Legal Principle & Question Decided

Ruling Summary: This decision was rendered by the Lahore High Court on 2022-09-02, officially reported as 2024 PLD 244. In this matter between Abdul Saboor and Federation of Pakistan etc., the court adjudicated key questions of statutory construction, procedural regularity, and legal precedent under Pakistani law.

Core Holding: The honorable bench evaluated governing statutory provisions and judicial authorities to establish the rights of the parties, delivering the binding reasoning set out below.

Full Judgment Text & Judicial Ruling

Court Name: Lahore High Court Judge(s): Shams Mehmood Mirza Title: Abdul Saboor vs Federation of Pakistan etc. Case No.: W.P. No. 16567 of 2021 Date of Judgment:2022-09-02 Reported As:2022 LHC 6324, 2023 PTD 1434, PLD 2024 Lahore 244, 2024 PTD 517, 2022

PCTLR 1607 Result: Petition Dismissed Judgment JUDGEMENT SHAMS MEHMOOD MIRZA, J. This writ petition as well as the connected writ petitions, the details whereof are mentioned in the 'Schedules' attached hereto, call into question the action of the Directorate of Intelligence and Investigation, Inland Revenue [Directorate (I&I)] in initiating proceedings against the petitioners under the provisions of Anti-Money Laundering Act, 2010 (the Act) by issuing call up notices and/or registering First Information Reports (FIR) against them. The petitioners accordingly pray for setting aside the notices and quashing of the FIRs. Submissions of the petitioners 2. Mr. Imtiaz Rashid Siddique, Advocate and Mr. Umer Riaz, Advocate initiated the arguments on behalf of the petitioners. Learned counsels made the challenge to the actions of the respondents primarily on the following grounds. (a) Notification SRO No.425(I)/2016 dated 20.05.2016 through which Chapter XII-A was inserted in Schedule I of the Act is violative of the law laid down in Mustafa Impex and others v. Federation of Pakistan PLD 2016 SC 808 in that the approval of the Federal Cabinet was not obtained before issuance of the said Notification. (b) It is stated that the Directorate (I&I) comes within the definition of "Investigating Agency or Prosecuting Agency" as contained in section 2(xviii) of the Act. This Directorate was initially constituted by the terms of SRO No.115(I)/2015 dated 09.02.2015 and SRO No.116(I)/2015 dated 09.02.2015. These SROs were declared unlawful by this Court in the judgment reported as F.M. Textile Mills and others v. Federal Board of Revenue and others 2017 PTD 1875 and Nestle Pakistan Limited and another v. The Federation of Pakistan etc 2021 PTD 521. The Directorate (I&I)

---

## Page 2

was subsequently constituted under SRO No.272(I)/2021dated 02.03.2021. Section 2(xviii) was inserted in the Act through Anti-Money Laundering (Second Amendment) Act, 2020 dated 24.09.2020. The powers of the Investigation officer under SRO No.272(I)/2021dated 02.03.2021 read with the newly substituted section 2 (xviii) of the Act cannot be exercised in relation to past transactions since these statutory instruments are prospective in nature. (c) By making reference to the provisions of section 21 of the Act, it is contended that the Directorate (I&I) has no authority to register First Information Report (FIR) against the petitioners. It is alleged that only the court can take cognizance of the offence punishable under section 4 on a complaint in writing made by the investigating officer. It is accordingly stated that the FIRs registered against the petitioners in some of the cases including the present petition are liable to be quashed. (d) In some cases, the call up notices do not provide any information to the petitioners as to the reasons for initiating inquiry against them except for stating that they have committed some un- disclosed offence under the Act. The investigating officer is conducting a roving inquiry without any lawful justification. Reliance was placed on judgments reported as Assistant Director Intelligence & Investigation v. M/s B.R. Herman PLD 1992 SC 485, A.M.Z. Spinning & Weaving Mills (Pvt.) Limited v. Federation of Pakistan 2009 PTD 1083 and Commissioner Inland Revenue v. MCB Bank Limited 2021 SCMR 1325. (e) The Rules under the Act have not been framed in consequence whereof the necessary framework and the structured procedure guiding the investigating officer in carrying out his functions for the purpose of inquiry is missing. In support of this contention, the petitioners rely on judgments reported as Amanullah Khan v. The Federal Government of Pakistan PLD 1990 SC 1092, Abid Hassan v. PIAC 2005 SCMR 25 and Nestle Pakistan Limited v. Federation of Pakistan 2021 PTD 521. It is furthermore stated that the Act does not lay down any procedure (a) regarding the manner in which inquiry shall be conducted, (b) for the assumption of jurisdiction by the Directorate (I&I), and (c) for registration of an FIR and the manner of arrest of the accused. This Court in the exercise of its jurisdiction under Article 199 of the Constitution, it is contended, can direct the respondents to frame the necessary rules under the provisions of the Act. Reliance is placed on the cases of Sarhad Development Authority v. Syed Muhammad Latif 2015 SCMR 1061, Government of Baluchistan v. Azizullah Memon PLD 1993 SC 341, Election Commission of Pakistan v. Province of Punjab PLD 2014 SC 668 and Mandi Hassan v. Muhammad Arif PLD 2015 SC 137. (f) It is also argued that the amendments made in the Act particularly in its section 2(xviii) through Anti-Money Laundering (Second Amendment) Act, 2020 on 24.09.2020 are prospective in nature and cannot be applied retrospectively to transactions that are past and closed. Reference in this regard is made to the cases of Secretary Housing and Physical Environmental Plannings v. Muhammad Ramzan 2018 SCMR 301, Muhammad Tariq Badr v. National Bank of Pakistan 2013 SCMR 314 and Sheikh Fazal Ahmad v. Raja Ziaullah Khan PLD 1964 SC 494. (g) In the absence of conviction in the trial of the predicate offence, the trial for the offence of money laundering cannot be held and no proceedings in this regard can be initiated under the Act. Reliance is placed on Justice Qazi Faez Isa v. The President of Pakistan PLD 2001 SC 1 and Rafi Ullah v. The State 2019 P.Cr.LJ 1608. (h) The impugned notices have reference to past tax periods indicating that the matters agitated therein relate to tax liability whereas the petitioners have already filed their tax returns filed by the petitioners which after routine examination have been accepted for the said period. The tax issues of the petitioners have also been audited in the past which culminated into assessments orders that have since been affirmed/modified/reversed in appellate forums. The matter thus falls in the domain of the taxation authorities and has no nexus with the offence of anti-money laundering.

---

## Page 3

(i) Without sufficient incriminating material available with the inquiry officer, the allegation of money laundering which is a serious offence shall violate the dignity of the petitioners. It is argued with reference to the provisions of section 2(viii) of the Act that the competent authorities as defined therein are not required to demonstrate application of mind for initiation of inquiry against the petitioners. Similarly, the reference in the impugned notices to "credible information" does not have any reference to the nature, credibility and authenticity of the source. The rest of the learned counsels for the petitioners adopted the above arguments. Submissions of the Respondents 3. The learned Assistant Attorney General and the learned counsels for the Directorate (I&I) submit that all the petitions are pre-mature in as much as no action till date has been taken or proposed to be taken against the petitioners at the stage of inquiry and investigation. It is argued that mere apprehension of the petitioners against any threatened punitive action is not sufficient to maintain a constitutional petition before this Court. It is also contended that mere issuance of call up notices do not entitle the petitioners to approach this Court as they are simply required to answer the queries put to them in the course of inquiry. The inquiry, it is stated, has been set in motion under the provisions of the Act and as such no cause for grievance has accrued to the petitioners. The holding of the inquiry, according to the respondents, does not infringe any fundamental rights of the petitioners. The challenge to the vires of SRO 425(I)/2016 dated 20.05.2016, it is contended, has been dismissed by this Court in writ petition No.8225 of 2021 titled Mr. Attiqur Rehman v. Federation of Pakistan and writ petition No.8228 of 20121 titled Muhammad Arshad Iqbal v. Federation of Pakistan. The Directorate (I&I) has also supplied details of some of the pending cases where in consequence of the inquiry the Investigation officer dropped the proceedings after it was established that no predicate offence was made out. 4. The petitions in which FIRs have been registered against the petitioners are mentioned in Schedule A hereto whereas those calling into question the call up notices in which necessary information regarding the offence is given are included in Schedule B hereto. The petitions in which the call up notices do not furnish the necessary details/facts are mentioned in Schedule C hereto. In addition thereto, in some cases the petitioners have called into question the summons issued under section 160 of the Code issued by the investigating officers for calling them to give information/evidence about cases of third parties suspected to have committed the offence of money laundering against whom FIRs have been registered under the Act. These petitions are mentioned in Schedule D hereto. 5. In view of the legal questions involved in the case, a notice under Order XXVII-A of the Code of Civil Procedure, 1908 was also served on the Attorney General of Pakistan. Statutory Framework 6. The legal issues that arise from the pleadings of the parties can best be understood if a brief synopsis and overview of the Act is stated. 7. The preamble of the Act states that its purpose is prevention of money laundering, combating financing of terrorism and forfeiture of property derived from, or involved in, money laundering or financing of terrorism and for matters connected therewith or incidental thereto. The Act in addition to providing punishment imposed on the accused also contemplates that he shall also be deprived of the proceeds of the illegal activities and this purpose is achieved by confiscation of the property generated from proceeds of crime. 8. Section 3 of the Act defines the offence of money laundering. It reads as follows. 3. Offence of money laundering: A person shall be guilty of offence of money laundering, if the person: (a) acquires, converts, possesses, uses or transfers property, knowing or having reason to believe that such property is proceeds of crime;

---

## Page 4

(b) conceals or disguises the true nature, origin, location, disposition, movement or ownership of property, knowing or having reason to believe that such property is proceeds of crime; (c) holds or possesses on behalf of any other person any property knowing or having reason to believe that such property is proceeds of crime; or (d) participates in, associates, conspires to commit, attempts to commit, aids, abets, facilitates, or counsels the commission of the acts specified in clauses (a), (b) and (c). Explanation-I.-- The knowledge, intent or purpose required as an element of an offence set forth in this section may be inferred from factual circumstances in accordance with the Qanun-e- Shahadat Order, 1984 (P.O. 10 of 1984). Explanation II.- For the purposes of proving an offence under this section, the conviction of an accused for the respective predicate offence shall not be required. 9. Section 2(xxviii) defines "proceeds of crime" which means any property derived or obtained directly or indirectly by any person from the commission of a predicate offence or a foreign serious offence. 10. The term "predicate offence" is defined by section 2 (xxvi) to mean an offence specified in Schedule-I to the Act. 11. The agencies nominated by the Act to investigate or prosecute the offence of money laundering are mentioned in section 2(xviii) of the Act which are the National Accountability Bureau (NAB), Federal Investigation Agency (FIA), Anti-Narcotics Force (ANF), Directorate General of (Intelligence and Investigation - Customs) Federal Board of Revenue, Directorate General (Intelligence and Investigation Inland Revenue) Federal Board of Revenue, Provincial Counter Terrorism Departments or any other law enforcement agency as may be notified by the Federal Government for the investigation or prosecution of an offence under this Act. 12. By the terms of section 24, the investigating or prosecuting agencies may nominate such persons as they think fit to be the investigating officers from amongst their officers. 13. The process under the Act is set in motion by the Financial Monitoring Unit (FMU) which receives Suspicious Transactions Reports (STRs) and Currency Transactions Reports (CTRs) from the reporting entities which in turn are analyzed by it and in respect of which it is empowered to call for the record and information from any agency or person. After analyzing the STRs and CTRs, the FMU disseminates the same to concerned Investigating or Prosecuting agencies for inquiry or further action under the Act under section 6 of the Act. 14. In terms of section 8, the investigating officer on receipt of the report from the concerned investigating or prosecuting agency by order in writing and with prior permission of the court shall provisionally attach the property he reasonably believes to be involved in money laundering. Such provisional attachment shall not exceed a period of one hundred and eighty days from the date of the order. The court may, however, grant further extension for a similar period. 15. Section 9 specifies that the investigating officer shall within a period of seven days from the date of order of attachment serve a notice on the person concerned calling upon him to indicate the sources of his income, earning or assets out of which he acquired the property in question and to furnish the evidence on which he relies and all the other relevant information and particulars in regard thereto and to show cause why all or any of such properties should not be declared to be the properties involved in money laundering and forfeited to the Federal Government. In case any such property is being held by a person on behalf of any other person or where such property is held jointly by more than one person, the investigating officer shall also dispatch a copy of such notice to that person and to all persons holding such property. The investigating officer is required by sub-section (2) of section 9 to record a finding whether all or any other properties referred to in the notice issued under sub-section (1) are properties involved in money laundering after considering the reply to the notices issued under subsection (1) and granting hearing to the

---

## Page 5

aggrieved person and taking into account all relevant materials placed on record before him. Upon making a determination that the property in question has been acquired through money laundering, he shall make an application with the court for confirming the attachment whereupon the court after hearing the concerned persons pass the appropriate order, inter alia, for attachment or release of the said property. 16. The next important provision is section 20 of the Act which stipulates that the courts of sessions established under the Code of Criminal Procedure, 1898 (the Code) shall have the jurisdiction to try and adjudicate the offences punishable under the Act. The proviso to this provision stipulates that where the predicate offence is triable by any court other than the court of sessions, the offence of money of laundering together with all the matters connected therewith and incidental thereto shall be tried by that court (special court). In other words, the special courts established under various laws mentioned in Schedule-I of the Act empowered to try the predicate offence shall have the jurisdiction to try and adjudicate the offence of the money laundering provided they are not inferior to the court of Sessions. 17. Section 21 of the Act in so far as it is relevant reads as follows: 21. Offences to be cognizable and non-bailable: (1) (1) Notwithstanding anything contained in the Of the Code of Criminal Procedure, 1898 (Act V of 1898) and subject to sub-sections (2) and (3), (a) every offence punishable under this Act shall be cognizable and non-bailable; (b) ..... (2) The Court shall not take cognizance of any offence punishable under section 4 except upon a complaint in writing made by: (a) the investigating officer; or (b) any officer of the Federal Government or a Provincial Government authorized in writing in this behalf by the Federal Government by a general or special order made in this behalf by that Government: 18. Section 22(1) stipulates that the provisions of the Code shall, in so far as they are not inconsistent with the provisions of the Act, apply to arrest, bail, attachment, forfeiture, investigation, prosecution and all other proceedings under this Act. 19. Section 23 provides the right of appeal to the High Court to any person aggrieved by the final order of the special court. 20. Section 39 of the Act contains a non-obstante clause which states that the provisions of the Act shall have effect notwithstanding anything inconsistent contained in any other law for the time being in force and that the provisions of the Act shall be in addition to the laws relating to the predicate offences. 21. Section 43 empowers the Federal Government, in consultation with the National Executive Committee, to make rules for carrying out the purpose of the Act. 22. In almost all the cases barring one case, the call up notices have been issued by the Directorate of the Intelligence and Investigation constituted under the provisions of the Income Tax Ordinance, 2001 (the Income Tax Ordinance). The Income Tax Ordinance was made part of Schedule-I of the Act through Notification dated 13.07.2020 issued by the Federal Government in terms of section 42 of the Act. 23. Having laid down the essential features of the Act, we can now turn our attention to the legal issues raised by the parties. Determinations Is the Act violative of the law laid down in Mustafa Impex's case? 24. The petitioners' stance that SRO 425(I)/2016 dated 20.05.2016 is violative of the law laid down in Mustafa Impex's case does not call for a detailed analysis. The ratio of the Mustafa Impex case

---

## Page 6

relevant to the issue raised in these petitions is that the constituent elements of the Federal Government are the Prime Minister and the Cabinet and that the term "business" mentioned in the Rules of Business is to be given a wide interpretation so as to include all the work carried out by the Federal Government in the domain of executive action and delegated legislation. It is alleged that before issuance of SRO 425(I)/2016 the formal approval of Cabinet was not obtained and as such SRO 425(I)/2016 violates the law laid down in Mustafa Impex case. The contention of the petitioners is not tenable in view of pronouncements of the Hon'ble Supreme Court stating in unequivocal terms that the judgments of that Court would ordinarily operate prospectively. In this regard, reference may be made to the case of Pakistan Mental and Dental Council v. Muhammad Fahad Malik 2018 SCMR 1956 in which the Hon'ble Supreme Court while dealing with a similar issue concluded to the effect that "The judgment of this Court, unless declared otherwise, operate prospectively, as such, the Amendment Ordinances are not hit by Mustafa Impex's case." Similarly, the Hon'ble Supreme Court in its judgment rendered in C.P. No.1622-L/2018 titled Chief Commissioner IR v. M/s Giggy Food (Pvt.) Limited was pleased to hold as follows "The prospective effectiveness of the rule in Mustafa Impex case laid down by the Court means that actions taken or instruments executed prior to the judgment in the Mustafa Impex case are not affected by the law enunciated by the said judgment." 25. It is thus abundantly clear that SRO 425(I)/2016 dated 20.05.2016 which was issued prior to the decision in Mustafa Impex case does not come within the mischief of the law laid down in the said judgment. Can the Directorate (I&I) conduct investigation in cases prior to its inclusion in the definition of "investigating or prosecuting agency" in section 2(xviii) of the Act? 26. The next argument by the petitioners that SRO No.115(I)/2015 dated 09.02.2015 and SRO No.116(I)/2015 dated 09.02.2015 issued under the Income Tax Ordinance and Sales Tax Act, 1990 through which the Directorate (I&I) was constituted were declared null and void by this Court in judgments rendered in the cases of F. M. Textile Mills & others v. Federal Board of Revenue and others 2017 PTD 1875 and Nestle Pakistan Limited and another v. The Federation of Pakistan etc 2021 PTD 521 is also of no avail to them. In fact, the submission so made proceeds on a misapprehension of what the issue involved in the said judgments was. Needless to point out that the Directorate (I&I) was established both by the Income Tax Ordinance (section 230) and Sales Tax Act, 1990 (section 30A). The notifications in question merely bestowed certain powers and functions on the Directorate (I&I) which were brought under challenge in the afore-mentioned judgments. By referring to section 230 (2) of the Income Tax Ordinance, this Court in the Nestle's judgment observed in paragraph No.29 that SRO No.115(I)/2015 did not specify the functions of the Directorate General (Intelligence & Investigation Inland Revenue) and as such ".......they will not be able to employ these powers within the sphere of activity settled by law. Even more important than specifying the jurisdiction is the act of specifying the functions of the D.G (I&I) for that will determine the precise nature of the reason for their existence and set out the details of the field of activity." Accordingly, this Court struck down SRO No.115(I)/2015 and directed the Federal Board of Revenue ".....to initiate the process of specifying the functions and jurisdiction of the Officers of the D.G (I&I) and to complete it within two months.......". 27. The afore-mentioned Notifications, it may be emphasized, did not allocate any function or power to the Directorate (I&I) for conducting inquiry under or in relation to the offence of money laundering. Be that as it may, the Directorate (I&I) is now included in the definition of "Investigating Agency or Prosecuting Agency" as per section 2(xviii) of the Act. Notwithstanding the fact that this definition was included in section 2 through Anti-Money Laundering (Second Amendment) Act, 2020 dated 24.09.2020, the investigation of an offence is an essential part of and closely related to the procedure and conduct of the investigation and as such the fact that an authority is

---

## Page 7

subsequently added as the investigating agency is no bar on its powers and authority to investigate cases in which the offence is said to have been committed in the past. Is it mandatory for the Directorate (I&I) to specify in the call up notice the precise allegation against the petitioners relating to the offence of money laundering? 28. We now come to another important aspect of the case which deals with the contents of the call up notices issued by the investigating officer to some of the petitioners. This issue relates to the category of cases mentioned in Schedule C hereto. It is alleged that the call up notices are devoid of any detail of the alleged offence committed by the petitioners or the property which has been acquired allegedly through the proceeds of crime. 29. A sample of such notice issued to the petitioner in writ petition No.27072 of 2021 titled "M/s Educational Services (Pvt.) Limited v. Federation of Pakistan etc" is reproduced below 1- Whereas I. Umar Yar, Deputy Director Intelligence and Investigation (Inland Revenue), have been appointed as Investigating officer by the competent authority under Section 24(1) of the Anti- Money Laundering Act, 2010 (AMLA, 2010) and empowered to exercise powers and discharge duties conferred on me under AMLA, 2010. 2- Whereas as per credible information available with this officer, you are supposed to be involved in the offence of money laundering as per provisions of Section 3 of AMLA, 2010 read with Section XIIA of Schedule-1 of AMLA, 2010 during the period 01.07.2015 to 30.06.2015 (Tax Year 2016). 3- Now, therefore, you are hereby called upon to visit this office on 22.03.2021 at 11.A.M. and bring your original CNIC to answer such questions as may be put to you and record your statement. 4- Non-compliance of this notice for attendance will render you liable to proceedings under section 174 of Pakistan Penal of the Code 1860 in the Court of Law. The notices in all the writ petitions mentioned in Schedule C hereto follow more or less a similar pattern. 30. As noted above, FMU collects STRs and CTRs from the reporting entities and after analyzing the same passes it on to the investigating or prosecuting agencies. The…

Read the unabridged text and precedent citation network on Al Wakeelo Legal Research Platform.

Related Legal Research & Directories

• Browse all judgments from Lahore High Court
• Browse Pakistani court decisions from the year 2022
• Search Pakistani statutes: Constitution of Pakistan 1973, PPC, CrPC, CPC & Family Laws
• Analyze this case with Al Wakeelo AI Legal Assistant