A bench of Chief Justice of India U.U. Lalit and Justice Bela M. Trivedi set aside a judgment passed by the Madras High Court in March 2021, which quashed the proceedings against Padmanabhan Kishore under Prevention of Money Laundering Act (PMLA), 2002. The Enforcement Directorate (ED) moved the apex court challenging the high court judgment.

The top court noted that it is true that so long as the amount is in the hands of a bribe giver, and till it does not get impressed with the requisite intent and is actually handed over as a bribe, it would definitely be untainted money.

It said if the money is handed over without such intent, it would be a mere entrustment and if it is thereafter appropriated by the public servant, the offence would be of misappropriation or species thereof, but certainly not of bribe.

“The crucial part therefore is the requisite intent to hand over the amount as bribe and normally such intent must necessarily be antecedent or prior to the moment the amount is handed over. Thus, the requisite intent would always be at the core before the amount is handed over,” it observed.

The bench further added that such intent having been entertained well before the amount is actually handed over, the person concerned would certainly be involved in the process or activity connected with “proceeds of crime” including inter alia, the aspects of possession or acquisition thereof.

“By handing over money with the intent of giving bribe, such person will be assisting or will knowingly be a party to an activity connected with the proceeds of crime. Without such active participation on part of the person concerned, the money would not assume the character of being proceeds of crime. The relevant expressions from Section 3 of the PML Act are thus wide enough to cover the role played by such person,” it said.

The top court said it is quite clear that the respondent was prima facie involved in the activity connected with the proceeds of crime. “The view taken by the high court that the respondent cannot be held liable for the offence under the PML Act is thus completely incorrect,” it said.

In 2011, the CBI recovered Rs 50 lakh from an IRS officer, also an accused in the case. During investigation, it came to light that the sum was handed over to the officer by Kishore, whose income tax file was pending with the officer for clearance.

A case was registered under Section 120B, Indian Penal Code, 1860 and Sections 7, 12, 13(1)(d) read with Section 13(2) of the Prevention of Corruption (PC) Act, 1988. Later, a case was registered by the Enforcement Directorate against the accused including the respondent under Sections 3 and 4 of the PML Act.

The basic submission advanced on behalf of the respondent was that the amount in question, as long as it was in the hands of respondent, could not be said to be tainted money, that it assumed such character only after it was received by the public servant, and as such the respondent could not be said to be connected with proceeds of crime and could not be proceeded against under the provisions of the PML Act. This submission was accepted by the high court, which quashed the proceedings in PML Act against the respondent.

The apex court noted that controversy in the instant matter is not with regard to Kishore’s involvement in the offence punishable under the PC Act, but raises a question whether he can be proceeded against under the provisions of the PML Act.

Allowing the ED’s appeal, the top court said: “The observations made by us regarding involvement of the respondent are prima facie in nature and for considering whether the allegations made by the prosecution if accepted to be true at this stage, would make out an offence or not. Needless to say that, on facts, the matter shall be considered purely on merits at the appropriate stage(s)… Consequently, the respondent shall continue to be arrayed and proceeded against in accordance with law in E.C.I.R. registered by the Enforcement Directorate.”

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