Prevention of Money Laundering Act, 2002 is an Act of the Parliament enacted by the NDA government to discourage money-laundering and to provide for seizure of property obtained from money-laundering. PMLA and the Rules that were announced came into force with effect from July 1, 2005. The Act and Rules that are communicated, imposed obligation on banking companies, intermediaries and financial institutions to verify the identity of clients, keep records and furnish authentic information in prescribed form to Financial Intelligence Unit.
At the time of drafting the law, it is very important to inlay enough checks and balances within the law to avoid arbitrary and unrestricted abuse of power by using that law. This ambition is well reflected in the Prevention of Money Laundering Act, 2002.
It protects the proceeds of crime by way of which the Enforcement Directorate has the authority to attach any property while the pendency of a trial, regardless of whether the owner himself was involved in any crime or not.
Much attention was taken with regard to the PMLA at imposing conditions on the authorities. The officer should form an belief; apply his mind based on the facts regarding the property being prima facie contemplative of the proceeds of offence before attaching such a property. He should also examine the scope whether there is any fast approaching danger, that the owner may distance himself from the property, infuriating the entire investigative or trial proceedings.
But are the officials executing the statute while remaining within its restrictions? The ED, rightly, throws a net to catch sharks. But more often than not the ED also catches an innocent fish that get mix-up in this. Despite no fault of their own, the innocent is subjected to an expensive and tedious or delayed litigation process. However the Act has came under a lot of heat recently for being arbitrary and completely unconstitutional.
Certain sections of PMLA have been inquired wherein the enforcement directorate primarily acts as a whiplash on wrongdoers, where in the wrongdoers may not be given bails. Supreme Court of India attached down on arbitrary rule of not providing bail to the lawbreakers.
Section 65 of the Prevention of Money Laundering Act, 2002 (PMLA) has been under careful examination for long, Being one of the means of oppresion by the authorities. It gives them the scope to pick up and choose the provisions they want to apply in case a certain aspect is covered by both the Criminal Procedure Code, 1973 and PMLA.
65 of PMLA states that[i]:
The provisions of the Code of Criminal Procedure, 1973 (2 of 1974) shall apply, insofar as they are not inconsistent with the provisions of this Act, to arrest, search and seizure, attachment, confiscation, investigation, prosecution and all other proceedings under this Act.
Although the lawmakers have incomporated the word ‘inconsistent’ to create a distinction as to when will the benefits of CrPC be used to broaden PMLA, the authorities under the Enforcement Directorate have become completely ignorant towards it.
The Supreme Court in case of Innoventive Industries Ltd. v. ICICI Bank laid down the guidelines for determining if there is incompatibility between the two statutes by finding out if one of the statutes has adopted a plan or a scheme, which will be hindered or obstructed by giving effect to the other statute.
In the case of Abdullah Ali Balsharaf v. Directorate of Enforcement a case appeared in relation to an instability between S. 109 of CrPC and S. 17(1A) of PMLA where the ED grasped the assets of the petitioner u/s 102 of CrPC. The court while clarifying how the provisions of CrPC were irrelevant for seizing the property for the offence of money laundering, specified irregularity on two grounds:
- The power u/s 17(1) of PMLA to provisionally attach, seize or freeze a property can be exercised only
(a)if the specified officer has material in his possession, which provides him ‘reason to believe’ that the property sought to be attached or seized is proceeds of crime or related to a crime; and
(b) after recording the reasons in writing. Whereas the power under S. 102 of CrPC can be exercised without meeting any of the abovementioned requirements.
- U/s 20 of PMLA the orders of provisional attachment and/or seizure and/or freezing cannot extend beyond the period of 180 days. Whereas the property can be seized u/s 102 of CrPC for an indeterminate period.
The nature of the power of seizure examined under the provisions of CrPC is serious and exercising such power is likely to have an adverse effect on the individual concerned. The parliament in its wisdom did not bestow upon the ED any powers to attach or sieze assets on a mere suspicion. The Authorities cannot pass through the legislative aim using the tool of arbitrary discretion and need to obey the legislative wisdom behind a particular provision.
In another case Moin Akhtar Qureshi v. UOI the Delhi High Court held that there lies an express instability between the provisions of arrest under CrPC and PMLA. The authorities cannot recource to S. 41 of CrPC to arrest a person for an offence of money laundering. While under the section 41 of CrPC the ED can arrest a person on ‘mere suspicion’. However the arrest provisions under section 14 of PMLA have initial requirements that need to be complied with. Under section 14 of the PMLA adequate evidence to form a “reason to believe” that the person is guilty of the offence of money laundering is necessary. This requirement is not required to be fulfilled in case an arrest is made under section 41 of the CrPC.
It is clear from the above two cases how the ED is (these days) acting in a crudely arbitrary manner and using S. 65 of PMLA as a means of explaining their illegal and random acts. The absolute ignorance of the provisions of PMLA by the ED is disturbing and needs to be dealt by the courts in a stricter manner. Contradicting from the scheme of the Act in any case straightly affects on the fundamental right of the victim under article 14 of the Constitution of India as the act becomes arbitrary. Therefore, the upper authorities need to be pro-active and take stringent action against misbehaving officers to restrict this gradually increasing invasion of the rights of the victim to settle this issue.
Edited by Pushpamrita Roy
Approved & Published – Sakshi Raje