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  • DAILY CURRENT AFFAIRS:Supreme Court upholds ED power to arrest and confiscation under PMLA

Supreme Court upholds ED power to arrest and confiscation under PMLA

Tags: National Economy/Finance Latest

The Supreme Court of India has upheld the constitutional validity of the Prevention of Money laundering Act (PMLA) 2022, while delivering judgement on the Vijay Madanlal Chaudhary Vs Union India and 240 other petition on 27 July 2022.

A three judge bench of Justices AM Khanwilkar, Dinesh Maheshwari and CT Ravikumar upheld the Enforcement Directorate’s(ED) power to arrest and seize properties under the Prevention of Money Laundering Act (PMLA) 2002.

Prevention of Money Laundering Act (PMLA) 2022 

  • In order to meet its international obligation on money laundering the Prevention of Money Laundering Act (PMLA), was passed by the parliament in 2022 and was implemented on 1 July 2005. 
  • The law aims to prevent money laundering in India and provides for the confiscation, attachment, and seizure of proceeds from money laundering and related acts and matters. 
  • The provision of PMLA is implemented by the Enforcement Directorate (ED), under the Union Ministry of Finance.

Issues and Judgement of the Supreme Court

  • The Court 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 and twin conditions for grant of bail by court) and 50 (statements made to ED officials).

Section 45 and twin condition of bail 

  • Section 45 of the PMLA provides for a twin condition for bails of the accused under the act. 
  • First the accused has to provide reasonable ground to the court that  it is prima facie not guilty in the case  and  secondly he or she is not likely to commit any offence while on bail.
  • In the Nikesh Tarachand Shah vs Union of India 2017, the Supreme Court struck down this as unconstitutional. However, in a subsequent amendment in 2018, Parliament inserted these provisions again, through the Finance Bill.
  • The amendment was challenged in the court on the ground that it was done through a money bill and these provisions were unconstitutional as pointed out by the Supreme Court in the Nikesh Tarachand Shah case.

Judgement of the court 

  • The Supreme court upheld the 2018 amendment as parliament was competent to make law and can make any changes in it .
  • On the issue of whether the amendments could have been passed as a Money Bill, it has left the question open for a larger bench to consider it.

ED powers to seize and arrest 

  • The Supreme Court upheld the power of the ED to provisionally seize the properties of the accused, arrest them even before an FIR has been registered with the local police. 
  • However the ED has to inform the police   and register a FIR on which basis ED can investigate and prosecute the accused.

ED officers are not Police officers

  • The top court also held that ED officers cannot be considered as “police” officers because their roles are distinct under the PMLA. It means,  , if an ED officer records an incriminating statement of a witness, suspect or accused, such a statement can become a piece of valid evidence and cannot be thrown out on the ground of being self-incriminatory and thus, violative of Article 20(3).
  • Article 20(3) of the constitution provides that No person accused of any offence shall be compelled to be a witness against himself.
  • In a normal case statement before police is not admissible as evidence in a court of law.

Disclosing ECIR (Enforcement Case Information Report)

  • Many petitioners argued that they shall have the right to see the ECIR as FIR (First Information Report) copy is always given to the accused.
  • The Court said that ECIR is an internal document of the agency. 
  • The court said that since there is no legal requirement of ED to compulsorily register an ECIR in a crime like an FIR by police, no directive to share a copy of ECIR with the accused can be issued. But the ED has to inform the person about the grounds of his arrest.

Section 24 which provides for reverse burden of proof

  •  Normally in a criminal case an accused is presumed innocent until proven guilty.
  • In the PMLA it is reversed. Here under section 24 of the act, a court will presume that the accused is involved in money laundering until the accused proves that he is innocent.
  • The Supreme Court upheld this section of the PMLA.


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