PMLA Judgment Allowing ED To Take Possession Of Property Before Trial In Exceptional Cases Leaves Scope For Arbitrariness : Supreme Court

In the judgment delivered on Tuesday relating to the Benami Transactions Prohibition Act 1988,  the Supreme Court expressed concerns about the ratio in the recent PMLA judgment which allowed the taking possession of the property before trial in exceptional circumstances.

A bench led by the Chief Justice of India NV Ramana, while dealing with the constitutionality of certain provisions of the Benami Transactions Prohibition Act, observed that the ratio of the PMLA judgment in relation to Section 8(4) requires "further expounding in an appropriate case,without which, much scope is left for arbitrary application".

Section 8(4) of the Prevention of Money Laundering Act allows the officers of the Enforcement Directorate to take the possession of the attached property once the provisional attachment order is confirmed.

In the case Vijay Madanlal Choudary & Ors v. Union of India, a 3-judge bench comprising Justices AM Khanwilkar, Dinesh Maheshwari and CT Ravikumar rejected the challenge to the constitutionality of Section 8(4) of PMLA. However, the bench held that "the provision in the form of Section 8(4) can be resorted to only by way of an exception and not as a rule."

Observations in case concerning Benami Transactions Prohibition Act

In the case Union of India versus M/s Ganpati Dealcom Pvt Ltd, the bench comprising CJI NV Ramana, Justice Krishna Murari and Hima Kohli was dealing with the constitutionality of the provisions of the Benami Transactions Prohibition Act 1988.

An issue arose is in the case as to whether the provision for forfeiture of property is punitive or a civil consequence. While discussing this issue, the bench referred to the PMLA judgment and observed as follows :

"In Vijay Madanlal Choudary & Ors v. Union of India, SLP (Civ.) No. 4634 of 2014 and others, this Court dealt with confiscation proceedings under Section 8 of the Prevention of Money Laundering Act, 2002 ("PMLA") and limited the application of Section 8(4) of PMLA concerning interim possession by authority before conclusion of final trial to exceptional cases. The Court distinguished the earlier cases in view of the unique scheme under the impugned legislation therein. Having perused the said judgment, we are of the opinion that the aforesaid ratio requires further expounding in an appropriate case, without which, much scope is left for arbitrary application"

It may be noted that the PMLA judgment, in which the expansive powers of the ED for arrest, raid and attachment and the stringent bail conditions were upheld as constitutional, has attracted widespread criticism. Recently, former Supreme Court judge Justice L Nageswara Rao, speaking at a public event, opined that he might have taken a different view in the PMLA judgment.

Separate report about the judgment in the Benami Transactions Prohibition Act can be read here.

Also Read : "Unduly Harsh" : Why Supreme Court Quashed Blanket Ban On Benami Transactions?