2016 (1) TMI 1326 - HC - Indian Laws

Validity of provisions of the Prevention of Money Laundering Act - constitutional validity of Sections 3, 5, 8, 9, 17 to 19, 23, 24 & 44 of the PML Act - That the provisions of the Act are capable of being misused - Held that - Section 8, as amended by the Amendment Act of 2013, cannot be said to be arbitrary and violative of the fundamental right of a person if the proceedings are continued under the PML Act, even if the trial of a scheduled offence results in an acquittal and the alleged proceeds of crime pertained to that scheduled crime. The challenge to Section 9 of the Act on the ground that if the Adjudicating Authority confirms a provisional attachment order and the guilt is recorded under Sections 3 and 4, there is a provision for confiscation and hence the statutory remedy of appeal is foreclosed. This proposition may not be accurate . Even after an order of confiscation is made, an appeal is provided for to challenge the basis of such order when the finding of guilt is naturally challenged in appeal. It is merely an enabling provision providing for the consequence of a finding of guilt in respect of the offences alleged under the PML Act. The power of search, seizure and arrest are considered an important tool in any investigation. Such power being available in matters relating to economic offences is not unusual. Identical provisions are found in the Customs Act, 1962, the Prevention of Food Adulteration Act, 1954, the Railway Property ( Unlawful Possession Act, 1966, etc. Further, as investigation precedes the filing of a charge sheet under Section 173 Cr.P.C , the exercise of power of search, seizure and arrest as part of investigation would not prejudice any person as such measures are controlled by other provisions of the Cr.P.C. Section 65 of the PML Act does provide that the provisions of the Cr.P.C. would be applicable including the provisions for investigation under the Act. Section 19 is assailed also on the ground that there is no judicial body provided to scrutinize the initial action as in the case of scheduled offences. However, Section 19 (3) itself provides that every person arrested under the Act would be produced before a Magistrate within 24 hours of such arrest. Further, the contention that such arrest may not be warranted by an officer under the Act, may not be tenable. If the authorized officer, on the basis of material in his possession has reason to believe that the person is guilty of an offence punishable under the Act , he being empowered to arrest is akin to powers conferred on authorized officers under other legislation which power of arrest As Section 23 of the Act has been amended it is evident that as it existed post the Amendment Act, 2009, in so far as the presumption arising in inter-connected transactions, where money laundering was alleged to be involved in two or more transactions , and if one or more such transactions was proved to be involved in money laundering then for purposes of adjudication or confiscation under Section 8 , unless otherwise proved, it could be presumed that the remaining transactions formed such inter-connected transactions. Hence if the scheduled offence resulted in acquittal, in terms of Section 8 the presumption with regard to inter connected transaction ceased to exist. However, with the Amendment Act of 2013, by the inclusion of the phrase or for the trial of the money laundering offence after the words for the purpose of adjudication or confiscation under Section 8 - the offence of money laundering is sought to be treated as not being dependent on the result of the trial of the scheduled offence. Such a presumption is now possible by virtue of the 2013 Amendment. As already noticed, the offence of money laundering is no more inextricably linked to the proceeds of crime of a scheduled offence. Under the Amendment Act of 2013, there is an initial presumption that the alleged proceeds of crime on the basis of which an offence under Section 3 of the Act is alleged, are involved in money laundering. In a proceeding under Section 8 (1) of the Act , the defendant is not an accused. It is now possible for the Adjudicating Authority in construing the provisions of Section 24 as applicable to proceedings under Section 8 (1) as well. This places a person being proceeded against under Section 8 (1) at some disadvantage. This construction, by virtue of the impugned amendment, cannot be held to be violative of Article 14 of the Constitution of India, merely on the ground that it may cause hardship on account of such proceedings being initiated. Hence, Section 24 as amended by the Amendment Act of 2013 is held to be constitutionally valid. In so far as Section 44 of the Act there is no material placed before the Court as to any incongruous situation having arisen wherein the Special Court not being able to reconcile the provisions in arranging the manner in which it has proceeded, thereby resulting in any prejudice being caused to any person or resulting in a miscarriage of justice. This court is not therefore in a position to proceed on a speculation as to particular situations having arisen that could be held as rendering the procedure prescribed, or other infirmity rendering, the creation of the Special Courts or the procedure contemplated as being unconstitutional. The petitions lack merit and are dismissed.

Summary

Issues Involved:
1. Constitutional validity of Sections 2(1)(u), 3, 5, 8, 9, 17, 18, 19, 23, 24, and 44 of the Prevention of Money Laundering Act, 2002 (PML Act).
2. Interpretation and implications of amendments made to the PML Act, particularly by the Amendment Act of 2013.
3. Procedural and substantive safeguards under the PML Act.

Detailed Analysis:

1. Constitutional Validity of Section 3:
The petitioners argued that the amendment to Section 3, which included the phrase "including its concealment, possession, acquisition or use," was arbitrary and violative of Articles 14 and 21 of the Constitution. The court found that the amendment did not render the section unconstitutional as it still required establishing that the proceeds of crime were knowingly involved in money laundering. The amendment was justified by recommendations from the Financial Action Task Force (FATF).

2. Constitutional Validity of Section 5:
The petitioners contended that the amended Section 5 gave wide powers to authorities to attach properties even of those not accused of scheduled offenses. The court noted that the section provided for provisional attachment for a limited period of 180 days and required confirmation by the Adjudicating Authority. The safeguards in place, such as the need for a complaint to be filed within 30 days, rendered the section constitutionally valid.

3. Constitutional Validity of Section 8:
The petitioners argued that the amendment to Section 8 allowed for proceedings under the PML Act even if the accused was acquitted of the scheduled offense, which they claimed was illogical. The court held that the definition of "proceeds of crime" could extend to property used in the commission of an offense under the Act or any scheduled offense. The amendment aimed to treat money laundering as a standalone offense, which was not arbitrary or violative of fundamental rights.

4. Constitutional Validity of Section 9:
The petitioners claimed that Section 9 denied a statutory challenge to the order of confiscation. The court clarified that an appeal was still available against the order of confiscation, and the section merely provided for the consequence of a finding of guilt.

5. Constitutional Validity of Sections 17, 18, and 19:
The petitioners challenged these sections on the grounds that officers empowered to arrest were not police officers and that actions could be taken based on a report under Section 157 Cr.P.C. The court found that the power of search, seizure, and arrest was essential for investigating economic offenses and was controlled by other provisions of the Cr.P.C. The court upheld the sections as constitutionally valid.

6. Constitutional Validity of Section 23:
The petitioners argued that the amendment to Section 23 allowed for presumptions in interconnected transactions even if the scheduled offense resulted in acquittal. The court held that the amendment aimed to treat money laundering as independent of the scheduled offense, which was constitutionally valid.

7. Constitutional Validity of Section 24:
The petitioners contended that Section 24, which placed the burden of proof on the accused, was against criminal jurisprudence. The court found that similar provisions existed in other laws, such as the Prevention of Corruption Act, 1988, and the Negotiable Instruments Act, 1881. The section was upheld as constitutionally valid.

8. Constitutional Validity of Section 44:
The petitioners argued that Section 44, which mandated joint trials for scheduled offenses and money laundering offenses, was arbitrary and violated the right to a speedy trial. The court found no material evidence of any incongruous situations arising from joint trials and upheld the section as constitutionally valid.

Conclusion:
The court dismissed the petitions, upholding the constitutional validity of the challenged provisions of the PML Act, including the amendments made by the Amendment Act of 2013. The court found that the amendments were in line with international obligations and aimed at effectively combating money laundering.