Read Time: 11 minutes

Synopsis

The Supreme Court on November 6, 2024 held that a prior sanction would be required for the prosecution of public servants even in cases of money laundering lodged against them in discharge of their official duty.

A bench of Justices Abhay S Oka and Augustine George Masih ruled that the provisions of Section 197(1) of CrPC apply to a complaint under Section 44(1)(b) of the PMLA.

"We have carefully perused the provisions of the PMLA. We do not find that there is any provision therein which is inconsistent with the provisions of Section 197(1) of CrPC. Considering the object of Section 197(1) of the CrPC, its applicability cannot be excluded unless there is any provision in the PMLA which is inconsistent with Section 197(1). No such provision has been pointed out to us," the bench said.

The court pointed out that Section 65 of the Prevention of Money Laundering Act makes the provisions of the CrPC applicable to all proceedings under the PMLA, provided the same are not inconsistent with the provisions contained in the PMLA. 

"The words ‘All other proceedings’ include a complaint under Section 44 (1)(b) of the PMLA," it said.

The court also noted that Section 71 gives an overriding effect to the provisions of the PMLA notwithstanding anything inconsistent therewith contained in any other law for the time being in force. 

"Section 65 is a prior section which specifically makes the provisions of the CrPC applicable to PMLA, subject to the condition that only those provisions of the CrPC will apply which are not inconsistent with the provisions of the PMLA. Therefore, when a particular provision of CrPC applies to proceedings under the PMLA by virtue of Section 65 of the PMLA, Section 71 (1) cannot override the provision of CrPC which applies to the PMLA," the bench said.

The court also declared that once it is held in view of Section 65 of the PMLA, Section 197(1) will apply to the provisions of the PMLA, Section 71 cannot be invoked to say that the provision of Section 197(1) of CrPC will not apply to the PMLA. 

"A provision of CrPC, made applicable to the PMLA by Section 65, will not be.overridden by Section 71. Those provisions of CrPC which apply to the PMLA by virtue of Section 65 will continue to apply to the PMLA, notwithstanding Section 71. If Section 71 is held applicable to such provisions of the CrPC, which apply to the PMLA by virtue of Section 65, such interpretation will render Section 65 otiose. No law can be interpreted in a manner which will render any of its provisions redundant," the bench said.

The court dismissed a plea by the Enforcement Directorate against the Andhra Pradesh High Court's order which quashed the Special Court's order of taking cognizance of a complaint filed against two IAS officers Bibhu Prasad Acharya and Adityanath Das. 

According to the allegation, the first respondent, in conspiracy and connivance with Y S Jagan Mohan Reddy (the then Chief Minister of the state), another accused, allotted 250 acres of land for the SEZ project to M/s Indu Tech Zone Private Ltd by violating the existing norms, regulations and procedures. 

Further, it was alleged that he was indirectly involved in the offence of money laundering by knowingly assisting M/s Indu group of companies in the creation of vast proceeds of crime. The allegation against the second respondent, who was at the relevant time Principal Secretary, I & CAD Department of the State Government, was that in conspiracy with Y S Jagan Mohan Reddy, he extended favour to India Cement Limited by allotting an additional 10 lakh litres of water from River Kagna without referring the matter to Interstate Water Resources Authority and by violating the existing norms, regulations and procedures.

The court noted that both the respondents are civil servants. It also recorded that both respondents were alleged to have committed acts related to the discharge of the duties entrusted to them. 

The bench noted it was not even the allegation in the complaints that the two respondents were not empowered to do the acts they had done. There is a connection between their duties and the acts complained of, it highlighted.

"The second condition for the applicability of Section 197(1) also stands satisfied, and therefore, in this case, Section 197(1) of CrPC applies to the respondents, assuming that Section 197(1) of CrPC applies to the proceedings under the PMLA," the bench said.

The court also noted the cognizance of the offence under Section 3, punishable under Section 4 of the PMLA, had been taken against the respondents accused without obtaining previous sanction under Section 197(1) of CrPC.

"Therefore, the view taken by the High Court is correct. We must clarify that the effect of the impugned judgment is that the orders of the Special Court taking cognisance only as against the accused B P Acharya and Adityanath Das stand set aside," the bench said.

The court, however, clarified the order of cognizance against the other accused would remain unaffected. 

"However, it will be open for the appellant (ED) to move the Special Court to take cognizance of the offence against the two respondents if a sanction under Section 197(1) of CrPC is granted in future," the bench said.

Case Title: Directorate of Enforcement Vs Bibhu Prasad Acharya and Others