The Hon’ble Supreme Court recently had to consider whether a particular amount assumes the character of being tainted money only after it is received by a public servant. An Appeal¹ was filed by the Directorate of Enforcement against a judgement passed by the Madras High Court, quashing proceedings under the PMLA against the Respondent.

Facts

One Andasu Ravinder (A1), IRS, was working as Additional Commissioner of Income Tax, Chennai. On intelligence, the CBI checked a car that was parked in front of the premises of A1’s house and recovered a sum of Rs. 50,00,000/- in cash. It is alleged that A1 and one Uttam Chand Bohra (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 the said Andasu Ravinder (A1) by one Padmanabhan Kishore (A2), the Respondent herein, whose income tax file was pending with A1 for clearance. Since the Respondent wanted certain benefits, he had allegedly paid the sum of Rs. 50,00,000/- as bribe to A1.

In connection with this seizure, the CBI registered an FIR and after completing the investigation, filed charge sheet arraigning 6 Accused for having committed an offence of conspiracy to commit offences punishable under Sections 7, 12, 13(1)(d) read with Section 13(2) of the Prevention of Corruption Act, 1988.

Since the case registered by the CBI disclosed the commission of a ‘schedule offence’ under the PMLA, the Enforcement Directorate registered a case and after completing the investigation, filed a complaint against Everonn Education Limited and three others including the present Respondent for the offences under Section 3 read with Section 4 of the PMLA.

The controversy is not with regard to the involvement of the Respondent in the offence punishable under the Prevention of Corruption Act, 1988, but raises a question as to whether the Respondent can be proceeded against under the provisions of the PMLA by assuming the amount to be within the ambit of the definition of “proceeds of crime” i.e. property derived or obtained by any person as a result of criminal activity relating to a scheduled offence.

Impugned Judgement
The Madras High Court had held that for attracting the penal provisions of the PMLA, the Accused should have projected the proceeds of a crime as untainted money and in this case, the sum of Rs. 50,00,000/- as long as it was in the hands of the Respondent could not have been stated as a tainted money because it is not the case of the CBI that the Respondent had mobilised Rs. 50,00,000/- via a criminal activity.

It further held that the sum of Rs. 50,00,000/- became the proceeds of a crime only when A1 accepted it as a bribe. Even before A1 could project the sum of Rs. 50,00,000/- as untainted money, the CBI intervened and seized the money in the car. Thus, the Madras High Court quashing the proceedings under the PMLA as against the Respondent.

Held
The Hon’ble Supreme Court reasoned 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 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 over.

It was observed that 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 the aspects of possession or acquisition thereof. A person handing over money with the intent of giving bribe, will be assisting or will knowingly be a party to an activity connected with the proceeds of crime. Without this active participation on part of the person concerned, the money would not assume the character of being proceeds of crime.

Based on the averments in the complaint filed by the Enforcement Directorate, the Hon’ble Supreme Court held that it was quite clear that the Respondent was prima facie involved in the activity connected with the proceeds of crime and thus the proceedings could not have been quashed. The relevant expressions from Section 3 of the PMLA are wide enough to cover the role played by the Respondent. The Appeal was therefore allowed and proceedings against the Respondent under the PMLA were continued.

By - Lakshmi Raman