Socio-Economic Offences

Contents
Introduction:................................................................................................................................................1
Salient features of Socio-economic offences:..........................................................................................1
Examples of SEO:....................................................................................................................................2
Emergence of socio-economic crimes in Indian context:............................................................................2
Effect of industrialization:.......................................................................................................................2
Administrative inefficiencies and abuse of administrative power:..........................................................3
Perils of Welfare state:.............................................................................................................................3
Public apathy – unconcerned and indifferent..........................................................................................3
Influence of power or status:...................................................................................................................3
Classification of Socio-economic offences:................................................................................................3
Theory of Differential Association given by Edward Sutherland:..........................................................4
Indian aspect:...........................................................................................................................................4
Impact of Socio-economic crimes:..............................................................................................................5
Hoarding and Black Marketing...................................................................................................................6
THE ESSENTIAL COMMODITIES ACT, 1955...................................................................................6
Section 2A – Essential commodities declaration, etc..........................................................................9
Section 3 – Powers to control production, supply, distribution, etc., of essential commodities.........9
Section 4 – Imposition of duties on State Governments, etc.―..........................................................9
Section 5 – Delegation of powers.―...................................................................................................9
Section 6. Effect of orders inconsistent with other enactments.―....................................................10
Section 6B. Issue of show cause notice before confiscation of food grains, etc.―..........................10
Section 7: Penalties:...........................................................................................................................10
Section 9: False statement –..............................................................................................................11
Section 10: Offences by companies...................................................................................................11
Section 10C: Presumption of culpable mental state..........................................................................12
Section 11: Cognizance of offences:.................................................................................................12
Section 13. Presumption as to orders.―............................................................................................12
Section 16: repeal and savings:..........................................................................................................12
PREVENTION OF BLACK MARKETING AND MAINTENANCE OF SUPPLIES OF
ESSENTIAL COMMODITIES ACT....................................................................................................13
Difference between PofBM Act and ECA:.......................................................................................13
Sec. 3 – Power to make orders detaining certain persons..................................................................14
Section 5: Power to Regulate Detention:...........................................................................................15
Sec. 15 - temporary release of persons detained................................................................................16
LEGAL METROLOGY ACT, 2009.........................................................................................................18
Section 2: Definition:.........................................................................................................................19
Section 3: Overriding effect of this Act –..........................................................................................20
Section 11. Prohibition of quotation, etc., otherwise than in terms of standard units of weight,
measure or numeration......................................................................................................................20
MONEY LAUNDERING:........................................................................................................................26
Common Methods of Money Laundering.............................................................................................26
a) Use of shell companies:..............................................................................................................26
b) Hawala transactions....................................................................................................................27
c) Fake Charities & NGOs..............................................................................................................27
d) Real Estate Investments..............................................................................................................27
e) Trade-Based Money Laundering................................................................................................27
Why is ML treated as a socio-economic offence?.................................................................................27
Historical origin.....................................................................................................................................29
The Prevention of Money-Laundering Act, 2002:................................................................................30
Section 2(p): Definition on Money Laundering:...............................................................................30
Section 3. Offence of money-laundering.—......................................................................................32
Chapter 3: Attachment, Adjudication and Confiscation....................................................................34
Section 4 Punishment for money laundering —................................................................................39
Section 11 - Power regarding summons, production of documents and evidence, etc.—................40
Section 17 – Search and seizure –.....................................................................................................40
Section 23 – Presumption in inter-connected transactions:...............................................................41
Section 24 – burden of proof.............................................................................................................41
Jurisdiction of Special Court –..........................................................................................................41
CORRUPTION..........................................................................................................................................45
Understanding of Corruption.................................................................................................................45
World Bank:.......................................................................................................................................45
Inge Amundsen:.................................................................................................................................45
Causes of Corruption in India:...............................................................................................................45
3 major causes:..................................................................................................................................46
Forms of Corruption – Corruption is spread in the society in several forms:.......................................46
Why is corruption a socio-economic offence? The consequences of corruption:.................................47
Historical background:...........................................................................................................................48
Objective and Purpose of the PCA, 1988:.............................................................................................48
Prevention of Corruption Act:...............................................................................................................49
Section 1: extends to the whole of India and also applies to citizens of India outside India............49
 Section 2: definitions —....................................................................................................................49
Section-6 Jurisdiction.—...................................................................................................................52
Liability-related sections -.....................................................................................................................52
Section 7 - Offence relating to public servant being bribed.............................................................52
Sec-8 Applicability.—.......................................................................................................................53
Section 11 - Public servant obtaining undue advantage, without consideration from person
concerned in proceeding or business transacted by such public servant...........................................53
Section 13 - Criminal misconduct by a public servant......................................................................53
Section 15 - Punishment for attempt.................................................................................................54
Section 12: Punishment for abetment of offences.—........................................................................54
Investigation into cases under the Act:..................................................................................................54
Section 17: persons Authorized to investigate –................................................................................54
Section 3: power to appoint special judges........................................................................................55
Section 17A: Enquiry or Inquiry or investigation of offences relatable to recommendations made or
decision taken by public servant in discharge of official functions or duties.—...............................55
Section 19: Previous sanction necessary for prosecution:.................................................................56
Section 20: Presumption where public servant accepts any undue advantage:.................................57
Section 21: Accused person to be a competent witness.—..............................................................57
FUGITIVE ECONOMIC OFFENDER ACT............................................................................................59
Implications of this Offence -................................................................................................................59
Objective -.............................................................................................................................................59
Definitions:........................................................................................................................................60
Section 4 - Application for declaration of fugitive economic offender and procedure therefor.......61
Section 5 - Attachment of property...................................................................................................61
Section 10 - Notice............................................................................................................................62
Section 11 - Procedure for hearing application.................................................................................62
Section 12 - Declaration of fugitive economic offender...................................................................62
Section 14 - Power to disallow civil claims.......................................................................................63
Section 21 - Overriding effect...........................................................................................................63
ARTICLE: Fugitive Economic Offenders Act, 2018: A Silver Lining for Tackling Non-Performing
Assets Problem in the Present Scenario.................................................................................................63
FOOD SAFETY AND STANDARDS ACT.............................................................................................66
Section 4: Establishment of Food Safety and Standards Authority of India.....................................67
Section 16: duties and functions of food authority:...........................................................................67
Section 18: General principles to be followed in Administration of Act..........................................68
Section 23. Packaging and labelling of foods....................................................................................68
Section 28. Food recall procedures....................................................................................................69
 Failure to follow with the guidelines under this act:.............................................................................69
Adjudication and Food Safety Appellate Tribunal................................................................................69

Introduction:
Social offence - which affects the society at large. Economic offence - which affects the economy of the
country.
Socio-economic offences: this is a manifestation of criminal acts. These are committed individually or
by a form of a group of associates or committed in an organized manner. Whosoever commits such
offence, their intention is to create wealth for themselves or by sheer greed. In the course of commission
of crime, the person is violating the law of the land – any law that regulates the economic activities of
the country. (this def is inclined towards the economic aspect)
The 47th law commission report identified these salient features.
Salient features of Socio-economic offences:
1) Motive: it is driven by sheer greed. In traditional crime, the motive is based on basic necessity.
However, these offences are driven by avarice.
2) Background: the internal background, the emotional aspect. Here, the emotional aspect is lacking,
it is non-emotional.
3) Mode of operation: or the modus operandi. These crimes are committed secretively or
anonymously. There is no involvement of force.
4) Mens rea: the intention is immaterial in such cases as long as your action is violating the law.
*Case: State of MH v. George: the court held that the purpose of FERA would be defeated if it
was required that the accused should be proved to have knowledge that he was contravening the
law before he contravened the provision. If chance is given to prove their mistake then the
economy of our country would be defeated
5) Victim aspect: the victims are society at large, it could be minorities, public at large who are
impacted by such acts. Victims and offenders need not always have a connection.
6) Offender: they belong to upper middle class or rich people. They are sitting at a higher position
and exploiting it.
7) Statute: The law affected in such crimes are special statutes.
8) Liability: when the mens rea is already overlooked, you can draw a conclusion that it will be an
absolute liability which means that there will be no exceptions. *Case: Tejani v. Dange 1974:
deals with food adulteration act. The SC held that in food offences, the rule is either strict liability
or absolute liability regardless of knowledge, bad faith - there are no exceptions. If one has sold
any article of food contrary to the provisions of the act, one is guilty and there is no argument
about it.
9) Stigma: society is somewhat lenient in such cases because of the brutality of the offence – it is
less, people usually respect such offenders who belong to the rich community
10) Public apathy: public are more lenient towards these offenders because they are driven by profit
making and every individual’s motive is to do the same.
11) Burden of proof: it lies on the offender. Presumption: You will always be presumed to be guilty.
There are exceptions to it like the prevention of corruption act.
12) Detections and investigations: this is much tougher than traditional crimes. The complexity in
proving these kinds of crime - usually requires special agency such as ED.
13) Sentencing system: the legal course in the statute generally concentrates on the private interest.
Hence, the mode of sentence usually is in the compensatory form rather than being sent to prison.
It is much softer as compared to traditional crimes.
Examples of SEO:
1. Offences committed to prevent or obstruct the economic development of the country. Eg: tax
evasion, embezzlement of public funds, etc.
2. If anyone is a public servant or holding a prominent position in the public department, they abuse
that position for personal or financial gain.
3. Breach of contract: Offenses that result in the delivery of goods that don't meet specified
standards.
4. Hoarding and black marketing: Offenses that involve the illegal stockpiling and selling of goods
at inflated prices.
5. Adulteration of food and drugs: Offenses that involve the contamination or dilution of food and
pharmaceutical products
6. Theft and misappropriation of public property: Offenses that involve stealing or misusing public
property or funds
7. Trafficking in licenses and permits: Offenses that involve illegally trafficking in licenses and
permits
Emergence of socio-economic crimes in Indian context:
Only after 1947, we faced a lot of problems – refugee rehabilitation, maintenance of essential services.
We were facing scarcity in lots of things, growth of unemployment, attacks on Kashmir. Initially the
Indian government had a 5 year plan to develop the Indian economy. To meet these challenges this plan
was required – this plan was adopted. Industrialisation was one of the main reasons for the emergence
of SEO in India.
Effect of industrialization:
- The shift from agrarian to industrial societies created new opportunities and challenges, leading
to the emergence of new types of offences.
- The Indian government was trying to encourage private businesses – major plan to tackle the
crisis at that point. There was extreme competitiveness because of industrialisation. Whoever
indulged in business were driven by profit making, there were monopolistic markets at that time
to drive away the competitors.
- In order to fight this competition, people started opting for shortcut methods by using methods
such as theft, bribery, etc – these led to an increase in these kinds of offences. People in power
started granting licenses, abusing their powers. People departed from following a moral or
ethical conduct and led to the evolution of SEO.
- In 1962, they came up with the Santhanam Committee. They scrutinised these new kinds of
offences. They pointed out that our legislation was not equipped enough to take these offences
into account. After a proper thorough scrutiny, they made an observation – the old systems of our
country would be replaced with a new system.
Administrative inefficiencies and abuse of administrative power:
- As per the ILC report in 1958, they observed that there is a vast feel of administrations. When
people were in the administrative positions, they were acting in the script scope of law without
the injured citizens getting redressal.
Perils of Welfare state:
- Advancement of scientific development led to control of all of these by a small group of people
but not everyone was smart enough to sit in these kinds of positions. Only elites were able to get
access to this – they were not following the moral and ethical code of conduct.
Public apathy – unconcerned and indifferent.
- Public is apathetic about these offences because of lack of awareness.
- Normalisation of corruption - no one is really questioning as long as they get their work done.
- This has a direct implication on enforcement of law. People are not bothered about whether that
person is held accountable or not.
Influence of power or status:
- People with more connections are able to do this. Sometimes driven by greed people may accept
bribes and influence the investigation.
- This leads to abuse of positions and contributes to this crime.
Classification of Socio-economic offences:
Why white collar crimes a subset of socio-economic offences?
What crimes qualify as white collar crimes?
- Edward Sutherland – defined WCC, “WCC is a crime committed by a person of respectability,
and high social status in the course of his occupation”
- FBI – “WCC are those crimes which are characterised by deceit, concealment or violation of
trust or which are not dependent upon the application of threat or physical force of violence”
- Edward A. Rouse – “A person misuses their position of power and again another person”
- Albert Morise –
- The common thing between all these criminologists is that – “immunity of the group of criminals
from the legal process because of their social, economic and political status”
- Earlier, criminologists overlooked the crime committed by people in the higher strata. They
always try to associate crime with the background of the person eg: poverty.
● Carrier case, 1473: the person is not in a designated position, does not belong to higher social
strata.
Theory of Differential Association given by Edward Sutherland:
The main cause of WCC is social disorganisation on account of individualistic policies and competitive
economy.
Differential association theory is when one learns criminal attitudes and behaviors through those around
them. It is suggested that individuals learn to become criminals by associating with criminals. Edwin
Sutherland devised the differential association theory to provide guidelines to measure criminal
behavior. He also called this theory a learning theory. Based on Sutherland's theory, if one wants to be a
thief, they must associate with thieves. Sutherland's theory is widely recognized and has aided in
explaining criminal behavior.
Key principles:
 1. Crime is not inherited or biologically inherited. It is something we develop and we learn through
interactions with others.
2. If this is not biologically inherited, then how is it learned? Learning occurs through
communication. The attitude, the motive, the technique is learned through communications –
verbal or non verbal.
3. Where is it learned? In intimate, close groups – they play a crucial role in shaping a person’s
behaviour.
4. Reason for adopting this behaviour – depends on definitions of law. Directions of learning
depend on the definition of law. Eg: an ethical person and an unethical person’s definition of law
is very different.
5. Learning of criminal behaviour is like learning of non-criminal behavior.
6. Not all associations have equal influence. It depends on
● how frequently you mingle with them,
● durations of you associating with them,
● how much your prioritise them,
● intensity
WCC is committed by a person having high social strata for their occupation. According to this theory,
you are surrounding yourself with different people with the same mindset, you are getting influenced by
this group. It depends on whether you were raised ethically or not?
Indian aspect:
29th law commission report: differentiates socio economic with white collar crimes.
WCC are affecting society at large. If we go by the strict definition given by western people, then many
crimes would not be covered. Thus, we have to take the Indian scenario into consideration. This may not
be like how it is practiced in the western countries but we have to look at the Indian aspect. Our concept
does not only confine it to higher social status. It is a crime committed in any capacity.
FBI definition: they are not only confining it to higher social status.
Eg of WCC: counterfeiting, extortion, bribery, medical practitioners also commit WCC, organ
trafficking.
Impact of Socio-economic crimes:
Wanchoo Committee Report on Tax evasion 1971:
1996 national crime research bureau report pertaining to crimes in India
1. Increase in inflationary pressure
2. Uneven distribution of resources and creation of elitism
3. Marginalisation of tax base
4. Generation of abundance black money
5. Creations of a parallel economy
6. Development work/ efforts are undermined. Eg: resources of financial institution
7. Country’s economic equilibrium is at stake
8. Breeding ground of corruption
9. Illicit business and public office corruption try and affect normal business and activities
10. Weaken moral and commitment of the citizens and promote social disorganisation
11. The poor or the weakest continue to be poorer and at risk
 Hoarding and Black Marketing
"Hoarding" is the purchase of a large quantity of commodity with the intention to sell it in future when it
is understock or not available in the market at a higher price. We can say this as a kind of monopoly
over the market, when people do not have any option to purchase the same commodity with another
buyer due to shortage of the same.
Why hoarding and black marketing are considered as socio-economic offences?
THE ESSENTIAL COMMODITIES ACT, 1955
Hoarding and Black Marketing
Police arrest Navneet Kalra in an oxygen concentrator black marketing case.
Illegal storage or accumulation of essential commodities, is hoarding. The motive is to inflate prices.
Black marketing can be committed in several ways. Selling of essential commodities at an inflated price
through illegal channels.
Govt can set limits on procuring stock of essential commodities under the Essential Commodity Act of
1955. If this limit is breached then govt can confiscate these goods. Confiscation can take place even if
the intent behind stockpiling is not to create demand. Because the primary intent is to balance demand
and supply.
The principle Act governing hoarding is an essential commodities Act. Govt derives its power to decide
MRP and consumption/procurement limit.
BM – Prevention of BM and maintenance of supply of essential commodities, 1980.
These two are socio-economic offences because they impact the economy of the country as well as
disturb the aim of the welfare state. It creates inequality in the distribution of wealth. Poor people won't
be able to procure essential goods due to unjust prices. It can lead to disharmony in the society.
The objective of the Essential Commodities Act –
The objective of the Essential Commodities Act is to ensure the availability of essential commodities to
consumers at fair prices by giving the government the power to regulate the production, supply, and
distribution of certain goods, thereby preventing hoarding, black marketing, and price gouging,
especially during times of scarcity; essentially protecting the public interest by controlling the trade of
vital items like food and fuel.
The contention of Kalra was that oxygen was not declared as an essential commodity. The central govt
has the power to declare commodities as EC. State govt gets delegated power through this Act to declare
goods as EC.
Areas governed under the EC Act –
1. Preventing hoarding and black marketing - The Act empowers the government to regulate stock
limits and prevent traders from hoarding essential goods to artificially inflate prices. Example: If
traders hoard rice to create a shortage and drive up prices, the government can impose stock
limits and seize excess stock.
2. The Act empowers govt to regulate stock limits.
 3. Ensuring availability of essential commodities - The Act ensures that essential goods like food
grains, medicines, and fuel are available to the public at reasonable prices. Example: During a
natural disaster, the government can intervene to prevent shortages and distribute food and
medicines fairly.
4. Control prices to protect customers - The government can fix price caps for essential
commodities to prevent the exploitation of consumers. Example: The government may set a
maximum retail price (MRP) for onions if their market price rises abnormally.
5. Regulating supply and distributions - The Act allows the government to control how essential
commodities are supplied and distributed to avoid regional shortages. Example: If a state
experiences a fuel shortage, the government can divert fuel from surplus areas to ensure supply.
6. It encourages fair trade practices - The Act ensures that businesses do not engage in unfair
practices that disrupt the market. Example: If a company manipulates prices by restricting
production, the government can take action under this Act.
7. Responding to emergencies - During crises like war, pandemics, or inflation, the Act enables the
government to take urgent measures to ensure public welfare. Example: During the COVID-19
pandemic, the government used the Act to regulate the supply of medical oxygen and masks.
8. Delegation of Powers - The central government can delegate powers to state governments for
effective enforcement. Example: State governments can impose temporary restrictions on
selling essential goods during festivals or calamities.
This act applies to the entire nation w no exceptions.

Tata Iron and Steel Co. Ltd. v. CCE - Essential Commodities Act, 1955 authorizes regulation of price
not imposition of any tax
Union of India v. Cynamide India Ltd.: One of the principal objectives of the Essential Commodities
Act, 1955 is to fetter and curb profiteering in the scarce resources of the community keeping up to the
directive in Article 39(b) of the Constitution
Dy. Commr. v. Rudolph Fernandes: The object of the Act is to deter a person from illegally dealing in
an essential commodity and consequently, impose a deterrent penalty against a person dealing in them
illegally
N. Nagendra Rao & Co. v. State of A.P: The prime object of the legislation was to secure availability
of essential commodities to the general public at fair prices and to protect their interest by way of
equitable distribution
Jitendra Kumar v. State of Bihar: the petitioner challenged the applicability of the act, as this act
works via notifications sent by the central govt. the list of essential commodities keeps changing (last
update – 2007). Here the CG had uniformly notified list of essential commodities, this was challenged
on the ground that the state already had one order passed by the SG. The SC said that act extends to all
of India, and a central law on essential commodities overrides any state order concerning the same.
Narendra Kumar & Ors v. UOI– decided const validity of the act, as if the govt imposes restrictions
on some trade activities (copper, lead and zinc), will this amount to violation of Art. 19(1)(g) of the
concerned traders? The SC decided that the govt has the power to rule essential commodities. It wasn’t
violating Art.19(1)(g) as it was falling under Art.19(6) which talks about they are subject to reasonable
restrictions for the public interest.
The govt can give a temporary list of essential commodities for a spl period of time, this power is to CG
& the SG, with a validity of up to 6 months. The govt can notify both permanent lists as well as
temporary lists, oxygen was essential during the pandemic, but not so anymore.
The order concerning them is under Entry 33 and falls u/ concurrent list.
“essential commodities”
Revised the list in 2007, there is no defn of this. We rely on the 2007 list only –
i. Drugs
ii. Fertilizer
iii. Edible oils and seeds
iv. Cotton (yarn)
v. Petroleum product
vi. Jute textiles
vii. Seeds
Maharaja Book Depot v. State of Gujarat —Definition of ‘essential commodity’ is descriptive and
contains items under general heads that may not in ordinary parlance fall under that item.
Section 2A – Essential commodities declaration, etc
- Utilized at the times of crisis. Eg: masks during covid.
- It empowers the central govt who exercises the power under these sections. When the
government has to make a declaration and declare a certain commodity is essential – would this
be valid? – (3) Any notification issued under sub-section (2) may also direct that an entry shall
be made against such commodity in the said Schedule declaring that such commodity shall be
deemed to be an essential commodity for such period not exceeding six months to be specified in
the notification.
- This notification has to be presented before the parliament.

Section 3 – Powers to control production, supply, distribution, etc., of essential commodities

- power is derived from here to make declaration under section 2A.

 - If the CG is of opinion that it is necessary or expedient so to do for maintaining or increasing
supplies of any essential commodity or for securing their equitable distribution and availability at
fair prices, or for securing any essential commodity for the defense of India or the efficient
conduct of military operations, it may, by order, provide for regulating or prohibiting the
production, supply and distribution thereof and trade and commerce therein.
- Shri Sitaram Sugar Co. Ltd. v. Union of India: (3-C) is attracted whenever any producer is
required to sell sugar by an order made with reference to sub-section (2)(f) and no notification
has been issued under sub section (3-A) or any such notification, having been issued, has ceased
to be in force. Whenever sub section (3-C) is attracted, it operates notwithstanding anything
contained in sub-section (3)
- K. Ramanathan v. State of T.N.: —Powers under sub-section (1) of section 3 are general and
those under sub-section (2) are illustrative in nature without conferring any fresh power
Section 4 – Imposition of duties on State Governments, etc.―
An order made under section 3 may confer powers and impose duties upon the Central Government or
the State Government or officers and authorities of Central Government or State Government, and may
contain directions to any State Government or to officers and authorities thereof as to the exercise of any
such powers or the discharge of any such duties.
Section 5 – Delegation of powers.―
The Central Government may, by notified order, direct that the power to make orders or issue
notifications under section 3 shall, in relation to such matters and subject to such conditions, if any, as
may be specified in the direction, be exercisable also by―
(a) such officer or authority subordinate to the Central Government, or
(b) such State Government or such officer or such authority subordinate to a State Government, as
may be specified in the direction.
State of A.P. v. Potta Sanyasi Rao: There is nothing in Section 5 to limit the power of delegation in
favour of the State Government only to the commodities specified in Section 2(a) or to those
commodities declared essential under Section 2(a)(xi) up to the date of delegation. Delegation under
Section 5 is a general delegation.
Section 6. Effect of orders inconsistent with other enactments.―
Any order made under section 3 shall have effect notwithstanding anything inconsistent therewith
contained in any enactment other than this Act or any instrument having effect by virtue of any
enactment other than this Act.
Ram Chandra Mawa Lal v. State of U.P: Section 6 of the Essential Commodities Act saves any order
made under Section 3 of that Act from the impact of any other enactment. The other Act or enactment
referred to therein cannot be said to be limited only to the Act or enactment which was in force on the
date of commencement of that act and not any future Act or Acts.
Section 6B. Issue of show cause notice before confiscation of food grains, etc.―
No order to confiscate any essential commodity, its packaging, or the means of transporting it (like
animals, vehicles, vessels, etc.) under Section 6A can be made unless:
 1. The owner or person from whom it was seized is:
 Given a written notice stating the grounds for proposed confiscation.
 Given a chance to submit a written explanation within a reasonable time.
 Given a reasonable opportunity to be heard.
2. Additionally, an animal, vehicle, or vessel cannot be confiscated if the owner proves to the
Collector that it was used without their knowledge or consent, and that they had taken reasonable
precautions to prevent such misuse.
3. Even if there are minor defects or irregularities in the notice given under (1)(a), the confiscation
order will still be valid as long as the notice requirements were substantially followed.
Section 7: Penalties:
Punishment for Contravention of Orders under Section 3:
 If a person violates an order related to storage or transport (under Section 3(2)(h) or (i)), they can be
punished with imprisonment up to one year and a fine.
 For other violations, imprisonment shall be at least three months (extendable up to seven years)
along with a fine.
 Courts can impose a lesser sentence (below three months) if there are adequate and special reasons
mentioned in the judgment.
Sopana Trimbak Wani v. State of Maharashtra: Punishment may be given below the statutory limit
only for adequate or special reasons,
Food World Super Markets Ltd. v. State of Karnataka: Vicarious liability.—Where offence under
Section 7 of Essential Commodities Act was found committed by company its Directors could not be
prosecuted for vicarious liability in absence of specific averment that they were in charge of and
responsible to company for conduct of its business.
Liability of employee.—Shameem Ahmad v. State of Uttarakhand: Liability of employee of owner
of godown determined as culpable acts being those of employee alone, misusing the premises.
Section 9: False statement –
If a person knowingly makes a false statement or provides false information when required under an
order made under Section 3 — whether verbally or in any document (like a book, account, record,
declaration, or return) — they can be punished with imprisonment up to five years, or with a fine, or
with both.
Section 10: Offences by companies
When a company violates any order made under Section 3 of the Act, both the company itself and
every person who was in charge of, and responsible for, the conduct of its business at the time of
the offence will be considered guilty and can be prosecuted and punished accordingly.
However, such responsible individuals can avoid punishment if they prove that:
 The offence occurred without their knowledge, or
 They had exercised all due diligence to prevent the contravention.
Additionally, regardless of the above, if it is proven that the offence was committed with the consent
or connivance of, or was due to the negligence of any director, manager, secretary, or other officer
of the company, then such individuals will also be deemed guilty and subject to punishment.
State (Govt. of NCT of Delhi) v. D.A.M. Prabhu: Interpretation/Construction.—“Person” as defined in
Section 3(42) of General Clauses Act, 1897, has been incorporated in Expln. (a) to Section 10. Associate
unit is an “association of individuals” as included in Explanation. Hence, person-in-charge or officer(s)
of such unit can be prosecuted for the offence under Section 7
State of Madras v. C.V. Prakash: Liability of the company. —The liability of those in charge of the
company cannot arise unless the company was first charge-sheeted
State of Punjab v. Kasturi Lal: Liability of persons in charge.—The persons in charge, or the officers
of the company or the company itself may be prosecuted jointly or severally for contravention of order
made under this section. There is no statutory compulsion that the person in charge or an officer of the
company may not be prosecuted unless he be ranged alongside the company itself.
Sham Sunder v. State of Haryana: Person entrusted with business of firm and responsible for conduct
of business alone liable to be prosecuted and not all partners,
Section 10C: Presumption of culpable mental state
In prosecutions under this Act where a culpable mental state (such as intention, motive, knowledge, or
belief) is required, the court will presume that such a mental state existed.
However, the accused can defend themselves by proving that they did not have the required mental
state regarding the alleged offence. Importantly, to succeed in this defence, the accused must prove the
absence of the mental state beyond a reasonable doubt—not just on the balance of probabilities.
Section 11: Cognizance of offences:
A court can take cognizance (i.e., begin legal proceedings) of an offence under this Act only if a written
report detailing the facts of the offence is submitted by either:
 A public servant (as defined under Section 21 of the Indian Penal Code),
 An aggrieved person, or
 A recognized consumer association, regardless of whether the person filing the complaint is a
member of that association.
Section 13. Presumption as to orders.―
If an order appears to be made and signed by an authority under the powers given by this Act, the court
will presume it to be validly made by that authority, as per the Indian Evidence Act, 1872.
Section 16: repeal and savings:
The following laws are hereby repealed:― (a) the Essential Commodities Ordinance, 1955 (1 of 1955);
(b) any other law in force in any State immediately before the commencement of this Act in so far as
such law controls or authorises the control of the production, supply and distribution of, and trade and
commerce in, any essential commodity.
State of Bihar v. Hiralal Kejriwal: Words “any other law” can only mean any law other than the
Essential Commodities Ordinance, 1955, mentioned in Section 16(1)(a)
S.K.G. Sugar Ltd. v. State of Bihar: There was no competition or collision between taxing provisions
of the Bihar Act 7 of 1955 and those of the Essential Commodities Act, 1955. The two exist side by side
and each remains operative in its own distinct field without interfering with the other
PREVENTION OF BLACK MARKETING AND MAINTENANCE OF SUPPLIES OF
ESSENTIAL COMMODITIES ACT
Difference between PofBM Act and ECA:
Both are aimed at ensuring the availability of essential commodities, but they differ in their scope,
provisions, and mechanisms for enforcement.
1) Purpose
- Essential Commodities Act, 1955:
a) Primarily focuses on regulating the production, supply, and distribution of essential
commodities to ensure that they are available at fair prices and to prevent hoarding or black
marketing.
b) It gives the government powers to control the prices and regulate the trade of essential
commodities, including foodstuff, drugs, and petroleum products, among others.
- Prevention of Black Marketing and Maintenance of Supplies of Essential Commodities Act,
1980:
a) to deal effectively with malpractices like blackmarketing, boarding, profiteering, and to arrest
the unjustified rise in prices of essential commodities by providing for the preventive detention
of person likely to indulge in such practices.
b) The Ordinance recognised preventive detention as a necessary evil and accordingly sought to
provide for various safeguards to avoid scope for possible abuse of powers thereunder. The
ground on which a person could be detained under the Ordinance was defined specifically. It
provided that an order directing the, detention of a person could be made thereunder only with
a view to preventing such person from acting in any prejudicial manner prejudicial to the
maintenance of supplies of commodities essential to the community and it also defined the
expression “acting in any manner prejudicial to the maintenance of supplies of commodities
essential to the community”.
c) It also made the necessary provisions for ensuring, in accordance with the said amendments,
that a person is not detained for a period longer than two months without the approval of an
Advisory Board. Unlike the earlier laws as to preventive detention, the Ordinance limited the
maximum period of detention to six months.
d) The provisions of the Ordinance are useful as a deterrent measure to combat malpractices like
blackmarketing, hoarding and profiteering.

2) Scope and Application

- Essential Commodities Act, 1955:
a) The Act empowers the government to issue orders related to the production, supply,
distribution, and pricing of essential commodities.
b) It addresses a broader range of regulatory activities and controls, such as licensing of
businesses dealing with essential goods, fixing of stock limits, and seizing of goods that are
hoarded.
- Prevention of Black Marketing and Maintenance of Supplies of Essential Commodities Act,
1980:
a) This Act has a narrower scope and application, specifically aimed at dealing with individuals
or groups engaged in black marketing and hoarding.
b) It mainly targets the arrest and detention of individuals responsible for black marketing and
ensures that such individuals are detained to prevent them from causing further harm to the
supply chain.
3) Enforcement and Penalties
- Essential Commodities Act, 1955: Violations under this Act (such as hoarding, black marketing,
or profiteering) may lead to criminal penalties, including imprisonment and fines. The emphasis
is on regulating trade, preventing market manipulation, and ensuring the fair distribution of
goods.
- Prevention of Black Marketing and Maintenance of Supplies of Essential Commodities Act,
1980: The primary penalty under this Act is detention without trial for up to 6 months
(extendable in certain circumstances), which is a preventive measure. The Act focuses on taking
immediate action against individuals suspected of black marketing or hoarding by allowing their
detention.

4) Government Powers
- Essential Commodities Act, 1955: Grant powers to the government to regulate and control the
production, supply, and distribution of essential goods. It empowers authorities to seize stocks,
cancel licenses, and regulate prices.
- Prevention of Black Marketing and Maintenance of Supplies of Essential Commodities Act,
1980: Gives the government the power to detain individuals suspected of black marketing,
hoarding, or manipulating essential commodity supplies. The government can issue detention
orders without trial if an individual’s actions are considered prejudicial to the supply of essential
commodities.

5) Ultimate Measure
- Essential Commodities Act, 1955: This Act is a Regulatory Measure that focuses on regulating
and controlling essential commodity markets to ensure their proper supply and fair prices.
- Prevention of Black Marketing and Maintenance of Supplies of Essential Commodities Act,
1980: The Act is a Preventive Measure as it focuses on preventive action by detaining
individuals engaged in black marketing or hoarding, thereby taking immediate action to
safeguard the public interest.

Sec. 3 – Power to make orders detaining certain persons.

Detention is to make sure that essential commodities are available to the public. This section grants the
government the authority to detain any person who is engaged in activities that are considered
prejudicial to the maintenance of supplies of essential commodities or who is involved in black
marketing, hoarding, or other malpractices related to essential goods.
Type of actions under Black Marketing Act:
This act consists of two actions –
i. Preventive actions
ii. Actions to ensure fair supply of essential commodities - this comes into picture only after the
preventive actions are taken.
The order can be issued by the DM. the order of detention can last for 12 days but in certain cases this
can extend to 15 days. For ex- A issued order against B, A has the duty to inform B the grounds of his
detention within 5 days as per Sec.8 of the Black-Marketing Act. if B is informed after 5 days but not
later than 10 days, then the validity period of detention order will be effective for 15 days rather than 12
days.
After the expiry of this time period, further approval is required by the state govt. by the time state govt
gives the approval. There is no bail concept here for this is a preventive action. The person can free
himself –
1) The person has the chance to present himself before the state govt as soon as the person is
informed by the authority as the opportunity of being heard is given by the SG/CG. We have to
see whether the order is approved by the CG or not.
2) If the govt approves the detention, the govt will constitute an advisory committee/ board which
can ask for further information. Post this, if the board is convinced that there is no ground to
detain the person then the person can free himself. When the board is constituted, the person has
to advocate for himself. The person can have representative while appearing before the govt. the
board must be constituted within 3 weeks since the day of the person’s detention.
3) Other means – writ petitions; the person can challenge the detention on the basis of infringement
of his FRs. The writ of habeus corpus is applied here.
Section 4: Execution of Detention Orders: This section provides the legal mechanism for executing
detention orders issued under Section 3. It also specifies the procedures for dealing with individuals
detained under the Act.
Section 5: Power to Regulate Detention:
The government has the power to regulate the place and conditions of detention for individuals detained
under the Act.
Every person in respect of whom a detention order has been made shall be liable— (a) to be detained in
such place and under such conditions, including conditions as to maintenance, discipline and
punishment for breaches of discipline, as the appropriate Government may, by general or special order,
specify; and (b) to be removed from one place of detention to another place of detention, whether within
the same State or in another State, by order of the appropriate Government: Provided that no order shall
be made by a State Government under clause (b) for the removal of a person from one State to another
State except with the consent of the Government of that other State.
Section 6: Grounds for Detention - No detention order shall be invalid or inoperative merely by reason
— (a) that the person to be detained thereunder is outside the limits of the territorial jurisdiction of the
Government or officer making the order, or (b) that the place of detention of such person is outside the
said limits.
Section 8: Advisory Board : Section 8 provides for the establishment of an Advisory Board to review
the cases of individuals detained under the Act. The Board’s function is to ensure that detention is
justified and not arbitrary.
Section 9: Period of Detention: This section specifies the maximum period for which a person can be
detained under the Act. The period can be extended under certain circumstances, subject to review by
the Advisory Board.
Section 10: Repeal and Saving: This section ensures that the provisions of the Act will continue to
apply even if similar laws are repealed or modified. It also provides saving provisions for actions taken
in good faith under the Act.
Sec. 15 - temporary release of persons detained.
The detainee can be freed at the stage when he is justifying himself before the govt. The government
may temporarily release a person detained under a detention order, either unconditionally or on accepted
conditions.
- It can cancel such release anytime.
- The released person may be required to sign a bond, with or without sureties, to ensure
compliance with the conditions.
- The person must surrender at the specified time, place, and to the designated authority. If they
fail to surrender or violate the conditions, they can face up to two years’ imprisonment, a fine, or
both.
- Violating bond conditions also leads to forfeiture of the bond and liability to pay the penalty.
→ How does the advisory board take decisions to confirm or reject the detention order- The board
reviews the case and decides whether there are sufficient grounds for the detention. If they find no
grounds, the person is released.

What if the order passed by the SG is in contravention of the order passed by the CG & whether
the CG will override the SG order – the CG’s order will override the SG’s order. The SG can’t use
any issue which is liberalized by the CG to make excess restrictions:
Omprakash Agarwal v. State of UP & Ors.: Allahabad High Court examined the validity of a
detention order issued under Section 3(1) of the Prevention of Black Marketing and Maintenance of
Supplies of Essential Commodities Act, 1980.
Legal Provisions Involved:
- Article 226 of the Constitution of India
- Section 3(1) of the Prevention of Black Marketing and Maintenance of Supplies of Essential
Commodities Act, 1980
- U.P Cement Control Order, 1973
- U.P Essential Commodities (Display of Prices and Stock and Control of Supply and Distribution)
Order, 1977
- Essential Commodities Act
- Delegation Order under Section 5 of the Essential Commodities Act
Facts: • Om Prakash Agarwal, a retail dealer in non-levy cement in Agra, was operating his business
under a license granted under the U.P. Cement Control Order, 1973. • An inspection on July 4, 1984,
revealed several irregularities at his premises, including: • Operating at a location different from the one
specified in his license. • Absence of stock and sale registers. • Failure to display stock and rate boards. •
Issuance of improper cash memos lacking purchaser details. • An excess stock of 33 cement bags
beyond the recorded amount. • These actions were alleged to contravene the U.P. Cement Control Order,
1973, and the U.P. Essential Commodities (Display of Prices and Stock and Control of Supply and
Distribution) Order, 1977. • Consequently, a report was filed against Agarwal under Sections 3 and 7 of
the Essential Commodities Act. • Before he could secure bail, the District Magistrate of Agra issued a
detention order on August 2, 1984, under the Prevention of Black Marketing and Maintenance of
Supplies of Essential Commodities Act, 1980.
Issue: The primary issue was whether the detention order was valid, given that the alleged irregularities
pertained to non-levy cement, which had been decontrolled by the Central Government’s Cement
Control Order of 1967, as amended on February 28, 1982.
Decision: • The court noted that the 1982 amendment to the Central Government’s Cement Control
Order distinguished between “levy cement” and “non-levy cement,” with the latter being exempt from
certain regulatory controls. • The U.P. Cement Control Order, 1973, had not been amended to reflect this
distinction, leading to inconsistencies between state and central regulations. • The court held that the
state’s control order could not override the central order, especially concerning non-levy cement. • It
was determined that Agarwal’s actions did not constitute a violation of the Essential Commodities Act
or any other law related to the control of production, supply, or distribution of essential commodities. •
Consequently, the court found that the grounds for detention were not substantiated and ordered
Agarwal’s immediate release, declaring his detention invalid. This case underscores the importance of
ensuring that state regulations align with central directives, especially when central policies have
liberalized controls over certain commodities.
 LEGAL METROLOGY ACT, 2009
The "Standards of Weights and Measures Act, 1976" and the "Standards of Weights and Measures
(Enforcement) Act, 1985" were both replaced by the Legal Metrology Act, 2009
What is the importance of weights and measurements – there are certain objects which are measured on
the basis of their weights, heaviness which is necessary for a society.
The advancement of technology has necessitated the review of abovementioned enactments to make
them simple, eliminate obsolete regulations, ensure accountability and bring transparency. It has become
imperative to combine the provisions of the existing two Acts to get rid of anomalies and make the
provisions simple. It has also become necessary to keep the regulation pragmatic to the extent required
for protecting the interest of consumers and at the same time keep the industry free from undue
interference. It has also become necessary to recognise certain “Government approved Test Centres”
which will be empowered to verify prescribed weight or measure
How to measure the heaviness of an object: mg, microgram, g, kg, quintal, tons.
Effects:
1) Consumer exploitation
2) Unfair trade practice
3) Loss of government revenue
4) Loss to industrial and public sector
5) Structural failures
6) international trade barriers
India follows the metric system – it uses metres, etc.
- 1956 act: Adopting uniform standard of weights and measurements
- 1985 act: To enforce the standards of uniform metric system
- When both these are read together, it is really confusing for the consumers. With the
advancement of technology, there are many new things coming up. It was becoming obsolete and
thus a new act was required.
- Objective of metrology act: Combining the provisions of the existing two acts, because following
two acts was getting difficult and to make the provisions simplified. Since it has become
important to keep regulations pragmatic, protect the interest of consumers and keep the industry
free from interference. Necessary to obtain government approved test centres.
Key features of the act:
1. Regulates weights and measures used in transactions
2. Approval of model of weights and measures
3. Provides provisions for verification of weights and measures by govt based test centres
4. Provisions on appointment of govt officials
5. Provisions on penalties
6. Compounding of offences is given
Section 2: Definition:
(i) “manufacturer” in relation to any weight or measure, means a person who— (i) manufactures
weight or measure, (ii) manufactures one or more parts, and acquires other parts, of such weight or
measure and, after assembling those parts, claims the end product to be a weight or measure
manufactured by himself or itself, as the case may be, (iii) does not manufacture any part of such weight
or measure but assembles parts thereof manufactured by others and claims the end product to be a
weight or measure manufactured by himself or itself, as the case may be, (iv) puts, or causes to be put,
his own mark on any complete weight or measure made or manufactured by any other person and claims
such product to be a weight or measure made or manufactured by himself or itself, as the case may be
(l) “pre-packaged commodity” means a commodity which without the purchaser being present is
placed in a package of whatever nature, whether sealed or not, so that the product contained therein has
a pre-determined quantity;
(m) “person” includes,— (i) a Hindu undivided family, (ii) every department or office, (iii) every
organisation established or constituted by Government, (iv) every local authority within the territory of
India, (v) a company, firm and association of individuals, (vi) trust constituted under an Act, (vii) every
co-operative society, constituted under an Act, (viii) every other society registered under the Societies
Registration Act, 1860 (21 of 1860)
(r) “sale” with its grammatical variations and cognate expressions, means transfer of property in any
weight, measure or other goods by one person to another for cash or for deferred payment or for any
other valuable consideration and includes a transfer of any weight, measure or other goods on the hire-
purchase system or any other system of payment by instalments, but does not include a mortgage or
hypothecation of, or a charge or pledge on, such weight, measure or other goods
- Federation of hotels and association of India v. UOI: The meaning of sell, the definition of “sale”
contained both in the 1976 Act and now in the 2009 Act would go to show that composite indivisible
agreements for supply of services and food and drinks would not come within the purview of either
enactment, and that this is for the very good reason that the object for both these enactments is
something quite different - the object being, as has been pointed out above, to standardize weights
and measures for defined goods so that quantities that are supplied are thus mentioned on the
package and that MRPs are mentioned so that there is one uniform price at which such goods are
sold.
● Therefore the Standards of Weights and Measures Act, 1976 read with the enactment of
1985, or the Legal Metrology Act, 2009, would apply so as to interdict the sale of mineral
water in hotels and restaurants at prices which are above the MRP.
(u) “transaction” means,— (i) any contract, whether for sale, purchase, exchange or any other purpose,
or (ii) any assessment of royalty, toll, duty or other dues, or (iii) the assessment of any work done, wages
due or services rendered;
(v) “verification”, with its grammatical variations and cognate expressions, includes, in relation to any
weight or measure, the process of comparing, checking, testing or adjusting such weight or measure with
a view to ensuring that such weight or measure conforms to the standards established by or under this
Act and also includes re-verification and calibration
Section 3: Overriding effect of this Act –
You cannot sell something beyond MRP Price, no false labialization. Manufacturing businesses cannot
commit fraud. The same kind of offense are covered under general Act (IPC/BNS)
- The special statutes shall prevail in case of conflict
- State of UP v. Aman Mittal: offender did false labelling over their product. Question was
whether section 6 of the metrology act would override any inconsistent provisions of the general
act? The SC upholding section 3 of the act decided that this has an overriding effect over any
other laws especially in case of penalties for offense.
- Section 3 talks about this overriding effect – Provisions of this Act to override provisions of any
other law.—The provisions of this Act shall have effect notwithstanding anything inconsistent
therewith contained in any enactment other than this Act or in any instrument having effect by
virtue of any enactment other than this Act.
Section 4. Units of weights and measures to be based on a metric system.—Every unit of weight or
measure shall be in accordance with the metric system based on the international system of units.
Section 5. Base unit of weights and measures.
Section 6. Base unit of numeration.
Section 7. Standard units of weights and measures.
Section 8. Standard weight, measures or numeral.
Section 9. Reference, secondary and working standard.
Section 10. Use of weight or measure for particular purposes.
Section 11. Prohibition of quotation, etc., otherwise than in terms of standard units of weight,
measure or numeration.
(1) No person shall, in relation to any goods, things or service,—
(a) quote, or make announcement of, whether by word of mouth or otherwise, any price or
charge, or
(b) issue or exhibit any price list, invoice, cash memo or other document, or
(c) prepare or publish any advertisement, poster or other document, or
(d) indicate the net quantity of a pre-packaged commodity, or
(e) express in relation to any transaction or protection, any quantity or dimension, otherwise
than in accordance with the standard unit of weight, measure or numeration.
(2) The provisions of sub-section (1) shall not be applicable for export of any goods, things or
service.
(1) Prohibited Actions: No person is allowed to quote or display any information (such as price,
quantity, or dimensions) using non-standard units in the following situations:
(a) While stating or announcing prices or charges—either spoken or written.
(b) On documents like price lists, invoices, or cash memos.
(c) In any advertisements or posters.
(d) On packaging that mentions the net quantity of a product.
(e) During any transaction where quantity or size is involved.
In all these cases, only officially standardized metric units (e.g., gram, litre, metre) must be used.
(2) Exception: This rule does not apply to goods, services, or products meant for export. In such cases,
the units can be based on the importing country’s requirements.
Contravention of section 11 results in legal action under section 29
- Section 29: Penalty for quoting or publishing, etc., of non-standard units.—Whoever
violates section 11 shall be punished with fine which may extend to ten thousand rupees and, for
the second or subsequent offence, with imprisonment for a term which may extend to one year,
or with fine, or with both.
Cadbury India Ltd. v. Controller of Legal Metrology (2013): Cadbury India Limited (Cadbury) filed
the Writ Petition before the High Court of Karnataka challenging the order of the Legal Metrology
Department whereby their advertisement of “5 star chocolate” was held violative of section 11 read with
section 29 of the Legal Metrology Act, 2009.
- Issue 2: Whether term advertisement, poster include promotional material related to goods and
services?
- The matter pertains to Cadbury’s humorous advertisement in local language which depicts two
brothers got lost while eating “5 star chocolate” and ultimately end up converting their father’s
trouser to the size of a nicker. In the advertisement, the expression “angula” was used, which
means “an inch” and is a non metric system of length and therefore it was alleged that the said
advertisement violated the provisions of section 11(1)(c) of the Act.
- It was held by the Court that mere usage of the “nonmetric” expression in the advertisement
would not falls within the ambit of section 11 of the Act unless the goods/commodities which are
subject matter of the advertisement are published/advertised other than in accordance with the
standard unit of weight or measure or numeration. Further, as the advertisement pertains to
“chocolate” the usage of the non standard unit of measure is inconsequential.
- Section 11 and 29 applies to every doc, advertisement where they are not in accordance with the
adhered standards
- The phrase concerning any other goods would mean all forms of advertisement, misleading
weights. Controller of legal metrology would have authority to take action. Promote is
synonymous to advertisment.
- Legality of action taken by the authorities: The action contemplated by section 29 of the act
would stand attract or can be taken only when a person in relation to any goods/ commodities,
prepares or publishes any advertisement otherwise than in accordance with the standard unit or
weight, measure or numeration. The expressions in relation to any goods, things or service in
section 11 of the act means the preparations or publications of any advertisement, poster or other
document, if the goods, things or service to be advertised or in respect of which any poster or
other docs is prepared or published. The words advertisement, poster or document would mean if
the goods, commodities, things manufactured or service rendered to be advertised printed on
posters or documents.
Section 12. Any custom, usage, etc., contrary to standard weight, measure or numeration to be
void. –
Any custom, usage, practice or method of whatever nature which permits a person to demand, receive or
cause to be demanded or received, any quantity of article, thing or service in excess of or less than, the
quantity specified by weight, measure or number in the contract or other agreement in relation to the
said article, thing or service, shall be void.
Section 15: Power of inspection, seizure, etc.—
(1) The Director, Controller or any legal metrology officer may, if he has any reason to believe,
whether from any information given to him by any person and taken down in writing or from
personal knowledge or otherwise, that any weight or measure or other goods in relation to which
any trade and commerce has taken place or is intended to take place and in respect of which an
offence punishable under this Act appears to have been, or is likely to be, committed are either
kept or concealed in any premises or are in the course of transportation,—
(a) enter at any reasonable time into any such premises and search for and inspect any
weight, measure or other goods in relation to which trade and commerce has taken place,
or is intended to take place and any record, register or other document relating thereto;
(b) seize any weight, measure or other goods and any record, register or other document or
article which he has reason to believe may furnish evidence indicating that an offence
punishable under this Act has been, or is likely to be, committed in the course of, or in
relation to, any trade and commerce.
(2) The Director, Controller or any legal metrology officer may also require the production of every
document or other record relating to the weight or measure referred to in sub-section (1) and the
person having the custody of such weight or measure shall comply with such requisition.
(3) Where any goods seized under sub-section (1) are subject to speedy or natural decay, the
Director, Controller or legal metrology officer may dispose of such goods in such manner as may
be prescribed.
(4) Every search or seizure made under this section shall be carried out in accordance with the
provisions of the Code of Criminal Procedure, 1973, relating to searches and seizures.
Reliance Retail Ltd. v. State of Karnataka (2019):
- Facts: The petitioner, a company incorporated under the Companies Act, 1956, engages in the
retail sale of agricultural products, including fruits and vegetables, as well as fast-moving
consumer goods. The petitioner operates multiple distribution centers and retail outlets across the
country and has obtained a general license from the Dasanapura Grama Panchayat for its
warehouse/distribution center on March 12, 2012. The petitioner does not engage in
manufacturing or packaging activities but acts solely as a reseller/retailer of goods.
- On August 22, 2012, the petitioner received a show cause notice from the 4th respondent
alleging violations of the Legal Metrology Act, 2009 (hereinafter referred to as "the Act") and
the Legal Metrology (Packaged Commodities) Rules, 2011 (hereinafter referred to as "the
Rules"). The notice, however, did not specifically reference Rule 18 of the Rules, which imposes
obligations on wholesalers and retailers to ensure compliance of the products they offer for sale.
Issue:
a) legality of the warrantless search and seizure?
b) Applicability of these rules to the retailer? Whether the petitioner can be held liable for
violations of the Act and the Rules when it does not control the packaging or manufacturing of
the products sold.
Held:
a) The court held that Section 15(4) provides that every search or seizure made under the Section
shall be carried out in accordance with the provisions relating thereto and Criminal Procedure
 Code, 1973. Due to failure to comply with mandatory legal procedure, the search and seizure
was held as violative of rights of individuals
b) Section 18 of the act says that – companies dealing with pre-packaged commodities. In this case,
they are distributors and their work is to distribute.
● Section 18. Declarations on pre-packaged commodities .—(1) No person shall
manufacture, pack, sell, import, distribute, deliver, offer, expose or possess for sale any
pre-packaged commodity unless such package is in such standard quantities or number
and bears thereon such declarations and particulars in such manner as may be prescribed.
(2) Any advertisement mentioning the retail sale price of a pre-packaged commodity shall
contain a declaration as to the net quantity or number of the commodity contained in the
package in such form and manner as may be prescribed.
● Applicability of packaging rules: The Legal Metrology (Packaged Commodities) Rules,
2011. These are in extension of this act. Whether they have violated rule 18, but question
is - are these rules even applicable to the company considering they are only distributing.
● These rules are applicable because although primary reference is to manufacturing,
however rule 18 is dealing with retailing. The court quashed the show cause notice due to
its vagueness and failure to provide specific allegations.
This case talks about the importance of following the procedural law failing of which the investigation
conducted will be held as invalid.

Leo Crasta v. State of Karnataka:

- Section 36 talks about the Penalty for selling, etc., of non-standard packages
- When you violate section 18, then only section 36 will be applicable.
- Held: this case talks about the applicability of section 36(1). The court said that When you
violate section 18, then only section 36(1) will be applicable.
Other areas with which the act deals with:
- Section 19. Registration for importer of weight or measure . No person shall import any weight
or measure unless he is registered with the Director in such manner and on payment of such fees,
as may be prescribed.
● If they are importing and if it is being imported through any other company, then also it is
required to be registered.
- Section 20. Non-standard weights and measures not to be imported. No weight or measure,
whether singly or as a part or component of any machine shall be imported unless it conforms to
the standards of weight or measure established by or under this Act.
- Section 22. Approval of model. Every person, before manufacturing or importing any weight or
measure shall seek the approval of model of such weight or measure in such manner, on payment
of such fee and from such authority as may be prescribed: Provided that such approval of model
may not be required in respect of any cast iron, brass, bullion, or carat weight or any beam scale,
length measures (not being measuring tapes) which are ordinarily used in retail trade for
measuring textiles or timber, capacity measures, not exceeding twenty litre in capacity, which are
ordinarily used in retail trade for measuring kerosene, milk or potable liquors:
Provided further that the prescribed authority may, if he is satisfied that the model of any weight
or measure which has been approved in a country outside India conforms to the standards
 established by or under this Act, approve such model without any test or after such test as he
may deem fit.
Section 23. Prohibition on manufacture, repair or sale of weight or measure without licence. —(1)
No person shall manufacture, repair or sell, or offer, expose or possess for repair or sale, any weight or
measure unless he holds a licence issued by the Controller under sub-section (2): Provided that no
licence to repair shall be required by a manufacturer for repair of his own weight or measure in a State
other than the State of manufacture of the same. (2) For the purpose of sub-section (1), the Controller
shall issue a licence in such form and manner, on such conditions, for such period and such area of
jurisdiction and on payment of such fee as may be prescribed.
Star Scale Repairing Centre v. State of Maharashtra (2015) SCCOnline Bom 8347:
- It is the responsibility of the licensed repairer to repair the weights and measures or the scale,
submit it for verification to the authorised officer and only after receiving certificate of
verification, deliver the same to the user. The deposit of fees for verification shall obviously be
an integral part of the process. Merely because there are certain complaints lodged by the users
of the weights and measures and the petitioners to the Anti-Corruption Bureau against the
officers of the Legal Metrology Department, cannot be a ground for issuance of circulars/orders
prohibiting the licensed repairers from collecting the fees and depositing the same with the
authorised officer in the name of the users of the weights and measures.
Section 51 Offences under Legal Metrology Act (LM Act).—
State of U.P. v. Aman Mittal - If an offence is disclosed to be made out under provisions of LM Act,
accused cannot be prosecuted for the same offence falling under Ch. XIII (i.e. Sections 264 to 267) IPC.
However, prosecution is maintainable with respect to other offences under IPC (like Sections 415, 467,
468, 471, 34, 120-B IPC herein) which are not covered by the LM Act.
 MONEY LAUNDERING:
Process of disguising illegally obtained money as legitimate income bypassing through a series of
transactions to hide its origin.
To convert black money into white money, it is done through 3 stages:
1) Placement - At this stage, the money launderers inject the crime money into the financial
system. That is often done by depositing funds into a bank account registered to an anonymous
corporation or a professional middleman.
● This is done through smurfing – breaking huge amounts into small bank accounts.
2) Layering - The money so injected by placement is moved or spread over various transactions in
different accounts of the same country and other countries where anti-money laundering laws are
not so stringent, thus, making it difficult to trace the source.
● Transactions like the purchase of tradable assets like expensive cars, artwork, and real
estate can also be included in layering the funds.
3) Integration- Such well-placed and well-layered money again enters the financial system,
obliterating the original association with crime and using such laundered money as if it came
from clean sources, thus defeating the law.
Common Methods of Money Laundering
a) Use of shell companies:
A shell company, or a shell corporation, is a business entity that exists only on paper, with no physical
presence, no employees, and no operations. It's a hollow entity, like an empty shell, hence the name.
Shell companies are legal entities and can be used for legitimate purposes, such as facilitating mergers
and acquisitions, protecting assets, or managing investments. However, they are often exploited for
illegal activities like tax evasion and money laundering due to their ability to obscure ownership and
financial transactions.
Shell companies and money laundering:
Money laundering involves disguising the origins of illegally obtained money to make it appear as
though it came from legitimate sources. Shell companies play a pivotal role in this process, serving as
vehicles to move and hide illicit funds while hiding the identity of the ultimate beneficiaries.
The process typically involves setting up a shell company in a jurisdiction known for strict privacy laws.
These jurisdictions, also known as tax havens, offer a legal veil of secrecy, making it challenging for
investigators to trace the money trail back to the original criminal activity.
The shell company then engages in a series of transactions designed to "clean" the dirty money. For
instance, it might issue fake invoices for non-existent goods or services, create a series of complex
financial transactions to confuse the money trail or engage in round-tripping, where the same assets are
sold back and forth to create an illusion of legitimate business activity.
b) Hawala transactions.
An informal underground banking system used to transfer money without physical movement. Example:
Terrorists used hawala networks to fund the 26/11 Mumbai attacks.
2g spectrum case.
c) Fake Charities & NGOs
Fraudsters donate black money to fake NGOs, then withdraw it as “project expenses.” Example: A
businessman donates ₹50 crore to a fake NGO, which later transfers it to his personal account.
d) Real Estate Investments
Buying property at a lower declared price and later selling it at full price to convert black money into
legal income. Example: A corrupt officer buys land for ₹1 crore (real value ₹5 crore), then sells it at ₹6
crore later.
e) Trade-Based Money Laundering
Manipulating import-export invoices to move money across borders. Example: A company over-
invoices the cost of imported goods to send extra money abroad.
Definitions:
1) Interpol: Money laundering is concealing or disguising the origins of illegally obtained proceeds
so that they appear to have originated from legitimate sources. It is frequently a component of
other serious crimes such as drug trafficking, robbery or extortion.
Why is ML treated as a socio-economic offence?
ML as an Economic Offense:
1. It weakens financial institutions: because the purpose of financial regulators is to keep track of
transactions and maintain a balance sheet. Money launderers inject illicit funds into legitimate
businesses, making it difficult for regulators to distinguish between legal and illegal transactions.
This affects the accuracy of financial reports and disrupts monetary policy decisions. If banks
and financial institutions are perceived as being involved in money laundering, people lose
confidence in them, leading to potential financial instability and capital flight. Money laundering
schemes, such as shell companies, offshore accounts, and fake invoices, are designed to evade
scrutiny, making it harder for financial authorities to track illegal financial activities.
2. It encourages tax evasion and reduce government revenue: Money laundering results in tax
evasion and loss of government revenue, which has long-term socio-economic consequences:
- Reduced Public Welfare Spending: When money is hidden through illegal channels,
governments lose tax revenue, limiting their ability to fund healthcare, education, and
infrastructure.
- Undermining the Formal Economy: A parallel underground economy emerges, reducing
taxable income and increasing the burden on honest taxpayers.
3. It distorts market competition and increases illegal business : Money laundering allows
criminals to integrate illicit proceeds into the legal economy, giving them an unfair advantage
over legitimate businesses. This leads to:
- Unfair Competition: Businesses funded by laundered money can afford to sell products at
lower prices, pushing genuine businesses out of the market.
- Artificial Inflation: Large sums of illicit money flowing into the economy without
corresponding productive activities can lead to inflation, affecting ordinary citizens.
- Erosion of Investor Confidence: If an economy is perceived as being highly susceptible
to money laundering, investors may hesitate to invest, fearing financial instability and
regulatory crackdowns.
ML as a social offense:
 4. Increases crime and corruption: eg: 2g spectrum case. Money laundering is closely linked to
organized crime, drug trafficking, human trafficking, and terrorism financing. When criminals
successfully launder money, they:
- Fund More Criminal Activities: The ability to legitimize illicit funds encourages further
criminal acts, such as drug trade, arms smuggling, and fraud.
- Corrupt Law Enforcement and Public Officials: Criminals use laundered money to bribe
law enforcement, judiciary, and politicians, weakening the rule of law and governance.
- 2G Spectrum Scam: How Bribe Money Was Laundered Through Offshore Accounts. The
2G Spectrum Scam (2008) was one of India’s biggest corruption scandals, involving the
illegal allocation of telecom licenses at throwaway prices, causing an estimated ₹1.76
lakh crore ($39 billion) loss to the Indian government. Bribe money received by
politicians and corporate executives was laundered through offshore accounts and shell
companies to make it appear legitimate. (READ FROM THE DOC)
5. Inequality and poverty: Money laundering contributes to income inequality and worsens poverty
in multiple ways:
- Wealth Concentration Among Criminal Elites: Laundered money often benefits
organized crime groups, corrupt officials, and illicit business owners, while honest
citizens and law-abiding businesses suffer.
- Diversion of Public Resources: Corruption and illicit financial flows linked to money
laundering reduce the funds available for essential public services such as healthcare,
education, and social welfare.
- Rising Cost of Living: Money launderers often invest in high-value assets such as real
estate, artificially inflating prices. This makes housing and essential goods unaffordable
for the average population.
6. It threatens national security: Money laundering is closely linked to national security risks,
including:
- Terrorism Financing: Laundered money is often used to fund terrorist organizations,
enabling them to operate across borders, purchase weapons, and carry out attacks.
- Drug and Human Trafficking: Criminal syndicates engaged in drug smuggling, child
trafficking, and illegal arms trade use money laundering to clean their proceeds,
sustaining these illegal markets.
- Example: The 26/11 Mumbai attacks were financed using hawala networks, a common
money laundering method. (READ FROM THE DOC)
7. Political Corruption and Destabilization: Corrupt politicians and officials use laundered money
to finance election fraud, suppress opposition, or manipulate public policies. Criminal
organizations infiltrate legitimate businesses, law enforcement agencies, and even government
bodies, weakening governance structures.
What are the Various Methods of Money Laundering Besides Shell Companies:
a) Smurfing (structuring transaction)
b) Trade based money laundering
c) Hawala transaction
d) Casino and gambling money laundering
e) Real estate laundering
f) Cryptocurrency and digital currencies
g) Fake charities and NGOs
h) Investing in precious metals and art
 i) Offshore bank accounts and tax havens
j) Fake loans and bank fraud
Historical origin
In the 1920s and 1930s, alcohol was banned in the USA. The organized criminal, AI Kopen, tried to
take advantage of this situation, and used to sell alcohol in black market. To integrate it in the market
they used Laundromat through which they were converting their illegally generated income into legally
generated income.
1) United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic
Substances (Vienna Convention, 1988)
It was found that the root cause of the main source of illegal money was through drug dealing. In 1918,
the UN convened a treaty – United Nations Convention Against Illicit Traffic in Narcotic Drugs and
Psychotropic Substances (Vienna Convention, 1988). Vienna UN Convention against illicit traffic in
NDPS 1988. The foundation is based on these international conventions.
- Purpose was to have an international framework to combat the growing problem of supply of
drugs.
2) Financial Action Task Force (FATF) – 1989
The Financial Action Task Force (FATF) was established in 1989 by the G7 to examine and develop
measures to combat money laundering. The FATF was given responsibility to examine money
laundering techniques and trends, review the action already taken at a national or international level, and
to set out measures needed to combat money laundering. In 2001, the FATF expanded its mandate to
also combat terrorist financing. In April 1990, less than a year after its creation, the FATF issued a
report containing a set of Forty Recommendations. These aimed to provide a comprehensive plan of
action to fight money laundering. Key functions of FATF:
A) Developing Global Standards:
B) Monitoring Compliance - The Financial Action Task Force (FATF) maintains two lists to
monitor and regulate countries that fail to effectively combat money laundering (ML) and
terrorist financing (TF): 1. Grey List (Increased Monitoring List) 2. Black List (High-Risk
Jurisdictions List). The Grey List includes countries that have deficiencies in their anti-money
laundering (AML) and counter-terrorism financing (CFT) laws but are actively working with
FATF to fix them. These countries do not face sanctions, but they are under close monitoring and
required to implement reforms within a given timeframe.
Bank of International Settlement:
- Being aware of the risks incurred by banks of being used, intentionally or unintentionally, for
criminal activities, the Basel Committee on Banking Supervision is issuing these guidelines to
describe how banks should include money laundering (ML) and financing of terrorism (FT) risks
within their overall risk management.
- The Committee has a long-standing commitment to promote the implementation of sound Anti
Money Laundering and Countering Financing of Terrorism (AML/CFT) policies and procedures
that are critical in protecting the safety and soundness of banks and the integrity of the
international financial system.
- 2000 – adopted a convention to address organised crimes, corruption and ML.
Different Indian regulations;
- NDPS Act – targeted drugs.
- Benami Transactions
- FERA replaced by FEMA
- Income Tax Act
To effectively combat ML, PMLA was brought into the picture.
The Prevention of Money-Laundering Act, 2002:
Section 2(p): Definition on Money Laundering:
ML is the process of disguising illegally obtained money as legitimate income by passing it through a
series of transactions to hide its criminal origin. The goal is to clean dirty money so it appears legally
earned.
Preamble: This legislation was enacted to prevent money laundering and provide for the confiscation of
property derived from money laundering.
Territorial Extent: whole of India.
Enforced phase wise.
Ram Jethmalani v. UOI (2011):
- Related to the objective of PMLA. The concern was that the government was not active enough
to combat these financial crimes, the enforcement was not effective enough. Why is active
enforcement required? Because of increasing monetization in the economy.
- As a medium of exchange, money is vital for the smooth functioning of exchange in the
marketplace. However, Increasing monetization of most social transactions has been viewed as
potentially problematic for the social order, in as much as it signifies a move to evaluating value,
and ethical desirability, of most areas of social interaction only in terms of price obtained in the
marketplace.
- In this case, it was filed by Jethmalani seeking govt action against black money stashed in
foreign bank accounts.
- SC observations:
1) The increase role of social interactions weakens moral and ethical values
2) Unregulated financial transactions in social, religious activities facilitates ML and black
money accumulations
- Unregulated monetisation of transactions allowed illicit wealth accumulation leading to black
money and financial crime.
- The court stressed that the state has a duty to regulate financial transactions in social and political
domains and prevent illegal activities. The government must prevent the misuse of the financial
system for laundering money through social and political channels.
- The case highlights how ML is linked to the monetisation of social transactions, as illicit funds
are funneled through religious institutions, charities and political donations.
- The court directed authorities to take strict action against authorities and institutions in financial
misconduct.
- The concern raised here is directly related to PMLA which aims to track, regulate and prevent
ML.
Implications on PMLA after this case:
1) 2013 amendment; the amendment has removed monetary threshold. Under the previous act, 30
lakhs was the limit - this was removed post this case.
2) Post this case, inclusion of few offences in the list of offences under PMLA, like financial fraud.
This shows the government was active in taking care of financial frauds.

Territorial extent:
Yogendra Kumar Jaiswal v. State of Bihar (2016): application of Orissa special courts act which also
deals with corruption. The validity of this law was challenged. Here, we are trying to talk about whether
PMLA is applicable to states who are dealing with financial crimes through their own laws
- The court dismissed the argument that the special law is inconsistent with PMLA. Both the acts
deal in different spheres. The submission that the provisions of the Orissa Act are repugnant to
other enactment as the provisions encroach upon the offences under the Acts, namely, the
Prevention of Money Laundering Act, 2002, as amended in 2009, is totally untenable as the
sphere of operation is altogether different.
- The State legislature keeping in view the accumulation of extensive properties disproportionate
to the known sources of income by persons who had held or are holding high political and public
offices, thought it appropriate to provide special courts for speedy trial for certain class of
offences and for confiscation of properties involved; and accordingly, enacted the Orissa Act
which was passed by the Orissa Legislative Assembly that got the assent of the President of
India. On the other hand, PMLA is a nationwide law dealing with money laundering and related
to financial crimes. Since, the acts do not have an overlapping nature, they can co-exist.
- ML cases can be tried separately from the corruption cases even when they arise from the same
fact. This case reinforced the principle that state and central law can exist if they don’t conflict.
Process:
1) Registration of ECIR: this report is not a public document, it is an internal record. If the ED gets
information, they will investigate. ED has the power to inform grounds for investigation, it is not
necessary for them to give a copy of this report to the potential accused person.
2) Investigation: when a report is regd, investigation is carried out. Serving a copy of ECIR is not
necessary. This is kept anonymous because it has an impact on the people who have committed
the crime, they will become aware about it.
3) Filing of chargesheet: provisional attachment of property can be done here.
4) Former interrogation will take place.
5) Formally issue a summon to the accused persons.
6) Adjudicating authority is appointed to review the attached property which were attached during
the investigation. They investigate whether it truly is the proceeds of crime.
After this, the trial begins.

Section 2(1)(a): Who is the adjudicating authority? “Adjudicating Authority” means an Adjudicating
Authority appointed under sub-section (1) of section 6.
- Section 6:
Section 2(p) “money-laundering” has the meaning assigned to it in section 3.
Section 3. Offence of money-laundering.—
Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is
actually involved in any process or activity connected with the proceeds of crime (ML - PoC – SO)
including its concealment, possession, acquisition or use and projecting or claiming it as untainted
property shall be guilty of offence of money-laundering.
Explanation.—For the removal of doubts, it is hereby clarified that,—
(i) a person shall be guilty of offence of money-laundering if such person is found to have directly or
indirectly attempted to indulge or knowingly assisted or knowingly is a party or is actually involved in
one or more of the following processes or activities connected with proceeds of crime, namely:—
(a) concealment; or
(b) possession; or
(c) acquisition; or
(d) use; or
(e) projecting as untainted property; or
(f) claiming as untainted property, in any manner whatsoever;
(ii) the process or activity connected with proceeds of crime is a continuing activity and continues till
such time a person is directly or indirectly enjoying the proceeds of crime by its concealment or
possession or acquisition or use or projecting it as untainted property or claiming it as untainted property
in any manner whatsoever
Indian Bank v. GoI, Ministry of Finance, Dept of Revenue, Directorate of Enforcement
- The court held that the expression "money laundering" is defined under Section 2(1)(p) of the
Act to have the same meaning as assigned to it in Section 3. Section 3 states that a person is
guilty of the offence of money laundering, if he directly or indirectly attempts to indulge or
knowingly assists or knowingly is a party or is actually involved in any process or activity
connected with the proceeds of crime and projecting it as untainted property. Therefore, the
stress is on two things viz., (i) involvement in any process or activity connected with the
proceeds of crime and (ii) projecting it as untainted property.
- The expression "proceeds of crime" is defined in Section 2(1)(u), to mean 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.
● Section 2(1)(v) “property” means 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; Explanation.—For the removal of doubts, it is hereby clarified that the term
“property” includes property of any kind used in the commission of an offence under this
Act or any of the scheduled offences
● The expression scheduled offence is defined under Section 2(1)(y) to mean (i) the
offences specified under Part A of the Schedule; or (ii) the offences specified under Part
B of the Schedule if the total value involved in such offences is rupees thirty lakhs or
more; or (iii) the offences specified under Part C of the Schedule.
- ML is not a standalone offense because to obtain black money, the person would have to engage
in illegal activity, then the money laundered would trigger PMLA.
Directorate of Enforcement v. Padmanabhan Kishore: The primary issue was whether the act of
handing over 50 lakhs as a bribe to Public servant by kishore could be considered as proceeds of crime
thereby making him liable for prosecution under the PMLA Section 3, 4 and 5
- The SC held that the intention to offer bribes inherently involves the individual aim, activities
connected with proceeds of crime. Therefore handing over cash to public servants would be
considered as proceeds of crime.
P. Chidambaram v. ED: It was held that offences under the act are cognizable in nature. Scheduled
offences are sine qua non for offences of ML.
J. Sekar v. ED: Standard of proof for conviction of offences under PMLA. This would be different
from general criminal offenses which are to prove beyond reasonable doubt. The standard is similar to
the traditional crimes.
- It is the duty of the court to look into the allegations and the material collected in support thereto
and determine whether prima offenses under PMLA are made out. Unless the allegations are
substantiated by the authorities and proved against a person in the court of law, the person is
innocent.
- Standard of proof is beyond reasonable doubt and not the preponderance of probabilities.
Benoy Babu v. ED: It was held that if a person is involved in any process or activity connected with the
proceeds of crime, it would be sufficient to prosecute him under section 3.
Chapter 3: Attachment, Adjudication and Confiscation
Section 5. Attachment of property involved in money-laundering:
(1) Where the Director or any other officer not below the rank of Deputy Director authorised by the
Director for the purposes of this section, has reason to believe (the reason for such belief to be
recorded in writing), on the basis of material in his possession, that—
(a) any person is in possession of any proceeds of crime; and
(b) such proceeds of crime are likely to be concealed, transferred or dealt with in any manner
which may result in frustrating any proceedings relating to confiscation of such proceeds
of crime under this Chapter,
he may, by order in writing, provisionally attach such property for a period not exceeding 180
days from the date of the order, in such manner as may be prescribed:
Provided that no such order of attachment shall be made unless, in relation to the scheduled
offence, a report has been forwarded to a Magistrate under section 173 of the Code of Criminal
Procedure, 1973, or a complaint has been filed by a person authorised to investigate the offence
mentioned in that Schedule, before a Magistrate or court for taking cognizance of the scheduled
offence, as the case may be, or a similar report or complaint has been made or filed under the
corresponding law of any other country:
- A Chargesheet is being filed here. 2 scenarios – ED can directly proceed with
investigation by registering ECIR, police registers an FIR against a person and they get to
know that this is not a simple case but can be regd under PMLA.
- Purpose is to ensure that ED does not misuse their power of attachment and to ensure that
there is an actual relation to ML. Legislature is careful enough in drafting the legislation.
 Provided further that, notwithstanding anything contained in first proviso, any property of any
person may be attached under this section if the Director or any other officer not below the rank
of Deputy Director authorised by him for the purposes of this section has reason to believe (the
reasons for such belief to be recorded in writing), on the basis of material in his possession, that
if such property involved in money-laundering is not attached immediately under this Chapter,
the non-attachment of the property is likely to frustrate any proceeding under this Act:
Provided also that for the purposes of computing the period of one hundred and eighty days, the
period during which the proceedings under this section is stayed by the High Court, shall be
excluded and a further period not exceeding thirty days from the date of order of vacation of
such stay order shall be counted.;
- Computation of 180 days:
(2) The Director, or any other officer not below the rank of Deputy Director, shall, immediately after
attachment under sub-section (1), forward a copy of the order, along with the material in his
possession, referred to in that sub-section, to the Adjudicating Authority, in a sealed envelope, in
the manner as may be prescribed and such Adjudicating Authority shall keep such order and
material for such period as may be prescribed.
(3) Every order of attachment made under sub-section (1) shall cease to have effect after the expiry
of the period specified in that subsection or on the date of an order made under sub-section (3) of
section 8, whichever is earlier.
(4) Nothing in this section shall prevent the person interested in the enjoyment of the
immovable property attached under sub-section (1) from such enjoyment.
Explanation.—For the purposes of this subsection, “person interested”, in relation to any
immovable property, includes all persons claiming or entitled to claim any interest in the
property.
(5) The Director or any other officer who provisionally attaches any property under sub-section (1)
shall, within a period of thirty days from such attachment, file a complaint stating the facts of
such attachment before the Adjudicating Authority.
J. Sekar v. UOI (2018) SCCOnline Del 6523: Constitutional validity of section 5(1) has been
challenged on the grounds of it being arbitrary in nature.
 The Delhi HC upheld constitutional validity of second proviso of section 5 of the PMLA which
empowered the ED to provisionally attach the property both from the proceeds of crime.
Stage of attachment:
A. Kamarunnisa Ghori v. Chairperson, PML (2012): Order of attachment passes through three
different stages - provisional order under section 5(1), confirmation of provisional order under section
8(3) and finality of order of attachment under section 8(3)(b).
M. Saraswathy v. Registrar, Adjudicating Authority (2012): If there is an urgent/ immediate
necessity that unless and until property involved is not attached at once, it may frustrate proceeding
under the act and notice prior to attaching is not required.
P. Chidambaram v. ED (2019): The term “reason to believe” is not defined in PMLA. The expression
“reason to believe” has been defined in Section 26 of IPC. As per the definition in Section 26 IPC, a
person is said to have “reason to believe” a thing, if he has sufficient cause to believe that thing but not
otherwise. The specified officer must have “reason to believe” on the basis of material in his possession
that the property sought to be attached is likely to be concealed, transferred or dealt with in a manner
which may result in frustrating any proceedings for confiscation of their property under the Act. It is
stated that in the present case, exercising power under Section 5 of the PMLA, the Adjudicating
Authority had attached some of the properties of the appellant. Challenging the attachment, the appellant
and others are said to have preferred appeal before the Appellate Tribunal and stay has been granted by
the Appellate Authority and the said appeal is stated to be pending.
Indian Bank v. GoI, Ministry of Finance, Dept of Revenue, ED (2012): Pointed out a legal gap. If a
property is proved to be involved in money laundering, the Adjudicating Authority has only one choice
viz., to make the attachment absolute, wait for the final adjudication by the Criminal Court and either
release the property to the accused if he is acquitted in the Criminal Court or confiscate the property to
the Central Government if the accused is convicted by the Criminal Court. Therefore, Section 8 in its
entirety is accused-centric and Central Government-centric. It does not take into account the plight of
victims of crime.
The act does not provide any mechanism to third parties to claim such property and victims of fraud
whose money is traceable to such property cannot stake claim. Adjudicating authority cannot act under
section 5, 8 and 9 to deny rights of victims of fraud.
Section 8: Adjudication:
(1) On receipt of a complaint under sub-section (5) of section 5, or applications made under sub-
section (4) of section 17 or under sub-section (10) of section 18, if the Adjudicating Authority
has reason to believe that any person has committed an 1[offence under section 3 or is in
possession of proceeds of crime], it may serve a notice of not less than thirty days on such
person calling upon him to indicate the sources of his income, earning or assets, out of which
or by means of which he has acquired the property attached under sub-section (1) of section 5,
or, seized or frozen under section 17 or section 18, the evidence on which he relies and other
relevant information and particulars, and to show cause why all or any of such properties should
not be declared to be the properties involved in money-laundering and confiscated by the Central
Government:
Provided that where a notice under this sub-section specifies any property as being held by a
person on behalf of any other person, a copy of such notice shall also be served upon such
other person: Provided further that where such property is held jointly by more than one
person, such notice shall be served to all persons holding such property.
(2) The Adjudicating Authority shall, after— (a) considering the reply, if any, to the notice issued
under sub-section (1); (b) hearing the aggrieved person and the Director or any other officer
authorised by him in this behalf; and (c) taking into account all relevant materials placed on
record before him, by an order, record a finding whether all or any of the properties referred to in
the notice issued under sub section (1) are involved in money-laundering: Provided that if the
property is claimed by a person, other than a person to whom the notice had been issued, such
person shall also be given an opportunity of being heard to prove that the property is not
involved in money-laundering.
(3) Where the Adjudicating Authority decides under sub-section (2) that any property is involved in
money-laundering, he shall, by an order in writing, confirm the attachment of the property made
under sub section (1) of section 5 or retention of property or record seized or frozen under
section 17 or section 18 and record a finding to that effect, whereupon such attachment or
 retention or freezing of the seized or frozen property or record shall— (a) continue during
investigation for a period not exceeding three hundred and sixty-five days or the pendency of the
proceedings relating to any offence under this Act before a court or under the corresponding law
of any other country, before the competent court of criminal jurisdiction outside India, as the
case may be; and (b) become final after an order of confiscation is passed under sub-section (5)
or sub-section (7) of section 8 or section 58B or sub-section (2A) of section 60 by the 5[Special
Court];] Explanation.—For the purposes of computing the period of three hundred and sixty-five
days under clause (a), the period during which the investigation is stayed by any court under any
law for the time being in force shall be excluded.]
(4) Where the provisional order of attachment made under sub-section (1) of section 5 has been
confirmed under sub-section (3), the Director or any other officer authorised by him in this
behalf shall forthwith take the 7[possession of the property attached under section 5 or frozen
under sub-section (1A) of section 17, in such manner as may be prescribed: Provided that if it is
not practicable to take possession of a property frozen under sub-section (1A) of section 17, the
order of confiscation shall have the same effect as if the property had been taken possession of.]
(5) Where on conclusion of a trial of an offence under this Act, the Special Court finds that the
offence of money-laundering has been committed, it shall order that such property involved in
the money laundering or which has been used for commission of the offence of money-
laundering shall stand confiscated to the Central Government.
(6) Where on conclusion of a trial under this Act, the Special Court finds that the offence of money
laundering has not taken place or the property is not involved in money-laundering, it shall order
release of such property to the person entitled to receive it.
(7) Where the trial under this Act cannot be conducted by reason of the death of the accused or the
accused being declared a proclaimed offender or for any other reason or having commenced but
could not be concluded, the Special Court shall, on an application moved by the Director or a
person claiming to be entitled to possession of a property in respect of which an order has been
passed under sub-section (3) of section 8, pass appropriate orders regarding confiscation or
release of the property, as the case may be, involved in the offence of money-laundering after
having regard to the material before it.]
- why is this required w.r.t director? why ED wants to take attachment of such pending property
1) duty of the ED that criminally acquired property should not benefit anyone.
2) india is very much actively implementing the guidelines and scheme for financial
action task force. thus, it is the duty of the enforcement agency that they strictly
comply with guidelines of the task force.
3) in public interest.
(8) Where a property stands confiscated to the Central Government under sub-section (5), the
Special Court, in such manner as may be prescribed, may also direct the Central Government to
restore such confiscated property or part thereof of a claimant with a legitimate interest in the
property, who may have suffered a quantifiable loss as a result of the offence of money
laundering:
Provided that the Special Court shall not consider such claim unless it is satisfied that the
claimant has acted in good faith and has suffered the loss despite having taken all reasonable
precautions and is not involved in the offence of money laundering:
Provided further that the Special Court may, if it thinks fit, consider the claim of the claimant for
the purposes of restoration of such properties during the trial of the case in such manner as may
be prescribed.
Explanation of the process:
A) Initiation and Notice - This clause outlines how the adjudication process begins. It specifies the
triggers: complaints under Section 5(5), applications under Section 17(4), or Section 18(10).
- It empowers the Adjudicating Authority to issue a notice when there's reason to believe an
offense under Section 3 has occurred, or proceeds of crime are possessed.
- It mandates a minimum 30-day notice to the person concerned, requiring them to disclose
income sources, evidence, and reasons why their property shouldn't be confiscated.
- It includes provisos for serving notices to other relevant parties, such as those holding property
on behalf of others or joint property holders.
B) Adjudicating Authority's Decision - This clause details the decision-making process of the
Adjudicating Authority. It requires the Authority to consider:
- Replies to the issued notice.
- Hearings with the aggrieved person and the Director (or authorized officer).
- All relevant evidence presented.
It mandates a recorded finding on whether the properties are involved in money laundering. It also
contains a proviso that if someone else claims the property, they must be allowed to be heard.
C) Confirmation of Attachment/Retention/Freezing: This clause covers the confirmation of actions
taken against the property. If the Authority finds the property is involved in money laundering, it
confirms the attachment, retention, or freezing.
- It specifies the duration of these actions: during investigation (up to 365 days, with exclusions)
and during the pendency of court proceedings.
- It also states that the actions become final after a confiscation order from the Special Court.
- It includes an explanation of how to calculate the 365 day period, and that court ordered stays
are to be excluded from that calculation.
D) Possession: This clause addresses the taking of possession of attached or frozen property. It
authorizes the Director (or authorized officer) to take possession after confirmation of attachment. It
also addresses the handling of frozen property, and what happens when it is impractical to take
possession of said property.
E) Confiscation by Special Court (Trial Conclusion): This clause details the Special Court's role in
confiscation after a trial. If the Court finds money laundering has occurred, it orders confiscation of
the involved property.
F) Release of Property (Trial Conclusion): This clause covers the release of property if the Court finds
no money laundering.
G) Confiscation/Release (Special Circumstances): This clause addresses situations where a trial cannot
be concluded. It empowers the Special Court to order confiscation or release based on available
material.
H) Restoration of Confiscated Property: This clause allows for the restoration of confiscated property to
those with legitimate claims. It sets out conditions for such restoration, including good faith and lack
of involvement in money laundering. It also allows for those claims to be addressed during the trial.

A. Kamarunnisa Ghori v. Chairperson, PML: While the property is attached, the accused alienates
the property and then gets that property registered. What could be the value of registration?
 It was held that the object of attachment is to ensure that the proceedings for confiscation of
proceeds of crime are not frustrated. By retaining symbolic, legal and constructive possession of
the property, the Government can always ensure that the proceedings for confiscation are not
frustrated. Once a property is attached and necessary encumbrances are entered in the records of
the Sub Registrar and once a prohibitive order is also passed, no alienation can take place.
  Even if any alienations take place, they would be null and void.
 Therefore, merely because physical possession is retained by a person accused of the scheduled
offences under the Prevention of Money Laundering Act, 2002, it does not mean that the
proceedings for confiscation may get frustrated.
Indian Bank v. GoI, 2012: Once a property is attached and you continue to physically possess the
property, does it mean that it frustrates the attachment. Adjudicating authority should hear persons
aggrieved and shall give them opportunity to present.
Section 4 Punishment for money laundering —
- Whoever commits the offense of money laundering shall be punishable with rigorous
imprisonment for a term which shall not be less than three years but which may extend to seven
years and shall also be liable to a fine.
- Provided that where the proceeds of crime involved in money laundering related to any offense
specified under paragraph 2 of Part A of the Schedule, the provisions of this section shall have
effect as if for the words “which may extend to seven years”, the words “which may extend to
ten years” had been substituted.

Role of Special Court -

- If the chargesheet is not filed by the Police, then the attachment can be retracted.
- The role of adjudicating authority ends with the determination of the final attachment, which is
then transferred to the special court.
Where do you appeal against the AA order? Appellate tribunal in chapter 6 section 25 of the Act.
- Special Court has the power to release the property during trial.
What happens to the attached property when the accused is convicted?
- Confiscated by the Central govt u/s 9.

Section 11 - Power regarding summons, production of documents and evidence, etc.—

- A/q to prov of CrPC/ If any property has been seized under Section 5 or 17, both have to be
notified to AA under Section 8.
Section 17 – Search and seizure –
Section 17 empowers certain officers (Director or Deputy Director level and above) to authorize search
and seizure operations if they have recorded reasons to believe
- that a person is involved in money laundering, possesses proceeds of crime, related records,
or property linked to crime. Authorized officers can search buildings, vehicles, vessels, etc.,
and seize or mark records and property.
If seizing the property is not practical, they can issue a freezing order to prevent its transfer or use. A
copy of the search or freezing order, along with the reasons and supporting material, must be
submitted in a sealed envelope to the Adjudicating Authority immediately. If evidence is found during
a survey (under Section 16) that may be concealed or tampered with, the officer may conduct a search
without prior authorization.0
Lastly, within 30 days of the seizure or freezing, the authority must file an application before the
Adjudicating Authority to seek retention or continuation of such action.
Nemichand Jain v. Superintendent of Customs 1963: Seize is taking physical possession of the
property. It relates to movable property. Section 5 is for immovable but section 17 is for immovable
property.
- Reason to believe
OPTO Circuits India Ltd v. Axis Bank 2021: Issues:
1. Was there compliance with procedural requirements under section 17?
2. Was it valid without recording the reasons to believe?
For the purpose of clarity, it is emphasized that the freezing of the account will also require the same
procedure since a bank account having alleged ‘proceeds of crime’ would fall both under the ambit of
“property” and “records”.
Section 23 – Presumption in inter-connected transactions:
The provision states that if money laundering involves two or more inter-connected transactions, and at
least one of those transactions is proven to involve money laundering, then all the related transactions
will also be presumed to be part of the money laundering offense unless proven otherwise.
Section 24 – burden of proof
- The burden of Proof (reversal of the burden of proof)
For a Person Charged with Money Laundering [Clause (a)]: If someone is formally charged with the
offense of money laundering, the Court or Authority must presume that the money/assets in question are
proceeds of crime and have been used in money laundering.
- The accused must disprove this presumption by providing evidence that the assets are legally
acquired.
For Any Other Person [Clause (b)]: If a person is not directly charged under Section 3 but is connected
to the case (e.g., a relative, business partner, or third party holding the assets), the Court or Authority has
the discretion to presume that such assets are involved in money laundering.
- This means that the burden of proof is lighter compared to a primary accused, and the Court may
or may not assume money laundering.
This provision shifts the burden of proof to the accused, making it tougher for offenders to escape
liability. It ensures that once a person is charged with money laundering, they must prove their
innocence rather than the prosecution proving their guilt.
A Bhupendra Singh Chudasama v. State of Gujarat 1998: Until and unless you prove otherwise, AA
will presume you as the offender. You can invoke a general exceptions clause to prove otherwise. For
instance:
 Does not fall under the schedule
 No object to convert tainted into untainted money.
The burden of proof of general exceptions is on the accused, however, such burden can be discharged by
showing a preponderance of probability.
Gautam Kundu v. ED 2015: Unless the contrary is proved, the court shall presume that proceeds of
crime are involved in money laundering. The burden lies on the accused.
Jurisdiction of Special Court –
Section 43: Special Courts -
Is the special court constituted separately or the existing COS designated or assigned as the special
court? – the latter one. Sessions courts have no pecuniary jurisdiction, but territorial jurisdiction is
relevant.
1) The Central Government, in consultation with the Chief Justice of the High Court, has the
power to designate one or more Sessions Courts as Special Courts. These Special Courts will
be responsible for trying offenses punishable under Section 4 of the same Act. The government
will specify the area, case, class, or group of cases that the Special Court will handle through
an official notification.
Explanation – "High Court" in this section refers to the High Court of the State where the
designated Sessions Court was functioning before being designated as a Special Court.
2) A Special Court can also try other offenses that are not covered under sub-section (1), as long as
the accused is charged with them in the same trial under the CrPC.
Section 44: Offences triable by Special Courts –
1) Jurisdiction –
a) Special Courts will exclusively try offenses under Section 4 (related to money laundering) and
any scheduled offenses (i.e., crimes linked to money laundering). The Special Court for a
particular area will have jurisdiction over offenses committed in that area.
Provided: If a scheduled offense was already being tried in a regular court before this Act was
enacted, the same court will continue with the trial.
b) A Special Court can directly take cognizance of a money laundering offense without the accused
being committed for trial. However, this can happen only on a complaint made by an authorized
authority under this Act (such as the Enforcement Directorate).
Provided: If, after an investigation, no money laundering offense is found, the investigating
authority (ED or other authorized agency) must submit a closure report to the Special Court.
c) If a scheduled offense (such as corruption or drug trafficking) is being tried in a regular court, and
the Enforcement Directorate files a money laundering case separately, the ED can apply to
transfer the scheduled offense case to the Special Court. Once transferred, the Special Court will
continue the trial from the stage at which it was committed.
d) The Special Court will follow the Criminal Procedure Code (CrPC), 1973, as applicable to a
Sessions Court trial. This ensures that the rights of the accused and procedural safeguards under
CrPC are followed.
Explanation: i) the jurisdiction of the Special Court while dealing with the offense under this Act,
during investigation, inquiry, or trial under this Act, shall not be dependent upon any orders passed in
respect of the scheduled offense, and the trial of both sets of offenses by the same court shall not be
construed as a joint trial
 - These have to be looked at as two different offenses and not to be considered for a joint trial.
ii) A complaint under this Act includes any supplementary complaints filed due to further investigation.
If additional evidence or new accused persons are found later, the complaint can be expanded.
2) This provision ensures that the High Court retains its special powers under Section 439 of CrPC for
granting bail. The High Court can exercise powers as if the term “Magistrate” also includes a
“Special Court” under this Act. This means an accused can directly approach the High Court for bail,
even if the case is before a Special Court.
Rana Ayyub v. Directorate of Enforcement: It was clarified that a trial of a scheduled offense by the
same court cannot be construed as the same trial.
KA Rauf Sherif v. Directorate of Enforcement: The place where the transaction of money laundering
takes place - the way to determine jurisdiction. Determination of special court jurisdiction – irrespective
of where the FIR relating to the scheduled offense was filed and irrespective of which Court took
cognizance of the scheduled offense, the question of territorial jurisdiction of a Special Court to take
cognizance of a complaint under PMLA should be decided with reference to the place/places where
anyone of the activities/processes which constitutes the offense under Section 3 took place.
The jurisdiction should be decided so that ED is wise enough to know where the case should be filed
against the accused.
Section 45: offenses to be cognizable and non-bailable:
This has an overriding effect over CrPC or any other general procedural law.
Twin conditions: No person accused of an offense shall be released on bail or on his own bond unless -
i. the Public Prosecutor has been given an opportunity to oppose the application for such release;
and
ii. where the Public Prosecutor opposes the application, the court is satisfied that there are reasonable
grounds for believing that he is not guilty of such offense and that he is not likely to commit any
offense while on bail:
- These two must be fulfilled to grant that individual bail.
Provided: a person, who, is under the age of sixteen years, is a woman or is sick or infirm, or is accused
either on his own or along with other co-accused of money laundering a sum of less than one crore
rupees may be released on bail if the Special Court so directs.
Rohit Tandon v. Directorate of Enforcement (2018): two threshold conditions stipulated under
section 45 must be complied with even in respect of bail conditions under CrPC as section 45 overrides
general provisions of CrPC.
Gautam Kundu v. ED 2015: section 45 has an overriding effect over section 439 CRPC.
Section 50: Powers of authorities regarding summons, production of documents and to give
evidence, etc.
(3) All the persons so summoned shall be bound to attend in person or through authorized agents, as
such officer may direct, and shall be bound to state the truth upon any subject respecting which they are
examined or make statements and produce such documents as may be required.
 - Arbitrary power equipped with ED under section 50 – you do not have the power to ask for the
ECIR. Compare this to confessions being inadmissible when made before a Police officer. Also,
compare it to Article 20(3) of the constitution.
Vijay Madanlal Choudhary v. UOI (2022):
The constitutional validity of prov. of PMLA, including the constitutional validity of ECIR and section
50(3). Main issues:
1) Whether PMLA provisions and section 3, 19 - the power to arrest violate constitutional
safeguards?
2) Is the Enforcement Directorate obligated to provide the accused with the ECIR filed against
them?
3) Are statements made before the ED officer admissible?
4) Whether proceeds of crime is the property required to be projected as untainted?
The SC upheld the constitutional validity of PMLA and said that ECIR is an internal document and
could not be shared with the accused. It has a special framework due to the global nature of financial
crime and its procedure as justified. Statements made before ED officers are admissible since they are
not considered as police officers under Evidence Act. Offense of ML does not require the property to be
projected as untainted, mere possession is enough for the ED to investigate the matter.
 CORRUPTION
Understanding of Corruption
Corruption is an act or form of dishonest or unethical conduct by an individual who is entrusted with the
positions of authority. These are persons sitting in the public office.
World Bank:
Corruption is defined as the abuse of public office for private or personal gain. What all conduct would
amount to abuse of public office –
1) When that official accepts a bribe, solicits a bribe or extorts a bribe.
- Accepts bribe – When another private agent offers and the public official accepts the offer, a
bribe is being committed.
- Solicits bribe – means to ask for or request a bribe, which is a form of corruption where someone
offers or asks for something of value in exchange for an action that is illegal, unethical, or a
breach of trust.
- Extorts bribe – an ultimatum is being given, use of threat. Extorting bribes involves using threats
or intimidation to force someone into paying money or providing something of value.
2) Patronage – Patronage refers to the support, encouragement, or financial aid that an individual or
organization provides to another, encompassing both financial and business support, as well as the
power to grant favors or jobs. A person in a position of power using patronage is called abuse of
power.
3) Misappropriation of Public funds – Misappropriation of public funds refers to the illegal use or
theft of funds entrusted to a public servant or official, often for personal gain.
Inge Amundsen:
Defined corruption in terms of transparency and international aspects. He considered corruption as
cancer. Corruption is a disease, a cancer that eats into the cultural, political and economic fabric of
society, and destroys the functioning of vital organs.
Causes of Corruption in India:
1) Emergence of Political Elite: Post independence, politicians were nation oriented. From the 4th
general elections - 1967 - dynamics changed. Now, they were more self-interest oriented. They
wanted to do something which benefited their self-interest. That led to the emergence of the political
elite which led to the rise of corruption. For any kind of public scheme which is to be allocated to
certain developed programs, they fail to get it even when eligible because of the intervention of the
political parties. Even the public servants in order to avoid getting transferred to a remote area, end
up paying bribery.
- Corruption also emerges from the power of the government officials of taking decisions, say,
issuing licenses, assessing income tax, giving extensions and so [Link] is not the rules but the
interpretation of the rules which enables officers to receive kickbacks and pocket the bribe.
Many officers pay lakhs and thousands of rupees to get themselves posted in particular positions
only because those positions enable them to earn thousands and lakhs of rupees every month as
illegal gratification.
2) Flaws in Economic Policy: it paved a way for the big shot entrepreneurs in order to profit their
pockets. The economic policies have so many flaws, wherein it becomes biased towards business
and industrialists. The businessman is able to bribe the politicians and then the economic policies are
drafted in a way to favour a certain section of the country
 - Most of the recent scandals have been in areas where either purchase policies or prices are
controlled by the government. Sugar, fertilizers, oil, military weapons, electronic equipment are
some of the examples. One NRI businessman claimed in the courts that he had to pay twenty
lakhs of rupees to Chandraswami, with verbal assurances from a former prime minister, to get a
contract for selling pulp to India.
3) Scarcity of certain commodities and things: scarcity of the products, therefore people in positions
of authority can bribe and get things in abundance. When things required are in short supply, people
in power demand 'consideration' to ensure their regular supply or increase their cost. This happens
whenever there is high demand but low supply of commodity of daily use like cement, sugar, oil,
etc.
4) Decline in Value system: Corruption is caused as well as increased because of the change in the
value system and ethical qualities of people who administer. The old ideals of morality, services and
honesty are regarded as anachronistic. People in positions are getting there through unqualified
measures such as nepotism, thus people with actual value and ethics are not able to get a position in
the society.
5) Ineffective administrative organisation: as an outcome of corruption. Lack of vigilance, enormous
powers to the ministerial staff, unaccountability, defective information system, etc., give scope to
officials not only to be corrupt but also remain unaffected even after following corrupt practices.
3 major causes:
a) Economic causes – craze for higher living standard, lack of morality in business standards.
b) Political causes - Political patronage, political apathy, nexus of criminals with politicians.
c) Social causes – erosion in social values, illiteracy, public indifference, people’s toleration, public
indifference and exploitative social structure.
Forms of Corruption – Corruption is spread in the society in several forms:
1) Bribe
2) Nepotism
3) Misappropriation of public funds
4) Patronage
5) Favouritism
Difference between Favouritism and Patronage:
- Favouritism: This is the broadest term, indicating the act of showing partiality towards someone
or a group, often based on personal feelings or relationships rather than merit. There are feelings
involved here.
- Patronage: Patronage is most commonly associated with politics. It involves a person in a
position of power (often a political figure) granting favors, such as jobs or contracts, to their
supporters or allies.
Why is corruption a socio-economic offence? The consequences of corruption:
1) Loss of national wealth: national fund is transferred to personal gain. Corrupt officials siphon off
money meant for public projects such as infrastructure, healthcare, and education. This leads to
incomplete or poor-quality projects that do not benefit the people.
2) Hindrance in development: Corruption is a major obstacle to a country's progress, as it diverts
resources, weakens institutions, and discourages innovation. It negatively affects all aspects of
development, including infrastructure, education, healthcare, and economic growth.
 3) Backwardness: it drives the country backward. Corruption is a major factor contributing to a
nation's backwardness in terms of economic growth, social progress, and technological
advancement. It creates inefficiencies, discourages innovation, and prevents a country from
reaching its full potential.
4) Poverty: the rich become richer and poor become poorer. Corruption diverts resources meant for
public welfare, weakens economic growth, and creates a system of inequality where the rich get
richer, and the poor struggle to survive. Corruption keeps people trapped in poverty by limiting
access to education, healthcare, and job opportunities.
5) Authority and power in wrong hands: Corruption allows incompetent, unethical, and self-serving
individuals to gain power, leading to weak governance, injustice, and societal decline. When
authority is placed in the wrong hands due to bribery, favoritism, or fraud, decision-making is
driven by personal gain rather than the public good.
6) Brain drain: Corruption is a major factor behind brain drain, the mass migration of skilled
professionals from a country to other nations in search of better opportunities. When corruption
dominates a society, talented individuals—such as doctors, engineers, scientists, and
entrepreneurs—lose hope in their home country and move abroad.
7) Rise in terrorism and crimes: Corruption directly contributes to the rise of terrorism and crime by
weakening law enforcement, allowing illegal activities to flourish, and creating economic and
social conditions that drive people toward criminal activities. When government officials, police,
and security agencies are corrupt, they fail to prevent crime and may even collaborate with
criminals and terrorists for financial gain.
8) Rise in suicide cases: Corruption has devastating effects on mental health, often leading to an
increase in suicide cases. It creates a society where injustice, economic struggles, and
hopelessness drive individuals into severe stress, depression, and ultimately, suicide. When
corruption dominates a system, people lose faith in fairness, opportunities, and the possibility of
a better future.
9) Psychological and social order: Terrorism has severe psychological and social consequences,
leading to widespread fear, trauma, instability, and the breakdown of societal harmony. The
constant threat of violence affects not only the direct victims but also the entire community,
creating an environment of mistrust, anxiety, and disruption of normal life. The accused is able
to secure himself by bribing the officials.
Historical background:
The law related to mitigation of corruption is somewhat scattered - under IPC and other laws. There
were shortcomings with respect to definitions and thus, they came up with the Prevention of Corruption
Act, 1988.
Post WWI and WWII, we were not sufficient in many things and commodities. So the limited stock was
required to be properly administered. At the same time, this led to corruption. This scarcity of
commodities and resources created opportunities for individuals, especially in positions of power, to
exploit the situation. With goods being in short supply, black markets emerged, and corruption took
root, particularly within the government and public services that were responsible for managing these
resources. This is where the issue of corruption became more pronounced.
Prevention of Corruption Act, 1947 came into picture which was really not effective. This forced the
government to create new schemes. In 1962, under the chairmanship of K Santhanam, a committee,
Santhanam Committee, was constituted to look into twin problems - corruption and administrative
reform. Post submission of the report, the government took initiative to form the Central Vigilance
Commission in 1964. The objective of it was —
 a) If any public servant is suspected of committing any offense, they shall be arrested.
b) Investigation or inquiry against any complaint. If Public servant had exercised some power or
refrain from exercising to stop corruption, investigation shall be done
c) To call for a report from all the central ministry dept.
It led to an amendment to the PC by incorporating few definitions. However, corruption was never
mitigated effectively. They looked at the reason and it was – our law was haphazard in nature, and it was
not comprehensive in nature. There were overlapping provisions between PC Act and IPC. enforcement
of the acts was not done effectively. Thus, a need was felt to come up with the comprehensive act. It
broadened the definition of public servant. To ensure that the scope of the act is wide enough so that no
single person can escape from getting covered under the act.
Objective and Purpose of the PCA, 1988:
State of MP v. Ram Singh (2000): the objective of the act was to make the effective provisions for
prevention of bribe and corruption rampant among public servant

Govt of AP v. P. Venku Reddy (2002): the PCA, 1988 was brought into force with the purpose of
effective prevention of bribery and corruption.

Subramanian Swamy v. CBI (2014): several objectives:

a) The act is enacted to consolidate and amend the law relating to the prevention of corruption.
b) It is intended to make corruption laws more effective by widening their coverage and
strengthening provisions
c) It seeks to provide for speedy trial of offences punishable under the Act in public interest as the
legislature had become aware of corruption amongst the public servants.
d) It purposes to track down corrupt public servants and punish them.
State of MP v. Ram Singh (2000):
- It compares corruption with plague which is not only contagious, but if not controlled then it
spreads like a wildfire.
- Its virus is compared with HIV leading to AIDS, being incurable.
- It has also been termed as Royal thievery. The socio-political system exposed to such a dreaded
communicable disease is likely to crumble under its own weight.
- It affects the economy and destroys cultural heritage. Unless nipped in the bud at the earliest, it is
likely to cause turbulence, shaking off the socio-economic-political system in an otherwise
healthy, wealthy, effective and vibrant society.
Prevention of Corruption Act:
Section 1: extends to the whole of India and also applies to citizens of India outside India.
State of MP v. Ram Singh: It is a social legislation defined to curb illegal activities of the public
servants and is designed to be liberally construed so as to advance its objective and include all the
evolutions in the society. However, this liberal interpretation shall not be in the favour of the accused or
evade the accused from the illegal activities.
Kanwar Tanuj v. State of Bihar (2020): equal and similar treatment should be given to the accused
who have committed any offense under this act, and just because they are a higher rank public servant,
cannot be a reason for differential treatment.
Section 2: definitions —
This act is applicable on public servants who perform public duty.
(b) “public duty” means a duty in the discharge of which the State, the public or the community at large
has an interest.
- Person appointed for government interest.
(c) “public servant” means—
● (i) any person in the service or pay of the Government or remunerated by the Government by
fees or commission for the performance of any public duty;
- In the form of remuneration - full time govt servant, in the form of fees or commission -
not necessarily full time govt servant.
● (ii) any person in the service or pay of a local authority;
- Local authority – object is to perform duty where the community has an interest.
● (iii) any person in the service or pay of a corporation established by or under a Central or
State Act, or an authority or a body owned or controlled or aided by the Government or a
Government company as defined in section 617 of the Companies Act, 1956;
- Govt corporations
- When is a company called a government company? 51% shares held by the central or the
state govt.
- A company during its inception can be regd as a govt company and later on can be
converted into a private company. Thus nature during incorporation is not necessary,
rather we have to look at the entities who are holding the shares. Even if the company is
acquired later on by the govt, it can be considered as a govt company.

● (iv) any Judge, including any person empowered by law to discharge, whether by himself or as
a member of any body of persons, any adjudicatory functions;

-Includes Judges and individuals legally empowered to perform adjudicatory functions as

part of a judicial body.
● (v) any person authorised by a court of justice to perform any duty, in connection with the
administration of justice, including a liquidator, receiver or commissioner appointed by such
court;
- Includes individuals appointed by courts, such as liquidators, receivers, or
commissioners, who perform duties related to the administration of justice.
- Role of the liquidators, receivers or commissioners. During the period of time they are
appointed in this role, they are considered as public servants.

● (vi) any arbitrator or other person to whom any cause or matter has been referred for decision
or report by a court of justice or by a competent public authority;

● (vii) any person who holds an office by virtue of which he is empowered to prepare, publish,
maintain or revise an electoral roll or to conduct an election or part of an election;
 - Individuals responsible for preparing and maintaining electoral rolls or conducting
elections.
● (viii) any person who holds an office by virtue of which he is authorised or required to
perform any public duty;
● (ix) any person who is the president, secretary or other office-bearer of a registered co-
operative society engaged in agriculture, industry, trade or banking, receiving or having
received any financial aid from the Central Government or a State Government or from any
corporation established by or under a Central, Provincial or State Act, or any authority or
body owned or controlled or aided by the Government or a Government company as defined in
section 617 of the Companies Act, 1956 (1 of 1956);
- Presidents, secretaries, or office bearers of registered co-operative societies engaged in
agriculture, industry, trade, or banking that receive government financial aid.
● (x) any person who is a chairman, member or employee of any Service Commission or Board,
by whatever name called, or a member of any selection committee appointed by such
Commission or Board for the conduct of any examination or making any selection on behalf
of such Commission or Board;
- Members of Service Commissions, Selection Boards, or Committees conducting exams
or selecting candidates on behalf of such bodies.
● (xi) any person who is a Vice-Chancellor or member of any governing body, professor, reader,
lecturer or any other teacher or employee, by whatever designation called, of any University
and any person whose services have been availed of by a University or any other public
authority in connection with holding or conducting examinations;
- Vice-Chancellors, professors, lecturers, or other employees of universities or any other
publicly engaged educational institution involved in conducting examinations.
● (xii) any person who is an office-bearer or an employee of an educational, scientific, social,
cultural or other institution, in whatever manner established, receiving or having received any
financial assistance from the Central Government or any State Government, or local or other
public authority.
- Office-bearers and employees of educational, scientific, social, or cultural institutions that
receive government financial assistance.
State v. CN Manju Nath 2017: Licensed surveyors under Section 18-A Karnataka Land Revenue Act,
1964, are “public servant” for purposes of Prevention of Corruption Act, 1988 as they perform statutory
duties/public function, not only to aid and assist State Government in its statutory functions, but are also
controlled by State Government in their functioning as licensed surveyors. Who is a license surveyor?
Can they be treated as public servants? Yes. Held license of surveyor for land survey. Considered a
public officer.
CBI v. Ramesh Gelli: No bank can run itself without obtaining a licence from RBI even if it is a private
bank. Should the KMP of such private banks be considered as Public servants? Because they are
performing public duty + they are functioning by virtue of the licensing of a regulator - So public
servant.
 - Chairman/Managing Director or Executive Director of a private bank operating under licence
issued by RBI under Banking Regulation Act, 1949, holds an office and performs public duty so
as to attract definition of public servant for the purpose of PC Act, 1988. However, such accused
person cannot be said to be public servant within the meaning of Section 21 IPC, as offence
under Section 409 IPC may not get attracted
State of Maharashtra v. Prabhakar Rao 2002: Definition of Public servant is given under IPC section
21 also, which definition will override? IBC qualification is immaterial, if qualifying under this Act.
PB Narasimha Rao v. State 1998: Member of Parliament - Public servant
State of Gujarat v. Mansukhbhai Kangibha Shah 2020: Status of Deemed university? Officials of
deemed universities were treated as public servants based on the fact that they - perform public duty.
Public duty means any duty discharged wherein state, the public or community at large has any interest.
(d) “undue advantage” means any gratification whatever, other than legal remuneration.
Explanation.—For the purposes of this clause,—
(a) the word “gratification” is not limited to pecuniary gratifications or to gratifications estimable
in money;
(b) the expression “legal remuneration” is not restricted to remuneration paid to a public servant,
but includes all remuneration which he is permitted by the Government or the organisation,
which he serves, to receive.
Explanation 1.—Persons falling under any of the above sub-clauses are public servants, whether
appointed by the Government or not.
Explanation 2.—Wherever the words “public servant” occur, they shall be understood by every
person who is in actual possession of the situation of a public servant, whatever legal defect there
may be in his right to hold that situation.
Undue advantage refers to any kind of gratification that a person (especially a public servant) receives,
except for their legal remuneration. Gratification is not limited to money—it can include anything of
value, such as gifts, favors, or other benefits. Legal remuneration means the salary or payments that a
public servant is officially allowed to receive from the government or their organization.
Section-6 Jurisdiction.—
It is no doubt true that the policy under Section 6 of the Prevention of Corruption Act, 1947 is that there
should not be unnecessary harassment of a public servant. But if the accused ceases to be a public
servant and loses his protective cover under Section 6 of the Prevention of Corruption Act, 1947 or
Section 197 CrPC and is open to prosecution without sanction having to be obtained, it would also
necessarily mean that the Special Judge under the Special Courts Act, 1949, would cease to have
jurisdiction over the accused in terms of Section 4 of the Special Courts Act,
Liability-related sections -
Section 7 - Offence relating to public servant being bribed
- Pay for performing or refrain from performing duty.
- If the person accepts a reward for such then it's a bribe.
 - If you influence someone in the public office from doing or not doing his job in favour of
someone, for receiving undue advantage.
- 3 to 7 years.
A Subair v. State of Kerala 2009: The essential ingredients of Section 7 are:
(i) that the person accepting the gratification should be a public servant;
(ii) that he should accept the gratification for himself and the gratification should be as a motive or
reward for doing or forbearing to do any official act or for showing or forbearing to show, in
the exercise of his official function, favour or disfavor to any person.

V Kannan v. State 2009: Demand and acceptance are two most important aspects and both, the demand
as well as the acceptance, must be proved by the prosecution. In absence of clear evidence of demand
and acceptance, the conviction in corruption cases cannot be sustained.
C M Sharma v. State of AP: The mere recovery by itself cannot prove the charge of the prosecution
against the accused, in the absence of any evidence to prove payment of bribe or to show that the
accused voluntarily accepted the money knowing it to be a bribe. Coincidence of demand of illegal
gratification and voluntary acceptance is required.
Sec-8 Applicability.—
Parkash Singh Badal v. State of Punjab: If Section 8 is analytically dissected then it would read as
below: (i) whoever (ii) accepts or obtains gratification from any person (iii) for inducing any public
servant (by corrupt or illegal means) (iv) to render or attempt to render any services or disservice (etc.)
(v) with any public servant (etc.) If a public servant accepts gratification for inducing any public servant
to do or to forbear to do any official act, etc. then he would fall in the net of Sections 8 and 9n
Section 11 - Public servant obtaining undue advantage, without consideration from person concerned
in proceeding or business transacted by such public servant.
- Illegally accepting benefits.
- If he accepts, tries to obtain undue advantage without proper payment. (Acceptance of
gratifications). If it is not related to business transactions then it won't be bribery.
- If you take something free of cost as a reward.
- If you have already performed, or refrained from performing for favouring any party then
acceptance of reward is bribery.
- From 6 months to 3 years of imprisonment + fine
Section 13 - Criminal misconduct by a public servant
(a) if he dishonestly or fraudulently misappropriates or otherwise converts for his own use any property
entrusted to him or any property under his control as a public servant or allows any other person so
to do; or
(b) if he intentionally enriches himself illicitly during the period of his office.
- Accumulation of wealth more than legally possible, disproportionate to income. Illegal
accumulation of wealth.
Explanation 1.—A person shall be presumed to have intentionally enriched himself illicitly if he or
any person on his behalf, is in possession of or has, at any time during the period of his office, been in
possession of pecuniary resources or property disproportionate to his known sources of income which
the public servant cannot satisfactorily account for.
Explanation 2.—The expression ‘‘known sources of income’’ means income received from any
lawful sources. (2) Any public servant who commits criminal misconduct shall be punishable with
imprisonment for a term which shall be not less than four years but which may extend to ten years and
shall also be liable to fine.
State of MP v. Awadh Kishore Gupta 2004: The phrase "known sources of income" in section 13(1)
(e) {old section 5(1)(e)} has clearly the emphasis on the word "income". It would be primary to observe
that qua the public servant, the income would be what is attached to his office or post, commonly known
as remuneration or salary. The term "income" by itself, is elastic and has a wide connotation. Whatever
comes in or is received, is income. But, however, wide the import and connotation of the term "income",
it is incapable of being understood as meaning receipt having no nexus to one's labour, or expertise, or
property, or investment, and having further a source which may or may not yield a regular revenue.
These essential characteristics are vital in understanding the term "income".
- Therefore, it can be said that, though "income" is a receipt in the hand of its recipient, every
receipt would not partake into the character of income. Qua the public servant, whatever return
he gets of his service, will be the primary item of his income.
- Other incomes which can conceivably are income qua the public servant, will be in the regular
receipt from (a) his property, or (b) his investment. A receipt from windfall, or gains of graft,
crime, or immoral secretions by persons prima facie would not be receipt from the "known
sources of income" of a public servant.
Neeraj Yadav v. CBI: Criminal misconduct by public servant.—As accused abused her position as
public servant entrusted with management and control of Noida (modern industrial city), committing
gross irregularities in allotment and conversion of land in Noida itself, for herself and her daughters, she
is, held, guilty of obtaining valuable thing for herself and her daughters by abusing her position as a
public servant. Appellant not only gained pecuniary advantage for herself by manipulating rules of
Noida Authority, but also caused grave loss to Noida Authority. Her conviction is confirmed.
Section 15 - Punishment for attempt
Whoever attempts to commit an offence referred to in 5 [clause (a)] of sub-section (1) of section 13
shall be punishable with imprisonment for a term which shall not be less than two years but which may
extend to five years and with fine
Section 12: Punishment for abetment of offences.—
Whoever abets any offence punishable under this Act, whether or not that offence is committed in
consequence of that abetment, shall be punishable with imprisonment for a term which shall not be less
than three years, but which may extend to seven years and shall also be liable to fine.
Investigation into cases under the Act:
Who can start an investigation committed under this act?
Section 17: persons Authorized to investigate –
Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), no police
officer below the rank,—
 (a) in the case of the Delhi Special Police Establishment, of an Inspector of Police;
(b) in the metropolitan areas of Bombay, Calcutta, Madras and Ahmedabad and in any other
metropolitan area notified as such under section 8(1) of the Code of Criminal Procedure,
1973, of an Assistant Commissioner of Police;
(c) elsewhere, of a Deputy Superintendent of Police or a police officer of equivalent rank,
shall investigate any offence punishable under this Act without the order of a Metropolitan
Magistrate or a Magistrate of the first class, as the case may be, or make any arrest therefor without a
warrant:
Normally, under the Criminal Procedure Code (CrPC), police can investigate crimes.
But for offences under this Act, only senior officers of a certain rank can investigate, and they
generally need permission from a Magistrate first. What court has the jurisdiction the entertain
matters under this act. Minimum Ranks Required:
 Delhi Special Police Establishment (like CBI): Inspector of Police or above
 Metropolitan Areas (like Mumbai, Chennai, Kolkata, Ahmedabad): Assistant Commissioner of
Police (ACP) or above
 Elsewhere in India: Deputy Superintendent of Police (DSP) or an officer of equivalent rank or
above

These officers cannot investigate or arrest without the Magistrate’s order and without a warrant,
unless stated otherwise.

- If a State Government gives special or general authorization, an Inspector of Police can

investigate and arrest without needing prior Magistrate permission.
- For certain serious offences (specifically referred under Section 13(1)(b) — usually involving
disproportionate assets or corruption), investigation can only be done with the approval of a
Superintendent of Police (SP) or higher.

Section 3: power to appoint special judges

(1) The Central Government or the State Government may, by notification in the Official Gazette,
appoint as many special Judges as may be necessary for such area or areas or for such case or
group of cases as may be specified in the notification to try the following offences, namely:— (a)
any offence punishable under this Act; and (b) any conspiracy to commit or any attempt to
commit or any abetment of any of the offences specified in clause (a).
(2) A person shall not be qualified for appointment as a special Judge under this Act unless he is or
has been a Sessions Judge or an Additional Sessions Judge or an Assistant Sessions Judge under
the Code of Criminal Procedure
Section 17A: Enquiry or Inquiry or investigation of offences relatable to recommendations made or
decision taken by public servant in discharge of official functions or duties.—
No police officer shall conduct any enquiry or inquiry or investigation into any offence alleged to
have been committed by a public servant under this Act, where the alleged offence is relatable to any
recommendation made or decision taken by such public servant in discharge of his official functions
or duties, without the previous approval—
(a) in the case of a person who is or was employed, at the time when the offence was alleged to
have been committed, in connection with the affairs of the Union, of that Government;
 (b) in the case of a person who is or was employed, at the time when the offence was alleged to
have been committed, in connection with the affairs of a State, of that Government;
(c) in the case of any other person, of the authority competent to remove him from his office, at
the time when the offence was alleged to have been committed:
Provided that no such approval shall be necessary for cases involving arrest of a person on the spot
on the charge of accepting or attempting to accept any undue advantage for himself or for any other
person:
Provided further that the concerned authority shall convey its decision under this section within a
period of three months, which may, for reasons to be recorded in writing by such authority, be
extended by a further period of one month.
When is the CG approached for sanction - if the public servant works for the CG. same in the case of
SG. if the public servant works for any other authorities then sanction is granted by them.
Section 19: Previous sanction necessary for prosecution:
Sanction has to be obtained before the special court takes cognizance of the offence, suo moto
cognizance cannot be taken. The court has to take it only after sanction. Here, prosecution will begin.
- Sanction is required before prosecuting a public servant for offences under Sections 7, 11, 13,
and 15 of the Act.
- Authorities Competent to Grant Sanction:
a) Central Government – If the public servant is employed by the Union and not removable
without its approval.
b) State Government – If the public servant is employed by the State and not removable
without its approval.
c) Other Authorities – Whoever is competent to remove the person from office.
- Sanction by Private Individuals (Non-Police): A private individual must:
● File a complaint in a competent court.
● Ensure the complaint is not dismissed under Section 203 CrPC.
● Be directed by the court to seek sanction.
The public servant must be given an opportunity to be heard before the sanction is granted.
Decision on sanction must be given within 3 months, extendable by 1 more month if legal
consultation is needed.
Provided that no request can be made, by a person other than a police officer or an officer of an
investigation agency or other law enforcement authority, to the appropriate Government or
competent authority, as the case may be, for the previous sanction of such Government or authority
for taking cognizance by the court of any of the offences specified in this sub-section, unless—
(i) such person has filed a complaint in a competent court about the alleged offences for which the
public servant is sought to be prosecuted; and
(ii) the court has not dismissed the complaint under section 203 of the Code of Criminal Procedure,
1973 and directed the complainant to obtain the sanction for prosecution against the public servant
for further proceeding
 - Former Public Servants: Sanction is also required even if the accused has left office during
which the alleged offence took place.
- Clarification on Competent Authority (in Case of Doubt) : The authority competent to remove the
public servant at the time of the alleged offence shall grant sanction.
- Protection Against Technical Errors:
● Courts won’t reverse or stay proceedings merely due to errors or absence of sanction,
unless it has caused failure of justice
● Courts must consider whether the objection was raised earlier and if it was avoidable.
Section 20: Presumption where public servant accepts any undue advantage:
If it is proved that a public servant has:
● Accepted, obtained, or attempted to obtain any undue advantage (bribe) for himself or others,
● From any person,
then the court shall presume (unless the accused proves otherwise) that:
● The undue advantage was taken as a bribe (motive or reward) for improperly or dishonestly
performing a public duty (under Section 7), or
● The undue advantage was taken without proper consideration or for inadequate consideration
(under Section 11).
The burden shifts to the accused to prove that the benefit was not a bribe—this makes conviction easier
once acceptance of the undue advantage is established. Presumption is drawn towards the motive of the
accused to take the bribe.
Om Parkash v. State of Haryana: where demand is not proved, section 20 will have no application.
Section 21: Accused person to be a competent witness.—
An accused can testify as a witness in their own defence in a corruption case, but only if they choose to.
Key Safeguards:
a) Voluntary Testimony Only: The accused cannot be forced to testify. They can only be called as a
witness at their own request.
b) No Negative Inference: If the accused chooses not to testify, Prosecution cannot comment on
that decision, and No presumption of guilt can be drawn from their silence.
c) Protection from Character Attack: The accused cannot be questioned about: Past criminal record,
or Bad character, unless:
i) It is relevant to proving the current charge, or
ii) The accused introduces evidence of their own good character, or The defence attacks the
character of the prosecutor or a prosecution witness, or
iii) The accused gives evidence against a co-accused.
 FUGITIVE ECONOMIC OFFENDER ACT
The Fugitive Economic Offenders Act, 2018 (FEO Act) is a law in India that aims to deter individuals
from evading criminal prosecution by leaving the country. It empowers authorities to confiscate the
assets and properties of those declared fugitive economic offenders (FEOs), both within and outside
India. This act addresses instances where economic offenders flee the country to avoid facing legal
consequences in India.
Implications of this Offence -
1. It obstructs justice - the escape of these offenders impedes the delivery of justice to the victims.
2. Undermines rule of law - No man is above the law, the purpose of the law is to hold the criminal
accountable to their actions. But due to their escape, liability is being evaded. It creates a
perception of inequality before the law.
3. Delay in judicial proceedings - due to obstructions in investigation and trial.
4. Existing law could not address this issue.
Rampant high profile economic and financial frauds lead to bringing of this Act. Some of the most
infamous fugitive economic offenders are Nirav Modi, his wife Ami Modi, his brother Nishal Modi, and
uncle Mehul Choksi, who absconded from India after carrying out the Punjab National Bank Fraud
(PNB) letter of undertaking fraud worth INR 11,300 crore (US$ 1.4 billion). Another is Vijay Mallya, a
former Member of Parliament (Rajya Sabha) who escaped to the UK after committing financial crimes
in India.
In order to earn the trust of public because of the impact on the rule of law, this Act was introduced.
A fugitive economic offender undermines the rule of law for several key reasons:
1. Evades Legal Accountability: • When an economic offender flees the country, they avoid arrest,
investigation, and trial, escaping the consequences of their actions. • This defiance of legal
process weakens public confidence in the justice system
2. Creates a Perception of Inequality Before the Law: • If wealthy or influential individuals can
escape legal proceedings while ordinary citizens cannot, it violates the principle of equality before
the law—a core pillar of the rule of law. • It suggests that the law does not apply equally to all.
3. Affects Victims’ Rights and Public Interest: • Victims (such as banks or investors) are often
denied justice or restitution, as offenders enjoy stolen assets from abroad. • This erodes public
trust in both legal remedies and financial institutions.
4. Encourages Lawlessness: • If one fugitive escapes without consequence, it may encourage others
to follow, creating a culture of impunity. • It challenges the authority of the State and its capacity
to enforce laws. • Financial impact: Most offences involved non-repayment of large bank loans,
further worsening the financial health of Indian banks and the broader economy.
Objective -
1. The Act seeks to deter economic offenders from evading legal proceedings.
2. To preserve the sanctity of law by ensuring that the offender faces sanctions and cannot enjoy the
proceeds of the crime.
3. Recovery of losses by the victim was challenging but with this Act, we seek to expedite the
recovery process by having provisions on attachment and confiscation.
4. By putting pressure on the offender to ensure his return to India
 5. The Act provides for the exhaustive definition of Fugitive economic offender and creates a
sufficient framework, depending on the amount of fraud and whether the offense is listed in the
schedule.
6. Enable authorities (Director or authorized officers) to: • Conduct search, seizure, and survey
operations. • Attach and confiscate properties (including benami properties and proceeds of
crime). • Appoint an Administrator to manage confiscated assets. • Bar the FEO from defending
or initiating civil claims in India.
This legislative framework empowers courts and enforcement authorities with sufficient tools to tackle
large-scale financial frauds and hold offenders accountable, even when they are beyond India’s physical
jurisdiction.

Mehul Choksi vs The State Of Maharashtra 2023: The purpose of the Act is to provide for measures
to deter fugitive economic offenders from evading the process of law in India by staying outside the
jurisdiction of Indian courts, to preserve the sanctity of the rule of law in India, and for matters
connected therewith or incidental thereto.

Definitions:
Section 2f - “fugitive economic offender” means any individual against whom a warrant for arrest in
relation to a Scheduled Offence has been issued by any Court in India, who—
1. has left India so as to avoid criminal prosecution; or
2. being abroad, refuses to return to India to face criminal prosecution;
Section 2k - “proceeds of crime” means 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,
or where such property is taken or held outside the country, then the property equivalent in value held
within the country or abroad;
Monetary threshold for invoking the Act
Section 2m - “Scheduled Offence” means an offence specified in the Schedule, if the total value
involved in such offence or offences is one hundred crore rupees or more;
Section 2n - “Special Court” means a Court of Session designated as a Special Court under sub-section
(1) of section 43 of the Prevention of Money-laundering Act, 2002.

- There has to be an ongoing case filed against the offender. In the meantime the person
absconded that’s where the Act will apply. This is not a standalone Act, offence is created under
any other law and post escape this Act applies.
- Only the ED can declare any person a Fugitive economic offender.
- So, there are two tribunals now, one where the previous offence was tried upon and the second
being the special court.

Section 4 - Application for declaration of fugitive economic offender and procedure therefor.
Step 1 - Filing an application for declaring someone a Fugitive offender.
File an application when they have reason to believe, based on material in his possession, that any
individual is a fugitive economic offender
The application has to contain -
A. Reasons for the belief that an individual is a fugitive economic offender;
B. Any information available as to the whereabouts of the fugitive economic offender?
C. A list of properties or the value of such properties believed to be the proceeds of crime, including
any such property outside India for which confiscation is sought;
D. A list of properties or benami properties owned by the individual in India or abroad for which
confiscation is sought; and
E. A list of persons who may have an interest in any of the properties listed under clauses (c) and
(d).
Benami transaction means any transaction in which property is transferred to one person for a
consideration paid or provided by another person; This is included under the relevant information for
increasing the scope of ED’s power.
Section 5 - Attachment of property
Section 5 empowers the Director (or a Deputy Director-level officer authorized by the Director) to
attach property suspected to be proceeds of crime or benami property related to a fugitive economic
offender.
1. With Special Court’s Permission: After filing an application under Section 4, the officer may
attach such property through a written order, with prior permission from the Special Court.
2. Provisional Attachment (Before Filing the Case): Even before filing an application, the officer
can provisionally attach property if:
 There's reason to believe the property is linked to economic offences or is benami,
 And it is being or likely to be disposed of, making it unavailable for future
confiscation. In this case, the officer must file the application within 30 days before
the Special Court.
3. Validity of Attachment: The attachment order is valid for 180 days, unless extended by the
Special Court before the expiry.
4. Use of Attached Immovable Property: The law does not prevent any interested person (like an
owner or someone with a claim) from using or enjoying the immovable property, despite it being
attached.
Section 10 - Notice
The special court will serve notice to the concerned accused. The notice requires the individual to appear
at a specified place and time not less than six weeks from the date of issue of such notice.
Failure to appear at the specified place and time shall result in a declaration of the individual as a
fugitive economic offender and confiscation of property under this Act.
Serve the notice within two weeks to the authority in the contracting state.
Implications of declaring a person as a Fugitive economic offender
 ● Confiscation of property
● Bars applied
Manner of filing application - Extended rules.
Section 11 - Procedure for hearing application.
1. Appears personally - the Special Court may terminate the proceedings under this Act. Matter
goes back to the original court.
2. Appears by counsel - the Special Court may in its discretion give a period of one week to file a
reply to the application under section 4.
3. Accused avoided such notice - Scrutinise
a. Whether the authority made every effort to effectuate the notice.
b. Whether the accused deliberately avoided the service of notice.
If satisfied, pass an ex parte order.
4. The Special Court may also give any person to whom notice has been issued under sub-section
(2) of section 10 a period of one week to file a reply to the application under section 4. (any
other person of interest)
1st implication: confiscation
Section 12 - Declaration of fugitive economic offender.
- After hearing the application under section 4, if the Special Court is satisfied that an individual is
a fugitive economic offender, it may, by an order, declare the individual as a fugitive economic
offender.
- On declaration, special court may order for confiscation of property - vesting with the
government. Even benami property will be confiscated.
- The confiscation order of the Special Court shall, to the extent possible, identify the properties in
India or abroad that constitute proceeds of crime which are to be confiscated, and in case such
properties cannot be identified, quantify the value of the proceeds of crime. - Complex
transactions where property cannot be quantified.
- Third-party interest - exempt from confiscation any property which is a proceed of crime in
which any other person, other than the fugitive economic offender, has an interest if it is satisfied
that such interest was acquired bona fide and without knowledge of the fact that the property was
proceeds of crime.
Other implications: Debar civil suits.
Section 14 - Power to disallow civil claims.
Section 14 empowers courts and tribunals in India to disallow civil claims related to individuals or
entities linked to a fugitive economic offender (FEO).
1. For Individuals: Once a person is declared a fugitive economic offender, any court or tribunal
may bar them from filing or defending any civil case in India.
2. For Companies/LLPs: Courts may also disallow companies or LLPs from filing or defending
civil claims if:
 The claim is filed by, or
  The company is controlled by (as promoter, key managerial personnel, majority shareholder, etc.)
an individual who is declared a fugitive economic offender.
Section 21 - Overriding effect.
The provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained
in any other law for the time being in force.
Mehul Choksi v. State of Maharashtra, 2023 case: The objective of the Act and the overriding effect
of the Act. Challenged the application filed by ED, for not fulfilling requirements of ED. Here the court
commented on the overriding effect of the Act.
- Overriding effect on CrPC.—Section 21 of the FEO gives an overriding effect to the this Act and
therefore even as per Section 5 of CrPC and also as per Section 21 of the Fugitive Economic
Offenders Act, 2018, the special procedure prescribed under the Fugitive Economic Offenders
Act, 2018 will not get affected by any provision under CrPC
ARTICLE: Fugitive Economic Offenders Act, 2018: A Silver Lining for Tackling Non-Performing
Assets Problem in the Present Scenario
The article discusses the serious problem of Non-Performing Assets (NPAs) and banking frauds in
India, and how the Fugitive Economic Offenders Act, 2018 (FEOA) was enacted to deal with
economic offenders who flee the country to avoid prosecution. Major financial scams (like those
involving Vijay Mallya, Nirav Modi, Mehul Choksi) created huge NPAs and dented trust in India's
financial system, demanding strong action. The FEO Act aims to bring fugitives back, seize their assets,
and restore financial discipline.
Banking Frauds and NPAs: After liberalization, the Indian banking sector grew rapidly but was hit by
a wave of frauds and scams. High-profile fraud cases (e.g., PNB scam, Andhra Bank scam) increased
NPAs massively. RBI reports showed alarming rises in NPAs and banking frauds between 2017–2019.
Scams strained India's economy, shook public trust in banks, and demanded stronger regulatory
measures.
Introduction of the Fugitive Economic Offenders Act, 2018: The Act came into force to target
economic offenders who evade prosecution by fleeing India. It empowers authorities to confiscate
properties of declared fugitives and bar them from defending or initiating civil claims.
Major Provisions of the FEO Act:
 Fugitive Economic Offender (FEO) Definition: A person against whom an arrest warrant has
been issued for a scheduled offence and who either has left India or refuses to return.
 Attachment of Property: Properties (including benami properties) linked to the fugitive can be
provisionally attached and later confiscated by the government.
 Special Court: A designated PMLA Court (Sessions Court) handles FEO cases.
 Survey and Search Powers: Enforcement Directorate officers can conduct surveys, searches,
and seizures without prior consent.
 Notice and Declaration: Special Court must issue notice to the alleged fugitive. If the person
doesn't appear, the court can declare them an FEO and confiscate their assets.
  Disallowing Civil Claims: FEOs and companies linked to them are barred from filing or
defending civil suits in India.
Existing Laws for Debt Recovery: The article compares the FEO Act with other laws like:
 SARFAESI Act, 2002 – to directly seize and sell secured assets.
 Insolvency and Bankruptcy Code, 2016 – to restructure or liquidate companies.
 PMLA, 2002 – to attach and confiscate proceeds of crime.
 RDDBFI Act, 1993 – for setting up Debt Recovery Tribunals (DRTs).
 FEMA, 1999 – for confiscating illegal foreign assets.
Despite these, economic offences continued to rise, necessitating the FEO Act.
Constitutionality Concerns:
The article addresses criticisms that:
 Some provisions may violate principles of natural justice (like presumption of innocence).
 Section 5(2) (provisional attachment before trial) was controversial but justified under
international anti-corruption standards.
 Section 10(3)(b) and Section 14 (disallowing civil claims) were viewed as potentially
overbroad, but courts upheld them under the principle that enforcement of law must balance
individual rights with national interest.
Impact and Conclusion:
 The FEO Act strengthens India’s legal framework against financial offenders.
 It sends a strong message against escaping justice and protects the financial system.
 Successful application (e.g., Vijay Mallya declared the first FEO) showed early effectiveness.
 The article calls for continuous vigilance, transparent banking processes, and quicker extradition
mechanisms to fully realize the Act’s potential.

The Fugitive Economic Offenders Act, 2018 is seen as a strong step towards curbing economic
offences, restoring trust in financial institutions, and ensuring that fugitives cannot escape Indian
law by hiding abroad.
 FOOD SAFETY AND STANDARDS ACT
Prior to this there was fragmentation of legislation. Prevention of Food adulteration act, Food Product
Order Act. now these have been consolidated into one.
Object of FSS Act: An Act to consolidate the laws relating to food and to establish the Food Safety and
Standards Authority of India for laying down science based standards for articles of food and to regulate
their manufacture, storage, distribution, sale and import, to ensure availability of safe and wholesome
food for human consumption and for matters connected therewith or incidental thereto.
Swami Achyutanand Tirth v. UOI: 4 major objective -
1) To consolidate the laws relating to food
2) to establish the Food Safety and Standards Authority of India for laying down science based
standards for articles of food and
3) to regulate their manufacture, storage, distribution, sale and import,
4) to ensure availability of safe and wholesome food for human consumption and for matters
connected therewith or incidental thereto.
The Act, apart from making more stringent provisions (e.g. prescribing higher penalties etc.) to curb
food adulteration, also ushers in new concepts such as putting in place Food Safety Management
Systems and Food Safety Audit to realize its ultimate goal of ensuring availability of safe and
wholesome Food for human consumption. In order to ensure food safety, effective food safety systems
implementation and to ensure that food producers and suppliers operate responsibly and supply safe
food to consumers, the Act further stipulates:-
a) Licensing for manufacture of food products, which is presently granted by the central agencies
under various Acts and orders, would stand decentralized to the commissioner of Food Safety
and his officer.
b) Single reference point for all matters relating to Food Safety and Standards, regulations and
enforcement.
c) Shift from mere regulatory regime to self-compliance through Food Safety management systems.
d) Responsibility on Food Business Operators to ensure that Food processed, manufactured,
imported or distributed is in compliance with the domestic Food laws.
Centre For Public Interest Litigation v. Union Of India (2013): Food authority should take into
account prevalent national and international standards and practices and shall be guided by general
principles of food safety.
Brihanmumbai Mahanagar Palika v. Willingdon Sports Club (2013): Importance of obtaining
licensing w.r.t ensuring food safety. It was held that although licensing alone cannot be a full proof
mechanism for ensuring food safety, it is certainly one of the most effective methods in ensuring that
quality food is prepared in hygienic conditions and made available to the consumers. The licensing
system prevents the opening of establishments that pose a threat to the health of the people. The
licensing mechanism also provides for penalties in case of non-compliance with licensing conditions,
which could lead to cancellation or suspension of the licence.
Section 3(j) defines food. “Food” means any substance, whether processed, partially processed or
unprocessed, which is intended for human consumption and includes primary food to the extent defined
in clause (zk), genetically modified or engineered food or food containing such ingredients, infant food,
packaged drinking water, alcoholic drink, chewing gum, and any substance, including water used into
the food during its manufacture, preparation or treatment but does not include any animal feed, live
animals unless they are prepared or processed for placing on the market for human consumption, plants,
prior to harvesting, drugs and medicinal products, cosmetics, narcotic or psychotropic substances :
- Does paan and gutka fall within the definition of “food”? If anyone produces this then can they
be held accountable under this act? This depends on whether the manufacturing process falls
within this definition.
- Commissioner food safety, GNCTD v. Sugandhi Snuff King Pvt. Ltd.: pan masala,
undisputedly, would constitute food and would fall within the ambit of Section 3(1)(j). This is
the precedent now - every manufacturer has to follow this.
The food inspector can go and check on the food items. The food items can be scrutinised whether they
are fit for consumption. There is little scope for escaping liability under this act.
Section 4: Establishment of Food Safety and Standards Authority of India.
(1) The Central Government shall, by notification, establish a body to be known as the Food Safety
and Standards Authority of India to exercise the powers conferred on, and to perform the
functions assigned to, it under this Act.
(2) The Food Authority shall be a body corporate by the name aforesaid, having perpetual
succession and a seal with power to acquire, hold and dispose of property, both movable and
immovable, and to contract and shall, by the said name, sue or be sued.
They form guidelines and take into account all the interests of stakeholders. They consult with all the
stakeholders.
Section 16: duties and functions of food authority:
Primary Duty: Ensure safe and wholesome food by regulating and monitoring the manufacture,
processing, distribution, sale, and import of food in India.
Regulatory Functions (Sub-section 2):
 Set standards and guidelines for food articles and enforce them.
 Specify limits for additives, contaminants, pesticide residues, veterinary drug residues, heavy
metals, etc.
 Accredit certification bodies for food safety management systems.
 Enforce quality control on imported food.
 Accredit and notify laboratories for testing food quality.
 Prescribe methods for sampling, analysis, and inter-agency information sharing.
 Conduct surveys on enforcement and administration.
 Set food labeling standards, including health and nutritional claims.
 Lay out procedures for risk analysis and management.
Scientific and Advisory Functions (Sub-section 3):
 Provide scientific advice and technical support to central and state governments.
 Collect and analyze data on:
o Food consumption and risk exposure,
o Biological risks and food contaminants,
o Emerging risks,
o Introduce a rapid alert system.
 Develop and promote risk assessment methods and communicate food-related health risks.
  Assist in crisis management related to food safety.
 Create a network of scientific organizations to share data, expertise, and best practices.
Section 18: General principles to be followed in Administration of Act
While implementing the Food Safety Act, the Central and State Governments, the Food Authority, and
other agencies must prioritize human health protection, consumer interests, and fair food trade
practices.
They must base decisions on risk assessment, adopt provisional measures if scientific uncertainty
exists, ensure that actions are proportionate and periodically reviewed, and inform the public if food-
related health risks arise.
The Food Authority must consider domestic practices and international standards, apply risk
analysis transparently, consult the public (except in urgent cases), and protect consumers from
fraudulent practices and unsafe food.
Importantly, the Act does not apply to farmers, fishermen, or farm-level produce.
FSSAI also looks into registration of licensing under section 31 - Licensing and registration of food
business.
Section 23. Packaging and labelling of foods.
(1) No person shall manufacture, distribute, sell or expose for sale or despatch or deliver to any
agent or broker for the purpose of sale, any packaged food products which are not marked and
labelled in the manner as may be specified by regulations:
(2) Every food business operator shall ensure that the labelling and presentation of food, including
their shape, appearance or packaging, the packaging materials used, the manner in which they
are arranged and the setting in which they are displayed, and the information which is made
available about them through whatever medium, does not mislead consumers.
By mandating this labelling, this puts forth nutritional information besides the other information. This
ensures transparency and protects human rights of individuals.
Section 28. Food recall procedures.
(1) If a food business operator considers or has reasons to believe that a food which he has
processed, manufactured or distributed is not in compliance with this Act, or the rules or
regulations, made thereunder, he shall immediately initiate procedures to withdraw the food in
question from the market and consumers indicating reasons for its withdrawal and inform the
competent authorities thereof.
(2) A food business operator shall immediately inform the competent authorities and co-operate with
them, if he considers or has reasons to believe that a food which he has placed on the market may
be unsafe for the consumers.
Failure to follow with the guidelines under this act:
Section 51. Penalty for sub-standard food. Any person who whether by himself or by any other person
on his behalf manufactures for sale or stores or sells or distributes or imports any article of food for
human consumption which is sub-standard, shall be liable to a penalty which may extend to five lakh
rupees.
Section 52. Penalty for misbranded food.
(1) Any person who, whether by himself or by any other person on his behalf manufactures for sale
or stores or sells or distributes or imports any article of food for human consumption which is
misbranded, shall be liable to a penalty which may extend to three lakh rupees.
(2) The Adjudicating Officer may issue a direction to the person found guilty of an offence under
this section, for taking corrective action to rectify the mistake or such article of food shall be
destroyed.
Section 53: Penalty for misleading advertisement.
Section 59: Punishment for unsafe food.
Adjudication and Food Safety Appellate Tribunal
Section 60: Adjudication - (1) For the purposes of adjudication under this Chapter, an officer not below
the rank of Additional District Magistrate of the district where the alleged offence is committed, shall be
notified by the State Government as the Adjudicating Officer for adjudication in the manner as may be
prescribed by the Central Government.