PMLA Arrest Process Like A 'Frankenstein's Monster' : Kapil Sibal Urges Supreme Court To Devise Fair Procedure

The Supreme Court on Wednesday continued hearing a batch of petitions concerned with interpretation of the Prevention of Money Laundering Act, 2002 ("PMLA Act").

The matter was listed before the bench of Justices AM Khanwilkar, Dinesh Maheshwari and CT Ravikumar.

Submissions Of Counsel(s)

We've Created Frankenstein Monster; Laws Of This Nature Should Be Dealt With As Quickly As Possible: Senior Advocate Kapil Sibal

Senior Advocate Kapil Sibal, while referring to Section 19 of PMLA Act which deals with the Powers of Arrest, submitted that there had to be a procedure through which the accused is informed so that he/she is entitled to seek constitutional remedies.

Bescheeing the bench to devise some procedure, Senior Counsel while questioning the validity of arrest on the exclusion of material said,

"If the material is not disclosed to me & is given to the adjudicating authority & only sections are disclosed to me, how can I ask for bail? I only know grounds for arrest but since no ECIR (Enforcement Case Information Report) is given to me, I have no material. What I'm canvassing is, there has to be a procedure through which I'm informed so that I am entitled to seek my constitutional remedies. I have remedies u/s 482 CrPC, Art 226, 32, but all these flow from Art 21. If the material is excluded, what would be the validity of arrest? Your lordships need to devise some procedure."

While Sibal during the course of hearing was referring to various judgements of the High Court to apprise the bench of the views taken by the High Court's, Justice AM Khanwilkar the presiding judge of the bench said,"Just wondering how much judicial hours have been wasted in this case. Lawless paradise."

Responding to the remarks made by the bench, the Senior Counsel to conclude his submission said, "It's not only lawless paradise but Bureaucrat's paradise. We've created Frankenstine monster. It's like "Be Lagam Ghoda" because there is no restraint. Laws of this nature should be dealt with as quickly as possible. I'd say we need to control this Frankenstein Monster that we've created."

Submissions Of Senior Advocate Siddharth Luthra

There Is No Magisterial Oversight; There's A Lawless Regime; It's Onerous To Point Of Being Scary For Individual Who Has Been Picked Up Under Statue

Senior Advocate Siddharth Luthra commenced his submissions by stating that the Charge Sheet test should not "only" be considered for determining whether officers under ED are police officers or not.

To elaborate on this contention, Senior Counsel while referring to the definition of investigation u/s 2(na) of PMLA and 2(h) of CrPC said that both were same and dealt with, "proceedings for collection of evidence". He further contended that the procedure and events antecedent to the filing of the Complaint are the same i.e. the same investigation as defined under the Cr.P.C. or the PMLA.

To further substantiate this contention, Senior Counsel referred to the additional powers that have been granted to ED officers with regards to filing of closure reports (proviso to section 44(1)(b) PMLA which is akin to the Cr.P.C. where a closure report is filed under the same provision as that for filing of a charge sheet i.e. Section 173(2) Cr.P.C.; and for carrying out further investigation [Explanation (ii) to Section 44(1) PMLA] which is also a power vested in police officers under Section 173(8) Cr.P.C.

He further submitted that the provision u/s 45 of the PMLA, 2002 were onerous and even the Magistrate u/s 157 was not aware of why the accused was arrested.

"There are onerous provisions u/s 45 & I don't even get the ECIR. Magistrate under 157 does not know why I am arrested. It's a peculiar problem. There is no Magisterial Oversight. There's a lawless regime. It's onerous to the point of being scary for the individual who has been picked up under the statue."

During the course of hearing, the bench posed a question to Senior Counsel as to whether the ED officer was expected to maintain everything that a police officer maintained under CrPC.

"If there is mutatis mutandis, do you expect the officer to maintain everything that a police officer maintains under CrPC? Is it going to be your argument that being a police officer for PMLA, officers are required to adhere to all the discipline? CrPC we've said mutatis mutandis, but there are other provisions too," asked Justice AM Khanwilkar.

"The police are governed under various regimes & they supplement with CrPC & they are sacrosanct. These (manuals & provisions by States on Police) are nuts & bolts but they do not supersede CrPC," responded Luthra.

Referring to Sections 154 and 155 of CrPC, Senior Counsel said that there was no provision under PMLA dealing with as to how investigation would trigger.

Highlighting the procedure followed by Adjudicating Authority u/s 8 of PMLA Act, Senior Counsel said, "Adducting authority to whom the information goes is not overseeing my arrest. It has nothing to do with my arrest."

At this juncture, Justice Khanwilkar remarked :

"Here is a different section altogether. Reporting entity informs the Designated Officer. After receipt of information- there is enquiry & after that statements are recorded. How this process begins. How this information & details are already there based on which opinion is formed that the person is guilty & then he forwards the same to adjudicating authority. All these records are on a case to case basis. At the same time there can be a criminal case if there is offense under PMLA & now under sec 155 you say that another process has to follow. It would be converse. PMLA will prevail".

During the course of hearing, the bench also also deliberated on how harmonious construction could be given to ensure that the person gets the requisite information with regards to reasons for his arrest.

The bench said, "Show us under this existing Act itself, how it can be worked out. How can harmonious construction be given so as to ensure that you get requisite information about the reasons for your arrest so that you also effectively defend yourself."

We Can't Have A Situation How Accused(s) Fundamental Rights Can Be Abridged Without Any Legitimate & Regulatory Mechanism; Circulars, Guidelines & Manuals Don't Qualify As Law Or Existing Law

Referring to Article 21 of the Constitution of India, Senior Advocate Siddharth Luthra submitted that the procedure that is followed by ED should be consistent with Fundamental Rights. Emphasizing on the point that the law as per which personal liberty can be deprived pre-supposes law in the context of Article 13 of the Constitution, Senior Counsel argued that except ED Manual there was no procedure prescribed under PMLA.

"Article 21 pre-supposes law in the context of Article 13. Laws are supposed to be consistent with Fundamental Rights. That being the situation, can we have a domain where personal liberty is being dealt with circular or administrative directions? Today we're dealing with liberties of individuals relying on sec 23 & 24 of the Act & there is no procedure as to how everything is done except the ED Manual. Law doesn't give them the liberty to frame their own procedure.

Procedure has to meet the test of Article(s) 14, 19, 20 & 21. When the court & accused does not know the procedure, where is the point of Article(s) 14, 19, 20,21. Circulars, guidelines & manuals don't qualify as law or existing law," submitted Luthra.

Relying on the Top Court's judgment in Bedi Supply Co v UOI AIR 1956 SC 479, Luthra said, "Proposition that we seek to make is that we can't have a situation how my Fundamental Rights can be abridged without any legitimate & regulatory mechanism."

"If Section 50 is the only power of investigation & there is no other power, then either recourse will be taken to CrPC. Then arguendo that there is ED Manual would fail and therefore they have no authority to investigate," submitted Senior Counsel.

We Can't Have Different Procedures For Investigation Of PMLA & Predicate Offenses; We Can't Have A Situation Where PMLA & Predicate Offense Is To Be Treated Separately

Senior counsel submitted that there could not be different procedures for investigation of PMLA and predicate offense. Referring to the Top Court's judgment in Subramanian Swamy v. Union of India, Ministry of Law and Ors Writ Petition (Criminal) No.184 Of 2014, Senior Counsel said,

"The nexus with objects that ought to be achieved cannot be done in the manner that sought to be done by excluding the safeguard which are applicable. We can't have a situation where PMLA & predicate offense is to be treated separately"

On Senior Counsel's submission, Justice AM Khanwilkar said, "Mr Luthra, there is fallacy in your argument. PMLA may be because of the amount generated during commission of offense. But these are two distinct offenses. Money Laundering is independent & it's a different offense altogether. This offense is only taken note at the instance of the dept. Therefore the procedure is entirely different & there's a distinction between the two."

Responding to the remarks made by the bench, Luthra said, "The issue that I was trying to make was. Under the statute, there are scheduled offenses of a variety of crimes. Some having twin conditions & some not having twin conditions. Classification of Trade Marks Act, Plant Varieties Act cannot be subjected to the same restriction as regarding UAPA Offense or NDPS offense. Money laundering is movement, handling of the proceeds arising from predicate offense."

Relying on Section 44(c) of PMLA, Senior Counsel said, "Look at peculiarity here, everywhere in the country 420 etc are Magistrate triable offence. But see the onerous situation, you've taken me from Magistrate court to Special Court."

The bench would continue hearing the matter on February 3, 2022.

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PMLA Interpretation - Accused Has Right To Remain Silent; Can't Be Forced To Cooperate With Investigation: Kapil Sibal In Supreme Court