PMLA

Statements made under PMLA: Decoding Supreme Court Judgment

Statements made under PMLA

Various statutes confer the power of recording statements to the investigating agencies. The investigating agencies can record statements of the accused and the witnesses, which are verified during the course of examination in chief and cross-examination of the parties. As a general rule, such statements recorded by investigative agencies must be voluntary and should not have been taken under any undue influence or threat. Recently while upholding the validity of the PML Act, the Supreme Court has elaborated on the law governing statements made under PMLA. This piece of writing will discuss that in detail.

Significance of the Prevention of Money Laundering Act

With the rising instances of money laundering across the globe, many countries introduced stringent measures to curb this menace. India brought legislation that sought to prevent instances of money laundering. The Prevention of Money Laundering Act was enacted in response to India’s global commitment to prevent money laundering.

The major objectives of this Act were combatting the use of money to fund illegal activities, preventing money laundering, and providing for the confiscation of property derived from the offence of money laundering. The Act introduced certain strict punishments against those found guilty of money laundering. This included freezing or seizing properties, records, attachment of property, etc.

However, this legislation hasn’t been free of controversy, as many have questioned its validity and significance. Claims of a low conviction rate further support this. This legislation was criticized as a draconian law that affected people’s personal liberty. Various Sections of the Act were termed unconstitutional by many as they claimed it was violative of the Constitution of India.

However, on July 27, 2022, the Apex Court of the country upheld the validity of various sections of the PML Act 20221. The Court called it unique and special legislation.

Statements Made Under PMLA: Authorized Officers

The following are the authorized officers who, as per statute authorised to record statements under the Act-

  • The Director or;
  • Additional Director or;
  • Joint Director or;
  • Deputy Director or;
  • Assistant Director.

Statements Made Under PMLA- What Does The Act Say?

Section 50 of the Prevention of Money Laundering Act confers the power to investigating authority to summon any person whose attendance the authority considers necessary to give evidence or to furnish any records during the investigation process.

This section further provides that summoned persons shall be bound to attend physically or through authorized agents as the officer may direct. Such persons shall be required to state the truth upon a subject for which they are examined, make statements, and produce documents.

Section 11 (2) provides that the persons who have been directed by the adjudicating authority to attend in person or through authorized agents must make a truthful statement about the subject for which they are examined.

Apart from that, Section 16 enables the authority under the PML Act to record statements of persons who may be present where the Act of money laundering offence is carried out. Such place shall also include any other place wherein the person carrying out such activity states that his records are kept or the place where any part of his property relating to such activity is kept.

Section 18 of the PML Act allows the authority under the Act to record the statements of a person who has secreted about himself or in anything under his possession, control, record, or proceeds of crime that is relevant to any proceedings under the Act. Section 18 provides that the authority shall record such a person’s statement regarding records or proceeds of crime found or seized by the authority during the search.

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Further, Section 63 of the Act punishes a person in a case where such a person doesn’t sign a statement that he makes during proceedings under the Act, which must be signed.

Recording Of Statements Made Under PMLA: Supreme Court’s Judgment

The Supreme Court in Vijay Madanlal Choudhary Vs Union of India has elaborated on various aspects of the PML Act, including Section 50 of the Prevention of Money Laundering Act 2002.

Contentions raised against Section 50 of the PML Act

  • The validity of Section 50 was challenged before the Supreme Court in this case. It was averred that the provision violated Articles 20(3) and 21 of the Indian Constitution. It was also argued before the Court that the provision allowed the officer under the Act to summon any person and record his statement during the investigation process.
  • Further, it was contended that the provision mandated the person to disclose true and correct facts known to him relating to the subject matter of the investigation. It was pointed out that the person had to sign the given statement with the threat of punishment under Section 63 of the said Act. It was urged that this practice of the investigating agency, i.e., ED, violated constitutional protections by implicating the accused by procuring statements signed by him under threat of penalty.
  • It was argued before the Court that the provisions under Section 50 of the PML Act are draconian compared to the constitutional law, the Code of Criminal Procedure, and the Evidence Act.
  • It was further contended that Section 50 of the PML Act infringes upon a person’s right to liberty who has been summoned under the said Act and that it violates the right against self-incrimination.

Supreme Court’s View Point

  • On the contention that the provision was violative of Article 20(3) of the Constitution, the Court held that it could not understand how the said Article would intervene in respect of the process of recording of the statement pursuant to the summon, which as per Court is only for collecting information or evidence under the Act.
  • The Court observed that the person summoned is bound to attend to state the truth upon a subject for which they are examined or is expected to make a statement and produce documents.
  • The Court then noted that the criticism was essential because sub-section 4 states that every proceeding under sub-sections 2 and 3 will be deemed a judicial proceeding.
  • The Court pointed out that even then, the fact remains that Article 20(3) of the Constitution or Section 25 of the Evidence Act will come into play only when the person who is summoned is accused of an offence at the relevant time and is compelled to be a witness against himself.
  • The Court explained that the summons issued by the authority under Section 50 is related to the inquiry about the proceeds of crime. The Court said that in respect of such action, the designated officers could summon any person for information collection and for collection of evidence presented before the Adjudicating authority. The Court held that initiating prosecution against the notice is not mandatory.
  • The Court expressed that the power of officers under this Act, which is couched as investigation in a real sense, pertains to undertaking inquiry to ascertain relevant facts.
  • The Court further expressed that it is a different thing that the matter and evidence collected during the inquiry may disclose the commission of the money laundering offence and the person’s involvement who has been summoned.
  • The Court pointed out that there won’t be any formal document showing the chances of the person’s involvement as an accused at this stage. The Court said that if, through such a person’s statement, the offence of money laundering is revealed or the existence of proceeds of crime is made out, then it becomes actionable under the Act.
  • The Court further explained that recording statements made under PMLA to inquire about relevant facts is not an investigation for prosecution as such. The Court held that there wouldn’t be any formal accusation against the notice.
  • The Court also stated that if such a person’s statement is recorded after the arrest by the ED official, then the consequences of said Article and Section of the Evidence Act would come into play.
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The Court said it would not preclude the prosecution from proceeding against the person.

Statements made under PMLA: Comparing with the NDPS Act

In the comparison of provisions of PMLA relating to the recording of statements with the NDPS Act, the Supreme Court held that there is a stark distinction between the two. The Court pointed out that since the authorities under PMLA are not police officers, the statements recorded by the PML Act cannot be hit by the vice of Article 20(3) of the Constitution.

Section 63 of the Act

Under this section, penal consequences would ensue for giving false information if the person refuses to answer any question put to him by the authority or if he refuses to sign the statements made under PMLA. The Court has clarified that this provision is just an enabling provision that applies to situations stated there. It also pointed out that it is in the nature of consequences that ensue for not cooperating with the authorities during the proceedings.

The Court also stated that the power vested with the authority is analogous to the power exercised in a Civil Court under CPC while trying a suit related to matters mentioned in Section 50 of the PML Act. The Court said that it is in the nature of deeming provision allowing the authority to prevent the money laundering offence.

The Court opined that if any person makes misleading revelations in such inquiry, the matter should be proceeded according to the law.

The Court held that Section 63 of the PML Act is the procedure established by law and suggested that to keep such a provision be unreasonable or manifestly arbitrary would be unfathomable. The Court held that it has clear nexus with the purpose sought to be achieved by the PML Act 2002.

Supreme Court’s Conclusion

Based on the above premise, the Supreme Court made two significant conclusions pertaining to Statements made under PMLA-

  • The Supreme Court concluded that the statements made under PMLA, which the Authorities record, are not hit by Article 20(3) or Article 21 of the Constitution.
  • The Court further held that Section 63 of the PML Act, which contains the provision of punishment regarding false information or failure to give information, does not suffer from the vice of arbitrariness.

Takeaway

In the PMLA verdict, the Supreme Court’s Bench cleared the air regarding the validity of the Act while also upholding the ED’s power under the Act. This also means that the investigation agency’s process, including recording statements made under PMLA, will continue to go unchecked. The margin of error for the person accused seems less under the Act. However, in order to ensure a fair trial and investigation, the principles of natural justice should be followed. The investigating agency should support its allegations against the accused with compelling shreds of evidence. The process of statements made under PMLA should be followed, considering the principles of natural justice.

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FAQs

What is the Supreme Court Judgement on the PMLA case?

According to the PMLA, authorities cannot take any action against a person for money laundering based on hypotheses, suppositions, or guesses that property obtained from the person accused of a scheduled offence must be “proceeds of crime”.

What is Section 50 of the PMLA statement?

The authority to call an accused person and record a statement under Section 50 is acceptable evidence in court.

Does PMLA have a retrospective effect?

In the case of DA Paul v. Union of India & Ors [2020 SCC OnLine Kar 4995: (2021) 1 KCCR (SN 23) 35]., it was determined that money laundering under the PMLA is a “continuing offence” and as a result, the issue of whether it is “retrospective” in its effects does not arise.

What is the burden of proof under PMLA?

When someone is suspected of committing the offence described in section 3, it is their responsibility to show that the profits of the crime are legitimate assets.

Can proceedings under PMLA continue if there is no scheduled offence, says the court?

“It is pretty evident that the PMLA lawsuit cannot proceed if there is no scheduled/predicate crime. Similarly, in the absence of a case involving a scheduled offence, the PMLA court does not have the authority to continue a PMLA case.

What is section 71 of PMLA?

No matter what is incongruous with them in any other legislation that is now in existence, the provisions of this Act shall have precedence.

What is Section 19 of the PMLA?

Any Director, Deputy Director, Assistant Director of the ED, or any such approved officer has the authority to arrest a person who is thought to have committed the crime of money laundering under Section 19 of the PML Act.

Is PMLA civil or criminal?

Crime profits are of a civil character. As a result, the PMLA prosecution, attachment, and confiscation actions for properties used in money laundering are separate processes. If a person is charged with money laundering, these two forms of legal action may be brought against him.

What is Section 44 of the PMLA?

Section 44 of the PMLA deals with “crimes that may be tried by Special Courts.” Section 44(1)(b) now includes a clause saying that the appropriate entity must give the Special Court a report of closure if no evidence of money laundering is discovered at the conclusion of the investigation.

What is the conviction rate in PMLA?

The ED has asserted a conviction rate of 96% in cases registered under the Prevention of Money Laundering Act in which trials have been concluded, despite claims that its investigations are started for political motives and swiftly transform into roaming inquiries only to fail in courts.

What are the key elements of PMLA?

Stopping the laundering of money. • Preventing the flow of money into economic crime and illicit activity. • Allowing for the forfeiture of assets connected to or obtained by money laundering.

Who can investigate under PMLA?

The officials of the Directorate of Enforcement have the authority to look into allegations of money laundering under Sections 48 and 49 of the PMLA. The police have also been given permission to file lawsuits in the designated Special Court and to begin the process of attaching property.

Is PMLA a stand-alone offence?

The Karnataka High Court ruled that money laundering is a separate offence under the PMLA. It was based on the definition of “proceeds of crime” included in Section 2(1)(u) of the aforementioned Act.

Read our Article: Underlining the Scope of Investigation under PMLA

References

  1. https://enforcementdirectorate.gov.in/pmla

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