Day 19 Oral Hearing: Prevention of Money Laundering Act

Challenges to the Prevention of Money Laundering Act

On March 3rd, 2022, an indulgent Bench heard Solicitor General Tushar Mehta, appearing for the Union Government, repeat his argument that money laundering investigations need not follow the rules in the Code of Criminal Procedure, 1973. Justices A.M. Khanwilkar, Dinesh Maheshwari and C.T. Ravikumar were in agreement with Mr. Mehta’s argument that directly applying the procedure in CrPC to the Enforcement Directorate’s (ED) investigations would defeat the purpose of the Prevention of Money Laundering Act, 2002. 

Today marks the nineteenth day Khanwilkar J’s Bench has spent hearing the challenges to the PMLA. Over 100 petitioners, many of whom are accused of money laundering themselves, have argued that the PMLA disregards the constitutional rights of the accused to liberty and free trial. They argued that the CrPC more effectively balances the need for  thorough investigations to stop crime with the rights of the accused. Hence, they stated that the safeguards in the CrPC must apply to the ED. 

Mr. Mehta has spent the last four hearings emphasising that money laundering is a serious offence. India must meet the international standards to combat money laundering by giving the investigative authority (the ED) wide powers of arrest, search and seizure. The Union government is yet to address the petitioners’ argument that several provisions of the PMLA, such as the onerous requirement for bail, give the ED unchecked and unconstitutional powers. 

Applying CrPC Provisions to PMLA Investigations Will Enable The Accused To Get Away With Crime 

Mr. Mehta began the hearings by continuing his long exposition that the general investigative procedure in the CrPC can be ousted when the legislature lays out specific procedures, as in the PMLA, to investigate special crimes. Provisions of the CrPC will apply to money laundering offences only where the PMLA is silent on an issue and the imposition of CrPC standards will not defeat the purpose of the PMLA. As long as the PMLA does not violate fundamental rights, it need not conform with the CrPC. 

Indicating that Mr. Mehta’s is a settled position of law that needs no further exposition, the Bench asked Mr. Mehta to focus on which specific provisions of the CrPC can be applied to the PMLA without defeating the purpose of preventing and punishing money laundering offences. 

Chapter 12 of the CrPC sets out the general procedure for criminal investigations. Mr. Mehta argued that the PMLA is a complete code—it clearly states the scope and powers of the ED while investigating a money laundering offence. Accordingly, if any provision of Chapter 12 is imposed on the ED, it will be in conflict with the investigative procedure specifically laid out in the PMLA. 

Section 41(A) of the CrPC requires police officers to examine accused persons without arresting them, where the police have reason to believe that an arrest is not needed to thoroughly investigate the case. The police may issue notice to such an accused, informing them of the conditions under which they may appear before the police for questioning. If the accused person follows these conditions, the police have limited powers to arrest them. The notice also serves to inform the accused of the charge against them. The ED may arrest accused persons in money laundering crimes without such notice and with no limits on the power to subsequently arrest. 

The petitioners previously argued that Section 41(A) must apply to the ED. Mr. Mehta argued that this would defeat the purpose of the Act. Money laundering is a sophisticated offence which accused persons carry out  in a continuing fashion. If they have prior information that they are suspects through the ED’s notice, they will be able to delete or manipulate the entire trail of the crime in seconds. 

 

The Bench will continue to hear Mr. Mehta defend the PMLA on March 8th, 2022.