Day 6 Oral Hearing: Prevention of Money Laundering Act

Challenges to the Prevention of Money Laundering Act

On February 1st, 2022 Senior Advocate Kapil Sibal made main arguments challenging the Prevention of Money Laundering Act, 2002 (PMLA). First, he argued that the Enforcement Directorate’s power to summon and record incriminating statements from the accused violates the Fundamental Right Against Self Incrimination. Second, Mr. Sibal argued again that the Enforcement Directors have police powers and must be subject to the rules of criminal procedure.Justice A.M. Khanwilkar stated that Mr. Sibal had satisfied the three-Judge Bench that is a penal statute. 

Mr. Sibal appears for Mr. Karti Chidambaram in this case, who is one of many opposition party members accused of money laundering in recent times. Politicians have previously raised alarm about the misuse of the ED’s unchecked powers to stifle political dissent. 

ED Violates Articles 21 and 20 (3) by Using Section 50 Powers to Summon Accused 

Section 50 of the PMLA empowers the ED to summon any person and record their statement in the course of investigation. Mr. Sibal argued that this provision was only meant to be used to summon reporting agencies such as banks. The ED regularly uses s 50 to record statements of accused persons and suspects. Mr. Sibal argued that this is unconstitutional. 

S 50(3) requires that all statements made to the ED are truthful. Refusal to sign [s 63 2(b)] statements made under s 50 are punishable with fine [s 63 (2)] or arrest [s 19]. Therefore, Mr. Sibal argued that if the ED is permitted to use s 50 powers to summon the accused, it will be able to procure signed confessions from them under threat of fine or arrest. 

Mr. Sibal argued that the accused has a fundamental right to silence and against self-incrimination. The Code of Criminal Procedure, 1973 and the Evidence Act, 1872 protect these rights by differentiating between a witness and an accused person during investigation. Both state that an accused cannot be forced to make self incriminating statements. Since there is the chance that the police might threaten confessions,  the statements of an accused to the police cannot be used against them in a normal criminal trial. The rights of the accused, Mr. Sibal argued, must be protected in a money laundering investigation as well. 

PMLA Is a Penal Statute Which Gives the ED Police Powers 

Mr. Sibal argued that two factors must be considered when determining whether an officer under a special statute is a police officer— the purpose of the statute and the nature of powers exercised by the officer. 

The purpose of the PMLA, Mr. Sibal stated, is purely penal. The SC, in Barkat Ram (1962), stated that a penal statute is one in which the main purpose of special officers is the prevention, detection and punishment of crimes. Mr. Sibal argued that the main object of the PMLA, like the NDPS Act, is preventing and punishing drug-related crimes. The SC previously found NDPS officers to be police officers. Mr. Sibal read out several provisions of the PMLA to prove that it recognised the new crime of money laundering and set up the framework to prevent and punish the crime. 

Mr. Sibal further argued that in Toofan Singh (2020), the SC held that it is unnecessary to go into the exact nature and extent of a special officer’s powers if the special statute empowers them to obtain a statement from the accused. Mr. Sibal stated that the PMLA gives coercive powers to ED officers and so they must be considered police officers. Criminal procedure must apply to them in the same way that it applies to the police. 

 

The Bench will continue hearing Mr. Sibal on February 2nd 2022.