2017 (7) TMI 177 - HC - Money Laundering

Money laundering - nature of offence - Held that - It invariably involves secretive actions and dealings by the perpetrators, of transfer and rotation of moneys within and outside the country. It is also likely to involve fabrication and fudging of documents and records. The persons involved in money laundering invariably cover their tracks, and conceal their identities. The challenge faced by the investigating authorities is to uncover the money trail, so as to expose the process and mechanism of money laundering. The propensity and likelihood of the suspects involved in money laundering, to further cover their tracks and destroy the evidence, whenever there is an effort underway to unearth their crime, would obviously be high. Thus, while scrutinizing the decision of the authorized officer concerned to arrest the suspect in exercise of the power conferred under Section 19 of the PMLA by applying the principles and guidelines laid down in Section 41 and 41A of the Code, the same would be tested in the aforesaid light, and while keeping in view the object and purpose of the PMLA. We are not inclined to pass any orders of restraint as sought by the petitioner in the present application. In case the authorities under the PMLA invoke their power under Section 19 of the said Act, they shall comply with the requirements of Section 19 of the Act and also adhere to the guidelines laid down in Sections 41 and 41A of the Code as explained herein above.

Issues Involved:
1. Restraint against coercive steps during proceedings under PMLA.
2. Summoning as an accused or witness under Section 50 of PMLA.
3. Admissibility of statements under Section 50 of PMLA.
4. Applicability of Article 20(3) of the Constitution.
5. Nature of the offense under Section 3 of PMLA (cognizable or non-cognizable).
6. Applicability of the Code of Criminal Procedure (CrPC) provisions.
7. Principles from Arnesh Kumar vs. State of Bihar.
8. Power of arrest under Section 19 of PMLA.

Detailed Analysis:

1. Restraint against coercive steps during proceedings under PMLA:
The petitioner sought an order to restrain the respondents from taking any coercive steps against him during proceedings under Sections 50(2) and 50(3) of the PMLA. The court noted that the petitioner feared arrest under Section 19 of the PMLA upon joining the investigation.

2. Summoning as an accused or witness under Section 50 of PMLA:
The petitioner argued that he was not informed whether he was summoned as an accused or a witness, which could affect his rights under Article 20(3) of the Constitution. The court observed that it would be premature to label the summoned person as either a witness or an accused during the investigation stage.

3. Admissibility of statements under Section 50 of PMLA:
The petitioner contended that statements recorded under Section 50 of the PMLA are admissible in evidence, as proceedings under Section 50(2) and (3) are deemed judicial proceedings. The court acknowledged this but noted that the protection against self-incrimination under Article 20(3) would apply only if the petitioner is named as an accused in the complaint.

4. Applicability of Article 20(3) of the Constitution:
The court held that Article 20(3) of the Constitution, which protects against self-incrimination, would come into play only if the petitioner is named as an accused in the complaint filed before the Special Court. At the investigation stage, this protection does not apply.

5. Nature of the offense under Section 3 of PMLA (cognizable or non-cognizable):
The petitioner argued that the offense under Section 3 of the PMLA is non-cognizable, and thus, the power of arrest under Section 19 cannot be exercised without a warrant. The court rejected this argument, stating that the amendment to Section 45 of the PMLA, which removed the cognizable nature of the offense, only divests the police of jurisdiction but does not affect the authorities under the PMLA from acting.

6. Applicability of the Code of Criminal Procedure (CrPC) provisions:
The court examined the applicability of CrPC provisions to PMLA proceedings, noting that PMLA is a special statute with its own procedural framework. The court held that the provisions of Chapter XII of the CrPC do not apply to investigations under the PMLA, as the PMLA provides a comprehensive procedural mechanism.

7. Principles from Arnesh Kumar vs. State of Bihar:
The petitioner relied on the principles laid down in Arnesh Kumar vs. State of Bihar regarding the exercise of the power of arrest. The court noted that while the guidelines in Sections 41 and 41A of the CrPC, which aim to safeguard against arbitrary arrests, are relevant, they must be applied in the context of the PMLA’s objectives and the specific nature of money laundering offenses.

8. Power of arrest under Section 19 of PMLA:
The court emphasized that the power of arrest under Section 19 of the PMLA must be exercised judiciously and in compliance with the statutory requirements. The court directed that if the authorities decide to arrest the petitioner, they must adhere to the guidelines in Sections 41 and 41A of the CrPC, as well as the procedural safeguards under Section 19 of the PMLA.

Conclusion:
The court did not grant the petitioner’s request for a restraint order but emphasized the need for the authorities to comply with statutory safeguards and guidelines while exercising the power of arrest. The application was disposed of with these directions.

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