The crime of conspiracy was once famously called the "prosecutor's darling". The moniker has never quite gone out of fashion, because of how police and prosecutors the world over have continued to rely upon the offence to cast a wide net of liability and ensnare defendants. It is also a helpful starting point to explain the problem being discussed in this post — the presence of the conspiracy offence under Section 120-B of the Indian Penal Code 1860 [IPC] [offence defined under Section 120-A] in the Schedule to the Prevention of Money Laundering Act 2002 [PMLA] and its consequences.
A brief review of Indian anti money laundering regime is in order. India is a jurisdiction which does not apply sanctions of money laundering to the generation of tainted assets from any criminal activity. Rather, it lists out a series of predicate offences in a Schedule to the statute, and restricts the invocation of money laundering offences to any proceeds of crime that may be generated, derived, or obtained by acts relating to the commission of these scheduled offences. Sitting pretty in that list of offences along side crimes such as drug-trafficking and terrorism is the crime of conspiracy.
Having conspiracy in the list of offences to trigger the PMLA throws up a serious problem. Even though it exists as a standalone offence on the books, the very idea of a conspiracy is that one agrees with others to do something else, and it is that something else which is usually the problematic part. But at the same time, the recognition of conspiracy as an offence is a legislative statement that the act of conspiring merits sanction. This tussle of objectives is captured in the history of the conspiracy offence in India. The act of conspiring to do something was always a part of the IPC, identified as a species of abetment. Almost half a century later, a specific offence was inserted in the Code, criminalising the agreeing to commit an offence. Returning to the PMLA context, this tussle of objectives poses a very obvious problem. If we change focus from that ultimate act, to the process of conspiring itself, then essentially we open a doorway for agencies to trigger money laundering to any crime. In other words, although the idea of listing out certain offences in a Schedule was to limit application of the PMLA, the presence of conspiracy as part of the list carries the potential to remove that harness and allow the PMLA to run amok.
It was not as if the presence of conspiracy was not being so used. PMLA proceedings had been launched in cases where a set of persons were accused of conspiring to commit tax fraud — an ultimate objective which was not in the Schedule. Similarly, conspiracies to commit criminal breach of trust were made the basis for launching PMLA cases. One such case finally reached the Supreme Court and was decided recently, giving crucial clarity to how agencies and courts are to treat the presence of the conspiracy offence within the Schedule to the PMLA.
In Pavana Dibbur v. Directorate of Enforcement [Crl. Appeal No. 2779 / 2023], the Appellant raised three primary contentions to argue that the PMLA case against her ought to be closed. One of these submissions was that the PMLA process had been initiated on the basis of predicate crimes of alleged conspiracies to commit a set of offences not covered by the Schedule to the PMLA. Such a reading of the statute, it was argued, would render the very idea of the Schedule otiose. On the contrary, the Government argued that presence of the conspiracy offence as a standalone entry in the Schedule was evidence of legislative intent to trigger the PMLA wherever a conspiracy was alleged to have begotten proceeds of crime.
The discussion begins from Para 18 onwards. The crux is contained in Paras 24 and 25, where the Court held that the presence of conspiracy within the Schedule could not be used to defeat the idea of having a Schedule in the first place that restricted the applicability of the PMLA. The absence of several offences that may result in generation of assets from the Schedule clearly signalled a strong legislative intent to not apply the PMLA to illegal acts wholesale. In such a case, it was imperative to confer a construction upon the entries of the Schedule which did not render it contrary to legislative intent. This, the Court held, could be achieved by specifying that the alleged conspiracy must relate to commission of another Scheduled Offence to invoke the PMLA.
Pavana Dibbur arrives at a desirable solution to a vexing problem and will restrain the application of the PMLA for the time being. Separately, it is noteworthy that the Court relied upon the principle of strict construction of penal statutes to buttress its reasoning. Recall that such a characterisation of the PMLA as a 'penal statute' was exactly what a different Bench in Vijay Madanlal Choudhary had steadfastly refused to admit by resorting to verbal acrobatics, settling instead upon calling it a 'sui generis' statute. One can only hope that the frank acknowledgment of the PMLA as a penal statute is here to stay, paving the way for jurisprudential clarity and an affirmation of constitutional and procedural rights for those caught in its unending net.
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