Authored By: Rishabh Krishan
Amity University Jharkhand
Court: Indian Supreme Court
Judgement Date: July 27, 2022
Bench: C.T. Ravikumar, Dinesh Maheswari, and Justice A.M. Khanwilkar
Introduction
” Individuals are vision, justices are words for the community.” Crime and law exist everywhere, but a society’s real identity is shaped by its members’ points of view on crime and the laws put in place to prevent it[i].
As money is the basis of crime, it is logical to infer that the danger of laundering money has existed for a long time. It inhales for the first time as rapidly as society will let it. The laundering of money has been suspected of corrupting governmental funds and depriving ordinary people of their hard-earned wealth in the country and all other countries. The participants in the Vienna Convention were asked to declare money laundering as a criminal offense and adopt the necessary legal measures to deal with it to counter this.
In the legal proceedings in Vijay Madanlal Chaudhary vs. Union of India[ii] in this instance, the judges and advocates of offenses and advocates in this particular instance voice their concerns about money laundering offenses and the regulations that forbid them.
Facts
In reaction to worldwide conventions against money laundering, the Indian Parliament passed a Prevention of Money Laundering Act in 2002. Citing violations of fundamental rights, more than 80% of applicants challenged the Act’s harsh provisions. Over fifteen years, several legal challenges—including writ petitions, appeals, and special leave applications—led to the Vijay Madanlal Choudhary and Others. Versus Union of India and Others case. The highest court in India compressed its investigation procedure and focused on the most significant legal challenges by deciding to only consider all the legal issues brought up concerning the PMLA provisions[iii].
Issues
- Is it unconstitutional for special agencies, the Enforcement Directorate in general, and other government agencies specifically to give arresting abilities?
- Is it possible for the judiciary to prohibit the ED from using “coercive steps” in every PMLA case solely as sure its terms have been challenged as constitutionally invalid?
- Was the 2018 adjustment to the PMLA’s bail requirements valid? Is the Court’s decision in the Nikesh Tarachand matter [2017] influenced by the adjustments?
- Does Article 300A’s right to property come in the framework of PMLA rules about property attachment?
- Is there any law that allows charges of crime to be brought against a person without presenting him with knowledge of the allegations?
- Whether the PMLA’s burden of proof provision compromises against the accused person’s basic liberties.
- Is the 2018 verdict that these criteria do not apply to anticipatory bail a proper way to enforce the legislation if the twin condition in the Prevention of Money Laundering Act, better known as the PMLA, turns out to have been reinstalled?
- Whether hearings that depend upon statements recorded by Enforcement Directorate officers while conducting their investigation are unlawful under the provisions of section 25 of the Criminal Evidence Act and infringe paragraph (3) of article 20 of the Constitution[iv].
Arguments
Arguments of the Petitioner:
The Enforcement Directorate’s (ED) method of recording its Enforcement Cases Information Reports is unreadable, arbitrary, and an invasion of an accused person’s fundamental rights, according to Kapil Sibal, a senior lawyer for private parties. The investigation techniques utilized by the ED violate the rights of the accused under Articles 14, 20, and 21 of the third part of the Indian Constitution. The description of money laundering per section 3 is now wider and includes charges against persons who were not responsible for the crime, and an ECIR serves as an internal file that does not wish to be published publicly[v].
For an ECIR to be lodged against a person charged, the ED must ensure that any “proceeds of crimes” are presented as clean property. This criminal justice device’s base, the belief of innocence, is smashed by a reversed burden of proof. The grounds for arrest and the specifics of the charges are contained in the ECIR, which makes it challenging for those being charged to defend themselves during the bail process or begin preparing for trial afterward.
Under Nikesh Tarachand Shah’s verdict, Section 45 was illegal, and the PMLA, 2002 lacks the necessary safeguards to provide a fair investigation and punishment. Due to the absence of effective protections, the ED went further with its inquiry exceeding what was covered in the ECIR.
It is discriminatory and a violation of an individual’s constitutional rights for the ED to arrest without communicating with them an ECIR. As an essential aspect of Article 21, the accused is entitled to a preliminary copy of his or her First Information Report and to be informed about the allegations. This argument is supported in the case Youth Bar Association in India versus Union of India and Others[vi] The accused should be given a list of the documentation and materials that have been seized by the investigation agencies.
Arguments Presented by the Respondent:
In the Nikesh Tarachand Shah[vii] case, the Supreme Court’s ruling on money laundering and related offenses was opposed by the Union of India, which was represented by the Solicitor General Tushar Mehta. They contended that the preceding decision of the court overlooked to consider significant statutory provisions or precedents, and that bail should be granted solely if the twin conditions outlined in Section 45 (1) are achieved. The Union maintained that any activity related to any proceeds of crime, such as sole ownership, concealing, use, or acquisition, comprises money laundering.
The PMLA, 2002 differs from laws such as the CRPC 1973 in that it is a mixed statute with components that include prevention, regulation, and punishment. The Act’s unique nature and far-reaching effects make it different from the Criminal Procedure Code 1973. Since hiding something is regarded as a deliberate act, the general meaning of the third section under the PMLA, 2002 was precautionary.
Since lawmakers can prescribe an unusual method with precautions to guarantee it is equivalent to constitutional values, the legislature’s choice of implementing a law lacking adherence to the Criminal Procedure Code 1973 is senseless. Since the Enforcement Directorate is not a law enforcement agency, they are not authorized to be considered officers of law enforcement under the PMLA.
There are several safeguards for every aspect that the petitioners highlighted, thus the argument that there are not anymore is baseless. From the perspective of the accused, the twin circumstances recognized by section 45 in the PMLA, 2002, are reasonable and are consistent with the provisions of Article 14 in the Constitution of India. Given the grave nature and seriousness of such an offense and the necessity to keep violators from advancing society while incurring financial losses, the burden of proof for the offense is intentionally placed on the accused.
Verdict delivered by the court.
On July 27, 2022, the Honourable Supreme Court delivered its verdict maintaining the constitutionality regarding the Prevention of Money Laundering Act of 2002. The court respected the legislative reasoning for the act and defended its strict provisions by comparing them to the fundamental principles of US law.
The court also stipulated that the accused does not have the right to obtain the Enforcement Cases Information Reports (ECIR) from the Enforcement Directorate. By the regulations of the Code of Criminal Procedure, which was adopted in 1973, the court reasoned that since the ECIR is not the precise same as a FIR, it does not need to be provided to the accused.
The court also made it clear that the Enforcement Directorate merely needs to notify the accused of the reason for the arrest at the time of the arrest. As stated in the provisions of Article 22 (1) in the text of the Constitution, it is deemed enough observance if the person being accused receives knowledge of the reasons behind the arrest of him.
The person charged would receive all of the relevant materials that are part of the complaint that the Authority submitted before the Special Court under Section 44 (1) (b) under the 2002 Act, the court further stated, provided that the complaint has been filed within the statutory term specified in the 1973 Code following the accused’s being imprisoned.
According to the court, it is not possible to blame someone for not providing ECIR in a particular circumstance. If the information is disclosed before the investigation or inquiry necessary for moving forward against any assets being proceeds of crime, which includes the individual responsible for the process or action connected thereby, it may negatively affect the investigation’s outcome. The ECIR can include details about the evidence in the Authority’s possession and documentation that explains the belief that the individual is guilty of the laundering of money offense.
Assessment of Judgement
The judgment is significant because it enhances the Enforcement Directorate’s authority under the PMLA, a key tool in the fight against money laundering. The court has guaranteed the Enforcement Directorate’s ability to continue performing its functions efficiently by confirming the validity of those laws.
The Indian government seems enthusiastic about upholding fundamental rights, even if achieving so means sacrificing individual liberties in the name of social progress. Private parties claim that it is more advantageous for society to arrest someone accused without telling them they may be involved in money laundering. According to the learned council, the legislation known as the Prevention in Money Laundering Act has been over-extended by lawmakers through modifications, and investigations must clarify the claimed proceeds of crime[viii].
Set the bar for investigating economic offenses, the Government of India conducted a global comparison of the situation. On the reverse side, the legislative body is tasked by the courts with ensuring equality in politics, society, and the economy as well as eliminating inequalities.
The basis of organized crime is money laundering, which hurts the economic and social framework of the entire nation and encourages other terrible offenses. In circumstances involving economic offenses, the highest court in the land instructed lower courts to use strict procedures for granting both regular and anticipatory bail.
The court’s decision does, still emphasise the value of striking a balance between upholding individual rights and enforcing the law. Although the PMLA is an essential weapon in the campaign towards money laundering, it is crucial to make assured the statute’s terms are not abused or implemented in a way that breaches individual freedoms.
Conclusion
Sum up, the case described here highlights the complicated nature of the PMLA, raising issues with the Enforcement Directorate’s wide authority, strict bail requirements, and breach of property rights. Although the PMLA is essential for fighting monetary crimes, there are severe constitutional problems with its application. Maintaining the credibility and efficacy of this law demands finding a balance between strict enforcement and fundamental rights. Guarantee the proper enforcement of the PMLA while respecting individual liberties and the right to property, judicial review, and parliamentary review are required.
Taking everything into account the verdict reflects the challenges faced in combating money laundering and strikes a careful balance between the need for efficient regulation and the safeguarding of freedoms enjoyed by individuals.
[i] Mudit Vikram Singh ‘Vijay Madanlal Choudhary VS. Union Of India (2022)’ ( 30 May 2024) < https://lawfullegal.in/vijay-madanlal-choudhary-vs-union-of-india-2022/ > accessed date 13 January 2025
[ii] Vijay Madanlal Choudhary vs. Union of India, (2022) SCC Online SC 929
[iii] Amit Ghodke ‘PMLA Clarity:Deep Dive into the Supreme Court’s Decision in Vijay Madanlal Choudhary Case’ ( 05 January 2024) < https://unfoldlaw.in/pmla-in-vijay-madanlal-choudhary-case/ > Accessed date 13 January 2025
[iv] ibid
[v] Chaitanya Krishna Talapoola ‘CASE COMMENT : Vijay Madanlal Choudhary vs Union Of India[2022] SLP(Crl.) No. 4634 of 2014’ < https://theamikusqriae.com/case-comment-vijay-madanlal-choudhary-vs-union-of-india2022-slpcrl-no-4634-of-2014/ > accessed on 15 January 2025
[vi] Youth Bar Association of India vs. Union of India & Anr (2016) SCC OnLine SC 1703
[vii] Nikesh Tarachand Shah vs Union of India ( 2017) SCC Online SC 1355
[viii] Akash Bhatia’ Vijay Madanlal Chaudhary v/s Union of India, 2022: Money Laundering Laws and the Ideologies of Indian Society and Judiciary’ < https://www.legalserviceindia.com/legal/article-15965-vijay-madanlal-chaudhary-v-s-union-of-india-2022-money-laundering-laws-and-the-ideologies-of-indian-society-and-judiciary.html > accessed on 18 January 2024
