Validity of vast powers conferred to ED under Prevention of Money Laundering Act

 

Validity of vast powers conferred to ED under the Prevention of Money Laundering Act

 FACTS 

The Directorate of Enforcement (ED) is a financial investigation agency which comes under the Union Government’s Department of Revenue, responsible for enforcing the provisions of the Prevention of Money Laundering Act, 2002 (PMLA). To conduct investigations, the ED is empowered to issue the summons, record statements, make arrests, and search and seize property. However, the ED is not classified as a ‘police agency’ and is not obliged to follow the Code of Criminal Procedure Code, 1973 (CrPC).

The petitions were filed challenging the vast powers conferred to ED. The following provisions of the Prevention of Money Laundering Act, 2002 were challenged before the Court-

• Sections 5 and 8(4) confer the ED with wide discretionary powers to attach the property of the accused.

• Section 17 confers on the ED-wide powers to enter and search suspected property without judicial permission.

• Section 19 gives the ED the power of arrest.

• Section 24 presumes guilt of the accused until it is disproved.

• Section 45 of the Act provides twin Conditions for the release of bail. To be granted bail, the accused must prove prima facie that they were not guilty, and satisfy the Court that they will not commit any further offence.

• Section 50 of the act, the process envisaged by Section 50 of the 2002 Act is in the nature of an inquiry against the proceeds of crime and is not "investigation" in the strict sense of the term for initiating a prosecution and the statements recorded by the Authorities under the 2002 Act are not hit by Article 20(3) or Article 21 of the Constitution of India.

 WHAT DID THE COURT SAY? 

A 3-Judge Bench upheld all the challenged provisions of the Prevention of Money Laundering Act, 2002. - Supreme Court upholds constitutionality of powers of Enforcement Directorate for arrest, search and seizure, attachment.

Section 5 of the 2002 Act is constitutionally valid. It provides for a balancing arrangement to secure the interests of the person and also ensures that the proceeds of crime remain available to be dealt with in the manner provided by the 2002 Act. The procedural safeguards as delineated by us hereinabove are effective measures to protect the interests of the person concerned.

The Court held Section 24 of the 2002 Act has reasonable nexus with the purposes and objects sought to be achieved by the 2002 Act and cannot be regarded as manifestly arbitrary or unconstitutional. The proviso in Clause (a) of sub-section (1) of Section 44 of the 2002 Act is to be regarded as a directory in nature and this provision is also read down to mean that the Special Court may exercise judicial discretion on a case-to-case basis.

The Court also noted that the beneficial provision of Section 436A of the Code of Criminal Procedure can be used by the accused arrested for an offence punishable under the PMLA 2002 Act. 

The Court said that the process prescribed by Section 50 Act is in the nature of an inquiry and is not "investigation" in the strict sense of the term for initiating a prosecution and the Authorities under the 2002 Act are not police officers as such and the statements recorded by the Authorities under the 2002 Act are not hit by Article 20(3) or Article 21 of the Constitution of India.

Additionally, the Court noted that Enforcement Case Information Report is an internal document and cannot be compared to a First Information Report thus submitting an ECIR as part of PMLA proceedings is not required.