The Supreme Court, on 27 July 2022, upheld the constitutional validity of the Prevention of Money Laundering Act (PMLA), 2002. A bench of Justices AM Khanwilkar, Dinesh Maheshwari and CT Ravikumar upheld the validity of Sections 3 (definition of money laundering), 5 (attachment of property), 8(4) (taking possession of attached property), 17 (search and seizure), 18 (search of persons), 19 (powers of arrest), 24 (reverse burden of proof), 44 (offences triable by special court), 45 (offences being cognizable and non-bailable).
The court also held that the supply of Enforcement Case Information Report (ECIR) under PMLA proceedings by the Enforcement Directorate (ED) is not mandatory, since ECIR is an internal document and cannot be equated to a First Information Report (FIR). Supply of ECIR to the accused is not mandatory and only disclosure of reasons of arrest to the accused during arrest are enough. Even the ED manual is not to be published since it is an internal document, the Court held.
The court also rejected the argument about proportionality of punishment under the PMLA Act, with respect to scheduled offences as wholly “unfounded”. It added that the stringent conditions for bail under the PMLA Act is legal and is not arbitrary. Enforcement Directorate, Serious Fraud Investigation Office (SFIO), Directorate of Revenue Intelligence (DRI) officials, and not ‘police’ statements recorded during an inquiry are valid evidence, the court observed, in a stinging rebuttal to Modi baiters and the Opposition invariably clamouring about the supposed high-handedness of the ED.
However, the court held that the question of enactment of amendments in 2019 to the PMLA Act as Money Bill has to be decided by a larger bench of seven judges before whom the same question is already pending. The apex court’s verdict upholding arrests by the ED under PMLA is a big blow to the Left-Congress ecosystem, which has been crying hoarse about how arrests by the ED tantamount to gross violation of stated procedures. With over Rs 120 crore of unaccounted cash, gold bars, foreign currency and a lot more, from the close aide of Partha Chatterjee, who till a week back held important portfolios like Commerce, Industry, Transport and Information Technology, in the Mamata Banerjee cabinet in West Bengal, the spotlight now is on the TMC as well, which is mired in massive corruption. The TMC and Mamata cannot dismiss these grave corruption charges, because Partha was virtually No.2 in the Mamata cabinet.
Coming back to PMLA, what exactly were the concerns of petitioners? Well, the petitioners had questioned various aspects of the law including the wide powers given to ED for search, seizure and attachment, the reverse burden cast on accused to prove innocence, the admissibility of statements made to ED as evidence, the stringent conditions for grant of bail and the impact of predicate offence and its outcome, in PMLA cases.
The Modi government had argued that the offence of money laundering under Section 3 is a standalone offence so long as there is a predicate offence irrespective of whether there is acquittal or conviction in such predicate offence. Pertinently it was also argued by the Central government that money laundering under Section 3 is a continuing offence, irrespective of time at which the predicate offence is included in the Schedule. Basically, the apex court stated that money laundering is a standalone offence under the PMLA in a big victory for the Modi government which has zero tolerance for corruption and has been fast-tracking such money laundering cases, much to the discomfiture of the Opposition.
Speaking of money laundering, it is important to talk of the Patra Chawl scam, reportedly abetted by Sanjay Raut, leader of the erstwhile MVA government in Maharashtra. As per ED, Guru Ashish Construction Private Ltd signed an agreement with the Maharashtra Housing and Area Development Authority (MHADA) in 2007 to provide new homes to 672 tenants of Patra Chawl in Mumbai’s suburban area of Goregaon, then develop flats for MHADA and sell the remaining area to private developers.
However, the ED claims that Pravin Raut and the other directors of Guru Ashish Constructions did not build a single house for the 672 displaced tenants. They actually sold the floor space index to nine private developers for Rs 901.79 crore. In addition, Guru Ashish Constructions launched a project called “The Meadows” and received bookings worth approximately Rs 138 crore from flat buyers. According to the ED, Guru Ashish Constructions’ total proceeds of crime from these “illegal activities” amount to Rs 1,039.79 crore.
According to the ED, their investigations revealed that Pravin received Rs 100 crore from HDIL and diverted it to various accounts of his close associates, family members, and business entities, including Sanjay Raut’s family. The ED also stated that in 2010, Varsha Raut received Rs 83 lakh in criminal proceeds directly or indirectly from Madhuri Raut, Pravin Raut’s wife. Varsha Raut used this money to purchase a Dadar apartment. It was also revealed that after the ED investigation was launched, Varsha Raut transferred Rs 55 lakh to Madhuri Raut. There are also a number of other transactions, the ED said.
Clearly, the investigation into the Patra Chawl scam by the ED shows the deep-rooted nexus between Sanjay Raut, his spouse and of course close associates, in not only fleecing the poor of hundreds of crores but also trying to brazenly hoodwink the regulators. However, with the ED getting a huge pat on the back by the top court, corrupt politicians like Raut will now have to learn to be accountable.
This landmark judgement by the Supreme Court upholding powers of the ED under PMLA comes at a time when the Congress too has been desperately trying to shield the Gandhi dynasty from persistent ED summons to Sonia Gandhi and Rahul Gandhi in the National Herald money laundering scam. Backing the ED with a crucial judgement, the top court upheld almost all the stringent provisions of the PMLA in proceeds of crime, search and seizure, power of arrest, attachment of properties, and bail, which were under challenge in the court. Section 19, which deals with the power to arrest, does not suffer from the “vice of arbitrariness”, the court said, adding that Section 5 of the Act relating to the attachment of property of those involved in money laundering, is also constitutionally valid.
Money laundering not only affects the social and economic fabric of the nation but also tends to promote other heinous offences such as terrorism, offences related to NDPS Act (Narcotic Drugs and Psychotropic Substances Act), etc, the court said. The petitioners had argued that unchecked power to arrest the accused without informing them of grounds of arrest or evidence is unconstitutional. They further said the ED recording incriminating statements from an accused during questioning under the threat of being fined for withholding information amounts to compulsion. The supply of ECIR copy to the accused is not mandatory as it is an internal document, the top court said. The petitioners said that putting the burden of proof on the accused violates fundamental rights like the right to equality and the right to life.
Another major challenge, that filing PMLA charges on cases that occurred before 2002 (when PMLA came into existence) is unconstitutional, was also turned down. The Modi government justified it by saying that money laundering is a continuing offence, and not a single act but a chain. Proceeds of crime could have been generated before 2002, but could have still been in possession or in use by the accused, post-2002.
The ED’s money laundering raids are up 26-times under the Modi government. Proceeds of crime worth Rs 99,356 crore were attached between 2014 and 2022, while only Rs 5,346 crore was attached between 2004 and 2014 under the then Congress regime. While there were 888 prosecution complaints under the Modi government, there were just 104 between 2004 and 2014, indicating how increased searches show the Central government’s commitment to preventing money laundering.
The apex court verdict will go a long way in fighting corruption and money laundering cases in the country.
The author is an economist, national spokesperson of the BJP and the bestselling author of ‘The Modi Gambit’. Views expressed are personal.
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