Summary
The CBI seized Rs 50 lakh in cash allegedly paid by an assessee as a bribe to an Additional Commissioner of Income Tax, and the Enforcement Directorate then prosecuted the assessee for money laundering. The Madras High Court quashed that prosecution. It reasoned that the money was untainted in the bribe-giver's hands and became proceeds of crime only on acceptance. The Supreme Court reversed. Money in a giver's hands is untainted until handed over with the intent to bribe. But that intent necessarily exists before the handover, and only through the giver's active participation does the money become proceeds of crime. A bribe-giver is therefore involved in, or knowingly a party to, an activity connected with proceeds of crime under Section 3 of the PML Act. Corruption offences are scheduled offences. These views were prima facie, with the merits left for trial.
Issues
- Whether a person who allegedly gave a bribe to a public servant can be prosecuted for money laundering under Section 3 of the PML Act, given that the money was untainted while in his hands.
Provisions considered
- Section 3, Prevention of Money Laundering Act, 2002Its wide terms, covering one who knowingly assists, is a party to or is actually involved in any process or activity connected with proceeds of crime including possession or acquisition, cover a bribe-giver acting with the requisite intent. (¶¶ 15, 16)
- Section 2(1)(u) and paragraph 8 of Part A of the Schedule, Prevention of Money Laundering Act, 2002Offences under Sections 7, 12 and 13 of the PC Act are scheduled offences, so property derived from criminal activity relating to them is proceeds of crime. (¶¶ 9, 11, 13)
- Sections 7, 12 and 13(1)(d) read with 13(2), Prevention of Corruption Act, 1988The predicate charges of conspiracy to commit bribery offences against the respondent supplied the scheduled offence. (¶¶ 5, 12)
Held
- Money in a bribe-giver's hands is untainted until handed over with the intent to bribe, but that intent is antecedent to the handover; by handing it over with that intent the giver knowingly becomes party to an activity connected with proceeds of crime, without which the money would not acquire that character. (¶ 16)
- The complaint prima facie showed the respondent's involvement in an activity connected with proceeds of crime, so the High Court's view that he could not be liable under the PML Act was completely incorrect; the observations are prima facie and the merits are left to the appropriate stage. (¶¶ 17, 18, 19)
Result
Appeal allowed; the Madras High Court's judgment quashing the PML Act proceedings against the respondent set aside, and the respondent to continue to be proceeded against in ECIR No. 13 of 2016 in accordance with law.