Supreme Court Clarifies Jurisdiction in Money Laundering Cases: Rana Ayyub vs. Directorate of Enforcement (2023)

Date of the Judgment: 7 February 2023
Citation: 2023 INSC 101
Judges: V. Ramasubramanian, J. and J.B. Pardiwala, J.
Can the location of a bank account determine the jurisdiction for a money laundering case, or does it depend on where the funds were acquired, possessed, or used? The Supreme Court of India recently addressed this crucial question in a case involving allegations of money laundering. The court clarified that the jurisdiction for trying money laundering offenses is not solely determined by the location of the bank account where the funds were deposited, but rather by where the various activities related to the offense took place. This judgment was delivered by a two-judge bench comprising Justice V. Ramasubramanian and Justice J.B. Pardiwala.

Case Background

The case revolves around a writ petition filed by Rana Ayyub challenging a summoning order issued by the Special Judge, Anti-Corruption, CBI Court No.1, Ghaziabad. The order was based on a complaint lodged by the Directorate of Enforcement (respondent) under Section 45 read with Section 44 of the Prevention of Money-laundering Act, 2002 (PMLA).

The petitioner, Rana Ayyub, initiated three crowdfunding campaigns through an online platform named “Ketto” between April 2020 and September 2021. Following this, the Mumbai Zonal Office of the Enforcement Directorate initiated an inquiry against her under the Foreign Exchange Management Act, 1999 (FEMA) on 3 August 2021.

Subsequently, on 7 September 2021, a complaint was filed by Vikas Sankritayan at Indirapuram Police Station, Ghaziabad, alleging offences under Sections 403, 406, 418, and 420 of the Indian Penal Code (IPC), along with Section 66D of the Information Technology (Amendment) Act, 2008, and Section 4 of the Black Money Act.

The petitioner received an order under Section 37 of FEMA read with Section 133(6) of the Income-tax Act, 1961, from the Mumbai Zonal Office of the Enforcement Directorate, seeking additional documents. After submitting a detailed response, the Delhi Zone-II Office of the Directorate of Enforcement registered a complaint in ECIR No.DLZO-II/58/2021 on 11 November 2021, in the Court of the Special Judge at Ghaziabad. This complaint was based on the FIR registered on 7 September 2021.

Following the registration of this complaint, the petitioner was summoned to the Delhi Zone-II Office, and her statement under Section 50 of the PMLA was recorded on 15 December 2021. A provisional order of attachment of the petitioner’s bank account in HDFC Bank, Navi Mumbai, was passed by the Directorate of Enforcement on 4 February 2022. The Adjudicating Authority issued a show cause notice on 8 March 2022.

A Look out Circular issued against the petitioner was set aside by the High Court of Delhi. The High Court also restrained the Directorate of Enforcement from taking further steps under Section 8 of the PMLA, due to the expiry of the 180-day validity period of the provisional attachment order on 4 August 2022.

The Special Judge, Anti-Corruption, CBI Court No.1, Ghaziabad, passed an order on 29 November 2022, taking cognizance of the complaint and summoning the petitioner to appear on 13 December 2022. The petitioner then filed the present writ petition challenging this summoning order, specifically on the grounds of territorial jurisdiction.

Timeline:

Arguments

The petitioner’s primary argument is that the Special Court in Ghaziabad lacks territorial jurisdiction to try the case. The petitioner contended that under Section 44(1) of the PMLA, the offense should be tried by the Special Court in the area where the offense was committed.

The petitioner argued that since the alleged proceeds of crime were deposited in her bank account in Navi Mumbai, Maharashtra, and the provisional attachment proceedings were initiated in New Delhi, the Special Court in Maharashtra should have taken cognizance of the complaint. The petitioner relied on the Supreme Court’s decision in Vijay Madanlal Choudhary & Ors. vs. Union of India & Ors. [2022 SCC OnLine SC 929], specifically paragraphs 356 and 357, which state that the trial for money laundering should occur in the area where the offense was committed.

The petitioner also argued that the complaint filed in Ghaziabad was an abuse of process, influenced by the founder of the Hindu IT Cell, and that the Special Court should have returned the complaint to the respondent under Section 201 of the Code of Criminal Procedure (Cr.P.C).

The respondent, represented by the learned Solicitor General, argued that the complaint for money laundering should follow the complaint for the scheduled offense. Since the scheduled offense was registered in Indirapuram Police Station, Ghaziabad, the Enforcement Case Information Report (ECIR) was necessarily lodged in the same court’s jurisdiction.

The respondent also contended that a part of the cause of action arose within the jurisdiction of the Special Court in Ghaziabad, as several victims who contributed money were located within that jurisdiction.

Issues Framed by the Supreme Court

The Supreme Court framed the following issues for consideration:

1. Whether the trial of the offense of money-laundering should follow the trial of the scheduled/predicate offense or vice versa?
2. Whether the Court of the Special Judge, Anti-Corruption, CBI Court No.1, Ghaziabad, can be said to have exercised extra-territorial jurisdiction, even though the offense alleged, was not committed within the jurisdiction of the said Court?

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The Court considered the following authorities:

Judgment

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the need to ensure that the trial of money laundering offenses takes place in the appropriate jurisdiction. The Court emphasized that the determination of territorial jurisdiction is not a simple matter of where the bank account is located, but rather a complex question of fact that depends on the various activities involved in the offense.

The Court’s reasoning was guided by the following key points:

• The primacy of the Special Court constituted under Section 43(1) of the PMLA for the trial of money laundering offenses.
• The definition of money laundering under Section 3 of the PMLA, which includes various activities such as concealment, possession, acquisition, or use of proceeds of crime.
• The need for a factual inquiry into where these activities took place to determine the correct jurisdiction.
• The application of the principles of territorial jurisdiction under Sections 177 to 184 of the Cr.P.C.

The Court considered the definition of “money laundering” in Section 3 of the PMLA, which includes various activities such as concealment, possession, acquisition, or use of proceeds of crime. The Court noted that these activities could occur in different places, and therefore, the jurisdiction cannot be determined solely based on the location of the bank account.

The Court also considered the provisions of the Cr.P.C. regarding territorial jurisdiction, but emphasized that Section 44(1) of the PMLA has an overriding effect.

The Court rejected the petitioner’s argument that the Special Court in Ghaziabad lacked jurisdiction. The Court held that the issue of territorial jurisdiction is a factual matter that needs to be determined by the Trial Court based on evidence.

The Court cited the decision in Kaushik Chatterjee vs. State of Haryana & Ors. [2020 (10) SCC 92], which held that the issue of jurisdiction depends on facts established through evidence.

The Court did not find any alternative interpretations that would alter its decision.

The Court concluded that the issue of territorial jurisdiction cannot be decided in a writ petition, especially when there is a serious factual dispute about the place of commission of the offense.

The Court’s decision was unanimous.

The court quoted the following from the judgment:

• “The expression “offence” in three places in contradistinction to the expression “scheduled offence” used only once. This usage is not without significance. In all three places where the word “offence” alone is used, it connotes the offence of money-laundering.”
• “Therefore, it is clear that the trial of the scheduled offence should take place in the Special Court which has taken cognizance of the offence of money-laundering. In other words, the trial of the scheduled offence, insofar as the question of territorial jurisdiction is concerned, should follow the trial of the offence of money-laundering and not vice versa.”
• “Therefore, we are of the view that the issue of territorial jurisdiction cannot be decided in a writ petition, especially when there is a serious factual dispute about the place/places of commission of the offence. Hence, this question should be raised by the petitioner before the Special Court, since an answer to the same would depend upon evidence as to the places where any one or more of the processes or activities mentioned in Section 3 were carried out.”

Key Takeaways

• The jurisdiction for trying money laundering offenses is not solely determined by the location of the bank account where the funds were deposited.
• The trial of the scheduled offense should follow the trial of the offense of money-laundering, and not vice versa.
• The Special Court constituted under Section 43(1) of the PMLA has primacy in trying both the money laundering offense and the scheduled offense.
• The determination of territorial jurisdiction depends on a factual inquiry into where the various activities related to money laundering occurred, such as concealment, possession, acquisition, or use of proceeds of crime.
• The issue of territorial jurisdiction cannot be decided in a writ petition, especially when there is a factual dispute.

Directions

The Supreme Court directed the petitioner to raise the issue of territorial jurisdiction before the Trial Court.

Specific Amendments Analysis

There is no discussion of specific amendments in this judgment.

Development of Law

The ratio decidendi of this case is that the Special Court constituted under Section 43(1) of the PMLA has primacy in trying money laundering offenses, and the trial of the scheduled offense should follow the trial of the money laundering offense. The determination of territorial jurisdiction is a factual matter that depends on where the various activities related to money laundering occurred.

This judgment clarifies that the location of the bank account is not the sole determinant of jurisdiction in money laundering cases, which is a departure from a potentially simplistic view of jurisdiction based solely on the location of the bank account.

Conclusion

The Supreme Court dismissed the writ petition, clarifying that the territorial jurisdiction for money laundering cases is not solely determined by the location of the bank account but by the location of the various activities related to the offense. The Court emphasized the primacy of the Special Court constituted under the PMLA and directed the petitioner to raise the issue of territorial jurisdiction before the Trial Court, as it depends on a factual inquiry.