2016 (5) TMI 120 - HC - Money Laundering

Validity of summons issued under Section 50(2) and (3) of PMLA - whether summons are violative of the Constitutional protection and guarantee under Article 20(3) of the Constitution of India - Commission of an offence of money-laundering under Section 3 of PMLA punishable under Section 4 of PMLA hence ECIR - Held that - ECIR is not filed before any jurisdictional Magistrate and is only an information report with the Directorate of Enforcement. The stage of filing of complaint for prosecution under PMLA is envisaged under Section 44(1)(b) of PMLA. Admittedly that stage has not yet reached. Thus though the charge sheet filed by the CBI is to the extent of predicate offences so far as offence under Section 3 of PMLA is concerned the matter is clearly at the investigation stage. At this stage investigation is only for the purpose of collecting evidence with regard to proceeds of crime in the hands of the persons suspected and their involvement if any in the offence under Section 3 of PMLA. Therefore i am unable to equate ECIR registered by the first respondent to an FIR under Section 154 Cr.P.C and consequently agreed with the learned Additional Solicitor General that under PMLA the petitioners are not accused at present. Consequently therefore the submission of the petitioners on the assumption that petitioners are accused under PMLA is liable to be rejected. Therefore the summons issued to the second petitioner under Section 50(2) and (3) of PMLA is non-violative of the Constitutional protection and guarantee under Article 20(3) of the Constitution of India. Seeking protection against testimonial compulsion - Held that - in view of the various decision of Supreme Court when an ECIR is lodged with the Directorate of Enforcement there is no Magisterial intervention unlike an FIR and mere registration of ECIR against the suspects of offence under Section 3 of PMLA cannot go to mean that such persons are accused under Section 3 of PMLA. Therefore the protection against testimonial compulsion as under Cr.P.C as well as under Article 20(3) of the Constitution of India would not be available. Also as the petitioners are not accused under PMLA the reading down of Section 50 of PMLA even if permissible would not arise on the facts and circumstances of the case. - Decided against the petitioner

Summary

Issues Involved:
1. Validity of summons issued under Section 50 of the Prevention of Money-Laundering Act (PMLA).
2. Applicability of Article 20(3) of the Constitution of India to the summons under PMLA.
3. Legality of further steps initiated under Section 63(4) of PMLA for non-compliance with the summons.

Issue-wise Detailed Analysis:

1. Validity of Summons Issued under Section 50 of PMLA:
The petitioners contended that the summons issued under Section 50 of PMLA compelled them to provide incriminating statements and documents, thereby violating their constitutional protection against self-incrimination under Article 20(3) of the Constitution of India. They argued that as accused persons in a related CBI case, they should not be compelled to give evidence against themselves. The respondents countered that the petitioners were not accused under PMLA but were only suspects, and the summons were part of the investigation process to trace proceeds of crime. The court held that the petitioners were not accused under PMLA at this stage, as the Enforcement Case Information Report (ECIR) was not equivalent to an FIR under the Criminal Procedure Code (Cr.P.C). Therefore, the protection against self-incrimination did not apply, and the summons issued under Section 50 of PMLA were valid.

2. Applicability of Article 20(3) of the Constitution of India to the Summons under PMLA:
The petitioners argued that Section 50 of PMLA should be read down to exclude accused persons to align with Article 20(3) of the Constitution, which protects against self-incrimination. They relied on several Supreme Court judgments to support their contention that the protection under Article 20(3) applies at the investigation stage and includes oral and written statements as well as the production of documents. The respondents argued that the petitioners were not accused under PMLA and that the investigation was still ongoing. The court agreed with the respondents, stating that the petitioners were not accused under PMLA, and thus, the protection under Article 20(3) did not apply. The court also noted that the validity of Section 50 of PMLA was not challenged in the writ petition.

3. Legality of Further Steps Initiated under Section 63(4) of PMLA for Non-compliance with the Summons:
The petitioners challenged the penal proceedings initiated under Section 63(4) of PMLA for their non-compliance with the summons. They contended that the repeated issuance of summons and the initiation of penal proceedings were unjustified, especially since the court had previously directed the respondents to defer the examination of the second petitioner. The respondents maintained that there was no eternal deferral of the summons and that the petitioners' non-cooperation necessitated further action under Section 63(4) of PMLA. The court found that the issue in this writ petition was dependent on the outcome of the first writ petition (WP.No.36838 of 2014). Since the first writ petition was dismissed, the court also dismissed the second writ petition, upholding the legality of the further steps initiated under Section 63(4) of PMLA.

Conclusion:
The court dismissed both writ petitions, holding that the summons issued under Section 50 of PMLA were valid and did not violate the petitioners' constitutional rights under Article 20(3). The court also upheld the legality of the further steps initiated under Section 63(4) of PMLA for non-compliance with the summons. The court emphasized that the petitioners were not accused under PMLA at this stage, and the investigation was still ongoing. As a result, the petitioners' claims of self-incrimination and the need to read down Section 50 of PMLA were rejected.