Enforcement Directorate May Probe PMLA Cases Throughout India, Including J&K: Karnataka High Court

Justice Krishna S Dixit said,

"Sub-section (2) of section 1 of the (PML) Act reads "It extends to the whole of India. Thus, keeping the RPC (Ranbir Penal Code) offences away from the Act would offend the very parliamentary intent of extending this Act "to the whole of India."

The bench noted that many central legislations specifically excluded their application to the State of J&K because of its special status; however that is not the case with the PMLA.

It added that,

"It would bewilder any legally trained mind that only one province in the country should be singularly reserved as a 'Money Laundering Haven'. The sin of money laundering to which the world at large is committed by International Conventions, Conferences & Treaties."

Case Background:

Petitioners Anish Mohammed Rawther and others had approached the High Court challenging the proceedings initiated against them by the Enforcement Directorate under the provisions of the Prevention of Money Laundering Act.

The proceedings were initiated following registration of a case against the petitioners by the Anti Corruption Bureau, Srinagar, for offences punishable u/s 5(1)(d) r/w section 5(2) of Jammu & Kashmir Prevention of Corruption Act, 2006 r/w section 120-B of the Ranbir Penal Code, 1989.

It was alleged that during the period between 2002 and 2017, a company by name M/s S.A. Rawther Spices Pvt. Ltd, had obtained financial assistance, in all amounts to Rs.308.13 crore from the J&K Bank, Bangalore. The loan account became NPA during September 2017 and the net amount that remained un-repaid was quantified at Rs.285.81 crore plus unapplied interest of Rs.66.91 crore.

Same time the company also borrowed Rs.16.5 crore from HDFC Bank and Rs.25 crore from RBL Bank by providing the very same property by way of security. The branch head of the said bank recommended for releasing three of the mortgaged properties and in connivance with other officials at Head Quarters of the J & K said bank, by taking some other unworthy properties in lieu thereof and thereby, caused a huge loss of crores of rupees of public money.

This led to the Directorate of Enforcement recording an Enforcement Case Information Report dated 2.1.2020. Having prima facie convinced of illegal diversion of funds, misutilization of credit facilities, substitution of sub-standard security properties etc., the agency formed an opinion that the acts alleged in the FIR registered by ACB amounted to offences specified in Schedule-A to the PMLA Act.

Petitioner's arguments:

Senior Advocate Kiran S. Javali, appearing for the petitioners, contended that for proceedings to be initiated under the PMLA Act, the accused ought to have derived or obtained "proceeds of crime" in relation to a "scheduled offence" as per Sec.2(1)(u) of the Act.

Referring to offences specified in Part A, B and C of the Schedule of PMLA Act, it was said, "The 1989 Code (RPC) does not find a place in the Schedule to the Act. Thus the institution of subject proceedings is without jurisdiction and opposed to the intent of the Statute."

Court findings:

The court took note of the Statement of Objects & Reasons of the PMLA Act and said that, "The Parliament enacted and structured the PML Act to implement Political Declaration and Global Programme of Action adopted by the UN General Assembly at its 17th Special Session in 1990 and the Political Declaration adopted by Special Session of UN General Assembly in 1998 asking the member States to evolve policy framework and programmes to prevent money laundering."

It then observed, "The argument of Mr. Javali that the Act does not, in so many words, refer to RPC, 1989, is true. However, in the realm of law, what is said is important and at times, what is left unsaid is even more important. The fact that nothing in the Act mentions RPC 1989, per se cannot drive one to hastily conclude that the offences thereunder are alien to the principal object and policy content of the Act."

Further it said, "The submission if accepted would carve out an unconscionable exception to the all pervasive parliamentary policy of preventing money laundering...Such an argument militates against the legislative logic and policy considerations of the Act."

The court also noted that the Parliament has enacted the Jammu and Kashmir Reorganization Act, 2019 w.e.f. 9.8.2019. Section 95 r/w Item 48, Table-1 in the Fifth Schedule to this Act omits the phrase "except the State of Jammu and Kashmir" from section 1 of Indian Penal Code, 1860.

It said, "Thus, the application of IPC is extended to the State of Jammu & Kashmir; the Enforcement Case Information Report has been registered on 02.01.2020, apparently this is post the new enactment. Therefore, the question raised and argued by the petitioners in the case at hand is answered by this legislative development."

Accordingly, it held that, "The Writ Petition has been structured sans advertence to this new development. In the above circumstances, no other question having been argued, the Writ Petition is liable to be dismissed and accordingly it is."

Case Title: Anish Mohammed Rawther v. The Deputy Director, Enforcement Directorate

Case No: Writ Petition No.20092 of 2021

Date Of Order: 3rd Day of January, 2022

Citation: 2022 LiveLaw (Kar) 4

Appearance: Senior Advocate Kiran S Javali, A/W Advocate Chandrashekara For Petitioner; Advocate Prasanna Kumar P For Respondent.

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