Vijay Madanlal Choudhary v. Union of India

Facts:

Over the previous fifteen years, the Supreme Court (SC) has heard a slew of legal cases, including special leave petitions, appeals, and writ petitions. In these cases, several parts of the Prevention of Money Laundering Act, 2002 (PMLA) were challenged, including their constitutionality. Some of these cases originated as a result of orders issued by High Courts or subordinate courts rejecting applications for discharge, bail, quashing, and other similar matters.

In dealing with this batch of cases, the Supreme Court made a strategic decision not to dive into the exact facts of each individual case. Instead, the Court preferred to concentrate entirely on the legal issues posed in connection with the PMLA provisions. This method enabled the Court to shorten its examination process and focus on the most important legal problems at hand.

Issues:

  1. Whether all provisions of Chapter 12 of the Criminal Procedure Code, 1973[2], must be followed when commencing and conducting investigations under the Prevention of Money Laundering Act, 2002.
  2. Whether or not the recent amendment to Section 45 [3]of the Prevention of Money Laundering Act (PMLA), which removes the foundation of a previous judgement from 2018, and reinstates the twin conditions for granting bail, renders the current version of Section 45 of the PMLA, which includes twin conditions for granting bail, unconstitutional.
  3. Is the 2018 decision that ruled these criteria cannot apply to anticipatory bail the correct application of the law if the Prevention of Money Laundering Act’s (PMLA) twin conditions are determined to have been revived?
  4. Whether the accused person’s fundamental rights are violated by the PMLA’s provisions governing the burden of proof?
  5. What is a violation of the Prevention of Money Laundering Act’s (PMLA) Section 3? Does the 2019 amendment’s explanation to Section 3[4] enlarge the definition of the offence, and is this expansion permitted under the law?
  6. Whether it is necessary to file a chargesheet, complaint, or FIR for the primary offence before using the PMLA’s arrest power? In the context of section 3 read with section 2(u)[5] of PMLA, is it possible for money laundering not to be a stand-alone offence?
  7. Does the arrest authority granted by Section 19[6] of the PMLA violate Articles 14 [7]and 21[8] of the Constitution?
  8. Whether the search and seizure provisions of Section 17 [9]of the PMLA, as amended, are unlawful and discriminatory?
  9. Whether judicial procedures that rely on statements taken down by Enforcement Directorate agents during their investigation violate article 20(3) [10]of the Constitution and are invalid under section 25 [11]of the Evidence Act?
  10. Will there be charges and prosecutions for money laundering even after the primary offence has occurred? If the predicate offence wasn’t already listed as a scheduled offence when it was committed, may money laundering still be viewed as a crime?
  11. Whether or not the PMLA’s provisions for property attachment violate article 300A’s right to property?
  12. Whether the PMLA apply to actions that had place before the addition of the offence listed in the Act’s Schedule?

Contention:

The Prevention of Money Laundering Act, 2002 (PMLA) does not require the beginning or continuation of investigations to follow the process outlined in Chapter 12 of the Criminal Procedure Code (CrPC). The PMLA offers a unique system for stopping and looking into cases of money laundering.

The two requirements under Section 45 of the PMLA, as amended, for granting bail are not unconstitutional. The twin criteria were reinstated, and the retrospective change fixed the flaw in the clause that had been pointed out in an earlier judgement.

It is incorrect to state in the 2018 judgement that anticipatory bail is not subject to the twin criteria. The court determined that the non-obstante clause in Section 45 of the PMLA precludes the application of the Criminal Procedure Code to issues involving bail.

The accused’s fundamental rights are not violated by the PMLA’s regulations governing the burden of proof. The responsibility of proving their innocence is on the accused according to Section 24 [12]of the PMLA, which does not infringe on their constitutional rights.

Money laundering is a crime that can be committed even after the predicate offence has occurred and even if the predicate crime was not initially categorised as a scheduled crime when it was committed. Money laundering is connected to illicit property gains made as a result of criminal activity.

The Constitution’s Articles 14 and 21 are not violated by the arrest authority granted by Section 19 of the PMLA. In the context of fighting money laundering, the rule offers safeguards to prevent arbitrary arrests and is reasonable.

The PMLA’s search and seizure provisions are not invalid and unconstitutional. The Act enables senior officials to use the power of search and seizure and offers strict protections.

The comments that Enforcement Directorate agents recorded during the inquiry are admissible in court proceedings and do not contravene Article 20(3) of the Constitution. The protection of Section 25 of the Evidence Act may apply in some circumstances to the officers covered by the PMLA because they are not regarded police officers.

Under Section 3 of the PMLA, money laundering may be prosecuted as a separate offence if there has been an illicit acquisition of property as a result of criminal activity associated with a scheduled offence.

The PMLA’s rules on property attachment do not infringe on Article 300A’s [13]guarantee of property rights. The provisions are appropriate in attaining the Act’s goals and are intended to combat money laundering.

Acts that took place prior to the addition of the offence listed in the Act’s Schedule may be covered by the PMLA. The Act’s legality is unaffected by the addition or omission of offences from the Schedule, which is a matter of legislative policy.

The court also noted that providing a copy of the Enforcement Case Information Report to the person in question is not required, that the Special Court has the authority to review pertinent documents provided by the ED to support continued detention, that the executive must fill any vacancies on the Appellate Tribunal, and that the argument regarding the proportionality of punishment in light of the scheduled offense’s nature was rejected.

Rationale:

Significant repercussions for the crime of money laundering under the Prevention of Money Laundering Act (PMLA) are caused by the Supreme Court’s decision in this case. The court made it clear that if the primary offence has been resolved or overturned and the accused has been found not guilty by a court of competent jurisdiction, money laundering prosecutions cannot proceed. The court disagreed with the Enforcement Directorate’s (ED) interpretation of the PMLA’s section 44(1)(d) [14]explanation, which gave them the right to carry on with their investigation even after the predicate offence had been resolved. This decision guarantees that the ED cannot begin money laundering investigations without a case involving the scheduled offence.

PMLA is based on the idea of “proceeds of crime.” The Supreme Court emphasised that this phrase must be properly interpreted and can only cover assets obtained directly or indirectly from criminal behaviour connected to a scheduled offence. The court emphasised that the ED cannot simply presume that the property collected must be the profits of crime; rather, the onus is now on the ED to demonstrate a direct connection between the alleged predicate offence and the alleged proceeds of crime.

Section 8(4) [15]of the PMLA, which mandated that the ED take physical possession of attached properties as soon as the provisional attachment order (PAO) was confirmed, was repealed by the Supreme Court with regard to custody of attached properties. Taking possession prior to a formal order of confiscation should be the exception, not the rule, the court decided. Even after PAO confirmation, the idea outlined in Section 5(4) [16]of the PMLA—allowing a person interested in enjoying attached real property—should still be true. This decision highlights the necessity for investigation in these situations and limits the ED’s capacity to automatically issue possession notices based just on PAO confirmation.

These explanations and interpretations offer direction for the ED’s future activities and a foundation for those who have been wronged to seek redress. It emphasises how the ED must demonstrate a direct link between the scheduled offence and the alleged proceeds of crime in order to operate under the PMLA. However, a review petition has been submitted to the Apex Court, raising the issue of whether the ED’s authority is legitimate.

Defects of Law:

The ruling of the Supreme Court reveals a number of shortcomings in the current money laundering legislation. First off, even in the absence of further proof of illegal conduct, the Court deems “projecting” or “claiming” proceeds of crime as clean property to be a separate act of money laundering that may result in unfair allegations. Second, the decision permits temporary property attachments without requiring the registration of a predicate offence, which could result in abuse of authority and arbitrary behaviour. Additionally, uncertainty is caused by the uncertain status of property that has been provisionally attached when a confirmation complaint is not submitted within 365 days.

Furthermore, it goes against the idea of “innocent until proven guilty” to put the burden of proof on the accused to demonstrate that the proceeds of crime are pure. Furthermore, it may lead to unfair treatment if the Prevention of Money Laundering Act (PMLA) is given precedence over predicate charges, even though a person is only charged with the predicate offence and not under the PMLA. The PMLA’s sentencing guidelines for money laundering are similarly excessive when compared to the penalties for the underlying violations. Concerns about arbitrary decision-making are raised by the Enforcement Directorate (ED) Manual’s lack of openness, while the use of money bills for modifications violates the bicameral structure of the Parliament and the legislative process. These flaws serve as a reminder that the current legal system has to be carefully reviewed and improved in order to ensure a fair and just legal system and guard against potential power abuse.

Inference:

Several facets of the 2002 Prevention of Money Laundering Act (PMLA) were discussed by the Supreme Court. It made it clear that not all of the rules in Chapter 12 of the Criminal Procedure Code apply to offences involving money laundering under the PMLA. The Court determined that anticipatory bail is also subject to the dual requirements for granting release under Section 45. It reaffirmed the legality of the Section 24 burden of proof and recognised the admissibility of remarks made by Enforcement Directorate agents while conducting investigations. The Court upheld Section 19’s authority to make arrests while pointing out that there were sufficient safeguards in place. It also made it clear that actions taken prior to the addition of the offence listed in the Act’s Schedule are subject to the PMLA. Overall, the decision gives PMLA critical clarity, guaranteeing an efficient legal framework to fight money laundering while protecting constitutional norms.

Written By:

Lakshman Singh

3rd Year, BBA LLB (Hons.)

Shri Ramswaroop Memorial University, Lucknow-Deva Road


[1] Vijay Madanlal Choudhary v. Union of India, MANU/SC/0924/2022

[2] The Code of Criminal Procedure Act, 1973, No. 12, Acts of Parliament, 1973

[3] Prevention of Money Laundering Act,2002, § 45, Acts of Parliament, 2002

[4] Prevention of Money Laundering Act,2002, § 3, Acts of Parliament, 2002

[5] Prevention of Money Laundering Act,2002, § 2(u), Acts of Parliament, 2002

[6] Prevention of Money Laundering Act,2002, § 19, Acts of Parliament, 2002

[7] INDIA CONST. Art. 14

[8] INDIA CONST. Art. 21, amended by The Constitution (Eighty-Sixth Amendment) Act, 2002

[9] Prevention of Money Laundering Act,2002, § 17, Acts of Parliament, 2002

[10] INDIA CONST. Art. 20, cl.2

[11] Indian Evidence Act, 1872, §25, Acts of Parliament, 1872

[12] Prevention of Money Laundering Act,2002, § 24, Acts of Parliament, 2002

[13] INDIA CONST. Art. 300A, amended by The Constitution (Forty-Fourth Amendment) Act, 1978

[14] Prevention of Money Laundering Act,2002, § 44(1)(d), Acts of Parliament, 2002

[15] Prevention of Money Laundering Act,2002, § 8(4), Acts of Parliament, 2002

[16] Prevention of Money Laundering Act,2002, § 5(4), Acts of Parliament, 2002

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