Court held that the PMLA is a self-contained law and the offence registered thereunder can standalone independent of the predicate offence. A similar view has been expressed in Babulal Verma (supra) to the effect that offence under the PMLA registered on the basis of a scheduled offence stands on its own and does not require support of predicate/scheduled offence even if such an offence is compounded or results in acquittal or the proceeding is quashed, inasmuch as, investigation by ED under the said Act is not in any way affected or ceased to continue or wiped off. So the argument of Mr. Nayak, learned counsel for the ED is based on and heavily relying upon the decisions referred to above. Debendra Kumar Panda Vrs. Union of India and Others CRLMC No.3059 of 2019 Page 6 of 10 7. On a reading of the judgment of the Apex Court in Vijay Madanlal Choudhury (supra), it is made to appear that while dealing with the challenges as to the validity and interpretation of certain provisions of the PMLA and the procedure followed by the ED during enquiry, investigation under the said Act being violative of the Constitutional mandate, after a comprehensive and detailed analysis on the seminal points involved, held and concluded that the PMLA has a wider reach and captures every process and activity, direct or indirect, in dealing with the proceeds of crime and is not limited to the happening of the final act of integration of tainted property in the formal economy and in so far as the Explanation inserted to Section 3 by way of Amendment of 2019 does not expand the purport of the said provision but is only clarificatory in nature and it would make no difference even if it is introduced by way of Finance Act or otherwise. It has been further concluded therein that the offence under Section 3 of the PMLA is dependent on illegal gain of property as a result of criminal activity relating to a scheduled offence and the authority under the said Act either on assumption or notionally cannot prosecute a person unless there is a complaint and in case that person is discharged or acquitted of the scheduled offence or the prosecution in that respect is dropped or quashed, there can be no offence of money laundering. In a recent decision of the Apex Court in Indrani Pattnaik and Others Vrs. Enforcement Directorate decided in W.P.(C) No.368 of 2021 and disposed of on 3rd November, 2022, it has been held therein that if the accused stands discharged of the scheduled offence, in view of the law declared in Vijay Madanlal Choudhury (supra), there could arise no question of him being prosecuted for illegal gain of property as a result of the criminal activity relating to the alleged scheduled offence and that being the position, there lies no reason to allow the prosecution under the PMLA. 8. The PMLA Act was brought into force in the year 2005 to prevent money laundering and to provide mechanism to deal with the proceeds of the crime and matters related thereto. In terms of Section Debendra Kumar Panda Vrs. Union of India and Others CRLMC No.3059 of 2019 Page 7 of 10 3 of the PMLA Act, for an offence of money laundering to be made out, a person ought to have attempted to indulge directly or indirectly or knowingly assisted or has been a party to any such activity connected with the proceeds with the crime including its possession, concealment, acquisition or use and projecting or claiming it as untainted property. The expression ‘proceeds of crime’ is defined in Section 2(1)(u) of the PMLA Act to mean 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 India, then the property equivalent in value held within the country or abroad. Further, the scheduled offences include such offences as specified in Part A, B & C of the Schedule to the PMLA. Considering the challenge in the present case, question would arise whether an offence of money laundering could still breathe and survive dehors a scheduled offence? 9. In fact, the PMLA is a law linked with the scheduled offence. The same is evident from a sincere reading of Sections 5 and 8 of PMLA as it stood prior to 2009 and 2013 Amendments. In Section 5 of the PMLA (as it was originally enacted), a condition prerequisite for an order of provisional attachment of property was that the accused has been charged of having committed a scheduled offence. The said requirement was diluted to the effect that notwithstanding the above, provisional attachment could be ensured under Section 5 of PMLA when the concerned officer expressed his view in writing that the failure to immediately attach property would likely frustrate or defeat the action against money laundering. 10. Section 8 of the PMLA prior to its 2013 Amendment), any attachment or retention of property under the PMLA would cease to exist once the person charged with a scheduled offence stood acquitted for the said offence. However, the amendment of 2013 was done away with the unamended Section 8 of PMLA. Having discussed so far, it is clear and apparent that while the continuance of the Debendra Kumar Panda Vrs. Union of India and Others CRLMC No.3059 of 2019 Page 8 of 10 proceeding under the PMLA was intricately linked to the scheduled offence proceeding, the Legislature attempted to erase the said distinction by introducing amendments which led to incongruent interpretations resorted to by the various High Courts. In Karnataka High Court in Sachin Narain Vrs. Income Tax Department decided in W.P.(C)No. 5299 of 2019 held that the proceedings of money laundering are standalone offences and if on account of some reasons, the predicate offence proceedings were to be closed or dropped, then the PMLA action would not automatically disappear and are not required to be dropped. The said view was quoted with approval in VGN Developers Private Limited (supra) and Usha Agarwal Vrs. Union of India 2017 SCC OnLine Sikk 146 of the Sikkim High Court. The Delhi High Court in Mahanivesh Oils and Foods Pvt. Ltd. Vrs. Directorate of Enforcement in contrast reached at a conclusion that in cases where scheduled offences is itself negated, the fundamental premise of continuing proceedings under PMLA also vanishes. The aforesaid view stands supported in Rajib Chanana Vrs. Deputy Director, Directorate of Enforcement 2014 SCC OnLine Delhi 4889 and Sushil Kumar Katiyar Vrs. Union of India 2016 SCC OnLine All 2632. 11. The Parliament amended the PMLA in 2018. Among the amendments, one is the Explanation to Section 44 of the PMLA as stated earlier. After such an Explanation introduced, the Bombay High Court in Babulal Verma (supra) held that notwithstanding the outcome of the investigation with regard to the scheduled offence and closure report filed and accepted by the court of competent jurisdiction, it will not wipe out or ceased to continue investigation by the E.D. in respect of the money laundering offences till it reaches the stage as contemplated in Section 44 of the PMLA. Likewise, in Jagati Publication Vrs. Enforcement Directorate decided in Criminal Petition No. 1073 of 2021, the Telangana High Court held that after the Explanation to Section 44 is introduced, the trial concerning the money laundering offence has to be held as independent and need Debendra Kumar Panda Vrs. Union of India and Others CRLMC No.3059 of 2019 Page 9 of 10 not get impacted due to the trial of the scheduled offences. It further held therein that even in case of a person who is not initially booked for a scheduled offence but later so and subsequently acquitted of the scheduled offence, he can still be proceeded against under the PMLA. Despite such an amendment with introduction of an Explanation to Section 44, the Delhi High Court in Prakash Industries Vrs. Directorate of Encroachment 2022 SCC OnLine Del 2087 maintained the stand that once a competent authority finds that the predicate offence is either not evidenced or on facts, the authority concludes that no offence was committed, the proceeding under the PMLA would necessarily have to fall and be brought to a close. In the said decision, the Delhi High Court held that Section 44 and its Explanation cannot be interpreted to mean that proceeding under the PMLA would remain unaffected by an acquittal or quashing of the proceeding relating to a scheduled offence. In the similar vein, the Delhi High Court in Directorate of Enforcement Vrs. Gagandeep Singh 2022 SCC OnLine Delhi 514 while interpreting the PMLA after 2018 Amendment came into force held that involvement in a scheduled offence is a precondition to the offence of money laundering. In the said case, it is further held that a bare perusal of the provision of PMLA establishes the prerequisite relation between the commission of the scheduled offences and the subsequent offence of money laundering. In any case, according to the Court, the position of law has been put to rest by the Apex Court in Vijay Madanlal Choudhury (supra). With the above ratio laid down by the Supreme Court, it has to be held that proceedings of money laundering are liable to be terminated with the underlined scheduled offences ending in acquittal, dismissal or being quashed. 12. Mr. Nayak, learned counsel for the E.D. heavily relied on the Explanation to Section 44 of the PMLA by contending that jurisdiction of a Special Court is not dependent on any orders passed in respect of the scheduled offences and in that regard, the decision in Smt. Janata Jha (supra) has been referred to. It is submitted that the investigation Debendra Kumar Panda Vrs. Union of India and Others CRLMC No.3059 of 2019 Page 10 of 10 of a crime for money laundering is independent and once the ECIR is registered then the predicate/scheduled offence is no more required for taking the offence under the PMLA to its logical end. In other words, according to Mr. Nayak, the scheduled offence is necessary only for registration of an offence under PMLA and thereafter whatever may be the position of the predicate/ schedule offence is not relevant in respect of the proceedings under PMLA otherwise the basic and fundamental purpose of the Special Act would be frustrated. The decisions in Radha Mohan Lakhotia, VGN Developers Pvt. Ltd. besides Babulal Verma (supra) have been cited in support of such contention. But in the considered view of the Court, all the aforesaid decisions have been neutralized by the decision of the Apex Court in Vijay Madanlal Choudhury (supra). In the plain language, if the foundation does not exist, how the edifice can survive. In other words, when the predicate offence fails, the foundation having been demolished, the superstructure is to fall and crumble. 13. Accordingly, it is ordered. 14. In the result, the CRLMC stands allowed. As a logical sequitur, the proceeding in Criminal Misc. Case (PMLA) No.40 of 2017 pending in the file of learned District and Sessions Judge-cum-Special Judge (PMLA Act), Khurda at Bhubaneswar is hereby quashed for the reasons discussed herein above. (R.K. Pattanaik) Judge U.K. Sahoo "