Supreme Court rules on the jurisdiction of Special Court under the Prevention of MoneyLaundering Act

The Hon’ble Supreme Court while interpreting sections 43 and 44 of the Prevention of Money

Laundering Act, 2002 (‘the Act’) has, in the case of Rana Ayyub vs. Directorate of Enforcement

Through its Assistant Director1, held that the Special Court, as constituted under the Act, shall

have the jurisdiction to conduct the trial of the scheduled offence. The Hon’ble Court refrained from deciding the issue of territorial jurisdiction in the matter considering the complication posed by the monetary transactions carried out in the virtual world.

Facts

• In this case, the Petitioner i.e. Rana Ayyub initiated a crowdfunding campaign through an online crowdfunding platform named “Ketto” and ran three campaigns from April 2020

  to September 2021.

• In connection with the above crowdfunding, the Enforcement of Directorate, Mumbai,

  initiated enquiry against the Petitioner under the provisions of Foreign Exchange

  Management Act, 1999.

• Subsequent to the initiation of the inquiry, a criminal complaint was filed against the

  Petitioner in Ghaziabad alleging misappropriation of property, cheating, etc. under the

  provisions of the Indian Penal Code, 1860 and consequently, an FIR was registered.

• Basis the above FIR, the Directorate of Enforcement, Delhi, registered a complaint in

  the court of the Special Judge, Ghaziabad. Accordingly, acknowledging the said

  complaint, the said Special Judge issued summons to the Petitioner.

• Challenging the said summoning order on the ground of lack of territorial jurisdiction, the

  Petitioner preferred a writ petition before the Hon’ble Supreme Court under Article 32 of

  the Constitution.

Judgment

The Hon’ble Supreme Court while dismissing the writ petition sought to answer the questions

that (i) whether the trial of the offence of money laundering should follow the trial of scheduled offence or vice versa; and (ii) whether the Special Court, Ghaziabad, has exercised extraterritorial jurisdiction?

Answering the questions, the Hon’ble Supreme Court held that in terms of the provisions of

the Act, the court trying the offence of money laundering will also carry out the trial of the

scheduled offence. Upon a detailed analysis of the provisions of the Act, the Hon’ble Court

observed as follows:

• Section 43(1) of the Act provides for the constitution of Special Court(s) for trial of the offence of money laundering and section 43(2) of the Act provides additional jurisdiction to such Special Court(s) to also try any offence, connected with the offence of money laundering, with which the accused has been charged.

• In terms of section 44 of the Act, if there are two courts, one which has taken

  cognizance of the scheduled offence and the other one has taken cognizance of the

  offence of money laundering then the former court should transfer the matter to the

  latter court.

• The trial being carried out by the Special Court of the money laundering offence as

  well as that of the scheduled offence cannot be treated as a joint trial, especially,

  considering section 44 of the Act.

In terms of the second question i.e. the issue of territorial jurisdiction, the Hon’ble Supreme

Court held that the activity of money laundering includes the following activities; (i) concealment; (ii) possession; (iii) acquisition; (iv) use; (v) projecting as untainted property; or

(vi) claiming as untainted property. In the said case, only one of the above-mentioned activity

viz., possession of proceeds of crime (if the money is really proceeds of crime) has taken

place in a bank in Mumbai, Maharashtra, whereas the activity of acquisition of money has

taken place in the virtual world.

The Hon’ble Court further observed that since the transactions were carried out in the virtual

world, details of which i.e. the location from which such money was transferred is known only

to the Petitioner and its bank therefore, the determination of territorial jurisdiction is a question of fact and needs to be determined by the trial court.

Accordingly, the Hon’ble Court held that the question of territorial jurisdiction being one of fact, considering it needs to be decided where the offence has been committed based on the

appreciation of evidence, should be decided by the Special Court itself.

Our Comments

The judgment recognizes the challenges in deciding the place of commission of offence when

the same has been committed in the virtual world.

The judgment also poses an interesting complexity that in case of crowdfunding where money is being collected from various persons located in different jurisdictions and some of the activities, in a case of alleged money laundering, with respect to such money have taken place in multiple jurisdictions then where can it be said that an alleged offence has been committed and which court will have territorial jurisdiction. We will have to wait for the clarification on the issue.