Low Conviction Rates In ED Cases Not A Ground To Decide Validity Of PMLA Provisions, Says Supreme Court During Hearing

He indicated that analogous provisions to section 50(3) are found in 4 different statutes- section 171A of sea customs act, section 108 of customs act, section 14 of the central excise act, and section 40 of fera, which dont take into account the Cr. P. C. or police route.

"All these are also not enquiry- Section 40 of the FERA is an investigation unlike the other three. Therefore, the argument of the other side, which I am anticipating, is that these persons are not police officers, that they are equivalent to FERA/FEMA and that when you have equivalent provisions there, you cannot challenge the vires of 50(3) under PMLA", he submitted.

He indicated the 1968 constitution bench decision of the Supreme Court in ramesh chandra mehta's case where it was held that in customs and in Fera, the person does not stand in the character of an accused because there is no FIR and no complaint and so Article 20(3) cannot apply.

"In PMLA, in a given case maybe they don't have to register an FIR, but the normal rule in PMLA, which is different from customs and FERA, is that you must have an FIR which is the predicate offence FIR. Once that FIR is lodged, the person stands in the position of accused. That is the difference between PMLA and customs. When that person was summoned under customs and FERA, there was no FIR and therefore 20(3) was not hit. That is why the constitutionality of FERA and customs was upheld. Under PMLA, while he can be summoned, while he must attend, he cannot be forced to make incriminating statements against himself", he submitted.

"A person is duty-bound to attend if summoned. But my submission is that when the accused appears, he cannot be asked to give incriminating answers or make oral statements or give incriminating documentary evidence, unless voluntary", he continued.

Justice Khanwilkar said, "The exception is that he must produce all the relevant records. You are saying he cannot be forced to be a witness against himself. But how can you say I will not give the records if you have them? How will investigation of crime proceed then?

Mr. Ponda replied that documents are also evidence and that the person summoned must answer only non-incriminating questions. "The law is very settled now that testimental compulsion is not only for oral evidence but documents also. Under 20(3), the protection to the person who stands in the character of an accused in an FIR is not just limited to oral", he submitted.

Justice Khanwilkar asked, "Just because there is a predicate offence against you, can you say that the agency will have no access to your records for the purpose of investigation? Admissibility part can be gone into later"

In response, Mr. Ponda indicated the 1964 Supreme Court decision in Shyamlal Mohanlal's case where it was held that "Art. 20(3) has been construed by this Court in Kalu Oghad's case to mean that an accused person cannot be compelled to disclose documents which are incriminatory and based on his knowledge. Section 94, Criminal Procedure Code, permits the production of all documents including the above mentioned class of documents. If s. 94 is construed to include an accused person, some unfortunate consequences follow. Suppose a police officer and here it is necessary to emphasise that the police officer has the same powers as a Court-directs an accused to attend and produce or produce a document. According to the accused, he cannot be compelled to produce this document under Art. 20(3) of the Constitution. What is he to do ? If he refuses to produce it before the Police Officer, he would be faced with a prosecution under s. 175, Indian Penal Code, and in this prosecution he could not contend that he was not legally bound to produce it because the order to produce is valid order if s. 94 applies to an accused person...Thus it seems to us that if we construe s. 94 to include an accused person, this construction is likely to lead to grave hardship for the accused and make investigation unfair to him"

"They can seize the documents, ask my manager to provide the same- I can't stop that. But me being forced is the issue", submitted Mr. Ponda.

Justice Khanwilkar observed, "The local police cannot compel. But under the statutory law, if FIR is registered, he won't even produce before the income ax authorities or before the ED? Say, under the GST Act, for verification purposes, documents are asked to be produced. You will say my FIR is registered so I will not produce documents?"

"In case of PMLA, ED officer is operating on the assumption that FIR is registered in respect of an offence from which the property is derived. He is registering FIR for money laundering offence which is subsequent to the predicate offence. 20(3) will be applicable to predicate offence and not to subsequent offence. PMLA offence works on its own. It is governed by PMLA provisions. Can 20(3) protection be invoked there?", asked the judge

Justice Maheshwari observed, "The Evidence Act is not ruled out in its applicability to PMLA. As to a fact specifically within your knowledge, in terms of the requirements of 106 evidence act, you are not duty-bound to state that which is specifically in your knowledge? Even with the safeguards which are already available under section 27 of the evidence act, with reference to the decisions of this court? Also, once you attend section 50 proceedings, thereafter in the trial, what is to be used and what is not to be used with reference to the safeguards of article 20 is a matter different. But say, when you are charged for travelling without a ticket, the onus that you had the ticket is on you. Because you are called under section 50, to make statement or divulge the documents, how does that provision become bad, with reference to all the safeguards already available? Ultimately, what is admissible or acceptable in evidence in trial is a different matter"

Mr. Ponda responded, "106 has no applicability at the stage of investigation. Where the person chooses to remain silent, he stands to suffer the risk of his silence at trial. I am travelling without ticket, if I choose not to say I have the ticket, I will pay the price for it"

Justice Maheshwari repeated, "All that is a matter for consideration at trial. How does section 50 become bad?"

"My submission is that today, the officials are arresting people for not confessing before them- they rely on 50(3) and say you are not cooperating or giving information incriminating in nature and so we will arrest you- and they are using it to extend remand. It is in violation of 20(3), and not a matter to be taken up in trial, it affects my spinal cord of liberty!", urged Mr. Ponda. He clarified that his submission applies only to those persons named as accused in the FIR.

Justice Khanwilkar noted, "PMLA offence is another offence, it is not the predicate offence. The course of action in PMLA is independent of predicate offence. There has to be property generated in that predicate offence which becomes actionable under the PMLA. It is a separate event altogether. In respect of it, whether there will be this embargo is what you have to point out"

"Suppose I am charged with cheating. There is an FIR. If PMLA authorities investigate proceeds of crime which relate to cheating, I may say that it will affect my case in the cheating FIR and I have the right to stay silent", responded Mr. Ponda