PAVANA DIBBUR vs. THE DIRECTORATE OF ENFORCEMENT

2023 INSC 1029 Reportable IN THE SUPREME COURT OF INDIA CRIMINAL APPELLATE JURISDICTION  CRIMINAL APPEAL NO.2779 OF 2023 Pavana Dibbur            … Appellant versus The Directorate of Enforcement    … Respondent J U D G M E N T ABHAY S. OKA, J. OVERVIEW 1. The   respondent–the   Directorate   of   Enforcement   (for short, ‘ED’), filed a complaint under the second proviso to Section   45(1)   of   the   Prevention   of   Money   Laundering   Act, 2002 (for short, ‘the PMLA’) before the Special Court for PMLA Cases   at   Bengaluru.     The   appellant–Pavana   Dibbur   was shown as accused no.6 in the said complaint.  By the order th dated 17  March 2022, the Special Court took cognisance of the said complaint.  The appellant filed a petition before the High Court of Karnataka at Bengaluru under Section 482 of Signature Not Verified the   Code   of   Criminal   Procedure,   1973   (for   short,   ‘Cr.PC’) Digitally signed by Anita Malhotra Date: 2023.11.29 17:22:54 IST Reason: seeking the relief of quashing of the said complaint.  By the Criminal Appeal No.2779 of 2023     Page 1 of 31 th impugned judgment and order dated 27   September 2022, the petition for quashing the complaint has been dismissed. In the year 2011, Alliance Business School (for short, 2. ‘ABS’)   purchased   a   property   bearing   Khata   no.37/22   at Gollahalli Village, Jigani Hobli, Anekal Taluk, Bengaluru for the consideration of Rs.13.05 crores.   The area of the said property   is   approximately   five   acres.     For   the   sake   of convenience, we are describing the said property as ‘the First st Property’.  On 1  July 2013, the appellant purchased the first property   from   ABS   by   a   registered   sale   deed   for   a consideration of Rs.13.5 crores.  The accused no.1–Madhukar Angur,   purchased   a   property   measuring   4   acres   and   0.4 Guntas bearing survey nos.61, 62 and 63 at Karpur Village, Kasaba   Hobli,   Anekal   Taluk,   Bengaluru.     For   the   sake   of convenience, we are describing this property as ‘the Second Property’.  The appellant purchased the second property by a th registered sale deed on 29  June 2019 for a consideration of Rs.2.47 crores from accused no.1–Madhukar Angur. 3. For a period of five years, i.e. from 2010 to 2015, the appellant’s   husband–Dr   Ayyappa   Dore,   was   the   Vice­ Chancellor   of   the   Alliance   University.     The   appellant   also acted as the Vice­Chancellor of the Alliance University for a th brief period.   On 11   November 2017, a First Information Report (FIR) was registered on the complaint of the Registrar of   the   Alliance   University   against   accused   no.1–Madhukar Angur, alleging that he collected a sum of Rs.107 crores from Criminal Appeal No.2779 of 2023     Page 2 of 31 the students by claiming himself as the Chancellor of the Alliance University.  The allegation was that he collected the said   amount   between   January   2017   and   November   2017, which   was   deposited   in   the   account   of   Srivari   Education Services.  Subsequently, crores of rupees were transferred to the account of the accused no.1.  An   Enforcement   Case   Information   Report   (ECIR)   was 4. th registered on 16   October 2020 by the ED against accused nos.1, 2 and 3, namely Madhukar Angur, his wife Priyanka Angur and Mr Ravikumar, Partner, Srivari Education Services and other unknown accused alleging the commission of the offence of money laundering under Section 3 of the PMLA. The ECIR was based on four FIRs, the details of which are as under: 

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th On 27  September 2021, the ED passed an order under 5. Section 5 of the PMLA attaching first and second properties. A complaint was filed before the adjudicating authority on th 13   October 2021, in which the appellant is shown as the fifth defendant. 6. The allegation against the appellant in the complaint filed under the second proviso of Section 45(1) of the PMLA is that she has entered into a conspiracy with accused no.1– Madhukar Angur by getting executed nominal sale deeds in respect of the first and second properties in her name for the benefit of accused no.1.  The allegation of the ED is that the appellant   facilitated   the   accused   no.1   to   use   her   bank accounts to siphon the university funds, thereby, assisting the accused no.1 in the activity connected with the proceeds of   crime.     By   the   impugned   judgment,   the   learned   Single Judge of the High Court dismissed the petition filed by the Criminal Appeal No.2779 of 2023     Page 4 of 31 appellant.  The learned Single Judge relied upon the decision of a Bench of three Hon’ble Judges of this Court in the case of Vijay Madanlal Choudhary & Ors. v. Union of India & 1 Ors. . SUBMISSIONS OF THE APPELLANT 7. Ms   Meenakshi   Arora,   the   learned   senior   counsel appearing for the appellant, firstly submitted that the first and   second   properties   are   not   tainted   properties   and, therefore,   the   same   are   not   covered   by   the   definition   of “proceeds   of   crime”   under   clause   (u)   of   sub­section   (1)   of Section 2 of the PMLA.   The learned senior counsel pointed st out that the first property was acquired on 1   July 2013, much prior to the commission of the first scheduled offence. th The allegation in the FIR dated 11   November 2017 against accused   no.1   is   that   he   collected   a   sum   of   about   Rs.107 crores   from   the   students   between   January   and   November 2017   and   transferred   the   said   amount   to   his   account. Therefore, the appellant's acquisition of the first property can never be linked with the proceeds of the crime regarding the scheduled   offence.     She   submitted   that   regarding   the acquisition of the second property, the appellant had her own resources available to acquire the same.  The learned senior counsel   relied   upon   an   Income   Tax   Return   filed   by   the appellant under the Income Declaration Scheme, 2016, by which   she   declared   a   total   undisclosed   income   of 1 (2022) SCC Online SC 929 Criminal Appeal No.2779 of 2023     Page 5 of 31 Rs.26,42,54,193/­.     The   appellant   paid   Rs.11,89,08,385/­ th towards income tax and penalty on 8  September 2016.  The th return   was   filed   on   12   September   2016.     Therefore,   the appellant had a source of money for acquiring the second property for the consideration of Rs.2.47 crores.   Both the properties acquired by the appellant had no nexus at all with the proceeds of crime of the scheduled offences.  The learned senior   counsel   pointed   out   that   consideration   of   Rs.2.47 crores was agreed upon, as it is mentioned in the sale deed that   it   was   a   distress   sale   made   by   the   accused   no.1– Madhukar Angur. 8. The   second   limb   of   the   submissions   of   the   learned senior   counsel   appearing   for   the   appellant   is   that   as   the appellant   has   not   been   arraigned   as   an   accused   in   the chargesheets   filed   pertaining   to   the   alleged   scheduled offences,   she   cannot   be   roped   in   as   an   accused   for   the offences punishable under Section 3 of the PMLA.  She relied upon what is held in paragraphs 251 to 253 of the decision of 1 this Court in the case of  .   She Vijay Madanlal Choudhary submitted that in the decision, this Court held that if an accused   in   the   scheduled/predicate   offence   is acquitted/discharged, he cannot be prosecuted for the offence punishable   under   the   PMLA.     She   submitted   that   the appellant's case stands on a better footing as she was not even   shown   as   an   accused   in   any   scheduled/predicate offences.  She would, therefore, submit that the cognizance of Criminal Appeal No.2779 of 2023     Page 6 of 31 the crime under the PMLA could not have been taken against the appellant. The   third   submission   of   the   learned   senior   counsel 9. appearing   for   the   appellant   is   that   out   of   the   four scheduled/predicate offences, chargesheets have been filed in the case of three offences, and in these chargesheets, only one offence   covered   by   the   Schedule   to   the   PMLA   has   been mentioned, which is Section 120­B of IPC.  She pointed out that in FIR no.119 of 2016 and FIR no.52 of 2017, Section 420 of IPC was included.  However, in FIR no.119 of 2016, the closure report was filed, and in FIR no.52 of 2017, while filing the   chargesheet,   Section   420   of   IPC   was   excluded.     She contended that Section 120­B of IPC alone, in the absence of any other scheduled offence, cannot sustain a charge under the   PMLA.     Unless   there   is   an   allegation   regarding   a conspiracy to commit any scheduled offence, the prosecution under   the  PMLA  cannot   lie.    Relying  upon   the   proviso  to Section 120­A of IPC, the learned senior counsel submitted that   an   illegal   act   or   a   legal   act   by   illegal   means,   in furtherance of an agreement, committed by any person is a sine qua non   for attracting the offence of conspiracy under Section 120­B of IPC.  If Section 120­B of IPC can be treated as   a   standalone   offence   to   attract   prosecution   under   the PMLA, by that logic, a complaint under the PMLA can be filed where the allegation is of criminal conspiracy to commit an offence   which   is   not   a   scheduled   offence.     Therefore,   she Criminal Appeal No.2779 of 2023     Page 7 of 31 submits that the complaint against the appellant deserves to be quashed. SUBMISSIONS OF THE RESPONDENT 10. Shri S.V. Raju, the learned Additional Solicitor General appearing for the ED, submitted that even assuming that the appellant   had   monetary   capacity   to   acquire   the   second property, one cannot conclude that the funds siphoned by the accused no.1, which constitute proceeds of crime, were not used by the appellant for acquiring the second property.  He submits that this issue can be gone into only at the time of trial.     Regarding   the   second   submission,   the   learned Additional Solicitor General submitted that a person can be held guilty of the commission of a money laundering offence under Section 3 of the PMLA, even if he is not shown as an accused in the predicate offence.   He submitted that it is apparent from the provision of Section 3 of the PMLA that in a given case, a person who is not an accused in the predicate offence   can   commit   the   offence   of   money   laundering. Regarding   the   third   submission,   the   learned   Additional Solicitor   General   submitted   that   wherever   the   legislature intended, it has made a particular offence read with another offence as a scheduled offence.   He invited our attention to Paragraphs 4 and 6 of Part A of the Schedule to the PMLA. Referring to Paragraph 11 of the Schedule to the PMLA, he urged that the first four offences in Paragraph 4 and all the offences   in   Paragraph   6   clearly   show   the   legislature's Criminal Appeal No.2779 of 2023     Page 8 of 31 intention.  He submitted that the schedule must be read as it is, and nothing can be added or subtracted from the Schedule considering the objects of the PMLA.  He submitted that the validity of the Schedule has been upheld in the case of  Vijay 1    He would, therefore, submit that no Madanlal Choudhary . interference is called for with the impugned order. CONSIDERATION OF SUBMISSIONS THE EFFECT OF THE APPELLANT NOT BEING SHOWN AS AN ACCUSED IN PREDICATE OFFENCE Section 3 of the PMLA reads thus: 11. “3.   Offence   of   money­laundering.— 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 including   its   concealment,   possession, acquisition   or   use   and   projecting   or claiming it as untainted property shall be   guilty   of   offence   of   money­ laundering.  Explanation.— For   the   removal   of doubts, it is hereby clarified that,—  (i) a person shall be guilty of offence of money­laundering   if   such   person   is found   to   have   directly   or   indirectly attempted   to   indulge   or   knowingly assisted or knowingly is a party or is actually involved in one or more of the following   processes   or   activities connected   with   proceeds   of   crime, namely:—  Criminal Appeal No.2779 of 2023     Page 9 of 31 (a) concealment; or  (b) possession; or  (c) acquisition; or  (d) use; or  (e) projecting as untainted property; or  (f) claiming as untainted property,  in any manner whatsoever;  (ii)   the   process   or   activity   connected with proceeds of crime is a continuing activity and continues till such time a person is directly or indirectly enjoying the   proceeds   of   crime   by   its concealment   or   possession   or acquisition   or   use   or   projecting   it   as untainted   property   or   claiming   it   as untainted   property   in   any   manner whatsoever. ” On a plain reading of Section 3, unless proceeds of crime exist, there cannot be any money laundering offence.  Clause (u)   of   sub­section   (1)   of   Section   2   of   the   PMLA   defines “proceeds of crime”, which reads thus:  (1) In this Act, unless “2.Definition –   the context otherwise requires,­    .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. . (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   or   where   such   property   is taken or held outside the country, then the   property   equivalent   in   value   held within the country or abroad;  Criminal Appeal No.2779 of 2023     Page 10 of 31 Explanation.— For   the   removal   of doubts,   it   is   hereby   clarified   that "proceeds of crime" include property not only   derived   or   obtained   from   the scheduled offence but also any property which   may   directly   or   indirectly   be derived or obtained as a result of any criminal   activity   relatable   to   the scheduled offence. ” 12. Clause (v) of sub­section (1) of Section 2 of the PMLA defines “property” to mean any property or assets of every description,   whether   corporeal   or   incorporeal,   movable   or immovable, tangible or intangible.  To constitute any property as proceeds of crime, it must be derived or obtained directly or indirectly by any person as a result of criminal activity relating to a scheduled offence.  The explanation clarifies that the proceeds of crime include property, not only derived or obtained from scheduled offence but also any property which may directly or indirectly be derived or obtained as a result of any   criminal   activity   relatable   to   the   scheduled   offence. Clause   (u)   also   clarifies   that   even   the   value   of   any   such property   will   also   be   the   proceeds   of   crime.     Thus,   the existence of “proceeds of crime” is  sine qua non  for the offence under Section 3 of the PMLA.   13. Clause (x) of sub­section (1) of Section 2 of the PMLA defines   “schedule”.     Clause   (y)   thereof   defines   “scheduled offence”, which reads thus: (1) In this Act, unless “2. Definition –  the context otherwise requires,­    Criminal Appeal No.2779 of 2023     Page 11 of 31 .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. . . (y) “scheduled offence” means—  (i) the offences specified under Part A of the Schedule; or (ii) the offences specified under Part B of   the   Schedule   if   the   total   value involved in such offences is one crore rupees or more; or (iii) the offences specified under Part C of the Schedule. ” 14. The condition precedent for the existence of proceeds of crime is the existence of a scheduled offence.  On this aspect, it is necessary to refer to the decision of this Court in the case 1 of   Vijay Madanlal Choudhary .   In paragraph 253 of the said decision, this Court held thus:

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In paragraphs 269 and 270, this Court held thus: “269.  From   the   bare   language   of Section 3 of the 2002 Act, it is amply clear   that   the   offence   of   money­ laundering is an independent offence regarding   the   process   or   activity connected with the proceeds of crime which had been derived or obtained as a result of criminal activity relating to or in relation to a scheduled offence. The process or activity can be in any form   —   be   it   one   of   concealment, possession,   acquisition,   use   of proceeds   of   crime   as   much   as projecting it as untainted property or Criminal Appeal No.2779 of 2023     Page 13 of 31 claiming it to be so. Thus, involvement in any one of such process or activity connected with the proceeds of crime would   constitute   offence   of   money­ laundering. This offence otherwise has nothing to do with the criminal activity relating   to   a   scheduled   offence   — except the proceeds of crime derived or obtained as a result of that crime. 270.  Needless   to   mention   that   such process or activity can be indulged in only   after   the   property   is   derived   or obtained as a result of criminal activity (a scheduled offence). It would be an offence of money­laundering to indulge in or to assist or being party to the process or activity connected with the proceeds of crime; and such process or activity in a given fact situation may be a continuing offence, irrespective of the date   and   time   of   commission   of   the scheduled offence. In other words, the criminal   activity   may   have   been committed before the same had been notified   as   scheduled   offence   for   the purpose   of   the   2002   Act,   but   if   a person has indulged in or continues to indulge directly or indirectly in dealing with   proceeds   of   crime,   derived   or obtained   from   such   criminal   activity even   after   it   has   been   notified   as scheduled offence, may be liable to be prosecuted   for   offence   of   money­ laundering under the 2002 Act — for continuing to possess or conceal the Criminal Appeal No.2779 of 2023     Page 14 of 31 proceeds of crime (fully or in part) or retaining possession thereof or uses it in trenches until fully exhausted. The offence   of   money­laundering   is   not dependent on or linked to the date on which the scheduled offence or if we may say so the predicate offence has been committed. The relevant date is the date on which the person indulges in   the   process   or   activity   connected with   such   proceeds   of   crime.  These ingredients are intrinsic in the original provision (Section 3, as amended until 2013 and were in force till 31.7.2019); and   the   same   has   been   merely explained   and   clarified   by   way   of Explanation vide Finance (No. 2) Act, 2019.   Thus   understood,   inclusion   of Clause (ii) in Explanation inserted in 2019 is of no consequence as it does not   alter   or   enlarge   the   scope   of Section 3 at all. ” (underline supplied) Coming back to Section 3 of the PMLA, on its plain 15. reading, an offence under Section 3 can be committed after a scheduled offence is committed.  For example, let us take the case   of   a   person   who   is   unconnected   with   the   scheduled offence, knowingly assists the concealment of the proceeds of crime or knowingly assists the use of proceeds of crime. In that case, he can be held guilty of committing an offence under Section 3 of the PMLA.  To give a concrete example, the offences under Sections 384 to 389 of the IPC relating to Criminal Appeal No.2779 of 2023     Page 15 of 31 “extortion” are scheduled offences included in Paragraph 1 of the Schedule to the PMLA.  An accused may commit a crime of extortion covered by Sections 384 to 389 of IPC and extort money.  Subsequently, a person unconnected with the offence of extortion may assist the said accused in the concealment of the proceeds of extortion.   In such a case, the person who assists the accused in the scheduled offence for concealing the proceeds of the crime of extortion can be guilty of the offence of money laundering.   Therefore, it is not necessary that a person against whom the offence under Section 3 of the PMLA is alleged must have been shown as the accused in the scheduled offence.   What is held in paragraph 270 of the decision   of   this   Court   in   the   case   of   Vijay   Madanlal 1   Choudhary supports the above conclusion.  The conditions precedent for attracting the offence under Section 3 of the PMLA are that there must be a scheduled offence and that there must be proceeds of crime in relation to the scheduled offence as defined in clause (u) of sub­section (1) of Section 3 of the PMLA. 16. In a given case, if the prosecution for the scheduled offence ends in the acquittal of all the accused or discharge of all the accused or the proceedings of the scheduled offence are quashed in its entirety, the scheduled offence will not exist, and therefore, no one can be prosecuted for the offence punishable under Section 3 of the PMLA as there will not be any proceeds of crime. Thus, in such a case, the accused Criminal Appeal No.2779 of 2023     Page 16 of 31 against whom the complaint under Section 3 of the PMLA is filed   will   benefit   from   the   scheduled   offence   ending   by acquittal or discharge of all the accused.  Similarly, he will get the   benefit   of   quashing   the   proceedings   of   the   scheduled offence.  However, an accused in the PMLA case who comes into the picture after the scheduled offence is committed by assisting in the concealment or use of proceeds of crime need not be an accused in the scheduled offence. Such an accused can still be prosecuted under PMLA so long as the scheduled offence exists.   Thus, the second contention raised by the learned   senior   counsel   appearing   for   the   appellant   on   the ground that the appellant was not shown as an accused in the chargesheets filed in the scheduled offences deserves to be rejected. ACQUISITION OF THE FIRST AND SECOND PROPERTY 17. The allegation against the appellant in the complaint is that she purchased the property worth crores, though she did not have the source of income which would generate enough money to buy the subject properties.  The allegation against the appellant is that she allowed and facilitated accused no.1– Madhukar Angur, to conceal the siphoned/misappropriated amounts by using her bank account. Another allegation is that she is shown to have purchased the second property from accused no.1, though she did not have the resources to pay the consideration.  The allegation is that she allowed the accused no.1 to use her bank accounts to facilitate siphoning Criminal Appeal No.2779 of 2023     Page 17 of 31 the proceeds of the crime.  Another allegation is that both the first and second properties have been acquired out of the proceeds of crime.  The first property, ex­facie, cannot be said to have any connection with the proceeds of crime as the acts constituting   the   scheduled   offence   took   place   after   its acquisition.  The case of the appellant is that she possessed a substantial   amount,   as   can   be   seen   from   the   declaration made by her under the Income Declaration Scheme, 2016 in September 2016 and therefore, at the time of the acquisition of   the   second   property,   more   than   sufficient   money   was available with her to acquire the second property.  The issue of whether the appellant used tainted money to acquire the second property  can be decided only  after the evidence is adduced. This is not a case where any material is placed on record to show that the sale consideration was paid from a particular Bank Account of the appellant.  Therefore, it is not possible to record a finding at this stage that the Second property was not acquired by using the proceeds of crime.  We also make it clear that we have considered the issue only in the context of the applicability of the PMLA.   We have not dealt  with   the   issues  of  valuation  and  legality   of  the  sale deeds. INTERPRETATION OF THE FIRST ENTRY IN PARAGRAPH 1 OF THE SCHEDULE 18. Now,   we   come   to   the   third   argument   made   by   the learned senior counsel appearing for the appellant based on the interpretation of the Schedule. It must be noted here that Criminal Appeal No.2779 of 2023     Page 18 of 31 1 in the case of  Vijay Madanlal Choudhary , even the validity of the Schedule was under challenge.  A perusal of the said decision   shows   that   this   Court   was   not   called   upon   to interpret any entry in the Schedule and, in particular, entry of Section 120­B in the Schedule.  The challenge to the Schedule is dealt with in paragraphs 453, 454 and 455 of the said decision.   The contention before this Court was that even minor offences have been included in the Schedule, and even compoundable offences form part of the Schedule.   It was submitted that the offences which do not have cross­border implications   have   been   included   in   the   Schedule.     In paragraphs 454 and 455 of the said decision, this Court held thus: “454.  This Schedule has been amended by Act 21 of 2009, Act 2 of 2013, Act 22 of 2015, Act 13 of 2018 and Act 16 of 2018, thereby inserting new offences to be regarded as scheduled offence. The challenge   is   not   on   the   basis   of legislative   competence   in   respect   of enactment   of   Schedule   and   the amendments thereto from time to time. However, it had been urged before us that   there   is   no   consistency   in   the approach   as   it   includes   even   minor offences   as   scheduled   offence   for   the purposes   of   offence   of   money­ laundering,   more   so   even   offences which   have   no   trans­border implications   and   are   compoundable between the parties. The classification or grouping of offences for treating the same   as   relevant   for   constituting offence of money­laundering is a matter Criminal Appeal No.2779 of 2023     Page 19 of 31 of legislative policy. The Parliament in its   wisdom   has   regarded   the   property derived   or   obtained   as   a   result   of specified   criminal   activity,   being   an offence under the concerned legislation mentioned   in   the   Schedule.   The   fact that some of the offences may be non­ cognizable   offences   under   the concerned   legislation   or   regarded   as minor and compoundable offences, yet, the   Parliament   in   its   wisdom   having perceived   the   cumulative   effect   of   the process   or   activity   concerning   the proceeds of crime generated from such criminal activities as being likely to pose threat   to   the   economic   stability, sovereignty and integrity of the country and   thus,   grouped   them   together   for reckoning   it   as   an   offence   of   money­ laundering,   is   a   matter   of   legislative policy. It is not open to the Court to have a second guess at such a policy.  Needless   to   underscore   that   the 455. 2002 Act is intended to initiate action in respect   of   money­laundering   activity which necessarily is associated with the property   derived   or   obtained   by   any person, directly or indirectly, as a result of   specified   criminal   activity.   The prosecution   under   this   Act   is   not   in relation   to   the   criminal   activity  per se  but   limited   to   property   derived   or obtained   from   specified   criminal activity.   Resultantly,   the   inclusion   of criminal   activity   which   has   been regarded   as   non­cognizable, compoundable or minor offence under the concerned legislation, should have Criminal Appeal No.2779 of 2023     Page 20 of 31 no   bearing   to   answer   the   matter   in issue.   In   that,   the   offence   of   money­ laundering   is   an   independent   offence and   the   persons   involved   in   the commission of such offence are grouped together   as   offenders   under   this   Act. There is no reason to make distinction between them insofar as the offence of money­laundering is concerned. In our opinion, therefore, there is no merit in the argument under consideration. ” In this case, we are not called upon to decide the validity of the Schedule or any part thereof.  The question is whether the offence under Section 120­B of IPC, included in Paragraph 1 of the Schedule, can be treated as a scheduled offence even if the criminal conspiracy alleged is to commit an offence which is not a part of the Schedule. This issue did not arise for 1 consideration in the case of  . Vijay Madanlal Choudhary 19. Section   120­A   of   IPC   defines   “criminal   conspiracy”, which reads thus: “120A.   Definition   of   criminal When   two   or   more conspiracy.— persons   agree   to   do,   or   cause   to   be done,—  (1) an illegal act, or  (2) an act which is not illegal by illegal means,   such   an   agreement   is designated a criminal conspiracy:  Provided that no agreement except an agreement  to  commit  an  offence shall Criminal Appeal No.2779 of 2023     Page 21 of 31 amount to a criminal conspiracy unless some act besides the agreement is done by   one   or   more   parties   to   such agreement in pursuance thereof.  Explanation.—It is immaterial whether the illegal act is the ultimate object of such agreement, or is merely incidental to that object. ” Section 120­B of IPC provides for punishment for a criminal conspiracy which reads thus:  “120B.   Punishment   of   criminal conspiracy.—  (1) Whoever is a party to a   criminal   conspiracy   to   commit   an offence   punishable   with   death, imprisonment   for   life   or   rigorous imprisonment for a term of two years or upwards,   shall,   where   no   express provision is made in this Code for the punishment   of   such   a   conspiracy,   be punished in the same manner as if he had abetted such offence.  (2)   Whoever   is   a   party   to   a   criminal conspiracy   other   than   a   criminal conspiracy   to   commit   an   offence punishable   as   aforesaid   shall   be punished   with   imprisonment   of   either description for a term not exceeding six months, or with fine or with both. ” 20. Now, we turn to the Schedule to the PMLA.  We find that many offences, which may generate proceeds of crime, have not been included in the Schedule.  We are referring to only a few of such offences only by way of illustration:­ Criminal Appeal No.2779 of 2023     Page 22 of 31 a. Section 263A of IPC, which deals with the offence of making or possessing fictitious stamps is not a part of the Schedule; b. Though offences punishable under Sections 392 to 402   regarding   robbery   and   dacoity   have   been included in part A of the Schedule, the offence punishable under Section 379 of committing theft and the offence punishable under Section 380 of theft in a dwelling house are not made a part of parts A and B of the Schedule.  The theft of both categories can be of a very large amount running into   crores.   The   said   two   offences   become scheduled offences by virtue of clause (3) of part C of the Schedule only if the offences have cross­ border implications; c. The   offence   punishable   under   Section   403   of dishonest misappropriation of property does not form   part   of   the   Schedule.   The   said   offence becomes a scheduled offence by virtue of clause (3) of part C of the Schedule only if the offence has cross­border implications; d. The offence under Section 405 of criminal breach of trust, which is punishable under Section 406, is not   a   part   of   the   Schedule   The   said   offence becomes a scheduled offence by virtue of clause (3) Criminal Appeal No.2779 of 2023     Page 23 of 31 of part C of the Schedule only if the offence has cross­border implications; Though the offence under Section 417 of cheating e. has   been   made   a   scheduled   offence,   the   more stringent   crime   of   forgery   for   the   purposes   of cheating under Section 468 is not a part of the Schedule, and f. Though the offences under Sections 489A to 489C regarding forging or counterfeiting currency notes are part of the Schedule, the offence under Section 489D   of   making   or   possessing   instruments   or materials   for   forging   or   counterfeiting   currency notes is not a part of the Schedule. 21. Now, coming to Part B of the Schedule, it includes only one offence under Section 132 of the Customs Act, 1962.  The offence under Section 132 of the Customs Act of making a false declaration, etc., becomes a scheduled offence in view of sub­clause (ii) of Clause (y) of sub­section (1) of Section 2 of the PMLA only if the total value involved in the offence is Rs.1 crore or more.   Part C of the Schedule provides that any offence specified in Part A having cross­border implications becomes a part of Part C.  More importantly, all the offences against the property under Chapter XVII of IPC having cross­ border implications become scheduled offences.   As pointed out   earlier,   the   offences   punishable   under   Sections   379 Criminal Appeal No.2779 of 2023     Page 24 of 31 (theft),   380   (theft   in   dwelling   house),   403   (dishonest misappropriation   of   property)   and   405   (criminal   breach   of trust) are part of Chapter XVII.  Though the said offences are not included in Part A, they become scheduled offences by virtue of Part C only if they have cross­border implications. Thus, it can be said that many offences capable of generating proceeds of crime do not form a part of the schedule.  22. The learned Additional Solicitor General argued that as Section 120­B of IPC is included in Part A to the Schedule, even if the allegation is of making a criminal conspiracy to commit an offence which is not a part of the Schedule, the offence becomes a scheduled offence.  As stated earlier, many offences under Chapter XVII of IPC are not included in Parts A and B.   They become scheduled offences only if the same have   cross­border   implications.     Thus,   the   offences   of dishonest misappropriation of property or criminal breach of trust or theft can become a scheduled offence, provided they have   cross­border   implications.     If   the   argument   of   the learned Additional Solicitor General is accepted, if there is a conspiracy to commit offences under Section 403 or Section 405, though the same have no cross­border implications, the offence under Section 120­B of conspiracy to commit offences under Sections 403 and 405 will become a scheduled offence. Thus, if any offence is not included in Parts A, B and C of the Schedule   but   if   the   conspiracy   to   commit   the   offence   is alleged, the same will become a scheduled offence. A crime punishable under Section 132 of the Customs Act is made a Criminal Appeal No.2779 of 2023     Page 25 of 31 scheduled offence under Part B, provided the value involved in the offence is Rupees One Crore or more. But if Section 120­B of IPC is applied, one who commits such an offence having a value of even Rs.1 lac can be brought within the purview of the PMLA.  By that logic, a conspiracy to commit any   offence   under   any   penal   law   which   is   capable   of generating   proceeds,   can   be   converted   into   a   scheduled offence   by   applying   Section   120­B   of   the   IPC,   though   the offence is not a part of the Schedule.   This cannot be the intention of the legislature. 23. The penal statutes are required to be strictly construed. It is true that the penal laws must be construed according to the   legislative   intent   as   expressed   in   the   enactment.     In Chapter 1 of GP Singh’s Principles of Statutory Interpretation th (15  Edition), it is observed that: “The intention of the Legislature, thus, assimilates two aspects: In one aspect it carries the concept of "meaning”, i.e. what the words mean and in another aspect,   it   conveys   the   concept   of "purpose and object" or the "reason and spirit"   pervading   through   the   statute. The process of construction, therefore, combines   both   literal   and   purposive approaches.  In other words the legislative intention, i.e., the true or legal meaning of an   enactment   is   derived   by   considering the   meaning   of   the   words   used   in   the enactment in the light of any discernible purpose or object which comprehends the mischief   and   its   remedy   to   which   the Criminal Appeal No.2779 of 2023     Page 26 of 31 enactment is directed." In the words of A Driedger,   Construction   of   Statute,   2nd Edn, 1983:   The words of an Act are to be read in their entire context and in their   grammatical   and   ordinary   sense harmoniously with the Scheme of the Act,   the   object   of   the   Act,   and   the   This intent   of   the   Parliament. formulation later received the approval of the   Supreme   Court   and   was   called   the "cardinal   principle   of   construction"."   In both   Constitutional   and   statutory interpretation,   the   court   is   supposed   to exercise   discretion   in   determining   the proper relationship between the subjective and objective purposes of the law and help the law achieve its purpose. ”                 (Emphasis added) 24. While giving effect to the legislature's intention, if two reasonable   interpretations   can   be   given   to   a   particular provision of a penal statute, the Court should generally adopt the   interpretation   that   avoids   the   imposition   of   penal consequences.  In other words, a more lenient interpretation of the two needs to be adopted.  25. The legislative intent which can be gathered from the definition of the scheduled offence under clause (y) of sub­ Section (1) of Section 2 of the PMLA is that every crime which may   generate   proceeds   of   crime   need   not   be   a   scheduled offence.   Therefore, only certain specific offences have been included in the Schedule.   Thus, if the submissions of the learned   Additional   Solicitor   General   are   accepted,   the Schedule will become meaningless or redundant. The reason Criminal Appeal No.2779 of 2023     Page 27 of 31 is that even if an offence registered is not a scheduled offence, the provisions of the PMLA and, in particular, Section 3 will be invoked by simply applying Section 120­B.  If we look at Section 120­B, only because there is a conspiracy to commit an offence, the same does not become an aggravated offence. The   object   is   to   punish   those   involved   in   conspiracy   to commit a crime, though they may not have committed any overt   act   that   constitutes   the   offence.     Conspiracy   is   an agreement between the accused to commit an offence. If we look at the punishments provided under Section 120­B, it becomes evident that it is not an aggravated offence. It only incorporates the principle of vicarious liability.  If no specific punishment   is   provided   in   the   Statute   for   conspiracy   to commit   a   particular   offence,   Section   120­B   treats   a conspirator   of   the   main   accused   as   an   abettor   for   the purposes  of  imposing  the  punishment.    The  interpretation suggested   by   the   ED   will   defeat   the   legislative   object   of making only a few selected offences as scheduled offences.  If we accept such an interpretation, the statute may attract the vice of unconstitutionality for being manifestly arbitrary. It cannot be the legislature's intention to make every offence not included   in  the   Schedule   a   scheduled  offence  by   applying Section   120­B.     Therefore,   in   our   view,   the   offence   under Section 120­B of IPC included in Part A of the Schedule will become a scheduled offence only if the criminal conspiracy is to commit any offence already included in Parts A, B or C of the Schedule.   In other words, an offence punishable under Criminal Appeal No.2779 of 2023     Page 28 of 31 Section 120­B of IPC will become a scheduled offence only if the conspiracy alleged is of committing an offence which is otherwise a scheduled offence. 26. Coming   back   to   the   facts   of   the   case,   in   the chargesheets filed in the alleged scheduled offences, there is no   allegation   of   the   commission   of   criminal   conspiracy   to commit   any   of   the   offences   included   in   the   Schedule.   As pointed out earlier, except for Section 120B of the IPC, no other offence in the schedule has been applied. Therefore, in this case, the scheduled offence does not exist at all.  Hence, the   appellant   cannot   be   prosecuted   for   the   offences punishable under Section 3 of the PMLA. CONCLUSIONS 27. While   we   reject   the   first   and   second   submissions canvassed by the learned senior counsel appearing for the appellant,   the   third   submission   must   be   upheld.     Our conclusions are: It is not necessary that a person against whom the a. offence under Section 3 of the PMLA is alleged, must   have   been   shown   as   the   accused   in   the scheduled offence; b. Even if an accused shown in the complaint under the   PMLA   is   not   an   accused   in   the   scheduled offence, he will benefit from the acquittal of all the accused in the scheduled offence or discharge of Criminal Appeal No.2779 of 2023     Page 29 of 31 all   the   accused   in   the   scheduled   offence. Similarly, he will get the benefit of the order of quashing the proceedings of the scheduled offence; c. The   first   property   cannot   be   said   to   have   any connection with the proceeds of the crime as the acts   constituting   scheduled   offence   were committed after the property was acquired; d. The   issue   of   whether   the   appellant   has   used tainted   money   forming   part   of   the   proceeds   of crime  for  acquiring  the  second  property   can  be decided only at the time of trial; and The offence punishable under Section 120­B of the e. IPC will become a scheduled offence only if the conspiracy   alleged   is   of   committing   an   offence which is specifically included in the Schedule. th 28. Accordingly, the impugned order dated 27   September 2022 is, hereby, quashed and set aside, and the complaint being Special C.C no.781 of 2022 pending before the Special Court for PMLA cases, Bengaluru is, hereby, quashed only insofar as the present appellant is concerned. Criminal Appeal No.2779 of 2023     Page 30 of 31 29. The appeal is, accordingly, allowed.   …………………….J. (Abhay S. Oka) .…………………...J.  (Pankaj Mithal) New Delhi; November 29, 2023. Criminal Appeal No.2779 of 2023     Page 31 of 31