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Analyzing Controversies Surrounding Arrests Under The Prevention Of Money Laundering Act

The Prevention of Money Laundering (Amendment) Act, 2012 (PMLA Act) outlines a structured arrest procedure designed to ensure fairness and legality. Before an arrest can be made, law enforcement must have reasonable grounds to believe that an individual has committed a money laundering offense. While the PMLA Act plays a crucial role in combating money laundering, its implementation has faced significant criticism and controversy.

According to section 3 of the PMLA Act, a person commits the offense of money laundering if they directly or indirectly attempt to engage in, knowingly assist, or knowingly participate in any process or activity related to the proceeds of crime with the intention of making the property appear legitimate.

According to section 4 of the PMLA Act, anyone found guilty of money laundering shall be punished with rigorous imprisonment for a term of not less than three years and up to seven years, extendable to ten years. They will also be subject to a fine that may extend to five lakh rupees.

Section 19 of the Prevention of Money Laundering Act (PMLA) outlines the process for arrest in cases related to money laundering offenses:

  1. Grounds for Arrest:
    If the Director, Deputy Director, Assistant Director, or any other officer authorized by the Central Government has reason to believe that a person has committed an offense under the PMLA Act, they can arrest that person. The reason for believing the person is guilty must be recorded in writing.
  2. Arrest Procedure:
    The officer making the arrest must inform the arrested person of the reasons for their arrest. Immediately after the arrest, the officer must send a copy of the arrest order and the evidence to the Adjudicating Authority in a sealed envelope. The Adjudicating Authority must keep these documents for a prescribed period.
  3. Appearance Before a Magistrate:
    The arrested person must be taken before a Judicial Magistrate or Metropolitan Magistrate within 24 hours of their arrest. The 24-hour time limit does not include the time taken to travel from the place of arrest to the Magistrate's court.

This section outlines the legal basis for arrests under the PMLA Act. It emphasizes the need for justification and documentation of the arrest. It also ensures that the arrested person is presented before a Magistrate within a specific timeframe.

The investigating agency continues its inquiry, gathering further evidence to support the charges. The arrested person can apply for bail, and the Magistrate will decide based on factors such as the severity of the offense weighing the evidence furnished by the investigative agency, ingredients of section 45 of the PMLA Act, and the likelihood of the individual fleeing or tampering with evidence.

The twin bail conditions stipulated under Section 45 of the PMLA present formidable hurdles for the accused. The accused is obligated to demonstrate to the court their prima facie innocence of the offense. Additionally, the accused must persuade the judge that they will refrain from committing any offenses while on bail. The onus of proof rests solely on the incarcerated accused, who may be disadvantaged in contesting the formidable power of the state. These stringent conditions render it exceptionally challenging for an accused to secure bail under the PMLA.

The Supreme Court has ruled that when a defendant appears in court in response to a summons, the investigative agency must apply to the same court to obtain custody of the individual. This was stated in a judgment delivered by a bench consisting of Justices A.S. Oka and Ujjal Bhuyan in New Delhi on May 16, 2024. The judgment also noted that if an accused appears before a special court after being summoned, it cannot be assumed that they are in custody, and there is no requirement for the accused to apply for bail.

This judgment restricts the Directorate of Enforcement's arresting authority (ED) after a special court takes cognizance of a case. The bench further stated that the ED must submit a separate application for the custody of a person who appears in court. Justice Oka, who wrote the judgment, stated that the Central agency must demonstrate specific grounds that mandate custodial interrogation.

The Act's arrest provisions, in particular, have drawn scrutiny due to concerns surrounding:

  • Misuse for Political Gain: Allegations of selective arrests targeting political opponents have raised concerns about the PMLA Act being weaponized for political purposes.
  • Due Process Violations: Arbitrary arrests, prolonged detention without trial, and lack of transparency in investigations and prosecutions have raised serious concerns about violations of due process rights.
  • Economic Impact: Arrests under the PMLA Act can severely impact businesses and investment activities, leading to disruptions and a loss of confidence in the economy.
  • Legal Ambiguity: The ambiguous nature of certain PMLA Act provisions has created confusion among stakeholders and challenges in its implementation.
  • Balancing Enforcement and Rights: While arrests are an essential component of PMLA Act enforcement, the need for greater transparency, accountability, and adherence to the rule of law is paramount. Striking a balance between effective enforcement and safeguarding individual rights is crucial for maintaining the integrity of the legal system and effectively combating money laundering.
In Union of India and Others v, Pankaj Bansal dated 26 July 2023, the Supreme Court dismissed a request by the Central government to reconsider a decision requiring the Enforcement Directorate (ED) to provide written reasons for arrests in money laundering investigations.

In Pankaj Bansal's case, the petitioner challenged his arrest by the ED, asserting that he was not informed of the reasons for his arrest, as required by Section 19(1) of the PMLA. In adjudicating on this issue, the Supreme Court referenced Section 19(1) and the precedents set in Vijay Madanlal Choudhary v. Union of India and V. Senthil Balaji v. The State, concluding that the accused must be informed of the grounds for their arrest.

The Supreme Court noted that the PMLA does not specify the method of communicating the reasons for arrest. Article 22(1) of the Indian Constitution guarantees arrested persons the right to be informed of the grounds for their arrest. The court emphasized that 'the mode of conveying information of the grounds of arrest must be meaningful so as to fulfil its intended purpose. The court ruled that arrested individuals must be informed of the reasons for their arrest in writing 'as a matter of principle and without exception.'

Throughout the process, it is crucial to adhere to legal procedures and safeguard the rights of the suspect to ensure a fair and impartial investigation.

In the Vijay Madanlal Choudhary case (2022), a three-judge bench of the Supreme Court upheld the constitutionality of Section 19 (arrest power) of the Prevention of Money Laundering Act, subject to the test of Article 22(1) of the Constitution, which requires that an arrested person be informed of the grounds for their arrest.

Section 167(2) of the code dictates the maximum detention periods for accused individuals:
For crimes punishable by death, life imprisonment, or sentences exceeding 10 years, the maximum detention period is 90 days. For other offenses, the maximum detention period is 60 days. The code also provides for 'default bail' in cases where investigations are not completed within the specified deadlines.

However, recent trends in cases investigated by the Enforcement Directorate (ED) have shown a pattern of opposing bail applications for accused individuals facing proceedings under the Prevention of Money Laundering Act (PMLA). The ED often argues that their investigation is ongoing and uses the filing of supplementary chargesheets to justify continued detention. This practice has raised concerns about the potential for prolonged detention without adequate justification.

The Supreme Court held that the right to bail is a direct consequence of Article 21 of the Constitution, which guarantees the right to liberty,' as stated by Justices Sanjiv Khanna and Dipankar Datta of the Supreme Court on 20 March 2024 during the hearing of Prem Prakash's bail petition. Prakash, who is accused of being an aide to former Jharkhand Chief Minister Hemant Soren, is currently detained in relation to an illegal mining case. The Supreme Court further stated that the stricter bail conditions within the Prevention of Money Laundering Act (PMLA) do not infringe upon courts' ability to grant bail in cases filed under this law.

Justice Khanna informed the Enforcement Directorate's (ED) counsel, Additional Solicitor General S.V. Raju, that the primary purpose of default bail is to prevent the agency from arresting the accused until the investigation is concluded.

The judge further stated, 'You cannot assert that a trial cannot commence unless the investigation is complete. You cannot continuously file supplementary chargesheets and keep the individual in jail indefinitely without a trial.'

The court noted that Prakash has been imprisoned for 18 months, expressing concern and warning that the court may issue a notice to the ED regarding the matter. The bench emphasized, 'A trial must begin once an accused is arrested.' Raju was notified that Prakash's case fell under the classification of 'a clear case of bail.

Justice Sanjiv Khanna remarked on 20 march 2024 that Section 45 of the Prevention of Money Laundering Act (PMLA) does not prevent courts from granting bail to individuals facing prolonged incarceration and trial delays.

Written By: Md.Imran Wahab, IPS, IGP, Provisioning, West Bengal
Email: [email protected], Ph no: 9836576565

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