How PMLA got its sharp teeth?

  • April 8, 2024
  • Posted by: OptimizeIAS Team
  • Category: DPN Topics
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How PMLA got its sharp teeth?

Subject: Polity

Section: Legislation in news

Context:

BRS leader K. Kavitha was produced at Rouse Avenue Court in connection with the Delhi excise policy-linked money laundering case.

More on news:

In 2023, Delhi High Court granted bail to 49-year-old Preeti Chandra, wife of Sanjay Chandra, who was the Director of M/s Unitech Group, underlining the exception for women.

What is the bail provision in PMLA?

  • Section 45 provides for bail on money laundering charges.
  • This provision in the law, like the stringent bail standard in the Unlawful Activities (Prevention) Act, 1967 (UAPA), puts the onus on the accused to prove that there is no prima facie case against them while seeking bail.
  • Section 45(1) reads,No person accused of an offense under this Act shall be released on bail or on his own bond unless
    • (i) the Public Prosecutor has been given an opportunity to oppose the application for such release; and 
    • (ii) where the Public Prosecutor opposes the application, the Court is satisfied that there are reasonable grounds for believing that he is not guilty of such offense and that he is not likely to commit any offense while on bail.
  • However, there is a crucial exception to the bail standard.
  • Provided that a person, who is under the age of sixteen years or is a woman or is sick or infirm, may be released on bail, if the Special Court so directs.
  • This exception is similar to exemptions under the Indian Penal Code for women and minors.

What is the legal precedent?

  • In 2023, Delhi High Court granted bail to 49-year-old Preeti Chandra, wife of Sanjay Chandra, who was the Director of M/s Unitech Group, underlining the exception for women.
  • The ED, like in Kavitha’s case, had made an argument that the accused was not a “household lady”.
  • The HC said that the PMLA or the Constitution does not make a distinction between a household lady, a businesswoman, or a political figure.
  • To argue what kind of woman is entitled to fall within the proviso to section 45(1) PMLA by creating an ad hoc illusionary sub-classification of educated women, business women, women belonging to high social strata, within the broader classification of “woman”…is misconceived,” the court said.
  • The court added a qualifier that the accused cannot be a “flight risk” or “tamper witness” to be eligible for bail. (Preeti Chandra vs Directorate of Enforcement, June 14, 2023).

Prevention of Money Laundering Act, 2002 (PMLA)

  • The Prevention of Money-Laundering Bill, 1998 was introduced in Lok Sabha on August 4, 1998, by the Atal Bihari Vajpayee government. 
  • The proposed law was focused on preventing money laundering and connected activities, confiscation of the proceeds of crime, setting up of agencies and mechanisms to coordinate measures to combat money laundering, etc.
  • Prevention of Money Laundering Act, 2002 (PMLA) was enacted to fight against the criminal offense of legalizing the income/profits from an illegal source. The Prevention of Money Laundering Act, 2002 enables the Government or the public authority to confiscate the property earned from the illegally gained proceeds.
  • Imprisonment: The offender can face imprisonment for not less than three years, extending up to seven years. In some instances where the crime involves specified offenses, imprisonment can extend up to 10 years.
  • Monetary Penalty: In addition to imprisonment, a penalty of Rs. 5 lakhs can be imposed on the offender.

Enforcement Directorate (ED)

  • The Directorate of Enforcement is a multi-disciplinary organization mandated with investigation of offenses of money laundering and violations of foreign exchange laws. The statutory functions of the Directorate include enforcement of following Acts:
    • The Prevention of Money Laundering Act, 2002 (PMLA): It is a criminal law enacted to prevent money laundering and to provide for confiscation of property derived from, or involved in, money-laundering and for matters connected therewith or incidental thereto.
    • The Foreign Exchange Management Act, 1999 (FEMA): It is a civil law enacted to consolidate and amend the laws relating to facilitate external trade and payments and to promote the orderly development and maintenance of foreign exchange market in India.
    • The Fugitive Economic Offenders Act, 2018 (FEOA): This law was enacted to deter economic offenders from evading the process of Indian law by remaining outside the jurisdiction of Indian courts.
  • ED has been given the responsibility to conduct investigation into suspected contraventions, enforce the provisions of the respective laws by conducting investigation to trace the assets derived from proceeds of crime, to provisionally attach the property and to ensure prosecution of the offenders and confiscation of the property by the Special court.

Supreme court verdicts:

  • On July 27, 2022, a three-judge Bench headed by Justice A M Khanwilkar (now retired) upheld the constitutional validity of PMLA, which was under challenge in a batch of more than 200 individual petitions.
  • The first challenge was against the alternate criminal law system that the PMLA creates since the ED is kept outside the purview of the Code of Criminal Procedure (CrPC). 
  • The ED is not considered ‘police’, and hence does not follow the provisions of CrPC for searches, seizures, arrests, and attachment of properties.
  •  This is significant — since the ED is not a police agency, statements made by an accused to the ED are admissible in court.
  • The judgment in Vijay Madanlal Choudhary &Ors vs Union of India upheld these sweeping powers of the ED.
  • The PMLA, like the UAPA, lays down a stringent standard for granting bail.
  • Section 45 of the PMLA is a ‘negative’ provision — which bars courts from granting bail unless the accused can prove that there is no “prima facie” case against them, and that they will not commit any offense in the future.
  • In Nikesh Tarachand Shah v Union of India, the Supreme Court struck down these provisions as unconstitutional.
  • Parliament put them back in by amending the PMLA through the Finance Act, 2018. This was upheld by the 2021 ruling.

Two key amendments to PMLA:

  • In 2009: ‘Criminal conspiracy’ under Section 120B of the Indian Penal Code was added to the PMLA’s schedule among various other offenses.
  • In 2012: The PMLA was amended to move the Prevention of Corruption Act, 1988 (PC Act) to Part A of the statute’s schedule from Part B. This was a significant move as it applied stringent bail conditions on those accused of corruption.
  • Section 45(1) of the PMLA requires that the public prosecutor must be given an opportunity to oppose any application for release on bail. Where the public prosecutor opposes bail, the court must be satisfied that there were reasonable grounds to believe that the accused was not guilty and was unlikely to commit an offense if granted bail.
  • This section, however, is applicable only to Part A of the statute’s schedule. 
  • When Parliament passed PMLA in 2002, Part A only covered offenses such as waging war against the nation and trafficking of drugs. But the 2012 amendment expanded Part A to include the PC Act, the Wildlife (Protection) Act, the Immoral Traffic (Prevention) Act, the Antiquities and Arts Treasures Act, the Transplantation of Human Organs Act 1994, the Passports Act, the IT Act, and other laws.
How PMLA got its sharp teeth? Polity