The recent judgment of the Supreme Court upholding the validity of provisions of the Prevention of Money Laundering Act (PMLA) has been panned by academicians, lawyers and civil society as a death knell to fundamental rights.
The verdict saw stringent bail conditions in money-laundering cases being upheld, in variance with earlier Supreme Court decisions.
Provisions relating to arrest, search, seizure, attachment, use of statements to the Enforcement Directorate (ED) as admissible evidence, and non-requirement to supply Enforcement Case Information Report (ECIR) were all upheld, effectively rendering the Code of Criminal Procedure (CrPC) inapplicable in money laundering cases.
Critics have argued that these go against the basic protections afforded by Articles 20 and 21 of the Constitution. In fact, comparisons have been drawn to the infamous ADM Jabalpur judgment, through which the Supreme Court infamously upheld the suspension of fundamental rights during the Emergency period.
However, Advocate Abhimanyu Bhandari, who made submissions on behalf of private parties to the case, paints a slightly more hopeful picture in this interview with Bar & Bench's Debayan Roy.
In fact, he argues that if the judgment is read and interpreted in the context of existing precedents which are not yet overruled as such, it provides sufficient avenues for accused in PMLA cases to secure relief.
Edited excerpts of the interview follow.
Debayan Roy (DR): Doesn't the judgment pave the way for an accused to be perpetually deprived of their property attached as proceeds of crime? Or at least till the trial is over?
Abhimanyu Bhandari (AB): In the PMLA judgment, the Supreme Court has recorded my submission made at Para 12 (iv) and has clarified that the confirmation of the provisional attachment order should not enable the ED to immediately take possession of such property and deprive the accused and other persons whose assets have been attached from enjoyment of such property until a confiscation order has been passed by the trial court hearing the matter.
DR: Does the judgment effectively provide that when the properties are attached by ED, the owner will have to vacate the same unless a trial court directs so?
AB: There is an astronomical number of cases pending before the Tribunal where the ED has issued notices under Section 8(4) immediately after the passing of the confirmation order, almost in a mechanical manner. These notices have been served on persons running factories, dwelling houses and other immovable assets.
Although one could argue that the language of Section 8(4), when strictly read, empowers the ED to issue notices forthwith, the judgment at Para 73-74 now clarifies that:
“...merely because the provisional attachment order passed under section 5(1) is confirmed, it does not follow that the property stands confiscated; and until and order of confiscation is formally passed, there is no reason to hasten the process of taking possession of such property. The principle set out in section 5(4) of the Act needs to be extended even after confirmation of provisional attachment order until a formal confiscation order is passed. Section 5(4) clearly states that nothing in Section 5 including the order of provisional attachment shall prevent the person interested in the enjoyment of immovable property attached under sub-section(1) from such enjoyment.”
It is hoped that the ED will now refrain from issuing Section 8 4) notices asking persons whose assets are attached to vacate their properties before a confiscation order is passed by the trial court.
DR: But the judgment gives an expansive meaning to what constitutes 'proceeds of crime' used for money laundering. It is now to be construed as including concealment, possession, acquisition, or even use of even untainted money. What are counsel to argue in cases where the ED relies on any such activity allegedly carried out by an accused?
AB: At the heart and soul of this Act lies the definition of the term “proceeds of crime”. The top court has noted that this term, being the core of the ingredients constituting the offence of money laundering, needs to be construed “strictly”. To be proceeds of crime, the property must be derived or obtained, directly or indirectly, as a “result of” criminal activity relating to the scheduled offence. The Supreme Court, at paragraph 31of the judgment, gives the example that the “vehicle used in commission of the scheduled offence” may not be proceeds of crime.
DR: The judgment underscores that the ED's officials are not police officers, and so not all CrPC provisions will apply. Does this mean that anyone with unaccounted money can be prosecuted under the Act?
Bhandari: The Court has also clearly said at para 53 that the authority of the officer to prosecute any person for the offence of money laundering gets triggered only if there exists 'proceeds of crime', and further, if they are involved in any process or activity of money laundering.
The Court has also held that not even in a case of existence of undisclosed income and irrespective of its volume, the definition of “proceeds of crime” will get attracted, unless the property has been derived or obtained as a result of criminal activity relating to a scheduled offence.
To prosecute a person for the offence of money laundering, the ED has to not only have reason to believe that the person is in “possession of proceeds of crime” but that belief should be further supported by tangible and credible evidence indicative of the fact that person concerned was involved in any process or activity connected with the proceeds of crime.
This means that not everyone in possession of 'proceeds of crime' can be prosecuted, but only those concerned in any process or activity.
The practice of making every person whose assets are attached as an accused, and prosecuting them merely because they are relatives of the main accused person and are holding an asset given to them by the main accused, will now hopefully stop.
Further, in cases relating to the alleged coal scam, where no mining was done and no coal was generated from an illegal allotment, there can be no attachment as no proceeds of crime was generated. The reasoning in the decision in Himachal Emta v. ED of the Delhi High Court seems to echo in the Supreme Court's judgement.
DR: The judgment states that the ECIR is an internal document of the ED, and that the lack of a first information report (FIR) does not come in the way of commencing inquiry or initiating civil action of provisional attachment of property. How can accused seek to defend an attachment? Any safeguards?
AB: The Supreme Court has held that the twin test under Section 5(a) and (b) has to be satisfied before any attachment is made. At para 57, the Court has emphasised on the second proviso under Section 5, which enables an officer to issue a provisional attachment order (PAO) only after recording satisfaction and reasons to believe in writing that (a) the property is involved in money laundering, and most importantly, (b) that if not attached immediately, it would frustrate the proceedings.
Therefore, there has to be a prima facie belief that property will be dissipated, before attachment. The concerned officer has to “delineate the reasons” as to why the proceedings would be frustrated if the property is not attached immediately. This will be a huge relief to many where no such reasons are given in the PAO and the Authority has simply rubber stamped the language of the statue.
DR: So, in your opinion, it will not be as hard for those accused of money-laundering to get relief till the trial is over, as is being projected?
AB: No doubt now that with the twin conditions having been revived, getting bail in a PMLA case will be a Herculean task! Just last month, the apex court in Satender Kumar Antil’s case had cited Nikesh Tarachand with approval to emphasise that bail is the rule and jail the exception.
However, the judgment does not interfere in any manner with the law laid down in Antil’s case that if an accused has not been arrested during investigation, then bail should not be rejected merely upon filing of the complaint/chargesheet.
According to me, the twin conditions may not apply in such a scenario. If the person was not arrested and a complaint is filed, then in that situation, the twin conditions don’t apply.
At paragraph 140 of the judgment, the Court contemplates only two scenarios where the twin conditions apply.
The first scenario is where the accused has been arrested under Section 19 of the PMLA Act, and the second is when he seeks bail under Section 438 (anticipatory bail) of the CrPC to avoid arrest.
The Court clarifies that “ the underlying principles of Section 45 would get triggered “in either case” before relief of bail is granted in connection with the offence of money laundering. Therefore, if the Authority itself has decided not to arrest the accused, then there is no reason to not grant bail after filing of a complaint by applying the rigours of Section 45.
We should not forget that in Antil’s case the Supreme Court clarified that,
“...in a case where the prosecution does not require custody of the accused, there is no need for an arrest when a case is sent to the magistrate under section 170 of the code. There is not even a need for filing a bail application, as the accused is merely forwarded to the court for framing of charges and issuance of process for trial."
Abhimanyu Bhandari is an advocate practicing in Delhi.
Read our coverage of the current case and the litigation surrounding the PMLA Act, here.