PMLA cannot be invoked in tax evasion cases by simply alleging criminal conspiracy: Supreme Court

The Supreme Court on Wednesday orally opined that the Enforcement Directorate (ED) cannot invoke the Prevention of Money Laundering Act (PMLA) for tax evasion cases since offences under the Income Tax Act are not scheduled offences under the PMLA..A Bench of Justices Sanjay Kishan Kaul, Sanjiv Khanna and Bela M Trivedi was hearing a batch of petitions challenging the stringent provisions of the PMLA.Appearing for Congress leader Govind Singh, Senior Advocate Kapil Sibal argued that in tax evasion cases, the ED was invoking PMLA by alleging that the offence of criminal conspiracy was involved.Pertinently, Section 120B of the Indian Penal Code (IPC), which lays down the punishment for criminal conspiracy, is a scheduled offence under the PMLA..In response to Sibal's submission, the Court orally observed that tax evasion cases cannot be portrayed as a criminal conspiracy, only to invoke the PMLA."If the Directorate of Enforcement says that by adding (Section) 120B IPC to a non-scheduled offence, cognisance can be can taken under the PMLA to register an ECIR, then I have an issue. Unless parent offence is included, 120B, as a standalone provision, will not make it a money-laundering offence," Justice Khanna remarked..The Court was considering a batch of petitions seeking reconsideration of its earlier judgment in Vijay Madanlal Choudhary v. Union of India, in which the validity of provisions of the PMLA was upheld.The Court had earlier refused a request to defer the hearing in these petitions in view of the ongoing Financial Action Task Force (FATF) review of the country's anti-money laundering and terror financing laws..Today, Solicitor General (SG) Tushar Mehta, appearing for the Central government, expressed his strong reservations at the petitioners allegedly expanding the scope of the hearing through amendments to their petitions.The SG added that the entire Act was now sought to be challenged, instead of some provisions, as earlier indicated. If the Court was allowing such an amendment, then the government authorities would need time to file a reply, he argued..Sibal urged the Court to refer the matter to a five-judge bench. He stated that the questions of law involved may be better determined by a Constitution Bench.The senior lawyer reiterated concerns that the PMLA gave the ED police-like powers, which forced an accused or a witness to give statements without knowing the grounds on which they were summoned.Justice Trivedi, in turn, questioned how the issue of a summons would constitute a violation of the right to life and personal liberty, since the investigating agency is only seeking cooperation with the probe."But I must know what I am called for. Liberty is the heart of the Criminal Procedure Code, and when we are called under Section 161 (of the CrPC) for a statement, we are called as witnesses only, we know. But here, I am completely at sea because I cannot exercise my constitutional rights. Because I do not know why I am called, and I can be arrested," Sibal replied.Sibal also raised concern over the expansion of legal provisions to tackle transnational organised crime and terror financing to private disputes, with excessive discretion being conferred on the probe agencies. .As the day's hearing drew to a close, Justice Kaul remarked that the Court has to examine whether the law is constitutional, irrespective of what the FATF may say."What FATF wants or not, the legislature is empowered to enact a law. What we have to examine is whether it is in line with constitutional provisions," he said..The hearing will continue tomorrow..In November 2017, a Bench of Justices Sanjay Kishan Kaul and Rohinton Nariman had struck down Section 45(1) of the PMLA to the extent that it imposed two additional conditions for the grant of bail to persons accused of money laundering.However, this decision was overruled in July 2022 by a three-judge bench of Justices AM Khanwilkar, Dinesh Maheshwari and CT Ravikumar.In that ruling, the Court upheld the validity of several other provisions of the PMLA as well, including 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), 45 (offences being cognizable and non-bailable and twin conditions for grant of bail by court) and 50 (statements made to ED officials).The Court further held that the supply of the Enforcement Case Information Report (ECIR) to an accused under PMLA proceedings is not mandatory since ECIR is an internal document and cannot be equated to a First Information Report (FIR).Moreover, the Court rejected the argument that punishments under the PMLA with respect to scheduled offences were disproportional, terming this argument as wholly "unfounded."The 2022 ruling invited vehement criticism and led to several review applications being filed. .In August last year, the Supreme Court issued notice to the Central government on a review plea filed by Congress leader Karti Chidambaram challenging the Vijay Madanlal ruling.In March this year, a Bench led by Justice Kaul also sought the response of the Central government and the Enforcement Directorate (ED) on a plea challenging the validity of Sections 50 (issue of summons, production of documents, and giving evidence, etc.) and 63 (punishment for furnishing false information or for failure to provide information) of the PMLA.