ED Authorities Are Not Police Officers; Article 20(3) Protection Available Only After Arrest & Not At Summons Stage : Supreme Court

The Supreme Court has held that the authorities of the Directorate of Enforcement(ED) who are investigating into money laundering cases as per the Prevention of Money Laundering Act are not "police officers". Hence, the statements recorded by ED authorities under Section 50 of the PMLA Act while inquiring into the proceeds of crime are not hit by Article 20(3) of the Constitution (the right against self incrimination).

The Court however held that the defence of an accused who is prosecuted for money laundering offence that his statement is inadmissible in evidence as barred by Section 25 of the Evidence Act (which makes confessional statements to police inadmissible in evidence) can be considered on a case-to-case basis.

The protection under Article 20(3) and Section 25 of the Evidence Act cannot be invoked at the stage of summons and may be raised only after a formal arrest.

"At the stage of issue of summons, the person cannot claim protection under Article 20(3) of the Constitution. However, if his/her statement is recorded after a formal arrest by the ED official, the consequences of Article 20(3) or Section 25 of the Evidence Act may come into play to urge that the same being in the nature of confession, shall not be proved against him", the Court said.

"In a given case, whether the protection given to the accused who is being prosecuted for the offence of money- laundering, of Section 25 of the Evidence Act is available or not, may have to be considered on case-to-case basis being rule of evidence", the Court stated.

A bench comprising Justices AM Khanwilkar, Dinesh Maheshwari and CT Ravikumar made the above pronouncement in the judgment in the case Vijay Madanlal Choudhary vs Union of India, in which several provisions of PMLA were challenged.

The petitioners had challenged Section 50 of the PMLA on the ground of being violative of Articles 20(3) and 21 of the Constitution.

Protection of Article 20(3) not available at the stage of ED summons; may be raised after formal arrest

The Court noted Section 50 gives the powers of a Civil Court to the ED authorities to summon any person and call for production of documents in an investigation under the Act. The Court said that such a summons or direction can be issued against any witness and such a witness need not be an accused. The protection under Article 20(3) is available only to an accused person.

"...designated officials have been empowered to summon any person for collection of information and evidence to be presented before the Adjudicating Authority. It is not necessarily for initiating a prosecution against the noticee as such. The power entrusted to the designated officials under this Act, though couched as investigation in real sense, is to undertake inquiry to ascertain relevant facts to facilitate initiation of or pursuing with an action regarding proceeds of crime, if the situation so warrants and for being presented before the Adjudicating Authority", the Court said.

"In such a situation, at the stage of issue of summons, the person cannot claim protection under Article 20(3) of the Constitution. However, if his/her statement is recorded after a formal arrest by the ED official, the consequences of Article 20(3) or Section 25 of the Evidence Act may come into play to urge that the same being in the nature of confession, shall not be proved against him", the Court added.

Not police officers.

"The purposes and objects of the 2002 Act for which it has been enacted, is not limited to punishment for offence of money- laundering, but also to provide measures for prevention of money- laundering. It is also to provide for attachment of proceeds of crime, which are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceeding relating to confiscation of such proceeds under the 2002 Act. This Act is also to compel the banking companies, financial institutions and intermediaries to maintain records of the transactions, to furnish information of such transactions within the prescribed time in terms of Chapter IV of the 2002 Act. Considering the above, it is unfathomable as to how the authorities referred to in Section 48 can be described as police officer."

Tofan Singh judgment distinguished

The petitioners relied on the judgment in the Tofan Singh case, which held that NCB officers authorised to investigate NDPS Act are "police officers" within the meaning of Section 25 of the Evidence Act and hence the confessional statements recorded by them under Section 67 of the NDPS Act are inadmissible in evidence.

The Court distinguished Tofan Singh judgment saying that it was rendered in the particular legislative framework of the NDPS Act, which allowed investigation into NDPS offences both by the local police and NCB officers. This led to a dichotomy between the investigation carried out by police and NCB and it was in this context that the Tofan Singh judgment was rendered.

However, under the PMLA Act, the local police are barred from investigating money laundering offences and exclusive jurisdiction has been conferred upon the ED authorities.

"However, in the case of provisions of the 2002 Act, there is no similar provision as Section 53A of the NDPS Act. As a result, even this deficiency noticed in that judgment has no application to the provisions of the 2002 Act. The Court also noted in that decision that unlike the provisions of in the Customs Acts, 1962, Central Excise Act, 1944 and Railway Property (Unlawful Possession) Act, 1966, in the case of NDPS Act prevention, detection and punishment of crime cannot be said to be ancillary to the purpose of regulating and exercising of control over narcotic drugs and psychotropic substances", the bench observed.

The bench also referred to precedents holding that authorities carrying out investigation under the Customs Act, Central Excise Act, Railway Property Act etc., are not police officers.

"Ex-consequenti, the statements recorded by authorities under the 2002 Act, of persons involved in the commission of the offence of money-laundering or the witnesses for the purposes of inquiry/investigation, cannot be hit by the vice of Article 20(3) of the Constitution or for that matter, Article 21 being procedure established by law. In a given case, whether the protection given to the accused who is being prosecuted for the offence of money- laundering, of Section 25 of the Evidence Act is available or not, may have to be considered on case-to-case basis being rule of evidence".

The Court concluded its findings on this point as follows :

(a) The process envisaged by Section 50 of the 2002 Act is in the nature of an inquiry against the proceeds of crime and is not "investigation" in strict sense of the term for initiating prosecution and the Authorities under the 2002 Act (referred to in Section 48), are not police officers as such.

(b) The statements recorded by the Authorities under the 2002 Act are not hit by Article 20(3) or Article 21 of the Constitution of India.

Also Read : Supreme Court Upholds ED's Power Of Arrest, Attachment, Search & Seizure And "Twin-Conditions" For Bail; Says PMLA Has Stringent Safeguards
Summary Of Supreme Court's PMLA Judgement- Vijay Madanlal Choudhary Vs Union of India