In a significant ruling on the interplay between the Prevention of Money Laundering Act (PMLA) and the Code of Criminal Procedure (CrPC), the Supreme Court upheld a prior High Court decision requiring sanction under Section 197 of the CrPC before cognizance could be taken against public servants in money laundering cases. The judgment in Directorate of Enforcement v. Bibhu Prasad Acharya & Others (Criminal Appeal Nos. 4314-4316 of 2024), delivered by a bench comprising Justice Abhay S. Oka and Justice Augustine George Masih, emphasized the applicability of CrPC’s sanction requirements even within PMLA proceedings.
Background of the Case
The case involved two senior government officials from Andhra Pradesh: Bibhu Prasad Acharya, former Vice Chairman and Managing Director of Andhra Pradesh Industrial Infrastructure Corporation Ltd., and Adityanath Das, Principal Secretary of the I&CAD Department. The Directorate of Enforcement (ED) filed complaints against them under Section 44(1)(b) of the PMLA, alleging that Acharya and Das were involved in criminal conspiracies with the then Chief Minister, Y.S. Jagan Mohan Reddy. The accusations stated that they enabled the allocation of land and water resources to private corporations in violation of regulatory norms, thus participating in activities linked to money laundering.
Upon receiving the complaint, the Special Court took cognizance, prompting Acharya and Das to challenge the decision, arguing that their roles as public servants necessitated prior sanction under Section 197 of the CrPC. The High Court accepted their argument, setting aside the cognizance order concerning the two respondents, which led the ED to appeal to the Supreme Court.
Key Legal Issues Addressed
The Supreme Court examined two primary issues:
1. Applicability of Section 197 of CrPC in PMLA Cases: Whether prior sanction under Section 197 of CrPC is mandatory before taking cognizance against public servants in PMLA cases.
2. Overrides and Consistencies Between CrPC and PMLA: Given the PMLA’s overriding clause (Section 71), the Court explored if it could nullify the CrPC’s Section 197 requirement for sanction.
Arguments Presented
– Prosecution’s Stand: Shri S.V. Raju, Additional Solicitor General representing the ED, argued that the PMLA should override CrPC provisions due to its unique mandate to combat money laundering. Citing Section 71 of the PMLA, which gives the Act an overriding effect, he contended that requiring a sanction would obstruct the Act’s purpose.
– Defense’s Stand: Senior Counsel Mrs. Kiran Suri, representing the accused officials, pointed to the roles and conditions of appointment of both respondents, contending that they were appointed and could be removed only by the state government, qualifying them for protection under Section 197. She highlighted that their alleged acts were intertwined with their official duties, making prior sanction essential.
Supreme Court’s Decision
The Supreme Court upheld the High Court’s judgment, reiterating that the requirement for prior sanction in prosecuting public servants cannot be dismissed merely because of the nature of the allegations under the PMLA. Justice Oka, writing the judgment, clarified that:
– Section 197 of CrPC Applies to PMLA Proceedings: The Court concluded that CrPC provisions, including Section 197, apply to PMLA cases as long as they are not inconsistent with the PMLA. Section 65 of the PMLA explicitly states that the CrPC applies to proceedings under PMLA, which does not present any inconsistency with Section 197’s requirement for prior sanction.
– Interplay Between Sections 65 and 71 of PMLA: The Court explained that Section 65 of the PMLA makes the CrPC provisions applicable unless they contradict PMLA’s purpose. Justice Oka stated, “Section 71 of the PMLA cannot override a CrPC provision made applicable by Section 65, as interpreting otherwise would render Section 65 redundant.”
– The Nature of Alleged Offences: Referring to established precedents, the Court emphasized that when an act reasonably connects to official duty, even if done with excess, it could qualify for sanction protection. The Court observed, “The act and the official duty are interrelated if it can be reasonably postulated that the act was done in the performance of official duty, even if it exceeded necessity.”
