Introduction:
The Prevention of Money Laundering Act, 2002 (PMLA) (hereinafter referred to as the "Act") was enacted for the objective of curbing the serious economic threat of money laundering. The Enforcement Directorate (ED) has been the official body/authority responsible for the enquiries and prosecution of offences under the Act for the past decades. There have been concerns raised about the fact that the Directorate exercises its powers particularly in issues concerning arrest, investigation, attachment of property, and bail with little transparency and accountability.
The landmark ruling in "Vijay Madanlal Choudhary v. Union of India (2022)"reinforced the constitutional legitimacy of the ED's broad powers under the PMLA. The review petitions and subsequent debate, however, highlight the urgent necessity of ensuring that rule of law is maintained and ED's powers are utilized upon evidence particular, tangible, and proximate to facts, and not on vague notions or political whims.
Landmark ruling of the "Vijay Madanlal Choudhary v. Union of India (2022)" and the Hon'ble Courts affirmation on the same:-
In July 2022, a three-member bench of the Supreme Court of India passed a landmark judgment in "Vijay Madanlal Choudhary v. Union of India", where it affirmed the constitutional validity of various major provisions of the Prevention of Money Laundering Act, 2002 (PMLA). The Court upheld the legality of:
– Sections 5, 8(4), 15, 17, and 19 of the Prevention of Money Laundering Act (PMLA), 2002, authorize the Enforcement Directorate (ED) to attach property provisionally, search and seize, take evidence, and arrest individuals suspected of money laundering involvement.
– Section 24 of the Act states about the concept of reverse burden of proof, where it is upon the Accused person to prove that no case has been made out against him and prosecution has an upper hand in the trial.
– Section 45, which prescribes twin conditions for granting bail:
- The court is required to be satisfied that there are reasonable grounds to assume that the accused is not guilty.
- The court is also required to be satisfied that the accused is not likely to commit any offence while on bail.
– Section 50, which provides ED officials with civil court-like powers of summoning, production of documents, and recording statements during investigation. The statements are receivable in evidence, and the Court held that these do not offend Article 20(3) (the right against self-incrimination), as ED officials are not police officers within the PMLA regime.
The Court also held that the PMLA constitutes a "self-contained code" and functions autonomously in relation to the Code of Criminal Procedure (CrPC). It consequently held that the Enforcement Case Information Report (ECIR), which is commonly synonymous with a First Information Report (FIR) in criminal law, is only an internal report intended for departmental use. The Court held that there is no statutory obligation to provide the ECIR to the accused and that its failure to do so does not violate constitutional protections under Article 21, provided that the accused is apprised of the reasons for arrest at a stage appropriate in the process and has a chance to challenge the same in court.
The Rule of Law: Need for Procedural Fairness
Though the Court stressed the need for effective tools to fight economic offences, critics cautioned against forsaking procedural checks—the same bulwarks of rule of law under Article 21. Some of the major apprehensions are:
- No compulsion to provide ECIR: Unlike the FIR regime under CrPC, an accused under PMLA can be kept in the dark regarding the allegations.
- Reverse burden of proof: Section 24 places the onus on the accused to establish that the claimed "proceeds of crime" are free from taint, contravening the right to the presumption of innocence.
- Charging conditions: Section 45 imposes two burdensome conditions before bail is allowed, departing from standard bail jurisprudence.
- Admissibility of compulsion statements: Section 50 enables ED to call persons and take statements, which can subsequently be adduced against them—potentially violating rights of testimonial compulsion and self-incrimination.
- The Requirement of Specific Evidence: Preventing Random Action
One of the core principles of justice is that accusation and prosecution should be based on specific credible evidence. In the case of PMLA the investigations should follow a clear chain of money tracing its illegal source, hidden flow, and mix. Vaguely worded charges with supporting documents and financial evidence result in abuse, as indicated in a few high-profile cases where opposition leaders or critics have been arrested. Without standards of evidence judiciously overseen by courts, ED's sweeping powers can easily turn into political retribution tools.
Subsequent Review Petition filed against the Judgement:
On 23 August 2022, Karti Chidambaram and others moved a review petition against several points in the Vijay Madanlal judgment. The Supreme Court, in August 2024, decided to hear the review on two critical questions:
- Is the ED under any obligation to provide the ECIR to the accused?
- Is presumption reversal of constitutionality valid?
These queries touch upon the essence of transparency, fair trial, and due process, reinforcing the basic values enshrined within Article 21 of the Constitution.
Other Important Judgement on the topic:
In Nikesh Tarachand Shah v. Union of India (2017), the Supreme Court had invalidated the twin bail conditions of Section 45 as violative of the right to personal liberty. However, this was overruled by the Vijay Madan Lal judgmentin favor of preserving the bail provisions after the 2018 amendments.
The analogy has significant questions:
- Are economic crimes such as money laundering so special that they warrant pre-trial imprisonment without protection?
- Can the legislature override constitutional safeguards by simply reinstating earlier disallowed provisions.
Conclusion
The PMLA ruling in Vijay Madanlal indeed strengthens the ED's hand in combating money laundering. Yet, unfettered power without evidentiary diligence and procedural justice contradicts constitutionalism.
Prevention of Money Laundering Act (PMLA)To reaffirm the rule of law, future interpretations particularly in the pending review need to ensure more transparency, including disclosure of ECIR or grounds for arrest, judicial supervision to ensure the non-arbitrary exercise of coercive power, rigorous standards of evidence prior to prosecution or freezing of assets, and the Presumption of innocence as a foundation of criminal jurisprudence.
It is vital to combat the economic crimes persistent in the country, but the battle should not at the expense of executive convenience compromising individual liberty, justice, and fairness. The Enforcement Directorate has to be evidence led, not politically led, if it's to serve the Constitution and the public trust.
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