Day 13 Oral Hearing: Prevention of Money Laundering Act

Challenges to the Prevention of Money Laundering Act

On February 16th 2022, the Supreme Court heard Senior Advocates Niranjan Reddy and Dr. Menaka Guruswamy challenging the Prevention of Money Laundering Act, 2002. Justices A.M. Khanwilkar, Dinesh Maheshwari and C.T. Ravikumar were unconvinced by Mr. Reddy’s argument that the Special Court can convict in PMLA offences only after conviction in the predicate offence from which the allegedly laundered money arose.

Trial on Money Laundering Offence Should Follow Trial of Scheduled Offence

Mr. Reddy, restating Senior Advocates Kapil Sibal argument, said that money laundering is a ‘parasitic’ offence that cannot be committed without a predicate offence that generates proceeds of crime. The predicate offence is hence a necessary condition to prove money laundering. Mr. Reddy asked the Court to clarify what sequence the Special Court,which is responsible to hear both the predicate and the money laundering offence (Section 44), must conduct the trials in. He argued that it would be counter-intuitive to convict the accused of money laundering first, since there was a chance of acquittal in the predicate offence. 

The Bench found Mr. Reddy’s suggestion that there should be no conviction in money laundering offences without first convicting in the predicate offence to be ‘unworkable’. It would lead to a situation in which money laundering offences would remain pending for decades while the predicate offence went through trial and appeal. Maheshwari and Khanwilkar JJ stated that it is enough to prove the predicate offence in the money laundering trial—the outcome of the scheduled offence trial would have no consequence. 

Lack of Due Process in PMLA Makes ED Lax and Judges Sceptical 

Dr. Guruswamy stated that the ED’s wide powers of arrest, search, seizure and summons came at the cost of the foundational constitutional principles like equality and liberty. The returns from these costs, she submitted, were shockingly low. The ED had only secured 9 convictions since 2011, despite having launched over 1,700 raids. 

Even in the most egregious cases of terrorism, such as Mohd. Ajmal Amir Kasab v State of Maharashtra (2019), Dr. Guruswamy argued that the SC had maintained that deprivations of liberty in criminal law must only be through due process. By enabling the ED to force signed confessions out of accused persons and making the ECIR containing the evidence against the accused unavailable during crucial stages of the trial, the PMLA disregards due process. Dr. Guruswamy further pointed out that the Appellate Authority under the PMLA had remained unstaffed since 2019, leaving the accused without the remedy of appeal. 

Dr. Guruswamy argued that Section 50 of the PMLA deprives an accused person of their only ‘two friends’ during an investigation—the Constitution and the Code of Criminal Procedure, 1973. The CrPC sets out procedures to protect the accused persons constitutional right against self-incrimination. Section 50 enables the ED to compel accused persons to give evidence against themselves while in custody under fear of fine and imprisonment if they lie. Evidence obtained in this manner can be used against the accused in court. 

Dr Guruswamy stated that if the ED and money laundering are to be taken seriously, it is imperative to establish proper procedure in these investigations. The current scheme, she argued, promotes laxity within the ED and scepticism in Judges and the public. 

Dr. Guruswamy will continue to argue on February 17th 2022.