SC upholds ED\'s powers under stringent PMLA

New Delhi: The Supreme Court on Wednesday upheld the validity of various stringent provisions of the Prevention of Money Laundering Act empowering the Enforcement Directorate (ED) to arrest, provisionally attach properties suspected to be the proceeds of crime and is not bound to supply a copy of the ECIR at the time of detaining an accused in a money laundering case.

The court said on Wednesday that the amended provisions of the PMLA Act does not suffer from the vice of arbitrariness and unconstitutionality.

Observing that money laundering is an offence against the sovereignty and integrity of the country, a bench comprising Justices A.M. Khanwilkar, Dinesh Maheshwari and C.T. Ravikumar, in a 545-page order, said: “The classification or grouping of offences (including minor compoundable offences) for treating the same as relevant for constituting an offence of money laundering is a matter of legislative policy… Parliament in its wisdom having perceived the cumulative effect of the process or activity concerning the proceeds of crime generated from such criminal activities as likely to pose a threat to the economic stability, sovereignty and integrity of the country and thus grouped them together for reckoning it as an offence of money laundering, is a matter of legislative policy. It is not open to the court to second guess such a policy.”

Having upheld the amendments to the PMLA Act that were introduced in the Finance Act 2018, a money bill, which was also under challenge, the judgment said that it will be adjudicated by a larger bench.

“The question as to whether some of the amendments to the Prevention of Money Laundering Act 2002 could not have been enacted by Parliament by way of a Finance Act has not been examined in this judgment. The same is left open for being examined along with or after the decision of the larger bench (seven judges) of this court in the case of Rojer Mathew”, the judgment said.

Holding that the supply of a copy of Enforcement Case Information Report (ECIR), in every case, to the person concerned is not mandatory, the court said: “It is enough if the ED, at the time of arrest, discloses the grounds of such arrest.”

However, the court said when the arrested person is produced before a special court, it is open to the special court to look into the relevant records presented to the court by the ED for “answering the issue of the need for his/her continued detention in connection with the offence of money laundering”.

Drawing a distinction between an inquiry by the ED and an investigation, the court said the ECIR cannot be equated with an FIR under the Code of Criminal Procedure as the ECIR is an internal document of ED. The fact that an FIR in respect of the offence has not been recorded does not come in the way of the ED authorities referred to in Section 48 to commence inquiry/investigation for initiating “civil action” of “provisional attachment” of property being proceeds of a crime.

Asking the government to take “corrective measures” for filling up vacancies in the Appellate Tribunal, the court said the petitioners (challenging the amendment to PMLA Act) are “justified in expressing serious concern bordering on causing injustice owing to the vacancies in the Appellate Tribunal”.

“We deem it necessary to impress upon the executive to take corrective measures in this regard”, the court told the government.

Addressing the contention by the petitioners that even if a closure report is filed in a predicate offence, the proceedings under the PMLA Act can still continue, the court said: “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.”

Having upheld the validity of the amended stringent provisions of the PMLA Act, the court extended the interim relief already granted to the petitioners accused by another four weeks so that they can take further recourse to legal remedies.

The court also disposed of various pleas challenging the various provisions of the PMLA Act.

Nearly 250 petitioners had raised multiple issues, including the absence of a procedure to commence investigation and summoning the accused, while the accused was not made aware of the contents of the Enforcement Case Information Report (ECIR).

Justifying the constitutional validity of the provisions of PMLA, the Centre had told the court the PMLA is not a conventional penal statute but one which is aimed at preventing money laundering, regulating certain activities relatable to money laundering, aims at confiscating the “proceeds of crime” and to punish the offenders.