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Article 22 in The Constitution Of India 1949
Article 21 in The Constitution Of India 1949
The Indian Penal Code
Shri D.K. Basu,Ashok K. Johri vs State Of West Bengal,State Of U.P on 18 December, 1996
Article 22(1) in The Constitution Of India 1949

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Gujarat High Court
5 Whether It Is To Be Circulated To ... vs Union Of India & 3 on 16 January, 2015
       R/SCR.A/4496/2014                                    CAV JUDGMENT




            IN THE HIGH COURT OF GUJARAT AT AHMEDABAD


    SPECIAL CRIMINAL APPLICATION (DIRECTION) NO. 4496 of 2014


                                    With


            SPECIAL CRIMINAL APPLICATION NO. 4672 of 2014



FOR APPROVAL AND SIGNATURE:



HONOURABLE MR.JUSTICE ANANT S. DAVE


and


HONOURABLE MR.JUSTICE G.B.SHAH

================================================================

1     Whether Reporters of Local Papers may be allowed to see
      the judgment ?

2     To be referred to the Reporter or not ?

3     Whether their Lordships wish to see the fair copy of the
      judgment ?

4     Whether this case involves a substantial question of law as
      to the interpretation of the Constitution of India, 1950 or any
      order made thereunder ?

5     Whether it is to be circulated to the civil judge ?

================================================================
                RAKESH MANEKCHAND KOTHARI....Applicant(s)
                                Versus
                   UNION OF INDIA & 3....Respondent(s)
================================================================
Appearance:



                                 Page 1 of 127
       R/SCR.A/4496/2014                           CAV JUDGMENT



SCR.A No.4496 of 2014
MR VIKRAM CHAUDHARY Senior Advocate with MR SANJAY AGARWAL with
MR CHETAN K PANDYA, ADVOCATE for the Applicant(s) No. 1
MR DEVANG VYAS, ASG for the Respondent(s) No. 1
MS KRINA P CALLA APP for the Respondent(s) No. 4

SCR.A No.4672 of 2014
MR SUNIT SHAH for MR ISHAN MIHIR PATEL with MR OMKAR DAVE with
MR RJ GOSWAMI, ADVOCATE for the Applicant(s) No. 1
MR DEVANG VYAS, ASG for the Respondent(s) No. 1
MS KRINA P CALLA APP for the Respondent(s) No. 4
================================================================

          CORAM: HONOURABLE MR.JUSTICE ANANT S. DAVE
                 and
                 HONOURABLE MR.JUSTICE G.B.SHAH

                             Date : 16/01/2015
                          COMMON CAV JUDGMENT
           (PER : HONOURABLE MR.JUSTICE ANANT S. DAVE)



1             Considering   the   common   issue   involved   in 
both   these   petitions,   they   are   taken   up   for   final 
hearing   together   and   are   being   disposed   of   by   the 
common judgment.

1.1           The   petitioner   of   Special   Criminal 
Application   No.4496   of   2014   has   filed   this   petition 
under   Articles   226   and   227   of   the   Constitution   of 
India, with the following prayers:



      "[a] To strike down Section 45 of the Prevention 
      of   Money­Laundering   Act,   2002   [hereinafter 
      referred to as `PMLA'] [as inserted / substituted 



                                 Page 2 of 127
 R/SCR.A/4496/2014                                      CAV JUDGMENT



by Amendment Act 2005 [20 of 2005] dt. 21.5.2005, 
as   the   said   provision   does   not   bear   any 
reasonable   and   rational   nexus   with   variety   of 
Scheduled   offences   mentioned   in   the   Schedule 
under the Act which may even be non­cognizable, 
bailable and on much lighter pedestal, for being 
unreasonable   and   ultra   vires,   and   consequently 
unconstitutional,                      illegal,           arbitrary, 
discriminatory,   and   thus   being   violative   of 
Articles   14,   19   and   21   of   the   Constitution   of 
India, and this Hon'ble Court may read down, lay 
down, expound, interpret and deliberate upon the 
scope and perspective of Section 45 of PMLA so as 
to   harmonize   the   same   in   juxtaposition   with 
various scheduled offences [under amended Part A 
of the Schedule],


[b] To   read   down,   expound,   deliberate   and 
interpret the scope and perspective of Section 19 
of PMLA in light of section 49(3) read with Rules 
notified   by   GSR   446[E]   dated   1.7.2005,   in 
consonance              and         harmony       with         settled 
constitutional mandate of Articles 14, 21 and 22 
of Constitution of India as also in the context 
of various provisions under the Code of Criminal 
Procedure, 1973, as amended from to time and the 
Guidelines laid down by the Hon'ble Apex Court in 
D.K.Basu vs State of West Bengal 1997(1) SCC 416,


[c] For   issuance   of   an   appropriate   writ  of  quo 
warranto, calling upon Respondent No.3, who being 


                              Page 3 of 127
 R/SCR.A/4496/2014                              CAV JUDGMENT



an   Assistant   Director,   Enforcement   Directorate, 
appointed under Foreign Exchange Management Act, 
1999,   can   under   Section   54   of   PMLA   only   assist 
any   officer   investigating   under   PMLA,   to   show 
cause as to how and under what authority has he 
exercised the power of arrest under Section 19 of 
PMLA, while effecting arrest of the Petitioner on 
01.09.2014 in ECIR/01/SRT/2014, without producing 
till   date,   despite   specific   objection   by   the 
Petitioner ­


        [i] any authorization conferring upon him by 
        way   of   any   notification  or  order  issued   by 
        the   Central   Government   in   terms   of   Section 
        19 and Section 49 of PMLA, 2002, read with 
        Rules   notified   by   GSR   446(E),   dt.1.7.2005, 
        authorizing him to be an "Arresting Officer" 
        and   to   exercise   power   to   arrest   under 
        section 19,


        [ii] any   notification   issued   by   Central 
        Government   for   his   appointment   a   Assistant 
        Director under section 49 of PMLA,


        [iii]       any   records   to   show   compliance   of 
        Rules notified by GSR 446(E) dated 1.7.2005, 
        and


        [v] any   Criminal   Proceedings   against   the 
        Petitioner in the alleged Scheduled offence 
        showing the Petitioner as an accused person; 


                         Page 4 of 127
 R/SCR.A/4496/2014                              CAV JUDGMENT



        and 


[d] For   issuance   of   an   appropriate   writ   of 
Habeas   corpus,   or   order   or   direction   under 
Article   226   of   the   Constitution   of   India, 
directing   forthwith   release   of   the   Petitioner 
from   custody,   by   setting   aside   the   Impugned 
Arrest   Order   dated   1.9.2014   and   the   consequent 
remand   proceedings,   as   the   arrest   of   the 
Petitioner   is   manifestly   illegal,   without 
jurisdiction, null and void ab initio, for clear 
violation of­


        [i] The directives of the Hon'ble Apex Court 
        in  D.K.Basu vs. State of West Bengal, 1997 
        (1)   SCC   416  [more   particularly   those 
        prescribed in sub­para (2), (9) and (10) of 
        Para 35 thereof],


        [ii] The provision of PMLA including amongst 
        others   of   Section   19(1)   of   PMLA,   which 
        mandatorily prescribe the arrest to be made 
        on   the   basis   of   such   "material   in 
        possession",   on   the   basis   of   which   there 
        exists   "reason   to   believe"   that   person   is 
        "guilty" of an offence under the PMLA; which 
        shall be "recorded in writing"; and pursuant 
        to arrest to inform him of the `Grounds' for 
        such arrest,


        [iii]       Rules       notified       by       Central 


                        Page 5 of 127
       R/SCR.A/4496/2014                             CAV JUDGMENT



              Government vide GSR 446[E], dt.1.7.2005,


              [iv] notification   GSR   441(E)   dated   1.7.2005 
              issued by the Central Government appointing 
              Director   to   exercise   the   "exclusive"   power 
              conferred under section 19 of PMLA


              [v] Article 14, 21, 22 of the Constitution 
              of India.


      [e] At the interim / ad­interim stage­


              [i] The   proceedings   under   PMLA   against   the 
              Petitioner may please be stayed,


              [ii] The Petitioner may please be released on 
              regular   bail   in   the   above   case   in 
              ECIR/01/SRT/2014,


              [f] Dispense   with   filing   of   affidavit   in 
              support   to   this   Petition   as   the   Petitioner 
              is in judicial custody;


      [g] For   such   other   or   further   order/s   in   the 
      peculiar facts of the case.


1.2           The   petitioner   of   Special   Criminal 
Application   No.4672   of   2014   has   filed   this   petition 
under   Articles   226   and   227   of   the   Constitution   of 
India, with the following prayers:




                               Page 6 of 127
 R/SCR.A/4496/2014                               CAV JUDGMENT




"[A] To strike down Section 45 of the Prevention 
of   Money­Laundering   Act,   2002   [hereinafter 
referred to as `PMLA'] [as inserted / substituted 
by   Amendment   Act   2005   [20   of   2005]  dt. 
21.5.2005], as the said provision does not bear 
any reasonable and rational nexus with variety of 
Scheduled   offences   mentioned   in   the   Schedule 
under the Act which may even be non­cognizable, 
bailable and on much lighter  pedestal, for being 
unreasonable   and   ultra   vires,   and   consequently 
unconstitutional,               illegal,           arbitrary, 
discriminatory,   and   thus   being   violative   of 
Articles   14,   19   and   21   of   the   Constitution   of 
India, and this Hon'ble Court may read down, lay 
down, expound, interpret and deliberate upon the 
scope and perspective of Section 45 of PML Act so 
as   to   harmonize   the   same   in   juxtaposition   with 
various scheduled offences [under amended Part A 
of the Schedule],


[B] If the Hon'ble Court finds that provision of 
Section 45 is not ultra vires of the Article 14, 
19, 21 and 22 of the Constitution of India, then 
to   read   down,   expound,   deliberate   and   interpret 
the   scope   and   perspective   of   Section   45   of   the 
PML Act to the scheduled offences where minimum 
punishment is 3 years in the context of objects 
and reasons underlying the rigors of Section 45 
r/w. Section 4 of the PML Act.




                       Page 7 of 127
 R/SCR.A/4496/2014                                   CAV JUDGMENT



[C] To   read   down,   expound,   deliberate   and 
interpret the scope and perspective of Section 19 
of  PML Act in light of section 49(3) read with 
Rules notified by GSR 446[E] dated 1.7.2005, in 
consonance              and         harmony       with       settled 
constitutional mandate of Articles 14, 21 and 22 
of Constitution of India as also in the context 
of various provisions under the Code of Criminal 
Procedure, 1973, as amended from time to time and 
the   Guidelines   laid   down   by   the   Hon'ble   Apex 
Court in D.K.Basu v. State of West Bengal 1997(1) 
SCC 416,


[D] For issuance of an appropriate writ of  quo 
warranto, calling upon respondent No.3, who being 
an   Assistant   Director,   Enforcement   Directorate, 
appointed under Foreign Exchange Management Act, 
1999,   can   under   Section   54   of   PMLA   only   assist 
any   officer   investigating   under   PMLA,   to   show 
cause as to how and under what authority has he 
exercised the power of arrest under Section 19 of 
PMLA, while effecting arrest of the Petitioner on 
21.05.2014 in ECIR/01/SRT/2014, without producing 
till date ­


        [i]             any   authorization   conferring   upon 
        him   by   way   of   any   notification   or   order 
        issued by the Central Government in terms of 
        Section 19 and Section 49 of PML Act, 2002, 
        read   with   Rules   notified   by   GSR   446(E), 
        dt.7.7.2005,   authorizing   him   to   be   an 


                              Page 8 of 127
 R/SCR.A/4496/2014                             CAV JUDGMENT



        "Arresting Officer" and to exercise power to 
        arrest under section 19,


        [ii]        any notification issued by Central 
        Government   for   his   appointment   a   Assistant 
        Director under section 49 of PML Act,


        [iii]       records to show compliance of Rules 
        notified by GSR 446(E) dated 1.7.2005, and


[d] For   issuance   of   an   appropriate   writ   of 
Habeas   corpus,   or   order   or   direction   under 
Article   226   of   the   Constitution   of   India, 
directing   forthwith   release   of   the   Petitioner 
from   custody,   by   setting   aside   the   Impugned 
Arrest   Order   dated   1.9.2014   and   the   consequent 
remand   proceedings,   as   the   arrest   of   the 
Petitioner   is   manifestly   illegal,   without 
jurisdiction, null and void ab initio, for clear 
violation of­


        [i] The directives of the Hon'ble Apex Court 
        in  D.K.Basu   v.   State   of   West   Bengal,   1997 
        (1)   SCC   416  [more   particularly   those 
        prescribed in sub­para (2), (9) and (10) of 
        Para 35 thereof,


        [ii] The   provisions   of   PML   Act   including 
        amongst others of Section 19(1) of PML Act, 
        which mandatorily prescribe the arrest to be 
        made   on   the   basis   of   such   "material   in 


                         Page 9 of 127
 R/SCR.A/4496/2014                                CAV JUDGMENT



        possession",   on   the   basis   of   which   there 
        exists   "reason   to   believe"   that   person   is 
        `guilty'   or   an   offence   under   the   PML   Act; 
        which   shall   be   `recorded   in   writing';   and 
        pursuant   to   arrest   to   inform   him   of   the 
        `Grounds' for such arrest,


        [iii]       Rules         notified       by       Central 
        Government vide GSR 446[E], dt.1.7.2005.


        [iv] Notification   GSR   441(E)   dated   1.7.2005 
        issued by the Central Government appointing 
        Director   to   exercise   the   `exclusive'   power 
        conferred under section 19 of PML Act.


        [v] Articles   14,   21   and   22   of   the 
        Constitution of India.


[F] At the interim / ad­interim stage­


        [i] The Petitioner may please be released on 
        regular   bail   in   connection   with   Complaint 
        NO.3 of 2014 pending in the court of Special 
        Judge, Ahmedabad District, Ahmedabad [Rural] 
        arising out of ECIR No.1/SRT/2014­15.


[G] Dispense with filing of affidavit in support 
to this Petition as the Petitioner is in judicial 
custody.


[H] For   such   other   and   further   order/s   in   the 


                         Page 10 of 127
       R/SCR.A/4496/2014                             CAV JUDGMENT



      peculiar facts of the case.




2             The   facts   of   both  the   petitions   are  almost 
similar,   however,   for   the   purpose   of   deciding   the 
issues involved in these petitions, facts of Special 
Criminal   Application   No.4496   of   2014   are   taken   up. 
The facts of  Special Criminal Application No.4496 of 
2014, as per the petitioner of that petition, are as 
under:


2.1           On   11.04.2014,   FIR   No.5/16/2014   dated 
11.4.2014 was registered by the District Crime Branch, 
Surat, alleging various offences under IPC against one 
M/s   R.A.   Distributors   Pvt.   Ltd.,   Surat   and   its 
Directors   for   preparing   bogus   Bills   of   Entry   and 
presenting the same for outward remittances to various 
parties in Dubai and Hong Kong.  The petitioner herein 
is   not   amongst   the   accused   persons   in   the   said   FIR 
dated 11.4.2014.


2.2           On 13.4.2014, another FIR was registered by 
the   District   Crime   Branch,   Surat,   alleging   various 
offences under IPC against M/s. Agni Gems Pvt. Ltd., 
M/s. Harmony Diamonds Pvt. Ltd., and their Directors 
for preparing bogus Bills of Entry and presenting the 
same   for   outward   remittances   to   various   parties   in 
Dubai   and   Hong   Kong.     The   petitioner   herein   is   not 
amongst the accused persons even in the said FIR dated 
13.4.2014.




                              Page 11 of 127
       R/SCR.A/4496/2014                            CAV JUDGMENT



2.3           On   17.4.2014,   Enforcement   Case   Information 
Report   (ECIR)/01/Surat­Sub­Zonal   /2014­15   was 
registered   by   the   Directorate   of   Enforcement   of 
Ahmedabad,   Surat­Zone   Surat   against   the   persons 
accused   in   the   aforesaid   FIRs   dated   11.4.2014   and 
13.4.2014.  This Fir (termed as ECIR), was registered 
by   respondent   No.3   and   the   case   was   taken   up   for 
investigating purportedly under the provisions of PMLA 
and   the   Rules   framed   there   under.     The   petitioner 
herein is not amongst the accused persons named in the 
said ECIR dated 17.4.2014.


2.4           Under   the   provisions   of   PML   Act,   although 
there is no bar on filing a Charge Sheet under section 
173(2) of Code of Criminal Procedure, however, second 
proviso to impugned section 45 provides for filing of 
a   Complaint   in   writing   in   the   manner   prescribed. 
Therefore,   on   18.7.2014,   after   completing 
investigations   qua   the   persons   accused   there   under, 
the Deputy Director of the Directorate of Enforcement 
filed   a   complaint   before   Trial   Court   against   79 
accused, including natural persons and legal entities. 
The petitioner herein is not named as accused in this 
exhaustive   complaint   filed   by   the   Enforcement 
Directorate   against   79   accused,   which   relief   on 
plethora of statements.


2.5           On   01.09.2014,   the   petitioner   on   being 
summoned  appeared before the respondent NO.3.  He was 
coerced to give a confession.  He was threatened that 
even his family members will be roped in the matter 


                              Page 12 of 127
       R/SCR.A/4496/2014                          CAV JUDGMENT



and put behind bars.  Vide impugned Arrest Order dated 
1.9.2014,   the   petitioner   was   arrested   by   respondent 
No.3   purportedly   in   exercise   of   powers   conferred   by 
Section 19(1) of PMLA, while alleging to have reasons 
to   believe   that   the   petitioner   has   been   guilty   of 
offences punishable under Section 4 read with Section 
3 of PMLA. This arrest was in blatant violation of the 
provisions   of   Section   19   of   PMLA   read   with   Rules 
notified vide GSR 446 (E), dt. 1.7.2005, Notification 
GSR   441(E)   dated   1.7.2005,  also   in   violation  of  the 
Guidelines   framed   by   the   Hon'ble   Apex   Court   in 
D.K.Basu Vs. State of West Bengal, 1997 (1) SCC 416, 
and   in   derogation   of   fundamental   rights   conferred 
under the Constitution of India vide Articles 14, 21 
and 22.  Whereas the petitioner was coerced to give an 
endorsement of having been informed of the Grounds of 
Arrest and having understood the same, no such Grounds 
of Arrest were either shown or supplied to him.   No 
witness was called to witness the petitioner's arrest 
and   alleged   oral   communication   of   grounds. 
Consequently there is no endorsement of any witness on 
the Arrest Order, or alleged Grounds of Arrest.   The 
respondent No.3 was not even authorized by the Central 
Government to exercise power of arrest under Section 
19 of PMLA.


2.6           After such illegal arrest of the petitioner, 
the relatives of the petitioner sent a friend to meet 
the petitioner to whom the personal belongings of the 
petitioner   were   handed   over   by   the   respondent   no.3. 
It is not even the claim of the Respondents that at 


                           Page 13 of 127
       R/SCR.A/4496/2014                            CAV JUDGMENT



the time of Arrest or purported oral communication of 
the Grounds of Arrest, this friend was present and had 
witnessed the same.


2.7           On   2.9.2014,   the   Application   for   seeking 
Enforcement   custody   was   filed   by   respondent   No.3 
before   the   Designated   Judge   under   PMLA   Principal 
District   Judge   Ahmedabad   (Rural).     In   this   Remand 
Application   it   was,   inter   alia,   claimed   by   the 
Respondent No.3 that the arrest of the petitioner was 
done   on   1.9.2014   concerning   his   involvement   in   the 
huge money laundering racket, and investigation could 
not   be   completed   in   a   short   period   of   time.     Thus 
existence of reasonable belief that the petitioner has 
been guilty of offence was far from reality.


2.8       In   Enforcement   custody,   the   petitioner   was 
again   coerced,   pressurized   and   threatened   with   dire 
consequences   including   arrest   of   all   his   family 
members   and   relatives,   unless   he   submits   to   the 
dictates   of   the   officers   of   Respondent   No.3.     The 
petitioner   has   truthfully   narrated   in   his   oral 
interrogation, all the requisite details and answers 
to   all   the   questions   orally   put   to   him.     However, 
instead   of   permitting   the   petitioner   to   record   his 
statements   as   per   his   version   and   in   his   own 
handwriting, he was coerced to sign typed statements 
prepared   by   the   officers   of   Respondent   No.3   without 
knowing   the   contents   thereof.     By   use   of   coercive 
measures,   various   such   statements   and   endorsements 
were   obtained   from   the   petitioner,   against   his   will 


                             Page 14 of 127
       R/SCR.A/4496/2014                            CAV JUDGMENT



and contrary to facts.   The petitioner was not even 
permitted to read the contents of statements recorded 
by  the   officers   of   respondent  No.3.     The   petitioner 
submits   that   false   statements   which   were   fictitious 
creations   of   the   officers   were   forcefully   thrusted 
upon the petitioner, and the same are far from being 
voluntary and thus liable to be rejected.


2.9           On   8.9.2014,   the   application   for   opposing 
further remand and for seeking bail was filed by the 
petitioner before the trial Court, inter alia seeking 
temporary bail till final disposal of the application.


3             The case of the   respondent No.3, as stated 
on oath, against the petitioners, is as under:


3.1           That   certain   information   was   received   from 
the Joint Commissioner of Customs, Customs Division, 
Surat that companies M/s. Harmony Diamonds Pvt. Ltd., 
M/s. Agni Gems Pvt. Ltd. and M/s. R. A. Distributors 
Pvt. Ltd. have made foreign remittance on the strength 
of   fake   bills   of   entry   without   having   made   any 
imports.   It   was   gathered   that   within   a   span   of   two 
months i.e. January and February 2014, remittances to 
foreign shores worth more than Rs. 1000 crore against 
fake   import   documents     viz.   bills   of   entry   and 
invoices   were   made   from   the   said   accounts. 
Investigations   have   revealed   that   the   various 
companies   were   involved   in   presenting   fake   bills   of 
entry   before   the   ICICI   bank   for   foreign   outward 
remittances  and   all   of   them   have  opened   accounts   in 


                              Page 15 of 127
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late December, 2013 and January, 2014.  The addresses 
and the names of the Directors who were dummy and name 
lenders.


3.2            Names   of   the   companies   involved   in   the 
fraudulent remittances from their bank accounts with 
ICICI Bank, their fake addresses and dummy directors:

Sr.    Name of the Company               Directors             Account No       Amount 
No.                                                                             illegally 
                                                                                remitted
                                                                                Rs. in Crores
1      M/s. Agni Gems Pvt. ltd.          Pankaj S. Jain and  005205500995       168.93
       304,   Shayona   Hatfalia,        Deepak   Mahadev 
       Haripura, Surat                   Patil
2      M/s. Harmony Diamonds Pvt.        Pankaj S. Jain and  005205501001       76.28
       ltd.                              Deepak   Mahadev 
       I   Floor,   Somnath   Mahadev    Patil
       Street,   Gurajara   Faliyu, 
       Surat
3      M/s.   R.   A.   Distributors     Shailesh   R.   Patel  624605501750    1521
       Pvt. ltd.                         and          Aniket 
       6/1943,   Office   No.   303,     Ambekar
       Cabin   No.   1,   3rd  Floor, 
       Navakar   Building,   Opp. 
       Kabir Mandir, Mahidarpura, 
       Surat
4      M/s. Hem Jewels Pvt. ltd.         Sagar   Kamble   and  624605501807     348.59
       6/1764,   Cabin   No.   6,        Manoj Kamble
       Ground   Floor,   Back   side, 
       Krishna   Kunj   Gundisheri, 
       Laldarwaja,   Mahidarpura, 
       Surat
5      M/s.   Maa   Mumbadevi   Gems     Sagar   Kamble   and  624605501808.    446.4
       Pvt. Ltd.                         Manoj Kamble
       6/1764,   Cabin   No.   6, 
       Ground   Floor,   Back   side, 
       Krishna   Kunj   Gundisheri, 
       Laldarwaja,   Mahidarpura, 
       Surat
6      M/s. Riddhi Exim Pvt.ltd.         Sitaram   Salvi   and  085005500829.   994.77
       101,   I   Floor,   Krishna       Shailesh R. Patel
       Kunj,             Gundisheri, 
       Laldarwaja,   Mahidarpura, 
       Surat
7      M/s.   M.B.   Offshore            Sachin   Sitaram  085005500828.        1013.18
       Distributors Pvt. ltd.            Salvi   and     Aniket 
       6/1943,   Office   No.   303,     Ambekar
       Cabin   No.   1,   3rd  Floor, 
       Navakar   Building,   Opp. 
       Kabir Mandir, Mahidarpura, 
       Surat
8      M/s. Ramshyam Exports Pvt.        Sumit   Kumar   Babel  085005500850    650.42
       ltd.                              and        Mahendra  and 
       6/1943,   Office   No.   303,     Kumar Ranka            085005500879
       Cabin   No.   1,   3rd  Floor, 
       Navakar   Building,   Opp. 
       Kabir Mandir, Mahidarpura, 
       Surat
9      M/s.   Trinetra   Trading         Sumit   Kumar   Babel  085005500849    176.18
       Pvt. ltd.                         and        Mahendra  and 
       6/1943,   Office   No.   303,     Kumar Ranka            085005500880
       Cabin   No.   1,   3rd  Floor, 
       Navakar   Building,   Opp. 




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           R/SCR.A/4496/2014                                                            CAV JUDGMENT


          Kabir Mandir, Mahidarpura, 
          Surat



  3.3                Investigation   have   also   revealed   that   the 
  companies   based   in   Hong   Kong   and   Dubai   were   the 
  beneficiaries   of   foreign   remittances   made   and   the 
  following table shows the amount of rupees in crores 
  were   fraudulently   remitted   by   the   above   said   Indian 
  firms.


Indian        R.   A.    M/s.    M/s.        M/s.      M/s.       M/s.      M/s.       M/s.        M/s.    Grand 
Firms         Distri     Agni    Harmony     M.B.Of    Hem        Riddhi    Ram        Trinetra    Maa     Total
Foreign       butors     Gems    Diamonds    fshore    Jewels     Exim      Shyam      Trading     Mumba
Firms         Pvt.       Pvt.    Pvt.Ltd     Distri    Pvt.       Pvt.      Exports    Pvt.        Devi 
              Ltd        Ltd.                butors    Ltd.       Ltd       Pvt.       Ltd.        Gems 
                                             Pvt.                           Ltd                    Pvt.
                                             Ltd.                                                  ltd

Nippon        230        0       0           165.94    60         150.25    106.14     6.29        103     821.62
Mabrook       239        0       0           228.08    0          269.58    106.6      0           163     1006.26
Daimur        290        0       0           55.93     49.59      74.45     43.71      12.55       42      568.23
Cornell       294        0       0           125.47    85         129.86    72.56      0           39.69   746.58
Al Saba       314        0       0           121.91    154        148.46    165.61     97.21       0       1001.19
Al Mignas     75         0       0           257.19    0          49.69     0          0           0       381.88
Al Almas      79         0       0           0         0          165.76    71.18      31.22       98.71   445.87
Golden                   34.89   0           0         0          0         0          0           0       34.89
King
Good  Step               47.79   0           0         0          0         0          0           0       47.79
Trading
Bin   Sabt                       0           0         0          0         0          16.86       0       16.86
Jewellery                0
LLC
Nice  able               86.25   47.9        0         0          0         0          0           0       134.15
Trading
Sharp                            15.81       0         0          0         0          0           0       15.81
Crown
Silver                           12.57       0         0          0         0          0           0       12.57
Smart
Al Johara                                    0         0          6.72      0          0           0       6.72
Oracle                                       58.66     0          0         0          0           0       58.66
General 
Trading
Comet                                                                       43.8       0           0       43.8
Corpn.
Chaushan                                                                    40.82      12.05       0       52.87
Trading 
Ltd.
Total         1521       168.9   76.28       1013.1    348.59     994.77    650.42     176.18      446.4   5395.75
                         3                   8




  3.4                Investigation   as   to   who  are   the   sources   of 
  such   huge   funds   revealed   that  fake   firms   with   dummy 
  partners have made RTGS Credits from their respective 
  bank   accounts     with   Axis   Bank     to   the   ICICI   Bank 
  accounts of above mentioned companies.



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  Sr     Name   of   the  Address                                 Name of the partners
  No     company
  1      M/s. Aarzoo      6/1854,   PAI,   Shop                   Faisal  Reza  M Ali  Patel 
         Enterprises      No.   4,   Cab.   No.   1,              and Zahir Abbas  M Patel
                          Navkar   Chambers, 
                          Bhojabhai   No   Tekro, 
                          Mahidarpura,   Surat­
                          395003
  2                       6/869, Ami Kunj                         Shahid   M.   Tamboli   and 
         M/s.         GT  Building, Ground                        Faisal Reza M Ali Patel
         Traders          Floor, Back 
                          Side,Cabin No. A, 
                          Chapariya Sheri, 
                          Mahidarpura, Surat­
                          395003
  3      M/s. Vandana &  6/2132, 3rd Floor,                       Ali Raza  H. Bhojani  and 
         Co.              Cabin NO. 301, B,                       Shahid M. Tamboli. 
                          Limbu Sheri, 
                          Mahidarpura, Surat 
  4      M/s.   Maruti  6/2497. 3rd Floor,                        Shahid   M.   Tamboli   and 
         Trading          Cabin No. 1 Ajanta                      Zahir Abbas M. Patel.
                          Matlar, Limbusheri, 
                          Mahidarpura, Surat 
  5      M/s.       Jash  7/3717 A, Cabin No.                     Faisal  Reza  M Ali  Patel 
         Traders          1, 2nd Floor,                           and Ali Raza H. Bhojani
                          Rampura Main Road, 
                          Surat
  6      M/s.   Natural  6/2155, Cabin NO. 3,                     Pukhraj   Anandmal   Mutha 
         Trading Co       Basement, Gokul                         and           Munnichand 
                          Bldg., Pipala Sheri,                    Shantilal Bhandari. 
                          Mahidarpura, Surat
  7      M/s.       M.D.  6/1766, Sainath                         Munnichand   Shantilal 
         Enterprise       Building, Ground                        Bhandari   and     Sushil 
                          floor, Cabin No. 1,                     Kumar Anandmal Jain
                          Gundisheri, 
                          Mahidarpura, Surat
  8      Ms/.             307, Suparshwa                          Shri   Surendra   Kumar 
         Millennium   &  Building, 3rd Floor,                     Anandmal   Dungarwal   and 
         Co.              Cabin No. 1,Near                        Shri          Sushilkumar 
                          Ganesh Temple, Thoba                    Anandmal Jain
                          Sheri, Mahidarpura, 
                          Surat.




 3.5             The following table further shows the amount 
 of  funds  transferred  through   RTGS   from  the   firms   to 
 the companies.

Directorial    M/s.R.A.      M/s.      M/s. Hem    M/s. Maa     M/s. M.B.    M/s.Ram    M/s.        Total
Companies      Distri­       Riddhi    Jewels      Mumbadevi    Offhsore     Shyam      Trinetra 
Partnership    butors        Exim      Pvt. ltd    Gems Pvt.    Distri­      Exports    Trading 
Firms          Pvt.          Pvt.                  ltd          butors       Pvt.       Pvt. 
               Ltd.          ltd                                Pvt. Ltd.    ltd.       ltd. 
M/s.Vandana    233           113.6     45          54           139          65.99      13.56       664.15




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& Co
M/s.Natural      95          46.40    0           0          74    49         9       273.4
Trading Co
M/s.Jash         349         124.56   57          126        175   79.45      11.78   922.79
Traders
M/s.GT           270         154      54          66         202   87         6.33    839.33
Traders
M/s.M.D.         88          27       0           0          92    44.85      13.65   265.5
Enterprise
M/s.   Aarzoo    272         64.85    47          95         155   71.66      7.35    712.86
Enterprise
M/s.             26          4.4      0           0          24    0          0       54.4
Millennium & 
Co
M/s.   Maruti    18          40       0           0          51    78.93      8.79    196.72
Trading 
                 1351        574.81   203         341        912   476.88     70.46   3929.
                                                                                      15




 3.6                  It  has   also  been   found   that   several  firms, 
 individuals, cheque discounters, commission agents and 
 others based in New Delhi, Mumbai, Surat, Chandigarh, 
 Hyderabad   and   Ahmedabad   have   made   RTGS   transfers   to 
 the partnership firms. 


 3.7                  The   respondent   No.3   had   initially   started 
 investigation   under   the   FEMA,1999,   and   following   in 
 the   FIR   NO.   I/16/2014   dtd.   11.04.2014   and   FIR   No. 
 I/17/2014 dtd. 13.04.2014 registered by the Detection 
 of Crime Branch, Surat Police under Sections 420, 465, 
 467,   468,   471,   477   A   of   IPC   upon   the   complaint   of 
 ICICI   Bank   investigations   under   the   Prevention   of 
 Money Laundering Act, 2002 (PMLA) have been initiated 
 as the Offences under Section 420, 467, 471 of IPC are 
 'scheduled   offences'   in   terms   of   Section   2(y)   under 
 the   Prevention   of   Money   Laundering   Act,   2002,   which 
 have been registered against the above said companies 
 and its directors. Upon scrutiny of the said two FIRs, 
 a   case   was   registered   under   ECIR   No.   01/2014   dtd. 
 17/04/2014   by   the   Directorate   of   Enforcement,   Surat 



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for investigation into the offence of money laundering 
under PMLA, 2002.


3.8          One Shri Afroz Mohamed Hasanfatta one of the 
petitioner   in   cognate   writ   petition   along   with   one 
Shri   Madanlal   Jain   was   the  brain  behind   the   illegal 
transfer   of   money   and   since   he   has   received   huge 
proceeds for his active role in the crime he has been 
arrested under Section 19 of PMLA, 2002. Shri Madanlal 
Jain created the fake companies with dummy directors 
and   lent  the   same  for   Shri  Afroz  Mohamed   Hasanfatta 
for import and export of diamonds.  No such import and 
export   of   diamonds   have   been   made   from   the   said 
private   limited   companies   and  bills  of  entry  of  the 
year 2011 were allowed to be made and forged with the 
signatures of Customs Officials for illegal transfer 
of money by submitting the same before the ICICI Bank. 
The   Police   have   arrested   Shri   Madanlal   Jain   on 
7/7/2014 and the Directorate has also arrested him on 
17/7/2014   under   the   Section   19   of   PMLA,   2002 
following   the   transit   remand   granted   by   the   Chief 
Court, Surat. During his custodial interrogation, he 
has   stated   that   RTGS   credits   in   huge   amounts   were 
received   through     Shri   Rakesh   Kothari   and   the   said 
RTGS   credits   received   in   the   accounts   of   the   said 
firms with the Axis bank were transferred to M/s. R. 
A. Distributors Pvt. Ltd., M/s. Riddhi Exim Pvt. Ltd., 
M/s.   Hem   Jewels   pvt.   Ltd.,   M/s.   Maa   Mumbadevi   Gems 
Pvt.ltd. M/s.M.B. Offshore Distributors Pvt.ltd., M/s. 
Ramshyam Exports Pvt. Ltd. and M/s. Trinetra Trading 
Company Pvt.ltd.  He has also stated that Shri Rakesh 


                            Page 20 of 127
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Kothari of M/s. Riddhi Siddhi Bullion Ltd would ensure 
credits   through   RTGS  were   made   in   the   firms   namely, 
M/s.   Vandana   &  Co.,   M/s.   Aarzoo   Enterprise,   M/s.   GT 
Traders, M/s. Jash Traders, M/s. Maruti Trading, M/s. 
M.D.   Enterprise,   M/s.   Millennium   &   Co.,   and   M/s. 
Natural Trading Co. from places like Mumbai, Surat and 
Delhi     and   would   use   the   same   for   smuggling   of 
diamonds and Gold. He further stated that M/s.  Riddhi 
Siddhi Bullion Ltd. had business transactions in Dubai 
through   Shri   Raju   Kothari   of   M/s.   Riddhi   Siddhi 
Bullion   Ltd.   had   business   transactions   with   M/s.   Al 
Khayal   Al   Dahabi   Jewellery   LLC,   Dubai   and   the   said 
firm had reportedly made illegal transactions with the 
firm   Al   Khayal   Al   Dahabi   Jewellery   LLC,   Dubai   for 
smuggling of Gold.


Role played by the Petitioner

     Shri   Urvish   D.   Shah,   Director   of   M/s.   P.   Umesh 
Chandra & Co , an Angadia firm, in his statement dtd. 
26.6.2014 has named Shri Prithviraj Kothari (paternal 
uncle of Rakesh Kothari) would send cash to Surat from 
Mumbai through M/s. P. Umesh Chandra & Co. They would 
telephone from 022­23098745 to M/s. P. Umesh Chandra & 
Co for collecting the cash and during a period of time 
the cash amounting to Rs. 150 crore was stated to have 
been   transferred.   The   said   cash   was   delivered   to 
various   persons   on   the   instructions   of   Shri   Prafful 
Patel, Surat. Shri Madanlal Jain in his statement dtd. 
22/07/2014   has   stated   the   sources   of   funds   received 
through   RTGS   in   second  layer   companies   namely,   M/s. 


                            Page 21 of 127
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Vandana   &  Co,   M/s.   GT   Traders,   M/s.  Maruti   Trading, 
M/s.Jash   Traders,   M/s.  Aarzoo   Enterprises,   M/s. 
Millennium   &   Co,   M/s.  Natural   Trading   and   M.D. 
Enterprise.   He   had   stated   that   Shri   Rakesh   Kothari 
would   ensure   credits   through   RTGS   transfer   to   the 
companies from places like Mumbai , Surat and Delhi. 
He had also stated that Shri Rakesh Kothari would use 
the fraudulent remittances made to Hong Kong and Dubai 
for smuggling of Gold and Diamonds.


     To   specific   question   on   the   names   of   the 
companies in which Shri Rakesh Kothari had ensured the 
RTGS transfers to which Shri Madanlal Jain stated that 
Shri   Rakesh   made   RTGS   to   M/s.GT   Traders   and   M/s. 
Vandana & Co. 

     The forensic analysis of the computer seized from 
the Office of Shri Madanlal Jain has the messages sent 
from Shri Jayesh Desai regarding the debit advice of 
Shri   Raju   Kothari,   Shri   Rajesh   Kothari   is   an   elder 
brother   of   Shri   Rakesh   Kothari.   Shri   Rakesh   Kothari 
has not turned up on being twice summoned and turned 
up   on   01.09.2014   for   his   statement   to   be   recorded 
under Section 50 of PMLA, 2002. 


The Modus Operandi under which the Petitioner helped 
in Financing Shri Madanlal Jain:­

     In   one   of   the   Statements   of   the   Petitioner 
recorded   under   Section   50   of   the   PMLA,   2002   on 
06/09/2014   wherein   he   inter   alia  stated   that  he  had 



                            Page 22 of 127
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agreed   to   the   statements   dtd.  5/9/2014  of  Shri   C.K. 
Patel   (Jayanti   Amba   Angadia   firm)   and   Shri   Praveen 
Kumar   Jain   (Commission   agent   from   Mumbai)   recorded 
under Section 50 of PMLA, 2002 and perused and put his 
dated signature on the above statements; that he had 
sent Rs. 750 Crore to Surat through various angadias 
for   further   RTGS   and   the   money   belonged   to   his 
paternal uncle Shri Prithviraj Kothari; that on being 
asked   to   elaborate   the     whole   modus   operandi   of 
collecting cash and sending it for the procurement of 
RTGS     he   stated   that   the   man   of   Shri   Prithviraj 
Kothari, Shri Anil would give cash to the petitioner 
and   Mr.   Anil   was   working   in   the   Office   of   Shri 
Prithviraj Kothari; that     Mr. Madanlal Jain and Mr. 
Prithviraj Kothari would discuss the issue of handing 
over the cash to individual / company for the purpose 
of RTGS and Mr. Anil  would come to him with the cash 
and direction that to whom the cash might be given for 
the purpose of making of RTGS; that thereafter as per 
the direction given he would  hand over the concerned 
company   /   individual   and   they   would   complete   the 
transaction by making the RTGS; that he would wait for 
2 to 3 hours and in case if the phone did not come to 
him then it would be  presumed that RTGS process was 
     complete and in case it was not complete then the 
person would   inform him   citing the reason for non 
completion   and   it   was   being   completed   the   following 
day; that  Rs. 750 Crore in cash had been given by him 
to   different   RTGS  arranging   persons   from   the   period 
during   December'2013   to   February/Mach'2014;   that 
besides   him   the   other   person   who   was   doing   illegal 


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transfer   of   money   work   for   Shri   Prithviraj   Kothari 
were   Shri   Hukam   Raj,   Rajni   Mahal,   Tara   deo,   Shri 
Yunus, Masjid under etc and the cash was given by him 
to   either   angadias   or   the   persons   who   arranged   the 
RTGS; that the RTGS arranged in Mumbai for that money 
was given directly to the person who arranged the RTGS 
and the RTGS procured in Surat money was given to the 
Angadias; that the angadias thereafter would transport 
the   money   from   their   Office   in   Mumbai   to   Surat   and 
would give it to the persons  arranging RTGS in Surat; 
that   the   name   of   RTGS   arranging   persons   were   Shri 
Sagar   and Shri Dharmendra; that those two were main 
persons who arranged RTGS and the total money given by 
him to the following angadias which was around Rs. 750 
Crore were   M/s. P. Umesh Chandra & Co, M/s. Gujarat 
Angadia,   M/s.   Jayantilal   Ambalal   Choksi,   M/s.   S. 
Babulal, Shri Arpit, Fofal wadi, Bhuleshwar, M/s. Soma 
Magan,   Fofal   wadi,   Bhuleshwar   and   in   addition   to 
above,     certain   cheque   discounters   in   Mumbai   would 
also arrange direct RTGS from Mumbai itself; that his 
brother Shri Rajesh Kothari alias Raju Kothari has a 
company named Al Khayal Al Dhahabi Jewellery LLC, M­1, 
M­2, M­3, Gold Souq, Deilva, P.O. Box, 51377, Dubai, 
U.A.E. 


4            According to the petitioner of Special Civil 
Application No.4496 of 2014, FIR No.5/16 of 2014 was 
registered   by   District   Crime   Branch,   Surat   on 
11.04.2014 alleging various offences under IPC against 
one   M/s.   R.A.Distributors   Pvt.   Ltd.,   Surat   and   its 
directors   for   preparing   bogus   bills   of   entry   and 


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presenting the same for outward remittance to various 
parties   in   Dubai   and   Hong   Kong.     That     another   FIR 
came to be registered by District Crime Branch, Surat 
on 13.04.2014 for various offences under IPC against 
M/s. Agni Gems Pvt. Ltd., M/s. Harmony Diamonds Pvt. 
Ltd.   and  the   directors   for  preparing   bills   of   entry 
and   presenting   the   same   for   outward   remittance   to 
various   parties   in   Dubai   and   Hong   Kong.   However, 
Enforcement   Case   Information   Report   [ECIR]01/Surat­
Sub­Zonal/2014­15   was   registered   by   Directorate   of 
Enforcement   of   Ahmedabad,   Surat   Zone,   Surat   against 
persons accused in the aforesaid FIRs dated 11.04.2014 
and   13.04.2014   and   it   was   registered   by   respondent 
No.3 and investigation commenced under provisions of 
the PML Act and the Rules framed there under. During 
the   course   of   investigation,   the   Deputy   Director   of 
the Directorate of enforcement complained against 79 
accused   including   interested   persons   and   legal 
entities, but the petitioners herein were not named. 
Later on, when the petitioner, who appeared on being 
summoned was arrested by respondent NO.3 purportedly 
in  exercise  of  powers   conferred   by   Section   19(1)   of 
the PML Act.  On reasonable belief that the petitioner 
has been guilty of offences punishable under Section 4 
read   with   Section   3   of   PML   Act,   on   02.09.2014   an 
application   was   filed   by   respondent   No.3   before   the 
designated Judge under PML Act viz. Principal District 
Judge,   Ahmedabad   [Rural]   for   seeking   enforcement 
custody of the petitioner.  In the remand application 
it   was   claimed   by   respondent   No.3   that   arrest   of 
petitioner was done on 01.09.2014 for involvement in 


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the   huge   money   laundering   racket   and   investigation 
could not be completed in short time. Thereafter, the 
application   for   opposing   further   remand   and   for 
seeking bail was filed by the petitioner on 08.09.2014 
for seeking temporary bail, till final disposal of the 
said application.  However, by order dated 09.09.2014, 
learned   Sessions   Judge   [PMLA]   Designated   Court   was 
pleased to reject the prayers for interim relief and 
thereafter   matter   was   kept   for   hearing   on   regular 
bail.   An affidavit in reply was filed by respondent 
No.3   on   15.09.2014   and   arguments   were   canvassed   by 
both the learned advocate for the parties respectively 
and   finally   application   filed   by   the   petitioner   for 
opposing remand and grant of bail came to be rejected 
by order dated 08.10.2014.  


4.1           In   the   above   mentioned   factual   aspects, 
petitioners   have   filed   the   present   petitions   under 
Article 226 of the Constitution of India with manifold 
prayers as quoted herein above.


4.2           At   the   outset,   legality,   validity   and 
constitutionality   of   the   PML   Act   is   not   under 
challenge.     However,   Section   45   of   PML   Act   is 
challenged   as   arbitrary,   unreasonable,   illegal, 
discriminatory   inasmuch   as   certain   offences   under 
amended schedule, which can even be non­cognizable and 
bailable and/or had much lighter importance mandates 
such   offences   not   only   cognizable   and   non­bailable, 
but also put onerous restrictions on accused persons 
of such schedule offences while taking bail from the 


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competent court of law and such accused persons have 
to undergo rigor of provisions of Section 45 of the 
PML Act which makes it impossible for them to get any 
relief   unless   the  court  is  satisfied   that  there  are 
reasonable grounds for believing such accused person 
is   not   guilty   of   such   offence   and   that   he   is   not 
likely to commit any offence while on bail.   That in 
the   present  case,  when   the  petitioner   herein  is  not 
even accused of any schedule offence, still, rigors of 
impugned   Section   45   are   erroneously   made   applicable 
and law clearly abhors deprivation of any individual 
except   according   to   procedure   established   by   law   as 
per Article 21 of the Constitution of India.   It is 
also submitted that even arrest of the petitioner in 
exercise of powers under Section 19 of the PML Act by 
respondent   No.3   is   per   se   illegal   and   violative   of 
procedure prescribed in the above Section itself read 
with directions issued by the Apex Court in the case 
of   D.K.Basu   [supra]   and   respondent   No.3   is   not 
competent   enough   to   order   such   arrest   of   the 
petitioner   and   further   mandatory   procedure   of   rules 
notified by Central Government vide GSR 446[E] dated 
01.07.2005   viz.   "The   Prevention   of   Money   Laundering 
[the   Forms   and   the   Manner   of   Forwarding   a   Copy   of 
Order of Arrest of a Person along with the Material to 
the   Adjudicating   authority   And   Its   period   of 
Retention] Rules, 2005".  That respondent Nos. 2 and 3 
are   the   officers   of   the   enforcement   directorate   and 
such   officers   are   empowered   to   order   arrest,   as 
envisaged under Section 19 of the PML Act.  




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4.3           Referring   to   two   notifications   dated 
01.07.2005,  GSR   446[E]   and  GSR   441[E],  it  is  stated 
that the above notifications were issued in exercise 
of powers under sub­section (1) read with clause [a], 
Clause [p] of sub­section (2) of section 73 of PML Act 
notifying   The   Prevention   of   Money   Laundering   [the 
Forms and the Manner of Forwarding a Copy of Order of 
arrest   of   a   Person   Along   with   the   Material   to   the 
Adjudicating   Authority   and   its   Period   of   Retention] 
Rules, 2005 and the second notification was issued by 
the Central Government in exercise of powers conferred 
by   sub­section   [1]   of   Section   49   of   the   PML   Act 
whereby the Central Government appointed with effect 
from 1st  day of July, 2005 Directorate of Enforcement 
holding office immediately before the said date under 
the   Foreign   Exchange   Management   Act,   1999   as   the 
Director who exercise the exclusive powers conferred 
under Sections 5, 8, 16, 17, 18, 19 20 and 21 and sub­
section (1) of Section 26, Sections 45, 50, 57, 60, 62 
and Section 63 of the PML Act and the said director 
shall also concurrently exercise powers conferred by 
sub­sections 3, 4 and 5 of   Section 26 and Sections 
39, 40, 41, 42, 48, 49, 66 and 69 of the PML Act.  


4.4           That   on   01.06.2009   Prevention   of   Money 
Laundering [Amendment] Act, 2009 [No.21 of 2009] was 
amended and vide Section 38 of the said Amended Act, 
2009, the Schedule was partly amended and the offences 
of   lesser   gravity   remained   in   Part   B   of   the   said 
Schedule with monetary ceiling. That on 27.11.2011 the 
Directorate   of   Enforcement   issued   a   circular   Order 


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bearing [Tech] No.03/2011 after cadre restructure of 
the Directorate and re­designation of posts at various 
levels.  


4.5            On   03.01.2013,   Prevention   of   Money 
Laundering [Amendment] Act, 2013 was amended further 
to amend the PML Act and Section 3 of the Act came to 
be   amended   and   vide   Section   30   of   the   amended   act, 
even   offences   enumerated   in   Part   B   of   the   Schedule 
were   also   inserted   in   Part   A   of   the   Schedule   by 
omitting Part B and substituting Part A of the said 
Schedule.     That   on   08.02.2013   Central   Government 
appointed 15.02.2013 as the date on which provisions 
of Prevention of Money Laundering Act, 2012 came into 
force by putting same into gazette.  


4.6            That Section 54 also came to be amended and 
which was pertaining to certain officers empowered to 
assist   in   inquiry   etc.   and   clause   [g]   of   the   said 
section   54   provide   that   officers   of   enforcement 
appointed   under   sub­section   (1)   of   Section   36   and 
Foreign Exchange Management Act, 1999 along with other 
such officers of the Central Government institutions 
recognized under law and thus like any other officers 
of   any   other   Department   mentioned   under   Section   54, 
the   respondent   No.3   was   empowered   according   to   the 
petitioner to assist in inquiry and was not competent 
to arrest the petitioner under Section 17 of the PML 
Act.


5              In the backdrop of factual scenario of facts 


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and law, learned Senior Advocate Mr. Vikram Chaudhary 
with Mr. Sanjay Agarwal for the petitioner contended 
that   Section   45   of   the   PML   Act   is   unreasonable, 
unconstitutional,   illegal,   arbitrary,   discriminatory 
and   ultra   vires   to   Articles   14,   21   and   22   of   the 
Constitution of India.   It is submitted that amended 
schedule would show minor / lighter offences under the 
IPC and other enactments which are even non­cognizable 
or bailable have been subjected to rigor in terms of 
Section   45   of   the   PML   Act,   even   when   a   person   is 
accused of such an offence and recourse to Section 3 
of PML Act is attracted, the offence under the PML Act 
could   necessary   become   cognizable   and   non­bailable. 
Such an anomalous situation would lead to disastrous 
consequences.  On the one hand a person may be accused 
of non­cognizable and/or a bailable offence however, 
if applied rigors of PML Act, such an offence if finds 
place in Part A of the Schedule of the offences under 
PML Act, would become much graver, and if the liberty 
of   such   person   is   curtailed,   by   application   of   the 
provisions of Section 45 of the Act, a greater burden 
would   be   put   on   the   Court   to   hold   that   there   are 
reasonable grounds to believe that the accused person 
is not guilty of offences under PML Act in order to 
grant bail and such rigor is blatantly unreasonable, 
absurd and discriminatory. Such rigor is even greater 
than   Section   37   of   the   NDPS   Act   where   in   case   of 
certain   types   of   offences   viz.   under   Sections   19   or 
Section 24 or Section 27A and for offences involving 
commercial   quantity   under   NDPS   Act   where   to   undergo 
rigor of section 37 and not for lesser offences. 


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5.1           It  is  further   submitted  that  a  bare  glance 
on   the   provisions   of   Section   45   of   PMLA   would   show 
that irrespective of the nature of the accusation in 
scheduled   offence,   all   offences   under   PMLA   are 
cognizable as well as non­bailable, and if the person 
is accused of any scheduled offence punishable for a 
term of imprisonment of 3 years and more [even if of a 
non­cognizable   and   bailable   offence],   any   offence 
under   PMLA   concerning   Proceeds   of   Crime   qua   such 
Scheduled   offence,   would   attracts   rigors   of   Section 
45(1)   of   PMLA   thereof   (supra).     Although   the 
petitioner is not an accused of any scheduled offence, 
and as such rigors of section 45 are not applicable to 
him, the respondents are making their endeavors to any 
how incarcerate the petitioner for oblique purposes. 
In any event, such provisions are therefore certainly 
tantamount to transgressing into fundamental rights of 
life and liberty of persons guaranteed in Articles 14, 
19, 21 and 22 of the Constitution of India.




5.2           It is further submitted that viewed from any 
perspective,   the   provisions   relating   to   bail   under 
PMLA   as   well   as   construction   of   nature   of   offences 
there under, cannot be made in such a manner which may 
render   the   very   purpose   thereof   to   be   oppressive, 
harsh,   indiscriminate   and   repugnant   to   basic 
fundamental right of an individual.


5.3           It   is   further   submitted   that   law   on   the 


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subject is no more res integra that­


    [i] if the court wants to ignore any law on the 
    ground   that   it   violates   the   Constitution, 
    declaration             by         the            Court       of         its 
    unconstitutionality   is   essential.   Even   though   a 
    law becomes void automatically under Article 13, 
    without   the   necessity   of   any   declaration   by   a 
    court, a declaration that a law has become void 
    is   necessary   before   a   court   can   refuse   to   take 
    notice   of   it.     The   voidness   of   law   is   not   a 
    tangible thing which can be noticed as soon as it 
    comes   into   existence,   a   declaration   that   it   is 
    void is necessary before it can be ignored.


    [ii] In   the   alternative   to   submission   (i),   dire 
    necessity is to expound and interpret Section 45 
    of  PMLA.    It  is  however  well  nigh  settled  that 
    even if a provision under penal statue is intra 
    vires, the same may not stand the scrutiny of law 
    in case there is basic difficulty on account of 
    jurisdictional   issue.     Section   19   read   with 
    Section 49(3) of PMLA, and Rules notified by GSR 
    446(E),   dated   1.7.2005   would   clearly   show   that 
    officers   authorized   under   the   Act   can   exercise 
    power to arrest only in the following manner and 
    eventualities -


    (a) There   has   to   be   accusation   of   Scheduled  
    offence,




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(b) There   has   to   be   Proceeds   of   Crime   derived 
out   of   the   Scheduled   offence,   and   case   shall 
relate to its projection as untainted.


(c) There has to be 'material in possession',


(d) There must be reason to believe,


(e) The reasons for such belief must be recorded 
in writing,


(f) Reasons to believe must relate to any person 
to   be   'guilty'   of   an   offence   punishable   under 
PMLA,
(g) Pursuant to such arrest, it is mandatory to 
inform   the   arrestee   of   the   grounds   for   such 
arrest,


(h) In terms of Rules notified vide GSR 446 (E), 
dated 1.7.2005, particularly Rule 2(1)(c), 2 (1) 
(e), 2 (1) (f), 2 (1) (g), 2 (1) (h), Rule 3, and 
Rule   6,   arrest   under   PMLA   can   be   made   by   an 
"arresting   officer"   as   defined   in   the   Rules   on 
the   basis   of   "material"   and   upon   service   of 
Arrest   order   which   must   be   made   in   accordance 
with Form III, containing material particulars in 
the   matter   of   arrest,   and   the   officer   to   be 
'authorised'   in   this   behalf   by   the   Central 
Government,   and   also   indicating   'reason   to 
believe'   as   required   under   Section   19   because 
arrest order would mean the order of arrest of a 


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person and includes the grounds for such arrest 
under sub­section (1) of section 19 of the Act. 
The   aforesaid   rules   are   reproduced   hereinafter 
for ready reference ­


"2 Definitions


1.      In these rules, unless the context otherwise 
requires,­


(c) "Arresting   Officer"   means   the   Director, 
Deputy Director, Assistant Director or any other 
officer, authorized in this behalf by the Central 
Government   by   general   or   special   order   to 
exercise   the   power   to   arrest   any   person   under 
sub­section (1) of Section 19 of the Act;" 


"(e)   "Director"   or   "Deputy   Director"   or 
"Assistant Director" means a Director or a Deputy 
Director   or   an   Assistant   Director,   as   the   case 
may   be,   appointed   under   sub­section   (1)   of 
Section 49 of the Act;"


"(f) "Form" means forms appended to these  rules;"


"(g) "material" means any information or material 
in   the   possession   of   the   Director   or   Deputy 
Director or Assistant Director or any authorized 
officer,   as   the   case   may   be,   on   the   basis   of 
which   he   has   recorded   reasons   under   sub­
section(1) of Section 19 of the Act;"


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      "(h)   "order"   means   the   order   of   arrest   of   a 
      person and includes the grounds for such arrest 
      under sub­section (1) of Section 19 of the Act;"


      (I)   Rule   3   of   the   aforesaid   Rules   further 
      prescribes   that   pursuant   to   the   arrest,   the 
      Arresting Officer shall prepare an index of the 
      copy of the order and the material in possession 
      and sign each page of such index of the copy of 
      the order and the material and shall also write a 
      letter while forwarding such index, order and the 
      material   to   the   Adjudicating   Authority   in   a 
      sealed envelope.


      Rule   6   specifically   provides   that   the   Arresting 
      Officer while exercising powers under sub­section 
      (1)   of   Section   19   of   the   Act   shall   sign   the 
      arrest order in Form III appended to the Rules.


5.4           It   is   further   submitted   that   as   logical 
corollary   would   postulate   mandate   of   law,   it   is 
luminous   that   in   the   event   of   breach   of   any   of   the 
mandatory   procedure   as   culled   out   above,   the   arrest 
would be illegal and contrary to procedure established 
by   law   and   thus   violative   of   Article   21   of   the 
Constitution of India.


5.5           It is further submitted that even if Section 
45 of PMLA is taken on its face value, the same cannot 
override   the   mandate   of   Section   19   (1)   read   with 


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Section   49(3)   of   PMLA   and   Rules   thereunder   (supra). 
Viewed   from  any   perspective,   Section   45   (1)   of   PMLA 
must be construed in a harmonious manner in order to 
give   true   meaning,   effect   of   lack   of   authority,  and 
mandatory   provisions   under   the   Act   and   rigors   as 
contained in Section 45 (1) cannot be invoked unless 
the   other   mandatory   procedural   requirements   are   met 
with.     It   is   further   submitted   that   Section   45   of 
PMLA, to the extent it is ultra vires of Articles 14, 
19,   21   and   22   of   the   Constitution   of   India,   is 
unconstitutional.


5.6           Learned   Senior   Advocate   would   contend   that 
Section 19 of the PML Act is to be read down, expound, 
deliberate   and   interpret   in   light   of   section   49(3) 
read with Rules notified by GSR 446[E] dated 1.7.2005 
and directions and guidelines laid down by the Hon'ble 
Apex Court in D.K.Basu vs State of West Bengal 1997(1) 
SCC 416.  The above contention of learned counsel are 
on   the   premise   that   the   graver   offences   alleged 
stricter   requirement   to   follow   the   procedure   and   in 
the   instant  case   there   is   total   breach  of  procedure 
prescribed   by   law   while   taking   away   liberty   of   the 
petitioner in illegal manner.


5.7           Section 49(3) permits the Central Government 
to impose such conditions and limitations on exercise 
of   the   powers   and   discharge   of   duty   conferred   or 
imposed on any authority under the PMLA.   Thus, as a 
logical   corollary   it   can   be   safely   inferred   that 
Central   Government   can   by   way   of   Rules   and 


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Notifications etc issued by it from time to time may 
also define and limit the scope and manner of exercise 
of   powers   and   functions   by   any   authority   under   the 
PMLA. It is not open for the respondents to claim the 
rules   and   notifications   issued   by   the   Central 
Government as redundant, much less when the personal 
liberty of any citizen is taken away in violation of 
the   rules   and   notifications   issued   by   the   Central 
Government.  


5.8           It is further submitted that in exercise of 
powers conferred by sub­section (1) read with clause 
(b) of sub­section (2), of Section 73 of the PML Act, 
the Central Government has notified Rules. 


5.9           It   is   further   submitted   that   on   26.9.2013, 
the   purported   Grounds   of   Arrest   were   handed   over   to 
the counsel for the petitioner, after the arguments in 
the bail application were concluded by them on earlier 
date.  Even these purported Grounds of Arrest contain 
the following manifest illegalities­


      [a] The same are not even titled as 'Grounds of 
      Arrest'.


      [b] The   same   are   not   even   addressed   to   the 
      petitioner.


      [c] No FIR of any Scheduled Offence is remotely 
      mentioned in the Grounds of Arrest.




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[d] No   gist   of   any   Scheduled   Offence   is 
mentioned in the Grounds of Arrest.


[e] It is not even informed that the petitioner 
is not accused of any Scheduled Offence.


[f] No ECIR case number under PMLA is mentioned 
in the Grounds of Arrest.


[g] No   brief   details   of   allegations   leading   to 
registration of the ECIR case are mentioned.


[h] There   is   no   reference   to   the   Complainant 
already filed against 79 accused persons in the 
same case under PMLA.


[i] The purported Grounds of Arrest do not bear 
endorsement   of   any   witness   to   suggest   that   the 
same were actually informed to the petitioner.




[j] The purported Grounds of Arrest do not bear 
any endorsement of the petitioner to suggest that 
these   were   the   Grounds   claimed   as   explained   to 
the petitioner.


[k] Although,   the   purported   Grounds   of   Arrest 
claim   that   (copies   of   statements   enclosed),   no 
statements   were   provided   even   on   26.9.2014, 
despite specific request by the Counsel for the 
petitioner.


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       [l] No   proceeds   of   Crime   relatable   to   the 
       petitioner   herein   are   identified   in   these 
       Grounds, much less any willful conversion and/or 
       projection of any Proceeds of Crime as untainted, 
       by the petitioner, directly or indirectly.


       [m] It do not show any prima facie basis to have 
       reasonable   belief   that   the   petitioner   has   been 
       guilty of offence under PMLA.


       [n] In   one   paragraph   the   petitioner   is   alleged 
       as connected with Real Time Gross Settlement RTGS 
       received in about 8 second layer entities (Group 
       C), in the very next paragraph it is restricted 
       to 2 out of these 8 entities.


       [p] The   purported   Grounds   of   Arrest   show   that 
       the   petitioner   had   denied   the   allegations   in 
       interrogation.  This however cannot be the reason 
       for his arrest without there being any reasonable 
       belief, on any material in possession, that he is 
       guilty of offence under PMLA, even on prima facie 
       basis.


5.10           Inter   alia,   reliance   is   placed   by   the 
learned Senior Advocate on the law laid down by the 
Apex Court in the3 case of State of Punjab v. Baldev 
Singh   -   AIR   1999   SC   2378   and   also   in   the   case   of 
D.K.Basu,. Vs. State of West Bengal, 1997(1) SCC 416.




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5.11           Thus,  it  is  submitted   that  order  of  arrest 
of  the   petitioner  by  respondent   No.3   in   exercise   of 
powers under Section 19(1) of the PML Act deserves to 
be quashed and set aside.


5.12           Learned   Senior   Advocate   submits   that   the 
"Grounds   of   Arrest"   on   the   basis   of   material   in 
possession   for   reason   to   believe   the   applicant   as 
guilty of offence under PML Act, have not even been 
served upon the applicant, though mandatory under the 
provisions   of   sub­section   (1)   of   Section   19   of   PML 
Act.   The existence of such grounds for arriving at 
such   reasonable   belief   is   pre­requisite   for   arrest 
under   PML   Act   and   are   required   to   be   recorded   in 
writing.     Hence,   non­supply   of   such   "Grounds   of 
Arrest",   at   the   time   of   arrest   or   immediately 
thereafter   is   fatal   and   hence   the   applicant   is 
entitled to be released on bail even on this ground. 
It is further submitted that the arrest officer shall 
record purported belief that the applicant is guilty 
of offence under PML Act and thus having arrived at 
such   belief,   non­communication   of   the   grounds   of 
arrest has rendered the arrest illegal, null and void 
ab initio and hence the petitioner is entitled to be 
released on bail.   The applicant has also placed on 
record by way of an illustration "Grounds of Arrest" 
being   served   upon   arrest   under   PML   Act.     Non­
communication of grounds of arrest to the applicant is 
thus   in   violation   of   Article   14,   21   and   22   of   the 
Constitution of India. Along with the above emphasis 
is laid on para 30 guidelines in the case of D.K.Basu 


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and   directions   are   also   equally   binding   to   Revenue 
Intelligence, Directorate of Enforcement, etc.


5.13           That even Rule 2(1)(c) of the Rules notified 
vide   GSR   446[E]   dated   01.07.2005   defines   duly 
authorize   arresting   officer   and   not   absence   of   any 
general   or   specific   order   by   Central   Government 
pursuant to respondent No.3 to exercise powers under 
Section   19   of   PML   Act   and   arrest   of   the   petitioner 
again  become   illegal  and   such  exercise  and   abuse   of 
process of law, and therefore, the impugned order is 
required   to   be   quashed   and   set   aside   and   the 
petitioner is required to be enlarged on bail.  


5.14           Learned   Senior   Advocate   placed   reliance   on 
the following decisions:


       [1] D.K.Basu  v.  State  of  West   Bengal  -  (1997)1 
       SCC 416.


       [2] State of Punjab v. Baldev Singh - AIR 1999 
       SC 2378.


       [3] Harikishan   v.   State   of   Maharashtra   -   AIR 
       1962 SC 911.


       [4] K.   Kuppuswamy   &   Anr.   vs.   State   of   T.N.   ­ 
       (1998)8 SCC 469.


       [5] Sunil   Fulchand   Shah   v.   Union   of   India   - 
       (2000)3 SCC 409.


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      [6] Hema   Mishra   v.   State   of   UP   -   (2014)4   SCC 
      453.


      [7] Madhu Limaye & Ors. ­ 1969(1) SCC 292.


      [8] C.B.Gautam   v.   Union   of   India   -   (1993)1   SCC 
      1999.


      [9] Pragnasingh Thakore vs. State of Maharashtra 
      (2011)10 SCC 445.


      [10] Hussein   Ghandially   &   Ors.   v.   State   of 
      Gujarat - (2014)8 SCC 425.


      The learned Senior Advocate has further relied on 
      the   Prevention   of   Money   Laundering   (Amendment) 
      Bill 2011 and the Prevention of Money Laundering 
      Bill of 1999.


6             Mr.   Devang   Vyas,   learned   ASG   has   heavily 
relied on the affidavit in reply and opposed grant of 
any   relief   in   the  prayer   clauses  and   submitted   that 
involvement of the petitioner in offence under PML Act 
have   surfaced   during   the   course   of   investigation 
carried out and submitted as under:


6.1           Learned   ASG   appearing   for   the   respondent 
No.3 submits that Section 45 of PMLA is a mandate duly 
provided by the legislature so as to make the offence 
of   money   laundering   a   cognizable   and   non   bailable 


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offence, the offence of money laundering is a distinct 
and   separate   offence   which   is   exclusive   of   the 
schedule   offence   on   the   basis   of   which   money 
laundering   investigation   under   PMLA   takes   it   course 
and hence the investigation of the offence punishable 
under section 4 of the Act has its own sanctity which 
is not dependent on the course of schedule offence and 
its   procedure,   the   exclusivity   of   the   offence   and 
section 45 has to be read in consonance with the Aims 
and Objective of the said Act. It is further submitted 
that public interest is paramount in the subject case 
and   PMLA,   2002   has   been   enacted   to   serve   public 
interest  as  evident   in   the  opening   statement  of  the 
Statement of Objects and Reasons, which is as under:

               
              " It   is   being   realized,   world   over,   that
                                                                   
              money­laundering poses a serious threat not 
              only to the financial systems of countries, 
              but   also   to   their   integrity   and 
              sovereignty."


6.2           It   is   submitted   that   the   nature   and 
classification of schedule offence be it bailable or 
cognizable   or   non  bailable  or  non   cognizable  has   no 
bearing on offence under S.3 of PMLA as the mandate of 
the same provides for a distinct offence under Section 
3 which is punishable under Section 4 of the statute 
and   creates   a   new,   different   and   a   separate 
investigation under PML Act which is totally exclusive 
and   divergent of the course and nature of schedule 
offence investigated and prosecuted by the predicate 


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agency and henceforth, it is pertinent to mention that 
Section   45   which   has   its   applicability   over   the 
offence under Section 3 has to be dealt in without the 
nature and course of schedule offence and in light of 
the aims and objectives of the PMLA.


6.3           It is further submitted that the Respondent 
No.3 is empowered to investigate cases under PMLA and 
has rightly executed his powers as defined in the law. 
It   is   submitted   that   due   process   of   law   was 
scrupulously followed and was within the jurisdiction 
as manifested in the PMLA. 


6.4           It   further   submitted   that   the   contention 
raised   by   the   Petitioner   in   terms   of   'Arresting 
Officer'   as   defined   in   Rule   2(1)(C)   of   the   rules 
notified  vide   GSR  446(E)   dated   01.07.2005  has   to   be 
contrasted with the expression used in sub­section (1) 
of section 19 of the Act and hence the rules cannot 
control the provisions of the enactment and therefore, 
the power of Arrest given under Section 19 (1) by the 
Parliament, could not be curtailed under rule making 
power   of   the   executive   by   specifying   that   such 
Assistant Director has to be additionally authorised 
by Central Government by general or special order.


6.5           It is further submitted that as far as the 
contention of the applicant in terms of the power to 
arrest   has   been   conferred   by   Central   Government 
exclusively   upon   the   Director   in   the   Enforcement 
Directorate   vide   Notification   GSR   441(E)   dated 


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01.07.2005, the words used in the notification do not 
show that the Director was to have powers under the 
Act to the exclusion of all other officers. It only 
reveals that the Director has the exclusive power but 
not   necessarily   to   the   exclusion  of  the   others,  who 
are empowered under the Act.  The same contention was 
also settled by the Hon'ble Bombay High Court in the 
matter   of   Syed   Mohamed   Masood   Vs   D.   Shanmugam   and 
others in Criminal Bail Application No. 71 of 2013.


6.6           It   is   further   submitted   that   PMLA   was 
amended   so   as   to   bring   the   offences   under   various 
statutes   under   the   ambit   of   investigation   under   the 
Prevention   of   Money   Laundering,   stringent   and 
Statement as to notification.




6.7           It   is   further   submitted   that   Amendment   to 
the   PML   Act,2002   has  further   been   made  which  merged 
the erstwhile schedules under a single schedule so as 
to remove the monetary limit for investigation under 
PMLA,2002.


6.8           It is further submitted that the contention 
raised by the petitioner in terms of Section 54 of the 
PML   Act   does   not   have   any   locus   as   the   arresting 
officer   is   duly   authorized   under   the   provisions   of 
statute and derives his authority from Section 19 of 
the   Prevention  of  Money  laundering   Act,   2002  and   as 
far   as   Directors,   Deputy   Directors,   or   Assistant 
Directors are concerned, no authorization of Central 


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Government   is   required   and   that,   as   far   as   the 
contention of the petitioner in terms of the power to 
arrest   has   been   conferred   by   Central   Government 
exclusively   upon   the   Director   in   the   Enforcement 
Directorate   vide   Notification   GSR   441(E)   dated 
01.07.2005, the words used in the notification do not 
show that the Director was to have powers under the 
Act to the exclusion of all other officers. It only 
reveals that the Director has the exclusive power but 
not   necessarily   to   the   exclusion  of  the   others,  who 
are empowered under the Act.  It is further  submitted 
that in terms of S. 54 (g) of PMLA, 2002 that other 
officers   of   enforcement   who   are   not   specially 
empowered to authorized powers under various Sections 
like 19, 17 etc. are also to assist the officers like 
Director,   Joint   Director,   Deputy   Director,   Assistant 
Director who exercises the power to arrest etc under 
provisions   of   PMLA   and   hence   54(g)   provides   just   as 
the   staff   to   assist   the   officer   exercising   and   the 
Assistant   Director   was   well   within   his   powers   to 
investigate the cases under PMLA and the execution of 
powers   vested   in   him   under   the   Section   19   was 
apposite.


6.9           It is further submitted that the contention 
of  the   petitioner  with   respect   to   not   mentioning   of 
his name in FIR No. I/16/2014 dated 11.4.2014 and FIR 
No.I/17/2014  dated 13.4.2014 is irrelevant and is not 
applicable in the present set of case as the offence 
of   money   laundering   as   defined   under   Section   3   r/w 
Section 2 (1) (u) of the Act there should only be a 


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nexus   between   the   criminal   activity   relating   to 
scheduled offence and the proceeds thereof in order to 
bring   the   person   to   book,   and   the   said   offence   of 
money   laundering   is   altogether   a   separate   and   a 
distinct offence which is investigated by Enforcement 
Directorate   exclusive   of   the   Schedule   offence   and 
persons found involved in the money laundering racket 
who   may   or   may   not   have   been   named   in   offence 
registered by the predicate agency are been prosecuted 
for   their   alleged   involvement   in   the   offence   as 
defined under S. 3 of the Act.


6.10           It   is   further   submitted   that   the 
petitioner's   involvement   in   the   offence   has   come   up 
during the process of investigation carried on by the 
Directorate   of   Enforcement   and   his   name   appeared   as 
one   of   the   main   accused   while   unearthing   the   said 
money   laundering   racket   later   on   after   17.4.2014. 
Initially the investigation covers the individuals / 
companies   mentioned   in   the   FIR   and   as   the 
investigation progresses, names of other individuals / 
companies keep on coming up. The persons / companies 
so emerged during the investigation consequently come 
under the ambit of investigation under the PMLA, 2002. 
It   is   most   respectfully   submitted   that   the 
petitioner's role cropped up during the investigation 
and   he   was   twice   summoned   under   PMLA,2002.   Since   he 
was   not   forthcoming   during   the   investigations   his 
arrest under PMLA,2002 has been effected.


6.11           It   is   next   submitted   that   the   Prosecution 


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Complaint dated 18.07.2014 has been filed before the 
Hon'ble   Designated   Court   Under   PML   Act   against   79 
accused   and   in   the   same   case   after   further 
investigation a supplementary complaint has also been 
filed   on   29.10.2014   against   the   said   petitioner   and 
other 9 accused. Investigation is still in progress in 
terms of the proceeds of crime and the beneficiaries 
of fraudulent remittances at Hong Kong and Dubai.


6.12           It   is   next   contended   that   unsubstantiated 
allegations of the petitioner against the Directorate 
as   to   coercion   and   threatening   are   nothing   but   the 
afterthought just to abuse the due process of law and 
it   is   respectfully   submitted   that   the   arrest   under 
section 19 (1) of PML Act by respondent no. 3 is valid 
and within the powers conferred upon him by Section 19 
read   with   Rules   notified   vide   GSR   446   (E)   dated 
1.7.2005 of Prevention of Money Laundering Act, 2002 
and   not   in   derogation   with   the   fundamental   rights 
enshrined   by   the   Constitution   of   India   as   the   said 
arrest   comes   under   the   purview   and   fulfills 
requirement   of   S.   19.   It   is   also   submitted   to   the 
Hon'ble Court that as provided by S. 19 (1) grounds of 
arrest   were   communicated   to   the   accused,   and   a   due 
medical check up was under taken after which accused 
was produced within stipulated time frame before the 
Hon'ble   Designated   Judge   under   PML   Act,   Ahmedabad 
along   with   the   detailed   Production   memo   providing 
reasons   and   written   grounds   of   such   arrest   and   the 
application   for   custody   thereof   which   were   not 
objected by the petitioner during the said production. 


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It is further submitted that the baseless allegation 
as to derogation of fundamental rights are nothing but 
an afterthought added to the baseless allegations of 
coercion   and   the   same   was   not   complained   by   the 
petitioner on being produced on the very first day and 
thereafter before the Hon'ble Designated Court.  It is 
also respectfully submitted that this is ploy to abuse 
due   process   of   law   since   the   investigation   has 
revealed his involvement and the complaint has already 
been filed before the Designated Court under PML Act, 
Ahmedabad.


6.13           It is submitted that in execution of arrest 
in   compliance   with   the   procedure   followed   above, 
relatives   of   accused   were   telephonically   informed 
about his arrest which has also been endorsed by the 
accused on arrest memo given to him and one Mr. Amit 
Solanki, a Chartered Account and friend of the accused 
was   handed   over   the   belongings   and   signed   the 
inventory   annexed   to   the   arrest   memo.   The   personal 
belongings   of   the   petitioner   as   mentioned   in   the 
inventory   were  handed   over  to  Shri   Amit   Solanki  who 
accompanied the   petitioner to Ahmedabad from Mumbai 
on 01/9/2014 and was waiting in the corridor of the 
office   of   the   Enforcement   Directorate.     He   has   been 
told   the  reasons   for  handing   over   the   belongings   of 
the   petitioner   and   had   duly   acknowledged   of   having 
received the belongings of the petitioner.


6.14           It is further submitted that along with the 
production   of   the   accused,   an   application   for 


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Enforcement   Custody   was   made   before   the   Designated 
Judge   and   the   learned   Judge   was   pleased   to   grant 
custody of the petitioner for four days from 4/9/2014 
to 8/9/2014.   That the petitioner has been told the 
grounds of arrest and having learned about his grounds 
of arrest he has put his signature on the arrest memo.


6.15           It   is   further   submitted   that   repeated 
allegations   as   to   threatening   of   petitioner   and   his 
family members and coercing him to sign the statements 
made   during   the   custody   are   preposterous,     false, 
baseless and can be termed as   added script as same 
were   never   contended   by   the   petitioner   during   his 
production   post   arrest   or   after   the   enforcement 
custody,   the   statements   given   were   voluntary   and 
petitioner   thereby   was   not   forced   to   give   any 
involuntary   confession.   It   is   also   respectfully 
submitted   that  the   statements  were   typed   as   per  the 
version and say of the petitioner and he was allowed 
to   read   before   he   put   his   signature   on   all   the 
occasions.     That   the   petitioner   has   in   his   own 
handwriting made several corrections to the statements 
and hence there was no question of coercion or duress. 
The   petitioner   in   his   own   handwriting   has   also 
mentioned that whatever was stated during the remand 
period was voluntarily, without any coercion and the 
facts to the best of his knowledge.


6.16           It   is   further   submitted   that   on   08.09.2014 
application   opposing   further   enforcement   custody   has 
never   been   an   issue   involved   in   the   given   case   as 


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Enforcement Directorate has not prayed for any further 
custody   of   the   petitioner   and   in   addition   to   that 
Hon'ble   Designated   Court   vide   their   order   dated 
09/09/2014   was   pleased   to   reject   the   prayer   of 
temporary bail to the petitioner and as on date the 
alleged   involvement   of   the   petitioner   in   offence   of 
money laundering has been made clear by filing of a 
prosecution   complaint   dated   29.10.2014     against   the 
petitioner and others in the Hon'ble Designated Court. 
The proceeds derived from helping Shri Madanlal Jain 
and others in the illegal transfer of money to Hong 
Kong   and   Dubai   are   being   investigated   against   the 
petitioner.


6.17           It is further submitted that the Arrest Memo 
was   served   to   petitioner   and   the   inventory   of   the 
belongings   of   the   petitioner   were   handover   to   Shri 
Amit   Solanki,   a  Chartered   Account   and   friend  of  the 
petitioner   and   grounds   of   arrest   were   inculcated   in 
the   production  memo   which   was  very   well   served   upon 
the   petitioner   at   the   time   of   first   production, 
moreover the file containing the grounds of arrest has 
been perused by the Hon'ble Designated Judge and was 
pleased   to   grant   the   petitioner   the   Enforcement 
Custody of the petitioner. During the hearing of the 
bail   application   a   request   has   been   made   by   the 
counsel of the petitioner that the grounds of arrest 
be made available to them and as per the directions of 
the Hon'ble  Designated Judge, the copy of the grounds 
of arrest has been made   available to the counsel of 
the petitioner.   The said copy of grounds of arrest 


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has also been seen by the Hon'ble Designated Judge and 
confirmed that it was the same copy that was produced 
before   them   for   seeking   remand.   It   is   pertinent   to 
note   that   production   memo   submitted   before   the 
Designated   Judge   also   contained   detailed   grounds   of 
arrest.


6.18           It is further submitted that the petitioner 
was in cahoots with Shri Madanlal Jain in financially 
helping him in as much as sending the money through 
various   angadia   firms   to   Surat   and   other   places  for 
the   sake   of   RTGS   transfers   to   the   companies 
categorised  as  Group  C   by   the  petitioner   himself   is 
well   established.   That   the   petitioner   has   himself 
stated the modus operandi as to how the large chunks 
of money were allowed to be transferred through RTGS 
to   the   companies   under   Group   C   with   the   help   of 
various   cheque   discounters   /   angadia   firms   known   to 
the   petitioner.     The  statement   of   the   petitioner   is 
quite evident as to how he helped in illegal transfer 
of   money   by   various   individuals   without   being 
connected to the companies mentioned under the Groups 
A, B, C and D either directly or indirectly.   It is 
further   submitted   that   investigations   were   initially 
started   under   FEMA   and   on   receipt   of   the   copies   of 
FIRs from the Police authorities, investigations under 
PMLA have also been initiated. The investigation under 
FEMA   is   also   in   progress   and   is   in   parallel   to   the 
investigation   under   PMLA,2002.   The   role   of   the 
petitioner has cropped up during the investigation in 
the form of statements of various cheque discounters, 


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angadia   firms   and   Shri   Madanlal   Jain   with   whom   the 
Petitioner   was   having   good   relations.     That   the 
petitioner   with   the   help   of   his   brother   Shri  Rajesh 
Kothari used the said illegal monies remitted on the 
strength of fake documents to Dubai for smuggling of 
Gold   and  Diamonds  was   stated   by   Shri   Madanlal   Jain. 
Shri Rajesh Kothari is a beneficiary of the unlawful 
remittances to Dubai and his role has been evident by 
the summary of email messages sent from the computer 
of   Shri   Madanlal   Jain   wherein   the   summary   reads   as 
under: details of debit of Rajesh Kothari's account. 
It   is   submitted   that   the   petitioner   is   guilty   of 
offence under Money laundering in as much as he had 
financially helped Shri Madanlal Jain for making RTGS 
transfers   to   the   companies   owned   by   Shri   Madanalal 
Jain.     The   Petitioner   has   used   cheque   discounters, 
angadia firms for sending money to various places and 
has   also   made   arrangements   for   RTGS   transfers   from 
Mumbai itself. The statements of various persons who 
transferred   monies   belonging   to   the   petitioner   and 
further   allowed   the   same   for   RTGS   transfers   is 
insurmountable.


6.19           It is further submitted that the petitioner 
with his strong financial clout sourced huge chunks of 
money to the companies mentioned under Group C which 
belonged to Shri Madanlal Jain is undeniable. That the 
petitioner having lent money to Shri Madanlal Jain for 
his   fraudulent   activities   has   also   unquestionably 
received   commission   for   helping   in   the   Offence   of 
Money   Laundering.     Since   the   petitioner   has   helped 


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Shri Madanlal Jain in his criminal activities and the 
petitioner having derived proceeds from such criminal 
activities are nothing but proceeds of crime which is 
a   matter   of   investigation   being   conducted   by   the 
Enforcement   Directorate.     The   petitioner   has   been 
guilty   of   offence   of   money   laundering,   a   complaint 
under PMLA, 2002 has been filed before the designated 
court on 29/10/2014.


6.20           It   is   further   submitted   that   the 
investigation   conducted   so   far   has   undoubtedly 
established the role of the Petitioner in the Offence 
of   Money   Laundering.   The   material   in   possession   and 
other evidence submitted before the designated court 
and after considering the same the bail application of 
the   petitioner   was   rejected   vide   an   order   dtd. 
8/10/2014 by the Hon'ble Designated Court.   That the 
claim of the petitioner that the material possession 
with   the   Enforcement   Directorate   was   vague   or 
insufficient   to   be     called  the   petitioner  guilty   of 
Offence under Money Laundering has reasonably been set 
aside by the Hon'ble Designated Judge for PMLA,2002.


6.21           It is further submitted that mere mention of 
the words such as "believe" " Incontrovertible"   and 
other phrases without the full sentences accompanying 
the above words do not give a complete understanding 
of the background   in which the said words / phrases 
have been used.  In so far as the grounds under which 
the above words and phrases were mentioned under the 
remand   application   and   the   reply   filed   before   the 


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designated   court   for   PMLA,2002   was   to   elaborate   the 
role of the involvement of the petitioner in sourcing 
funds to Shri Madanlal Jain in the mammoth fraudulent 
remittances   to   Hong   Kong   and   Dubai.       That   the 
petitioner   was   not   alleged   to   have   made   remittances 
abroad   but   had   only   sourced   funds   belonging   to   his 
paternal   uncle   to   the   companies   mentioned   under   the 
Group   C   is   unquestionably   substantiated.   That   the 
companies under Group C were of Shri Madanlal Jain and 
made RTGS transfer to Companies mentioned under Group 
A which used the same for illegal transfer of money to 
places like Hong Kong and Dubai on strength of fake 
documents. The investigation has also established the 
role of the petitioner beyond an iota of doubt to the 
extent of sourcing funds to the companies categorised 
as Group C and the petitioner himself as stated the 
way   the   funds   were   seen   to   be   transferred   through 
RTGS.   Shri   Rajesh   Kothari,   the   brother   of   the 
petitioner has been named by Shri Madanlal Jain to be 
a beneficiary of illegal remittances in Dubai and the 
petitioner   with   the   help   of   his   brother   used   such 
illegal remittances for smuggling of Gold and Diamonds 
is   incontrovertible.   Hence   it   is   most   respectfully 
submitted that the petitioner is guilty of offence of 
money   laundering   as   defined   under   Section   3   of 
PMLA,2002.


6.22           It   is   further   submitted   that   the 
petitioner's   involvement   in   the   offence   of   money 
laundering has been established by the statements of 
various persons and the investigation carried out by 


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the   Directorate   of   Enforcement   following   which   a 
prosecution complaint has been duly filed against the 
accused before Designated Court on 29/10/2014.   Shri 
Madanlal   Jain   for   whom   the   petitioner   lent   Rs.   750 
crore   financial   help   for   illegal   transfer   of   money 
amounting to Rs. 5395.75 Crore has stated that the two 
brothers, the Petitioner and Shri Rajesh Kothari used 
the illegal remittances for the sake of smuggling of 
Gold and Diamonds.   The petitioner has himself named 
various commission agents and cheque discounters who 
helped   in   arranging   RTGS   transfers   from   Mumbai   and 
other   places.   The   forensic   analysis   of   the   computer 
seized from the Office of Shri Madanlal Jain had email 
messages sent from Shri Jayesh Desai, an accomplice of 
Shri Madanlal Jain regarding the debit advice of Shri 
Raju Kothari also known as Shri Rajesh Kothari who is 
an   elder   brother   of   the   petitioner   and   details   of 
transactions in PDF format.


6.23           It is further submitted that the Respondent 
has   taken   due   care   in   making   arrest   of   the   said 
petitioner   and   the   same   has   been   executed   after 
fulfilling   the   requites   as   laid   under   S.   19   of   the 
prevention of Money Laundering Act, 2002, The material 
in  possession   and  reasons   to   believe   were  also   made 
explicit   in   the   production   memo   at   the   time   of 
production of the petitioner after arrest before the 
Designated Court.


6.24           It   is   further   submitted   that   offence   under 
prevention of money laundering act, 2002 is a separate 


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and   distinct   offence   altogether   exclusive   of   the 
schedule offence registered by predicate agency, hence 
the   contention  of  the   petitioner  not   being   named   in 
the FIR has no relevance because on the basis of the 
FIR a distinct case has been registered under PMLA and 
role   of   petitioner   has   been   established   by   the 
investigation carried on by the Directorate.  The ECIR 
was registered following the receipt of FIR registered 
by   the   Police   authorities.     The   investigations 
launched   under   PMLA,2002   after   registering   the   ECIR 
for source and trail of this mammoth illegal transfer 
of  money  led   to   various  individuals  and     companies. 
The   financial   sources   to   the   companies   categorised 
under Group C by the petitioner himself was used for 
RTGS   transfers   to   the   companies   categorised   under 
Group   A   which   have   made   the   fraudulent   remittances 
made from Surat on the strength of fake documents.  It 
is most respectfully submitted that Shri Madanlal Jain 
created the companies mentioned under categories Group 
A and Group C and one of the sources of funds to the 
companies under Group C is the petitioner who had used 
the services of cheque discounters, angadias and other 
commission   agents   for   the   benefit   of   Shri   Madanlal 
Jain. The petitioner is thus appropriately termed as 
guilty under the offence of money laundering and his 
role   is   aptly   covered   under   the   definition   under 
Section 3 of PMLA,2002. The proceeds thus derived from 
the illegal transfer of money are nothing but proceeds 
of crime as has been defined under Section 2 (1) (u) 
of PMLA,2002.




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6.25           It   is   further   submitted   that   it   has   been 
held   by   the  Hon'ble  Designated   Judge   under   PML  Act, 
Ahmedabad   that   the   Respondent   No.   3   i.e.   Assistant 
Director of Enforcement has been authorized to execute 
arrest   and   arrest   is   not   invalid   in   law   vide   their 
order   dated   09.09.2014   and   Hon'ble   Designated   Court 
was   also   pleased   to   reject   the   interim   and   regular 
bail   application   of   the   petitioner.   The   Hon'ble 
Designated   Court   was   pleased   to   reject   the   bail 
application   of   petitioner   vide   its   seasoned   order 
dated 8/10/2014.


6.26           It is further submitted that on mere perusal 
of the bare provisions of Section 37 of NDPS Act and 
Section   45   of   the   PML   Act   shows   similarity   in   the 
provisions moreover, the S. 45 of PML Act cannot be 
construed as violative of the Constitution of India on 
sole reasons of providing grounds in addition to the 
normal bail procedure provided under code of criminal 
procedure,   furthermore   the   mandate   of   the   Act   is 
intended   to   make   money   laundering   an   offence   and 
provide   for  its   punishment  thereof   so   as   to   deprive 
the offender to enjoy fruits of money which has ill 
gotten   source,   henceforth   creating   an   altogether 
separate   and   distinct   offence   which   is   purely 
exclusive of the schedule offence, so contention as to 
nature   of   the   schedule   offence   with   respect   to 
bailable or non cognizable does not have any locus as 
the investigation under PMLA is not dependent on the 
investigation and procedure under schedule offence and 
it is the aim and objective of the Act to provide for 


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such provisions so as to deprive the offenders of such 
heinous crime to continue involving themselves in such 
racket and enjoy fruits of the proceeds so generated. 
The scope of S.45 PMLA, 2002 like S. 37 of NDPS Act 
and   similar   provision   in   MCOCA   Act   stands   to   the 
offence included in the same statute and thus, it is 
submitted   that   'offences'   which   come   within   the 
purview   of   the   S.45   are   the   offence   under   the 
Prevention   of   Money   Laundering   Act   and   hence 
applicability of the said section is over the offence 
under   PMLA,   2002   and   not   over   the   investigation   or 
trial under the schedule offence on basis of which the 
independent investigation under PMLA takes it course.


6.27           It   is   further   submitted   requisites   of   S.19 
have been complied while executing arrest under PMLA 
and hence no such breach and violation of Fundamental 
Rights of the petitioner have been done.


6.28           It is further submitted that the rules which 
have been relied on have been framed in exercise of 
the powers under clauses (a) and (p) of Section 73 (1) 
and   (2)   of   the   Act.   These   clause   (a)   and   (p)   of 
Section 73(2) read as under:

               73.   (2)   (a)   the   form   in   which   records  
               referred to in this act may be maintained;

               73.   (2)   (p)   the   manner   in   which   the   order 
               and   the   material   referred   to   in   Section  
               19(2) shall be maintained.

6.29           It is further submitted that the rules were, 


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therefore, framed in order to prescribe forms in which 
records were to be maintained and the manner in which 
order and material referred to in sub section (2) of 
Section   19   was  to  be  maintained.  The   term  arresting 
officer   was   defined   for   the   purpose   of   those   rules 
only   and   definition   of   "Arresting   Officer"   in   these 
rules cannot be held to control provisions of Section 
19 of the Act or require that the Central Government 
has   to   issue   notification   under   those   rules   for 
authorising an assistant director to effect arrest.


6.30           It   is   further   submitted   that  the   non­
communication of grounds of arrest is not the question 
because   the   same   has   been   communicated   to   the 
petitioner as described in above paragraphs.


6.31           It   is   further   submitted   that  the   impugned 
provisions   and   the   actions   or   inactions   of   the 
Respondents cannot be upheld as legal and proper and 
in consonance with the fundamental rights guaranteed 
under the constitution of India.


7              Mr.   Sunit   Shah,   learned   counsel   for   the 
petitioner   of   Special   Civil   Application   No.4672   of 
2014 adopted the arguments canvassed by learned Senior 
Advocate   Shri   Vikram   Chaudhary   appearing   for   the 
petitioner   in   Special   Civil   Application   No.4496   of 
2014.  He further relied on debate in the Rajya Sabha 
[Council   of   States]   when   the   Prevention   of   Money 
Laundering   Bill,   1999   was   presented   after   it   was 
passed   by   Lok   Sabha   [House  of  Representatives].     He 


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further   submitted   that   under   Section   24   of   the   Act 
burden   of   proof   is   shifted   upon   accused,   and 
therefore, it is virtually impossible for an accused 
of   scheduled   offence   under   Money   Laundering   Act   to 
secure his freedom.


8            Before   dealing   with   the   rival   contentions 
and submissions made by the learned counsels for the 
parties, the relevant provisions of the Prevention of 
Money­Laundering   Act,   2002   and   The   Prevention   of 
Money­Laundering   [The   Forms   and   the   Manner   of 
Forwarding a copy of Order of Arrest of a Person Along 
With   The   Material   to   the   Adjudicating   Authority   and 
its period of Retention] Rules, 2005, are reproduced, 
as under:



     THE PREVENTION OF MONEY­LAUNDERING ACT, 2002


[A] The   enacting   history   of   the   Act   including 
International   commitment   and   convention,   resolutions 
of   the   General   Assembly   of   the   United   Nations,   the 
statement of objects and reasons accompanying the Bill 
which   was   eventually   enacted   by   the   Parliament;   the 
preamble   of   the   Act;   and   its   several   provisions 
disclosing   a   policy   to   address   the   scourge   of 
Laundering   of   Money   which   destabilizes   National   and 
International   economies,   the   sovereignty   of   several 
States   and   has   adverse   impact   on   law   and   order 
maintenance.  The provisions of the Act must therefore 
be   interpreted   consistently   with   the   evil   the 



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provisions are intended to address;


[B] Money­Laundering   while   facially   appears   to 
comprise   one   or   more   clear   and   simple   financial 
transactions, involves and comprises and complex web 
of   financial   and   other   transactions.     A   money 
laundering transaction usually involves three stage:


     [i] The   placement   stage:   The   malfeasant   places 
     the crime money into the normal financial system;


     [ii] The   Layering   state:   The   money   induced   into 
     the   financial   system   is   layered­spread   out   into 
     several transactions within the financial system 
     with a view to concealing the origin or original 
     identity   of   the   money   and   to   make   this 
     origin/identity virtually disappear; and


     [iii]               The   integration   stage:   The   money   is 
     thereafter   integrated   into   the   financial   system 
     in such a way that its original association with 
     crime is totally obliterated and the money could 
     be used by the malfeasant and/or the accomplices 
     to get it as untainted/clean money.


[C] Money   laundering   often   involves   five   different 
directional fund flows:


     [i] Domestic   money   laundering   flows:   In   which 
     domestic   funds   are   laundered   within   the   country 
     and   reinvested   or   otherwise   spent   within   the 


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     country;


     [ii] Returning laundered funds:Funds originate in 
     a   country,   are   laundered   abroad   and   returned 
     back.


     [iii]               Inbound   funds:illegal   funds   earned   out 
     of   crime   committed   abroad   are   either   laundered 
     [place]   abroad   or   within   the   country   and   are 
     ultimately integrated into the country;


     [iv] Out   bound   funds:   Typically   constitute 
     illicit capital flight from a country and do not 
     return back to the country; and 


     [v] Flow­through:   The   funds   enter   a   country   as 
     part of the laundering process and largely depart 
     for integration elsewhere.


[D] The   Act   is   a   special   Law   and   a   self   contained 
code   intended   to   address   the   increasing   scourge   of 
money   laundering   and   provides   for   confiscation   of 
property derived from or involved in money laundering. 
The   Act   provides   a   comprehensive   scheme   for 
investigation,   recording   of   statements,   search   and 
seizure, provisional attachment and its confirmation, 
confiscation and prosecution.   The provisions of the 
Act   [vide   Sec.71]  are   enacted  to  have   an   overriding 
effect   [entrenched   by   a   non­obstante   provision], 
notwithstanding   anything   inconsistent   therewith 
contained   in   any   other   law   fro   the   time   being   in 


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force.


[E] The   provisions   of   the   Act   are   fair,   reasonable 
and have sufficient safeguards, checks and balances to 
prevent   arbitrary   exercise   of   power   and/or   abuse   by 
the authorities and provide several layers of scrutiny 
at various stages of the proceedings.


[F] A person accused of money laundering is subject 
to broadly two parallel actions:


[i] prosecution   for   punishment   under   section   4,   for 
the offence of money­laundering defined in Section 3;
[ii] attachment   of   the   property   involved   in   money­
laundering, under Section 5 of the Act.   Proceedings 
under each section is independent.


     Money­laundering poses a serious threat not only 
to   the   financial   systems   of   countries,   but   also   to 
their   integrity   and   sovereignty.     To   obviate   such 
threats   international   community   has   taken   some 
initiatives.  It has been felt that to prevent money­
laundering   and   connected   activities   a   comprehensive 
legislation   is   urgently   needed.     To   achieve   this 
objective   the   Prevention   of   Money­laundering   Bill, 
1998 was introduced in the Parliament.   The Bill was 
referred to the Standing Committee on Finance, which 
presented   its   report   on   4th  March,   1999   to   the   Lok 
Sabha.     The   Central   Government   broadly   accepted   the 
recommendation   of   the   Standing   Committee   and 
incorporated   them   in   the   said   Bill   along   with   some 


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other desired changes.


STATEMENT OF OBJECTS AND REASONS


     It   is   being   realized,   would   over,   that   money­
laundering   poses   a   serious   threat   not   only   to   the 
financial   systems   of   countries,   but   also   to   their 
integrity   and   sovereignty.     Some   of   the   initiatives 
taken by the international community to obviate such 
threat are outline below:­


[a] the   United   Nations   Convention   Against   Illicit 
Traffic in Narcotic Drugs and Psychotropic Substances, 
to   which   India   is   a   party,   calls   for   prevention   of 
laundering   of   proceeds   of   drug   crimes   and   other 
connected   activities   and   confiscation   of   proceeds 
derived from such offence.


[b] the Basic Statement of Principles, enunciated in 
1989,   outlined   basic   policies   and   procedures   that 
banks   should   follow   in   order   to   assist   the   law 
enforcement agencies in tackling the problem on money­
laundering.


[c] the   Financial   Action   Task   Force   established   at 
the summit of seven major industrial nations, held in 
Paris   from   14th  to   16th  July,   1989,   to   examine   the 
problem   of   money­laundering   has   made   forty 
recommendations, which provide the foundation material 
for comprehensive legislation to combat the problem of 
money­laundering.  The recommendations were classified 


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under various heads.  Some of the important heads are­


[i] declaration   of   laundering   of   monies   carried 
through serious crimes a criminal offence;


[ii] to work out modalities of disclosure by financial 
institutions regarding reportable transactions;


[iii]        confiscation of the proceeds of crime;


[iv] declaring money­laundering to be an extraditable 
offence; and 


[v] promoting                international             co­operation        in 
investigation of money­laundering.


[d] the Political Declaration and Global Programme of 
Action adopted by United Nations General Assembly but 
its Resolution No.S­17/2 of 23rd February, 1990, inter 
alia,   calls   upon   the   member   States   to   develop 
mechanism to prevent financial institutions from being 
used   for   laundering   of   drug   related   money   and 
enactment of legislation to prevent such laundering.


[e] the   United   Nations   in   the   Special   Sessions   on 
countering   World   Drug   Problem   Together   concluded   on 
the   8th  to   the   10th  June,   1998   has   made   another 
declaration   regarding   the   need   to   combat   money­
laundering.  India is a signatory to this declaration.


2    In view of an urgent need for the enactment or a 


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comprehensive   legislation   inter   alia   for   preventing 
money­laundering and connected activities confiscation 
of   proceeds   of   crime,   setting   u   of   agencies   and 
mechanisms for co­coordinating measures for combating 
money­laundering,   etc.,   the   Prevention   of   Money­
Laundering Bill, 1998 was introduced in the Lok Sabha 
on the 4th August, 1998.  The Bill was referred to the 
Standing   Committee   on   Finance,   which   presented   its 
report   on   the   4th  March,   1999   to   the   Lok   Sabha.   The 
recommendations of the Standing committee accepted by 
the   Central   Government   are   that   (a)   the   expressions 
"banking company" and "person" may be defined; (b) in 
Part   I   of   the   Schedule   under   Indian   Penal   Code   the 
work   offence   under   section   477   A   relating   to 
falsification   of   accounts   should   be   omitted;   (c) 
'knowingly'  be  inserted  in  clause   3  (b)   relating   to 
the   definition   of   money­laundering;   (d)   the   banking 
companies   financial   institutions   and   intermediaries 
should   be   required   to   furnish   information   of 
transactions to the Director instead of Commissioner 
of Income­tax (e) the banking companies should also be 
brought   within   the   ambit   of   clause   II   relating   to 
obligations   of   financial   institutions   and 
intermediaries; (f) a definite time­limit of 24 hours 
should be provided for producing a person about to be 
searched   or   arrested   person   before   the   Gazetted 
Officer or Magistrate; (g) the words "unless otherwise 
proved to the satisfaction of the authority concerned" 
may be inserted in clause 22 relating to presumption 
on   inter­connected   transactions;   (h)   vacancy   in   the 
office of the Chairperson of an Appellate Tribunal, by 


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reason   of   his   death,   resignation   or   otherwise,   the 
senior­most  member shall act as the Chairperson till 
the   date   on   which   a   new   Chairperson   appointed   in 
accordance with the provisions of this Act to fill the 
vacancy,   enters   upon   his   office;   (i)   the   appellant 
before   the  Appellate   Tribunal   may   be   authorized   to 
engage any authorized representative as defined under 
section   288   of   the   Income­tax   Act,   1961,   (j)   the 
punishment   for   vexatious   search   and   for   false 
information   may   be   enhanced   from   three   months 
imprisonment   to   two   years   imprisonment,   or   fine   or 
rupees ten thousand to fine of rupees fifty thousand 
or both; (k) the word 'good faith' may be incorporated 
in  the   clause   relating   to   Bar  of  legal  proceedings. 
The Central Government have broadly accepted the above 
recommendations   and   made   provisions   of   the   said 
recommendations in the Bill.


3    In   addition   to   above   recommendations   of   the 
standing committee the Central Government proposes to 
(a) relax the conditions prescribed for grant of bail 
so that the Court may grant bail to a person who is 
below   sixteen   years   of   age,   or   woman,   or   sick   or 
infirm, (b) levy of fine for default of non­compliance 
of the issue of summons, etc. (c) make provisions for 
having   reciprocal   arrangement   for   assistance   in 
certain   matters   and   procedure   for   attachment   and 
confiscation   of   property   so   as   to   facilitate   the 
transfer   of   funds   involved   in   money­laundering   kept 
outside   the   country   and   extradition   of   the   accused 
persons from abroad.


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4   The Bill seeks to achieve the above objects.


Act 15 of 2003


    The   Prevention   of   Money­Laundering   Bill   having 
been passed by both the Houses of Parliament received 
the assent of the President on 17th January, 2003.  It 
came on the Statute Book as THE PREVENTION OF MONEY­
LAUNDERING ACT, 2002 (15 of 2003).


    Section 2 contains definitions.


    [c] "Assistant   Director"   means   an   Assistant 
    Director   appointed   under   sub­section   (1)   of 
    section 49; 


    [d] "attachment"   means   prohibition   of   transfer, 
    conversion,   disposition   or   movement   of   property 
    by an order issued under Chapter III;


    [da] "authorised   person"   means   an   authorised 
    person as defined in clause (c) of section 2 of 
    the Foreign exchange Management Act, 1999 [42 of 
    (1991)]


    [j] "Deputy   Director"   means   a   Deputy   Director 
    appointed under sub­section (1) of section 49; 


    [k] "Director"   or   "Additional   Director"   or 
    "Joint   Director"   means   a   Director   or   Additional 


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Director or Joint Director, as the case may be, 
appointed under sub­section (1) of section 49; 

[na] "Investigation" includes all the proceedings 
under this Act conducted by the Director or by an 
authority   authorized   by   the   Central   Government 
under this Act for the collection of evidence.

[p] "money­laundering"   has   the   meaning   assigned 
to it in section 3.

[r] "notification"   means   a   notification 
published in the Official Gazette;


[s] "person" includes­ 


        i]          an individual, 


        ii] a Hindu undivided family, 


        iii] a company, 


        iv] a firm, 


        v]          an association of persons or a body of 
        individuals, whether incorporated or not, 


        [vi]            every   artificial   juridical   person 
        not falling within any of the preceding sub­
        clauses, and 


        [vii]           any agency, office or branch owned 


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        or   controlled   by   any   of   the   above   persons 
        mentioned in the preceding sub­clauses; 


[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;


[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;


[y] "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 is thirty lakh rupees or more


        [iii]       the offences specified under Part C 
        of the Schedule


[z] "Special   Court"   means   a   Court   of   Sessions 
designated as Special Court under sub­section (1) 
of Section 43;


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[za] "transfer"   includes   sale,   purchase, 
mortgage, pledge, gift, loan or any other form of 
transfer of right, title, possessions or lien;


[zb] "value"   means   the  fair   market  value  of  any 
property   on   the   date   of   its   acquisition   by   an 
persons,   or   if   such   date   cannot   be   determined, 
the date on which such property is possessed by 
such person.


3       Offence of money­laundering­
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   proceeds   of   crime   including 
tis   concealment,   possession,   acquisition   or   use 
and   projecting   or   claiming   it   as   untainted 
property   shall   be   guilty   of   offence   of   money­
laundering.


4       Punishment for money­laundering.­
Whoever   commits   the   offence   of   money­laundering 
shall   be   punishable   with   rigorous   imprisonment 
for   a   term   which   shall   not   be   less   than   three 
years   but   which   may   extend   to   seven   years   and 
shall also be liable to fine which may extend to 
five   lakh   rupees:   Provided   that   where   the 
proceeds   of   crime   involved   in   money­laundering 
relates to any offence specified under paragraph 
2  of  Part  A  of  the  Schedule,  the  provisions  of 


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this   section   shall   have   effect   as   if   for   the 
words   "which   may   extend   to   seven   years",   the 
words   "which   may   extend   to   ten   years"   had   been 
substituted.


19      Power to arrest.­
[1] If the Director, Deputy Director, Assistant 
Director or any other officer authorised in this 
behalf   by   the   Central   Government   by   general   or 
special   order,   has   on   the   basis   of   material   in 
his possession, reason to believe (the reason for 
such belief to be recorded in writing) that any 
person has been guilty of an offence punishable 
under   this   Act,   he   may   arrest   such   person   and 
shall,   as   soon   as   may   be,   inform   him   of   the 
grounds for such arrest.


2       The   Director,   Deputy   Director,   Assistant 
Director or any other officer shall, immediately 
after   arrest   of   such   person   under   sub­section 
(1), forward a copy of the order along with the 
material in his possession, referred to in that 
sub­section,   to   the   Adjudicating   Authority   in   a 
sealed   envelope,   in   the   manner,   as   may   be 
prescribed and such Adjudicating Authority shall 
keep such order and material for such period, as 
may be prescribed.


3       Every person arrested under sub­section (1) 
shall,   within   twenty­four   hours,   be   taken   to   a 
Judicial Magistrate or a Metropolitan Magistrate, 


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as the case may be, having jurisdiction: Provided 
that   the   period   of   twenty­four   hours   shall 
exclude the time necessary for the journey from 
the place of arrest to the Magistrate's Court.


23. Presumption  in inter­connected  transactions 
-   Where   money   laundering   involves   two   or   more 
inter­connected transactions and one or more such 
transactions is or are proved to be involved in 
money­laundering,   then   for   the   purposes   of 
adjudication or confiscation under section 8f or 
for the trial of the money­laundering offence, it 
shall   unless   otherwise   provided   to   the 
satisfaction of the Adjudicating authority or the 
Special   Court,   be   presumed   that   the   remaining 
transactions   form   part   of   such   inter­connected 
transactions.


24      Burden of Proof - In any proceeding relating 
to proceedings of crime under this Act,


        [a] in the case of a person charged with the 
        offence of money­laundering under section 3, 
        the   Authority   or   Court   shall,   unless   the 
        contrary   is   provided,   presume   that   such 
        proceeds   of   crime   are   involved   in   money 
        laundering; and


        [b] in   the   case   of   any   other   person   the 
        Authority   or   Court,   may   presume   that   such 
        proceeds   of   crime   are   involved   in   money­


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        laundering.


44. Offences triable by Special Courts.                


45      Offences   to   be   cognizable   and   non­
bailable.­


[1] Notwithstanding   anything   contained   in   the 
Code of Criminal Procedure, 1973 (2 of 1974), no 
person   accused   of   an   offence   punishable   for   a 
term   of   imprisonment   of   more   than   three   years 
under Part A of the Schedule shall be released on 
bail or on his own bond unless­ 


[i] the   Public   Prosecutor   has   been   given   an 
opportunity   to   oppose   the   application   for   such 
release; and 


[ii] where   the   Public   Prosecutor   opposes   the 
application,   the   court   is   satisfied   that   there 
are reasonable grounds for believing that he is 
not   guilty   of   such   offence   and   that   he   is   not 
likely to commit any offence while on bail.


Provided that a person, who, is under the age of 
sixteen   years,   or   is   a   woman   or   is   sick   or 
infirm, may be released on bail, if the Special 
Court so directs:


Provided further that the Special Court shall not 
take   cognizance   of   any   offence   punishable   under 


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section 4 except upon a complaint in writing made 
by­ 


[i] the Director; or 


[ii] any   officer  of  the   Central  Government   or   a 
State   Government   authorised   in   writing   in   this 
behalf by the Central Government by a general or 
special   order   made   in   this   behalf   by   that 
Government. 


[1A] Notwithstanding   anything   contained   in   the 
Code   of   Criminal   Procedure,   1973,   [1973   (2   of 
1974],   or   any   other   provision   of   this   Act,   no 
police officer shall investigate into an offence 
under this Act unless specifically authorized, by 
the   Central   Government   by   a   general   or   special 
order, and, subject to such conditions as may be 
prescribed.


[2] The limitation on granting of bail specified 
in   sub­section   (1)   is   in   addition   to   the 
limitations under the Code of Criminal Procedure, 
1973 (2 of 1974) or any other law for the time 
being in force on granting of bail.


48      Authorities   under   Act­  There   shall   be   the 
following classes of authorities for the purposes 
of this Act, namely:­


[a] Director   or   Additional   Director   or   Joint 


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Director, 


[b] Deputy Director, 


[c] Assistant Director, and 


[d] such   other   class   of   officers   as   may   be 
appointed for the purposes of this Act.


49      Appointment   and   powers   of   authorities   and 
other officers.­ [1]            The   Central   Government 
may appoint such persons as it thinks fit to be 
authorities for the purposes of this Act.


[2] Without prejudice to the provisions of sub­
section (1), the Central Government may authorise 
the Director or an Additional Director or a Joint 
Director   or   a   Deputy   Director   or   an   Assistant 
Director   appointed   under   that   sub­section   to 
appoint   other   authorities   below   the   rank   of   an 
Assistant Director. 


[3] Subject   to   such   conditions   and   limitations 
as   the   Central   Government   may   impose,   an 
authority   may   exercise   the   powers   and   discharge 
the duties conferred or imposed on it under this 
Act.


50. Powers   of   authorities   regarding   summons, 
production   of   documents   and   to   give   evidence, 
etc.


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51      Jurisdiction   of   authorities­          [1]   The 
authorities   shall   exercise   all   or   any   of   the 
powers   and   perform   all   or   any   of   the   functions 
conferred on, or, assigned, as the case may be, 
to such authorities by or under this Act or the 
rules framed there under I accordance with such 
directions   as   the   Central   Government   may   issue 
for the exercise of powers and performance of the 
functions by all or any of the authorities. 


[2] In issuing the directions or orders referred 
to in sub­section (1), the Central Government may 
have regard to any one or more of the following 
criteria, namely:­ 


        [a] territorial area; 


        [b] classes of persons; 


        [c] classes of cases; and 


        [d] any   other   criterion   specified   by   the 
        Central Government in this behalf.


52   Power   of   Central   Government   to   issue 
directions, etc.­


The   Central   Government   may,   from   time   to   time, 
issue such orders, instructions and directions to 
the authorities as it may deem fit for the proper 


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administration   of   this   Act   and   such   authorities 
and   all   other   persons   employed   in   execution   of 
this   Act   shall   observe   and   follow   such   orders, 
instructions   and   directions   of   the   Central 
Government: 


Provided   that   no   such   orders,   instructions   or 
directions shall be issued so as to­ 


        [a] require   any   authority   to   decide   a 
        particular case in a particular manner; or 


        [b] interfere   with   the   discretion   of   the 
        Adjudicating   Authority   in   exercise   of   his 
        functions.


53       Empowerment of certain officers.­
The   Central   Government   may,   by   a   special   or 
general order, empower an officer not below the 
rank of Director of the Central Government or of 
a State Government to act as an authority under 
this Act: 


Provided that the Central Government may empower 
an   officer   below   the   rank   of   Director   if   the 
officer of the rank of the Director or above are 
not available in a particular area.


54      Certain   officers   to   assist   in   inquiry, 
etc.­
The   following   officers   are   hereby   empowered   and 


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required   to   assist   the   authorities   in   the 
enforcement of this Act, namely:­ 


[a] to [f]          xxx


[g] officers of enforcement appointed under sub­
section (1) of section 36 of the Foreign Exchange 
Management Act, 1999 (40 of 1999); 


73      Power to make rules.­


[1] The Central Government may, by notification, 
make   rules   for   carrying   out   the   provisions   of 
this Act. 


[2] In particular, and without prejudice to the 
generality of the foregoing power, such rules may 
provide for all or any of the following matters, 
namely:­ 


[p] the   manner   in   which   the   order   and   the 
material   referred   to   in   sub­section   (2)   of 
section 19 shall be maintained.


  The Prevention of Money­Laundering [The Forms 
 and the Manner of Forwarding a copy of Order of 
  Arrest of a Person Along With The Material to 
   the Adjudicating Authority and its period of 
              Retention] Rules, 2005

2[c]   "Arresting   Officer"   means   the   Director, 
Deputy Director, Assistant Director or any other 



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     officer, authorized in this behalf by the Central 
     Government   by   general   or   special   order   to 
     exercise   the   power   to   arrest   any   person   under 
     sub­section (1) of section 19 of the Act.


     6.      Forms   of   records   -   The   Arresting   Officer 
     while exercising powers under sub­section (1) of 
     section 19 of the Act shall sign the Arrest Order 
     in Form III appended to these Rules.




       The Foreign Exchange Management Act, 1999


     The   Director   of   Enforcement   holding   office 
immediately before the 1st day of July, 2005 under the 
Foreign   Exchange   Management   Act,   1999   [42   of   1999] 
shall   be   entitled   to   exercise   the   exclusive   powers 
conferred under the following provisions:


     [1] Under section 5 i.e attachment of property  
             involved in money­laundering.


     [2] Under section 8 i.e. power of adjudication.


     [3] Under section 16 i.e. power power of  survey.


     [4] Under section 17 i.e. power to search and  
             seizure.


     [5] Under   section   18   i.e.   power   to   search  
             persons.


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     [6] Under section 19 i.e. power to arrest.


     [7] Under   section   20   i.e.   retention   of  
             property.


     [8] Under section 21 i.e. retention of records.


     [9] Under sub­section (1) of 26 i.e. to prefer  
             appeals before the Appellate Tribunal.


     [10] Under   section   45   i.e.   to   file   complaints  
             before the Special Court.


     [11] Under   section   50   i.e.   power   regarding  
             summons,   production   of   documents   and   to  
             give evidence.


     [12] Under section 57 i.e. to apply for letter  of 
     request to a contracting state.


     [13] Under section 60 i.e. power of attachment,  
             seizure   and   confiscation   in   contracting  
             State or in India.


     [14] Under section 63 i.e. to impose penalty in  
             respect of failure to give information.


36. Directorate   of   Enforcement   -  [1]   The   Central 
Government   shall   establish   a   Directorate   of 
Enforcement with a Director and such other officers or 


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class of officers as it think fit, who shall be called 
officers of Enforcement, for the purposes of this Act.


[2] Without   prejudice   to   provisions   of   sub­section 
(1), the Central Government may authorise the Director 
of   Enforcement   or   an   Additional   Director   of 
Enforcement or a Special Director of Enforcement or a 
Deputy Director of Enforcement to appoint officers of 
Enforcement below the rank of an Assistant Director of 
Enforcement.


[3] Subject to such conditions and limitations as the 
Central   Government   may   impose,   an   officer   of 
enforcement may exercise the powers and discharge the 
duties conferred or imposed on him under this Act.


     Relevant notifications / Orders / Circular, are 
reproduced hereinbelow: 


                          "Notification 
                   New Delhi, the 1st July, 2005


G.S.R.440[E] - In exercise of the powers conferred by 
sub­section   (1)   of   Section   49   of   the   Prevention   of 
Money­laundering Act, 2002 [15 of 2003], the Central 
Government   hereby   appoints,   with   effect   from   the   1st 
day   of   July,   2005,   the   Director,   Financial 
Intelligence   Unit,   India,   under   the   Ministry   of 
Finance,   Department   of   Revenue,   as   the   Director   to 
exercise the exclusive powers conferred under clause 
[b] of sub­section (1) of section 12 and its proviso, 


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section   13,   sub­section   (2)   of   section   26   and   sub­
section (1) of section 50 of the said Act and the said 
Director,   Financial   Intelligence   Unit,   India,   shall 
also   concurrently   exercise   powers   conferred   by   sub­
section (3) and sub­section (5) of section 26, section 
39,   section  40,   section  41,   section  42,   section  48, 
sub­section (2) of section 49, section 66 and section 
69 of the afore­said Act.


                 [Notification No.5/2005/F.No.6/2/2005­E.S.]
                                      V.P.ARORA, Under Secy.

                          "Notification 
                   New Delhi, the 1st July, 2005


G.S.R.441[E] - In exercise of the powers conferred by 
sub­section   (1)   of   Section   49   of   the   Prevention   of 
Money­laundering Act, 2002 [15 of 2003], the Central 
Government   hereby   appoints,   with   effect   from   the   1st 
day of July, 2005, the Director of Enforcement holding 
office   immediately   before   the   said   ate   under   the 
Foreign Exchange Management Act, 1999 [42 of 1999], as 
the   Director   to   exercise   the   exclusive   powers 
conferred   under   section   5,   section   8,   section   16, 
section   17,   section   18,   section   19,   section   20, 
section 21, sub­section (1) of section 26, section 45, 
section   50,   section   57,   section   60,   section   62  and 
section 63 of the said Act and the said Director shall 
also   concurrently   exercise   powers   conferred   by   sub­
section   (3),   subsection   (4)   and   sub­section   (5)   of 
section   26,   section   39,   section   40,   section   41, 



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section   42,   section   48,   section   49,   section   66   and 
section 69 of the aforesaid­said Act.


                 [Notification No.6/2005/F.No.6/2/2005­E.S.]
                                              V.P.ARORA, Under Secy."


  ORDER NO. S.O. 906[E] DATED 21.04.2010, ISSUED BY 
     MINISTRY OF FINANCE [DEPARTMENT OF REVENUE]

     In   exercise   of   powers   conferred   by   sub­section 
(1)   of   section   49   of   the   Prevention   of   Money­
Laundering   Act,   2002   (15   of   2003),   the   Central 
Government hereby appoints the Enforcement Officer in 
the   Directorate   of   Enforcement   appointed   under   sub­
section   (2)   of   section   36   of   the   Foreign   Exchange 
Management Act as Assistant Director for the purpose 
of the Prevention of Money­Laundering Act, 2002.



                      MINISTRY OF FINANCE
                    (Department of Revenue)
                             ORDER

New Delhi, the 13th September, 2005 S.O.1273(E) - In exercise of the powers conferred  by sub­section (1) of Section 49 of the Prevention of  Money­laundering Act, 2002 (15 of 2003), the Central  Government   hereby   appoints,   with  effect   from   the   1st  day of July, 2005, the Special Director holding office  immediately   before   the   said   date   under   the   Foreign  Exchange   Management   Act,   1999   (42   of   1999),   as   the  Additional Director for the purpose of the Prevention  Page 85 of 127 R/SCR.A/4496/2014 CAV JUDGMENT of Money­laundering Act, 2002.

[F.No.6/2/2005­E.S.] ANUJ SARANGI, Director ORDER New Delhi, the 13th September, 2005 S.O.1274[E] - In exercise of the powers conferred  by Sub­section (1) of Section 49 of the Prevention of  Money­laundering   Act,   2002   (15   of   2003)   the   Central  Government   hereby   appoints,   with   effect   from   the   1st  day of July, 2005, the Deputy Director holding office  immediately   before   the   said   date   under   the   Foreign  Exchange   Management   Act,   1999   (42   of   1999),   as   the  Deputy Director for the purpose of the Prevention of  Money­laundering Act, 2002.

[F.No.6/2/2005­E.S.] ANUJ SARANGI, Director ORDER New Delhi, the 13th September, 2005 S.O.1275[E] - In exercise of the powers conferred  by Sub­section (1) of Section 49 of the Prevention of  Money­laundering   Act,   2002   (15   of   2003)   the   Central  Government   hereby   appoints,   with   effect  from   the   1st  day   of   July,   2005,   the   Assistant   Director   holding  office   immediately   before   the   said   date   under   the  Foreign Exchange Management Act, 1999 (42 of 1999), as  the   Assistant   Director   for   the  purpose   of   the  Prevention of Money­laundering Act, 2002.

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[F.No.6/2/2005­E.S.] ANUJ SARANGI, Director Ref.No.A­3/1/2011  Date:27/08/2011 CIRCULAR ORDER (TECH) NO.03/2011 The   cadre   restructuring   of   the   Directorate   and   re­ designation   of   posts   of   Deputy   Director,   Assistant  Director  Grade  I   and  Assistant   Director   Grade   II   in  the Directorate as Joint Director, Deputy Director and  Assistant   Director   respectively   vide   Circular   Order  (Admn.)   No.54/2011   dated   28/09/2011   has   necessitated  revision   in   the   statutory   authorities   in   the  Directorate.     In   view   of   the   above,   there   shall   be  following   statutory   authorities   under   PMLA   and   FEMA  for the enforcement of the provisions of the   said  two enactments:­ (I) Statutory Authorities under PMLA:


Sections     Nature of function          Officer           Conditions   of 
                                         Authorized        Authorization
5            Provisional   Attachment Joint Director       Nil
             of Property
8(4)         Taking   possession   of Deputy Director      Subject        to 
             attached property                             approval       of 
                                                           Joint Director
16           Survey                      Assistant         Subject        to 
                                         Director          approval       of 
                                                           Joint Director
17           Search and Seizure          Assistant        Subject        to 
                                         Director/Deputy  approval       of 
                                         Director         Joint Director
18           Search of persons           Assistant         Subject        to 
                                         Director          approval       of 
                                                           Joint Director
19           Power of arrest             Assistant         Subject       to 
                                         Director          approval      of 
                                                           Special Director




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45         Filing   of   Prosecution Deputy Director   Subject       to 
           complaint                                   approval      of 
                                                       Special Director




(II) Statutory Authorities under FEMA:

The Assistant Director shall continue to act as  Investigating Officer.   The authorities and functions  presently   being   discharged   by   the   officers   shall  continue to be so discharged.

(III) Legal cadre:

The legal cadre shall be consulted in all matters  relating   to   legal   issues   as   well   as   before   the  Courts/Tribunals/Adjudicating authorities.

The   above   mentioned   authorities   shall   also  perform other works/functions, as may be specifically  assigned to them from time to time by the Director of  Enforcement/their supervisory officers.

9 The Apex Court in the case of Ram Jethmalani  & Ors. vs. Union of India & Ors. reported in (2011)8  SCC   1,   extensively   considered   unaccounted   /   black  money   generated   in   India   by   Indians   and   transferred  and accumulated in foreign banks and about prevention  of   money­laundering   and   Part­I   of   the   above   order  begins as under:

"1 "Follow the money" was the short and simple   Page 88 of 127 R/SCR.A/4496/2014 CAV JUDGMENT advice given by the secret informant, within the   American   Government,   to   Bob   Woodward,   the   journalist   from   Washington   Post,   in   aid   of   his   investigations  of  the  Watergate   Hotel  break   in.  Money has often been claimed, by economists, to   only be a veil that covers the real value and the   economy. As a medium of exchange, money is vital   for   the   smooth   functioning   of   exchange   in   the   market   place.     However,   increasing   monetization   of   most   social   transactions   has   been   viewed   as   potentially problematic for the social order, in   as   much   as   it   signifies   a   move   to   evaluating   value, and ethical desirability, of most areas of   social   interaction   only   in   terms   of   price   obtained in the market place. 

9.1 That other paragraphs before Part­II of the  order   speak   volume   about   state   of   affairs   about  incidence   of   crime,   petty   and  grand,   like  any   other  social   phenomena   is   often   linked   to   transfers   of  monies, small or large, the Apex Court clearly notices  that   money,   in   the   sense,   can   both   power   and   also  reward   crime.     In   paras   11   and   14,   the   Apex   Court  further held as under:

"11. Unaccounted   for   monies,   especially   large  sums held by nationals and entities with a legal   presence   in   the   nation,   in   banks   abroad,  especially in tax havens or in jurisdictions with  a   known   history   of   silence   about   sources    of  Page 89 of 127 R/SCR.A/4496/2014 CAV JUDGMENT monies,   clearly   indicate   a   compromise   of   the   ability   of   the   State   to   manage   its   affairs   in   consonance   with   what   is   required   from   a   constitutional   perspective.   This   is   so   in   two   respects. The quantum of such monies by itself,   along   with   the   numbers   of   individuals   or   other   legal entities who hold such monies, may indicate   in   the   first   instance   that   a   large   volume   of   activities,   in   the   social   and   the   economic   spheres   within   the   country   are   unlawful   and   causing   great   social   damage,   both   at   the  individual   and   the   collective   levels.   Secondly,   large quanta of monies stashed abroad, would also   indicate  a  substantial  weakness   in  the  capacity  of   the   State   in   collection   of   taxes   on   incomes   generated by individuals and other legal entities  within   the   country.   The   generation   of   such   revenues is essential for the State to undertake   the various public goods and services that it is   constitutionally   mandated,   and   normatively  expected   by   its   citizenry,   to   provide.   A  substantial   degree   of   incapacity,   in   the   above   respect,   would   be   an   indicia   of   the   degree   of   failure   of   the   State;   and   beyond   a   particular   point, the State may spin into a vicious cycle of  declining   moral   authority,   thereby   causing   the   incidence of unlawful activities in which wealth   is sought to be generated, as well as instances   of   tax   evasion,   to   increase   in   volume   and   in   intensity. 
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14. When a catchall word like "crimes" is used,   it is common for people, and the popular culture   to assume that it is "petty crime," or crimes of   passion committed by individuals. That would be a   gross mis­characterization of the seriousness of   the issues involved. Far more dangerous are the   crimes   that   threaten   national   security,   and   national   interest.   For   instance,   with  globalization, nation states are also confronted   by the dark worlds of international arms dealers,   drug   peddlers,   and   various  kinds   of   criminal  networks,   including   networks   of   terror.  International   criminal   networks   that   extend  support to home­grown terror or extremist groups,  or those that have been nurtured and sustained in  hostile  countries,  depend  on  networks  of  formal  and  informal,   lawful  and  unlawful  mechanisms  of  transfer  of  monies  across   boundaries  of  nation­ states.   They   work   in   the   interstices   of   the   micro­structures   of   financial   transfers   across  the globe, and thrive in the lacunae, the gaps in  law and of effort. The loosening of control over   those   mechanisms   of   transfers,   guided   by   an   extreme   neo­liberal   thirst   to   create   a   global   market that is free of  the friction of law and  its enforcement, by nation­states, may have also   contributed to an increase in the volume, extent   and   intensity   of   activities   by   criminal   and   terror networks across the globe". 

9.2 Though   Part­I   of   the   order   prefaces   issues  Page 91 of 127 R/SCR.A/4496/2014 CAV JUDGMENT of   large   sums   of   unaccounted   for   monies,   modus  operandi   of   transfers   of   such   money   generated   in  activities that have been deemed unlawful, nature of  governance,   impact   on   economy   of   the   State,   cross­ border   funding   for   terrorist   activities,   etc.   shows  concern   of   the  Apex   Court   on   such   issues,  including  money­laundering in general is to be born in mind in  the   context   of   subject   petition   for   which  investigation is carried out ­ "Follow the Money" by  the   Directorate   of   Enforcement   upon   registering   on  offence under Section 3 of the PML Act to the tune of  Rs.5395.75 crores is to be considered.

10 It is to be noted that no specific challenge  is made to omission of Part B containing paras 1 to 25  by amendment Act 2 of 2013 with effect from 15.02.2013  and also substitution of Part A by the very Act. That  only effect and consequence of the above omission of  Part B and substitution of Part A by amendment Act 2  of 2013 with effect from 15.02.2013 qua Section 45 of  the PML Act is under challenge on the ground that it  is   violative   of   Articles   14,   21   and   22   of   the  Constitution of India.  

10.1 It   is   trite   that   any   provision   of   any  statute if operate harshly or effect of such operation  result into any hardships or difficulty by itself is  no ground to declare such provision as ultra vires to  the   Constitution   of   India   if   legality,   validity   and  constitutionality   of   the   enactment   is   otherwise   not  ultra   vires   meaning   thereby   such   an   enactment   is  Page 92 of 127 R/SCR.A/4496/2014 CAV JUDGMENT enacted   in   exercise   of   powers   conferred   upon   the  Central   Government   or   State   Government,   as   the   case  may   be,   keeping   in   mind  various   entries   in   Schedule  VII read with Articles 245 and 246 of the Constitution  of India. There is no dispute about legality, validity  and   constitutionality   of   the   PML   Act,   2002   and  subsequent   amendments   except   Section   45   of   the   Act,  which is subject matter of the petition. 

10.2 That   for   interpretation   of   a   penal   statute  and   provisions   include   imposition   of   penalties   for  infringement,   it   is   trite   that   all   such   penal  provisions   contain   in   penal   statutes   are   to   be  construed strictly so as to see that thing charges as  an offence is within plain meaning of words used and  such words are not to be stretched on any notion by  supplying  casus omissus.

10.3 Maxwell   in   the   Interpretation   of   Statutes  [12th  Edn.] says : "the strict construction of penal  statutes seems to manifest itself in four ways : in  the requirement of express language for the creation  of an offence; in interpreting strictly words settling  out   the   elements   of   an   offence;   in   requiring  the  fulfillment   to   the   letter   of   statutory   conditions  precedent   to   the   infliction   of   punishment;   and   in  insisting   on   the   strict   observance   of   technical  provisions   concerning   criminal   procedure   and  jurisdiction.

10.4 In   Craies   and   Statute   Law   [7th   Edn.   At  Page 93 of 127 R/SCR.A/4496/2014 CAV JUDGMENT P.529]   it   is   said   that   penal   statutes   must   be  construed strictly. At page 530 of the said treatise,  referring to [U.S.   v.   Wiltberger   [1820]2   Wheat   [US]  76], it is observed, thus : the distinction between a  strict construction and a more free one has, no doubt  in modern times almost disappeared, and the question  now is, what is the true construction of the statute?  I should say that in a criminal statute you must be  quite   sure   that   the   offence   charged   is   within   the  letter of the law.  This Rule is said to be founded on  the   tenderness   of   the   law   for   the   rights   of  individuals,   and   on   the   plain   principles   that   the  power of punishment is vested in the Legislature, and  not   in   the   juridical     department,   for   it   is   the  Legislature, not the Court, which is to define a crime  and ordain its punishment".

10.5 Even   the   Apex   Court   interpreted   provisions  of Penal statute containing strict provisions.  In the  case of Kartar Singh vs. state of Punjab reported in  (1994)3   SCC   569,   the   Apex   Court   held   that   "The  conditions imposed under section 20(8)(b), as rightly  pointed out by th Additional Solicitor General, are in  consonance   with   the   conditions   prescribed   under  clauses   [I]  and   [iii]   of   sub­section   (1)   of   Section  437 and clause [b] of sub­section [3] of that section.  Similar to the conditions in clause [b] of subsection  [8], there are provisions in various other enactments  such as Section 35(1) of Foreign Exchange Regulation  Act   and   Section   104(1)   of   the   Customs   Act   to   the  effect that any authorized or empowered officer under  Page 94 of 127 R/SCR.A/4496/2014 CAV JUDGMENT the   respective   Acts,   if,   has   got   reason   to   believe  that any person in India or within the Indian Customs  water has been guilty of an offence punishable under  the respective Act, may arrest such person. Therefore,  the   condition   that   "there   are   grounds   for   believing  that he is not guilty of an offence",  which condition  in different form is incorporated in other Acts such  as   clause   [I]   of   Section   437(1)   of   the   Code   and  Section 35(1) of FERA and 104(1) of the Customs Act,  cannot   be   said   to   be   an   unreasonable   condition  infringing   the   principle   of   Article   21   of   the  Constitution.  IN view of the detailed discussion made  above,   we   set   aside   the   conclusion   of   Punjab   and  Haryana   High   Court   in   Bimal   Kumar   holding.  "Therefore,   the   last   portion   of   clause   [b]   of   sub­ section (8) of Section 20 of the Act, which reads :  `and that he is not likely to commit any offence while  on bail, alone is ultra vires".   On th same analogy,  the   limitations   contained   in   S.37(1)(b)   and   (2)   are  constitutionally valid". 

10.6 The   Apex   Court   interpreted   the   identical  provisions   regarding   granting   of   bail   while   dealing  with section 21[4] of Maharashtra Control or Organised  Crime   Act,   1999   (MCOCA)   and   held   that   the   said  wordings   does   not   lead   to   the   conclusion   that   the  Court   must   arrive   at   a   positive   finding   that   the  applicant has not committed offence under the Act.  It  must   be   so   construed   that   the   Court   is   able   to  maintain   a   delicate   balance   between   a   judgment   of  acquittal   and   conviction   and   an   order   granting   bail  Page 95 of 127 R/SCR.A/4496/2014 CAV JUDGMENT much before commencement of trial.  The Court will be  required to maintain finding as to the possibility of  his committing a crime after grant of bail.  However,  such an offence in future   must be an offence under  the   Act   and   not   any   other   offence.     Since   it   is  difficult to predict the future conduct of an accused,  the Court must necessarily consider this aspect of the  matter   having   regard   to   the   antecedents   of   the  accused, is propensities and the nature and manner in  which he is alleged to have committed the offence.

10.7 That Section 2 of Chapter I contains various  definitions   and   money   laundering   is   defined   under  Section 2(p) makes a reference that `money laundering'  means   the   meaning   assigned   to   it   in   section   3   of  Chapter II under the head Offences of Money­Laundering  is wide and extensive.

10.8 It is worth noting that Section 3 is again  amended and earlier words "with the proceeds of crime  and   projecting"   came   to   be   substituted   by   Act   2   of  2013   with   effect   from   15.02.2013   vide   S.O.   343(E),  dated   8.2.2013,   with   the   words   "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".

10.9 Therefore,   Section   3   in   its   width   and  amplitude   include   whosoever   directly   or   indirectly  attempts to include or knowingly assist or knowingly  Page 96 of 127 R/SCR.A/4496/2014 CAV JUDGMENT is a party or is actually involved in any proceeds or  activity   connected  proceeds   of   crime   including   its  concealment,   possession,   acquisition   or   use   and  projecting or claiming it as untainted property shall  be   guilty   of   offence   of   money­laundering   read   with  definitions of "proceeds of crime" under Section 2[u],  "property'   under   Section   2[v]   and   "value"   under  Section [zb] of the PML Act.  In the present case, not  only   direct  or  indirect  attempt   to   indulge,   but  the  petitioners   have   knowingly   assisted   various   persons  and   companies   viz.   legal   entities   and   actually  involved in process and also activity connected with  proceeds of crime, which include its concealment and  projecting   and   claiming   as   untainted   property   in  possessing   and   transferring   untainted   money   by  creating forged record of department of Customs, RTGS  and import and export of diamonds and payment thereof.

10.10 That the "proceeds of crime" is defined  in Section 2[u], which 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 as defined  under   Section   2[v]   of   the   PML   Act   and   activity  relating to schedule offence or value of any property  and   scheduled   offence   is   defined   under   Section   2[y]  which after amendment Act 2 of 2013 remained all those  offences specified under part A of the schedule since  part   B   is   omitted   and   part   A   is   substituted  accordingly by shifting offences in Part B enblock to  Part A.  

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10.11 That   reference   to   criminal   activity  relating   to   a   schedule   offence   is   again   a   wider  connotation and even may extend to a person, who is  connected with  criminal activity relating to schedule  offence but may not be offender of scheduled offence.  Thus, money laundering itself is an offence standalone  under   Section   3   of   PML   Act   having   a   distinct  character,   with   many   facets   with   wider   implications  and,   therefore,   twofold  dragnet   is   laid   down  by  the  Legislature by providing a mechanism of punishment as  defined   under   Section   4   for   such   offender   under  Section 3 read with Sections 44 and 45 of PML Act and  to   take   care   of   attachment,   confiscation   of   such  tainted property under sections 5, 8, etc. subject to  outcome at the end of trial before the special court.  In   the   above   context,   section   24   of   PML   Act   cast  burden of proof upon an accused person to prove that  proceeds of crime are untainted property.

10.12 A bare perusal of section 45 of the PML  Act reveals that it is pertaining to offences to be  cognizable   and   non­bailable   and   begins   with   non­ obstinate   clause   "notwithstanding   anything   contained  in the Code of Criminal Procedure, 1973" and mandates  that no person accused of offence punishable for term  of imprisonment for more than 3 years under Part A of  the Schedule shall be released on bail or on his own  bond unless; [i]  the Public Prosecutor has been given  opportunity   to   oppose   the   application   for   such  release; and [ii]  Where the Public Prosecutor opposes  Page 98 of 127 R/SCR.A/4496/2014 CAV JUDGMENT such   application,   the   court   has   to   satisfy   about  existence   of   reasonable   grounds   for   believing   that  such accused person is not guilty of such offences and  that he is not likely to commit such offences while on  bail.  The above two conditions are of course subject  to two un­numbered provisos viz. that a person under  the age of sixteen years or is a women or is sick or  infirm, may be released on bail, if the special court  so  directs   and  further   that   Special  Court  shall  not  take   cognizance   of   any   offence   punishable   under  section 4 except upon a complaint in writing made by  authorized   person.   Thus,   when   the   situation   arises  about legality and validity of the complaint whether  filed by the authorized officers / authorities or not  can be considered at the time of taking cognizance of  offence under PML Act by the Special Court.  However,  limitations of granting of bail     specified in sub­ section (1) is in addition to the limitation under the  Code of Criminal Procedure, 1973 or any other law time  being in force for grant of bail.

10.13 Thus,   if   the   accused   person   succeeds   in  satisfying   the   designated   court   /   special   court   for  believing   that   reasonable   grounds   exist   that   the  accused person is not guilty of such offence and while  on   bail   he   is   not   likely   to   commit   any   offence  in  spite   of   opposition   by   the   public   prosecutor,   no  restriction   is   put   upon   orders   of   Special   Court   to  release   such   accused   person   on   bail.   When   money  laundering   is   a  distinct   offence  under  Section   3  of  PML Act read with Section 2[p], 2[u], 2[v] and 2[zb],  Page 99 of 127 R/SCR.A/4496/2014 CAV JUDGMENT which comprise one or more clear and simple financial  transactions, which may involve and comprise a complex  web of financial and other transactions and is carried  out   mainly   at   three   states   viz.     placement,   the  layering   and   integration   and   its   further   five  different   directional   fund   flows;   viz.   [i]   domestic  money laundering flow; [ii] returning laundered funds;  [iii]   inbound   funds;   [iv]   out   bound   funds   and   [v]  flow­through   assume   graver   magnitude   of   crime.   That  omission   of   Part­B   and   substituting   Part­A   of   the  schedule   by   amendment   Act   2   of   2013   relegating   the  offender of Section 3 of PML Act having connected with  "proceeds   of   crime"   meaning   thereby   as   defined   in  Section   2[u]   and   "property"   as   per   Section   2[v]  derived as a criminal activity relating to erstwhile  part   B  offences   prior   to   omission   and   subjecting   to  rigor of Section 45 of PML Act is adequate remedy to  secure bail by a person accused of Section 3 of PML  Act before designate court. That offences under penal  statue   or   statutes   included   in   Part   B   prior   to  omission having lesser or  negligible consequences or  infraction on liberty of an individual after omission  of Part B and inclusion by way of substitution of Part  A of the schedule under Section 2[y] of the PML Act  resulting into a stricter procedure if considered in  view of aforementioned facet of money laundering read  with object and reasons of the Act, we are of the view  that such an amendment Act 2 of 2013 with effect from  15.02.2013   consequently   resulting   into   such   offender  under   section   3   of   the   PML   Act   to   undergo   rigor   of  Section 45 is not ultra vires to the Constitution of  Page 100 of 127 R/SCR.A/4496/2014 CAV JUDGMENT India.  That   such   offences   of   lesser   gravity   having  negligible consequences if related or connected with  criminal activities of offenders of Section 3 of PML  Act   viz.   money   laundering   transactions   having  interstate   and/or   cross   border   implications   become  menace to humankind.   Even to trace out its source,  transfer and ultimate use even by terrorists group or  outlaws   jeopardize   integrity   and   sovereignty   of  nations   and   having   far   reaching   consequences   on  financial system / economies of such sovereign state  along with security of the citizens cannot be viewed  only on the touchstone of cognizable or non­cognizable  and bailable and non­bailable offences as contended by  the learned Senior Counsel.  Since in a given case the  magnitude   of   crime   of   money   laundering   affect   the  humanity as a whole. 

10.15 That   contention   based   on   Article  22  of  the  Constitution   of   India   about   safeguards   provided   by  Constitution   of   India,   no   doubt   are   of   paramount  importance   but   complete   mechanism   is   provided   in  Section 19 of the PML Act which takes care of clauses  1 and 2 of Article 22 of the Constitution of India and  facts stated on oath by the deponent ­ respondent No.3  about   following   the   above   safeguards   are   discerning  from the record that the accused person  was informed  about the grounds for such arrest as signed by him and  was also produced within a period of 24 hours of such  arrest   before   the   nearest   Magistrate.   That   other  provisions of Article 22 of the Constitution of India  Page 101 of 127 R/SCR.A/4496/2014 CAV JUDGMENT are about preventive detention as stated in clauses,  4, 5, 6 and 7 and by no stretch of imagination case of  the petitioners accused can be considered on the above  mentioned   clauses.     Therefore,   the   arrest   of   the  petitioners   is   not   violative   of   Article   22   of   the  Constitution   of   India.   That   careful   perusal   of  guidelines contained in the case of D.K.Basu [supra]  and paras 35 and 36   of the above decision no doubt  applies to enforcement directorate also, but again for  the reasons recorded herein that proper procedure was  followed by respondent No.3 and other officers while  arresting the petitioners it cannot be said that the  arrest is violative of Article 22 of the Constitution  of   India   or   guidelines   /   directions     of   D.K.Basu  [supra] warranting any interference of this court in  exercise   of   jurisdiction   under   Article   226   of   the  Constitution of India issuing writ of habeas corpus. 10.16 The   next  contention   is   based   on   Section   19  read with Sections 48 and 49 of the PML Act that the  respondent   No.3   is   not   authorized   officer,   and  therefore,   competent   to   order   arrest   of   the  petitioners, is also based on misconceived application  of   Rule   2(1)   of   The   Prevention   of   Money­Laundering  [The Form and the Manner of Forwarding a Copy of Order  of Arrest of a Person Along With the material to the  Adjudicating   Authority   and   its   Period   of   Retention]  Rules, 2005 [for short, Order of Arrest Rules, 2005']  vis­a­vis Section 19 of the Act we may also deal with  contention   of   non­existence   of   "coma[`]",   in   sub­ section (1) of Section 19 after the words "any other  officer".  Section 48 defines authority under the Act  Page 102 of 127 R/SCR.A/4496/2014 CAV JUDGMENT and   Section   49   is   about   appointment   and   powers   of  authorities   and   other   officers,   Section   50   is   about  powers of authorities regarding summons, production of  documents and to give evidence etc.  Section 51 is for  jurisdiction of authorities. Section 52 is for powers  of Central Government to issue directions and Section  53 is for empowerment of certain officers and Section  54   is   for   certain   officers   to   arrest   in   inquiry.  Section 73 empowers the Central Government to make the  rules and sub­section (1) of section 73 specifically  provides   that   the   Central   Government   may,   by  notification, make rules for carry out the provisions  of this Act and sub­section (2) states in particular,  and   without   prejudice   to   the   generality   of   the  foregoing power, such rules may provide for all or any  of   the   following   matters.     Clause   [p]   includes   the  manner in which order and the material referred to in  section   2   and   Section   19   shall   be   maintained   and  precisely for this purpose.   Clause [a] provides for  form   in   which   records   referred   to   in   the   Act   to   be  maintained.  

10.14 The Rules, 2005 defines "Arresting Officer"  as  per   definition  under  rule   2(c)   and   contains,  ","  [coma] after "Any other officer", which is missing in  Section   19   of   the  Act,   and  therefore,   contention   of  learned counsel for the petitioners that unless there  is special notification empowering Assistant director  of Enforcement Directorate to order arrest could not  have exercised power for the purpose of Section 19 of  the PML Act and therefore arrest of the petitioners is  Page 103 of 127 R/SCR.A/4496/2014 CAV JUDGMENT illegal.  Reliance is placed on various notifications  containing   specific   orders   empowering   Special  Director,   Deputy   Director,   Assistant   Director,   vide  notification   dated   13.09.2005   in   exercise   of   powers  conferred in sub­section (1) of Section 49 of the Act  and such officer empowered for the purpose of PML Act  ought   to   have   held   office   immediately   before  01.07.2005.  That reference is also made to GSR 440(E)  and   GSR   441(E)   both   dated   01.07.2005   issued   in  exercise   of   powers   conferred   by   sub­section   (1)   of  Section   49   of   the   PML   Act,   which   specifically  conferred exclusive power upon designated officers for  the   purpose   of   sections   mentioned   therein.   It   is  contended that vide GSR 440 [E], no power is conferred  upon the Director, Financial Intelligence Unit, under  the   Ministry   of   India,   Department   of   Revenue   though  designated   as   the   Director   to   exercise   powers   under  various Sections but not under Section 19 of the PML  Act,   but   GSR   441   (E)   confers   such   power   upon   the  Directorate of Enforcement holding office immediately  before   01.07.2005   under   FEMA   Act,   1999   to   exercise  powers as the Director under various sections of PML  Act including Section 19 of the PML Act.   Therefore,  when no specific notification is issued empowering the  Assistant   Director   -   respondent   No.3   in   the   present  case ordering arrest of the petitioners, such exercise  of   power   is   illegal   and   unconstitutional   and  accordingly arrest order is to be set aside.

10.15 That   Section   19   postulates   the   following  pre­conditions viz. that the competent authority under  Page 104 of 127 R/SCR.A/4496/2014 CAV JUDGMENT the   Act   empowered   to   arrest   must   have   material   in  possession before exercising such powers and rule 2[g]  of   Order   of   Arrest   Rules,   2005   define   the   term  "material".

10.16 That   on   the   basis   of   such   material   in  possession, the competent authority must have reason  to belief recorded in writing that any person has been  guilty of offences punishable PML Act and upon arrest  of such person as soon as may be, he is to be informed  of the grounds for such arrest.

10.17 That   sub­section   (2)   of   section   19   further  imposes duty upon such competent authority to forward  a   copy   of   such   arrest   with   the   material   in   his  possession to the adjudicating authority in a sealed  envelop   as   per   the   procedure   prescribed   and   sub­ section (3) of Section 19 mandates that every person  arrested under that section shall have to be produced  before   the   learned   Magistrate   or   the   Metropolitan  Magistrate, as the case may be, having jurisdiction,  within a period of 24 hours.  The above provisions are  in consonance with Article 22(1) of the constitution  of India.  

10.18 That the Ministry of Finance, Department of  Revenue has appointed the Enforcement Officer in the  Directorate of Enforcement appointed under sub­section  (2) of Section 36 of FEMA as Assistant Director for  the   purpose   of   PML   Act   and   such   order   is   issued   in  exercise   of   powers   conferred   by   sub­section   (1)   of  Page 105 of 127 R/SCR.A/4496/2014 CAV JUDGMENT Section 49 of the PML Act. When the above notification  is in force and subsequent orders are issued on the  same   line   by   the   Ministry   of   Finance,   Department   of  Revenue,   Central   Government   and   definition   of  Assistant Director as contained in Section 2(1)(c) of  PML Act means the Assistant Director appointed under  sub­section (1) of Section 49, it cannot be said that  Assistant   Director   of   Enforcement   Department   is  incompetent to arrest the petitioners in exercise of  powers under Section 19(1) of the PML Act. That sub­ section   (2)   of   Section   49   will   come   into   play   only  when Director, Deputy Director or Assistant Director,  as the case may be, would like to appoint any other  officer   for   the   purpose   of   exercising   powers   and  discharge   the   duties   conferred   or   imposed   under   the  PML Act.  However, that does not preclude the Ministry  of   Finance,   Department   of   Revenue   to   issue   order  appointing   Assistant   Director   of   FEMA   to   function  under PML Act.  

10.19 Under Rule 2(1)(c) of the Rules, 2005, again  cannot have over­riding effect over Section 19 of the  PML   Act   when   the   Act  itself   provides   that  Assistant  director shall have power to order arrest subject to  fulfillment of conditions enumerated in subsection (1)  of Section 19 of the Act.  It only shows that GSR 441  [E]   dated   01.07.2005   confers   the   Director   exclusive  power   but   not   to   the   exclusion   of   other   officers  empowered under the PML Act.

Therefore, a conjoint reading of Sections 19, 49,  Page 106 of 127 R/SCR.A/4496/2014 CAV JUDGMENT 73(1)(2)(a)(p) and definition clause 2(1)(c) makes it  clear that as far as the Directors, Deputy Directors  or Assistant Directors are concerned, no specific or  general   authorization   of   the   Central   Government   is  necessary and such authorization will be required only  when   any  other  officer   viz.   officers   other   than  the  above are to be appointed to carry out purpose of the  Act, a notification by the Central Government may be  necessary.   Therefore,   contention   raised   by   learned  counsel for the petitioners that Assistant Director -  respondent No.3 who ordered arrest of the petitioners  lacked competence and authority to arrest, is de­void  of merit, and therefore also, there is no violation of  any procedural safeguards, as envisaged in Article 22  of the Constitution of India or under the provisions  of PML Act.

10.20 It   is   profitable   to   refer   to   order   dated  04.02.2013   passed   by   learned   single   Judge   [Coram   :  Hon'ble   Mr.   Justice   R.C.Chavan]   passed   in   Criminal  Bail Application No.71 of 2013, where a person who was  arrested   by   the   enforcement   directorate   for   his  involvement   in   offence   under   Section   3   of   PML   Act,  2002 came to be decided where similar contention was  raised   by   the   applicant   therein   that   the   Assistant  Director   was   not   authorized   to   affect   arrest   under  Section 19(1) of the PML Act, in which reliance was  placed on Scheme of the Act viz. Sections 19, 45, 49,  73, etc came into consideration along with SR 441(E)  dated   01.07.2005   and   other   such   notifications.     The  learned Single Judge of Bombay High Court in paras 13  Page 107 of 127 R/SCR.A/4496/2014 CAV JUDGMENT to 17 held as under:

"13. I have considered these arguments. First the   rules which have been relied on have been framed   in exercise of powers under clauses (1) and (p)   of   sub­section   (2)   of   Section   73   of   the   Act.   These clauses (a) and (p) of Section 73(2) read   as under:
"73.(2)(a)   the   form   in   which   records   referred to in this act may be maintained;
(p) the   manner   in   which   the   order   and   the   material   referred   to   in   sub­section   (2)   of   Section 19 shall be maintained.
14. The   rules   were,   thus,   framed   in   order   to  prescribe   forms   in   which   records   were   to   be  maintained   and   the   manner   in   which   order   and   material   referred   to   in   sub­section   (2)   of   section   19   was   to   be   maintained.   The   term   "Arresting Officer"  was defined  for the  purpose  of those rules only.     Inserting in clause (c)   (1)   of   Rule   (2)   of   those   Rules,   a   subsequent   comma,   [,]   after   the   words,   "or   any   other   officer",   may   be   an   error   of   the   draftsman.   In   any   case   it   is   not   necessary   to   go   into   that   question since definition is only for the purpose   of   rules   which   have   been   framed   for   the   restricted purpose of clauses (a) & (p) of sub­ section (2) of section 73 of the Act. Therefore,   definition of "arresting officer" in these rules   cannot   be   held   to   control   the   provisions   of   Section   19   of   the   Act   or   to   require   that   the   Central   Government   has   to   issue   notification   under those rules for authorizing an officer to   defect   arrest.   The   definition   would   have   to   be   read in conformity with the provisions of Section   19   of   the   Act   and   the   most   appropriate   interpretation may be that as far as Directors,   Deputy   Directors,   or   Assistance   Directors   are   concerned,   no   authorization   of   the   Central   Government   is   required,   and   while   any   other   officer could also be authorised by the Central   Government,   if   such   other   officers   has   to   be   Page 108 of 127 R/SCR.A/4496/2014 CAV JUDGMENT authorised,   a   notification   by   the   Central   Government would be required. Thus, there is no   substance   in   the   contention   that   the   Assistant   Director who effected arrest lacked the authority  to   arrest.   Therefore,   there   is   no   violation   of   any   procedural   safeguards   which   the   application   had and he cannot be said to have suffered by any   eclipse   of   his   rights   by   not   following   the   procedure   established   by   law   in   effecting   his   arrest.

15. The   observations   of   the   Supreme   Court   in  Shri Gurbaksh Singh Sibbia and ors. vs. State of   Punjab, reported in (1980)2 SCC 565, do not help   the   applicant   since   there   is   no   breach   of   procedural safeguards provided in the Act. Since   there is no violation of Articles 21 and 22 of   the   Constitution   of   India,   in   effecting   the   arrest   of   the   applicant,   even   judgment   of   this   Court in Suaibo Ibow Casamma ­vs­ Union of India,  reported in 1995 (80) E.L.T. 762 (Bom.), does not  help the applicant.

16. Learned   Senior   Counsel   for   the   applicant   next submitted that the power to arrest has been   conferred by the Government exclusively upon the   Director of the Enforcement Directorate.  He drew   my attention tot he notification dated 1st  July,  2005,   which   has   been   extensively   reproduced   in   ground (a)(v) of the application.

"{SR 441 (E) DT. 1`.7.2005}.
In   exercise   of   powers   conferred   by   sub­ section (1) of Section  49 of  th Prevention   of Money Laundering Act, 2002 (15 of 2003),   the Central Government hereby appoints, with   effect from the 1ast day of July, 2005, the  Director   of   Enforcement   holding   office  immediately   before   the   said   date   under   the   Foreign Exchange Management Act, 1999 (42 of   1999), as director to exercise the exclusive   powers conferred under Section 5, section 8,   section 17, section 18, section 19, section   20,   section   21,   sub­section   (1)   of   section   26,   section   45,   section   50,   section   57,   section 60, section 62, and section 63, of   Page 109 of 127 R/SCR.A/4496/2014 CAV JUDGMENT the   said   Act   and   the   said   Director   shall  also   concurrently   exercise   powers   conferred  by sub­section (3) sub­section (4) and sub­ section   (5),   of   section   26,   section   39,   section 40, section 41, section 42, section   48, section 49, section 66 and section 69 of   the aforesaid Act".
17. As rightly submitted by the learned Advocate   General,   the   words   used   in   the   notification   do   not   show   that   the   Director   was   to   have   powers   under Section 5, 8, 17, 18, 19, 20, 21, 26, 28 of  the Act, to the exclusion of all other offences.   It only shows that the Director has the exclusive  power   but   not   necessarily   to   the   exclusion   of   others,   who   have   been   empowered   under   the   Act.   Since   the   act   itself   does   not   provide   for   any   power   in   the   Central   Government   to   issue  notification   abridging   the   powers   statutorily  conferred on the authorities under the Act, there   can   be   no  question   of   the   Central   Government   issuing notification the Assistant director from   the   authorities   who   are   exercising   power   of   arrest.  Therefore,  ,  this  notification  too  does  not help the applicant in contending that he has   been   arrested   by   the   officer   who   had   no   authority."  

10.21 Thus,   with   amended   Section   3   and   Schedule  under   Section   2[y]   by   Amendment   Act   2   of   2013   the  above reasonings persuade us to take similar view upon  due   deliberations   and   Scheme   of   th   Act   read   with  relevant notification. Accordingly, we are unable to  agree   with   submissions   made   by   learned   Counsels   for  the   petitioners   that   reasonings   of   learned   Single  Judge   of   High   Court   of   Bombay   in   the   above   case  ignored true import of Notification GSR 441(E) dated  01.07.2005 and Section 73(1) of the Act. That it is  trite that by the above notifications dated 01.07.2005  powers   were   conferred   upon   the   authority   so   defined  Page 110 of 127 R/SCR.A/4496/2014 CAV JUDGMENT under Section 48 of the PML Act and in view of Section  49 the Central Government appoints such persons as it  thinks fit to be authorized for the purposes of this  Act.   Therefore,   the   appointment   of   Director,  Department   of   Enforcement   is   not   exclusion   of   other  authorities viz. Additional Director, Joint Director,  Deputy Director, Assistant Director, who are otherwise  empowered by PML Act, 2002.  

10.22 Thus,   what   emerges   from   the   discussion  and findings as above, our conclusions are as under:

That Section 45 of PML Act, 2002 [as substituted  by   amendment   Act   2005]   is   not   illegal,   arbitrary,  discriminatory and violative of Articles 14, 19 and 21  of the Constitution of India and accordingly no case  is made out to read down, lay down, expound, interpret  and   deliberate   upon   the   scope   and   perspective   of  Section 45 of the PML Act  so as to harmonize the same  in   juxtaposition   with   various   scheduled   offences  [under amended Part A of Schedule].

In   the   process   of   undertaking   lawful  investigation,   Ministry   of   Finance   has   issued   3  different   orders   viz.   [i]   S.O.   1273[E],   [ii]   S.O.  1274[E] and [iii] S.O. 1275/E all dated 13.09.2005 in  exercise of powers under sub­section (1) of Section 49  of   PML   Act   whereby   the   Special   Director,   Deputy  Director   and   Assistant   Director,   who   held   office  immediately   before   01.07.2005   under   The   Foreign  Page 111 of 127 R/SCR.A/4496/2014 CAV JUDGMENT Exchange Management Act, 1999 as Additional Director,  Deputy Director and Assistant Director for exercise of  powers under PML Act.  

This   is   further   evident   from   the   fact   that   in  continuation of order No. S.O. 906[E] dated 21.04.2010  issued by   Ministry of Finance in exercise of powers  conferred by sub­section (1) of Section 49 of the PML  Act, the Central Government has appointed enforcement  officer   in   the   Directorate   of   Enforcement   appointed  under   sub­section   (2)   of   Section   36   of   The   Foreign  Exchange   Management   Act,   1999   as   Assistant   Director  for   the   purpose   of   PML   Act,   2002.     Circular   Order  No.03/2011   dated   27.08.2011   further   designated   the  posts of Deputy Director, Assistant Director Grade­I  and Assistant Director, Grade­II and conferred power  of arrest upon Assistant Director, subject to approval  of Special Director.  Therefore, harmonious reading of  Sections 48 to 54 and definition of Assistant Director  contained   in   Section   2[c]   of   PML   Act   reveal   the  Assistant Director - respondent No.3 in this case is  duly empowered to order arrest under Section 19 of the  PML Act.

10.23 That   in   view   of   our   holding   that   the  Assistant   Director   of   Directorate   of   Enforcement   -  respondent   No.3   is   competent   and   authorized   officer  under PML Act to order arrest under Section 19(1) of  PML   Act,   and   therefore,   again   there   is   no   scope   to  read down, lay down, expound, interpret and deliberate  upon the scope and perspective of Section 19 of PML  Page 112 of 127 R/SCR.A/4496/2014 CAV JUDGMENT Act   in   light   of   Section   49(3)   read   with   the   Rules  notified   under   Notification   GSR   446(E)   dated  01.07.2005.

10.24 That not mentioning name of the petitioners  in   FIR   dated   11.04.2014   and   13.04.2014   is   of   no  consequence   since   in   the   present   case   nexus   is  established between the criminal activity relating to  schedule offence and the proceedings thereof for the  offences of money laundering as defined under Section  3   read   with   Section   2(1)(u)   of   the   PML   Act.     That  during   the   process   and   investigation   carried   out   by  the   Directorate   of   Enforcement,   the   petitioners   are  found to have been involved in money laundering racket  and   not   naming   the   petitioners   in   the   offences  registered   initially   by   investigating   agency   is   now  being prosecuted for the involvement under Section 3  of the PML Act by Directorate of Enforcement.    Even,  prosecution complaint dated 18.07.2014 is filed before  the designated court under PML Act and after further  investigation   a   supplementary   complaint   is   filed   on  29.10.2014.

10.25 The   grounds   of   arrest   was   communicated   to  the accused after due medical check up as undertaken  and   he   was   also   produced   within   the  stipulated   time  before the designated Judge under PML Act at Ahmedabad  and   no   complaint   or   grievance   was   ever   made   by   the  petitioners   about   any   kind   of   ill­treatment   or  coercion by the offices of Directorate of Enforcement.  That   in   execution   of   arrest,   all   procedural  Page 113 of 127 R/SCR.A/4496/2014 CAV JUDGMENT requirements   were   complied   with   and   the   accused   has  signed receipt of grounds for arrest and even a friend  of the accused viz. Mr. Amit Solanki, C.A. Was handed  over the belongings and signed the inventory annexed  to the arrest memo. That learned Designated Judge was  pleased   to   grant   custody   of   the   petitioners   for   a  period of 4 days and in a pro in a procedure to remand  etc.   and   rejection   of   prayer   of   temporary   bail   on  09.09.2014   by   the   designated   court   and   filing   of  prosecution   complaint   dated   29.10.2014   against   the  petitioner and competency of the Assistant Director -  respondent   No.3   to   order   arrest   in   compliance   of  Section 19(1) of PML Act surface on record, which is  again   in   consonance   with   the   safeguards   enshrined  under Article 22(1) of the Constitution of India and  we find no breach of any procedural enumerated either  under   Article   19(1)of   the   PML   Act   or   under   Article  22(1)  of  the   Constitution   of   India.     Further,   since  the   subject   matter   is   pending   before   the   competent  designated court and upon registering complaint, we do  not further deliberate on the import of the nature of  involvement of the petitioners for the offences under  Section 3 of the PML Act, but the fact remains that  affidavit   filed   by   the   respondent   No.3   placing   his  version   on   the   record   remains   undisputed   till   the  matter was heard and kept for judgment.

10.26 Thus, it cannot be said that order of arrest  suffers from vice of any illegality on the ground that  it is ordered by the incompetent or unauthorized and  there  is  no  failure   in   adhering   procedure  laid   down  Page 114 of 127 R/SCR.A/4496/2014 CAV JUDGMENT under Seton 19(1) of the PML Act and further no breach  to the guidelines laid down in the case of D.K.Basu  [supra] and it cannot be said that the petitioners are  detained or confined illegally warranting issuance of  writ of Habeas Corpus.   At the same time respondent  No.3 - Assistant Director of Enforcement is competent  and authorized to issue order of arrest under Section  19(1) of the PML Act and no case is made out to issue  writ of quo warranto as prayed for.

10.27 That offence under Section 3 of PML Act is  distinct   and   different,   and   therefore,   omission   of  Part   B   from     Schedule   under   Section   2[y]   and  substitution of Part A do not make any difference to  the   case   of   the   petitioners,   who   are   accused   of  offences under Section 3 of the PML Act, irrespective  of absence of monetary ceiling.  

11 The Apex Court has taken note of the above  aspect that offence under Section 3 of the PML Act is  distinct   in   the   case   of   Binod   Kumar   vs.   State   of  Jharkhand and Ors. reported in (2011)11 SCC 463.

12 The Andhra Pradesh High Court in the case of  B. Rama Raju v. Union of India, Ministry of Finance,  Department   of   Revenue,   represented   by   its   Secretary  [Revenue],   New  Delhi  &   Ors.   reported   in   2011(3)  ALT  443   has   formulated   various   issues,   including   the  issues [E] and [F] with regard to Section 24 of the  PML   Act   and   we   are   in   complete   agreement   with   the  reasons and conclusions qua sections 23 and 24 of the  Page 115 of 127 R/SCR.A/4496/2014 CAV JUDGMENT PML   Act   and   we   reject   the   contention   of   Shri   Sunit  Shah, leaned counsel for the petitioner that burden of  proof is shifted at the stage of time of bail but not  at the stage of trial.  The relevant portion of issues  [E]   and   [F]   of   the   judgment   in   the   case   of   B.Rama  Raju, reads as under:

ISSUE­E The challenge to Section 23 is projected on the  ground   that   the   presumption   enjoined   by   this  provision   in   respect   of   inter­connected   transactions   is   unduly   restrictive   of   the   right   to   property;   is   a   disproportionate   burden,   not  commensurate   with   legitimate   Governmental   interests in targeting proceeds of crime involved   in money­laundering, for eventual confiscation.
Money­laundering,   it   is   pleaded   in   the   counter affidavit by the Enforcement Directorate,   while   apparently   comprising   one   or   more  apparently   clear   and   simple   financial  transactions   or   dealings   with   property,   in  reality   involve   a   complex   web   of   transactions   that   are   processed   through   three   stages   ­   the   placement,   layering   and   integration   stage.   When   laundering   operations   are   pursued   across   State   boundaries, flows of funds would involve several   routes. Since the object of the Act is to seize   or   attach   proceeds   of   crime   involved   in   money­ laundering   for   eventual   confiscation   to   the   State,   the   enforcement   strategy   must   be  commensurate   with,   correspond   to   and   complement   the   degree   of   camouflage,   deceit,   layering   and  integration   normally   associated   with   a   money­ laundering   operation,   to   be   effective   and   successful,   is   the   contention   on   behalf   of   the   respondents. 

Section 23 enjoins a presumption in respect   of inter­connected transactions. Money­laundering  is   defined   in   Section   2   (p)   (with   reference   to   Page 116 of 127 R/SCR.A/4496/2014 CAV JUDGMENT Section 3). Though Section 3 defines the offence   of   money­laundering,   the   ingredients   of   the   offence   enumerated   in   this   provision   define   money­laundering in its generic sense as applied   by   the   Act   to   attachment   and   confiscation   processes   as   well.   Such   duality   is   achieved   by   the   drafting   technique   of   defining   money­ laundering in Section 2 (p) by ascription of the   definition of the offence of money­laundering in   Section 3.

This   technique,   though   specific,   is   not  unique.   As   observed   in   LIC   of   India   Vs.   Crown   Life   Insurance   Co.,   the   object   of   a   definition   clause in a statute is to avoid the necessity of   frequent   repetitions   in   describing   all   the  subject matter to which the word or expression so   defined   is   intended   to   apply.   A   definition   section may borrow definitions from an earlier or   an   existing   statute;   not   necessarily   in   the   definition   section   but   in  some   other   provision,   of   that   Act;   and   may   equally   borrow   the   definition   from   some   other   section   of   the   same   Act where a word or an expression is defined for   a   distinct   purpose,   occasion,   or   in   a   specific   context.   Section   2(1)(p),   thus,   defines   the   expression   money­laundering   by   borrowing   the  definition   expressed   in   Section   3,   where   this   expression   is   defined   for   the   purpose   of   delineating   the   offence.   In   Section   2(1)(p),   however,   the   expression   money­laundering   is  defined for the generic purpose of describing the   contours of the conduct; wherever the expression   is employed in the several provisions of the Act,   including   in   Chapter.III   for   attachment   and   confiscation.   It   is   also   well   settled   that   the   legislature has the power to define a word or an   expression   artificially   Kishanlal   Vs.   State   of  Rajasthan.   The   definition   of   a   word   or   an   expression in the definition section may thus be   restrictive or extensive of its ordinary meaning.   When   a   word   is   defined   to   mean   so   and   so,   the   definition   is   prima   facie   exhaustive   and   restrictive   Inland   Revenue   Commissioner   Vs.  Joiner;   Vanguard   Fire   and   General   Insurance   Co.  

Page 117 of 127 R/SCR.A/4496/2014 CAV JUDGMENT

Ltd.   Vs.   Frazer   &   Ross;   and   Feroze   N.   Dotiwala   Vs. P.M.Wadhwani. 

Conduct of directly or indirectly attempting   to indulge, knowingly assist or being a party to   or actual involvement in any process or activity   connected   with   proceeds   of   crime   and   projecting   such   proceeds   of   crime   as   untainted   property,   constitutes   money­laundering.   The   expression  proceeds   of   crime   means   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   {Section   2   (u)}.   Thus,   a   property   acquires a taint on account of being a derivative   of   criminal   activity   relating   to   a   scheduled  offence and includes the value of such property.   Since   placement,   layering   and   integration   are  among the essential features of money­laundering,   the   proceeds   of   crime   may   not   necessarily   continue   in   the   hands   of   the   original  malfeasant(s). 

Where proceeds of crime are layered through   plural transactions, the intent to camouflage the   source   of   the   property   as   a   derivative   of  criminality renders it difficult to identify the   succeeding   transactions   as   relatable   to   the   initial proceeds of crime. It is for this reason   and   to   effectuate   the   purposes   of   the   Act   that   Section   23   incorporates   the   presumption   that   where   money­laundering   involves   two   or   more   connected   transactions   and   one   or   more   such   transactions   is/are   proved   to   be   involved   in  money­laundering,   then   for   the   purposes   of  adjudication or confiscation under Section 8, it   shall,   unless   otherwise   proved   to   the   satisfaction   of   the   adjudicating   authority,   be   presumed   that   the   remaining   transactions   form  part   of   such   interconnected   transactions   i.e.,   involved in money­laundering as well.

The   presumption   enjoined   by   Section   23   is   Page 118 of 127 R/SCR.A/4496/2014 CAV JUDGMENT clearly a rebuttable presumption i.e., presumptio   pro tantum.

In  Izhar   Ahmad   v.   Union   of   India,  Gajendragadkar,   J.   [as   his   Lordship   then   was]   observed   (in   the   majority   opinion   of   the   Constitution Bench) that: The term Presumption in   its largest and most comprehensive signification,   may be defined to be an inference, affirmative or   disaffirmative   of   the   truth   of   false­hood   of   a   doubtful fact or proposition drawn by a process   of   probable   reasoning   from   something   proved   or  taken   for  granted.   Quoting   with   approval   the  statement of principle set out in the Principles   of   the   Law   of   Evidence   by   Best,   his   Lordship   observed that when the rules of evidence provide   for the raising of a rebuttable or irrebuttable   presumption, they are merely attempting to assist   the judicial mind in the matter of  weighing the  probative   or   persuasive   force   of   certain   facts  proved   in   relation   to   other   facts   presumed   or   inferred.

Wills  observes   that   the   expression  Presumption   inherently   imports   an   act   of   reasoning ­­­­ a conclusion of the judgment; and   it   is   applied   to   denote   such   facts   or   moral   phenomena,   as   from   experience   we   know   to   be  invariably,   or   commonly,   connected   with   some   other related facts.

In M. Narsinga Rao v. State of A.P., Thomas,   J. [writing the opinion for the Court] observed   that   presumption   is   an   inference   of   a   certain   fact   drawn   from   other   proved   facts.   While   inferring the existence of a fact from another,   the   Court   is   only   applying   a   process   of   intelligent reasoning which the mind of a prudent   man   would   do   under   similar   circumstances.   Presumption   is   not   the   final   conclusion   to   be   drawn from other facts, but it could as well be   final,   if   it   remains   undisturbed   later.  Presumption   in   the   law   of   evidence   is   a   rule   Page 119 of 127 R/SCR.A/4496/2014 CAV JUDGMENT indicating   the   stage   of   shifting   the   burden   of   proof. From a certain fact or facts the Court can   draw   an   inference   and   that   would   remain   until   such inference is either disproved or dispelled. 

Having   regard   to   the   fact   that   money­ laundering is indulgence, informed assistance or  being   a   party   to   or   actual   involvement   in   any   process   or   activity   connected   with   proceeds   of  crime   and   projecting   it   as   untainted   property,  inherently   assuming   a   degree   of   deceit   and   camouflage   in   the   process   of   layering   the   proceeds   of   crime   through   a   series   of  transactions,   in   the   considered   legislative  wisdom   a   presumption   in   inter­connected   transactions   is   enjoined   by   Section   23   of   the   Act,   contingent   upon   one   or   more   of   inter­ connected transactions having to be proved to be   involved   in   money­laundering.   The   legislatively  enjoined   presumption   shifts   the   burden   of   proof   to   the   person   in   the   ownership,   control   or   possession   of   a   property   comprising   the   inter­ connected   transactions   to   rebut   the   statutory  presumption that this property is not involved in   money­laundering. 

Section   23   enacts   a   rule   prescribing   a   rebuttable presumption and is a rule of evidence.   The rule purports to regulate and structure the   judicial   process   of   appreciating   evidence  relating to adjudication of money­laundering for  the   purposes   of   confirmation   of  attachment/seizure and confiscation and provides   that the said appreciation will draw an inference   from the fact of one or more transactions forming   part of inter­connected transactions having been  proved   to   be   involved   in   money­laundering,   that   the   other   transactions   are   also   to   be   presumed   so, unless the contrary is established.

As observed in Izhar Ahmad (supra), the rule   of presumption enjoined by Section 23 takes away   judicial discretion either to attach or not due   Page 120 of 127 R/SCR.A/4496/2014 CAV JUDGMENT probative value to the fact that one or more of   the inter­connected transactions have been proved   to   be   involved   money­laundering;   and   requires  prima   facie   due   probative   value   to   be   attached   and   mandates   an   inference   that   the   other  transactions   form   part   of   the   raft   of   inter­ connected   transactions   involved   in   money­ laundering,   subject   of   course   to   the   said   presumption   being   rebutted   by   proof   to   the   contrary.

On the aforesaid analysis, since Section 23   enjoins   a   rule   of   evidence   and   a   rebuttable   presumption considered essential and integral to  effectuation   of   the   purposes   of   the   Act   in   the   legislative   wisdom;   a   rebuttable   and   not   an   irrebuttable presumption, we are not persuaded to   conclude   that   the   provision   is   unduly   harsh,  oppressive or arbitrary. After­all a legislative  remedy must correspond to the social pathology it   professes to regulate.

 Issue­E is answered accordingly. 

 

" ISSUE­F   Section 24 shifts the burden of proving that   proceeds   of   crime   are   untainted   property   onto   person(s) accused of having committed the offence   under Section 3.  This provision is challenged as   arbitrary; is contended to be applicable only to   the trial of an offence under Section 3 and not   the   proceedings   for   attachment  and   confiscation  of property under Chapter­III; and alternatively  as   not   applicable   to   proceedings   for   attachment   and   confiscation   of   property   of   a   person   not   accused of an offence under Section 3. 

On its textual and grammatical construction,   the provision shifts the burden of proving that   proceeds   of   crime   are   untainted   property   on   person(s) accused of having committed the offence   under Section 3.

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We   have   noticed   while   on   the   analysis   of  Issues C to E that the provisions of Sections 3,   5, 8, 17, 18, 20, 21 and 23; the definitions of   money­laundering   {Section   2   (p);   proceeds   of   crime (Section 2 (u); property (Section 2 (v) and   value   (Section   2   (zb)}   are   inter­twined,   delineate   the   provisions   of   each   other   and   in   tandem   operate   to   effectuate   one   of   the   two   substantial purposes of the Act viz., attachment   for   the   purposes   of   eventual   confiscation,   of   proceeds   of   crime   involved   in   money­laundering,   whether   in  the   ownership,   control   or   possession   of a person accused of the offence under Section   3   or   not.    The   offence   of   money­laundering   as  defined in Section 3 comprises direct or indirect   attempt   to   indulge,   knowingly   assist,   and   knowingly be a party to or actual involvement in   any   process   or   activity   connected   with   the   proceeds of crime and projecting it as untainted   property.     Proceeds   of   crime   is   any   property   derived or obtained directly or indirectly by any   person   as   a   result   of   a  criminal   activity  relating to a scheduled offence or the value of  any   such   property  (Section   2   (u).     Qua   the   provisions in Chapter­III of the Act, the process   of   provisional   attachment,   confirmation   of   such   attachment   by   the   adjudicating   authority   and   confiscation   of   the   property   attached   is   operative   against   property   constituting   the  proceeds   of   crime   involved   in   money­laundering   whether   in  the   ownership,   control   or   possession   of   a   person   who  has   committed   an   offence   under   Section   3   or   otherwise.     Section   8   (1)   while   enjoining   the   adjudicating   authority   to   issue   a   notice to a person in possession of proceeds of a   crime, whether in his own right or on behalf of   any   other   person,   calling   upon   the   noticee   to   indicate   the   sources   of   his   income,   earning   or   assets for the purposes of establishing that the   acquisition   of   ownership,   control   or   possession   of the property by the noticee is bona fide and   out of legitimate sources; of his income, earning   or   assets,   does   not   enact   a   presumption   that   where   the   noticee   is   a   person   accused   of   the   Page 122 of 127 R/SCR.A/4496/2014 CAV JUDGMENT offence   under   Section   3,   the   provisionally  attached   property   is   proceeds   of   crime.     Since   camouflage and deceit are strategies inherent and   integral   to   money­laundering   operations   and   may   involve   successive   transactions   relating   to  proceeds   of   crime   and   intent   to   project   the  layered   proceeds   as   untainted   property,   effectuation   of   the   legislative   purposes   is   achieved only where the burden is imposed on the   accused to establish that proceeds of crime are   untainted   property.   This   is   the   legislative   purpose and the justification for Section 24 of   the Act.

In response to a notice issued under Section   8   (1)   and   qua   the   legislative   prescription   in   Section   24   of   the   Act   the   person   accused   of   having committed the offence under Section 3 must   show   with   supporting   evidence   and   material   that   he   has   the   requisite   means   by   way   of   income,   earning  or  assets,  out  of  which  or  by  means  of  which he has acquired the property alleged to be   proceeds   of   crime.     Only   on   such   showing   would   the   accused   be   able   to   rebut   the   statutorily   enjoined presumption that the alleged proceeds of   crime   are   untainted   property.     This   being   the   purpose, we are not satisfied that the provisions   of Section 24 are arbitrary or unconstitutional.   Section   24   is   not   confined   to   the   trial   of   an   offence   under   Section   3   but   operates   to   attachment   and   confiscation   proceedings   under   Chapter­III,   as   well.     The   legislative   prescription that the burden of proof inheres on   a person accused of having committed the offence   under Section 3 is only to confine the inherence   of the expressed burden to an accused.  Where the   property   is   in   the   ownership,   control   or   possession   of   a   person   not   accused   of   having   committed   an   offence   under   Section   3   and   where   such property/proceeds of crime is part of inter­ connected   transactions   involved   in   money­ laundering,   then   and   in   such   an   event   the   presumption   enjoined   in   Section   23   comes   into   operation   and   not   the   inherence   of   burden   of   proof   under   Section   24.     This   is   in   our   Page 123 of 127 R/SCR.A/4496/2014 CAV JUDGMENT considered view the true and fair construction of   the provisions of Section 24.

Clearly,   therefore   a   person   other   than   one   accused   of   having   committed   the   offence   under   Section   3   is   not   imposed   the   burden   of   proof   enjoined by Section 24.   On a person accused of   an   offence   under   Section   3   however,   the   burden   applies,   also   for   attachment   and   confiscation  proceedings.

Issue F is answered accordingly."

12.1 We   are   in   complete   agreement   with  declaration of law with regard to Sections 23 and 24  of the PML Act by the Division Bench of Andhra Pradesh  High Court in the above decision, which gives complete  answer to additional contentions raised by Shri Sunit  Shah, learned counsel in cognate petition.  

It   is   trite   that   debate   in   the   Parliament  while enacting any legislation no doubt gives insight  about   what   was   passing   in   the   minds   of  parliamentarians, but when the statute is enacted and  it   comes   into   force,   the   Court   interpreting   the  provisions of such statute will go by clear wordings  of   the   provisions   as   per   golden   rule   of  interpretation.

13 In the case of D.K.Basu [supra], the Apex Court  upheld the basic human rights of an individual in the  context   of   Article   21   of   the   Constitution   of   India  vis­a­vis   custodial   violence   and   deprecated   naked  violation of human dignity by custodial violence and  Page 124 of 127 R/SCR.A/4496/2014 CAV JUDGMENT found third degree methods are totally impermissible.  While laying down mandatory guidelines in paras 35 and  36 of the said judgement mandated police authorities  and   likewise   to   follow   such   guidelines   strictly   and  breach   thereof   would   entail   serious   consequences,  including   proceedings   to   be   taken   up   by   the   Court  concerned in accordance with law, including punishment  for   contempt   of   court.   However,   as   we   have   noticed,  discussed and upheld that arrest of the petitioners by  a   competent   officer   viz.   The   Assistant   Director   -  respondent   No.3   herein   duly   empowered   to   do   so   and  further   envisaged   procedure   under   Section   19   of   the  PML   Act,   which   galore   on   the   record   of   the   case.  Therefore, judgement in the case of D.K.Basu [supra]  is   not   applicable   to   the   facts   of   the   present  petitioners.

13.1 The   decision   in   the   case   of   Harikishan  [supra]   was   in   the   context   of   order   of   detention  passed   under   Section   3(1)(a)(ii)   of   the   Preventive  Detention Act in which no opportunity was given to the  appellant   -   detenue   to   have   sufficient   knowledge   of  all the grounds on which the detention order was based  and thus depriving him of making representation.  The  case   of   Harikishan   [supra]   again   will   not   be  applicable in the facts and circumstances of the case  when the petitioners are arrested during the course of  investigation by following procedure laid down under  Section 19 of the PML Act.

13.2 In   the   case   of   K.   Kuppusamy   [supra],   the  Page 125 of 127 R/SCR.A/4496/2014 CAV JUDGMENT Apex   Court   held   the   where   the   rules   framed   under  Article 309 had not been amended, the Government could  not act contrary to such rules merely because it had  taken   a   decision   to   amend   such   Rules.     It   is,  therefore,   held   that   administrative   instructions,  circulars, orders could not over­ride statutory Rules.  Therefore,   case   of   K.Kuppusamy   [supra]   is   not  applicable to the facts of the present cases.

13.3 The case of Sunil Fulchand Shah [supra] was  again   arising   out   of   Sections   10   and   12   of  Conservation   of   Foreign   Exchange   and   Prevention   of  Smuggling Activities Act, 1974 where the distinction  was   made   of   preventive   detention   and   punitive  detention.

13.4 In   the   case   of   Madhu   Limaye   [supra]  detention   was   ordered   without   informing   grounds   of  arrest which was held to be violative of Article 22(1)  and   (2)   of   the   Constitution   of   India.     Neither   the  detention of the petitioners is unlawful nor it is in  violation of Provisions of Section 19 of the PML Act  and the appellant is not only informed the grounds of  arrest   duly   signed   by   him,   as   reflected   from   his  arrest memo and produced on record of the petition and  even   the  above  fact   was  recorded  by  learned   Special  Judge   while   considering   application   for   bail.     The  above   decision,   therefore,   is   of   no   help   to   the  petitioners.

13.5 The   next   decision   in   the   case   of   Hussein  Ghadially [supra] was in the context of Terrorist and  Page 126 of 127 R/SCR.A/4496/2014 CAV JUDGMENT Disruptive Activities (Prevention) Act, 1987 and the  Apex Court held that the Apex Court in the context of  Designated   Authority   [SP]   under   Section   20A   had   not  given   approval,   but   such   approval   was   given   by  superior officer and it was held that such invalidity  cannot be cured by Section 465 of the Code of Criminal  Procedure. 

Therefore,   the   decisions   relied   upon   by   the  learned counsels appearing for the petitioners have no  bearing   on   the   facts   of   the   present   case   and   law  involved in the subject petitions.

14 In the result, both these petitions fail and  are hereby dismissed.  

Rule   issued   in   each   of   the   petitions   stand  discharged.   However, there shall be no order as to  costs.

(ANANT S.DAVE, J.) (G.B.SHAH, J.) pvv Page 127 of 127