Prior sanction a must in PMLA cases against officials, says SC

The Supreme Court ruled that prior sanction is mandatory to prosecute public servants in money laundering cases, establishing a key safeguard under PMLA

The Supreme Court on Wednesday ruled that prior sanction is mandatory to prosecute public servants in money laundering cases, establishing a key procedural safeguard under the stringent Prevention of Money Laundering Act (PMLA) and adding a layer of accountability to PMLA prosecutions involving public servants.

The decision, rendered by a bench of justices Abhay S Oka and AG Masih, reinforced the application of Section 197(1) of the Code of Criminal Procedure (CrPC) in PMLA cases, mandating that no prosecution against a public servant can proceed without obtaining prior sanction from the competent authority. (HT Photo)

The decision, rendered by a bench of justices Abhay S Oka and AG Masih, reinforced the application of Section 197(1) of the Code of Criminal Procedure (CrPC) in PMLA cases, mandating that no prosecution against a public servant can proceed without obtaining prior sanction from the competent authority. The provision corresponds to Section 218 of the Bhartiya Nagrik Suraksha Sanhita, 2023, which has replaced the CrPC with effect from July 1.

The bench underscored the importance of procedural fairness and transparency in handling cases of alleged corruption and financial misconduct involving government officials.

“The object of Section 197(1) must be considered here. The object is to protect the public servants from prosecutions. It ensures that the public servants are not prosecuted for anything they do in the discharge of their duties. This provision is for the protection of honest and sincere officers,” stated the bench.

This ruling held significant implications for cases under PMLA, particularly in light of heightened scrutiny around public sector accountability and high-profile corruption cases. By applying Section 197(1) to PMLA prosecutions, the top court effectively created a check against arbitrary or politically motivated prosecutions of public servants, requiring prosecuting agencies to secure necessary approvals before pursuing allegations of money laundering. The ruling also sought to prevent the misuse of legal proceedings for harassment and ensured that public servants accused of corruption or financial mismanagement are treated in accordance with established procedural norms.

It emphasised PMLA’s Section 65, which makes the CrPC applicable to PMLA procedures unless inconsistent with PMLA’s provisions. In this context, Section 197(1) requires prior approval for prosecuting public servants, a provision now clearly extended to money laundering investigations involving public officials.

“We have carefully perused the provisions of the PMLA. We do not find that there is any provision therein which is inconsistent with the provisions of Section 197(1) of CrPC. Considering the object of Section 197(1) of the CrPC, its applicability cannot be excluded unless there is any provision in the PMLA which is inconsistent with Section 197(1). No such provision has been pointed out to us. Therefore, we hold that the provisions of Section 197(1) of CrPC are applicable to a complaint under Section 44(1)(b) of the PMLA,” held the judgment. Section 44(1)(b) pertains to filing of a charge sheet by the Enforcement Directorate (ED) and a subsequent order of cognisance by the trial court.

The bench also rejected ED’s argument that in view of Section 71 of PMLA, the special law will have an overriding effect over the provisions of the other statutes, including CrPC. Section 71 states that the provisions of PMLA shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force.

When a particular provision of CrPC (section 197(1) in this case) applies to proceedings under PMLA by virtue of Section 65 of PMLA, the court declared, Section 71 cannot override the provision of CrPC which applies to PMLA.

“Those provisions of CrPC which apply to the PMLA by virtue of Section 65 will continue to apply to the PMLA, notwithstanding Section 71. If Section 71 is held applicable to such provisions of the CrPC, which apply to PMLA by virtue of Section 65, such interpretation will render Section 65 otiose. No law can be interpreted in a manner which will render any of its provisions redundant,” it held.

The Supreme Court’s decision came as it upheld the Telangana high court’s 2019 ruling, which set aside an order of cognisance against two former bureaucrats implicated in a disproportionate assets case involving YSR Congress president and former Andhra Pradesh chief minister YS Jaganmohan Reddy. The Telangana high court held that the case against the two could not proceed without prior sanction.

Even as it affirmed quashing of the orders of the special court taking cognisance against the two accused, BP Acharya and Adityanath Das, the bench clarified that the order of cognisance against other accused in the case will remain unaffected. “However, it will be open for the appellant (ED) to move the special court to take cognisance of the offence against the two respondents if a sanction under Section 197(1) of CrPC is granted in future,” added the bench.