Offence of Criminal Conspiracy and PMLA

Introduction

Section 120A of the India Penal Code, 1860 defines ‘criminal conspiracy’ and section 120B provides its punishment. Enforcement Directorate has invoked it jurisdiction by registering ECIR in many cases where section 120B of IPC was the only schedule offence and no other offences were scheduled offences under the Prevention of Money Laundering Act, 2002 (PMLA). PMLA was enacted in 2002. The main object of this Act is to rest the integration of the ‘proceeds of crime’ with the mainstream economy. The ‘proceeds of crime’ has been defined under Section 2(i)(u) of PMLA. Section 2(y) of PMLA defines the ‘scheduled offence’. A bare perusal of very definition of ‘proceeds of crime’ shows that it is very much interlinked with the existence of ‘scheduled offence’.

Also Read: Origin of PMLA

Offence of Criminal Conspiracy and PMLA

PMLA has been amended time to time and more offences have been included in in Schedule to PMLA as ‘scheduled offence’ to widen the scope of PMLA to meet out its main objective.

There have been instances wherein provisions of PMLA have been invoked retrospectively on the offences which were not ‘scheduled offences’ at the time of its occurrence.

This issue came before the High Court of Karnataka. The allegation was that the accused therein committed the offences  under sections 120B, 420 and 411 of the IPC and section 13(2) read with sections 13(1)(d)  and 13(1)(e) of the PC Act, 1988. The Petitioner therein contended that the alleged offences were included as scheduled offences only on 01.06.2009 whereas the alleged offences were allegedly committed between June, 2007 and May, 2009. The Petitioner further contended that the said offences were allegedly committed prior to the coming into operation of the amendment to the PMLA.

Relevant paras of the Judgment dated 22.03.2017 titled as Obulapuram Mining Company Pvt. Ltd. & Ors. v. Joint Director Directorate of Enforcement Government of India and Ors. reported as MANU/KA/0545/2017, (passed by the High Court of Karnataka) are reproduced herein below:

“10. It can be seen from the records that all the offences allegedly committed by the writ petitioner were earlier to the insertion of the provision in the schedule of the Prevention of Money Laundering (Amendment) Act, 2009, and as such, they have no application.

11. Therefore, the Enforcement Case Information Report and the order of attachment are without jurisdiction and are liable to be quashed. As we have, already, held that the writ petitioner cannot be prosecuted for the offences alleged, as they are not the scheduled offences under the PML Act. Those offences under the Mines and Geology (Development and Regulation) Act, 1957, the Forest (Conservation) Act, 1980, the Indian Penal Code and the Prevention of Corruption Act, 1988, were included in the PML Act declaring them as scheduled offences only with effect from June 1, 2009. Hence, the Enforcement Directorate could not have invoked the provisions of the PML Act with retrospective effect.

12. The petitioner cannot be tried and punished for the offences under the PML Act when the offences were not inserted in the schedule of offences under the PML Act. This would deny the writ petitioner the protection provided under clause (1) of Article 20 of the Constitution of India. Article 20(1) of the Constitution of India prohibits the conviction of a person or his being subjected to penalty for ex-post facto laws. Consequently, the order of attachment is, also, liable to be set aside.

The Enforcement Directorate challenged the above-said judgment of the Karnataka High Court before the Hon’ble Supreme Court of India. The Hon’ble Supreme Court vide its order dated 24.07.2017 passed in Special Leave to Appeal Crl. No. 4466/2017 matter titled as ‘Directorate of Enforcement v. Obulapuram Mining Company Pvt Ltd., held that-

“Leave granted. In the meantime, the impugned judgment and order will not operate as a precedent. Liberty is granted to file Rejoinder Affidavit within a period of 4 weeks from today.”

The High Court of Madras dealt with the retrospective effect of PMLA and vide its Judgment dated 13.07.2017 in a case titled as Ajay Kumar Gupta v. Adjudicating Authority (PMLA) reported as ­­­MANU/TN/2654/2017, held that-

“12. Similarly, the charge sheet was filed on 13.1.2009 under Section 13 of Prevention of Corruption Act, but this section was included in the list of Scheduled Offences under Prevention of Money Laundering Act is only on 1.6.2009. Therefore subsequent amendment cannot be given any retrospective effect…”

The above-said SLP pertaining to the judgment dated 22.03.3017 of Karnataka High Court (Obulapuram Mining Company Pvt. Ltd. & Ors. Vs. Joint Director Directorate of Enforcement Government of India and Ors.) is pending and as such final view of the Supreme Court is awaited on this important aspects of PMLA.

Invoking Section 120-B IPC when offences were not scheduled offences

Section 120-B IPC defines meaning of criminal conspiracy. Enforcement Directorate has invoked its jurisdiction in in many cases only on the ground that section 120B of IPC is ‘scheduled offence’ under PMLA where other offences were not scheduled offences before the amendment of PMLA.

Provisions of PMLA have been invoked in many cases where at the time of their occurrence, section 120B was not including under PMLA as scheduled offence. Thus, with the aid of section 120B IPC, provisions of PMLA used to be invoked retrospectively.

This issue came before various High Courts. The High Court of Jammu & Kashmir in Ahsan Ahmad Mirza & Others v. Enforcement Directorate [WP(C) No. 2780/2019] , decided on 15.10.2019, held as under:

“29. I am persuaded to take the view which has been taken by the Karnataka High Court in the judgment supra, for, the view taken by the Karnataka High Court is the only correct view having regard to the settled legal position enumerated extensively in the several judgments of the Apex Court. It is beyond the pale of any doubt that offence of criminal conspiracy punishable under Section 120-B IPC is a stand alone offence and figures on top of Part A of the Schedule of PMLA. That being the position, it is difficult to accept the plea that unless the offence of criminal conspiracy is committed in conjunction with a scheduled offence, it cannot be taken to be a scheduled offence for the purpose of Section 3 read with clause (u) of Sub- section 1 of Section 2 of PMLA. Undoubtedly, the offence of money- laundering relates to the process or activity connected with the proceeds of the crime including its concealment possession, acquisition etcetra and ‘proceeds of crime’ would mean any property derived or obtained directly or indirectly as a result of criminal activity relating to scheduled offence. Once Section 120-B is held to be a distinct, independent and stand alone offence and is one of the scheduled offences under PMLA, any property derived or obtained by any person directly or indirectly as a result of criminal activity relating to the offence of conspiracy would come within the definition of ‘proceeds of crime’. A fortiori, any process or activity connected with ‘proceeds of crime’ including its concealment, possession, acquisition etcetra as untainted property, shall come within the purview of offence of money-laundering as defined under Section 3 of PMLA. That being the position of law, no fault could be found with the investigation or action initiated by the respondents including issuance of summons in exercise of powers conferred by Section 50(2) and (50(3) of PMLA.”

The Karnataka High Court in Sachin Narayan and Ors. v. The Income Tax Department and Ors. [MANU/KA/6286/2019], vide its judgment dated 29.08.2019, held as under:

“39. As to whether by a criminal conspiracy the offences indicated in the schedule to PML Act is made out or not would be an issue which can be unearthed only after investigation. During the course of investigation, the authorities may arrive at a conclusion that there is no necessity to further investigate the matter and it may drop the investigation or in the event of authorities finding there is some material, it may then proceed to adjudicate. It all depends on circumstances emerging from investigation in a given case.

40. If principles of interpretation is adopted, then, there was no necessity for the expression “conspiracy” being indicated in several enactments as found in the schedule to the PML Act. Section 120-B of IPC found in part-A of the schedule to PML Act refers to IPC offences only and if it was referable to other offences, the framers of law would not have incorporated the expression “conspiracy” under Part-A Paragraph -1 as defined under other enactments. Section 120-B is a predicate, distinct and stand alone offence. The inclusion of said offence under the schedule is not under challenge in these writ petitions.”

Offence of Criminal Conspiracy cannot be alleged on mere suspicion

The Hon’ble Supreme Court Judgment in CBI v. K. Narayana Rao [(2012) 9 SCC 512], held that-

24. The ingredients of the offence of criminal conspiracy are that there should be an agreement between the persons who are alleged to conspire and the said agreement should be for doing of an illegal act or for doing, by illegal means, an act which by itself may not be illegal. In other words, the essence of criminal conspiracy is an agreement to do an illegal act and such an agreement can be proved either by direct evidence or by circumstantial evidence or by both and in a matter of common experience that direct evidence to prove conspiracy is rarely available. Accordingly, the circumstances proved before and after the occurrence have to be considered to decide about the complicity of the accused. Even if some acts are proved to have been committed, it must be clear that they were so committed in pursuance of an agreement made between the accused persons who were parties to the alleged conspiracy. Inferences from such proved circumstances regarding the guilt may be drawn only when such circumstances are incapable of any other reasonable explanation. In other words, an offence of conspiracy cannot be deemed to have been established on mere suspicion and surmises or inference which are not supported by cogent and acceptable evidence”.

Conclusion

The very definition of conspiracy is very extensive. Offence of criminal conspiracy under section 120B of IPC can be easily invoked where two or more persons are involved in a crime. In its plain reading, section 120B of IPC can be added to bring any offence (which was not the scheduled offence at the time of its occurrence) under the scope and ambit of PMLA. In a way, by aiding section 120B IPC, provisions of PMLA are being invoked retrospectively.

Final finding of the Hon’ble Supreme Court of India is still awaited on this issue…

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