Prevention of Money Laundering Act suffers from acute lacunae: HC

If at all there is a punitive Central legislation that punishes not only the perpetrators but also victims of crime, it is undoubtedly the Prevention of Money Laundering (PML) Act 2002, due to its inherent lacunae, the Madras High Court has said.

Justice V. Ramasubramanian observed: “For the victims of crime (under the PML Act), there would virtually be no difference between the accused and the Central Government as in any case they would have to lose their property to either of the two.

He also pointed out that the legislation, enacted in pursuance of a United Nations declaration for meeting a serious threat posed by money laundering, was diluted in course of time and made to encompass all kinds of offences, including robbery, dacoity, fraud and kidnapping.

Though the object of the UN declaration was not to deal with normal crimes, the PML Act seemed to have fallen into the same kind of “disuse or misuse” as other enactments of similar nature by first targeting local criminals than their international counterparts, he added.

“Take for instance a case where an offence of kidnapping for ransom takes place. If the money involved in the crime is more than Rs. 30 lakh, it becomes a scheduled offence under the Act. Therefore, if the money is later recovered and an attachment followed by confiscation is ordered, then the person who paid the ransom and who happens to be the victim of the crime will have to lose his money.

“He would rather prefer to turn hostile in the criminal case by reaching an agreement with the accused so that the attachment order gets lifted (on securing an acquittal) and he takes away his money… The same analogy holds good even for the offences of robbery and dacoity (when money involved in those crimes is attached and confiscated by the Centre),” the judge added.

The observations were made while disposing of two sets of writ petitions, one filed by the family members of a couple of accused challenging attachment of their immovable properties by the Directorate of Enforcement and another by a nationalised bank seeking a similar relief in a different case on the ground that the properties were actually purchased by defrauding the bank.

However, the Enforcement Directorate claimed that Section 8 (4) of the Act empowers it to take possession of both movable and immovable properties even before the accused were convicted. The attachment order would get ceased only if the accused gets acquitted and not otherwise.

A Division Bench of the Andhra Pradesh High Court had also upheld the Constitutional validity of the Act in a case filed by B. Rama Raju in connection with the Satyam scam.

Differing with the Division Bench judgment passed on the basis of national interest, Mr. Justice Ramasubramanian said: “With great respect to the Division Bench of the Andhra Pradesh High Court, the court has not tested the validity of Section 8 (4) of the Act on the touchstone of the Constitutional guarantees available to children and women residing in the property and the statutory protection available to tenants in terms of other enactments.

“Even if I assume for a minute that the object of the PML Act is to keep the accused out of the possession and enjoyment of the proceeds of crime, the human rights of other members of his family or even persons who are in occupation of the property under lawful agreements of tenancy cannot be thrown to the mercy of the respondents (Union Finance Ministry and Enforcement Directorate),” the judge said.

He held that the Directorate could be allowed to take only symbolic, legal or constructive possession and not physical possession as the right to property was a constitutional right under Article 300A and also part of human right as held by the Supreme Court.

“By retaining symbolic, legal and constructive possession of the property, the Government can always ensure that the proceedings for confiscation are not frustrated. Once a property is attached and necessary encumbrances are entered in the records of the Sub-Registrar and once a prohibitive order is also passed, no alienation can take place.

“Even if any alienation takes place, it would be null and void. Therefore, merely because physical possession is retained by a person accused of the scheduled offences under the PML Act, it does not mean that the proceedings for confiscation may get frustrated,” the judge concluded.

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