Supreme Court judgment misses an opportunity to refine PMLA

This is a new trend in the Supreme Court. While dismissing a petition, the petitioner is punished or the law is made even more stringent when it is challenged on the grounds of stringency.

A three-judge bench of the Supreme Court on July 27 rejected a challenge to the various provisions of the Prevention of Money Laundering Act, 2002 (PMLA), while expanding the scope of Section 3 of the PMLA and making it even more stringent. 

Section 3 defines the offence of money laundering. It currently reads, inter-alia: “Whosoever directly or indirectly attempts or indulges or knowingly assists or knowingly is a party to, or is actually involved in, any process or activity connected  with the proceeds of crime, including its concealment, possession, acquisition, or use AND projecting or claiming it as untainted property, shall be guilty of offence of money laundering.”

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The word ‘and’, as specified above, clearly suggests that unless a tainted property is projected or claimed as an untainted property, there cannot be any offence of money laundering.  The Supreme Court has now replaced the word ‘and’ with ‘OR‘ and has indulged in judicial legislation, ostensibly in exercise of its powers under Article 142 of the Constitution. It did not say which Article of the Constitution was pressed into service to write what Parliament clearly did not.

Instead, the justification for radically altering the scope, purport, and clear wordings of Parliament is reflected, spread over 18 paragraphs (Paras 37 to 55), and 25 pages from pages 274 to 299 in the judgment. The justification for this expansion of the scope of Section 3 of PMLA, which is the backbone of the legislation, is unconvincing.

Global treaty vs domestic law

The SC reasoned that the word ‘and’ would not be fully in line with the Vienna and Palermo conventions. This completely ignored the settled legal principle that a clear domestic law overrides treaty obligations. Equally untenable was the SC’s reliance on the Sanjay Dutt judgment on Section 5 of TADA pertaining to arms and ammunition.

The court also did not attach much importance to the most important word, ‘knowingly’, in Section 3 of PMLA. I recall that ‘knowingly’ was inserted in Section 3 after much debate when the law was in the process of being enacted.

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The judicial legislation to expand the scope of the backbone of PMLA and make it more stringent was not necessary, and, in fact, is surprising. 

An abused law

PMLA has, in any case, been an abused law. The legislation aims at confiscating the proceeds of various crimes mentioned in the schedule of the PMLA. These are called “scheduled offences”. More than 160 scheduled offences exist today in PMLA. Each can be tried independent of PMLA.

But why did the legislature place them again in the schedule of PMLA? Because PMLA creates a new offence of money laundering under Section 3, apart from scheduled offences. If the proceeds of such crimes, arising out of scheduled offences, change hands, then anyone having anything to do with the proceeds of crime commits the offence of money laundering.

As per the scheme of PMLA, the scheduled offence and the offence of money laundering can be tried only by a court of sessions, being a special court, as per Sections 43 and 44 of PMLA. The entire scheme of PMLA aims at confiscating properties generated out of crimes mentioned in the schedule. Importantly, an essential prerequisite for confiscating properties is conviction by a special court. If the special court acquits the accused, then the temporarily attached properties are required to be released to the person.  

The 545-page judgment refers extensively to submissions made by the contending parties, and analyses various provisions of law and judicial pronouncement.

Minuscule rate of conviction

In my view, the Supreme Court should have taken judicial notice of the fact that as on March 31, 2022, the rate of conviction in PMLA is only 0.42%. Official figures are exactly 23 convictions out of 5,422 cases filed. And, the total confiscated assets as on that date is worth just Rs 869.31 crore, though assets/properties worth Rs 1,04,702 crore have been attached. This implies that the remaining about Rs 1,03,000 crore worth of assets wrongfully attached would have to be released.

These figures present a grim picture. Not only that, the elaborate verdict overlooks constitutional provisions, particularly, Articles 14, 20 (3) and 21 of the Constitution. Arbitrary arrests strike at Article 14 of the Constitution. Coercing an accused to extract a statement hits right against self incrimination guaranteed under Article 20 (3), and deprivation of personal liberty beyond the ambits of procedure established by law is protected under Article 21.

These are immutable, inalienable fundamental rights. Even Parliament in its absolute majority cannot abrogate them. Some words of caution and wisdom from the Supreme Court about these aspects would have guided those who are wielding raw powers without ostensible accountability. The Supreme Court missed a golden opportunity to send out a clear signal to uphold human rights. In fact, conflicting signals emanating from different benches from the apex court does not augur well for the democracy.

FERA abuses re-manifest in PMLA

I had the honour of deposing as a witness in 1998 before the Parliamentary Standing Committee of Finance, Chaired by the late Murli Deora, when the debate from FERA to FEMA and PMLA was going on. I have no hesitation in stating that the intention of Parliament has not been fulfilled. All the abuses of FERA have manifested in PMLA. Whichever government has come to power has allowed the powers of ED to be exercised arbitrarily. And cutting across the political spectrum.

International obligations impelled India to enact PMLA,  in 2003. But India hesitated still, before implementing it on July 1, 2005. Tragically, in the PML legislation, an international perspective is missing. Foreign exchange laws are beyond the purview of PMLA. 

Instead, the schedule of offence has been filled with laws irrelevant to international foreign transactions, the real meaning of money laundering in the global context. Irrelevant pieces of legislation like those pertaining to prostitution have been brought within the ambit of money laundering laws. Imagine — prostitutes can be entangled in money laundering, but not international operators indulging in hawala, in an astronomical scale. A humongous tragedy. India deserves better. 

(The writer is Senior Advocate, Supreme Court of India, and former Additional Solicitor General of India)

(The Federal seeks to present views and opinions from all sides of the spectrum. The information, ideas or opinions in the articles are of the author and do not necessarily reflect the views of The Federal)