Thursday, February 29, 2024

SC upholds ED’s power to arrest under PMLA

The Supreme Court upheld the validity of various sections of the Prevention of Money Laundering Act on Wednesday: These include Sections 3 (definition of money laundering), 5 (attachment of property), 8(4) [taking possession of attached property), 17 (search and seizure), 18 (search of persons), 19 (powers of arrest), 24 (reverse burden of proof), 44 (offences triable by special court) and 45 (offences being cognizable and non-bailable). 

A three-judge bench led by Justices AM Khanwilkar was hearing the pleas filed by 242 persons including Congress MP Karti Chidambaram.

The Supreme Court upholding the ED’s right to arrest persons under the PMLA assumes significance at a juncture when many prominent politicians are under the scanner of the central agency. Moreover, the SC held that the argument about proportionality of punishment under this Act with respect to scheduled offences is “wholly unfounded and rejected”. In its verdict, it also made a clear distinction between an Enforcement Case Information Report and an FIR. 

The apex court ruled, “ECIR cannot be equated with FIR and ECIR is an internal document of ED. Supply of ECIR to the accused is not mandatory and only disclosure of reasons during the arrest is enough. Even the ED manual is not to be published since it is an internal document. Department has to explore the desirability of uploading broad objectives of the Act on website”. This is of vital importance in the context of the National Herald case where Congress has accused the ED of not supplying the Gandhis with a copy of the ECIR. 

Meanwhile, the SC stated that the question of enactment of amendments to the PMLA in 2019 as a “money bill” will be decided by a larger bench of 7 judges. It allowed the parties seeking bail to seek remedies before an appropriate forum and also made it clear that the interim reliefs already granted to petitioners challenging the validity of the PMLA sections will continue for another 4 weeks. The PMLA was enacted in 2002 but implemented from July 1, 2005, onwards. 

During the SC hearing, Solicitor General Tushar Mehta stated that if a person “knowingly” becomes a party or is actually involved in any activity connected with the proceeds of crime, then such an individual is prima facie guilty of the offence of money laundering. He told the apex court, “Money-laundering poses a serious threat not only to the financial systems of countries but also to their integrity and sovereignty. To obviate such threats international community has taken some initiatives. It has been felt that to prevent money-laundering and connected activities comprehensive legislation is urgently needed”. 

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