Day 8 Oral Hearing: Prevention of Money Laundering Act

Challenges to the Prevention of Money Laundering Act

On February 3rd 2022, Senior Advocates Siddharth Luthra and Abhishek Manu Singhvi argued that the Prevention of Money Laundering Act, 2002 (PMLA) violates the accused’s right to life and liberty. Mr. Luthra focused on the onerous test for bail in Section 45 and Mr. Singhvi argued against the reversed burden of proof in Section 24. 

Justices A.M. Khanwilkar, Dinesh Maheshwari and C.T. Ravikumar reminded the advocates that money laundering is a heinous crime that terrorises the nation’s financial system. So the legislature can deviate from the scheme of the Criminal Procedure Code (CrPC) to curb this offence. An accused person’s rights will not be violated only because an identical procedure is not followed  in PMLA and CrPC investigations. 

Bail Conditions Reverses Presumption of Innocence and Violates Article 21 

Under S 45, bail can only be granted if the Court has reasonable grounds to believe that the accused is not guilty of the alleged crime. This is different from the CrPC, where guilt is irrelevant for granting bail—the Court only considers if the accused is likely  to flee, disrupt the investigation or be a threat to society if released on bail.

In the unamended Act, the accused had to be considered not  guilty of the predicate offence from which the proceeds of crime were generated. The Supreme Court, in Nikesh Tarachand Shah, held this to have no nexus with the objective of the Act—to prevent and punish money laundering. The provision was then amended so that the accused can be granted bail if the Court is convinced that they are not guilty of money laundering. 

Unlike others arguing against the provision, Mr. Luthra did not contend that the amendment revives conditions that the Court has declared unconstitutional. Instead, Mr. Luthra argued  that the PMLA has been amended several times to include a wide range of predicate offences within its net. It is arbitrary and unconstitutional to apply such a high standard for bail to all these offences. He compared the PMLA to other special criminal acts like the NDPS and UAPA to argue that in the rest, the Court had upheld the validity of similarly onerous bail conditions only because they applied to a narrow set of heinous offences. 

The Bench recognised the need to narrow the scope of the offences that the Act applies to, but stated that money laundering was a heinous crime itself. Khanwilkar J stated that it is worse than murder. It is important to view the conditions in context of the objective of the Act to curb this heinous crime. 

Reversed Burden Of Proof In PMLA Investigations Violates Right to Liberty

Mr. Singhvi broke down the commission of a money laundering offence into three steps—a predicate offence must be committed, then proceeds must be generated from this offence and finally the tainted proceeds must  be projected as untainted. S 24 states that once the prosecution has proved that the accused received proceeds of the predicate offence, the Court must assume that the accused tried to launder the proceeds. 

In the normal course of criminal investigations, it is up to those who bring a charge against the accused to prove that their accusation is true. Mr. Singhvi argued that after the Court’s presumption as per S 24, the accused must disprove the allegation against them instead of the prosecution having to first prove it. This reversed burden of proof, he argued, violates the right to liberty guaranteed in Articles 14, 19, 20 and 21. 

 

Mr. Singhvi will continue his arguments on February 8th 2022, focusing on the provisions for possession, search and seizure and bail under the PMLA.