•        Case: Pavana Dibbur vs. Directorate of Enforcement

•        Court: Supreme Court of India

•        Judgement Date: November 29, 2023

•        Appellant: Pavana Dibbur Respondent: Directorate of Enforcement (ED)

Facts: 

The case involved Ms. Pavana Dibbur, accused of money laundering under the Prevention of Money Laundering Act, 2002 (PMLA). The Directorate of Enforcement (ED) alleged that Ms. Dibbur had purchased two properties with proceeds derived from criminal activities. Ms. Dibbur challenged the ED’s complaint before the High Court of Karnataka, but her petition was dismissed.

The subject Properties involved are Property 1 purchased by Alliance Business School (ABS) in 2011 and sold to the appellant in 2013 for Rs. 13.5 crores and the second property was purchased by accused no. 1 Madhukar Angur in 2011 and then sold to the appellant in 2019 for Rs. 2.47 crores.

Allegations:

• Accused no. 1 Madhukar Angur collected Rs. 107 crores from students by posing as Chancellor of Alliance University.
• ED alleges appellant conspired with Angur by purchasing properties with proceeds of crime.
• The appellant allegedly facilitated Angur’s use of her bank accounts to siphon university funds.

Previous Proceedings:

• FIRs were filed against Angur in 2016 and 2017 under various sections of IPC.
• ECIR was filed against Angur, his wife, and others by ED in 2020 under PMLA.
• The first and second properties were attached by ED under PMLA in 2021.

Complaint filed against the appellant before adjudicating authority under PMLA in 2021.

The petition filed by the appellant to quash the complaint was dismissed citing the decision of this Court on its decision in Vijay Madanlal Choudhary & Ors. v. Union of India & Ors. (2022) SCC Online SC 929

Appellant’s Submissions

1. Properties Not Tainted:

• The appellant argues that neither the first nor the second property is tainted by proceeds of crime.
• Regarding the first property, she claims it was purchased in 2013, before any alleged criminal activity.
• Regarding the second property, she claims she had sufficient funds from an income declaration scheme to purchase it.

2. Not an Accused in Predicate Offenses:

• The appellant argues that she was not named as an accused in any of the chargesheets filed for the alleged predicate offenses.
• She cites the Supreme Court’s judgment in Vijay Madanlal Choudhary to support the argument that acquittal/discharge in a predicate offense bars prosecution under PMLA.
• She claims her case is stronger since she wasn’t even accused of predicate offenses.

3. Conspiracy Charge Insufficient:

• The appellant points out that only one scheduled offense (Section 120B of IPC) is mentioned in the chargesheets for three of the predicate offenses.
• She argues that Section 120B alone, without another scheduled offense, cannot support a PMLA charge.
• She claims conspiracy must involve an agreement to commit a scheduled offense to be relevant under PMLA.

She argues that treating Section 120B as a standalone offense for PMLA prosecution would allow complaints based on conspiracy to commit non-scheduled offenses.

Respondent’s Submissions:

1. Second Property Purchase:

• The respondent acknowledges that the appellant might have had the financial capacity to buy the second property.
• However, they argue it cannot be definitively concluded that proceeds of crime were not used.
• They claim this issue requires further investigation at the trial stage.

2. Non-Accused in Predicate Offenses:

• The respondent argues that a person can be prosecuted for money laundering under PMLA even if they weren’t accused in the underlying offense.
• They cite Section 3 of PMLA as evidence, suggesting it allows for the prosecution of individuals not involved in the predicate crime.

3. Scheduled Offenses:

• The respondent argues that the legislature has explicitly listed specific offenses as scheduled offenses under PMLA.
• They point to Paragraphs 4 and 6 of Part A in the PMLA Schedule to support their argument.
• They further cite Paragraph 11, suggesting the legislature’s clear intention regarding scheduled offenses.
• They emphasize that adding or removing offenses from the Schedule would be inappropriate considering the PMLA’s objectives.
• The Vijay Madanlal Choudhary case is used as an example of upholding the Schedule’s validity.

Court’s Reasoning on the Interpretation of the Schedule: 

The court addresses the argument raised by the appellant’s counsel, which concerns the interpretation of the Schedule to the PMLA, specifically the entry for Section 120B of the IPC (criminal conspiracy).

Key points of the Court’s reasoning:

• The Court clarifies that its previous decision in Vijay Madanlal Choudhary did not address the interpretation of any specific entry in the Schedule.
• The Court rejects the challenge to the Schedule’s validity based on the inclusion of minor offenses, compoundable offenses, and non-cognizable offenses.
• The Court emphasizes that the PMLA targets the proceeds of crime, regardless of the nature of the underlying offense.
• The Court focuses on the specific question of whether Section 120B of the IPC, included in Paragraph 1 of the Schedule, constitutes a scheduled offense even if the conspiracy involves committing an offense not listed in the Schedule.

Therefore, the Court has narrowed down the discussion to the interpretation of a specific entry in the Schedule, paving the way for a definitive ruling on the scope of Section 120B in the context of PMLA.

Interpretation of Section 120B of the IPC

The court addresses the specific question of whether conspiracy to commit an offense not listed in the PMLA Schedule can be considered a “scheduled offense” based on Section 120B of the IPC (criminal conspiracy).

Key points of the court’s reasoning:

• Selective inclusion of offenses: The PMLA Schedule includes only specific offenses deemed capable of generating proceeds of crime. Many offenses, even those capable of generating significant proceeds, are not included.
• Unintended consequences: Accepting the ED’s argument that any offense becomes a scheduled offense through conspiracy under Section 120B would render the Schedule meaningless and potentially unconstitutional.
• Legislative intent: The court seeks to interpret the law in a way that reflects the legislature’s intent. They conclude that applying Section 120B should not circumvent the deliberate selection of specific offenses in the Schedule.
• Harmony with principles of interpretation: The court emphasizes the need to construe penal statutes strictly and avoid interpretations that impose unnecessary penal consequences.
• The limited scope of Section 120B: The court highlights that conspiracy itself is not an aggravated offense and serves primarily to punish agreement to commit a crime, not the actual commission.
• Interpretation to avoid absurdity: The court argues that accepting the ED’s interpretation would lead to absurd results, where conspiracy for any offense could be considered a scheduled offense.

Therefore, the court concludes that Section 120B of the IPC can only be considered a scheduled offense if the alleged conspiracy involves committing an offense already included in the PMLA Schedule (Parts A, B, or C). This interpretation protects the intended purpose of the Schedule and prevents the arbitrary expansion of PMLA’s scope to encompass offenses not explicitly included by the legislature.

Hence, the order dismissing the quash petition by the High Court is set aside and the petition is allowed. The whole crux is that Section 120B alone can’t be cited as a reason without its conjunction with any other scheduled offense listed in the schedule of PMLA.