Introduction
In its recent decision in Directorate of Enforcement v. Bibhu Prasad Acharya, etc.[i], the Supreme Court clarified the requirements for sanction under s. 197 of the Code of Criminal Procedure, 1973 (‘CrPC’) – now corresponding to s. 218 of the Bharatiya Nagarika Suraksha Sanhita, 2023 (‘BNSS’) – in cases prosecuted under the Prevention of Money Laundering Act, 2002 (‘PMLA’). This case arose when the Telangana High Court quashed an order by a PMLA Special Court taking cognizance of two public servants due to the lack of necessary sanction for their prosecution. This Supreme Court’s decision not only clarifies how CrPC provisions apply to PMLA cases but also reinforces key procedural safeguards for public servants.
The judgment revisits the elements of sanction, emphasizing the need for a clear link between the alleged offence and a public servant’s official duties before prosecution can proceed. By aligning CrPC requirements with the PMLA framework, the Supreme Court highlights the judiciary’s commitment to procedural integrity while upholding accountability in money laundering cases.
Of particular note is s. 218(1)(b) of the BNSS introduces a proviso mandating that the government must decide on a sanction request within 120 days of receipt. It further provides that if the government fails to act within this timeframe, the sanction is automatically deemed granted, thereby addressing potential delays that might otherwise shield accused public servants from timely prosecution.
Brief Facts
The Directorate of Enforcement (‘ED’) filed complaints under s. 44(1)(b) of the PMLA against Mr. Bibhu Prasad Acharya and Mr. Adityanath Das (‘Respondents’), both of whom held public office during the alleged offences.
The complaints alleged that Mr. Acharya, as Managing Director of a state corporation, colluded with then-Chief Minister Y. S. Jagan Mohan Reddy and allocated 250 acres to M/s Indu Tech Zone (P) Ltd. for a Special Economic Zone (SEZ) in violation of regulations. Mr. Das, as Principal Secretary, was alleged to have allotted an additional 10 lakh litres of water to India Cement Ltd., bypassing regulatory protocols to favour the Company.
The Special Court took cognizance of the complaints and issued summonses to both Respondents. They challenged this order in the Telangana High Court, asserting that public servants could not be prosecuted without prior sanction under s. 197 of the CrPC. The High Court upheld their argument, quashing the cognizance order. The ED then appealed before the Supreme Court, contending that CrPC sanction requirements were inconsistent with the objectives of the PMLA.
Held
The Supreme Court upheld the High Court’s decision, ruling that there was no conflict between s. 197(1) of the CrPC and any of the provisions of the PMLA. It held that prosecuting public servants without the required sanction violates procedural propriety and emphasized that a sanction under s. 197 of the CrPC is necessary in PMLA cases involving public servants if the alleged offence is connected to their official duties. The Court acknowledged that s. 197 shields public servants from undue prosecution for actions taken within their professional roles.
The Court reiterated two conditions for applying s. 197: (1) the accused must be a public servant removable by the government, and (2) the alleged offence must be related to the discharge of official duties. Both conditions were found to be satisfied in this case, as the alleged actions were directly tied to the respondent’s official roles. Referring to its decision in Centre for Public Interest Litigation v. Union of India[ii], the Supreme Court noted that s. 197 can be invoked only if the alleged offence has a ‘reasonable connection’ to the official duties of the public servant concerned.
Discussing ss. 65 and 71 of the PMLA, the Court clarified that CrPC provisions apply to PMLA cases unless they are inconsistent or in conflict with the PMLA framework. It was noted that s. 65 of the PMLA expressly incorporates CrPC procedures, while s. 71’s non-obstante clause does not override this application as there is no inherent inconsistency between s. 197(1) of the CrPC and PMLA provisions. The Court further stated that the phrase ‘all other proceedings’ includes a complaint under s. 44 (1)(b) of the PMLA, making s. 197(1) of the CrPC applicable to such complaints.
Relying on prior rulings, including P. K. Pradhan[iii] and Prakash Singh Badal[iv], the Court noted that the question of the absence of sanction for prosecution could be raised at any stage of the proceedings – from after the cognizance to a trial conclusion or even after conviction.
Our Analysis
This decision reinforces procedural safeguards, particularly s. 197 of the CrPC protects public servants from unwarranted prosecution unless a clear nexus exists between the alleged offence and their official duties.
This decision also builds upon the Supreme Court’s earlier judgment in A. Sreenivasa Reddy[v], which examined the sanction requirements under the Prevention of Corruption Act, 1988 (‘PCA’) and the Indian Penal Code, 1860 (‘IPC’). In A. Sreenivasa Reddy (supra), the Court highlighted that s. 197 of the CrPC mandates sanction for public servants accused of offences directly related to their official duties, whereas the PCA does not consider offences committed to discharge official duties as eligible for such protection. Notably, the applicability of s. 197 to PMLA cases involving both PCA and IPC charges were left open, with the Court emphasizing that a clear nexus between the act and official duty is essential.
By affirming the compatibility of CrPC provisions with the PMLA mandate, the Supreme Court clarified that s. 197’s sanction requirement is not overridden by the PMLA’s non-obstante clause under s. 71. Additionally, this approach opens the door for other non-conflicting CrPC provisions to apply to PMLA by virtue of s. 65, which further solidifies procedural consistency across statutes. The judgment also addresses a long-standing question of whether ED investigations are subject to CrPC provisions by dealing with s. 71 of the PMLA are not to have applications once s. 65 has applied to it.
End Notes
[i] 2024 SCC OnLine SC 3181, dated: 06.11.2024.
[ii] 4 (2005) 8 SCC 202.
[iii] P. K. Pradhan v. State of Sikkim, (2001) 6 SCC 704.
[iv] Prakash Singh Badal & Anr. v. State of Punjab & Ors., (2007) 1 SCC 1.
[v] A. Sreenivasa Reddy v. Rakesh Sharma & Anr., (2023) 8 SCC 711.
Authored by Srishty Jaura, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinions.