Day 12 Oral Hearing: Prevention of Money Laundering Act

Challenges to the Prevention of Money Laundering Act

On the twelfth day of final hearings in the challenges to the Prevention of Money Laundering Act, 2002 (PMLA), the Supreme Court continued to emphasise that special procedure which may vary from the Criminal Procedure Code is needed to tackle special offences. The Court repeatedly made this observation in response to Senior Advocate Amit Desai’s argument that the bail provision (Section 45) in the PMLA is unnecessarily restrictive of the accused’s liberty. 

Arguing a related point, Mr. Desai further submitted that guidelines must be read into Section 19 (arrest) to ensure that the Enforcement Directorate arrests accused persons only if it is necessary to keep them in custody. If the investigation can be completed without this deprivation of liberty, the ED must not be permitted to make arrests. 

Judicial Discretion in Bail Must be Maintained to Balance Interests of Accused and State 

Section 45(2) of the PMLA requires special courts to grant bail only if they have reasonable ground to believe that the accused is  not guilty and will not commit any offence while on bail. Instead of considering whether bail will impede the investigation, as in the CrPC, the PMLA makes bail dependent on guilt. Mr. Desai had previously argued that the onerous conditions in Section 45 reduce the chances of bail to a ‘vanishing point’ for the accused. 

Mr. Desai argued that special criminal legislations do not warrant restrictive bail conditions only by virtue of recognising a special crime. The accused person’s liberty is violated if they are kept in custody before conviction. In other criminal statutes, this deprivation of liberty is justified by proving that the arrest is necessary for proper administration of justice. Mr. Desai argued that the gravity of the punishment is important to consider in this regard. In the CrPC, restrictive bail is warranted for crimes punishable with death or life sentence since a accused is more likely to flee from fear of a grave punishment. The maximum sentence under the PMLA is seven years—default restrictive bail is not warranted for such offences. 

Justices A.M. Khanwilkar, Dinesh Maheshwari and C.T. Ravikumar were unimpressed with this argument. Khanwilkar J stated that higher punishment is not the only factor to determine the gravity of the offence. He said that money laundering is more serious crime than many crimes punishable with life imprisonment or death in the CrPC, as laundering harms the entire economy and not just one victim. 

Mr. Desai responded, stating that there was a need to balance the accused’s rights with the need for strict laws to protect the economy from money laundering. The Courts, he submitted, are the filter through which this balance is achieved in criminal law. He stated that  the PMLA must respect the seniority of special court Judges by allowing them to use their discretion to ascertain which accused person will harm the investigation when let out on bail. Mr. Desai gave the example of some accused who were not the primary beneficiaries of the money laundering offence, but were under arrest for petty involvement in the offence as low-ranking employees of the beneficiaries. These accused had no financial means to fight protracted cases for bail and the special courts lacked discretion to release them. 

 

Final hearings will continue on February 16th, 2022. The Bench will hear Senior Advocate Niranjan Reddy argue  against the use of the PMLA to ‘rope in’ unrelated third parties and to charge retrospectively of acts committed before the PMLA was implemented.