PMLA Interpretation - Laundering Proceeds Of Crime Can't Have Severe Penal Consequences Than Generating Such Proceeds: Sibal To Supreme Court

On Thursday, the Supreme Court continued hearing the batch of petitions on the interpretation of the Prevention of Money Laundering Act, 2002. Appearing before a Bench comprising Justices AM Khanwilkar, Dinesh Maheshwari and CT Ravikumar, Senior Advocate, Mr. Kabil Sibal made submissions about the lacunae in the Prevention of Money Laundering Act, 2002 ("PMLA'), without directly assailing the amendments brought about in the year 2019 through the Finance Act for the time being. Submissions made by Mr. Sibal Mr. Sibal appeared on behalf of Mr. Karti Chidambaram, who has challenged the 2019 amendment to the PMLA for being arbitrary, unreasonable, non-compliant to the principles of due process and thus violative of Articles 14, 19, 20 and 21 of the Constitution of India. Legislative History of Section 3 PMLA Referring to his note that encapsulated the history of Section 3 of the PMLA, Mr. Sibal apprised the Bench that the original text of the PMLA Bill, 1999 did not mention 'and projecting it as untainted property'. However, on the Select Committee's suggestion, it was added to the proposed text, which ultimately became an Act. The scope of the provision was expanded by the amendment in 2012, wherein concealment, possession, acquisition, use, were also included as offences under the PMLA. However, the 2019 amendment by substituting 'and' with 'or' before 'projecting or claiming it as untainted property' has rendered the underlined portion of the provision otiose. "See the left hand column that is the original PMLA Bill of 1999 that said that whosoever acquires, owns, possesses, transfers any proceeds of crime or knowingly enters into any transaction which is related to proceeds of crime either directly or indirectly or conceals or aids in the concealment of the proceeds of crime commits the offence of money laundering. Your lordships will see that 'and projecting it as untainted property' is missing in the original provision. Then is the report of the select committee. Then came an amendment in 2012, 'Whosoever directly or indirectly attempts to indulge or knowingly assist or knowingly is a party or actually is involved in any process or activity connected with the proceeds of crime" these word were added "including its concealment, possession, acquisition or use and projecting or claiming it as untainted property shall be guilty of the offence of money laundering" This portion was inserted by a amendment in 2012. Then came the Finance Act where the word 'or' came after 'use' instead of 'and' by virtue of the explanation, by virtue of the Finance Act." How to charge under Section 3 PMLA Mr. Sibal put forth his suggestions as to who all can be charged under the PMLA and how. "We have made some suggestions regarding the interpretation of Section 3. (before 2019 amendment) How are people to be charged under Section 3 of PMLA?". When you look at 'directly' how will it read? "whosoever is directly involved in any process or activity connected with proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property." Now Milords the next 'whosoever indirectly' "whosoever is indirectly involved in any process or activity connected with proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property." Then 'whosoever knowingly assists' "whosoever knowingly assists in any process or activity connected with proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property." Then 'knowingly is a part' "whosoever knowingly is a part in any process or activity connected with proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property." And last is 'actually involved' "whosoever is actually involved in any process or activity connected with proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property." He added - "This will cover all those expressions in connection with and projecting and claiming it as untainted property. The word "projecting or claiming it as untainted property" has been there from the beginning." The Bench enquired, "What is the distinction between 'directly attempts to indulge' and 'knowingly assist'." Mr. Sibal explained with an example - "Suppose I go to a bank, the bank does not accept the money, that would be an attempt. If I help that individual to actually deposit it would be assisting him." The Bench checked with Mr. Sibal if his argument was that the core of the offence under PMLA is "and projecting or claiming it as untainted property" in...

PMLA Interpretation - Laundering Proceeds Of Crime Can't Have Severe Penal Consequences Than Generating Such Proceeds: Sibal To Supreme Court

Sohini Chowdhury

"I believe it is these kinds of laws that have interfered with economic progress in India. People feel that tomorrow the ED will come after me, why should I do business here", Sibal said.

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