~ By Akshat Patria
The Delhi High Court recently, in the case of Adnan Nisar v. Directorate of Enforcement, passed a significant verdict expanding the scope of the Prevention of Money Laundering Act, 2002 (hereinafter referred to as the PMLA) to the offences committed outside India. The Hon’ble High Court has clearly held that an offence committed under a foreign law can be treated as a predicate or scheduled offence, the original offence which generates proceeds of crimes as mentioned under Section 2(1)(u) of the PMLA, if the same has cross-border implications, and proceeds of crime arising out of the same has been transferred to India.
The Hon’ble High Court, while considering the submissions made on behalf of the Petitioners, held that it is not necessary for an offence having cross-border implications under Part C to also be an offence under Part A of the Schedule, and, therefore, the investigating agency (Directorate of Enforcement, in this case) would be well within its power to resort to the definition of the terms “Corresponding Law” and “Area” under Section 2(1)(ia) and Section 2(2) of the PMLA, respectively.
PMLA: A general overview
Under the scheme of the PMLA, the Enforcement Directorate has been provided with the power to initiate proceedings against an individual by registering the Enforcement Case Information Report (ECIR); however, the registration of a scheduled offence is the sine qua non for initiating such proceeding by the ED, and hence it cannot simply act on the notional basis that an offence has been committed. The predicate offences, which form the basis of the offence of money laundering under Section 3 of the Act, are provided in a detailed Schedule of the PMLA. The Schedule, as defined in Section 2(y) of the Act, is divided into three parts. While the offences mentioned in Part A and Part C constitute proceeds of crime when any property is derived or obtained as a result of criminal activity relating to a scheduled offence, the offences under Part B constitute proceeds of crime only if the total value in such offences exceeds one crore rupees or more.
Deciphering “Cross Border Implications” in Part C
Before 2009, the PMLA did not provide for any provision by way of which a predicate offence committed outside India may be tried under Indian law if the proceeds of the crime are remitted to India.
The government, vide an amendment to the PMLA in 2009, incorporated the definition of “cross border implications” under Section 2(1)(ra) of the Act. The definition covers within its ambit two categories – first (which is relevant for the present purpose), an offence committed outside India, which would have constituted an offence under Part A, Part B, or Part C of the Schedule had it been committed in India and the proceeds of crime out of which are transferred to India. Second, an offence as specified in Part A, Part B or Part C has been committed in India, and proceeds of crime are transferred to a place outside India.
To substantiate the ambit of the above definition, the government, vide the same amendment of 2009, also included Part C, which makes an offence an offence of cross-border implication if it is specified either in Part A of the Schedule or under Chapter VII of the Indian Penal Code which deals with offences against property such as theft, extortion, robbery and dacoity, criminal breach of trust, criminal misappropriation of property, etc, or under Section 51 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.
Now, in the above case, the Petitioners were accused of committing offences under the US Law corresponding to which were Section 75 of the Information Technology Act, 2000 and Sections 420 and 424 of the Indian Penal Code 1860. Based on the same, the Petitioner, inter alia, made three important submissions. One, the ED had initiated their own investigation in India based on such offences which were committed and investigated in the US while considering the offences to be under Part C of the Schedule. Therefore, the ED acted in excess of its power by registering the ECIR and arresting the Petitioner when the Mutual Legal Assistance (hereinafter referred to as the MLA) received from the US was limited only to seizure and freezing. Two, even if an offence is considered to have cross-border implications under Part C, the same must also be an offence in Part A as well. Third, ED’s reliance upon the definition of “corresponding law” under Section 2(1)(ia) of the PMLA to prosecute the Petitioner is not well-founded.
Observations of the Hon’ble Court
Taking note of the first submission made by the Petitioner, the Hon’ble High Court noted that while the said MLA request was confined to the seizure and freezing of properties, a bare reading of Section 60(4) of the PMLA would make it clear that the ED may take further steps to execute such request which may include conducting an inquiry, investigation, or survey. Moreover, the Hon’ble High Court, while considering the case in P. Chidambaram v. Directorate of Enforcement, reiterated that an arrest is ordinarily a part of an investigation to gather all evidence that may be available on record, and, therefore, the ED was within its power to arrest the Petitioner.
Responding to the second and third submissions, the Hon’ble High Court rejected the Petitioner’s contention that an offence in Part C must be included in Part A as well. The Court said that there are some offences against property in Chapter VII of the IPC, like theft, which are not mentioned in Part A, would still be considered scheduled offences by virtue of Part C itself if they have cross-border implications. However, the issue arises when the offences committed by the accused person(s) do not find a place either in Part A or when the provisions of the IPC are applicable across the globe. In such a situation, it would be prudent to refer to the definitions mentioned in Section 2(1)(ia) and 2(2) of the Act, a combined reading of which would suggest that where and in relation to an area, the provisions of the PMLA are not applicable, the corresponding law of any foreign country will have to be read into the schedule of the PMLA.
Additionally, the Court also noted one important aspect that laws which are applicable in the Indian territory need not be proved, but when the question of proving the corresponding law of the foreign country arises, the same must be pleaded like any other fact during the course of the trial in accordance with Section 57 of the Evidence Act 1872, accompanied by an expert opinion on the foreign law, and since, at the stage of granting bail, there was no prima facie case against the Petitioner as the ED had failed to provide the contents of the alleged offences in their complaint, the Petitioner was enlarged on bail.
Conclusion
The Delhi High Court, by way of this judgment, not only reaffirmed the principles laid down by the Apex Court in Vijay Madanlal Choudhary v. Union of India that a three-fold test is required to establish the prima facie case of money laundering but also reinforced one of the basic objectives of the PMLA to keep the track of all suspicious transaction having cross border ramifications by enabling the central government to enter into reciprocal arrangements with other countries for sharing information, attaching and confiscating property. By referring to the statutory provisions of the PMLA, the Court has also cleared the air that ED’s powers are not limited to fulfilling the requirements of the formal MLA request made by a foreign contracting state, and it may also exercise other powers or steps, including arrest, to execute such request.
The High Court’s ruling also acts as a significant reminder for the investigating agencies to explain the contents of the corresponding law or any other alleged offence committed in the complaint apart from seeking an expert opinion on such offences. The argument put forth by the ED that the MLA request received from the US is a certified copy, and in the absence of the US Code, the same can be proved under section 78(6) of the Evidence Act 1872 could not be accepted because as per the general law of evidence, under no circumstances can a certified copy be admitted as a substitute for the primary evidence.
Moreover, this judgment is also in line with the cardinal principle that a person ought not to be dragged merely because a complaint has been filed against him, and though not touched upon by this judgment significantly, it can reasonably be inferred from the ruling of the Delhi High Court that while taking cognizance of the complaint and summoning the accused, the magistrate has not only to apply his judicial mind to the facts of the case and law applicable but also to examine the nature of the allegations made in the complaint and the evidence in support thereof, and he if passes a cryptic or non-speaking order to that effect, then the accused would be entitled to the benefit of the doubt. Therefore, the judgment, while upholding the above objectives, highlights the importance of adhering to the procedure of law to ensure fairness and justice.
The author is a fourth-year B.A. LL. B (Hons.) student at Vivekanand Institute of Professional Studies, GGSIPU, New Delhi.