Supreme Court upholds stringent Money Laundering Act provisions as not arbitrary

A signboard is seen outside the premises of Supreme Court in New Delhi, India, September 28, 2018. REUTERS/Anushree Fadnavis - RC1B5CE56370

The Supreme Court on July 27 upheld the stringent provisions under the Prevention of Money Laundering Act (PMLA) in its judgment on a batch of petitions challenging amendment to the law.

The ruling from the apex court comes on batch of over 240 petitions that challenged the constitutional validity of certain provisions of the Prevention of Money Laundering Act (PMLA) that give wide powers to the Enforcement Directorate (ED) pertaining to search, seizure, arrest, investigation, and attachment of properties, among others. The twin-condition for bail was also under challenge before the court.

The court rejected the challenge to the provisions dealing with the interpretation of the term proceeds of crime, scope of enquiry by the ED, and power of the ED to conduct search and seizures and make arrests.

In a significant ruling, the top court also stated that the Enforcement Case Information Report (ECIR) cannot be equated with a First Information Report (FIR) given that the ECIR is an internal document for the ED. Supply of the ECIR to the accused is not mandatory and the intimation of the grounds for arrest by the ED to the accused is sufficient.

Moreover, the court said that ED officials are not police officers and as such statements made before these officials as part of the investigation are not hit by the protection against self-incrimination enshrined under the Articles 20 and 21 of the Constitution.

The court said that the PMLA provides essential safeguards against misuse of law.

The court said that the provisions "do not suffer from the vice of arbitrariness".

The top court, however, did not pass a ruling on the question of whether the amendment to the law could have been made by the Parliament under a money bill and the issue is left open for a seven-judge bench to hear and decide along with similar pending cases.

The case

The petitioners had challenged these provisions on the grounds that they violate fundamental rights.

The case for challenging the provisions of the PMLA hinged on the argument that the ED is conferred with a wide scope of powers and the Act provides for stringent rules.

The issues raised before the court in these petitions touched upon the provision that allows for arrest without supply of ECIR in money laundering cases. Ordinarily, every person accused of a crime is entitled to receive a copy of the FIR as a matter of right. This requirement vis-à-vis the ECIR is done away with in the PMLA as it stands today.

Stringent bail conditions under the PMLA were also challenged before the Supreme Court, along with the provision that allows for statements made before the investigating officer to be used as evidence against the accused during a trial.

The Constitution of India protects every person against self-incrimination under the Articles 20 and 21 and under normal criminal trials, confessions made before the investigating agency cannot be relied on as evidence during the trial. The PMLA departs from this practice and goes against the constitutional guarantee, the petitioners had argued before the Supreme Court.

The three-judge bench headed by Justice AM Khanwilkar also heard the parties on the issue of the ED's power to attach properties, power to conduct raids, make immediate arrests, as well as the lack of clarity on the meaning of certain important terms such as proceeds of crime.

The petitioners alleged misuse of the law for political vendetta. It is to be noted that many opposition leaders, including Sonia Gandhi, Rahul Gandhi, P Chidambaram, Farooq Abdullah, to name a few, face ED action.

While defending the amendments to the PMLA that conferred such a wide scope of powers on the ED and made the provisions more stringent, the government said that the amended law was in line with India's global commitments.

Citing examples of the cases against fugitives Mehul Choksi, Nirav Modi, and Vijay Mallya, the government counsel said that it was owing to the orders passed by courts under the PMLA that an amount of Rs 18,000 crore was confiscated by the ED and returned to the banks.