Explained: Challenges to ED's powers under PMLA in Supreme Court

New Delhi, Oct 22 (IANS) Supreme Court on Wednesday agreed to hear applications seeking reconsideration of the judgment in the 'Vijay Madanlal Chaudhary' which asserted the powers of the Enforcement Directorate (ED) under the Prevention of Money Laundering Act (PMLA).

A special bench of Justice Sanjay Kishan Kaul, Justice Sanjiv Khanna, and Justice Bela M. Trivedi will hear the review of PMLA judgments on November 22. The top court will examine whether the Supreme Court judgment delivered in July 2022 examined the validity of the PMLA in its entirety.

Appearing for the petitioners, senior advocate Kapil Sibal posed five broad points in front of the special bench and will be challenging PMLA on these points in the next hearing.

1) A penal statute not a regulatory statute

Senior Advocate Kapil Sibal raised the issue of the PMLA not being recognised as a penal statute. "I can be convicted for money laundering and sentenced...And it's not a penal statute?" he asked the court.

If PMLA is ruled to be a penal statute then just like confessions made to police officers, the confessions made to ED officers will be rendered inadmissible in court as evidence.

2) ED's powers to summon

Sibal raised the issue that when someone is summoned by the ED, they don't know if they are being summoned as a principal offender or as a witness. He contended that Section 50 of the PMLA is not well defined.

What is Section 50 of PMLA?

Parts 2 and 3 of Section 50 provide for summoning powers of the ED.

"The Director, Additional Director, Joint Director, Deputy Director or Assistant Director shall have power to summon any person whose attendance he considers necessary whether to give evidence or to produce any records during the course of any investigation or proceeding under this Act."

All the persons so summoned shall be bound to attend in person or through authorised agents, as such officer may direct, and shall be bound to state the truth upon any subject respecting which they are examined or make statements, and produce such documents as may be required.

3) Enforcement Case Information Report (ECIR)

Sibal said he would be raising the issue of access to the ECIR, contending that if the accused does not know what are the allegations against him, how will he defend himself and how will he get bail?

PMLA empowers the ED officers to not share the ECIR with the accused. Unlike in the case of an FIR, the accused is not aware of the charges in the ECIR on which their arrest was made.

4) Proceeds of crime under Section 3

Sibal raised the issue of Section 3 on proceeds of crime. Justice Khanna who had earlier raised the question of whether 'Generation' will come under proceeds of crime while listening to Former Delhi deputy CM Manish Sisodia's bail plea said that there are some nuances in section 3 that probably need to be ironed out.

According to Section 3: "Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the 1[proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming] it as untainted property shall be guilty of offence of money-laundering."

Under Section 3, a person shall be guilty of offence of money-laundering if such person is found to have directly or indirectly attempted to indulge or knowingly assisted or knowingly is a party or is actually involved in one or more of the following processes or activities connected with proceeds of crime, namely: concealment, possession; or acquisition; or use; or projecting as untainted property; or claiming as untainted property, in any manner whatsoever.

The section also states that the process or activity connected with the proceeds of crime is a continuing activity and continues till such time a person is directly or indirectly enjoying the proceeds of crime by its concealment or possession or acquisition or use or projecting it as untainted property or claiming it as untainted property in any manner whatsoever.

5) The fifth issue relates to the twin conditions for bail under Section 45 of the PMLA

PMLA imposes two additional conditions to get bail.

Firstly, the court should be convinced that there are reasonable grounds for believing that the accused is not guilty of such offence.

Secondly, the court should be convinced that the accused seeking bail is not likely to commit any offence while on bail.

Earlier, the division bench of Justices Rohinton Nariman and Sanjay Kishan Kaul had struck down Section 45(1) of the PMLA for imposing two additional conditions to grant bail to money laundering accused calling them arbitrary.

However, this decision was overruled by July 2022 judgement by bench comprising Justice A.M. Khanwilkar, Dinesh Maheshwari, and C.T. Ravikumar in the Vijay Madanlal Choudhary.

Sibal also raised the issue of retrospective application, ED's jurisdiction across states, and the constitutionality of PMLA. While the government has maintained that it has framed amendments to PMLA in accordance with Financial Action Task Force (FATF) mandate, Sibal argued that PMLA includes several other predicate offences other than drug money and terror financing which are not included in international conventions to counter money laundering.

In July 2022, the apex court upheld the 2019 amendments made to the PMLA, 2002 that deal with ED's power of arrest, attachment, and search and seizure. The amendments made it nearly impossible for the accused to secure bail. It also shifted the burden of proof of innocence onto the accused rather than the ED.

While observing that the Parliament had the power to make these amendments the court said that the Parliament enacted PMLA as a result of international commitment to sternly deal with the menace of money laundering.

However, since the Centre brought in the changes through the Finance Act 2019, the apex court has left the question of deciding whether the said amendments could be brought in as a Money Bill on the recently constituted 7 Judge Constitutional bench.

In August 2022, a bench headed by then CJI N.V Ramana issued notice and observed that two facets of the July judgment prima facie needed reconsideration. Firstly, the provision that the accused need not be given a copy of the Enforcement Case Information Report (ECIR). Secondly, the reversal of the presumption of innocence.

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