New Delhi: The Supreme Court on Wednesday upheld the validity of stringent provisions of the Prevention of Money Laundering Act related to power exercised by the Enforcement Directorate on arrest, search and seizure of ill-gotten wealth, posing a threat to economic stability, as it observed that money laundering is no less heinous than terrorism.
A bench, headed by Justice A.M. Khanwilkar and comprising Justices Dinesh Maheshwari and C.T. Ravikumar, said: “The international bodies have been discussing the menace of money laundering on regular basis for quite some time; and strongly recommended enactment of stringent legislation for prevention of money-laundering and combating with the menace thereof including to prosecute the offenders and for attachment and confiscation of the proceeds of crime having direct impact on the financial systems and sovereignty and integrity of the countries.”
It added that money laundering is one of the heinous crimes, which not only affects the social and economic fabric of the nation, but also tends to promote other heinous offences, such as terrorism, offences related to NDPS Act, etc.
The top court affirmed the validity of Sections 5 (attachment of property), 8(4) (taking possession of attached property),3 (definition of money laundering), 17 (search and seizure), 18 (search of persons), 19 (powers of arrest), 24 (reverse burden of proof), 45 (offences being cognisable and non-bailable and twin conditions for grant of bail by court), 50 (statements made to ED officials), and 44 (offences triable by special court).
However, the top court left the question whether some of the amendments to the PMLA, 2002 could not have been enacted by the Parliament by way of a Finance Act, to be considered by a larger bench.
The bench said the offence under Section 3 of the 2002 Act is dependent on illegal gain of property, as a result of criminal activity relating to a scheduled offence and it is concerning the process or activity connected with such property, which constitutes the offence of money laundering.
“The authorities under the 2002 Act cannot prosecute any person on notional basis or on the assumption that a scheduled offence has been committed, unless it is so registered with the jurisdictional police and/or pending enquiry/trial including by way of criminal complaint before the competent forum,” it added.
It further added that if the person is finally discharged/acquitted of the scheduled offence against him is quashed by the court, there can be no offence of money laundering against him or any one claiming such property being the property linked to stated scheduled offence through him.
The top court said: “Section 3 of the 2002 Act has a wider reach and captures every process and activity, direct or indirect, in dealing with the proceeds of crime and is not limited to the happening of the final act of integration of tainted property in the formal economy. The explanation inserted to Section 3 by way of amendment does not expand the purport of Section 3 but is only clarificatory in nature.”
The bench also declared that supply of a copy of ECIR (Enforcement Case Information Report) in every case to the accused is not mandatory, if the ED, at the time of arrest, discloses the grounds of such an action.
The top court upheld the twin conditions for bail as mentioned in Section 45 of the Act. “It was argued that the twin conditions of bail contained in Section 45 of the 2002 Act would act grossly disproportionate and illogical qua a person who is not directly connected with the scheduled offence but merely an accessory after the fact. Even this argument needs to be stated to be rejected for the same reason.”
The bench said the Parliament was competent to amend the provision in 2018 even after the Nikesh Tarachand Shah case judgment passed by the apex court, held those conditions as unconstitutional.
The top court judgment came on over 200 writ petitions including former Maharashtra Home Minister Anil Deshmukh, Congress MP Karti Chidambaram and former J&K Chief Minister Mehbooba Mufti among others.
A battery of senior advocates — Kapil Sibal, Siddharth Luthra, A.M. Singhvi, Mukul Rohatgi, Amit Desai – represented various parties in the matter. The Central government was represented by Solicitor General Tushar Mehta.
Not mandatory for ED to supply ECIR, disclosing ground of arrest enough: SC
The Supreme Court on Wednesday said supply of a copy of Enforcement Case Information Report (ECIR) in every case to the person concerned is not mandatory, while holding it is not equivalent to an FIR.
A bench, headed by Justice A.M. Khanwilkar and comprising Justices Dinesh Maheshwari and C.T. Ravikumar said: “Supply of a copy of ECIR in every case to the person concerned is not mandatory, it is enough if ED at the time of arrest, discloses the grounds of such arrest.”
The bench said in view of a special mechanism envisaged by the Prevention of Money Laundering Act (PMLA), the ECIR cannot be equated with an FIR. “ECIR is an internal document of the ED and the fact that FIR in respect of scheduled offence has not been recorded does not come in the way of the authorities referred to in Section 48 to commence inquiry/investigation for initiating ‘civil action’ of ‘provisional attachment’ of property being proceeds of crime,” it added.
It said the argument of prejudice pressed into service by the petitioners for non-supply of ECIR deserves to be answered against the petitioners. “For, the arrested person for offence of money laundering is contemporaneously informed about the grounds of his arrest; and when produced before the Special Court, it is open to the Special Court to call upon the representative of the ED to produce relevant record concerning the case of the accused before him and look into the same for answering the need for his continued detention,” it added.
The petitioners’ counsel had argued that as per present situation, the ED can arrest an individual on the basis of an ECIR without informing him of its contents, which is per se arbitrary and violative of the constitutional rights of an accused. It was vehemently argued that in some cases, the ECIR is voluntarily provided, while in others it is not, which is completely arbitrary and discriminatory.
Senior advocate Kapil Sibal, representing one of the petitioners, while referring to the definition of “money laundering” under Section 3 of the PMLA, submitted that the ED must satisfy itself that the proceeds of crime have been projected as untainted property for the registration of an ECIR or the application of the PMLA.
The top court said that ECIR cannot be equated with an FIR which is mandatorily required to be recorded and supplied to the accused. “Revealing a copy of an ECIR, if made mandatory, may defeat the purpose sought to be achieved by the 2002 Act including frustrating the attachment of property (proceeds of crime),” it said.
It held that non-supply of ECIR, which is essentially an internal document of the ED, cannot be cited as violation of constitutional right. “This is compliant with the mandate of Article 22(1) of the Constitution. It is not unknown that at times FIR does not reveal all aspects of the offence in question. In several cases, even the names of persons actually involved in the commission of offence are not mentioned in the FIR and described as unknown accused,” it noted.
The bench said even, the particulars as unfolded are not fully recorded in the FIR, despite that, the accused named in any ordinary offence is able to apply for anticipatory bail or regular bail, in which proceeding, the police papers are normally perused by the court concerned.
It also noted that in some cases, the ED has furnished a copy of ECIR to the person before filing of the complaint. “That does not mean that in every case the same procedure must be followed. It is enough, if the ED at the time of arrest, contemporaneously discloses the grounds of such arrest to such person,” it said.
The top court noted that ECIR may contain details of the material in possession of the authority and recording satisfaction of reason to believe that the person is guilty of money laundering offence. “If revealed before the inquiry/investigation required to proceed against the property being proceeds of crime including to the person involved in the process or activity connected therewith, may have deleterious impact on the final outcome of the inquiry/investigation,” said the bench.
The ED had submitted that the ECIR is an internal document created by the department before initiating penal action or prosecution against the person involved with process or activity connected with proceeds of crime.
The top court judgment came on more than 200 petitions challenging various provisions of the PMLA.
