proceeds of Crime and the scope and ambit of Section 3 of PMLA,

IN THE HIGH COURT OF DELHI AT NEW DELHI
RESERVED ON 2
nd June, 2023
% PRONOUNCED ON -3
rd July,2023
+ BAIL APPLN. 1178/2023
VIJAY NAIR ..... Petitioner
Through: Ms. Rebecca Memmon John, Sr. Adv.
with Mr. Samudra Sarangi, Ms. Nitya
Jain, Ms. Alisha Luthra and Mr.
Pravir Singh, Advs.
versus
DIRECTORATE OF ENFORCEMENT ..... Respondent
Through: Mr.S.V.Raju, learned ASG with Mr.
Zoheb Hossain, Special counsel for
ED with Mr. Vivek Gurnani and
Mr.Kartik Sabharwal, Advocates
CORAM:
HON'BLE MR. JUSTICE DINESH KUMAR SHARMA40. Regarding proceeds of Crime and the scope and ambit of Section 3 of
PMLA, it has been laid down in Vijay Madanlal Chaudhary (supra)
wherein it has been held as under:
BAIL APPLN. 1178/2023 Page 28 of 45
263.Coming to Section 3 of the 2002 Act, the same defines the
offence of money-laundering. The expression moneylaundering, ordinarily, means the process or activity of
placement, layering and finally integrating the tainted property in
the formal economy of the country. However, Section 3 has a
wider reach. The offence, as defined, captures every process and
activity in dealing with the proceeds of crime, directly or
indirectly, and not limited to the happening of the final act of
integration of tainted property in the formal economy to constitute
an act of money-laundering. This is amply clear from the original
provision, which has been further clarified by insertion of
Explanation vide Finance (No. 2) Act, 2019. Section 3, as
amended, reads thus:
3. Offence of money-laundering.-Whosoever directly or
indirectly attempts to indulge or knowingly assists or knowingly
is a party or is actually involved in any process or activity
connected with the proceeds of crime including concealment,
possession, acquisition or use and projecting or claiming] it as
untainted property shall be guilty of offence of moneylaundering.
Explanation. -For the removal of doubts, it is hereby clarified
that,-
(i) a person shall be guilty of offence of money-laundering if
such person is found
to have directly or indirectly attempted to indulge or
knowingly assisted or knowingly is a party or is actually
involved in one or more of the following processes or
activities connected with proceeds of crime, namely:-
a. concealment; or
b. possession; or
c. acquisition; or
d. use; or
e. projecting as untainted property; or
f. claiming as untainted property, in any manner whatsoever,
BAIL APPLN. 1178/2023 Page 29 of 45
(ii) the process or activity connected with proceeds of crime is
a continuing activity and continues till such time a person is
directly or indirectly enjoying the proceeds of crime by its
concealment or possession or acquisition or use or projecting
it as untainted property or claiming it as untainted property in
any manner whatsoever.
265. To put it differently, the section as it stood prior to 2019 had
itself incorporated the expression including, which is indicative
of reference made to the different process or activity connected
with the proceeds of crime. Thus, the principal provision (as also
the Explanation) predicates that if a person is found to be directly
or indirectly involved in any process or activity connected with the
proceeds of crime must be held guilty of offence of moneylaundering. If the interpretation set forth by the petitioners was to
be accepted, it would follow that it is only upon projecting or
claiming the property in question as untainted property, the
offence would be complete. This would undermine the efficacy of
the legislative intent behind Section 3 of the Act and also will be
in disregard of the view expressed by the FATF in connection with
the occurrence of the word and preceding the expression
projecting or claiming therein. This Court in Pratap Singh v.
State of Jharkhand, enunciated that the international treaties,
covenants and conventions although may not be a part of
municipal law, the same be referred to and followed by the Courts
having regard to the fact that India is a party to the said treaties.
This Court went on to observe that the Constitution of India and
other ongoing statutes have been read consistently with the rules
of international law. It is also observed that the Constitution of
India and the enactments made by Parliament must necessarily be
understood in the context of the present-day scenario and having
regard to the international treaties and convention as our
constitution takes note of the institutions of the world community
which had been created. In Apparel Export Promotion Council v.
A.K. Chopra, the Court observed that domestic Courts are under
an obligation to give due regard to the international conventions
and norms for construing the domestic laws, more so, when there
is no inconsistency between them and there is a void in domestic
BAIL APPLN. 1178/2023 Page 30 of 45
law. This view has been restated in Githa Hariharan as a, as also
in People's Union for Civil Liberties 82, and National Legal
Services Authority v. Union of India.
266. In the Core Recommendations of the FATF referred to above,
the same clearly mention that the word and in Section 3 of the
2002 Act would not be fully in line with the Vienna and Palermo
Conventions. This doubt has been ably responded and elucidated
by India to the international body by referring to the
jurisprudence as evolved in India to interpret the word and as
or in the context of the legislative intent - to reckon any (every)
process or activity connected with the proceeds of crime
constituting offence of money-laundering. To buttress the stand
taken by India before the FATF, reliance has been justly placed
on reported decisions of this Court amongst other Sanjay Dutt,
which had occasion to deal with the expression arms and
ammunition occurring in Section 5 of the TADA Act. The Court
noted that if it is to be read conjunctively because of word and,
the object of prohibiting unauthorised possession of the forbidden
arms and ammunition would be easily frustrated by the simple
device of one person carrying the forbidden arms and his
accomplice carrying its ammunition so that neither is covered
under Section 5 when any one of them carrying more would be so
liable. The principle underlying this analysis by the Constitution
Bench must apply proprio vigore to the interpretation of Section 3
of the 2002 Act. To the same end, this Court in the case of Ishwar
Singh Bindra v. The State of U.P.165, Joint Director of Mines
Safety and Gujarat Urja Vikas Nigam Ltd. v. Essar Power Ltd.,
interpreted the word and in the concerned legislation (s) as
word or to give full effect to the legislative intent.
273. On a bare reading of Section 3, we find no difficulty in
encapsulating the true ambit, given the various arguments
advanced. Thus, in the conspectus of things It must follow that the
interpretation put forth by the respondent will further the
purposes and objectives behind the 2002 Act and also adequately
address the recommendations and doubts of the international
body whilst keeping in mind the constitutional limits. it would,
BAIL APPLN. 1178/2023 Page 31 of 45
therefore, be just to sustain the argument that the amendment of
way or the explanation has been brought about already present
words, only to clarity the any and including which manifests
the true meaning of the definition and clarities the mist around its
true nature.