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Degree of punishment not the only criteria to define the severity of a crime under PMLA: Solicitor General Tushar Mehta before Supreme Court

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The degree of punishment is not the only criteria that can define the severity of a crime, Solicitor General Tushar Mehta told the Supreme Court on Wednesday.

Making arguments on the provisions of the Prevention of Money Laundering Act, 2002, the SGI referred to the case of AK Roy vs Union of India (UoI), wherein he emphasised on the fact that the liberty of an individual has to be subordinate within reasonable bounds for the good of people, as it not only affects the economy, but also the sovereignty of a nation.

The next case law referred to was, Mohd. Qureshi vs State of Bihar- ‘The court presumes that he legislature understands and correctly the needs of its own people that its law are directed to problems manifested by directions that its discriminations are based on adequate grounds. And the legislature is free to recognize degrees of harm and may confine its restriction where the need is deemed to be clearest and sustain the constitutionality.

Further, the counsel went on to emphasize om the peculiar nature of this offence (money laundering) Talab Hazi Hussain judgement was referred for the same wherein the counsel highlighted how the interest of prosecution is essentially public interest. The counsel also highlighted the fact that a criminal trial should be such that it is easier for the witnesses to give their statement without any pressure or fear. The consel went onto to dictate various guideline laid down in the judgement regarding a criminal trial procedure. The counsel further went onto suggest how economic offence are a different class of crimes and thus need to be dealt with separately. The very classification is a clear demarcation of judicially recognized jurisprudence thus highlight the gravity of the offence (Money laundering).

  • The counsel went on to explain How the classification of a separate procedure and separate bail procedure are not arbitrary in nature.

whether the provisions of PMLA and specifically Section 45 contravene Article 14.
in Kartar Singh v. State of Punjab, (1994) 3 SCC 569, the question before the constitution bench was that the classification between TADA and non-TADA offences is antithesis to Article 14. The constitution bench held that there is a reasonable basis for classification and an object which is sought to be achieved. approving the scope of Article 14 discussed in the case of Chiranjit Lal v. Union of India 1950 SCR 869 this Hon’ble Court has laid down seven propositions as follows., “The presumption is always in favour of the constitutionality of an enactment, since it must be assumed that the legislature understands and correctly appreciates the needs of its own people, that its laws are directed to problems made manifest by experience and its discriminations are based on adequate grounds.”
Submission: It is submitted that classification in the PMLA as a whole and Section 45, is not arbitrary but has a specific background and rationale. It is submitted that the said background and rationale is strengthened by the object that Section 45 seeks to achieve – deterrence effect.
At last, the judgment the NIA v. Zahoor Ahmad Shah Watali, (2019) 5 SCC 1 (twin conditions in UAPA offences was considered) was referred to in order to highlight how the twin conditions must be applied correctly while releasing an individual on bail. The following is the settled legal position about matters to be considered while granting bail-
a- Whether there is a prima facie reasonable ground to believe that he accused had committed the offence.
b- Nature and gravity of charge
c- Severity of punishment
d- Danger of accused if released on bail
e- Character, behavior, means and standing of the accused
f- Likelihood of the offence being repeated and etc.
g- Reasonable apprehension of the witness being tampered with and,
h- Danger, of course, of justice being thwarted by grant of bail.

Money laundering takes place cross border. That is the first distinction. Second, there are certain countries where it is easy to park your illicit money and give shelter by giving citizenship with which india does not have any reciprocal treaty for extradition. Third, because of the very international nature of the offence, the accused has his own infrastructure and every infrastructure in that respective country, gets citizenship of that country. Fourth, this is an offence which is pre-mediated. Bearing these factors in mind, unlike in MACOCA, this will have trans border implications.
ARGUMENT: 436(a) as a statutory right is excluded in 45, PMLA
SECTION 45 PMLA – Ousts Section 436 (a) CRPC. Subsection 2- wherever the legislature wanted to incorporate provisions of CRPC it has done so.
Justice Khanwilkar- if there is presumption about validity, there must be presumption about protection of rights of accused, also.
SGI- Any provision of the CRPC in ignorance of the non-obstantive clause will create several complications in several provisions.
Case law referred SC legal Aid committees, 1994- the court under 32 said that prolonged incarceration without trial is against Article 21. the right of being released after a prolonged imprisonment under 21 and not under a statutory; one time direction. The special court can exercise the special power
Shaheen Bagh Association; Further three classes for bail were dictated under TADA.
Justice Khanwikar- Both the sections came into force in 2005. The legislature must have been conscious of the fact that Section 436 (a) was introduced in CRPC.
SGI- despite that Legislature has not chosen to apply 436 (a) as a statutory right as is excluded in 45 of PMLA.
Justice Dinesh- you are responding, assuming that we are reading 436(a) into 45, PMLA. The area of operation of the CRPC provision is entirely different.
justice Khanwilkar- the benefit is same under Art 21 and Section 436(a). the substance is same. Have you made any provision under the PMLA act, similar to Section 436(a)?
SGI- No. Moreover, this benefit should apply only when he has undergone half of the term.
Justice Khanwikar- We will say that 436(a) is an independent scheme dealing with specific situation which has not been modified by PMLA. Therefore, it will apply by virtue of Section 65.

ASG S.V. Raju submitted that challenge to Section 50 PMLA is mainly on the following grounds:

I. Statements recorded under section 50 violate the fundamental right against self-incrimination contained in article 20(3) of the Constitution. 

II. Additionally, such statements are inadmissible in evidence, in view of the bar contained in section 25 of the evidence act.

 III. Statements under section 50 are actually statements under section 161 of the CrPC, the admission and extent of admission are governed by section 162 of the CrPC.

IV. Section 50 of the PMLA stands on the same footing as section 67 of the NDPS act and therefore statement recorded under section 50 would be governed by the principles laid down in the case of Tofan Singh vs. State of Tamil Nadu, 2020 SCC Online SC 882 and consequentially Section 50 of the PMLA is violative of Articles 14 and 21 of the Constitution of India.

  1. Article 20(3)

The requirements for Art. 20(3) to apply are:

a. That a person should be accused of any offence,

Test of Formal Accusation at the time the statement was made. 

Khanwilkar- should the accusation be in Public Domain? 

Formal accusation requires an accusation either in a FIR or a complaint. 

Referred to the case of Ramesh Chandra Mehta v. State of W.B.: Lodging of a FIR or a Complaint is the requirement of formal accusation, even arrest under Section 170A of the Sea Customs Act, 1878 doesn’t amount to formal accusation.

Submission- at the time when he is arrested under section 19, there is no formal accusation.

Dinesh: Here you have to record reasons as to why the person is guilty of the offence, to your satisfaction. No record is supplied to him and then if the person is called pursuant to Section 50 (2) of PMLA.

ASG- to answer this he pointed out the Section 104 of Customs Act which is pari materia to Section 50 PMLA. To support his argument he cited Deepak Mahajan’s Case (1994). He pointed out that Section 35 (2) of FERA, Section 104 of Customs Act and Section 50 PMLA are all identical as far as arrest and recording of reasons is concerned. 

Further, In M.P. Sharma v. Satish Chandra 1954 SCR 1077 the court held:

(i) That the right against testimonial compulsion contained in Article 20 (3) of the Constitution is not confined to oral evidence of a person standing his trial for an offence when called to the witness stand but also applies to production of documents, i.e., documentary evidence and also to gestures. (ii) Testimonial compulsion connotes coercion which procures the positive volitional evidentiary acts of the person, as opposed to the negative attitude of silence or submission on his part. (iii) It is available to a person against whom a formal accusation relating to the commission of the offence has been levelled.

In the case of Mohd. Dastagir v. State of Madras, AIR 1960 SC 756 the court has held that if he has the power to refuse then it cannot be said that he was compelled.

Kathi Kalu Oghad: Application of Article 20(3) only if the person making the statement was an accused at the time when he made the statement. Raja Narayanlal Bansilal v. Maneck Phiroz Mistry: For invoking right under Art. 20(3) formal accusation relating to the commission of an offence is required to be made. K. Joseph Augusthi v. A. Narayanan: The accusation of any offence is an essential condition for the application of Art.20(3) and is a condition precedent for applying Art.20(3)

Test of Formal Accusation at the time the statement was made. – Formal accusation requires an accusation either in a FIR or a complaint.

He brought the case of Balkishan A. Devidayal v. State of Maharashtra to the notice of this court where: 20(3) applies only to a person against whom a formal accusation of commission of an offence has been made in an FIR or a formal complaint or other formal documents.

Khanwilkar- the scheme of Section 50 (1) and (2) are different. The clause 1 applies to proceedings and the second clause applied to investigation. 

Dinesh: If you will be compelling the accused under 50 (2) then it will be in contradiction of Article 20(3) of the Constitution. 

 “Accused of an Offence”

Applying the test of formal accusation which requires either the lodging of a FIR or a complaint before a person can be said to be an accused for the purpose of Art. 20(3), it is crystal clear that the person referred to in Section 50(2) of PMLA is not an accused person and consequently there is no violation of Art. 20(3) of the Constitution. – If a person is not a person accused of an offence, the compliance of other ingredients of Art. 20(3) are immaterial.

b. Such a person should be compelled, and 

Compulsion is a question of fact to be decided at the trial stage. 3.5 Thus, it can be seen that all these issues depend on facts of each case to be decided at the stage of trial and cannot be generalized and decided in the type of cases being presently heard.

In M.P. Sharma & Ors. V. Statish Chandra AIR 1954 SC 300 ‘testimonial compulsion’ has been defined as follows in para 10: “10……testimonial compulsion connotes coercion which procures the positive volitional evidentiary acts of the person, as opposed to the negative attitude of silence or submission…

c. Such compulsion should be for the purpose of being a witness against himself. All these ingredients must co-exist if a breach or violation of Art. 20(3) is to take place.

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