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

The Supreme Court today commenced 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 Purpose Of PMLA Was That Drug Money Is Not Channeled Into Organizations That Work Against The Country Which Disrupt The Peace & Harmony Of The Country

Senior Advocate Kapil Sibal commenced his arguments by apprising the bench of the broad arguments on which he would deal. Debating on the enormous powers granted to the executive as a result of the various amendments made in the statute, Senior Counsel submitted that these powers that were now available with the executive were so draconian that they violated the basic procedure of the justice system.

"There has been major deviation from CrPC & powers that have been given that were never available under Part III," he added.

Criticizing the provisions of bail under PMLA, Sibal said, "The bail provisions are such that the accused has no access to the documents. We have seen in the past that allegations are made, accepted by the court & bail has been denied. The Public Prosecutor has to be heard & unless I am not proved innocent, I will not get bail."

He also pointed out that one of the issues was with regards to a person being called without telling him if he is called as a witness or accused & his evidence is recorded.

In Our Criminal Justice System Any Process Involving Criminal Justice Must Be Open; Procedure By Enforcement Directorate Under PMLA By Recording ECIR Without Informing Proposed Accused Of Contents Of ECIR Is Procedure Unknown To Law & Violative Of Article 21

To elaborate his submission that these laws were not only against the Constitution but also against the very system of criminal justice, Senior Counsel submitted that the person against whom Enforcement Case Information Report ("ECIR") was registered had no clue as to what ECIR contained.

In the backdrop of this submission, he said, "The first question is can there be a procedure in law where penal proceedings can be started against an individual in law without informing him as to what is against him."

Remarking that in our criminal justice system any process involving Criminal Justice must be open, Sibal said that any process involving criminal investigation must be open.

"This involves informing the accused about the nature of investigation & the allegations on which the investigation has commenced & the allegations that have been levied. The procedure by ED under PMLA by recording ECIR without informing the proposed accused of the contents of ECIR is procedure unknown to law. This is violative of Article 21," he added.

Reference was also made to the Top Court's judgment in Youth Bar Association v. Union of India which held that accused was entitled to get the copy of the FIR and that the online copy of the FIR must be uploaded except in sexual crimes and sensitive offences relating to terrrorism and national security.

Scheme Of The Act Excludes Provisions Of CrPC

Senior Counsel further submitted that the scheme of the act excluded the provisions of CrPC. While Sibal referred to the provisions of CrPC with regards to the availability of documents to the accused on registration of FIR, Justice Khanwilkar asked,

"Does PMLA expressly exclude this provision? If it does not, then the same can be telescoped here. Another analogy is, even in case of detention matters, immediately after arrest, detenue is provided with documents. Even if this offence is related to detention & ordinary law, then also these provisions will apply. This we will assume that it is Sui generis procedure & Sui generis offence but the procedure remains the same. Firstly Art 22(1) will apply. Transparency cannot be done away with under Article 22(1)."

"The better aspect is to consider that the provisions of CrPC would apply mutatis mutandis to the provisions on PMLA unless expressly provision is made," Justice Khanwilkar remarked further.

Provisions Of PMLA Act Have Been Amended By Virtue Of Money Bill; Amendments Are Still Born; Amendments Are Colourable Exercise Of Power To Amend Various Provisions Of Criminal Law Without Referring Is To Rajya Sabha

Referring to the amendments under section 2(1)(u), section 3 of PMLA Act, Senior Counsel submitted that the same were "stillborn" & many such amendments were made through Finance Act though the provisions have nothing to do with Money Bill. He further added that these amendments were a colourable exercise of power to amend various provisions of criminal law without referring it to the Rajya Sabha.

"What we could not give to the executive through processes of laws, we are through subterfuge granting them powers through procedures unknown to law. These powers allow the individuals to misuse them in any way they want", Sibal further added.

Senior Counsel in this regard relied on the Top Court's judgment in Rojer Mathew vs South Indian Bank Ltd And Ors and Article 110 of the Constitution of India, 1950.

"It is these laws that are making it difficult for people to do business properly. Because these are such enormous powers," he further added.

The Journey From Converting Proceeds Of Crime From Illegitimate To Legitimate, Untainted To Tainted Is Money Laundering

During the course of the hearing, Senior Counsel while referring to the definition of "money laundering" in Black's Law Dictionary and by Ramnath Iyer said, "Possessing, concealing proceeds of crime can never be laundering. If I keep it, it's not laundering. If I give it to a friend- its not laundering but if I convert the same into legitimate purpose- then it's laundering. From illegitimate to legitimate, tainted to untainted- that is laundering. The journey, that is laundering."

Referring to an example, Senior Counsel further said that there was a huge hiatus of procedure in the manner in which ED must proceed in case of money laundering.

"For example, 10 lakhs is given for murder & 5 lakh is deposited in the account...offence of money laundering takes place only wrt 5 lakhs", he submitted.

On Senior Counsel's submission, Justice AM Khanwilkar the presiding judge of the bench said, "That is the case of laying down guidelines. You see PMLA is not triggered just because of a predicate offence but gets triggered when the proceeds are used in a manner. That's money laundering. If there is conspiracy for making the money legitimate, then also ED can interfere. Even in anticipation also, ED can jump in."

In response to the remarks made by the bench, Senior Counsel to further substantiate his contention said, "If I conceal & disguise the money, I will be a conspirator. If I attempt to conceal & disguise the money, I'll be a conspirator. We can't lose sight of the genesis of the entire legislature or statue. Money laundering will take place if you're trying to evade the legal consequences, converting the property which is illegal into legal."

Such Laws Have Done More Damage To Polity Of This Country Than To Deal With Crime

Referring to the Schedule under PMLA Act which deals with various offences under various statutes that are included under the list of "schedule offense" under PMLA, Senior Counsel contended that individual offences cannot be considered as offences under PMLA. Questioning the predicate offences that were being considered under PMLA, he further added that the originally very few offenses were added under "scheduled offense".

"These are too broad. Look at the predicate offenses that are being considered under PMLA. There were originally very few offences that were there under PMLA. Now the situation is...straight away PMLA will apply. Such laws have done more damage to the polity of this country than to deal with crime," Sibal further argued.

Senior Counsel submitted while concluding his submissions for the day said,

"In reality what happens is once an FIR is registered, there is no investigation. ED comes in, takes a statement which is admissible in law. Now some investigation has to be done, who is doing that? State of the play today is, No FIR, ECIR which is kept by the department & search, seizure & arrest. How is that possible? These are fundamentals of law which only your lordships can protect. Impetus to do is aggrandise of power, I'm sorry to say. Determination of guilt cannot be done without carrying on the investigation including carrying search & seizure which are aid of investigation."

The bench would now hear the matter on January 27, 2022.

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

Also Read : PMLA Interpretation : 'Whole Act An Attempt To Aggrandize Power Of State', Kapil Sibal Argues In Supreme Court

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