TAMILNADU CASH-FOR-JOB SCAM CASE. CRIMINAL TRIAL IS NOT A FRIENDLY MATCH BETWEEN THE COMPLAINANT AND THE ACCUSED

VINAY TYAGI CASE EXPLAINED

1. Vinay Tyagi (supra) – (2013) 5 SCC 762 arose out of certain peculiar facts. The Special Cell of Delhi Police registered a First Information Report against two persons under some provisions of the Explosive Substances Act, 1908, a few provisions of the IPC and Section 25 of the Arms Act. The accused filed a petition in the High Court of Delhi seeking a transfer of investigation to CBI on the ground that they were working as Informers for the Intelligence Agencies and that they have been falsely implicated. Though the High Court entertained the petition, no stay was granted. Therefore, the Special Cell of Delhi Police proceeded with the investigation and filed a charge-sheet. Thereafter, the High Court passed an order directing the CBI to undertake an inquiry and submit a report to the Court. Accordingly, CBI undertook an inquiry and filed a report stating that the investigation carried out by Delhi Police did not inspire confidence and that further investigation was needed. Thereafter, CBI filed a closure report. On the basis of the same, the accused sought discharge. Since discharge was not ordered, they approached the High Court, but the High Court remanded the matter back to the Sessions Court. It is the said order of remand that was challenged by the Investigating Officer before this Court. This Court framed two questions as arising for consideration in Vinay Tyagi. They read as follows:-

“Question 1 1.1. Whether in exercise of its powers under Section 173 of the Code of Criminal Procedure, 1973 (for short “the Code”), the trial court has the jurisdiction to ignore any one of the reports, where there are two reports by the same or different investigating agencies in furtherance of the orders of a court? If so, to what effect?
Question 2 1.2. Whether the Central Bureau of Investigation (for short “CBI”) is empowered to conduct “fresh”/ “reinvestigation” when the cognizance has already been taken by the court of competent jurisdiction on the basis of a police report under Section 173 of the Code?”

1. While dealing with the First Question, this Court pointed out that investigation can be of three kinds namely, (i) initial investigation; (ii) further investigation; and (iii) fresh or de novo or reinvestigation. After exploring the meaning of “initial investigation” in paragraph 21 and the meaning of “further investigation” in paragraph 22, this Court recorded in paragraph 23, what a fresh investigation/reinvestigation/de novo investigation is and the circumstances under which the same can be ordered. Paragraph 23 of the decision reads as follows:-

“23. However, in the case of a “fresh investigation”, “reinvestigation” or “de novo investigation” there has to be a definite order of the court. The order of the court unambiguously should state as to whether the previous investigation, for reasons to be recorded, is incapable of being acted upon. Neither the investigating agency nor the Magistrate has any power to order or conduct “fresh investigation”. This is primarily for the reason that it would be opposed to the scheme of the Code. It is essential that even an order of “fresh”/“de novo” investigation passed by the higher judiciary should always be coupled with a specific direction as to the fate of the investigation already conducted. The cases where such direction can be issued are few and far between. This is based upon a fundamental principle of our criminal jurisprudence which is that it is the right of a suspect or an accused to have a just and fair investigation and trial. This principle flows from the constitutional mandate contained in Articles 21 and 22 of the Constitution of India. Where the investigation ex facie is unfair, tainted, mala fide and smacks of foul play, the courts would set aside such an investigation and direct fresh or de novo investigation and, if necessary, even by another independent investigating agency. As already noticed, this is a power of wide plenitude and, therefore, has to be exercised sparingly. The principle of the rarest of rare cases would squarely apply to such cases. Unless the unfairness of the investigation is such that it pricks the judicial conscience of the court, the court should be reluctant to interfere in such matters to the extent of quashing an investigation and directing a “fresh investigation”.

1. In paragraphs 43 and 45, this Court held that the power to order de novo investigation vests only with superior courts and that the same has to be exercised sparingly in exceptional cases. In paragraph 46, this Court pointed out that while ordering de novo investigation, there are two options open to the superior court namely, (i) to direct the report already prepared or the investigation so far conducted, not to form part of the records of the case; or (ii) to direct the report already prepared or the investigation so far conducted to form part of the record. If the superior court is silent on this aspect, the report already prepared or the investigation so far conducted will form part of the record. In other words, if the superior court intended that the investigation so far conducted and the report already filed should not form part of the record, it should specifically say so.

VICTIM CAN PARTICIPATE IN CRIMINAL PROCEEDINGS

1. It is true that criminal jurisprudence recognizes a limited role for victims and it is the State which is entrusted with the onerous responsibility of prosecuting the accused and getting them punished. But we must remember that certain theories of law were developed at a time when the process of administration of the criminal justice system was in the hands of honest and responsible Police officials and the stream remained largely unpolluted. Today the situation is different. In cases of this nature, where some of the complainants and the accused have come together to form an unholy alliance, the victims of crime cannot be left at the mercy of such partnerships. We have seen in this case, persons aspiring to secure public employment, paying illegal gratification, through persons who are public servants, to persons in power and later coming to the Court supporting the accused on the basis of an out of Court settlement. What was compromised between the complainant and accused is not just their disputes, but justice, fair-play, good conscience and the fundamental principles of criminal jurisprudence. In fact, the case on hand is one where there are two teams just for the purpose of record, but no one knows who is playing for which team and where the match was fixed.

2. As a matter of fact, very vocal submissions were made on the question of locus in the previous round of litigation in P. Dharamaraj vs. Shanmugam [2022 SCC OnLine SC 1186] in Criminal Appeal Nos.1514-1516 of 2022. But the objections relating to maintainability were rejected by this Court in the very same proceedings in the first round. Therefore, the accused cannot raise the question of locus again and again. But for the fact that the victims came to this Court in the first round of litigation, a huge scam would have been buried on the basis of a compromise.

CRIMINAL TRIAL IS NOT A FRIENDLY MATCH BETWEEN THE COMPLAINANT AND THE ACCUSED

1. One more objection was raised about the locus of Y. Balaji, the appellant in one of these appeals, on the ground that he had already filed a writ petition in WP No.24275 of 2021 on the file of the High Court seeking further investigation and that, therefore, he must pursue his remedies only in that writ petition. But this argument seeks to sweep under the carpet, the actual reality that by virtue of the impugned order dated 31.10.2022 directing de novo investigation, the writ petition filed by Y. Balaji for further investigation has been rendered infructuous. Therefore, if such a person who participated in the selection but who did not get appointment due to the corrupt practices adopted by the concerned persons and who had already filed a writ petition seeking further investigation, does not have locus standi, we do not know who else will have. 36. The investigation and trial of a criminal case cannot be converted by the complainant and the accused into a friendly match. If they are allowed to do so, it is the Umpire who will lose his wicket.

THIRD PARTIES CAN HAVE S.164 Cr.P.C CONFESSION STATEMENT

1. Much ado was made about some of the appellants filing copies of the confession statements under Section 164 of the Code, as part of the paper book in the appeals. It was contended by the learned senior counsel that the confession statements recorded before the Magistrate are sacrosanct and that the copies of the same cannot be made available to third parties and that at any rate, the appellants have not even explained as to whether they filed third party copy applications as stipulated in the Rules, 2019 and obtained these copies officially.

2. It is clear from Rule 207(12) that a confession statement is a confidential document till the time investigation is complete and Final Report filed. The relevant portion of Rule 207(12) states “… not to make its contents public until the investigation is completed and final report filed”.

3. Rule 210 extracted above enables “third parties to apply to the Court for the grant of copies of Judgment or order or any proceeding or document in the custody of a Court”. Therefore, it is not as though the appellants have filed something to which they could have never had any access. It is an irony that persons who are victims of a huge jobs-for-cash scam are alleged to have come to Court with unclean hands by persons whose hands were allegedly tainted with corruption money.

JOB-FOR-CASH SCAM MAIN ACCUSED

1. What is worrisome is the fact that V. Ganesh Kumar is an employee of the Transport Corporation. In the charge-sheet filed on his complaint, which has been taken on file as CC No.19 of 2020, this V. Ganesh Kumar is stated to have collected amounts ranging from Rs.2,00,000/- to Rs.4,50,000/- for every post of Driver, Conductor or Mechanic, as the case may be. We do not know whether the Transport Corporation has at least placed him under suspension and initiated departmental proceedings. If they have not done so far, the Corporation should initiate disciplinary action against this V. Ganesh Kumar not only for being party to a job-for-cash scam but also for turning turtle and supporting the accused and thereafter coming to this Court to assail the order of de novo investigation, despite being an employee of the Corporation. Interestingly, his attack on the order of de novo investigation is not to achieve the same purpose as the victims want to achieve, by assailing the same order. The victims assail the order of de novo investigation for the purpose of ensuring that the offences under the PC Act are properly investigated and tried. But the object of V. Ganesh Kumar is not the same.

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IMPUGNED ORDER OF THE HIGH COURT

1. Irrespective of the correctness of the reasonings given by the High Court in the impugned order, the conclusion of the High Court was only this, namely, that the ED cannot proceed, till the disposal of (i) Criminal Revision Case No.224 of 2021 filed by Minister-Senthil Balaji against the order of the Trial Court refusing to discharge him; and (ii) Criminal O.P. No.15122 of 2021, filed by Devasagayam seeking de novo investigation. 65. Therefore, it is as clear as crystal, that the High Court, in the impugned order dated 01.09.2022 has given only a temporary reprieve to the accused against the summons issued by the ED. Today, Criminal Revision Case No.224 of 2021 filed by the Minister against the dismissal of his discharge petition, has been rejected by the High Court by its order dated 31.10.2022. Though Criminal O.P. No.15122 of 2021, filed by Devasagayam has been allowed by the High Court, by the very same order dated 31.10.2022, the said order has been set aside by us in Part-I of this judgment.

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1. In other words, the High Court has not quashed the summons issued by ED. The High Court had merely injuncted ED from proceeding further till the clog on the cases relating to the predicate offences is removed.

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FUNDAMENTAL QUESTIONS ARISE IN THE PRESENT APPEAL

1. According to Shri Kapil Sibal, learned senior counsel, certain fundamental questions arise in the present proceedings. They are:-

❖ What are the jurisdictional prerequisites for the ED to initiate investigation under the PMLA?
❖ Does the ED have the power to seek information from authorities investigating the predicate offence merely on the basis that investigation of a predicate offence is ongoing, even without receiving any information that a cognizable offence under the PMLA has occurred and being in possession of material that indicates the offence of money-laundering has taken place?
❖ Can the mere existence of proceeds of crime confer jurisdiction upon the ED to initiate investigation?
❖ What are the elements of “money-laundering”?
❖ What conditions need to be satisfied before the ED is empowered to issue summons under Section 50 of the PMLA?
❖ Can a summons under Section 50 PMLA be issued to a person who is in the nature of an accused under the PMLA or in the predicate offence?
❖ Do Sections 50 and 63 of the PMLA violate the constitutional safeguards under Art.20(3) and 21 of the Constitution?

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1. In sum and substance, all the above arguments of Shri Kapil Sibal, learned senior counsel are aimed at convincing us that Vijay Madanlal Choudhary was wrongly decided and that therefore we may refer it to a larger Bench.

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1. The arguments of Shri Sidharth Luthra, learned senior counsel is actually two-fold, namely, (i) that in the absence of a jurisdictional fact, which is a sine qua non or condition precedent for the exercise of power by ED, the summons issued by ED should go; or alternatively (ii) that in view of inherent contradictions contained in the decision in Vijay Madanlal Choudhary and in view of this Court having ordered notice in the review petition, the appeals on hand should also be referred to a larger Bench.

2. In support of his contention that the existence of a jurisdictional fact is a condition precedent for the exercise of power by ED, the learned senior counsel relies upon the decisions in Shauqin Singh vs. Desa Singh [(1970) 3 SCC 881] and Arun Kumar vs. Union of India [(2007) 1 SCC 732].

SUMMARIZE OF ALL THE PARTIES ARGUMENTS

1. We have carefully considered the rival contentions. A careful analysis of the arguments advanced by all the three learned senior counsel appearing for the accused namely Shri Kapil Sibal, Shri C.A. Sundaram and Shri Sidharth Luthra would show that a three-pronged strategy has been formulated in their attack on the initiation of proceedings by the ED. This three-pronged strategy goes as follows: (i) questioning the correctness of the decision in Vijay Madanlal Choudhary and seeking a reference to larger Bench (by Shri Kapil Sibal); (ii) accepting the decision in Vijay Madanlal Choudhary as correct and trying to demonstrate how the initiation of proceedings in the present case falls foul of the ratio in Vijay Madanlal Choudhary (by Shri C.A. Sundaram); and (iii) relying upon some portions, but attacking some other portions of Vijay Madanlal Choudhary so that any one of these provide an escape route (by Shri Luthra).

QUESTIONS OF LAW FORMULATED BASED ON THE ARGUMENTS

1. In terms of issues, the arguments advanced by all the three learned senior counsel can be crystallized and formulated into two fundamental questions that may have to be addressed by us. These questions are:-

(i) Whether without identifying the proceeds of crime or a property representing the proceeds of crime and without identifying any process or activity connected to proceeds of crime as required by Section 3, which constitute the foundational/ jurisdictional fact, ED can initiate an investigation and issue summons?
(ii) Whether in the light of the fact that notice has been ordered in the review petition and a few interim orders have been passed in some proceedings, it is necessary for this Court to tag these appeals along with a review petition or defer the hearing of these matters until a decision is rendered in the review petition and other petitions?

BACKDROP & HISTORY OF PMLA LEGISLATION BEING ENACTED

1. Before we find an answer to these two questions, it is necessary to take note of how and why PMLA came into existence and what geopolitical circumstances compelled India to bring the law. According to United Nations Office on Drugs and Crime [For short, “UNODC”], South Asia, corruption is recognized as a crucial governance and security challenge in South Asia region. UNODC has estimated that corruption costs more than 5% of global GDP (US$2.6 trillion) annually, with estimates of global money-laundering at around $500 billion (works out to INR 40 lakhs crores) annually. Based upon a study conducted by Pune based Forensic Accounting Company by name “India forensic” way back in the year 2011 on “Ascertaining size of Corruption in India with respect to money laundering”, the Economic Times reported in its Edition dated 17.07.2011 that money laundered out of India in the decade 2001-2010 could be pegged at Rs.18,86,000 crores. This is why in May 2011, India became party to the United Nations Convention against Corruption (UNCAC) joining over 160 other countries who were party to this UN Convention.

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ANSWERING QUESTIONS OF LAW

Therefore, it is clear that the provisions of PMLA are in tune with the Model Law drafted by UNODC. Keeping this in mind, let us now search for an answer to the two questions.

QUESTION 1

“Whether without identifying the proceeds of crime or a property representing the proceeds of crime and without identifying any process or activity connected to proceeds of crime as required by Section 3, which constitute the foundational/jurisdictional fact, ED can initiate an investigation and issue summons?”

1. The common theme of the song of the learned counsel for the accused is that the mere registration of a FIR for a predicate offence, even if it is a scheduled offence, is not sufficient for the ED to register an Information Report and summon anyone. According to the learned counsel, the commission of the scheduled offence should have generated proceeds of crime and those proceeds of crime should have been laundered by someone, for the ED to step in. Going a step further, it was contended by the learned senior counsel that the ED should first identify some property as representing the proceeds of crime, before an Information Report is registered and a summon issued under Section 50(2).

2. These contentions, in our opinion, if accepted, would amount to putting the cart before the horse. Unfortunately for the accused, this is not the scheme of the Act.

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1. If the main part of Section 3 is dissected with forensic precision, it will be clear that Section 3 addresses itself to three things (we may call them 3 ‘P’s) namely, (i) person; (ii) process or activity; and (iii) product. Insofar as persons covered by Section 3 are concerned, they are, (i) those who directly or indirectly attempt to indulge; or (ii) those who knowingly assists; or (iii) those who are knowingly a party; or (iv) those who are actually involved. Insofar as process is concerned, the Section identifies six different activities, namely (i) concealment; (ii) possession; (iii) acquisition; (iv) use; (v) projecting; or (vi) claiming as untainted property, any one of which is sufficient to constitute the offence. Insofar as product is concerned, Section 3 identifies “proceeds of crime” or the property representing the proceeds of crime as the product of the process or activity.

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1. All the three FIRs allege that the accused herein had committed offences included in the Schedule by taking illegal gratification for providing appointment to several persons in the Public Transport Corporation. In one case it is alleged that a sum of more than Rs.2 crores had been collected and in another case a sum of Rs.95 lakhs had been collected. It is this bribe money that constitutes the ‘proceeds of crime’ within the meaning of Section 2(1)(u). It is no rocket science to know that a public servant receiving illegal gratification is in possession of proceeds of crime. The argument that the mere generation of proceeds of crime is not sufficient to constitute the offence of money-laundering, is actually preposterous. As we could see from Section 3, there are six processes or activities identified therein. They are, (i) concealment; (ii) possession; (iii) acquisition; (iv) use; (v) projecting as untainted property; and (vi) claiming as untainted property. If a person takes a bribe, he acquires proceeds of crime. So, the activity of “acquisition” takes place. Even if he does not retain it but “uses” it, he will be guilty of the offence of money-laundering, since “use” is one of the six activities mentioned in Section 3.

2. The FIRs for the predicate offences identify all the three components of Section 3, namely, (i) persons; (ii) process; and (iii) product. Persons accused in the FIRs are those who have indulged in the process or activity. The illegal gratification that they have taken, represents the proceeds of crime. The (i) acquisition of such illegal gratification in the first instance; (ii) the possession of the tainted money before putting it to use; and (iii) today projecting it as untainted money, is the process or activity in which the accused have indulged. The corruption money represents the proceeds of crime.

3. Therefore, all the arguments as though there are no foundational facts or jurisdictional facts, are simply aimed at hoodwinking the Court.

WHAT IS PROCEEDS OF CRIME – EXPLAINED

1. It is true that there are some offences, which, though scheduled offences, may or may not generate proceeds of crime. For instance, the offence of murder punishable under Section 302 is a scheduled offence. Unless it is a murder for gain or murder by a hired assassin, the same may or may not generate proceeds of crime. It is in respect of such types of offences that one may possibly argue that mere commission of the crime is not sufficient but the generation of proceeds of crime is necessary. In the case of an offence of corruption, the criminal activity and the generation of the proceeds of crime are like Siamese twins.

2. Therefore, even if an intangible property is derived as a result of criminal activity relating to a scheduled offence, it becomes proceeds of crime under Section 2(1)(u). In view of the above, we are not impressed with the contention that the investigation by ED was triggered without any foundational/jurisdictional facts. In our view, the allegations in the FIR point out to (i) involvement of persons in criminal activity relating to scheduled offences; (ii) the generation as well as (iii) laundering of the proceeds of crime within the meaning of Section 3. This is in view of the fact that wherever there are allegations of corruption, there is acquisition of proceeds of crime which itself tantamount to money-laundering.

THE RECEIPT OF BRIBE MONEY IS AN ACT OF MONEY-LAUNDERING

SUPREME COURT AFTER FURNISHED NECESSARY FACTS OF THE CASE HAS HELD AS FOLLOWS:
111. In fact, the FIRs as well as Final Reports are now uploaded in the websites of the Police Department in some of the States. In the State of Tamil Nadu, Police started uploading FIRs online, way back in 2016. In all Police Stations, a Crime and Criminal Tracking Network and Systems, popularly known as ‘CCTNS’ is installed. Therefore, the information relating to FIRs is in the public domain.

1. Once an information relating to the acquisition of huge amount of illegal gratification in the matter of public employment has come into the public domain, it is the duty of the ED to register an Information Report. This is because “acquisition” is an activity amounting to money-laundering and the illegal gratification acquired by a public servant represents “proceeds of crime,” generated through a criminal activity in respect of a scheduled offence. Therefore, it does not require any expedition, much less a fishing expedition for someone to say that the receipt of bribe money is an act of money-laundering.

ANSWER TO QUESTION NO.1

1. Therefore, all the arguments on facts and all the legal contentions emanating from some portions of the judgment in Vijay Madanlal Choudhary, to challenge the validity of the proceedings initiated by ED are completely unsustainable.

QUESTION NO. 2

“Whether in the light of the fact that notice has been ordered in the review petition and a few interim orders have been passed in some proceedings, it is necessary for this Court to tag these appeals along with a review petition or defer the hearing of these matters until a decision is rendered in the review petition and other petitions?”

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1. First of all, we should point out that a notice ordered in the review petition being Review Petition (Crl.) No.219 of 2022, will not destroy or diminish the precedential value of Vijay Madanlal Choudhary. The argument of the learned counsel for the accused, if accepted, will not only destroy the principles of judicial discipline and the doctrine of stare decisis, but also bring to a grinding halt, all pending investigation in the country. In fact, the order dated 25.08.2022 passed in Review Petition (Crl.) No.219 of 2022 discloses that prima facie the Court was of the view that at least two of the issues raised in the review petition require consideration. Though it is not precisely spelt out in the order, those two issues relate to (i) not providing the accused with a copy of the ECIR; and (ii) reversal of the burden of proof and presumption of innocence. The points that the respondents are canvasing in this case, have nothing to do with those two issues. Therefore, the accused cannot have a piggyback ride on the review petition.

2. Therefore, the accused is not entitled at all either to seek a reference to a larger Bench or to seek to defer the matter till a decision is rendered in the matters involving larger issues. 83 119. In view of the above, the appeals arising out of the order of the Division Bench of the High Court are liable to be allowed. Accordingly, these appeals are allowed and the order of the Division Bench of the Madras High Court dated 01.09.2022 is set aside. ED will now be entitled to proceed further from the stage at which their hands were tied by the impugned order.

INVESTIGATION OFFICE OF ED MAY INSPECT ELECTRONIC DOCUMENTS WITHOUT S.65-B EVIDENCE ACT CERTIFICATE

1. The grievance of the appellant in this appeal is that the High Court has overlooked the provisions of Rule 231(3) of the Rules, 2019 and also Section 65B of the Indian Evidence Act, 187235. But both the above contentions are without substance. Rule 231 primarily deals with the grant of certified copies of certain other documents to the accused, before filing of the Final Report. Rule 231(3) states that certified copies of unmarked documents shall not be given. The High Court has not passed any order directing the grant of certified copies of unmarked documents. All that the High Court has done is permitting the ED to have an inspection of the documents under Rule 237 and thereafter to file a proper copy application. This is not contrary to Rule 231(3).

2. We do not know how an argument revolving around Section 65B of the Evidence Act is raised. Section 65B concerns the admissibility of electronic records. Without certification, ED may not be able to use those electronic records in evidence, in the prosecution under PMLA. But it does not mean that they cannot even have a look at the electronic record.

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RESULTS SUMMED UP

1. The result of the entire discussion is summed up as follows:

(i) The appeals arising out of the order for de novo investigation are allowed. That portion of the order of the High Court dated 31.10.2022 passed in Criminal O.P. No. 15122 of 2021 is set aside. The directions issued in the said original petition for de novo investigation are set aside. The Investigation Officer shall proceed with further investigation in all cases by including the offences under the PC Act. Any let up on the part of the Investigation Officer in this regard will pave the way for this Court to consider appointing a Special Investigation Team in future.
(ii) The appeals arising out of the order of the Division Bench of the High Court dated 01.09.2022 are allowed. The order dated 01.09.2022 is set aside. All the three writ petitions challenging the initiation of proceedings by ED shall stand dismissed.
(iii) The appeal arising out of the order of the High Court dated 30.03.2022 is dismissed.
(iv) The appeal challenging the orders dated 27.11.2019 and 01.11.2021 of the High Court relating to extension of time for completion of investigation is dismissed. The Investigation Officer shall proceed with further investigation and file Further/Final Reports within two months.
(v) The Contempt Petitions and I.A. No. 26257 of 2023 are dismissed. Application for impleadment is dismissed.
Pending application(s), if any, shall also stand disposed of.

PARTY: Y. BALAJI vs KARTHIK DESARI & ANR. ETC. CRIMINAL APPEAL NOS. OF 2023 (Arising out of SLP (Crl.) Nos.12779-12781 of 2022) – MAY 16, 2023.

https://main.sci.gov.in/supremecourt/2022/37936/37936_2022_13_1501_44539_Judgement_16-May-2023.pdf

Y.Balaji vs. Karthik Desari – may 2023