Local police not competent to investigate PMLA matter, only Director or authority authorized by Central Government can investigate or collect evidence: P&H HC

Read Order: Navrattan Garg & Another v. Respondent State of Haryana

While dealing with a quashing plea filed by an accused who was found in possession banned currency notes amounting to Rs 20 lakh , the Punjab and Haryana High Court has held that the local police is not competent under the Prevention of Money Laundering Act, 2002 (PML Act) to investigate a matter because only a Director or an authority authorised by the Central Government is competent to investigate such a matter or collect evidence. 

The Bench of Justice Sant Parkash made the above-stated observation keeping in view the definition of the term “investigation” as given under Section 2(na) of the PML Act. The court, in this case, was called upon to address the issue of jurisdiction of local police to investigate the matter.

The Court was dealing with a quashing plea under Section 482 Cr.P.C. for quashing FIR registered under Section 4 of the PML Act read with Sections 420, 120-B IPC. 

The petitioners were apprehended by the police party as they were found in conscious possession of Rs. 20 lakh, having currency notes of denomination of Rs. 2000/-, Rs. 1000/- and Rs. 500/- respectively, for getting them exchanged in Sector 20, Panchkula, without there being any documentary evidence, since the currency notes of denomination of Rupees 500/- and Rupees 1,000/- were declared to be illegal tender.

The case of the petitioner’s counsel was that the FIR registered against them was liable to be quashed as money laundering is a special statute in which police have no role to play and the investigation was to be conducted by the Director or authority appointed by Central Government under special order. Further, it was contended that the petitioners were only exchanging old currency. The Counsel also submitted that during the course of the investigation, Section 4 of the PML Act was deleted and on explaining the source of income to the Income Tax Department, the money recovered from the petitioners was refunded with interest.

Also, on the offences made punishable under the IPC, the Counsel argued that the provisions of Section 420 read with Section 120-B IPC were not attracted in the facts & circumstances of the case because petitioners did not cheat or conspire with anyone. Lastly, the Counselpleaded that the currency notes belonged to the petitioners and thus, the aforesaid provisions of the Indian Penal Code were wrongly invoked by the local police. 

The State counsel on the other hand vehemently opposed the prayer made in the petition and while reiterating the contents of the State reply, contended that petitioners did not have any authority to deal with the currency which was banned by the Government and thus, exchanging of banned currency was illegal. 

In light of the fact that investigation in the case was conducted by the Police of Sector 20, Panchkula.

The Court with reference to Section 2(na) of the PML Act which defines the term “investigation” and after perusal of this term, held that the local police was not competent to investigate the matter, as only a Director or an authority authorised by the Central Government was competent to investigate or collect evidence. 

Thus, the Court opined that the aforesaid essential ingredient to attract the offence of money laundering was absent and the proceedings were held liable to be quashed.

So far as invoking of provisions of Section 420 IPC was concerned, the Court observed that in order to constitute an offence punishable under Section 420 IPC, the prosecution was to prove essential ingredients of the offence of cheating as defined in Section 415 IPC, which were identified by the Court to be: the deception of any person; fraudulently or dishonestly inducing that person to deliver any property to any person; or to consent that any person shall retain any property; or intentionally inducing that person to do or omit to do anything which he would not do or omit if he were not so deceived, and which act or omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property.

Coming to the facts of the present case, the Court observed that in this case, it was established during investigation that the alleged currency, undoubtedly, belonged to the petitioners. Moreover, the Court noted that the Income Tax Department having satisfied with the source of income, returned the amount to the petitioners with interest. 

Admittedly, it was the position that the petitioners intended to exchange the old currency with the general public, however, the Court was of the view that the prosecution failed to establish, with documentary evidence, the fact that the public was cheated by the alleged act of petitioners. 

Therefore, the Court held that under no stretch of interpretation, a conclusion could be reached that any offence under Section 420 IPC was made out from the story put forth by the prosecution.

Accordingly, the petition was allowed and the FIR was quashed.