New Delhi: The overarching powers of the Enforcement Directorate under the amended Prevention of Money Laundering Act came under the Supreme Court’s scrutiny on Wednesday as the petitioners argued that the provisions under the anti-money laundering law were violative of the Constitution as the suspects are summoned without being informed whether they have been called as an accused or as a witness. The hearing in the matter will resume on Thursday.
During the course of the day-long hearing, the Centre, however, defended the amendments to the PMLA, asserting that as much as Rs 17,000 crores have been restored to victims, especially in bank fraud cases.
Senior advocate Kapil Sibal, representing some of the petitioners in the case, told the bench about the stringent amendments made in the PMLA and said: “Every crime would amount to laundering of money, and in every crime, unless you show that you are not guilty, you will not get bail.”
“The Vijay Madanlal judgment interprets the PMLA as a regulatory statute. When your property is attached, your bank account is frozen. A businessman's business is finished. You cannot have draconian provisions of this manner,” Mr Sibal asserted.
Elaborating on the fallout of the amended provisions of the PMLA, Mr Sibal said the ED summons a person without clarifying whether he is being called as an accused or as a witness, thus taking away his right to seek appropriate legal remedy in the form of anticipatory bail.
“We have reached a stage where the ED can go anywhere. It doesn’t also tell you whether you are being summoned as a witness or an accused. The PMLA provisions need to be tested on the anvil of our constitutional principles,” Mr Sibal argued, urging the judges to refer the cases to a larger five-member bench.
The PMLA came in 2005, was amended in 2019, and made a penal offence a continuing offence. The senior advocate mentioned the case of NCP leader Nawab Malik, who had purchased a property in 1999 but was arrested later and continues to be in jail.
Arguing that people arrested under the PMLA are not told the reasons and offences for which they have been arrested, Mr Sibal said:”he problem is, you don't arrest the man at that stage. You call him under Section 50 (of PMLA), without telling him whether you are being summoned as a witness or an accused. ECIR is not known to him.”
The Enforcement Case Information Report (ECIR) is the equivalent of the First Information Report (FIR) in police parlance.
At this, Justice Khanna said: “What you are saying is that they record a statement making the person plead guilty. And then they rely on that statement, and the onus shifts? Is it also not the law that any of the admissions or confessions, the court can always ask for corroborative evidence?”
Mr Sibal responded: “I have to not only give a statement but also sign the statement. This is violative of Article 20(3) of the Constitution.”
Defending the Centre, solicitor-general Tushar Mehta told the special three-judge bench comprising Justices Sanjay Kishan Kaul, Sanjiv Khanna and Bela M. Trivedi: “As a nation, we should be proud that there is a provision that allows the confiscated property to be restored to claimants with legitimate interest. Approximately Rs 17,000 crores has been restored to victims, especially in bank fraud cases.”
Senior advocate Abhishek “Manu” Singhvi, who was also appearing for the petitioners, told the bench that the ED is applying the PMLA to income-tax evasion cases too, though the Income-Tax Act is not a scheduled offence, by using Section 120-B of the Indian Penal Code (IPC). Section 120-B refers to the offence of criminal conspiracy.
Expressing his disapproval of this, Justice Khanna said: “If the ED says that by adding 120-B to a non-scheduled offence, cognisance can be taken under the PMLA for registration of ECIR, then I have an issue.”
The apex court is hearing a clutch of petitions challenging its 2022 judgment in the Madan Lal Chaudhary case in which it had upheld the constitutional validity of the amended PMLA provisions relating to arrest, seizure, presumption of innocence and stringent bail conditions, among others.
The top court had also held that the supply of ECIR under the PMLA proceedings is not mandatory as it is an internal document and cannot be equated to an FIR.