PMLA's Original Intent Getting Lost With Ordinary Crimes Being Added As Scheduled Offences : Senior Lawyers Argue In SC

The Supreme Court on Thursday continued hearing batch of petitions concerned with the interpretations of various provisions of Prevention of Money Laundering Act, 2002 ("PMLA Act")

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

Submission Of Counsels

Vacuum In Special Legislation Is To Be Filled By CrPC: Senior Advocate Vikram Chaudhari

Focusing on filling the vacuum in any special legislation by CrPC, Senior Advocate Vikram Chaudhari submitted that CrPC is the parent legislation or procedure for substantive criminal law in India and it applies across the board.

Referring to the judgements in Ashok Munilal Jain vs. Directorate of Enforcement (2018) 16 SCC 158, Deepak Mahajan's case [(1994) 3 SCC 440] , Om Parkash v. Union of India, (2011) 14 SCC 1, Sunil Gupta v. Union of India and Bhavin Impex (P) Ltd. v. State of Gujarat, Chaudhari said, "Only when special law procedure is to the contrary, only to that extent special law will prevail. If there's a vacuum, it'll be filled only by CrPC," he further added.

Highlighting on the aspect of absence of procedure for investigation under PMLA and arguing that , Senior Counsel said, "There are procedural safeguards in CrPC. Today's only emphasis is that if PMLA doesn't call for a procedure of investigation for either cognisable or non cognisable commencement procedure, it isn't there. Sending a copy to the Adjudicating Authority in sealed cover isn't an alternative for investigation procedure."

Submissions By Senior Advocate Amit Desai

Until Section 3 And Scheme Of The Legislature Is Construed, Object Of Legislation Will Get Defeated Since You'll Go After Businesses And Harm The Economy

Senior Advocate Amit Desai commenced his submission by laying down the genesis of the Act. He submitted that the act had its genesis to the joint initiatives taken by several nations wherein the international community acknowledged and recognised the threat posed by the vice of money laundering to the financial systems as well as sovereignty and integrity of nations.

Underlying the principle as to why PMLA was enacted, Desai said, "What's happening is that these ordinary crimes are being looked at in a special manner. We today have the Money Laundering Act which has been enunciated as a part of global cooperation which was in the context of organized crime business which was pervasive across the world. The underlying principle of PMLA was to deal with proceeds of crime generated through organized crime syndicate. Organised crimes be it in prostitution, narcotics generated proceeds of crime & those through various processes integrated into the legitimate economy of nation. The Money Laundering Act intended to cut off the financing of that particular activity/ business since that was the only way to tackle the same."

Contending that over the period of time the original intention of PMLA is being lost sight due to addition of crimes in various statutes under the ambit of scheduled offenses, Senior Counsel while drawing court's to the struggle on the interpretation of Section 3 of the PMLA Act said,

"When this was the original intent & when the original legislature was brought in- please see the schedule- over a period of time we've seen how the schedule has increased, original intent of PMLA is being lost sight of since many statutes which do not have link are being brought into. There's a struggle in the context of Section 3 of PMLA. There are some issues on grammar, language & drafting. When your lordship looks at the nature of offense- gravamen of the charge is converting illegitimate money into leg money. Until the section & scheme of the legislature is construed, the object of the legislature will get defeated because you'll go after the businesses and harm the economy."

To Say That ED Can Suo Moto Come Is Contrary To The Scheme Of Powers, Then There Is No End; Unless An ED Officer Believes That Its Result Of Generation Of Criminal Acts, He Cannot Set The Wheels Of Criminal Law In Motion

During the course of hearing Senior Counsel also drew the court's attention to money laundering being invoked with regards to the scheduled offenses which were committed 20 years ago. Desai while dealing with the question of ex post facto laws:

"Because of the ambiguity of the provision, scheduled offenses are being invoked which were committed 20 years ago. There is no end to this but we're seeing situations like this that 10 years, 20 years old matter, they say that we're starting a money laundering investigation," Desai added.

During the course of hearing, Senior Counsel to substantiate his contention referred to the Delhi High Court's judgment in Arun Kumar Mishra v. ED. and Andhra Pradesh High Court's judgment in Tech Mahindra v Joint Director ED.

While Senior Counsel was making his submissions on the applicability of authorities proceeding with PMLA when the predicate offense and projection pre-dates the commencement of the Act, Justice AM Khanwilkar, the presiding judge of the bench, asked, "We're taking a very recent episode. ED organized some search & traced almost like 190 crore cash & no predicate offense was registered. How do you deal with that? Local police & IT Authorities did not do their job. Which authorities are responsible & which authority will have jurisdiction?"

"If a particular authority has not done its job, the authority which does not have jurisdiction cannot do the job. Would your lordship confer jurisdiction which does not exist? It's an action which is outside the scope of PMLA. It'll have some very serious connotations in criminal law & law as well. Question is do we confer jurisdiction on somebody to have some jurisdiction? To say that ED can suo moto come is contrary to the scheme of the powers- then there is no end," submitted the Senior Counsel to respond to the question posed by the judge.

Supplementing the question, the bench further added, "If information is received by an ED officer that unaccounted cash is lying at someone's house- should the ED officer rush the police to consider the same? The police will register a case under which section of IPC?"

Answering the question, Desai said, "Question is if an ED officer goes to a Police officer that there's cash- he's going to the wrong agency. Unless an ED officer believes that its result of generation of criminal acts, he cannot set the wheels of criminal law in motion."

Emphasizing on the existence of specialized officers with special training for adjudicating offenses under various legislatures, Desai added, "When that particular statute commences any inquiry into the contravention of the provisions of the act then ED can come in."

Individualistic Acts Which Come Within The Ordinary Law (Scheduled Offenses) Should Be Left To The Ordinary Law To Be Dealt With

Desai further added that individualistic acts which come within the ordinary law (scheduled offenses) should be left to the ordinary law to be dealt with.

"Let us not presume that the officers under ordinary law don't know how to investigate. Let us not give ED under PMLA has so much power," he further added.

Senior Counsel also laid emphasis on the issue of trial under PMLA continuing irrespective of acquittal of the accused in the predicate offense.

"If victims have resolved their problem by compounding which results in acquittal, then how must one say that I face harassment under money laundering. PMLA is not compoundable offenses- although i've compounded that but i'm sitting in jail because this is PMLA offence.When it comes under PMLA, closure of predicate offense should also result in closure of PMLA," he added.

The bench would continue hearing the matter on February 15, 2022.

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