Delhi High Court Seeks Centre's Stand On Plea Against Inclusion Of CAs Within ‘Reporting Entities’ Under PMLA

The Delhi High Court on Monday sought the stand of the Union Government on a plea challenging the inclusion of Chartered Accountants, Company Secretaries or Cost Accountants within the definition of “Reporting Entities” and casting other obligations on them under the Prevention of Money Laundering Act (PMLA).

A division bench comprising Chief Justice Satish Chandra Sharma and Justice Sanjeev Narula granted time to Additional Solicitor General Chetan Sharma to obtain appropriate instructions in the matter and listed it for hearing on October 04.

The plea has been moved by Rajat Mohan, a practicing Chartered Accountant, challenging the gazette notification published on May 05 which expanded the definition of the word “person” used in Section 2(1)(sa)(vi) as well as the definition of the word “activity” under the Act.

“Specifically, a class of professionals i.e., Chartered Accountants/Company Secretaries/Cost Accountants have been included within the definition of ‘'Reporting Entities’' and onerous obligations under the PMLA have been put on them with consequences of noncompliance leading to criminal prosecution,” the plea states.

Mohan is represented by Senior Advocate Trideep Pias. The petition has been moved by Advocate Shweta Kapoor.

It is Mohan’s case that the effect such inclusion is that they virtually make him and others notified under the impugned notification “engage virtually” in policing their own clients who interact with them in a fiduciary capacity “even when a case under the PMLA has not even commenced.”

The plea states that the impugned notification has “virtually put the cart before the horse” and that the PMLA was not meant to harass persons prior to there even being a predicate offence in existence.

“The impugned notification is further ultra vires the object of the PMLA as it creates the framework for a fishing and roving enquiry into every financial transaction of each individual/citizen of the country who attends the office of the petitioner to engage his services without exception even before a money laundering proceeding has been initiated against any such citizen/individual or juristic entity,” the plea states.

It adds, “The scope and application of PMLA is extremely rigorous and strict and even a bonafide oversight shall put the life, liberty careers of the Reporting Entities under threat. A sword of Damocles would always remain hanging on the head of the petitioner.”

Case Title: RAJAT MOHAN v. UNION OF INDIA & ORS.