PMLA

Adjudicating Authority under PMLA: An Overview

Adjudicating Authority under PMLA

The Prevention of Money Laundering Act 2002 (PMLA) was enacted in 2002 and enforced on 1st July 2005. The legislative intent behind such enactment was the international commitment made by India to the United Nations being the signatory to the declaration on the need of tackling money laundering, passed in the  ‘Special Session on Countering World Drug Problem Together’ in 1988.
To fulfil the objective of Act i.e., preventing money laundering in India, it is important that there exists an authority empowered to effectuate the provisions of the Act, and that is when the Adjudicating Authority steps in, the provisions in respect of which have been enumerated in Section 6 of the Act. Therefore it is essential to be aware to the Adjudicating Authority under PMLA, its composition and powers which shall be discussed in the present article.

Adjudicating Authority under PMLA: Meaning

Section 2 of PMLA defines Adjudicating Authority (AA) as an authority appointed under Section 6(1) of the said Act.

 Section 6 (1) of the Act states that the Central Government shall appoint an Adjudicating Authority by notification for exercising jurisdiction, powers and authority conferred by or under this Act.

The definition of an Adjudicating Authority under PMLA can be better understood through the judgement in the case titled Pareena Swarup vs Union of India.Writ Petition NO.634 OF 2007 dated 30th September 2008, the brief facts of the case are – 

The petitioner in the case had filed a writ petition under Article 32 of the  Indian Constitution before the Hon’ble Apex Court seeking a  declaration of several provisions of the PMLA 2002, including Section 6  that dealt with Adjudicating Authority and claimed it to be unconstitutional, submitting that the provisions of the Act are so provided that there may not be independent Judiciary for deciding the cases under the Act, since the  Chairperson and the Members are to be selected by the selection committee presided by the Revenue Secretary.

The petitioner further contended that the statutory provisions of the Act and the rules, particularly the one related to the constitution of the Adjudicating Authority and Appellate Tribunal, are in violation to the basic constitutional guarantee of a free and independent Judiciary, beyond the legislative competence of the Parliament.

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 It was ultimately pleaded by the petitioner that the provisions brought forward by her must be quashed on the ground of them being unconstitutional, inconsistent with the separation of power and interfering with the judicial functioning of the Tribunal as ultra vires of the Indian Constitution.

Deciding upon this matter the Apex Court held the following –

“The ‘Adjudicating Authority’ is a body of experts from different fields to adjudicate on the issue of confirmation of Provisional attachment of property involved in money laundering. The functions of adjudicating authority are civil in nature to the extent that it does not decide on the criminality of the offence nor does it have power to levy penalties or impose punishment. Adjudication is a function which is performed by Executives under many statutes.”

The above-mentioned extract from the judgement can help in providing a clarity on the definition of an Adjudicating Authority under PMLA.   

Adjudicating Authority under PMLA: Composition

An Adjudicating Authority must consist of a

  • A Chairperson and
  • Two other Members

wherein the person having experience in the law shall have the following qualification to qualify as a member –

  • The person must be qualified for appointment as District Judge; or
  •  The person has been a member of the Indian Legal Services along with holding   a post in Grade I of that service;

The person having experience in the field of finance, administration or accounting unless he has such qualifications as may be prescribed.

The chairman shall be appointed by the Central Government

Jurisdiction

The provisions regarding the jurisdiction of the adjudicating Authority are discussed below.

  1. The jurisdiction of the Adjudicating Authority  can be exercised by Benches
  2.  The Chairperson of the Adjudicating Authority under PMLA shall constitute a Bench having 1 or 2 Member as deemed fit by the Chairperson.
  3.  The Adjudicating Authority’s Benches shall ordinarily be seated at New Delhi and at other places as the Central Govt. may specify through a notification upon consulting with the Chairperson.
  4. The Central Government shall also specify, through a notification, the areas relating to which each Bench of the Adjudicating Authority may exercise jurisdiction.
READ  Role of Financial Institutions in Tackling Money Laundering

The Chairperson is empowered to transfer a Member from one Bench to another Bench.

 In case, at any stage of the hearing of any matter or case, if it seems to the Chairperson or Member depending on the nature of the case should be heard by a Bench consisting of two Members, the Chairperson can transfer the same or, it can be referred to him for transfer, to such Bench as deemed fit by the Chairperson.

Adjudicating Authority under PMLA: Term of Office

  • The term of holding the office for the Chairperson and the Members would be 5 years from the date of entry in the office or post the attainment of 62 years of age.
  • The member’s salary, allowance payable or any other terms or conditions with regard to his services shall be complied with in the manner as prescribed.
  • It must be noted that the salary and allowances or the other terms and conditions of service of the Member shall not be varied to his disadvantage post appointment.
  • In the event of the occurrence of a vacancy in the office of the Member or Chairperson due to any reason other than temporary absence, Central Government shall appoint another person according to the provisions of this Act to fill the vacancy, and the proceedings may be resumed before the AA from the stage at which the vacancy is filled.
  • The Chairperson or any other Member can opt for resignation from the office upon giving written notice under his hand addressed to the Central Govt.
  • The Chairperson or any other Member must continue to hold the office until the expiration of 3 months from the date of the receipt of the notice of resignation to the Central Govt.[1]  or until a person duly appointed as his successor makes an entry in his office or until the expiration of his term of office, except in cases where he has been permitted to relinquish his office sooner by the Central Govt.
  • The removal of the Chairperson or any other Member from his office shall not take place except by order of the Central Govt.  after giving the necessary opportunity of hearing.
  • If a vacancy in the office of the Chairperson has occurred due to his resignation,  death, or otherwise, the senior-most Member will act as the Chairperson of the Adjudicating Authority till a  new Chairperson has filled such vacancy and enters upon his office pursuant to his appointment as per the provisions of this Act.
  • In the event of the Chairperson’s inability towards discharging his functions due to illness, absence or any other cause, the senior-most Member would be discharging the same till the date of the resumption of the duties of such Chairperson.
READ  Provisional Attachment Order Under the Prevention of Money Laundering Act, 2002

Powers

The powers of the Adjudicating Authority shall not be bound by the procedure prescribed in the Code of Civil Procedure, 1908, but would be as per the principles of natural justice and, with regard to the provisions of this Act, the Adjudicating Authority shall be empowered for regulating its own procedure.

Conclusion

It is an undeniable fact that Adjudicating Authority plays a significant role in the prevention of money laundering. The clarity of the relevant provisions regarding the Adjudicating Authority under PMLA can facilitate the smooth functioning and faster disposal of the cases under PMLA, which can, in turn, help in combating money laundering in India, thereby fulfilling the objective of this Act. 

Also Read:
Different Stages of Money Laundering
Attachment of Property under PMLA- An Overview
Supreme Court Judgment Delineating Statutory Safeguards under PMLA

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