Prevention of Money Laundering Act, 2002 is an Act, enacted by the parliament in Fifty Third Year of the Republic of India, to prevent money laundering, and to confiscate property, derived from or involved in money laundering and any matters connected therewith or incidental thereto. This Act was made to implement the resolution & declaration, made in the United Nations General Assembly. On February 23, 1990, at the United Nations General Assembly’s seventeenth special session, resolution S-17/2 was adopted, with the Political Declaration and Global Programme of Action annexed. In a special session of the United Nations General Assembly from June 8, 1998 to June 10, 1998, a Political Declaration calling for member states to adopt national money laundering legislation and programme, was adopted.
Money Laundering under Prevention of Money Laundering Act, 2002, is defined in clause (p) of sub section (1) of section 2, it states that the money laundering has meaning, as defined in section 3 of the Prevention of Money Laundering Act, 2002. Section 3 of the Prevention of Money Laundering Act, 2002, defines offence of money laundering, and states that a person is guilty of offence of money laundering, if the person directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime and projecting it as untainted property. In the case of Indian Bank V. Government of India, Ministry of Finance, Department of Revenue, Directorate of Enforcement, (2012) 4 CTC 225 (Mad), the court gave two essentials of the offence of money laundering, i.e.
I.Involvement in any process or activity connected with the proceeds of crime; and
II. Projecting it as untainted property.
The constitutional validity of the provisions of Prevention of Money Laundering Act, 2002, is questioned more than once. The Supreme Court, in the case of Nikesh Tarachand Shah V. Union of India & Anr., (2018) 11 Supreme Court Cases1: (2018) 2 Supreme Court Cases (Cri) 302, 2017 SCC Online SC 1355;, sub -section (1) of section 45 of Prevention of Money Laundering Act, 2002, was declared unconstitutional, I relations to the conditions relating to the bail, as sub-section (1) of section 45 was declared ultra vires to Article 14 & Article 21 of the Constitution of India. After the Supreme Court Judgement, parliament, on March 29, 2018, amended the sub-section (1) of section 45, by replacing the “schedule offenses” with “offenses”.
On May 9th , 2018, A Special Leave Petition was filed before the Supreme Court bench comprising Justices A.M. Khanwilkar, Dinesh Maheshwari and C.T. Ravikumar, in the case of Vijay Madanlal Choudhary & Ors. versus Union of India, 2022 SCC OnLine SC 929, the constitutional validity of section 3, sections 5, section 8(4), section 15, section 17, section 19 and section 45 of the Prevention of Money Laundering Act, 2002, was called into question. The key elements in questions were, the definition of money laundering, reverse burden of proof, attachment of property, powers of search and seizure and arrest, stringency in granting bail, supply of EICR, admission of statement made to ED & enactments of amendments.
On section 3 of the Prevention of Money Laundering Act, 2002, the petitioners argued that it is only upon projecting or claiming the property in question as untainted property that the offence of ‘money laundering’ would be attracted. It would mean that the mere possession of ‘proceeds of crime’ is also an offence of money laundering. The court upheld the constitutional validity of section 3 of Prevention of Money Laundering Act, 2002, the reasoning the court relied upon that section 3 is widely worded , to not only investigate the offence, but also to regulate and prevent the offence of money laundering.
The court upheld the constitutional validity of section 5, the bench held that this provision provides for a balancing arrangement to secure the interests of the person in addition to ensuring that the proceeds of crime remain available to be dealt with in the manner provided by the PMLA. This provision permits the Director or officer not below the rank of Deputy Director of the ED for the purposes of attaching property involved in money-laundering. The court also upheld the provisions for attachment of property, as given in section 8 of the Prevention of Money Laundering Act, 2002.
Power of search seizure and arrest, entailed in section 17, 18 and 19 respectively, was also upheld, as these provisions have mechanism, to prevents its misuse and arbitrary actions.Burden of Proof for accuse, as required under Section 24 , was also upheld for the reason that the legal provision would not be unconstitutional on its own simply because the burden of proof is often put on the accused.
The bench upheld the two requirements set forth by the PMLA for the granting of bail. No person accused of an offence under the PMLA shall be released on bail unless (i) the Public Prosecutor has been given the opportunity to oppose the application for such release; and (ii) where the Public Prosecutor opposes the application, the court is satisfied that there are reasonable grounds for believing that they are not guilty of such offence and that they are not a risk of absconding. Even though the two requirements set forth in section 45 limit the accused's ability to get bail, it cannot be stated that these circumstances impose a complete ban on bail grants. The court has the discretion, which is judicial in nature and is not arbitrarily or irrationally applied as stipulated by section 45.
In upholding Section 50 of the PMLA, the bench asserted that the process it underlines is in the nature of an inquiry against the proceeds of crime and is not a "investigation" in the strict sense of the word for launching a prosecution. It also stated that the ED officials covered by Section 50 are not police officers in the traditional sense. It further explained that the stage of taking statements for the purpose of learning the pertinent details pertaining to the property being the proceeds of crime is not, in that sense, an investigation for prosecution as such; in any event, there would not be a formal allegation against the notice. The bench further stated that such summons could be issued to witnesses in the ED's investigation.The bench further ruled that ECIR, can not be treated as FIR,, as it is internal document of the ED.This case, clarified on the constitutional validity of Prevention of Money Laundering Act, 2002, by clearing all confusions, and creating effective implementation of law.
· Prevention of Money Laundering Act, 2002
· Indian Bank V. Government of India, Ministry of Finance, Department of Revenue, Directorate of Enforcement, (2012) 4 CTC 225 (Mad)
· Nikesh Tarachand Shah V. Union of India & Anr., (2018) 11 Supreme Court Cases1: (2018) 2 Supreme Court Cases (Cri) 302, 2017 SCC Online SC 1355
· Vijay Madanlal Choudhary & Ors. versus Union of India, 2022 SCC OnLine SC 929