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Supreme Court says money laundering heinous crime, concerns the sovereignty and integrity of the country

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The Supreme Court on Thursday said that Money Laundering was a heinous crime, which dealt with the sovereignty and integrity of the country.

“You cannot say that Money Laundering is not a heinous crime. It deals with sovereignty and integrity of the nation. The offence of Money Laundering will have to be linked to a predicate offence,” said Justice A.M. Khanwilkar, in response to submission made by Senior Counsel Siddharth Luthra, arguing on the investigative powers of the Enforcement Directorate (ED) under the PMLA Act. 

A Bench comprising Justice A.M. Khanwilkar, Justice Dinesh Maheshwari and Justice C.T. Ravikumar today resumed the hearing on a batch of petitions involving the interpretation of the 2002 Act of Prevention of Money Laundering.

Senior Advocate Sidharth Luthra, while referring to that twin conditions for grant of bail, struck down by the Apex Court in Nikesh T. Shah Vs. Union of India in 2018 which stand resurrected in view of the Legislative intervention vide Amendment Act 13 of 2018, submitted that these conditions are violative of presumption of innocence and Articles 14 and 21 of the Constitution.

While quoting the Supreme Court Judgement in Babu vs State of Kerela he emphasized on the principle of “presumption of innocence”.  He contended that where the statute is silent on the issue of presumption, burden lies with the prosecution to prove otherwise. He drew a comparison between Articles 14 and 19 of ICCPR, 1976 and condition under Section 41 of the Criminal Procedure Code, 1908 and submitted that under CrPc the twin conditions as under the PMLA do not exist.

He quoted the landmark Supreme Court judgement on Section 41 Crpc, “Arnesh kumar vs State of Bihar” and submitted, “When we are looking at pre trail incarceration we have a tripod test for it”. The Apex court directed the State Governments to provide a checklist to the Police officers containing specified sub-clauses under Section 41 (1) (b) (ii) of the CrPc. He submitted that this is akin to the restrictions in terms of preventive detention under Article 22 of the Constitution. He further argued that the test under Section 45 PMLA has led to series of disabilities with regard to safeguards granted under Article 22 of the Constitution.

“The ED manual is a grey area document, which has never seen the light of the day.”

On this, the Bench observed that under PMLA, it is not preventive detention, investigation and arrest is after predicate offence has been committed.

Luthra posed a question before the Court, “A person who is not arrested under Section 19 during investigation of PMLA and complaint under the Act had been filed without arrest, can he be subjected to Section 41 (1) restrictions upon appearance or summoning by court, post cognizance?”

Justice Maheshwari observed that the PML Act’s framework and overall set up is different from that of CrPc and therefore the fact that PMLA does not gel with the latter it is not conclusive.

Luthra contended that, “the test under UAPA, TADA, MACOCA, NDPS AND PMLA is not guilty. Under UAPA the twin restrictions apply to chapters which deal with terrorist and terror organizations. When test is ‘not guilty’ it should pari materia apply to PMLA also.”

He argued that under Section 45 PMLA there is a blanket which covers anything and everything. Therefore, it is unreasonable as it covers every offence. He further submitted that, The United Nations Convention and FATFF, 2020 wanted serious crime to be taken into consideration.

To emphasize the importance of applying CrPc provisions to PMLA he quoted the Apex Court’s judgement in “NIA vs Zahoor Ahmed Shah Watali.” He further placed reliance on Apex Court’s judgement in Kartar Singh vs. State of Punjab where distinction was drawn by stating that UAPA deals with certain categories of offences, certain class of persons and objectives. Therefore it is not comparable to PMLA.

On this Justice Khanwilkar observed, “You cannot say that Money Laundering is not a heinous crime. It deals with sovereignty and integrity of the nation. The offence of Money Laundering will have to be linked to a predicate offence.”

Luthra further submitted that prior to the current amendments in PMLA, the twin conditions under Section 45 are raising the bar for achieving liberty. Moreover the schedule of offences under the Act are vast, expansive and arbitrary in nature.

He pleaded before the court on the issue that when the grave restriction is imported through Section 45 by calling it offence against the State and restricting bail for holding monies, irrespective of the desired objective of conventions, Article 22 of the constitution should apply.

On this Justice Khanwilkar observed that once Section 45 is there and it is procedure established by law. Hence, Article 22 cannot be brought here. “If you establish that the section is inconsistent with the provisions of the constitution, it will be a different matter.”

What is Article 22 of the Constitution? 

Article 22 Protection of life and personal liberty – Constitution of India. No person who is arrested shall be detained in custody without being informed, as soon as may be, of the grounds for such arrest nor shall he be denied the right to consult, and to be defended by, a legal practitioner of his choice.

Luthra emphasized on the phrase, “All properties to be attached”. He contended that the wideness of this explanation creates problem in interpretation of Section 2(u).

“Powers under section 5 (1) (a) and (b) exclude bona fide proceeds. Therefore, the power to attach anything and everything as long as anybody in possession of any proceeds or property may lead to difficulties. The main issue is that the proviso allows attachment dehors the underlying offence.” On the issue of attachment he expressed his concern as to what would happen to movable property. Further after 2005 amendment in PMLA, Section 5 applies retrospectively and allows attachment of any person’s property which according to him is bad in law.

With this, Luthra rested his submissions. 

Following which, Senior Advocate, Dr. Manish Singhvi put forth an overview of his arguments. He submitted that his contentions would be centred around section 5, Section 8, Possession qua the rules, Sections 17, 18, 24 and 45 of the PMLA.

“Pre 2013 the entire burden of proof from initial stage till trial was on the accused. That is unconstitutional and contrary to all laws. Post 2013 amendment, there is no doubt partial rectification and balance from the initial stage to the charge framing stage. Thereafter, the court frames charges but the burden is still on accused.”

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