•clause of definition of “proceeds of terrorism” i.e. existing Section 2(g). In order to make this,
i.e. fund/property intended to be used for terrorism more explicit/clear, existing sub-clause (g) is
•proposed to be subdivided as proposed in clause 2 (ii) of the Bill. Similar cascading changes are
•proposed in Chapter V dealing with “forfeiture of proceeds of terrorism” which will be discussed
later.
1.5.4 Under Clause 2(iii) the definition of property under Section 2(h) is proposed to be further
•refined in order to cover the entire range of property and assets by inserting the phrase ‘including
•but not limited to’. The proposed amendment intends to facilitate to bring the definition of funds
•in line with CFT.
•Inclusion of Hindu Undivided Family under the definition of "Person"
1.5.5 The Committee discussed in detailed the defi nition of the term ‘person’ in the proposed
•amendment particularly with reference to Hindu Undivided Family. Members expressed
•reservations over bringing Hindu Undivided Family under the definition of person. The
•concerned Joint Secretary in this regard clarified as under:-
•“In the FATF recommendations, one of the concerns is the non-profit
•organizations being used as means for terrorist financing and funding. Therefore,
•there was a need to categorically capture the definition of person consistent with
•PMLA, Income Tax Act. When you talk of non-profit organizations, which become
•charitable organizations or trusts, all these become germane to the assessment."
1.5.6 The Committee pointed out that the defin ition of Hindu Undivided Family (HUF) is not
•convincing as the issue connected with the In come Tax and Prevention of Money Laundering
•Act are altogether different where there is a relevance for HUF. But UAPA the issue is
•connected with terrorism where HUF does not come into the picture. Clarifying this, the Home
•Secretary stated as under:-
•“Under the Prevention of Money Laundering Act, ‘terrorism’ is a predicate
offence.That means, the Prevention of Money L aundering Act will operate
•against the funds which arise out of a category of crimes. There are a number of
•categories of crimes, one of which is te rrorism. So, if any fund which is generated
•by terrorism is involved, then, the Prevention of Money Laundering Act operates
•and this Act also operates. Such actions come under both the Acts. Therefore,
•there is a requirement to make sure that these sections correspond to each other.”
1.5.7 On the Committee’s observation that the defini tion is not convincing and there is a need
•to change the wordings, the concerned Joint Secretary stated as under:-
•“As finance is the lifeline of terrorism, the endevaour of the Government is to also
•invoke provisions of various relevant laws, such as PMLA, Income Tax Act,
•Foreign Exchange Management Act to check financing of terroris m. It may kindly
•be noted that the offence of financing of terrorism is a scheduled offence in the
PMLA...... It is not about a legitimate Hindu Undivided Family or Trade Unions; it
•is a game of misusing the Trust. So, the entities may not know and they are
exploited.So, what the FATF said is, “Aim to put in place such legal provisions
•that would prevent misuse of legal structures so that they are not exploited for
•channelising funds for terro rism or money launderi ng. Special recommendation
no.8 which relates to non-profit organisation reads as follows – it is a
•recommendation -- “Country should revi ew the adequacy of law and regulation
•that relates to entity , that can be abused for financing of terro rism. Non-profit
•organisations are, particularly, vulnerable and country should ensure that they
•cannot be misused (i) by terrorist organisa tions posing as legitimate entities; (2)
•to exploit legitimate entiti es as conduit for terrorist financing, including for the
•purpose of escaping asset freezing measures. Because when we come back to
•asset freezing, what they will do is, without the Trust or the Association knowing,
•they will park the money as a chairtable donation and park it there. (3) to conceal
•or obscure the clandestine diversion of funds intended for legitimate purposes to
•various organizations. It is in this backg round that IMG felt that while we strive
•to bring laws in consonance with international standard, it would only be befitting
•to harmonize the definitions and prov isions of related domestic laws and
•accordingly suggested that a person ma y be defined in th e Amendment Bill
accordingly.So, for all the three Acts which feed into the UAPA, we cannot have a
•distinct definition and this is more in terms of a preventive measure because it is a
•game of misusing the trust of a legitimate organization and using it to hide funds.
•That is the purpose.”
1.5.8 The Committee sought the observation of the La w Secretary on the definition of the term
•'HUF' in the proposed amendment. The Law Secretar y stated that the Ministry of Law & Justice
•had examined the issue and fully concurs with th e viewpoints of the Ministry of Home Affairs.
•Thereon, the Home Secretary further clarified as under:-
•“When we are criminalizing acts by persons, we include the following categories;
•and persons includes both ‘a natural person’ as well as ‘a legal or juridical
•person’. The categories of juridical persons are: company, firm, society,
•association, etc. These ar e all categories of legal persons or juridical persons.
•Now, Hindu Undivided Families also in the financial terms are legal/juridical
persons.So, when you are expounding on that definition of person or a juridical
•person, then you include all these categor ies. Now, this does not mean that any
•firm will get prosecuted just because it is a firm, or, any company will get
•prosecuted because it is a company, or, an association will get prosecuted because
•it is an association. It only means that if that asso ciation or firm is used to park
•funds meant for financing terrorism, if it is used to raise and collect funds for
•financing terrorism, then, that firm will get prosecuted.”
1.5.9 The Members of the Committee felt that the definition of the term HUF in the Income
•Tax Law is meant to give some relief in the Income Tax to the people belonging to that category,
•and using HUF as an association or a firm is beyond convincing. The Home Secretary clarifying
•the point replied as under:-
•“The question is whether the funds, resources or property can be held in the name
•of a Hindu Undivided Family or not. If funds can be he ld in the name of a Hindu
•Undivided Family, then funds could be parked there without the Hindu Undivided
•Family knowing the origin of those funds. And because those funds are parked in
•the name of a Hindu Undivided Family, if it is not included, it will be outside the
•mischief of this law.”
1.5.10 The Committee wanted to know as per the provision of the proposed amendment whether
•a criminal act committed by the head of the fam ily and the funds parked under his name would
•implicate the entire HUF, the Joint Secretary, Depa rtment of Revenue, Ministry of Finance made
•the following observation:-
•“In the Prevention of Money Laundering Act al so, 'person' has been defined as an
•individual, a Hindu Undivided Family, a company, a firm, an association of
•persons or a body of individuals and every other artificial juridical persons, etc.
•We are in agreement with the logic whic h has been given by the Home Secretary
•and officials of the Home Ministry. Actually, certain measures are being taken to
•prevent money laundering. There are cert ain obligations for the financial
•institutions, banking companies, etc. When they are dealing with opening of
•accounts, etc., whether of an individual or a company, they are subjected to
•certain rigors. They have to follow th e ‘Know Your Customer' norms and also
•apply customer due diligence, etc. Now, it is only through these measures,
•whether it is individual accounts or any company’s accounts, that an oversight
•mechanism is put in place by which it can be inferred whether any money
•laundering has taken place. So, these enti ties are subjected to some kind of a
•reporting system. The financial instituti ons are supposed to apply the same due
•diligence measures whether these are accounts of individuals, companies or
•corporates, etc. So, because a large number of Hindu Undivided Families were
•also holding bank accounts, they could not be separated. That is why, they have
•also been kept under the purview of the definition of ‘persons’.”
1.5.11 Some Members pointed out that Income Ta x Act, Prevention of the Money Laundering
•Act and Unlawful Activities (Prevention) Act ha ve different scope and purpose, the later being
•related to the criminal activities of a person. Theref ore, it is necessary to bring in all other such
•corporates, which are relevant in the case of financial matters, but not relevant insofar as
•individual crimes are concerned.
1.5.12 The Home Secretary made an attempt to convince the Committee on bringing HUF under
•the definition “Person” as under:-
•“Our stand before the financial action ta skforce was that ‘person’ includes a
•juridical person and, therefore, no further exposition is necessary. The Financial
•Action Task Force was not agreeable. They wanted a detailed definition that
•would include companies, firms and all ot her juridical persons to be specified.
•Now how this Act is concerned with peopl e who are bodies, associations, etc., in
•two ways. One is with regard to atta chment of proceeds of terrorism or
•attachment of funds for financing terrori sm or for future funds for financing
•terrorism and for forfeiture of funds gene rated out of terrorism. The other is
•through FIC, that is, Fake Indian Currency, distribution thereof, printing thereof,
etc."
1.5.13 The Home Secretary fu rther opined that:-
•“The term ‘HUF’ can be avoided by this mechanism by saying this will also
•include persons as defined in section so and so of the PMLA Act. That is suffice.”
1.5.14 Thereupon, some Members felt that the mean ing would be the same. The Members also
•felt that the term ‘person’ should be used in the Unlawful Activities (Prevention) Amendment
•Act which is generally used in the criminal law.
1.5.15 The Home Secretary, agreei ng to the view of the Committee, subscribed as under:-
•“There are two types of crimes. One is crime which can be committed only by an
individual.There a 'person' means an indi vidual. The other types of crimes are
•those which can be committed by an individual or by an association or a body of
•person or a firm. They can also commit crime. The funds ar e parked many times
•in the names of some association, some N GOs. In fact, Sir, we are now coming to
•the conclusion that cross-border trade, which is happening, is somehow being
•used to finance terrorism in Kashmir through hawala. ……This has a relation to
finance.We are seizing funds which have been generated by terrorism and we are
•confiscating funds which have been generated by terrorism and we are
•confiscating funds which have been collected to finance terrorism. We can
•consider changing the definition accordingly.”
1.5.16 The Committee is not convinced by the inclusion of 'Hindu Undivided Family'
•under the term 'person' in the Unlawful Activities (Prevention) Bill, 2011. Though the
•Home Secretary has tried to convince the necessity of bringing HUF under the term
•'person' in view of the similar definition available in the P revention of Money Laundering
•Act (PMLA) and Income Tax Act, but the Commi ttee feels that it should not be the reason
•to bring the similar amendment in the UAPA Act. The Committee feels that a person
•means a person only and the terminology should be so used which is generally used in the
•criminal law. The Committee also feels that the suggestion of the Home Secretary that
•instead of using the term 'HUF', it can be avoi ded by including persons, as defined in the
•PMLA Act, is also not tenable because it woul d ultimately amount the same interpretation.
•However, since the Home Secretary has agreed to change the definition, the Committee
•suggests that a via media may be found out under which HUF is not brought under the
•purview of UAPA Act.
•Definition of Associations
1.5.17 The Committee also discussed in detail the proposed amendment in Clause 2(i) where
•under the term ‘person’ includes an association of persons or a body of individuals, whether
•incorporated or not. The Committee apprehended that under the categorization of Associations,
•the Trade Unions may also be included in such case they are likely to be harassed. The Home
•Secretary clarifying this, stated as under:-
•“This refers to an association which is being used to funnel funds for terrorisim,
•which is used to give funds or divert funds or provide funds or source funds for
terrorism.So, that is where this comes in. Apart from that, any association or a
•company or organisation which is engaged in printing, distribution etc. of high
•quality fake Indian currency, this is only with reference to that. UAPA refers to
•only such crimes. …….The Associations and Unions which are engaged in the
•normal activities don’t come within the ambit of this Act at all. This Act is meant
•only for juridical persons, or natural-bor n persons who are engaged in terrorism-
•related activities or unlawful activities.”
1.5.18 Some Members further pointed out that the term ‘an associ ation of persons or a body of
•individual has been imported from Preventi on of Money Laundering Act where the conditions
•and circumstances are different whereas UAPA relates to terrorist activities. The Committee
•apprehended that associations, which may be labor union, club associati on, football association
etc.and the proposed expression in the Bill gives leverage to the investigating officer and scope
•for harassment of innocent persons. The Memb ers also felt that there should be some
•parameters/safeguards. The Members also refe rred to some cases where initially the wrong
•persons were arrested, wrong people confessed, and the wrong trial started and wrong people
punished.The Members, therefore, felt that ther e should be some safegu ard against such wrong
proceedings.Responding to the issue, the Home Secretary commented as under:-
•“The expression ‘an association of persons or a body of individuals, whether
•incorporated or not’ is just to incl ude those groups of people who are not
•incorporated according to the companies law. This is to in clude those groups of
•people who may form a group or an association which is not incorporated
•according to the company law or any other law. Otherwise, if we had not included
•this, the liability would not have been fastened on that group of persons because it
•has not been incorporated. So, that is a distinction between this -- a company and
•a firm. I would give you just one example; that would make things clear. In the
•North East, there are some clubs; they ca ll themselves ‘clubs’. They are not
•registered anywhere. There are some unions; they call themselves ‘unions’, but
•they are not registered under any law. But those clubs or unions get funds for
•terrorist groups for underground groups and hold funds for underground groups.
•It is such bodies which are covered here.”
1.5.19 Further clarifying the issue, the Ho me Secretary stated as under:-
•“This whole Act is addressed towards fighting terrorism, and it is only when
•terrorist acts are committed or are planned, organized or funded that this Act
•comes into force. About the possibility of the Police misusing this law to harass
•innocent individuals, any criminal acti on can be taken against any person or
•group of persons only when it is seen that that person or that group has a common
•purpose of aiding terrorist activity or financing terrorist activity. Unless and until
•that is proved or establis hed, no crime is made out. It is only when it is
•established that a person or a group or a group of persons or an association has
•committed some act which is in violation of this law, that a person, association or
•group becomes culpable. Now, there can be one question that there may be some
•members of a association, group or a company who were not associated with that
•decision to keep terrorist funds or with th e decision of financing terrorism. It is
•possible, but there is also a provision here that wher e any person, any member of
•a firm or any member of a company is not associated with it, he can produce
•evidence for that purpose to show that he is not associated with that. That is the
safeguard.He can produce evidence to show that he is not associated. By and
•large, what happens is that when a co mpany, a firm, an association, body of
•individuals or an indivi dual commits a crime, he eith er receives funds which are
•proceeds of terrorism, or collects funds fo r financing terrorism, or harbours funds
•for financing terrorism, the pres umption is that it is th e office bearers, those who
•had in their hands the management of that group or company or firm, who are
•liable, not every member. There is no doubt that not in one case but in many cases
•there would have been instances of pe ople being accused without sufficient
evidence.That is why the law says that wh enever a person is arrested he is to be
•produced before the Magistrate within 24 hours. If a person is convicted of
•murder and this conviction has been upheld right up to the Supreme Court, and
•that person has kept saying, 'Look, I am innoc ent'. It is possi ble. What I am
•saying, Sir, is that it is a question of some material or some evidence seeming to be
•sufficient evidence to fasten the guilt, and some additional evidence not coming to
•light at that point of time which comes to light later. So, it is not peculiar to a
•particular law. It is not only an associat ion or a firm, etc., which can be wrongly
•accused; individuals can also be wrongly accused. And, there have been cases like
that.So, it is not peculiar either to this association or to this law. That is
•something for which the law has provided sa feguards. If a person is innocent, he
•has to bring that evidence before the Cour t. He has to be presented before the
Court.That is why, everything has not been left to the Police. That is why, we
•have the courts.”
1.5.20 Money laundering and terrorism are very closely linked nowadays because a lot of
•terrorism that the country faces is cross-border or international. A very large part of it is
•funded through some kind of money laund ering but the Committee agrees with the
•apprehensions of some Members that bringi ng association of persons or a body of
•individuals under the definition of 'person' gives a leverage to the investigating officer.
•There could be a large number of cases of harassment of associations or unions due to
•which innocent people could be affected. The Committee is of the view that the Ministry
•may consider putting a rider and safeguards so that innocent people are not harassed.
1.5.21 Subject to the above observations, the Clause is adopted.
