Can Refer Aspects Of PMLA Verdict To Constitution Bench, If Need Be: Supreme Court

Relevance: GS2 - Structure, organization, and functioning of the Judiciary, Statutory, regulatory and various quasi-judicial bodies, GS3 - Challenges to internal security, money-laundering and its prevention.

(Source: The Hindu, 10/19/2023)

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Why in the news?

• Recently, a three-judge bench of the Supreme Court stated that it would refer aspects of the PMLA verdict to a Constitution Bench if necessary.
• In 2022, a Coordinate Bench of the Supreme Court upheld core amendments of the PMLA Act giving extensive powers to the Enforcement Directorate.

What has the Supreme Court stated on petitions challenging the PMLA verdict?

• A Special Bench comprising Judges Sanjay Kishan Kaul, Sanjiv Khanna, and Bela M. Trivedi was hearing a set of petitions challenging the PMLA verdict passed by a three-judge bench in the Vijay Madanlal Choudhary case in 2022.
• The Bench stated that it would refer any aspect of the verdict to a Constitution Bench if it found it necessary but that it would not conduct a general review of the verdict.
• If an issue was found to be worthy of reconsideration, it would refer to a larger bench of five or seven judges.

What was the verdict of the Supreme Court in the 2022 judgment?

• In 2022, a three-judge bench of the Supreme Court comprising Justices A.M. Khanwilkar, Dinesh Maheshwari, and C.T. Ravikumar upheld the core amendments made to the Prevention of Money Laundering Act (PMLA).
• The amendments give the government and the Enforcement Directorate (ED) virtually unbridled powers of summons, arrest, and raids, making bail nearly impossible and shifting the burden of proof of innocence onto the accused.
• Petitions: Over 240 petitions were filed against the amendments alleging that they violated personal liberty, procedures of law, and the constitutional mandate
• Finance bills: The petitioners challenged the amendments introduced to the 2002 Act by way of the Finance Acts.
• However, the Bench stated that the method of introduction of the amendments through Money Bills would be separately examined by a larger Bench of the apex court.
• Money laundering: Money laundering is an offense against the sovereignty and integrity of the country and expanded the meaning of the offense to include all processes and activities, which directly or indirectly, deal with the proceeds of the crime.
• Inquiry: The Court stated that a person cannot claim protection from being summoned for an inquiry under Article 20(3) of the Constitution i.e. the fundamental right against self-incrimination.
• Powers of Arrest: The Court rejected the petitioner’s claim that the ED had been given unbridled powers of arrest, search of person and property, and seizure which violated Article 21.
• The Court cited the in-built safeguards within the Act, such as the recording of reasons in writing while effecting an arrest.
• Section 3: The Supreme Court accepted the government’s submission that a drafting error had crept in, and said that the expression “and” should be read as “or” in Section 3.
• This would expand the scope of the provision in terms of defining who is punishable under the offense of money laundering.
• Retrospective application: According to the Supreme Court, money laundering, is a continuous offense and can be acted upon regardless of when the offense was committed.
• This meant that holding property derived from an offense that may not have been a scheduled offense at the time of the commission of the offense would also be defined as money laundering.
• Enforcement Directorate and police: The Court upheld Section 50 of the PMLA which empowers ED officials to record statements on oath from any person.
• This is admissible in court, unlike statements or confessions made to the police as they are not police officers.
• ECIR: The Supreme Court also ruled that the ED need not supply a copy of the Enforcement Case Information Report (ECIR) to an arrested person as this could affect the final outcome of the case.
• Bail provisions: The SC verdict upheld the bail provisions under PMLA that impose a reverse burden of proof on the accused.
  • Section 45 consists of two conditions for imposing bail:
    • The prosecutor is given the opportunity to oppose the bail application and
    • There are reasonable grounds for believing that he is not guilty of such an offense and that he is not likely to commit any offense while on bail.
• Petitioners had claimed that the accused were limited in their ability to persuade the Special Court to grant bail in the absence of an FIR, complaint, and other documents relied upon by the prosecution.

What is the Solicitor General’s argument on the petitions?

• The Solicitor General Tushar Mehta claimed that every provision of the PMLA was debated before the Khanwilkar Bench and described the petitions as an abuse of law.
• He also stated that petitions filed under Article 32 challenging a judgment cannot be referred to Constitution Benches.
• He stated that a mutual evaluation exercise was being conducted in coordination with the Financial Action Task Force (FATF) and that any questions about the PMLA provisions could affect it.
• He described the PMLA as part of a global response to money laundering terror financing and urged the court to adjourn the hearings until the completion of the mutual evaluation exercise in the national interest.

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FAQs

MCQs

Question: Which one of the following statements is correct with reference to FEMA in India? (UPSC CSE 2003)

(a) The Foreign Exchange Regulating Act (FERA) was replaced by the Foreign Exchange Management Act (FEMA) in the year 2001

(b) FERA was given a sunset clause of one year till 31st May 2002 to enable the Enforcement Directorate to complete the investigation of pending issues.

(c) Under FEMA, violation of foreign exchange rules has ceased to be a criminal offense

(d) As per the new dispensation, the Enforcement Directorate can arrest and prosecute people for the violation of foreign exchange rules.