Y. BALAJI versus KARTHIK DESARI & ANR. ETC.
[2023] 8 S.C.R. 1026, Supreme Court of India, 2023
Outcome: Disposed off
Segment: Facts
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Y. BALAJI
v.
KARTHIK DESARI & ANR. ETC.
(Criminal Appeal Nos. 1671-1673 of 2023)
MAY 16, 2023
[KRISHNA MURARI AND V. RAMASUBRAMANIAN, JJ.]
Prevention of Money Laundering Act, 2002 – ss.3, 2(1)(u) –
Offence of Money Laundering – Prevention of Corruption Act, 1988
– Jobs-for-cash scam in the State of Tamil Nadu – Whether without
identifying the proceeds of crime/a property representing the
proceeds of crime and any process or activity connected to proceeds
of crime as required by s.3, which constitute the foundational/
jurisdictional fact, can ED initiate an investigation and issue
summons – Held: All the three FIRs alleged that the accused had
committed offences included in the schedule by taking illegal
gratification for providing appointment to several persons in the
Public Transport Corporation – It is the bribe money that constitutes
the proceeds of crime u/s.2(1)(u) – A public servant receiving illegal
gratification is in possession of proceeds of crime – Mere generation
of proceeds of crime is sufficient to constitute the offence of money-
laundering – In s.3 there are 6 activities or process and one of them
is “acquisition” – If a person takes a bribe, he acquires proceeds
of crime, hence, activity of “acquisition” takes place – Even if he
does not retain it but “uses” it, he will be guilty of offence of money-
laundering, since “use” is one of the activities mentioned in s.3 –
The
FIRs for the predicate offences identify all the three components
of s.3, persons; process; and product – Corruption money represents
the proceeds of crime – In the case of an offence of corruption, the
criminal activity and the generation of the proceeds of crime are
like Siamese twins – The contention that the investigation by ED
was triggered without any foundational/jurisdictional facts are aimed
at hoodwinking the Court – Wherever there are allegations of
corruption, there is acquisition of proceeds of crime which itself
tantamount to money-laundering – Once an information relating to
the acquisition of huge amount of illegal gratification in the matter
of public employment has come in the public domain, it is the duty
of the ED to register an Information Report – This is because
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“acquisition” is an activity amounting to money-laundering and
the illegal gratification acquired by a public servant represents
“proceeds of crime”, generated through a criminal activity in respect
of a scheduled offence – Receipt of bribe money is an act of money-
laundering – All the arguments on facts and all the legal contentions
emanating from some portions of the judgment in Vijay Madanlal
Choudhary, to challenge the validity of the proceedings initiated by
ED are completely unsustainable.
Criminal Law – Matters pertaining to Jobs-for-cash scam in
the State of Tamil Nadu – Impugned order allowed de novo
investigation on a ground not raised in the petition – Held: ‘D’,
whose original complaint led to the registration of FIR in Crime
No.441 of 2015 seems to have had a genuine grievance against the
culprits at the bottom of the layer, but he later turned out to be a
Trojan horse, willing to sabotage the investigation against influential
persons – Order directing de novo investigation in all the three cases,
actually inured to the benefit of the accused, but the High Court
put it on the ground that the credibility of the investigation should
not be eroded – In fact, the accused did not seek de novo investigation
on the ground of slackness on the part of the Investigating Officer,
but it was ‘D’ who sought it, with the able assistance of the
Investigating Officer – What is shocking is that the High Court
directed reinvestigation to be started ab
initio, wiping out the earlier
investigation altogether – By issuing the said direction, the High
Court not only directed the wiping out of the investigation carried
out so far, but virtually wiped out even the judgment of Supreme
Court dtd.08.09.2022 passed in the previous round of litigation –
The problem with the impugned order is not merely one of improper
usage of language, as sought to be diluted by the accused and the
complainant, but something more – Prevention of Money Laundering
Act, 2002 –Prevention of Corruption Act, 1988.
Doctrines/Principles – Doctrine of stare decisis – Whether in
the light of the fact that notice has been ordered in the review petition
and a few interim orders have been passed in some proceedings, it
is necessary for this Court to tag these appeals along with a review
petition or defer the hearing of these matters until a decision is
rendered in the review petition and other petitions – Held: A notice
ordered in the review petition will not destroy or diminish the
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precedential value of Vijay Madanlal Choudhary – The argument of
the counsel for the accused, if accepted, will not only destroy the
principles of judicial discipline and the doctrine of stare decisis, but
also bring to a grinding halt, all pending investigation in the country
– Accused is not entitled at all either to seek a reference to a larger
Bench or to seek to defer the matter till a decision is rendered in the
matters involving larger issues – Appeals arising out of the order of
the Division Bench of the High Court are allowed – Order of the
Division Bench of the High Court dtd. 01.09.2022 is set aside – ED
entitled to proceed further from the stage at which their hands were
tied by the impugned order – Prevention of Money Laundering Act,
2002 –Prevention of Corruption Act, 1988 – Criminal Law.
Prevention of Money Laundering Act, 2002 – History of –
Discussed.
Criminal Rules of Practice, 2019 – rr.231(3), 237 – Appellant
contended that the High Court overlooked the provisions of r.231(3)
and also s.65B, Evidence Act – Held: Both the contentions are without
substance – r.231 primarily deals with the grant of certified copies
of certain other documents to the accused, before filing of the Final
Report – It states that certified copies of unmarked documents shall
not be given – High Court has not passed any order directing the
grant of certified copies of unmarked documents – It has only
permitted the ED to have
an inspection of the documents u/r.237
and thereafter to file a proper copy application – This is not contrary
to r.231(3) – Further, it is not known how an argument revolving
around s.65B, Evidence Act is raised – s.65B concerns the
admissibility of electronic records – Without certification, ED may
not be able to use those electronic records in evidence, in the
prosecution under PMLA – But it does not mean that they cannot
even have a look at the electronic record – Evidence Act, 1872 –
s.65B – Prevention of Money Laundering Act, 2002 –Prevention of
Corruption Act, 1988 – Criminal Law.
Criminal Law – Matters pertaining to Jobs-for-cash scam in
the State of Tamil Nadu – Objection to the maintainability of the
appeals by appellants, against the order of de novo investigation –
Held: Criminal jurisprudence recognizes a limited role of victims
and it is the state which is entrusted with the onerous responsibility
of prosecuting the accused and getting them punished – These
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theories of law were developed when process of administration of
criminal justice system was largely unpolluted – However, where
some of the complainants and the accused have come together to
form an unholy alliance, victims cannot be left at the mercy of such
partnerships – What was compromised between the complainant
and accused is not just their disputes, but justice, fair play, good
conscience and the fundamental principles of criminal jurisprudence
– Investigation trail of a criminal case cannot be converted by the
complainant and accused into a friendly match – Further,
submissions made on the question of locus in the previous round of
litigation in were rejected by Supreme Court in the very same
proceedings in the first round – Therefore, the accused cannot raise
the question of locus again and again.
Criminal Rules of Practice, 2019 – rr.207(12), 210 – Some of
the appellants filed copies of the confession statements u/s.164,
CrPC, as part of the paper book in the appeals – It was contended
that the confession statements recorded before the Magistrate are
sacrosanct and that the copies of the same cannot be made available
to third parties – Held: It is clear from r.207(12) that a confession
statement is a confidential document till the time investigation is
complete and Final Report filed – r. 210 enables “third parties to
apply to the Court for the grant of copies of Judgment or order or
any proceeding or document in the custody of a Court” –
Therefore,
it is not as though the appellants have filed something to which they
could have never had any access – Further, many of the documents
had started appearing in the public domain at the instance of several
persons – Hence, it is futile to contend that the appeals are liable to
be thrown out on the ground that the appellants came up with
documents to which they could not have had any access – Code of
Criminal Procedure, 1973 – s.164.
Criminal Law – Matters pertaining to Jobs-for-cash scam in
the State of Tamil Nadu – Political vendetta alleged – On the basis
of the timeline of events, it was alleged the Minister was implicated
in the case on 08.03.2021, for offences under the PC Act immediately
after the announcement of the elections to the Legislative Assembly,
as he had switched over from the party in power to another – Held:
That the Investigation Officer did not choose to include the offences
under the PC Act from the year 2015 till 08.03.2021, cannot be
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taken to the credit of the Minister, but should be taken as a discredit
of the prosecution – If the shield of office protected him from 2015
till he formed part of the splinter group and the shield stood
temporarily removed for a brief period of time until he again became
a Minister in the next regime, the same cannot be said to be a case
of political vendetta – Prevention of Corruption Act, 1988.
Practice and Procedure – For all the accused in the PMLA
case, arguments were advanced for the grant of larger reliefs than
what they got under the impugned order, without even filing any
appeal against the same – Held: It is possible in law for a successful
party (though in civil proceedings) to support the decree without
supporting the judgment – But what the accused sought to do before
Supreme Court was to support the judgment and seek an enlargement
of the decree, without independently filing appeals – Since they
took a chance by adopting such a course, they may not even be
able to challenge the impugned order hereafter, once the seal of
approval on the same is affixed by this Court and the doctrine of
merger comes into play – Prevention of Money Laundering Act,
2002 – Doctrines/Principles – Doctrine of merger.
Disposing of the appeals, the Court
HELD: 1. The order directing de novo investigation in all
the three cases, has actually inured to the benefit of the accused,
but the High Court put it on the ground that the
credibility of the
investigation should not be eroded. In fact, the accused did not
seek de novo investigation on the ground of slackness on the
part of the Investigating Officer, but it was ‘D’ who sought it,
with the able assistance of the Investigating Officer. The fact that
‘D’s petition was intended to help the accused is also borne out
by one more fact. His original complaint dated 29.10.2015 which
led to the registration of FIR in Crime No.441 of 2015 was against
ten persons and the offences registered therein were only under
Sections 406 and 420 read with Section 34 IPC. On this complaint,
a Final Report was filed under Section 173(2) of the Code on
13.06.2017 and this resulted in the registration of Calendar Case
in CC No.3627 of 2017. ‘D’ was happy with the fact that the Report
filed under Section 173(2) did not include the offences under the
PC Act. ‘D’ was not bothered at that time about the fact that the
register for entering the interview marks, sent to the Forensic
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Department had not been received. Suddenly, he became worked
up after the filing of the Report under Section 173(8) leading to
the registration of Calendar Case No.24 of 2021 including the
offences under the PC Act. What is shocking is that the High
Court directed reinvestigation to be started ab initio, wiping out
the earlier investigation altogether. One saving grace in this case
is that even the learned senior counsel appearing for ‘D’ and the
learned senior counsel appearing for the accused could not
support the operative portion of the impugned order dated
31.10.2022, in Criminal O.P. No.15122 of 2021. By issuing the
aforesaid direction, the High Court not only directed the wiping
out of the investigation carried out so far, but virtually wiped out
even the judgment of this Court dated 08.09.2022 passed in
Criminal Appeal Nos.1514-1516 of 2022. This Court has said in
paragraph 45 of the decision dated 08.09.2022 in Criminal Appeal
Nos.1514-1516 of 2022 “We are constrained to say that even a
novice in Criminal Law would not have left the offences under
the PC Act, out of the final report.” Ignoring the said opinion of
this Court, the High Court has directed the Investigating Officer
to find out afresh whether the offences under the PC Act are
made out or not. Therefore, the problem with the impugned order
is not merely one of improper usage of language, as sought to be
diluted by the learned senior counsel for the accused and the
complainant, but
something more. [Paras 19-22, 25][1054-B-G;
1055-D; 1056-C-D]
2. It is true that criminal jurisprudence recognizes a limited
role for victims and it is the State which is entrusted with the
onerous responsibility of prosecuting the accused and getting
them punished. But we must remember that certain theories of
law were developed at a time when the process of administration
of the criminal justice system was in the hands of honest and
responsible Police officials and the stream remained largely
unpolluted. Today the situation is different. In cases of this nature,
where some of the complainants and the accused have come
together to form an unholy alliance, the victims of crime cannot
be left at the mercy of such partnerships. We have seen in this
case, persons aspiring to secure public employment, paying illegal
gratification, through persons who are public servants, to persons
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in power and later coming to the Court supporting the accused
on the basis of an out of Court settlement. What was compromised
between the complainant and accused is not just their disputes,
but justice, fair-play, good conscience and the fundamental
principles of criminal jurisprudence. In fact, the case on hand is
one where there are two teams just for the purpose of record,
but no one knows who is playing for which team and where the
match was fixed. As a matter of fact, very vocal submissions were
made on the question of locus in the previous round of litigation
in P. Dharamaraj vs. Shanmugam in Criminal Appeal Nos.1514-
1516 of 2022. But the objections relating to maintainability were
rejected by this Court in the very same proceedings in the first
round. Therefore, the accused cannot raise the question of locus
again and again. [Paras 33, 34][1060-D-H; 1061-A]
3. It is clear from Rule 207(12) that a confession statement
is a confidential document till the time investigation is complete
and Final Report filed. The relevant portion of Rule 207(12) states
“… not to make its contents public until the investigation is
completed and final report filed”. Rule 210 extracted above
enables “third parties to apply to the Court for the grant of copies
of Judgment or order or any proceeding or document in the
custody of a Court”. Therefore, it is not as though the appellants
have filed something to which they could have
never had any
access. Many of the documents have started appearing in the
public domain at the instance of several persons. Hence, it is
futile to contend that the appeals are liable to be thrown out on
the ground that the appellants have come up with documents to
which they could not have had any access. [Paras 39-41][1062-D-
E, G-H;]
4. That the Investigation Officer did not choose to include
the offences under the PC Act from the year 2015 till 08.03.2021,
cannot be taken to the credit of the Minister, but should be taken
as a discredit of the prosecution. If the shield of office protected
him from 2015 till he formed part of the splinter group and the
shield stood temporarily removed for a brief period of time until
he again became a Minister in the next regime, the same cannot
be said to be a case of political vendetta. [Para 44][1064-D-F]
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Janata Dal vs. H.S. Chowdhary (1992) 4 SCC 305 :
[1992] 1 Suppl. SCR 226; Simranjit Singh Mann vs.
Union of India (1992) 4 SCC 653 – held inapplicable.
5. What is worrisome is the fact that V. Ganesh Kumar is an
employee of the Transport Corporation. In the charge-sheet filed
on his complaint, which has been taken on file as CC No.19 of
2020, this V. Ganesh Kumar is stated to have collected amounts
ranging from Rs.2,00,000/- to Rs.4,50,000/- for every post of
Driver, Conductor or Mechanic, as the case may be. We do not
know whether the Transport Corporation has at least placed him
under suspension and initiated departmental proceedings. If they
have not done so far, the Corporation should initiate disciplinary
action against this V. Ganesh Kumar not only for being party to a
job-for-cash scam but also for turning turtle and supporting the
accused and thereafter coming to this Court to assail the order
of de novo investigation, despite being an employee of the
Corporation. [Para 47][1065-C-D]
6. ED registered an Information Report on 29.07.2021, only
after filing of a Final Report under Section 173(8) of the Code., in
CC No.24 of 2021, including the offences punishable under the
PC Act. This Final Report was in FIR No.441 of 2015, which was
originally registered as CC No.3627 of 2017 (it became CC No.24
of 2021). The Final Report filed under Section 173(8) of the Code
on 08.03.2021, named Shri V. Senthil Balaji (Minister) as Accused
No.1 and the offences
charged against the accused were under
Sections 406, 419, 420 read with Section 34 and 120B, 465, 467,
471 and 201 IPC read with Sections 7, 12, 13(2) read with Section
13(1)(d) of the PC Act and Section 109 of IPC. Since the offences
under Sections 120B, 419, 420, 467 and 471 of IPC and Sections
7 and 13 of the PC Act are included in The Schedule to the
Prevention of Money-laundering Act, 200211, the registration of
the Information Report by ED on 29.07.2021 cannot be faulted.
[Para 50][1066-B-D]
7. The High Court has not quashed the summons issued by
ED. The High Court had merely injuncted ED from proceeding
further till the clog on the cases relating to the predicate offences
is removed. Interestingly, none of the accused has come up with
any appeal challenging the order of the High Court dated
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01.09.2022, on the ground that the High Court ought to have
quashed the summons issued by the ED in total, on other grounds.
Instead, the accused appeared through counsel only to defend
the impugned order dated 01.09.2022. Therefore, in law, (i) once
the dismissal of the petition for discharge has attained finality
with the dismissal of Criminal Revision Case No.224 of 2021; (ii)
once the order for de novo investigation in Criminal O.P.
No.15122 of 2021 is set aside; (iii) once the order of the High
Court dated 30.03.2022 relating to right of the ED to secure the
copies of documents is dealt with; (iv) once the order of the High
Court dated 30.07.2021 quashing one of the criminal cases is set
aside; and (v) once the stay operating in two of the criminal cases
for predicate offences is vacated, then the temporary reprieve
that has been granted by the High Court to the accused in the
impugned order would automatically go. Realising this difficulty
in law, the accused changed the theme of the song completely
before us, despite the fact that they were ordained as respondents
in the appeals only to support the impugned order of the High
Court. In fact, all the learned senior counsel appearing for all the
accused in the PMLA case, advanced arguments for the grant of
larger reliefs than what they got under the impugned order,
without even filing any appeal against the same. It is possible in
law for a successful party
(though in civil proceedings) to support
the decree without supporting the judgment. But what the accused
sought to do before us was to support the judgment and seek an
enlargement of the decree, without independently filing appeals.
Since they took a chance by adopting such a course, they may not
even be able to challenge the impugned order hereafter, once
the seal of approval on the same is affixed by this Court and the
doctrine of merger comes into play. [Paras 67-70][1072-A-F]
8.1 If the main part of Section 3 is dissected with forensic
precision, it will be clear that Section 3 addresses itself to three
things (we may call them 3 ‘P’s) namely, (i) person; (ii) process
or activity; and (iii) product. Insofar as persons covered by Section
3 are concerned, they are, (i) those who directly or indirectly
attempt to indulge; or (ii) those who knowingly assists; or (iii)
those who are knowingly a party; or (iv) those who are actually
involved. Insofar as process is concerned, the Section identifies
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six different activities, namely (i) concealment; (ii) possession;
(iii) acquisition; (iv) use; (v) projecting; or (vi) claiming as
untainted property, any one of which is sufficient to constitute
the offence. Insofar as product is concerned, Section 3 identifies
“proceeds of crime” or the property representing the proceeds
of crime as the product of the process or activity. Out of the three
things that Section 3 addresses, namely (i) person; (ii) process;
and (iii) product, the first two do not require any interpretation
or definition. The third aspect namely “product”, which Section
3 refers to as “proceeds of crime” requires a definition and hence
it is defined in Section 2(1)(u). [Paras 96 and 97][1088-A-D]
8.2 All the three FIRs allege that the accused herein had
committed offences included in the Schedule by taking illegal
gratification for providing appointment to several persons in the
Public Transport Corporation. In one case it is alleged that a
sum of more than Rs.2 crores had been collected and in another
case a sum of Rs.95 lakhs had been collected. It is this bribe
money that constitutes the ‘proceeds of crime’ within the meaning
of Section 2(1)(u). It is no rocket science to know that a public
servant receiving illegal gratification is in possession of proceeds
of crime. The argument that the mere generation of proceeds of
crime is not sufficient to constitute the offence of money-
laundering, is actually preposterous. As we could see from
Section
3, there are six processes or activities identified therein. They
are, (i) concealment; (ii) possession; (iii) acquisition; (iv) use;
(v) projecting as untainted property; and (vi) claiming as untainted
property. If a person takes a bribe, he acquires proceeds of crime.
So, the activity of “acquisition” takes place. Even if he does not
retain it but “uses” it, he will be guilty of the offence of money-
laundering, since “use” is one of the six activities mentioned in
Section 3. The FIRs for the predicate offences identify all the
three components of Section 3, namely, (i) persons; (ii) process;
and (iii) product. Persons accused in the FIRs are those who
have indulged in the process or activity. The illegal gratification
that they have taken, represents the proceeds of crime. The (i)
acquisition of such illegal gratification in the first instance; (ii)
the possession of the tainted money before putting it to use; and
(iii) today projecting it as untainted money, is the process or
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activity in which the accused have indulged. The corruption money
represents the proceeds of crime. [Paras 99, 100][1089-A-F]
8.3 It is true that there are some offences, which, though
scheduled offences, may or may not generate proceeds of crime.
For instance, the offence of murder punishable under Section
302 is a scheduled offence. Unless it is a murder for gain or murder
by a hired assassin, the same may or may not generate proceeds
of crime. It is in respect of such types of offences that one may
possibly argue that mere commission of the crime is not sufficient
but the generation of proceeds of crime is necessary. In the case
of an offence of corruption, the criminal activity and the generation
of the proceeds of crime are like Siamese twins. Even if an
intangible property is derived as a result of criminal activity
relating to a scheduled offence, it becomes proceeds of crime
under Section 2(1)(u). In view of the above, we are not impressed
with the contention that the investigation by ED was triggered
without any foundational/jurisdictional facts. In our view, the
allegations in the FIR point out to (i) involvement of persons in
criminal activity relating to scheduled offences; (ii) the generation
as well as (iii) laundering of the proceeds of crime within the
meaning of Section 3. This is in view of the fact that wherever
there are allegations of corruption, there is acquisition of
proceeds of crime which
itself tantamount to money-laundering.
[Paras 102, 104][1089-G-H; 1090-A, E-F]
8.4 Once an information relating to the acquisition of huge
amount of illegal gratification in the matter of public employment
has come into the public domain, it is the duty of the ED to register
an Information Report. This is because “acquisition” is an activity
amounting to money-laundering and the illegal gratification
acquired by a public servant represents “proceeds of crime,”
generated through a criminal activity in respect of a scheduled
offence. Therefore, it does not require any expedition, much less
a fishing expedition for someone to say that the receipt of bribe
money is an act of money-laundering. The contention that there
was no explanation for the delay on the part of the ED in
registering the Information Report, is a self-serving argument.
If the ED registers an Information Report immediately upon the
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registration of a FIR for a predicate offence, ED will be accused
of acting in haste. If they wait until the drama unfolds up to a
particular stage, ED will be attacked as guilty of delay. The
accused should be thankful to ED for giving a long rope from
2016 till 2021. Therefore, all the arguments on facts and all the
legal contentions emanating from some portions of the judgment
in Vijay Madanlal Choudhary, to challenge the validity of the
proceedings initiated by ED are completely unsustainable. [Paras
112-114][1092-B-F]
9. A notice ordered in the review petition being Review
Petition (Crl.) No.219 of 2022, will not destroy or diminish the
precedential value of Vijay Madanlal Choudhary. The argument
of the learned counsel for the accused, if accepted, will not only
destroy the principles of judicial discipline and the doctrine of
stare decisis, but also bring to a grinding halt, all pending
investigation in the country. In fact, the order dated 25.08.2022
passed in Review Petition (Crl.) No.219 of 2022 discloses that
prima facie the Court was of the view that at least two of the
issues raised in the review petition require consideration. Though
it is not precisely spelt out in the order, those two issues relate
to (i) not providing the accused with a copy of the ECIR; and (ii)
reversal of the burden of proof and presumption of innocence.
The points that the respondents are canvasing in this case, have
nothing to do with those two issues. Therefore, the
accused cannot
have a piggyback ride on the review petition. In fact, as we have
pointed out elsewhere, the accused have not come up with any
appeal challenging the order of the High Court dated 01.09.2022.
Therefore, they are entitled at the maximum, to argue only for
the dismissal of the appeals filed by ED and others against the
said decision. Suppose we agree with the learned counsel for the
accused and dismiss the appeals filed by ED, even then they
cannot have an escape route since the impugned order of the
High Court protects them only till the other proceedings are kept
at bay. Therefore, the accused is not entitled at all either to seek
a reference to a larger Bench or to seek to defer the matter till a
decision is rendered in the matters involving larger issues. In
view of the above, the appeals arising out of the order of the
Division Bench of the High Court are liable to be allowed.
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Accordingly, these appeals are allowed and the order of the
Division Bench of the Madras High Court dated 01.09.2022 is
set aside. ED will now be entitled to proceed further from the
stage at which their hands were tied by the impugned order. [Paras
116-119][1093-A-F]
Vijay Madanlal Choudhary vs. Union of India 2022
SCC OnLine SC 929 – referred to.
10. The grievance of the appellant in this appeal is that the
High Court has overlooked the provisions of Rule 231(3) of the
Rules, 2019 and also Section 65B of the Indian Evidence Act,
1872. But both the above contentions are without substance. Rule
231 primarily deals with the grant of certified copies of certain
other documents to the accused, before filing of the Final Report.
Rule 231(3) states that certified copies of unmarked documents
shall not be given. The High Court has not passed any order
directing the grant of certified copies of unmarked documents.
All that the High Court has done is permitting the ED to have an
inspection of the documents under Rule 237 and thereafter to
file a proper copy application. This is not contrary to Rule 231(3).
We do not know how an argument revolving around Section 65B
of the Evidence Act is raised. Section 65B concerns the
admissibility of electronic records. Without certification, ED may
not be able to use those electronic records in evidence, in the
prosecution under PMLA. But it does not mean that they cannot
even have a
look at the electronic record. Therefore, we find no
merits in the appeal. Hence, the appeal challenging the order of
the High Court dated 30.03.2022 passed in Criminal O.P. No.5726
of 2022 is dismissed. [Paras 122-124][1094-C-F]
11. The appeals arising out of the order for de novo
investigation are allowed. That portion of the order of the High
Court dated 31.10.2022 passed in Criminal O.P. No. 15122 of
2021 is set aside. The directions issued in the said original petition
for de novo investigation are set aside. The Investigation Officer
shall proceed with further investigation in all cases by including
the offences under the PC Act. Any let up on the part of the
Investigation Officer in this regard will pave the way for this Court
to consider appointing a Special Investigation Team in future. (ii)
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The appeals arising out of the order of the Division Bench of the
High Court dated 01.09.2022 are allowed. The order dated
01.09.2022 is set aside. All the three writ petitions challenging
the initiation of proceedings by ED shall stand dismissed. (iii)
The appeal arising out of the order of the High Court dated
30.03.2022 is dismissed. (iv) The appeal challenging the orders
dated 27.11.2019 and 01.11.2021 of the High Court relating to
extension of time for completion of investigation is dismissed.
The Investigation Officer shall proceed with further investigation
and file Further/Final Reports within two months. (v) The
Contempt Petitions and I.A. No. 26257 of 2023 are dismissed.
[Para 133][1096-F-H; 1097-A-C]
P. Dharamaraj vs. Shanmugam 2022 SCC OnLine SC
1186; Dharmaraj vs. Shanmugam 2022(13) SCALE
142; Vinay Tyagi vs. Irshad Ali alias Deepak (2013) 5
SCC 762 : [2012] 13 SCR 1005; Arun Kumar vs. Union
of India (2007) 1 SCC 732 : [2006] 6 Suppl. SCR 290;
Bihta Co-operative Development and Cane Marketing
Union Ltd. vs. Bank of Bihar AIR 1967 SC 389 : [1967]
SCR 848; Union of India vs. Ganpati Dealcom Private
Limited (2023) 3 SCC 315; Shauqin Singh vs. Desa
Singh (1970) 3 SCC 881; Enforcement Directorate vs.
Gagandeep Singh 2022 SCC Online Del 514; Parvathi
Kollur vs. State through ED Crl. Appeal No.1254/2022
dt.16.08.2022; Jairam Ramesh vs. Union of India SLP
(C) No.13103 of 2019; Thomas Franco Rajendra Dev
vs. Union of India WP (C) No.366/2022 dated
12.05.2022; Kantaru Rajeevaru (Right to Religion, In
re-9 J.) vs. Indian Young Lawyers Association (2020) 9
SCC 121; Asgar Ali vs. State of Jammu and Kashmir
2022 SCC Online SC 3095; Central Board of Dawoodi
Bohra Community vs. State of Maharashtra 2023 SCC
Online SC 129; Badrinath vs. Government of Tamil
Nadu (2000) 8 SCC 395 : [2000] 3 Suppl. SCR 573;
State of Kerala vs. Puthenkavu N.S.S. Karayogam
(2001) 10 SCC 191; State of Punjab vs. Davinder Pal
Singh Bhullar (2011) 14 SCC 770: [2011] 15 SCR 540;
Management of the Northern Railway Co-operative
Y. BALAJI v. KARTHIK DESARI & ANR. ETC.
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Credit Society Ltd., Jodhpur vs. Industrial Tribunal,
Rajasthan, Jaipur (1967) 2 SCR 476; Sakshi vs. Union
of India (2004) 5 SCC 518 : [2004] 2 Suppl. SCR 723;
Central Board of Dawoodi Bohra Community vs. State
of Maharashtra (2005) 2 SCC 673 : [2004] 6 Suppl.
SCR 1054 – referred to.
Street Tramways vs. London County Council (1898) AC
375 (378); Redcliffe vs. Ribble Motor Services (1939)
AC 215 (245) – referred to.
Case Law Reference
[2012] 13 SCR 1005
referred to
para 26
[1992] 1 Suppl. SCR 226
held inapplicable
para 45
(1992) 4 SCC 653
referred to
para 45
[2006] 6 Suppl. SCR 290
referred to
para 60
[1967] SCR 848
referred to
para 72
(2023) 3 SCC 315
referred to
para 74
(1970) 3 SCC 881
referred to
para 78
[2006] 6 Suppl. SCR 290
referred to
para 78
(2020) 9 SCC 121
referred to
para 81
[2000] 3 Suppl. SCR 573
referred to
para 82
(2001) 10 SCC 191
referred to
para 82
[2011] 15 SCR 540
referred to
para 82
[1967] 2 SCR 476
referred to
para 84
[2004] 2 Suppl. SCR 723
referred to
para 85
[2004] 6 Suppl. SCR 1054
referred to
para 85
CRIMINAL APPELLATE JURISDICTION : Criminal Appeal
Nos.1671-1673 of 2023.
From the Judgment and Order dated 01.09.2022 of the High Court
of Judicature at Madras in WP Nos.18213, 18209 and 12159 of 2022.
With
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Criminal Appeal Nos.1674, 1677, 1675-1676, 1678, 1658-1661,
1663-1664, 1662, 1679 of 2023, Contempt Petition (C) Nos.750-751 of
2023 And Criminal Appeal Nos.1680, 1681-1682, 1665 of 2023
Tushar Mehta, Solicitor General, Ms. Aishwarya Bhati, A.S.G.,
Amit Anand Tiwari, A.A.G., Gopal Sankaranarayan, C.A. Sundaram,
Mukul Rohatgi, Kapil Sibal, Sidharth Luthra, Siddharth Dave, Siddharth
Agarwal, Ranjit Kumar, Ms. V. Mohana, Sr. Advs., A. Lakshminarayanan,
B. Karunakaran, Nar Hari Singh, Balaji Srinivasan, Ms. Gauri Pasricha,
Ms. Aakriti Priya, Shiva K., Devamshu Behl,  Rohan Dewan, Lakshmi
Rao, Ms. Jhanvi Dubey, D. Raghu,  K. Sathiresan, Scv Vimal Pani, Ms.
Garima Jain,  Balaji Srinivasan, Ms. Misha Rohatgi, Nakul Mohta, Ms.
Riya Dhingra, Devansh Srivastava, Bharat Monga, Ms. Rohini, Zafar,
Mukesh Kumar Maroria, Prashant Bhushan, N Subramaniyan, Pranav
Sachdeva, Jatin Bhardwaj, Ms. Neha Rathi, Ms. Aakriti, S. Senthil, C.
Pandian, M. Thangathurai, Aditya Kishor Tyagi, T.S. Nanda Kumar,
Yusuf, Dr. Ram Sankar, N. Bharani Kumar, Ms. Anusha Nagarajan,
Ms. Rupali Samuel, Ms. Sumedha Roy Sarkar, Anand Kumar V., G. Jai
Singh, M/s. Ram Sankar & Co, Senthil Jagadeesan, Sajal Jain, Ms.
Anasuya Choudhury, Rudraditya Khare, Ms. Misha Rohatgi, Nakul
Mohta, Ms. Riya Dhingra, Bharat Monga, Ms. Alina Merin Mathew,
Samyak Jain, Mohd. Owais, Aakash Kumar, Gaurav Agrawal, Mayank
Pandey, Ashish Kumar Pandey, Arkaj Kumar,  Madhav Sinhal, Ms.
Deepabali Dutta, Kanu Agarwal, Vivek
Gupta, Zoheb Hussain, Dr. Joseph
Aristotle S., Ms. Devyani Gupta, Shobhit Dwivedi, Ms. Vaidehi Rastogi,
Kanu Agarwal, Vivek Gupta, Sarad Kumar Singhania, Zoheb Hussain,
Ms. Bhavya Pande, Ms. Sneha Botwe, Advs. for the appearing parties.
The Judgment of the Court was delivered by
V. RAMASUBRAMANIAN, J.
Permission to file special leave petition(s) is granted.
2. Delay condoned.
3. Leave granted.
4. Aggrieved by two independent orders, one passed by a learned
Judge of the Madras High Court on 31.10.2022 disposing of a batch of
criminal petitions and the other passed by the Division Bench of the
Madras High Court on 01.09.2022, putting on hold an investigation by
the Enforcement Directorate1, various persons such as (i) the de-facto
1 For short, “ED”
Y. BALAJI v. KARTHIK DESARI & ANR. ETC.
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complainants; (ii) third parties; (iii) the accused; and (iv) the ED have
come up with these batch of appeals. Other than the batch of appeals
arising out of the said two orders of the High Court, there are also two
appeals, one challenging the refusal of the High Court to extend the time
for completion of investigation and another challenging an order passed
by the Division Bench of the High Court granting limited relief to the
Enforcement Directorate to access certain documents available on record
in the Special Court trying the predicate offences. Apart from these
appeals, there are also two contempt petitions and an application seeking
the constitution of a Special Investigation Team.
5. We have heard Shri Tushar Mehta, learned Solicitor General
appearing for the ED, Shri Gopal Sankaranarayan, learned senior counsel,
Shri Prashant Bhushan and Shri Balaji Srinivasan, learned counsel
appearing for one set of parties (victims and a NGO), Shri Kapil Sibal,
Shri C.A. Sundaram, Shri Sidharth Luthra, Shri Mukul Rohatgi, learned
senior counsel appearing for another set of parties (accused), Ms. V.
Mohana and Shri Siddharth Agrawal, learned senior counsel appearing
for the de facto complainants and Shri Ranjit Kumar, learned senior
counsel appearing for the State of Tamil Nadu.
Background Facts
6. The background facts necessary to understand the complexities
of the batch of cases on hand are as follows:
(i) In November
2014, the Metropolitan Transport Corporation,
wholly owned by the State of Tamil Nadu issued five Advertisements, in
Advertisement Nos.1/2014 to 5/2014, calling for applications for
appointment to various posts such as Drivers (746 posts), Conductors
(610 posts), Junior Tradesman (Trainee) (261 posts), Junior Engineer
(Trainee) (13 posts) and Assistant Engineer (Trainee) (40 posts);
(ii) After interviews were held on 24.12.2014 and the Select List
got published, one Devasagayam lodged a complaint on 29.10.2015 with
the Chennai PS CCB against 10 individuals, alleging that he paid a sum
of Rs.2,60,000/- to a Conductor by name Palani for getting the job of
Conductor in the Transport Corporation for his son. However, his son
did not get a job and when he confronted Palani, he was directed to
several persons. When he demanded at least the refund of money, he
did not get it. Therefore, he lodged a complaint which was registered as
FIR No.441 of 2015 for alleged offences under Sections 406, 420 read
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with Section 34 of the Indian Penal Code, 18602. In this complaint, the
accused who are now before us, including the one who is holding the
post of Minister in the Government of Tamil Nadu were not implicated.
(iii) Similarly, one Gopi gave a petition dated 07.03.2016 to the
Commissioner of Police claiming that he had applied for the post of
Conductor and that after the interviews, he was approached by one
Ashokan claiming to be the brother and one Karthik claiming to be the
brother-in-law of the Minister Senthil Balaji, demanding a bribe for
securing appointment and that he had paid a sum of Rs.2,40,000/- to
those persons. Complaining that the Police did not register his complaint,
the said Gopi filed a petition in Crl. OP No.7503 of 2016 on the file of the
High Court of Judicature at Madras under Section 482 of the Code of
Criminal Procedure, 19733 seeking a direction to the Commissioner of
Police to register his complaint and investigate the same.
(iv) The said Crl. OP No.7503 of 2016 filed by Gopi was disposed
of by a learned Judge of the High Court by an Order dated 20.06.2016.
In the said order, it was recorded that according to the Additional Public
Prosecutor, 81 persons had given similar complaints to the Police and
that the complaint given by Devasagayam had been registered as FIR
No.441 of 2015. The Additional Public Prosecutor took a stand before
the High Court in the said petition filed by Gopi that all the 81 persons
including Gopi will be
enlisted as witnesses in the complaint registered at
the instance of Devasagayam.
(v) When it was stated by the Additional Public Prosecutor at the
time of hearing of the petition filed by Gopi that all 81 persons including
Gopi will be cited as witnesses, in the complaint filed by Devasagayam,
the petitioner Gopi objected to the same on the ground that Devasagayam
had already been won over by the accused. In fact, it was pointed out
that the Minister did not figure as an accused in the complaint of
Devasagayam. A specific grievance was projected by Gopi that the Police
are not going beyond the lower level officers. Accepting his statement,
the High Court passed an Order dated 20.06.2016 in Crl. OP No.7503
of 2016 filed by Gopi, holding that the Police is duty bound to probe
beyond the lower level minions to find out where the money had gone.
After so holding, the Court directed the Assistant Commissioner of Police,
Central Crime Branch (Job Racketing) to take over the investigation in
2 For short “IPC”
3 For Short “the Code”
Y. BALAJI v. KARTHIK DESARI & ANR. ETC.
[V. RAMASUBRAMANIAN, J.]
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FIR No.441 of 2015 and also directing the Deputy Commissioner of
Police to monitor the same. The Court also held that since a FIR has
already been registered at the behest of Devasagayam, it is not necessary
to have another FIR registered on the complaint/representation made by
Gopi.
(vi) Despite the direction issued by the High Court on 20.06.2016
to the Police to go beyond lower level officers and find out where the
money trail ends (more than about 2 crores allegedly given to the Minister
during January and March, 2015) and despite Gopi making specific
averments against the brother and brother-in-law of the Minister, the
Police filed a Final Report on 13.06.2017 under Section 173(2) of the
Code, only against 12 individuals including those 10 persons named by
Devasagayam. Upon the filing of the Final Report, the case got numbered
as Calendar Case No.3627 of 2017 in FIR No.441 of 2015. Neither the
Minister nor his brother or brother-in-law, were cited as accused, in the
Final Report. The accused named in the Final Report were charged only
for the offences under Sections 406, 420 and 419 read with Section 34
IPC and not under any provisions of the Prevention of Corruption Act,
19884.
(vii) One V. Ganesh Kumar then lodged a criminal complaint in
FIR No.298 of 2017 on 09.09.2017 with the Chennai PS CCB, against
four persons including the Minister Senthil Balaji. It was stated in his
complaint that he was an employee of
the Transport Department and
that one of his colleagues by name Annaraj and his friend R. Sahayarajan
were taken by one Prabhu (a relative of the Minister) to the house of the
Minister Senthil Balaji and that the Minister instructed them to collect
money from persons aspiring to get appointment as Drivers and
Conductors. It was further stated in the complaint that as per the directions
of the Minister, an amount totaling to Rs.95 lakhs was collected during
the period from 28.12.2014 to 10.01.2015 and that though the amount
was given to Prabhu and Sahayarajan, the persons who parted with
money did not get appointed. Therefore, persons who paid money started
exerting pressure upon V. Ganesh Kumar forcing him to lodge a complaint
on 09.09.2017. Even this complaint, registered as FIR No.298 of 2017,
was only for offences under Sections 406, 420 and 506(1). A Final Report
was filed on 07.06.2018 in FIR No.298 of 2017, against the Minister
Senthil Balaji and three others, only for offences punishable under
4 For short, “PC Act”
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Sections 420 and 506(1) read with Section 34 IPC. This Final Report
was filed before the Special Court and the case was numbered as CC
No.19 of 2020. Despite specific allegations, the offences under the PC
Act were not included.
(viii) Another complaint was lodged by one K. Arulmani, on
13.08.2018 with the Commissioner of Police, Chennai City, complaining
that a huge amount of Rs.40,00,000/- was collected by his friends who
wanted to get employment in the Transport Corporation and that the
money was actually paid to Shanmugam, PA to the Minister at the
residence of the Minister in the first week of January, 2015. It was
further stated in the complaint that after money was paid to Shanmugam,
the complainant also met Ashok Kumar (brother of the Minister) and
Senthil Balaji (Minister) and that the Minister assured to get appointment
orders issued. This complaint was registered by Chennai CCB PS as
FIR No.344 of 2018, again for offences only under Section 406, 420 and
506(1) IPC. We do not know why the State Police were averse to the
idea of including the offences punishable under the PC Act, in any
of the three FIRs. While one may be averse to corruption, one cannot
be averse to the PC Act.
(ix) As had happened in respect of the other two complaints, the
complaint in FIR No.344 of 2018 was also investigated (or not
investigated) and a Final Report was filed on 12.04.2019. Even this Final
Report, taken on record in Calendar Case No.25 of 2021 did not include
the offences under the PC Act.
(x) At this juncture, a person by name R.B. Arun Kumar, working
as a Driver in the Metropolitan Transport Corporation and who was
cited as witness LW 47 in the Final Report in CC No.3627 of 2017
arising out of FIR No.441 of 2015 (Devasagayam’s complaint) moved
the Madras High Court by way of a petition under Section 482 of the
Code in Crl. O.P No.32067 of 2019, seeking further investigation in the
case, on the ground that the State Police have not acted as per the
directions issued by the High Court in its order dated 20.06.2016 in Crl.
O.P. No.7503 of 2016 to go beyond the lower level officers. In his petition,
R.B. Arun Kumar also pointed out that the specific allegation of a huge
amount of more than Rs.2 crores, having been paid to the Minister Senthil
Balaji, had been completely suppressed by the investigating agency and
that a dummy charge-sheet had been filed against minions. Therefore,
by an order dated 27.11.2019, the High Court directed the Assistant
Y. BALAJI v. KARTHIK DESARI & ANR. ETC.
[V. RAMASUBRAMANIAN, J.]
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Commissioner of Police, CCB (Job Racketing) to conduct further
investigation in CC No.3627 of 2017 and to complete the same within
six months.
(xi) Emboldened by the non-inclusion of the offences under the
PC Act in any of the three charge-sheets, Minister Senthil Balaji, arrayed
as Accused No.1 in CC No.19 of 2020 arising out of FIR No.298 of
2017 lodged by V. Ganesh Kumar, filed a petition in Criminal M.P.
No.7968 of 2020 seeking his discharge in CC No.19 of 2020. But the
Special Court dismissed the petition for discharge, by an order dated
26.08.2020. Against the said order dismissing his discharge petition, the
Minister filed a criminal revision petition in Crl. R.C. No.224 of 2021 on
the file of the High Court
(xii) But in the meantime, a Final (further) Report under Section
173(8) of the Code was filed in C.C.No. 24 of 2021 against 47 persons
including the Minister Senthil Balaji and Shanmugam (PA to the Minister)
in which the offences under the PC Act were included.
(xiii) Upon coming to know of the way in which the entire
recruitment of candidates to various posts in the Transport Corporation
had gone on, candidates who appeared for the selection but did not get
selected started filing writ petitions, challenging the entire selection. A
writ petition in WP No.9061 of 2021 was filed by one A. Nambi Venkatesh
seeking to set at naught, the appointment of Junior Engineers. Similarly,
one P. Dharmaraj and M.
Govindarasu filed a writ petition in WP No.8991
of 2021, with regard to the post of Assistant Engineers.
(xiv) In May, 2021 the political climate in the State changed.
Though the principal actors changed, the script remained the same
for the victims and the political fortunes of the Minister continued,
as he got a berth in the Cabinet, even in the new dispensation.
(xv) Thereafter, the person alleged to be the PA to the Minister,
namely, Shanmugam, who was arrayed as Accused No.3 in CC No.25
of 2021 arising out of FIR No.344 of 2018 lodged by Arulmani, filed a
petition in Crl.O.P No.13374 of 2021 on the file of the High Court seeking
to quash CC No.25 of 2021. He claimed in the said petition that a
compromise had been reached between the victims (Arulmani and others
and the accused) and that, therefore, the complaint may be quashed.
Following suit, R. Sahayarajan who was Accused No.3 in CC No.19 of
2020 also filed a quash petition in Crl.O.P No.13914 of 2021, enclosing a
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joint compromise memo seeking to quash CC No.19 of 2020. Similarly,
one Vetrichelvan (Accused No.10) filed Crl. O.P No.6621 of 2021 for
quashing the proceedings in CC No.24 of 2021.
(xvi) By an order dated 30.07.2021, the High Court quashed CC
No.25 of 2021 on the basis of the Joint Compromise Memo. This order
was passed completely overlooking the nature of the allegations, the
offences for which the accused ought to have been charged as well as
the previous orders passed by the High Court itself.
(xvii) Just a day before the High Court passed orders quashing
CC No.25 of 2021, the ED registered an Information Report on
29.07.2021 in ECIR/MDSZO/21/2021 and issued summons to the Minister
Senthil Balaji.
(xviii) At this stage, Devasagayam who filed the first complaint in
FIR No.441 of 2015 and in whose case a Final Report was filed in CC
No.3627 of 2017, filed a very strange petition on the file of the High
Court in Crl.O.P. No.15122 of 2021 seeking de novo investigation in
CC No.24 of 2021. It must be recalled at this stage that Devasagayam’s
complaint was registered as FIR No.441 of 2015 dated 29.10.2015 and
a Final Report was filed therein on 13.06.2017 leading to Calendar Case
No.3627 of 2017. But by the orders of the High Court, the complaint of
Gopi and others got clubbed with the investigation in Devasagayam’s
case leading to the registration of a separate Calendar Case in CC No.24
of 2021. The clubbing actually happened after an allegation was made
before the High Court by Gopi, (petitioner in Crl. O.P No.7503 of 2016)
to the effect that Devasagayam had been won over. While ordering the
complaint of Gopi to be clubbed with the investigation in FIR No.441 of
2015, the High Court did not perhaps realize that it may enable
Devasagayam to derail (incidentally he had retired from Railways
and the word “derail” suits him) even the proceedings in CC No.24
of 2021.
(xix) Finding that the offences under the PC Act were included
only in one of the cases and not in others and that it had enabled the
High Court even to quash one of the four calendar cases on the basis of
a Joint Compromise Memo, candidates who were unsuccessful in the
recruitment and who had filed writ petitions in the High Court challenging
the process of selection, filed impleadment petitions, both in the quash
petitions in other cases as well as in the petition filed by Devasagayam
for de novo investigation.
Y. BALAJI v. KARTHIK DESARI & ANR. ETC.
[V. RAMASUBRAMANIAN, J.]
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(xx) At this stage, ED filed miscellaneous petitions in CC Nos.
19/20, 24/21 and 25/21 before the Trial Court seeking certified copies of
the FIR, statements of witnesses, Final Report, etc. By an order dated
09.11.2021, the Trial Court directed the supply of certified copies of the
FIRs, complaints and the statements under Sections 161 and 164 of the
Code. However, the Trial Court refused to issue certified copies of
unmarked documents.
(xxi) As against the order dated 30.07.2021 passed by the Madras
High Court quashing CC No.25 of 2021 on the basis of the Joint
Compromise Memo, a special leave petition was filed by one P.
Dharmaraj. It may be recalled that he was one of the unsuccessful
candidates and he had filed a writ petition seeking to quash the entire
selection.
(xxii) An NGO by name Anti-Corruption Movement also filed a
special leave petition against the order of the High Court quashing CC
No.25 of 2021.
(xxiii) Aggrieved by one portion of the order of the Trial Court
refusing to grant certified copies of unmarked documents, the ED filed
petitions before the High Court. By an order dated 30.03.2022 the High
Court permitted ED to conduct an inspection under Rule 237 of the
Criminal Rules of Practice, 20195 and thereafter to make third party
copy applications for supply of copies of documents. The High Court
also noted that under Rule 238, ED was entitled even to take extracts
and thereafter file a fresh third
party copy application before the Special
Court. Challenging the limited relief granted by the High Court to ED in
its order dated 30.03.2022, a person who is Accused No.3 in CC No.3627
of 2017 (CC No.24/2021) has come up with a special leave petition
which forms part of the present batch of cases.
(xxiv) Thereafter, three writ petitions came to be filed, one by
Minister Senthil Balaji and another by Shanmugam, alleged to be his
Secretary and the third by Ashok Kumar (brother of the Minister),
challenging the summons issued by ED. These writ petitions were allowed
by the High Court by an order dated 01.09.2022, primarily on the ground
that one of the four calendar cases had already been quashed by the
High Court by order dated 30.07.2021 on the basis of a Joint Compromise
Memo and that further proceedings in the other calendar cases had
been stayed by the High Court.
5 For short “Rules, 2019”
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(xxv) But by a Judgment dated 08.09.2022, this Court overturned
the order of the High Court dated 30.07.2021 and not only restored the
calendar cases back to file but also directed the inclusion of the offences
under the PC Act.
(xxvi) Despite the Judgment of this Court dated 08.09.2022, the
High Court passed an order dated 31.10.2022 allowing the petition filed
by Devasagayam and ordered a de novo investigation.
(xxvii) Therefore, challenging the order of the High Court dated
01.09.2022 quashing the summons issued by them, ED has come up
with three appeals and the candidate who was unsuccessful in the
selection and who has filed a writ petition before the High Court has
come up with one appeal.
(xxviii) Challenging the order of the High Court dated 31.10.2022
directing de novo investigation, the ED has come up with one appeal,
two candidates who were unsuccessful in the selection have come up
with two separate appeals, Anti-Corruption Movement has come up with
one appeal, the person who compromised the matter with the accused
and supported the accused before the High Court for quashing the
complaint has come up with one appeal and one of the accused has
come up with another appeal.
(xxix) In other words, we have four appeals on hand arising out
of the order of the High Court dated 01.09.2022 quashing the summons
issued by ED. Similarly, we have six appeals challenging the order dated
31.10.2022 passed by the High Court directing de novo investigation.
(xxx) We have two more appeals, which do not form part of the
main stream. One of them is by an accused challenging the order of the
High Court dated 30.03.2022, permitting the ED to conduct an inspection
of the documents before the Trial Court under Rule 237 of the Rules,
2019. Another appeal is filed by the unsuccessful candidate challenging
an order passed by the High Court dismissing a petition for extension of
time to complete investigation.
(xxxi) Thus, we have on hand 12 appeals, four of them challenging
the quashing of summons issued by ED, six of them challenging the
order for de novo investigation, one of them challenging an order
permitting ED to have inspection of documents and the last arising out
of the order refusing to grant further time for completion of investigation.
Y. BALAJI v. KARTHIK DESARI & ANR. ETC.
[V. RAMASUBRAMANIAN, J.]
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(xxxii) Other than the appeals, we also have two contempt petitions
filed by the Anti-Corruption Movement, complaining willful disobedience
by the State of the directions issued by this Court in the order dated
08.09.2022 in Criminal Appeal Nos.1515-1516 of 2022.
(xxxiii) We also have an application in IA No.26527 of 2023 filed
by the appellant in one of these appeals, who is an unsuccessful candidate.
The prayer in this application is for the constitution of a Special
Investigation Team to undertake a comprehensive investigation into the
entire scam and for the appointment of a senior lawyer of repute as the
Special Public Prosecutor to prosecute the accused. This application is
taken out on the ground that a similar prayer made in Criminal Appeal
Nos.1514-1516 of 2022 was turned down by this Court, in the order
dated 08.09.2022, in the hope that the State Police would act fairly and
impartially. According to the applicant/appellant, the State Police had
belied the hope expressed by this Court and that therefore it is now time
to constitute a Special Investigation Team.
7. Since the batch of appeals on hand (not including the contempt
petitions and the application for constitution of a Special Investigation
Team) arise out of four different orders of the High Court, let us divide
this Judgment into four parts, the first dealing with the challenge to the
order for de novo investigation; the second dealing with the
challenge to
the order setting aside the summons issued by ED; the third dealing with
the order permitting the ED to have inspection of the records of the Trial
Court; and the fourth dealing with an order refusing to grant extension
of time to complete investigation.
Part-I (Challenge to the order for de novo investigation)
 8. As we have pointed out earlier, de novo investigation has been
ordered by the High Court by its decision dated 31.10.2022 at the instance
of one Devasagayam, who was the first person to lodge a complaint
way back on 29.10.2015 alleging that one C. Palani working in the
Transport Corporation received a sum of Rs.2,60,000/- for securing the
job of a Conductor for his son and that he and his accomplices committed
offences punishable under Sections 406 and 420 read with Section 34
IPC. This complaint was registered as FIR No.441 of 2015. Despite the
fact that the allegations of Devasagayam related to payment of money
to an employee of the Transport Corporation for procuring a job for his
son, the offences under the PC Act were not included in the FIR.
Interestingly, Devasagayam is a retired employee of the Railways. While
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he was happy about paying illegal gratification for procuring
employment for his son, he was not unhappy about the Police not
including the offences under the PC Act in FIR No.441 of 2015.
9. This attitude of Devasagayam was responsible for an allegation
being made against Devasagayam in a petition filed by another victim by
name Gopi, in Criminal O.P. No.7503 of 2016, that Devasagayam had
been won over by the accused.
10. On Devasagayam’s complaint, the Investigating Officer filed
a Final Report on 13.06.2017, which led to the registration of a Calendar
Case in CC No.3627 of 2017. Even in this Final Report, the offences
under the PC Act were not included. Devasagayam did not bother to
question the Police or move the Court as to why the offences under the
PC Act were not included.
11. But fortunately, pursuant to the order passed by the High Court
in the petition filed by Gopi, another Calendar Case came to be registered
in CC No.24 of 2021, on a further Report submitted by the Police under
Section 173(8) of the Code. In this CC No.24 of 2021, the Minister and
his accomplices were included as accused and the offences under the
PC Act were included.
12. This further Report under Section 173(8) of the Code which
culminated in the registration of CC No.24 of 2021 was filed on
08.03.2021.
13. The inclusion of the name of the Minister and his accomplices
in the Final Report submitted under Section 173(8) and the inclusion of
the offences under the PC Act
seems to have bothered Devasagayam
more than the Minister himself. Therefore, Devasagayam filed a petition
in Criminal O.P. No.15122 of 2021 in CC No.24 of 2021 seeking a direction
to the Investigating Officer to conduct a de novo investigation.
14. The grounds on which Devasagayam sought de novo
investigation were quite strange. In his petition seeking de novo
investigation, Devasagayam stated that though his specific complaint
was against one Baskar and nine others, the Final Report filed under
Section 173(8) included other persons, who, according to Devasagayam,
had no connection with the case. Devasagayam also stated in his petition
seeking de novo investigation that Baskar and Kesavan against whom
he made a specific complaint, are not shown as accused. In fact, the
allegation made by Gopi in his petition before the High Court that
Y. BALAJI v. KARTHIK DESARI & ANR. ETC.
[V. RAMASUBRAMANIAN, J.]
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Devasagayam had been won over by the accused, was not without
substance, as can be seen from a few averments made by Devasagayam
in his petition Criminal O.P. No.15122 of 2021. For instance, in paragraph
7 of his petition seeking de novo investigation, he stated as follows:
“It is crystal clear that the Petitioner and his son has made a
specific complaint against one Baskar and Kesavan. The fictitious
persons namely Baskar and Kesavan was arrayed as Accused
No.1 and 2. …”
15. It is not known whether Devasagayam was referring to the
persons against whom he made a specific complaint as fictitious persons
or whether he was calling the Minister and the person alleged to be his
Secretary, named as accused in the Final Report as fictitious persons.
16. In paragraph 9 of his petition seeking de novo investigation,
Devasagayam even relied upon a judicial precedent and contended in
paragraph 10 that the Final Report under Section 173(8) had been filed
without issuing notice to him and that the charges contained in the Report
against the other accused are irrelevant to the facts of his own case.
Paragraphs 28 to 30 of Devasagayam’s petition seeking de novo
investigation show that he had gone to the extent of pleading the case of
the main culprits. These paragraphs read as follows:
“28. The gross violation and the irregularity in concluding the final
report, with all the above it is pertinent to state that the final report
did
not warrant any commission of offence against anybody and
the crime registered is motivated. A Court proceeding ought not
to be permitted to degenerate into a weapon of harassment of
prosecution.
29. The allegations made in the Final report are so absurd and
inherently Improbable on the basis of which no prudent person
can ever reach a just conclusion that there is sufficient ground for
proceeding against the accused, but may escape from the clutches
of law.
30. The present criminal proceeding is manifestly attended with
mala fide and/or the proceeding is maliciously instituted with an
ulterior motive for wreaking vengeance on the accused and with
a view to spite him due to private and personal grudge.”
17. It appears that Devasagayam, originally seems to have
had a genuine grievance against the culprits at the bottom of the
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layer, but he later turned out to be a Trojan horse, willing to sabotage
the investigation against influential persons. This fact is borne out
more by his pleadings in paragraph 31 of the petition in Criminal O.P.
No.15122 of 2021. The relevant portion of paragraph 31 reads as follows:
“31. …Where criminal proceedings are initiated based on
illicit material collected on search and arrest which are per
se illegal and vitiate not only a conviction and sentence
based on such material but also the trial itself, the proceedings
cannot be allowed to go on as it cannot but amount to abuse of the
process of the court; in such a case not quashing the
proceedings would perpetuate abuse of the process of the
court resulting in great hardship and injustice to the
accused. In our opinion, exercise of power under section 482
Cr.P.C. to quash proceedings in a case like the one on hand, would
indeed secure the ends of justice.”
18. It is seen from the above averment of Devasagayam, that he
was virtually pleading the case of the accused and seeking de novo
investigation. But alas, Devasagayam was not the only one to be
blamed. He had a silent partner in the prosecution which we shall
see now. If Devasagayam leapfrogged several miles to protect the
actual culprits, the High Court seems to have gone one step further
by ordering de novo investigation on a point not canvassed in the
petition filed by Devasagayam. In fact, in the main paragraph 21 of
the impugned order of the
High Court dated 31.10.2022, the High Court
has discussed elaborately the contentions advanced on behalf of
Devasagayam in support of his plea for de novo investigation. These
contentions were in sync with the averments contained in his petition in
Criminal O.P. No.15122 of 2021.
19. Though the original petition and the arguments recorded in
paragraph 21 of the impugned order do not reflect one particular ground,
the operative portion of the impugned order allows de novo investigation
on a ground not raised in the petition. In paragraph 55 of the impugned
order, it was recorded by the High Court that as per the affidavit filed by
the Investigating Officer, the investigating agency had seized the register
used for entering interview marks and sent the same to the Forensic
Department for analysis to find out the manipulations and that the Final
Report under Section 173(8) of the Code was filed even before the
receipt of the report of the Forensic Department. It is on this contention
Y. BALAJI v. KARTHIK DESARI & ANR. ETC.
[V. RAMASUBRAMANIAN, J.]
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that the High Court thought fit to order de novo investigation not only in
the case in which Devasagayam sought de novo investigation but also
in all the criminal cases. What is interesting is that the order directing
de novo investigation in all the three cases, has actually inured to
the benefit of the accused, but the High Court put it on the ground
that the credibility of the investigation should not be eroded. In fact,
the accused did not seek de novo investigation on the ground of
slackness on the part of the Investigating Officer, but it was
Devasagayam who sought it, with the able assistance of the
Investigating Officer.
20. The fact that Devasagayam’s petition was intended to help
the accused is also borne out by one more fact. His original complaint
dated 29.10.2015 which led to the registration of FIR in Crime No.441
of 2015 was against ten persons and the offences registered therein
were only under Sections 406 and 420 read with Section 34 IPC. On this
complaint, a Final Report was filed under Section 173(2) of the Code on
13.06.2017 and this resulted in the registration of Calendar Case in CC
No.3627 of 2017. Devasagayam was happy with the fact that the Report
filed under Section 173(2) did not include the offences under the PC
Act. Devasagayam was not bothered at that time about the fact that the
register for entering the interview marks, sent to the Forensic Department
had not been received. Suddenly,
he became worked upafter the filing
of the Report under Section 173(8) leading to the registration of Calendar
Case No.24 of 2021 including the offences under the PC Act.
21. What is shocking is that the High Court directed
reinvestigation to be started ab initio, wiping out the earlier
investigation altogether. One saving grace in this case is that even
the learned senior counsel appearing for Devasagayam and the
learned senior counsel appearing for the accused could not support
the operative portion of the impugned order dated 31.10.2022, in
Criminal O.P. No.15122 of 2021. Paragraphs 79 to 81 of the impugned
order dated 31.10.2022, needs to be extracted. They read as follows:
“79. Therefore, I am of the view that reinvestigation to be
started ab-initio wiping out the earlier investigation
altogether and to collect fresh evidence and material in the above
criminal cases. Hence, I allowed the Crl.O.P.No. 15122 of2021
in C.C.No.24 of 2021 for de-novo investigation along with
C.C.No.19 of 2021.
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80. Therefore, it is directed the investigation should be conducted
ab-initio comprehensively without reference to the earlier
investigation on record covering all the aspects in relation
C.C.No.19 of 2020 and C.C.No.24 of 2021 including whether
the offence under Prevention of Corruption Act, 1988 are
made out against the accused. The special Court before which
C.C.No.19 of 2020 and C.C.No.24 of 2021 are pending will be at
liberty to exercise power under Section 216 Cr.P.C, if there is any
reluctance on the part of the State/investigating Officer.
81.Further, on completion of investigation, if the investigating
agency makes out a case for cognizance of offence against the
accused then the investigating agency of the predicate offence
shall provide the relevant materials/documents to the Directorate
of Enforcement so as to enable it to invoke its jurisdiction to
commence its enquiry under the P.M.L.A Act thereafter.”
22. By issuing the aforesaid direction, the High Court not only
directed the wiping out of the investigation carried out so far, but
virtually wiped out even the judgment of this Court dated 08.09.2022
passed in Criminal Appeal Nos.1514-1516 of 2022. Hail judicial
discipline!
23. Shri Kapil Sibal, learned senior counsel appearing for the
accused and Shri Siddharth Aggarwal, learned senior counsel for
Devasagayam, contended before us that the problem reflected in
paragraphs 79 to 81 of the impugned order is one of language and
not of law.
According to them, the expression “wiped out” had been
used out of context and that what was sought to be removed by the High
Court was only the conclusions reached by the Investigating Officer on
the basis of the materials already collected. In other words, their
contention was that the investigation so far made and the materials so
far collected can never be thrown into the dustbin but that the conclusions
reached by the Investigating Officer on the basis of those materials
alone required to be wiped out.
24. It is true that English is not our mother tongue. It is also
true that some allowance (or discount ranging from 0 to 90%) can
be given at times to the use of certain loose expressions. But the
expressions used in paragraphs 79 to 81 of the impugned order do
not reflect a mere deficiency in language or law, but something
more. As rightly pointed out by Shri Gopal Sankaranarayanan, learned
Y. BALAJI v. KARTHIK DESARI & ANR. ETC.
[V. RAMASUBRAMANIAN, J.]
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senior counsel, the High Court has used in the impugned order, several
words and expressions such as, (i) reinvestigation to be started ab initio,
(ii) wiping out the earlier investigation altogether; (iii) collect fresh
evidence and material; and (iv) without reference to the earlier
investigation on record.
25. Apart from the usage of the above words and phrases,
which in our opinion, not merely opened up a small loophole in the
law but opened up a huge black hole in the galaxy, the High Court
issued one more direction in paragraph 80. This direction is to the
investigating agency to find out whether the offences under the PC Act
are made out against the accused or not. Such a direction stares at what
this Court has said in paragraph 45 of the decision dated 08.09.2022 in
Criminal Appeal Nos.1514-1516 of 2022. This Court has said “We are
constrained to say that even a novice in Criminal Law would not
have left the offences under the PC Act, out of the final report.”
Ignoring the said opinion of this Court, the High Court has directed the
Investigating Officer to find out afresh whether the offences under the
PC Act are made out or not. Therefore, the problem with the impugned
order is not merely one of improper usage of language, as sought to be
diluted by the learned senior counsel for the accused and the complainant,
but something more.
26. Even while supporting the impugned order, the learned senior
counsel for
the accused and the learned senior counsel for Devasagayam,
requested us to read down paragraphs 79 to 81 of the impugned order
and go by its intent. But it is easier said than done since we have had
precedents of this Court reading down statutes but never one of
reading down a judgment. In view of the stand so taken even by the
counsel for the accused and counsel for Devasagayam, it may not be
strictly necessary to deal with the law relating to de novo investigation.
Yet we would make a useful reference to the decision in Vinay Tyagi
vs. Irshad Ali alias Deepak6.
27. Vinay Tyagi (supra) arose out of certain peculiar facts. The
Special Cell of Delhi Police registered a First Information Report against
two persons under some provisions of the Explosive Substances Act,
1908, a few provisions of the IPC and Section 25 of the Arms Act. The
accused filed a petition in the High Court of Delhi seeking a transfer of
investigation to CBI on the ground that they were working as Informers
6 (2013) 5 SCC 762
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for the Intelligence Agencies and that they have been falsely implicated.
Though the High Court entertained the petition, no stay was granted.
Therefore, the Special Cell of Delhi Police proceeded with the
investigation and filed a charge-sheet. Thereafter, the High Court passed
an order directing the CBI to undertake an inquiry and submit a report to
the Court. Accordingly, CBI undertook an inquiry and filed a report stating
that the investigation carried out by Delhi Police did not inspire confidence
and that further investigation was needed. Thereafter, CBI filed a closure
report. On the basis of the same, the accused sought discharge. Since
discharge was not ordered, they approached the High Court, but the
High Court remanded the matter back to the Sessions Court. It is the
said order of remand that was challenged by the Investigating Officer
before this Court. This Court framed two questions as arising for
consideration in Vinay Tyagi. They read as follows:-
“Question 1
1.1. Whether in exercise of its powers under Section 173 of the
Code of Criminal Procedure, 1973 (for short “the Code”), the
trial court has the jurisdiction to ignore any one of the reports,
where there are two reports by the same or different investigating
agencies in furtherance of the orders of a court? If so, to what
effect?
Question 2
1.2. Whether the Central Bureau of Investigation (for short
“CBI”) is empowered to conduct “fresh”/ “reinvestigation” when
the cognizance has
already been taken by the court of competent
jurisdiction on the basis of a police report under Section 173 of the
Code?”
28. While dealing with the First Question, this Court pointed out
that investigation can be of three kinds namely, (i) initial investigation;
(ii) further investigation; and (iii) fresh or de novo or reinvestigation.
After exploring the meaning of “initial investigation” in paragraph 21
and the meaning of “further investigation” in paragraph 22, this Court
recorded in paragraph 23, what a fresh investigation/reinvestigation/de
novo investigation is and the circumstances under which the same can
be ordered. Paragraph 23 of the decision reads as follows:-
“23. However, in the case of a “fresh investigation”,
“reinvestigation” or “de novo investigation” there has to be a
definite order of the court. The order of the court unambiguously
should state as to whether the previous investigation, for reasons
Y. BALAJI v. KARTHIK DESARI & ANR. ETC.
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to be recorded, is incapable of being acted upon. Neither the
investigating agency nor the Magistrate has any power to order
or conduct “fresh investigation”. This is primarily for the reason
that it would be opposed to the scheme of the Code. It is essential
that even an order of “fresh”/”de novo” investigation passed by
the higher judiciary should always be coupled with a specific
direction as to the fate of the investigation already conducted.
The cases where such direction can be issued are few and far
between. This is based upon a fundamental principle of our criminal
jurisprudence which is that it is the right of a suspect or an accused
to have a just and fair investigation and trial. This principle flows
from the constitutional mandate contained in Articles 21 and 22 of
the Constitution of India. Where the investigation ex facie is unfair,
tainted, mala fide and smacks of foul play, the courts would set
aside such an investigation and direct fresh or de novo investigation
and, if necessary, even by another independent investigating
agency. As already noticed, this is a power of wide plenitude and,
therefore, has to be exercised sparingly. The principle of the rarest
of rare cases would squarely apply to such cases. Unless the
unfairness of the investigation is such that it pricks the judicial
conscience of the court, the court should be reluctant to interfere
in such matters to the extent of quashing an
investigation and
directing a “fresh investigation”.
29. In paragraphs 43 and 45, this Court held that the power to
order de novo investigation vests only with superior courts and that the
same has to be exercised sparingly in exceptional cases. In paragraph
46, this Court pointed out that while ordering de novo investigation, there
are two options open to the superior court namely, (i) to direct the report
already prepared or the investigation so far conducted, not to form part
of the records of the case; or (ii) to direct the report already prepared or
the investigation so far conducted to form part of the record. If the
superior court is silent on this aspect, the report already prepared or the
investigation so far conducted will form part of the record. In other
words, if the superior court intended that the investigation so far conducted
and the report already filed should not form part of the record, it should
specifically say so.
30. In the order impugned in these appeals, the High Court has
indicated by using four different expressions and phrases that the
investigation so far conducted shall not form part of the record. But
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even according to the learned senior counsel for Devasagayam and
learned senior counsel for the accused, the operative portion of the
impugned order of the High Court need not be understood in such a
manner. If that is so, all those phrases and expressions deserve to
be removed. If they are removed, the life gets ebbed out of the
impugned order, which in our opinion, it richly deserves.
31. Before we wind up our discussion in Part-I, it may be necessary
to deal with a few preliminary objections raised on behalf of the accused
to the very maintainability of these appeals. The question of maintainability
is raised on the basis of the status of the parties. Therefore, it is essential
to take stock of the status of parties who have filed appeals against the
order of the Madras High Court for de novo investigation. For easy
appreciation, the status of parties who are the appellants in the appeals
arising out of the order for de novo investigation and a brief indication
of who they are, are presented in a tabular column as follows:-
Civil Appeals arising out of 
Special Leave Petitions and 
Diary Numbers 
Name of appellant 
Brief description of who he is and how he is 
aggrieved 
by 
the 
order 
of 
de 
novo 
investigation 
SLP (Crl.) Nos.1207-1208 of 
2023 
Director, 
Enforcement 
ED is aggrieved because any shadow cast on 
the investigation of the predicate offence, is 
taken advantage of by the accused to thwart the 
investigation 
of 
the offence 
of
money 
laundering. 
SLP (Crl.) No.11396 of 2022 
Y. Balaji  
He was one of the aspirants for the post of 
Assistant 
Engineer 
in 
the 
Transport 
Corporation. His grievance is that he did not 
get selected on account of the corrupt practices 
adopted by the Minister and others. He has also 
filed writ petition in WP No.24275 of 2021 
seeking a direction to the Director, Vigilance 
and 
Anti-corruption 
to 
conduct 
further 
investigation in CC No.19 of 2020. The writ 
petition is pending. 
SLP (Crl.) No.11397 of 2022 
S. Prithvirajan 
He is one of the aspirants for the post of Junior 
Engineer. He claims that his marks were 
tampered to accommodate less meritorious 
candidates who indulged in corrupt practices. 
SLP (Crl.) D.No.961 of 2023  
Anti-Corruption 
Movement 
A NGO interested in combating corruption. 
SLP(Crl.)D.No. 10217 of 2023 
V. Ganesh Kumar 
He was the complainant in FIR No.298 dated 
09.09.2017, registered against (i) Minister 
Senthil Balaji; (ii) Prabhu; (iii)Sahayarajan; 
and (iv) Annaraj, for offences under Sections 
406, 420 and 506(1) IPC. Interestingly, he 
entered into a compromise with the accused 
and supported them in their petition for 
quashing of the FIR. Now he is aggrieved by 
the order for de novo investigation for obvious 
reasons. 
SLP(Crl.)D.No. 10186 of 2023 
R.Sahayarajan 
He is one of the accused in the complaint given 
by V. Ganesh Kumar and he filed a petition 
before the High Court seeking to quash the FIR 
and the charge-sheet on
the ground of a 
compromise. 
Y. BALAJI v. KARTHIK DESARI & ANR. ETC.
[V. RAMASUBRAMANIAN, J.]
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32. Shri Mukul Rohatgi, Shri Kapil Sibal, Shri Sidharth Luthra,
and Shri C.A. Sundaram, learned senior counsel appearing for different
accused, uniformly raised a chorus, vociferously objecting to the
maintainability of the appeals by each of those appellants, against the
order of de novo investigation. Their contention is that investigation of a
criminal offence cannot be a free-for-all exercise and that one must
have locus to challenge the proceedings. According to the learned counsel,
some of the appellants who are strangers, have not only come to court
without any locus, but are also guilty of coming with unclean hands as
can be seen from the fact that they have managed even to obtain copies
of the confession statements recorded under Section 164 of the Code. It
is also contended that some of the appellants before us are obviously set
up by a rival political party and that therefore, this Court should not
entertain the appeals filed by persons who have no locus standi.
33. It is true that criminal jurisprudence recognizes a limited role
for victims and it is the State which is entrusted with the onerous
responsibility of prosecuting the accused and getting them punished. But
we must remember that certain theories of law were developed at a
time when the process of administration of the criminal justice system
was in the hands of honest and responsible Police officials and the
stream remained largely unpolluted.
Today the situation is different.
In cases of this nature, where some of the complainants and the
accused have come together to form an unholy alliance, the victims
of crime cannot be left at the mercy of such partnerships. We have
seen in this case, persons aspiring to secure public employment, paying
illegal gratification, through persons who are public servants, to persons
in power and later coming to the Court supporting the accused on the
basis of an out of Court settlement. What was compromised between
the complainant and accused is not just their disputes, but justice,
fair-play, good conscience and the fundamental principles of
criminal jurisprudence. In fact, the case on hand is one where there
are two teams just for the purpose of record, but no one knows who
is playing for which team and where the match was fixed.
34. As a matter of fact, very vocal submissions were made on the
question of locus in the previous round of litigation in P. Dharamaraj
vs. Shanmugam7 in Criminal Appeal Nos.1514-1516 of 2022. But the
objections relating to maintainability were rejected by this Court in the
7 2022 SCC OnLine SC 1186
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very same proceedings in the first round. Therefore, the accused cannot
raise the question of locus again and again. But for the fact that the
victims came to this Court in the first round of litigation, a huge scam
would have been buried on the basis of a compromise.
35. One more objection was raised about the locus of Y. Balaji,
the appellant in one of these appeals, on the ground that he had already
filed a writ petition in WP No.24275 of 2021 on the file of the High Court
seeking further investigation and that, therefore, he must pursue his
remedies only in that writ petition. But this argument seeks to sweep
under the carpet, the actual reality that by virtue of the impugned order
dated 31.10.2022 directing de novo investigation, the writ petition filed
by Y. Balaji for further investigation has been rendered infructuous.
Therefore, if such a person who participated in the selection but who did
not get appointment due to the corrupt practices adopted by the concerned
persons and who had already filed a writ petition seeking further
investigation, does not have locus standi, we do not know who else will
have.
36. The investigation and trial of a criminal case cannot be
converted by the complainant and the accused into a friendly match.
If they are allowed to do so, it is the Umpire who will lose his wicket.
37. Much ado was made about some of the appellants filing copies
of the confession statements under Section 164 of the Code, as part of
the paper
book in the appeals. It was contended by the learned senior
counsel that the confession statements recorded before the Magistrate
are sacrosanct and that the copies of the same cannot be made available
to third parties and that at any rate, the appellants have not even explained
as to whether they filed third party copy applications as stipulated in the
Rules, 2019 and obtained these copies officially.
38. Reliance was placed upon Rule 207(12) and Rule 210 of the
Rules, 2019 in support of his contention. Rule 207(12) and Rule 210 read
as follows:-
“207(12) After recording the confession statement of an accused,
the Magistrate shall arrange to take two photocopies of the same
under his direct supervision and certify the same as true copies.
The confession statement in original shall be sent in a sealed cover
to the jurisdictional Court through a special messenger or by
Registered Post with Acknowledgment Due. One certified copy
Y. BALAJI v. KARTHIK DESARI & ANR. ETC.
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of the confession statement shall be immediately furnished to the
Investigating Officer free of cost with a specific direction to use
it only for the purpose of investigation and not to make its contents
public until the investigation is completed and final report filed.
The other certified copy of the confession statement shall be kept
in a sealed cover in safe custody of the Magistrate.
210. Application for copies by third parties. – Application for
the grant of copies of judgment or order or any proceeding or
document in the custody of a Court by a third party to the proceeding
shall be allowed only by order of the Court obtained on a petition
supported by an affidavit setting forth the purpose for which the
copy is required.”
39. It is clear from Rule 207(12) that a confession statement is a
confidential document till the time investigation is complete and Final
Report filed. The relevant portion of Rule 207(12) states “… not to
make its contents public until the investigation is completed and
final report filed”.
40. Rule 210 extracted above enables “third parties to apply to
the Court for the grant of copies of Judgment or order or any
proceeding or document in the custody of a Court”. Therefore, it is
not as though the appellants have filed something to which they could
have never had any access. It is an irony that persons who are victims
of a huge jobs-for-cash scam are alleged to have come to Court
with
unclean hands by persons whose hands were allegedly tainted
with corruption money.
41. As a matter of fact, right from the time when Gopi approached
the High Court with a petition in Crl. O. P. No. 7503 of 2016, there have
been several proceedings before the High Court where the parties have
filed copies of several documents. There were also writ petitions filed
by unsuccessful candidates challenging the selection. The counter filed
by the Investigating Officer in those cases have been extracted by this
Court in the Judgment dated 08.09.2022 in Dharmaraj vs. Shanmugam8.
Therefore, many of the documents have started appearing in the public
domain at the instance of several persons. Hence, it is futile to contend
that the appeals are liable to be thrown out on the ground that the appellants
have come up with documents to which they could not have had any
access.
8 Criminal Appeal Nos.1514-1516 of 2022
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42. Though Shri Gopal Sankaranarayanan, learned senior counsel
appearing for the appellant in one of these appeals refrained from giving
any political colour to the case on hand, it was contended by Shri Kapil
Sibal, learned senior counsel that the appellant had been obviously set up
by a rival political party. In support of his contention, he relied upon the
timeline of events that began after the lodging of the first complaint in
FIR No.441 of 2015. Though we did not wish to go into these details, we
are compelled at least to touch the peripheries, lest we shall be held
guilty of not dealing with an argument advanced across the Bar. The
timeline of events provided by Shri Kapil Sibal, learned senior counsel is
as follows:-
29.10.2015 
Complaint of Devasagayam against 10 individuals but not the 
Minister. 
7/8.03.2016 
Complaint of one Gopi alongwith several others alleging that the 
Minister, his brother and his brother-in-law demanded illegal 
gratification for making appointments. 
20.06.2016 
Criminal OP No.7503 of 2016 filed by Gopi was allowed by the 
High Court. 
13.06.2017 
A report under Section 173(2) of the Code was filed in the FIR 
lodged by Devasagayam, only for offences under Sections 406, 
419 and 420 against 12 persons. The Minister was not named 
there. 
22.08.2017 
Minister Senthil Balaji formed part of the group of 18 MLAs who 
submitted a letter to the Governor. 
09.09.2017 
FIR No.298 of 2017 registered on the complaint of one V
Ganesh 
Kumar against the Minister and three others. 
18.09.2017 
The Minister was disqualified. 
13.06.2018 
Cognizance was taken in CC No.19 of 2020 arising out of FIR 
No.298 of 2017 against the Minister and three others. 
13.08.2018 
A complaint is lodged by one Arulmani, naming the Minister, his 
brother Ashok Kumar and his PA Shanmugam. This results in the 
registration of FIR No.344 of 2018, albeit only for offences under 
Sections 406, 420 and 506 IPC 
14.12.2018 
The Minister defected to another political party. 
12.04.2019 
Final report filed in FIR No.344 of 2018 (becomes Calendar Case 
No.25 of 2021). 
23.05.2019 
Minister Senthil Balaji wins the by-elections, as a candidate of 
the party which he joined in 2018. 
27.11.2019 
Cognizance was taken in CC No.25 of 2021 arising out of FIR 
No.344 of 2018. 
26.08.2020 
The petition filed by Senthil Balaji for discharge is dismissed. 
26.02.2021 
General Elections to the State Assembly are announced. 
08.03.2021 
A final report under Section 173(8) of the Code is filed against 
the Minister and others, not only for the offences under the IPC 
but also for offences under the PC Act. 
01.04.2021 
Cognizance is taken in CC No.24 of 2021
02.05.2021 
Results of the general election to the State Assembly are 
declared, the party in power is voted out, a new dispensation 
forms the Government and he becomes a Minister in the new 
regime.  
July, 2021 
A quash petition is filed and a compromise is reached. 
30.07.2021 
The High Court quashes CC No.25 of 2021 on the basis of the 
Joint Compromise Memo. 
Y. BALAJI v. KARTHIK DESARI & ANR. ETC.
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43. On the basis of the above timeline of events, it is contended
by Shri Kapil Sibal that the Minister was implicated in the case on
08.03.2021, for offences under the PC Act immediately after the
announcement of the elections to the Legislative Assembly, as he had
switched over from the party in power to another. Therefore, it is claimed
that the appellant is obviously set up by the political opponents in hot
pursuit of the Minister.
44. But all that we could make out of the above timeline of events
is that trouble started for the Minister, even when he was a Minister in a
different political dispensation and even before he became part of a
group of 18 MLAs in August, 2017. It must be remembered that the
allegations in Criminal O.P. No.7503 of 2016, disposed of by the High
Court on 20.06.2016, were made at a time when he was still a Minister
in the previous regime and it happened more than a year before he
became part of a splinter group. In the order dated 20.06.2016, it was
recorded as a contention of the counsel for the petitioner in paragraph 6
that the Police had seen to it that the name of the Minister did not figure
in the complaint, in order to shield him. That the Investigation Officer
did not choose to include the offences under the PC Act from the
year 2015 till 08.03.2021, cannot be taken to the credit of the
Minister, but should be taken as a discredit of the prosecution. If
the shield of office
protected him from 2015 till he formed part of
the splinter group and the shield stood temporarily removed for a
brief period of time until he again became a Minister in the next
regime, the same cannot be said to be a case of political vendetta.
We do not know whether the complainants would have entered into a
compromise in July, 2021 if he had not become a Minister again in the
new regime.
45. The decisions in Janata Dal vs. H.S. Chowdhary9 and
Simranjit Singh Mann vs. Union of India10, relied upon by the learned
senior counsel for questioning the locus standi of the appellants, will
not go to their rescue. This Court has already dealt with the question of
locus in its Judgment dated 08.09.2022 in Criminal Appeal Nos.1514-
1516 of 2022 in P. Dharamaraj (supra).
46. Interestingly, we have two appeals challenging the correctness
of the order of the High Court dated 31.10.2022 directing de novo
9 (1992) 4 SCC 305
10 (1992) 4 SCC 653
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investigation, one of which is by the complainant V. Ganesh Kumar in
FIR No.298 of 2017 and other by the accused R. Sahayarajan, who was
arrayed as Accused No.3 in the complaint of the V. Ganesh Kumar.
Both of them entered into a compromise and successfully trapped the
High Court to quash the proceedings on the basis of the compromise.
Fortunately, the order quashing the complaint was reversed by this Court.
Yet both of them have the audacity to come before this Court attacking
the order of de novo investigation.
47. What is worrisome is the fact that V. Ganesh Kumar is an
employee of the Transport Corporation. In the charge-sheet filed on his
complaint, which has been taken on file as CC No.19 of 2020, this V.
Ganesh Kumar is stated to have collected amounts ranging from
Rs.2,00,000/- to Rs.4,50,000/- for every post of Driver, Conductor or
Mechanic, as the case may be. We do not know whether the Transport
Corporation has at least placed him under suspension and initiated
departmental proceedings. If they have not done so far, the
Corporation should initiate disciplinary action against this V. Ganesh
Kumar not only for being party to a job-for-cash scam but also for
turning turtle and supporting the accused and thereafter coming to
this Court to assail the order of de novo investigation, despite being
an employee of the Corporation. Interestingly, his attack on the order
of de novo investigation is not to achieve the same purpose as the victims
want to
achieve, by assailing the same order. The victims assail the
order of de novo investigation for the purpose of ensuring that the
offences under the PC Act are properly investigated and tried. But the
object of V. Ganesh Kumar is not the same.
48. This is why we made repeated queries to Ms. V. Mohana,
learned senior counsel appearing for V. Ganesh Kumar as to what V.
Ganesh Kumar eventually wants. The only answer that we got to this
question was that the power to order de novo investigation should be
exercised sparingly and that this is not the case where the power requires
to be exercised. Thus, it is clear that V. Ganesh Kumar is in a different
camp as of now.
49. Therefore, the appeals challenging the impugned order of the
High Court dated 31.10.2022 insofar as they are traceable to Criminal
O.P. No.15122 of 2021 are concerned, deserve to be allowed.
Accordingly, these appeals are allowed and the order dated 31.10.2022
Y. BALAJI v. KARTHIK DESARI & ANR. ETC.
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passed in Criminal O.P.No.15122 of 2021 is set aside. Criminal
O.P.No.15122 of 2021 shall stand dismissed.
Part-II (Concerning proceedings by Enforcement
Directorate)
50. As we have narrated in the sequence of events, ED registered
an Information Report on 29.07.2021, only after filing of a Final Report
under Section 173(8) of the Code., in CC No.24 of 2021, including the
offences punishable under the PC Act. This Final Report was in FIR
No.441 of 2015, which was originally registered as CC No.3627 of 2017
(it became CC No.24 of 2021). The Final Report filed under Section
173(8) of the Code on 08.03.2021, named Shri V. Senthil Balaji (Minister)
as Accused No.1 and the offences charged against the accused were
under Sections 406, 419, 420 read with Section 34 and 120B, 465, 467,
471 and 201 IPC read with Sections 7, 12, 13(2) read with Section
13(1)(d) of the PC Act and Section 109 of IPC. Since the offences
under Sections 120B, 419, 420, 467 and 471 of IPC and Sections 7 and
13 of the PC Act are included in The Schedule to the Prevention of
Money-laundering Act, 200211, the registration of the Information Report
by ED on 29.07.2021 cannot be faulted.
51. After registration of the Information Report, the ED started
issuing summons to the accused. ED also filed petitions before the Special
Court (in seisin of the predicate offences) seeking copies of documents.
These petitions were partly allowed by the Trial Court by
an order dated
09.11.2021. As against the portion of the order of the Trial Court
disentitling ED to certified copies of the unmarked documents, ED filed
petitions under Section 482 of the Code before the High Court. The
petitions were partly allowed by the High Court by an order dated
30.03.2022 permitting the ED to follow the procedure of conducting
inspection under Rule 237 of Rules, 2019 and thereafter by filing a fresh
third-party copy application before the Special Court.
52. Thereafter, ED sent fresh summons to the Minister and others
in April, 2022. Immediately, the Minister and two others filed three
separate writ petitions seeking the quashing of the summons issued by
ED.
53. In the writ petition filed by the Minister in W.P. No.18213 of
2022 for quashing the summons issued by the ED, he contended inter-
alia: -
11 For short “PMLA”
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(i)  that he was falsely implicated in FIR Nos.441 of 2015, 15 of
2016, 298 of 2017 and 344 of 2018;
(ii) that FIR No.15 of 2016 had already been quashed;
(iii) that FIR Nos.441 of 2015 and 298 of 2017 were stayed by the
High Court;
(iv) that FIR No.344 of 2018 was quashed by the High Court;
(v) that in view of the above, the mandatory requirements of Section
2(1)(y) and Section 3 of the PMLA, are not attracted;
(vi) that the registration of ECIR was based upon those complaints;
(vii) that since those complaints are the subject matter of scrutiny
in the quash petitions, there is nothing for ED to proceed;
(viii) that Section 63 of the PMLA prescribes a punishment for
false information or failure to give information and hence the summons
issued under Section 50 will force him to give statements incriminating
himself in the cases for the predicate offences, thereby infringing upon
his rights under Article 20(3) of the Constitution;
(ix) that ED had not identified any proceeds of crime with the
accused, so as to enable them to proceed with the investigation;
(x) that before the Trial Court and the High Court, ED wanted
copies of documents available with the State Police, on the ground that
without the copies of such documents, it was not possible for ED to
proceed;
(xi) that the initiation of investigation by the ED is vitiated by
malafide;
(xii) that without any material being available with the ED either
about the proceeds of crime or about the act of
money-laundering on the
part of the accused, ED cannot proceed; and
(xiii) that without having any incriminating material against the
accused about money-laundering, ED cannot proceed further.
54. The focus in the writ petitions challenging the summons issued
by the ED was primarily on: -
(i) the stay of further proceedings in two criminal cases for the
predicate offences;
Y. BALAJI v. KARTHIK DESARI & ANR. ETC.
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(ii) the quashing of one criminal case for a predicate offence; and
(iii) the attempt of the ED to proceed with the investigation in
wilderness, after getting copies of the basic documents from the Special
Court, without actually identifying the proceeds of crime. However, certain
legal arguments were developed before the High Court in the course of
oral hearing.
55. The arguments advanced before the High Court in the course
of arguments, revolved around:-
(i) the law laid down by this Court in Vijay Madanlal Choudhary
vs.Union of India12;
(ii) the necessity for the existence of jurisdictional facts before an
authority or officer assumes jurisdiction;
(iii) the absence of a combination of criminal activity amounting
to a scheduled offence, the generation of proceeds of crime therefrom
and the act of money-laundering, which form the jurisdictional fact for
ED to step in; and
(iv) the danger of allowing the ED to go on a fishing expedition
without any material.
56. It is of interest to note that the accused argued before the
High Court that their case was squarely covered by the decision in Vijay
Madanlal Choudhary (supra) . It will be worthwhile to extract the
relevant portions of the order of the High Court dated 01.09.2022, in
which the counsel for each of the accused is stated to have relied upon
the decision in Vijay Madanlal Choudhary.
57. The argument of the counsel for R.V. Ashok Kumar, brother
of the Minister
is extracted by the High Court in paragraph 3 as follows:-
“3. Mr.Aryama Sundaram, learned Senior Counsel appearing for
the petitioner in Writ Petition No.l8209 of 2022 pleaded at the
outset that his client’s case is squarely covered by the judgment
of the Hon’ble Supreme Court in Vijay Madanlal Choudhury
and others case (supra) in his favour, again proceeding further
contended that Mr.R. V.Ashok Kumar is the brother of
Mr.V.Senthil Balaji, who was the former Transport Minister during
the period from 2011 to 2015…”
12 (2022 SCC OnLine SC 929
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58. The argument of the counsel appearing for Shanmugam
(Accused No.3) is extracted by the High Court as follows:-
“2. … there is no basis for proceeding against the petitioner under
the Prevention of Money-laundering Act, because the Hon’ble
Supreme Court in Vijay Madanlal Chaudhary and others v.
Union of India and others, 2022 (10) SCALE 577 has held
that in the absence of proceeds of crime, the authorities under the
Prevention of Money-laundering Act cannot step in or initiate any
prosecution, therefore, the writ petition deserves to be allowed,
by quashing the impugned proceedings.
59. Thus, it is seen from the impugned order that at least two out
of three accused specifically argued before the High Court that their
case was squarely covered by the decision of this Court in Vijay
Madanlal Choudhary,but interestingly most of the arguments
advanced before us turned out to be an attack on the correctness of
the decision in Vijay Madanlal Choudhary. We are not suggesting
that this defection from one point of view to the other is covered by
Schedule X. We are just recording this fact to show that most of the
arguments were actually arguments of convenience.
60. Keeping in mind what the accused argued before the High
Court, let us now see what the High Court did. In paragraph 13 of the
impugned order, the High Court took note of Vijay Madanlal Choudhary
with particular reference to paragraph 187(v)(d). In paragraph 14, the
High Court took note of the
quashing of the complaint for the predicate
offence in one case and the stay of further proceedings in the other two
cases relating to predicate offences. In paragraph 15, the High Court
addressed the question as to what is the effect of a stay order. The High
Court concluded that if proceedings under the PMLA are permitted to
go on during the operation of the stay order in respect of predicate
offences, it will cause damage to the reputation and goodwill of the
parties and that therefore investigation by the ED cannot proceed. In
paragraph 16 of the impugned order, the High Court recorded that other
than the three FIRs, the ED was not in possession of anything else to
proceed under the PMLA. In paragraph 17, the High Court recorded
the contention relating to the non-existence of jurisdictional facts and
referred to the decision in Arun Kumar vs. Union of India13 in paragraph
13 (2007) 1 SCC 732
Y. BALAJI v. KARTHIK DESARI & ANR. ETC.
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19. Thereafter, the High Court came to the conclusion in paragraph 20
that the quashing of the complaint in one criminal case and the stay of
proceedings in other two Calendar Cases, showed that there was no
jurisdictional fact or cause of action for the ED to initiate proceedings.
61. Since lot of arguments were advanced before us as though
the ED proceeded without the existenceof jurisdictional facts, it is
necessary to extract paragraph 20 of the impugned order to show what
the High Court thought to be a jurisdictional fact. Hence, paragraph 20
of the impugned order is extracted as follows:
“20. A mere perusal of the above judgment clearly shows that the
existence of jurisdictional fact is a condition precedent for the
exercise of power by a Court of limited jurisdiction. Therefore, in
the cases on hand, when there is no cause of action, since the
proceeding in one of the calendar cases was quashed by the order
dated 30.07.2021 in Criminal Original Petition No.13374 of 2021
and the proceedings in two other calendar cases have been stayed
by this Court, there is no jurisdictional fact or cause of action for
the respondent/department to initiate any proceedings during the
period of order of stay operating against the two FIRs. Viz.
C.C.No.l9/2020 and C.C.No.24 of 2021.”
62. Again, in paragraph 22, the High Court recorded an opinion
that the grant of stay would amount to eclipsing the proceedings.
Therefore, on this
sole ground, the High Court concluded in paragraph
22 of the impugned order that the ED has to await the outcome of the
proceedings for quashing the criminal complaints, in which a stay order
was in force. But the High Court made it clear that it was not entering
upon the merits and demerits of the proceedings initiated by the ED and
the High Court left all the questions to be dealt with in appropriate
proceedings.
63. Eventually, the High Court concluded in paragraph 23 of the
impugned order as follows:
“23. … Therefore, as we have concluded that in view of the
quashing of the proceedings in C.C.No.25 of 2021 and staying of
the proceedings in C.C.No.l9 of 2020 & C.C.No.24 of 2021 as
highlighted above, the scheduled offence for the present is eclipsed,
suspended or stop operating during the period of stay, the
respondent Department has to await the finality of the said
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proceedings. Needless to mention, if the proceedings in C.C.No.l9
of 2020 and C.C.No.24 of 2021 are quashed pursuant to the orders
in the applications filed by the respective persons to quash the
proceedings, in which event, the respondent cannot step in or initiate
any proceedings under the Prevention of Money-laundering Act,
as held by the Hon’ble Supreme Court in Vijay Madanlal
Chaudhary and others and in Parvathi Kollur and another v. State
by Directorate of Enforcement, 2022 LiveLaw (SC) 688 cited
supra. Therefore, the respondent is hereby refrained from
proceeding any further pursuant to the impugned proceedings
in ECIR/MDSZO/21/2021, till the disposal of the Criminal
Revision Case No.224 of 2021, Criminal Original Petition
No.15122 of 2021 and the SLP (Crl) Diary No.9957 of 2022
(SLP (Crl) No.3841 of 2022).”
64. Irrespective of the correctness of the reasonings given by the
High Court in the impugned order, the conclusion of the High Court was
only this, namely, that the ED cannot proceed, till the disposal of (i)
Criminal Revision Case No.224 of 2021 filed by Minister-Senthil Balaji
against the order of the Trial Court refusing to discharge him; and (ii)
Criminal O.P. No.15122 of 2021, filed by Devasagayam seeking de novo
investigation.
65. Therefore, it is as clear as crystal, that the High Court, in the
impugned order dated 01.09.2022 has given only a temporary reprieve
to the accused against the summons issued by the ED. Today, Criminal
Revision Case No.224 of 2021 filed by the Minister against the dismissal
of his discharge petition, has been rejected by the High Court by its
order dated 31.10.2022. Though Criminal O.P. No.15122 of 2021, filed
by Devasagayam has been allowed by the High Court, by the very same
order dated 31.10.2022, the said order has been set aside by us in Part-
I of this judgment.
66. Insofar as the SLP (Crl.) No.3941 of 2022 @ Diary No.9957
of 2022 is concerned, it arises out of the order of the High Court dated
30.03.2022, which again is the subject matter of the present appeals.
67. In other words, the High Court has not quashed the
summons issued by ED. The High Court had merely injuncted ED
from proceeding further till the clog on the cases relating to the
predicate offences is removed.
Y. BALAJI v. KARTHIK DESARI & ANR. ETC.
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68. Interestingly, none of the accused has come up with any appeal
challenging the order of the High Court dated 01.09.2022, on the ground
that the High Court ought to have quashed the summons issued by the
ED in total, on other grounds. Instead, the accused appeared through
counsel only to defend the impugned order dated 01.09.2022.
69. Therefore, in law, (i) once the dismissal of the petition for
discharge has attained finality with the dismissal of Criminal Revision
Case No.224 of 2021; (ii) once the order for de novo investigation in
Criminal O.P. No.15122 of 2021 is set aside; (iii) once the order of the
High Court dated 30.03.2022 relating to right of the ED to secure the
copies of documents is dealt with; (iv) once the order of the High Court
dated 30.07.2021 quashing one of the criminal cases is set aside; and (v)
once the stay operating in two of the criminal cases for predicate offences
is vacated, then the temporary reprieve that has been granted by the
High Court to the accused in the impugned order would automatically
go. Realising this difficulty in law, the accused changed the theme of the
song completely before us, despite the fact that they were ordained as
respondents in the appeals only to support the impugned order of the
High Court.
70. In fact, all the learned senior counsel appearing for all the
accused in the PMLA case, advanced arguments for the grant of larger
reliefs than what they got
under the impugned order, without even filing
any appeal against the same. It is possible in law for a successful party
(though in civil proceedings) to support the decree without supporting
the judgment. But what the accused sought to do before us was to support
the judgment and seek an enlargement of the decree, without
independently filing appeals. Since they took a chance by adopting such
a course, they may not even be able to challenge the impugned order
hereafter, once the seal of approval on the same is affixed by this Court
and the doctrine of merger comes into play.
71. We may look at this from another angle also. Suppose we
dismiss all the appeals challenging the order of the High Court dated
01.09.2022, then the other portion of our order dealing with the challenge
to the order of the High Court dated 31.10.2022 would automatically
result in lifting the injunction imposed by the Division Bench of the High
Court in the ED case by its order dated 01.09.2022. Therefore, it is not
even necessary for us to deal with the contentions raised on behalf of
the accused for the purpose of getting larger reliefs. But we do not wish
to adopt this route. Therefore, we shall address the contentions raised.
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72. The contentions of Shri Kapil Sibal, learned senior counsel
are:
(i)  that to constitute the offence of money-laundering, one must
have involved in any process or activity connected to the proceeds of
crime;
(ii) that none of the three FIRs which formed the basis for the
registration of an Information Report contained any allegation of
generation of proceeds of crime or the offence of money-laundering;
(iii) that the ED was never in possession of any material to suspect
that the accused did any activity connected with the proceeds of crime;
(iv) that this is why the ED filed applications before the Special
Court seeking copies of documents to find out if something could be
found;
(v) that under Section 66(2) of PMLA, the flow of information
can be only from the ED to the other authorities about the contravention
of the provisions of any other law and not the other way about;
(vi) that there are lot of inherent contradictions in the way the
provisions of the PMLA were interpreted in Vijay Madanlal
Choudhary;
(vii) that though Section 50(2) of PMLA empowers the Director
and his subordinates to summon any person whether to give evidence or
to produce any record during the course of investigation, this Court held
in Vijay Madanlal Choudhary that it is not investigation in the real
sense;
(viii) that the power under Section 50(2) of PMLA is akin to the
power of the Police Officer under Section 160 of the Code;
(ix) that with the amendment of PMLA by
Finance (No.2) Act,
2019 w.e.f. 01.08.2019, the requirement of mens rea was done away
with and the Explanation inserted by the amendment made all processes
or activities such as concealment, possession, acquisition, use, projecting
as untainted property and claiming as untainted property, available in the
alternative. In other words, while the main part of Section 3 uses the
conjunction “and”, the Explanation under Section uses the expression
disjunction “or”;
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(x) that the amendment of Section 3 goes completely contrary to
the law laid down in Bihta Co-operative Development and Cane
Marketing Union Ltd.vs.Bank of Bihar14, to the effect that an
Explanation cannot widen the scope of the main Section;
(xi) that it is only where proceeds of crime are laundered that the
PMLA comes into play, though the existence of proceeds of crime is a
sine qua non for the commission of an offence under PMLA;
(xii) that if the ED were to have jurisdiction to investigate solely
on the basis of information that a predicate offence has been committed,
involving the proceeds of crime, it would amount to empowering the ED
to enter the domain of the State Police, thereby causing fissures in the
federal structure;
(xiii) that the mere existence of proceeds of crime without the
quantum of proceeds being specified/identified and without the proceeds
of crime being laundered, an offence of money-laundering cannot be
made out;
(xiv) that it was wrongly decided in Vijay Madanlal Choudhary
that it was not a penal statute, though the object of the Act is to prosecute
and punish a person for the offence of money-laundering;
(xv) that the procedural safeguards available under the Code are
also not available and hence Vijay Madanlal Choudhary has not been
correctly decided. The learned counsel also drew our attention to several
passages such as paragraphs 159, 163, 168 and 172 in the decision in
Vijay
Madanlal Choudhary and it was contended that it was wrongly
decided.
73. According to Shri Kapil Sibal, learned senior counsel, certain
fundamental questions arise in the present proceedings. They are:-

What are the jurisdictional prerequisites for the ED to initiate
investigation under the PMLA?

Does the ED have the power to seek information from
authorities investigating the predicate offence merely on
the basis that investigation of a predicate offence is ongoing,
even without receiving any information that a cognizable
offence under the PMLA has occurred and being in
14 AIR 1967 SC 389
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possession of material that indicates the offence of money-
laundering has taken place?
Can the mere existence of proceeds of crime confer
jurisdiction upon the ED to initiate investigation?

What are the elements of “money-laundering”?

What conditions need to be satisfied before the ED is
empowered to issue summons under Section 50 of the
PMLA?

Can a summons under Section 50 PMLA be issued to a
person who is in the nature of an accused under the PMLA
or in the predicate offence?

Do Sections 50 and 63 of the PMLA violate the constitutional
safeguards under Art.20(3) and 21 of the Constitution?
74. Admitting the inevitable position in law that as a Two Member
Bench, we are bound by the decision of the Three Member Bench in
Vijay Madanlal Choudhary, Shri Kapil Sibal argued that the matter
may be placed before a Three Member Bench for resolving the
conundrum created by the PMLA. In this connection, he drew our
attention to paragraph 113 of the decision of another Three Member
Bench in Union of India vs. Ganpati Dealcom Private Limited15,
wherein this Court expressed an opinion that the ratio laid down in Vijay
Madanlal Choudhary with respect to confiscation proceedings under
Section 8 of the PMLA, required further exposition in an appropriate
case and that without such exposition, much scope is left for arbitrary
application. Learned senior counsel also drew our attention to an order
passed by another Two Member Bench of this Court in a writ
petition
being Writ Petition (Crl.) No.65 of 2023, challenging some of the provisions
of the PMLA. By an order dated 03.03.2023, a Two Member Bench of
this Court directed the said writ petition to be placed when the Bench
would be sitting in a combination of three Judges. After it was so placed
before a Three Member Bench, notice was ordered in the writ petition.
Therefore, he contended that the present appeals arising out the
proceedings initiated by ED may be placed before a larger Bench.
75. In sum and substance, all the above arguments of Shri Kapil
Sibal, learned senior counsel are aimed at convincing us that Vijay
15 (2023) 3 SCC 315
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Madanlal Choudhary was wrongly decided and that therefore we may
refer it to a larger Bench.
76. Shri Sidharth Luthra, learned senior counsel appearing for
one of the accused contended: -
(i)  that when ECIR was registered, ED did not have requisite
foundational materials, as admitted by them in their own counter affidavit;
(ii) that there has been a long delay both in the registration of
FIRs for the predicate offence and the ECIR;
(iii) that the period of the commission of offence, according to the
de-facto complainants was between December, 2014 and January, 2015
but the FIRs other than those filed by Devasagayam were of the year
2017 and 2018 and the ECIR was registered in the year 2021;
(iv) that there is no explanation on the part of the ED for such a
delay;
(v) that to make out an offence of money-laundering even prima
facie, three things are essential, namely (i) the commission of a crime,
which is a scheduled offence, (ii) generation of proceeds of crime; and
(iii) the laundering of those proceeds, and that none of these three
foundational facts are present in this case.
77. The arguments of Shri Sidharth Luthra, learned senior counsel
is actually two-fold, namely, (i) that in the absence of a jurisdictional
fact, which is a sine qua non or condition precedent for the exercise of
power by ED, the summons issued by ED should go; or alternatively (ii)
that in view of inherent contradictions contained in the
decision in Vijay
Madanlal Choudhary and in view of this Court having ordered notice
in the review petition, the appeals on hand should also be referred to a
larger Bench.
78. In support of his contention that the existence of a jurisdictional
fact is a condition precedent for the exercise of power by ED, the learned
senior counsel relies upon the decisions in Shauqin Singh vs. Desa
Singh16 and Arun Kumar vs. Union of India17.
79. To demonstrate that there are inherent contradictions in the
decision in Vijay Madanlal Choudhary, the learned senior counsel relies
16 (1970) 3 SCC 881
17 (2007) 1 SCC 732
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upon the decision of the Delhi High Court in Enforcement Directorate
vs. Gagandeep Singh18and Parvathi Kollur vs. State through ED19.
80. To show that a petition for review has been entertained by
this Court, the learned senior counsel relies upon the record of proceedings
of this Court dated 25.08.2022 in Review Petition (Crl.) No.219 of 2022
in Karti P. Chidambaram vs. The Directorate of Enforcement.
81. Lastly, it is contended that when certain questions of law are
referred to a larger Bench, all subsequent matters should be tagged or
deferred. In support of this contention, the learned senior counsel relies
upon the orders passed by this Court in Jairam Ramesh vs. Union of
India20, Thomas Franco Rajendra Dev21vs. Union of India, Kantaru
Rajeevaru (Right to Religion, In re-9 J.) vs. Indian Young Lawyers
Association22, Asgar Ali vs. State of Jammu and Kashmir23 and
Central Board of Dawoodi Bohra Community vs. State of
Maharashtra24.
82. Contending that when the very initiation of proceedings by the
ED was without the existence of jurisdictional facts, all subsequent actions,
like a pack of cards should fall, the learned senior counsel relies upon
the latin maxim sublato fundamento cadit opus meaning that “if initial
action is not in consonance with law, all subsequent and
consequential proceedings fall through”. In support of this contention,
the learned senior counsel has relied upon the following decisions: (i)
Badrinath vs. Government of Tamil
Nadu25; (ii) State of Kerala vs.
Puthenkavu N.S.S. Karayogam26;and (iii) State of Punjab vs.
Davinder Pal Singh Bhullar27.
83. Shri C.A. Sundaram, learned senior counsel appearing for
one of the accused, adopted a different line of argument. Instead of
attacking the correctness of Vijay Madanlal Choudhary, the learned
senior counsel contended:-
18 2022 SCC Online Del 514
19 Crl. Appeal No.1254/2022 dt.16.08.2022
20 SLP (C) No.13103 of 2019
21 WP (C) No.366/2022 dated 12.05.2022
22 (2020) 9 SCC 121
23 2022 SCC Online SC 3095
24 2023 SCC Online SC 129
25 (2000) 8 SCC 395
26 (2001) 10 SCC 191
27 (2011) 14 SCC 770
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(i) that the object of PMLA is to prevent money-laundering;
(ii) that to constitute an offence of money-laundering, a person
should have involved himself in any process or activity connected with
the proceeds of crime;
(iii) that ED can assume jurisdiction only after identification of the
proceeds of crime;
(iv) that the mandate of ED does not extend to the prosecution of
any one for offences other than money-laundering;
(v) that this is why Section 66(2) obliges the Director to share the
information available with him with other authorities, whenever such
information discloses the contravention of the provisions of any other
law;
(vi) that without the identification of a property which represents
the proceeds of crime, a jurisdictional fact for the initiation of proceedings
does not get triggered;
(vii) that no summons can be issued under Section 50 without
registering an information report;
(viii) that the power to issue summons under Section 50(2) can be
exercised only during the course of any investigation or proceeding under
the Act;
(ix) that in the case on hand, no property representing the proceeds
of crime has been identified;
(x) that this is why the High Court questioned the ED as to how
Section 3 got invoked; and
(xi) that therefore the initiation of proceedings by the ED cannot
be sustained even within the contours of law interpreted in Vijay
Madanlal Choudhary.
84. Lastly, it is contended by Shri C.A.
Sundaram, learned senior
counsel for one of the accused that though the High Court allowed the
prayer of the accused for reasons other than those argued now, the
party successful before High Court can always seek to sustain the
judgment, on grounds other than those stated in the impugned order. In
support of this contention, the learned senior counsel relies upon the
decision of this Court in Management of the Northern Railway Co-
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operative Credit Society Ltd., Jodhpur vs. Industrial Tribunal,
Rajasthan, Jaipur28.
85. In response to the above submissions, it was argued by Shri
Tushar Mehta, learned Solicitor General:
(i) that the offence of money-laundering is treated by the global
community as an offence of international implication, affecting the
economies of Nations;
(ii) that the law could be traced to Palermo and Vienna Conventions;
(iii) that the Conventions led to the establishment of Financial Action
Task Force29;
(iv) that for a long time after the above Conventions and the
formation of FATF, India was found to be lacking in curbing money-
laundering and hence certain recommendations were made for the Mutual
Evaluation of Anti-Money Laundering and Combating the Financing of
Terrorism;
(v) that the recommendations made by them were carried into
effect by making suitable amendments to the Act;
(vi) that the historical perspective of the Act and the amendments
thereto are discussed in detail in Vijay Madanlal Choudhary;
(vii) that almost all provisions of the PMLA were challenged in
Vijay Madanlal Choudhary and every ground of attack to each of the
provisions is dealt with in extenso by the Three Member Bench;
(viii) that there cannot be repeated attempts to have several bites
at the cherry;
(ix) that by doubting the correctness of the decision of a larger
Bench, a cloud of uncertainty cannot be created on the application of a
law;
(x) that the decision in Vijay Madanlal
Choudhary is a binding
precedent and the doctrine of stare decisis should be given meaning
and value;
(xi) that the English precedents on the doctrine of stare decisis,
such as those in Street Tramways vs. London County Council30 and
Redcliffe vs. Ribble Motor Services31,have been followed by our Courts;
28 (1967) 2 SCR 476
29 For short, “FATF”
30 (1898) AC 375 (378)
31 (1939) AC 215 (245)
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(xii) that as laid down by this Court in Sakshi vs. Union of India32,
the doctrine of stare decisis gives certainty to law and guides people to
mould their affairs in the future;
(xiii) that as held by this Court in Central Board of Dawoodi
Bohra Community vs. State of Maharashtra33, a Bench of lesser coram
cannot express disagreement with or question the correctness of the
view taken by a Bench of larger coram;
(xiv) that as opined by Chief Justice John Roberts of the Supreme
Court of the United States, ‘it is a jolt to the legal system when you
overrule a precedent’;
(xv) that the ratio laid down by a larger Bench should not become
suspect merely because another view is possible;
(xvi) that in any case, Vijay Madanlal Choudhary has taken
note of different views of several High Courts including the High Courts
of Bombay, Delhi, Jharkhand and Punjab and Haryana, etc.; and
(xvii) that unsettling the law laid down in Vijay Madanlal
Choudhary at a time when the ranking of the country in curbing the
menace of money-laundering has improved, will derail the whole process.
86. We have carefully considered the rival contentions. A careful
analysis of the arguments advanced by all the three learned senior counsel
appearing for the accused namely Shri Kapil Sibal, Shri C.A. Sundaram
and Shri Sidharth Luthra would show that a three-pronged strategy has
been formulated in their attack on the initiation of proceedings by the
ED.
This three-pronged strategy goes as follows:
(i) questioning the correctness of the decision in Vijay Madanlal
Choudhary and seeking a reference to larger Bench (by Shri Kapil
Sibal);
(ii) accepting the decision in Vijay Madanlal Choudhary as
correct and trying to demonstrate how the initiation of proceedings in
the present case falls foul of the ratio in Vijay Madanlal Choudhary
(by Shri C.A. Sundaram); and
(iii) relying upon some portions, but attacking some other portions
of Vijay Madanlal Choudhary so that any one of these provide an
escape route (by Shri Luthra).
32 (2004) 5 SCC 518
33 (2005) 2 SCC 673
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87. In terms of issues, the arguments advanced by all the three
learned senior counsel can be crystallized and formulated into two
fundamental questions that may have to be addressed by us. These
questions are:-
(i) Whether without identifying the proceeds of crime or a property
representing the proceeds of crime and without identifying any process
or activity connected to proceeds of crime as required by Section 3,
which constitute the foundational/ jurisdictional fact, ED can initiate an
investigation and issue summons?
(ii) Whether in the light of the fact that notice has been ordered in
the review petition and a few interim orders have been passed in some
proceedings, it is necessary for this Court to tag these appeals along
with a review petition or defer the hearing of these matters until a decision
is rendered in the review petition and other petitions?
88. Before we find an answer to these two questions, it is necessary
to take note of how and why PMLA came into existence and what
geopolitical circumstances compelled India to bring the law. According
to United Nations Office on Drugs and Crime34, South Asia, corruption
is recognized as a crucial governance and security challenge in South
Asia region. UNODC has estimated that corruption costs more than
5% of global GDP (US$2.6 trillion) annually, with estimates of global
money-laundering at around $500 billion (works out to INR 40 lakhs
crores) annually. Based upon a study conducted by Pune based
Forensic
Accounting Company by name “Indiaforensic” way back in the year
2011 on “Ascertaining size of Corruption in India with respect to
money laundering”, the Economic Times reported in its Edition dated
17.07.2011 that money laundered out of India in the decade 2001-2010
could be pegged at Rs.18,86,000 crores. This is why in May 2011, India
became party to the United Nations Convention against Corruption
(UNCAC) joining over 160 other countries who were party to this UN
Convention.
89. The history of the legislation on money-laundering is almost
six decades old. In brief, this history can be traced as follows:
(i) In 1961, United Nations Convention on Narcotic Drugs was
adopted and it was amended by the protocol of the year 1972.
34 For short, “UNODC”
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(ii) In 1971, United Nations Convention on Psychotropic
Substances was made.
(iii) In 1974, a bank known as Herstatt Bank in Germany was
forced into liquidation by the Regulators. On the day on which it happened,
a number of banks had released payments to Herstatt in exchange for
US dollars to be delivered in New York. But due to the time zone
differences, Herstatt ceased operations between the times of the
respective payments. As a result, payments were not made in New
York. Therefore, a Standing Committee which came to be known as
Basel Committee on Banking Supervision (BCBS) was formed by G-10
countries namely Belgium, Canada, France, Germany, Italy, Japan,
Netherlands, Sweden, Switzerland, UK and USA.
(iv) In December 1988, two things happened. One was the
adoption of a Convention by name UN Convention Against Illicit Traffic
in Narcotic Drugs and Psychotropic Substances (popularly known as
Vienna Convention). The second was that at about the same time, the
Basel Committee issued a general statement of ethical principles which
encourages banks’ management to put in place effective procedures to
ensure that all persons conducting business with their institutions are
properly identified, that transactions that do not appear legitimate are to
be discouraged and that cooperation with law enforcement agencies is
achieved.
(v) In 1989, the FATF was established at the G-7 summit held at
Paris, as an inter-governmental
body by the member countries namely
Canada, France, Germany, Italy, Japan, UK and USA. Now FATF
consists of 39 members including India and over 200 jurisdictions around
the world have committed to the FATF recommendations.
(vi) In 1990, the Member States of the Council of Europe signed
and ratified a Convention known as The Convention on Laundering,
Search, Seizure and Confiscation of the Proceeds from Crime, also known
as the Strasbourg Convention or CETS 141. Interestingly, Australia
though not a Member of the Council of Europe, also signed and ratified
this Convention. The Convention sought to facilitate international co-
operation and mutual assistance in investigating crime and tracking down,
seizing and confiscating the proceeds thereof. The purpose of bringing
the States together was to assist them in attaining a similar degree of
efficiency even in the absence of full legislative harmony.
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(vii) As part of United Nations office on Drugs and Crime, a
Global Programme against Money Laundering (GPML) was established
in 1987 to assist Member States to comply with UN Conventions and
other instruments that deal with money-laundering and terrorism
financing.
(viii) On 15.11.2000, the UN General Assembly adopted the United
Nations Convention against Transnational Organized Crime and it opened
for signature by Member States at a high level political Conference
convened at Palermo, Italy in December 2000 (now known as Palermo
Convention).
(ix) On October 31, 2003, the United Nations General Assembly
adopted the UN Convention against corruption and the Convention came
into force in 2005.
(x) Pursuant to the political Declaration adopted by the special
session of the United Nations General Assembly held between 8th to
10th June 1998 (of which India is one of the signatories) calling upon
member States to adopt Anti Money Laundering Legislation &
Programme, the Parliament has enacted a special law called the
‘Prevention of Money Laundering Act, 2002’ (PMLA 2002). The Act
has come into force with effect from 1st July 2005. It has been substantially
amended, by way of enlarging its scope, in 2009 (w.e.f. 01.06.2009), by
enactment of Prevention of Money Laundering (Amendment) Act, 2009.
The Act was further amended by Prevention of Money-Laundering
(Amendment) Act, 2012 (w.e.f. 15-02-2013).
(xi) As part of the effort to assist jurisdictions prepare or
upgrade
their legislative framework to conform with international standards and
best practices to implement anti-money laundering measures and
combating the financing of terrorism, UNODC issued in 2003, “Model
Money-Laundering, Proceeds of Crime and Terrorist Financing
Bill”.
90. The Commonwealth Secretariat of the UNODC released in
April 2009 an updated version of the “Model Provisions on Money
Laundering, Terrorist Financing, Preventive Measures and Proceeds
of Crime”. Some of the provisions of the UN Model Law 2009 show
that PMLA has been brought in tune with the Model Law.
91. The Drafting Note on self-laundering, contained in the Model
Law deals with the question whether a person should necessarily be
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implicated in the predicate offence so as to be an accused in the offence
of money-laundering. It reads as follows:
“Self-laundering:
“As the section refers to “any person,” this includes both the
person who committed the predicate offence and third party
launderers. Although generally not an issue in States in the
common law tradition, there can be a question whether the
offence should be extended to the person who also committed
the predicate offence.
The Vienna and Palermo Conventions provide an exception
to the general principle that both the predicate offender and
third parties should be liable for money laundering where
fundamental principles of domestic law require that it not apply
to the person who committed the predicate offence. In some
countries, constitutional principles prohibit prosecuting a
person both for money laundering and a predicate offence.
In the case of most common law countries, there do not appear
to be fundamental principles that prohibit the application of
the money laundering offence to self-launderers. However, if
an exception is necessary, an additional provision, as “[t]he
offence of money laundering shall not apply to persons who
have committed the predicate offence” should be
incorporated.
If drafters believe that there is a need for additional clarity
beyond the reference to “any person” to ensure that those
who launder their own proceeds are covered, a provision can
be added as
“[t]he offences set forth in Section 3(2) - (5)
shall also apply to the person who has committed the
offence(s), other than money laundering, that generated the
proceeds of crime.”
92. Similarly, the portion of the Drafting Note in the Model Law,
enlisting the kind of activities that may constitute the offence of money
laundering reads as follows:
“Kinds of Offences: As the UN’s Legislative Guide to the
Palermo Convention and Legislative Guide for the
Implementation of the United Nations Convention Against
Corruption make clear, there are four general kinds of
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conduct that should be criminalized. The minimum
requirements for each are:
1. Conversion or transfer of proceeds of crime. This includes
“instances in which financial assets are converted from one
form or type to another, for example, by using illicitly
generated cash to purchase precious metals or real estate or
the sale of illicitly acquired real estate, as well as instances in
which the same assets are moved from one place or jurisdiction
to another or from one bank account to another.” (See, e.g.,
paragraph 231, in Legislative Guide for the implementation
of the UN Corruption Convention). Regarding mental
elements, the conversion or transfer must be intentional, the
accused must have knowledge at the time of conversion or
transfer that the assets are criminal proceeds, and the act
must be done for either one of the two purposes stated –
concealing or disguising criminal origin or helping any person
(whether one’s self or another) to evade criminal liability for
the crime that generated the proceeds.
2. Concealment or disguise of proceeds of crime. There are
many aspects noted in the provision as to which there can be
concealment or disguise – almost any aspect of, or information
about, the property, so this section is broad. The concealment
or disguise must be intentional and the accused must have
knowledge that the property constitutes proceeds of crime at
the time of the act. This provision deals with the intentional
deception of others. This will
include the intentional deception
of law enforcement authorities. True nature may be the
essential quality of it having been derived from criminal
activity. Origin may be the physical origin, or its origin in
criminality. For this second offence, there should not be a
requirement of proof that the purpose of the concealment or
disguise is to frustrate the tracing of the asset or to conceal
its true origin. Although as a general matter this will be the
purpose of the concealing or disguising, the applicable UN
Conventions require that there be criminalization that is not
dependent upon a showing of such purpose.
3. Acquisition, possession or use of proceeds. This section
imposes liability on recipients who acquire, possess or use
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property, and contrasts with the two provisions above that
deal with liability for those who provide illicit proceeds. There
must be intent to acquire, possess or use, and the accused
must have knowledge at the time of acquisition or receipt that
the property was proceeds.
4. Participation in, association with or conspiracy to commit,
attempts to commit and aiding, abetting, facilitating and
counselling. There are varying degrees of complicity or
participation other than physical commission of the offence:
assistance (aiding and abetting, facilitating) and
encouragement (counselling). In addition, attempts are to be
criminalized. Finally, this section includes conspiracy, a
common law concept, or as an alternative, an association of
persons working together to commit an offence.
Knowledge: The variants suggested are first, the basic one
of knowledge that the property is proceeds of crime (which
knowledge may be inferred from objective factual
circumstances); and secondly a more flexible standard of
knowledge or suspicion that the property is proceeds of
crime.”
Therefore, it is clear that the provisions of PMLA are in tune with
the Model Law drafted by UNODC. Keeping this in mind, let us now
search for an answer to the two questions.
Question 1: Whether without identifying the proceeds of
crime or a property representing the proceeds of crime and
without identifying any process or activity connected to proceeds
of
crime as required by Section 3, which constitute the
foundational/jurisdictional fact, ED can initiate an investigation
and issue summons?
93. The common theme of the song of the learned counsel for the
accused is that the mere registration of a FIR for a predicate offence,
even if it is a scheduled offence, is not sufficient for the ED to register
an Information Report and summon anyone. According to the learned
counsel, the commission of the scheduled offence should have generated
proceeds of crime and those proceeds of crime should have been
laundered by someone, for the ED to step in. Going a step further, it was
contended by the learned senior counsel that the ED should first identify
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some property as representing the proceeds of crime, before an
Information Report is registered and a summon issued under Section
50(2).
94. These contentions, in our opinion, if accepted, would amount
to putting the cart before the horse. Unfortunately for the accused, this
is not the scheme of the Act.
95. Section 3 of the Act which defines the offence of money-
laundering reads as follows:
“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.”
Y. BALAJI v. KARTHIK DESARI & ANR. ETC.
[V. RAMASUBRAMANIAN, J.]
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96. If the main part of Section 3 is dissected with forensic precision,
it will be clear that Section 3 addresses itself to three things (we may
call them 3 ‘P’s) namely, (i) person; (ii) process or activity; and (iii)
product. Insofar as persons covered by Section 3 are concerned, they
are, (i) those who directly or indirectly attempt to indulge; or (ii) those
who knowingly assists; or (iii) those who are knowingly a party; or (iv)
those who are actually involved. Insofar as process is concerned, the
Section identifies six different activities, namely (i) concealment; (ii)
possession; (iii) acquisition; (iv) use; (v) projecting; or (vi) claiming as
untainted property, any one of which is sufficient to constitute the offence.
Insofar as product is concerned, Section 3 identifies “proceeds of crime”
or the property representing the proceeds of crime as the product of the
process or activity.
97. Out of the three things that Section 3 addresses, namely (i)
person; (ii) process; and (iii) product, the first two do not require any
interpretation or definition. The third aspect namely “product”, which
Section 3 refers to as “proceeds of crime” requires a definition and
hence it is defined in Section 2(1)(u) as follows:-
“2. Definitions. — (1) In this Act, unless the context otherwise
requires, —
xxx                        xxx                       xxx
(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” including 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;”
98. Keeping in mind these essential elements that make up the
molecular structure of Section 3, if we go back to the case on hand, we
will find (i) that the offences under Sections 120B, 419, 420, 467 and
471 IPC are scheduled offences included in paragraph 1 of the Schedule;
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and (ii) that the offences under Sections 7 and 13 of the PC Act are
included in paragraph 8 of the Schedule.
99. All the three FIRs allege that the accused herein had committed
offences included in the Schedule by taking illegal gratification for
providing appointment to several persons in the Public Transport
Corporation. In one case it is alleged that a sum of more than Rs.2
crores had been collected and in another case a sum of Rs.95 lakhs had
been collected. It is this bribe money that constitutes the ‘proceeds of
crime’ within the meaning of Section 2(1)(u). It is no rocket science to
know that a public servant receiving illegal gratification is in
possession of proceeds of crime. The argument that the mere generation
of proceeds of crime is not sufficient to constitute the offence of money-
laundering, is actually preposterous. As we could see from Section 3,
there are six processes or activities identified therein. They are, (i)
concealment; (ii) possession; (iii) acquisition; (iv) use; (v) projecting as
untainted property; and (vi) claiming as untainted property. If a person
takes a bribe, he acquires proceeds of crime. So, the activity of
“acquisition” takes place. Even if he does not retain it but “uses” it,
he will be guilty of the offence of money-laundering, since “use” is one
of the six activities mentioned in Section 3.
100. The FIRs for the predicate offences identify all the three
components of Section 3, namely, (i) persons; (ii)
process; and (iii)
product. Persons accused in the FIRs are those who have indulged in
the process or activity. The illegal gratification that they have taken,
represents the proceeds of crime. The (i) acquisition of such illegal
gratification in the first instance; (ii) the possession of the tainted money
before putting it to use; and (iii) today projecting it as untainted money,
is the process or activity in which the accused have indulged. The
corruption money represents the proceeds of crime.
101. Therefore, all the arguments as though there are no
foundational facts or jurisdictional facts, are simply aimed at hoodwinking
the Court.
102. It is true that there are some offences, which, though
scheduled offences, may or may not generate proceeds of crime.
For instance, the offence of murder punishable under Section 302
is a scheduled offence. Unless it is a murder for gain or murder by
a hired assassin, the same may or may not generate proceeds of
crime. It is in respect of such types of offences that one may possibly
Y. BALAJI v. KARTHIK DESARI & ANR. ETC.
[V. RAMASUBRAMANIAN, J.]
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argue that mere commission of the crime is not sufficient but the
generation of proceeds of crime is necessary. In the case of an
offence of corruption, the criminal activity and the generation of
the proceeds of crime are like Siamese twins.
103. In fact, PMLA defines the word “property” in Section 2(1)(v)
as follows:
“2. Definitions.—(1) In this Act, unless the context otherwise
requires,—
xxx                        xxx                       xxx
(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;”
104. Therefore, even if an intangible property is derived as a result
of criminal activity relating to a scheduled offence, it becomes proceeds
of crime under Section 2(1)(u). In view of the above, we are not
impressed with the contention that the investigation by ED was triggered
without any foundational/jurisdictional facts. In our view, the allegations
in the FIR point out to (i) involvement of persons in criminal activity
relating to scheduled offences; (ii) the generation as well as (iii)laundering
of the
proceeds of crime within the meaning of Section 3. This is in view
of the fact that wherever there are allegations of corruption, there is
acquisition of proceeds of crime which itself tantamount to money-
laundering.
105. A lot of heat and dust was generated about the ED registering
an Information Report on 29.07.2021 without any material whatsoever
and thereafter indulging in a fishing expedition both by summoning the
respondents and by seeking copies of various documents from the Special
Court before which the complaints relating to the predicate offences are
pending. But we do not see any substance in these arguments. The
reason why we say so will be understood if we rewind and go back to a
few facts.
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106. On 29.10.2015, Devasagayam made a complaint. It was
against ten different persons, but not against the Minister, his brother
and his Secretary. But on 07/08.03.2016, one Gopi made a complaint
naming the brother of the Minister and claimed that a total amount of
more than Rs.2 crores was paid. Gopi then filed Criminal O.P. No.7503
of 2016 on the file of the High Court in which the High Court passed an
order on 20.06.2016, to expand the investigation and go against the real
culprits. But a Final Report under Section 173(2) of the Code was filed
on 13.06.2017. This was followed by another complaint filed by V. Ganesh
Kumar on 09.09.2017 in FIR No.298 of 2017. In this FIR, a Final Report
was filed on 07.06.2018. Similarly, one Arulmani filed a complaint on
13.08.2018 in FIR No.344 of 2018 in which a Final Report was filed on
12.04.2019.
107. Subsequently, at the instance of one R.B. Arun Kumar, further
investigation was ordered in FIR No.441 of 2015, by an order of the
High Court dated 27.11.2019. Thereafter, a discharge petition was filed
by the Minister in one of those cases and after the same was dismissed,
he filed a revision before the High Court. During the pendency of the
revision, a Final Report was filed under Section 173(8) in one of those
cases.
108. Around the same time, writ petitions were filed pointing out
that there was a huge jobs-for-cash scam. In those writ petitions, the
Assistant Commissioner of Police filed counter affidavits.
109.
Thus, the information about all complaints, the nature of
the complaints, the amount of money allegedly collected towards
illegal gratification had all come into public domain. To say that
the ED should have adopted an Ostrich like approach, without trying
to find out where and to whom the huge money generated in the
scam had gone, is something unheard of.
110. In fact, ED was not trying to access any document which
was inaccessible. In several proceedings before the High Court, such as
(i) petitions for further investigation; (ii) writ petitions; and (iii) quash
petitions, some of the documents whose certified copies were sought by
the ED were already annexed. All that the ED wanted was authenticated
copies of those documents and nothing more.
111. In fact, the FIRs as well as Final Reports are now uploaded
in the websites of the Police Department in some of the States. In the
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State of Tamil Nadu, Police started uploading FIRs online, way back in
2016. In all Police Stations, a Crime and Criminal Tracking Network and
Systems, popularly known as ‘CCTNS’ is installed. Therefore, the
information relating to FIRs is in the public domain.
112. Once an information relating to the acquisition of huge
amount of illegal gratification in the matter of public employment has
come into the public domain, it is the duty of the ED to register an
Information Report. This is because “acquisition” is an activity
amounting to money-laundering and the illegal gratification acquiredby a
public servant represents “proceeds of crime,” generated through a
criminal activity in respect of a scheduled offence. Therefore, it does
not require any expedition, much less a fishing expedition for
someone to say that the receipt of bribe money is an act of money-
laundering.
113. The contention of Shri Sidharth Luthra that there was no
explanation for the delay on the part of the ED in registering the
Information Report, is a self-serving argument. If the ED registers
an Information Report immediately upon the registration of a FIR
for a predicate offence, ED will be accused of acting in haste. If
they wait until the drama unfolds up to a particular stage, ED will
be attacked as guilty of delay. The accused should be thankful to
ED for giving a long rope from 2016 till 2021.
114. Therefore, all the arguments on facts and
all the legal
contentions emanating from some portions of the judgment in Vijay
Madanlal Choudhary, to challenge the validity of the proceedings
initiated by ED are completely unsustainable.
Question No. 2: Whether in the light of the fact that notice
has been ordered in the review petition and a few interim orders
have been passed in some proceedings, it is necessary for this
Court to tag these appeals along with a review petition or defer
the hearing of these matters until a decision is rendered in the
review petition and other petitions?
115. Now let us come to the contention revolving around the
correctness of some portions of the decision in Vijay Madanlal
Choudhary.
116. First of all, we should point out that a notice ordered in the
review petition being Review Petition (Crl.) No.219 of 2022, will not
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destroy or diminish the precedential value of Vijay Madanlal
Choudhary. The argument of the learned counsel for the accused, if
accepted, will not only destroy the principles of judicial discipline and the
doctrine of stare decisis, but also bring to a grinding halt, all pending
investigation in the country. In fact, the order dated 25.08.2022 passed
in Review Petition (Crl.) No.219 of 2022 discloses that prima facie the
Court was of the view that at least two of the issues raised in the review
petition require consideration. Though it is not precisely spelt out in the
order, those two issues relate to (i) not providing the accused with a
copy of the ECIR; and (ii) reversal of the burden of proof and
presumption of innocence. The points that the respondents are canvasing
in this case, have nothing to do with those two issues. Therefore, the
accused cannot have a piggyback ride on the review petition.
117. In fact, as we have pointed out elsewhere, the accused have
not come up with any appeal challenging the order of the High Court
dated 01.09.2022. Therefore, they are entitled at the maximum, to argue
only for the dismissal of the appeals filed by ED and others against the
said decision. Suppose we agree with the learned counsel for the accused
and dismiss the appeals filed by ED, even then they cannot have an
escape route since the impugned order of the High Court protects them
only till the other proceedings are kept at bay.
118. Therefore, the accused
is not entitled at all either to seek a
reference to a larger Bench or to seek to defer the matter till a decision
is rendered in the matters involving larger issues.
119. In view of the above, the appeals arising out of the order of
the Division Bench of the High Court are liable to be allowed. Accordingly,
these appeals are allowed and the order of the Division Bench of the
Madras High Court dated 01.09.2022 is set aside. ED will now be entitled
to proceed further from the stage at which their hands were tied by the
impugned order.
PART-III (Permission to ED to inspect the records of the
Special Court trying the predicate offences)
120. To recapitulate, ED registered an Information Report on
29.07.2021. Thereafter, ED filed applications before the Special Court
seeking certified copies of the FIR, statements of witnesses, etc. By an
order dated 09.11.2021, the Special Court allowed the application partly
and directed the issue of certified copies of FIR, complaint, statements,
etc., but refused to provide certified copies of unmarked documents.
Y. BALAJI v. KARTHIK DESARI & ANR. ETC.
[V. RAMASUBRAMANIAN, J.]
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121. As against the said order, ED moved the High Court under
Section 482 of the Code. These petitions were partly allowed by the
High Court by an order dated 30.03.2022, permitting ED to have
inspection of the documents under Rule 237 of the Rules, 2019 and
thereafter, to file a fresh third party copy application. It is against this
order that one of the accused by name M. Karthikeyan (Accused No.3)
in the Final Report filed under Section 173(8) of the Code in CC No.24
of 2021 has come up with an appeal.
122. The grievance of the appellant in this appeal is that the High
Court has overlooked the provisions of Rule 231(3) of the Rules, 2019
and also Section 65B of the Indian Evidence Act, 187235. But both the
above contentions are without substance. Rule 231 primarily deals with
the grant of certified copies of certain other documents to the accused,
before filing of the Final Report. Rule 231(3) states that certified copies
of unmarked documents shall not be given. The High Court has not
passed any order directing the grant of certified copies of unmarked
documents. All that the High Court has done is permitting the ED to
have an inspection of the documents under Rule 237 and thereafter to
file a proper copy application. This is not contrary to Rule 231(3).
123. We do not know how an argument revolving around Section
65B of the Evidence Act is raised. Section 65B concerns the admissibility
of electronic records.
Without certification, ED may not be able to use
those electronic records in evidence, in the prosecution under PMLA.
But it does not mean that they cannot even have a look at the electronic
record.
124. Therefore, we find no merits in the appeal. Hence, the appeal
challenging the order of the High Court dated 30.03.2022 passed in
Criminal O.P. No.5726 of 2022 is dismissed.
PART – IV (Extension of time to complete further
investigation)
125. There is one appeal filed by Y. Balaji, whose status is indicated
by us in a tabular column elsewhere. His appeal challenges an order
passed by the High Court originally on 27.11.2019 directing the prosecution
to complete further investigation in CC No.3627 of 2017 within six
months. When a petition for extension of time was moved, the Court
rejected it by an order dated 01.11.2021 on the ground that the prayer
35 For short “the Evidence Act”
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had become infructuous. Therefore, worried about the fate of further
investigation, the victim has come up with the above appeal. But the
worry of the appellant is baseless. Merely because the High Court has
not granted extension of time, it does not mean that the direction to
conduct further investigation has become infructuous. On the contrary,
a Final Report has already been filed under Section 173(8) of the Code
on 08.03.2021 in CC No.3627 of 2017 and the same has now become
CC No.24 of 2021.
126. Therefore, the appeal challenging the orders dated 27.11.2019
and 01.11.2021 is dismissed.
Contempt Petitions
 127. Anti Corruption Movement has come up with petitions
seeking the initiation of contempt proceedings against the Police Officials
who are in-charge of the investigation, on the ground (i) that the offences
under the PC Act have not been included in CC No.25 of 2021; (ii) that
steps were not taken to have the interim stay vacated in two criminal
cases; and (iii) that a misleading picture was projected before the High
Court as though the investigation was incomplete.
128. Shri Ranjit Kumar, learned senior counsel appearing for the
State and Shri Tiwari, learned AAG for the State submitted that there
was no willful disobedience of the orders passed by this Court and that
the State actually took steps to vacate the stay. According to the learned
senior counsel, the hands of the investigating agency were tied due to
the stay order and that once the
appeals arising out of the two substantial
orders of the High Court dated 01.09.2022 and 31.10.2022 are disposed
of, the State will take expeditious steps.
129. For the present, we would accept the explanation offered
by the alleged contemnors. This is for the reason that the alleged
contemnors alone are not to be blamed for where we are. The entire
case turned out to be a match where it became impossible to identify
who was playing for which team. Despite this Court’s order dated
08.09.2022, the High Court passed the order dated 31.10.2022, which
practically has the effect of wiping out the directions issued by this Court.
In its order dated 31.10.2022, the High Court referred to our order at
various places and eventually destroyed the effect of the order of this
Court. Therefore, the Police Officers alone cannot be held guilty of
wilful disobedience. Hence, the contempt petitions are dismissed.
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However, if the future course of investigation shows any disobedience
of the orders of this Court, it will always be open to the petitioner to
come up again. With this observation, the contempt petitions are
dismissed.
I.A.No. 26257 of 2023
130. This is an application taken out by Y. Balaji, appellant in
some of these appeals, seeking the constitution of a Special Investigation
Team and the appointment of a Special Public Prosecutor. This application
is filed on the ground that the hope expressed by this Court in its order
dated 08.09.2022 that the State Police would do a proper job, has been
belied by subsequent events. Therefore, the applicant prays that time is
now ripe for the constitution of a Special Investigation Team.
131. The application is opposed on the ground, (i) that a prayer of
this nature cannot be made by way of an interlocutory application; and
(ii) that the allegation of the prosecution being influenced by the Minister
does not stand substantiated.
132. As we have pointed out while dealing with the contempt
petitions, the entire blame for this fiasco cannot be laid at the doorstep
of the Police alone. We find several coparceners. Hence, we reject
this I.A. at this stage with liberty to the applicant to come back with a
substantial petition seeking such a prayer, at a later point of time, when
a foul play is suspected. Accordingly, I.A. No.26257 of 2023 is dismissed
with the above liberty.
Results
summed up
133. The result of the entire discussion is summed up as follows:
(i) The appeals arising out of the order for de novo investigation
are allowed. That portion of the order of the High Court dated 31.10.2022
passed in Criminal O.P. No. 15122 of 2021 is set aside. The directions
issued in the said original petition for de novo investigation are set aside.
The Investigation Officer shall proceed with further investigation in all
cases by including the offences under the PC Act. Any let up on the part
of the Investigation Officer in this regard will pave the way for this
Court to consider appointing a Special Investigation Team in future.
(ii) The appeals arising out of the order of the Division Bench of
the High Court dated 01.09.2022 are allowed. The order dated 01.09.2022
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is set aside. All the three writ petitions challenging the initiation of
proceedings by ED shall stand dismissed.
(iii) The appeal arising out of the order of the High Court dated
30.03.2022 is dismissed.
(iv) The appeal challenging the orders dated 27.11.2019 and
01.11.2021 of the High Court relating to extension of time for completion
of investigation is dismissed. The Investigation Officer shall proceed
with further investigation and file Further/Final Reports within two
months.
(v) The Contempt Petitions and I.A. No. 26257 of 2023 are
dismissed.
Application for impleadment is dismissed.
Pending application(s), if any, shall also stand disposed of.
Divya Pandey
Appeals disposed of.
(Assisted by : Shevali Monga, LCRA)
Y. BALAJI v. KARTHIK DESARI & ANR. ETC.
[V. RAMASUBRAMANIAN, J.]