Holding

Section 120B of the IPC becomes a scheduled offence under the PMLA only when the alleged conspiracy is to commit an offence that is itself specified in the Schedule; without such a scheduled offence, prosecution under section 3 of the PMLA cannot proceed.

Summary

The Directorate of Enforcement filed a complaint under the PMLA alleging that Pavana Dibbur conspired with accused Madhukar Angur to launder proceeds of a fraud at Alliance University by using nominal sale deeds and her bank accounts. The appellant challenged the complaint, arguing that the only predicate offence in the chargesheets was IPC section 120B, which she claimed could not render the case a scheduled offence under the PMLA. The Supreme Court examined whether a conspiracy under section 120B becomes a scheduled offence when the underlying crime is not itself listed in the PMLA Schedule. It held that section 120B is a scheduled offence only if the conspiracy targets an offence expressly included in Parts A, B or C of the Schedule; otherwise, no scheduled offence exists and the PMLA charge under section 3 cannot stand. Consequently, the High Court's order dismissing the petition was set aside, the complaint against the appellant was quashed, and the appeal was allowed. The Court also clarified that a person need not be an accused in the predicate offence to be liable under section 3, but must benefit from the acquittal or discharge of all accused in the scheduled offence.

Issues considered

Whether an offence punishable under IPC section 120B, included in Part A of the PMLA Schedule, becomes a scheduled offence when the alleged conspiracy is to commit an offence not listed in the Schedule.
Whether the absence of a scheduled offence precludes prosecution under section 3 of the PMLA.
Whether a person not named as an accused in the predicate offence can be prosecuted under section 3 of the PMLA.

Legislation cited

Code of Criminal Procedure, 1973s. 482
Indian Penal Code, 1860s. 120A, s. 120B
Prevention of Money Laundering Act, 2002s. 2(1)(u), s. 2(1)(y), s. 3, s. 45(1) second proviso, s. 5

Subjects

Money launderingScheduled offencePMLASection 120B IPCConspiracyProceeds of crimeStatutory interpretationQuashing of complaintCriminal procedure

Judgment

[2023] 13 S.C.R. 1049 : 2023 INSC 1029

CASE DETAILS

PAVANA DIBBUR
v.
THE DIRECTORATE OF ENFORCEMENT
(Criminal Appeal No. 2779 of 2023)
NOVEMBER 29, 2023
[ABHAY S. OKA AND PANKAJ MITHAL, JJ.]

HEADNOTES

Issue for consideration: Whether the oﬀence u/s.120B, IPC included
in Paragraph 1 of the Schedule to the Prevention of Money Laundering Act,
2002, can be treated as a scheduled oﬀence even if the criminal conspiracy
alleged is to commit an oﬀence which is not a part of the Schedule.
Prevention of Money Laundering Act, 2002 – Paragraph 1 of the
Schedule – Penal Code, 1860 – s.120B – Appellant purchased the ﬁrst
property from Alliance Business School and the second property from
accused no.1 against whom an FIR was registered alleging that he
collected Rs.107 crores from the students by claiming himself as the
Chancellor of the Alliance University – Four FIRs, ECIR registered –
Complaint ﬁled against the appellant-accused alleging that she entered
into a conspiracy with accused no.1 by getting executed nominal sale
deeds in respect of the ﬁrst and second properties in her name for the
beneﬁt of accused no.1 and facilitated him to use her bank accounts to
siphon the university funds, assisting him in the activity connected with
the proceeds of crime – Petition for quashing the complaint ﬁled by the
appellant, dismissed by High Court – Appellant pleaded that out of the
four scheduled/predicate oﬀences, chargesheets were ﬁled in the case
of three oﬀences wherein only one oﬀence covered by the Schedule to
the PMLA was mentioned– It was thus contended that s.120B of IPC
alone, in the absence of any other scheduled oﬀence cannot sustain a
charge under the PMLA and unless there is an allegation regarding a
conspiracy to commit any scheduled oﬀence, the prosecution under the
PMLA cannot lie:
1049
1050 SUPREME COURT REPORTS [2023] 13 S.C.R.

Held: The oﬀence punishable u/s.120B of the IPC will become a
scheduled oﬀence only if the conspiracy alleged is of committing an oﬀence
which is speciﬁcally included in the Schedule – In the present case, in the
chargesheets ﬁled in the alleged scheduled oﬀences, there is no allegation
of the commission of criminal conspiracy to commit any of the oﬀences
included in the Schedule – Except for s.120B, IPC, no other oﬀence in
the schedule was applied – Therefore, in this case, the scheduled oﬀence
does not exist at all – Hence, the appellant cannot be prosecuted for the
oﬀences punishable u/s.3, PMLA – Impugned order quashed and set aside
– Complaint pending before the Special Court for PMLA cases, Bengaluru
quashed as regards the present appellant – Code of Criminal Procedure,
1973 – s.482. [Paras 26, 27]
Prevention of Money Laundering Act, 2002 – s.3 – Plea of the
appellant that as she was not arraigned as an accused in the chargesheets
ﬁled pertaining to the alleged scheduled oﬀences, she cannot be roped
in as an accused for the oﬀences punishable u/s.3:
Held: In a given case, if the prosecution for the scheduled oﬀence
ends in the acquittal of all the accused or discharge of all the accused or
the proceedings of the scheduled oﬀence are quashed in its entirety, the
scheduled oﬀence will not exist, and therefore, no one can be prosecuted for
the oﬀence punishable u/s.3 of the PMLA as there will not be any proceeds
of crime – Thus, in such a case, the accused against whom the complaint
u/s.3 of the PMLA is ﬁled will beneﬁt from the scheduled oﬀence ending by
acquittal or discharge of all the accused – Similarly, he will get the beneﬁt of
quashing the proceedings of the scheduled oﬀence – However, an accused
in the PMLA case who comes into the picture after the scheduled oﬀence
is committed by assisting in the concealment or use of proceeds of crime
need not be an accused in the scheduled oﬀence – Such an accused can still
be prosecuted under PMLA so long as the scheduled oﬀence exists – An
oﬀence u/s.3 can be committed after a scheduled oﬀence is committed – It
is not necessary that a person against whom the oﬀence u/s.3 is alleged
must have been shown as the accused in the scheduled oﬀence – Plea of
the appellant rejected. [Paras 15, 16]
Interpretation of Statutes – Prevention of Money Laundering
Act, 2002 – Paragraph 1 of the Schedule – Penal Code, 1860 – s.120B:
PAVANA DIBBUR v. THE DIRECTORATE OF 1051
ENFORCEMENT

Held: The penal statutes are required to be strictly construed – The
penal laws must be construed according to the legislative intent as expressed
in the enactment – While giving eﬀect to the legislature’s intention, if two
reasonable interpretations can be given to a particular provision of a penal
statute, the Court should generally adopt the interpretation that avoids the
imposition of penal consequences – A more lenient interpretation of the two
needs to be adopted – The legislative intent which can be gathered from
the deﬁnition of the scheduled oﬀence under clause (y) of sub Section (1)
of s.2 of the PMLA is that every crime which may generate proceeds of
crime need not be a scheduled oﬀence – Therefore, only certain speciﬁc
oﬀences have been included in the Schedule – Thus, if the submission of
the ED that as s.120B, IPC is included in Part A to the Schedule even if
the allegation is of making a criminal conspiracy to commit an oﬀence
which is not a part of the Schedule, the oﬀence becomes a scheduled
oﬀence, is accepted, the Schedule will become meaningless or redundant
– Reason explained – Interpretation suggested by the ED will defeat the
legislative object of making only a few selected oﬀences as scheduled
oﬀences – If such an interpretation is accepted, the statute may attract the
vice of unconstitutionality for being manifestly arbitrary – It cannot be the
legislature’s intention to make every oﬀence not included in the Schedule
a scheduled oﬀence by applying s.120B – Therefore, the oﬀence u/s.120-B
included in Part A of the Schedule will become a scheduled oﬀence only
if the criminal conspiracy is to commit any oﬀence already included in
Parts A, B or C of the Schedule. [Paras 23-25]

LIST OF CITATIONS AND OTHER REFERENCES

Vijay Madanlal Choudhary & Ors. vs. Union of India & Ors. (2022)
SCC Online SC 929 – referred to.
OTHER CASE DETAILS INCLUDING IMPUGNED
ORDER AND APPEARANCES
CRIMINAL APPELLATE JURISDICTION : Criminal Appeal
No.2779 Of 2023
From the Judgment and Order dated 27.09.2022 of the High Court of
Karnataka at Bengaluru in CRLP No.3542 of 2022.
1052 SUPREME COURT REPORTS [2023] 13 S.C.R.

Appearances:
Ms. Meenakshi Arora, Sr. Adv., Ms. Ashima Mandla, Ms. Mandakini
Singh, Surya Pratap Singh, Ms. Ankita Chaudhary, Advs. for the Appellant.
S. V. Raju, ASG, Mukesh Kumar Maroria, Ms. Alka Agarwal, Annam
Venktesh, Ms. Sairica Raju, Zoheb Hussain, Advs. for the Respondent.
JUDGMENT / ORDER OF THE SUPREME COURT

JUDGMENT

ABHAY S. OKA, J.
OVERVIEW
1. The respondent–the Directorate of Enforcement (for short, ‘ED’),
ﬁled a complaint under the second proviso to Section 45(1) of the Prevention
of Money Laundering Act, 2002 (for short, ‘the PMLA’) before the Special
Court for PMLA Cases at Bengaluru. The appellant–Pavana Dibbur was
shown as accused no.6 in the said complaint. By the order dated 17th
March 2022, the Special Court took cognisance of the said complaint. The
appellant ﬁled a petition before the High Court of Karnataka at Bengaluru
under Section 482 of the Code of Criminal Procedure, 1973 (for short, ‘Cr.
PC’) seeking the relief of quashing of the said complaint. By the impugned
judgment and order dated 27th September 2022, the petition for quashing
the complaint has been dismissed.
2. In the year 2011, Alliance Business School (for short, ‘ABS’)
purchased a property bearing Khata no.37/22 at Gollahalli Village, Jigani
Hobli, Anekal Taluk, Bengaluru for the consideration of Rs.13.05 crores.
The area of the said property is approximately ﬁve acres. For the sake of
convenience, we are describing the said property as ‘the First Property’.
On 1st July 2013, the appellant purchased the ﬁrst property from ABS by
a registered sale deed for a consideration of Rs.13.5 crores. The accused
no.1–Madhukar Angur, purchased a property measuring 4 acres and 0.4
Guntas bearing survey nos.61, 62 and 63 at Karpur Village, Kasaba Hobli,
Anekal Taluk, Bengaluru. For the sake of convenience, we are describing
this property as ‘the Second Property’. The appellant purchased the second
property by a registered sale deed on 29 th June 2019 for a consideration of
Rs.2.47 crores from accused no.1–Madhukar Angur.
PAVANA DIBBUR v. THE DIRECTORATE OF 1053
ENFORCEMENT [ABHAY S. OKA, J.]

3. For a period of ﬁve years, i.e. from 2010 to 2015, the appellant’s
husband–Dr Ayyappa Dore, was the Vice-Chancellor of the Alliance
University. The appellant also acted as the Vice-Chancellor of the Alliance
University for a brief period. On 11th November 2017, a First Information
Report (FIR) was registered on the complaint of the Registrar of the
Alliance University against accused no.1–Madhukar Angur, alleging that
he collected a sum of Rs.107 crores from the students by claiming himself
as the Chancellor of the Alliance University. The allegation was that he
collected the said amount between January 2017 and November 2017, which
was deposited in the account of Srivari Education Services. Subsequently,
crores of rupees were transferred to the account of the accused no.1.
4. An Enforcement Case Information Report (ECIR) was registered
on 16th October 2020 by the ED against accused nos.1, 2 and 3, namely
Madhukar Angur, his wife Priyanka Angur and Mr Ravikumar, Partner,
Srivari Education Services and other unknown accused alleging the
commission of the oﬀence of money laundering under Section 3 of the
PMLA. The ECIR was based on four FIRs, the details of which are as under:
Sl. FIR No. Sections in Chargesheet Sections under
FIR which the
No.
Chargesheet
was ﬁled
1. 119 of 2016 376, 420 and B-Report ﬁled/ Closure Report
506 of IPC Closure Report accepted
(PS Jayaprakash
ﬁled on 2nd
Nagar)
February 2017
2. 730 of 2016 143, 144, Chargesheet Chargesheet
147, 148, ﬁled on 4th July is ﬁled under
(PS Madiwala)
149, 506 and 2017 in which Sections 143,
120-B of IPC the appellant is 144, 147, 148,
not named as the 149, 506, 120-B
accused of IPC
3. 52 of 2017 506, 504, Chargesheet ﬁled Chargesheet ﬁled
143, 149 and on 25th March under Sections
(PS
420 of IPC 2018 in which 504, 506, 120-B
Shankarpura)
the appellant is read with 34 of
not named as the IPC
accused
1054 SUPREME COURT REPORTS [2023] 13 S.C.R.

4. 188 of 2017 143, 406, Chargesheet Chargesheet ﬁled
th
407, 408, 409 ﬁled on 18 June under Section
(PS Anekal)
and 149 of 2019 in which 406, 408, 408,
IPC the appellant is 447, 204, 120-B
not named as the read with 34 of
accused IPC

5. On 27th September 2021, the ED passed an order under Section 5 of
the PMLA attaching ﬁrst and second properties. A complaint was ﬁled before
the adjudicating authority on 13th October 2021, in which the appellant is
shown as the ﬁfth defendant.
6. The allegation against the appellant in the complaint ﬁled under
the second proviso of Section 45(1) of the PMLA is that she has entered
into a conspiracy with accused no.1–Madhukar Angur by getting executed
nominal sale deeds in respect of the ﬁrst and second properties in her name
for the beneﬁt of accused no.1. The allegation of the ED is that the appellant
facilitated the accused no.1 to use her bank accounts to siphon the university
funds, thereby, assisting the accused no.1 in the activity connected with the
proceeds of crime. By the impugned judgment, the learned Single Judge
of the High Court dismissed the petition ﬁled by the appellant. The learned
Single Judge relied upon the decision of a Bench of three Hon’ble Judges
of this Court in the case of Vijay Madanlal Choudhary & Ors. v. Union of
India & Ors.1.
SUBMISSIONS OF THE APPELLANT
7. Ms Meenakshi Arora, the learned senior counsel appearing for
the appellant, ﬁrstly submitted that the ﬁrst and second properties are not
tainted properties and, therefore, the same are not covered by the deﬁnition
of “proceeds of crime” under clause (u) of sub-section (1) of Section 2 of
the PMLA. The learned senior counsel pointed out that the ﬁrst property
was acquired on 1st July 2013, much prior to the commission of the ﬁrst
scheduled oﬀence. The allegation in the FIR dated 11th November 2017
against accused no.1 is that he collected a sum of about Rs.107 crores
from the students between January and November 2017 and transferred

1 (2022) SCC Online SC 929
PAVANA DIBBUR v. THE DIRECTORATE OF 1055
ENFORCEMENT [ABHAY S. OKA, J.]

the said amount to his account. Therefore, the appellant’s acquisition of the
ﬁrst property can never be linked with the proceeds of the crime regarding
the scheduled oﬀence. She submitted that regarding the acquisition of the
second property, the appellant had her own resources available to acquire
the same. The learned senior counsel relied upon an Income Tax Return ﬁled
by the appellant under the Income Declaration Scheme, 2016, by which she
declared a total undisclosed income of Rs.26,42,54,193/-. The appellant paid
Rs.11,89,08,385/- towards income tax and penalty on 8 th September 2016.
The return was ﬁled on 12th September 2016. Therefore, the appellant had a
source of money for acquiring the second property for the consideration of
Rs.2.47 crores. Both the properties acquired by the appellant had no nexus
at all with the proceeds of crime of the scheduled oﬀences. The learned
senior counsel pointed out that consideration of Rs.2.47 crores was agreed
upon, as it is mentioned in the sale deed that it was a distress sale made by
the accused no.1–Madhukar Angur.
8. The second limb of the submissions of the learned senior counsel
appearing for the appellant is that as the appellant has not been arraigned
as an accused in the chargesheets ﬁled pertaining to the alleged scheduled
oﬀences, she cannot be roped in as an accused for the oﬀences punishable
under Section 3 of the PMLA. She relied upon what is held in paragraphs
251 to 253 of the decision of this Court in the case of Vijay Madanlal
Choudhary1. She submitted that in the decision, this Court held that if an
accused in the scheduled/predicate oﬀence is acquitted/discharged, he cannot
be prosecuted for the oﬀence punishable under the PMLA. She submitted
that the appellant’s case stands on a better footing as she was not even shown
as an accused in any scheduled/predicate oﬀences. She would, therefore,
submit that the cognizance of the crime under the PMLA could not have
been taken against the appellant.
9. The third submission of the learned senior counsel appearing for the
appellant is that out of the four scheduled/predicate oﬀences, chargesheets
have been ﬁled in the case of three oﬀences, and in these chargesheets, only
one oﬀence covered by the Schedule to the PMLA has been mentioned,
which is Section 120-B of IPC. She pointed out that in FIR no.119 of 2016
and FIR no.52 of 2017, Section 420 of IPC was included. However, in FIR
no.119 of 2016, the closure report was ﬁled, and in FIR no.52 of 2017, while
ﬁling the chargesheet, Section 420 of IPC was excluded. She contended that
1056 SUPREME COURT REPORTS [2023] 13 S.C.R.

Section 120-B of IPC alone, in the absence of any other scheduled oﬀence,
cannot sustain a charge under the PMLA. Unless there is an allegation
regarding a conspiracy to commit any scheduled oﬀence, the prosecution
under the PMLA cannot lie. Relying upon the proviso to Section 120-A of
IPC, the learned senior counsel submitted that an illegal act or a legal act by
illegal means, in furtherance of an agreement, committed by any person is
a sine qua non for attracting the oﬀence of conspiracy under Section 120-B
of IPC. If Section 120-B of IPC can be treated as a standalone oﬀence to
attract prosecution under the PMLA, by that logic, a complaint under the
PMLA can be ﬁled where the allegation is of criminal conspiracy to commit
an oﬀence which is not a scheduled oﬀence. Therefore, she submits that the
complaint against the appellant deserves to be quashed.
SUBMISSIONS OF THE RESPONDENT
10. Shri S.V. Raju, the learned Additional Solicitor General appearing
for the ED, submitted that even assuming that the appellant had monetary
capacity to acquire the second property, one cannot conclude that the funds
siphoned by the accused no.1, which constitute proceeds of crime, were not
used by the appellant for acquiring the second property. He submits that
this issue can be gone into only at the time of trial. Regarding the second
submission, the learned Additional Solicitor General submitted that a person
can be held guilty of the commission of a money laundering oﬀence under
Section 3 of the PMLA, even if he is not shown as an accused in the predicate
oﬀence. He submitted that it is apparent from the provision of Section 3
of the PMLA that in a given case, a person who is not an accused in the
predicate oﬀence can commit the oﬀence of money laundering. Regarding
the third submission, the learned Additional Solicitor General submitted
that wherever the legislature intended, it has made a particular oﬀence
read with another oﬀence as a scheduled oﬀence. He invited our attention
to Paragraphs 4 and 6 of Part A of the Schedule to the PMLA. Referring
to Paragraph 11 of the Schedule to the PMLA, he urged that the ﬁrst four
oﬀences in Paragraph 4 and all the oﬀences in Paragraph 6 clearly show
the legislature’s intention. He submitted that the schedule must be read as
it is, and nothing can be added or subtracted from the Schedule considering
the objects of the PMLA. He submitted that the validity of the Schedule
has been upheld in the case of Vijay Madanlal Choudhary1. He would,
therefore, submit that no interference is called for with the impugned order.
PAVANA DIBBUR v. THE DIRECTORATE OF 1057
ENFORCEMENT [ABHAY S. OKA, J.]

CONSIDERATION OF SUBMISSIONS
THE EFFECT OF THE APPELLANT NOT BEING SHOWN AS
AN ACCUSED IN PREDICATE OFFENCE
11. Section 3 of the PMLA reads thus:
“3. Oﬀence of money-laundering.—Whosoever directly or
indirectly attempts to indulge or knowingly assists or knowingly
is a party or is actually involved in any process or activity
connected with the proceeds of crime including its concealment,
possession, acquisition or use and projecting or claiming it as
untainted property shall be guilty of oﬀence of money-laundering.
Explanation.—For the removal of doubts, it is hereby clariﬁed
that,—
(i) a person shall be guilty of oﬀence of money-laundering if
such person is found to have directly or indirectly attempted
to indulge or knowingly assisted or knowingly is a party or is
actually involved in one or more of the following processes or
activities connected with proceeds of crime, namely:—
(a) concealment; or
(b) possession; or
(c) acquisition; or
(d) use; or
(e) projecting as untainted property; or
(f) claiming as untainted property,
in any manner whatsoever;
(ii) the process or activity connected with proceeds of crime is a
continuing activity and continues till such time a person is directly
or indirectly enjoying the proceeds of crime by its concealment or
possession or acquisition or use or projecting it as untainted property
or claiming it as untainted property in any manner whatsoever.”
On a plain reading of Section 3, unless proceeds of crime exist, there
cannot be any money laundering oﬀence. Clause (u) of sub-section
1058 SUPREME COURT REPORTS [2023] 13 S.C.R.

(1) of Section 2 of the PMLA deﬁnes “proceeds of crime”, which
reads thus:
“2.Deﬁnition – (1) In this Act, unless the context otherwise
requires,-
.. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .
(u) “proceeds of crime” means 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
or where such property is taken or held outside the country, then
the property equivalent in value held within the country or abroad;
Explanation.—For the removal of doubts, it is hereby clariﬁed
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.”
12. Clause (v) of sub-section (1) of Section 2 of the PMLA deﬁnes
“property” to mean any property or assets of every description, whether
corporeal or incorporeal, movable or immovable, tangible or intangible. To
constitute any property as proceeds of crime, it must be derived or obtained
directly or indirectly by any person as a result of criminal activity relating
to a scheduled oﬀence. The explanation clariﬁes that the proceeds of crime
include property, not only derived or obtained from 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. Clause
(u) also clariﬁes that even the value of any such property will also be the
proceeds of crime. Thus, the existence of “proceeds of crime” is sine qua
non for the oﬀence under Section 3 of the PMLA.
13. Clause (x) of sub-section (1) of Section 2 of the PMLA deﬁnes
“schedule”. Clause (y) thereof deﬁnes “scheduled oﬀence”, which reads thus:
“2. Deﬁnition – (1) In this Act, unless the context otherwise requires,-
.. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..
(y) “scheduled oﬀence” means—
PAVANA DIBBUR v. THE DIRECTORATE OF 1059
ENFORCEMENT [ABHAY S. OKA, J.]

(i) the oﬀences speciﬁed under Part A of the Schedule; or
(ii) the oﬀences speciﬁed under Part B of the Schedule if the total
value involved in such oﬀences is one crore rupees or more; or
(iii) the oﬀences speciﬁed under Part C of the Schedule.”
14. The condition precedent for the existence of proceeds of crime is
the existence of a scheduled oﬀence. On this aspect, it is necessary to refer
to the decision of this Court in the case of Vijay Madanlal Choudhary1. In
paragraph 253 of the said decision, this Court held thus:
“253. Tersely put, it is only such property which is derived or
obtained, directly or indirectly, as a result of criminal activity
relating to a scheduled oﬀence can be regarded as proceeds of
crime. The authorities under the 2002 Act cannot resort to action
against any person for money-laundering on an assumption that
the property recovered by them must be proceeds of crime and
that a scheduled oﬀence has been committed, unless the same
is registered with the jurisdictional police or pending inquiry by
way of complaint before the competent forum. For, the expression
“derived or obtained” is indicative of criminal activity relating to
a scheduled oﬀence already accomplished. Similarly, in the event
the person named in the criminal activity relating to a scheduled
oﬀence is ﬁnally absolved by a Court of competent jurisdiction
owing to an order of discharge, acquittal or because of quashing
of the criminal case (scheduled oﬀence) against him/her, there
can be no action for money-laundering against such a person or
person claiming through him in relation to the property linked
to the stated scheduled oﬀence. This interpretation alone can be
countenanced on the basis of the provisions of the 2002 Act, in
particular Section 2(1)(u) read with Section 3. Taking any other
view would be rewriting of these provisions and disregarding
the express language of deﬁnition clause “proceeds of crime”,
as it obtains as of now.”
(underline supplied)
In paragraphs 269 and 270, this Court held thus:
1060 SUPREME COURT REPORTS [2023] 13 S.C.R.

“269. From the bare language of Section 3 of the 2002 Act,
it is amply clear that the oﬀence of money-laundering is an
independent oﬀence regarding the process or activity connected
with the proceeds of crime which had been derived or obtained as
a result of criminal activity relating to or in relation to a scheduled
oﬀence. The process or activity can be in any form — be it one
of concealment, possession, acquisition, use of proceeds of crime
as much as projecting it as untainted property or claiming it to
be so. Thus, involvement in any one of such process or activity
connected with the proceeds of crime would constitute oﬀence of
money-laundering. This oﬀence otherwise has nothing to do with
the criminal activity relating to a scheduled oﬀence — except the
proceeds of crime derived or obtained as a result of that crime.
270. Needless to mention that such process or activity can be
indulged in only after the property is derived or obtained as a
result of criminal activity (a scheduled oﬀence). It would be an
oﬀence of money-laundering to indulge in or to assist or being
party to the process or activity connected with the proceeds of
crime; and such process or activity in a given fact situation may
be a continuing oﬀence, irrespective of the date and time of
commission of the scheduled oﬀence. In other words, the criminal
activity may have been committed before the same had been
notiﬁed as scheduled oﬀence for the purpose of the 2002 Act,
but if a person has indulged in or continues to indulge directly or
indirectly in dealing with proceeds of crime, derived or obtained
from such criminal activity even after it has been notiﬁed as
scheduled oﬀence, may be liable to be prosecuted for oﬀence
of money-laundering under the 2002 Act — for continuing to
possess or conceal the proceeds of crime (fully or in part) or
retaining possession thereof or uses it in trenches until fully
exhausted. The oﬀence of money-laundering is not dependent on
or linked to the date on which the scheduled oﬀence or if we may
say so the predicate oﬀence has been committed. The relevant
date is the date on which the person indulges in the process or
activity connected with such proceeds of crime. These ingredients
are intrinsic in the original provision (Section 3, as amended
PAVANA DIBBUR v. THE DIRECTORATE OF 1061
ENFORCEMENT [ABHAY S. OKA, J.]

until 2013 and were in force till 31.7.2019); and the same has
been merely explained and clariﬁed by way of Explanation vide
Finance (No. 2) Act, 2019. Thus understood, inclusion of Clause
(ii) in Explanation inserted in 2019 is of no consequence as it
does not alter or enlarge the scope of Section 3 at all.”
(underline supplied)
15. Coming back to Section 3 of the PMLA, on its plain reading,
an oﬀence under Section 3 can be committed after a scheduled oﬀence is
committed. For example, let us take the case of a person who is unconnected
with the scheduled oﬀence, knowingly assists the concealment of the
proceeds of crime or knowingly assists the use of proceeds of crime. In
that case, he can be held guilty of committing an oﬀence under Section 3
of the PMLA. To give a concrete example, the oﬀences under Sections 384
to 389 of the IPC relating to “extortion” are scheduled oﬀences included
in Paragraph 1 of the Schedule to the PMLA. An accused may commit a
crime of extortion covered by Sections 384 to 389 of IPC and extort money.
Subsequently, a person unconnected with the oﬀence of extortion may
assist the said accused in the concealment of the proceeds of extortion. In
such a case, the person who assists the accused in the scheduled oﬀence
for concealing the proceeds of the crime of extortion can be guilty of the
oﬀence of money laundering. Therefore, it is not necessary that a person
against whom the oﬀence under Section 3 of the PMLA is alleged must
have been shown as the accused in the scheduled oﬀence. What is held in
paragraph 270 of the decision of this Court in the case of Vijay Madanlal
Choudhary1 supports the above conclusion. The conditions precedent for
attracting the oﬀence under Section 3 of the PMLA are that there must be
a scheduled oﬀence and that there must be proceeds of crime in relation to
the scheduled oﬀence as deﬁned in clause (u) of sub-section (1) of Section
3 of the PMLA.
16. In a given case, if the prosecution for the scheduled oﬀence
ends in the acquittal of all the accused or discharge of all the accused or
the proceedings of the scheduled oﬀence are quashed in its entirety, the
scheduled oﬀence will not exist, and therefore, no one can be prosecuted
for the oﬀence punishable under Section 3 of the PMLA as there will not
be any proceeds of crime. Thus, in such a case, the accused against whom
1062 SUPREME COURT REPORTS [2023] 13 S.C.R.

the complaint under Section 3 of the PMLA is ﬁled will beneﬁt from the
scheduled oﬀence ending by acquittal or discharge of all the accused.
Similarly, he will get the beneﬁt of quashing the proceedings of the scheduled
oﬀence. However, an accused in the PMLA case who comes into the picture
after the scheduled oﬀence is committed by assisting in the concealment or
use of proceeds of crime need not be an accused in the scheduled oﬀence.
Such an accused can still be prosecuted under PMLA so long as the scheduled
oﬀence exists. Thus, the second contention raised by the learned senior
counsel appearing for the appellant on the ground that the appellant was
not shown as an accused in the chargesheets ﬁled in the scheduled oﬀences
deserves to be rejected.
ACQUISITION OF THE FIRST AND SECOND PROPERTY
17. The allegation against the appellant in the complaint is that she
purchased the property worth crores, though she did not have the source of
income which would generate enough money to buy the subject properties.
The allegation against the appellant is that she allowed and facilitated
accused no.1–Madhukar Angur, to conceal the siphoned/misappropriated
amounts by using her bank account. Another allegation is that she is shown
to have purchased the second property from accused no.1, though she did
not have the resources to pay the consideration. The allegation is that she
allowed the accused no.1 to use her bank accounts to facilitate siphoning the
proceeds of the crime. Another allegation is that both the ﬁrst and second
properties have been acquired out of the proceeds of crime. The ﬁrst property,
ex-facie, cannot be said to have any connection with the proceeds of crime
as the acts constituting the scheduled oﬀence took place after its acquisition.
The case of the appellant is that she possessed a substantial amount, as can
be seen from the declaration made by her under the Income Declaration
Scheme, 2016 in September 2016 and therefore, at the time of the acquisition
of the second property, more than suﬃcient money was available with her
to acquire the second property. The issue of whether the appellant used
tainted money to acquire the second property can be decided only after
the evidence is adduced. This is not a case where any material is placed on
record to show that the sale consideration was paid from a particular Bank
Account of the appellant. Therefore, it is not possible to record a ﬁnding at
this stage that the Second property was not acquired by using the proceeds
of crime. We also make it clear that we have considered the issue only in
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the context of the applicability of the PMLA. We have not dealt with the
issues of valuation and legality of the sale deeds.
INTERPRETATION OF THE FIRST ENTRY IN PARAGRAPH
1 OF THE SCHEDULE
18. Now, we come to the third argument made by the learned
senior counsel appearing for the appellant based on the interpretation of
the Schedule. It must be noted here that in the case of Vijay Madanlal
Choudhary1, even the validity of the Schedule was under challenge. A
perusal of the said decision shows that this Court was not called upon to
interpret any entry in the Schedule and, in particular, entry of Section 120-B
in the Schedule. The challenge to the Schedule is dealt with in paragraphs
453, 454 and 455 of the said decision. The contention before this Court
was that even minor oﬀences have been included in the Schedule, and
even compoundable oﬀences form part of the Schedule. It was submitted
that the oﬀences which do not have cross-border implications have been
included in the Schedule. In paragraphs 454 and 455 of the said decision,
this Court held thus:
“454. This Schedule has been amended by Act 21 of 2009, Act 2 of
2013, Act 22 of 2015, Act 13 of 2018 and Act 16 of 2018, thereby
inserting new oﬀences to be regarded as scheduled oﬀence.
The challenge is not on the basis of legislative competence in
respect of enactment of Schedule and the amendments thereto
from time to time. However, it had been urged before us that
there is no consistency in the approach as it includes even
minor oﬀences as scheduled oﬀence for the purposes of oﬀence
of money-laundering, more so even oﬀences which have no
trans-border implications and are compoundable between the
parties. The classiﬁcation or grouping of oﬀences for treating the
same as relevant for constituting oﬀence of money-laundering
is a matter of legislative policy. The Parliament in its wisdom
has regarded the property derived or obtained as a result of
speciﬁed criminal activity, being an oﬀence under the concerned
legislation mentioned in the Schedule. The fact that some of the
oﬀences may be non-cognizable oﬀences under the concerned
legislation or regarded as minor and compoundable oﬀences, yet,
1064 SUPREME COURT REPORTS [2023] 13 S.C.R.

the Parliament in its wisdom having perceived the cumulative
eﬀect of the process or activity concerning the proceeds of crime
generated from such criminal activities as being likely to pose
threat to the economic stability, sovereignty and integrity of the
country and thus, grouped them together for reckoning it as an
oﬀence of money-laundering, is a matter of legislative policy. It
is not open to the Court to have a second guess at such a policy.
455. Needless to underscore that the 2002 Act is intended to
initiate action in respect of money-laundering activity which
necessarily is associated with the property derived or obtained by
any person, directly or indirectly, as a result of speciﬁed criminal
activity. The prosecution under this Act is not in relation to the
criminal activity per se but limited to property derived or obtained
from speciﬁed criminal activity. Resultantly, the inclusion of
criminal activity which has been regarded as non-cognizable,
compoundable or minor oﬀence under the concerned legislation,
should have no bearing to answer the matter in issue. In that, the
oﬀence of money-laundering is an independent oﬀence and the
persons involved in the commission of such oﬀence are grouped
together as oﬀenders under this Act. There is no reason to make
distinction between them insofar as the oﬀence of money-
laundering is concerned. In our opinion, therefore, there is no
merit in the argument under consideration.”
In this case, we are not called upon to decide the validity of the
Schedule or any part thereof. The question is whether the oﬀence under
Section 120-B of IPC, included in Paragraph 1 of the Schedule, can be
treated as a scheduled oﬀence even if the criminal conspiracy alleged is to
commit an oﬀence which is not a part of the Schedule. This issue did not
arise for consideration in the case of Vijay Madanlal Choudhary1.
19. Section 120-A of IPC deﬁnes “criminal conspiracy”, which reads
thus:
“120A. Deﬁnition of criminal conspiracy.—When two or more
persons agree to do, or cause to be done,—
(1) an illegal act, or
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ENFORCEMENT [ABHAY S. OKA, J.]

(2) an act which is not illegal by illegal means, such an agreement
is designated a criminal conspiracy:
Provided that no agreement except an agreement to commit an
oﬀence shall amount to a criminal conspiracy unless some act
besides the agreement is done by one or more parties to such
agreement in pursuance thereof.
Explanation.—It is immaterial whether the illegal act is the
ultimate object of such agreement, or is merely incidental to
that object.”
Section 120-B of IPC provides for punishment for a criminal
conspiracy which reads thus:
“120B. Punishment of criminal conspiracy.— (1) Whoever is
a party to a criminal conspiracy to commit an oﬀence punishable
with death, imprisonment for life or rigorous imprisonment for a
term of two years or upwards, shall, where no express provision
is made in this Code for the punishment of such a conspiracy, be
punished in the same manner as if he had abetted such oﬀence.
(2) Whoever is a party to a criminal conspiracy other than a
criminal conspiracy to commit an oﬀence punishable as aforesaid
shall be punished with imprisonment of either description for a
term not exceeding six months, or with ﬁne or with both.”
20. Now, we turn to the Schedule to the PMLA. We ﬁnd that many
oﬀences, which may generate proceeds of crime, have not been included
in the Schedule. We are referring to only a few of such oﬀences only by
way of illustration:-
a. Section 263A of IPC, which deals with the oﬀence of making or
possessing ﬁctitious stamps is not a part of the Schedule;
b. Though oﬀences punishable under Sections 392 to 402 regarding
robbery and dacoity have been included in part A of the Schedule,
the oﬀence punishable under Section 379 of committing theft and
the oﬀence punishable under Section 380 of theft in a dwelling
house are not made a part of parts A and B of the Schedule. The
theft of both categories can be of a very large amount running
1066 SUPREME COURT REPORTS [2023] 13 S.C.R.

into crores. The said two oﬀences become scheduled oﬀences by
virtue of clause (3) of part C of the Schedule only if the oﬀences
have cross-border implications;
c. The offence punishable under Section 403 of dishonest
misappropriation of property does not form part of the Schedule.
The said oﬀence becomes a scheduled oﬀence by virtue of clause
(3) of part C of the Schedule only if the oﬀence has cross-border
implications;
d. The oﬀence under Section 405 of criminal breach of trust, which
is punishable under Section 406, is not a part of the Schedule The
said oﬀence becomes a scheduled oﬀence by virtue of clause (3)
of part C of the Schedule only if the oﬀence has cross-border
implications;
e. Though the oﬀence under Section 417 of cheating has been
made a scheduled oﬀence, the more stringent crime of forgery
for the purposes of cheating under Section 468 is not a part of
the Schedule, and
f. Though the oﬀences under Sections 489A to 489C regarding
forging or counterfeiting currency notes are part of the Schedule,
the offence under Section 489D of making or possessing
instruments or materials for forging or counterfeiting currency
notes is not a part of the Schedule.
21. Now, coming to Part B of the Schedule, it includes only one
oﬀence under Section 132 of the Customs Act, 1962. The oﬀence under
Section 132 of the Customs Act of making a false declaration, etc., becomes
a scheduled oﬀence in view of sub-clause (ii) of Clause (y) of sub-section
(1) of Section 2 of the PMLA only if the total value involved in the oﬀence
is Rs.1 crore or more. Part C of the Schedule provides that any oﬀence
speciﬁed in Part A having cross-border implications becomes a part of Part
C. More importantly, all the oﬀences against the property under Chapter
XVII of IPC having cross-border implications become scheduled oﬀences.
As pointed out earlier, the oﬀences punishable under Sections 379 (theft),
380 (theft in dwelling house), 403 (dishonest misappropriation of property)
and 405 (criminal breach of trust) are part of Chapter XVII. Though the
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ENFORCEMENT [ABHAY S. OKA, J.]

said oﬀences are not included in Part A, they become scheduled oﬀences
by virtue of Part C only if they have cross-border implications. Thus, it can
be said that many oﬀences capable of generating proceeds of crime do not
form a part of the schedule.
22. The learned Additional Solicitor General argued that as Section
120-B of IPC is included in Part A to the Schedule, even if the allegation
is of making a criminal conspiracy to commit an oﬀence which is not a
part of the Schedule, the oﬀence becomes a scheduled oﬀence. As stated
earlier, many oﬀences under Chapter XVII of IPC are not included in Parts
A and B. They become scheduled oﬀences only if the same have cross-
border implications. Thus, the oﬀences of dishonest misappropriation
of property or criminal breach of trust or theft can become a scheduled
oﬀence, provided they have cross-border implications. If the argument
of the learned Additional Solicitor General is accepted, if there is a
conspiracy to commit oﬀences under Section 403 or Section 405, though
the same have no cross-border implications, the oﬀence under Section
120-B of conspiracy to commit oﬀences under Sections 403 and 405 will
become a scheduled oﬀence. Thus, if any oﬀence is not included in Parts
A, B and C of the Schedule but if the conspiracy to commit the oﬀence is
alleged, the same will become a scheduled oﬀence. A crime punishable
under Section 132 of the Customs Act is made a scheduled oﬀence under
Part B, provided the value involved in the oﬀence is Rupees One Crore or
more. But if Section 120-B of IPC is applied, one who commits such an
oﬀence having a value of even Rs.1 lac can be brought within the purview
of the PMLA. By that logic, a conspiracy to commit any oﬀence under
any penal law which is capable of generating proceeds, can be converted
into a scheduled oﬀence by applying Section 120-B of the IPC, though
the oﬀence is not a part of the Schedule. This cannot be the intention of
the legislature.
23. The penal statutes are required to be strictly construed. It is true
that the penal laws must be construed according to the legislative intent
as expressed in the enactment. In Chapter 1 of GP Singh’s Principles of
Statutory Interpretation (15th Edition), it is observed that:
“The intention of the Legislature, thus, assimilates two
aspects: In one aspect it carries the concept of “meaning”, i.e.
1068 SUPREME COURT REPORTS [2023] 13 S.C.R.

what the words mean and in another aspect, it conveys the
concept of “purpose and object” or the “reason and spirit”
pervading through the statute. The process of construction,
therefore, combines both literal and purposive approaches.
In other words the legislative intention, i.e., the true or legal
meaning of an enactment is derived by considering the meaning
of the words used in the enactment in the light of any discernible
purpose or object which comprehends the mischief and its remedy
to which the enactment is directed.” In the words of A Driedger,
Construction of Statute, 2nd Edn, 1983: The words of an Act
are to be read in their entire context and in their grammatical
and ordinary sense harmoniously with the Scheme of the Act,
the object of the Act, and the intent of the Parliament. This
formulation later received the approval of the Supreme Court
and was called the “cardinal principle of construction”.” In both
Constitutional and statutory interpretation, the court is supposed
to exercise discretion in determining the proper relationship
between the subjective and objective purposes of the law and
help the law achieve its purpose.”
(Emphasis added)
24. While giving eﬀect to the legislature’s intention, if two reasonable
interpretations can be given to a particular provision of a penal statute, the
Court should generally adopt the interpretation that avoids the imposition
of penal consequences. In other words, a more lenient interpretation of the
two needs to be adopted.
25. The legislative intent which can be gathered from the deﬁnition of
the scheduled oﬀence under clause (y) of sub-Section (1) of Section 2 of the
PMLA is that every crime which may generate proceeds of crime need not
be a scheduled oﬀence. Therefore, only certain speciﬁc oﬀences have been
included in the Schedule. Thus, if the submissions of the learned Additional
Solicitor General are accepted, the Schedule will become meaningless or
redundant. The reason is that even if an oﬀence registered is not a scheduled
oﬀence, the provisions of the PMLA and, in particular, Section 3 will be
invoked by simply applying Section 120-B. If we look at Section 120-B,
only because there is a conspiracy to commit an oﬀence, the same does not
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ENFORCEMENT [ABHAY S. OKA, J.]

become an aggravated oﬀence. The object is to punish those involved in
conspiracy to commit a crime, though they may not have committed any
overt act that constitutes the oﬀence. Conspiracy is an agreement between the
accused to commit an oﬀence. If we look at the punishments provided under
Section 120-B, it becomes evident that it is not an aggravated oﬀence. It only
incorporates the principle of vicarious liability. If no speciﬁc punishment
is provided in the Statute for conspiracy to commit a particular oﬀence,
Section 120-B treats a conspirator of the main accused as an abettor for the
purposes of imposing the punishment. The interpretation suggested by the
ED will defeat the legislative object of making only a few selected oﬀences
as scheduled oﬀences. If we accept such an interpretation, the statute may
attract the vice of unconstitutionality for being manifestly arbitrary. It
cannot be the legislature’s intention to make every oﬀence not included in
the Schedule a scheduled oﬀence by applying Section 120-B. Therefore, in
our view, the oﬀence under Section 120-B of IPC included in Part A of the
Schedule will become a scheduled oﬀence only if the criminal conspiracy is
to commit any oﬀence already included in Parts A, B or C of the Schedule.
In other words, an oﬀence punishable under Section 120-B of IPC will
become a scheduled oﬀence only if the conspiracy alleged is of committing
an oﬀence which is otherwise a scheduled oﬀence.
26. Coming back to the facts of the case, in the chargesheets
filed in the alleged scheduled offences, there is no allegation of the
commission of criminal conspiracy to commit any of the offences
included in the Schedule. As pointed out earlier, except for Section
120B of the IPC, no other offence in the schedule has been applied.
Therefore, in this case, the scheduled offence does not exist at all.
Hence, the appellant cannot be prosecuted for the offences punishable
under Section 3 of the PMLA.
CONCLUSIONS
27. While we reject the ﬁrst and second submissions canvassed by
the learned senior counsel appearing for the appellant, the third submission
must be upheld. Our conclusions are:
a. It is not necessary that a person against whom the oﬀence under
Section 3 of the PMLA is alleged, must have been shown as the
accused in the scheduled oﬀence;
1070 SUPREME COURT REPORTS [2023] 13 S.C.R.

b. Even if an accused shown in the complaint under the PMLA is
not an accused in the scheduled oﬀence, he will beneﬁt from the
acquittal of all the accused in the scheduled oﬀence or discharge
of all the accused in the scheduled oﬀence. Similarly, he will
get the beneﬁt of the order of quashing the proceedings of the
scheduled oﬀence;
c. The ﬁrst property cannot be said to have any connection with the
proceeds of the crime as the acts constituting scheduled oﬀence
were committed after the property was acquired;
d. The issue of whether the appellant has used tainted money
forming part of the proceeds of crime for acquiring the second
property can be decided only at the time of trial; and
e. The oﬀence punishable under Section 120-B of the IPC will
become a scheduled oﬀence only if the conspiracy alleged is
of committing an oﬀence which is speciﬁcally included in the
Schedule.
28. Accordingly, the impugned order dated 27th September 2022 is,
hereby, quashed and set aside, and the complaint being Special C.C no.781
of 2022 pending before the Special Court for PMLA cases, Bengaluru is,
hereby, quashed only insofar as the present appellant is concerned.
29. The appeal is, accordingly, allowed.

Headnotes prepared by: Appeal allowed.
Divya Pandey