The PMLA (Prevention of Money-Laundering Act, 2002) judgment of the Supreme Court (pronounced on July 27, 2022) has been a subject of heated debate among political and legal circles, with the judgment upholding expansive powers of the Enforcement Directorate (ED) Authorities to attach property, conduct search & seizure, and effectuate arrest citing the object of the legislation to create deterrence towards commission of offence related to money-laundering. The article provides a concise outlook towards the reasoning adopted by the Court for constitutionally validating the said powers.
ATTACHMENT OF PROPERTY: SECTION 5
The Section provides power to the ED authority to attach property of any person after recording in writing the reasons to believe that it is in possession as any proceeds of crime. Furthermore, post Amendments to the principal statute, a chargesheet does not need to be necessarily filed for initiating the attachment proceedings. The Court held the said section to be constitutionally valid, citing the balancing norm of the provision by creating safeguards for a person while initiating attachment of property.
VALIDITY OF SECTIONS 17 & 18(SEARCH & SEIZURE) –
Section 17 of the Act (as Amended) gives elaborate powers to the ED to initiate search & seizure proceedings despite there being no prima facie case established and no charge-sheet filed. However, reading the entire scheme of the provision and noting that there are various inbuilt safeguards present in the Section itself (such as exercise of this power by high ranking officials, recording of reasons in writing, due reporting to be carried towards the Adjudicating Authority, etc.) the Supreme Court upheld the constitutionality of Sections 17 & 18 of the Act. The Court, basing its reasoning upon the inbuilt safeguards also highlighted that the Authorities carrying out search & seizure shall be subject to punishment under Section 62 & 63 if are found to be involved in vexatious search and reporting of false information, respectively. Additionally, the Court also observed that the scheme of the section serves the dual purpose of preserving the interest of the person subject to search, as well as at the same time provide efficacious establishment of mechanism regarding money-laundering and attachment of proceeds of crime.
POWER OF ARREST UNDER SECTION 19
Section 19 provides the ED Authorities the power to arrest any person against whom such authority has reason to believe on the basis of material in possession, that he is guilty of an offence punishable under PMLA. Following the same rationale that the Section provides for inbuilt safeguards such as recording in writing by the authority of reasons for belief, informing the grounds of arrest to the person and providing a follow-up of the same to the Adjudicating Authority, the Court concluded that the Section encapsulates the principle of fairness, objectivity and accountability. Furthermore, the Section also provides that the arrested person is required to be produced before Special Court. The court hence gave a stamp of approval to the wide powers of the authorities. It also disregarded the contention of the petitioners, that there needs to be necessarily filing of a complaint before effecting such arrest, and concluding that the said Section to be constitutional and in consonance with the mandate/object of the legislation.
REVERSE BURDEN OF PROOF UNDER SECTION 24 –
Section 24 relating to presumption against the accused and which shifts the burden of proof on the accused, as against the general rule of it being placed upon the prosecution, was held to be constitutional. The court rejected the arguments of the petitioner that the reverse burden of proof in statutes likes UAPA and MCOCA (where the reverse burden has been upheld due to compelling state interest) cannot be equated with the PMLA, 2002. Perusing the object of the Act of creating deterrence from committing the offence of money-laundering, the SC held Section 24 to be constitutional.
VALIDITY OF SECTION 45 (STRINGENT BAIL CONDITIONS) –
One of the essential questions raised in the case was the constitutionality of Section 45 of the 2002 Act (revived by the 2019 Amendment) that restricts the right of the accused to the grant of bail. The twin conditions, as envisaged in this amended section, have been held to have reasonable and direct nexus with the purpose sought to be achieved by the Act, with the court also observing that it does not impose absolute restraint in grant of bail. The Section was thus held to be very much constitutional, while rejecting the arguments of the petitioners that such conditions were arbitrary/unreasonable/violative of Article 14 or 21.
INTERPRETATION OF THE SCHEME AND COMPONENTS OF THE ACT –
The Court further went on to give expansive interpretation to the definition of ‘investigation’ under Section 2 of the Act to elaborate within its ambit the characteristics of inquiry to be undertaken by the Authorities under the Act. Essentially, interpreting the ambit of offence of money-laundering as encapsulated under Section 3 of the statute, the Court held that not just the final act of integrating the tainted property in the formal economy shall be considered as an offence but it shall also include every process and activity, direct or indirect, in dealing with the proceeds of crime.
Significantly, it was held that Enforcement Case Information Report (ECIR) cannot be equated with FIR, making the CrPC provisions concerning FIR inapplicable under this statute.
REMARKS
The judgment has been criticized by many including the political wing of the country for showering validity upon the state’s authority to use ED as a suppressing tool against its political opponents. The criticism further gains strength on the statistical background, as the conviction rate for the persons investigated/charged under the statute is extremely low (under 1%). The 2019 Amendment further enlarged the powers of the ED, and the same were also upheld under this judgment.
It now needs to be seen that what shall be the final outcome to the ED’s unbridled powers under this legislation, as the judgment now faces a review petition filed before the Supreme Court.
Source: Vijay Madanlal Choudhary v. Union of India MANU/SCOR/66284/2022 ( Order dated 27/07/2022)
