The Reasons Of The Top Court To Uphold ED’s Powers
The Enforcement Directorate has registered 5,422 cases under the anti-money laundering law since its inception. Out of these, 3,555 have been registered since 2014. That means that around 65% of the cases were registered in the last eight years.
The total attachment of alleged proceeds of crime come to Rs 1,04,702 crore.
These numbers, recently revealed by the central government in the Lok Sabha, brought to light the increasing role of the Enforcement Directorate as an investigating agency. Leading some to question the agency's independence since it comes under the Ministry of Finance, arguments around arbitrary use of its powers, and calling it a tool to target political rivals.
Within days of this data being revealed, the Supreme Court passed a verdict that'll further empower the ED. The apex court heard over 241 petitions for over 20 days on the legality of the powers of the agency including arrest, bail and summons. Twelve senior advocates pressed the case for the petitioners challenging the provisions of the Prevention of Money Laundering Act, 2002 which lays down the powers the agency.
In the end, arguments by Solicitor General of India Tushar Mehta and Additional Solicitor General of India S.V Raju, prevailed who defended the powers of the agency.
Here are the court’s views on some of the key powers of the agency which were upheld in the judgment.
Bail: Twin Conditions Upheld
Section 45 of the PMLA deals with conditions for bail. The provision was amended in 2019 to re-introduce the twin conditions for grant of bail which were struck down by the Supreme Court in Nikesh Tarachand Shah’s case.
The two conditions are needed to be satisfied on a prima facie basis for grant of bail. One, that there are reasonable grounds for believing that the accused is not guilty of such offence. And two, that he/she is not likely to commit any offence while on bail.
In Nikesh Tarachand, the top court struck down these two conditions for violating Article 14 [Right To Equality] and Article 21 [Right to Life].
The top court upheld this requirement in its judgment this week.
The bench noted that the Nikesh Tarachand judgment was given on the basis that the requirement of the twin conditions to be satisfied for grant of bail was restricted only to a particular class of offences- those which carry a punishment of more than three years.
The 2019 amendment removed the basis of the Nikesh Tarachand judgment by deleting the classification between the class of offences, the top court noted in this week’s judgment while upholding the twin conditions required under the PMLA for bail.
The judgment by the top court also noted that the twin condition for bail is not a feature limited to the PMLA but can also be found in several other special legislations.
Such twin conditions in the concerned provisions have been tested from time to time and have stood the challenge of the constitutional validity thereof.Supreme Court of India
On the specific analysis of the constitutional validity of the twin conditions the court held:
PMLA is a special legislation dealing with money-laundering activities having transnational impact on financial systems.
Money laundering is not an ordinary offence.
The stringent measures under the PMLA are required to combat the menace of money laundering.
The twin conditions for bail is a reasonable condition and has a direct nexus with the purpose sought to be achieved by the law.
The bench also added that the test of twin conditions will have to be satisfied before a person is granted anticipatory bail by the court.
FIR Vs ECIR: An Incorrect Comparison
Whether the Enforcement Directorate could be mandatorily required to share the copy of the Enforcement Directorate Information Report (ECIR) with the accused was one of the most hotly contested issues during the arguments in the case.
The central government argued that the ECIR was an internal document of the agency and could not be required to be shared with the accused.
The Supreme Court’s judgment noted that the PMLA provides a special procedure to be followed for investigation into the offence of money laundering and it cannot be compared to the procedure required to be followed by a police officer and the registration of an FIR.
And even an FIR at times does not reveal full details of the offence in question including the names of persons actually involved in the offence, the judgment said.
The PMLA Act, the top court noted, does not have any provision that requires that the ECIR must be recorded or a copy should be provided to the accused.
Revealing the contents of the ECIR, the bench said, might have an impact on the efforts to secure the proceeds of crime and have a ‘’deleterious impact’’ on the final outcome of the investigation.
Therefore there is no mandatory requirement to provide a copy of the ECIR and it would be sufficient if the agency informs the person about the grounds on which they are being arrested, the court held.
The Provision To Summon Does Not Violate Right Against Self-Incrimination
The key ground of challenge to Section 50 that allows an ED officer to summon any person during an investigation was that the provision violated the constitutional protection granted to an individual against self incrimination.
The government defended the provision on the ground that a person summoned under Section 50 is not an accused yet and therefore there was no question of violation of the right against self incrimination.
The bench noted that the question of right against self incrimination would only come into question once the person summoned is accused of any offence and is being compelled to be a witness against themselves.
However, if the statement is recorded after a formal arrest, then the rigors of Article 20(3) [Right against self incrimination] would come into play, the bench said.
Powers Of Arrest
The powers of arrest are explained in Section 19 of the PMLA Act. This provision allows the ED powers of arrest when it has material in possession giving reason to believe that a person is guilty of an offence under the PMLA.
The petitioners argued that the powers of arrest could be exercised even in the absence of a formal complaint. Allowing an officer to arrest someone without a formal complaint would be arbitrary and unconstitutional, the petitioners said.
The bench however said that the argument overlooked the overall scheme of the PMLA Act and the inbuilt safeguards within.
The top court noted that it was not unusual to provide for arrest of a person during the stage of an inquiry and before a formal complaint of money laundering is registered. In fact, the bench said, somewhat similar provisions are allowed in laws such as the Foreign Exchange Regulation Act as well as the Customs Act.
Further, the bench took the view that the safeguards within the law ensure that the officers do not exercise these powers in an arbitrary manner and make them accountable.
If the action of the authorised officer is found to be vexatious, he can be proceeded with and inflicted with punishment under Section 62 of the 2002 ActSupreme Court of India
The bench said that the power of arrest being vested in high ranking officials is one ground for passing the test of reasonableness of the provision.
The officers, the judgment noted, are also required to record in writing the reasons which result in the arrest of a person. Further, the authorised officer has to forward a copy of the order and material in his possession to the adjudicating authority.
……we hold that such a provision has reasonable nexus with the purposes and objects sought to be achieved by the 2002 Act of prevention of money-laundering and confiscation of proceeds of crime involved in money-laundering, including to prosecute persons involved in the process or activity connected with the proceeds of crime so as to ensure that the proceeds of crime are not dealt with in any manner which may result in frustrating any proceedings relating to confiscation thereof.Supreme Court of India