Supreme Court Judgment On Interpretation Of PMLA Provisions Expected Soon : A Recap Of The Main Issues

Upon reopening, the Supreme Court is expected to pronounce its judgment in the batch of petitions concerned with the interpretation of the Prevention of Money Laundering Act, 2002. Over a span of almost one and a half months, the Supreme Court heard arguments of the Senior Counsels representing the petitioners, the Solicitor General of India and the ASG appearing on behalf of the Enforcement Directorate, in this regard.A Bench comprising Justices A.M. Khanwilkar, Dinesh Maheshwari and C.T. Ravikumar originally commenced with the hearing on 27.10.2021 and then again on 25.01.2021. In the interim, the Bench could not take up the matter, inter alia, due to paucity of time, as it was elaborately hearing submissions in Zakia Jafri's plea pertaining to claims of larger conspiracy in the 2002 Gujarat riots. However, since 25.01.2022, the Bench heard the matter almost regularly, till it reserved its judgment on 15.03.2022.As we await the Apex Court's judgment, it might be beneficial to recapitulate the propositions put forth by the petitioners for its consideration.Absence of procedure to commence investigation and summoningUnlike the Cr.P.C.,the PMLA, also a penal statute, lacks procedure for commencing investigation and also that for summoning. The same is in the teeth of the protection to life and liberty guaranteed under Article 21 of the Constitution of India. The scheme of PMLA excludes the application of provisions of Cr.P.C. However, it is trite that the vacuum in special legislations is to be filled up by the provisions of Cr.P.C. Moreover, Section 65 PMLA also contemplates application of Cr.P.C. as long as it is not inconsistent with the provisions of PMLA.Accused is not made aware of the contents of the ECIR The workings of the PMLA is dependent on the internal manual which requires recording of Enforcement Case Information Report (ECIR), but does not mandate sharing of the ECIR with the prospective accused. This leaves the registration of the ECIR at the whims and fancies of the ED officers. It also jeopardizes the right to liberty under Article 21 of the Constitution. In Youth Bar Association v. Union of India the Apex Court had ruled that an accused is entitled to a copy of FIR and the same requirement ought to be extended to ECIRs. PMLA arrest process is referred to as the Frankenstein's Monster, wherein no disclosure is made about the material on the basis of which arrest is made by the authorities.There is no Magisterial oversightThe legitimacy of Section 45 PMLA was also assailed on the ground that it renders it impossible for the Magistrate taking cognizance under Section 157 of the Cr.P.C. to know why the accused had been arrested.Twin bail conditions Exists Without Safeguards The twin conditions under Section 45 PMLA pushes the threshold to secure bail higher, which, in essence, imposes restrictions, in the nature of preventive detention without the safeguards of preventive detention. Unfettered discretion with no procedural safeguards violates protection envisaged under Article 21. At the pre-complaint stage, the accused has no means to prima facie satisfy the Court that they are not guilty. And also at the post-complaint stage, the accused has no opportunity to rebut as there is no cross-examination or evidence at the said stage.Even when accused not arrested under Section 19 PMLA, twin condition is applied Arrests are frequently made when the accused appear on being issued summons, before the ED officials and not following the procedure under Section 19 PMLA dealing with power to arrest. As a matter of concern, even in such cases of arrest, the accused is required to meet the twin test. If the same is, at all, permissible needs to be settled by the Apex Court.The punishment and twin bail conditions are disproportionalThough the punishment for money laundering is a maximum term of 7 years, which from a legislative perspective, is not a grave crime, the standard for securing bail, by virtue of the twin condition in Section 45 PMLA has been made extremely high. Thus, it fails the test of proportionality.Legitimising 'proceeds of crime' is the offence under PMLA Generation of 'proceeds of crime' from the predicate offence is not punishable under PMLA. Even concealment of "proceeds of crime" by itself would not qualify as money laundering. What is punishable, then? It is the act of legitimising the tainted money. The projection of the money as untainted and its integration into the economy would constitute an offence of money laundering. The ED registers ECIR merely on the basis of the predicate offence, without any evidence to show that either attempts have been made to legitimise the proceeds of crime or the tainted money has actually been legitimised. Because of ambiguity in provisions of PMLA, scheduled offences committed 20 years ago are being investigated for money laundering.Statement of accused admissible in evidence under Section 50 PMLA is used for predicate offense Once ECIR is...

Supreme Court Judgment On Interpretation Of PMLA Provisions Expected Soon : A Recap Of The Main Issues

Sohini Chowdhury

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Sohini Chowdhury

Supreme Court Judgment On Interpretation Of PMLA Provisions Expected Soon : A Recap Of The Main Issues

Sohini Chowdhury

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Sohini Chowdhury

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