The PMLA weapon perfecting as punishment

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What has the SC said on PMLA’s validity? How did the court deal with the Enforcement Directorate’s powers? Were all challenges rejected?

K. Venkataramanan

The story so far: The Supreme Court has upheld several provisions of the Prevention of Money Laundering Act (PMLA) that deal with a wide range of issues, from what constitutes the main offence to the powers of the Enforcement Directorate (ED) and the procedure for conducting searches and seizures and effecting arrests. The manner in which the Act is being implemented has come in for much criticism in recent years, as several investigations have been opened against political functionaries opposed to the BJP. The court has given its thumbs up to what are considered ‘draconian’ provisions, rejecting strong challenges to their validity.

What is the verdict broadly based on?

Since the mid-1980s, there has been global concern over the proceeds of criminal activities such as drug-trafficking being ‘laundered’ or and used in financing terrorism. The UN Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances adopted in Vienna in 1988 (Vienna Convention) was the first treaty that called upon nations to adopt domestic laws to combat drug trafficking. As part of these laws, countries were asked to prohibit the conversion or transfer of property gained through dealing in narcotics to conceal its illicit origin. The Financial Action Task Force (FATF) was established in the G-7 Summit in Paris in 1989 in response to mounting concern over money-laundering. The Task Force made recommendations from time to time to strengthen laws on the subject. The UN Convention against Transnational Organized Crime of 2000 (Palermo Convention) also advocated legislative and other measures to combat organised crime, and specifically called for ‘criminalising the laundering of proceeds of crime’.

The PMLA was enacted in 2002 but came into force in 2005. Its provisions gave effect to India’s obligations to abide by international conventions. The Union government used this background to argue that PMLA provisions as well as subsequent amendments were valid and necessary to fulfil the country’s obligations to combat the menace of money-laundering. In its verdict, the Supreme Court agreed with the government’s contention. “Every provision in the 2002 Act will have to be given its due significance while keeping in mind the legislative intent for providing a special mechanism to deal with the scourge of money-laundering recognised world over and with the need to deal with it sternly,” it said.

What was a key issue over defining money-laundering?

The offence under this law is mainly the laundering of money made through a crime. It has a three-part schedule of offences (or ‘predicate offences’) listing the various crimes such as terrorism, drug-trafficking, corruption and cheating that give rise to tainted money. A major issue raised by the petitioners arose from an explanation added in 2019 to clarify the scope of the definition of money-laundering under Section 3. They said the original wording meant that only the projection of tainted money as untainted, and its integration into the economy would constitute the offence. The ED, they argued, was registering money-laundering case solely on the basis of the original crimes without any proof that their proceeds were laundered. As a result, even transactions that date back years before the PMLA came into force were being probed for laundering.

The court rejected the challenge, holding that the explanation does not expand the scope of the original definition, and it is only clarificatory. It aims to capture every process and activity dealing with the proceeds of crime. The generation of money through crime and its integration with the formal economy are independent offences. It will be wrong to say that only upon the latter activity that the offence of money-laundering is complete. In this context, the court interpreted the conjunction ‘and’ — used between a part that spoke of ‘possession, acquisition or use’ of proceeds of crime with the part ‘projecting or claiming as untainted’ — to mean ‘or’. This reading will render holding or using the proceeds of crime as much as an offence as the projecting or converting of the proceeds into legal money or property.

At the same time, the court clarified that the offence of money-laundering is dependent on illegal gain through the original crime (the scheduled offence). If a person is discharged or acquitted in respect of the original offence, or gets the case quashed through a competent court, there can be no case of money-laundering.

What were the issues concerning investigation by the ED? 

The ED works on the basis of an internal manual. It registers an ‘Enforcement Case Information Report’ (ECIR), the equivalent of an FIR in ordinary cases. The manual is not a public document, and the ED does not share the ECIR with the accused. Therefore, why and how a money-laundering probe is initiated is unknown. When a summons is issued to a person, he is unaware of the reason, but must, nevertheless, attend and answer all questions and submit the documents asked for. The petitioners argued that this left any investigation, issue of summons and decision to order a search, seizure or arrest completely at the whim of ED officials. Unlike in other criminal cases, there is no judicial oversight of the process, and the accused are forced to seek bail after arrest without knowing the exact nature of the charges against them.

The court rejected all these contentions. Its conclusions were that: the ECIR cannot be equated with an FIR; that there are sufficient safeguards in the entire process of survey, search, seizure and arrest, in as much as the law requires the officer responsible to record reasons in writing at every stage. A copy of the ECIR need not be given to the accused, but at the time of arrest, the grounds of arrest should be conveyed. In any case, the Special Court can examine the documents to decide whether the detention of the accused needs to be continued.

The court suggested that the ED may consider the desirability of informing the public through its website the scope of the authority under the Act, the measures adopted by its functionaries and the options or remedies available to the accused.

What did the court say on ED summons?

When a person is summoned by a police officer, it is known whether it is for giving a statement as a witness or an accused. However, the ED has the power of a civil court to enforce the attendance of a person summoned under Section 50. Giving a statement and producing documents are mandatory obligations and it is an independent offence not to do so, and giving a false statement amounts to perjury. Also, such a statement should be signed by the person summoned and it can be used against him in a trial. This was challenged on the ground that the section is unconstitutional as it forces people to be witnesses against themselves, something prohibited by Article 20 of the Constitution.

However, the court rejected the idea that this amounts to testimonial compulsion. Rather, ED officers were not police officers, and the proceedings related to summons, being only an inquiry related to proceeds of crime, do not amount to an investigation. Therefore, it was open to the ED to gather material without treating the person as an accused, but nevertheless prosecute him later, if the information gleaned disclosed a money-laundering offence. 

How did the Court uphold the stringent bail provision?

The petitioners had challenged the validity of the ‘twin conditions’ laid down in Section 45 of PMLA for grant of bail: that the court must be satisfied that there are reasonable grounds for believing that the accused is not guilty of an offence; and that he is not likely to commit any offence while on bail. In 2018, the Supreme Court had struck down this section, as it was originally worded, on the ground that the conditions only applied to those offences listed in Part A of the Schedule attracting a prison term of three years and more, but not for the offence of money-laundering itself. However, Parliament re-enacted the section with a change: that the conditions would apply to all cases under PMLA, without any reference to the scheduled offence. The court upheld Parliament’s power to enact a provision to cure a defect highlighted by the Supreme Court. It also ruled that given the gravity of the offence of money-laundering such stringent provisions related to bail are valid.

The court did not examine arguments based on the fact that some of the amendments were introduced in the form of Money Bills, as the issue concerning the scope of Money Bills is being separately considered by a seven-judge Bench. 

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We need to protect whistle blowersIgnoring the fact that Right to Information users are facing death for keeping democracy alive is a threat to democracy itself

Words, words, words” was Hamlet’s reply to Polonius’ question, “What do you read, my lord?” That is what our Right to Information (RTI) Act, 2005, is being reduced to. The Centre for Law and Democracy classifies it among the top five laws in the world. The RTI empowers us to participate in the policymaking process, by providing access to information relating to the functioning of all public authorities. Ordinary citizens have used the law to make public authorities accountable and transparent in their functioning. In fact, the law has been used extensively by a cross section of citizens including activists, lawyers, bureaucrats, researchers, journalists and most importantly, ordinary folk. They all have been asking simple questions and pursuing answers on the use of public funds, and unearthing corruption of all kinds from the Panchayat level right up to Parliament. The widespread understanding and use of the RTI is a shining example of a participatory democracy in spite of our current realities.

The killing of activists

Unfortunately, the dangerous underside of the RTI is manifesting itself through violent reactions from entrenched interests and powerful lobbies. Since the implementation of the Act, some 100 RTI activists across the country have been killed and several are harassed on a daily basis. This is a reality of one of the strongest laws for democratic accountability that we must systematically address through strong legal and institutional safeguards.

Bihar is turning out to be one of the most dangerous States for RTI activists despite being one of the earliest promoters of the law. The State ranks first in the number of deaths of RTI users. As many as 20 RTI users have lost their lives since 2010 in different districts across Bihar. In 2018, six RTI users were killed for seeking information related to the functioning of public programmes and institutions. These brutal murders have not only raised an urgent question of the protection of people engaging with the system to seek accountability, but also of the state’s responsibility to provide legal assistance, time-bound grievance redressal, compensation, and dignified access to justice to the families of those killed.

Earlier this month, civil society organisations organised a public hearing in Patna where families of the ‘whistle blowers’ disclosed that the whistle blowers had been working on issues of public importance and interest, exposing irregularities and corruption, pursuing transparency in the functioning of the Public Distribution System, the Mahatma Gandhi National Rural Employment Guarantee Act, Anganwadi centers, housing schemes, illegally operating health clinics and so on. They had been requesting information that should have been mandatorily disclosed to the public under Section 4 of the RTI Act. Family members at the hearing also questioned the abdication of responsibility by the State government in assisting them to get justice in each case. After all, the whistle blowers were performing a basic civic duty of public vigilance that the government should encourage and initiate timely action on. The killing of RTI users and the intimidation of their family as they struggle for justice, in Bihar and other parts of the country, are reflective of the lack of action by the government and collusion of the police with powerful vested interests to deny, if not subvert, justice.

A new framework

We are living in a time where the government denies the existence of casualties emanating from its acts of omission and commission. This has prompted civil society to maintain lists of persons who lost their lives on account of demonetisation, COVID-19 and now RTI, so that the lives of the people, particularly the poor, are not remembered merely as numbers. We need to move beyond maintaining a count. We need to advocate for and move towards creating a socio-legal system that recognises RTI users under attack as human right defenders and build a framework that facilitates and protects them in their attempt to pursue issues of public interest. Otherwise, words in the RTI legislation will ring hollow.

There can be multiple components to such a framework, and it is time State governments take the lead without waiting for the Central government to set an example. First, State governments must direct law-enforcement agencies to expeditiously and in a time-bound manner complete investigations in all cases where RTI users are harassed. This must include making proactive efforts to provide adequate compensation to the victim’s family.

Second, available evidence clearly shows that the information requested by the murdered RTI users was information that should have been mandatorily disclosed in the public domain under Section 4 of the RTI Act. Therefore, the State governments must take immediate efforts to institutionalise proactive disclosure of actionable information. Is this possible? Rajasthan has taken the lead in active disclosure. Its Jan Soochna portal subsequently followed by Karnataka’s Mahiti Kanaja are outstanding examples of practical ways of mandatory disclosure.

Third, in all cases of threats, attacks or killings of RTI users, the State Information Commission must immediately direct the relevant public authorities to disclose and publicise all the questions raised and the answers given to the user. Giving wide publicity to such information may potentially act as a deterrent against attacks on RTI users, as perpetrators get the message that rather than covering up the matter, any attack would invite even greater public scrutiny.

Effective legislation

Last, there is an urgent need to enact an effective legislation to protect whistle blowers. In 2016, a Supreme Court bench of Justice T.S. Thakur and Justice A.K. Sikri came down heavily on the Union government for its reluctance in notify the Whistle Blowers Protection Act of 2014, but unfortunately to no avail. The Supreme Court observed that there was an “absolute vacuum” which could not be allowed to go on. The Central government was called upon to decide on a specific time frame to establish an administrative set-up to protect whistle blowers. The court recognised that the concept of a whistle blower is a global phenomenon and has become a reality. It cannot be wished away. Words, words, words that have no effect on the Central government. Eight years have gone by and the proposed Act has not been notified.

Given this reality, State governments, such as those of Bihar and Maharashtra, which have recorded the highest number of murders of RTI activists, must introduce their own mechanisms for protecting whistle blowers by enacting at least a State-level whistle blower protection law. Ignoring the plight of RTI users facing death for keeping our democracy alive is a threat to democracy itself.

Justice Madan B. Lokur, a former judge of the Supreme Court of India, is presently a judge of the Supreme Court of Fiji 

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