B. Rama Raju vs. Union of India (UOI), Ministry of Finance, Department of Revenue and Ors

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GODA RAGHURAM, J.:—
These writ petitions substantially challenge the vices of certain provisions of the
Prevention of Money Laundering Act, 2002 (Central Act 15 of 2003) [‘the Act’];
amended by the Prevention of Money Laundering (Amendment) Act, 2005 (Central
Act 20 of 2005) [‘the Amendment Act’]; further amended by the Prevention of
Money-Laundering (Amendment) Act, 2009 [Central Act 21 of 2009] (the 2nd
Amendment Act) and orders passed by the primary and attaching authorities and the
adjudicating authority. The particulars, the circumstances and the defence to the
provisions of the Act and the impugned orders are set out hereinafter. WP No. 10765
of 2010:

2. B. Rama Raju 5/0 B. Ramalinga Raju seeks (i) invalidation of Sections 5(1), 8
   (1), 8(2), 8(3), 8(4), 23 and 24 of the Act; (ii) a declaration that the provisional
   attachment Order No. 1/09 in ECIR No. 01.H20/2009, dated 18.8.2009 passed by the
   Deputy Director, Enforcement, Hyderabad (R3), is arbitrary and illegal; (iii) that the
   order dated 14.1.2010 passed by the Adjudicating Authority (R4) in OC No. 38/09 is
   arbitrary and illegal; (iv) a declaration that the 4th respondent’s direction to the
   petitioner to handover possession of the attached properties is without jurisdiction and
   contrary to law and the Directorate of Enforcement (R2) or any other officer is not
   entitled to take possession of the petitioner’s properties; (v) a declaration that the
   petitioner’s properties sought to be attached by the impugned provisional attachment
   order (dated 18.8.2009) as confirmed by the impugned order (dated 14.1.2010) of the
   4th respondent are free from attachment or encumbrance; and (vi) for attendant
   reliefs.
3. (A) The Deputy Director, Enforcement, passed the provisional attachment
   order dated 18.8.2009, purportedly under Section 5 of the Act, in respect of movable
   properties comprising the shares of M/s SRSR Holdings Ltd., in M/s Satyam
   Computer Services Ltd., and 287 immovable properties of various companies and
   persons including the petitioner. The petitioner’s immovable properties enumerated at
   SI. Nos. 246 to 251 in the table of immovable properties in the order were
   provisionally attached.
   106
   (B) The Deputy Director, Enforcement, filed Application No. 38/2009 on
   15.9.2009 before the Adjudicating Authority against 132 defendants. The petitioner is
   the 8th defendant therein. The Adjudicating Authority issued notice to all the 132
   defendants in respect of the movable and immovable properties enumerated in the
   complaint of the Deputy Director, Enforcement, on 15.9.2009, the day the complaints
   were filed.
   (C) Several of the defendants including the petitioner filed applications before the
   Adjudicating Authority setting out objections to its jurisdiction; seeking dismissal of
   the complaint; and discharge of the notice. The Adjudicating Authority however
   orally pronounced disposal of the objection applications on 20.11.2009 (the date of
   the hearing). A copy of the order dated 20.11.2009 was furnished to the several
   defendants including the petitioner on 24.1.2009
   (D) The petitioner and some other defendants filed WP No. 27058/09 challenging
   the Adjudicating Authority’s notice dated 15.9.2009 and the order dated 20.11.2009
   This Court by the order dated 1.12.2009 in WP No. 25846/09 (filed by another
   defendant) allowed the petitioner therein to appear before the Adjudicating Authority
   to seek information as to whether he was being proceeded against as one who
   committed an offence under Section 3 of the Act or for being in possession of the
   proceeds of a crime. Consequent on this order the petitioner also applied to the
   Adjudicating Authority for relevant information. On 7.12.2009 the Adjudicating
   Authority informed all the defendants seeking information that they were being
   proceeded against for committing an offence under Section 3 of the Act.
   (E) This Court eventually disposed of the writ petition filed by the petitioner on
   10.12.2009 on similar lines as other writ petitions directing that the proceedings
   before the Adjudicating Authority be postponed to 21.12.2009 and the writ petitioners
   submit their defense and proceed with the matter according to law.
   (F) On 20.12.2009 the petitioner filed his response to the show-cause notice
   issued by the Adjudicating Authority. The Counsel for the petitioner was heard on
   23.12.2009 Written submissions were also filed.
   (G) On 14.1.2010 the Adjudicating Authority passed an order confirming
   attachment of the petitioners’ properties; directed the attachment to continue during
   pendency of the proceedings pertaining to the scheduled offence before the trial Court
   and till its conclusion and until the order of the trial Court becomes final; and further
   directed that the defendants shall handover possession of properties to the
   Enforcement Directorate or any officer authorized, forthwith.
4. The challenge to the vires of provisions of the Act: 1. Section 2(u) of the Act
   defines “proceeds of crime” expansively to include property or the value thereof,
   derived or obtained, directly or indirectly, as a result of criminal activity relating to a
   scheduled offence even if in the hands of a person who has no knowledge or nexus
   with such criminal activity allegedly committed by others. The expansive definition
   thus inflicts grossly unreasonable consequences on innocent persons and is, therefore,
   unconstitutional offending Articles 14, 20, 21 and Article 300 – A of the Constitution.
5. Under Section 5(1) of the Act the authorized officer may provisionally attach
   properties for a period not exceeding 150 days if he has reason to believe on the basis
   of material in his possession that any person is in possession of proceeds of crime;
   that such person has been charged of having committed a scheduled offence and such
   proceeds of crime are likely to be concealed etc., in any manner which could result in
   frustrating any proceedings relating to confiscation of such proceeds of crime, under
   Chapter III. The two provisos to Section 5(1) were incorporated by the 2nd
   Amendment Act. Under the first proviso no order of attachment shall be made unless
   the report is forwarded under Section 173 Cr.PC in relation to a includable offence, or
   a complaint is filed before a Magistrate or a Court for taking cognizance of the
   scheduled offence. The 2nd proviso enacts that notwithstanding anything in Clause
   (b), any property of a person may be attached under the Section if an authorized
   officer has reason to believe that such property involved in money-laundering, if not
   immediately attached is likely to frustrate any proceedings under the Act.
   Section 5(1) is vague and confusing. While under the main provision [Section
   5(1)], ‘such property’ is the property of a person charged of a scheduled offence; the
   2nd proviso enables property of any person, and of involved in money-laundering, to
   be proceeded against. The term ‘involved in money laundering’ is vague and
   ambiguous. There is no indication as to the nature or degree of involvement required.
   It is not clear whether the liability runs with the property or is only in respect of
   property belonging to a person charged with committing a scheduled offence. The
   provision is also bereft of guidelines consistent and commensurate with the serious
   consequences that follow. The provision is therefore arbitrary and unconstitutional.
6. The proviso to Section 5(1) can be operated only from the date of coming into
   force of provisions of the 2nd Amendment Act. It cannot therefore apply against
   property acquired or possessed prior to enactment of this provision or in respect of
   any scheduled offence prior to its enactment. It is however being construed otherwise.
   Since the consequence of attachment and eventual confiscation are severe and have
   penal and punitive consequences there could be no retrospective incidence of liability.
   The operational reality of retrospective application of the provisos to Section 5(1) of
   the Act by the executing agencies – the respondents renders the provision
   unconstitutional as offending Articles 14, 20 and 300-A of the Constitution.
   4 Section 8 of the Act provides for adjudication following a provisional
   attachment under Section 5(1) and a complaint under Section 5(5). Section 8 (1) sets
   out the conditions precedent to the exercise of jurisdiction and initiation of
   proceedings by a notice and as to the nature and scope of the notice. The Adjudicating
   Authority is required to apply its mind to the complaint and the material filed
   therewith and form a reason to believe that a person has committed an offence under
   Section 3 or is in possession of proceeds of crime. On settled principle and authority,
   the reason to believe is neither academic nor on subjective satisfaction but must
   follow upon an objective consideration, for good and sufficient reasons. The notice
   issued by the Adjudicating Authority should be directed only against such persons as
   it has reasons to believe have committed an offence under Section 3 or are in
   possession of the proceeds of crime.
   The offence of money laundering as defined in Section 3 is in respect of acts of
   persons. There are no guidelines as to what properties can be said to be ‘involved in
   money laundering’ and thus subject to attachment and/or confiscation under the Act.
   The Act does not enable the Adjudicating Authority to go into the legality, validity,
   propriety or correctness of the provisional attachment order made under Section 5(1),
   even though the Adjudicating Authority is required to consider confirmation of such
   attachment. The criteria for provisional attachment are different from the course of
   enquiry and the consideration that the Adjudicating Authority must apply to confirm
   the order of attachment. The standard of evidence and the sequence of leading
   evidence is also uncertain. Thus, persons against whom proceedings are pursued are
   disabled from presenting their defence in the proceedings and are thus denied fair
   trial, violative of Article 14. The impugned order of the Adjudicating Authority
   illustrates absence of focus and clarity as to what is adjudicated and decided upon; on
   what criteria; and under what procedure and application of standards of appreciation
   of evidence. The scheme of adjudication set out in Section 8(1) to (3) being vague,
   unfair and diffused, is violative of Article 14.
7. Under the scheme of the Act even if a person is acquitted by the Special Court
   of the offence of money laundering, the Adjudicating Authority’s finding as to such
   person being involved in money laundering and the involvement of such person in
   money laundering would nonetheless stand undisturbed and such person would not
   have any recourse against orders of attachment and confiscation. The same
   consequence follows if the person is not even accused of or charged with the offence
   of money laundering; and his guilt determined by improper standards of trial or
   proceedings and by an improper forum, is inflicted with punitive consequences. The
   provisions of the Act are thus arbitrary and offend Articles 14, 21 and 300-A of the
   Constitution.
8. Section 8(4) of the Act as construed by the respondent authorities enables
   deprivation of possession and enjoyment of an attached immovable property
   even/before conclusion of the trial of the scheduled offence. This provision is harsh
   and so disproportionate as to violate Articles 14, 21 and 300-A of the Constitution.
9. Section 23 provides that where money laundering involves two or more
   interconnected transactions, proving that one or more of such transactions is involved
   in money laundering raises a rebuttable presumption that the rest of the transactions
   form part of such interconnected transactions. Such legislatively enjoined
   presumption is grossly unreasonable and excessively disproportionate and places
   irrational burdens upon the defendant. Section 23 thus violates Article 14 and its
   consequences violate Article 300-A as well.
10. Section 24 enacts that the burden of proving that proceeds of crime are
    untainted property is on the person accused of having committed the offence under
    Section 3. This provision is contradictory and vague. It is being construed as if a bald
    and baseless allegation of there being proceeds of crime and/or that any property
    constitutes proceeds of crime is presumed to be true and the burden is upon the
    accused to prove to the contrary. These provisions offend Article 14. In any case
    Section 24 applies only to the trial of an offence under Section 3. In a proceedings
    under Section 8(1) the defendant is not an accused. However the Adjudicating
    Authority is construing the provisions of Section 24 as applicable to proceedings
    under Section 8(1) as well. On such construction Section 24 is illegal, unreasonable
    and offends Article 14.
11. The impugned provisional attachment order (dated: 18.8.2009) is illegal as
    properties of persons not even accused of any scheduled offence are attached; there is
    no assertion in the order as to the commission of any scheduled offence or of any fact
    disclosing commission of any scheduled offence; there is no statement of facts or
    material on the basis of which the officer has formed a belief that the properties are
    likely to transferred; no facts or reasons are recorded disclosing application of mind, a
    condition precedent to passing an order of provisional attachment. The provisional
    attachment order is thus invalid.
12. The order of the Adjudicating Authority (dated: 14.1.2010) passed under
    Section 8(3) of the Act is invalid since the Authority failed to apply its mind to
    whether there is substance in the complaint as to the commission of any scheduled
    offence, when and by whom the offence was allegedly committed. Since the
    Adjudicating Authority failed to deal with any of the submissions, contentions and
    arguments of the petitioner and other defendants; since the order proceeds on
    generalizations, surmises and conjectures; and the Adjudicating Authority erred in
    assuming and holding that it was not necessary to draw a conclusion as to the
    commission of an offence to consider adjudication under Section 8 of the Act, the
    same is vitiated by an error in holding that the investigation by the CBI and the
    Directorate of Enforcement, are sufficient material to infer the commission of a
    scheduled offence as well as an offence under Section 3 of the Act. The confirmation
    order is unsustainable for failure to consider whether determination of guilt as to
    commission of a scheduled offence; whether for the purpose of punishment or for
    attachment and/or confiscation of property, must be predicated on the same standards
    of evidence – “beyond reasonable doubt”.
    There are other and detailed challenges pleaded to the validity of the order of the
    Adjudicating Authority (dated 14.1.2010).
    We are not inclined to consider the several challenges to the merits of the orders
    of provisional attachment or of the Adjudicating Authority conforming the orders of
    provisional attachment, since any person aggrieved by the order passed by the
    Adjudicating Authority may appeal to the Appellate Tribunal constituted under
    Section 25, under Section 26 of the Act. There is a further appeal provided to the
    High Court against a decision or order of the Appellate Tribunal, under Section 42.
13. Pleadings in response:
    On behalf of the respondents, in particular the Directorate of Enforcement, the
    Deputy Director of Enforcement, Hyderabad has filed a counter. It is generally
    contended that the writ petitions are misconceived; the challenge to provisions of the
    Act is asserted only to protract the proceedings and without any basis; and that the
    writ petitions are not maintainable and should not be countenanced since there is an
    effective and alternative remedy by way of an appeal under Section 26 of Act. The
    counter-affidavit sets out detailed responses to the several contentions of the
    petitioners regarding challenges to the provisions of the Act as well as to contentions
    assailing on merits provisional attachment and confirmation orders passed by the
    respondent authorities under the provisions of Sections 5 and 8 of the Act,
    respectively. As we are not inclined to consider the specific challenges to the orders
    of provisional attachment or of confirmation ort the merits of the decision making
    process or the eventual conclusion of the Authorities under the Act, in view of the
    available alternative remedy of an appeal, and a further appeal, we summarise herein
    only those responses in the counter-affidavit of the Enforcement Directorate
    pertaining to challenge to the provisions of the Act. (12) The counter asserts and sets
    out:
    (A) The enacting history of the Act including international commitment and
    convention, resolutions of the General Assembly of the United Nations, the Statement
    of Objects and Reasons accompanying the Bill which was eventually enacted by the
    Parliament; the preamble of the Act; and its several provisions disclosing a policy to
    address the scourge of Laundering of Money which destabilizes National and
    International economies, the sovereignty of several States and has adverse impact on
    law and order maintenance. The provisions of the Act must therefore be interpreted
    consistently with the evil the provisions are intended to address;
    (B) Money-Laundering while facially appears to comprise one or more clear and
    simple financial transactions, involves and comprises a complex web of financial and
    other transactions. A money laundering transaction usually involves three stages: (i)
    The placement stage: The malfeasant places the crime money into the normal
    financial system; (ii) The layering stage: The money induced into the financial system
    is layered—spread out into several transactions within the financial system with a
    view to concealing the origin or original identity of the money and to make this
    origin/identity virtually disappear; and (iii) The integration stage: The money is
    thereafter integrated into the financial system in such a way that its original
    association with crime is totally obliterated and the money could be used by the
    malfeasant and/or the accomplices to get it as untainted/clean money. (C) Money
    laundering often involves five different directional fund flows:
    (i) Domestic money laundering flows: In which domestic funds are laundered
    within the country and reinvested or otherwise spent within the country;
    (ii) Returning laundered funds: Funds originate in a country, are laundered abroad
    and returned back.
    (iii) Inbound funds : illegal funds earned out of crime committed abroad are either
    laundered [placed] abroad or within the country and are ultimately integrated into the
    country; (iv) Out bound funds: Typically constitute illicit capital flight from a country
    and do not return back to the country; and
    (v) Flow-through: The funds enter a country as part of the laundering process and
    largely depart for integration elsewhere.
    (D) The Act is a Special Law and a self contained code intended to address the
    increasing scourge of money laundering and provides fof confiscation of property
    derived from or involved in money laundering. The Act provides a comprehensive
    scheme for investigation, recording of statements, search and seizure, provisional
    attachment and its confirmation, confiscation and prosecution. The provisions of the
    Act [vide Section 71] are enacted to have an overriding effect [entrenched by a nonobstante provision], notwithstanding anything inconsistent therewith contained in any
    other law for the time being in force.
    (E) The provisions of the Act are fair, reasonable and have sufficient safeguards,
    checks and balances to prevent arbitrary exercise of power and/or abuse by the
    authorities and provide several layers of scrutiny at various stages of the proceedings.
    (F) A person accused of money laundering is subject to broadly two parallel
    actions:
    (i) prosecution for punishment under Section 4, for the offence of moneylaundering defined in Section 3;
    (ii) attachment of the property involved in money-laundering, under Section 5 of
    the Act. Proceedings under each section is independent.
    (iii) The punishment specified for the offence of money-laundering under Section
    4 of the Act can be administered only after prosecution by way of filing a
    complaint/charge sheet before the Special Court and due trial and conviction; while
    on investigation if any property is suspected to have been derived out of the proceeds
    of crime, that property is placed under provisional attachment under Section 5(1) and
    a complaint is filed before the Adjudicating Authority within thirty (30) days of such
    attachment [Section 5(5) of the Act]. An order of provisional attachment is operative
    for a period not exceeding one hundred and fifty days from the date of such order
    [Section 5(1) of the Act].
    (iv) On receipt of a complaint, under Section 8(1) the Adjudicating Authority is
    required to issue a notice [to any person who has committed an offence under Section
    3 or is in possession of proceeds of crime], to indicate the sources of income, earnings
    and assets out of which or by means of which he has acquired the property attached
    under Section 5(1) of the Act. If on considering the response and after granting an
    opportunity of hearing, the Adjudicating Authority is satisfied that any property is
    involved in money laundering, it shall under Section 8(3) issue an order confirming
    the provisional attachment. The confirmation of an order or provisional attachment by
    the Adjudicating Authority attains finality only after the Adjudicating Authority
    passes an order confiscating the property, after giving an opportunity to the persons
    concerned and when a person is found guilty of the scheduled offence by the
    competent Court, after trial.
    (v) From the scheme of the Act and the evils its provisions are intended to
    address it is apparent that action by way of provisional attachment under Section 5(1)
    must be taken expeditiously during the course of investigation so that properties
    which comprise proceeds of crime are not concealed, transferred or dealt with in any
    manner that may frustrate proceedings for eventual confiscation of such proceeds of
    crime. For this purpose the Act provides a three tiered process and procedure before
    an order of confiscation;
    (a) A provisional attachment by the Director or an officer authorized by the
    Director in this behalf, under Section 5(1);
    (b) Confirmation of the provisional attachment by the Adjudicating Authority
    under Section 8(3); and
    (c) A final order of confiscation by the Adjudicating Authority under Section
    8(6).
    The writ petitions are filed at the 2nd stage i.e, confirmation of the provisional
    attachment orders, under Section 8(3).
    (G) At the present stage, when investigations are ongoing the Adjudicating
    Authority is required to take only a prima facie view, on whether the properties are
    involved in money-laundering. There is a presumption of culpability of the mental
    stage on the part of the defendant on whom shifts the burden to establish that the
    properties are not involved in money laundering, as the defendant is accused of
    money laundering under Section 3 of the Act. This shifting of burden is indicated in
    Section 24 of the Act. (H) A further and detailed opportunity is provided at the stage
    of confiscation. The Adjudicating Authority is required to consider the matter again
    while finally considering confiscation of properties under attachment, under Section
    8(6). At this stage an opportunity of hearing is provided. Confiscation proceedings
    can be pursued only after the guilt of a person accused of a scheduled offence is
    established in the trial Court and when the order of such trial Court becomes final
    [Section 8(6) read with 8(3)(b) of the Act]. From the scheme of the Act an order of
    provisional attachment and confirmation thereof constitutes the first stage of the
    relevant proceedings involving a prima facie assessment. It is at the stage of
    confiscation (2nd stage) that the entire evidence is required to be appreciated and a
    definitive finding recorded by the Adjudicating Authority.
    (I) Elaborate and fair procedures are incorporated in the Act. The order of
    provisional attachment shall be only by the Director or any other officer not below the
    rank of a Deputy Director, specifically authorized by the Director for the purposes of
    Section 5; the decision to provisionally attach the property must be supported by
    reasons to be recorded which must be based on material available in the possession of
    the attaching authority; no order of provisional attachment could be made unless, in
    relation to the scheduled offence a report has been forwarded to a Magistrate under
    Section 173 of the Code of Criminal Procedure, 1973 or a complaint has been filed by
    a person authorized to investigate the offence set out in the Schedule to the Act,
    before a Magistrate or Court for taking cognizance of the Scheduled Offence, as the
    case may be; the provisional attachment is limited for a period not exceeding one
    hundred and fifty days; under the 2nd proviso to Section 5 (1) attachment of property
    even of persons not charged with committing a scheduled offence is permitted but
    must be exercised only in exceptional cases for reasons to be recorded in writing and
    on the basis of the material in possession of the Authority concerned asserting that the
    property is involved in money laundering and non-attachment of such property would
    frustrate any proceedings under the Act; the order of provisional attachment and the
    material in possession of the Authority concerned must immediately after attachment
    be forwarded to the Adjudicating Authority for its consideration at appropriate stages;
    provisional attachment does not disable a person interested in the enjoyment of
    immovable property from such enjoyment; and only after the Adjudicating Authority
    confirms an order of provisional attachment under Section 8(3) is possession of the
    property taken over by the Director or any other officer authorized in this behalf—
    vide Section 8(4) of the Act.
    (J) From the provisions of Section 6 it is clear that the Adjudicating Authority is
    comprised of expertise in the field of law, finance, accountancy or administration; is
    independent of the enforcement mechanism, ensuring a matrix of independent
    scrutiny of the actions and orders passed by Enforcement Authority. There are
    sufficient safeguards to prevent abuse of the powers conferred on the Adjudicating
    Authority as well. The Adjudicating Authority must consider any complaint or
    application received by it and issue a notice only when it has reasons to believe that a
    person has committed an offence under Section 3 or is in possession of proceeds of
    crime, calling upon such person to indicate the sources of income, earning or assets
    out of which or by means of which he has acquired the property provisionally
    attached under Section 5(1) or seized under Section 17 or 18, along with evidence on
    which the person relies and other relevant information and particulars and to showcause why or all any of such property should not be declared to be properties involved
    in money laundering and confiscated by the Central Government.
    (K) The provision mandating taking over possession of a provisionally attached
    property upon confirmation is in furtherance of the legislative intent of securing the
    property [pending completion of proceedings before a Court of competent jurisdiction
    and till the order of such trial Court becomes final], with a view to prevent frustration
    of the legislative intent by dissipation or spoilage of the immovable property during
    the interregnum proceedings.
    (L) There are further salutary provisions to prevent abuses of authority and
    powers under the Act. An appeal is provided to the Appellate Tribunal, a body whose
    independence is legislatively entrenched qua the qualifications prescribed and tenure
    protection provided vide Sections 28 and 29 of the Act. A further appeal is provided
    to the High Court, to any person aggrieved by a decision or order of the Appellate
    Tribunal, both on a question of law and fact, arising from such order.
    (M) The provisions of Sections 23 and 24 of the Act are valid and unassailable.
    These provisions are incorporated to regulate an inherently complex and layered
    series of transactions involved in money laundering operations. Section 23 enacts a
    presumption [applicable to adjudication or confiscation under Section 8 of the Act],
    that where money laundering involves plural and interconnected transactions and one
    or more of such transactions is/are proved to be involved in money laundering, it
    shall, unless otherwise proved to the satisfaction of the Adjudicating Authority, be
    presumed that the remaining transaction forms part of such interconnected
    transactions. The presumption is a rebuttable presumption.
    (N) Section 24 inheres on a person accused of having committed the offence
    under Section 3, the burden of proving that the proceeds of crime are untainted
    property. The shifting of the incidence of the burden of proof, which is rebuttable, is
    an essential component of the scheme of the Act which targets money laundering,
    which as already noticed comprises a complex and series of financial dealings
    involving deceit, layering and diversion of the proceeds of the crime through several
    transactions.
    (O) After the confession by Sri. B. Rama/inga Raju on 7.1.2009, the share price
    of Satyam Computer Services Limited [for short the SCSL] fell drastically and a large
    number of investors suffered huge financial losses. Pursuant to a complaint by one
    such investor Smt. L. Mangat, the A.P.C.I.D registered FIR No. 2/2009 on 9.1.2009
    under Section 120-B read with Sections 406, 420, 467, 471, 477-A of the IPC. The
    State Government transferred the case to the CBI for investigation and the Anti
    Corruption Branch of the CBI, Hyderabad registered RC.4[S]/2009 on 20.2.2009
    After completion of investigation a charge sheet was filed by the CBI before the XIV
    Additional Chief Metropolitan Magistrate’s Court under Sections 420, 419, 467, 468,
    471, 477-A and 201 of the IPC. The designated Court after considering the chargesheet has taken cognizance of the offence. After the State CID registered FIR. 2/2009,
    the Enforcement Directorate registered an Enforcement Case Information Report
    [ECIR], under the Act against Sri. B. Ramalinga Raju and others since the FIR reveals
    information as to the commission of a scheduled offence i.e, under Section 467 IPC.
    The investigation under the Act reveals commission of a scheduled offence and
    generation of proceeds of crime thereby. Hence initiation of proceedings both for
    prosecution and for attachment and for subsequent proceedings, against persons
    accused of committing scheduled offences and for attachment and confiscation of the
    proceeds of crime against the accused and others in possession of proceeds of crime,
    is valid.
14. The enacting history: On 14.12.1984 the General Assembly of the U.N by a
    resolution requested the Economic and Social Council of the U.N to request the
    Commission on Narcotic Drugs in its 31st Session, 1985, to initiate preparation of a
    draft convention about illicit traffic in Narcotic Drugs by considering the problem
    holistically on a priority basis. Eventually the U.N Conference for Adoption of a
    Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances
    [NDPS] met in Vienna and with participation of delegates of 106 States including
    India; specialized agencies; and representatives of Inter-Governmental Organizations;
    interested agencies and bodies drew up the U.N Convention Against Illicit Traffic in
    NDPS. The conference adopted a raft of resolutions pertaining to exchange of
    information; provisional application of the U.N Convention against Illicit Traffic in
    NDPS and provision of necessary resources to the Division of Narcotic Drugs and the
    Secretariat of the International Narcotic Board to enable discharge of the task
    entrusted to them under International Drug Control Treaties. The purpose of the
    Convention was to promote cooperation among the parties and to more effectively
    address various aspects of illicit traffic in NDPS, having an international dimension.
    The Convention exhorts the parties to take necessary measures including legislative
    and administrative, in conformity with the fundamental provisions of their respective
    domestic law. The Convention enumerated measures for incorporation as offences,
    conduct promoting NDPS and for confiscation of proceeds derived from offences
    established in relation to NDPS.
    In 1990, the Financial Action Task Force [FATF— an inter governmental body,
    which sets standards, develops and promotes policies to combat money-laundering
    and terrorist financing with a membership of a number of countries and international
    organizations] drew up forty recommendations as initiatives to combat moneylaundering and terrorist financing to provide an enhanced, comprehensive and
    consistent framework of measures for combating money-laundering and terrorist
    financing. The FATE recommendations have been revised from time to time.
15. From the above, it is clear that the law seeks to prevent money-laundry which
    in plain terms means the preventing legitimizing of the money earned through illegal
    and criminal activities by investments in movable and immovable properties. The
    need for a law on the subject has been the focus of the Government world over in
    recent times and that of the U.N also, because the scourge of money-laundering has
    threatened to wreck the foundations of the States and undermine their sovereignty
    even. The terrorist outfits and smuggling gangs have been depending upon money
    laundering to finance their operations and it is known that money for such operations
    are arranged through laundering. Many such illegal outfits have set up ostensibly legal
    front organization. The money generated through illegal activities is ultimately
    inducted and integrated with legitimate money and its species like movable and
    immovable property. Thus certain economic offences, commercial frauds, crimes like
    murder, extortion have contributed to money-laundering in a significant manner. The
    perpetrators of such heinous crimes should not be allowed to enjoy the fruits of the
    money that passed under the activity and therefore the present enactment is intended
    to deprive the property which is related to the proceeds of specific crimes listed in the
    Schedule to the Act.
16. At the oral hearing, learned Counsel Sri. Gopal Chowdary [WP No. 23166 of
    2010] and Sri. S. Niranjan Reddy [WP No. 10765 of 2010] made detailed
    submissions. In support of the contention that the definition of “Proceeds of Crime”
    [21] is void for vagueness and over breadth and that in its broad connotation the
    expression traps innocent persons and their property; places disproportionately
    onerous burdens and requirements to make enquiries and investigation as to
    antecedent criminality adhering to a property; poses a pervasive and infinite threat to
    the title of a property and thus constitutes a confiscatory law, Sri. Gopal Chowdary
    has enumerated a few illustrations to assert that the expression “Proceeds of Crime” as
    defined/understood/interpreted by the Enforcement Authority is likely to target bona
    fide purchasers/transferees of the property who have no
    knowledge/nexus/participation in any antecedent criminality associated with a
    property. A similar exercise is undertaken by Sri. Chowdary, the learned Counsel to
    impeach the expression “Property involved in Money-Laundering”, employed in the
    2nd proviso to Section 5(1), 8(2) and 8(3) of the Act. Sri. Niranjan Reddy contends
    that the Act is applicable only against a person guilty of committing a scheduled
    offence and had derived any benefit either directly or indirectly therefrom and only
    such benefit as derived from a criminal conduct may be classified as “Proceeds of
    Crime”. While a property in the domain, custody or possession of any person who
    knowingly assists or participates in the criminal activity of a person accused of a
    scheduled offence would constitute proceeds of crime, property in the domain,
    custody or possession of a person who is a bona fide purchaser/transferee of such
    property without knowledge of or participation in the malfeasance cannot constitute
    proceeds of crime, elaborates Sri. Niranjan Reddy. He further contends that mens rea
    must be considered an integral component of every shade of conduct criminalized
    under Section 3 of the Act; otherwise the provision would be unconstitutional. It is
    also contended by Sri. Reddy that the provisions of Section 8 are arbitrary and
    unconstitutional.
17. We are not inclined to identify or exhaustively enumerate the various factual
    circumstances and component parts of transactions, to which the provisions of the
    Act, whether with regard to the offence and its prosecution; or proceedings of
    attachment, its confirmation and eventual confiscation might or might not apply. The
    Act is a recent piece of legislation and the fullness of its personality and nuances of its
    several provisions will manifest and must be identified in the fullness of time and as
    occasions arise. Our exercise is adjudicatory and not an academic exercise nor a
    treatise on the provisions of the Act. We will confine analysis of the provisions of the
    Act as applicable to the narrow set of facts and circumstances of the cases on hand.
    Even in this respect our analysis of the facts and circumstances the assertions and
    responses are predicated on a prima facie view of the relevant factual matrix, since the
    trial of the scheduled offence is under way. Though the petitioners assert to be not yet
    accused of having committed a scheduled offence, it is the contention on behalf of the
    Enforcement Directorate as expressed by Sri. Rajeev Awasthi, learned Counsel for the
    Enforcement Directorate that the petitioners will also be eventually charged of an
    offence under Section 3 of the Act. Our analysis of the provisions and their
    applicability to the facts of these cases is also tentative since the proceedings are now
    at the stage of confirmation of orders of provisional attachment which in our view
    involves only a prima fade assessment of the matter by the Adjudicating Authority; a
    comprehensive view to be taken at the stage of confiscation.
18. On the basis of rival pleadings, contentions and the material on record, the
    following issues are formulated for consideration. Issues:
    (A) Whether property owned by or in possession of a person, other than a person
    charged of having committed a scheduled offence is liable to attachment and
    confiscation proceedings under Chapter-Ill and if so whether Section 2(1)(u) which
    defines “proceeds of crime” broadly, is invalid?;
    (B) Whether provisions of the second proviso of Section 5(1) [incorporated by the
    2nd amendment Act—w.e.f 6.3.2009] are applicable to property acquired prior to
    enforcement of this provision and if so, whether the provision is invalid for
    retrospective penalisation?;
    (C) Whether the provisions of Section 8 are invalid for vagueness; incoherence as
    to the onus and standards of proof; ambiguity as regard criteria for determination of
    the nexus between a property targetted for attachment/confirmation and the offence of
    money-laundering; and for exclusion of mens rea/knowledge of criminality in the
    acquisition of such property?;
    (D) Whether Section 8(4) is invalid for enjoining deprivation of possession of
    immovable property even before conclusion of guilt/conviction in the prosecution for
    an offence of moneylaundering?;
    (e) Whether the presumption enjoined by Section 23 is unreasonably
    restrictive, excessively disproportionate and thus invalid?; and
    (f) Whether shifting/imposition of the burden of proof, by Section 24 is
    arbitrary and invalid; is applicable only to the trial of an offence under Section
    3; not to proceedings for attachment and confiscation of property under ChapterIII; and in any case not in respect of a person not accused of having committed the
    offence under Section 3?
    Issue – A:The core contention on behalf of the petitioners is that property in ownership,
    control or possession of a person not charged of having committed a
    scheduled offence would not constitute proceeds of crime, liable to attachment and
    confiscation proceedings, under Chapter III of the Act.
19. Learned Counsel for the petitioners adverted to the Convention against Illicit
    Traffic in Narcotic Drugs and Substances, [to which India is a party and a signatory].
    Article 3 in Part-XVII of this Convention sets out provisions pertaining to
    Offences and Sandions. Certain provisions, of clauses (b) and (c) of sub-section (1),
    and sub- sections (2) and (3) of Article 3 are adverted to in this behalf. The
    provisions adverted to by the petitioners read:
    Article 3
    Offences and Sanctions
    (1) Each party shall adopt such measures as may be necessary to establish as
    criminal offences under its domestic law, when committed intentionally;
    (b)(i) The convention or transfer of property, knowing that such property
    is derived from any offence or offences, established in accordance with
    subparagraph (a) of this paragraph, or from an act of participation in such
    offence or offences, for the purpose of concealing or disguising the illicit origin
    of the property or of assisting any person who is involved in the commission of
    such an offence or offences to evade the legal consequences of his actions;
    (ii) The concealment or disguise of the true nature, source, location,
    disposition, movement, rights with respect to, or ownership of property
    knowing that such property is derived from an offence or offences
    established in accordance with sub-paragraph (a) of this paragraph;
    (c) Subject to its constitutional principles and the basic concepts of its legal
    system-
    (i) The acquisition, possession or use of property, knowing at the time of
    receipt, that such property was derived from an offence or offences, established
    in accordance with sub-paragraph (a) of this paragraph or from an act of
    participation in such offence or offences;
    (iv) Participation in, association or conspiracy to commit, attempts to
    commit and aiding, abetting, finalizing and counseling the commission of any of the
    offences established in accordance with this Article
    (2) Subject to its constitution, principles and the basic concepts of its legal
    system, each Party shall adopt such measures as may be necessary to establish
    as a criminal offence under its domestic law, when committed intentionally, the
    possession, purchase or cultivation of narcotic drugs or psychotropic substances for
    personal consumption contrary to the provisions of the 1961Convention, the 1961
    Convention as amended or the 1971 Convention.
    (3) Knowledge, intent or purpose required as an element of an offence set forth
    in Paragraph I of this Article may be inferred from objective factual circumstances.
20. Learned Counsel Sri. Rajeev Awasthi, referred to the General Assembly
    resolution 55/25, dated 15.11.2000, the United Nations Convention against
    Transnational Organized Crime. The purport of the Convention is to promote
    cooperation to prevent and combat Transnational Organised Crime more effectively.
    The Convention is aimed to integrate international cooperation inter a/ia for seizure
    and confiscation of proceeds of crime derived from predicate offences covered by the
    Convention or property the value of which corresponds to that of such proceeds; and
    property, equipment or other instrumentalities used in or destined for use in offences
    covered by the Convention. The scope of application of this Convention is to prevent,
    investigate and prosecute specified offences and other serious crime, where the
    offence is transnational in nature and involves an organised criminal group.
    Suffice it to notice for the purposes of this /is that while detailing measures to be
    adopted by State Parties for seizure and confiscation of proceeds of crime, it is
    indicated that State may consider the possibility of requiring that an offender
    demonstrate the lawful origin of the alleged proceeds of crime or other property liable
    to confiscation, to the extent the requirement is consistent with the principle
    of their Domestic law and with the nature of judicial and other proceedings. It also
    provided that provisions for seizure and confiscation should not be construed to
    prejudice the rights of a bona fide third parties [Article 12 Clauses 7, 8].
21. Sri. Gopal Chowdury has also contended, by reference to provisions of the
    Narcotic Drugs and Psychotropic Substances Act, 1985 that mens rea or some
    measure of an informed association with an offence is the sine qua non to constitute
    “illegally acquired property” under the NDPS Act.
22. We are required, in the context of the rival contentions in these writ petitions
    to interpret the Act in accordance with established and applicable principles of
    statutory interpretation. The unit of interpretation is the Act as a whole and such of
    those provisions which are considered for interpretation but in the context of the
    provisions of Act. While the preamble to the Act refers to the U.N General Assembly
    Resolution S-17/2, dated 23.2.1990; and the political declaration adopted by the
    Special Session of the U.N General Assembly held on 8th to 10th June, 1998; these
    are among the reasons for the legislation and the contents of those resolutions or
    declarations are not to be considered while interpreting provisions of a domestic law
    such as the Act unless there is an ambiguity in any provision necessitating reference
    to extra textual sources for’ guidance. The well established principle is that the words
    of a statute, passed after the date of a treaty and dealing with the same subject-matter,
    are to be construed, if they are reasonably capable of bearing such a meaning, as
    intended to carry out the treaty obligation and not to be inconsistent with it Garland v.
    British Rail Engineering Ltd., (1983) 2 AC. 751; A (FC) v.Secretary of State for the
    Home epartment, (2005) UKHL 71. This principle is reiterated in our jurisdiction as
    well. In Visakha v. State of Rajasthan, 1997 (2) ALD (Crl~.) 604 (SC) : (1997) 6
    SCC 241. , the Supreme Court explained that is now an accepted rule of judicial
    construction that regard must be had to international conventions and norms for
    construing domestic l~aw when there is no inconsistency between them and there is a
    void in the domestic law. While International Treaties, Conventions, Protocols or
    other instruments may catalyze domestic Legislation, these are not to be construed as
    the authority for Legislation. The Power to Legislate in India is derived from the
    grant of Legislative Power qua the provisions of the Constitution and the limits upon
    the legislative powers enumerated in the provisions of the Constitution including the
    authorised and enumerated fields of legislation in Lists 1, 2 and 3 of the Seventh
    Schedule of the Constitution.
    The learned Counsel for the petitioners are not heard to contend that the
    provisions of the Act are u/tra vires international treaties, conventions; the FATF
    Standards etc. The contours of the powers of Parliament to make any law for the
    whole or any part of the territory of India for implementation of any treaty,
    agreement, convention or any decision made at any international conference,
    association or body is well established to justify the customary parade of familiar
    scholarship and a catena of precedent – see Maganbhai v. Union of India, (1970) 3
    SCC 400; S. Jagannath v. Union of India, (1997) 2 SCC 87 : 1997 (3) ALD (SCSN)
    28; Bilabeti Behera v. State of Orissa, (1993) 2 SCC 746; and Apparel Export
    Promotion Council v. A.K Chopra, (1999) 1 SCC 759 : 1999 (1) ALD (SCSN) 26.
    We therefore proceed to interpret the provisions of the Act within the framework of
    its provisions, tested on the anvil of the limits on legislative powers enjoined by the
    provisions of our Constitution; for we are not persuaded that there is any ambiguity
    that legitimizes a resort to translegislation sources for guidance.
23. We had benefit of perusing the judgment by a learned Division Bench of the
    Bombay High Court, dated 5.8.2010 in First Appeal Nos. 527 to 529 of 2010 [per
    A.M Khanwilkar, J] The very question as to whether the provisions in the Act are
    applicable for attachment and confiscation of property belonging to persons other
    than those charged and prosecuted of having committed a scheduled offence fell for
    consideration in this judgment. The appeals (to the Bombay High Court) were
    preferred [under Section 42 of the Act] against the judgment and order of the
    Appellate Tribunal rejecting a challenge to orders of the Adjudicating Authority
    confirming orders of provisional attachment. It however requires to be noted that the
    decision was delivered in the context of the provisions of Section 5 of the Act prior to
    its amendment by the 2nd Amendment Act, 2009 i.e, prior to the introduction of the
    second proviso to Section 5(1) of the Act. On an interactive interpretation of the
    several provisions of the Act including definition of the expressions-“Person”;
    “Proceeds of Crime”; “Property”; and “Transfer”; and the provisions of Sections 5
    and 8, the Bombay judgment concluded that attachment of proceeds of crime in
    possession of any person [other than the person charged of having committed a
    scheduled offence] will fall within the sweep of Section 5 of the Act.
24. While it may perhaps be contended that the provisions of Section 5(1) [prior
    to the second provision exclude from the domain of the Act, attachment and
    confiscation of property in the possession of a person not charged of having
    committed a scheduled offence, this contention in our considered view is wholly
    misconceived after enactment of the second proviso. The second proviso enjoins that
    any property of any person may be attached if the specified authority therein ha
    reason to believe -. The non obstante clause in the second proviso clearly excludes
    clause (b) of Section 5(1) . It is this clause [b] that incorporates the requirement that
    the proceeds of crime should be in possession of a person who is charged of having
    committed a scheduled offence, for initiating proceedings for attachment and
    confiscation. If the provisions of the Section 5(1)(b) are to be eschewed for
    ascertaining the meaning of the second proviso [qua the legislative injunct of the non
    obstante provision], on a true and fair construction of the provisions of Section 5(1)
    including the second proviso thereof but ignoring clause (b), the Legislative intent is
    clear, unambiguous and linear. Provided the other conditions set out in Section 5 of
    the Act are satisfied, any property of any person (the expression “person”, is not
    restrictively defined in Section 2(s) limited to a person charged of having committed
    a scheduled offence), could be proceeded against for attachment, adjudication and
    confiscation. We are persuaded to the view that incorporation of the 2nd proviso
    Section 5(1) is intended to clarify the position or remove any ambiguity as to the
    application of Section 5(1) to property of a person not charged of having committed a
    scheduled offence.
25. Inter alia it was suggested that attachment and confiscation proceedings could
    be initiated for instance against a shareholder of a Company who receives higher
    dividend or higher value on the sale of shares of such company, where the company
    makes and declares substantial profits by evading customs duties or the like. Would
    the higher dividends received by the shareholder or the gains made by selling his
    shares in the company at higher price relatable to the illegal activity of the Company,
    of which illegality he was clearly not aware, be liable to attachment and confiscation,
    query the petitioners. In response, Sh. Rajeev Awasthi for the respondent has stated
    that as a policy the Enforcement Officials are not proceeding against properties, under
    the Act, unless satisfied that the property is proceeds of the crime; is in possession of
    a person who is either accused/charged of a scheduled offence or has knowledge of
    the property being the proceeds of crime.
26. In our considered view the petitioners’ contention proceeds on a
    misconception of the relevant provisions of the Act. Against transactions constituting
    money laundering, the provisions of the Act contemplate two sets of proceedings; (a)
    prosecution for the offence of money-laundering defined in Section 3 with the
    punishment provided in Section 4; and (b) attachment, adjudication and confiscation
    in the sequential steps and subject to the conditions and procedures enumerated in
    Chapter 111 of the Act. Section 2 (p) defines the expression “money- laundering” as
    ascribed in Section 3. Section 3 defines the offence of Money- Laundering in an
    expansive locus as comprehending direct or indirect attempt to indulge; assist, be a
    party to or actually involved knowingly in any process or activity connected with the
    proceeds of the crime and projecting it as untainted property. On proof of guilt and
    conviction of the offence of Money-Laundering, the punishment provided in Section
    4 of the Act would follow after a due trial by the Special Court; which is conferred
    exclusive jurisdiction qua Section 44, Chapter VII of the Act. The prosecution, trial
    and conviction for the offence of money-laundering are the criminal sanction
    administered by the Legislation and effectuated by a deprivation of personal liberty as
    a disincentive to a malfeasant. The second matrix of proceedings targets the
    “proceeds of crime” defined in Section 2(u); as any property derived or obtained,
    directly or indirectly, by any person as a result of criminal activity relating to a
    scheduled offence or the value of any such property, for initial attachment and
    eventual confiscation.
27. Chapter III of the Act enables the specified authority, if he has reasons to
    believe [the reasons to be recorded in writing], on the basis of material in possession
    of the authority that any person charged of having committed a scheduled offence
    [Section 5(1)(b)] or even if not so charged [second proviso to Section 5(1)] is in
    possession of proceeds of crime and such proceeds are likely to be concealed,
    transferred etc., in a manner as may frustrate any proceeding relating to confiscation
    of such proceeds of crime under Chapter III, to provisionally attach [Section 5(1)];
    confirm an order of provisional attachment after a process of adjudication [Section
    8(3)]; and eventually pass an order confiscating such property [Section 8(6)].
28. On the afore-stated scheme the provisions of the Act, the prosecution under
    the Act; and attachment and eventual confiscation proceedings are distinct
    proceedings. These two sets of proceedings may be initiated against the same person
    if he is accused of the offence of money-laundering. Even when a person is not so
    accused, the property in his possession may be proceeded against for attachment and
    confiscation, on a satisfaction by the appropriate and competent authority that such
    property constitutes proceeds of crime.
29. In our considered view, the provisions of the Act which clearly and
    unambiguously enable initiation of proceedings for attachment and eventual
    confiscation of property in possession of a person not accused of having committed
    an offence under Section 3 as well, do not violate the provisions of the Constitution
    including Articles 14, 21 and 300-A and are operative proprio vigore.
30. While the offence of money-laundering comprises various degrees of
    association and activity with knowledge and information connected with the proceeds
    of crime and projection of the same as untainted property; for the purposes of
    attachment and confiscation (imposition of civil and economic and not penal
    sanctions) neither mens rea nor knowledge that a property has a lineage of criminality
    is either constitutionally necessary or statutorily enjoined. Proceeds of crime [as
    defined in Section 2(u)] is property derived or obtained directly or indirectly as a
    result of criminal activity relating to a scheduled offence or the value of any such
    property. “Property” is defined in Section 2(v) to include property of every
    description corporeal, incorporeal, movable, immovable, tangible, and intangible and
    includes deeds and instruments evidencing title to or interest in such property or
    assets wherever located.
31. The matrix of the relevant provisions of the Act compel the inference that the
    legislation subsumes that property which satisfies the definition of “proceeds of
    crime”, prime fade is considered as property whose transfer [defined in Section 2
    (za)] is subject to verification to consider whether the transfer is a stratagem of a
    money laundering operation and is part of a layering transaction. As the provisions of
    the Act target malfeasants charged of an offence under Section 3 and the proceeds of
    crime in the possession of a person so charged and any other person as well, the
    legislative intent is manifest that attachment and confiscation constitute a critical and
    clearly intended and specifically enacted strategy to combat the evil of moneylaundering. A person though not accused/charged of an offence under Section 3,
    when in possession of any proceeds of crime, from the provisions of the Act it is
    clear, has but a defeasible and not a clear title thereto. In the context of attachment
    and confiscation proceedings, knowledge that a property is proceeds of crime is not
    legislatively prescribed.
32. Proceeds of crime is defined to include not merely property derived or
    obtained as a result of criminal activity relating to a scheduled offence but the value
    of any such property as well. The bogey of apprehensions propounded on behalf of
    the petitioners is that where proceeds of crime are sequentially transferred through
    several transactions, in favour of a series of individuals having no knowledge or
    information as to the criminality antecedent to the property; the authorities may
    proceed against each and all of such sequential transactions, thus bringing within the
    vortex of Chapter-III of the Act, all the properties involved in several transactions.
33. Section 8(1) clearly postulates affording of an opportunity to a person in
    possession of proceeds of crime to indicate the sources of his income, earnings or
    assets; out of which or by means of which he has acquired the property attached,
    under Section 5(1) or seized under Sections 17 or 18 the vidence on which he relies
    and other relevant information and particulars. It is therefore clear that here a
    property is provisionally attached under Section 5, the person in possession of such
    property may avail the opportunity under Section 8 to indicate/establish that he has
    acquired the property attached (prime fade the proceeds of crime) out of his lawful
    earnings or assets, that he has the means to do so, and that his acquisition is therefore
    legitimate, bona fide and at fair market value of such property; and that the value paid
    for acquisition of the property and not the property in his possession
    that constitutes proceeds of crime, if at all. On such showing, to the satisfaction of the
    adjudicating authority, it would perhaps be not the property in possession of a person
    but the fair value for which he has acquired the property and paid to the transferor
    that constitutes proceeds of crime and the authorities may have to proceed against the
    property or value in the hands of the transferor. \
34. In the illustration proffered on behalf of the petitioners; since the dividend,
    the higher dividend or the value of the shares sold would be relatable to illegal
    conduct of a company or its officers (if such illegality is a scheduled offence and the
    company or a person in management or control of the company is accused of an
    offence under Section 3 and would be proceeds of crime, so much of the quantum of
    the dividend received or the value of a share sold as constitutes proceeds of crime
    could be liable to attachment and confiscation. This in our considered view is the true
    and fair construction of the provisions of the Act. At this stage of the proceedings we
    cannot be oblivious of the fact that the petitioners and others, whose assets are being
    subjected to the processes under Chapter III of the Act, are alleged to be closely
    related to or employees of the individual(s) who orchestrated the massive scam and
    that these persons had traded in the shares of SCSL (with a presumptive insider
    information) when those shares had a peak value, achieved on account of the criminal
    conduct of Sri Ramalinga Raju, and others.
35. The contention by the petitioners that attachment and confiscation of
    proceeds of crime in possession of a person who is not charged of an offence under
    Section 3 or who has no knowledge or information as to the antecedent criminality
    are arbitrary and unfair legislative prescriptions is misconceived.
    35 Section 24 inheres on a person accused/charged of having committed an
    offence under Section 3, the burden of proving that proceeds of crime are untainted
    property. Section 23 of the Act enjoins a presumption in inter””connected
    transactions that where money-laundering involves two or more inter-connected
    transactions and one or more of such transactions is or are proved to be involving in
    money-laundering, then for the purposes of adjudication or confiscation under
    Chapter’lll, the Act enjoins a rebuttable presumption that the remaining transactions
    form part of such interconnected transactions.
36. From the scheme of the provisions of the Act, it is apparent that, a person
    accused of an offence under Section 3 of the Act whose property is attached and
    proceeded against for confiscation must advisedly indicate the sources of his income,
    earnings or assets, out of which or means by which he has acquired the property
    attached, to discharge the burden (Section 24) that the property does not constitute
    proceeds of crime. Where a transaction of acquisition of property is part of
    interconnected transactions, the onus of establishing that the property acquired is not
    connected to the activity of money-laundering, is on the person in ownership, control
    or possession of the property, though not accused of a Section 3 offence, provided
    one or more of the interconnected transactions is or are proved to be involved in
    money-laundering (Section 23).
37. It further requires to be noticed that not only from the second proviso to
    Section 9 of the Act but on general, principles of law as well, a person deprived of the
    property in his ownership, control or possession on account of confiscation
    proceedings under the Act, has a right of action against the transferor of such property
    to recover the value of the property.
38. In the context of the fact that money-laundering is perceived as a serious
    threat to financial systems of countries across the globe and to their integrity and
    sovereignty as well; in view of the fact that targetting the proceeds of crime and
    providing for attachment and confiscation of the proceeds of crime is conceived to be
    the appropriate legislative strategy; and given the several safeguards procedural and
    substantive alluded to hereinbefore, we are not persuaded to the view that attachment
    and confiscation of property constituting proceeds of crime in the possession of a
    person not accused/charged of an offence under Section 3 constitutes an arbitrary or
    unconstitutional legislative prescription.
39. The contention that the definition of “proceeds of crime” [Section 2(u)] is too
    broad and is therefore arbitrary and invalid since it subjects even property acquired,
    derived or in the possession of a person not accused, connected or associated in any
    manner with a crime and thus places innocent persons in jeopardy, is a contention that
    also does not merit acceptance. In Attorney General for India v. Amratlal
    Prajivanda.s, (1994) 5 SCC 54, a Constitution Bench of the Supreme Court
    considering the validity of provisions of the Smugglers and Foreign Exchange
    Manipulators (Forfeiture of Property) Act, 1976 (SAFEMA) observed: The relatives
    and associates are brought in only for the purpose of ensuring that the illegally
    acquired properties of the convict or detenu, acquired or kept in their names, do not
    escape the net of the Act. It is a well-known fact that persons indulging in illegal
    activities screen the properties acquired from such illegal activity in the names of
    their relatives and associates. Sometimes they transfer such properties to them, may
    be, with an intent to transfer the ownership and title. In fact, it is immaterial how such
    relative or associate holds the properties of convict/detenu – whether as a benami or
    as a mere name-lender or as a bona fide transferee for value or in any other manner.
    He cannot claim those properties and must surrender them to the State under the Act.
    Since he is a relative or associate, as defined by the Act, he cannot put forward any
    defence once it is proved that that property was acquired by the detenu whether in his
    own name or in the name of his relatives and associates. 40. The Court further
    observed : By way of illustration, take a case where a convict/detenu purchases a
    property in the name of his relative or associate – it does not matter whether he
    intends such a person to be a mere name lender or whether he really intends that such
    person shall be the real owner and/or possessor thereof -or gifts away or otherwise
    transfers his properties in favour of any of his relatives or associates, or purports to
    sell them to any of his relatives or associates – in all such cases, all the said
    transactions will be ignored and the properties forfeited unless the convict/detenu or
    his relative/associate, as the case may be, establishes that such property or properties
    are not “illegally acquired properties” within the meaning of Section 3(c). In this view
    of the matter, there is no basis for the apprehension that the independently acquired
    properties of such relatives and associates will also be forfeited even if they are in no
    way connected with the convict/detenu. So far as the holders (not being relatives and
    associates) mentioned in Section 2(2)(e) are concerned, they are dealt with on a
    separate footing. If such person proves that he is a transferee in good faith for
    consideration, his property – even though purchased from a convict/detenu – is not
    liable to be forfeited. It is equally necessary to reiterate that the burden of establishing
    that the properties mentioned in the show-cause notice issued under Section 6, and
    which are held on that date by a relative or an associate of the convict/detenu, are not
    the illegally acquired properties of the convict/detenu, lies upon such
    relative/associate. He must establish that the said property has not been acquired with
    the monies or assets provided by the detenu/convict or that they in fact did not or do
    not belong to such detenu/convict.
40. The Supreme Court concluded: The application of SAFEMA to the relatives
    and associates [in clauses (c) and (d) of Section 2(2)] is equally valid and effective
    inasmuch as the purpose and object of bringing such persons within the net of
    SAFEMA is to reach the properties of the detenu or convict, as the case may be,
    wherever they are, howsoever they are held and by whomsoever they are held. They
    are not conceived with a view to forfeit the independent properties of such relatives
    and associates as explained in this judgment.
41. SAFEMA targets for forfeiture ‘illegally acquired property’ of a person
    (defined as a convict or detenue under specified enactments and relative or associate
    of such convict or detenue (the expression relative or associate also defined)). This is
    a 1976 enactment that provides for forfeiture of illegally acquired properties of
    smugglers and foreign exchange manipulators. The Act, on the other hand,
    specifically targets the wider pathology of money-laundering in relation to a large
    number of scheduled offences enumerated from a variety of specified legislations. In
    the context of the objects sought to be achieved by the Act and the specificity of the
    definitions of the expressions “money-laundering” and “proceeds of crime”; the
    inherence of the burden of proof on a person accused of an offence under Section 3
    (Section 24) and the presumptions in inter-connected transactions (Section 23), it is
    clear that what is targeted for confiscation is proceeds of crime in the ownership,
    control or possession of any person and not all property or proceeds of all crime in
    the ownership, control or possession of any person.
42. Again, in Smt. Heena Kausar v. Competent Authority, 2008 (7) SCALE 331
    the validity of the proviso to Section 68 – C. of the Narcotic Drugs and Psychotropic
    Substances Act, 1985, (NDPS Act, 1985), prior to its amendment by Central Act 9 of
    2001 fell for the consideration of the Supreme Court. Dealing with the challenge the
    Supreme Court observed: “…The purported object for which such a statute has been
    enacted must be noticed in interpreting the provisions thereof. The nexus of huge
    amount of money generated by drug trafficking and the purpose for which they are
    spent is well known … Necessity was felt for introduction of strict measures so that
    money earned from the drug trafficking by the persons concerned may not continue to
    be invested, inter alia, by purchasing movable or immovable properties not only in
    his own name but also in the names of his near relatives.”
43. In Heena Kausar’s case (supra), interpreting similar provisions in Chapter VA
    of the NDPS Act, 1985, the Apex Court pointed out that the property sought to be
    forfeited must be one which has a direct nexus with the income, etc., derived by way
    of contravention of any of the provisions of the Act or any property acquired
    therefrom. The Court explained that the meaning of “identification of such property”
    (a phrase employed in Section 68 – E of Chapter VA), is that the property was derived
    from or used in the illicit traffic.
44. The SAFEMA; The NDPS Act, 1985; The Prevention of Illicit Traffic in
    Narcotic Drugs and Psychotropic Substances Act, 1988; and The Benami
    Transactions (Prohibition) Act, 1988 are illustrations of statutes that incorporate
    provisions for forfeiture, confiscation or acquisition without compensation, of
    property derived, acquired, possessed or dealt with in contravention of specified
    legislative prescriptions. The Act is a later statute to the aforementioned Acts and
    specifically targets the perceived evil of money-laundering. The category of offences
    enumerated in Parts A, B and C of the Schedule of the Act elucidate the legislative
    intent that the several offences and the unlawful gains/wealth derived therefrom by
    malfeasant(s) are targetted and confiscated, including from others when the property
    being the derivative of criminal activity is laundered through one or more layered
    transactions and finds its way to the ownership, control or possession of nonoffenders as well; but in respect of scheduled offences.
45. The object of the Act is to prevent money – laundering and connected
    activities and confiscation of “proceeds of crime” and preventing legitimising of the
    money earned through illegal and criminal activities by investments in movable and
    immovable properties often involving layering of the money generated through illegal
    activities, i.e, by inducting and integrating the money with legitimate money and its
    species like movable and immovable property. Therefore, it is that the Act defines the
    expression “proceeds of crime” expansively to sub-serve the broad objectives of the
    Act. We thus do not find any infirmity in the provisions of the Act.
46. 1-SSUE-A is answered accordingly. Issue-B:
47. The Bombay High Court in the judgment dated 5.8.2010 (in First Appeal
    Nos. 527 to 529 of 2010) has interpreted the provisions of Section 5(1) of the Act
    even prior to incorporation of the second proviso by the Second Amendment Act,
    2009) as enabling initiation of proceedings for attachment and confiscation of
    property in possession of a person not accused/charged of an offence under Section 3
    as well. The Second Amendment Act insofar as it has incorporated the second
    proviso to Section 5(1), it is contended on behalf of the respondents is by way of
    clarification and emphasis as to the true import and trajectory of Section 5(1). Be that
    as it may.
48. The process of adjudication under Section 8 of the Act is in respect of
    property attached under Section 5(1); proceeds of crime involved in moneylaundering in possession of any person searched and seized under Section 17 and in
    respect of which the appropriate authority has filed an application to the adjudicating
    authority for retention of such property under Section 17(4); and proceeds of crime
    seized from the possession, ownership or control of any person under Section 18(1)
    and in respect of which an application is filed under sub-section (10) of Section 18 to
    the adjudicating authority, requesting for retention of such property. The common
    objective of Sections 5, 8, 17 and 18 is provisional attachment, confirmation of
    attachment and confiscation of property constituting proceeds of crime. While there
    was perhaps an ambiguity on the issue whether the process of provisional attachment
    under Section 5 and confirmation of such provisional attachment under Section 8(3)
    could lie against property in possession of a person other than one accused/charged of
    having committed an offence under Section 3 [this ambiguity has since been resolved
    by the provisions of the Second Amendment Act incorporating appropriate
    amendments by way of the second proviso to Section 5(1) and addition of the clause
    “or is in possession of proceeds of crime” in Section 8(1)], there was no ambiguity
    that the process of adjudication under Section 8 is available against all proceeds of
    crime whether in possession of a person accused/charged of an offence under Section
    3 or otherwise, in view of the adjudication process applying to property seized under
    Sections 17 and 18 of the Act. Neither the provisions of Sections 17 nor 18 require
    for search and seizure operations that the proceeds of crime involved in moneylaundering should be in possession only of a person accused/charged of an offence
    under Section 3. The provisions of Clause (ii) of Section 17(1) clearly (by employing
    the disjunctive ‘or’) stipulate that search and seizure operations may proceed not only
    130
    against a person who has committed an act which constitutes money-laundering but
    also against a person in possession of any proceeds of crime involved in moneylaundering or in possession of records relating to money-laundering. On search of any
    person or seizure of such record or property constituting proceeds of crime in the
    possession, ownership or control of any person, which may be useful or relevant to
    any proceedings under the Act, a property, which constitutes proceeds of crime seized
    under Section 17 or 18, is equally subject to the adjudicatory processes under Section
    8.
49. On analysis of the provisions of Section 5, 8, 17 and 18, it is clear that
    provisions of the Second Amendment Act have carefully ironed out the creases and
    the latent rucks in the texture of the provisions of the Act relating to attachment,
    adjudication and confiscation in Chapter-Ill. Attachment or confiscation of proceeds
    of crime in the possession of a person who is not accused or charged of an offence
    under Section 3 is thus not an incorporation for the first time by the provisions of the
    Second Amendment Act, 2009. The contention on behalf of the petitioners that the
    second proviso to Section 5(1) of the Act, applies only to property acquired/possessed
    prior to enforcement of this provision or if interpreted as being retrospective, the
    provision itself must be invalidated for arbitrary retrospective operation is therefore
    without substance or force.
50. The above contention does not merit acceptance even otherwise. Article 20 of
    the Constitution enacts an injunction only in respect of ex post facto laws resulting in
    conviction for offences or imposition of penalties greater than which might have been
    inflicted under the law enforceable at the time of commission of the offence. No
    provision of the Constitution has been brought to our notice which prohibits a
    legislative measure which targets for attachment and confiscation proceeds of crime.
    On the text and authority of our Constitution while it may perhaps gainfully be
    contended that conviction for the offence of money-laundering cannot be recorded if
    the said offence is committed prior to the enforcement of Section 3 of the Act, such a
    contention cannot be advanced to target proceedings for attachment and confiscation,
    as these fall outside the pale of the prohibitions of the Constitution, in particular
    Article 20(1).
51. The majority opinion in Khemka & Co. is only a reiteration and application
    of the well-accepted “void for vagueness” principle which applies to invalidate
    irredeemably ambiguous statutory provisions. The observations in the majority
    opinions are not to be considered as encompassing legislative sanctions which do not
    effect personal liberties within the constitutional prohibition of ex post-facto laws
    enjoined by Article 20(2) of the Constitution. The Khemka majority opinion, in our
    carefully considered view, only means that no regulation of conduct; imposition of
    person’s civil, economic rights or of personal liberty or regulation of freedoms,
    131
    natural or guaranteed by constitutionally entrenched rights, may be brought about by
    overly vague and unspecific legislative prescriptions; and nothing more.
52. In Amratlal Prajivandasrs case (supra) the validity of SAFEMA was
    challenged and upheld by the Constitution Bench. Section 3(c) of the legislation
    defined ‘illegally acquired property’ as any property acquired whether before or after
    the commencement of SAFEMA, wholly or partly out of or by means of any income,
    earnings or assets derived or obtained from or attributable to any activity prohibited
    by or under any law which the Parliament has the power to make. The challenge to
    the definition of illegally acquired wealth on grounds of over breadth and as an
    excessive and disproportionate legislative response to the perceived evil, was
    repelled. Jeevan Reddy, J., put it pithily when he observed: Bitter medicine is not bad
    medicine.
53. The huge quanta of illegally acquired wealth; acquired from crime and
    economic and corporate malfeasance corrodes the vitals of rule of law; the fragile
    patina of integrity of some of our public officials and State actors; and consequently
    threatens the sovereignty and integrity of the Nation. The Parliament has the authority
    to legislate and provide for forfeiture of proceeds of crime which is a produce of
    specified criminality acquired prior to the enactment of the Act as well. It has also the
    authority to recognise the degrees of harm and identified pejorative conduct has on
    the fabric of our society and to determine the appropriate remedy for the pathology.
54. Issue-B is answered accordingly.
    Issues – C & D:
55. Under Issue – C, the challenge to the provisions of Section 8 on the ground of
    vagueness is considered. The petitioners also contend that the definitions, “moneylaundering” [Section – 2(1)(p)]; “proceeds of crime” [Section – 2(1)(u)] and the
    provisions of Section 5 (enabling provisional attachment) are void for being vague.
    We analyse the authorities cited on behalf of the petitioners to support the void for
    vagueness contention.
56. Reliance is placed on precedents of foreign and domestic jurisdiction. Cited at
    the bar are decisions of the U.S Supreme Court in, Thornhill v. State of Alabama, 310
    U.S 88 (1940), United States v. Harriss, 347 U.S 612 (1954), Papachristou v. City of
    Jacksonvill, 405 U.S 156 (1972), Grayned v. City of Rockford, 408 U.S 104 (1972);
    the decision of the Supreme Court of Canada In, R v. Nova Scotia Pharmaceutical
    Society, 408 U.S 104 (1972), Reliance is also placed on the decisions of our Supreme
    Court in Romesh Thapar v. State of Madras, AIR 1950 SC 124; A.K Roy v. Union of
    India, (1982) 1 SCC 271; Kartar Singh v. State of Punjab, (1994) 3 SCC 569.
57. The United States Courts have evolved the Void for Vagueness doctrine to
    scrutinize laws that are intrinsically vague and thus enable arbitrary and
    discriminatory enforcement of criminal statutes and other statutes that deter citizens
    from engaging in certain political and religious discourse. This doctrine advances
    four seminal constitutional policies flowing out of the Due Process Clauses of the 5th
    and 14th Amendments to the United. States Constitution: (a) It encourages the
    Government to clearly distinguish conduct that is lawful from that which is not so—
    enabling individuals to have adequate notice of their legal obligations so that they can
    govern their behaviour accordingly. Under this value where individuals are left
    uncertain by the wording of an imprecise statute, the law becomes an arbitrary and a
    standardless trap for the unwary; (b) the doctrine curbs arbitrary and discriminatory
    enforcement of criminal statutes. The standard assumes that penal laws must be
    understood by those persons who are required to obey them and those persons who
    charged with the duty of enforcing them. Therefore, statutes that do not carefully
    outline detailed procedures by which Enforcement officials may perform an
    investigation, conduct a search or make an arrest, confer a wide discretion upon each
    officer to act as he sees fit. Precisely worded statutes confine the officers’ activities to
    the letter of the law; (c) the doctrine discourages Judges from attempting to apply
    sloppily worded laws. In cases of vague provisions, the Courts may attempt to
    narrowly construe a vague statute so that it applies only to a finite set of
    circumstances. By a reading of specific enactment requirements into a vaguely
    structured or worded law, Courts attempt to insulate innocent behaviour from
    criminal sanction. Such interpretive techniques are not always possible. Eventually, a
    confusing law that cannot be cured by a narrow judicial interpretation will be struck
    down as unconstitutional violation of the Due Process Clause and; (d) the doctrine
    avoids encroachment on the First Amendment freedoms, such as speech and religion.
    Since vague laws produce uncertainty in the minds of average citizens, some citizens
    will inevitably decline to undertake risky behaviour that might deprive them of
    liberty. Where vague provisions of legislation deter citizens from engaging in certain
    political and religious discourse, Courts will apply heightened scrutiny to ensure that
    protected expressions are not suppressed. It must however be noted that though
    Courts will scrutinize a vague law that strikes a fundamental freedom, in other cases
    the void for vagueness doctrine does not however require mathematical precision on
    the part of the Legislators. Also, laws that regulate the economy are scrutinized less
    closely than those that regulate individual behaviour; and laws that impose civil or
    administrative penalties may be drafted with less clarity than those imposing criminal
    sanctions.
58. The decisions of our Supreme Court in Romesh Thapar, Khemka &
    Company, AX Roy and Kartar Singh’s cases (supra), reiterate and reinforce the void
    for vagueness doctrine evolved and refined in other constitutional jurisdictions, in the
    United States and Canada. A prohibitory order issued by the Governor of Madras in
    exercise of powers under Section 9(1-A) of the Madras Maintenance of Public Order
    Act, 1949 — prohibiting the entry into or circulation, sale or distribution in the State
    of Madras of a newspaper “Cross Roads”; validity of certain provisions of the
    National Security Act, 1980; and challenge to the provisions of the Terrorist Effected
    Areas (Special Courts) Act, 1984, the Terrorist and Disruptive Activities (Prevention)
    Act, 1985; the Terrorist and Disruptive Activities (Prevention) Act, 1987 and Section
    9 of the Code of Criminal Procedure (UP Amendment), 1976 respectively fell for
    consideration of our Supreme Court, in the above cases. In these decisions, the Apex
    Court reiterated the principle that a law would be void for vagueness particularly if it
    involves criminal sanctions. In A.K Roy, Chief Justice Chandrachud, reiterated the
    well established principle that crimes must be defined with appropriate definiteness
    and it is regarded as a fundamental concept in criminal law and must now be regarded
    as a pervading theme of our Constitution. The Court held: Neither the criminal law
    nor the Constitution requires the application of impossible standards and therefore,
    what is expected is that the language of the law must contain an adequate warning of
    the conduct which may fall within the prescribed area, when measured by common
    understanding.
59. Bhagwati, 3 pointed out in Naraiandas Indurkhya v. State of M.P, (1974) 4
    SCC 764, where the power conferred by a statute on any authority of the State is
    vagrant and unconfined and no standards or principles are laid down by the statute to
    guide and control the exercise of such power, the statute would be violative of the
    equality clause, because it would permit arbitrary and capricious exercise of power,
    which is an anti-thesis of equality before the law.
60. The plea for invalidation of the provisions of the Act on the ground of
    vagueness is in our considered view misconceived. The vagueness doctrine prohibits
    only laws that fail either to give proper notice to regulate parties or to meaningfully
    limit the discretion of their enforcers. The judicial branch cannot determine a law’s
    constitutionality simply by examining how it is enforced. The reason is readily
    apparent. If a Court makes only the determination that an enforcer is behaving
    arbitrarily and with unrestrained discretion, it cannot know whether the enforcer’s
    actions are authorised by an unconstitutionally vague law or whether the enforcer is
    acting outside the authority granted by a sufficiently tailored and, therefore, intra
    wires law. It is therefore appropriate that a Court scrutinising a vagueness challenge
    must come to the law at issue rather than simply examine the actions or potential
    actions of its enforcer.
61. In the light of the authority of the precedents, we proceed to consider the
    provisions of the Act in the context of the challenges classified in issues ‘C and ‘D’.
    The scheme of Section 8:
62. The challenge to the validity of Section 8 is considered under these issues.
    ‘Proceeds of crime’ is defined as any property derived or obtained, directly or
    indirectly, by any person as a result of criminal activity relating to a scheduled
    offence or the value of any such property [Section 2(u)]. Under Section 8, if on
    receipt of a complaint under Section 5(5) (after an order of provisional attachment) or
    applications under Section 17(4) or 18(10) (pursuant to a search and seizure
    operation), where the adjudicating authority has reason to believe that any person has
    committed an offence under Section 3 or is in possession of proceeds of crime, he
    may initiate the process delineated in Section 8.
63. While Section 5 does not enjoin a notice or opportunity to any person in
    possession of proceeds of crime, whether charged of having committed a scheduled
    offence or otherwise, Section 8(1) mandates service of a notice (for the stipulated
    period) requiring the noticee to indicate the sources of his income, earning or assets,
    out of which or by means of which, he has acquired the property attached under
    Section 5(1) or seized under Section 17 or 18; the evidence on which such person
    relies and other relevant information and particulars. The noticee must show-cause
    why all or any of the properties provisionally attached or seized as the case may be,
    be not declared to be properties involved in money laundering and confiscated by the
    Central Government.
64. We consider Sections 5; 8(1), (2) and (3); 17 and 18 to comprise an
    intermeshing raft of provisions. The process of provisional attachment under Section
    5; seizure under Section 17(1)(c) or 18(1) are, in the legislative scheme of the Act,
    intended to empower the appropriate authority to provisionally attach but without the
    consequence of dispossession from immovable property (under Section 5) or to seize
    a property (under Section 17 or 18), on the basis of a unilateral satisfaction of the
    appropriate authority (if there is reason to believe; such belief to be recorded in
    writing), that such property constitutes proceeds of crime, in the possession,
    ownership or control of any person, whether or not accused of an offence under
    Section 3.
65. At the provisional attachment stage under Section 5(1) or a seizure under
    Section 17 or 18, the prima facie satisfaction that the property in question constitutes
    proceeds of crime as defined in the Act, is a satisfaction that the appropriate authority
    arrives on his own; on the basis of the report as to the scheduled offence forwarded to
    a Magistrate under Section 173 of the Code of Criminal Procedure, 1973 or a
    complaint filed by a person authorized to investigate an offence enumerated in the
    Schedule before a Magistrate or a Court for taking cognizance of the scheduled
    offence [first proviso to Section 5(1) and proviso to Section 18(1)]; or on the basis of
    information in the possession of the authorized officer [under Section 17(1)]. No
    notice or providing of an opportunity to the person in possession, ownership or
    control of the property, believed by the authorised officer to constitute proceeds of
    crime; hearing the version or considering the material produced by any such person
    (in support of a claim that the property does not constitute proceeds of crime in view
    of the sources of his income, earning or assets out of or by means of which the
    property was acquired), is envisaged or obligated, at this stage of the process.
66. Since the reason to believe or the satisfaction requisite for provisional
    attachment or seizure of a property under these provisions is unilateral, it is mandated
    that the period of provisional attachment shall not exceed 150 days from the date of
    the order and that within 30 (thirty) days therefrom a complaint should be filed before
    the adjudicating authority stating the facts of such attachment —[vide Section 5(5)].
    Similarly, clause (4) of Section 17 and clause (10) of Section 18 enjoin that the
    authority seizing any record or property under the substantive provisions, shall within
    thirty (30) days from such seizure, file an application before the adjudicating
    authority requesting for retention of such record or property.
67. Section 20 enjoins that where a property has been seized under Section 17 or
    18 and the authorized officer, on the basis of material in his possession, has a reason
    to believe (the reason to be recorded in writing) that such property is required to be
    retained for the purposes of adjudication under Section 8, such property may be
    retained for a period not exceeding three months, from the end of the month in which
    the property was seized. This provision also enjoins that the authorized officer, after
    passing an order for retention of the property for the purposes of adjudication under
    Section 8, shall forward a copy of the order along with the material in his possession
    to the adjudicating authority whereupon the adjudicating authority is required to keep
    such order and material for the prescribed period; further on expiry of the period
    specified in sub-section (1), the property shall be returned to the person from whom it
    was seized, unless the adjudicating authority permits retention of such property
    beyond the said period. To a similar effect are the provisions of Section 21 with
    regard to retention of records seized under Section 17 or 18.
68. Proceeds of crime is defined as any property, derived or obtained by any
    person as a result of criminal activity relating to a scheduled offence or the value of
    such property. For confirmation of provisional attachment [under Section 8(2)], the
    adjudicating authority must record a finding that all or any of the properties
    provisionally attached or seized are involved in money laundering and only thereafter
    may he pass an order under Section 8(3), confirming the provisional attachment made
    under Section 5(1) or retention of a property seized under Section 17 or 18. The
    vagueness challenge:
69. Within the scheme of the provisions of the Act, on receipt of a complaint
    under Section 5(5) (from the authority which passed the provisional attachment order)
    or pursuant to applications made under Section 17(4) or 18(10) (pursuant to a search
    and seizure), the adjudicating authority is required, on the basis of the material in his
    possession to have a reason to believe that any person has committed an offence
    under Section 3 or a person even if not so accused is in possession of proceeds of
    crime involved in money laundering. On such prima facie satisfaction, the
    adjudicating authority is required to serve a notice (for the stipulated period) on such
    person; on any other person holding the property on behalf of another person; or
    where the property is jointly held by more than one person on all persons holding the
    property [1st and 2nd Provisos to Section 8(1)] calling upon him/them to indicate the
    sources of his/their income etc. The noticee is thus provided an opportunity to rebut
    the prima facie assumptions of the adjudicating authority and to establish that the
    property in question does not constitute/comprise proceeds of crime involved in
    money-laundering. This is a salutary safeguard to the noticee, also in view of the
    presumption regarding interconnected transactions enjoined by Section 23 of the Act.
    Where the noticee is a person accused of having committed the offence under Section
    3 of the Act, in the light of the enjoined burden of proof on such person (Section 24),
    this opportunity provides an avenue to discharge the burden.
70. Sub-section (2) of Section 8 obligates the adjudicating authority to consider
    the reply if any submitted by a noticee; hear the aggrieved person (as well as the
    Director or any other officer authorised by him in this behalf); take into account all
    relevant materials available on record before him; and to record a finding by passing
    an order whether all or any of the properties referred to in the notice issued [under
    Section 8(1)], are involved in money-laundering. The proviso to Section 8(2) enables
    a person who claims the property but is not issued or served a notice under Section
    8(1) to avail the opportunity of being heard to establish that the property claimed by
    him is not involved in money-laundering.
71. Only on a finding recorded under Section 8(2) that a property referred to in a
    notice [issued under Section 8(1)] is involved – in money-laundering, is the
    adjudicating authority authorised to pass an order (in writing) confirming attachment
    of the property or retention of the property or record seized. Section 8 (3) stipulates,
    vide Clauses (a) and (b) that where the adjudicating authority passes an order
    confirming attachment of a property [seized under Section 5(1)] or retention of
    property or the record seized (under Section 17 or 18), the attachment or retention of
    the seized property or record as the case may be shall continue during the pendency
    of any proceedings relating to any scheduled offence before a Court and would
    become final after the guilt of the person is proved in the trial Court and the order of
    such trial Court becomes final.
72. Under Section 8(4), on confirmation of an order of provisional attachment
    [under sub-section (3)], the specified authority is enjoined to take possession of the
    attached property.
73. Section 8(6) provides that only when the attachment of any property or
    retention of the seized property or record becomes final under Section 8(3)(b) i.e
    (proof of guilt of the accused in the trial Court and such order attaining finality), the
    adjudicating authority may initiate the process and shall again afford an opportunity
    of being heard to the person concerned with the property, before passing an order
    confiscating the property.
74. Clause (5) of Section 20 and of Section 21 provide that after an order of
    confiscation under Section 8(6) is passed, the adjudicating authority shall direct
    release of all properties other than properties involved in money laundering to the
    person from whom such properties were seized; and direct release of records to the
    person from whom such records were seized, respectively.
75. In view of the clear and unambiguous provisions of Section 8 (analysed
    above), considered in the context of the other provisions of the Act, we discern no
    vagueness in the trajectory of the provisions of Section 8. It is clear that the stage of
    confirmation of an order of provisional attachment or retention of the property or
    record seized is an intermediary stage, anterior to confiscation. Where the property is
    provisionally attached or a record seized from the ownership, control or possession,
    of a person accused of an offence under Section 3 or not so accused, the attachment,
    retention and the eventual authority to order confiscation of the property is dependant
    and contingent upon proof of guilt and finality of an order of conviction of a person,
    of the offence of money-laundering, under Section 3 of the Act. The several degrees
    of assumptions and reasons to believe on the part of the adjudicating authority,
    anterior to the stage of confiscation are thus in the scheme of the Act prima facie and
    tentative assumptions or reasons to believe, since determination of the guilt of the
    person accused, of the offence of money-laundering is within the exclusive domain of
    the Special Court constituted for trial of the offence and outside the domain of the
    adjudicating authority under Section 8. Challenge: Incoherence as to the onus and
    standards of proof:
76. The processes under Chapter-III of the Act (provisional attachment,
    confirmation; seizure under Chapter-V and confiscation of property attached/seized
    under Section (8) as noticed supra are available against proceeds of crime involved in
    money-laundering, whether in the ownership, control or possession of a person
    accused of an offence under Section 3 or of a person not so accused.
77. The burden of proving, that proceeds of crime are untainted property inheres
    on a person accused of having committed an offence under Section 3 qua Section 24.
    The first proviso to Section 5 mandates that no order of provisional attachment shall
    be made unless a final report under Section 173 of the Code of Criminal Procedure
    has been forwarded to a Magistrate or a complaint filed for taking cognizance of a
    scheduled offence by a person authorized to investigate the scheduled offence.
    Further, confiscation proceedings in respect of an attached/retained property may be
    initiated only on proof of guilt of a person charged of an offence under Section 3 and
    138
    the order of the trial Court becomes final. Section 23 enjoins a presumption in interconnected transactions; that where money -laundering involves two or more interconnection transactions and one or more of these are proved to be involved in moneylaundering, then for the purposes of adjudication or confiscation under Section 8, it
    shall, unless otherwise proved to the satisfaction of the adjudicating authority, be
    presumed that the remaining transactions form part of such inter-connected
    transactions (i.e, involved in money-laundering).
78. As we have observed earlier in this judgment in another context, the
    provisions of Sections 3, 5, 8, 23 and 24 are also inter-related provisions and must be
    considered as components of a statutory symphony that elucidate the true scope of the
    onus probandi and the burden of proof. The argument as to incoherence as to the onus
    and standards of proof in Section 8, proceeds on a misconception of the holistic
    trajectory of the several provisions of the Act. If the several provisions are considered
    together as they must, there is no incoherence discernible. On a person accused of
    having committed offence under Section 3, inheres the burden of proving that the
    proceeds of crime are untainted property. Proceeds of crime is defined [Section 2(u)]
    as any property derived or obtained, directly or indirectly by any person as a result of
    a criminal activity relating to a scheduled offence or the value of any such property.
    ‘Value’ is defined [Section 2(zb)] as the fair market value of any property on the date
    of its acquisition by any person or if such date cannot be determined, the date on
    which such property is possessed by such person. Where proceeds of crime continue
    in the ownership, control or possession of a person accused of an offence under
    Section 3, the burden of proof is clearly expressed (Section 24). Where however
    proceeds of crime are layered through a money-laundering operation and pass(es)
    through one or more transactions which are inter-connected transactions and one or
    more of such inter-connected transactions is/are proved to be involved in moneylaundering, Section 23 enjoins a presumption that the other transactions form part of
    such inter-connected transactions (involved in money-laundering), unless proved (to
    rebut the enjoined presumption) otherwise (by the person in ownership, control or
    possession of property involved in the remaining transactions), for the purposes of
    adjudication and confiscation under Section 8.
79. At the stage of confirmation of an order of provisional attachment under
    Section 8, even where the provisional attachment and confirmation pertain to
    property in the ownership, control or possession of a person not accused of an offence
    under Section 3, there must be an anterior forwarding of a final report under Section
    173 of the Cr.PC or a complaint made by an authorized person, in relation to a
    scheduled offence. It is only thus that a prima facie satisfaction (reason to believe),
    could be recorded by an adjudicating authority that a person has committed an
    offence under Section 3 or in possession of proceeds of crime, since proceeds of
    crime is referable to property derived or obtained as a result of criminal activity
    relating to a scheduled offence or the value of any such property.
    The clear implication, though prima facie at this stage, is that the property in the
    ownership, control or possession of any person not accused of an offence under
    Section 3 is proceeds of crime having a nexus with or inter-connected with the
    offence of money-laundering under Section 3. Therefore at the stage of confirmation
    of provisional attachment under Section 8, the person in possession of the property
    believed by the adjudicating authority to constitute proceeds of crime involved in
    money-laundering must satisfy the adjudicating authority by indicating the sources of
    his income, earning or assets, out of which or by means of which he has acquired the
    property attached under Section 5(1) or seized under Section 17 or 18, the evidence
    on which he relies to establish the claim of his income, earning or assets and other
    relevant information and particulars, that the property is acquired by him bona fide;
    without knowledge or information of the association with criminality; and out of his
    own income, earnings or assets and for fair market value, to dispel the presumption
    that the property is proceeds of crime involved in money-laundering.
80. The same is the burden even at the confiscation stage under Section 8(6). By
    then, there is proof of guilt of a person accused of a scheduled offence established
    before a Court and the conviction recorded by the trial Court would have become
    final. Where the property is in the ownership, control or possession of a person not
    accused of a scheduled offence but constitutes part of inter-connected transactions i.e,
    connected to one or more transactions proved to have been involved in moneylaundering, the presumption under Section 23 comes into play and must be
    discharged by the person (though not an accused, but) in the ownership, control or
    possession of the property attached or seized and retained (under Sections 5; 17 or 18
    and 8).
81. This section shows that the initial burden of proving a prima facie case in his
    favour is cast on the plaintiff; when he gives such evidence as will support a prima
    facie case, the onus shifts on to the defendant to adduce rebutting evidence to meet
    the case made out by the plaintiff. As the case continues to develop, the onus may
    shift back again to the plaintiff. It is not easy to decide at what particular stage in the
    course of the evidence the onus shifts from one side to the other. When after the
    entire evidence is adduced, the Tribunal feels it cannot make up its mind as to which
    of the versions is true, it will hold that the party on whom the burden lies has not
    discharged the burden; but if it has on the evidence no difficulty in arriving at a
    definite conclusion, then the burden of proof on the pleadings recedes into the
    background.
82. In Raghavanna v. Chenchamma, AIR 1964 SC 136, Subba Rao, 3 (as his
    Lordship then was) again explained the distinction between burden of proof and onus
    …There is an essential distinction between burden of proof and onus of proof: burden
    of proof lies upon the person who has to prove a fact and it never shifts, but the onus
    of proof shifts. The burden of proof in the present case, undoubtedly lies upon the
    plaintiff to establish the factum of adoption and that of partition. The said
    circumstances do not alter the incidence of the burden of proof. Such considerations,
    having regard to the circumstances of a particular case, may shift the onus of proof.
    Such a shifting of onus is a continuous process in the evaluation of evidence.
83. Section 22 of the Act also enjoins a presumption that where any records or
    property are or is found in the possession or control of any person in the course of a
    survey or a search, it shall be presumed that — (i) such records or property belong or
    belongs to such person; (ii) the contents of such records are true; and (iii) the
    signature and every other part of such records which purport to be in the handwriting
    of any particular person or which may reasonably be assumed to have been signed by,
    or to be in the handwriting of, any particular person, are in that person’s handwriting,
    and in the case of a record, stamped, executed or attested, that it was executed or
    attested by the person by whom it purports to have been so stamped, executed or
    attested. Sub-section (2) of this section enjoins a substantially similar presumption in
    respect of records received from outside India.
84. From the scheme of the Act and its several provisions, in particular the
    provisions of Sections 8 and 22 to 24, it is clear that the Legislature considered it
    appropriate to inhere different shades of presumptions and thus corollary burdens, on
    persons in the ownership, control or possession of property believed to be proceeds of
    crime, depending on whether the person is accused of a scheduled offence or not,
    necessitating such person to dislodge the presumption by probative evidence or
    material. The inherence of such presumptions is a matter of legal policy and no case
    is made put to hold, nor is it contended that the inherence of the burden by the
    enactment of presumptions is ultra vires the legislative power for being in
    transgression of any limitations on such legislative power in the Constitution of India.
    Challenge: As to ambiguity as regards criteria for determination of nexus between the
    property attached and the offence of money-laundering: 99. In view of the analysis on
    the sub-issue relating to the challenge of incoherence on onus and standards of proof;
    the definition of the expressions -‘proceeds of crime’; ‘money-laundering’; and the fact
    that money-laundering includes acquisition of title to or possession of property
    derived or obtained as a result of criminal activity relating to a scheduled offence and
    passing it of as an untainted property including by layering such property through
    several transactions, the contention as to ambiguity in criteria for determining the
    nexus between the property proceeded against for attachment and confiscation and
    the offence of money-laundering, does not commend acceptance by this Court.
85. Where the acquisition of property that is alleged to constitute proceeds of
    crime involved in money-laundering, is by a person not accused of a scheduled
    offence and such person in the ownership, control or possession of such property is
    able to establish, to the satisfaction of the adjudicating authority that he has acquired
    the property bona fide without information or knowledge as to the antecedent
    criminality or for fair market value (vide definition of value in Section 2 (zb), he may
    successfully campaign for extrication of the property from attachment or confiscation
    proceedings under Chapter-Ill of the Act. There are clearly discernable and statutorily
    explicated criteria for identification of the nexus between property; the commission of
    scheduled offence and money-laundering operations. The challenge as to ambiguity
    in identifying criteria or incoherence in ascertaining nexus, is thus without substance.
    Challenge to the exclusion of men, rea:
86. The contention is that provisional attachment, its confirmation and
    confiscation; of property in the ownership, control or possession of a person not
    accused of an offence under Section 3 and having no involvement or knowledge as
    regards a scheduled offence or the offence of money-laundering i.e without mens rea
    or knowledge of antecedent criminality in the acquisition of such property, is an
    arbitrary prescription.
87. In our concluding analysis on issue-A, we have noticed that the legislative
    intent is clear and specifically expressed by the several provisions of the Act, that
    proceeds of crime involved in money-laundering is targetted for eventual confiscation
    as a multi-national co-operative effort to control the incidence and spread of conduct
    which cripples financial systems of countries across the globe, corrodes the rule of
    law and governance systems and pejoratively impacts the integrity and sovereignty of
    Nations. We have also in the analysis on issue-A noted that a person in possession,
    ownership or control of a property (provisionally attached or seized) is provided
    ample opportunity to produce relevant material and evidence to satisfy the
    adjudicating authority, at the stage of confirmation of provisional attachment or
    retention of the seized property [Sections 8(1) to (3)], that the property was acquired
    out of lawful earnings or assets, that there were means to do so and thus the
    acquisition of the property is legitimate, bona fide and at the fair market value of such
    property. A person aggrieved by or concerned with the property provisionally
    attached may perhaps gainfully contend that in the circumstances it is the value paid
    for the acquisition of the property and not the property currently in his possession that
    constitutes proceeds of crime involved in money-laundering.
88. Since proceeds of crime is defined to include the value of any property
    derived or obtained directly or indirectly as a result of criminal activity relating to a
    scheduled offence, where a person satisfies the adjudicating authority by relevant
    material and evidence having a probative value that his acquisition is bona fide,
    legitimate and for fair market value paid therefore, the adjudicating authority must
    carefully consider the material and evidence on record (including the reply furnished
    by a notice in response to a notice issued under Section 8(1) and the material or
    evidence furnished along therewith to establish his earnings, assets or means to
    justify the bona fides in the acquisition of the property); and if satisfied as to the bona
    fide acquisition of the property, relieve such property from provisional attachment by
    declining to pass an order of confirmation of the provisional attachment; either in
    respect of the whole or such part of the property provisionally attached in respect
    whereof bona fide acquisition by a person is established, at the stage of the Section
    8(2) process. A further opportunity of establishing bona fide acquisition of property
    or that the property in question is not proceeds of crime involved in moneylaundering is available and mandated, prior to the adjudicating authority passing an
    order of confiscation, under Section 8(6).
89. Proceedings for attachment and confiscation of proceeds of crime are a
    process distinct and dissimilar to the process for prosecution of the offence of money
    -laundering. Deprivation of property involved in money-laundering is the sanction in
    the first process while deprivation of personal liberty is the sanction enjoined in
    conviction for the offence. Mens rea is not a jurisprudential non-derogable adjunct for
    visitation of civil consequences and therefore the legislative policy in this area is
    eminently within the domain of legislative choice. This challenge must therefore fail.
    Challenge to dispossession before conviction of the accused:
90. Section 8(4) of the Act enjoins the taking over of possession of an attached
    property on the passing of an order of confirmation of provisional attachment. This
    provision is arbitrary since dispossession precedes the recording of guilt/conviction
    by the Special Court in the prosecution of the offence of money-laundering under
    Section 3. Section 8(4) is therefore invalid, contend the petitioners. This conclusion
    in our considered view is without merit and misconceived.
91. At the stage of provisional attachment under Section 5(1) a person interested
    in the enjoyment of the suspect immovable property is not deprived of enjoyment, in
    view of the provisions of sub-section (4) thereof. However Section 8 (4) enjoins
    taking over possession of the attached property whose provisional attachment is
    confirmed under Section 8(3). On an holistic analysis of the several provisions of the
    Act, in particular of Sections 5 and 8, we are of the considered view that the
    legislative intent underlying the preservation of the right to the enjoyment of
    immovable property provisionally attached under Section 5(1) while enjoining taking
    over of possession on confirmation under Section 8(3), is part of a consciously
    calibrated legislative schemata to achieve the object which the several provisions of
    the Act are designed to fulfil. The wholesome legislative intent underpinning the
    sequential provisions for provisional attachment, confirmation of such attachment and
    eventual confiscation; or for retention of a seized property, permitting continuance of
    such retention pending a determination as to confiscation under Section 8, while
    preserving the right to possession at the stage of provisional attachment while
    mandating dispossession after confirmation of the attachment; are conceived to
    balance the governmental interest expressed by the provisions of the Act on the one
    hand and the several degrees of rights of persons in possession of property that is
    believed to be proceeds of crime involved in money-laundering, on the other. In our
    analysis of the provisions of Sections 5 and 8, we have observed that the reason to
    believe that a property in possession of a person constitutes proceeds of crime
    involved in money-laundering, is a satisfaction that may legitimately be arrived at
    unilaterally and without a participatory process involving hearing or consideration of
    material that may be produced by, the person in the ownership, control or possession
    of the property, to disprove the assumption as to involvement of the property in
    money-laundering. The process of provisional attachment is also in the nature of an
    emergency prophylactic. An order of provisional attachment is passed where the
    authorized authority has reason to believe that if the property is not attached
    immediately, any proceedings under the Act may be frustrated. Having regard to the
    exigency of the public interest involved in attaching a property believed to be
    proceeds of crime involved in money-laundering, to prevent frustration of other
    proceedings under the Act, the maximal due process of hearing an affected party
    before passing an order of provisional attachment is consciously excluded under the
    presence of Section 5. It is for this reason that while passing an order of provisional
    attachment as a prophylactic measure to preserve the property, possession is not
    disturbed. This appears to be a finely calibrated legislative measure structured to meet
    the governmental interest at that stage, while not inflicting a disproportionate burden,
    of deprivation of possession, at this nascent stage of forming of a belief, unilaterally.
92. At the stage of confirmation of provisional attachment however, the person
    in ownership, control or possession of property is provided an opportunity to showcause why all or part of such property be not declared to be involved in moneylaundering and confiscated by the Central Government. The person interested in the
    property is required by notice to indicate the source of his income, earning or assets,
    out of which or by means of which he has acquired the property provisionally
    attached or seized. An order confirming the provisional attachment, as already
    noticed, may be passed only on the adjudicating authority being satisfied, on
    considering the material on record including material or evidence furnished in
    response to the notice issued under Section 8(1); the reply furnished in response
    thereto; and taking all and other relevant material into consideration, to record a
    finding that the property or so much of it, is involved in money-laundering.
93. Only at the confirmation stage is taking possession of the attached property
    legislatively enjoined [Section 8(4)]. The reason for the prescription as to
    dispossession is apparent. The apparent purpose is also vouchsafed in the counter of
    the respondents and the contentions of the learned Counsel Sri Rajeev Awasthi. The
    satisfaction as to the provisional attached property constituting proceeds of crime
    involved in money-laundering is arrived at by the adjudicating authority after
    considering a fuller basket of information, material and evidence which includes a
    showing by a person concerned with the property. From the legislative scheme, in
    particular of Section 8, we infer that dispossession from immovable property is
    prescribed under Section 8(4) to prevent wastage or spoilage of the property and thus
    dissipation of its value so as to preserve the integrity and value of the property till the
    stage of confiscation. Thus construed the provisions of Section 8(4) are neither
    arbitrary nor disproportionate to the object sought to be achieved by the provisions of
    the Act. The provisions of Section 8(4) are reasonable and unimpeachable. The
    challenge to Section 8 of the Act must therefore fail.
94. Issues C & D are answered as above. Issue-E:
95. The challenge to Section 23 is projected on the ground that the presumption
    enjoined by this provision in respect of interconnected transactions is unduly
    restrictive of the right to property; is a disproportionate burden, not commensurate
    with legitimate Governmental interests in targetting proceeds of crime involved in
    money-laundering, for eventual confiscation.
96. Money-laundering, it is pleaded in the counter-affidavit by the Enforcement
    Directorate, while apparently comprising one or more apparently clear and simple
    financial transactions or dealings with property, in reality involve a complex web of
    transactions that are processed through three stages—the placement, layering and
    integration stage. When laundering operations are pursued across State boiundaries,
    flows of funds would involve several routes. Since the object of the Act is to seize or
    attach proceeds of crime involved in money-laundering for eventual confiscation to
    the State, the enforcement strategy must be commensurate with, correspond to and
    complement the degree of camouflage, deceit, layering and integration normally
    associated with a money-laundering operation, to be effective and successful, is the
    contention on behalf of the respondents.
97. Section 23 enjoins a presumption in respect of inter-connected transactions.
    Money-laundering is defined in Section 2(p) (with reference to Section 3). Though
    Section 3 defines the offence of money-laundering, the ingredients of the offence
    enumerated in this provision define money-laundering in its generic sense as applied
    by the Act to attachment and confiscation processes as well. Such duality is achieved
    by the drafting technique of defining money-laundering in Section 2(p) by ascription
    of the definition of the offence of money-laundering in Section 3.
98. This technique, though specific, is not unique. As observed in LIC of India
    v. Crown Life Insurance Co., AIR 1965 SC 1985, the object of a definition clause in a
    statute is to avoid the necessity of frequent repetitions in describing all the subject
    matter to which the word or expression so defined is intended to apply. A definition
    section may borrow definitions from an earlier or an existing statute; not necessarily
    in the definition section but in some other provision, of that Act; and may equally
    borrow the definition from some other section of the same Act where a word or an
    expression is defined for a distinct purpose, occasion, or in a specific context. Section
    2(1)(p), thus, defines the expression “money-laundering” by borrowing the definition
    expressed in Section 3, where this expression is defined for the purpose of delineating
    the offence. In Section 2(1)(p), however, the expression “money-laundering” is
    defined for the generic purpose Gf describing the contours of the conduct; wherever
    the expression is employed in the several provisions of the Act, including in Chapter
    III – for attachment and confiscation. It is also well settled that the Legislature has the
    power to define a word or an expression artificially – Kishanlal v. State of Rajasthan,
    1990 Supp SCC 742 : AIR 1990 SC 2269. The definition of a word or an expression
    in the definition section may thus be restrictive or extensive of its ordinary meaning.
    When a word is defined to ‘mean” so and so, the definition is prima facie exhaustive
    and restrictive – Inland Revenue Commissioner v. Joiner, (1975) 3 ALL. E.R 1050;
    Vanguard Fire and General Insurance Co. Ltd. v. Frazer & Ross, AIR 1960 SC 971;
    and Feroze N. Dotiwala v. P.M Wadhwani, (2003) 1 SCC 433. 114. Conduct of
    directly or indirectly attempting to indulge, knowingly assist or being a party to or
    actual involvement in any process or activity connected with proceeds of crime and
    projecting such proceeds of crime as untainted property, constitutes moneylaundering. The expression ‘proceeds of crime’ means property derived or obtained,
    directly or indirectly by any person as a result of criminal activity relating to a
    scheduled offence or the value of any such property [Section 2 (u)]. Thus, a property
    acquires a taint on account of being a derivative of criminal activity relating to a
    scheduled offence and includes the value of such property. Since placement, layering
    and integration are among the essential features of money -laundering, the proceeds
    of crime may not necessarily continue in the hands of the original malfeasant(s).
99. Where proceeds of crime are layered through plural transactions, the intent
    to camouflage the source of the property as a derivative of criminality renders it
    difficult to identify the succeeding transactions as relatable to the initial proceeds of
    crime. It is for this reason and to effectuate the purposes of the Act that Section 23
    incorporates the presumption that where money -laundering involves two or more
    connected transactions and one or more such transactions is/are proved to be involved
    in money-laundering, then for the purposes of adjudication or confiscation under
    Section 8, it shall, unless otherwise proved to the satisfaction of the adjudicating
    authority, be presumed that the remaining transactions form part of such
    interconnected transactions i.e, involved in money-laundering as well.
100. The presumption enjoined by Section 23 is clearly a rebuttable presumption
     i.e, presumptio pro tantum. 117. In Izhar Ahmad v. Union of India, AIR 1962 SC
     1052, Gajendragadkar, 3 (as his Lordship then was) observed (in the majority opinion
     of the Constitution Bench) that: The term “Presumption” in its largest and most
     comprehensive signification, may be defined to be an inference, affirmative or
     disaffirmative of the truth or false hood of a doubtful fact or proposition drawn by a
     process of probable reasoning from something proved or taken for granted. Quoting
     with approval the statement of principle set out in the Principles of the Law of
     Evidence by Best, his Lordship observed that when the rules of evidence provide for
     the raising of a rebuttable or irrebuttable presumption, they are merely attempting to
     assist the judicial mind in the matter of weighing the probative or persuasive force of
     certain facts proved in relation to other facts presumed or inferred.
101. Having regard to the fact that money-laundering is indulgence, informed
     assistance or being a party to or actual involvement in any process or activity
     connected with proceeds of crime and projecting it as untainted property, inherently
     assuming a degree of deceit and camouflage in the process of layering the proceeds of
     crime through a series of transactions, in the considered legislative wisdom a
     presumption in inter-connected transactions is enjoined by Section 23 of the Act,
     contingent upon one or more of inter-connected transactions having to be proved to
     be involved in money-laundering. The legislatively enjoined presumption shifts the
     burden of proof to the person in the ownership, control or possession of a property
     comprising the inter-connected transactions to rebut the statutory presumption that
     this property is not involved in money-laundering. 121. Section 23 enacts a rule
     prescribing a rebuttable presumption and is a rule of evidence. The rule purports to
     regulate and structure the judicial process of appreciating evidence relating to
     adjudication of money-laundering for the purposes of confirmation of
     attachment/seizure and confiscation and provides that the said appreciation will draw
     an inference from the fact of one or more transactions forming part of inter-connected
     transactions having been proved to be involved in money-laundering, that the other
     transactions are also to be presumed so, unless the contrary is established.
102. As observed in Izhar Ahmad’s case (supra), the rule of presumption enjoined
     by Section 23 takes away judicial discretion either to attach or not due probative
     value to the fact that one or more of the inter-connected transactions have been
     proved to be involved money-laundering; and requires prima facie due probative
     value to be attached and mandates an inference that the other transactions form part
     of the raft of inter-connected transactions involved in money-laundering, subject of
     course to the said presumption being rebutted by proof to the contrary. 123. On the
     aforesaid analysis, since Section 23 enjoins a rule of evidence and a rebuttable
     presumption considered essential and integral to effectuation of the purposes of the
     Act in the legislative wisdom; a rebuttable and not an irrebuttable presumption, we
     are not persuaded to conclude that the provision is unduly harsh, oppressive or
     arbitrary. After all a legislative remedy must correspond to the social pathology it
     professes to regulate. 124. Issue-E is answered accordingly. Issue-F: 125. Section 24
     shifts the burden of proving that proceeds of crime are untainted property onto
     person(s) accused of having committed the offence under Section 3. This provision is
     challenged as arbitrary; is contended to be applicable only to the trial of an offence
     under Section 3 and not the proceedings for attachment and confiscation of property
     under Chapter-Ill; and alternatively as not applicable to proceedings for attachment
     and confiscation of property of a person not accused of an offence under Section 3.
103. On its textual and grammatical construction, the provision shifts the burden of
     proving that proceeds of crime are untainted property on person(s) accused of having
     committed the offence under Section 3. 127. We have noticed while on the analysis
     of Issues C to E that the provisions of Sections 3, 5, 8, 17, 18, 20, 21 and 23; the
     definitions of ‘money-laundering’ [Section 2(p); ‘proceeds of crime’ (Section 2(u);
     ‘property’ (Section 2(v) and ‘value’ (Section 2(b)] are inter twined, delineate the
     provisions of each other and in tandem operate to effectuate one of the two
     substantial purposes of the Act viz., attachment for the purposes of eventual
     confiscation, of proceeds of crime involved in money-laundering, whether in the
     ownership, control or possession of a person accused of the offence under Section 3
     or not. The offence of money-laundering as defined in Section 3 comprises direct or
     indirect attempt to indulge, knowingly assist, and knowingly be a party to or actual
     involvement in any process or activity connected with the proceeds of crime and
     projecting it as untainted property. Proceeds of crime is ‘any property’ derived or
     obtained directly or indirectly by any person as a result of a criminal activity relating
     to a scheduled offence or the value of any such property (Section 2(u). Qua the
     provisions in Chapter-Ill of the Act, the process of provisional attachment,
     confirmation of such attachment by the adjudicating authority and confiscation of the
     property attached is operative against Property constituting the proceeds of crime
     involved in money-laundering whether in the ownership, control or possession of a
     person who has committed an offence under Section 3 or otherwise. Section 8(1)
     while enjoining the adjudicating authority to issue a notice to a person in possession
     of proceeds of a crime, whether in his own right or on behalf of any other person,
     calling upon the noticee to indicate the sources of his income, earning or assets for
     the purposes of establishing that the acquisition of ownership, control or possession
     of the property by the noticee is bona fide and out of legitimate sources; of his
     income, earning or assets, does not enact a presumption that where the noticee is a
     person accused of the offence under Section 3, the provisionally attached property is
     proceeds of crime. Since camouflage and deceit are strategies inherent and integral to
     money-laundering operations and may involve successive transactions relating to
     proceeds of crime and intent to project the layered proceeds as untainted property,
     effectuation of the legislative purposes is achieved only where the burden is imposed
     on the accused to establish that proceeds of crime are untainted property. This is the
     legislative purpose and the justification for Section 24 of the Act.
104. In response to a notice issued under Section 8(1) and qua the legislative
     prescription in Section 24 of the Act the person accused of having committed the
     offence under Section 3 must show with supporting evidence and material that he has
     the requisite means by way of income, earning or assets, out of which or by means of
     which he has acquired the property alleged to be proceeds of crime. Only on such
     showing would the accused be able to rebut the statutorily enjoined presumption that
     the alleged proceeds of crime are untainted property. This being the purpose, we are
     not satisfied that the provisions of Section 24 are arbitrary or unconstitutional.
     Section 24 is not confined to the trial of an offence under Section 3 but operates to
     attachment and confiscation proceedings under Chapter-Ill, as well. The legislative
     prescription that the burden of proof inheres on a person accused of having
     committed the offence under Section 3 is only to confine the inherence of the
     expressed burden to an accused. Where the property is in the ownership, control or
     possession of a person not accused of having committed an offence under Section 3
     and where such property/proceeds of crime is part of inter-connected transactions
     involved in money-laundering, then and in such an event the presumption enjoined in
     Section 23 comes into operation and not the inherence of burden of proof under
     Section 24. This is in our considered view the true and fair construction of the
     provisions of Section 24.
105. Clearly, therefore a person other than one accused of having committed the
     offence under Section 3 is not imposed the burden of proof enjoined by Section 24.
     On a person accused of an offence under Section 3 however, the burden applies, also
     for attachment and confiscation proceedings.
106. Issue F is answered accordingly.
107. R.K Garg v. Union of India, (1981) 4 SCC 675, exemplifies the latter
     approach of diffused scrutiny to economic legislation.
108. Having considered the several challenges to the provisions of the Act and on
     the various grounds addressed and in the context of the appropriate and applicable
     principles of judicial scrutiny we have recorded our conclusions on each of the issues
     formulated for decision. We now record a summary of our conclusions. Summary of
     Conclusions:
109. On the several issues framed herein-before we held:
     (i) On Issue – A: that property owned or in possession of a person, other than a
     person charged of having committed a scheduled offence is equally liable to
     attachment and confiscation proceedings under Chapter-Ill; and Section 2(1) (u)
     which defines the expression “Proceeds of Crime”, is not invalid;
     (ii) On Issue – B: that the provisions of the second proviso to Section 5 are
     applicable to property acquired even prior to the coming into force of this provision
     (vide the second amendment Act with effect from 6.3.2009); and even so is not
     invalid for retrospective penalisation.
     (iii) On Issues – C & D: that the provisions of Section 8 are not invalid for
     vagueness; incoherence as to the onus and standard of proof; ambiguity as regards
     criteria for determination of the nexus between a property targeted for
     attachment/confirmation and the offence of money-laundering; or for exclusion of
     mens real knowledge of criminality in the acquisition of such property; Section 8(4),
     which enjoins deprivation of possession of immovable property pursuant to an order
     confirming the provisional attachment and before conviction of the accused for an
     offence of money-laundering, is valid;
     (iv) On Issue – E: that the presumption enjoined in cases of interconnected
     transactions enjoined by Section 23 is valid; and
     (v) On Issue – F: that the burden of proving that proceeds of crime are untainted
     property is applicable not only to prosecution and trial of a person charged of
     committing an offence under Section 3 but to proceedings for attachment and
     confiscation – in Chapter III of the Act as well; but only to a person accused of having
     committed an offence under Section 3. The burden enjoined by Section 24 does not
     inhere on a person not accused of an offence under Section 3. The presumption under
     Section 23 however applies in interconnected transactions, both to a person accused
     of an offence under Section 3 and a person not so accused.
110. We record our appreciation for the methodical, clinical and meticulous
     assistance provided by Sri Copal Choudhary, Sri S. Niranjan Reddy and Sri Rajeev
     Awasthi. learned Counsel for the respective Parties in this case.