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Rajasthan High Court
Criminal Law

Accused Need Not Have Committed Scheduled Offence to Face Money-Laundering Prosecution: Rajasthan High Court

Published: · NyayVidhan

The Rajasthan High Court dismissed three revision petitions against a Special Court's order of 21.01.2019 taking cognizance under Sections 3 and 4 of the PMLA in a mines bribery case, and seven Section 482 petitions against the refusal to convert the accused's arrest warrants into bailable warrants (opening paragraph, paras 2, 48, 63). A person accused of money laundering need not have committed the scheduled offence (para 44), and the 2019 Explanation to Section 3 is clarificatory (para 41).

Accused Need Not Have Committed Scheduled Offence to Face Money-Laundering Prosecution: Rajasthan High Court

Judgment Intelligence

Petition Dismissed
Shyam Sunder Singhvi v. Union of India (through Assistant Director, Enforcement Directorate)
S.B. Criminal Revision Petition No. 273/2019 with S.B. Criminal Revision Petition Nos. 275/2019 and 1061/2019 and S.B. Criminal Miscellaneous (Petition) Nos. 2872/2019, 4770/2019, 4771/2019, 5426/2019, 5427/2019, 5430/2019 and 5524/2019
Court
Rajasthan High Court
Date of Decision
24 January 2020
Bench
Justice Ashok Kumar Gaur
Relevant Acts & Sections
Prevention of Money Laundering Act, 2002 — Sections 2(1)(u), 2(1)(v), 3 (with the Explanation added by the Finance (No. 2) Act, 2019), 4, 45; Code of Criminal Procedure, 1973 — Sections 70(2), 397, 401, 482
Final Outcome

All three revision petitions against the cognizance order of 21.01.2019 and all seven Section 482 petitions on the arrest warrants were dismissed, without costs; the trial court is to proceed independently of these observations (paras 48, 63). Note: the Supreme Court later examined the link between the Section 3 offence and the scheduled offence in Vijay Madanlal Choudhary v. Union of India (27.07.2022).

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Key holdings

  1. Revisional power against a cognizance order is used sparingly and does not reach the merits (paras 25, 28, 30).
  2. The placement-layering-integration test rests on a stayed Delhi High Court ruling; the complaint alleged it anyway (paras 33-34).
  3. The Explanation added to Section 3 by the Finance (No. 2) Act, 2019 is clarificatory, not a new penal provision (paras 36, 41).
  4. A PMLA accused need not have committed the scheduled offence, and receiving the proceeds is not decisive (paras 42, 44, 47).
  5. Refusal to convert the arrest warrants into bailable warrants was upheld (paras 59-63).

Case explainer by NyayVidhan: an account of this judgment and the law it laid down, not the court's text. The judgment itself is the authoritative version.

Brief Facts

An Anti Corruption Bureau FIR of 19.09.2015 under the Prevention of Corruption Act and Sections 120-B and 409 IPC alleged that mines were closed and reopened for bribes to Mines Department officials (paras 3-6). The ACB alleged that the lead petitioner, a chartered accountant, handed over Rs.2.55 crore and that Rs.2.50 crore was seized; it filed a charge-sheet on 04.11.2015 (paras 5, 7). The Enforcement Directorate registered an ECIR on 30.10.2015 and filed a prosecution complaint under Section 45(1) of the PMLA on 16.07.2018 (paras 8-9). On 21.01.2019 the Special Court took cognizance and issued arrest warrants; it later refused to make them bailable under Section 70(2) CrPC (opening paragraph, paras 2, 11, 49).

Court's Findings

Revision under Sections 397 and 401 CrPC does not allow re-appreciation of evidence; a cognizance order is disturbed only if it is perverse, illegal or without jurisdiction (paras 25, 27-28). The Special Court had considered the complaint, statements and documents, and the merits were for trial (paras 26, 29-30). The placement, layering and integration test came from a Delhi High Court ruling whose findings a Division Bench had stayed, and the complaint in any case alleged layering and integration (paras 33-34). Anyone directly or indirectly involved in a process connected with proceeds of crime who projects them as untainted can be prosecuted under Section 3 (para 35). The 2019 Explanation removed doubts without changing the basic ingredients, so it was not a punitive provision confined to prospective operation (para 41). Receiving the proceeds is not decisive, and converting recovered proceeds into fixed deposits can itself be an offence (paras 42-43). On the warrants, the Court read Inder Mohan Goswami as requiring a balance between liberty and societal interest, without a straitjacket formula, and treated economic offences as a class apart (paras 58-60). The Special Court had weighed the allegations, the petitioners' roles and the impact on society (para 62).

Legal Principle

Money laundering under Section 3 of the PMLA is an independent, stand-alone offence: a person can be prosecuted for it even if he is not guilty of the scheduled offence, and the 2019 Explanation to Section 3 only clarifies the existing ingredients. A revisional court will not weigh the merits at the cognizance stage (paras 30, 41, 44, 47).

Precedents Relied Upon

  1. Inder Mohan Goswami v. State of Uttranchal (2007) 12 SCC 1
    Explained Discussed at ¶ 53, 56, 57, 58, 61

    Cited by the petitioners against the arrest warrants; the Court quoted it and read it as requiring courts to balance personal liberty and societal interest before issuing warrants, with no straitjacket formula; the refusal to convert the warrants was upheld.

  2. Y.S. Jagan Mohan Reddy v. CBI (2013) 7 SCC 439
    Relied Upon Discussed at ¶ 59

    Relied on (printed as (2013) 7 SSC 439) for the rule that economic offences constitute a class apart and must be viewed seriously as grave offences affecting the economy.

  3. State of Gujarat v. Mohanlal Jitamalji Porwal and Anr. (1987) 2 SCC 364
    Relied Upon Discussed at ¶ 60

    Relied on (printed as (1987) 2 SSC 364) on the nature of economic offences, committed with cool calculation and deliberate design.

View all precedents (17)
  1. Pooran Singh and Anr. v. State of Rajasthan S.B. Criminal Misc. Petition No. 474/2010, decided on 25.05.2010
    Relied Upon Discussed at ¶ 61

    Coordinate Bench decision on arrest warrants, which considered Inder Mohan Goswami and held that the status of the accused is one of the considerations to be taken into account.

  2. M/s. Mahanivesh Oils & Foods Pvt. Ltd. v. Directorate of Enforcement 2016 (1) High Court Cases (Del) 265
    Referred To Discussed at ¶ 33, 34

    The source of the placement, layering and integration interpretation relied on by the petitioners; the Court noted that its findings had been stayed by a Division Bench and that the complaint alleged layering and integration in any case.

  3. Directorate of Enforcement v. M/s. Mahanivesh Oils & Foods Pvt. Ltd. LPA No. 144/2016, Delhi High Court, order dated 30.11.2016
    Referred To Discussed at ¶ 33

    Division Bench order quoted by the Court: the Single Judge's findings on the PMLA were not to be construed as conclusive and binding precedent until further orders.

  4. Rakesh Manekchand Kothari v. UOI Special Criminal Application (Direction) No. 4496/2014, Gujarat High Court (Division Bench), decided on 16.01.2015
    Referred To Discussed at ¶ 45

    Cited by the Additional Solicitor General for the proposition that the PMLA applies to a person connected with the criminal activity relating to the scheduled offences who may not be an offender of the scheduled offences.

  5. Commissioner of Income Tax (Central)-I, New Delhi v. Vatika Township Pvt. Ltd. (2015) 1 SCC 1
    Referred To Discussed at ¶ 39

    Cited by the Additional Solicitor General for the submission that the clarificatory 2019 amendment to Section 3 is retrospective.

  6. M/s. VGN Developers Pvt. Ltd. v. The Deputy Director, Directorate of Enforcement Crl.O.P. No. 9796/2019 and Crl.M.P. No. 5129/2019, Madras High Court (Division Bench), decided on 04.10.2019
    Referred To Discussed at ¶ 39

    Cited by the Additional Solicitor General on the 2019 amendment to Section 3.

  7. Popular Muthiah v. State represented by Inspector of Police JT 2006 (6) SC 332
    Referred To Discussed at ¶ 38

    Cited by counsel for the petitioners.

  8. Nikesh Tarachand Shah v. UOI & Ors. 2017 (13) Scale 6098
    Referred To Discussed at ¶ 38

    Cited by counsel for the petitioners (citation as printed).

  9. Pushya Mitra Singh Deo & Anr. v. UOI S.B. Crl. Misc. Petition No. 2097/2018, decided on 09.05.2018
    Referred To Discussed at ¶ 38

    Cited by counsel for the petitioners.

  10. Obulapuram Mining Co. Pvt. Ltd. & Ors. v. Jt. Director, Directorate of Enforcement & Ors. Writ Petition Nos. 5962, 11442 & 11440-11441 of 2016, Karnataka High Court, decided on 13.03.2017
    Referred To Discussed at ¶ 16

    Cited by counsel for Tamanna Begum.

  11. Binod Kumar Sinha @ Binod Kumar v. State of Jharkhand Writ Petition (Crl.) No. 257/2012 with Crl. Rev. No. 920/2012 & Crl. Rev. No. 699/2011, Jharkhand High Court, decided on 19.02.2013
    Referred To Discussed at ¶ 16

    Cited by counsel for Tamanna Begum.

  12. Kanhaiyalal & Anr. v. State of Rajasthan & Anr. S.B. Crl. Misc. Petition No. 2381/2019, decided on 23.04.2019
    Referred To Discussed at ¶ 16

    Coordinate Bench decision cited by counsel for Tamanna Begum.

  13. Surendra Kumar Sharma & Anr. v. Ms. Annupama Saxena S.B. Crl. Misc. Petition No. 5068/2017, decided on 11.10.2017
    Referred To Discussed at ¶ 53

    Cited by counsel for the petitioners against the non-bailable warrants.

  14. Pushpendra Agrawal v. Mukesh Kumar Meena S.B. Crl. Misc. Petition No. 7892/2018, decided on 17.12.2018
    Referred To Discussed at ¶ 53

    Cited by counsel for the petitioners against the non-bailable warrants.

Topics: Economic Offences Issuance of Warrants Cognizance and Issue of Process Money Laundering
NyayVidhan
Court Judgments · 3 min read
Decided: January 24, 2020 Justice Ashok Kumar Gaur
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