Friday, December 2, 2022

Probe cannot be started without information: Kapil Sibal on PMLA

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Senior Advocate Kapil Sibal has made his submission before the Supreme Court on the provisions of the Prevention of Money Laundering Act (PMLA).

The bench of Justices A.M. Khanwilkar, Dinesh Maheshwari and C.T. Ravikumar resumed the PMLA hearing on Tuesday.

Sibal said the heart of criminal jurisprudence was the fundamental constitutional premise that a probe cannot be started without information that you record and without the accused knowing the information that you record. The reason behind that is that under the code of criminal procedure, in absence of my knowing that procedure, I will not be able to exercise my right of anticipatory bail or bail, in the context of any piece of information that is kept within the confines of the ED.
The second fundamental premise is that the code of criminal procedure is to regulate investigation; it is a procedure through which you do not allow the police officer to do what he likes.
That is why there is judicial oversight, provisions requiring the maintenance of a case diary- why is the case diary necessary and why is it important to paginate?
So that you cannot fudge the investigation, you will have to include all the statements recorded in the case diary when you file the challan ultimately and seek prosecution.
It is necessary to regulate the conduct of the police officer by virtue of Article 21″.

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By virtue of Section 3 of the PMLA, mere acquisition, possession and use of proceeds of crime alone is sufficient to constitute money laundering and the projection of tainted property as untainted is not a mandatory requirement.
SG Tushar Mehta had told the Court the ‘and’ in section 3 which preceded the phrase ‘projecting or claiming’ is to be read as ‘or’.

SG had traced the evolution of the PMLA statute in its present form from the 1988 Convention Against Illicit Traffic in NDPS to the Palermo Convention to the UN Convention Against Corruption. “It started off for drug money as it was drug money which was laundered.
Determined to deprive persons engaged in illicit traffic (in NDPS) of the proceeds of their criminal activities and thereby eliminate their main incentive for so doing, the 1988 Convention said that Each Party shall adopt such measures as may be necessary to establish as criminal offences under its domestic law, when committed intentionally.
The organisation, management or financing of any [drug trafficking] offences, and so on…So ‘Intentionally’ is an ingredient from the beginning.

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The argument of prejudice was that if a property is taken or purchased out of proceeds of crime and I am living there as a tenant, I would also be liable.
No, unless I live there knowing that this is a part of criminal proceeds. But ‘knowingly’ is a part essential to constitute a criminal offence”, the SG noted.
Sibal said,

“Article 3(1) of the Vienna convention says that each State party has to have a law to prohibit the possession of narcotics.
This does not deal with PMLA, it deals with the Narcotics Act where mere possession is an offence.
It is a separate offence under the Narcotics Act, and
not in reference to the PMLA Act.
Possession of what? Narcotics! Section 3 is dealt with in Article 3(1)(b) of the Vienna convention which deals with transfer etc (transfer, conversion, concealment and disguise of property derived from offences established under the Article).
When you transfer something, when you convert something, you want to conceal its origin. That is why it is a PMLA offence.
You get proceeds of trial, you transfer it and conceal it in a way to show it as untainted money.
That is why it is money laundering. Concealing means concealing the origin of the proceeds of crime, it does not mean to physically hide.”

Palermo convention is against transnational organised crime. It has nothing to do with PMLA.
‘Organised criminal group’ shall mean a structured group of three or more persons, existing for a period of time and acting in concert with the aim of committing one or more serious crimes or offences established in accordance with this Convention, in order to obtain, directly or indirectly, a financial or other material benefit.

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Then ‘structured group’ is defined as a group which is not randomly formed for the immediate commission of an offence and that does not need to have formally defined roles for its members, continuity of its membership or a developed structure. Then ‘proceeds of crime’ is defined in that context! How did the SG bring in Article 6 and tell your lordships that we have to honour the PMLA in view of this convention?”
We are dealing with psychotropic substances in case of Vienna and transnational organised crime including more than one state and a structured group of three or four people so far as Palermo is concerned. We are not dealing with any other offence in the schedule to the PMLA.

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