SC upholds ED’s power to arrest, attach property, search & seizure under PMLA

PTI, Jul 27, 2022, 4:32 PM IST

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New Delhi: In a significant verdict, the Supreme Court on Wednesday upheld the Enforcement Directorate’s (ED) powers relating to arrest, attachment of property involved in money laundering, search and seizure under the Prevention of Money Laundering Act (PMLA) that were challenged by multiple petitioners including politician Karti Chidambaram.

Observing that it is a common experience world over that money laundering can be a “threat” to the good functioning of a financial system, the apex court upheld the validity of certain provisions of the PMLA, underlining it is not an “ordinary offence”.

The Centre has been insisting money laundering is an offence that is committed not only by unscrupulous businessmen but also terror organisations, posing a grave threat to national security.

A bench headed by Justice A M Khanwilkar said authorities under the 2002 Act are “not police officers as such” and the Enforcement Case Information Report (ECIR) cannot be equated with an FIR under the Code of Criminal Procedure (CrPC).

The bench, also comprising Justices Dinesh Maheshwari and C T Ravikumar, said supply of an ECIR copy in every case to the person concerned is not mandatory and it is enough if ED, at the time of arrest, discloses the grounds of such arrest.

The petitioners in the case had raised the issue of the contents of ECIR not being disclosed to the accused.

The court was hearing a clutch of over 200 petitions filed by individuals and other entities questioning various provisions of the PMLA, a law which the opposition has often claimed has been weaponised by the government to harass its political adversaries.

The court said section 45 of the PMLA, which deals with offences to be cognisable and non-bailable and have twin conditions for bail, is reasonable and does not suffer from vice of arbitrariness or unreasonableness.

“The challenge to the constitutional validity of section 19 (power to arrest) of the 2002 Act is also rejected. There are stringent safeguards provided in section 19. The provision does not suffer from the vice of arbitrariness,” the bench said in its 545-page judgement.

It said section 5 of the Act, which relates to attachment of property involved in money laundering, is constitutionally valid.

“It provides for a balancing arrangement to secure the interests of the person as also ensures that the proceeds of crime remain available to be dealt with in the manner provided by the 2002 Act,” the bench said.

A host of top opposition politicians including Congress leaders Sonia Gandhi, Rahul Gandhi, P Chidambaram, his son and MP Karti Chidambaram, Shiv Sena’s Sanjay Raut, National Conference leader Farooq Abdullah, TMC MP and West Bengal Chief Minister Mamata Banerjee’s nephew Abhishek Banerjee and Delhi minister Satyendar Jain are among those under the ED’s lens for alleged money laundering.

It said the question as to whether some of the amendments to PMLA could not have been enacted by Parliament by way of a Finance Act has not been examined and is left open to be examined along with or after the decision of a larger bench of seven-judges.

The bench said section 24 of PMLA has reasonable nexus with the purposes and objects sought to be achieved by the Act and it cannot be regarded as unconstitutional.

Section 24 says when a person is accused of having committed the offence of money laundering, the burden of proving that proceeds of crime are untainted property shall be on the accused.

It said section 63 of the Act, which deals with punishment regarding false information or failure to give information, does not suffer from any vice of arbitrariness.

“The argument about proportionality of punishment with reference to the nature of scheduled offence is wholly unfounded and stands rejected,” the bench said.

The court said it does not find merit in the challenge to section 44, which deals with offences triable by special courts, being arbitrary or unconstitutional.

“The inclusion or exclusion of any particular offence in the Schedule to the 2002 Act is a matter of legislative policy; and the nature or class of any predicate offence has no bearing on the validity of the Schedule or any prescription thereunder,” it said.

The bench said in view of the special mechanism envisaged by the 2002 Act, 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 said.

The bench, however, conceded that petitioners are justified in expressing serious concern “bordering on causing injustice” owing to the vacancies in appellate tribunal.

“We deem it necessary to impress upon the executive to take corrective measures in this regard expeditiously,” it said.

The bench said, “The process envisaged by section 50 of the 2002 Act is in the nature of an inquiry against the proceeds of crime and is not ‘investigation’ in strict sense of the term for initiating prosecution; and the authorities under the 2002 Act (referred to in section 48), are not police officers as such.” Section 50 deals with powers of authorities regarding summons, production of documents and to give evidence.

The bench said statements recorded by authorities under the 2002 Act are not hit by Article 20(3) or Article 21 of the Constitution.

While Article 20 (3) says that no person accused of any offence shall be compelled to be a witness against himself, Article 21 deals with protection of life and personal liberty.

The apex court said section 3 of PMLA, which deals with offence of money laundering, has a wider reach and captures every process and activity in dealing with proceeds of crime and is not limited to the happening of final act of integration of tainted property in the formal economy.

“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 said.

“If the person is finally discharged/acquitted of the scheduled offence or the criminal case against him is quashed by the court of competent jurisdiction, 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,” it said.