India: Chapter XII Of CrPC Applicable To PMLA

Last Updated: 9 October 2019

By

Vijay Pal Dalmia, Advocate

Supreme Court of India & Delhi High Court

Email id: vpdalmia@vaishlaw.com

Mobile No.: +91 9810081079

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In this case (Rajbhushan Omprakash Dixit vs. Union of India and Ors. available at http://lobis.nic.in/ddir/dhc/SMD/judgement/19-02-2018/SMD19022018CRLW3632018.pdf

/ MANU/DE/0734/2018 ), the petitioner, Rajbhushan Omprakash Dixit, had moved a writ of habeas corpus before the High Court of Delhi (Court) for his release from custody. He has sought a declaration that issuance of a non-bailable warrant (NBW), his arrest pursuant thereto in ECIR and the resultant remand orders passed by the Additional Sessions Judge, Prevention of Money Laundering Act, 2002 (PMLA) was without the authority of law and in violation of Articles 14, 21 and 22 of the Constitution of India (Constitution). The petitioner had also prayed for mandamus to the Directorate of Enforcement (DOE) and the Union of India, the respondents in this case, to provide him a certified copy of Enforcement Case Information Report (ECIR), the application filed before the trial Court for issuance of warrants and the grounds of arrest recorded while arresting him.

The facts of the case were that the Income Tax Department conducted a search operation in the premises of the group entities of Sterling Biotech Limited (SBL) under Section 132 of the Income Tax Act, 1961 (IT Act). The petitioner, was one of the directors of SBL.

During the raid various documents were seized and they revealed that a huge amount of cash had been given to various government servants. Following this the Central Bureau of Investigation (CBI) registered an FIR for commission of offences under Section 13 (2) read with Section 13 (1) (d) of the Prevention of Corruption Act, 1988 (PC Act) read with Section 120 B of the Indian Penal Code, 1860 (IPC). Since these were also covered by the Schedule to the PMLA, the DOE recorded an ECIR in relation to the offence of money laundering under Section 3 PMLA punishable under Section 4 PMLA.

During the course of investigation, another FIR was registered by the CBI against SBL, its Directors including the petitioner, one chartered accountant and a former director of Andhra Bank as well as other known and unknown public servants for commission of offences under Sections 13 (2), 13 (1) of the PC Act and Sections 420, 467, 468 and 471 read with Section 120-B of the IPC. The central allegation in the said FIR was that huge credit facilities and loans were obtained by SBL and its sister concerns from Andhra Bank and a consortium of banks led by Andhra Bank on the basis of forged and fabricated documents in criminal conspiracy with the accused persons. A huge sum of Rs. 5383 crores was stated to be outstanding.

The first issue that arose in this case was that sections 44 and 45 of the PMLA had been amended to make the offence non-cognizable so that only the Director could take action but the heading of section 45, that is, Offences to be cognizable and non-bailable was not changed. So the court had to deal with the question 'Are the PMLA offences cognizable or non-cognizable?'

The court compared section 45 before and after amendment and it showed that although the heading of Section 45 has not undergone a change, the provision itself clearly has. Section 45 (1) (a) as it stood prior to 2005 was deleted and this was now consistent with the second proviso which states that the special court shall not take cognizance except on a complaint in writing.

The Court relied on the Supreme Court's decision in Union of India v. National Federation of the Blind ((2013) 10 SCC 772) [ https://www.supremecourtofindia.nic.in/jonew/judis/40868.pdf] in which was propounded that heading of a section or marginal note may be relied upon to clear any doubt or ambiguity but not when a plain reading of the Section itself does not give rise to any doubt or ambiguity.

Secondly, the Court dealt with the issue whether chapter XII of the Cr PC apply to the PMLA?

Court held that the question was no longer res integra after the decision of the Supreme Court (SC) in Ashok Munilal Jain v. Assistant Director, Directorate of Enforcement. Court expressed that although the SC was specifically referring to a question of applicability of Section 167 (2) Cr PC to the PMLA it could not lose sight of the fact that the Supreme Court was categorical that Sections 44 to 46 PMLA specifically incorporate the provisions of Cr PC prior to the PMLA and that there was no provision in the PMLA including the applicability of Cr PC. Further the Supreme Court was categorical that Section 65 of PMLA settled the controversy.

According to section 65 of PMLA 'Code of Criminal Procedure, 1973 to apply.'

"The provisions of the Code of Criminal Procedure, 1973 (2 of 1974) shall apply, in so far as they are not inconsistent with the provisions of this Act, to arrest, search and seizure, attachment, confiscation, investigation, prosecution and all other proceedings under this Act."

Court was of the opinion that there was no alternative to the DOE but to follow the CrPC, except where there are specific provisions in the PMLA that provide an alternative procedure. Given the mandate of Articles 21 and 22 of the Constitution of India the powers under the PMLA in relation to the offences under the PMLA, have to be governed by the Cr PC, if not by the PMLA. This is expressly recognised and acknowledged by Section 65 PMLA. It is, therefore, not open to the DOE to choose to not follow the Cr PC in an area where the PMLA is silent.

In this case, the DOE had admittedly not followed Section 19 of the PMLA and a copy of grounds of arrest had not been furnished to the petitioner. Court held that it was not the case in which the grounds of arrest was covered by the Official Secrets Act or any such law prohibiting it from being communicated and that the petitioner had a right to know why he has been arrested. The petitioner could not he be expected to apply for bail or oppose a request of the DOE for extending his remand without knowing the grounds of his arrest.

With regards to the third issue, that is, maintainability of writ petition, the Court decided to place the question before the larger bench.The Court granted bail to the petitioner as interim relief.

© 2019, Vaish Associates Advocates,
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