PMLA Interpretation : 'Whole Act An Attempt To Aggrandize Power Of State', Kapil Sibal Argues In Supreme Court

The Supreme Court on Wednesday commenced hearing on the batch of petitions concerned with the interpretation of the Prevention of Money Laundering Act.Senior Advocate Kapil Sibal enumerated the broad propositions for consideration by the bench of Justices A. M. Khanwilkar, Dinesh Maheshwari and C. T. Ravikumar.(1) How can there be a penal statute in the absence of procedure on how to commence investigation?"Your Lordships are supposed to presume as a matter of law that the Cr. P. C. is a procedure established under the law for the purpose of life and liberty. It is the procedure established by law for the purpose of Article 21. It prescribes two methods of investigation– cognisable and non-cognisable offences. In case of non-cognisable offences, the procedure applied is section 155 and for the cognisable, the procedure applied is section 154. Under the PMLA, there is no such procedure. You have neither an FIR, nor a 155 procedure. So how can you have a penal statute in the absence of a procedure as to how you commence the investigation?", submitted Mr. Sibal."The PMLA has an internal manual where they record an ECIR- Enforcement Case Information Report. That is something which is kept by the ED to themselves and not revealed to anybody. There is a matter before the Delhi High Court where the ED says that I am not obliged to reveal the ECIR to the prospective accused. In other words, I can prosecuted without an FIR, without a magisterial oversight, without telling him anything, only pursuant to an ECIR which I shall keep in my office. In some cases, we have had orders for giving us the copy of the ECIR and what we find is that the ECIR is nothing but an FIR though they do not call it that", he continued.(2) Not generating 'proceeds of crime', but legitimising them is an offence under the PMLA; Something beyond the FIR under the predicate offence needs to be established for the ED to take cognisance"The third broad proposition that we are going to advance is that PMLA deals with proceeds of crime pursuant to an act of criminality. So there must be a predicate offence- If there is an act of corruption, then the money which is taken in respect of corruption are the proceeds of crime. But generating proceeds of crime is not an offence under the PMLA, the offence is by attempting to or by legitimising them and showing them as legitimate money. If I indulge in an act of corruption and keep the money at my home, it is not an offence under the PMLA. But the moment I invest it in property and show it in my income tax returns, it amounts to money laundering. Your Lordships will have to decide at what stage this Act can come in. At what stage can the officer under PMLA take cognisance? The money is tainted but you show it as untainted and the act of showing it as untainted is money laundering. The ED must have some evidence to show that tainted money has been converted into untainted money. Without that I cannot be prosecuted. So how do they register an ECIR without that evidence? What is that stage they can prosecute me?", submitted Mr. Sibal.Justice Khanwilkar observed, "So legitimising tainted money is something like destroying evidence of crime committed. That is what has been made an offence here""It is an act of destruction by changing the character of the proceeds of crime", responded Mr. Sibal.Continuing, he advanced, "Suppose I get money to cheat somebody or kill somebody and I keep that money and I am caught, then I will be prosecuted for cheating or murder but I will not be prosecuted under PMLA. If I convert it into jewellery and show it in my tax returns as jewellery and that link is established, then I will be prosecuted under PMLA. Something beyond the FIR under the predicate offence needs to be established for the ED to commence!""And that information must be given to me that now you are showing this as untainted money. Otherwise, how will I go to the court in anticipatory bail? That information needs to be given to me in the form of an FIR or under 155 for my right to defend myself. Otherwise it is a violation of 21. There is no procedure for knowledge, no procedure for explanation under the Act. The moment there is a predicate offence, they register an ECIR. It is not the same thing! I can understand if there is a show cause notice. Under the GST, there is the same problem. Under Customs Act, it is different. But under the Customs Act, I am importing goods which are prohibited, say gold, and I get caught. I am aware why I am being prosecuted. But none of this happens under PMLA", he submitted.Justice Khanwilkar noted, "If you are informed about the source and contents of the information which has come to the knowledge of the official, there is possibility that by the time you make explanation and consideration takes place, the proceeds will be altered in different form and different places""That is the same for cheating, that is the same for criminal breach of trust. Once I convert it from tainted...

PMLA Interpretation : 'Whole Act An Attempt To Aggrandize Power Of State', Kapil Sibal Argues In Supreme Court

Mehal Jain

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