2017 (8) TMI 1452 - HC - Money Laundering

Constitutional validity and legality of the provisions of Sections 2(u), 3, 4, 5, 8, 13, 24, 45 and 50 of the Prevention of Money-Laundering Act, 2002 (PMLA Act) - it is indeed expedient to consider why it was essential to have legislative intervention to prevent money-laundering, a worldwide phenomenon, which if left unchecked can destabilize financial systems and jeopardize national security. Held that - The object of the Act as already pointed out in elaborate discussions under Section 2(u), is to abort the process of money-laundering at its inception. Thus, the wisdom of the Legislature cannot be questioned, when such inclusion has been made, as there may be circumstances where the predicate offence and the offence under Section 3 are intertwined. Section 24 clearly indicates that it is a rebuttable presumption, affording the Petitioner sufficient opportunity of establishing that the property in his possession or the value of any such property, has been acquired by legal means and is not the result of any illegal methods, which would comprise of an offence under Section 3. The insertion of this provision obviously takes us back to the object of the Act, being to prevent money-laundering, which itself comprises of a series of illegal acts. Once the offender is able to explain the source of the property, which is in his possession, then the prosecution is required to discharge its burden. Infact by shifting the onus to the accused, it affords him an opportunity of establishing his innocence and clarifying to the prosecution the source of his property and therefore, contains a safeguard for the accused. Consequently, it cannot be said that the provision is unconstitutional. Thus, when considering the Acts the object has to be given primary importance and the provision thereof cannot be said to be ultra vires when the end goal is to be achieved. Section 24 unequivocally extends an opportunity to the offender to establish the source of his property, which if legitimate can be fully justified by the Petitioner. Under Section 45(ii) of the Act discretion vests with the Court to enlarge the Petitioner on bail or to refuse such bail - Evidence beyond reasonable doubt is not envisaged at this stage. In my considered opinion, the limitations are not unfounded or arbitrary. The Legislature has evidently used the words reasonable grounds for believing , in Section 45(1)(ii) to enable the Court dealing with the bail, to justifiably hold, as to whether there is indeed a genuine case against the accused and whether the prosecution is able to produce prima facie evidence in support of the charge and the evidence so furnished if unrebutted could lead to a conviction. Apprehension of repetition of the crime is another consideration in refusing bail, as also the antecedents of an accused person. - There is evidently no infirmity in the provision and cannot be said to offend Articles 14 and 21 of the Constitution of India. In conclusion, bearing in mind the object of the Act and the detailed discussions which have ensued hereinabove, being bereft of merit, this Writ Petition stands dismissed. - Decided against the petitioner.

Summary

Issues Involved:
1. Constitutional validity of various sections of the Prevention of Money-Laundering Act, 2002.
2. Procedural impropriety and arbitrary application of the Act.
3. Quashing of the Enforcement Case Information Report (ECIR).

Detailed Analysis:

1. Constitutional Validity of Various Sections of the Prevention of Money-Laundering Act, 2002:

Section 2(u) - Definition of "Proceeds of Crime":
The term "proceeds of crime" includes any property derived or obtained directly or indirectly by any person as a result of criminal activity related to a scheduled offense. The court held that this definition does not require mens rea (guilty mind) and aims to prevent money laundering by targeting properties obtained through criminal activities. The provision is not arbitrary and aligns with the Act's objective of preventing money laundering.

Section 3 - Offense of Money-Laundering:
This section criminalizes the possession, acquisition, or use of "proceeds of crime" and projecting or claiming it as untainted property. The court noted that the term "knowingly" introduces the element of mens rea, ensuring that only those aware of the criminal nature of the property are prosecuted. The section is not arbitrary and serves the Act's purpose.

Section 4 - Punishment for Money-Laundering:
The section prescribes a minimum punishment for money laundering offenses. The court found no constitutional infirmity in prescribing a minimum sentence, as it serves as a deterrent.

Section 5 - Attachment of Property:
This section allows provisional attachment of property believed to be "proceeds of crime." The court held that the provision includes adequate safeguards, such as requiring "reason to believe" based on material evidence and limiting the attachment period. The section is not arbitrary and aligns with the Act's objectives.

Section 8 - Adjudication:
This section outlines the adjudication process for confirming the attachment of property. The court found that it provides sufficient opportunity for the accused to present their case and does not violate principles of natural justice.

Section 13 - Inclusion of IPC Offenses in the Schedule:
The inclusion of certain IPC offenses in the Schedule of the Act was challenged. The court upheld the inclusion, noting that it aligns with the Act's objective of preventing money laundering.

Section 24 - Burden of Proof:
This section shifts the burden of proof to the accused to demonstrate that the property is not "proceeds of crime." The court held that this provision is a rebuttable presumption and provides an opportunity for the accused to prove their innocence, thus not violating constitutional principles.

Section 45 - Offenses to be Cognizable and Non-Bailable:
This section imposes limitations on granting bail for offenses under the Act. The court found that the provision is not arbitrary, as it allows the court to exercise discretion based on the gravity of the offense and other relevant factors.

Section 50 - Powers of Authorities:
The court deferred the discussion on this section, noting that a similar issue under the NDPS Act is pending before the Supreme Court.

2. Procedural Impropriety and Arbitrary Application of the Act:
The petitioner argued that the Act is applied arbitrarily by authorities without proper checks and balances. The court found that the Act includes sufficient safeguards, such as requiring "reason to believe" and providing opportunities for the accused to present their case. The court dismissed the argument of procedural impropriety.

3. Quashing of the Enforcement Case Information Report (ECIR):
The petitioner sought the quashing of the ECIR. The court noted that the correct procedure would have been to file a petition under Section 482 of the Cr.P.C. rather than invoking Articles 226 and 227 of the Constitution. Consequently, the court did not entertain this prayer.

Conclusion:
The court upheld the constitutional validity of Sections 2(u), 3, 4, 5, 8, 13, 24, and 45 of the Prevention of Money-Laundering Act, 2002. The petition was dismissed, and no order as to costs was made.