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Applying Section 41A CrPC Will Defeat PMLA's Objective : Solicitor General Tells Supreme Court

Mehal Jain
3 March 2022 3:57 PM GMT
Applying Section 41A CrPC Will Defeat PMLAs Objective : Solicitor General Tells Supreme Court
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The Solicitor General of India Tushar Mehta continued his arguments in the Supreme Court on Thursday defending the provisions of the Prevention of Money Laundering Act.The top law officer of the Union emphasised that the PMLA was a "complete code" in itself and the provisions of the Code of Criminal Procedure, such as the notice under Section 41A CrPC, or the FIR procedure under...

The Solicitor General of India Tushar Mehta continued his arguments in the Supreme Court on Thursday defending the provisions of the Prevention of Money Laundering Act.

The top law officer of the Union emphasised that the PMLA was a "complete code" in itself and the provisions of the Code of Criminal Procedure, such as the notice under Section 41A CrPC, or the FIR procedure under Section 154, do not apply to money laundering offences. Highlighting that the PMLA has higher threshold and safeguards for arrest, the SG argued that applying Section 41A CrPC to money laundering offences can defeat the purpose of PMLA.

During the hearing, the bench orally remarked that section 154, Cr. P. C. (registration of FIR) has no place in the Prevention of Money Laundering Act regime because the latter envisages a "complaint procedure".

The Court was hearing Solicitor General Tushar Mehta's response to the argument of the petitioners that all Cr. P. C. provisions, as contained in its Chapter 12, including registration of FIR, giving a copy of the same to the accused, intimation to magistrate etc, would apply to PMLA offences. It has been his case that in case of an investigation by police officers under Cr. P. C., the Court takes cognisance on a police report filing under section 173[2] while in case of investigation by "authorities" under PMLA, the Court takes cognisance upon a complaint made by an authority; that the PMLA is a complete Code to the extent it provides for the investigative process till the stage of filing of the complaint. PMLA Section 44, under which the Special Court is empowered to take cognisance of the offence of money-laundering under Section 4 or any scheduled offence connected thereto, in terms of Section 44(1)(b), upon a complaint by the competent authority (specified under Section 45), was indicated as the judicial act of taking cognisance as under Cr. P. C. Section 190(1)(a). It was the SG's case that under the scheme of the PMLA, the recording of the Enforcement Case Information Report (ECIR) is the start of the investigative process; that the said recording is not to be equated with the registration of FIR; that ECIR is a term given for the purpose of administrative convenience for identification of each case and does not have any statutory sanction as in the case of FIR.
It was the SG's case that the fundamental misconception on which the argument of the Petitioners is premised is the Petitioners' understanding that the method, mode and manner of investigation of all criminal offences in the country is to be carried out only and only as per the provisions of the Cr. P. C. It was submitted that while Cr. P. C. represents a constitutional compliant substantive but generic procedural law with regard to criminal offences, the Cr. P. C. is not the only mode in which criminal offences in the country can be investigated/tried except the offences under the IPC. It was submitted that the same is clear from the Cr. P. C. itself in its sections 4 and 5.
It is submitted that this legislative intent reflected in Section 4 and 5 of the Cr. P. C. is clearly manifested in the PMLA in sections 65 and 71 of the PMLA. It was submitted that the Cr. P. C. is merely one of the means of investigation of criminal offences as is clear from a bare perusal of Section 5 Cr. P. C. It is, therefore, open for the Legislature, while enacting substantive penal provisions, to provide for a procedure that may differ from the procedure provided under the Cr. P. C. Admittedly, such procedure ought to entail sufficient constitutional safeguards; however, it would be open to make requisite departures from the procedure provided in the Cr. P. C. if the nature of the offence being dealt with so justifies. It was submitted that the Cr. P. C. itself envisages this departure by enacting Section 5 which itself puts restrictions on applicability of Cr. P. C. if special procedure is provided. It was submitted that further, a special criminal law procedure is wrongly portrayed by the Petitioners that procedure of all offences shall have to be Cr. P. C. compliant. It was submitted that such special procedure only ought to be constitutionally compliant and not necessarily Cr. P. C. compliant as sought to be canvassed by the Petitioners. It was submitted that the constitutional protections of non-arbitrariness [Article 14, Article 20, Article 21) (which is fair and reasonable procedure and other constitutional principles enshrined under Part III)] will form the basis of testing the validity of any special procedure prescribed by law. It was submitted that such procedure cannot be tested on the anvil of the procedure enshrined in Cr. P. C. It was submitted that the Cr. P. C. has a detailed procedure for registration, investigation, arrest by "Police officers" and subsequent trial for both, cognisable and non-cognisable offences. It was submitted that the legislature has, in order to specifically tackle a particular malaise/crime and considering the peculiar nature of the mischief of money laundering, has established a separate procedure under the enactment. The PMLA, a complete Code, when read in juxtaposition of the Cr. P. C., would override provisions of the Cr. P. C., to the extent the PMLA provides for a separate procedure, either directly or by implication. It was submitted that however, where the provisions of the Cr. P. C. cannot be ousted, either by
a. direct displacement by PMLA provisions or
b. by necessary implication by giving meaning to PMLA provisions as a whole,
the provisions of the Cr.P.C., to that extent alone and only when they are not inconsistent, directly or impliedly, apply to the investigation under PMLA.
On Thursday, as the SG continued to emphasise the 'Complete Code' doctrine and the Cr. P. C.'s exclusion by necessary implication by citing judicial precedents, Justice A. M. Khanwilkar observed, "The legislature has spelt out its mind in 4 and 5 (of the Cr. P. C.) or, for that matter, even in 65 and 71 (of the PMLA). What is additionally mentioned in the PMLA must be followed, but what is mentioned in Cr. P. C. may not necessarily be followed. The law is very clear, there is no need to multiply authorities on this point. Let us focus the time on the exercise to see which activity in the Cr. P. C. is not specifically mentioned in the PMLA"
The SG then took the bench through a comparative chart juxtaposing provisions of Cr. P. C. Chapter 12 viz. PMLA, beginning with section 154, Cr. P. C. (Information in cognisable cases).
Justice Khanwilkar observed, "154 has no place in PMLA. Because it is a complaint procedure."
"That is all I wanted to show. 154 is a different scheme. The petitioners are insisting on chapter 12 compliance essentially for 154. Your Lordships pointed out that under PMLA, it is a complaint case, and hence, there cannot be any FIR, no copy is to be given to the accused, no copy is to be forwarded to the magistrate. The moment that is done, everyone will be alerted, there is risk of losing evidence in a matter of seconds by the click of a button and the Act will be defeated. That is why the PMLA provides for a special procedure. But the moment we are touching the person, we have to comply- If we are arresting him, we have to record reasons and give him the order; if we are attaching property, we have to record reasons and give him order. But before that, there is nothing which is required to be complied with", submitted the SG.
It was the SG's case that section 154, Cr. P. C. is ousted by implied exclusion- "Information in the form of copies of the FIR/ Chargesheet/ Prosecution Complaint of the offence mentioned in the schedule of the PMLA are obtained from the Law Enforcement Agency u/s 54 of the PMLA. The starting point of investigation cannot be in the nature of an FIR considering the fact the procedure prescribed by PMLA provides for complaint process. The investigative powers are not vested with the police and neither the ED office is a 'police station'".
Similarly, he showed that section 155 (Information as to non- cognisable cases and investigation of such cases) is also ousted by implied exclusion. As against section 156 (Police officer's power to investigate cognisable case), it was submitted that the power of officer of ED to investigate offence under PMLA is prescribed in Chapter V r/w s. 50 of PMLA. As against section 157 (Procedure for investigation), it was advanced that the procedure of investigation by the officer of ED is prescribed in Chapter V r/w S. 50 of PMLA.
As against section158 (Report how submitted), the SG showed that under the PMLA, there exists no report in the nature of S. 157 and neither is there any jurisdictional magistrate therefore, S. 158 application is ousted, and since the investigation under the PMLA is initiated as sequel to FIR/Chargesheet/Prosecution Complaint filed by other Law Enforcement Agency, the Competent Court is aware of or has already taken cognisance of offence in the schedule of PMLA. Accordingly, the provisions of Section 158 are not applicable. After the completion of investigation, Prosecution Complaint is filed u/s 44 of PMLA before Special Court.
As against section 159 (Power to hold investigation or preliminary inquiry), it was submitted that the power to hold investigation/inquiry by ED officials is stipulated under Chapter V of PMLA. There exists no jurisdictional magistrate under the PMLA.
As against section 160 Cr. P. C. (Police officer's power to require attendance of witnesses), section 50 of PMLA (Powers of authorities regarding summons, production of documents and to give evidence, etc) was indicated. Further, it was submitted that the PMLA investigations are nationwide in character and cannot be limited to Cr. P. C. concepts of police station and their territorial jurisdiction. "The exception in the S. 50 of the PMLA makes a specific departure and declines to provide any specific reprieve to special category. Further, the power of S. 50 is also exercised on a far wider plane than S. 160 as the same is exercised even for regulatory or prevention functions of authorised officers", it was advanced. As regards section 161 – Examination of witnesses by police, 162 – Statements to police not to be signed: Use of statements in evidence, and 163 – No inducement to be offered, the same argument as above was advanced on the basis of section 50 PMLA.
As regards Cr. P. C. section 164 – Recording of confessions and statements, it was submitted that the statement recorded u/s 50 of PMLA is admissible as evidence in Court of Law as the officers of the ED are not police officers.
As regards Cr. P. C. section 165 – Search by police officer and section 166- when officer incharge of police station may require another to issue search warrant, it was submitted that section 17 (search and seizure) & 18 (search of persons) of PMLA oust the applicability of the said provisions.
As regards Cr. P. C. section 167 (Procedure when investigation cannot be completed in twenty-four hours), the SG has, however, submitted, "Provision like Section 167, provision for remand and other provision for conduct of trial etc contained in Cr. P. C. will apply as there are no pari materia provisions in PML Act that occupy the place and, therefore, such generic provisions of Cr. P. C. would apply since they are not inconsistent with the special provisions of PMLA. D. K. Basu guidelines for arrest will apply. 167 does apply- Every time the person is arrested, we produce him before the court and his remand is taken."
As regards Cr. P. C. section 169- Release of accused when evidence deficient, Justice Khanwilkar remarked, "The difference between police case and complaint case would be that here, at the complaint stage itself, you file whatever evidence you have and your statement is recorded. That is the complete procedure. Now there is no further investigation thereafter, you have already investigated it. There is no question of filing a complaint thereafter"
"There is a further complaint also contemplated under the PMLA", said the SG.
Justice Khanwilkar commented, "Further investigation may unravel some more information or maybe additional information that can be supplemented by way of evidence. But closure report is essentially in the case of police case, and it is before taking cognisance"
"The proviso to PMLA section 44(1)(b) provides for the filing of closure report if there is nothing to take cognisance of. It says, 'Provided that after conclusion of investigation, if no offence of money-laundering is made out requiring filing of such complaint, the said authority shall submit a closure report before the Special Court'".
Justice Khanwilkar asked, "Once you file complaint under PMLA, can you withdraw? Is withdrawal of prosecution there?"
When the SG replied in the negative, the judge remarked that then Cr. P. C. will come into play.
"No. The proviso to 44(1)(b) of PMLA will take care of that. It is pari materia to 169", replied the SG.
Further, as against Cr. P. C. section 170 – Cases to be sent to Magistrate when evidence is sufficient, the SG submitted that PMLA case is a complaint case under the second proviso to sub- section (1) of Section 45. Therefore, the question of police report or magistrate authorised under Cr. P. C. as mentioned in Section 170, does not arise.
As against Cr. P. C. section 172 – Diary of proceedings in investigation, the SG indicated that the file record is perused by the Special Judges while granting remand or for the purposes of bail, and after filing of complaint, all the relevant documents are supplied to the accused persons.
The conclusion urged by the SG was that it is amply clear from careful comparison of provisions of Chapter XII of Cr. P. C. and provisions of PMLA with regards to information and power of investigation by the police authorities and officers of Enforcement Directorate that the specific provisions have been incorporated in PMLA for investigation, search & seizure, arrest and filing of Prosecution Complaint, accordingly, provisions contained in Chapter XII of Cr. P. C. shall not apply being inconsistent with the provisions of PMLA in this regard as provided in Section 65 of PMLA. "The provisions of Section 167 falling in Chapter XII of Cr. P. C. are applicable to provisions of PMLA as specifically provided in Section 46 of PMLA. It is amply clear from the legal analysis of provisions contained in Chapter XII of Cr. P. C. and relevant provisions of PMLA that provisions of Chapter XII of Cr. P. C. do not apply to investigation into offences under PMLA except for exception as provided in Section 46 of PMLA that too for the proceedings before the Special Court", it has been submitted.
'Cr. P. C. Section 41A would defeat the object of PMLA'- SG Tushar Mehta
The SG was addressing the petitioners' argument that section 41A, Cr. P. C. (notice of appearance before police officer) is applicable under PMLA- "The other side said 41A also applies apart from chapter 12. 41A, from the language itself, would not apply. If that is so, PMLA sections 65 and 71 would become meaningless. If 41 A is held to be applicable as argued by the petitioners, apart from the mischief it will cause, it will turn PMLA section 19 on its head. It would be reversed".
"Firstly, the section says that it applies only to the arrests which are made under 41. Section 41 provides the lowest threshold of impinging on someone's personal liberty. Under section 41 Cr. P. C, a police officer making arrest can include even a head constable, and arrests can be made even on credible information or even a reasonable suspicion. But here, under Section 19 PMLA, there are several safeguards- only the director or other designated officer can arrest, you have to record reasons, you must have material in your possession, you will have that material sent in sealed cover to a neutral authority namely the adjudicating authority which will be retained for 10 years so that you don't tamper with the material, which is very easy in case of Cr. P. C. arrest. So there is a specific contrary provision in section 19 providing for power of arrest without warrant!", began the SG.
"Secondly, it applies to police officers. Thirdly, 41 A says that 'the police officer shall, in all cases where the arrest of a person is not required under the provisions of sub-section (1) of section 41, issue a notice directing the person against whom a reasonable complaint has been made, or credible information has been received, or a reasonable suspicion exists that he has committed a cognisable offence, to appear before him or at such other place as may be specified in the notice. (2) Where such a notice is issued to any person, it shall be the duty of that person to comply with the terms of the notice. (3) Where such person complies and continues to comply with the notice, he shall not be arrested in respect of the offence referred to in the notice unless, for reasons to be recorded, the police officer is of the opinion that he ought to be arrested'...Our threshold is at the outset only. We record only when the arrest is necessary. 41A is a specific departure that instead of you exercising the power of arrest based on either credible information- a loose term, reasonable suspicion- a loose term, a reasonable complaint- again a loose term, you will issue notice. For us, the threshold is very high", continued the SG.
"Your Lordships have said that the mischief rule is that any interpretation which leads to a potential mischief, your lordships would normally avoid it. In PMLA, there are distinct ingredients which are not found in IPC offences and, by 41A, the object of PMLA would be defeated- ML offence is a very highly sophisticated offence; It is an offence which necessarily is a premeditated offence, it is never committed in the heat of the moment; thirdly, the offence utilises the most advanced technology to ensure that it is very difficult for the PMLA authorities to find out, and any forewarning or prior notice or intimation gives them few minutes which is required or few seconds to delete the entire trail which is crucial for this kind of an investigation; Unlike IPC offences, majority of which are committed and investigated, money laundering offence is a continuing offence", urged the SG.
Previous Reports :

Only 9 Convictions In PMLA Cases Out Of 1700 Raids By ED Since 2011 : Menaka Guruswamy To Supreme Court




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