Shibamoy Dutta and Others vs Manoj Kumar

Sudip Ahluwalia, J.—1. This Revisional application is directed against the proceedings of M.L. Case No. 3 of 2015 of the Court of Learned Chief Judge, City Sessions Court, Calcutta in which cognizance was taken by the Ld. Judge of the offence punishable under Section 4 of the Prevention of Money Laundering Act, 2002 (hereinafter referred to as the ''PMLA''). The petitioner No. 1 is the Managing Director and the petitioner No. 3 was the Company Secretary of the Company named and styled as "Rose Valley Real Estates Construction Ltd.", while the petitioner No. 2 is a Trustee for the Company''s debentures.

The background of the matter is that on the basis of a letter of complaint issued by SEBI dated 26th June 2013 in favour of the ED (opposite party authority), the said authority registered ECIR No. KLZO/02/2014 dated 27.2.2014 therein alleging commission of offences by Rose Valley Real Estates Construction Ltd. and its officers punishable under Section 24 of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as ''SEBI Act) for which it was alleged that the said offending company and its Directors/Office-bearers had committed the offence in terms of Section 3 of the PMLA, 2002.

The petitioners were summoned during the course of investigation conducted by the opposite party/authority in connection with ECIR No. KLZO/02/2014 dated 27.2.2014. They claim to have duly appeared before the authority on various occasions. However on 02.04.2015 the complaint was filed by the opposite party before the Learned Chief Judge (in-charge), City Sessions Court, Calcutta, (which is also the designated Special Court), therein alleging commission of the offence of ''money laundering'' punishable under Sections 3/4 the PMLA, 2002 by Rose Valley Real Estates Construction Ltd., Gautam Kundu, and the petitioners herein. The complaint was registered as M.L. No. 3 of 2015. Along with the petition of complaint, the Investigating Officer had also filed a petition for issuance of process against the accused persons.

The Learned Chief Judge in-charge, City Sessions Court, Calcutta, upon consideration of such petition of complaint and prayer, by his impugned order dated 02.04.2015 took cognizance of the aforesaid offence(s) and was further pleased to issue non-bailable warrants of arrest against the petitioners.

Being aggrieved by such order, the petitioners moved an application which was duly admitted for hearing by this Court, and an order of stay was granted in respect of execution of the arrest warrants.

It may be mentioned that the "Securities and Exchange Board of India" (SEBI) had earlier filed its complaint against "Rose Valley Real Estates Construction Ltd." and its Directors/Office-bearers for alleged violation of various provisions of the Companies Act, 1956, as well as Sections 24/27 of the ''SEBI Act''. The Ld. Chief Metropolitan Magistrate, Calcutta, had taken cognizance in that complaint case and had directed issuance of process against the accused persons. Those proceedings were challenged in this Court by way of CRR No. 2077 of 2013. It is to be noted further that the gist of the allegations made out in the earlier complaint case filed on behalf of the SEBI are undisputedly the basis for the present complainant for filing its subsequent complaint under the PMLA, which is the subject matter of the present proceedings. Now, during pendency of the Revision (CRR No. 2077 of 2013), an application was filed on behalf of the present complainant/opposite party, i.e., the Directorate of Enforcement for being added as a party in that proceeding. But the same was disposed off with a liberty to the applicant to approach the Ld. Court below at an appropriate stage if the original complaint survived after disposal of that Revisional application. Subsequently the said CRR No. 2077 of 2013 was dismissed by a separate judgment, as the opposite parties arraigned against the petitioners in the two matters are different.

It has of course been asserted repeatedly on behalf of the petitioners that the complaint under the PMLA is not sustainable since the previous complaint filed by the SEBI, which was basis of the present complaint, was itself liable to be quashed. However after dismissal of the CRR 2077 of 2013 in which case the same had been challenged, this particular contention of the petitioners becomes infructuous. Consequently the scope of this judgment remains restricted to a consideration on the substantive merits of the subsequent complaint under the PMLA alone. This Court is therefore now to consider whether or not the impugned order of taking cognizance of the offence under Section 4 of the Prevention of Money Laundering Act, 2002, and the issuance of non-bailable warrants of arrest against the accused persons/petitioners is legal and justified.

In their Supplementary Affidavit filed on 20th of April 2015, and their subsequent written notes of arguments, the petitioners have raised the following contentions in assailing the impugned Order dated 02.04.2015-

a) That issuance of warrants of arrest against the Petitioners is unjustified and illegal;

b) That the complaint itself is untenable due to Non-compliance with the second Proviso to Section 45(1) of the PMLA, 2002;

c) That there is no application of the PMLA, 2002 in the present case;

d) That no offence is made out against the Petitioners under PMLA, since Section 24 of the SEBI Act is itself not a scheduled offence;

e) That the complaint is barred in view of Article 20(1) of the Constitution, since in any case Section 24 was introduced in the PMLA much after the alleged offences were committed;

f) That the Trial Court was not justified in passing any order on the petition of complaint in view of the observations of the High Court in W.P. No. 28728 (W) OF 2014;

The merits of the aforesaid contentions are now taken up for consideration and decision by this Court one by one in the succeeding paragraphs.

Unjustified issuance of warrant of arrest against the Petitioners-

It has been asserted on behalf of the petitioners that they have been co-operating with the opposite party/authority in the investigation and they have duly appeared before the said authority as and when summoned except on a solitary occasion, when they could not appear due to extenuating circumstances and duly informed the IO and had subsequently attended the summons. They have also contended that along with the complaint, the opposite party/authority had filed an application praying for issuance of process against the accused persons without specifying the requirement of issuance of non bailable warrants of arrest. Hence the impugned order was passed in absence of any cogent material reflecting the propensity of the petitioners to evade the course of justice and thus was an arbitrary exercise of power.

To support the above contentions the following decisions were cited on behalf of the petitioners-

a) Inder Mohan Goswami Vs. The State of Uttaranchal, reported in (2007) 1 SCC 1 : (2008) 1 SCC (Cri) 259,

b) Vikas Vs. The State of Rajasthan, reported in , (2014) 3 SCC 321,

c) Arnesh Kumar Vs. State of Bihar, reported in , (2014) 8 SCC 273,

d) Nanki Bhuniya Vs. State, reported in , (2014) 3 Crimes 586.

The sum and substance of the ratio in the aforesaid decisions can be summarised that a non-bailable warrant of arrest should be issued to bring a person to Court, only when summons or bailable warrants would be unlikely to have the desired result.

This could be when-

(i) it is reasonably believed that a person will not voluntarily appear in Court; or,

(ii) the police authorities are unable to find the person to serve him with a summons; or,

(iii) it is considered that the person could harm someone if not placed into custody immediately.

It has been further observed that as far as possible, if the Courts are of the opinion that summons will suffice in getting the appearance of the accused in the Court, the same should be preferred and that the warrants, either bailable or non-bailable, should never be issued without proper scrutiny of facts and complete application of mind, due to the extremely serious consequences and ramifications which ensue on issuance of warrants. It has been further observed that in complaint cases (as in the present case) at the first instance, the Trial Courts should direct serving of the summons along with the copy of the complaint and only if the accused seem to be avoiding summons, the Courts, in the second instance, should issue bailable warrant only on being fully satisfied that the accused are avoiding the Court proceedings intentionally. The petitioners have also emphasised that the power to issue non-bailable warrant of arrest being discretionary, it must have to be exercised judiciously with extreme care and caution, and that the Supreme Court as a general rule, has laid down that unless it is feared that any accused is likely to tamper or destroy the evidence or is likely to evade process of law, issuance of non bailable warrants should be avoided.

The response of the complainant/opposite party to the above submissions was that in the particular facts and circumstances of the present case, it was necessary to ensure attendance of the accused persons only by way of issuing arrest warrants against them, since there was every chance of their absconding or otherwise avoiding appearance in Court. Ld. Counsel for the opposite party in this regard has emphasised that the present complaint essentially involves mass scale offences of duping the general public/investors by the accused company/petitioners, and so the present case cannot be treated at par with ordinary private complaint cases. To support this contention further, certain judgments have been cited on behalf of the opposite party in which it has been held that issuance of non-bailable warrants of arrest to ensure attendance of the accused in lieu of summons is justified considering the gravity of the offence(s) involved. According to the complainant, the Supreme Court has observed in various decisions that offences of an economic nature which affect the public at large need to be to viewed very strictly, and that it is well recognised that in case of serious offences, issuance of arrest warrants to compel the appearance of the accused is permissible. It has also been emphasised that in any case, the procedure in relation to a Special Court (as in the present case) overrides the normal provisions of the Criminal Procedure Code.

In "Ram Narayan Popli Vs. CBI" [, (2003) 3 SCC 641], and Supreme Court had observed-

"380. The offences in these cases were not of the conventional or traditional type. The ultimate objective was to use public money in a carefully planned manner for personal use with no right to do it.

Funds of the public bodies were utilized as if they were private funds. There was no legitimacy in the transactions. Huge funds running into hundreds of crores of MUL, a government company, were diverted and all the accused persons concerned A-1, A-3 and A-5 played dubious roles in these illegitimate transactions. Their acts had serious repercussions on the economic system of the country, and the magnitude of financial impact involved in the present appeal is only the tip of the iceberg. There were several connected cases and interestingly some of the prosecution witnesses in the present case are stated to be accused in those cases. That itself explains the thread of self-perseverance running through their testimony. Therefore, the need to pierce the facadial smokescreen to unravel the truth to lift the veil so that the apparent, which is not real, can be avoided. The proverbial red herrings are to be ignored, to find out the guilt of the accused.

The cause of the community deserves better treatment at the hands of the court in the discharge of its judicial functions. The community or the State is not a persona non grata whose cause may be treated with disdain. The entire community is aggrieved if economic offenders who ruin the economy of the State are not brought to book. A murder may be committed in the heat of the moment upon passions being aroused. An economic offence is committed with cool calculation and deliberate design with an eye on personal profit regardless of the consequence to the community. A disregard for the interest of the community can be manifested only at the cost of forfeiting the trust and faith of the community in the system to administer justice in an even-handed manner without fear of criticism from the quarters which view white-collar crimes with a permissive eye, unmindful of the damage done to the national economy and national interest, as was aptly stated in State of Gujarat v. Mohanlal Jitamalji Porwal.

Unfortunately in the last few years, the country has seen an alarming rise in white-collar crimes which has affected the fibre of the country''s economic structure. These cases are nothing but private gain at the cost of the public, and lead to economic disaster."

In "R. Venkatkrishnan Vs CBI" [, (2009) 11 SCC 737] the Supreme Court had in para 159 referred to the above observations in "Ram Narayan Popli" (supra), and had made the following observations in relation to Special Courts-

"47. The jurisdiction of the Special Court is an exclusive one. It exercises original jurisdiction to try offences relating to the securities scam. It, having regard, to the peculiar nature of the offences sought to be dealt with, should receive a liberal construction. It was so held in Harshad S. Mehta -Versus- State of Maharashtra:- (SCC p. 280, para 48)

"48....The use of different words in Sections 6 and 7 of the Act as already noticed earlier also shows that the words in Section 7 that the prosecution for any offence shall be instituted only in the Special Court deserve a liberal and wider construction."

Similarly the Court in L.S. Synthetics Ltd. -Versus-Fairgrowth Financial Services Ltd. & also noted that: (SCC p. 464, para 18)

"18. The jurisdiction of the Special Court is of wide amplitude. Subject to a decision in appeal therefrom, its decision is final."

Further Section 4 of the Code of Criminal Procedure provides that all offences under the Penal Code shall be investigated and tried as per the provisions of the Code. The same, however, would be subject to special provisions to the contrary. Section 5 of the Code of Criminal Procedure contains a saving clause in terms of which the jurisdiction of special legislations is saved. The jurisdiction of the Special Court was required to be determined with reference to the said provision. The Act is a special Act. The section conferring jurisdiction on the Special Courts under the Act contains a "non obstante" clause. It, thus, prevails over any other law. (See Solidaire India Ltd. -Versus-Fairgrowth Financial Services Ltd.).

We must also make reference to the following observations of the Supreme Court in Ram Narayan Popli which was a case arising from the connected securities market scam, to bring home the point as to the impact of the transactions: (SCC p. 789, paras 380-82)...."

In "State of Gujarat Vs Mohanlal Jitamalji Porwal" [, (1987) 2 SCC 364], it was observed-

"5.....The community acting through the State and the Public Prosecutor is also entitled to justice. The cause of the community deserves equal treatment at the hands of the court in the discharge of its judicial functions. The community or the State is not a persona-non-grata whose cause may be treated with disdain. The entire community is aggrieved if the economic offenders who ruin the economy of the State are not brought to book. A murder may be committed in the heat of moment upon passions being aroused. An economic offence is committed with cool calculation and deliberate design with an eye on personal profit regardless of the consequence to the community. A disregard for the interest of the community can be manifested only at the cost of forfeiting the trust and faith of the community in the system to administer justice in an even-handed manner without fear of criticism from the quarters which view white collar crimes with a permissive eye unmindful of the damage done to the national economy and national interest...."

Again in "Nimmagada Prasad Vs CBI" [, (2013) 7 SCC 466], the Apex Court recalled its aforesaid observations in "State of Gujarat Vs Mohanlal Jitamalji Porwal" (supra) in observing-

"23. Unfortunately, in the last few years, the country has been seeing an alarming rise in white-collar crimes, which has affected the fibre of the country''s economic structure. Incontrovertibly, economic offences have serious repercussions on the development of the country as a whole. In State of Gujarat v. Mohanlal Jitamatji Porwal this Court, while considering a request of the prosecution for adducing additional evidence, inter alia, observed as under: (SCC p. 371, para 5)

"5....The entire community..............................national interest."

Economic offences constitute a class apart and need to be visited with a different approach in the matter of bail. The economic offence having deep-rooted conspiracies and involving huge loss of public funds needs to be viewed seriously and considered as a grave offence affecting the economy of the country as a whole and thereby posing serious threat to the financial health of the country."

The Gujarat High Court in "Swami Sachidananda Paramhansa Vedanatcharya Vs State of Gujarat" (Special Criminal Application No. 332 of 2011) had upheld the order passed by a Magistrate''s Court for issuance of an arrest warrant against the accused under Section 204 with the following observations-

"[6.2]....Therefore, when the petitioner is accused of serious offence punishable under Section 302 of the IPC and under Section 27(1) of the Arms Act and considering seriousness of the offence, when the learned Magistrate has directed to issue arrest warrant against the petitioner, while issuing process in exercise of powers under Section 204 of the Cr.P.C., it cannot be said that the learned Magistrate has committed any error and/or illegality and/or has exceeded in its jurisdiction which calls for interference of this Court in exercise of powers under Article 227 of the Constitution of India."

It is thus clear that qualitatively different standards of strictness are adopted when dealing with economic or very serious offences affecting the public at large. Interestingly in the present case, the petitioners'' side during the course of hearing placed before this Court a copy of the detailed order passed by the Supreme Court of India as late as on the 16th of December 2015, by virtue of which the Bail Petition filed on behalf of the petitioner Gautam Kundu, who is the Chairman of the accused Company was rejected. It may be mentioned that the said accused Gautam Kundu was the first person to be arrested and detained in connection with the complaint challenged in this Revisional application. It transpires that he had been produced before the Ld. Court below as far back as on 26th of March 2015, on which date he was taken into custody and has remained in detention ever since. The Apex Court rejected his bail application even though he had been in custody for almost nine months, obviously taking into account the nature and gravity of the offences involved. In these circumstances, considering the observations of the Supreme Court in the case of the Company''s Head namely Gautam Kundu himself, and in relying on the ratio of the decisions cited on behalf of the complainant, this Court is of the opinion that issuance of non-bailable warrants of arrest by the Ld. Court below to secure presence of the accused persons in the complaint was not inappropriate in the given facts and circumstances. As such there is no reason to interfere with the impugned order on this ground.

Non-compliance with the second Proviso to Section 45(1) of the PMLA, 2002-

It is the contention of the petitioners that the complaint itself is not maintainable in view of the second Proviso to Section 45(1) of the PMLA, 2002, which spells out the requirement in relation to a person competent to file the complaint. The text of the relevant Proviso to Section 45(1) is reproduced as follows-

"45. Offence to be cognizable and non-bailable - (1) Notwithstanding.....directs:

Provided further that the Special Court shall not take cognizance of any offence punishable under section 4 except upon a complaint in writing made by-

(i) the Director; or

(ii) any officer of the Central Government or State government authorised in writing in this behalf by the Central Government by a general or a special order made in this behalf by that Government......."

On perusal of the second Proviso to sub-section (1) of Section 45 of the PMLA, 2002 it would appear that it imposes restriction on a Court to take cognizance except upon a complaint in writing made by - (a) The Director; or (b) any officer of the Central Government or State Government authorized in writing in this behalf by the Central Government by a general or a special order.

It is thus apparent that where a petition of complaint is filed by the Director, there arises no requirement of any authorization in writing by the Central Government. However, in respect of any other officer, who files a petition of complaint under the PMLA, 2002, an authorization in writing in that behalf by the Central Government by a general or a special order is required in order to enable the designated Special Court to take cognizance of the offence alleged.

In this regard the contention of the petitioners is that the complainant Shri Manoj Kumar, is the Assistant Director (Eastern Region) of the Directorate of Enforcement and does not hold the post of a Director. He was therefore required to be authorised in writing by the Central Government to file the complaint for enabling the Ld. Court below to take cognizance.

To support this contention, attention of the Court was drawn to Article 77 of the Constitution of India in which stipulates-

"77. Conduct of business of the Government of India - (1) All executive action of the Government of India shall be expressed to be taken in the name of the President.

(2) Orders and other instruments made and executed in the name of the President shall be authenticated in such manner as may be specified in rules to be made by the President, and the validity of an order or instrument which is so authenticated shall not be called in question on the ground that it is not an order or instrument made or executed by the President.

(3) The President shall make rules for the more convenient transaction of the business of the Government of India, and for the allocation among Ministers of the said business."

In this regard the following judgments of the Hon''ble Supreme Court were referred by the petitioners-

a) State of Uttaranchal Vs. Sunil [ : (2011)8 Supreme 56],

b) Raghavendra Singh Vs. Superintendent, District Jail, Kanpur & Ors. [, AIR 1986 SC 356 : (1986) 1 SCC 650],

c) Shanti Sports Club Vs. Union of India [, (2009) 15 SCC 705],

d) Bachhittar Singh Vs. State of Punjab [, AIR 1963 SC 395 : 1962 Supp (3) SCR 713].

It has thus been emphasised that any authorisation other than in the name of the President of India would not be in conformity with the constitutional provision cited above. Therefore according to the petitioners, the authorisation relied upon by the opposite party/Enforcement Directorate which has not been issued in the name of the President is incomplete and consequently insufficient to meet the requirement of the second Proviso to Section 45(1) of the PMLA, 2002.

Admittedly, the text of the relevant order of authorisation relied upon on behalf of the opposite parties, which is at page 89 in their Affidavit-in-Opposition dated 23.4.2015, being order bearing F No. 6/14/2008, ES dated 11.11.2014 issued by Biplab Kumar Naskar, Under Secretary to the Government of India, is not in the name of the President. It has been stated therein that the "Central Government hereby authorizes the officers not below the rank of Assistant Directors in the Directorate of Enforcement to file a complaint under Section 45 of the Act before the designated Special Courts constituted under sub-section (1) of Section 43 of the Act for trial of offence punishable under Section 4 of the Act".

However in view of the stipulation in the relevant second Proviso to Section 45(1) of the PMLA, 2002 to the effect, "by a general or a special order made in this behalf by that Government......." (Emphasis added), in the opinion of this Court, the aforesaid order relied upon by the Enforcement Directorate would appear to meet up to the statutory requirement which permits authorisation by ''a general'' order i.e., in a simple format, as well as by a ''special'' order in which case, the trappings of formality may be necessary. In any case considering that according to 71 of the PMLA, its provisions are to override any other statute, this Court is of the opinion that quashing of the complaint on this ground at the present state of investigation would not be justified.

Non-application of the PMLA, 2002-

In this regard the petitioners have drawn attention to Section 3 of the Prevention of Money Laundering (PMLA) Act, which defines the offence of money laundering as-

"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 with the proceeds of crime and projecting it as untainted property shall be guilty of offence of money laundering".

Thus, according to the petitioners, the definition of the term ''proceeds of crime'' gains importance. The same has been defined under Section 2(u) of the PMLA Act as-

(u) "Proceeds of crime" means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a ''scheduled offence'' or the value of any such property".

Now the term ''scheduled offence'' has been defined under Section 2(y) of the PMLA Act as-

(y) "Scheduled offence "means - (i) The offence specified in Part A of the schedule; or

(ii) The offence specified under Part B of the schedule if the total value involved in such offence is thirty lakhs of rupees or more; or

(iii) The offence specified in Part C of the schedule".

The petitioners have also drawn attention of the Court to the fact that after amendment in 2013, part ''B'' of the schedule has been clubbed with Part ''A'' and thus the erstwhile part ''B'' stands deleted. In view of the aforesaid provisions it has been emphasised that for the purpose of a property being deemed to be the ''proceeds of a crime'', the said property must be derived or obtained, directly or indirectly as a result of criminal activity relating to a ''scheduled offence''. Such ''scheduled offence'' must be one which is mentioned in the Schedule to the PMLA Act. It is only when the property derived or obtained, directly or indirectly, as a result of criminal activity relating to a ''scheduled offence'' is dealt with in the manner provided under Section 3, coupled with the object of the Act, that the offence of money laundering can be said to have been committed. Else every commission of every offence mentioned in the Schedule shall be a scheduled offence, e.g. every offence under section 302 of IPC shall be an offence of money laundering and is to be tried under PML Act before a Special Court and the Court of Sessions shall not have any jurisdiction try the same.

Now according to the petitioners, in the complaint filed by the Enforcement Directorate, the accused persons are alleged to have committed an offence under Section 24 of the Securities Exchange Board of India Act, 1992 (SEBI Act, 1992). In the narrating part at page 7 of the petition of complaint under clause (ix), it is alleged that the accused persons have caused issuance of debentures during the period from 2.7.2001 to 15.11.2007 and have thereby illegally collected money from the public without following the formalities provided under the different Statutes for collection of money from the public by way of a public debenture. Hence according to the petitioners, it is important to consider the date on which the provisions/offences under the SEBI Act, 1992 were treated as ''scheduled offence'' under the PMLA Act.

In the original Prevention of Money Laundering Act, 2002 no provision/offence under the SEBI Act, 1992 was designated as a ''scheduled offence''. It was only under the Prevention of Money Laundering (Amendment) Act, 2009, that Section 12(A) read with Section 24 of the SEBI Act, 1992 was introduced as a ''scheduled offence'' under the PMLA Act. The said Prevention of Money Laundering (Amendment) Act, 2009 came into force only on and from 01.06.2009.

Hence according to the petitioners, prior to 01.06.2009, commission of any offence under the provisions of the SEBI Act, 1992 could not have been treated as a ''scheduled offence'' under the PMLA, 2002 and as such, no offence can be said to have been committed under Section 3 of the PMLA Act even when the property is derived directly or indirectly due to criminal activity connected with commission of any offence under the SEBI Act, 1992.

The petitioners have also emphasised that according to the complaint, the offence under the SEBI Act 1992 committed by the accused persons, though not admitted, took place during the period 02.07.2001 to 15.11.2007 and as such, any commission of an offence under the SEBI Act, 1992 during such period could not be a ''scheduled offence'' under the PMLA Act and so, no offence under Section 3 of the PMLA Act can be said to have been committed.

The petitioners have further contended that in the petition of complaint, the prosecuting agency has attempted to show the ''scheduled offence'' as the offence under Section 11(C) read with Sections 24 and 27 of the SEBI Act, 1992. However, in the schedule to the PMLA Act, 2002 there is no reference to "Section 11(C)" of the SEBI Act, 1992. The said scheduled offence under the PMLA is with the reference to "Section 12(A) read with Section 24" of the SEBI Act, 1992.

In this connection the further contention of the petitioners is that the Prevention of Money Laundering (Amendment) Act, 2012, which came into effect from 15.02.2013, has created an anomaly whereby Section 24 of the SEBI Act was also mentioned separately. Hence according to them, no offence is made out against the Petitioners under PMLA, since Section 24 of the SEBI Act is itself not a scheduled offence. Their further contention is that printing of Section 24 SEBI Act separately in the schedule to PMLA is an inadvertent clerical error considering the following background and circumstances-

a) That Section 24 of the SEBI Act was printed separately in the schedule of PMLA for the first time vide PMLA (Amendment) Act, 2012, w.e.f. 15.02.2013. The description of offence given under paragraph 11 of the Schedule to PMLA for Section 24 of SEBI Act reads as "acquisition of securities or control", which is different from the description given to the section under the SEBI Act, which describes the section as "Offences". Rather, the heading "acquisition of securities or control" is part of the heading of Section 12A of the SEBI Act which further proves that it is only Section 12A r/w 24 which is the scheduled offence.

b) That the relevant extract of the Schedule to the PML Act as it stood after the 2009 Amendment was as follows:-

Paragraph 8 - The Securities and Exchange Board Of India Act, 1992 (15 of 1992)

c) But the relevant extract of the Schedule to the PML Act after the Amendment Act of 2012 w.e.f. 15.02.2013 is as follows:-

Paragraph 11 - The Securities and Exchange Board Of India Act, 1992 (15 of 1992)

d) As such, on a conjoint reading of the offences mentioned against the sections in paragraph 11 in both the rows, the same will appear as the heading of Section 12A of the SEBI Act. The same is in substance a reproduction of paragraph 8 of Part B of the Schedule of PMLA as was in existence prior to amendment w.e.f. 15.02.2013, and therefore the position remains unchanged.

Hence according to the petitioners, the separate mention of Section 24 in Paragraph 11 to the schedule of the PMLA, 2002, post its 2012 amendment is a visible misnomer/palpable clerical error having no relation whatsoever with the actual purport of the amendment. It must therefore have to be regarded as a kind of "legislative pitfall", which in the circumstances ought to be disregarded by the Court since it creates a visible absurdity both grammatically, and also in actual substance. The petitioners have painstakingly tried to emphasise their submission that no new offence was meant to be added by way of the 2012 amendment, by drawing the Court''s attention to the "Statement of Objects and Reasons" to the Amendment of 2012, as well as the "Notes on Clauses" on the Amendment Act, 2012 and from a comparison of the Schedules of PMLA of 2009 and amended PMLA of 2012.

They have further submitted that if it was the intent of legislature to incorporate section 24 of SEBI Act alone as an offence in that event there would have been no necessity to incorporate "12A read with section 24" inasmuch as section 24 of the SEBI Act prescribes that all violations of provisions of SEBI Act would be punishable in terms of section 24 of the SEBI Act, 1992. Had that been the intention, the legislature would have mentioned either "offences or penalties under SEBI Act, 1992" or only "Section 24" and the heading thereof, as scheduled offence(s). There was or could be no necessity to specify section 12A separately if the legislature intended to incorporate section 24 as a separate scheduled offence.

Furthermore, the petitioners have also placed the ED''s own document titled "FAQs" on their website mentioning the Schedule to PMLA which treats S. 12A r/w 24 of the SEBI Act as a scheduled offence and not Section 24 alone. Similarly, the Schedule to PMLA on the website of the Ministry of Finance-Financial Intelligence Unit also mentions S. 12A r/w 24 of the SEBI Act as the scheduled offence and not Section 24 alone. This according to the petitioners, reflects the authority/government''s own understanding of the schedule.

In this manner their contention is that the printing of Section 24 of SEBI Act separately under the Schedule to the PML Act 2002 is an inadvertent typographical/clerical error that has crept into the legislation as apparent from the marginal note therein.

A number of decisions in this regard have been cited by the petitioners in which it has been held that it is an accepted principle of interpretation of statutes that where an inadvertent grammatical or other error has palpably crept into the legislation, the Court is at liberty to disregard the error in applying the statute. The most prominent among these decisions is that in "Afcons Infrastructure Ltd. v. Cherian Verkey Construction Co. (P) Ltd.," [, (2010) 8 SCC 24 (para 21)]. It is however, not necessary to refer to those decisions at this juncture since there is no dispute regarding the Court''s power to constructively intervene and act appropriately in the event of encountering a visibly erroneous expression in the statute.

The contention of the petitioners here is that no offence can be made out under the PMLA against the Petitioners as Section 24 of the SEBI, simplicitor, is not a separate scheduled offence under the PMLA. Section 12A r/w 24 of SEBI Act is the scheduled offence under the PMLA since 2009 But neither the complaint filed by SEBI, nor the present Complaint filed by the Respondents (ED) (which is based entirely on the SEBI complaint) sought to prosecute them under Sections 12A r/w 24 of SEBI Act.

The undisputed position of law is that the actual substance of allegations in a complaint is to be considered in any adjudication, and mere non-mentioning or even wrong mentioning of any specific Sections or statutory provisions would not automatically negate the actual allegations or invalidate the complaint.

Admittedly Section 24 itself does not describe any specific offence, and is only the penal provision for any offence(s) committed under the SEBI Act, or for violation of/non-compliance with the rules or regulations made thereunder, as would be clear from its text set out below-

"24. Offences. - (1) Without prejudice to any award of penalty by the Adjudicating Officer under this Act, if any person contravenes or attempts to contravene or abets the contravention of the provisions of this Act or of any rules or regulations made thereunder, he shall be punishable with imprisonment for a term which may extend to [ten years, or with fine, which may extend to twenty-five crore rupees or with both].

(2) If any person fails to pay the penalty imposed by the Adjudicating Officer or fails to comply with any of his directions or orders, he shall be punishable with imprisonment for a term which shall not be less than one month, but which may extend to [ten years or with fine, which may extend to twenty-five crore rupees or with both]."

In this backdrop, it would necessarily follow that punishment for all acts which may have been designated as ''offences'' under the SEBI Act, as well as all omissions and non-compliances with the rules, regulations or guidelines framed in connection with that Act, howsoever minor, are punishable under Section 24. In fact this penal provision only specifies the maximum punishment which may be awarded to the offender by way of imprisonment or fine, but by no means can it be construed that the maximum sentences provided must have to be awarded in every case. Naturally the quantum of punishment would depend upon the gravity of the offence or the alleged non-compliance with the provisions. So from a commonsense perspective, it would appear preposterous to assume that the various acts and omissions punishable under section 24, would automatically stand to be excluded as ''scheduled offence(s)'', simply because, separate inclusion of Section 24 in paragraph 11 is a ''legislative pitfall'' as argued by the petitioners.

But even assuming that the separate mention of Section in Paragraph 11 of the schedule of the PMLA is an error as contended, still the moot point to consider remains as to whether the allegations made in the petition of complaint as a whole indicate the existence of the ingredients constituting ''Money laundering'' within the meaning of Section 3 or not. It needs to be remembered that any money which may amount to ''proceeds of crime'' under Section 2(u) is derivable from any of the several ''scheduled offences'' prescribed in the 28 separate Paragraphs which now comprise the entire schedule to the Act, and such ''proceeds of crime'' need not be restricted to any single Paragraph like Paragraph 11, in respect of which alone so much stress has been laid.

It would therefore be in order to consider the allegations made out in the petition of complaint. The same is a voluminous document, running into as many as 40 pages while its Annexure covering the next Six pages simply contain the lists of the documents relied upon, as well as the witnesses who would be supporting the case. For reasons of brevity and convenience therefore, this Court is inclined to refer to only some select allegations and narration of facts made in the complaint, which appear to be directly relevant for adjudication at this juncture.

In the exhaustive Para No. 4 which contains the background of facts leading up to the complaint, it has been mentioned-

".....(xvii) From the voluntary statement of Shri Gautam Kundu, Chairman of Rose Valley Group of Companies dated 25.3.2015, Sri Shibmoy Dutta Managing Director dated 24.3.2015, Sri B.K. Mallick, Ex. Company Secretary dated 18.02.2015 and 24.3.2015 and Shri Sudhir Shaw, AGM, Accounts of Rose Valley Group dated 24.3.2015 recorded under Section 50 of PMLA, reveal that funds have been collected against the issue of Secured Non Convertible Debentures and had been deposited in the common bank Accounts maintained in various branches of the RVRECL wherein the amounts illegally received from the other so called Schemes were also deposited...

"....(xxvi) From the above statements and investigations, it becomes crystal clear that the Scheme of floating Non Convertible Debentures was for the purpose to cheat the innocent public at large by luring them with false promises of secured and high returns. The nomenclature was only a deliberate attempt to mislead and fool the investors and the Regulatory Bodies with an intention to launder the proceeds of crime. The Proceeds of crime amounting to Rs. 12.82 crores were siphoned off in project at Mondarmoni and Fixed Deposits. It is also seen that the refund to many of the investors was given from the funds received through other Schemes, investigation of which is already under progress by the Department through registration of other ECIRs, deposited in the same common Accounts running into more than 3000 bank accounts and the funds estimated to be more than Rs. 15,000 crores collected through purported issue of Secured Non Convertible Debentures which were completely misappropriated illegally by diverting, by the accused persons...."

Again, in Para 6 which purports to be a description of "DETAILS OF PROCEEDS OF CRIME ATTACHED OR SEIZED OR FROZEN AND EVIDENCE TO PROVE THAT THEY ARE INVOLVED IN MONEY LAUNDERING", it has been mentioned-

"...(vii) Shri Gautam Kundu, in his voluntary statement dated 25.3.2015 has, inter-alia, stated that Debenture was nothing but a Scheme like any other Scheme.; that the ''secured'' word was used in Debenture only to convince the investor that the fund what had been invested was secured; that the Debenture Scheme was one of Schemes floated and the money whatsoever had been collected from issuance of Debentures had been deposited in common Accounts of RVRECL; that the FD and other investments had been made from the same common Accounts. From the complaint filed by SEBI it is revealed that no offer document was filed to justify the real purpose of issue of purported Debenture.

(viii) From the above statement, it is crystal clear that the Scheme of floating Non Convertible Debentures was for the purpose to cheat the innocent people by luring them of secured and high returns. The nomenclature was misleading to fool the investors and the Regulatory Bodies with an intention to launder the proceeds of crime. The proceeds of crime amounting to Rs. 12.82 crores relating to illegal issue of debentures, relating to SEBI''s prosecution complaint, were siphoned off and illegally parked elsewhere the crime proceeds exceeding Rs. 15,000 crores as revealed from investigation. Whatever refunds to the investors given were from the illegal funds received through other illegal Schemes were deposited in the same common Account and have been merged with the common Account."

It is seen from the highlighted portions of the extracts from the petition of complaint reproduced above that there was an element of deceiving/cheating the investors by luring them with false promises of high returns, and that the word ''Secured'' was used only to mislead them that their investments would be secure. In this manner according to the complaint, the investors were induced to put their money in the Debenture Schemes. It is seen from the available material collected during investigation that there are complaints by the investors that their promised returns and in some cases even the investments were not delivered to them. There exists material in the form of statement(s) of certain investors to support these allegations. In the given circumstances, the ingredients of the offence of ''cheating'' punishable under Section 420 of the IPC do appear to be attracted in this case. Now this offence of ''cheating'' is a ''scheduled offence'' under Paragraph 1 of the Schedule to the PMLA. So this Court is not in agreement with the petitioners'' contention that the petition of complaint does not disclose any offence of ''money laundering'' per se.

Constitutional bar under Article 20(1)-

Here the petitioners have raised an alternative contention to the effect that assuming Section 24 simplicitor is to be treated as a scheduled offence, still the complaint would be hit by the bar against ex-post facto laws under Article 20(1) of the Constitution of India, as the said Section 24 was introduced vide PMLA (Amendment) Act, 2012, only w.e.f. 15.02.2013 i.e. much after the offences were alleged to be committed. On the face of it, this contention would appear to have some substance since admittedly according to the complaint, the investments/deposits secured by the petitioner Company by allegedly practising deceit on the investors were was between the period 2001-2007. Admittedly till that time Section 24 of the SEBI Act by itself was not included in the list of ''scheduled offences''.

Now Article 20(1) of the Constitution of India provides that-

"No person shall be convicted on any offence except for violation of a law in force at the time of commission of the act charged as an offence, nor be subjected to a penalty greater than that which might have been inflicted under the law in force at the commission of the offence".

Hence according to the petitioners, for being charged under Section 3 of the PMLA Act, 2002, the offence under the SEBI Act, 1992 necessarily ought to have been a ''scheduled offence'' under the PMLA Act, 2002 at the time of its commission. But the offence under the SEBI Act was treated as ''scheduled offence'' under the PMLA Act, 2002 only with effect from the year 2009, while the period of offence as projected by the prosecution is said to be between 02.07.2001 to 15.11.2007. Thus, commission of an offence under the SEBI Act, 1992 may have been punishable as per the provisions of the SEBI Act but no investigation could be conducted under the PMLA Act, 2002, nor any person charged for the offence of money laundering as provided under Section 3 in the given circumstances on account of the bar against ex post facto laws under Article 20(1) of the Constitution.

The petitioners have further relied upon a decision dated 19.01.2015 in connection with Criminal Bail Application No. 1779 of 2013 in the case of "Sayed Mohammed Masood v. Nilkanth Shelke & Anr." [, SCC OnLineBom 227]. It was observed that as the alleged offence section 420 of the IPC was said to have been committed prior to section 420 of the IPC became incorporated as a Scheduled offence under PML Act, the restrictions under Section 45 of the PML Act, 2002 were not applicable.

In the opinion of this Court however, the restriction under Section 45 referred to in the Bombay decision is only in the context of the propriety of granting bail to the concerned offender, and does not imply that the proceeding or investigation is automatically liable to be quashed as a whole.

Further, it needs to be remembered that according to the petition of complaint, the offences committed by the petitioners are "still continuing", as would be clear from the following averments in the complaint -

"11. The information derived from various sources during further investigation reveals the alleged commission of offence under PMLA 2002 by the accused persons and others spread over various States of the country and affecting the general public at large and this kind of heinous criminal offence has been continuing by or at their instance and for which investigation by the Department is still underway.

During the investigation conducted by the complainant in terms of the PMLA 2002, it reveals that the offence of money-laundering is still continuing as the debenture holders of the Accd. No. 1 company have not been paid till date and one of them has been given money during investigation without any intimation whatsoever.

It further reveals during investigation that the Accd. Person Nos. 8 and 9 have tampered with the material evidences by directly negotiating with the debenture holder of the company, who have lodged FIR against the accused persons...."

In this view of the matter, the contention regarding the complaint being barred in view of Article 20(1) might have been sustainable if the alleged offences had been committed in a final manner before inclusion of Section 24 as a ''scheduled offence''. But undoubtedly there can be no protection in the event of any act which amounts to ''money-laundering'' being committed after the 2012 Amendment in relation to any money which otherwise falls under the definition of ''proceeds of crime'', even though it may have been generated before such amendment had come into effect. Commission of any such act amounting to ''money-laundering'' after the amendment would undoubtedly be sufficient to sustain proceedings and under the PMLA, 2002. In the opinion of this Court, the averments made in Paras 11 to 13 of the complaint petition, quoted above do indicate the application of the offence of ''money-laundering'' on the part of the petitioners, even after the 2012 Amendment.

Alleged impropriety of Trial Court in passing order on the Complaint petition in view of High Court''s observations in W.P. No. 28728 (W) OF 2014-

In this regard, the petitioners in their written notes of arguments have narrated the detailed history pertaining to various applications/proceedings preferred from their side, after the initial show cause notice dated 19.6.2014 was served upon them/the Company. The entire background narrated in this regard by the petitioners is set out below-

"It is pertinent to mention herein that from the inception it has been the contention of Rose Valley Real Estates Construction Ltd. (hereinafter referred to as ''the Company''), the Company of which the petitioners are existing or erstwhile officers, that there was no application of the provisions of PMLA, 2002 to the enquiry/investigation that was being carried out by the opposite party authority. The said stand of the company was from the date of issuance of show cause notice dated 19.6.2014 issued by the adjudicating authority under the PMLA, 2002.

The company, after receipt of such show cause notice, had filed a writ petition before this Hon''ble Court, therein challenging the aforesaid show cause notice dated 19.6.2014 and a Single Judge of the Hon''ble High Court by judgment and order had dismissed the writ petition. Against such order of dismissal, the said company had filed an appeal being A.S.T. No. 345 of 2015 and a Division Bench of this Hon''ble Court vide order dated 28.7.2014 was pleased to pass the following order-

"Therefore, we are not inclined to stay the operation of the impugned notice dated 19th of June, 2014. However, we grant liberty to the appellants herein to raise all objections including applicability of the provisions of PML Act in the facts of the present case before the concerned authority before whom the appellants have been directed to appear by the impugned notice dated 19th June, 2014.

Needless to mention that the adjudicating authority will decide the preliminary objections as may be raised by the appellants herein including the applicability of the Prevention of Money Laundering Act, 2002 and also the steps taken by the Directorate of Enforcement under Section 17(1) of the said PML Act in relation to search and seizure of the records and properties of the appellants-companies before deciding any other issue or issues pursuant to the impugned notice dated 19th June, 2014.

The adjudicating authority should pass a reasoned order in the matter and communicate a copy of the same to the appellants herein within two days from the date of passing such order...."

...This order was not assailed before any superior court by the opposite party authority.

Subsequently by a cryptic order dated 10.9.2014, the adjudicating authority under the PMLA, 2002 passed an order, thereby directing retention of the seized materials/articles for a period not exceeding 180 days from date.

Aggrieved by such cryptic order passed by the Adjudicating Authority under the PMLA, 2002, which was in derogation of the order dated 28.07.2014 passed by a Division Bench of this Hon''ble Court in A.S.T. No. 345 of 2014, the company filed a writ petition before this Hon''ble Court, being W.P. No. 28728 (W) of 2014. The same was heard by Hon''ble Justice Nadira Patherya and after hearing the parties, Hon''ble Justice Patherya was pleased by order dated 25.11.2014 to hold to the following effect:-

"....The adjudicating authority after considering the submissions of the parties, was pleased to pass the order dated 10th September, 2014. On a reading of the said order it is apparently clear that the applicability of the 2002 Act has not been addressed and no finding given in respect thereof. This, therefore, is contrary to the order dated 28th July, 2014 passed by the Appeal Court in A.S.T 345 and ASTA 246 of 2014. As the merits of the case has been considered, and a finding given in respect thereof, this, therefore, renders the order dated 10th September, 2014 bad and liable to be set aside.

Accordingly, the order dated 10th September, 2014 is set aside and the adjudicating authority directed to consider the issue regarding the applicability of the act and the preliminary objections raised before deciding any other issue as directed by the order dated 28th July, 2014."

"In the instant case, to quash the letter dated 19th September, 2014 will give rise to a situation likely to do injustice to the debenture holders, therefore, no interference is called for with the letter dated 19th September, 2014. At this stage to form an opinion on the applicability of the 2002 Act would amount to usurping the power of the adjudicating authority. Needless to mention that investigation will not continue and in the event the same is completed before a decision is taken by the adjudicating authority, let no effect be given to the order to be passed till the decision of the adjudicating authority" (Annexed at page 155 of the Supplementary Affidavit filed by the petitioners).

It is pertinent to mention herein that no appeal was filed by the opposite party authority against the said order dated 25th November, 2014 passed by Hon''ble Justice Nadira Patherya in W.P. No. 28728 (W) of 2014. The company had however, filed an appeal on a limited scope against the order dated 25.11.2014 passed by Hon''ble Justice Nadira Patherya in W.P. No. 28728 (W) of 2014 to the extent whereby the prayer of the said company for quashing of the impugned notice dated 19.9.2014 issued by the Enforcement Directorate to the banks to prohibit/freeze the withdrawal from the account maintained in the branches of the said banks by Rose Valley Real Estates Construction Ltd. was rejected by Justice Patherya. The Hon''ble Appeal Court however did not allow the prayer of the Company for permission to operate its Bank accounts. (The said order has been annexed at page 15 of the Affidavit-in-Opposition filed by the opposite party).

However only on 26th August 2015, the adjudicating authority under the PMLA Act, 2002 passed an order holding that the Act is applicable in the case. The said order has been assailed before the Appellate Authority under the Act.

It is thus apparent that this Hon''ble Court in its order dated 25th November, 2014 passed in W.P. No. 27278 (W) of 2014 permitted the continuance of investigation but restricted passing of any order on completion of such investigation by the opposite party authority till passing of the order by the adjudicating authority. In such circumstances, filing of the petition of complaint by the opposite party authority is contrary to the orders passed by this Hon''ble Court in W.P. No. 27278 (W) of 2014 and no order taking cognizance could have been passed in respect of the offence mentioned in the petition of complaint till passing of an order by the adjudicating authority as directed by this Hon''ble Court."

From the above narration it is clear that the grievance of the petitioners is that Enforcement Directorate had flouted the direction passed by the Hon''ble Justice Nadira Patherya in W.P. No. 28728 (W) of 2014 on 25.11.2014 to the effect, ".... Needless to mention that investigation will not continue and in the event the same is completed before a decision is taken by the adjudicating authority, let no effect be given to the order to be passed till the decision of the adjudicating authority". According to the petitioners, the Enforcement Directorate went on with its purported investigation and even filed the complaint in the Ld. Court below on 26.3.2015 even though the adjudicatory authority determined that the PMLA was applicable in the case only as late as on the 26th of August 2015. Hence according to the petitioners, the Ld. Court below should not have taken cognizance on the complaint in view of the prevailing order in W.P. No. 28728 (W) of 2014 at the relevant time.

There is however, absolutely no material on record to show that the Ld. Trial Court had any intimation about the existence of the aforesaid direction, or that the same was brought to its notice even at any later stage. In any case, in the meantime the adjudicatory authority has admittedly determined that provisions of the PMLA are applicable in the present case. In such circumstances, the investigation commenced prior to challenging of the same by the petitioners, and the steps taken in pursuance thereof in the meantime stood regularised as a consequence of the determination by the adjudicating authority on 26th of August 2015. Consequently this Court finds no substantive merit even in this last contention raised on behalf of the petitioners.

For the aforesaid reasons, the Revisional Application Is dismissed. Interim order if any, stands vacated.

Later:

After passing of the judgment, learned counsel appearing for the petitioners prays for staying operation of the same for four weeks. The prayer is opposed on behalf of the opposite parties.

For ends of justice operation of the judgment is stayed for a period of three weeks from date after which it shall automatically vacate.