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KEY TAKEAWAYS

  • The Apex Court held that deposits made under section 21(5) of MMDR Act not proceeds of crime under Prevention of Money Laundering Act, 2002.
  • A bench comprising Hon’ble Justices A.M. Khanwilkar and Dinesh Maheshwari passed such order on the 26th of March.
  • The Court forbade the Enforcement Directorate from taking precipitative steps against the petitioner until further hearing.
  • The Enforcement Directorate was urged to carry on with their investigation in accordance with law and not to put a hold on it due to such order.
  • The matter will next be heard on 7th April.

OVERVIEW

In the case of Indrani Patnaik and Another v. Enforcement Directorate and Others, Writ Petition (Civil) No. 368/2021, the Supreme Court Prima facie held that the deposit made under Section 21(5) of the Mines and Minerals (Development and Regulation) Act, 1957 in cases of illegal mining does not come under the ambit of ‘proceeds of crime’ according to the provisions of Prevention of Money Laundering Act, 2021.

Such an order was passed by a bench comprising Hon’ble Justice A.M. Khanwilkar and Justice Dinesh Maheshwari while hearing the writ petition which sought from the court directions to refrain the Enforcement Directorate from conducting investigation and subsequent proceedings against the deposits made under Section 21(5) of the Mines and Minerals (Development and Regulation) Act, 1957.

The next hearing in this regard is scheduled to be held on the 7th of April, 2021.


RELEVANT PROVISIONS

Section 21(5) of the Mines and Minerals (Development and Regulation) Act, 1957 states that ‘Whenever any person raises, without any lawful authority, any mineral from any land, the State Government may recover from such person the mineral so raised, or, where such mineral has already been disposed of, the price thereof, and may also recover from such person, rent, royalty or tax, as the case may be, for the period during which the land was occupied by such person without any lawful authority.’
The Prevention of Money Laundering Act, 2002 defines ‘proceeds of crime’ as, ‘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,’ according to Section 2(u) of the Act.

Section 2(v) defines property as ‘any property or assets of every description, whether corporeal or incorporeal, movable or immovable, tangible or intangible and includes deeds and instruments evidencing title to, or interest in, such property or assets, wherever located.’

BACKGROUND

The Hon’ble Justice Satrughana Pujahari heard the case of Balasubramanian Prabhakaran v. State of Odisha in the Orissa High Court and on the 5th of March, 2021, delivered a judgement on the same.

The plea, in the petition filed under Section 482 of the Criminal Procedure Code (CrPC) and sought orders to quash the charges as has been booked in the charge-sheet that had been registered by the Balasore Vigilance Police Station, and the order of cognizance passed under Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act and Sections 420, 379, 120-B of I.P.C. and Section 21 of the MMDR Act, 1957.

Smt. Indrani Patnaik was arraigned as a co-accused for obtaining license for mining in the district of Keonjhar, area of Unchabali, for a period of twenty years by suppressing the fact that such area also consisted of a forest area.

Sri Jagdish Prasad Agrawal, the then Joint Secretary, Steel and Mines Department, Government of Odisha, further manipulated the documents and obtained a lease period of thirty years from the Central Government, without taking any approval from the concerned authorities.

The Court observed that, “The F.I.R. in the present case opens with the statement "On the allegation of corruption on illegal mining, theft and transportation of Iron Ore from M/s. Indrani Patnaik Mines located at Unchabahali at Joda in Keonjhar district, a Vigilance enquiry was taken up". Thus, as it appears, with reference to some allegation regarding the corruption etc., an inquiry / joint verification was taken up by the Vigilance police which led to lodging and registration of the F.I.R. purportedly in view of Section 157 of Cr.P.C.”

It was further noted that “A bare reading of the F.I.R. which was the immediate follow-up of the joint physical verification would show that the Raising Contractor Company was indicted in the F.I.R. for the reason of its being engaged by the lessee in carrying on the alleged illegal mining operation in connivance with some mining and forest officials, and on such allegation the F.I.R. was apparently registered against the Raising Contractor along with others. In the charge-sheet, however, it was not the Raising Contractor Company but the petitioner in his capacity as the Managing Director of the said Company was made a co-accused. It is the contention of the petitioner that he being the Managing Director of the Company, not involved in the day to day contractual extraction work, no penal liability can be vicariously attracted to him in absence of any specific provision in the statute for fixing the criminal liability vicariously on the Directors of a Company.”

The court, with regard to the matter at hand held, “thus is settled that it shall not be illegitimate on the part of the police to investigate a case involving offence under Section 21 of the MMDR Act, but when it comes to the question of taking cognizance, no Court shall take cognizance of such offence unless and until a complaint in writing is made by the person authorized to do so in view of Section 22 of the MMDR Act. In the present case, admittedly, no complaint as enjoined under Section 22 of the MMDR Act having been filed, the order of cognizance of the offence under Section 21 of the said Act is held to be illegal. Next remains, the offence under I.P.C. of which cognizance has been taken by the learned Court below, qua the present petitioner.”

A writ petition was filed before the Supreme Court after such judgement by Smt. Indrani Patnaik.

DETAILS OF THE ORDER

The Court, after considering the arguments of both the sides, stated in its order that, ‘Prima facie, we find force in the argument that such deposit cannot be treated as proceeds of crime.’

The Court considered the contention of the petitioner with respect to its previous judgement in the case of the Common Cause v. Union of India and Ors., reported in (2017) 9 SCC 499, wherein it was held that there is no criminal liability in respect of deposit made in reference to direction under Section 21(5) of the Mines and Minerals (Development and Regulation) Act, 1957. That is to say that Section 21(5) of the said Act is not a penal provision but was enacted with a view to compensate the State for acts of illegal mining.

The Court ordered that “Until the next date of hearing, no precipitative steps be taken against the petitioner.”

The Court further went on to clarify that “this does not mean that the investigation undertaken by the Enforcement Directorate should be put on hold. That may continue in accordance with law.”

CONCLUSION

The petition states that “the Enforcement Directorate is proceeding against the petitioner in respect of such deposit made by the petitioner.” Such deposit refers to deposit made under the provisions of Section 21(5) of the Mines and Minerals (Development and Regulation) Act.

But since it was prima facie observed by the apex Court that such deposit is not to be considered as proceeds to crime, the Court put a stay on any precipitative actions taken against the petitioner until further information came to light in the next hearing in this regard.

The court urged the Enforcement Directorate to carry on with their investigation in accordance with law and not to put a hold on it due to such order.

The matter will next be heard on 7th April.


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