The story so far: The draconian Prevention of Money Laundering Act (PMLA) of 2002 has evolved as the Government’s “hatchet” law in recent years, considering the series of raids and arrests of politicians, their relatives, and activists. The frequency and timings of these raids and arrests have raised suspicions of whether the PMLA and its agency, the Enforcement Directorate (ED), are the tip of the spear used to strike rival camps with political embarrassment. The unease about the law has become so rife that a bunch of petitions filed by people across the country have questioned the almost blanket powers given to the ED for search, seizure, investigation and attachment of assets considered to be the proceeds of crimes listed under the PMLA.
What is the PMLA?
The Act was enacted in a 2002 response to India’s global commitment (including the Vienna Convention) to combat the menace of money laundering. The statement of objects and reasons of the PMLA Bill of 1999 refers to various international conventions and instruments dealing primarily with money laundering related to crimes involving drugs and narcotics.
These include the United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, 1988; the Basle Statement of Principles, 1989; the Forty Recommendations of the Financial Action Task Force on Money Laundering, 1990; the Political Declaration and Global Program of Action adopted by the United Nations General Assembly in 1990; the Resolution passed at the UN Special Session on countering World Drug Problem Together, etc.
“PMLA was a comprehensive penal statute to counter the threat of money laundering, specifically stemming from trade in narcotics. Currently, the offences in the schedule of the Act are extremely overbroad, and in several cases, have absolutely no relation to either narcotics or organised crime,” senior advocate Kapil Sibal said.
What are some of the recent cases where people have been booked under the PMLA?
Ahead of the Punjab polls, the ED has arrested Chief Minister Charanjit Singh Channi’s nephew, Bhupinder Singh ‘Honey’, under money laundering charges in an illegal sand mining case. In 2021, the ED raided the residence and office premises of activist Harsh Mander, who has been a vocal critic of the Government. Former Maharashtra Home Minister Anil Deshmukh was arrested in a corruption and money laundering case in November 2021. The ED has also summoned Abhishek Banerjee, Trinamool Congress (TMC) leader and nephew of West Bengal Chief Minister Mamata Banerjee, for questioning in a money laundering case linked to an alleged coal pilferage scam.
What are the arguments raised in the Supreme Court?
Back-to-back hearings before a three-judge Bench led by Justice A. M. Khanwilkar has raised contesting points. That is, on one side, the gravity of the offence of money laundering. The court said the national economy is the ultimate victim of this crime. The offence affects every citizen. On the other side, senior advocates like Menaka Guruswamy have brought up convincing arguments to show the possibility of misuse of the law and subversion of constitutional guarantees. A Finance Ministry report, brought on record before the court, shows that the ED conducted 1,700 raids and launched special investigations in 1,569 cases between 2011 and 2020. However, it could secure conviction in only nine of these cases. Lawyers for the various petitioners argue that the PMLA is invoked in a case, say against a political rival or a dissenter, because the “process is itself the punishment”.
Senior advocate Amit Desai, for the petitioners, has argued that assets of genuine victims have been attached. The ED could just walk into anybody’s house. In all this, the fundamental purpose of the PMLA to investigate conversion of “illegitimate money into legitimate money” is lost. Petitioners point out that even the Enforcement Case Information Report (ECIR) — an equivalent of the first information report (FIR) — is considered an “internal document” and not given to the accused. They have argued that the ED treats itself as an exception to principles and practices of criminal procedure law and chooses to register an Enforcement Case Information Report (ECIR) on its “own whims and fancies”. The arguments in the court focussed on how, pursuant to the registration of the ECIR, the ED begins to summon accused persons and seeks details of all their financial transactions and that of their family members. The accused is called upon to make statements which are treated as admissible in evidence.
Throughout this whole procedure, the accused does not even know facts of the allegation against him, as the only document which contains the allegation is the ECIR, which is not supplied to the accused persons.
The court is also examining submissions that PMLA does not distinguish between an accused and a witness while summoning them.
They complain that the ED registers an ECIR immediately after an FIR is lodged. This is when the cause of action to commence an investigation under the PMLA can arise only if the commission of the alleged predicated offence has resulted in generation of “proceeds of crime” and such proceeds are “projected or claimed as untainted property”.
Petitioners have submitted that discretion exercised under the PMLA should be guided by rule of law. It must not be “arbitrary, vague and fanciful”.
