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Statements Of Accused Persons Under Section 50 Of The PMLA– Highlighting The Lack Of Constitutional Protection

Kunal Bilaney
10 Nov 2021 2:26 PM GMT
Statements Of Accused Persons Under Section 50 Of The PMLA– Highlighting The Lack Of Constitutional Protection
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Section 50 of the Prevention of Money Laundering Act, 2002 (hereinafter "PMLA") pertains to powers of an investigating officer in relation to summons, production of documents, giving evidence etc. Section 50(2) of the PMLA empowers The Director, Additional Director, Joint Director, Deputy Director or Assistant Director to summon any person for the purposes of giving evidence or...

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Section 50 of the Prevention of Money Laundering Act, 2002 (hereinafter "PMLA") pertains to powers of an investigating officer in relation to summons, production of documents, giving evidence etc. Section 50(2) of the PMLA empowers The Director, Additional Director, Joint Director, Deputy Director or Assistant Director to summon any person for the purposes of giving evidence or producing records. Section 50(3) of the PMLA compels the person so summoned to state the truth, without having any regard to the potentially inculpatory nature of the evidence/records so produced by such a person and even penalizes such a person under section 63 of the PMLA for their refusal to answer any question, thereby affecting his fundamental right against self-incrimination. Such an imposition therefore does beg the question – Is section 50 of the PMLA in violation of Article 20(3) of the Constitution of India?

Whether the statement of an 'accused' person be taken under section 50?

A bare perusal of Section 50 would show that the provision does not distinguish between a witness and an accused person. The phrase used in the provision is '…any person he [The Director, Additional Director, Joint Director, Deputy Director or Assistant Director] considers necessary to give evidence or to produce any records…' Considering that the section does not distinguish between an accused person and a witness, it prima facie appears that the section would also allow the summoning of an accused person. In Ramesh Chandra Mehta vs State of West Bengal (AIR 1970 SC 940), the Supreme Court categorically held that the phrase 'any person' would also include persons who are suspected or believed to be concerned in the smuggling of goods. The Court was dealing with the interpretation of section 171A of the Sea Customs Act, 1878. Similarly, in Nandini Satpathy vs PL Dani (AIR 1978 SC 1025), the Supreme Court, while interpreting section 161 of the CrPC, held that the phrase 'any person supposed to be acquainted with the facts and circumstances of the case' would include an accused person who fills that role as the police suppose him to have committed the crime and must therefore be familiar with the facts.

Since there is no decision in respect to section 50 of the PMLA, the decision in RC Mehta (supra) is widely relied upon as section 171A of the Sea Customs Act is pari materia to section 50 of the PMLA. Therefore, in light of these decisions, it would be prudent to assume that section 50 of the PMLA would also allow for statements of an accused person to be recorded.

Understanding Article 20(3) and the right against self-incrimination

Article 20(3) of the Constitution of India provides for the fundamental right against self-incrimination. In other words, the Article provides that any person accused of an offence cannot be compelled to be made a witness against himself. However, an important facet of the Article is that the protection under Article 20(3) can only be afforded to a person 'accused of an offence'. The Supreme Court in numerous decisions has held that a person can be said to be 'accused of an offence' only when a formal accusation is made. In the famous decision of M.P. Sharma vs Satish Chandra (AIR 1954 SC 300), the Apex Court went on to hold that the protection under Article 20(3) was available to the petitioners, against whom a First Information Report was recorded. Thereafter, in State of Bombay vs Kathi Kalu Oghad (AIR 1961 SC 1808), the Apex Court held that the person accused must have stood in the character of an accused person at the time he made the statement. It went on to further hold that it would not be enough if the person becomes an accused person after the statement was taken.

The distinction made out in Oghad (supra) is immensely important to the present discussion as it is this technical loophole that the authorities tend to exploit while investigating. In other words, when the investigating authorities receive any information about the commission of an offence, they can summon the persons they believe are connected to the offence and take their statements without making a formal accusation, thereby preventing the person so summoned from availing the protection under Article 20(3). However, they then array them as an accused on the basis of their own statement and then file the complaint against them. Therefore, as is visible, the constitutional protection under Article 20(3) gets sidelined very conveniently and more often than not, such persons are unable to claim the protection against self-incrimination as is guaranteed under the Article.

Section 50 of PMLA vis-à-vis Article 20(3)

The next question that therefore arises is whether summoning a person u/s 50 of the PMLA for giving evidence and/or produce record be in violation of Article 20(3) of the Constitution of India? The Supreme Court has not had a chance yet to consider this question. However, there are a few decisions of High Courts that are relevant in this regard. The most recent decision was given by the Telangana High Court in Dalmia Cement (Bharat) Limited and ORs. vs Asst. Director of Enforcement Directorate and Ors. (2016 (3) ALT 189), wherein the petitioners had challenged the summons under section 50 of the PMLA by claiming it to be violative of the constitutional protection and guarantee under Article 20(3). The Court went on to hold that the summons issued under section 50 was not violative of the constitutional protection and guarantee under Article 20(3) as no formal accusation was made when the summons was issued. It was argued by the Petitioners that the ECIR (Enforcement Case Information Report) was registered and thus the Petitioners were standing in the capacity of accused persons. The counter-argument to this by the Enforcement Directorate (hereinafter 'ED') was that the Petitioners were not accused and were merely suspects. The Court, however, while observing that an ECIR would not be akin to an FIR, held that since only an ECIR was registered, the Petitioners could not be said to persons accused of an offence. The Court further observed that until the complaint under section 44 of the PMLA was filed by the ED, the Petitioners could not be said to have been standing in the capacity of accused persons in order to afford the constitutional protection under Article 20(3).

In another decision given by the Madras High Court, in B. Narayanswamy vs Deputy Directorr, Enforcement Directorate Chenna (AIR Online 2019 Mad 1133), the Court held that at the time of making enquiry under section 50(2) and 50(3) of the PMLA, the persons so summoned cannot be treated as an accused person unless they are found to have been involved in money laundering. It was specifically argued by the prosecution that summoning persons under section 50 was only for the purposes of collecting evidence and then on the basis of the evidence collected and the statements recorded, if it was established that the person is involved in money laundering, only then would he be treated as an accused and a complaint would be filed against him. What is pertinent to note here is the usage of the word 'found', which is vastly different from 'believed' or 'suspected', which implies that a person said to be an accused only after evidence is found against them. However, what has not been considered is the tendency to array such a person as an accused on the basis of self-incriminating material.

Even in the decision of the Delhi High Court in Vakamulla Chandrashekhar vs Enforcement Directorate and Ors. (MANU/DE/3614/2017), the Delhi High Court held that Article 20(3) of the Constitution will only come into play if the person is named as an accused in the complaint filed before the Spl. Judge by the investigating authority. The argument advanced by the Petitioner in this case was that since the Petitioner was summoned u/s 50 of the PMLA to give evidence and produce record, without knowing whether he would eventually be cited as a witness or arrayed an accused, his fundamental right under Article 20(3) was violated.

Similarly, in RC Mehta (supra), the Supreme Court, while dealing with section 171A of the Sea Customs Act, held that a person summoned under section 171A of the Sea Customs Act to give evidence or to produce a document, cannot claim protection under Article 20(3) as he does not stand in the capacity of an accused person at that stage. The Apex Court further went on to observe that normally a person would only stand in the character of an accused person when a First Information Report is lodged against him or a complaint is filed against that person before a Magistrate.

A perusal of these four decisions would suggest that a person, when summoned under section 50 of the PMLA to give evidence or produce record, cannot claim protection under Article 20(3) for two reasons. One, since the complaint is not filed by the prosecution or two, because they are merely suspects at the time they are summoned. The problem with the first approach is that it would defeat the very purpose of incorporating the constitutional protection under Article 20(3). Any person so summoned can be made to give a self-incriminatory statement and it would be on the basis of that statement itself, that the authorities could file a prosecution complaint against him, thereby rendering the protection under Article 20(3) as completely useless. Waiting for the prosecution complaint to be filed, in order to activate the protection under Article 20(3) would make the constitutional protection redundant as, more often than not, once the prosecution complaint is filed, that means the investigation is completed and it is most likely that after the complaint is filed the authorities would not need to interrogate the accused person.

The problem with the second approach is that even when a person is suspected, calling upon him to give evidence and/or produce any record, which could be inculpatory in nature, and penalizing him for remaining silent, could violate Article 20(3) as the Act does not provide that the evidence/record so produced by such a person be exculpatory in nature. Secondly, not providing the protection under Article 20(3) would also be contrary to the law laid down by the Supreme Court in Nandini (supra), where the Supreme Court had categorically held that the protection would also extend to suspects. The Court specifically stated –

"It is plausible to argue that, where realism prevails over formalism and probability over possibility, the enquiries under criminal statutes with quasi-criminal investigations are of an accusatory nature and are sure to end in prosecution, if the offence is grave and the evidence gathered good. And to deny the protection of a constitutional shield designed to defend a suspect because the enquiry is preliminary and may possibly not reach the court is to erode the substance while paying hollow homage to the holy verbalism of the article [Article 20(3)]."

Admissibility of such statements of accused

Based on the approach the Courts seem to have adopted for the application of Article 20(3) of the Constitution, it thus becomes necessary to determine the admissibility of such statements of accused persons u/s 50 of the PMLA. In Rohit Tandon vs The Enforcement Directorate, the Supreme Court categorically held that the statements of the accused persons under section 50 of the PMLA would be admissible. This is further fortified by the fact that the bar under section 25 of the Indian Evidence Act, 1872 also does not apply to these statements as the investigating officers under the PMLA have not yet been equated with 'police officers' in the context of section 25 of the Indian Evidence Act, unlike the investigating officers under the NDPS Act, 1985.

Furthermore, in lieu of the line of judgments holding that statements made before a customs officer would be admissible, courts have also relied upon the same to hold that statements made under section 50 would be admissible, solely because section 108 of the Customs Act and section 50 of the PMLA are pari materia. The same is also visible in Karnataka High Court's decision in S.C. Jayachandran vs Enforcement Directorate (2017 (4) AKR 386). However, in this regard, the dissenting judgment of Justice Subba Rao in State of Punjab vs Barkat Ram (AIR 1962 SC 276) becomes relevant as he was not too naïve to observe that even the officers, who are not designated as police officers, but exercise all the powers and duties of the police officers would be hit by the bar under section 25 of the Indian Evidence Act.

It therefore seems evident that neither the protection under Article 20(3) of the Constitution of India nor the bar under section 25 of the Indian Evidence Act can come to the rescue of a person summoned under section 50 of the PMLA to give a statement. In this light, the judgment of the Supreme Court in A. Tajuddeen vs Union of India (AIR 2015 SC (Supp) 1646) becomes absolutely relevant wherein the Apex Court rightly held that statements made to officers of the Enforcement Directorate ought not to be readily believable, unless there is independent corroboration, as such statements can be easily thrust upon the person who was summoned.

Furthermore, it is somewhat astonishing to see that a self-incriminating statement made by an accused/suspected person, which would be inadmissible if made before a police officer, would be, if made under the same circumstances, admissible merely because it is being made under section 50 of the PMLA. Considering the above, it is imperative that the Supreme Court takes notice of this lack of protection and finds a suitable solution in order to prevent any potential high-handedness exercised by the authorities.

Author: Kunal Bilaney , Advocate, Chambers of Mr. Kushal Mor, Mumbai. Views are personal.


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