Directorate of Enforcement v. Abdullah Ali Balsharaf & Ors.

13. On a plain reading of the foregoing provisions, the following aspects emerge: firstly, the provisions of CrPC relating inter alia to seizure and attachment apply to proceedings under the PMLA but only insofar as they are not inconsistent with the provisions of the PMLA; secondly, the power conferred on an officer under section 17 of the PMLA inter alia for seizure of property must be exercised on the basis of information in the possession of the officer, if founded on such information the officer has reason to believe that a person has committed any of the acts specified in the provision; with the reason for such belief to be recorded in writing. Section 17 also mandates that upon seizure or upon issuance of a ‘freeze’ order, a copy of the reasons recorded by the officer alongwith material in his possession is required to be forwarded to the Adjudicating Authority in a sealed envelope.

14. On the other hand, section 102 CrPC empowers a police officer to seize any property which may (merely) be alleged or suspected to have been stolen; or which may be found in circumstances which create suspicion of commission of any offence. Section 102 also provided that a seizure so made is required to be reported to the officer-in-charge of a police station; and in certain cases to the concerned Magistrate or, in certain circumstances, be handed to any person on executing a bond of undertaking to produce the property before the court.

15. The question therefore is whether an officer of DoE acting under PMLA can seize property merely upon suspicion and without necessity of having or recording any reason to believe in writing.

16. The following provisions of PMLA and CrPC help elucidate the answer to the above query: Section 71 of PMLA reads as under: “71. Act to have overriding effect.—The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force.” whereby the intention of the legislature is manifest, namely that the provisions of PMLA are to have effect regardless of anything discordant with such provisions that may be contained in any other extant law. The provisions of PMLA therefore prevail if there is anything contrary herewith in any other statute, which in this case would include the CrPC.

17. Correspondingly, section 5 of CrPC saves the provisions of any special or local law; or any special jurisdiction or power conferred; or any special form of procedure prescribed by any other law in the following words: Section 5 of CrPC reads as under:

18. In Ajmer Singh & Ors. vs. Union of India & Ors. reported as (1987) 3 SCC 340, dealing with applicability of section 428 of the CrPC to a General Court Martial under the Army Act 1950 (Army Act), the Supreme Court has held that since section 167 of the Army Act specifically says that the period of sentence shall be reckoned from the day on which the original proceedings are signed by the presiding officer/court-martial, the benefit of set-off of the period of detention undergone by an accused during investigation, enquiry or trial under section 428 of the CrPC is not available against the term of imprisonment awarded by a court-martial. The Supreme Court has so held on an interpretation of section 5 of the CrPC, observing that the effect of section 5 is clearly to exclude application of the CrPC to any proceedings under any special or local law or any special jurisdiction or form of procedure prescribed by any other law, in this case the Army Act.

19. Though CrPC is the general procedural law applicable to all criminal matters, the legislature has provided that nothing in the CrPC is to affect any special law or special jurisdiction or special power or special form of procedure prescribed by any other law that may be in force. In our view, section 5 CrPC squarely applies in the context of PMLA, which is a special law, carving-out a special jurisdiction, providing special power and a special form of procedure for offences relating to money laundering and saves those provisions.

20. On a combined reading of section 5 of CrPC and section 71 of PMLA, it is clear that any special procedure or power conferred by PMLA would prevail over any general procedure or power conferred by CrPC Section 65 of PMLA must therefore be read as providing a residuary procedural blueprint inasmuch as for matters relating to arrest, search, attachment, confiscation, investigation, prosecution and all other proceedings under the PMLA, the relevant provisions contained in the CrPC are to apply but only so long as there is nothing inconsistent between provisions of CrPC and those of PMLA. Provisions of CrPC are, in that sense, the ‘fall-back option’ available provided there is no specific or inconsistent provision on a procedural matter under the PMLA.

21. In the context of the present matter however, section 17 lays down specific conditions and requirements for search and seizure to be made for offences covered by PMLA. The DoE would urge us to construe section 17 of the PMLA to bring it in consonance with the provisions of section 102 of CrPC; and to that extent read-down or dilute the stringent conditionalities for exercise of power of seizure under section 17. We are afraid that the purport of section 65 of PMLA and section 5 of CrPC is that section 102 of CrPC must be read, if at all, to bring in-line with the mandatory requirements of section 17 of the PMLA and not the other way around.

22. We find support for our view in the judgment of the Supreme Court in the case titled Gautam Kundu vs. DoE (Prevention of Money-Laundering Act), Government of India reported as (2015)16 SCC 1, in which case the Supreme Court considered the inter-play between the provisions of section 45 of PMLA (offences under PMLA being cognizable and non-bailable) and the provisions of section 439 of CrPC (special powers to the High Court and Sessions Court in matters of grant of bail). Ruling upon the necessity to comply with the conditions enumerated in section 45 of PMLA when considering the grant of bail under that Act, the Supreme Court holds:

23. In Gautam Kundu (supra) the Supreme Court has therefore held that where an offence alleged is one under PMLA, the conditions for grant of bail under section 45 of the PMLA must necessarily be satisfied before bail is granted; and the provisions of section 439 CrPC must, to that extent, yield to those of section 45. It may be mentioned here that section 439 CrPC gives to the High Court or the Sessions Court the discretion to admit an accused on bail without giving notice to the public prosecutor, for reasons to be recorded in writing, where the court is of the opinion that it is not practicable to give such notice. This direction is however taken away under section 45 of the PMLA (excepting in the case of certain categories of persons or amount involved, as specified in the provision).

24. As noted in the impugned order, a single Judge of the Gujarat High Court has taken a contrary view on the issue in a case titled Paresha G. Shah vs. State of Gujarat & Ors. reported as MANU/GJ/1127/2015: 2016 GLH(1) 329 holding that it may happen that initially the authority may be in possession of some material, which may create some doubt or suspicion but not adequate material sufficient to record reasons to believe that an offence under PMLA has been committed. In this view of the matter, the Gujarat High Court holds that the authorities are empowered to issue appropriate directions for attachment or freezing of a bank account in exercise of power under section 102 CrPC by virtue of provisions of section 65 of PMLA. We however, are not persuaded to concur in this view. Our difference of opinion with the view taken by the single Judge of the Gujarat High Court arises from noticing the emphasis and clarity with which the essential conditions for search and seizure are specified in section 17 of PMLA, as evident from the following extract of the provision: “17. Search and seizure.-(1) Where the Director or any other officer not below the rank of Deputy Director authorised by him for the purposes of this section, on the basis of information in his possession, has reason to believe (the reason for such belief to be recorded in writing) that any person…”

25. We must add that in fact the phrase ‘reason to believe’ is defined in section 26 of the Indian Penal Code, 1860 (IPC) in the following words:

The phrase ‘reason to believe’ as appearing in section 26 of IPC has been interpreted by the Supreme Court in the case titled Joti Parshad vs. State of Haryana reported as 1993 Supp (2) SCC 497 in the following way:

In substance what it means is that a person must have reason to believe if the circumstances are such that a reasonable man would, by probable reasoning, conclude or infer regarding the nature of the thing concerned. Such circumstances need not necessarily be capable of absolute conviction or inference; but it is sufficient if the circumstances are such creating a cause to believe by chain of probable reasoning leading to the conclusion or inference about the nature of the thing. These two requirements i.e. "knowledge” and "reason to believe" have to be deduced from various circumstances in the case…”

26. While the foregoing interpretation has been given in the context of an accused person having reason to believe, the interpretation is by no means confined only to the case of an accused person but would apply equally to an officer acting in exercise of his powers under a similar or cognate statute.

27. In fact in Noor Aga vs. State of Punjab reported as (2008) 16 SCC 417, the Supreme Court referred to the definition of ‘reason to believe’ as contained in section 26 of the IPC in the context of sections 42 and 43 of the Narcotic Drugs and Psychotropic Substances Act, 1985 (NDPS Act) as also Section 110 of the Customs Act, 1962 (Customs Act) which provisions concern powers of entry, search, seizure and arrest; and in which the requirement of reason to believe has been incorporated by the legislature. In the context inter-alia of the power of seizure under the NDPS Act and the Customs Act, the Supreme Court had this to say in Noor Aga‟s case:

It is therefore clear that where there is a requirement that an action may be taken by an officer only when there is reason to believe, especially in the context of a statute where stringent procedures are laid down, the requirement of having reason to believe must be strictly complied with. PMLA is exactly such a statute where stringent procedures have been laid down.

28. We see no reason why the essence of the definition contained in section 26 of the IPC should not inform the interpretation of the same phrase in section 17 of the PMLA. It is noteworthy that the phrase ‘reason to believe’ has a specific connotation in criminal jurisprudence and is not merely an ordinary and colloquial phrase.

29. Besides, we must never forget the venerated principle of law laid down by the Privy Council in the case of Nazir Ahmad vs. Emperor reported as AIR 1936 PC 253, that where a power is given to do a certain thing in a certain way, the thing must be done in that way or not at all; and other methods of performance are necessarily forbidden. In our view this principle must a fortiori apply to a special statute such as PMLA.

30. In light of the above discussion, we find no infirmity in the impugned judgment on the issue. We hold that ingredients of section 17 of PMLA must be scrupulously complied with and it is impermissible for seizure to be made by relying instead upon the provisions of section 102 of the CrPC.

31. Wherever there is/are any provision/s covering any aspect of proceedings under PMLA, such provisions would prevail and must be adhered to regardless of any cognate provision contained in the CrPC. Provisions of the CrPC may however be relied upon as residuary provisions for proceedings under PMLA on aspects and matters for which no specific provision is contained in PMLA. In case of any conflict or contradiction as between provisions of PMLA and CrPC, those contained in PMLA would prevail and those of the CrPC must yield.

32. For the record, insofar as the question of whether assets acquired prior to enactment of PMLA come within the definition of ‘proceeds of crime’, the view taken by the single Judge, namely that it is irrational to hold that such assets could never fall within the definition contained in section 2(1)(u)of the PMLA, has not been challenged or argued before us. The appellant has also not pressed any challenge to the observation of the single Judge that the private parties shall be entitled to seek consequential relief in any other court or forum.

33. In view of our opinion as aforesaid, we find no merit in the appeal, which is accordingly dismissed; without however, any order as to costs.

ANUP JAIRAM BHAMBHANI, J.

THE CHIEF JUSTICE MARCH 15, 2019