The Prevention of Money Laundering Act, 2002 (PMLA), poses a serious challenge to the Indian criminal jurisprudence inasmuch as it permits arrest of a person twice: by the Enforcement Directorate under Section 19 of the Act, and by the police/CBI in the Predicate Offence(s) under any of the laws enumerated in the schedule. It is to be noted that the predicate offence and the offence of money laundering are committed in course of one and the same transaction and yet a person is liable to be arrested twice. This clearly signifies flawed architecture of PMLA from the jurisprudential stand point.
A case under PMLA is registered only after the registration of an FIR relating to the commission of one of the ‘Scheduled Offences’ by the police/CBI. The agency for the investigation of money laundering offenses is the Enforcement Directorate under the PMLA. As per law, the ED can register the ECIR only after the registration of the FIR because money laundering per se is not an offence under PMLA.
Multiple amendments in PMLA
The PMLA was enacted to meet the challenge of money laundering in line with various international initiatives. The Act was repeatedly amended from time to time—in 2005, 2009, 2013 and 2019. The Finance Acts of 2015, 2016, 2018 and 2019 also amended it. Pertinently, the Principal Act had a very small category of scheduled offences but these offences increased exponentially by virtue of these amendments resulting in the law becoming more stringent. However, the purpose of this article is to focus only on one aspect of the law, that is, the liability of a person to be arrested twice by two investigating agencies on the basis of one FIR.
Two investigating agencies
The PMLA comes into play after the registration of a predicate offence by the police/CBI. Based on it, the ED registers the ECIR (Enforcement Case Information Report). Now two agencies carry out separate investigations simultaneously. The police agency investigates the FIR and the ED, the ECIR. On conclusion of investigation, the police may file a chargesheet against the accused under section 173 CrPC in the Special Court. Likewise, the ED may file a criminal complaint under Section 44(b) of PMLA in the same court. The Special Court tries the police chargesheet and the ED’s criminal complaint jointly under Section 44 of the Act.
The unprecedented and unsavory feature of this legal architecture is that an accused is liable to be arrested twice by the two agencies. He, thus, suffers from double whammy. The result is that the remand jurisprudence laid down in section 167 CrPC has turned on its head inasmuch as he is liable to be taken into police custody remand by the two agencies separately, one after the other. Thus, the maximum police remand period has effectively increased to 30 days, as against 15 days in non-PMLA offences.
Arrest u/s 19 is violative of human rights
It is trite that arrest of a person not only restraints his physical movements but also affects him psychologically. He loses social prestige and the people start looking at him with suspicion and derision. An arrested person cannot conduct his routine trade and business and becomes a social and economic parasite. An unnecessary/avoidable arrest is also violation of his human rights. The arrest should be avoided unless a person is involved in a grave crime and only once for all the offences committed by him in the course of the same transaction.
Arrest provisions in PMLA & CrPC
The ED can straight away arrest a person under Section 19 of PMLA but the grounds of arrest have to be communicated in writing to him/her as per the Supreme Court ruling in Pankaj Bansal (2023) SCC OnLine SC 1244. This provision, however, is in stark contrast to section 41A of CrPC which mandates the investigating officer to first issue a notice to the person against whom a complaint has been made and to take his version on it before taking any punitive action. This opportunity, however, is not available to a suspect under the PMLA.
Challenge to Section 19 of PMLA in Supreme Court
In my view, a half-hearted challenge was made to the constitutional validity of Section 19 before a three Judge Bench of the Supreme Court in Vijay Madanlal Chaudhary (SLP (Crl.) 4634 of 2014 decided on 27.07.2022). The Union government basically took the stand that there are adequate safeguards in section 19 which make this provision constitution-compliant such as arrest can be made only by a senior officer of ED; the arresting officer should have adequate material in his possession before making the arrest; he should be satisfied that the person has actually committed the offence; that issuing notice to the person would jeopardize investigation; and that only 313 arrests have been made under PMLA during last 17 years etc.
The bench accepted all these contentions and upheld the validity of Section 19, besides placing reliance on its earlier judgments in Ramesh Chandra Mehta (1968) SCC OnLine SC 62 and Padam Narayan Aggarwal (2008) 13 SCC 305.
In my opinion, the contentions raised by the Central government and the precedents relied upon by the bench are not relevant to the issue being raised here. In my view, this contention was never raised before the Bench.
Section 19 should be scrapped
It is to be emphasized that Section 19 does not satisfy the jurisprudential test. A person cannot be arrested twice and taken into police custody remand twice for committing an offence even if such offence encompasses money laundering. In fact, this legal arrangement is inconsistent with the general law of the land i.e. Section 220 of CrPC which provides for trial ofmore than one offences committed in the course of the same transaction.
Further, the argument advanced on behalf of the Central government in Vijay Madanlal Chaudhary that only 313 arrests were made during last 17 years has become outdated and irrelevant inasmuch as the ED is now making arrests at the drop of a hat during the last few years. For instance, 17 persons have so far been arrested in Delhi excise scam alone. In any case, even one unnecessary arrest is far too many and this needs to be avoided.
More importantly, the arrest of a person under Section 19 does not have any practical utility for theED for the following reasons: Firstly, the ED arrests a person under Section 19 for the purpose of thoroughly interrogating him to elicit information regarding the contours of crime, the names of his accomplices and their whereabouts etc. and for tracing out the ‘proceeds of crime’. The experience shows that this argument has no force as the persons involved in money laundering, generally speaking, are well-healed persons and under legal advice, they do not disclose any incriminating evidences to the ED during their custodial interrogation.
Secondly, for successful prosecution, the ED is required to establish the money trail which is basically record based (manual or electronic). Hence, even if the arrested person discloses incriminating information against himself and his accomplices, it is not going to have any legal weight unless it is supported by the money trail. The ED can establish money trail even without arresting a person and taking him in the police custody remand. Thus, the arrests made under Section 19 have not proved useful for collecting substantive evidence against the arrestees.
Thirdly, there may arise a situation where the ED arrests a person under Section 19 but the police/CBI investigating the predicate offence does not file the chargesheet in the predicate offence for lack of evidence or inadequate evidence. As a result, the arrested person would rot in jail for long time due to the stringent bail provisions for grant of bail but he cannot be put to trial on the money laundering charge if the police has not filed the chargesheet against him. Such situations are not imaginary and raise a jurisprudential challenge.
To conclude, the arrest of a person under Section 19 of PMLA is jurisprudentially untenable; it is inconsistent with section 220 of the CrPC; it has not helped build up substantive evidence against the money launderers; and, it has bred undesirable practices in the investigative process. For these reasons, the constitutional validity of this section needs to be reassessed by the Supreme Court of India.
(M.L. Sharma IPS (Retd) is the former special director, CBI & former Central Information Commissioner. The opinions expressed in this article are those of the author's and do not purport to reflect the opinions or views of THE WEEK)
