Saturday, December 2, 2023

ASG SV Raju makes submission under Section 24 of PMLA before Supreme Court

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Additional Solicitor General S.V. Raju on Thursday made submission before the Supreme Court regarding the constitutionality of Section 24 of Prevention of Money Laundering Act, 2002.

The Counsel submitted by refereeing Toofan Singh vs State of Punjab.

He submitted that as per Section 24 (a) of PMLA, which talks about the Burden of Proof where he pointed on the ingredients of Section 24 (a) person charged, presumption, and proceeds of crime. Further the Counsel submits that for the presumption under Section 24(a) of PMLA to apply two conditions are required to be complied with- That a person is charged with the offence of money laundering and that there are proceeds of crime. It is only if these two conditions exist that the Court shall presume that such proceeds of crime are involved in money laundering.
Counsel also submitted that the presumption which made out against the accused it is rebuttable presumption and further counsel submitted that the rebuttable presumption is a rule of evidence which has the effect of shifting the burden of proof and since the person concerned has the opportunity to displace the presumption by leading evidence the same cannot be said to be unconstitutional/unreasonable). Even under Section 24 of PMLA opportunity to displace the presumption is given to the accused by leading evidence, therefore, it cannot be said that the presumption under Section 24 is unreasonable, arbitrary or unconstitutional. The words shall presume is not conclusive and they do not mean that the presumption is without providing an opportunity to the accused to rebut the presumption by leading evidence. Counsel referred the Sodhi Transport Company case, where it has been held that the accused was to be provided opportunity to rebut the presumption.
Therefore, Presumption under Section 24(a) may be rebutted by showing that the person is not involved in the offence of money laundering. He may show his involvement in process or activity connected with proceeds of crime in a manner as described in Section 3 of the PMLA does not translate into an offence of money laundering.

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Therefore, Counsel submitted that the there are three ways which gives the opportunity to the accused to rebut presumption:

  1. On the basis of special facts within his knowledge will have to rebut the presumption.
  2. Replying under section 313 of Cr. PC.
  3. Cross examining prosecution witness, that is left entirely to the discretion of the accused.
    Counsel referred the case of UOI vs. Prafulla Kumar and cited the Para 10 relevant portion where principle was laid down-
    (1) That the Judge while considering the question of framing the charges under Section 227 of the Code has the undoubted power to sift and weigh the evidence for the limited purpose of finding out whether or not a prima facie case against the accused has been made out.
    (2) Where the materials placed before the Court disclose grave suspicion against the accused which has not been properly explained the Court will be fully justified in framing a charge and proceeding with the trial.
    In addition, counsel submitted that the prima facie case is different from proof beyond reasonable doubt, which is required at the stage of culmination of trial. Unlike proof beyond reasonable doubt, grave suspicion that the accused has committed the offence is sufficient to frame charge. Counsel submitted that grave suspicion regarding all the ingredients necessary for the commission of the offence of money laundering exists against the accused. It is in this background that the presumption will have to be viewed.

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Counsel submitted that the proof of existence of proceeds of crime is a foundational fact essential to be proved before the presumption under Section 24(a) kicks in. In other words, it is only after the prosecution establishes the existence of proceeds of crime that the burden shifts on the accused. Further Counsel submitted that the burden that is shifted on the accused is essentially pertaining to the process or activity connected to the proceeds of crime including its concealment, possession, acquisition, use, projection or claiming as untainted property as stated in Section 3 of the PMLA which is explained by the Solicitor General of India in their submissions regarding Section 3 of PMLA.
Counsel submitted that the prosecution has to establish that proceeds of crime exist. The presumption that arises thereafter is that the proceeds of crime so established are involved in money laundering.
Counsel submitted that the Section 24(a) is only a reiteration of the presumption under Section 106 of the Indian Evidence Act. In the absence of a provision like 24(a) of the PMLA the provisions of section 106 of the Evidence Act would apply and the result would be similar, if not the same. Under Section 106 of the Evidence Act, any fact which is within the special knowledge of a person, the burden of proving that fact is upon such person
Counsel summed up his submission regarding Section 24 (a) of the PMLA that the Petitioners is based on an erroneous assumption that no foundational facts are required to be established before the presumption under Section 24(a) of the PMLA can be raised the presumption under Section 24(a) will be raised only against a person who is charged with the offence of money laundering. It is only at the stage when charges are framed does a court applies its judicial mind to determine whether there is a prima facie case made out against the accused or not and whether there is enough evidence on record to frame a precise allegation, which the accused must answer in the trial. In addition, accused must have knowledge what he is alleged to be guilty of and therefore what guilt he is required to rebut when a presumption under Section 24(a) is raised against him. Further Counsel submitted that the presumption under section 24 (a) prosecution would have to show the existence of proceeds of crime. Therefore, a prima facie case is made out against the accused that the burden of proving that the said accused is not involved in money laundering will shift on such accused.

Counsel read the Section 24(b) and culled out the relevant keywords of this section- any other person, may presume and proceeds of crime. Counsel submitted that the Section 24(b) of the PMLA is concerned it applies to a person not charged with the offence of money laundering whereas Section 24(a) of the PMLA applies to a person charged with the offence of money laundering. The second difference between Section 24(a) and Section 24(b) is the use of word ‘shall’ in sub-section (a) and the use of word ‘may’ in sub-section (b). Further Counsel submitted that the presumptions falling under the category of ‘may presume’ are compendiously known as factual presumptions or discretionary presumptions and those falling under the category of ‘shall presume’ are known as legal presumptions or compulsory or obligatory presumptions.
Counsel referred the Madras Bar Association vs. UOI in this Hon’ble Court held that the Members of the ILS (Indian Legal Service) have been held to be competent by this Hon’ble Court to hold the post of Judicial Member in Tribunal. In second, case Pareena Swarup vs. UOI….
Counsel explained the Stage of Applicability of Section 24(b):

  1. Applies to a person who has not been charged of the offence, it can be raised possibly at the stage of bail and other proceedings before the courts, which are prior to the stage of framing of charge.
  2. At the stage of bail.
    Counsel Summed up his submissions related to the Section 24(b) that the presumption contemplated under Section 24(b) of the PMLA is neither arbitrary nor unreasonable nor violate any fundamental rights or constitutional rights.

Counsel submitted that the Article 20(1) of the Indian Constitution prohibits the following- 1.

  1. Making of an ex post facto criminal law i.e., making an act a crime for the first time and making that law retrospective.
  2. Infliction of a penalty greater than that, which might have been inflicted under the law, which was in force when the act was committed.
    The Counsel submitted that the offence of money laundering under the PMLA is not ex-post facto and is not in violation of Article 20(1), Constitution of India. The PMLA does not punish or seek to punish a person for any act committed prior to the PMLA or prior to the addition of the concerned offence in schedule to PMLA coming into force. Counsel referred the Section 3 of the PMLA and culled out the relevant Para of the explanation of Section 3 which states that the “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”
    The Counsel Submitted that the It is a settled principle of law that an Act cannot be said to be retrospective just because a part of the requisites for its action is drawn from a time antecedent to its passing. Counsel referred the case of Sajjan Singh v. State of Punjab which was a case pertaining to disproportionate assets punishable under Section 5(2) of the Prevention of Corruption Act, 1947, this Hon’ble Court held that there was no retrospective operation of the statute. Another Case Samuels v. McCurdy of the United States where US Supreme Court held that it does not provide punishment for past offence. It does not fix a penalty for the owner for becoming possessed of the liquor. The penalty it imposes is for continuing to possess the liquor after the enactment of the law. Another case cited by the Counsel of Mohan Lal v State of Rajasthan where the Counsel read the relevant Para 23 related to the Article 20(1) which states that Article 20 (1) Constitution of India would have no application and the act of possession is not punishable with retrospective effect. What is punishable is the possession of the prohibited article on or after a particular date when the statute was enacted, making the offence punishable or enhancing the punishment. “Article 20(1) gets attracted only when any penal law penalizes with retrospective effect i.e., when an act was not an offence when it was committed and additionally the persons cannot be subjected to penalty greater than that which might have been inflicted under the law in force at the time of commission of the offence.”
    Counsel submitted that offence under the PMLA… the date of coming into force of the PMLA or the date when the predicate offence was committed is irrelevant if the PMLA offence is committed on a date subsequent to both the above dates. Scheduled offence is not punishable under the PMLA, rather the offence that has been provided in the PMLA i.e., the act of money laundering which is committed by any person who is involved in any process or activity connected with the proceeds of crimes in terms of Section 3 of the PMLA is punishable under PMLA.

ASG SV Raju- As far as quashing of an FIR is concerned; the sine qua non of an FIR is the disclosure of a cognizable offence. An investigation cannot be carried out if there is no cognizable offence.
PMLA scheme is different for the CRPC scheme. It does not require registration of FIR. Therefore existence of a cognizable offence is not a must to start investigation under PMLA. Pre complaint stage there is nothing to quash.
It can’t be quashed by a person who is not an accused. It has recently been stated in the order passed on 07.02.22 in hukam chand garg that if you are not blamed/accused you can’t move to quash the complaint against some other person. The locus creeps in only when the person is accused.
The proceedings under Pmla are different therefore the stage of inviting the Section 482 of CRPC does not arrive. No offence cannot be made a ground to quash proceedings under PMLA because it does not require that offence should be there for an investigation.
Khanwilkar- no step is taken in the court of law before complaint is filed.
ASG- Submitted that FIR is not required to move an anticipatory bail and relied on Tapan Kumar Singh (2003 6SCC 17) case, “FIR is not an encyclopaedia which will disclose each and every thing… must disclose commission of a cognizable offence.
The Challenge to section 5 of the PMLA is raised on the following Grounds:
i. Second proviso permits for emergency attachment without the anchor of either the scheduled offence or the proceeds of crime relating to a specific Scheduled offence or the safeguard under the first proviso i.e. the filing of chargesheet in the scheduled offence.
ii. Second Proviso allows the attachment of ‘any property’ of ‘any person’ without any link to the scheduled offence or with the ‘proceeds of crime’.
iii. ED attaches property which has been purchased much before the commission of the scheduled offence and cannot have a nexus with the Scheduled offence.
iv. The attachment of property equivalent in value of the proceeds of crime cannot be done as the definition of proceeds of crime allows only the attachment of property equivalent in value to the proceeds of crime when the property is situated outside of India.
The challenge to Section 8 of the PMLA is on the following grounds:
i. Section 8(4) of PMLA deprives the person of his right to property.
ii. The period of attachment under Section 8(3)(a) of the PMLA which provides that the attachment can last for upto 365 days. In case a complaint is not filed within 365 days, what will be the fate of such attachment order?
Submission: The emergency attachment provision is related to the scheduled offence and a person need not be involved in the offence of Money Laundering.
• Section 2(1)(u)- ‘Proceeds of crime’
• Therefore, under section 5(1) what is attached is any property which is derived or obtained either directly or indirectly as a result of any criminal activity either relating to or relatable to the scheduled offence or used in the commission of money laundering or the value of such property and if the property is either held or taken outside India then the value equivalent of such property situated in India. The value of such property will be the fair market value on the date of the acquisition of the property and in case the date on which the property was acquired cannot be determined then the value of the property on the date on which such property was possessed. It covers “any person in possession of any proceeds of crime”.
Khanwilkar- How will you attach properties where 50% is legitimate and 50% is proceeds of crime?
Asg- depends on the nature of the property, Whether Divisible or not divisible, etc.
Khanwilar- You pass orders of provisional attachment till the confirmation by adjudicating authority. It also follows the same pattern. We will read it down to that extent that you cannot attach anything beyond the proceeds of crime value.
ASG- we do not go beyond the proceeds of crime.
Submission: Incorrect to say that ‘any property’ of ‘any person’ can be attached invoking the Second Proviso.
The second proviso deals with any property involved in moneylaundering of ‘any person’. This ‘any person’ could be a person in possession of proceeds of crime, which is likely to be “concealed, transferred or dealt with” in a manner that would frustrate the proceedings relating to confiscation. The second proviso, therefore, is consistent with Section 5(1) PMLA insofar as the person in possession of the proceeds of crime may not be a person who is facing trial for a scheduled offence.
Therefore, the interpretation that second proviso is wider than the main section inasmuch as it provides that property involved in moneylaundering, will subsume proceeds of crime, is consistent with the entire scheme of the Act especially if Section 8(5) is seen which on the conclusion of the trial permits confiscation of property involved in money laundering or which has been used for the commission of the offence of money laundering.
Submission: Value of the Property.
A plain reading of Section 2(1)(u) shows that proceeds of crime would include the value of, property derived or obtained, directly or indirectly as a result of criminal activity relating to a scheduled offence or the value of property derived or obtained, directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offence
Submission: Second proviso to Section 5(1)
sufficient safeguards have been provided for invocation of 2nd Proviso to section 5(1). The 2nd Proviso to section 5(1) which will require sufficient material in possession of Authorized Officer that: • Any person is in possession of any proceeds of crime; and
• Such proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime; and
Such property involved in money laundering; and
• Immediate non-attachment of the property is likely to frustrate any proceeding under this Act; and • Reason for such belief is to be recorded in writing on the basis of material in possession of Authorized Officer; and
• Provisional attachment of such property shall not exceed one hundred and eighty days from the date of order in writing.
Submission: Section 8
The preservation of the right to the enjoyment of immovable property upto the stage of confirmation of attachment and the mandate for dispossession after confirmation of attachment, are intended by the legislative scheme to balance the governmental interest on the one hand and the rights of persons in possession of the property on the other hand. – The purpose for dispossession under Section 8(4) is to prevent wastage or spoilage of property and the dissipation of its value, till the stage of confiscation. – Therefore the power conferred by Section 8(4) to dispossess a person in possession of the proceeds of crime or the property acquired from or out of the proceeds of crime and use of proceeds of crime is an offence u/s 3 of PMLA, accordingly, even before the conviction of the accused, is perfectly valid and justified

Submission: Section 17 and 18 of PMLA
At the very outset, it is submitted that the PMLA is a self-contained code with in-built safeguards in the provisions contained therein.
The provisions relating to the powers of the police to conduct searches and seizures under the Cr.P.C. are only for the purposes of investigation into an offence.

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However, the same is not the case under the PMLA as the purpose of the PMLA is not only to investigate into the offence of money laundering but is also to prevent money laundering and to provide for confiscation of property related to money laundering and matters connected therewith and incidental thereto. Therefore, the provisions dealing with searches and seizures under the PMLA are not only for the purposes of investigation into a money laundering offence but are also for the purposes of prevention, attachment, etc.
Thus, the scheme of the PMLA and the provisions of search & seizure contained therein are wholly different from the Cr.P.C.
Furthermore, the provisions of S. 17 & 18, PMLA pertaining to searches, seizures, and searches of persons contain in-built safeguards to prevent misuse and arbitrary application of the same. Furthermore, S. 62, PMLA provides an additional safeguard for vexatious searches by penalising officers for conducting searches in violation of S. 17, PMLA.

The amendments that have been brought in PMLA since its enactmentaremostlyClarificatory/Declaratory/Machinery/Proceduralin nature.

“It is to be noted that although most of the amendments brought in PMLA are in the nature of Clarification/Declaration/Machinery/Procedural, still there are some amendments which do not fall in this category. The amendments in PMLA which are not in the nature of Clarification/Declaration/Machinery/Procedural are to be applied prospectively and shall operate from the time when the amendments came into force.”

COUNTER- Response to submissions of Mr.Jethmalani with respect to S. 44(1)(c), PMLA regarding change of forum and loss of forum- ANTULAY JUDGEMENT

“It is further submitted that right to atrial in aparticular forum is not a constitutionalright. It is a right created by statute. It is the special law in the present case createdby PMLA. In view of the fact that thePMLA is a speciallaw,the provisions ofPMLA will overrule the provisions of Cr.P.C. in view of S.4(2)&S.5,Cr.P.C”

Even in Antulay’scase(Supra)in Para 39 this Hon’ble Court has held as follows:-

“The power to create or enlarge jurisdiction is legislative in character, soalso the power to confer a right of appeal or to take away a right of appeal.Parliament alone can do it by law and no court, whether superior or inferioror both combined can enlarge the jurisdiction of a court or divest a personof his rights of revision and appeal.”

It was in the context that the forum was changed not by a piece of legislation but byan order of the Court which was held to be impermissible and as amounting to enacting a law and was therefore held to be violative of Article 21 of the Constitution of India.

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