Challenges to the Prevention of Money laundering Act: Money Laundering Is A Continuing Offence Says ASG, PMLA Not Being Applied Retrospectively

On March 9th, 2022, Justices A.M. Khanwilkar, Dinesh Maheshwari, and C.T. Ravikumar finished hearing the Union government’s response to the challenges to the Prevention of Money Laundering Act, 2002 (PMLA). Additional Solicitor General S.V. Raju focused on the petitioners’ challenge to the retrospective application of the PMLA and the non-filing of an FIR in PMLA offences.

After 22 days of hearings, the Bench appears to have finally run out of patience with these protracted proceedings. Over 100 petitioners, many of whom are accused of money laundering themselves, have argued over 15 days that the PMLA disregards the accused’s Constitutional rights to liberty and a fair trial enshrined under Article 21 of the Constitution. 

Keen to end the hearings today, the Bench initially denied Senior Advocates Kapil Sibal, Dr. Abhishek Manu Singhvi, and Mukul Rohatgi more hearing time to respond to the Union’s arguments in their rejoinder—the lawyers were instructed to submit written notes containing their responses. After much persuasion, the petitioners have been granted time to orally respond to the Union on March 15th, 2022. 

ASG: Money Laundering Is A Continuing Offence, PMLA Not Being Applied Retrospectively

The petitioners previously submitted that using the PMLA to prosecute accused persons for predicate offences (from which the laundered proceeds originated) that took place before 2002, the year the Act was promulgated, would violate Article 20(3) of the Constitution, which disallows retrospective application of criminal laws. 

Mr. Raju responded by clarifying that money laundering is a continuing offence—it is not a single act that concludes as soon as it begins. Therefore, he argued that even if the proceeds were generated before 2002, if the proceeds continued to be in the accused’s possession or use, the act of projecting them to be legal funds could continue past 2002. Mr. Raju submitted that in State of Bombay v Vishnu Ramchandra (1961) the SC held that just because a part of the crime was committed before the Act came into force, it cannot be said that the Act was applied retrospectively. 

ASG: ECIR Is Distinct From FIR, Accused Need Not Be Given an ECIR Copy

Mr. Raju stated that there were several crucial differences in the nature of investigations contemplated in the Code of Criminal Procedure, 1973 (CrPC) and the PMLA. Section 2(h) of the CrPC defines an investigation procedure as one to be conducted by the police, which will begin after the police receives information of a crime from an external source. The PMLA investigation, as defined in Section 2(na) of the Act, is to be carried out by the Enforcement Directorate (ED), which, according to Mr. Raju, does not have police powers. The ED is also not required to receive prior intimation of money laundering in order to commence an investigation under Section 2(na).

Most crucially, Mr. Raju pointed out that the purpose of investigation under the CrPC is to collect information on a cognisable offence. On the other hand, the purpose of the PMLA investigation is completely different. An investigation under Section 2(na) of the PMLA can be conducted to collect evidence to formulate reasons to attach, confiscate, search or seize property or search a person. 

Due to these differences, Mr. Raju argued that the CrPC requirement of filing an FIR before commencing a criminal investigation would not apply to the PMLA. 

Additionally, Mr. Raju responded to the petitioners’ argument that the accused is entitled to a copy of the ED’s Enforcement Case Information Report (ECIR) during the PMLA proceedings. The ECIR contains all the materials that form the basis for the ED’s case against an accused. Mr. Raju argued that unlike the FIR under the CrPC, the ECIR is not a statutory document. The PMLA does not require that an ECIR be drawn up. Accordingly, he submitted that the ECIR is an internal document for the ED and need not be furnished to the accused. Therefore, CrPC requirement of furnishing the FIR to the accused would not apply to the ED. 

Mr. Raju further refuted the claim that lack of access to the ECIR will affect the accused’s ability to secure bail. He stated that under the CrPC, accused persons are routinely granted anticipatory bail without access to the FIR filed against them. Having access to all the information contained in the report is hence not necessary to argue effectively for bail. Further, he argued that the information contained in the ECIR would act as a tip off, allowing the accused to delete crucial evidence in the money laundering case filed against them. 

 

The Bench will hear rejoinders from the petitioners on March 15th, 2022. This will bring the final hearings of the PMLA case to a close. 

 

To access court documents, and to read more of SCO’s incisive journalism on past hearings of the PMLA case, click here.