Supreme Court Upholds Jurisdiction of Lucknow Court in Money Laundering Case: Ka Rauf Sherif vs. Directorate of Enforcement (2023)

Date of the Judgment: April 10, 2023
Citation: 2023 INSC 319
Judges: V. Ramasubramanian, J. and Pankaj Mithal, J.
Can a court in Lucknow have jurisdiction over a money laundering case when the alleged criminal activities occurred in Kerala? The Supreme Court of India addressed this question in a recent judgment, clarifying the scope of the Prevention of Money Laundering Act, 2002. The court held that the Special Court in Lucknow had the jurisdiction to try the case, even though the predicate offense occurred in Kerala. The judgment was delivered by a two-judge bench comprising Justice V. Ramasubramanian and Justice Pankaj Mithal.

Case Background

The case involves Ka Rauf Sherif, the petitioner, who was the General Secretary of the now-banned Campus Front of India. The Enforcement Directorate (ED) filed a complaint against him for money laundering, alleging that funds were transferred from various bank accounts of PFI to Anshad Badharudeen’s bank account. The ED’s case stemmed from a predicate offense that occurred in Kerala. The petitioner sought to transfer the case from the Special Court in Lucknow to Ernakulam, Kerala, arguing that the Lucknow court lacked jurisdiction.

Timeline:

Course of Proceedings

The Enforcement Directorate filed a complaint against the petitioner and others under Section 44 and 45 of the Prevention of Money Laundering Act, 2002 (PMLA), before the Special Judge, PMLA, Lucknow. The petitioner, who was arrayed as Accused No. 1, sought a transfer of the case to the Special Judge, PMLA, Ernakulam, Kerala. The Special Court in Lucknow framed charges against the petitioner and other accused persons for the offence of money-laundering under Section 3, punishable under Section 4 of PMLA. The examination-in-chief of PW1 was recorded and a discharge application was dismissed by the Special Court.

Legal Framework

The case revolves around the interpretation of the Prevention of Money Laundering Act, 2002 (PMLA), specifically Sections 3 and 44. Section 3 of the PMLA defines the offense of money laundering as involvement in any process or activity connected with the proceeds of crime, including concealment, possession, acquisition, use, or projecting as untainted property. Section 44 of the PMLA deals with the jurisdiction of Special Courts constituted under the Act. It states that the Special Court constituted for the area in which the offence of money-laundering has been committed has the jurisdiction to try the offense. The Supreme Court also considered Sections 177 to 184 of the Code of Criminal Procedure, 1973, which deal with the place of inquiry and trial.

Section 3 of the PMLA states:
“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.”

Section 44(1)(a) of the PMLA states:
“Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974),—(a) an offence punishable under section 4 and any scheduled offence connected to the offence under that section shall be triable by the Special Court constituted for the area in which the offence under that section has been committed”

Arguments

Petitioner’s Arguments:

• The proceedings pending before the Special Court, Lucknow, are without jurisdiction, as all criminal activities alleged by the prosecution have admittedly taken place in Kerala.
• 7 out of 10 accused are residents of Kerala, even as per the Enforcement Directorate’s prosecution complaint.
• 12 out of 17 cited witnesses in the prosecution complaint dated 06.02.2021, 9 out of 14 witnesses cited in the supplementary complaint dated 06.05.2022 and 5 out of 9 witnesses cited in the combined prosecution complaint dated 18.11.2022 are from Kerala/South India.
• The petitioner was lawfully remanded to custody by the learned Special Judge, Ernakulam, under Section 167(2) of the Code of Criminal Procedure, 1973, and hence the filing of the prosecution complaint at Lucknow is impermissible.

Respondent’s Arguments:

• The question of territorial jurisdiction is already settled by the Supreme Court in Rana Ayyub vs. Directorate of Enforcement, and the transfer petition is misconceived.
• The petition for transfer, filed after the commencement of examination-in-chief of PW-1 and after the dismissal of the discharge application of one of the co-accused, is an abuse of the process of law.

Innovativeness of the argument: The petitioner’s argument that the Lucknow court lacked jurisdiction because the criminal activities occurred in Kerala was a common argument in transfer petitions. However, the argument that the remand by the Ernakulam court made the Lucknow proceedings impermissible was a novel point.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues in a separate section. However, the core issues addressed by the court were:

1. Whether the Special Court, PMLA, Lucknow, has the territorial jurisdiction to entertain the complaint.
2. Whether the fact that the majority of the accused and witnesses are from Kerala is a valid ground for ordering the transfer of the case.
3. Whether the remand of the petitioner to custody by the Special Judge at Ernakulam under Section 167(2) of the Code makes the filing of the complaint at Lucknow impermissible.

Treatment of the Issue by the Court

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

Authorities

Cases Relied Upon by the Court:

The Supreme Court relied on the following case:

• Rana Ayyub vs. Directorate of Enforcement [2023 SCC OnLine SC 109] – The Supreme Court explained the interplay between Sections 43 and 44 of PMLA and Sections 177 to 184 of the Code of Criminal Procedure, 1973. It held that the Special Court constituted under PMLA has jurisdiction to try even the scheduled offense. It also clarified that the area in which the offense of money laundering has been committed is the area where any activity constituting the offense under Section 3 of PMLA took place.

Legal Provisions Considered by the Court:

• Section 3 of the Prevention of Money Laundering Act, 2002 – Defines the offence of money laundering.
• Section 44 of the Prevention of Money Laundering Act, 2002 – Deals with the jurisdiction of Special Courts under PMLA.
• Section 167(2) of the Code of Criminal Procedure, 1973 – Deals with the procedure when investigation cannot be completed in twenty-four hours.
• Sections 177 to 184 of the Code of Criminal Procedure, 1973 – Deals with the place of inquiry and trial.

Judgment

How each authority was viewed by the Court?

• The Court followed the ratio in Rana Ayyub vs. Directorate of Enforcement [2023 SCC OnLine SC 109]* to determine the jurisdiction of the Special Court under PMLA.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the interpretation of the Prevention of Money Laundering Act, 2002 (PMLA) and the precedent set in Rana Ayyub vs. Directorate of Enforcement. The Court emphasized that the jurisdiction of the Special Court under PMLA is determined by the location where any activity constituting money laundering takes place, not necessarily the location of the predicate offense. The court also focused on the fact that the transfer petition was filed after the commencement of examination-in-chief of PW-1 and after the dismissal of the discharge application of one of the co-accused, which was seen as an abuse of the process of law.

Logical Reasoning:

The Supreme Court considered the arguments made by the petitioner for transferring the case, but ultimately rejected them. The court reasoned that the jurisdiction of the Special Court under the PMLA is determined by the location where the money laundering activity occurred, not the location of the predicate offense. The court also noted that the transfer petition was filed after the examination-in-chief of PW-1, which was considered an abuse of process.

The Court quoted from paragraph 39 of Rana Ayyub (supra):

“In other words, a person may (i) acquire proceeds of crime in one place, (ii) keep the same in his possession in another place, (iii) conceal the same in a third place, and (iv) use the same in a fourth place. The area in which each one of these places is located, will be the area in which the offence of money-laundering has been committed. To put it differently, the area in which the place of acquisition of the proceeds of crime is located or the place of keeping it in possession is located or the place in which it is concealed is located or the place in which it is used is located, will be the area in which the offence has been committed.”

The Court also observed:

“In any case, the lack of jurisdiction of a Court to entertain a complaint can be no ground to order its transfer. A congenital defect of lack of jurisdiction, assuming that it exists, inures to the benefit of the accused and hence it need not be cured at the instance of the accused to his detriment.”

The Court further stated:

“Therefore, the argument revolving around Section 167(2) of the Code also fails.”

Key Takeaways

• The jurisdiction of a Special Court under the Prevention of Money Laundering Act, 2002 (PMLA) is determined by the location where any activity constituting money laundering takes place.
• The location of the predicate offense is not the determining factor for the jurisdiction of the Special Court under PMLA.
• The residency of the accused and the location of the witnesses are not valid grounds for transferring a case under PMLA.
• An order under Section 167(2) of the Code of Criminal Procedure, 1973 has to be passed by the Magistrate to whom an accused person is forwarded, irrespective of whether he has jurisdiction to try the case.
• Filing a transfer petition after the commencement of the examination-in-chief of a witness can be considered an abuse of process.

Directions

No specific directions were issued by the Supreme Court in this case.

Development of Law

The ratio decidendi of this case is that the jurisdiction of the Special Court under the Prevention of Money Laundering Act, 2002 (PMLA) is determined by the location where any activity constituting money laundering takes place, not necessarily the location of the predicate offense. This judgment reinforces the principles laid down in Rana Ayyub vs. Directorate of Enforcement and clarifies the interpretation of Section 3 and Section 44 of the PMLA.

Conclusion

The Supreme Court dismissed the transfer petition, upholding the jurisdiction of the Special Court, PMLA, Lucknow, to try the money laundering case. The court clarified that the location of the money laundering activity, not the predicate offense, determines the jurisdiction of the Special Court. The court also held that the residency of the accused and the location of the witnesses are not valid grounds for transferring a case. This judgment reinforces the principles laid down in Rana Ayyub vs. Directorate of Enforcement and clarifies the interpretation of Section 3 and Section 44 of the PMLA.