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That under Section 2(u) of the Prevention and Money Laundering Act, 2002 ("PMLA Act"), "proceeds of crime" has been defined as follows:
"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 propertyor where such property is taken or held outside the country, then the property equivalent in value held within the countryor abroad
The term 'scheduled offence" has defined under Section 2(y) of the PMLA Act as under:
"scheduled offence" means--
(i) the offences specified under Part A of the Schedule; or
(ii) the offences specified under Part B of the Schedule if the total value involved in such offences isone crore rupees or more; or
(iii) the offences specified under Part C of the Schedule.
The PMLA Act provides a schedule that contains three Parts, listing various offences. These offences are also referred to as "predicate offences."
Section 3 of the PMLA Act defines offence of money laundering as any direct or indirect attempt by any person 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:-
concealment; or
possession; or
acquisition; or
use;or
projecting as untainted property; or
claiming as untainted property,
Therefore, if proceeds are generated as a result of a scheduled offence and such proceeds are being laundered or there is an attempt to launder them, the offence of money laundering is being committed.
In Part A of the Schedule of the PMLA Act, an offence of criminal conspiracy under Section 120 B of the Indian Penal Code, 1860 ("IPC") is listed.
Section 120 B of the IPC
120 B. Punishment of criminal conspiracy.--(1) Whoever is a party to a criminal conspiracy to commit an offence punishable with death, imprisonment for life or rigorous imprisonment for a term of two years or upwards, shall, where no express provision is made in this Code for the punishment of such a conspiracy, be punished in the same manner as if he had abetted such offence.
(2) Whoever is a party to a criminal conspiracy other than a criminal conspiracy to commit an offence punishable as aforesaid shall be punished with imprisonment of either description for a term not exceeding six months, or with fine or with both.
Section 120 A of the IPC defines criminal conspiracy as under:
120A. Definition of criminal conspiracy- When two or more persons agree to do, or cause to be done,—
(1) an illegal act, or
(2) an act which is not illegal by illegal means, such an agreement is designated a criminal conspiracy:
.......
The question raised here is whether the provisions of the PMLA Act can be invoked solely on the basis of invocation of Section 120 B (criminal conspiracy) of the IPC, which is a scheduled offence under the PMLA Act. In other words, if criminal conspiracy is alleged in relation to a non-scheduled offence, can the PMLA Act be invoked in such a scenario?
In the case of Pavana Dibbur v. Enforcement Directorate, 2023 SCC Online SC 1586 ( Link to case), the Hon'ble Supreme Court of India, while addressing this issue, observed that the offence under Section 120 B of the IPC included in Part A of the Schedule will become a scheduled offence only if the criminal conspiracy involves committing an offence that is already included in Parts A, B, or C of the PMLA Act Schedule. The Court held as under:
"The offence punishable under Section 120B of the IPC will become a scheduled offence only if the conspiracy alleged is of committing an offence which is specifically included in the Schedule."
The Directorate of Enforcement filed a review petition against this judgment, which was subsequently rejected by the Hon'ble Supreme Court on 19th March 2024.
In the case of Anjaneya Hanumanthaiah vs. Union of India, Writ Petition (CRL.) No.281 of 2019 and other connected matters (https://indiankanoon.org/doc/4705511/), the Hon'ble Supreme Court while hearing special leave petition filed by Karnataka Deputy Chief Minister DK Shivakumar against an order passed by Karnataka High Court upholding the summons issued by the Enforcement Directorate for the alleged offences committed under the provisions of the Income Tax Act, 1961 and Section 120 B of the IPC, relied upon the case of Pavana Dibbur (supra), held as under:
In Anjaneya Hanumanthaiah v. Union of India, Writ Petition (CRL.) No. 281 of 2019, and other connected matters (Link to case), the Hon'ble Supreme Court, while hearing a special leave petition filed by Karnataka Deputy Chief Minister Mr. DK Shivakumar against an order passed by the Karnataka High Court, upholding the summons issued by the Enforcement Directorate for alleged offences under the provisions of the Income Tax Act, 1961 and Section 120 B of the IPC. The Court relied upon the case of Pavana Dibbur (supra), held as under:
"An offence punishable under Section 120-B IPC will become a scheduled offence only if the conspiracy alleged is of committing an offence which is specifically included in the Schedule and that it is not the legislative intent behind PMLA to make every offence not included in the Schedule a scheduled offence by applying Section 120-B IPC."
As the offences under the Income Tax Act are not scheduled offences under the PMLA Act, the Hon'ble Supreme Court quashed the proceedings initiated against the petitioners under the PMLA Act, as they were invoked solely on the basis of Section 120 B of the IPC.
Conclusion:
Based on the above case law, it is clear that the Enforcement Directorate cannot invoke the provisions of the PMLA Act solely on the basis of Section 120 B of the IPC if it is the only scheduled offence. The PMLA Act can only be invoked if the criminal conspiracy (Section 120 B of the IPC) is alleged to have been committed in relation to any other scheduled offence under the Act.
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
