Challenges to the Prevention of Money Laundering Act #9: Sr. Adv. A.M. Singhvi Argues PMLA Reverses Burden of Proof

On February 9th 2022,the Supreme Court heard Senior Advocate Dr. Abhishek Manu Singhvi argue against the provisions for investigation, search and seizure and attachment of property under the Prevention of Money Laundering Act, 2002 (PMLA). Dr. Singhvi stated before Justices A.M. Khanwilkar, Dinesh Maheshwari and C.T. Ravikumar that the Act enables the Enforcement Directorate (ED) to violate the Article 21 rights of the accused. 

Section 24 Reverses Burden of Proof For Essential Element of Money Laundering Offence

Dr. Singhvi stated that there are three elements to the offence of money laundering—there must be a predicate offence, proceeds must be generated from this offence and the accused must have attempted to project the proceeds of crime as legally obtained money. Section 24 requires a Judge to presume that the third element is fulfilled if the prosecution proves the first two. Dr. Singhvi argued that this reverses the burden of proof for the essential ingredient of the money laundering offence. 

Dr. Singhvi argued that even ‘more draconian’ laws like the Narcotic Drugs and Psychotropic Substances Act, 1985, Prevention of Terrorism Act, 2002 and Terrorism and Disruptive Activities (Prevention) Act, 1987 offer some safeguards to the accused when reversing the burden of proof. The PMLA has no safeguards, making it difficult for the accused to secure acquittal. This, Dr. Singhvi argued, violates Article 21. He argued that the safeguards in Sections 17 and 18, which allow the ED to search and seize property and persons, had been removed through amendments as well. Currently, the ED is entitled to search and seize on mere suspicion, even before an FIR is filed against the accused. 

Justice Khanwilkar stated that the burden of proof in Section 24 was reversed only for the limited purpose of the third element. The first two would still have to be proved by the prosecution. Dr. Singhvi responded stating that it would not be as grave a concern if the burden was reversed for the first two elements. The problem was a reversal for the final element that determined whether or not proceeds of crime had been laundered. 

Section 8(4) gives ED Wide Powers to Attach and Indefinitely Take Over Possession of Accused’s Property 

Dr. Singhvi argued that the ED’s power to take possession of property allegedly involved in the money laundering offence should be temporary. However Section 8(4) allows it to continue indefinitely until the accused is acquitted. Indefinite possession without adjudication of guilt, he argued, is disproportionate to the objective of the Act and violates Articles 14, 19 and 21. 

Justice Khanwilkar stated that possession in Section 8(4) served to secure the property while the trial was pending so that it may be confiscated  upon conviction. Dr. Singhvi argued that even if that was the case, there were no safeguards in the Act to ensure that possession happened only when attachment was not enough to secure the property. He stated that even though the fundamental right to property in Article 19 had been repealed, Article 300A still protected a person’s property from being taken away except through procedure established by law. 

Dr. Singhvi will continue arguments on February 10th 2022, focusing on the conditions for bail in Section 45 of the PMLA.