The Supreme Court on Wednesday said that while dealing with the validity of a tough law such as the prevention of money laundering act (PMLA), it cannot be oblivious to the potential misuse by states who deny investigation into cases by refusing consent to Central Bureau of Investigation (CBI).
Hearing a batch of petitions, which have challenged the wide scope of powers available to the directorate of enforcement (ED) for search, seizure, investigation and attachment of proceeds of crime under the law, a three-judge bench headed by justice AM Khanwilkar said that the purpose of enacting a law such as PMLA will be defeated if a “rigid formula” is applied to deal with such crimes.
“States are refusing to give consent to the CBI. It may be political or administrative, we don’t know. But we can’t be oblivious to that situation,” observed the bench, also comprising of justices Dinesh Maheshwari and CT Ravikumar.
The Court was responding to an argument made by senior advocate Niranjan Reddy appearing in one of the petitions on the definition of “proceeds of crime” under the PMLA Act of 2005 being too broad that encompassed within its meaning even those properties which, directly or indirectly, may have been derived or obtained as part of any other criminal activity punishable under a law mentioned in the schedule of offences under PMLA. This becomes a predicate offence for the ED to step in and begin its probe.
The bench said, “We have to look at things from a workable model. There are several imponderables that we have to consider. Suppose there is some powerful person who can ensure that the case against him is not registered by the police. If there is no predicate offence, it will defeat the whole purpose of the enactment (PMLA). We cannot have a rigid formula while dealing with such laws.”
Over the past two weeks, arguments have been addressed by a battery of senior lawyers, including Kapil Sibal, Abhishek Manu Singhvi, Mukul Rohatgi, Sidharth Luthra, Amit Desai among others have addressed various aspects related to potential misuse of PMLA provisions introduced by way of amendments to the Act, the latest being in 2019.
The law has been attacked on a score of legal and constitutional principles, which includes the stringent bail conditions, arrest of persons without supply of ECIR (akin to FIR), non-communication of grounds of arrest to the accused, statement given by accused during investigation made admissible as evidence during trial, and broad definitions of money laundering and proceeds of crime under the Act.
Arguments by another petitioner in the batch of cases represented by senior advocate Menaka Guruswamy pointed out that these amendments have not yielded the desired results of improved convictions but has only resulted in a procedure that takes away an individual’s liberty depriving them of all constitutional guarantees and procedure laid down under the code of criminal procedure (CrPC).
“There is no denying that money laundering is a societal problem. The question to be asked is whether in tackling this problem, the state can circumvent the law and the constitutional guarantees,” Guruswamy said. Referring to a ministry of finance report, she pointed out that between 2011 and 2020, the ED conducted 1700 raids, launched special investigation in 1569 cases but secured conviction in only 9 cases.
Adding another aspect to the cases in question, Guruswamy said that the law provides a remedy of appeal to a tribunal under PMLA. “Since 2019, the tribunal is understaffed. There is no Chairman and as per our instructions, there is one out of five members currently serving at the tribunal. This eliminates the remedy available to an accused against unjustified attachment of properties. Law in its application is rendering unconstitutional outcomes and rendering the text of Constitution meaningless.”
The Court will continue hearing the matter on Thursday. The Centre led by solicitor general Tushar Mehta will present submissions after the petitioners complete with their arguments.
(With inputs from agencies)