Delhi High Court
Directorate Of Enforcement vs M/S Mahanivesh Oils & Foods Pvt Ltd on 16 March, 2026
Author: C. Hari Shankar
Bench: C. Hari Shankar
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: 12 March 2026
Pronounced on: 16 March 2026
+ LPA 144/2016
DIRECTORATE OF ENFORCEMENT .....Appellant
Through: Mr. Zoheb Hossain and Mr.
Anupam Sharma, Special Counsel with Mr.
Vivek Gurnani, Panel Counsel, Mr. Satyam,
Ms. Riya Sachdev and Mr. Pranjal Tripathi,
Advs.
versus
M/S MAHANIVESH
OILS & FOODS PVT LTD .....Respondent
Through: Mr. Parag Tripathi, Sr. Adv.
with Mr. D.S. Kohli, Ms. Rini Mehra, Mr.
Yash Kadyan and Ms. Mannat Kohli, Advs.
CORAM:
HON'BLE MR. JUSTICE C. HARI SHANKAR
HON'BLE MR. JUSTICE OM PRAKASH SHUKLA
JUDGMENT
% 16.03.2026
C. HARI SHANKAR, J.
A. The lis, and the issue involved
1. This Letters Patent Appeal, against judgment dated 25 January
2016 of a learned Single Judge of this Court, involves the
interpretation of Section 5(1)1 of the Prevention of Money Laundering
1 5. Attachment of property involved in money-laundering. –
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Act, 20022. The neat question that arises for consideration may be
framed thus:
“If the scheduled offence is committed and, from the proceeds
thereof, property is purchased before the coming into force of
the PMLA, can it be attached under Section 5(1) thereof, if the
offender continues to remain in possession of, and continues to
use, the property even after the PMLA came into force?”
2. The learned Single Judge has, in the impugned judgment,
answered the question in the negative and has, therefore, set aside the
(1) Where the Director or any other officer not below the rank of Deputy Director authorised
by the Director for the purposes of this section, has reason to believe (the reason for such belief to
be recorded in writing), on the basis of material in his possession, that–
(a) any person is in possession of any proceeds of crime; and
(b) such proceeds of crime are likely to be concealed, transferred or dealt with in
any manner which may result in frustrating any proceedings relating to confiscation of
such proceeds of crime under this Chapter,
he may, by order in writing, provisionally attach such property for a period not exceeding one
hundred and eighty days from the date of the order, in such manner as may be prescribed:
Provided that no such order of attachment shall be made unless, in relation to the
scheduled offence, a report has been forwarded to a Magistrate under Section 173 of the Code of
Criminal Procedure, 1973 (2 of 1974), or a complaint has been filed by a person authorised to
investigate the offence mentioned in that Schedule, before a Magistrate or court for taking
cognizance of the scheduled offence, as the case may be, or a similar report or complaint has been
made or filed under the corresponding law of any other country:
Provided further that, notwithstanding anything contained in first proviso, any property of
any person may be attached under this section if the Director or any other officer not below the rank
of Deputy Director authorised by him for the purposes of this section has reason to believe (the
reasons for such belief to be recorded in writing), on the basis of material in his possession, that if
such property involved in money-laundering is not attached immediately under this Chapter, the
non-attachment of the property is likely to frustrate any proceeding under this Act.
Provided also that for the purposes of computing the period of one hundred and eighty
days, the period during which the proceedings under this section is stayed by the High Court, shall
be excluded and a further period not exceeding thirty days from the date of order of vacation of
such stay order shall be counted.
1 (u) “proceeds of crime” means 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 the country, then the property equivalent in value held within the country or
abroad;
Explanation. – For the removal of doubts, it is hereby clarified that “proceeds of crime” include
property not only derived or obtained from the scheduled offence but also any property which may directly or
indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offence;
2 “the PMLA” hereinafter
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attachment of the property in question, located at E-14/3, Vasant
Vihar, New Delhi3.
3. The Directorate of Enforcement, aggrieved thereby, is in
appeal.
4. We have heard, at length, Mr. Zoheb Hossain, learned Special
Counsel for the appellant, and Mr. Parag P. Tripathi, learned Senior
Counsel for the respondent. Learned Counsel have also filed written
submissions.
5. We now advert to the facts.
B. Facts
6. On the basis of a written complaint by Mr. S.K. Maggu, Deputy
Director of the National Agricultural Marketing Cooperative
Federation Ltd4, the Central Bureau of Investigation5 lodged a First
Information Report6 dated 8 May 2009 at New Delhi, alleging that
(i) Homi Rajvansh, the Additional Managing Director of
NAFED, had, in connivance with M.K. Agri International Ltd7
executed, on behalf of NAFED, certain Memoranda of
Understanding8 for import of raw sugar on High Seas Sale9
3 “the subject property” hereinafter
4 “NAFED” hereinafter
5 “CBI” hereinafter
6 “FIR” hereinafter
7 “MKAIL” hereinafter
8 “MOUs” hereinafter
9 “HSS” hereinafter
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basis through three HSS Agreements with M.K. International
Ltd10, a sister concern of MKAIL, without charging any cost,
(ii) vide MOU dated 30 November 2024 between NAFED,
through Homi Rajvansh, and MIL, raw sugar was sold by
NAFED to MIL under three separate HSS Agreements, which
was subsequently sold by MIL in the open market,
(iii) on 10 February 2005, MIL issued cheques for ₹ 1.5
crores in favour of its holding Companies Duroroyale
Enterprises Ltd11 and Sri Radhey Trading Pvt Ltd12,
(iv) Duroroyale and SRTPL issued two cheques for ₹ 75
lakhs each in favour of the respondent Mahanivesh Oils &
Foods Pvt Ltd, of which Alka Rajvansh, wife of Homi
Rajvansh, was a Director,
(v) the respondent issued cheques dated 16 February 2005
for ₹ 1,32,00,000 and 17 February 2005 for ₹ 10.81 lakhs in
favour of Uppal Agencies Pvt Ltd for purchase of the subject
property vide sale deed dated 18 March 2005, and
(vi) Alka Rajvansh, as the Director of the respondent-
Company, used the funds received from Duroroyale and SRTPL
for purchasing the subject property.
10 “MIL” hereinafter
11 “Duroroyale” hereinafter
12 “SRTPL” hereinafter
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The FIR alleged commission, by Alka Rajvansh, as the Director of the
respondent-Company, of offences under Sections 40313, 40914 and
42015 read with 120B16 of the Indian Penal Code, 186017. The
registration of the FIR was followed by filing of a charge-sheet
against the accused. Criminal proceedings, consequent thereupon, are
proceeding before the learned Chief Metropolitan Magistrate, New
Delhi.
7. On 24 January 2014, Provisional Attachment Order No.
01/2014, against which the respondent approached this Court, came to
be passed by the Deputy Director, Directorate of Enforcement18 under
Section 5(1) of the PMLA, provisionally attaching the subject
property. Inasmuch as the facts are not in dispute, and the issue is
purely one of law, detailed allusion to the contents of the Provisional
Attachment Order is eschewed. Suffice it, therefore, to reproduce, for
13 403. Dishonest misappropriation of property.–
Whoever dishonestly misappropriates or converts to his own use any movable property, shall be
punished with imprisonment of either description for a term which may extend to two years, or with
fine, or with both.
14 409. Criminal breach of trust by public servant, or by banker, merchant or agent. –
Whoever, being in any manner entrusted with property, or with any dominion over property in his
capacity of a public servant or in the way of his business as a banker, merchant, factor, broker,
attorney or agent, commits criminal breach of trust in respect of that property, shall be punished
with imprisonment for life, or with imprisonment of either description for a term which may extend
to ten years, and shall also be liable to fine.
15 420. Cheating and dishonestly inducing delivery of property. –
Whoever cheats and thereby dishonestly induces the person deceived to deliver any property to any
person, or to make, alter or destroy the whole or any part of a valuable security, or anything which
is signed or sealed, and which is capable of being converted into a valuable security, shall be
punished with imprisonment of either description for a term which may extend to seven years, and
shall also be liable to fine.
16 120-B Punishment of criminal conspiracy. –
(1) Whoever is a party to a criminal conspiracy to commit an offence punishable with death,
imprisonment for life or rigorous imprisonment for a term of two years or upwards, shall, where no
express provision is made in this Code for the punishment of such a conspiracy, be punished in the
same manner as if he had abetted such offence.
(2) Whoever is a party to a criminal conspiracy other than a criminal conspiracy to commit
an offence punishable as aforesaid shall be punished with imprisonment of either description for a
term not exceeding six months, or with fine or with both.
17 “IPC” hereinafter
18 “DOE” hereinafter
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our purpose, paras 14 and 15 of the Provisional Attachment Order,
thus:
“14. That, from the investigations conducted so far, it has inter-
alia emerged that:-
(i) The sale of above mentioned raw sugar through
three High Seas Agreements by Sh. Homi Rajvansh, the
then Addl. Managing Director of NAFED to M/s M.K.
International Ltd. of Sh. M.K. Agarwal, without charging
the cost of the commodity, was well designed to share the
undue benefit. The conspiracy caused/wrongful loss to
NAFED and corresponding wrongful gain to themselves
jointly and severally. That against the said three
consignments of raw sugar sold by Sh. Homi Rajvansh to
M/s M.K. International, an amount of ₹ 42,79,81,751/-
excluding interest and NAFED charges is outstanding as on
date. Smt. Alka Rajvansh w/o Homi Rajvansh also joined
the conspiracy hatched by her husband and M.K. Agarwal.
In furtherance of this conspiracy, M/s Mahanivesh Oil &
Foods Ltd., New Delhi was taken over by Smt. Alka
Rajvansh, as Director, in January 2005.
(ii) It is seen, from the HDFC bank account statement
of M/s M.K. International Ltd. that they have issued cheque
of ₹ 35,00,000/- and ₹ 75,00,000/- on 11.02.2005. It is also
seen from the Vijay Back account of M/s M.K.
International Ltd. that they have issued cheque of ₹
40,00,000/- to M/s Duroyale on 11.02.2005. Thus, it is
clear that Sh. M.K. Agarwal, Director of M/s M.K.
International Ltd. issued cheques of Rs.1.50 crores on
11.02.2005 from his company’s accounts with HDFC bank,
Lajpat Nagar branch and Vijaya bank, Defence Colony
branch, New Delhi in the name of his two holding
companies namely M/s Duoroyale Enterprises Ltd.. Delhi
and M/s Sri Radhey Trading Pvt. Ltd. Delhi, having thor
accounts with Indian Overseas Bank, G. K. part-II, New
Delhi. From the Balance Sheet of M/s M.K. International
Ltd. for the year ending 31 March, 2005 and statement of
Sh. M.K. Agarwal, it is seen that Sh. M.K. Agarwal is
controlling M/s Duoroyale Enterprise Ltd. and M/s M.K.
International Ltd. is having business transactions with M/s
Duoroyale Enterprises Ltd., Delhi and M/s Sri Radhey
Trading Pvt. Ltd. from time to time. The said two
companies, after credit of the amount into their respective
accounts, issued two cheques of ₹ 75,00,000/- each, (Total
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₹ 1,50,00,000/) in the name of M/s Mahanivesh Oil &
Foods Pvt. Ltd. This fact is also confirmed in the bank
account statements of M/s Duoroyale Enterprises Ltd.,
Delhi and M/s Sri Radhey Trading Pvt. Ltd. Delhi,
furnished by Indian Overseas Bank, G.K. part-II, New
Delhi vide their letter dated 03.01.2014. Further M/s
Mahanivesh Oil & Foods Pvt. Ltd., obtained credit of the
above said amount of ₹ 1,50,00,000/- in its account
No.1070383 (INR) with The Royal Bank of Scotland
(RBS) (formerly ABN Amro Bank) on 15.02.2005. Smt
Alka Rajvansh, W/o Sh. Homi Rajvansh purchased the
immovable property that is residential unit i.e. entire
basement and Ground Floor of house at E-14/3, Vasant
Vihar, New Delhi, in the name of her company M/s
Mahanivesh Oil & Foods Pvt. Ltd from one Sh. B.K. Uppal
for sale/purchase consideration of ₹ 1,35,00,000/- plus
Corporation and stamp duty charges. For the purpose of
purchase of the above said immovable property, Smt. Alka
Rajvansh has issued cheque No.100701 from her
company’s bank account no. 1070383 in the then ABN
Amro Bank and now the Royal Bank of Scotland for
amount of ₹ 1,32,00,000 towards sale/ purchase
consideration arid another amount of ₹ 3,00,000/-from her
account No.521-1-002300-1 with Standard Chartered Bank,
Greater Kailash branch, New Delhi. Smt. Alka Rajvansh
also issued cheque no.100702 of ₹ 10,80,000/-from her
company’s Bank account no. 1070383 in the then ABN
Amro Bank and now the Royal Bank of Scotland towards
corporation and stamp duty charges for registration of the
above said property. That the said Sh. B.K. Uppal, the
seller and the executer of the sale deed in question, had,
prior to this, availed credit of ₹ 45 crores, extended by
NAFED, under an MOU signed by Sh. B.K. Uppal and Sh.
Homi Rajvansh, then AMD of NAFED.
15. NOW THEREFORE, having reasons to believe that the
immovable E-14/3, property (house) basement and Ground Floor
of house at Vasant Vihar, New Delhi, purchased and acquired by
Smt Alka Rajvansh W/o Shri Homi Rajvansh, in the name of her
company M/s Mahanivesh Oil and Foods Pvt Ltd, against the
consideration value of ₹ 1,35,00,000/- excluding stamp duty and
Corpn. tax of ₹ 10,80,000/- is the Proceeds of Crime, which is
likely to be concealed, transferred or dealt with in any manner
which may result in frustrating in proceedings relating to
confiscation of the said Proceeds of Crime, I, hereby order
Provisional Attachment of the said immovable properties and
further order that the same shall not be transferred, disposed, parted
with or otherwise dealt with in any manner, whatsoever, until or
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unless specially permitted to do so by the undersigned. Relied upon
documents are mentioned in Annexure “A”.”
8. The respondent challenged the above Provisional Attachment
order before this Court, by way of WP (C) 1925/2014.
9. The impugned judgment of the learned Single Judge, as we
have already noted hereinabove, quashes the Provisional Attachment
order and allows the writ petition.
C. The Impugned Judgment
10. Given the importance of the issue involved, we deem it
appropriate to reproduce the paragraphs containing the reasoning of
the learned Single Judge, and also separately itemize his findings.
The following paragraphs from the impugned judgment contain its
ratio decidendi:
“18. In the present case, the impugned order has been made
under Section 5(1) of the Act. A plain reading of Section 5(1) of
the Act indicates that where the officer concerned has reason to
believe, on the basis of material in his possession that any person:
“(a) is in possession of any proceeds of crime; and (b) that
such proceeds are likely to be concealed, transferred or
dealt with in any manner that may frustrate any
proceedings relating to confiscation of such proceeds of
crime under this Chapter”, he may make an order for
provisional attachment of “such property”. The use of the
word ‘such’ clearly indicates that the reference is to the
property mentioned in the preceding portion of Section 5(1)
of the Act, that is, proceeds of crime.
19. Section 2(u) of the Act defines proceeds of crime and reads
as under: –
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“proceeds of crime” means 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;”
20. Thus, a conjoint reading of Section 5(1) read with Section
2(u) of the Act clearly indicates that the power to attach is only
with respect to the 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 such property.
21. Thus, plainly, the occurrence of a scheduled offence is the
substratal condition for giving rise to any proceeds of crime and
consequently, the application of Section 5(1) of the Act. A
commission of a scheduled offence is the fundamental pre-
condition for any proceeding under the Act as without a scheduled
offence being committed, the question of proceeds of crime
coming into existence does not arise.
22. In view of the above, the contention that the Act is
completely independent of the principal crime (scheduled offence)
giving rise to proceeds of crime is unmerited. It is necessary to
bear in mind that the substratal subject of the Act is to prevent
money-laundering and confiscate the proceeds of crime. In that
perspective, there is an inextricable link between the Act and the
occurrence of a crime. It cannot be disputed that the offence of
money-laundering is a separate offence under section 3 of the Act,
which is punishable under Section 4 of the Act. However as stated
earlier, the offence of money-laundering relates to the proceeds of
crime, the genesis of which is a scheduled offence. In the aforesaid
circumstances, before initiation of any proceeding under Section 5
of the Act, it would be necessary for the concerned authorities to
identify the scheduled crime. The First Proviso to Section 5 also
indicates that no order of attachment shall be made unless in
relation to a schedule offence a report has been forwarded to a
Magistrate under Section 173 of the Code of Criminal Procedure,
1973 or a complaint has been filed by a person authorised to
investigate the scheduled offence before a Magistrate or Court for
taking cognizance of the scheduled offence. Thus, in cases where
the scheduled offence is itself negated, the fundamental premise of
continuing any proceedings under the Act also vanishes. Such
cases where it is conclusively held that a commission of a
scheduled offence is not established and such decision has attained
finality pose no difficulty; in such cases, the proceedings under the
Act would fail.
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23. It was contended by Mr. Bhardwaj that, in terms of Section
8(5) of the Act, the attachment would continue till the conclusion
of a trial of an offence under the Act before the Special Court
irrespective of whether the person accused of the scheduled crime
has been acquitted. In my view, this contention is also not
acceptable. If the crime, which has allegedly resulted in the
proceeds attached under the Act, is not established, the basis of the
attachment would cease to exist and the question of proceeding
further under the Act would not arise. The trial for an offence of
money-laundering is also predicated on commission of a scheduled
crime and would have to be terminated. It is only in cases where it
is found that a scheduled crime has been committed that the
question of determining whether an offence of money-laundering is
made out would survive. Thus, in cases where the persons accused
of a scheduled offence are acquitted, the fundamental premise that
any proceeds have been derived or obtained from any activity
relating to a scheduled offence by either the persons accused or any
other person linked to them would also not hold good and,
therefore, any proceeding initiated under the Act would have to be
terminated.
24. The next issue to be examined is whether the order of
provisional attachment can be issued only in respect of property
that is in possession of a person accused of a scheduled offence. In
view of the statutory amendment to Section 5 of the Act carried out
by virtue of Prevention of Money-Laundering (Amendment) Act,
2012, this controversy does not survive. Prior to the said
amendment, the concerned officer could provisionally attach
proceeds of crime if he had reasons to believe that,
“(a) any person is in possession of any proceeds of crime;
(b) such person has been charged of having committed a
scheduled offence; and (c) such proceeds of crime are
likely to be concealed, transferred or dealt with in any
manner which may result in frustrating any proceedings
relating to confiscation of such proceeds of crime”. With
effect from 01.03.2013, clause (b) has been deleted and it is
now no longer necessary that the person who is in
possession of the property alleged to be proceeds of crime
must also be charged with a scheduled offence. In the
circumstances, the order of provisional attachment could be
issued against any property in possession or any person
even if the said person is not alleged to have committed the
scheduled offence.
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25. However, such powers are not unbridled and there are
several conditions that must be met before any property can be
attached or confiscated. First and foremost, it is necessary that the
property sought to be attached is one, which the concerned officer
has reason to believe is the proceeds of a scheduled crime.
Secondly, a provisional attachment under Section 5 is only in aid
of adjudication under Section 8(2) of the Act, which may result in
the Adjudicating Authority recording a finding that the property
concerned is involved in money-laundering; therefore, it is also
necessary that an offence of money-laundering is believed to have
been committed and the same bears a live link with the property
sought to be provisionally attached. Section 5 of the Act does not
stand independent of Section 3 of the Act and unless it is believed
that an offence of money-laundering has been committed the
question of attaching any property provisionally under Section 5
would not arise.
26. Mr. Bhardwaj had referred to the decision of the Gujarat
High Court in Alive Hositality and Foods Private Limited (supra)
wherein the court had observed that:”On the text and authority of
our Constitution while it may perhaps gainfully be contended that
conviction for the offence of money-laundering cannot be recorded
if the said offence is committed prior to the enforcement of Section
3 of the Act, such a contention cannot be advanced to target
proceedings for attachment and confiscation as these fall outside
the pale of the prohibitions of the Constitution, in particular
Article 20(1)”. However, I am unable to persuade myself to concur
with that view principally for the reason that Section 5 is not a
standalone provision; it is in aid of adjudication under Section 8 of
the Act and final vesting of the attached property with the Central
Government under Section 9 of the Act. The Adjudicating
Authority is required to return a finding under Section 8(2) of the
Act whether the property is attached/seized/frozen. And, by virtue
of Section 8(3) of the Act, if the Adjudicating Authority decides
that the property is involved in money-laundering, the attachment,
retention and freezing of the property shall continue during the
pendency of proceedings relating to the offence under the Act or a
corresponding law of any other country with whom India has a
bilateral agreement. Thus, it is not possible to envisage provisional
attachment of any property in absence of an offence of money-
laundering. Consequently, in a given case where the offence of
money-laundering cannot be made out as the acts constituting such
offence were prior to the Act being brought in force, it would be
impermissible for the authorities concerned to attach the property
representing the proceeds of crime.
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27. The central issue in the present case is not on whether the
scheduled offence was committed, but whether the attachment
under Section 5 of the Act can be sustained where the principal
offence as well as the offence of using its proceeds is alleged to
have been committed prior to the Act coming into force.
28. As stated hereinbefore, the scope of the offence of money-
laundering was widened by virtue of the Prevention of Money-
Laundering (Amendment) Act, 2012 and the rigor of Section 3 of
the Act also extends to any person who assists or is a party or is
involved in any process or activity connected with concealment,
possession, acquisition or use of proceeds of crime. However, the
subject of the offence continues to be the proceeds of crime and its
involvement in money-laundering. This again draws one to the
central controversy in this petition, that is, whether any property of
any person could be attached as allegedly involved in money-
laundering prior to the enactment of the Act or acquired as a result
of a crime, committed prior to the Act coming into effect.
29. The Act is a penal statute and, therefore, can have no
retrospective or retroactive operation. Article 20(1) of the
Constitution of India expressly forbids that no person can be
convicted of any offence except for the violation of a law in force
at the time of the commission of the act charged as an offence.
Further, no person can be inflicted a penalty greater than what
could have been inflicted under the law at the time when the
offence was committed. Clearly, no proceedings under the Act can
be initiated or sustained in respect of an offence, which has been
committed prior to the Act coming into force. However, the subject
matter of the Act is not a scheduled offence but the offence of
money-laundering. Strictly speaking, it cannot be contended that
the Act has a retrospective operation because it now enacts that
laundering of proceeds of crime committed earlier as an offence.
In The Queen v. The Inhabitants of St. Mary, Whitechapel19, the
Court pointed out that “The Statute which in its direct operation of
prospective cannot be properly be called a retrospective statute
because a part of the requisites for that action is drawn from the
time antecedent to its passing”. Thus, with effect from 1st June,
2009 laundering proceeds of crime under Section 420 of the IPC is
enacted as an offence of money-laundering punishable under
Section 4 of the Act. It is important to note that the punishment
under Section 4 of the Act is not for commission of a scheduled
offence but for laundering proceeds of a scheduled crime. The fact
that the scheduled crime may have been committed prior to the Act
coming into force would not render the Act a retrospective statute
19 (1848) 12 QB 120
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as only the offence of money-laundering committed after the
enforcement of the Act can be proceeded against under the Act.
30. The respondent’s contention that the relevant date would be
the date of offence of money-laundering and not that of the
commission of the scheduled offence is merited and the impugned
order cannot be set aside only on the ground that it has been issued
in respect of proceeds of a scheduled crime which was allegedly
committed prior to 1st July, 2005.
31. The next contention to be considered is whether in the
given facts and circumstances, any offence or money-laundering
had been made out to warrant an issuance of the impugned order. It
is alleged that on 10th February, 2005, MIL through its Director
issued cheques aggregating Rs. 1.5 crores in favour of its holding
companies, namely, M/s. Duoroyale Enterprises Ltd. and M/s. Shri
Radhey Trading Pvt. Ltd. and these companies in turn issued two
cheques of Rs. 75 lacs each in favour of the petitioner. It is
suggested that these amounts were proceeds of crime received by
the petitioner as a result of a criminal activity and bulk of these
funds were utilized by the petitioner for paying the consideration
for acquiring the property in question. It was argued that all actions
of integrating the money by purchase of immovable property
would fall within the definition of ‘money-laundering’. In this
respect it is relevant to note that the sale deed in respect of the
property was executed on 18.03.2005. Thus, even if the allegations
made by the respondent are assumed to be correct, the proceeds of
crime had been used by the petitioner for acquisition of the
property much prior to the Act coming into force. The process of
activity of utilising the proceeds of crime, if any, thus, stood
concluded prior to the Act coming into force. Even if it is assumed
that the funds received from M/s. Duoroyale Enterprises Ltd. and
M/s. Shri Radhey Trading Pvt. Ltd. were proceeds of crime and
were properties involved in money-laundering, such funds had
come into possession of the petitioner prior to the Act coming into
force. Thus, funds were already projected as untainted funds
unconnected with the crime for which Mr. Homi Rajvansh and
other persons are accused. The funds had, thus, been laundered at a
time when money-laundering was not an offence and proceedings
under the Act cannot be initiated.
32. Although, the respondent has not contended so in clear
terms, it appears that the respondents are proceeding on the basis
that an offence under Section 3 of the Act is a continuing offence.
According to the respondent, the possession of any property linked
to a scheduled offense irrespective of when it was acquired would
itself constitute the offence of money-laundering. It is important to
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understand the import of such interpretation. This would mean that
a person who has committed a scheduled crime; acquired proceeds
therefrom; and thereafter, projected it as untainted money, prior to
the Act coming into force, would nonetheless be guilty of the
offence of money-laundering only for the reason that he is in
possession of some property. This is so because the definition of
proceeds of crime also includes the value of any property derived
or obtained as a result of criminal activity relating to a scheduled
crime. Further any such property – even in the hands of a person
not accused of the scheduled crime or offense of money-laundering
– would also be subject to the proceedings under the Act. Thus,
practically, a person guilty of a scheduled offence who has
acquired any benefit in relation to the scheduled offence would in
effect also be guilty of the offence of money-laundering
immediately on the Act coming into force. If such an interpretation
is sought to be provided, the grievance of the petitioner that a penal
provision is sought to be given a retrospective operation would be
justified and this would clearly offend Article 20(1) of the
Constitution of India as an offender of a scheduled crime would
now be visited with a greater punitive measure than as could be
inflicted at the time when the scheduled offence was committed.
Given the wide definition of “proceeds of crime” it would be
contended that irrespective of how far back in the past a scheduled
offence was committed, the authorities could nonetheless try
persons for an offence of money-laundering as well as confiscate
the value of the property alleged to have been derived or obtained
by criminal activity relating to the scheduled offence. This would
be notwithstanding that the proceeds derived from a scheduled
offence have undergone significant changes and have been
integrated in legitimate economic activity. The properties could
also be traced in the hands of persons unconnected with the
scheduled offence. There is no indication from the express
language of the Act, that the Legislature intended the Act to be
retroactive or operative with retrospective effect.
33. The Act was enacted as the international community
recognised the threat of money-laundering whereby money
generated from illegal activities such as trafficking and drugs etc.
was finding its way into the economic system of a country and
funding further criminal activity. The expression money-
laundering would ordinarily imply the conversion and infusion of
tainted money into the main stream of economy as legitimate
wealth. According to the respondent, there are three stages to a
transaction of money-laundering : The first stage is Placement,
where the criminals place the proceeds of the crime into normal
financial system. The second stage is Layering, where money
introduced into the normal financial system is layered or spread
into various transactions within the financial system so that any
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link with the origin of the wealth is lost. And, the third stage is
Integration, where the benefit or proceeds of crime are available
with the criminals as untainted money. There is much merit in this
description of money-laundering and this also indicates that, by its
nature, the offence of money-laundering has to be constituted by
determinate actions and the process or activity of money-
laundering is over once the third stage of integration is complete.
Thus, unless such acts have been committed after the Act came
into force, an offence of money-laundering punishable under
Section 4 would not be made out. The 2013 Amendment to Section
3 of the Act by virtue of which the words “process or activity
connected with proceeds of crime and projecting it as untainted
property” were substituted by the words “any process or activity
connected with proceeds of crime including concealment,
possession, acquisition or use and projecting or claiming it as
untainted property”. The words “concealment, possession,
acquisition or use” must be read in the context of the process or
activity of money-laundering and this is over once the money is
laundered and integrated into the economy. Thus, a person
concealing or coming into possession or bringing proceeds of
crime to use would have committed the offence of money-
laundering when he came into possession or concealed or used the
proceeds of crime. For any offence of money-laundering to be
alleged, such acts must have been done after the Act was brought
in force. The proceeds of crime which had come into possession
and projected and claimed as untainted prior to the Act coming into
force, would be outside the sweep of the Act.
34. In the circumstances, it cannot be readily accepted that any
offence of money-laundering had been committed after the Act
coming into force. This Act cannot be read as to empower the
authorities to initiate proceedings in respect of money-laundering
offences done prior to 01.07.2005 or prior to the related crime
being included as a scheduled offence under the Act.”
11. It would be appropriate to itemize the observations and findings
of the learned Single Judge, thus:
(i) Section 5(1), read with Section 2(1)(u)20 of the PMLA
empowered the appropriate officer to attach property obtained20 (u) “proceeds of crime” means 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
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directly or indirectly as a result of criminal activity relating to a
scheduled offence. Thus, the occurrence of a scheduled offence
was a substratal condition for there to exist proceeds of crime,
which could be attached under Section 5(1).
(ii) “Money laundering” was a separate and distinct offence
under the PMLA, defined in Section 321 thereof. The offence of
money laundering, as per Section 3, related to proceeds of
crime, the genesis of which was the commission of a scheduled
offence. Identification of the scheduled offence was, therefore,
essential before Section 5 could be invoked.
(iii) After deletion of clause (b) in Section 522 by the
Prevention of Money Laundering (Amendment) Act, 201523, it
property is taken or held outside the country, then the property equivalent in value held within the country[or
abroad;
Explanation.– For the removal of doubts, it is hereby clarified that “proceeds of crime”
include property not only derived or obtained from the scheduled offence but also any property which may
directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled
offence;
21 3. Offence of money-laundering.- Whosoever directly or indirectly attempts to indulge or
knowingly assists or knowingly is a party or is actually involved in any process or activity connected with
the proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it
as untainted property shall be guilty of offence of money-laundering.
Explanation. – For the removal of doubts, it is hereby clarified that,–
(i) a person shall be guilty of offence of money-laundering if such person is found
to have directly or indirectly attempted to indulge or knowingly assisted or knowingly is a
party or is actually involved in one or more of the following processes or activities
connected with proceeds of crime, namely–
(a) concealment; or
(b) possession; or
(c) acquisition; or
(d) use; or
(e) projecting as untainted property; or
(f) claiming as untainted property,
in any manner whatsoever;
(ii) the process or activity connected with proceeds of crime is a
continuing activity and continues till such time a person is directly or indirectly enjoying
the proceeds of crime by its concealment or possession or acquisition or use or projecting
it as untainted property or claiming it as untainted property in any manner whatsoever.
22 Section 5(1), before amendment, contained the following clause (b), which was later deleted:
“such person has been charged of having committed a scheduled offence;”
23 “the 2015 Amendment Act” hereinafter
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was no longer necessary that the property should be in
possession of the person accused of the scheduled offence. The
correctness of this finding is not in dispute.
(iv) Section 5 was required to be read with Section 3. Absent
any reason to believe that the offence of money laundering had
been committed, there was no question of attachment of
property under Section 5.
(v) The view of the Gujarat High Court in Alive Hospitality
& Foods Pvt Ltd v. Union of India24, which holds that Article
20(1)25 of the Constitution of India would not apply to Section
5(1) of the PMLA, was not acceptable. Section 5 is not a
standalone provision. Provisional attachment under Section 5 is
in aid of further proceedings under Section 8(3)26, which could
culminate in confiscation of the attached property. Section 8
24 2013 SCC OnLine Guj 3909
25 20. Protection in respect of conviction for offences. –
(1) No person shall be convicted of any offence except for violation of a law in force at the
time of the commission of the act charged as an offence, nor be subjected to a penalty greater than
that which might have been inflicted under the law in force at the time of the commission of the
offence.
26 8. Adjudication. –
*****
(3) Where the Adjudicating Authority decides under sub-section (2) that any property is
involved in money-laundering, he shall, by an order in writing, confirm the attachment of the
property made under sub-section (1) of Section 5 or retention of property or record seized or frozen
under Section 17 or Section 18 and record a finding to that effect, whereupon such attachment or
retention or freezing of the seized or frozen property or record shall–
(a) continue during investigation for a period not exceeding three hundred and
sixty-five days or the pendency of the proceedings relating to any offence under this Act
before a court or under the corresponding law of any other country, before the competent
court of criminal jurisdiction outside India, as the case may be; and
(b) become final after an order of confiscation is passed under sub-section (5) or
sub-section (7) of Section 8 or Section 58-B or sub-section (2-A) of Section 60 by
the Special Court.
Explanation. – For the purposes of computing the period of three hundred and sixty-five days
under clause (a), the period during which the investigation is stayed by any court under any law for
the time being in force shall be excluded.
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applied only in the case of money laundering. Article 20(1)
would, therefore, apply to Section 5(1).
(vi) The issue before the Court was not with relation to
commission of the scheduled/predicate offence, but whether the
attachment could sustain where the offence of money
laundering, and the usage of the proceeds of the crime alleged
to have been committed, were prior to the coming into force of
the PMLA.
(vii) The PMLA could not apply retrospectively, as it was a
penal statute.
(viii) Proceedings under the PMLA could not, therefore, be
sustained in respect of an offence committed before the PMLA
came into force.
(ix) Strictly speaking, the PMLA cannot be said to apply
retrospectively merely because laundering of the proceeds of
the crime committed prior to the PMLA coming into force was
made an offence. It was held, in Queen v. Inhabitants of St.
Mary27, that a statute is not retrospective merely because part of
its requisites is drawn from a period prior to its passing.
(x) The next issue, therefore, was whether, on facts, the
offence of money laundering was made out.
27 (1848) 2 QB 120
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(xi) The sale deed was executed on 18 March 2005. This
meant that the proceeds of crime had been used by the
respondent for acquiring property before the PMLA came into
force.
(xii) The activity of utilization of the proceeds of crime, thus,
stood concluded before the coming into force of the PMLA.
(xiii) Even if the funds realized from the commission of the
scheduled offence were to be treated as the proceeds of crime,
they came into the possession of the respondent prior to the
coming into force of the PMLA.
(xiv) The subject property had already been projected as
untainted prior to the coming into force of the PMLA.
(xv) The money had, therefore, been laundered before the
PMLA came into force.
(xvi) The argument that the offence under Section 3 was a
continuing offence was unacceptable. If this were to be
accepted, it would mean that the possession of property
obtained from proceeds of crime at any time would amount to
money laundering, irrespective of when the property was
acquired. If a person committed a scheduled offence, acquired
proceeds therefrom and projected it as untainted, prior to the
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PMLA coming into force, he would ipso facto become liable of
having committed an offence under the PMLA immediately on
the PMLA coming into force as he would be in possession of
some property. This would result in the PMLA applying
retrospectively, which would violate Article 20(1) of the
Constitution of India. Moreover, irrespective of how far back in
time the scheduled offence might have been committed, the
person would become liable to be tried for the offence of money
laundering and to confiscation of his property, even if the
property might have undergone substantial changes, or even
reached the hands of persons unconnected with the scheduled
offence. There was nothing to indicate that the legislature
intended the Act to be thus retroactive or retrospective in
operation.
(xvii) Money laundering involves three stages; placement of the
proceeds of crime into the normal financial system, layering of
the money into transactions so as to lose the link with the origin
of the wealth, and integration, where the money is available
with the criminals as untainted money. The offence of money
laundering is over once the stage of integration is complete.
(xviii) The words “concealment, possession, acquisition or use”
in Section 3(1) had to be read in the context of the process or
activity of money-laundering. This activity was over once the
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came into possession or concealed or used the proceeds of
crime. These acts, therefore, must have been done after the
PMLA came into force. Proceeds of crime, into which the
person had come into possession, and which had been projected
and claimed by him as untainted prior to the coming into force
of the PMLA, would be outside its sweep.
(xix) No offence of money-laundering, thus understood, could
be said to have been committed in the present case after the
PMLA came into force. The PMLA does not empower
initiation of proceedings in respect of any offence of money-
laundering done prior to 1 July 2005, or prior to the scheduled
crime being included as a scheduled offence under the PMLA.
(xx) There was no evidence of satisfaction of the condition
envisaged in clause (b) of Section 5(1) of the PMLA in the
present case. There was no material on record which could lead
to believe that the respondent was likely to transfer or conceal
the subject property in any manner. The officer issuing the
Provisional Attachment order could not, therefore, have any
reason to so believe, as required by Section 5(1).
D. Rival Contentions
I. Submissions of Mr. Zoheb Hossain on behalf of the ED
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12. Mr. Zoheb Hossain advanced a preliminary submission that the
respondent had, with it, an alternate remedy by way of appeal against
the Provisional Attachment Order, under the PMLA and that,
therefore, the writ petition ought not to have been entertained.
However, we note that, before the learned Single Judge, learned
Counsel ad idem requested that the controversy be decided on merits,
as is recorded in para 5 thereof. As such, we reject the preliminary
submission.
13. Mr. Zoheb Hossain submits that, under Section 5(1) of the
PMLA, property purchased using proceeds of crime, which remained
in possession of the person concerned, could be attached. He took us
through the reasoning contained in the Provisional Attachment Order
to emphasise that there could be no dispute about the commission of
the scheduled offence. He has also referred us to the definitions of
“attachment” and “proceeds of crime” as contained in Section
2(1)(d)28 and 2(1)(u) of the PMLA. He has also invited us to the
following passages from the CBI chargesheet dated 30 July 2010:
“In all the above three HSS agreements terms of payment
mentioned is that M/s MKIL, New Delhi was to make payment by
demand draft in favour of NAFED within a period of 180 days
from the date of Bill of Lading. The due dates of payment were
22.05.2005, 04.07.2005 and 26.09.2005 respectively. This fact
shows that the above agreements have been executed by accused
Homi Rajvansh and M/s. MKIL, New Delhi with malafide
intention and in violation of the laid down norms of NAFED
Business Circular No.93 dated 17.10.2003 and also in violation of
the terms of MOU/agreement signed by them earlier which
stipulates delivery of commodity only after payment of 100% cost
and other NAFED charges. Further to safe guard the interest of28 (d) “attachment” means prohibition of transfer, conversion, disposition or movement of property by an
order issued under Chapter III;
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NAFED no Tri-Partile agreement was signed and no
Hypothecation of material was resorted to.
Investigation further revealed that in the month of August 2005,
this deal of raw sugar was transferred by NAFED HO to its
Ahmedabad branch to book the business. At this stage matter
relating to sale/purchase of raw sugar without charging/paying its
cost came to ilght and M/s MKIL was asked to make full payment
to NAFED. At this stage accused M.K.Agarwal with malafide
intention to cheat NAFED got current account
No.600500301000146 opened in Vijaya Bank, Defence Colony,
New Delhi in the name of Shri Ram Chander Sharma working as
Peon/helper in the company of accused M.K.Agarwal. After
opening of the account blank cheques of this account were got
signed from Shri Ramchander Sharma. Thereafter, with the
intention not to make payment to NAFED Manish Kant Agarwal
accused got issued 36 post dated (30.06.2006) cheques from this
account totaling to an amount of Rs.56,44,18,175/- in favour of
NAFED and got delivered vide letter dated 9.9.2005 to NAFED as
security with malafide intention knowing fully well that there was
no sufficient balance in the said account. In due course, all the said
cheques were got bounced/ dis-honoured when the same were
presented by NAFED as there was no balance in the account. It is
pertinent to mention here that in the same bank A/c No.
600500300003544 was already held and run by M/s M.K.
International Ltd. New Delhi with accused M.K. Agarwal as
authorized signatory to operate this account. However, with deep
malafide intention and under a premeditated design same was not
used for issuance of above post dated cheques to NAFED as
security.”
Mr. Zoheb Hossain submits that these allegations indicate that the
intention to cheat NAFED continued well beyond the coming into
force of the PMLA. Mr. Tripathi seriously objected to this line of
argument, stating that it was neither pleaded nor argued before the
learned Single Judge, nor constitutes part of the pleadings even in the
present LPA.
14. Mr. Hossain submits that the learned Single Judge has
erroneously treated only the money received by Alka Rajvansh to
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constitute “proceeds of crime”, overlooking the fact that the subject
property, purchased using the said money, also fell within the
definition. He submits that proceeds of crime, in possession of a
person, could be attached under Section 5(1)(a). He relies on the
definitions of “proceeds of crime” in Section 2(1)(u) and “property” in
Section 2(1)(v)29 of the PMLA. On a conjoint reading of the various
provisions of the PMLA, Mr. Hossain submits that there is no
justification for the finding, of the learned Single Judge that the
offence of money-laundering comes to an end once proceeds of crime
are “integrated” into the economy.
15. To sustain the submissions, Mr. Hossain places reliance on para
269 of Vijay Madanlal Choudhary v. Union of India30, various paras
from Pradeep Nirankarnath Sharma v. Enforcement Directorate31,
paras 15 and 23 from Tarun Kumar v. Enforcement Directorate32
and the judgment of a learned Single Judge of this Court in Anand
Kumar Kapur v. Union of India33.
16. Mr. Hossain further submits that the learned Single Judge is in
error in holding that the ingredients of clause (b) of Section 5(1) are
not satisfied in the present case, as there is a specific finding, in para
15 of the Provisional Attachment Order, that there was reason to
believe that the subject property was “likely to be concealed,
29 (v) “property” means any property or assets of every description, whether corporeal or incorporeal,
movable or immovable, tangible or intangible and includes deeds and instruments evidencing title to, or
interest in, such property or assets, wherever located;
Explanation. – For the removal of doubts, it is hereby clarified that the term “property” includes
property of any kind used in the commission of an offence under this Act or any of the scheduled offences;
30 2022 SCC OnLine SC 929
31 2025 SCC OnLine SC 560
32 (2024) 13 SCC 788
33 2025 Cri LJ 26
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transferred or dealt with in any manner which may result in frustrating
proceedings relating to confiscation of the proceeds of crime”.
17. Finally, Mr. Hossain submits that the Supreme Court has, in
para 304 of Vijay Madanlal Choudhary, held that provisional
attachment, under Section 5(1), could not result in dispossession from
residential properties. As such, he submits that the provisional
attachment of the subject property has not resulted in any prejudice to
the respondent.
II. Submissions of Mr. Tripathi
18. Mr. Tripathi submits that, by way of response to Mr. Zoheb
Hossain, the finding of the learned Single Judge that, once integration
of the proceeds of crime into the general economic fabric had taken
place, and the property had also been purchased using the proceeds of
crime prior to the coming into force of the PMLA, the offence of
money laundering stood committed, is unexceptionable. Use of the
subject property, too, he points out, commenced before the PMLA
came into force.
19. Mr. Tripathi submits that the interpretation that the ED seeks to
place on Sections 3 and 5 of the PMLA would make the provisions
retrospectively applicable and would, therefore, render them violative
of Article 20(1) of the Constitution of India. He drew our attention to
the elements of the offence of money laundering, as envisaged in
Section 3 of the PMLA, and submits that none of the judgments cited
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by Mr. Hossain deals with a situation in which the offence of money
laundering was complete prior to the PMLA coming into force.
20. Mr. Tripathi submits, echoing the view of the learned Single
Judge, that Section 5 of the PMLA cannot be read in isolation as
provisional attachment of the property under Section 5 is a step-in aid
of adjudication of the offence under Section 8 which, if adverse to the
accused, could result in confiscation of the provisionally attached
property. Inasmuch as property which cannot be provisionally
attached under Section 5 cannot be confiscated under Section 8, Mr.
Tripathi submits that Sections 3, 5 and 8 constitute an integrated
scheme and that, therefore, if the offence of money laundering cannot
be alleged to have occurred, ipso facto Section 5 would also be
rendered inapplicable. He reiterates the view of the learned Single
Judge that, as the money had come into the possession of the
respondent, used in purchase of the property and the sale deed
whereunder the property was purchased also executed prior to the
coming into force of the PMLA, the ED could not invoke the PMLA
against the respondent.
21. Apropos the aspect of whether the offence under the PMLA is a
continuing offence, Mr. Tripathi has placed reliance on Explanation
(ii) in Section 3. He submits that, even if one were to proceed as per
the said Explanation, all activities envisaged under the said
explanation had taken place prior to the coming into force of the
PMLA.
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22. Mr. Tripathi submits that if the mere possession and use of the
subject property by the respondent were to be construed as an offence,
it would amount to a second offence coming into being on the date
when the PMLA came into force, as the earlier offence of obtaining of
the proceeds of crime and usage of the proceeds of crime in
purchasing the subject property, as well as representing the property
as untainted had all taken place prior to coming into force of the
PMLA. He places reliance on the judgment of the Supreme Court in
Rao Shiv Bahadur Singh v. State of Vindhya Pradesh34.
23. He has taken us through paras 27 to 36 of the impugned
judgment and submits that they correctly lay down the legal position.
III. Rejoinder submissions
24. As Mr. Hossain was held up in another Court, Mr. Satyam, who
was assisting him in the matter, ably rejoined to the submissions of
Mr. Tripathi.
25. We have already expressed, in our order reserving judgment in
this matter, our satisfaction at Mr. Satyam, despite being a young
Counsel, not seeking an adjournment or a passover and facilitating the
conclusion of the proceedings by rejoining to Mr. Tripathi’s
submissions.
34 AIR 1953 SC 394
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26. In rejoinder, Mr. Satyam submits that the points raised by Mr.
Tripathi stand covered by a very recent judgment of a learned Single
Judge of the High Court of Calcutta in Enforcement Directorate
through D.N. Poddar, Deputy Director v. Papia Rozario35,
particularly by paras 25 to 30 thereof.
E. Analysis
I. Sections 3, 5 and 8 constitute an integrated scheme
27. We agree with Mr. Tripathi, as well as with the learned Single
Judge, that Section 5 of the PMLA cannot be read in isolation and is a
part of an integrated scheme which includes Sections 3, 5 and 8. We
also agree that, as a result, if no offence of money laundering, on the
face of it, can be said to have taken place, there is no question of
invoking Section 5 and attaching any property thereunder.
II. Three errors in impugned judgment
28. There appear, with respect, to be three fundamental errors in the
views expressed in the impugned judgment.
29. Firstly, the impugned judgment treats the money earned from
the commission of the scheduled offence alone to be the “proceeds of
crime”. This is contrary to the definition of “proceeds of crime” in
Section 2(1)(u) of the PMLA, which includes, within the definition,
35 2026 SCC OnLine Cal 471
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property purchased, directly or indirectly, from the said proceeds as
well.
30. Secondly, the impugned judgment deems the “coming into
possession” of the property to amount to the offence of money
laundering under Section 3. Section 3 does not use the expression
“come into possession”. It uses the word “possession”. Possession of
proceeds of crime amounts to money laundering. This erroneous
perception has resulted in a consequential erroneous finding that the
offence of money laundering stood committed and completed prior to
the coming into force of the PMLA as the respondent had come into
possession of the proceeds of crime prior thereto.
31. Thirdly, the impugned judgment overlooks the significance of
the word “includes” in Section 3(1). The acts to which the clause
alludes thereafter are, thereby, included within the definition of money
laundering by legislative fiat. These include mere possession, and
mere use, and militate against the finding, in para 33 of the impugned
judgment, that the offence of money laundering is complete once the
proceeds are crime are “integrated” into the financial system.
III. Facts stated in Provisional Attachment Order not disputed in
arguments – even otherwise, not within limits of certiorari
32. The submissions of Mr. Tripathi were centered largely around
Section 3 of the PMLA, in an attempt to convince us that no offence
of money laundering, as defined in the said provision, could be said to
have been taken place. His submission, which basically reiterates the
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view expressed in the impugned judgment, is that the offence of
money laundering took place, in its entirety, prior to the coming into
force of the PMLA. Of course, Mr. Tripathi was careful in clarifying
that he was making his submissions without prejudice.
33. However, Mr. Tripathi did not seek to dispute the facts alleged
in the provisional attachment order. His submissions were entirely
based on law and the interpretation of the statutory provisions. We,
therefore, proceed on the premise that the facts stated in the
provisional attachment order are correct.
34. Even otherwise, by seeking recourse to Article 226 of the
Constitution of India to challenge the provisional attachment order,
instead of following the statutory route of appeal available under the
PMLA, the respondent itself foreclosed any chance to argue on the
correctness or otherwise of the facts alleged in the provisional
attachment order. The jurisdiction of the writ court, in such a matter,
partakes of the nature of certiorari, and would be bound by the
parameters outlined in the following passages from the judgment of
the Supreme Court in Syed Yakoob v. K.S. Radhakrishnan36:
“7. The question about the limits of the jurisdiction of High
Courts in issuing a writ of certiorari under Article 226 has been
frequently considered by this Court and the true legal position in
that behalf is no longer in doubt. A writ of certiorari can be issued
for correcting errors of jurisdiction committed by inferior courts or
tribunals: these are cases where orders are passed by inferior
courts or tribunals without jurisdiction, or is in excess of it, or as a
result of failure to exercise jurisdiction. A writ can similarly be
issued where in exercise of jurisdiction conferred on it, the Court
or Tribunal acts illegally or properly, as for instance, it decides a36 AIR 1964 SC 477
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question without giving an opportunity, be heard to the party
affected by the order, or where the procedure adopted in dealing
with the dispute is opposed to principles of natural justice. There
is, however, no doubt that the jurisdiction to issue a writ of
certiorari is a supervisory jurisdiction and the Court exercising it
is not entitled to act as an appellate Court. This limitation
necessarily means that findings of fact reached by the inferior
Court or Tribunal as result of the appreciation of evidence cannot
be reopened or questioned in writ proceedings. An error of law
which is apparent on the face of the record can be corrected by a
writ, but not an error of fact, however grave it may appear to be.
In regard to a finding of fact recorded by the Tribunal, a writ of
certiorari can be issued if it is shown that in recording the said
finding, the Tribunal had erroneously refused to admit admissible
and material evidence, or had erroneously admitted inadmissible
evidence which has influenced the impugned finding. Similarly, if a
finding of fact is based on no evidence, that would be regarded as
an error of law which can be corrected by a writ of certiorari. In
dealing with this category of cases, however, we must always bear
in mind that a finding of fact recorded by the Tribunal cannot be
challenged in proceedings for a writ of certiorari on the ground
that the relevant and material evidence adduced before the
Tribunal was insufficient or inadequate to sustain the impugned
finding. The adequacy or sufficiency of evidence led on a point and
the inference of fact to be drawn from the said finding are within
the exclusive jurisdiction of the Tribunal, and the said points
cannot be agitated before a writ Court. It is within these limits that
the jurisdiction conferred on the High Courts under Article 226 to
issue a writ of certiorari can be legitimately exercised (vide Hari
Vishnu Kamath v Syed Ahmad Ishaque37, Nagandra Nath Bora v
Commissioner of Hills Division and Appeals Assam38
and Kaushalya Devi v Bachittar Singh39.
8. It is, of course, not easy to define or adequately describe
what an error of law apparent on the face of the record means.
What can be corrected by a writ has to be an error of law; hut it
must be such an error of law as can be regarded as one which is
apparent on the face of the record. Where it is manifest or clear
that the conclusion of law recorded by an inferior Court or
Tribunal is based on an obvious mis-interpretation of the relevant
statutory provision, or sometimes in ignorance of it, or may be,
even in disregard of it, or is expressly founded on reasons which
are wrong in law, the said conclusion can be corrected by a writ of
certiorari. In all these cases, the impugned conclusion should be so
plainly inconsistent with the relevant statutory provision that no
37 AIR 1955 SC 233
38 AIR 1958 SC 398
39 AIR 1960 SC 1168
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difficulty is experienced by the High Court in holding that the said
error of law is apparent on the face of the record. It may also be
that in some cases, the impugned error of law may not be obvious
or patent on the face of the record as such and the Court may need
an argument to discover the said error; but there can be no doubt
that what can be corrected by a writ of certiorari is an error of law
and the said error must, on the whole, be of such a character as
would satisfy the test that it is an error of law apparent on the face
of the record. If a statutory provision is reasonably capable of two
constructions and one construction has been adopted by the inferior
Court or Tribunal, its conclusion may not necessarily or always be
open to correction by a writ of certiorari. In our opinion, it is
neither possible nor desirable to attempt either to define or to
describe adequately all cases of errors which can be appropriately
described as errors of law apparent on the face of the record.
Whether or not an impugned error is an error of law and an error of
law which is apparent on the face of the record, must always
depend upon the facts and circumstances of each case and upon the
nature and scope of the legal provision which is alleged to have
been misconstrued or contravened.”
(Emphasis supplied)
35. The learned Single Judge has, in the impugned judgment, not
sought to question the correctness of the allegations against the
respondent on facts. As we have identified at the commencement of
this judgment, the issue addressed by the learned Single Judge, and
which also therefore falls for consideration before us, is purely legal,
i.e., whether the property purchased from proceeds of crime prior to
the coming into force of the PMLA, which continues to remain in
possession of the purchaser, can be confiscated under Section 5 of the
PMLA.
36. We, therefore, do not proceed to return any observations or
findings on the facts alleged in the provisional attachment order,
which are being treated as correct.
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37. Ergo, it would also follow that the money received by Alka,
using which she, as a Director of the respondent-Company, purchased
the subject property, constituted “proceeds of crime”. Indeed, the
learned Single Judge has also proceeded, in the impugned judgment,
on the premise that the said money constituted “proceeds of crime”.
The correctness of the said observation has not been disputed before
us by the respondent, nor has any cross appeal been filed, challenging
the said observation.
IV. Section 3 of PMLA and para 32 of the impugned judgment
38. Adverting, now, to Section 3 of the PMLA, we are of the
considered opinion that the impugned judgment errs on two counts.
39. Firstly, it fails to notice that the definition of money laundering,
as contained in Section 3, is inclusive in nature. The first part of the
Section, before the word “including” covers (i) directly or indirectly
attempting to indulge, (ii) knowingly assisting, (iii) knowingly being a
party or (iv) being actually involved, in any process or activity
connected with the proceeds of crime. Any person who, therefore,
indulges in any process or activity connected with the proceeds of
crime, or knowingly assists in any such activity or is knowingly a
party to any such activity, or is actually involved in any such activity,
would be guilty of the offence of money laundering by virtue of the
opening words in Section 3 of the PMLA.
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40. The definition does not, however, end there. It proceeds to
include, in the definition of money laundering, (i) concealment, (ii)
possession, (iii) acquisition and (iv) use of the said property, as within
the ambit of the offence of money laundering, subject to the condition
that the person projects or claims the property to be untainted. We
would presently advert to the aspect of whether projecting or claiming
the property to be untainted is a mandatory ingredient of the offence
of money laundering. Suffice it, however, for the nonce, to note that
the use of the coordinating conjunction “or”, between “acquisition”
and “use” in Section 3, indicates that the words “concealment”,
“possession”, “acquisition” and “use” have to be read disjunctively,
and that any one of these acts/activities would, if present, suffice to
constitute the offence of money laundering.
41. The use of the word “including”, in Section 3, extends the
definition of money laundering beyond the scope of the opening
words “whosoever directly or indirectly attempts to indulge or
knowingly assists or knowingly is a party or is actually involved in
any process or activity connected with the “proceeds of crime”. The
activities/aspects following the word “includes” would also, therefore,
fall within the definition of “money laundering”, even if the activities
preceding the word “includes” were, in a given case, to be absent.
42. The manner in which an inclusive definition is to be interpreted
is by now no longer res integra. Craies on Statue Law, 7th Edition,
states that “where an interpretation clause defines a word to mean a
particular thing, the definition is explanatory and prima facie
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restrictive and where an interpretation clause defines a term to include
something, the definition is extensive”. In Pancharatham Pillai v.
Emperor40, Bapu Vithal v. Secy of State41 and Province of Bengal v.
Hingul Kumari42, it has been held that when the expression
“includes” is used in a definition, the intention is that the scope of the
definition be widened by specific enumeration of certain matters
which in their ordinary meaning may or may not comprise, so as to
make the definition enumerative and not exhaustive. The High Court
of Andhra Pradesh, in A. Poorna Chandra Rao v. Government of
Andhra Pradesh43, has held that when the expression “includes” is
used, the definition has to be construed as comprehending not only
such things as it signifies according to its actual import but also those
things which the interpretation clause declares that they shall include.
The Supreme Court, too, in Mukesh K. Tripathi v. Senior Divisional
Manager, LIC44 and Indian Handicrafts Emporium v. Union of
India45, held that an interpretation clause which uses the word
“includes” has to be given a broader meaning, keeping in mind,
however, the scheme, object and purport of the statute.
43. In State of Maharashtra v. Reliance Industries Limited46, the
Supreme Court was examining Section 3(a) of the Land Acquisition
Act, 1894, which stated that “land includes benefits to arise out of
land and things attached to the earth or permanently fastened to
anything attached to the earth”. The issue before the Court was
40 AIR 1929 Mad 487
41 AIR 1932 Bom 370
42 AIR 1946 Cal 217
43 (1982) 1 APLJ 106
44 (2004) 8 SCC 387
45 (2003) 7 SCC 589
46 (2017) 10 SCC 713
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whether a proceeding under the Land Acquisition Act could be
launched to acquire a part of a building when the owners of the
building were different from the owners of the land. The High Court
of Bombay had quashed the acquisition, holding that the building
could not be acquired without the land. The Supreme Court, in appeal,
noted the fact that Section 3(a) was worded in an inclusive fashion.
The Supreme Court held that where a statute provided an inclusive
definition, “the word not only bears its ordinary, popular and natural
sense, whenever that would be applicable but it also bears its extended
statutory meaning”. Thus reading the definition of “land” as contained
in Section 3(a) of the Land Acquisition Act, the Supreme Court noted
that while the owner of the land was the State, the building was owned
by the respondent. As a building cannot stand without the land, the
building also became part of the land. Since the owners of the building
and the land were different, the State, it was held, could acquire a
portion of the building, if required for public purpose.
44. In Ramala Sahkari Chini Mills Ltd v. Commissioner of
Central Excise47, the issue before the Supreme Court was whether
CENVAT Credit was available on Central Excise Duty paid on
welding electrodes used in the manufacture of machines. Rule 2(g) of
the CENVAT Credit Rules, 2002 defined “input” thus:
“(g) ‘input’ means all goods, except light diesel oil, high speed
diesel oil and motor spirit, commonly known as petrol, used in or
in relation to the manufacture of final products whether directly or
indirectly and whether contained in the final product or not, and
includes lubricating oils, greases, cutting oils, coolants, accessories
of the final products cleared along with the final product, goods47 (2010) 14 SCC 744
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used as paint, or as packing material, or as fuel, or for generation of
electricity or steam used for manufacture of final products or for
any other purpose, within the factory of production.”
The Supreme Court held that the use of the word “includes” in Rule
2(g) indicated that the definition was to be construed expansively and
that, therefore, welding electrodes would also qualify as “inputs”.
Apropos the use of the word “includes” in the definition, the Supreme
Court observed as under:
“The word ‘include’ should be given a wide interpretation as by
employing the said word, the legislature intends to bring in, by
legal fiction, something within the accepted connotation of the
substantive part. It is also well settled that in order to determine
whether the word “includes” has that enlarging effect, regard must
be had to the context in which the said word appears.”
45. Similarly, in Oswal Oils and Fats Limited v. Additional
Commissioner48, the Supreme Court was concerned with Section
154(1) of the UP Zamindari Abolition and Land Reforms Act, 1950,
which referred to “person” but did not define the expression. The
Supreme Court, therefore, referred to Section 4(33) of the UP General
Clauses Act, 1904, which read:
“4. Definitions. – In all Uttar Pradesh Acts, unless there is
anything repugnant in the subject or context, –
*****
(33) ‘persons’ shall include any company or association
or body of individuals, whether incorporated or not;”
48 (2010) 4 SCC 728
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Apropos Section 4(33), and the use of the expression “includes”
therein, the Supreme Court held, in paras 36 to 39 of the decision, as
under:
“36. A reading of Section 3(1) reproduced above makes it clear
that the provisions contained in the U.P. General Clauses Act are
applicable to all Uttar Pradesh Acts including the Act with which
we are concerned. To put it differently, by virtue of Section 3(1) of
the U.P. General Clauses Act, the definition of the word “person”
contained in Section 4(33) will be deemed to have been engrafted
in the Act and the same cannot be given a restricted meaning as
suggested by the learned counsel. Rather, in view of the definition
contained in Section 4(33) of the U.P. General Clauses Act, the
word “person” appearing in Section 154(1) would include any
company or association or body of individuals, whether
incorporated or not. This view of ours is strengthened by the
language of Explanation added to Section 154(1) whereby it was
declared that the expression “person” shall include a cooperative
society. The word “include” is generally used in interpretation
clauses in order to enlarge the meaning of the words or phrases
occurring in the body of the statute and when it is so used those
words or phrases must be construed as comprehending, not only
such things, as they signify according to their natural import, but
also those things which the interpretation clause declares that they
shall include. The word “include” is susceptible of another
construction, which may become imperative, if the context of the
Act is sufficient to show that it was not merely employed for the
purpose of adding to the natural significance of the words or
expressions used. It may be equivalent to “mean and include” and
in that case it may afford an exhaustive explanation of the meaning
which for the purposes of the Act must invariably be attached to
those words or expressions. (Dilworth v. Stamps Commr.49)
37. In State of Bombay v. Hospital Mazdoor Sabha50
Gajendragadkar, J. observed:
“10. … It is obvious that the words used in an inclusive
definition denote extension and cannot be treated as
restricted in any sense. … Where we are dealing with an
inclusive definition, it would be inappropriate to put a
restrictive interpretation upon terms of wider denotation.”
49 1899 AC 99
50 AIR 1960 SC 610
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38. In CIT v. Taj Mahal Hotel51 this Court interpreted the
word “plant” used in Section 10(2)(vi-b) of the Income Tax Act,
1922. Speaking for the Court, Grover, J. observed:
“6. … The very fact that even books have been included
shows that the meaning intended to be given to ‘plant’ is
wide. The word ‘includes’ is often used in interpretation
clauses in order to enlarge the meaning of the words or
phrases occurring in the body of the statute. When it is so
used, those words and phrases must be construed as
comprehending not only such things as they signify
according to their nature and import but also those things
which the interpretation clause declares that they shall
include.”
39. Moreover, if the word “person” used in Section 154(1) is
interpreted keeping in view the object of legislation and by
applying the rule of contextual interpretation, the applicability of
which has been recognised in Poppatlal Shah v. State of
Madras52, S.K. Gupta v. K.P. Jain53, RBI v. Peerless General
Finance and Investment Co. Ltd.54and Central Bank of
India v. State of Kerala55, it becomes clear that the same would
include human being and a body of individuals which may have
juridical or non-juridical status.”
46. The position that the use of the expression “includes” widens
the clause beyond its normal ambit was also reiterated by the Supreme
Court in Bharat Diagnosis Centre v. Commissioner of Customs56,
Kotak Mahindra Bank v. A Balakrishnan57, and Jay Pee Infratech
Ltd Interim Resolution Professional v. Axis Bank58.
47. Applying this principle to Section 3(1) of the PMLA, the
offence of money laundering cannot be restricted, as is envisaged by
the “pre-includes” part of the sub-section, to directly or indirectly
51 (1971) 3 SCC 550
52 AIR 1953 SC 274
53 (1979) 3 SCC 54
54 (1987) 1 SCC 424
55 (2009) 4 SCC 94
56 (2014) 9 Scale 461
57 (2022) SCC Online SC 706
58 (2020) 8 SCC 401
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attempting to indulge, or knowingly assisting, or knowingly being a
party, or being actually involved in, any process or activity connected
with the proceeds of crime, but would also include concealment of
proceeds of crime, possession of proceeds of crime, acquisition of
proceeds of crime and use of proceeds of crime.
48. The expression “proceeds of crime” is defined in Section
2(1)(u) of the PMLA. It means any property derived or obtained,
directly or indirectly, as a result of criminal activity relating to a
scheduled offence. The scope of the definition is explained in the
explanation to Section 2(1)(u) by clarifying that the property in
question need not be derived or obtained from the scheduled offence
but may also derived or obtained as a result of any criminal activity
relatable to the scheduled offence.
49. “Scheduled offence” is defined in Section 2(1)(y)59 of the
PMLA as meaning the offences specified in Parts A, B or C of the
Schedule to the PMLA, with the caveat that in respect of offences
specified in Part B, the total value involved in the offence should be ₹
1 crore or more.
50. Among the offences alleged to have been committed by Alka
Rajvansh are offences under Section 120B and 420 of the IPC which
are enlisted as offences in Part A of the Schedule to the PMLA. There
59 (y) “scheduled offence” means–
(i) the offences specified under Part A of the Schedule; or
(ii) the offences specified under Part B of the Schedule if the total value involved in such
offences is one crore rupees or more; or
(iii) the offences specified under Part C of the Schedule.
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cannot, therefore, be any dispute about the fact that Alka Rajvansh
was charged with having committed scheduled offences.
51. “Property” is defined in Section 2(1)(v) of the PMLA as
meaning any property or asset of every description, corporeal or
incorporeal, moveable or immovable, tangible or intangible, wherever
located. The Provisional Attachment order specifically alleges that the
subject property had been acquired out of the funds which came into
the possession of Alka Rajvansh, following a trail starting from the
scheduled offence of cheating committed by her husband Homi
Rajvansh. The subject property, therefore, constitutes “proceeds of
crime” within the meaning of Section 2(1)(u) of the PMLA.
52. Though Mr. Tripathi, very fairly, did not seek to argue that the
subject property does not constitute “proceeds of crime” within the
meaning of Section 2(1)(u), 3 or 5 of the PMLA, the impugned
judgment indicates that the learned Single Judge has proceeded, at
more than one point, on the premise that the “proceeds of crime”, in
the present case, were the amounts received by Alka Rajvansh as
director of the respondent-company, and that the subject property was
been acquired using the proceeds of crime. Proceeding from this
premise, the impugned judgment holds that, with the acquisition of the
subject property, the proceeds stood entirely used prior to the
enactment of the PMLA. This finding appears to us to be incorrect as
the subject property also partakes of the character of “proceeds of
crime” and continued to remain in possession of, and used by, the
respondent, even after the PMLA came into force.
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53. This, according to us, is one of the apparent errors in the
impugned judgment.
54. We are unable to accept Mr. Tripathi’s submission, or the
corresponding finding in the impugned judgment, that activity and use
of the proceeds of crime in the present case were completed and,
thereby, the offence of money laundering also stood completed, prior
to the PMLA coming into force. The learned Single Judge has, in this
regard, accepted the respondent’s submission that use of the proceeds
of crime came to an end once the subject property was purchased and
thereby the money received by Alka Rajvash on behalf of the
respondent-Company was expended in purchasing the subject
property.
55. The fallacy in this finding, again, stems from the fact that the
learned Single Judge has presumed the “proceeds of crime” to be the
money received by Alka and used in the purchase of the subject
property. Once the subject property is also recognized as constituting
“proceeds of crime”, there can be no question of the offence of money
laundering having been completed prior to the enactment of the
PMLA, as the respondent was in possession of, and was using, the
subject property, on the date when the PMLA came into force.
56. Use and possession of proceeds of crime, by virtue of the post-
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possession of, proceeds of crime, ipso facto commits the offence of
money laundering. Inasmuch as the subject property also constitutes
“proceeds of crime”, and the respondent was in possession of the
subject property, and continued to remain in possession thereof, and
was using the subject property till the issuance of the Provisional
Attachment order, the respondent was, even on the date of passing the
said order, committing the offence of “money laundering” within the
meaning of Section 3 of the PMLA.
57. The learned Single Judge has, as we have already noted,
referred, at more than one point in the impugned judgment, to
“coming into possession” of the subject property. Section 3 does not
use the expression “coming into possession”. The very factum of
possession of proceeds of crime – which would include the subject
property – suffices to constitute the offence of money laundering. The
offence of money laundering does not, therefore, end on the date when
the person comes into possession of the proceeds of crime. It
continues so long as the person remains in possession of the proceeds
of crime. This is yet another error, in our respectful opinion, in the
impugned judgment, which conflates the concept of “possession” with
“coming into possession”. Section 3 envisages the former, whereas the
impugned judgment presumes the latter.
58. We now proceed to the Explanations in Section 3, which are
also of significance.
59. Both the Explanations to Section 3 make it clear that claiming
or projecting the proceeds of crime to be untainted is not a sine qua
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non for the offence of money laundering to be said to have been
committed. Explanation (i), in fact, places this position beyond the
pale of controversy, by providing that a person who is found to have
directly or directly attempted to indulge, or knowingly assisted, or is
knowingly involved, or is actually involved in one or more of the
activities enumerated in (a) to (f) thereunder would be guilty of money
laundering, and concealment, possession, acquisition, use, projection
as untainted property and claiming as untainted property are
separately indicated in the said six clauses (a), (b), (c), (d), (e) and (f).
Similarly, Explanation (ii), again, clarifies that the process or activity
connected with proceeds of crime is a continuing activity, which
continues till such as the person enjoys the proceeds of crime by
concealment or possession or acquisition or use or projecting it as
untainted property or claiming it as untainted property in any manner.
60. Explanation (ii) to Section 3, on which Mr. Tripathi relies, in
fact, further supports our interpretation of Section 3 and militates
against the view expressed in the impugned judgment. The
Explanation has been provided for removal of doubts, and is expressly
clarificatory in nature. It clarifies that (i) the process or activity
connected with proceeds of the crime is a continuing activity and (ii)
the process or activity continues till the time the person is directly or
indirectly enjoying the proceeds of crime by (a) concealment or (b)
possession (c) acquisition or (d) use or (e) projecting it as untainted
property or (f) claiming it as untainted property in any manner
whatsoever.
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61. Viewed thus, so long as the person is in possession or in use of
the proceeds of crime, which would include, in the present case, the
subject property – the offence of money laundering continues.
62. The result is that, on the date when the PMLA came into force,
i.e., 1 July 2005, the respondent was committing the offence of money
laundering as the respondent was in possession of, and was using, the
subject property, which constitutes ‘proceeds of crime’ within the
meaning of Section 2(u) of the PMLA.
63. The impugned judgment, in para 32, purports to specifically
address the contention that the offence of money laundering, under the
PMLA, is a continuing offence. The learned Single Judge has rejected
this argument. However, the argument has not been rejected as
contrary to the words used in the statute or as being incompatible
therewith. It has been rejected on the ground that accepting the
argument would result in consequences which the PMLA could not be
said to have envisaged. The learned Single Judge holds that if the
argument were to be accepted, any person who commits a scheduled
crime, acquires proceeds therefrom and projects it as untainted money
(thereby again indicating that the impugned judgment treats the
money received by Alka Rajvansh as the proceeds of crime), prior to
coming of the PMLA into force, would nonetheless be guilty of the
offence of money laundering “only for the reason that he is in
possession of some property”.
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64. With great respect, we are entirely unable to subscribe to this
observation. The use of the words “some property” indicate that the
impugned judgment ignores the significance of the fact that the
subject property was not just “some property”, but property purchased
using the monies paid to Alka Rajvansh, which were directly relatable
to the crime committed by Homi Rajvansh which, in turn, was a
scheduled offence. At the very least, therefore, the subject property
was, if not directly, certainly indirectly obtained as a result of the
criminal activity relating to the scheduled offence committed by Homi
Rajvansh. The reference to the property as “some property” is,
therefore, incompatible with the words used in the PMLA as well as
the very definition of “proceeds of crime” as contained in Section
2(1)(u) thereof. Referring to the property as “some property”
purchased from the proceeds of crime fails to notice the fact that the
property itself constitutes ‘proceeds of crime’. The person concerned,
therefore, would not be, merely in possession of “some property” but
would be in possession of proceeds of crime per se.
65. Para 32 of the impugned judgment goes on to observe that if
such property is in possession of a person who is not accused of the
scheduled crime or the offence of money laundering, he would also be
subject to proceedings under the PMLA and, that, therefore,
practically, a person guilty of a scheduled offence who has acquired
any benefit in relation to the scheduled offence would in effect also be
guilty of the offence of money laundering immediately on the PMLA
coming into force. In view of the definition of “proceeds of crime”,
especially read in the light of the Explanation thereto, which includes,
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within the definition of “proceeds of crime”, any property which is
directly or indirectly derived or obtained as a result of any criminal
activity relatable to the scheduled offence, the hypothetical gentleman
to whom para 32 of the impugned judgment refers, would certainly be
guilty of the offence of money laundering, immediately on the PMLA
coming into force, as the paragraph itself observes.
66. There is nothing incongruous in this.
67. If the person continues to remain in possession of, or continues
to use, the proceeds of crime, which would include properties directly
or indirectly obtained received from proceeds of crime, he would
certainly be guilty of the offence of money laundering immediately on
the PMLA coming into force. This is in tune with the intent and
purpose of the PMLA as a statute which is intended at curbing serious
economic offences, which tarnish the fiscal fabric of the country.
68. This is perfectly permissible, in view of the decision in Queen
v. Inhabitants of St Mary, on which the learned Single Judge himself
places reliance. Though the coming into possession of the moneys
paid by Duroroyale and SRTPL, and the acquisition of the subject
property using the said moneys, are part of the offence of money
laundering, the offence continued to be committed so long as the
respondent remained in possession of, and continued using, the
subject property. As has been held by the learned Single Judge, the
mere fact that part of the ingredients of an offence antedate the
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enforcement of the statute, would not result in the statute being
applied retrospectively.
69. Para 32 goes on to state that accepting the interpretation
advanced by the Directorate of Enforcement to Section 3(1) would
result in the provision being given a retrospective operation and would
thereby offend Article 20(1) of the Constitution of India “as an
offender of a scheduled crime would now be visited with a greater
punitive measure than as could be inflicted at the time when the
scheduled offence was committed.” We are unable to accept this
reasoning. The PMLA does not intend to punish for the commission
of scheduled offence. It punishes for commission of the offence of
money laundering. Infliction, for committing the offence of money
laundering, of a punishment which may be greater than the
punishment which attaches the commission of the scheduled offence
does not, therefore, in any manner violate Article 20(1) of the
Constitution of India.
70. It is clear that the scheduled offence and the offence of money
laundering are distinct and different. There can be no comparison,
therefore, of the punishments, which may visit the commission of
these two offences. Nor can Article 20(1) be said to be infracted if the
punishment visiting the commission of offence of money laundering is
greater than the punishment visiting the commission of scheduled
offence.
71. Article 20(1), to our mind, is not infracted in any manner, by
the interpretation of the provisions as placed on them by the
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Directorate of Enforcement, and as accepted by us in the present
judgment. This is because the offence of money laundering does not,
as the impugned judgment, seeks to hold, stand committed and
concluded on the date when the subject property was purchased by the
respondent. Inasmuch as the respondent continued to remain in
possession of, and continued to use, the subject property even after the
PMLA came into force, the offence of money laundering also
continued. It was not as though, therefore, any provision of the PMLA
was being given retrospective effect.
72. Para 32 of the impugned judgment goes on to say that,
irrespective of when the scheduled offence was committed, and how
far prior to the enactment of the PMLA it was committed, the
authorities could not attach and confiscate properties derived or
obtained by criminal activity relating to the scheduled offence. Indeed,
we may observe, they could. There is, again, nothing irrational or
incongruous in this. As we have already noted and as the impugned
judgment also acknowledges, the PMLA does not punish for the
commission of the scheduled offence. The date and time of
commission of the scheduled offence are, therefore, irrelevant, in so
far as the PMLA is concerned. Commission of the scheduled offence
alone is enough. We are unable to regard the date of commission of
the scheduled offence as of any relevance whatsoever.
73. Similarly, even if the property, which is included within the
definition of proceeds of crime undergoes “significant changes” or “is
integrated in legitimate economic activity” or “is in the hands of
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persons unconnected with the scheduled offence”, that would not
militate against the applicability of Section 3 of the PMLA. All that
has to be shown is that the alleged offender is in possession of, or is
using, the property.
IV. Our other differences with the impugned judgment
74. Apart from the above observations and findings in para 32, to
which, to our greatest regret, we are unable to agree, we may also
note, as under, the other observations and findings in the impugned
judgment, which, in our view, cannot be accepted:
(i) In para 31, the impugned judgment holds that “even if the
allegations made by the respondent are assumed to be correct, the
proceeds of crime had been used for acquisition of the property
much prior to the Act coming into force”. This observation omits
to note the fact that the subject property itself fell within the
definition of “proceeds of crime” and that, therefore, it could not
be said that the proceeds of crime had been used by the
respondent for acquisition of the subject property prior to the
coming into force of the PMLA. This observation of the learned
Single Judge is contrary to the definition of “proceeds of crime”
as contained in Section 2(1)(u) of the PMLA.
(ii) The immediately succeeding finding that “the process of
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unsustainable as the proceeds of crime also included the subject
property and it, could not, therefore be said that the activity of
utilizing the proceeds of crime stood concluded prior to the
PMLA coming into force.
(iii) The further observation in para 31 that, assuming the
funds received by Alka Rajvansh from Duroroyale and SRTPL to
be “proceeds of crime”, “such funds had come into possession of
the petitioner prior to the Act coming into force” and “thus …
were already projected as untainted funds connected with the
crimes for which Mr. Homi Rajvansh and other persons were
accused … and had thus been laundered at a time when money
laundering was not an offence” are also unsustainable, as the
learned Single Judge proceed again on the erroneous premise that
the funds received by Alka Rajvansh from Duroroyale and
SRTPL constituted the “proceeds of crime”, without noticing that
the subject property purchased using the said funds was also
“proceeds of crime” for the purposes of the PMLA.
(iv) Proceeding now to para 33, the impugned judgment holds
that the offence of money laundering is complete once the money
representing the proceeds of crime are integrated into the
mainstream of the economy. This finding ignores the fact that
Section 3 is worded in an inclusive fashion and includes, within
the ambit of the offence of “money laundering”, mere possession
and mere use of the subject property. Inasmuch as the respondent
continued to remain in possession and continued to use the
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property even after the PMLA came into force, it cannot be said
that the activity of money laundering was over, or concluded,
prior thereto.
(v) Para 33 goes on to note that “unless such acts have been
committed after the Act came into force, an offence of money
laundering punishable under Section 4 would not be made out”.
There can be no cavil with this proposition. However, when
applied to the facts of the present case, they clearly make out a
case of commission of an offence of money laundering on the
part of the respondent, as the act of being in possession of, and
using the subject property, which constitutes “proceeds of crime”
continued to be committed by the respondent even after the
PMLA came into force.
(vi) Para 33 goes on to observe that ‘the words “concealment,
possession, acquisition or use” must be read in the context of the
process or activity of money laundering and “this is over once the
money is laundered or integrated with the economy”. With the
observation that “this is over”, we regret our inability to agree.
The finding that the offence of money laundering was over once
the money was laundered is again predicated on the premise that
the money alone constitutes proceeds of crime. We have already
expressed our disagreement with that proposition.
(vii) Interestingly, para 33 also observes as under:
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“… The 2013 Amendment to Section 3 of the Act by virtue
of which the words “process or activity connected with
proceeds of crime and projecting it as untainted property”
were substituted by the words “any process or activity
connected with proceeds of crime including concealment,
possession, acquisition or use and projecting or claiming it
as untainted property.”
The impugned judgment, therefore, notes that by the 2013
Amendment, the words “including concealment, possession,
acquisition or use” were inserted in Section 3(1) of the PMLA.
This, to our mind, is clearly demonstrative of the legislative
intent not to restrict the offence of PMLA to the process or
activity connected with the proceeds of crime, or projection of
the proceeds of crime as untainted property, but also to include,
within the ambit of the offence, possession, acquisition and use
of the proceeds of crime. We are of the considered opinion that
the interpretation placed on the provisions of the PMLA by the
impugned judgment, if allowed to stand, would defeat the intent
and purpose of the amendment of the Section 3 of the PMLA by
the 2013 Amendment.
(viii) In para 34 of the impugned judgment, it is held that the
PMLA cannot empower the authorities to initiate proceedings in
respect of money laundering offences “done prior to 1 July
2005”. We agree. If the PMLA is invoked for an offence of
money laundering done prior to the PMLA coming into force on
1 July 2005, it would undoubtedly amount to retrospective
application of the PMLA and would violate Article 20(1). In the
present case, however, as the respondent continued to remain in
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possession of, and continued to use, the subject property, even on
the date when the PMLA came into effect and even thereafter,
the offence of money laundering was being committed even on
the date of the coming into force of the PMLA and continued to
be committed thereafter. The order of provisional attachment
does not, therefore, invoke the PMLA in respect of an offence of
money laundering done prior to 1 July 2005 but invokes it for an
offence which was being done even on that date and continued to
be done thereafter till the date when the order came to be passed.
(ix) Para 34 further observes that the PMLA cannot be
invoked in a case in which the offence of money laundering was
committed prior to the related crime being included as a
scheduled offence under the PMLA. We may note that Mr.
Tripathi did not advance any such submission before us.
Nonetheless, we are unable to agree with this finding of the
learned Single Judge. The PMLA, as we have noted, and as the
impugned judgment itself acknowledges, does not punish for the
commission of scheduled offence. It punishes for the commission
of the offence of money laundering. While assessing whether the
offence of money laundering was committed, the date of
commission of offence of money laundering is what matters, and
not the date of commission of scheduled offence. In fact, even
the scheduled offence in the present case was committed much
prior to the PMLA coming into effect, as is apparent from the
facts alleged in the provisional attachment order. This finding of
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the learned Single Judge, therefore, is not of significant moment
in so far as the controversy in issue is concerned.
(x) The last finding of the learned Single Judge in the
impugned order is that the ingredients of clause (b) of Section
5(1) of the PMLA were not satisfied as there was no material
forthcoming on the record which could lead to a belief that the
respondent was likely to transfer or conceal the subject property
in any manner. We must note, in this context, that what Section 5
envisages is the reason for such belief being entertained by the
Deputy Director or other officer who passes the order of
provisional attachment. The arrival at such a reasoned belief is
essentially a subjective decision of the concerned officer. If the
decision is completely baseless or based on no material
whatsoever, perhaps a court could interfere. However, given the
manner in which, starting from the MOUs executed by Homi
Rajvansh on behalf of NAFED with MKAIL till, followed by the
incorporation of MIL and Alka becoming a Director therein, the
tainted money was transferred to Duroroyale and SRTPL, from
whom it was paid to Alka Rajvansh and used in the purchase of
the subject property, we are of the opinion that, in exercise of
certiorari jurisdiction under Article 226 of the Constitution of
India, it would not be open to the learned Single Judge to sit in
appeal over the subjective decision of the Deputy Director in the
order of provisional attachment, that the property was likely to be
concealed, transferred or dealt with in a manner which could
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frustrate the proceedings relating to confiscation of the proceeds
of crime.
(xi) A prima facie case of commission of offence of money
laundering clearly exists. The subject property clearly constitutes
“proceeds of crime” within the meaning of the PMLA. In such
circumstances, if the trial which is presently proceeding against
Alka Rajvansh and other accused for commission of the offence
of money laundering results in any outcome adverse to the
accused, confiscation of the subject property under Section 8
would follow. In such circumstances, we cannot treat the
provisional attachment of the subject property as vitiated by any
error of fact or law or unsustainable in law for any other reasons.
It goes without saying that if the property were to be alienated, or
not to be available for confiscation, it would be impossible to
implement Section 8 in the event of the outcome of the criminal
trial being adverse to the accused.
(xii) We therefore, feel that the Deputy Director was justified
in his view that it was necessary to provisionally attach the
subject property as, otherwise, there was a danger of the property
being so dealt with as would frustrate proceedings for
confiscation of the property, representing the proceeds of crime,
in exercise of power conferred by Section 8 of the PMLA.
V. The decisions in Vijay Madanlal Choudhary and Pradeep
Nirankarnath Sharma
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75. We find our aforesaid conclusions fortified by the judgments of
the Supreme Court in Vijay Madanlal Choudhary and Pradeep
Nirankarnath Sharma, on which Mr. Hossain placed reliance.
76. Vijay Madanlal Choudhary has in paras 134 and 135,
explained the legal position thus:
“134. From the bare language of Section 3 of the 2002 Act, it is
amply clear that the offence of money laundering is an independent
offence regarding the process or activity connected with the
proceeds of crime which had been derived or obtained as a result
of criminal activity relating to or in relation to a scheduled offence.
The process or activity can be in any form — be it one of
concealment, possession, acquisition, use of proceeds of crime as
much as projecting it as untainted property or claiming it to be so.
Thus, involvement in any one of such process or activity connected
with the proceeds of crime would constitute offence of money
laundering. This offence otherwise has nothing to do with the
criminal activity relating to a scheduled offence — except the
proceeds of crime derived or obtained as a result of that crime.
135. Needless to mention that such process or activity can be
indulged in only after the property is derived or obtained as a
result of criminal activity (a scheduled offence). It would be an
offence of money laundering to indulge in or to assist or being
party to the process or activity connected with the proceeds of
crime; and such process or activity in a given fact situation may be
a continuing offence, irrespective of the date and time of
commission of the scheduled offence. In other words, the criminal
activity may have been committed before the same had been
notified as scheduled offence for the purpose of the 2002 Act, but
if a person has indulged in or continues to indulge directly or
indirectly in dealing with proceeds of crime, derived or obtained
from such criminal activity even after it has been notified as
scheduled offence, may be liable to be prosecuted for offence of
money laundering under the 2002 Act — for continuing to possess
or conceal the proceeds of crime (fully or in part) or retaining
possession thereof or uses it in trenches until fully exhausted. The
offence of money laundering is not dependent on or linked to the
date on which the scheduled offence, or if we may say so, the
predicate offence has been committed. The relevant date is the
date on which the person indulges in the process or activity
connected with such proceeds of crime. These ingredients are
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intrinsic in the original provision (Section 3, as amended until
2013 and were in force till 31-7-2019); and the same has been
merely explained and clarified by way of Explanation vide Finance
(No. 2) Act, 2019. Thus understood, inclusion of clause (ii) in the
Explanation inserted in 2019 is of no consequence as it does not
alter or enlarge the scope of Section 3 at all.”
(Emphasis supplied)
77. The opening sentences of para 134 of Vijay Madanlal
Choudhary are, in fact, by themselves to completely discountenance
the submissions of Mr. Tripathi, as well as the findings in the
impugned judgment.
78. Para 134 first holds that that money laundering is an
independent offence which deals with the process or activity
connected with the proceeds of crime which had been derived or
obtained as a result of criminal activity relating to a scheduled
offence. When this enunciation of the law is read in conjunction with
the stipulation in Section 2(1)(u) of the PMLA, that the proceeds of
crime could have been obtained “directly or indirectly”, there is no
escape from the position that the subject property itself constitutes
“proceeds of crime”, and not merely property obtained from proceeds
of crime.
79. Para 134 further proceeds to hold, in the next sentence, that the
process or activity of dealing with the proceeds of crime can be in any
form – concealment, possession, acquisition or use thereof, as much
as projecting or claiming the proceeds of crime to be untainted
property. Even de hors any projection, or claiming, of the property
constituting the proceeds of crime to be untainted, therefore, the very
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possession, or use, of the property would constitute the offence of
money laundering.
80. We fail to understand how, in view of this unequivocal
exposition of the law by the Supreme Court, the impugned judgment
can be sustained.
81. The Supreme Court has further clearly held, in para 135, that
continuing to possess proceeds of crime or retaining possession of
proceeds of crime or using of proceeds of crime until they are fully
exhausted, amounts to money laundering. It is also clarified, in the
same paragraph that the relevant date for determining when the
offence has been committed is the date when the person indulges in
the process or activity connected with the proceeds of crime.
Inasmuch as usage and possession of the proceeds of crime is also
covered under the definition of “money laundering”, the fact that the
subject property was in the possession of and continued to be used by,
the respondent on and after the date when the PMLA came into force,
ipso facto makes the PMLA applicable.
82. The same position is reflected from paras 21, 22, 24 and 25 of
Pradeep Nirankarnath Sharma, which may be reproduced thus:
“21. A significant ground raised by the appellant pertains to the
nature of the alleged offence under the PMLA. The appellant has
contended that the alleged acts do not constitute an offence under
the PMLA as the same was not in force during the relevant period,
or the predicate offences as alleged were not included in the
schedule to the PMLA at the relevant time and, therefore, cannot
be subject to proceedings under the PMLA. It has also been argued
that these instances do not constitute continuing offences. This
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contention, however, is untenable. It is well established that
offences under the PMLA are of a continuing nature, and the act of
money laundering does not conclude with a single instance but
extends so long as the proceeds of crime are concealed, used, or
projected as untainted property. The legislative intent behind the
PMLA is to combat the menace of money laundering, which by its
very nature involves transactions spanning over time.
22. The concept of a continuing offence under PMLA has been
well-settled by judicial precedents. An offence is deemed
continuing when the illicit act or its consequences persist over
time, thereby extending the liability of the offender. Section 3 of
the PMLA defines the offence of money laundering to include
direct or indirect attempts to indulge in, knowingly assist, or
knowingly be a party to, or actually be involved in any process or
activity connected with the proceeds of crime. Such involvement,
if prolonged, constitutes a continuing offence.
*****
24. In the present case, the material on record establishes that
the misuse of power and position by the appellant, coupled with the
alleged utilization and concealment of proceeds of crime, has had
an enduring impact. The act of laundering money is not a one-time
occurrence but rather a process that continues so long as the
benefits derived from criminal activity remain in circulation within
the financial system or are being actively utilized by the accused.
The respondent has submitted that fresh instances of the utilization
of the proceeds of crime have surfaced even in recent times,
thereby extending the offence into the present and negating the
appellant’s contention that the act was confined to a particular point
in the past.
25. The law recognizes that money laundering is not a static
event but an ongoing activity, as long as illicit gains are possessed,
projected as legitimate, or reintroduced into the economy. Thus,
the argument that the offence is not continuing does not hold good
in law or on facts, and therefore, the judgment of the High Court
cannot be set aside on this ground. Even if examined in the context
of the present case, the appellant’s contention does not hold water.
The material on record indicates the continued and repeated misuse
of power and position by the appellant, resulting in the generation
and utilization of proceeds of crime over an extended period. The
respondent has successfully demonstrated prima facie that the
appellant remained involved in financial transactions linked to
proceeds of crime beyond the initial point of commission. The
utilization of such proceeds, the alleged layering and integration,
and the efforts to project such funds as untainted all constitute
elements of a continuing offence under the PMLA. Thus, the
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proceedings initiated against the appellant are well within the legal
framework and cannot be assailed on this ground.”
83. The impugned judgment was rendered prior to the decisions in
Vijay Madanlal Choudhary and Pradeep Nirankarnath Sharma.
Had the learned Single Judge had the advantage of these decisions, we
are sanguine that the judgment would have ruled differently.
F. Conclusion
84. In view of the aforesaid discussion, we find ourselves unable to
sustain the impugned judgment of the learned Single Judge, which is,
accordingly, quashed and set aside. The Provisional Attachment order
dated 24 January 2014 stands upheld, and WP (C) 1925/2014, filed by
the respondent, would stand dismissed.
85. The appeal is, accordingly, allowed with no orders as to costs.
C. HARI SHANKAR, J.
OM PRAKASH SHUKLA, J.
MARCH 16, 2026/aky/yg
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