The Supreme Court on Wednesday upheld the Enforcement Directorate (ED)’s power to arrest and attach property under the Prevention of Money Laundering Act (PMLA), categorically stating that Section 19 of the PMLA “does not suffer from the vice of arbitrariness”. The apex court made this significant observation while disposing of a bunch of petitions on the interpretation of certain provisions of the anti-money laundering law.
Delivering the verdict upholding the constitutional validity of Section 19 of the 2002 Act, which deals with the power to arrest, a bench of justices AM Khanwilkar, Dinesh Maheshwari and C.T. Ravikumar rejected the petitions challenging the provision. “There are stringent safeguards provided in Section 19. The provision does not suffer from the vice of arbitrariness,” the court observed.
The petitions questioned, among others, the powers given to the ED for search, seizure and attachment, reverse burden cast on the accused to prove innocence and the stringent conditions for granting of bail in PMLA cases.
The top court further observed that the provisions in the form of Section 45 of the 2002 Act, as applicable post-2018 amendment, are reasonable and have direct nexus with the purposes and objects sought to be achieved by the Act for combating the menace of money laundering having transnational consequences, which include impacting the financial systems and sovereignty and integrity of the countries. “We hold that the provision in the form of Section 45 of the 2002 Act, as applicable post amendment of 2018, is reasonable and has direct nexus with the purposes and objects sought to be achieved by the 2002 Act to combat the menace of money-laundering having transnational consequences including impacting the financial systems and sovereignty and integrity of the countries,” the top court observed.
Upholding the validity of Section 19 of the Act, the Court observed, “On
the other hand, 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.”
Section 19 of the Act postulates the manner in which the arrest of a person involved in money laundering can be affected. Sub-section (1) of Section 19 envisages that the director, deputy director, assistant director or any other officer authorised on this behalf by the Central government, if has material in his possession giving rise to a reason to believe that any person has been guilty of an offence punishable under the 2002 Act, he may arrest such person. Besides the power being invested in high-ranking officials, Section 19 provides for inbuilt safeguards to be adhered to by the authorised officers, such as recording reasons for the belief regarding the involvement of a person in the offence of money laundering.
The bench also observed that the safeguards ensure that the authorised officers do not act arbitrarily, but are accountable for their judgment about the necessity to arrest any such person as involved in the commission of the offence of money laundering even before filing the complaint before the Special Court under Section 44(1)(b) of the 2002 Act in that regard. “If the action of the authorised officer is found to be vexatious, he can be prosecuted and inflicted with punishment specified under Section 62 of the 2002 Act,” the Court said in its verdict.
The Court also dealt in detail with Clauses (na) and (u) of Section 2(1) and Section 3 of the PMLA. Defining the expression “investigation” in Clause (na) of Section 2(1) of the 2002 Act, the Supreme Court bench further observed that the term does not limit itself to the matter of investigation concerning the offence under the Act and is interchangeable with the function of “inquiry” to be undertaken by the authorities under the Act.