HIGH COURT OF JUDICATURE AT ALLAHABAD, LUCKNOW BENCH
 
 

Reserved
 
Case :- CRIMINAL REVISION No. - 1004 of 2019
 

 
Revisionist :- Mohammad Iqbal
 
Opposite Party :- State Of U.P. & Anr.
 
Counsel for Revisionist :- Shrikant Misra,Jagrit Sharma
 
Counsel for Opposite Party :- G.A.,A.S.G.,Shiv P. Shukla
 

 
Hon'ble Rajeev Singh,J.

Heard Shri J.N. Mathur, learned Senior Counsel assisted by Shri Shrikant Misra for the revisionist and Shri Shiv P. Shukla, learned counsel appearing for the Union of India.

This revision has been filed challenging the order dated 29.04.2019 passed by Special Judge, PMLA/Sessions Judge, Lucknow in Complaint Case No. 4 of 2015 (Assistant Director, Directorate of Enforcement Vs. Mohd. Iqbal), under Section 3/4 of Prevention of Money Laundering Act, 2002.

Facts, in short, are that M/s. Afzal Timber Store, Kazibagh Town Area, near Nagar Panchayat Mahauna, Lucknow (hereinafter referred to as the ''firm') is a proprietorship firm of the revisionist, which is engaged in manufacture of commercial plywood. A complaint case bearing Case No. 69 of 2008 under Section 37 of the Air (Prevention and Control of Pollution) Act, 1981 (hereinafter referred to as the ''Act') was filed by U.P. Pollution Control Board, Lucknow (for short the ''Board') with the allegation that on 17th July, 2007, the officers of the Board inspected the firm and found that there is no proper arrangement for air pollution and the factory was operational from 12.09.1984 to 17.07.2007 without obtaining the consent of the Board, in contravention of Section 21 of the Act. Special Judicial Magistrate, (Water and Air Control) vide order dated 30th March, 2011, imposed penalty of Rs.10,000/- on the firm and also convicted the revisionist. Against the said judgment and order, revisionist filed Criminal Appeal No. 106 of 2011 (M/s. Afzal Timber Store & Anr. Vs. State of U.P. & Anr.), which was allowed vide judgment and order dated 5th February, 2016. In the meantime, the Board made a complaint to the Enforcement Directorate vide letter dated 03.01.2013, on which Directorate of Enforcement registered Enforcement Case Information Report (ECIR) No. 01/PMLA/LZO/2013 on 09.01.2013 for investigation of offence of money laundering under the provisions of Prevention of Money Laundering Act, 2002 (for short ''PML Act') to make inquiries regarding suspected 'Proceed of Crime' amounting to Rs.52,42,525/- generated by the revisionist and his firm out of the commission of Scheduled Offence. After investigation, Complaint Case No. 04 of 2015 (Assistant Director, Directorate of Enforcement Vs. Mohd. Iqbal) was filed by the Enforcement Directorate under Section 45 of the Act with the allegation that the Regional Officer, UP. Pollution Control Board vide letter dated 13.02.2014 informed that the value of pollution control equipment, including cyclonic dust collector and a ''chimni' of 70' height to check the air pollution arising from the boiler of 500 kg/hrs. capacity, is Rs.2,00,000/-, but the same was not installed, thus, the revisionist had generated ''Proceed of Crime' to the tune of Rs.2,00,000/- and retained the same. Vide order dated 30th April, 2015, court below summoned the revisionist. Against the said order, revisionist approached this Court by means of Application u/s 482 Cr.P.C. No. 5933 of 2015, which was disposed of vide order dated 04.12.2015 directing the court below to decide his bail application expeditiously. Thereafter, revisionist moved bail application twice, but could not succeed. Revisionist preferred Special Leave Petition No. 5721 of 2016 before the Hon'ble Apex Court challenging the rejection of his bail application and vide judgment and order dated 22.08.2016, revisionist was granted bail. In the meantime, revisionist also moved a discharge application before the trial court, which was rejected vide impugned order dated 29.04.2019. Hence, this revision.

Shri J.N. Mathur, learned counsel for the revisionist submitted that the revisionist, for establishing a factory for his firm, M/s. Afzal Timber Store, purchased a land on 18th May, 2004, construction of which was completed in the year 2007. In the meantime, he also purchased the necessary machine for running the factory and applied under Section 21 of the Act for grant of necessary permission from the Board for running the plywood factory. He further submitted that on 16th July, 2007, when the inspection was done by the officers of the Board, chimney was not found installed in the factory. Thereafter the Board filed frivolous Complaint Case No. 69 of 2008 (supra) against the revisionist firm under Section 37 of the Act on the basis of presumption that the revisionist was manufacturing the plywood without obtaining permission. Shri Mathur submitted that on the said complaint case, court below had wrongly passed the judgment and order dated 30.03.2011 convicting and sentencing the appellant with a simple imprisonment of two years and fine of Rs.10,000/-, and also imposed a fine of Rs.10,000/- on the firm. He further submitted that on 19th April, 2011, necessary equipment was installed and the permission was granted to start the factory.

Shri Mathur submitted that against the judgment and order dated 30th March, 2011 passed by the Special Judicial Magistrate (Pollution), Lucknow, revisionist preferred Criminal Appeal No. 106 of 2011 (supra), which was admitted and the revisionist was admitted to bail. However, in the meantime, the Board, with the malicious intent, made a complaint against the revisionist and the firm to the Directorate of Enforcement alleging that revisionist being the proprietor of the firm has been convicted for contravention of Section 37 of the Act, which is also a Scheduled Offence under the PML Act and recommended for prosecution. Directorate of Enforcement taking cognizance on the said complaint on 9th January, 2013, registered a case against the revisionist and its firm being ECIR No. 01/PMLA/LZO/2013 (supra) for investigation to inquire regarding alleged 'Proceed of Crime' generated by the revisionist and his firm.

Learned counsel for the revisionist further submitted that in the aforesaid case, in the heading of "Material relating to commission of offence and reason to believe that an offence of money laundering has been committed and assessment thereof", it is alleged that the firm is a proprietorship concern of the revisionist and was engaged in the manufacture of commercial plywood of various grades during the period 12.09.1984 to 17.07.2007 for which the firm had not obtained approval from the Board for manufacture of plywood through its aforesaid factory. It is further alleged in the said case that the officers of the Board inspected the factory premises on 16th July, 2007 and found that there was no suitable arrangement for air pollution control and the factory was operational without obtaining the consent of the Board, in contravention of Section 21 of the Act. It is also alleged therein that the contravention of provisions of Section 37 of the Act is a Scheduled Offence under Para 24 of Part-B of Schedule to PML Act w.e.f. 01.06.2009 and in terms of the provisions of Section 2(y)(ii) of the PML Act, Scheduled Offence under Part-B of the schedule, for the purpose of investigation under the Act, should involve a total value of Rs.30 lac or more. Further, perusal of copies of the balance sheets for financial year 2005-06 and 2006-07 of firm reveals that combined sale of final products during financial year 2005-06 and 2006-07, i.e., during the period of offence after coming into effect of the PML Act, was Rs.52,42,525/- (Rs.15,88,734/- during the period of 2005-06 and Rs.36,53,791/- during the period of 2005-06). Therefore, it appears that total value involved in the instant offence is more than Rs.30 lacs. In such circumstances, it is expedient to make inquiries against the said accused persons relating to unlawful gains to themselves, which are ''Proceeds of Crime', i.e., tainted money, earned out of commission of an offence, during the period of 2005-06 and 2006-07, under Section 37 of the Act, which is covered as Schedule Offence. The ''Proceeds of Crime' generated during the period 2005-06 and 2006-07 appears to have been utilised subsequently by the accused persons for acquisition of various movable/immovable assets so as to project them as "untainted" on continued basis even after 1st June, 2009, which is an offence under Section 3 of PML Act.

Submission of the learned counsel for the revisionist is that after investigation of the case by the Enforcement Directorate, when nothing incriminating material was found against the revisionist, Assistant Director, Directorate of Enforcement wrote a letter to the Chief Environment Officer for providing the cost of the unit which was not installed, in response to which, it was informed by the Board that the cost of the unit was Rs.2 lac. Even thereafter, Directorate of Enforcement filed a complaint under Section 45 of the PML Act before Special Judge/Sessions Judge, Lucknow, which was registered as Case No. 04 of 2015 (supra) with the allegation that by not investing funds legally required for installation of the pollution control equipments, invested in business, therefore, the revisionist had generated ''Proceeds of Crime' to the tune of Rs.2 lac. Shri Mathur vehemently submitted that Rs.2 lac cannot be said to be 'Proceed of Crime' as it was the value of the chimney/device, which was to be installed prior to the consent to run the factory. He further submitted that it is undisputed that initially the allegation was that from the factory run by the revisionist, he earned Rs.52,42,525/- in two financial years, i.e., 2005-06 and 2006-07, but later on, when nothing was found in the investigation of the Enforcement Directorate, a frivolous allegation was levelled that the value of the unit, which was not installed, is a 'Proceed of Crime', which is in sheer abuse of the law. In the meantime, Criminal Appeal No. 106 of 2011 (supra) was allowed vide order dated 5th February, 2016 by setting aside the judgment and order dated 30th March, 2011 passed by Special Court in Complaint Case No. 69 of 2008 (supra) and acquitted the revisionist under Section 37 of the Act. He submitted that the said appellate order has attained finality as it was not challenged by the Board in any higher forum.

Learned counsel for the revisionist next submitted that it is admitted in the complaint No. ECIR/01/PMLA-220/2013 dated 9th January, 2013 registered by the Enforcement Directorate that "in terms of the provisions of Section 2y(ii) of the PML Act, the Scheduled Offence under Part-B of the schedule, for the purpose of investigation under the Act, should involve a total value of Rs.30 lac or more, but in the present case, after due investigation, only 'Proceed of Crime', which was allegedly found, was Rs.2 lac, which was nothing but the cost of the chimney. He also submitted that the alleged amount, which was in lieu of chimney, cannot be said to be 'Proceed of Crime' as it was not obtained by doing a Scheduled Offence. Learned counsel for the revisionist lastly submitted that the revisionist has already been enlarged on bail, but his application for discharge moved before the court below was wrongly rejected vide impugned order dated 29.04.2019 without considering the provisions of Section 2y(ii) of the PML Act. He submitted that ''Proceeds of Crime" has been defined in Section 2(1)(u) of PML Act, as under:

"2(1)(u)- "proceeds of crime" means any property derived or obtained, directly or idirectly, by any person as a reslt of criminal activity relating to a scheduled offence or the value of any such property or where such property is taken or held outside the country, then the property equivalent in value held within the country or abroad."

Learned counsel for the revisionist submitted that after adding Explanation clause in Section 2(1)(u), which clarifies that "proceeds of crime" include property not only derived or obtained from the scheduled offence but also any property which may directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offence, but in the present case, no offence can be said to be made out. It is, thus, submitted that the impugned order dated 29.04.2019 is liable to be set aside.

Shri Shiv P. Shukla appearing for the respondent, on the other hand, submitted that revision is not maintainable. He submitted that officials of the Board informed to the Enforcement Directorate that the revisionist committed offence, for which he was convicted by the Special Court under Section 37 of the Act, which is a Scheduled Offence under para 24 of Part-B. He also submitted that ECIR was registered in terms of the provisions of Section 2y(ii) of the PML Act, which provides for investigation under Part B of the schedule of PML Act for the Scheduled Offences which involve a total value of Rs.30 lac or more. It was alleged that revisionist earned Rs.52,42,525/- during the aforesaid two financial years, therefore, the total amount involved in the instant case was more than Rs.30 lac, but after investigation, when it was found that 'Proceed of Crime' is Rs.2 lac, complaint was filed against the revisionist, on which, cognizance was taken by the court below. He vehemently submitted that even though the appeal in Scheduled Offence is allowed.

Shri Shukla further submitted that the point raised by the learned counsel for the revisionist has already been dealt by Karnataka High Court in the case of M/s Obulapuram Mining Company Pvt. Ltd. Vs. Joint Director of Enforcement (Writ Petition No. 5962 of 2016), and vide order dated 13.03.2017 allowed the said petition. Special Leave to Appeal against the said order dated 13.03.2017 was filed by the Directorate of Enforcement and the Hon'ble Apex Court stayed the aforesaid decision. He further submitted that a Division Bench of this Court while dealing with the similar controversy also dismissed Case u/s 482 Cr.P.C. No. 79 of 2016 (Shafaat Ejaz Siddiqui & Ors. Vs. State of U.P. & Ors.) vide order dated 10.04.2018. He further submitted that aforesaid decision of this Court was assailed before the Hon'ble Supreme Court by means of SLP No. 4321 of 2018, which was dismissed on 21st May, 2018. Relying on the judgment and order of the Hon'ble Apex Court passed in the case of State of Gujarat Vs. Mohanlal Jitamalji Porwal & Anr., (1987) 2 SCC 364, learned counsel for the respondent submitted that economic offences have serious repercussions on the development of the country as a whole.

I have considered the arguments advanced by the learned counsel for the parties and also gone through the record.

It is undisputed that initially, ECIR was registered with the allegation that the total value involved in the instant offence is more than Rs. 30 lac and due to contravention of provisions under Section 37 of the Act, the proceeding was initiated in terms of the provisions under Section 2y(ii) of the PML Act for the purpose of investigation. It is also undisputed that during the course of investigation, Assistant Director, Directorate of Enforcement wrote a letter to Chief Environment Officer on 13th December, 2013 and requested to provide the valuation of the unit, which was not installed in the factory, in reply to which, information was given by the said Officer that cost of the device/chimney, which was not installed at the time of inspection, is Rs.2 lac. Thereafter, Complaint Case No. 04 of 2015 was filed by Enforcement Directorate in the court of Special Judge (PML Act) with the allegation that the inspection of factory was conducted by the officers of the Board on 16th July, 2007 and it was found that no pollution control equipment was installed in the factory as per the provisions laid down in the Act However, after installation of the pollution control equipment, permission was granted him to run the factory on 19.04.2011 and the total cost of the installation of the desired pollution control equipment was Rs.2 lac. From the record, it is also evident that after purchasing the land in question in the year 2004 for running the factory, the revisionist had applied for consent of the Board in the year 2007 and the inspection of the premises was conducted by the officers of the Board, in which, the pollution control unit was not found.

Thereafter, complaint was filed by the Board with the presumption that the factory was running since long back and also reported the same to the Enforcement Directorate, on which, the Enforcement Directorate registered ECIR with the presumption that in two financial years, i.e., 2005-06 and 2006-07 combined sale of final products by the revisionist amounts to Rs.52,42,525/- which is more than Rs.30 lacs and, as such, the investigation was started. During the course of investigation, Assistant Director, Enforcement Directorate asked the cost of the device from the Board, which was not found installed by the revisionist at the time of inspection, then the value of the same was informed by the Chief Environment Officer to be Rs.2 lac, which amount was treated to be the 'Proceed of Crime'.

As by way of Act No. 23 of 2019, Explanation clause has been added in Section 2(u) of the PML Act, which clearly provides that the 'Proceed of Crime' include property not only derived or obtained from the scheduled offence but also any property which may directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offence. Indisputably, in the present case, the cost of the unit, viz. Rs.2 lac, which was not installed at the factory, is treated as 'Proceed of Crime'. Learned counsel for the respondent failed to dispute the fact that initially the allegation levelled was that total value involved in the offence was more than Rs.30 lac, which is categorically mentioned in the ECIR, but later on, in the complaint case, only the cost of equipment which was not installed, is treated as a 'Proceed of Crime'. Admittedly, the court below failed to consider this aspect of the matter.

In view of above facts and discussions, impugned order dated 29.04.2019 is hereby set aside. Revision is, accordingly, allowed.

Matter is remanded back to the court below to pass fresh orders taking into consideration the observations made above.

February 28, 2020 VKS