TMI Blog2012 (5) TMI 240X X X X Extracts X X X X X X X X Extracts X X X X ..... ke movable and immovable property. Therefore, it is that the Act defines the expression "proceeds of crime" expansively to sub-serve the broad objectives of the Act. We thus do not find any infirmity in the provisions of the Act. The huge quanta of illegally acquired wealth ; acquired from crime and economic and corporate malfeasance corrodes the vitals of rule of law ; the fragile patina of integrity of some of our public officials and State actors ; and consequently threatens the sovereignty and integrity of the Nation. Parliament has the authority to legislate and provide for forfeiture of proceeds of crime which is a produce of specified criminality acquired prior to the enactment of the Act as well. It has also the authority to recognise the degrees of harm an identified pejorative conduct has on the fabric of our society and to determine the appropriate remedy for the pathology. The vagueness challenge - held that:- In view of the clear and unambiguous provisions of section 8 (analysed above), considered in the context of the other provisions of the Act, we discern no vagueness in the trajectory of the provisions of section 8. It is clear that the stage of confirmation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Goda Raghuram, J. - These writ petitions substantially challenge the vires of certain provisions of the Prevention of Money-Laundering Act, 2002 (Central Act 15 of 2003) ('the Act') ; amended by the Prevention of Money-Laundering (Amendment) Act, 2005 (Central Act 20 of 2005) ('the Amendment Act') ; further amended by the Prevention of Money-Laundering (Amendment) Act, 2009 (Central Act 21 of 2009) (the second Amendment Act) and orders passed by the primary and attaching authorities and the adjudicating authority. The particulars, the circumstances and the defence to the provisions of the Act and the impugned orders are set out hereinafter. W.P. No. 10765 of 2010 2. B. Rama Raju s/o B. Ramalinga Raju seeks ( i ) invalidation of sections 5(1), 8(1), 8(2), 8(3), 8(4), 23 and 24 of the Act ; ( ii ) a declaration that the provisional attachment order No. 1 of 2009 in ECIR No. 01/H20/2009, dated August 18, 2009 passed by the Deputy Director, Enforcement, Hyderabad (respondent No. 3), is arbitrary and illegal ; ( iii ) that the order dated January 14, 2010 passed by the adjudicating authority (respondent No. 4) in O. C. No. 38 of 2009 is arbitrary and illegal ; ( iv ) a dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent, filed Application No. 38 of 2009 on September 15, 2009 before the adjudicating authority against 132 defendants. The petitioner is the 8th defendant therein. The adjudicating authority issued notice to all the 132 defendants in respect of the movable and immovable properties enumerated in the complaint of the Deputy Director, Enforcement, on September 15, 2009, the day the complaints were filed. (C)Several of the defendants including the petitioner filed applications before the adjudicating authority setting out objections to its jurisdiction ; seeking dismissal of the complaint ; and discharge of the notice. The adjudicating authority however orally pronounced disposal of the objection applications on November 20, 2009 (the date of the hearing). A copy of the order dated November 20, 2009 was furnished to the several defendants including the petitioner on January 24, 2009. (D)The petitioner and some other defendants filed W. P. No. 27058 of 2009 challenging the adjudicating authority's notice dated September 15, 2009 and the order dated November 20, 2009. This court by the order dated December 1, 2009 in W. P. No. 25846 of 2009 (filed by another defendant) allowed the pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds of crime ; that such person has been charged of having committed a scheduled offence and such proceeds of crime are likely to be concealed etc., in any manner which could result in frustrating any proceedings relating to confiscation of such proceeds of crime, under Chapter III. The two provisos to section 5(1) were incorporated by the second Amendment Act. Under the first proviso no order of attachment shall be made unless the report is forwarded under section 173 of the Criminal Procedure Code, 1973, in relation to a scheduled offence, or a complaint is filed before a Magistrate or a court for taking cognizance of the scheduled offence. The second proviso enacts that notwithstanding anything in clause ( b ), any property of a person may be attached under the section if an authorised officer has reason to believe that such property involved in money-laundering, if not immediately attached is likely to frustrate any proceedings under the Act. Section 5(1) is vague and confusing. While under the main provision [section 5(1)], "such property" is the property of a person charged of a scheduled offence ; the second proviso enables property of any person, and if involved in money-l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o attachment and/or confiscation under the Act. The Act does not enable the adjudicating authority to go into the legality, validity, propriety or correctness of the provisional attachment order made under section 5(1), even though the adjudicating authority is required to consider confirmation of such attachment. The criteria for provisional attachment are different from the course of enquiry and the consideration that the adjudicating authority must apply to confirm the order of attachment. The standard of evidence and the sequence of leading evidence is also uncertain. Thus, persons against whom proceedings are pursued are disabled from presenting their defence in the proceedings and are thus denied fair trial, violative of article 14. The impugned order of the adjudicating authority illustrates absence of focus and clarity as to what is adjudicated and decided upon ; on what criteria ; and under what procedure and application of standards of appreciation of evidence. The scheme of adjudication set out in section 8(1) to (3) being vague, unfair and diffused, is violative of article 14. Under the scheme of the Act even if a person is acquitted by the Special Court of the offenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8, 2009) is illegal as properties of persons not even accused of any scheduled offence are attached ; there is no assertion in the order as to the commission of any scheduled offence or of any fact disclosing commission of any scheduled offence ; there is no statement of facts or material on the basis of which the officer has formed a belief that the properties are likely to be transferred ; no facts or reasons are recorded disclosing application of mind, a condition precedent to passing an order of provisional attachment. The provisional attachment order is thus invalid. The order of the adjudicating authority (dated January 14, 2010) passed under section 8(3) of the Act is invalid since the authority failed to apply its mind to whether there is substance in the complaint as to the commission of any scheduled offence, when and by whom the offence was allegedly committed. Since the adjudicating authority failed to deal with any of the submissions, contentions and arguments of the petitioner and other defendants ; since the order proceeds on generalisations, surmises and conjectures ; and the adjudicating authority erred in assuming and holding that it was not necessary to draw a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the available alternative remedy of an appeal, and a further appeal, we summarise herein only those responses in the counter affidavit of the Enforcement Directorate pertaining to the challenge to the provisions of the Act. 9. The counter asserts and sets out : (A)The enacting history of the Act including International commitment and convention, resolutions of the General Assembly of the United Nations, the statement of objects and reasons accompanying the Bill which was eventually enacted by Parliament ; the preamble of the Act ; and its several provisions disclosing a policy to address the scourge of laundering of money which destabilises National and International economies, the sovereignty of several States and has adverse impact on law and order maintenance. The provisions of the Act must therefore be interpreted consistently with the evil the provisions are intended to address ; (B)Money-laundering while facially appears to comprise one or more clear and simple financial transactions, involves and comprises a complex web of financial and other transactions. A money-laundering transaction usually involves three stages : ( i )The placement stage : The malfeasant place ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the offence of money-laundering defined in section 3 ; ( ii )attachment of the property involved in money-laundering, under section 5 of the Act. Proceedings under each section is independent ; ( iii )The punishment specified for the offence of money-laundering under section 4 of the Act can be administered only after prosecution by way of filing a complaint/charge sheet before the Special Court and due trial and conviction ; while on investigation if any property is suspected to have been derived out of the proceeds of crime, that property is placed under provisional attachment under section 5(1) and a complaint is filed before the adjudicating authority within thirty (30) days of such attachment (section 5(5) of the Act). An order of provisional attachment is operative for a period not exceeding one hundred and fifty days from the date of such order (section 5(1) of the Act). ( iv )On receipt of a complaint, under section 8(1) the adjudicating authority is required to issue a notice (to any person who has committed an offence under section 3 or is in possession of proceeds of crime), to indicate the sources of income, earnings and assets out of which or by means of which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opportunity of hearing is provided. Confiscation proceedings can be pursued only after the guilt of a person accused of a scheduled offence is established in the trial court and when the order of such trial court becomes final (section 8(6) read with section 8(3)( b ) of the Act). From the scheme of the Act an order of provisional attachment and confirmation thereof constitutes the first stage of the relevant proceedings involving a prima facie assessment. It is at the stage of confiscation (second stage) that the entire evidence is required to be appreciated and a definitive finding recorded by the adjudicating authority. (I)Elaborate and fair procedures are incorporated in the Act. The order of provisional attachment shall be only by the director or any other officer not below the rank of a Deputy Director, specifically authorised by the director for the purposes of section 5 ; the decision to provisionally attach the property must be supported by reasons to be recorded which must be based on material available in the possession of the attaching authority; no order of provisional attachment could be made unless, in relation to the scheduled offence a report has been forwarde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... why all or any of such property should not be declared to be properties involved in money-laundering and confiscated by the Central Government. (K)The provision mandating taking over possession of a provisionally attached property upon confirmation is in furtherance of the legislative intent of securing the property (pending completion of proceedings before a court of competent jurisdiction and till the order of such trial court becomes final), with a view to prevent frustration of the legislative intent by dissipation or spoilage of the immovable property during the interregnum proceedings. (L)There are further salutary provisions to prevent abuses of authority and powers under the Act. An appeal is provided to the Appellate Tribunal, a body whose independence is legislatively entrenched qua the qualifications prescribed and tenure protection provided vide sections 28 and 29 of the Act. A further appeal is provided to the High Court, to any person aggrieved by a decision or order of the Appellate Tribunal, both on a question of law and fact, arising from such order. M)The provisions of sections 23 and 24 of the Act are valid and unassailable. These provisions are incorp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a scheduled offence and generation of proceeds of crime thereby. Hence initiation of proceedings both for prosecution and for attachment and for subsequent proceedings, against persons accused of committing scheduled offences and for attachment and confiscation of the proceeds of crime against the accused and others in possession of proceeds of crime, is valid. Chronology of events leading to initiation of the impugned proceedings 10. We have perused the rival pleadings ; the provisional attachment orders, dated August 18, 2009 ; the complaints forwarded to the adjudicating authority pursuant to the provisional attachment orders; and the orders of confirmation, dated January 14, 2010. The relevant circumstances leading to the initiation of the proceedings (including the impugned proceeding), under the provisions of the Act are adverted to in brief : ( a )On January 7, 2009 Sri B. Ramalinga Raju, the then chairman of SCSL addressed a letter to the board of directors admitting to inflated cash and bank balances; non-existent accrued interest; understated liability in respect of funds arranged by himself ; overstated debtors position; inflated revenues and operating margins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ured ordinary investors into buying shares of SCSL by continuously publishing falsified books of account including artificially inflated balance sheets and annual financial statements with a view to facilitating over valuing of the share. The shares of SCSL held by Ramalinga Raju and his other family members were off loaded at opportune time ; ( f )Five investment companies were floated by Ramalinga Raju and others in 1995 for sale of shares held by the promoters of SCSL. From 2001 onwards the shares of the family members were dishonestly and fraudulently offloaded at the inflated values as a part of the conspiracy. 327 Companies were floated by Sri B. Ramalinga Raju along with B. Rama Raju and B. Suryanarayana Raju and other near relatives in the guise of carrying out agricultural and other activities through these companies. With a view to investing the sale proceeds of the shares of SCSL in real estate and allied businesses and to shore up their personal financial positions, Sri Ramalinga Raju, B. Rama Raju and Sri B. Suryanarayana Raju floated the 327 companies, classified by the enforcement officials as A to D category companies. 83 companies are enumerated as Group A compri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her mentioned individuals in SCSL through the stock market. With these proceeds Sri B. Ramalinga Raju and his family members repaid the funds borrowed from M/s. DSP Merril Lynch ; (2)The transfer of the shareholding of Sri B. Ramalinga Raju and family members in the manner and for the purposes revealed by the investigation to various NBFC's, constitutes "transfer" as defined in section 2(1)( za ) of the Act. The investigation reveals an illegitimate gain of Rs. 1866.45 crores, attributable to criminal conduct relating to a scheduled offence, within the meaning of section 2(1)( u )-constituting "proceeds of crime" ; (3)The huge quantum of funds mobilised by Sri B. Ramalinga Raju and other family members were obtained from NBFC's by transfer of their fraudulent and artificially inflated shares of SCSL held through their holding company-SRSR Holdings and channelised into assets through some of the 327 companies floated through Ramalinga Raju's family members and trusted employees. Some of the 327 companies which received loans from several NBFCs could not repay the loans and the corresponding NBFCs sold the shares of SCSL pledged with them as collateral by SRSR Holdings, in the op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S, having an international dimension. The convention exhorts the parties to take necessary measures including legislative and administrative, in conformity with the fundamental provisions of their respective domestic law. The convention enumerated measures for incorporation as offences, conduct promoting NDPS and for confiscation of proceeds derived from offences established in relation to NDPS. 12. In 1990, the Financial Action Task Force (FATF-an inter Governmental body, which sets standards, develops and promotes policies to combat money-laundering and terrorist financing with a membership of a number of countries and international organisations) drew up forty recommendations as initiatives to combat money-laundering and terrorist financing to provide an enhanced, comprehensive and consistent frame work of measures for combating money-laundering and terrorist financing. The FATF recommendations have been revised from time to time. THE PREVENTION OF MONEY-LAUNDERING ACT, 2002 : RELEVANT PROVISIONS : "The preamble Whereas the Political Declaration and Global Programme of Action, annexed to the resolution S-17/2 was adopted by the General Assembly of the United Nations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... money and enactment of legislation to prevent such laundering. ( e )The United Nations in the Special session on Countering World Drug Problem together concluded on June 8 to 10, 1998, has made another declaration regarding the need to combat money-laundering. India is a signatory to this declaration. In view of an urgent need for the enactment of a comprehensive legislation inter alia , for preventing money-laundering and connected activities, confiscation of proceeds of crime, setting up of agencies and mechanisms for co-ordinating measures for combating money-laundering, etc., the Prevention of Money-laundering Bill, 1998 was introduced in the Lok Sabha on the 4th August, 1998. The Bill was referred to the Standing committee on Finance, which presented its report on the 4th March, 1999 to the Lok Sabha. The recommendations of the Standing Committee accepted by the Central Government are that : ( a )the expressions 'banking company' and 'person' may be defined; ( b )in Part I of the Schedule under Indian Penal Code, the word, 'offence' under section 477A relating to falsification of accounts should be omitted; ( c )'knowingly' be inserted in clause 3( b ) relating to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ney-laundering which in plain terms means the preventing legitimizing of the money earned through illegal and criminal activities by investments in movable and immovable properties. The need for a law on the subject has been the focus of the Government world over in recent times and that of the U.N. also, because the scourge of money-laundering has threatened to wreck the foundations of the States and undermine their sovereignty even. The terrorist outfits and smuggling gangs have been depending upon money-laundering to finance their operations and it is known that money for such operations are arranged through laundering. Many such illegal outfits have set up ostensibly legal front organization. The money generated through illegal activities is ultimately inducted and integrated with legitimate money and its species like movable and immovable property. Thus certain economic offences, commercial frauds, crimes like murder, extortion have contributed to money-laundering in a significant manner. The perpetrators of such heinous crimes should not be allowed to enjoy the fruits of the money that passed under the activity and therefore the present enactment is intended to deprive the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under paragraph 2 of Part A of the Schedule, the provisions of this section shall have effect as if for the words 'which may extend to seven years', 'the words' which may extend to ten years had been substituted. Chapter III ATTACHMENT, ADJUDICATION AND CONFISCATION 5. Attachment of property involved in money-laundering .-(1) Where the director, or any other officer not below the rank of Deputy director authorised by him for the purposes of this section, has reason to believe (the reason for such belief to be recorded in writing), on the basis of material in his possession, that- ( a )any person is in possession of any proceeds of crime ; ( b )such person has been charged of having committed a scheduled offence ; ( c )such proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime under this Chapter, he may, by order in writing, provisionally attach such property for a period not exceeding (one hundred and fifty days) from the date of the order, in the manner provided in the Second Schedule to the Income-tax Act, 1961 (43 of 1961), and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such attachment before the adjudicating authority. 8. Adjudication .‑ (1) On receipt of a complaint under sub-section (5) of section 5, or applications made under sub-section (4) of section 17 or under sub-section (10) of section 18, if the adjudicating authority has reason to believe that any person has committed an offence under section 3 or is in possession of proceeds of crime, it may serve a notice of not less than thirty days on such person calling upon him to indicate the sources of his income, earning or assets, out of which or by means of which he has acquired the property attached under sub-section (1) of section 5, or, seized under section 17 or section 18, the evidence on which he relies and other relevant information and particulars, and to show cause why all or any of such properties should not be declared to be the properties involved in money-laundering and confiscated by the Central Government : Provided that where a notice under this sub-section specifies any property as being held by a person on behalf of any other person, a copy of such notice shall also be served upon such other person : Provided further that where such property is held joint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of any property of a person, all the rights and title in such property shall vest absolutely in the Central Government free from all encumbrances : Provided that where the adjudicating authority, after giving an opportunity of being heard to any other person interested in the property attached under this Chapter, or seized under Chapter V, is of the opinion that any encumbrance on the property or leasehold interest has been created with a view to defeat the provisions of this Chapter, it may, by order, declare such encumbrance or leasehold interest to be void and thereupon the aforesaid property shall vest in the Central Government free from such encumbrances or leasehold interest : Provided further that nothing in this section shall operate to discharge any person from any liability in respect of such encumbrances which may be enforced against such person by a suit for damages. Chapter V SUMMONS, SEARCHES AND SEIZURES, ETC. 16. power of survey .‑ (1) Notwithstanding anything contained in any other provisions of this Act, where an authority, on the basis of material in his possession, has reason to believe (the reasons of such belief to be recorded i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... possession, has reason to believe (the reason for such belief to be recorded in writing) that any person- ( i )has committed any act which constitutes money-laundering, or ( ii )is in possession of any proceeds of crime involved in money-laundering, or ( iii )is in possession of any records relating to money-laundering, then, subject to the rules made in this behalf, he may authorise any officer subordinate to him to- ( a )enter and search any building, place, vessel, vehicle or aircraft where he has reason to suspect that such records or proceeds of crime are kept ; ( b )break open the lock of any door, locker, safe, almirah or other receptacle for exercising the powers conferred by clause ( a ) where the keys thereof are not available ; ( c )seize any record or property found as a result of such search ; ( d )place marks of identification on such record or make or cause to be made extracts or copies therefrom ; ( e )make a note or an inventory of such record or property ; ( f )examine on oath any person, who is found to be in possession or control of any record or property, in respect of all matters relevant for the purposes of any investigation under this Act : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or court for taking cognizance of the scheduled offence, as the case may be) (2) The authority, who has been authorised under sub-section (1) shall, immediately after search and seizure, forward a copy of the reasons so recorded along with material in his possession, referred to in that sub-section, to the adjudicating authority in a sealed envelope, in the manner, as may be prescribed and such adjudicating authority shall keep such reasons and material for such period, as may be prescribed. (3) Where an authority is about to search any person, he shall, if such person so requires, take such person within twenty-four hours to the nearest Gazetted officer, superior in rank to him, or a Magistrate : Provided that the period of twenty-four hours shall exclude the time necessary for the journey undertaken to take such person to the nearest Gazetted officer, superior in rank to him, or Magistrate's Court. (4) If the requisition under sub-section (3) is made, the authority shall not detain the person for more than twenty-four hours prior to taking him before the Gazetted officer, superior in rank to him, or the Magistrate referred to in that sub-section : Provided that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roperty was seized unless the adjudicating authority permits retention of such property beyond the said period. (4) The adjudicating authority, before authorising the retention of such property beyond the period specified in sub-section (1), shall satisfy himself that the property is prima facie involved in money-laundering and the property is required for the purposes of adjudication under section 8. (5) After passing the order of confiscation under sub-section (6) of section 8, the adjudicating authority shall direct the release of all properties other than the properties involved in money-laundering to the person from whom such properties were seized. (6) Notwithstanding anything contained in sub-section (5), the Director or any officer authorised by him in this behalf may withhold the release of any property until filing of appeal under section 26 or forty-five days from the date of order under sub-section (5), whichever is earlier, if he is of the opinion that such property is relevant for the proceedings before the Appellate Tribunal. 23. Presumption in interconnected transactions . ‑ Where money-laundering involves two or more interconnected transactions and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceeds of crime, property in the domain, custody or possession of a person who is a bona fide purchaser/transferee of such property without knowledge of or participation in the malfeasance cannot constitute proceeds of crime, elaborates Sri Niranjan Reddy. He further contends that mens rea must be considered an integral component of every shade of conduct criminalised under section 3 of the Act ; otherwise the provision would be unconstitutional. It is also contended by Sri Reddy that the provisions of section 8 are arbitrary and unconstitutional. 14. We are not inclined to identify or exhaustively enumerate the various factual circumstances and component parts of transactions, to which the provisions of the Act, whether with regard to the offence and its prosecution ; or proceedings of attachment, its confirmation and eventual confiscation might or might not apply. The Act is a recent piece of legislation and the fullness of its personality and nuances of its several provisions will manifest and must be identified in the fullness of time and as occasions arise. Our exercise is adjudicatory and not an academic exercise nor a treatise on the provisions of the Act. We will con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ably restrictive, excessively disproportionate and thus invalid ? and (F)Whether shifting/imposition of the burden of proof, by section 24 is arbitrary and invalid; is applicable only to the trial of an offence under section 3 ; not to proceedings for attachment and confiscation of property under Chapter III ; and in any case not in respect of a person not accused of having committed the offence under section 3 ? Issue A The core contention on behalf of the petitioners is that property in ownership, control or possession of a person not charged of having committed a scheduled offence would not constitute proceeds of crime, liable to attachment and confiscation proceedings, under Chapter III of the Act. 16. Learned counsel for the petitioners adverted to the United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, (to which India is a party and a signatory). Article 3 in Part XVII of this Convention sets out provisions pertaining to offences and sanctions. Certain provisions, of clauses ( b ) and ( c ) of sub-section (1), and sub-sections (2) and (3) of article 3 are adverted to in this behalf. The provisions adverted to by the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst transnational organised crime. The purport of the Convention is to promote co-operation to prevent and combat transnational organised crime more effectively. The Convention is aimed to integrate international co-operation, inter alia , for seizure and confiscation of proceeds of crime derived from predicate offences covered by the Convention or property the value of which corresponds to that of such proceeds ; and property, equipment or other instrumentalities used in or destined for use in offences covered by the Convention. The scope of application of this Convention is to prevent, investigate and prosecute specified offences and other serious crime, where the offence is transnational in nature and involves an organised criminal group. Suffice it to notice for the purposes of this lis that while detailing measures to be adopted by State Parties for seizure and confiscation of proceeds of crime, it is indicated that the State may consider the possibility of requiring that an offender demonstrate the lawful origin of the alleged proceeds of crime or other property liable to confiscation, to the extent the requirement is consistent with the principle of their domestic law a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wer to legislate in India is derived from the grant of legislative power qua the provisions of the Constitution and the limits upon the legislative powers enumerated in the provisions of the Constitution including the authorised and enumerated fields of legislation in Lists 1, 2 and 3 of the Seventh Schedule of the Constitution. Learned counsel for the petitioners are not heard to contend that the provisions of the Act are ultra vires international treaties, conventions ; the FATF Standards, etc. The contours of the powers of Parliament to make any law for the whole or any part of the territory of India for implementation of any treaty, agreement, convention or any decision made at any international conference, association or body is well established to justify the customary parade of familiar scholarship and a catena of precedent - see Maganbhai Ishwar Bhai Patel v. Union of India [1970] 3 SCC 400 ; S. Jagannath v. Union of India [1997] 2 SCC 87 ; Nilabati Behera v. State of Orissa [1993] 2 SCC 746 and Apparel Export Promotion Council v. A.K. Chopra [1999] 1 SCC 759. We therefore proceed to interpret the provisions of the Act within the frame work of its provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r dealt with etc. Per contra , Sri Rajeev Awasthi for the respondents contends that the Bombay decision correctly interprets the text and purposes of the provisions of the Act including section 5 thereof. In any event Sri Rajeev contends, a review of the vitality of the Bombay decision in the context of the provisions of section 5(1)( a ) to ( c ) is not called for in view of the legislative dynamics. The contention in this behalf is that the second proviso to section 5(1) of the Act ( vide the Second Amendment Act, 2009) removes any ambiguity in the trajectory of the provisions of section 5(1) and that the second proviso [fortified by a non obstante provision qua clause ( b ) of section 5(1)] clearly expresses the legislative intent beyond a scintilla of doubt. 22. While it may perhaps be contended that the provisions of section 5(1) (prior to the second proviso) exclude from the domain of the Act, attachment and confiscation of property in the possession of a person not charged of having committed a scheduled offence, this contention in our considered view is wholly misconceived after enactment of the second proviso. The second proviso enjoins that any property of any p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gal activity of the company, of which illegality he was clearly not aware, be liable to attachment and confiscation, query the petitioners. In response, Sri Rajeev Awasthi for the respondent has stated that as a policy enforcement officials are not proceeding against properties, under the Act, unless satisfied that the property is proceeds of crime ; is in possession of a person who is either accused/charged of a scheduled offence or has knowledge of the property being the proceeds of crime. 25. In our considered view the petitioners' contention proceeds on a misconception of the relevant provisions of the Act. Against transactions constituting money-laundering, the provisions of the Act contemplate two sets of proceedings; ( a ) prosecution for the offence of money-laundering defined in section 3 with the punishment provided in section 4; and ( b ) attachment, adjudication and confiscation in the sequential steps and subject to the conditions and procedures enumerated in Chapter III of the Act section 2( p ) defines the expression "money-laundering" as ascribed in section 3. Section 3 defines the offence of money-laundering in an expansive locus as comprehending direct or indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chment and eventual confiscation of property in possession of a person not accused of having committed an offence under section 3 as well, do not violate the provisions of the Constitution including articles 14, 21 and 300A and are operative proprio vigore . 29. While the offence of money-laundering comprises various degrees of association and activity with knowledge and information connected with the proceeds of crime and projection of the same as untainted property; for the purposes of attachment and confiscation (imposition of civil and economic and not penal sanctions) neither mens rea nor knowledge that a property has a lineage of criminality is either constitutionally necessary or statutorily enjoined. Proceeds of crime [as defined in section 2( u )] is property derived or obtained directly or indirectly as a result of criminal activity relating to a scheduled offence or the value of any such property. "Property" is defined in section 2( v ) to include property of every description corporeal, incorporeal, movable, immovable, tangible, and intangible and includes deeds and instruments evidencing title to or interest in such property or assets wherever located. 30. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttached ( prima facie the proceeds of crime) out of his lawful earnings or assets, that he has the means to do so, and that his acquisition is therefore legitimate, bona fide and at fair market value of such property ; and that the value paid for acquisition of the property and not the property in his possession that constitutes proceeds of crime, if at all. On such showing, to the satisfaction of the adjudicating authority, it would perhaps be not the property in possession of a person but the fair value for which he has acquired the property and paid to the transferor that constitutes proceeds of crime and the authorities may have to proceed against the property or value in the hands of the transferor. 33. In the illustration proffered on behalf of the petitioners ; since the dividend, the higher dividend or the value of the shares sold would be relatable to illegal conduct of a company or its officers (if such illegality is a scheduled offence and the company or a person in management or control of the company is accused of an offence under section 3) and would be proceeds of crime, so much of the quantum of the dividend received or the value of a share sold as constitute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olved in money-laundering (section 23). 37. It further requires to be noticed that not only from the second proviso to section 9 of the Act but on general principles of law as well, a person deprived of the property in his ownership, control or possession on account of confiscation proceedings under the Act, has a right of action against the transferor of such property to recover the value of the property. 38. In the context of the fact that money-laundering is perceived as a serious threat to financial systems of countries across the globe and to their integrity and sovereignty as well ; in view of the fact that targeting the proceeds of crime and providing for attachment and confiscation of the proceeds of crime is conceived to be the appropriate legislative strategy ; and given the several safeguards procedural and substantive alluded to hereinbefore, we are not persuaded to the view that attachment and confiscation of property constituting proceeds of crime in the possession of a person not accused/charged of an offence under section 3 constitutes an arbitrary or unconstitutional legislative prescription. 39. The contention that the definition of "proceeds of crime" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of section 3( c ). In this view of the matter, there is no basis for the apprehension that the independently acquired properties of such relatives and associates will also be forfeited even if they are in no way connected with the convict/detenu. So far as the holders (not being relatives and associates) mentioned in section 2(2)( e ) are concerned, they are dealt with on a separate footing. If such person proves that he is a transferee in good faith for consideration, his property - even though purchased from a convict/detenu - is not liable to be forfeited. It is equally necessary to reiterate that the burden of establishing that the properties mentioned in the show-cause notice issued under section 6, and which are held on that date by a relative or an associate of the convict/detenu, are not the illegally acquired properties of the convict/detenu, lies upon such relative/associate. He must establish that the said property has not been acquired with the monies or assets provided by the detenu/convict or that they in fact did not or do not belong to such detenu/convict (p. 844)." 41. The Supreme Court concluded. "The application of the SAFEMA to the relatives and associ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovable or immovable properties not only in his own name but also in the names of his near relatives (p. 2431)". 44. In Smt. Heena Kausar's case ( supra ), interpreting similar provisions in Chapter VA of the NDPS Act, 1985, the Apex Court pointed out that the property sought to be forfeited must be one which has a direct nexus with the income, etc., derived by way of contravention of any of the provisions of the Act or any property acquired therefrom. The court explained that the meaning of "identification of such property" (a phrase employed in section 68E of Chapter VA), is that the property was derived from or used in the illicit traffic. 45. The SAFEMA ; The NDPS Act, 1985 ; The Prevention of Illicit Traffic in Narcotic Drugs and Psychotropic Substances Act, 1988 ; and the Benami Transactions (Prohibition) Act, 1988 are illustrations of statutes that incorporate provisions for forfeiture, confiscation or acquisition without compensation, of property derived, acquired, possessed or dealt within contravention of specified legislative prescriptions. The Act is a later statute to the aforementioned Acts and specifically targets the perceived evil of money-laundering. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is filed under sub-section (10) of section 18 to the adjudicating authority, requesting for retention of such property. The common objective of sections 5, 8, 17 and 18 is provisional attachment, confirmation of attachment and confiscation of property constituting proceeds of crime. While there was perhaps an ambiguity on the issue whether the process of provisional attachment under section 5 and confirmation of such provisional attachment under section 8(3) could lie against property in the possession of a person other than one accused/charged of having committed an offence under section 3 [this ambiguity has since been resolved by the provisions of the Second Amendment Act incorporating appropriate amendments by way of the second proviso to section 5(1) and addition of the clause "or is in possession of proceeds of crime" in section 8(1)], there was no ambiguity that the process of adjudication under section 8 is available against all proceeds of crime whether in possession of a person accused/charged of an offence under section 3 or otherwise, in view of the adjudication process applying to property seized under sections 17 and 18 of the Act. Neither the provisions of section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y be contended that conviction for the offence of money-laundering cannot be recorded if the said offence is committed prior to the enforcement of section 3 of the Act, such a contention cannot be advanced to target proceedings for attachment and confiscation, as these fall outside the pale of the prohibitions of the Constitution, in particular article 20(1). 51. To support the empirical contention that attachment and confiscation of property is a process that is grave in itself ; has serious economic consequences for the person in the ownership, control or possession of such property and must be given the same exalted status as deprivation of personal liberty, for the purposes of applying the constitutional prohibition of ex post facto laws, Sri Choudary and Niranjan Reddy rely on the observations in the majority opinions of the Constitution Bench in Khemka Co. (Agencies) (P.) Ltd. v. State of Maharashtra [1975] 35 STC 571 ; [1975] 2 SCC 22. The leading opinion of the majority was delivered by Ray C. J. (for himself and Khanna, J.) ; Beg J. concurred, while Mathew and Chandrachud, J. (per Mathew, J.) recorded a dissenting opinion. The question involved was whether the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal prohibition of ex post facto laws enjoined by article 20(2) of the Constitution. The Khemka majority opinion, in our carefully considered view, only means that no regulation of conduct ; imposition of person's civil, economic rights or of personal liberty or regulation of freedoms, natural or guaranteed by constitutionally entrenched rights, may be brought about by overtly vague and unspecific legislative prescriptions ; and nothing more. 53. In Attorney-General for India's case ( supra ), the validity of the SAFEMA was challenged and upheld by the Constitution Bench section 3( c ) of the legislation defined "illegally acquired property" as any property acquired whether before or after the commencement of the SAFEMA, wholly or partly out of or by means of any income, earnings or assets derived or obtained from or attributable to any activity prohibited by or under any law which Parliament has the power to make. The challenge to the definition of illegally acquired wealth on grounds of over breadth and as an excessive and disproportionate legislative response to the perceived evil, was repelled. Jeevan Reddy J. put it pithily when he observed : Bitter medicine is not ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nduct that is lawful from that which is not so - enabling individuals to have adequate notice of their legal obligations so that they can govern their behaviour accordingly. Under this value where individuals are left uncertain by the wording of an imprecise statute, the law becomes an arbitrary and a standard less trap for the unwary ; ( b ) the doctrine curbs arbitrary and discriminatory enforcement of criminal statutes. The standard assumes that penal laws must be understood by those persons who are required to obey them and those persons who are charged with the duty of enforcing them. Therefore, statutes that do not carefully outline detailed procedures by which enforcement officials may perform an investigation, conduct a search or make an arrest, confer a wide discretion upon each officer to act as he sees fit. Precisely worded statutes confine the officers' activities to the letter of the law ; ( c ) the doctrine discourages judges from attempting to apply sloppily worded laws. In cases of vague provisions, the courts may attempt to narrowly construe a vague statute so that it applies only to a finite set of circumstances. By a reading of specific enactment requirements int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act to avoid constitutional doubts, we must also avoid a construction that would seriously impair the effectiveness of the Act in coping with the problem it was designed to alleviate. 60. In Papachristou's case ( supra ), a Jacksonville (Florida) vagrancy Ordinance was struck down as void for vagueness on the ground that it fails to give a person of ordinary intelligence fair notice that his contemplated conduct is forbidden by the statute and because it encourages arbitrary and erratic arrests and convictions. The court held that the Ordinance cannot be squared with U. S. Constitutional standards. 61. In Grayneds case ( supra ) the appellant was tried and convicted of violating two Rockford ordinances referred to as "Antipicketing" and "Antinoise" ordinances. He was fined. He challenged the constitutionality of the two ordinances unsuccessfully before the Supreme Court of Illinois and carried the appeal to the U.S. Supreme Court in Certiorari. The Supreme Court in an opinion by Justice Marshall invalidated the Antipicketing Ordinance and upheld the Antinoise Ordinance. The Antipicketing Ordinance was held to violate the equal protection clause of the 14th amendmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... need for flexibility and the interpretative role of the courts; ( b ) the impossibility of achieving absolute certainty, a standard of intelligibility being more appropriate, and ( c ) the possibility that many varying judicial interpretations of a given disposition may exist and perhaps coexist. The doctrine of vagueness can be summed up in one proposition ; a law will be found unconstitutionally vague if it so lacks in precision as not to give sufficient guidance for legal debate - that is, for reaching a conclusion as to its meaning by reasoned analysis applying legal criteria. The term 'legal debate' is not used to express a new standard or one departing from that previously outlined by this court. It is rather intended to reflect and encompass the same standard and criteria of fair notice and limitation of enforcement discretion viewed in the fuller context of an analysis of the quality and limits of human knowledge and understanding in the operation of the law. The criterion of absence of legal debate relates well to the rule of law principles that form the backbone of our policy. Legal provisions by stating certain propositions outline permissible and impermissible areas, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in criminal law and must now be regarded as a pervading theme of our Constitution. The court held : "Neither the criminal law nor the Constitution requires the application of impossible standards and therefore, what is expected is that the language of the law must contain an adequate warning of the conduct which may fall within the proscribed area, when measured by common understanding (p. 318)". 65. Bhagwati, J. pointed out in Narain Das Indurkhya v. State of M.P. [1974] 4 SCC 788 (page 813) : "Where the power conferred by a statute on any authority of the State is vagrant and unconfined and no standards or principles are laid down by the statute to guide and control the exercise of such power, the statute would be violative of the equality clause, because it would permit arbitrary and capricious exercise of power, which is an anti-thesis of equality before the law." (p. 813) 66. The plea for invalidation of the provisions of the Act on the ground of vagueness is in our considered view misconceived. The vagueness doctrine prohibits only laws that fail either to give proper notice to regulate parties or to meaningfully limit the discretion of their enforcers. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laint under section 5(5) (after an order of provisional attachment) or applications under section 17(4) or 18(10) (pursuant to a search and seizure operation), where the adjudicating authority has reason to believe that any person has committed an offence under section 3 or is in possession of proceeds of crime, he may initiate the process delineated in section 8. 70. While section 5 does not enjoin a notice or opportunity to any person in possession of proceeds of crime, whether charged of having committed a scheduled offence or otherwise, section 8(1) mandates service of a notice (for the stipulated period) requiring the noticee to indicate the sources of his income, earning or assets, out of which or by means of which, he has acquired the property attached under section 5(1) or seized under section 17 or 18; the evidence on which such person relies and other relevant information and particulars. The noticee must show cause why all or any of the properties provisionally attached or seized as the case may be, be not declared to be properties involved in money-laundering and confiscated by the Central Government. 71. We consider sections 5, 8(1), (2) and (3), 17 and 18 to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (4) of section 17 and clause (10) of section 18 enjoin that the authority seizing any record or property under the substantive provisions, shall within thirty (30) days from such seizure, file an application before the adjudicating authority requesting for retention of such record or property. 74. Section 20 enjoins that where a property has been seized under section 17 or 18 and the authorised officer, on the basis of material in his possession, has a reason to believe (the reason to be recorded in writing) that such property is required to be retained for the purposes of adjudication under section 8, such property may be retained for a period not exceeding three months, from the end of the month in which the property was seized. This provision also enjoins that the authorised officer, after passing an order for retention of the property for the purposes of adjudication under section 8, shall forward a copy of the order along with the material in his possession to the adjudicating authority whereupon the adjudicating authority is required to keep such order and material for the prescribed period; further on expiry of the period specified in sub-section (1), the property shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tunity provides an avenue to discharge the burden. 77. Sub-section (2) of section 8 obligates the adjudicating authority to consider the reply if any submitted by a noticee; hear the aggrieved person (as well as the director or any other officer authorised by him in this behalf); take into account all relevant materials available on record before him ; and to record a finding by passing an order whether all or any of the properties referred to in the notice issued [under section 8(1)], are involved in money-laundering. The proviso to section 8(2) enables a person who claims the property but is not issued or served a notice under section 8(1) to avail the opportunity of being heard to establish that the property claimed by him is not involved in money-laundering. 78. Only on a finding recorded under section 8(2) that a property referred to in a notice [issued under section 8(1)] is involved in money-laundering, is the adjudicating authority authorised to pass an order (in writing) confirming attachment of the property or retention of the property or record seized section 8(3) stipulates, vide clauses ( a ) and ( b ) that where the adjudicating authority passes an order co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority, anterior to the stage of confiscation are thus in the scheme of the Act prima facie and tentative assumptions or reasons to believe, since determination of the guilt of the person accused, of the offence of money-laundering is within the exclusive domain of the Special Court constituted for trial of the offence and outside the domain of the adjudicating authority under section 8. 83. Challenge : Incoherence as to the onus and standards of proof 84. The processes under Chapter III of the Act (provisional attachment, confirmation ; seizure under Chapter V and confiscation of property attached/seized under section 8) as noticed supra are available against proceeds of crime involved in money-laundering, whether in the ownership, control or possession of a person accused of an offence under section 3 or of a person not so accused. 85. The burden of proving, that proceeds of crime are untainted property inheres on a person accused of having committed an offence under section 3 qua section 24. The first proviso to section 5 mandates that no order of provisional attachment shall be made unless a final report under section 173 of the Code of Criminal Procedur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such interconnected transactions is/are proved to be involved in money-laundering, section 23 enjoins a presumption that the other transactions form part of such interconnected transactions (involved in money-laundering), unless proved (to rebut the enjoined presumption) otherwise (by the person in ownership, control or possession of property involved in the remaining transactions), for the purposes of adjudication and confiscation under section 8. 87. At the stage of confirmation of an order of provisional attachment under section 8, even where the provisional attachment and confirmation pertain to property in the ownership, control or possession of a person not accused of an offence under section 3, there must be an anterior forwarding of a final report under section 173 of the Criminal Procedure Code or a complaint made by an authorised person, in relation to a scheduled offence. It is only thus that a prima facie satisfaction (reason to believe), could be recorded by an adjudicating authority that a person has committed an offence under section 3 or in possession of proceeds of crime, since proceeds of crime is referable to property derived or obtained as a result of cri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es to the foreground and becomes the deciding factor. In Yellappa Ramappa Naik v. Tippanna , AIR 1929 PC 8 ; (56 IA 13) ; (53 Bom. 213), Lord Shaw said : 'In any case onus probandi applies to a situation in which the mind of the judge determining the suit is left in doubt as to the point on which side the balance should fall in forming a conclusion. It does happen that as a case proceeds the onus may shift from time to time . . .' What is called the burden of proof on the pleadings should not be confused with the burden of adducing evidence which is described as 'shifting'. The burden of proof on the pleadings never shifts, it always remains constant ( see Pickup v. Thames and Mersey Marine Insurance Co. [1878] 3 QBD 594 ; (47 LJQB 749). These two aspects of the burden of proof are embodied in sections 101 and 102 respectively of the Indian Evidence Act, 1872. Section 101 states : 'Whoever desires any court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts must prove that those facts exist. When a person is bound to prove the existence of any fact, it is said that the burden of proof lies on that person.' Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eir Lordships may here observe that in shifting the burden from one side to the other by adducing evidence, parties may rely on presumptions in law, which are really inferences of fact, in place of actual facts." 90. In A. Raghavamma v. A. Chenchamma , AIR 1964 SC 136, Subba Rao, J. (as his Lordship then was) again explained the distinction between burden of proof and onus : ". . . There is an essential distinction between burden of proof and onus of proof : burden of proof lies upon the person who has to prove a fact and it never shifts, but the onus of proof shifts. The burden of proof in the present case, undoubtedly lies upon the plaintiff to establish the factum of adoption and that of partition. The said circumstances do not alter the incidence of the burden of proof. Such considerations, having regard to the circumstances of a particular case, may shift the onus of proof. Such a shifting of onus is a continuous process in the evaluation of evidence. (p. 148)" 91. Subba Rao, J. in Kundan Lal Ralla Ram v. Custodian, Evacuee Property , AIR 1961 SC 1316 explained the contours of "burden of proof" in the context of section 118 of the Negotiable Instruments Act, 18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the plaintiff, and so on. The defendant may also rely upon circumstantial evidence and, if the circumstances so relied upon are compelling, the burden may likewise shift again to the plaintiff. He may also rely upon presumptions of fact, for instance those mentioned in section 114 and other sections of the Evidence Act. Under section 114 of the Evidence Act, 'The court may presume the existence of any fact which it thinks likely to have happened, regard being had to the common course of natural events, human conduct and public and private business, in their relation to the facts of the particular case'. Illustration ( g ) to that section shows that the court may presume that evidence which could be and is not produced would, if produced, be unfavourable to the person who withholds it. A plaintiff, who says that he had sold certain goods to the defendant and that a promissory note was executed as consideration for the goods and that he is in possession of the relevant account books to show that he was in possession of the goods sold and that the sale was effected for a particular consideration, should produce the said account books, for he is in possession of the same and the def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to such activity or its income or of the assets acquired therefrom. If such a person indulges in other illegal activity, the position would be no different. The violation of foreign exchange laws and laws relating to export and import necessarily involves violation of tax laws. Indeed, it is a well-known fact that over the last few decades, smuggling, foreign exchange violations, tax evasion, drugs and crime have all got mixed-up. Evasion of taxes is integral to such activity. It would be difficult for any authority to say, in the absence of any accounts or other relevant material, among the properties acquired by a smuggler, which of them or which portions of them are attributable to smuggling and foreign exchange violations and which properties or which portions thereof are attributable to violation of other laws (which Parliament has the power to make). It is probably for this reason that the burden of proving that the properties specified in the show-cause notice are not illegally acquired properties is placed upon the person concerned. May be this is a case where a dangerous disease required a radical treatment. Bitter medicine is not bad medicine. In law it is not possible t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther that if the value of the property representing the bribe depreciated the fiduciary had to pay to the injured person the difference between that value and the initial amount of the bribe, and if the property increased in value the fiduciary was not entitled to retain the excess since equity would not allow him to make any profit from his breach of duty. Accordingly, it is held that to the extent that they represented bribes received by the first respondent, the New Zealand properties were held in trust for the Crown, and the Crown had an equitable interest therein. The learned Law Lord observed further that if the theory of constructive trust is not applied and properties interdicted when available, the properties 'can be sold and the proceeds whisked away to some Shangri La which hides bribes and other corrupt moneys in numbered bank accounts' - to which we are tempted to add : one can under - stand the immorality of the bankers who maintained numbered accounts but it is difficult to understand the amorality of the Governments and their laws which sanction such practices - in effect encouraging them. The ratio of this decision applies equally where a person acquires properti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nfiscation and the offence of money-laundering, does not commend acceptance by this court. 96. Where the acquisition of property that is alleged to constitute proceeds of crime involved in money-laundering, is by a person not accused of a scheduled offence and such person in the ownership, control or possession of such property is able to establish, to the satisfaction of the adjudicating authority that he has acquired the property bona fide without information or knowledge as to the antecedent criminality or for fair market value [ vide definition of value in section 2( zb )], he may successfully campaign for extrication of the property from attachment or confiscation proceedings under Chapter III of the Act. There are clearly discernable and statutorily explicated criteria for identification of the nexus between property ; the commission of scheduled offence and money-laundering operations. The challenge as to ambiguity in identifying criteria or incoherence in ascertaining nexus, is thus without substance. Challenge to the exclusion of mens rea 97. The contention is that provisional attachment, its confirmation and confiscation ; of property in the ownership, cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bona fides in the acquisition of the property) ; and if satisfied as to the bona fide acquisition of the property, relieve such property from provisional attachment by declining to pass an order of confirmation of the provisional attachment ; either in respect of the whole or such part of the property provisionally attached in respect whereof bona fide acquisition by a person is established, at the stage of the section 8(2) process. A further opportunity of establishing bona fide acquisition of property or that the property in question is not proceeds of crime involved in money-laundering is available and mandated, prior to the adjudicating authority passing an order of confiscation, under section 8(6). 100. Proceedings for attachment and confiscation of proceeds of crime are a process distinct and dissimilar to the process for prosecution of the offence of money-laundering. Deprivation of property involved in money-laundering is the sanction in the first process while deprivation of personal liberty is the sanction enjoined in conviction for the offence. Mens rea is not a jurisprudentially non-derogable adjunct for visitation of civil consequences and therefore the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f crime involved in money-laundering, is a satisfaction that may legitimately be arrived at unilaterally and without a participatory process involving hearing or consideration of material that may be produced by, the person in the ownership, control or possession of the property, to disprove the assumption as to involvement of the property in money-laundering. The process of provisional attachment is also in the nature of an emergency prophylactic. An order of provisional attachment is passed where the authorised authority has reason to believe that if the property is not attached immediately, any proceedings under the Act may be frustrated. Having regard to the exigency of the public interest involved in attaching a property believed to be proceeds of crime involved in money-laundering, to prevent frustration of other proceedings under the Act, the maximal due process of hearing an affected party before passing an order of provisional attachment is consciously excluded under the presents of section 5. It is for this reason that while passing an order of provisional attachment as a prophylactic measure to preserve the property, possession is not disturbed. This appears to be a fine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act must therefore fail. Issues C D are answered as above. Issue E 105. The challenge to section 23 is projected on the ground that the presumption enjoined by this provision in respect of interconnected transactions is unduly restrictive of the right to property ; is a disproportionate burden, not commensurate with legitimate Governmental interests in targeting proceeds of crime involved in money-laundering, for eventual confiscation. 106. Money-laundering, it is pleaded in the counter affidavit by the enforcement directorate, while apparently comprising one or more apparently clear and simple financial transactions or dealings with property, in reality involve a complex web of transactions that are processed through three stages - the placement, layering and integration stage. When laundering operations are pursued across State boundaries, flows of funds would involve several routes. Since the object of the Act is to seize or attach proceeds of crime involved in money-laundering for eventual confiscation to the State, the enforcement strategy must be commensurate with, correspond to and complement the degree of camouflage, deceit, layering and integration normal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance Co. Ltd. v. Fraser Ross [1960] 30 Comp. Cas. (I) 13 ; AIR 1960 SC 971 and Feroze N. Dotivala v. P.M. Wadhwani [2003] 1 SCC 433. 109. Conduct of directly or indirectly attempting to indulge, knowingly assist or being a party to or actual involvement in any process or activity connected with proceeds of crime and projecting such proceeds of crime as untainted property, constitutes money-laundering. The expression "proceeds of crime" means 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 [section 2( u )]. Thus, a property acquires a taint on account of being a derivative of criminal activity relating to a scheduled offence and includes the value of such property. Since placement, layering and integration are among the essential features of money-laundering, the proceeds of crime may not necessarily continue in the hands of the original malfeasant(s). 110. Where proceeds of crime are layered through plural transactions, the intent to camouflage the source of the property as a derivative of criminality renders it difficult to identify the succeeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could as well be final, if it remains undisturbed later. Presumption in the law of evidence is a rule indicating the stage of shifting the burden of proof. From a certain fact or facts the court can draw an inference and that would remain until such inference is either disproved or dispelled. 115. Having regard to the fact that money-laundering is indulgence, informed assistance or being a party to or actual involvement in any process or activity connected with proceeds of crime and projecting it as untainted property, inherently assuming a degree of deceit and camouflage in the process of layering the proceeds of crime through a series of transactions, in the considered legislative wisdom a presumption in interconnected transactions is enjoined by section 23 of the Act, contingent upon one or more of interconnected transactions having to be proved to be involved in money-laundering. The legislatively enjoined presumption shifts the burden of proof to the person in the ownership, control or possession of a property comprising the interconnected transactions to rebut the statutory presumption that this property is not involved in money-laundering. 116. Section 23 enacts a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. We have noticed while on the analysis of issues C to E that the provisions of sections 3, 5, 8, 17, 18, 20, 21 and 23 ; the definitions of "money-laundering" [section 2( p )] ; "proceeds of crime" [section 2( u )] ; "property" [section 2( v )] and "value" [section 2 ( zb )] are inter-twined, delineate the provisions of each other and in tandem operate to effectuate one of the two substantial purposes of the Act viz., attachment for the purposes of eventual confiscation, of proceeds of crime involved in money-laundering, whether in the ownership, control or possession of a person accused of the offence under section 3 or not. The offence of money-laundering as defined in section 3 comprises direct or indirect attempt to indulge, knowingly assist, and knowingly be a party to or actual involvement in any process or activity connected with the proceeds of crime and projecting it as untainted property. Proceeds of crime is "any property" derived or obtained directly or indirectly by any person as a result of a criminal activity relating to a scheduled offence or the value of any such property [section 2( u )]. Qua the provisions in Chapter III of the Act, the process of provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onfine the inherence of the expressed burden to an accused. Where the property is in the ownership, control or possession of a person not accused of having committed an offence under section 3 and where such property/proceeds of crime is part of interconnected transactions involved in money-laundering, then and in such an event the presumption enjoined in section 23 comes into operation and not the inherence of burden of proof under section 24. This is in our considered view the true and fair construction of the provisions of section 24. 123. Clearly, therefore a person other than one accused of having committed the offence under section 3 is not imposed the burden of proof enjoined by section 24. On a person accused of an offence under section 3 however, the burden applies, also for attachment and confiscation proceedings. Issue F is answered accordingly. 124. Before summing up our conclusions in this judgment, we advert to an overarching contention on behalf of the petitioners, with regard to the parameters of judicial review of legislation. Several decisions were cited to contend that this court has the power, authority, jurisdiction and a concomitant obligation to d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es have been due to experimentation . . . There must be power in the States and the Nation to remould, through experimentation, our economic practices and institutions to meet changing social and economic needs . . . To stay experimentation in things social and economic is a grave responsibility. Denial of the right to experiment may be fraught with serious consequences to the Nation. It is one of the happy incidents of the federal system that a single courageous State may, if its citizens choose, serve as a laboratory ; and try novel social and economic experiments without risk to the rest of the country. This court has the power to prevent an experiment. We may strike down the statute which embodies it on the ground that, in our opinion, the measure is arbitrary, capricious or unreasonable. We have power to do this, because the due process clause has been held by the court applicable to matters of substantive law as well as to matters of procedure. But in the exercise of this high power, we must be ever on our guard, lest we erect our prejudices into legal principles. If we would guide by the light of reason, we must let our minds be bold." 126. The above dissenting opinion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) On Issue E : that the presumption enjoined in cases of interconnected transactions enjoined by section 23 is valid ; and ( v ) On Issue F : that the burden of proving that proceeds of crime are untainted property is applicable not only to prosecution and trial of a person charged of committing an offence under section 3 but to proceedings for attachment and confiscation - in Chapter III of the Act as well ; but only to a person accused of having committed an offence under section 3. The burden enjoined by section 24 does not inhere on a person not accused of an offence under section 3. The presumption under section 23 however applies in interconnected transactions, both to a person accused of an offence under section 3 and a person not so accused. 129. We record our appreciation for the methodical, clinical and meticulous assistance provided by Sri Gopal Choudhary, Sri S. Niranjan Reddy and Sri Rajeev Awasthi, learned counsel for the respective parties in this case. 130. On the analyses, conclusions and for the reasons recorded above, we discern no merit in the writ petitions which are accordingly dismissed but in the circumstances without costs. The petitioners ar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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