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IN THE HIGH COURT OF KARNATAKA
Aravind Kumar, J.
Sachin Narayan - Appellant
Vs.
Income Tax Department By Its Deputy Director Of Income Tax, Bangalore - Respondent
Writ Petition No. 5299 of 2019, 5408 of 2019, 5420 of 2019, 5421 of 2019, 5422 of 2019, 5423 of 2019, 5824 of 2019, 6210 of 2019
Decided On : 29-08-2019
MONEY LAUNDERING - SUMMONS ISSUED BY ENFORCEMENT DIRECTORATE - QUASHING OF - WRIT PETITIONS - SCHEDULE OFFENCES - CRIMINAL CONSPIRACY - SECTION 120B OF IPC - INTERPRETATION - MONEY LAUNDERING ACT, 2002 - SECTIONS 2(P), 2(U), 3, 5(1)(A), 8, 44, 50(2), 50(3) - CONSTITUTION OF INDIA, ARTICLES 14, 19, 21, 226, 227.
Fact of the Case:
Petitioners, who were issued summons by the Enforcement Directorate (ED) to appear before them for investigation, filed writ petitions seeking to quash the summons on the ground that the investigation was initiated based on a complaint filed by the Income Tax Department after obtaining sanction under Section 279(1) of the Income Tax Act, 1961 (IT Act) for alleged offences punishable under Sections 276C(I), 277 of IT Act and Sections 193 and 199 read with Section 120B of IPC, which are not scheduled offences under the Prevention of Money Laundering Act, 2002 (PML Act). They contended that Section 120B of IPC cannot be invoked in the absence of a predicate offence and that the proceedings under PML Act cannot be continued.
Finding of the Court:
The Court held that: * The offence of money laundering under Section 3 of the PML Act is an independent offence and does not require a predicate offence to be committed. * Section 120B of IPC is a predicate, distinct, and stand-alone offence, and its inclusion in Part A of the Schedule to the PML Act is not under challenge. * The summons issued under Section 50(2) of the PML Act is not contrary to the Adjudicating Authority Procedure Regulation, 2013, which relates to proceedings for adjudication and not to pre-adjudication proceedings. * The authorities are not required to state or reveal the nature of the material upon which they intend to rely upon for summoning a person for investigation, as it would defeat the purpose of the investigation.
Issues: 1. Whether the offence of money laundering under the PML Act requires a predicate offence to be committed? 2. Whether Section 120B of IPC can be invoked in the absence of a predicate offence? 3. Whether the proceedings under the PML Act can be continued if the alleged offences are not scheduled offences under the Act? 4. Whether the summons issued under Section 50(2) of the PML Act is contrary to the Adjudicating Authority Procedure Regulation, 2013? 5. Whether the authorities are required to state or reveal the nature of the material upon which they intend to rely upon for summoning a person for investigation?
Ratio Decidendi: 1. The offence of money laundering under Section 3 of the PML Act is an independent offence and does not require a predicate offence to be committed. This is evident from the fact that the definition of 'money laundering' in Section 2(p) of the Act includes 'any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence'. 2. Section 120B of IPC is a predicate, distinct, and stand-alone offence. This is evident from the fact that it is included in Part A of the Schedule to the PML Act, which lists the scheduled offences. The inclusion of Section 120B in the Schedule is not under challenge in these writ petitions. 3. The proceedings under the PML Act can be continued even if the alleged offences are not scheduled offences under the Act. This is because the offence of money laundering is an independent offence and does not require a predicate offence to be committed. 4. The summons issued under Section 50(2) of the PML Act is not contrary to the Adjudicating Authority Procedure Regulation, 2013. This is because the Regulation relates to proceedings for adjudication and not to pre-adjudication proceedings. 5. The authorities are not required to state or reveal the nature of the material upon which they intend to rely upon for summoning a person for investigation. This is because it would defeat the purpose of the investigation.
Final Decision: The Court dismissed the writ petitions filed by the petitioners, upholding the validity of the summons issued by the ED and the proceedings initiated under the PML Act.
JUDGMENT :
Aravind Kumar, J.
In these writ petitions though initially reliefs as set out in the respective writ petitions was sought for, they have restricted to single prayer only by filing memos on 07.03.2019 stating thereunder that they would not press other prayers as indicated in the respective memos and would restrict their prayer as indicated therein. In other words, prayer sought for in all these writ petitions relates to quashing of the summons issued to petitioners by the Enforcement Directorate (for short 'ED') to appear before them for investigation. The reliefs now sought for in the respective writ petitions relates to quashing of summons issued by ED and for immediate reference the prayer sought for in W.P.No.5824/2019 is extracted herein below:
Hence, these writ petitions are examined in the background of above prayer sought for which is identical in all these writ petitions.
2. I have heard the arguments of Sri. Kapil Sibal, Sri.B.V.Acharya, Sri.A.Shankar and Sri. Shashikiran Shetty, learned Senior Advocates and Sri.Sham Sundar, learned Advocate appearing for petitioners and Sri.K.M.Nataraj, learned Additional Solicitor General of India, Sri.Prabhuling K Navadgi, the then Learned Additional Solicitor General of India assisted by Sri.Unnikrishnan, learned Central Government Standing Counsel for Enforcement Directorate and Sri.Jeevan Neeralagi, learned Standing Counsel appearing for Income Tax Department.
3. Sri Kapil Sibal, learned Senior counsel appearing for petitioner in W.P.No.6210/2019 would contend that basis on which the Enforcement Directorate have issued summons to the petitioner to appear before them is for a purported investigation being carried, which is an offshoot of search conducted by the Income Tax Department and a complaint having been filed before the jurisdictional Court after purportedly obtaining sanction under Section 279(1) of the Income Tax Act, 1961 (for short 'IT Act') alleging thereunder, that accused No.1 i.e., Sri D K Shivakumar committed an offence punishable under Sections 276C(I), 277 of IT Act and Sections 193 and 199 read with Section 120B of IPC and accused Nos.2 to 5 had committed an offence punishable under Sections 278, 277 of IT Act and Sections 193 and 199 read with Section 120B of IPC and to take cognizance for which offences are not scheduled offences under the provisions of Prevention of Money Laundering Act, 2002 (for short 'PML Act'). He would contend that Section 120B of IPC cannot be invoked in the absence of predicate offence and offence under IT Act not being a scheduled offence, proceedings under PML Act cannot be continued. He would also contend that a plain reading of the definition clause of Section 2(p), 2(u) & Section 3 of PML Act would clearly indicate that it is only the "proceeds of crime" if attempted to be ploughed into main stream of the economy would attract the definition of "money laundering" and offence alleged to have been committed by the petitioner even according to respondents being under IT Act and same not being a scheduled offence, which is sine qua non for the provisions of PML Act being attracted, question of petitioner appearing before ED does not arise. He would elaborate his submission by contending that offence punishable under Section 276C(1) and Section 277 of the IT Act are compoundable offences under Section 279(2) and stage has not come where prosecution can be lodged and the procedure adopted by the enforcement authority is unkno
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