Day 11 Oral Hearing: Prevention of Money Laundering Act

Challenges to the Prevention of Money Laundering Act

On February 10th 2022, Justices A.M. Khanwilkar, Dinesh Maheshwari and C.T. Ravikumar completed eleven days of final hearings in the challenges to the Prevention of Money Laundering Act, 2002. 

Senior Advocate Vikram Chaudhari briefly argued that there were many gaps in the PMLA concerning the procedure of investigations. He urged the Court to specify that the Code of Criminal Procedure, 1973 should be used to fill these gaps instead of leaving it up to the Enforcement Directorate’s discretion. 

The Bench spent a majority of the hearing on Senior Advocate Amit Desai’s arguments against the inclusion of a broad set of predicate offences to the Act through various amendments. Mr. Desai argued against the retrospective use of the Act as well. 

Successive Amendments Have Extended the Scope of PMLA Beyond Legislative Intent

Mr. Desai stated that the PMLA was enacted in response to international concerns that money laundering poses to a nation’s financial system and sovereignty. Specifically, there was concern that proceeds of drug trafficking and organised crime would be channelised into the economies of developing nations. The PMLA was , hence, a statute that created ‘special’ procedures to address a special crime. 

Section 3 states that the attempt to project the proceeds of any predicate offence as legal is punishable as money laundering. Mr. Desai argued that successive amendments to the Act had added an ever widening set of offences to the list of predicate offences. This, he argued, was arbitrary and defeated the objective of the Act. 

Mr. Desai further stated that broadening the scope of the Act beyond its objective would harm the economy by allowing the Enforcement Directorate to target businesses. It would not serve any public interest. 

 

ED Cannot Exercise Powers Retrospectively and Suo Moto

Article 20(1) of the Constitution guarantees that a person can only be convicted for an act if a law criminalising it was in force at the time the  act was committed. Mr. Desai argued that due to lack of clarity on the interpretation of PMLA, the ED was using it to investigate offences committed more than twenty years before the commencement of the Act.

Mr. Desai argued that the ED cannot charge people for offences that predate the Act on the pretext that the projection of tainted money as untainted continues because the accused is in possession of proceeds of crime after the Act commenced. 

Further Mr. Desai argued that the ED should take suo moto action of a money laundering offence without an FIR being registered in the predicate offence. Khanwilkar J stated that in many situations the police did not do its job and register an FIR. Should the ED ignore the case as well? Mr. Desai responded stating that a body without jurisdiction cannot be tasked with covering up the discrepancies of the police. Suo moto powers of the ED are outside the scope of PMLA. 

 

Mr. Desai will continue his arguments on February 15th, 2022.