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

The Supreme Court today continued hearing the batch of petitions concerned with the 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 Kapil Sibal

Whole Concept Of Calling The Accused & Taking His Statement Is Outside Section 50; Violative of Articles 20(3), 21

Sibal argued that in so far as Section 50 of the PMLA allowed an Enforcement Directorate (ED) officer to summon any person to record his statement during the course of an investigation or require the said person to tell the truth in such statements or to sign the said statement under the threat of penalty or arrest was violative of Article 20(3) and 21 of the Constitution.

To further substantiate his contention, Senior Counsel referred to safeguards for recording statements by the Police under CrPC, 1973 and the Indian Evidence Act, 1872 to emphasize on the procedure established by law which is consistent with the constitutional guarantee against self- incrimination and right to silence under Article 20(3) and right to fair trial under Article 21.

"When a transaction takes place from illegitimate to legitimate, these ("reporting entities") are the agencies where the money goes. Thus u/s 50 you can call these agencies, call for records to suspect where the money has gone & receive evidence on affidavit. What is happening, ED is investigating & in course of investigation it can call any of these "reporting entities" to give evidence on record as to who all were involved. This is not meant to call the accused. The whole concept of calling the accused & taking his statement is outside 50. It will be violative of Art 21," Senior Counsel submitted.

Sibal in this regards further added that, "What will happen is, this will be very dangerous. At this stage what they are looking at "records with the reporting authority" transactions with respect to illegitimate to legitimate money and bring the same on affidavit. What the ED does is calls the accused, records the statement, says that it is evidence u/s 50 & gives it to the authority investigating the predicate offense & that statement is used to convict the accused."

Procedure Established By Law Must Be Fair & Reasonable; You Can't Introduce A Carte Blanche Procedure For Investigation

Sibal in this regard submitted that signing of statement by the accused is not an evidence under the Evidence Act and it does not have an evidentiary value.

The Senior Counsel said, "When the accused signs the statement, it becomes a judicial proceeding but it is not in trial. What will happen if the person goes to trial? This is not evidence under the Evidence Act. This does not have Evidentiary Value. If this is not evidence, how can it apply to a witness far on applying to the accused. This is not proceeding."

"Calling an accused u/s 50 will be a disaster. Neither an accused or statement can be called because it will be useless & will have no evidentiary value. This (sec 50) is a statutory provision which facilitates the process as to how illegitimate money has been provisioned to legitimate money through reporting entities," Sibal further added.

Requiring Accused To Tell Truth Under Threat Of Sanction Renders Safeguards u/s 161, 162, 313 and 315 CrPC, Section 25 of Indian Evidence Act & Protection Under Article 20(3) Illusionary

Sibal in this regards referred to the Top Court's judgments in The State Of Bombay vs Kathi Kalu Oghad And Others 1961 AIR 1808, Nandini Satpathy vs Dani (P.L.) And Anr 1978 AIR 1025, Selvi & Ors vs State Of Karnataka & Anr and MP Sharma's case.

"Time has come to look at it differently. Why should I cooperate with the police when they are discriminating against me? Please look at it from a different stand point. Law is not only to look at what the prosecution wants. There are constitutional rights to be looked at. In all cases, evidence is disclosed to the courts & in all these cases (ED) evidence is never disclosed. This whole concept of I am not cooperating, I am silent - It's held against you when the law prescribes otherwise. When I'm considered as an accused- I have a constitutional right. The accused has a constitutional right to remain silent. This right can't be used against the accused to deny him bail by saying he hasn't cooperated" submitted Sibal.

PMLA Act Is A Penal Statute; ED Officers Under PMLA Are Police Officers

Senior Counsel submitted that by way of judicial precedents a test has been developed to determine whether an officer is a police officer or not.In this regards, he further submitted that that there was a two fold test for such determination which was to:

• look at the purpose/ object of the said statute and to determine whether it is a penal statute that is dealing with prevention, detection and punishment of crime or a regulatory/ taxation statute which deals with levy of tax/ duty/ penalty
• nature of powers exercised by such officer

Purpose/Object Of The Statute

To substantiate his contention, Senior Counsel while emphasizing on the submission of PMLA Act being penal statute, said, "This statute is completely penal statute & is for curbing the menace of drug trafficking. This act deals with monies that are funneled into legitimate purposes. There's a link between NDPS & PMLA. It also deals with money related to heinous crimes."

Sibal also referred to the Top Court's judgment in State of Punjab vs. Barkat Ram AIR 1962 SC 276 where the issue for adjudication was whether a Customs Officer under the Land Customs Act, 1924 or Sea Customs Act, 1878 is a police officer within the meaning of Section 25, Evidence Act or not.

"Customs officer is not an officer of state in which he is located & he is a central govt employee who would not have an authority to investigate the offense but only impose fine, confiscate the goods. Once an offense is committed- he can't investigate & will have to hand it over to the police. That's the constitutional scheme. That investigation in some cases is handed over to CBI if it has interstate repercussions," submitted Sibal while referring to Barkat Ram's case.

Drawing distinction between the preamble of PMLA with various fiscal/taxation statutes, Sibal argued that under PMLA there is no provision for imposition of levy/penalty as the purpose of PMLA is not imposition or collection of tax but preventing and detecting newly created money laundering crimes.

Nature Of Powers Exercised By The Officer

Referring to various paragraphs of Toofan Singh v State of Tamil Nadu(which held confessions to NDPS officers as inadmissible in evidence), Senior Counsel argued that another test which was required for considering as to whether ED Officers are Police Officers or not was to see if the officer possessed powers that facilitate he obtaining confession from a suspect.

At this juncture, Justice AM Khanwilkar the presiding judge of the bench said, "Object of the act is essential. However if it's regulatory he cannot be a police officer but if it is penal- then he will be a police officer & all the provisions will apply. You've proved to us as to how this statute is a penal statute."

During the course of his submissions Senior Counsel also relied to the speeches delivered by the Finance Minister Yashwant Sinha in the Lok Sabha at the time of introducing PMLA Bill, 1999 to point that the offences which we have picked are heinous and P Chidambaram on Prevention Of Money Laundering (Amendment) Bill, 2005 and on Prevention of Money Laundering (Amendment) Bill, 2012.

The bench will continue hearing the matter tomorrow ie February 2, 2022.

Case Title: Vijay Madanlal Choudhary v Union of India & connected matters

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Previous Reports

PMLA Interpretation - ED's Procedure Of Not Informing Accused Of ECIR Contents Violates Article 21, Sibal To Supreme Court