Day 10 Oral Hearing: Prevention of Money Laundering Act

Challenges to the Prevention of Money Laundering Act

The Supreme Court heard Senior Advocates Dr. Abhishek Manu Singhvi, Mukul Rohatgi and Vikram Chaudhari on the tenth day of hearings in the challenges to the Prevention of Money Laundering Act, 2002.  

Dr. Singhvi and Mr. Chaudhari argued against the twin conditions for bail in Section 45 of the Act. Mr. Rohatgi focused on the explanation to Section 44, which permits PMLA investigations to continue even if the accused has been acquitted of the crime from which the tainted money allegedly arose. Upon the insistence of Justices A.M. Khanwilkar, Dinesh Maheshwari and C.T. Ravikumar, Mr. Rohatgi also addressed what constitutes a money laundering offence under Section 3. 

Even After Amendment, Section 45 Reduces Chances of Bail to Vanishing Point

Dr. Singhvi described bail as a concept that protects the accused’s right to liberty for the duration between arrest and conviction when it is presumed that the accused is innocent. This right, protected by Article 21, can only be infringed through procedure established by law. Dr. Singhvi argued that the conditions for bail under Section 45 reduce the chances of securing bail to a ‘vanishing point’ and hence, violate Article 21. 

In its original form in the 2002  Act, Section 45 required a Judge to grant bail only if there were reasonable grounds to believe that the accused was not guilty of the scheduled offence from which the allegedly laundered money originated. The Supreme Court found this provision to be unconstitutional in Nikesh Tarachand Shah (2017). The Court stated that it was arbitrary to judge guilt in the unrelated scheduled offence to determine bail for money laundering. The Court also found that the onerous requirement of  proving oneself not guilty for bail reversed the essential presumption of innocence in criminal law. 

Through an amendment in 2018, the Union government addressed the Court’s first problem with Section 45—the Judge must now consider reasonable grounds for guilt in the offence of money laundering while granting bail. 

Dr. Singhvi argued that the Union had no intention to address the second issue of presumption of innocence in 2018. Since the basis of Nikesh Tarachand Shah had not been changed, Dr. Singhvi argued that the Judgment had not been nullified and so the bail conditions in Section 45 are no longer valid. Mr. Chaudhari repeated the same argument. 

Money Laundering Is Inextricably Linked To But Distinct From the Predicate Offence

The explanation to Section 44 states that the Special Court’s trial of a money laundering offence will not depend on the outcome of the trial of the scheduled offence in any other court. Mr. Rohatgi argued that this could lead to a situation where one is acquitted for the predicate offence but subsequently found guilty for laundering proceeds from a crime that did not occur. This, he submitted, is contrary to Section 3, which defines money laundering as inextricably linked to the predicate offence. 

The Bench questioned the nature of the offence of money laundering under Section 3. Ravikumar J asked whether merely acquiring proceeds of the scheduled offence would constitute money laundering. Khanwilkar J stated that keeping  proceeds of crime in one’s possession is also money laundering . Mr. Rohatgi drew attention to the phrase ‘projecting or claiming as untainted property’ in Section 3 to argue that an overt act of declaring tainted money to be untainted to an audience is required to constitute money laundering. Only possessing or concealing the proceeds of crime is not enough. 

The Bench will continue hearing Mr. Chaudhari on February 10th, 2022.