Disproportionate Assets. Section 13(1)(e) of the Prevention of Atrocities Act.Impact of Jayalalitha's case. PCAct. Prevention of Corruption Act

1. DISPROPORTIONATE
ASSETS
:Prepared by:
H. S. MULIA
1

2. Disclaimer
Views expressed in
this document are
for information and
academic purpose
only.
2

3. Behind every great
fortune, there is a
Crime.
The immortal words of
Balzac are as true
today as it has always
been in the past. 3

4. Section 2(c) of he Prevention of
Corruption Act 1988 defines
who a public servant is and
punishes public servants
involved in corruption or
bribery. The law counts the
possession of ‘disproportionate
assets’ by a public servant as
criminal misconduct [Section
13(1)(e)].
4

5. Corruption by people in
position and power has always
been in the news. From the
Jeep scandal in 1948, the
Bofors scam, Fodder scam, 2G
scam, Coal Block scam and
more recently the Jayalalitha -
Sasikala case. The misuse of
public office for personal gains
has been constant and
consistent. 5

6. So, what happens, if public
servants misuse their
position? What if public
servants use their office to
gain assets for themselves?
There are laws on this,
though convictions are few
and far between. 6

7. To understand the intricacies involved with respect to the subject
matter, this paper has been divided into nine parts viz
1 - When are assets disproportionate.
2 - What should be the punishment for an offence punishable u/s
13(1) of the PC Act after the Lokpal and Lokayuktas Act, 2013?
3 - How did Sasikala get convicted for disproportionate assets.
4 - What will happen after the case? How will the govt recover the
assets.
5 - What happens to his/her job.
6 - What type of evidence are accepted by the courts against
the accused.
7 - Holding disproportionate assets below 10%, is it
condonable.
8 - What percentage of assets in excess would fall under the
category of disproportionate assets.
9 - Whether the police has the power to seize property including
Bank Account of accused or any of his relatives u/s 102 of CrPC.
7

8. PART - 1
When are assets disproportionate?
Within the law, the relevant section when talking
about disproportionate assets is Section 13(1)
(e) of the PC Act. There are three main
requirements for this section of the law to be
applicable to a public servant,
• He or any person on his behalf, is in possession
or has at any time during the period of his
office.
• He should own assets, which cannot possibly
be acquired by his legal sources of income.
• He is unable to explain how he came to own
these assets.
8

9. 1:- Known sources of income means
income from
• any lawful source and
• for which a receipt and paperwork
can be shown.
2:- The prosecution, however, is not
expected to know the whole affairs of
the accused. Those are matters,
which are specifically within the
knowledge of the accused u/s 106 of
the Evidence Act.
9

10. 3:- How do you define what
disproportionate is?
• There is no fixed formula given in the
law.
• The Supreme Court has explained in
the case of State of Maharashtra
vs. Pollonji Darabshaw Daruwalla,
AIR 1988 SC 88, the assumption that
in all joint deposits, the depositor first
named alone is the beneficial owner
and the depositor named second has
no such beneficial interest, is
erroneous. 10

11. • Vishwanath Chaturvedi vs. Union of
India & Ors., (2007) 4 SCC 380), the
Apex Court emphasized that submission
of income tax returns and the assessment
orders passed thereon, would not
constitute a full proof defense against a
charge of acquisition of assets
disproportionate to the known lawful
sources of income as contemplated under
the PC Act and that further
scrutiny/analysis thereof is imperative to
determine as to whether the offence as
contemplated by the PC Act is made out
or not. 11

12. • The Supreme Court in the case
of Shashikala (State of
Karnatak vs. Selvi J Jayalalitha,
Criminal Appeal No.300-303 of
2017) has observed that the
process undertaken by the
Income Tax authorities under
Section 68 of the Income Tax
Act is only to determine as to
whether the receipt is an
income from undisclosed
sources or not and is unrelated
to the lawfulness of the
sources or of the receipt. 12

13. • Constitution Bench in Iqbal Singh
Marwah Vs. Meenakshi
Marwah, AIR 2005 SC 2119 that
there is neither any statutory
provision nor any legal principle
that the findings recorded in one
proceeding may be treated as final
or binding in other as both the
cases have to be decided on the
basis of the evidence adduced
therein.
13

14. Part-2
Question:- What should be
punishment for an
offence punishable u/s
13(1) of the PC Act after
the inactment of Lokpal
and Lokayuktas Act,
2013, which came into
effect from 16.1.2014?
14

15. Relying on the ratio laid down
in the case of Kiran
Chander Asri vs. State of
Haryana, 2016 (1) SCC
578, the Full Bench of
Hon'ble Apex Court in the
case of Rakesh Kumar
Paul vs. State of Assam,
SLP(Cri) No.2009 of 2017,
dated 16th
August, 2017, it
has been held as under:- 15

16. The amendment made to the PC Act,
1988 by the Lokpal and Lokayuktas
Act, 2013 applies to all accused
charged with offences under the PC
Act irrespective of the fact whether
the action is initiated under the
Lokpal and Lokayuktas Act, 2013,
or any other law and it is further
held that the PC Act was amended
by the Lokpal and Lokayuktas Act,
2013 the punishment under
Section 13(2), as amended will
minimum of 4 years and which
may extend to 10 years. 16

17. Difference between
the Old Section [5(1)
(e)] and New Section
(13(1)(e)] of the PC
Act.
17

18. Section 13 (1)(e) of the PC Act,1988 provides
that, if he or any person on his behalf, is in
possession or has at any time during the
period of his office, been in possession for
which the public servant cannot satisfactorily
account, of pecuniary resources or property
disproportionate to his known sources of
income.
Section 5(1)(e) of the PC Act, 1947 provides
that, if he, or any of his dependents, is in
possession for which the public servant cannot
reasonably account, of pecuniary resources or
of property disproportionate to his known
sources of income.
18

19. New Act Explanation to Section 13 (1)(e):-
For the purposes of this section, "known
sources of income" means income received
from any lawful source and such receipt has
been, intimated in accordance with the
provisions of any law, rules or orders for the
time being applicable to a public servant.
Old Act Explanation to Section 5(1)(e):-In
this clause "dependent" in relation to a
public servant, means his wife, children and
step-children, parents, sisters and minor
brothers residing with and wholly
dependent on him. 19

20. New Section 13(2):- Any public servant who
commits criminal misconduct shall be
punishable with imprisonment for a term which
shall be not less than four year but which may
extend to ten years and shall also be liable to
fine.
Old Section 5(2):- Any public servant who
commits or attempts to commit criminal
misconduct shall be punishable with
imprisonment for a term which may extend to
seven years, or with fine, or with both, and the
pecuniary resources or property to which the
criminal misconduct relates may also be
confiscated to the State.
20

21. PART 3
How did Sasikala get convicted for
disproportionate assets?
Let’s first go through a brief timeline of the
case and understand how it came about.
• The case was initially filed against Jayalalitha
in 1996 by Subramanian Swamy, alleging that
she had amassed assets disproportionate to her
known sources of income.
• In 1997, prosecution was launched against
Jayalalitha, Sasikala, Sasikala’s nephew V.N.
Sudhakaran, and her sister-in-law J. Elavarasi,
for criminal conspiracy as well as criminal
misconduct. 21

22. In 2003, the case was transferred out of Tamil Nadu
to a special court in Bengaluru, which, in 2014
convicted all four.
• The conviction order came to be challenged
before the Karnataka High Court, in 2015 which
acquitted Jayalalitha, Sasikala and the others.
• This acquittal was then challenged by the
Karnataka Government in the Supreme Court,
which announced its verdict recently on 14th
February, 2017. The Supreme Court decided
that the case against Jayalalitha had abated due
to her death, while Sasikala and the two others
have been held guilty.
• They were sentenced under the Prevention of
Corruption Act to four years’ prison and Rs. 10
crore fine each. 22

23. A question that often comes
up, especially in reference
to the recent verdict, is that
when the law is for
corruption by public
servants, then how can
Sasikala, who holds no
public office be involved
and convicted under the PC
Act? 23

24. As per the P C Act (Section 8 & 9-
Abetment of Offence), if someone
illegally tries and influences a public
servant through corrupt methods.
• That person is breaking the law if he
accepts money or gifts in return for
influencing a public servant by illegal or
corrupt methods.
• It is also illegal to take money and
influence a public servant through his
personal relationship.
24

25. But this is not what happened in the
Sasikala case. Instead, she was accused
of being a conspirator who conspired
along with Jayalalitha to commit an
offence punishable as criminal
misconduct.
This means that she was regarded as
having helped Jayalalitha to plan and
execute her crimes.
The Supreme Court held that it was
obvious that Sasikala had helped
Jayalalitha in hiding her financial
transactions and acquiring a lot of land.25

26. Offence of acquiring and being in
possession of disproportionate
assets by Public Servant...
Non-public servant can be tried in
same trial along with public servant.
The legislative intent is manifest
that abettors and conspirator of all
the different offences under Section
13(1)(e) of the P.C. Act, 1988 should
also be dealt with along with the
public servant in the same trial. 26

27. The Apex court found it suspicious that
• Sasikala and her associates opened 10
firms in one day and no business activity
was undertaken by these firms other
than buying property.
• All these companies were shell
companies established to help Sasikala
and Jayalalithaa acquire property.
• The Court also said that it was difficult
to believe that Jayalalitha was unware of
all this since they all lived in the same
residence and hence it was quite clear
that this was a common conspiracy. 27

28. Conspiracy is punishable under the
IPC, with the same amount of
punishment as the original crime.
Section 13(2) of the Prevention of
Corruption mentions the
punishment for criminal
misconduct and this is what
Sasikala has been punished under
as someone who has conspired the
offence of disproportionate assets.
28

29. Why did Sasikala get prevented from
becoming Tamil Nadu Chief Minister?
Being convicted under the Prevention of
Corruption Act also has some important
consequences for anyone looking to get
elected to a Public Office.
Section 8(1)(m) of the Representation of
People’s Act 1951 says that if anyone has
been convicted for an offence punishable
under the Prevention of Corruption Act
then they are disqualified from elections till
the time that they are imprisoned, and a
further six years after that. 29

30. This means that Sasikala
can’t contest elections for 10
years. 4 years for the
imprisonment and a further 6
years after that as per the
law.
30

31. Part 4
What will happen after the case?
How will the govt recover the
assets?
The Government can use the Criminal
Law Amendment Ordinance, 1944 to
‘attach’ or basically take over property
which has been obtained as a result of
corruption or similar offences. Even if
the exact property cannot be
recovered, the government can take
over property of similar value. 31

32. Even if this property has been transferred to
someone else, the Government can still
recover it if the transfer seems fake (for
example, if the transfer was made for a much
lower price).
Property of this nature can be ‘attached’ the
moment a court takes notice of a case. It will
remain in Government control till a final
decision is made by the Court – if the person is
found not guilty, the property is released. If he
is found guilty, the amount of property gained
as a result of criminal acts will be forfeited to
the government.
32

33. Part 5
What happens to the job of
the Public Servant?
If a Central Government Officer
is convicted, his job status is
decided by an authority called
the Disciplinary Authority under
the Central Civil Services
(Classification, Control, and
Appeal) Rules, 1965. 33

34. The Authority will decide,
based on the seriousness of
the offence, whether the
Officer should be dismissed
or not. Even if he is not
dismissed, other disciplinary
action such as reduction of
pay.
34

35. Even if a Government
Officer is acquitted
because there is not
enough evidence for a
criminal charge, a
departmental inquiry can
still be held against him
leading to dismissal or
other penalties. 35

36. Part -6
What type of evidence is accepted by
the court against the accused?
Most cases of disproportionate assets are
proved through documents and witnesses,
like any other case. Various agencies like the
CBI and the Anti-Corruption Bureaus in states
are empowered to conduct raids. They can
unearth evidence like jewellery, property
documents etc. which can be used as
evidence. Witnesses can also be used to
testify about Benami transactions, or about
the amount of spending done by an accused
person. 36

37. Part - 7
Holding disproportionate assets - but below
10% - Is it condonable?
Hon'ble Apex Court in the case of Krishnanand
Agnihotri vs. State of M.P., reported in AIR 1977
SC 796 (FB) has observed in para 33 that, the assets
possessed by the accused were in excess of the
surplus income available to him, but since the excess
is comparatively small (Rs. 11,350/-), it is less than
10% - ten per cent of the total income of Rs.
1,27,715.43 – Supreme Court held that the assets
found in the possession of the accused were
disproportionate to this known sources of income.
Same has been followed in the case of M. Krishana
Reddy v. State, 1992 (4) SCC 49 and recently in
Kedari Lal v. State of M. P., AIR 2015 Sc (supp) 2159.
37

38. Referring to the judgment in Krishnanand
Agnihotri v State of Madhya Pradesh AIR
1977 SC 769 the Supreme Court in the case
of Shashikala has observed that the judgment
does not advance any proposition that in
order to adjudge the disproportionateness of
the assets in comparison of the income of a
public servant, the margin of 10% is a
permissible index of uniform application and
acknowledged as a determinant to decide as
to whether a public servant charged under
Section 13(1)(e) of the 1988 Act can be held
guilty of a criminal misconduct contemplated
by the statute judged on such benchmark.
38

39. Part 8
What percentage of assets in excess would fall
under the category of disproportionate assets.
One might like to know that the bone of contention in
Krishnanand Agnihotri (supra) decided over 40 years
back was over a mere Rs. 11,350/- being the excess
of assets over known sources of income.
High Court's calculation of DA in jayalalitha's case
Total income – Rs.34.76 Crore
Total Assets – Rs.37.58 Crore.
Total DA (Rs.37.58 Crore – Rs.34.76 Crore) = Rs. 2.82
Crore
Percentage of DA- Total DA divided by Total Income
multiplied by 100 = 8.12%.
39

40. Hon'ble Apex Court in the
Jayalalith's case has observed
that
The method of calculating D.A.
is wrong. If all the findings of
the High Court is accepted in
toto then the amount of D.A. is
Rs.14,38,93,645 i.e. 41.3% &
not Rs.2,82,36,36,812 i.e.
8.12% as held by the High
Court. 40

41. Part 9
Question:-
Whether the police has the
power to seize property
including Bank Account of
accused or any of his
relatives u/s 102 of CrPC?
41

42. Yes - Police officer in course of
investigation can seize or
prohibit operation of the Bank
Account of accused or any of
his relatives u/s 102 of CrPC.
Please refer to the ratio laid
down in the case of State of
Maharashtra v. Tapas D.
Neogy, AIR 1999 SCW 3389.42

43. Section 29 (1):- Where the Lokpal or any officer
authorised by it in this behalf, has reason to believe,
that any person is in possession of any proceeds of
corruption, such person is accused of having
committed an offence relating to corruption and
such proceeds of offence 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 offence, the reason
for such belief to be recorded in writing, on the basis
of material in his possession, the Lokpal or the
authorised officer may, by order in writing,
provisionally attach such property for a period not
exceeding ninety days from the date of the order, in
the manner provided in the Second Schedule to the
Income-tax Act, 1961 and the Lokpal and the officer
shall be deemed to be an officer under sub-rule (e)
of rule 1 of that Schedule. 43

44. (2) The Lokpal or the officer
authorised in this behalf 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 Special Court, in a
sealed envelope, in the manner as
may be prescribed and such Court
may extend the order of attachment
and keep such material for such
period as the Court may deem fit. 44

45. (3) Every order of attachment made under
sub-section (1) shall cease to have effect
after the expiry of the period specified in that
sub-section or after the expiry of the period
as directed by the Special Court under sub-
section (2).
(4) Nothing in this section shall prevent the
person interested in the enjoyment of the
immovable property attached under sub-
section (1) or sub-section (2), from such
enjoyment.
Explanation.—For the purposes of this sub-
section, "person interested", in relation to
any immovable property, includes all persons
claiming or entitled to claim any interest in
the property.
45

46. The next question which would arise is,
whether Police has power to seize and
request for attachment of 'Immovable
Property' u/s 102 of CrPC including Bank
Account of accused or any of his relatives?
To answer this question one has to refer to
the Section 5(6) of the PC Act, 1988, which
reads as under:-
Section 5(6) of the PC Act :- A special Judge,
while trying an offence punishable, under
this Act, shall exercise all the powers and
functions exercisable by a District Judge
under the Criminal Law Amendment
Ordinance, 1944. 46

47. The Schedule of the
Criminal Law Amendment
Ordinance, 1944, Section
4-A provides:- An offence
punishable under the
Prevention of Corruption
Act, 1988.
47

48. Therefore, the question which
arises at this stage is :-
The Criminal Law (Amendment)
Ordinance, 1944 being a pre-
constitutional law, whether the
Ordinance has got any validity
or can continue to remain valid
after the commencement of the
Constitution of India? 48

49. Answer is Yes.
As per Art. 366 (10) r/w Art.372
of the Constitution of India, it
remained in operation even
after the Constitution of India
was enacted, as same has not
been repealed under Art. 395
of the Constitution of India.
49

50. The Criminal Law Amendment
Ordinance No. 38 of 1944 was
promulgated on 23rd
October, 1944.
S. 72 of Schedule IX of the Government
of India Act, 1935 had the necessary
effect of equating the Ordinances which
were promulgated between June 27,
1940 and April 1, 1946, with Acts
passed by the Indian Legislature
without any limitation of time as
regards their duration.
50

51. Ordinances promulgated between
June 27, 1940 and April 1, 1946 are
perpetual in duration and continued
to be in force until they are
repealed. Please refer to ratio laid
down in the case of Hansraj
Moolji v. The State of Bombay,
AIR 1957 SC 497 (Five Judges)-
Followed in the case of Dr. V. K.
Rajan v. State of Kerala, 2008
CrLJ 909.
51

52. Thank
You 52