PMLA Offences Non-Cognizable In The Sense Local Police Can't Arrest, Says Supreme Court During Hearing

The Court was hearing SG Tushar Mehta's response to the primary contention of the Petitioners that the offence of money laundering under the PMLA is a non-cognisable offence, and that therefore, as a corollary, without obtaining an order from a competent magistrate under section 155 of the Cr. P. C., no investigation could have been initiated under the PMLA. By the Amendment Act of 2005, the erstwhile section 45(1)(a) of the PMLA, which said that 'every offence punishable under this Act shall be cognisable', was deleted.

At the outset, the SG advanced, "This compartmentalisation as cognisable and non-cognisable for the purpose of PMLA is only irrelevant. I will show Your Lordships that money laundering offences are cognisable but it may ultimately lead us nowhere. Because a cognisable offence, as defined under the Cr. P. C., is one where the police officer can arrest a person without warrant. He is not supposed to go to the court, wait till the court hears the matter and then issues the warrant. Whereas in case of the non-cognisable offences, he has to take a warrant and only then he can arrest. Because of the very peculiar nature of the money laundering offence, the very volatile nature of the evidence which can be erased with the click of a button, we have a separate provision for arrest, that is, section 19 of the PMLA. It has several safeguards. It is of a very high standard. 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, 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 when there is a specific contrary provision in section 19, the argument whether it is cognisable or non-cognisable is irrelevant. Because there is a specific provision providing for power of arrest without warrant!"

"In so far as section 45, as it stood then, said that a PMLA offence is cognisable, police officers started using powers of arrest under the PMLA on the ground that it is a cognisable offence. The police said that since it is cognisable offence, in terms of section 2(c) of the Cr. P. C., I have the power to arrest without warrant. But that was not the intention of the legislature. The intention of the legislature was to have a separate team of officers appointed especially for the purpose because of the peculiar nature of the offence. And therefore, with a view to clarify that a police officer is not supposed to arrest or undertake the investigation, the amendment was made, which is now misused! But this was the mischief sought to be remedied by deleting the word 'cognisable'", he continued.

Further, it was the SG's case that not only the authorities are not 'police officers', the scheme of PMLA provides for filing of a complaint before the Special Court. In other words, 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. "To remove this anomaly and only for the said purpose, the said words viz. 'cognisable' were deleted... Interestingly, with a view to obviate any possible misinterpretation, the definition of 'investigation' was also inserted. This is very crucial since in absence of definition of the term "investigation in PML Act" [till the said amendment of 2005], someone can rely upon the definition 'investigation' given in section 2[h] of Cr. P. C...Since the term 'police officer' was creating confusion which was sought to be removed by the amendment made in 2005, the definition of the word 'investigation' was inserted wide section 2[na] in the PML Act which reads as under- (na) 'investigation' includes all the proceedings under this Act conducted by the Director or by an authority authorised by the Central Government under this Act for the collection of evidence", it was submitted.

At this, Justice Dinesh Maheshwari noted, "Even while introducing this 2005 amendment, the heading of section 45- 'offences to be cognisable and non-bailable'- was not changed. The section itself starts with 'notwithstanding anything contained in the Cr. P. C.', so this is not supposed to mean 'cognisable' in terms of as it is understood in the Cr. P. C."

Justice A. M. Khanwilkar added, "The other way to put it is that it is not cognisable under the Cr. P. C. scheme. It is cognisable in the sense that you can arrest without the warrant. But not under the Cr. P. C. so that the police cannot arrest. That is why by the same amendment of 2005, sub-section (1A) was inserted to section 45 correspondingly [section 45(1A) says that Notwithstanding anything contained in the Cr. P. C., or any other provision of this Act, no police officer shall investigate into an offence under this Act unless specifically authorised, by the Central Government by a general or special order, and, subject to such conditions as may be prescribed]....  so it is non-cognisable only qua the local police; the provision is contextual and loosely-worded"

He indicated that sections 65 (the provisions of the Cr. P. C. shall apply, in so far as they are not inconsistent with the provisions of this Act, to arrest, search and seizure, attachment, confiscation, investigation, prosecution and all other proceedings under this Act) and 71 (the provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force) of the PMLA also repeat the same principle.

Justice Khanwilkar remarked, "Even if the specific provision was not there (in PMLA), even 4(2) of Cr. P. C. is good enough. This (section 65 and 71) is only reiteration of the same position"

It was the SG's case that the object which PML Act seeks to achieve, intricacies involved in the offence of money laundering [which would have nation and trans-border implications], the speed at which evidence can be destroyed, the moment the accused comes to know about the investigation, the legislature has provided for a separate architecture which explicitly and by implication oust the provisions of Chapter 12. He submitted that the petitioners cannot insist on the application of Chapter 12 or the other Cr. P. C. provisions in their entirety to the effect that the very purpose with which the PMLA is enacted and the object it seeks to achieve is negated. "Some provisions of Chapter 12, in particular, and of the Cr.P.C., in general, may however, apply in view of section 71 read with section 65 of PML Act. For example, while the procedure to be followed in case of commencement of investigation after an FIR, forwarding the copy of the FIR to the Magistrate etc. will not apply. But any time any right is affected, Cr. P. C. is complied with. If he is being arrested, everything will be supplied. If there is an attachment, he will be supplied the order of attachment. But there is no concept of registration of FIR so as to alert everybody and risk losing evidence. That is a very considered, customised departure. However, 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. But that cannot be the basis to say that entire chapter 12 applies which means you have to register FIR etc. Because of the very nature of offence of money laundering and the potential of the accused to remove even the traces of offence with a view to frustrate the investigation, the legislature has consciously avoided either provision of registering FIR for PMLA offence, supply the FIR to the Magistrate and requiring the authorities to obtain warrant before effecting arrest. Any form of intimation or notice will enable the accused to wipe off the evidence in a matter of literally a few minutes. The legislature has, therefore, very consciously provided for a different customised scheme to ensure effective investigation of the novel offence about which the entire world is troubled. Any interpretation either as canvassed by the petitioners or otherwise requiring the authorities to do anything more than what is specifically stipulated in the Special Act and under the special scheme will defeat the very object of the Act", it was submitted.

"After the writ petitions pending before High Court of Delhi in which interim orders were granted, were transferred by the Supreme Court to itself, the accused started filing Article 32 petitions raising the same grounds. After issuing notice in some matters, orders of 'no coercive steps' were passed in numerous petitions. Various high profile accused in cases involving Sterling Biotech, Bhushan Steel etc. availed such orders which were passed exparte...This order enabled the promoters of Sterling Biotech to scuttle the investigation pending against them and further granted them protection despite being absconders from the law and escaping the country. The petitioners [Sandesaras] suppressed the crucial fact that non-bailable warrants are issued against them and the proceedings under the Fugitive Offenders Act are over and the judgment of the competent special court for declaring as "fugitive offenders" is reserved to be pronounced on 03.07.2019. Shockingly, on the very next day on which the Supreme Court passed the order quoted above, the counsel for the petitioner-fugitives appeared before the special court, relied upon the aforesaid order passed by this Hon'ble Court and successfully thwarted the pronouncement of the order of the special court under the Fugitive Offenders Act. The Petitioner accused place on record the order dated 02.07.19 passed by this Hon'ble Court before the Special Judge who directed ED to seek clarification from the Hon'ble Supreme Court with regard to the effect of the 'no coercive step' order on the Fugitive Economic Offenders Act Application...The said order is an instance of how the magnanimity and the deference of this Hon'ble Court has been misused by high profile accused persons", it was submitted.