PMLA

Allegations of misuse of PMLA examined by the SC

The honourable Supreme Court of India (SC) is examining a batch of petitions where allegations have been put against the Prevention of Money Laundering Act, 2002 (PMLA) that PMLA which was introduced as a statute to curb the acts of money laundering generated from the illegal dealings in narcotic substances has now slowly transformed into potent weapon and misuse of PMLA’s provisions to target the opponents and deny them their rightful rights.

A three judge bench of the honourable SC led by Justice A.M. Khanwilkar is holding back-to-back hearings on the petitions filed by people from all walks of life to decide on the constitutionality of certain provisions of PMLA and also the charges levelled against the government and the Directorate of Enforcement (ED) of misuse of PMLA.

Charges of Misuse of PMLA

PMLA invoked for ‘ordinary crimes’

One of the senior advocates appearing for his client submitted before the court that provisions of PMLA are being invoked for the investigation of even ordinary crimes as well.

The senior advocate explained the background of the enactment of PMLA. He said PMLA was enacted in response to the commitment made by India at the global level and also the Vienna Convention in combating the menace of money laundering. He alleged that instead of curbing the said menace, misuse of PMLA has taken place by the ED and the government where the rights of the victims have been confined, cribbed and cabined.

Transgressing the purpose

The senior advocate stated that the purpose for which the statute of PMLA came into existence was to curb the illegal acts of money laundering, the proceeds of which are generated from the illegal trade in narcotics. The advocate argued that the list of predicate offences that have been added in the schedule of the PMLA^[1] have gone way overboard to include even offences related to environmental pollution which are neither connected with illegal trade in narcotics nor organised crime in any manner whatsoever.

Flouting of general principles of criminal jurisprudence

Misuse of PMLA is alleged when the petitioner accused the government of flouting the general principles of criminal jurisprudence.

One such act alleged by the petitioners is that even the Enforcement Case Information Report (ECIR) – which is an equivalent of First Information Report (FIR) – is being considered as an ‘internal document’ and not shared with the accused. This act of not sharing the ECIR with the accused has been alleged to be in violation of the general principles of criminal jurisprudence which mandates that the accused or an arrested person must know the grounds on which he is being arrested.

The counsel argued that the ED treats itself as an exception to the general principles of criminal jurisprudence in registering the ECIR as per its whims and fancies.

Following the registration of the ECIR on grounds known only to the ED, the ED then begins the process of summoning the accused persons and start asking from them details of their financial transactions and also that of their family members. On top of that the accused is called upon by ED to give statements which the ED can use it as admissible evidence in the court of law.

The senior advocate pointed out a senior irregularity in the procedure adopted by ED that the throughout the procedure of summoning the accused and recording of evidence from the statements given by him, the accused is not even aware of the allegations against him as the only document which lists down the grounds of allegations is the ECIR which is privy to the ED and not shared with the accused.

Distinction between an accused and witness at the time of summons

Arguments came from the counsels that misuse of PMLA is taking place when no distinction is made between an accused and a witness.   

Genuine people facing hardships

Another senior advocate submitted that even genuine victims are facing hardships because even their properties are being attached by the ED. He alleged that ED just walks into anybody’s house and the fundamental reason for bringing PMLA which was to investigate the conversion of illegitimate money into legitimate money is somewhat lost in the practices adopted by the ED.

Arbitrariness in Investigation by ED

The counsel for the petitioners argued that there exists lack of clarity in the way ED selects its cases to investigate the offences under the PMLA. They argued that the proper procedure of initiation of investigation of a case of money laundering begins when an FIR is registered. Thereafter, the ED immediately registers an ECIR. The ED can commence the investigation under PMLA only if the accused has committed a predicate offence listed in the schedule of PMLA and that offence has led to the generation of ‘proceeds of crime’ and the accused projects and claims these proceeds as untainted.

In order to do away the arbitrariness in the investigation done by the ED under the offences committed under PMLA, the petitioners have prayed before the court that the discretion exercised by the ED in selecting the cases for investigation are governed by Rule of Law and not based on arbitrariness, vagueness and fancies of ED since the initiation of investigation under the provisions of PMLA has the potential of curtailing the liberties of an individual.  

Conclusion

The questions raised by the petitioners are not just academic but do possess some merit within them. The issues argued by the petitioners cannot be brushed under the carpet by citing the needs of specific legislation especially when the general principles of criminal jurisprudence are under challenge. At the same time it must not be forgotten that the scheme of PMLA has been formulated to prevent misuse of PMLA and to see that the offenders who are usually part of organised syndicates having numerous do not bypass the law enforcement agencies and roam freely. It depends on the wisdom of the court to interpret the law maintaining a fine balance between the two concerns.

Read our Article:Section 45 of PMLA applies to those arrested by ED