Expansive Powers Of Arrest & Attachment Under PMLA Creating Havoc: Sidharth Luthra To Supreme Court

The Supreme Court on Thursday 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 Senior Advocate Sidharth Luthra 

Restrictions Under Section 45 Has Led To Series Of Disabilities To Individual Without Safeguard Under Article 22; ED Manual Is Grey Area Which Has Not Seen Light Of The Day; This Law Does Not Give Citizen Any Protection Whatsoever Which Is Akin To Preventive Detention Given To The Citizen

Mooting on the twin conditions imposed u/s 45(1) of PMLA Act, Senior Counsel submitted that the twin conditions were raising a bar against liberty and were violative of presumption of innocence and Article 21 of the Constitution of India.

"When we're looking at twin conditions, they are raising the bar against liberty. The bar is so high that they are in the nature of restrictions in the latter part of Art 22. So I'm really in the nature of preventive detention without the safeguards of preventive detention. This whole restriction that has been brought in under this legislature is unfettered discretion, without safeguard & I can't be put into a situation where my safeguards are not given to me."

Remarking that ED Manual is a grey area that has not seen the light of the day, Luthra said, "Forget me, even the Magistrate does not have ECIR & records of the case. There is no mandate of the law requiring the ED official to produce a particular document."

On Senior Counsel's submission, Justice AM Khanwilkar, the presiding judge of the bench said, "Structure of legislature itself, Director collects the material, records his opinion & makes it in writing. So that's his perception & then he gives it to the adjudicating authority. He is satisfied that the person is "guilty". That's why the term "guilty" has been used. Here under PMLA, he has formed his opinion. This is the view of the authority itself. That's a different structure. Scheme of the Act will also have to be kept in mind while interpreting this provision."

Reliance was placed on the relevant paragraphs of Nikesh T.Shah Vs. Union of India (2018)11 SCC 1, Babu v State of Kerala 2009 SCC, Sagir Ahmad v State of UP., NIA v. Zahoor Ahmad Shah Watali (2020), Dharmendra Kirthal vs State Of U.P. & Anr 2013 during the course of his submission.

Application Of Twin Conditions U/S 45(1) Of The Act When No Arrest Was Made U/S 19 Of The Act Was Creating Havoc

The Senior Counsel also drew Court's attention to the scenario wherein initially the accused was not arrested u/s 19 of PMLA but was arrested when the accused appeared before the officials pursuant to being summoned. In this regard, he submitted the application of twin conditions u/s 45(1) of the Act when no arrest was made u/s 19 of the Act was creating havoc.

"If the investigator does not find that threshold satisfied at the investigation stage to bring in 45 restrictions at post cognisance stage would mean that without any legitimate reason to put the person in custody, the person will be put in custody. Today it's becoming a routine in every case," submitted the Senior Counsel.

In this backdrop, Senior Counsel bescheed the bench to consider the question as to, "Whether a person not arrested u/s 19 during investigation of PMLA & complaint under PMLA if filed without arrest, can be subjected to sec 45(1) restrictions on appearance or summoning by court post cognisance?"

"Your attempt is to examine everything on the anvil of CrPC but the scheme of the Act & entire set up is different. Merely because it's not gelling with CrPC will not ipso facto be decisive of the matter," remarked Justice Maheshwari.

"It appears that you want to canvas a position that where a person was not arrested u/s 19 & when the complaint is filed, whether the Public Prosecutor is justified in opposing that application," Justice Ravikumar asked.

Expansive Nature Of Explanation Under Section 5 Dealing With "Person Interested" Is Creating Havoc

On the aspect of attachment, Senior Counsel while referring to Section 5 of the PMLA Act which deals with the attachment of property involved in money-laundering said that expansive nature of the explanation which clarified the position of "person interested" was creating havoc.

He submitted that attachment can be ordered against a bona fide purchaser as well.

If There Is A Statutory Provision Which Reverses Burden Of Proof, Then It Falls Foul Across The Arch Of Art 20, 21: Senior Advocate AM Singhvi

Senior Advocate AM Singhvi commenced his submissions with regards to section 24 of PMLA by putting forth two points

1. That pre-2013, the entire burden of proof from initial stage onwards till the trial end was put upon the accused & that is unconstitutional- contrary to norms.

2. Post 2013 amendment, there is no doubt partial rectification & balance from the initial stage to charge framing stage, but thereafter the court frames charges, and the burden continues to be on the accused.

Emphasizing the 3 essential ingredients related to the offense of money laundering which are "predicate offense", "proceeds of crime from that offense" and "converting the proceeds from tainted to untainted", the Senior Counsel, while referring to section 24 of PMLA which deals with "burden of proof", contended that if statutory provision which reverses the burden of proof, then it would fall foul across the arch of Articles 20 and 21.

The bench will now consider the matter on February 8, 2022.

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