Sanction and PMLA

In Bhibu Prasad Acharya [Crl. Appeal Nos. 3414-16 of 2024, decided on 06.11.2024], the Supreme Court held that the provisions of Section 197 of the Criminal Procedure Code 1973 [Cr.P.C.], and by extension of Section 218 of the Bharatiya Nagarik Suraksha Sanhita 2023 [BNSS] apply to the Prevention of Money Laundering Act 2002 [PMLA]. 

The basis for this view was Sections 65 and 71 of PMLA — the first applies Cr.P.C. provisions to PMLA proceedings so long as they are not inconsistent, and the latter rules that in case of any inconsistency, the PMLA overrides. Nothing within the PMLA excluded application of sanction provisions, and so necessary effect had to be given to Section 197. It made sense as well, according to the Court, considering the object of Section 197 which was to ensure that public servants are afforded a measure of protection against legal proceedings of a vexatious character [Paras 6, 17-18]. In the facts of Bhibu Prasad Acharya, the Court held that prior sanction was required, and absence of such sanction rendered proceedings unsustainable.

Since then, there has been quite a buzz around this decision and its purported harm to the PMLA regime's enforcement as obtaining sanction is now made mandatory. News reports also suggest that the government may be mooting a challenge to a position which renders sanction mandatory.

Only, obtaining sanction is not made mandatory by Bhibu Prasad Acharya.

The decision holds that the clause regarding need for prior sanction applies with equal force to PMLA as it does to other laws. It does not, by any stretch, hold that obtaining sanction itself is necessary for all PMLA cases, because Section 197 Cr.P.C. and Section 218 BNSS do not say so. These provisions are not like other clauses which by their very text make the need for sanction mandatory in all cases, such as Section 19 of the Prevention of Corruption Act 1988.

What Section 197 Cr.P.C. / 218 BNSS do is pose a question — was the alleged offence committed by the public servant while acting in the discharge or purporting to act in the discharge of official duty. If yes, it needs prior sanction. But if not, there is no need for sanction. Each case turns on its own facts. 

The case-by-case determination involved in Section 197 naturally meant that in cases where sanction was not taken, aggrieved persons challenged the move, and required courts to consider the scope of the clause. It has led to a large, complicated, and often inconsistent body of law on what acts are within the scope of an official's public duty, when sanction can be challenged, what happens if governments sit pretty and do not pass sanction orders, and how deep the scrutiny while granting sanction should be. But at no point has that body of law held that sanction under Section 197 is a must.

All that Bhibu Prasad Acharya does, and it does so absolutely correctly, is to give natural effect to the text of the PMLA which does not contain any clause ousting the issue of sanction. Its result is not to render the need for sanction mandatory, but to open up a new avenue for litigation in these cases. The ball will be in the agency's court. Where it does not seek sanction, quite often public servants will challenge the move, as they do in other kinds of cases.  

The Rajasthan Ordinance, and Seeking Sanction to Prosecute and Investigate Public Servants in India

In September 2017, the Rajasthan government issued an ordinance that sought to (i) make it necessary for investigating authorities to first get sanction from the government before pursuing allegations against a public servant, giving the government up to six months to consider, and (ii) bar any person from disclosing any details about the concerned official until this permission had been granted. The Government has since moved a bill in the legislature to make the law permanent, while the ordinance itself has been challenged before the Rajasthan High Court which is yet to decide the case. News media has seen few supporters barring a Junior Law Minister in the Union government supposedly considers the ordinance 'perfect and balanced'. Most others are challenging it for stifling investigations and illegally curbing the constitutionally protected freedom of speech.  

Are there any merits to, if not all, then some parts, of the Ordinance? Might we see more such ordinances across states in the near future if Rajasthan's version passes judicial muster? I have been thinking about these questions, and here, I try and understand them through this post. Understanding needs context, which is often absent from discussions of sanction in India. This post begins with a brief historical introduction to the 'sanction to prosecute', flagging the recent constitutional problems surrounding the concept. I then try and suggest that the Rajasthan ordinance is the logical aftermath of the judicial treatment of sanction. This means, unfortunately, that this is a rather long post. I hope it isn't long and pointless.

The Imperial Lineage of Sanction to Prosecute

Most legal systems recognise the right of an individual to pursue legal remedies when her rights are violated. If you beat me up, I have the right to pursue a case in court against you. In India, this can happen by either approaching the police who might take the case to court after investigation, or by going to court yourself. Now, it is easy to imagine the possibility of this (or any) right being abused - I might bring a false case to harass my opponent. We address this through preventing or punishing such conduct. The idea of seeking permissions to bring lawsuits fits in the former, which is basically what seeking 'sanction to prosecute' is. An administrative superior acts as a filter to ensure frivolous cases are not brought in court against public officials. The Criminal Procedure Code 1973 [Cr.P.C.] carries this filter in Section 197, which requires prior sanction to 'prosecute' (this is important) public servants (both serving and retired ones) only when allegations concern things they did actually in the course of duty, or purporting to be so.      

But why public officials, you might ask. An educated guess is India's colonial context informed this decision to protect those associated with government. The colonial regime introduced sanction in its first comprehensive criminal procedure code of 1861 [Section 167, at page 186 of the link], and kept it in the 1872 Code [Section 466, at page 509]. The modern version of this which I referred to above came in the 1898 Code [also Section 197, at page 141]. Broad protections shielded those working for the government who, to put it mildly, did not hesitate to step beyond the bounds of law while discharging their duties. A harsh terrain mandated harsh methods, and to allow prosecutions would stifle the governance project (opening for potential historical research examining if native and British persons were treated differently when it came to granting sanction!). Though speculative, I think this idea fits better than the arguments floated in London to defend similar restrictions to prosecute (the link is for debates in 1934, but the law remained the same even before). English law focused more on the nature of the offence rather than the offender - sedition, corruption and other potentially sensitive allegations could only be pursued with the Attorney General's consent, while the Indian version focused on the identity of the defendant and covered every person under the pay of the government. 

Over time it seems this justification changes, as seen from debates in the House on the Government of India Act 1935, which gave constitutional bases to protections for public servants from suits and prosecutions [Sections 270-71, at page 105. Fascinating, showing the crown was concerned about soon-to-be-elected local governments possibly changing the law on this front]. The legislature spent more time discussing civil suits, but the debates are useful for the criminal prosecution issue nonetheless. Mr. Thorp (column 54) spoke of how it was 'introducing a dangerous principle'  to India and could hurt genuine cases, while the Duchess of Atholl (column 55) spoke of apprehensions that the clause 'falls short of what civil servants feel to be necessary'. This largely mirrors the divide that we see today. Bureaucrats consider it necessary to have these protections to perform their duties while aggrieved persons consider them as impediments of entitlement. 

Independent India and the Opportunity Doctrine 

What became of the requirement of sanction in independent India? Well, it was quickly subjected to a constitutional challenge. In Matajog Dobey [AIR 1956 SC 44] the petitioner argued that Section 197 violated the equal protection clause by giving public servants protections from legal proceedings that others did not have. The Court swatted this aside by holding that public officials 'have to be protected from harassment in the discharge of official duties' while ordinary citizens did not. The vast category of public servants under the pay of the government - both union and state - was thus recognised as a class separate from all others, a distinction that has not been displaced. 

This did not mean the judiciary was not concerned with the debates that I highlighted above. In fact, the concern was palpable. High Courts before independence, and later the Supreme Court too, were acutely aware of the tightrope being tread - read the requirement too narrowly and you render the protection illusory, but read it to cover everything a public servant does and you make accountability a mirage. The judicial device created to navigate this problem was what I will call the 'Opportunity Doctrine' - if public office merely gave an opportunity to commit crime, then there was no need to get sanction. But where the alleged criminal acts were inseparable from the office and were 'integrally connected' to official duty, sanction was a must. So, if a public official misuses the privileges of office (goes on a joyride with government sponsored fuel) then prosecuting that offence should not require sanction. But if a municipal authority colludes with one real-estate developer to allot land at cheap rates, then we may need prior sanction to prosecute.          

The malleability of the Opportunity Doctrine should not go unnoticed - beyond the obvious cases it left a huge middle ground to be navigated with little more than gut instinct. For instance - what about the bank official who pilfers funds for his own use? Did his job merely grant an opportunity, or was it integral to the crime? The judicial grappling with sanction had a significant impact on the text itself. For starters, the test ignored that Section 197 never required an integral connection with duty: it's needs were met even if the acts were purportedly in discharge of duty. Since sanction was a tool to filter cases at the outset, it naturally required this broad scope. Considering whether sanction was needed in post-conviction review (appeals) by courts slowly dislocated it from its preventive roots. After all, how willing would a judge be to reverse a conviction arrived at after a lengthy trial on the technicality of there being no sanction to prosecute an official? This version undoubtedly tapers over the cracks but it would be difficult to argue that the broad shifts are not as I suggest.  

The Intra-Branch Dialogue and Sanctions to Investigate 

Thus we see how courts assumed control of the sanction to prosecute after having refused to strike it down as unconstitutional. Did this happen in a vacuum? Or did the legislature and executive - consisting several public servants protected by sanction - react? They did, and pretty quickly. In 1969 the government passed directions to the Central Bureau of Investigation that prevented it from starting any investigations against high-ranking public servants before getting permission. This was the 'Single Directive'. The thinking is clear - courts are applying a hindsight test which does not filter well, so lets go further back in time and filter at the institution of criminal cases. While doing this, the government impliedly admitted that the sanction protections are too broad to justify the rationale of their protecting public decision-making. Of course decision-makers must be treated differently from the ordinary rank-and-file bureaucrats, and so the latter would not be granted these protections.    

The Supreme Court did not agree that the public servants could be segregated like this. When the Supreme Court held this arrangement illegal, the government responded by re-introducing it almost immediately. When the Court slapped on the government's knuckles it retreated and withdrew the proposed change. But in 2003, it went ahead and amended the law to give it firm footing. While India's major political parties often don't look eye to eye, these moves were made both by the Congress and BJP led governments, showing a fairly clear indication of legislative will. What happens next? This statutory provision [Section 6-A of the Delhi Special Police Establishment Act 1946] was also struck down as invalid by the Court in 2014. On both occasions when the court struck down this protection, it did not overturn the Matajog decision to find sanction requirements were bad for creating an invidious classification between persons. Instead, the Court held that protecting only a class of bureaucrats was bad. How do you read this? Is the Court saying sanction should be limited to instituting prosecutions as done in the CrPC? Or is it saying that some public servants are not more equal than others, but all public servants are more equal than the rest of us. The second is a fair reading, and it was something the Court had agreed to in MK Aiyappa while handling sanction requirements under the Prevention of Corruption Act 1988 (a blistering commentary on the case can be read here). If the court reads the law this way, does it come as a surprise that others, such as the Rajasthan and Maharashtra governments, are doing the same? 

Past, Present, but what of the Future?

Maybe it is just me, but I can't help but notice patterns in how the law on sanctions to prosecute has been developing over time. There is a constant back and forth between the court and government - the court restricts its scope, the government expands it again. All of this was happening within the bounds of the constitution until the Supreme Court upped the ante and held the Single Directive to be unconstitutional in 1998. The government had been running the initiative for nearly thirty years to ensure lax sanction rules did not affect decision-makers, and the Court decided it didn't matter in the language which it could use - the Constitution. Was it inopportune? Perhaps. If the Court had a problem with having a sanction requirement then it should have said it outright. If it didn't, then there were better methods of dealing with the situation than refusing to acknowledge the few merits in the Single Directive scheme and starting a power tussle with the government. Today, because of how the Court avoided the forest for the trees, I think it will be hard for the Rajasthan High Court to hold that needing permission to start an investigation against public servants is unconstitutional. That might just convince the remaining BJP led states to pass similar laws, eventually bringing us back to the Supreme Court. Might the Court finally reconsider its position on all public servants being a separate class from the public?