DIRECTORATE OF ENFORCEMENTversusPADMANABHAN KISHORE

1064                     [2022] REPORTS
                SUPREME COURT   13 S.C.R. 1064             [2022] 13 S.C.R.


 A                   DIRECTORATE OF ENFORCEMENT
                                         v.
                          PADMANABHAN KISHORE
                        (Criminal Appeal No. 1864 of 2022)
 B                               October 31, 2022
         [UDAY UMESH LALIT, CJI AND BELA M. TRIVEDI, J.]
              Prevention of Money Laundering Act, 2002 – ss. 2(1)(u), 3,
       and 4 – Prosecution case was that A-1 was Additional Commissioner
       of Income Tax – On intelligence, the CBI checked a car that was
 C     parked in front of the house of A1 and recovered a sum of
       Rs.50,00,000/- in cash – It is alleged that A1 and A3 were in that
       car at that time – During investigation, it came to light that the sum
       of Rs.50,00,000/- was handed over to A-1 by A-2 whose income tax
       file was pending with A1 for clearance – Since A-2 wanted certain
       benefits, he had allegedly paid the sum of Rs.50,00,000/- as bribe
 D     to A1 – In connection with this seizure, case was registered under
       s.120- B IPC and ss.7, 12, 13(1)(d) r/w s.13(2) of the Prevention of
       Corruption Act, 1988, s.3 of the Prevention of Money Laundering
       Act, 2002 against A-1, A-2, A-3, A-4, A-5 and A6 – A-2 filed writ
       petition before High Court for quashing the proceedings on the
 E     ground that the amount in question as long as it was in the hands of
       respondent could not be said to be tainted money; that it assumed
       such character only after it was received by the public servant and
       as such respondent could not be proceeded against under the
       provisions of PML Act – High Court allowed writ petition and
       quashed the proceedings in PML Act against the respondent – On
 F     State’s appeal, held: The definition of “proceeds of crime” in PML
       Act, inter alia, means any property derived or obtained by any person
       as a result of criminal activity relating to a scheduled offence – The
       offences punishable under ss.7, 12 and 13 are scheduled offences
       – Any property thus derived as a result of criminal activity relating
       to offence mentioned in paragraph 8 of Part-A of the Schedule
 G     would certainly be “proceeds of crime” – It is true that so long as
       the amount is in the hands of a bribe giver, and till it does not get
       impressed with the requisite intent and is actually handed over as a
       bribe, it would definitely be untainted money – If the money is handed
       over without such intent, it would be a mere entrustment – If it is
 H     thereafter appropriated by the public servant, the offence would be
                                       1064
   DIRECTORATE OF ENFORCEMENT v. PADMANABHAN                          1065
                     KISHORE

of misappropriation or species thereof but certainly not of bribe –   A
The crucial part therefore is the requisite intent to hand over the
amount as bribe and normally such intent must necessarily be
antecedent or prior to the moment the amount is handed over –
Thus, the requisite intent would always be at the core before the
amount is handed over – Such intent having been entertained well
                                                                      B
before the amount is actually handed over, the person concerned
would certainly be involved in the process or activity connected
with “proceeds of crime” including inter alia, the aspects of
possession or acquisition thereof – By handing over money with
the intent of giving bribe, such person will be assisting or will
knowingly be a party to an activity connected with the proceeds of    C
crime – Without such active participation on part of the person
concerned, the money would not assume the character of being
proceeds of crime – The relevant expressions from s.3 of the PML
Act are thus wide enough to cover the role played by such person –
A bare perusal of complaint made by the Enforcement Directorate
                                                                      D
showed that the respondent was prima facie involved in the activity
connected with the proceeds of crime.
      Allowing the appeal, the Court
      HELD: 1. The definition of “proceeds of crime” in PML
Act, inter alia, means any property derived or obtained by any        E
person as a result of criminal activity relating to a scheduled
offence. The offences punishable under Sections 7, 12 and 13 are
scheduled offences, as is evident from paragraph 8 of Part-A of
the Schedule to the PML Act. Any property thus derived as a
result of criminal activity relating to offence mentioned in said
paragraph 8 of Part-A of the Schedule would certainly be “proceeds    F
of crime”. [Para 13][1071-B-C]
      2. It is true that so long as the amount is in the hands of a
bribe giver, and till it does not get impressed with the requisite
intent and is actually handed over as a bribe, it would definitely
be untainted money. If the money is handed over without such          G
intent, it would be a mere entrustment. If it is thereafter
appropriated by the public servant, the offence would be of
misappropriation or species thereof but certainly not of bribe.
The crucial part therefore is the requisite intent to hand over the
                                                                      H
1066            SUPREME COURT REPORTS                         [2022] 13 S.C.R.


 A     amount as bribe and normally such intent must necessarily be
       antecedent or prior to the moment the amount is handed over.
       Thus, the requisite intent would always be at the core before the
       amount is handed over. Such intent having been entertained well
       before the amount is actually handed over, the person concerned
       would certainly be involved in the process or activity connected
 B
       with “proceeds of crime” including inter alia, the aspects of
       possession or acquisition thereof. By handing over money with
       the intent of giving bribe, such person will be assisting or will
       knowingly be a party to an activity connected with the proceeds
       of crime. Without such active participation on part of the person
 C     concerned, the money would not assume the character of being
       proceeds of crime. The relevant expressions from Section 3 of
       the PML Act are thus wide enough to cover the role played by
       such person. On a bare perusal of the complaint made by the
       Enforcement Directorate, it is quite clear that the respondent
       was prima facie involved in the activity connected with the
 D
       proceeds of crime. [Paras 16 and 17][1071-E-H; 1072-A-B]
             CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No.
       1864 of 2022.
             From the Judgment and Order dated 01.03.2021 of the High Court
 E     of Judicature at Madras in WP No.25670 of 2019.
            Balbir Singh, ASG, Mukesh Kumar Maroria, Ms. Alka Agarwal,
       Ms. Snehashish Mukerjee, Naman Tondan, Digvijay Dam, Vishal
       Agarwal, Advs. for the Appellant.
              S. Nagamuthu, Sr. Adv., Y. Arunagiri, Ashok Kumar, Rajagopal,
 F     A. S. Vairawan, R. Sudhakaran, G. R. Vikash, D. Subrahmanya Bhanu,
       Rohan, T. Hari Hara Sudhan, P. Soma Sundaram, Advs. for the
       Respondent.
             The Judgment of the Court was delivered by
             UDAY UMESH LALIT, CJI
 G
             1. Leave granted.
             2. This appeal challenges the final judgment and order dated
       1.3.2021 passed by the High Court of Judicature at Madras in Writ Petition
       No. 25670/2019.
 H
   DIRECTORATE OF ENFORCEMENT v. PADMANABHAN                                   1067
          KISHORE [UDAY UMESH LALIT, CJI]

       3. The aforestated writ petition was filed by the respondent herein     A
seeking quashing of proceedings initiated against him under the provisions
of the Prevention of Money Laundering Act, 2002 (“PML Act”, for
short).
      4. The basic facts which led to the filing of said writ petition stand
captured in paragraphs 2.1 to 2.3 of the judgment under appeal, as under:-     B
      “2.1 One Andasu Ravinder (A1), IRS, was working as Additional
      Commissioner of Income Tax, Chennai. On intelligence, the
      Central Bureau of Investigation (for brevity “the CBI”) checked
      a car that was parked in front of the premises of the said Andasu
      Ravinder’s (A1) house on 29.08.2011 and recovered a sum of               C
      Rs.50,00,000/- in cash. It is alleged that Andasu Ravinder (A1)
      and one Uttam Chand Bohra (A3) were in that car at that time.
      2.2 During investigation, it came to light that the sum of
      Rs.50,00,000/- was handed over to the said Andasu Ravinder (A1)
      by one Padmanabhan Kishore (A2), petitioner herein, whose                D
      income tax file was pending with Andasu Ravinder (A1) for
      clearance. Since Padmanabhan Kishore (A2) wanted certain
      benefits, he had allegedly paid the sum of Rs.50,00,000/- as bribe
      to Andasu Ravinder (A1).
      2.3 In connection with this seizure, the CBI registered an FIR in        E
      R.C.No.MA1 2011 A 0033 on 29.08.2011 and after completing
      the investigation, filed charge sheet in C.C.No.3 of 2013 before
      the Special Court for the CBI Cases, Chennai, for the offences
      under Section 120-B IPC and Sections 7, 12, 13(1)(d) r/w 13(2)
      of the Prevention of Corruption Act, 1988, against Andasu
      Ravinder (A1), Padmanabhan Kishore (A2), Uttam Chand Bohra               F
      (A3), Ramakrishnan (A4), T.Banusekar (A5) and
      P.Chandrasekaran (A6). Since the case registered by the CBI
      disclosed the commission of a ‘schedule offence’ under
      the Prevention of Money Laundering Act, 2002 (for brevity “the
      PML Act”), the Enforcement Directorate registered a case in              G
      E.C.I.R.No.13 of 2016 and after completing the investigation, filed
      a complaint in C.C.No.60 of 2018 against Everonn Education
      Limited and three others including Padmanabhan Kishore (A2)
      for the offences under Section 3 r/w 4 of the PML Act, for quashing
      which, Padmanabhan Kishore (A2) is before this Court.”
                                                                               H
1068            SUPREME COURT REPORTS                        [2022] 13 S.C.R.


 A            5. As is evident from the quoted portion, the respondent had
       allegedly handed over a sum of Rs.50,00,000/- (Rupees fifty lakhs only)
       to a public servant, which transaction and the surrounding circumstances
       were projected in FIR dated 29.8.2011, leading to registration of crime
       under Section 120B, Indian Penal Code, 1860 (“IPC”, for short) and
       Sections 7, 12, 13(1)(d) read with Section 13(2) of the Prevention of
 B
       Corruption Act, 1988 (“PC Act”, for short). Later, a case was registered
       by the Enforcement Directorate against the accused including the
       respondent under Sections 3 and 4 of the PML Act.
              6. The basic submission advanced on behalf of the respondent
       was that the amount in question, as long as it was in the hands of
 C
       respondent, could not be said to be tainted money; that it assumed such
       character only after it was received by the public servant; and as such
       the respondent could not be said to be connected with proceeds of crime
       and could not be proceeded against under the provisions of the PML
       Act. The submission was accepted by the High Court with the following
 D     observations: -
             “7. For attracting the penal provisions of the PML Act, the accused
             should have projected the proceeds of a crime as untainted money.
             In this case, the sum of Rs.50,00,000/- as long as it was in the
             hands of Padmanabhan Kishore (A2) could not have been stated
 E           as a tainted money because it is not the case of the CBI in
             C.C.No.3 of 2013 that Padmanabhan Kishore (A2) had mobilised
             Rs.50,00,000/- via a criminal activity. The sum of Rs.50,00,000/-
             became the proceeds of a crime only when Andasu Ravinder
             (A1) accepted it as a bribe. Even before Andasu Ravinder
             (A1) could project the sum of Rs.50,00,000/- as untainted money,
 F
             the CBI intervened and seized the money in the car on 29.08.2011.
             8. Therefore, the prosecution of Padmanabhan Kishore (A2)
             under the PML Act, in our considered opinion, is misconceived.
             7. The High Court thus allowed the writ petition and quashed the
 G     proceedings in PML Act against the respondent, which decision is
       presently under challenge before us.
             8. We have heard Mr. Balbir Singh, learned Additional Solicitor
       General of India in support of appeal and Mr. S. Nagamuthu, learned
       senior counsel for the respondent.
 H
   DIRECTORATE OF ENFORCEMENT v. PADMANABHAN                                   1069
          KISHORE [UDAY UMESH LALIT, CJI]

      9. The definition of proceeds of crime, as appearing in Section          A
2(1)(u) of the PML Act is as under: -
      “2. Definitions. — (1) In this Act, unless the context otherwise
      requires,—
                      xxx                 xxx                 xxx
      (u) “proceeds of crime” means any property derived or obtained,          B
      directly or indirectly, by any person as a result of criminal activity
      relating to a scheduled offence or the value of any such property
      or where such property is taken or held outside the country, then
      the property equivalent in value held within the countryor abroad;
      Explanation.—For the removal of doubts, it is hereby clarified           C
      that “proceeds of crime” include property not only derived or
      obtained from the scheduled offence but also any property which
      may directly or indirectly be derived or obtained as a result of any
      criminal activity relatable to the scheduled offence;”
      10. Sections 3 and 4 of the PML Act which are the principal
                                                                               D
sections for the present purposes, are as under: -
      “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
      proceeds of crime including its concealment, possession, acquisition
      or use and projecting or claiming] it as untainted property shall be     E
      guilty of offence of money-laundering.
      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    F
      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                                                  G
          (d) use; or
          (e) projecting as untainted property; or
          (f) claiming as untainted property,
      in any manner whatsoever;
                                                                               H
1070            SUPREME COURT REPORTS                          [2022] 13 S.C.R.


 A           (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.
 B
             4. Punishment for money-laundering.—Whoever commits the
             offence of money-laundering 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:
             Provided that where the proceeds of crime involved in money-
 C           laundering relates to any offence specified under paragraph 2 of
             Part A of the Schedule, the provisions of 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.”
             11. Paragraph 8 of the Part-A of the Schedule to the PML Act
 D     deals with offences under the PC Act and said paragraph is to the
       following effect: -
                                   “PARAGRAPH 8
       OFFENCES UNDER THE PREVENTION OF CORRUPTION
                                      ACT, 1988
 E                                    (49 of 1988)




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   DIRECTORATE OF ENFORCEMENT v. PADMANABHAN                                   1071
          KISHORE [UDAY UMESH LALIT, CJI]

       12. The respondent stands charged for having committed offence          A
of conspiracy to commit offences punishable under Sections 7, 12, 13(1)(d)
read with Section 13(2) of the PC Act. The controversy in the instant
matter is not with regard to his involvement in the offence punishable
under the PC Act, but raises a question whether the respondent can be
proceeded against under the provisions of the PML Act.
                                                                               B
       13. The definition of “proceeds of crime” in PML Act, inter alia,
means any property derived or obtained by any person as a result of
criminal activity relating to a scheduled offence. The offences punishable
under Sections 7, 12 and 13 are scheduled offences, as is evident from
paragraph 8 of Part-A of the Schedule to the PML Act. Any property
                                                                               C
thus derived as a result of criminal activity relating to offence mentioned
in said paragraph 8 of Part-A of the Schedule would certainly be
“proceeds of crime”.
      14. The further question to be answered is: whether the role played
by respondent could come within the purview of Section 3 of the PML
                                                                               D
Act?
      15. Said Section 3 states, inter alia, that whoever knowingly assists
or knowingly is a party or is actually involved in any process or activity
connected with proceeds of crime including its concealment, possession,
acquisition or use shall be guilty of offence of money-laundering
(emphasis added by us).                                                        E

       16. It is true that so long as the amount is in the hands of a bribe
giver, and till it does not get impressed with the requisite intent and is
actually handed over as a bribe, it would definitely be untainted money.
If the money is handed over without such intent, it would be a mere
entrustment. If it is thereafter appropriated by the public servant, the       F
offence would be of misappropriation or species thereof but certainly
not of bribe. The crucial part therefore is the requisite intent to hand
over the amount as bribe and normally such intent must necessarily be
antecedent or prior to the moment the amount is handed over. Thus, the
requisite intent would always be at the core before the amount is handed       G
over.Such intent having been entertained well before the amount is actually
handed over,the person concerned would certainly be involved in the
process or activity connected with “proceeds of crime” including inter
alia, the aspects of possession or acquisition thereof. By handing over
money with the intent of giving bribe, such person will be assisting or will
                                                                               H
1072             SUPREME COURT REPORTS                         [2022] 13 S.C.R.


 A     knowingly be aparty to an activity connected with the proceeds of crime.
       Without such active participation on part of the person concerned, the
       money would not assume the character of being proceeds of crime.The
       relevant expressions from Section 3 of the PML Act are thus wide enough
       to cover the role played by such person.
 B            17. On a bare perusal of the complaint made by the Enforcement
       Directorate, it is quite clear that the respondent was prima facie involved
       in the activity connected with the proceeds of crime.
             18. The view taken by the High Court that the respondent cannot
       be held liable for the offence under the PML Act isthus completely
 C     incorrect.
              19. The observations made by us regarding involvement of the
       respondent are prima facie in nature and for considering whether the
       allegations made by the prosecution if accepted to be true at this stage,
       would make out an offence or not. Needless to say that, on facts, the
 D     matter shall be considered purely on merits at the appropriate stage(s).
             20. We therefore allow this appeal and set aside the judgment and
       order passed by the High Court.Consequently, the respondent shall
       continue to be arrayed and proceeded against in accordance with law in
       E.C.I.R. No. 13 of 2016 registered by the Enforcement Directorate.
 E            21. The appeal is thus allowed.

       Devika Gujral                                                Appeal allowed.
       (Assisted by : Mahendra Yadav, LCRA)


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