PMLA Provides Highest Benchmark For Arrest; Money Laundering Grave Offence As Victim Is National Economy, Says Supreme Court

Mehal Jain

15 Feb 2022 3:03 PM GMT

  • PMLA Provides Highest Benchmark For Arrest; Money Laundering Grave Offence As Victim Is National Economy, Says Supreme Court

    The Supreme Court on Tuesday orally remarked that the fact that the PMLA Act contemplates a maximum punishment of 7 year' imprisonment for the offence of money-laundering does not take away from its gravity, and that the offence may well be "graver" in the sense that it does not affect just one individual but the victim is the national economy.A bench comprising Justices AM Khanwilkar,...

    The Supreme Court on Tuesday orally remarked that the fact that the PMLA Act contemplates a maximum punishment of 7 year' imprisonment for the offence of money-laundering does not take away from its gravity, and that the offence may well be "graver" in the sense that it does not affect just one individual but the victim is the national economy.

    A bench comprising Justices AM Khanwilkar, Dinesh Maheshwari and CT Ravikumar was hearing a batch of petitions challenging the constitutionality of provisions under the Prevention of Money Laundering Act relating to arrest, bail, search, attachment etc.

    The observation of the bench came when Senior Advocate Amit Desai, for the petitioners in the PMLA batch of cases, submitted that since section 4 of the Act caps the maximum sentence for the offence of money-laundering, as defined in section 3, at 7 years, from a legislative perspective, it is not a very grave crime. "The legislative intent in the general law is that if it is up to 7 years, then the ordinary principle is the grant of bail", he had submitted. It was his case that in view of the 7-year term, the twin conditions stipulated in section 45 of the Act restricting the grant of bail are disproportional. Section 45 provides that no person accused of an offence under this Act shall be released on bail unless (i) the Public Prosecutor has been given an opportunity to oppose the application for such release; and (ii) where the Public Prosecutor opposes the application, the court is satisfied that there are reasonable grounds for believing that he is not guilty of such offence and that he is not likely to commit any offence while on bail.
    "7 years alone would not be decisive of the gravity. The very purpose of the enactment is different. Merely because it has provided seven years, maybe because of various other factors, it does not take away the gravity part of it. The gravity, to say the very least- although there cannot be any comparison of gravity like this- but in a sense, the gravity might well be rather graver so far as this offence is concerned, particularly when it does not affect just one individual. The victim is the national economy and, therefore, every individual who belongs to the nation. The gravity would be very different. Prima facie we feel that seven years alone will not be decisive. There are several other factors", observed Justice Dinesh Maheshwari.
    Justice C. T. Ravikumar added, "The offence also affects the integrity and sovereignty of the country."
    Justice A. M. Khanwilkar also noted, "That argument of seven years is not impressing us...It is the legislative policy as regards the nature of the offence that matters."
    Justice Khanwilkar also observed, "If your argument is accepted and the legislature brings about a change and, instead of seven years, makes it life imprisonment, because of the nature of offence? The punishment being limited to 7 years does not automatically reduce the gravity of the offence."
    Justice Maheshwari added, "When you are articulating this line of thought, just one more area for you to ponder over- This proposition is that in a case of seven years, usually the bail is not to be denied. But have you taken into account that another facet of the punishment here is that a minimum three years is also prescribed?"
    "There is a need in every society to deal with crime in law. I cannot stand and even argue for a moment to the contrary that bail is a matter of right in an offence punishable with seven years. If that were to be the case, they would have brought it under 436 (Cr. P. C.) and not 437. They would have made it a bailable offense, if that was the rule. I am not in that extreme proposition before Your Lordships. I cannot be, in the realm of criminal law. I am only canvassing a proposition that when we are dealing with a legislation where the punishment articulated is seven years, restrictions on bail, that were there for the offences in the terrorism and narcotics acts and MCOCA, have been put. And those Acts have a minimum sentence going from 10 years", Mr. Desai clarified.
    "Section 45 takes away the discretion which is already vested under the CrPC with senior judges with experience in the criminal justice system as to when to grant or when to refuse bail. The question is should the legislature take away the discretion which is contemplated and has worked very well wholesomely for all the offences under so many legislations, many of them going up to the punishment in death? Can the legislature say that 'sorry, we will take away the discretion of the sessions court only because I say so, because it is an offence punishable with seven years'?", he continued.
    At this, Justice Khanwilkar asked, "Is discretion inherent in a court of record? I am asking whether grant of bail is inherent in a court of record or a constitutional court? You say legislation cannot make provision to take away jurisdiction of sessions courts. If we accept your argument that the trial court or the special court cannot grant bail when there is an express provision to the effect that the special court will not grant bail if these two conditions are not fulfilled, you can always go to the High Court? Under Article 226 or article 32, it can be done?"
    "After the special judge grants or rejects bail, the prosecution will go in 439 (Cr. P. C.) or whatever jurisdiction. But so far as the accused is concerned, he can always go to High Court. And to the High Court, that limitation of 45 will not apply. When the matter is moved before the special judge, the investigation is always at the nascent stage and an intricate investigation is involved in view of the nature of the offence. Now look at the gravity. Can this technical argument defend that accused? See the economic impact on the country as a whole", continued the judge.
    Mr. Desai advanced, "Your Lordships have to consider whether the seven years criteria, and therefore, 45, satisfy the test of proportionality. The filter is the court. It is the Court that can balance State interest and that of the victim and the accused. Don't take away the ability of the court to bring that balance by bringing in a restriction in an offence of 7 years and leave things in the hands of the investigating agency. To what extent do we allow investigating agencies to arrest? Because then it becomes pre-trial punishment! Amid the COVID pandemic, it was Your Lordships' order from the last year that if the punishment is upto 7 years, don't arrest!"
    Justice Khanwilkar pointed out that that order was in the context of general law, unlike the PMLA which is a special legislation.
    "I am showing general law which is in context of Article 21 and contrasting it with 45. 45 must fail! It does not recognise the seniority of the judge who is a special judge constituted for this special offence! Therefore, if we have to go back to the 21 doctrine, which has felt that senior judges have the right to balance, why will you take away that? I am not saying that 7 years makes it a bailable offence. But the question is whether 21 is being violated or not? In the 60s and 70s, prosecutions regarding customs and smuggling were very common, but in all those cases, the discretion of court u/s 437, 439 was not taken away. Your Lordships did not say in any of your judgments that the court will not grant bail until these conditions are fulfilled", submitted Mr. Desai.
    "My argument is that if the sentence is up to 7 years, then the presumption which is applicable in case of extreme punishment of life sentence or death that the accused will not be available to attend the trial, that presumption is not available here. Then why take away the ability of the court to apply its mind to the facts of a particular case?", he continued.
    Justice Khanwilkar observed that the argument of the other side is bound to be that this is a special legislation and in the background in which it was introduced, these rigourous conditions are essential
    Mr. Desai responded, "The question which arises for your lordships' consideration is that merely because the legislation happens to be a special legislation or a legislation creating a special offence, that does not mean that the bail conditions have to be restrictive. Your Lordships are familiar there are hundreds and thousands of statutes which create special offences under the law and all of them are governed by the provisions of the Cr. P. C. and the bail principles under the Cr. P. C. Merely because it comes in a category of special legislation is not sufficient for the purpose of overriding all the principles of Article 21 when it comes to bail. The distinction to be drawn is in the context of the nature of the crime as in the context of the relationship to the question of bail. There can be a reasonable restriction because one of the highest duties is to ensure that the accused is available to face the trial. If the accused is not available, administration of justice fails. When the TADA, MCOCA, Narcotics line of cases involved special restrictive provisions, it was on the basis of the apprehension that the accused would not be available to face trial. The 3 elements relevant in this regard are: nature of the crime- in a 302 case, ordinarily your lordships have held that we will not consider bail; nature of the punishment- under 437(1), Cr. P. C., the magistrate is barred from granting bail in offences punishable with life or with death; and the nature of the offenders in those kinds of offences- who don't have roots in society and therefore the apprehension that they are likely to abscond. That is why the very, very restrictive provision on bail in those kinds of statutes. PMLA might be a special legislation but such rigour is not necessary in the manner in which it is being implemented."
    "In many of the PMLA cases, it is not just the principal accused or the principal beneficiary but their employees and other people who have not benefited who are sitting in jail for a long period of time, all their assets attached, all bank accounts attached and there is absolutely no ability under the scheme of the law to maintain their families...Their roles are very limited. And some of them are mere employees in companies who have earned 20,000, Rs.25,000, Rs.50,000 salary. They might have played some role for which the agency may say that this particular act is knowingly assisting in money laundering and therefore you are arrested. These people are also languishing in jail. With no salary, the burden is on the family, they are completely finished. They are not the beneficiaries of the crime. And the power of the court to consider drawing a distinction between who is the principal accused or the principal beneficiary and those who may have been smaller people and the discretion to consider their role is taken away by these 2 conditions to be satisfied as per 45. It is in these kinds of cases where we go before the court and plead 21 rights, saying that this is not so serious. Because the minimum sentence is three months, a person might get away with three months if found guilty, but they spent two years, three years, four years in jail. Under Cr. P. C., there is a provision to protect the rights of under trial prisoners, that if 50% of the sentence is completed, you will be granted bail. So the discretion of the court which 45 takes away has to be brought back, to do the Article 21 balancing!", Mr. Desai urged
    [Power of arrest u/s 19, PMLA] '19 ensures that no action is taken until the highest officer records his satisfaction of reason to believe involvement in commission of offence; highest standard provided'- SC
    Mr. Desai next highlighted the need for having guidelines which ascribe to Article 21 in the exercise of the power of arrest- "As in other matters, in criminal investigations, Your Lordships have given general guidelines for them to function. If Your Lordships give guidelines, magistrates/special courts can assess what to look at apart from the threshold of involvement in crime. Because the consequence of 19 is felt in 45. Without any preliminary enquiry, within 24 to 48 hours of NCR being registered, people are arrested and kept in custody. We are seeing it everyday."
    He took the bench through similar guidelines laid down by the top court in the Joginder Kumar and Arnesh Kumar cases.
    Perusing section 19, Justice Khanwilkar observed, "The officer of the highest rank is entrusted with the responsibility of arrest. He has to record reasons in writing for his belief that the person against whom action is required is guilty of an offence punishable under the Act. The highest benchmark is provided. This is not like the ordinary general law where on the basis of suspicion you are arrested. This is in favour of article 21."
    Section 19(1) says If the Director, Deputy Director, Assistant Director or any other officer authorised in this behalf by the Central Government by general or special order, has on the basis of material in his possession, reason to believe (the reason for such belief to be recorded in writing) that any person has been guilty of an offence punishable under this Act, he may arrest such person and shall, as soon as may be, inform him of the grounds for such arrest.
    Mr. Desai indicated the phrase "any other office authorised in this behalf" to submit that the power may be delegated to lower officers also. Justice Khanwilkar observed that any such officer be akin to the designation of a director, deputy director or assistant director and "not a peon or a clerk". Also, the judge indicated prior permission in writing of the director is required even when such authorised officer goes to make arrests.
    Mr. Desai advanced, "Is arrest necessary in every case? Go, file complaint and prosecute, don't make arrest pre-trial punishment everywhere. Joginder and Arnesh say if the investigation can be without deprivation of liberty, do it without arrest. There is no need to exercise power of arrest merely because you have power! The exercise of discretion appears to be uncannelised!"
    Justice Khanwilkar observed, "A provision such as 19 is in larger public interest. Because if not arrested, they will leave the country. You want us to say that wait till the investigation is completed?"
    Thereafter, Mr. Desai sought to indicate that Article 19(1) employs the phraseology "may arrest" and not "shall arrest". Justice Khanwilkar noted, "The use of the word 'may' is in the context of whether satisfaction has been recorded as to guilt. Once it is recorded, then the arrest comes. This is the discretion. Otherwise, you are asking us to interpret the provision differently."
    The arguments will continue tomorrow.

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