SC Upholds ED’s Powers of Search, Seizure, Arrest Under PMLA

New Delhi: In a crucial order backing the Enforcement Directorate (ED), the Supreme Court (SC) has upheld the constitutional validity of certain sections of the Prevention of Money Laundering Act (PMLA), 2002, including attachment of property, taking possession of the attached property, search and seizure and powers of arrest, by the law enforcement and economic intelligence agency.

Hearing a batch of 241 petitions, including those filed by politician Karti Chidambaram and former Jammu and Kashmir chief minister Mehbooba Mufti, challenging the Act on Wednesday, a Bench of Justices AM Khanwilkar, Dinesh Maheshwari and CT Ravikumar also observed that it is not mandatory for the ED to provide an Enforcement Case Information Report (ECIR) to the accused and it cannot be compared to a first information report, news agency PTI reported.

“Supply of ECIR to the accused is not mandatory and only disclosure of reasons during the arrest is enough. Even the ED manual is not to be published since it is an internal document,” the apex court observed.

The court upheld the validity of Sections 3 (definition of money laundering), 5 (attachment of property), 8(4) [taking possession of attached property), 17 (search and seizure), 18 (search of persons), 19 (powers of arrest), 24 (reverse burden of proof), 44 (offences triable by a special court) and 45 (offences being cognisable and non-bailable).

Responding to the petitioners that putting the burden of proof on the accused under Section 24 violates fundamental rights like the right to equality and the right to life, solicitor general (SG) Tushar Mehta said that it is justified because of the serious nature of money laundering and the need to curb it, NDTV reported. Upholding Section 24, the SC said that it has “reasonable nexus” with the objects of the Act, according to a report filed by LiveLaw.

The court also upheld the “twin conditions” for bail in Section 45 and said that Parliament is competent to amend it to cure the “defects” in its judgment in the Nikesh Tharachand Shah case  , which had struck down the twin conditions.

Rejecting the petitioners’ argument that the offence of “money laundering” under Section 3 is applicable only if the property is projected as untainted property, the top court held that “and” in the section has to be read as “or”.

The section has a wider reach and captures every activity indirectly or directly related to money laundering and is not merely related to the final act of laundering the money, the court said adding that mere possession of the proceeds of crime is money laundering.

The court also observed that the ED officials are not “police officials” and hence statements recorded by them under Section 50 are not hit by Article 20(3) of the Constitution, which guarantees the fundamental right against self-incrimination. The punishment of a fine or arrest for giving false information cannot be construed as a compulsion to give a statement, the Bench added. “Section 50 procedure is in the nature of an inquiry, not an investigation.”

Senior counsels appearing for the petitioners argued that the “unchecked power” to arrest without informing the accused of grounds of arrest or evidence is “unconstitutional”. The petitioners had further submitted that when the ED records incriminating statements of an accused under the threat of being fined for withholding information, it amounts to compulsion.

Senior counsels pointed out that the ED has secured only nine convictions after conducting 1,700 raids and 1,569 specific investigations since 2011. Besides, the severely understaffed PMLA Appellate Tribunal—with only one member of the five-person committee serving as on February 16—is a serious impediment in securing remedy for unjustified attachments made by the ED, the counsels argued.

The petitioners had further submitted that there is no procedure to commence with the investigation and for summoning individuals. It was submitted that the PMLA excludes the application of provisions of the Code of Criminal Procedure.

Highlighting the lack of magisterial safeguard, the petitioners had submitted that while taking congnisance under Section 157 of the CrPC, the magistrate is “not aware why the accused had been arrested”.

Regarding the twin bail conditions, the petitioners had said that it encourages preventive detention but without regular safeguards, which is a “blatant violation of Article 21”. In order to secure bail under the PMLA, the court ought to be prima facie satisfied that the accused is not guilty—but both at pre-complaint stage and post-complaint stage, the accused does not have sufficient means to prima facie establish that they are not guilty, they had submitted.

Comparing India’s situation with jurisdictions like the UK, the USA, China, Australia, Hong Kong, Belgium and Russia, Mehta contended that out of 4,700 cases investigated under PMLA, only 313 arrests have been made and 388 searches conducted, which is quite low.

Out of 33 lakh predicate offences registered, the ED has decided to take up only 2,186 cases for investigation in the last five years, Mehta added.

The SG further contended that the possession of proceeds of the crime is enough to constitute an offence under PMLA and is not limited to projection of ‘proceeds of the crime’ as untainted.