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Supreme Court limits ED’s power to arrest PMLA accused

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 Context

  • The Supreme Court held that a person summoned by a designated special court under the Prevention of Money Laundering Act (PMLA), is presumed to be not in custody and need not apply for bail.

About Prevention of Money Laundering Act (PMLA) 2002

  • The Parliament enacted the PMLA as a result of international commitment to deal with the menace of money laundering.

Provisions:

  • 3 of PMLA defines the offense of money laundering as any process or activity connected with the proceeds of crime and projecting it as untainted property.
  • Prescribe obligation: PMLA prescribes the obligation of banking companies, financial institutions and intermediaries for verification and maintenance of records of the identity of all its clients.
  • Empowerment of officers: PMLA empowers Directorate of Enforcement to carry out investigations in cases involving offense of money laundering and also to attach the property involved in money laundering.
  • Special Courts: It envisages the designation of one or more courts of sessions as Special Court to try the offenses punishable under PMLA.
  • Agreement for Central Government: It allows the Central Government to enter into an agreement with the Government of any country outside India for enforcing the provisions of the PMLA.

Stringent norms of PMLA

  • The twin conditions of bail under Section 45 of the PMLA pose stringent thresholds for an accused.
  • For one, the person has to prove in court that he or she is prima facie innocent of the offense.
  • Secondly, the accused should be able to convince the judge he would not commit any offense while on bail. The burden of proof is entirely on the incarcerated accused.
  • The twin conditions make it almost impossible for an accused to get bail under the PMLA.

Supreme Court Judgment

  • The judgment limits the power of arrest by the Directorate of Enforcement (ED) after a special court takes cognisance of a case.
  • The ED would have to separately apply for the custody of a person who appears in court. The Central agency would have to show specific grounds that necessitated custody.
  • However, when the ED wants to conduct a further investigation concerning the same offense, it may arrest a person not shown as an accused in the complaint filed under Section 44(1)(b) of the PMLA, provided the requirements of Section 19 (procedures of arrest) under the Act were fulfilled.
  • Section 19 of the PMLA allows ED officers to arrest an individual “on the basis of material in possession (and) reason to believe (to be recorded in writing) that the person is guilty”.
  • An accused, who appears in a special court pursuant to its summons, could be exempted from personal appearance in the future.
  • On the other hand, if an accused does not appear after a summons is served, the special court could issue a bailable warrant followed by a non-bailable one.
Directorate of Enforcement (ED)

–       The Directorate of Enforcement is a multi-disciplinary organization mandated with investigation of offenses of money laundering and violations of foreign exchange laws.

–       It functions under the Department of Revenue of the Ministry of Finance.

–       The origin of this Directorate goes back to 1st May, 1956, when an ‘Enforcement Unit’ was formed in the Department of Economic Affairs for handling Exchange Control Laws violations under Foreign Exchange Regulation Act, 1947 (FERA ’47).

–       In 1957, this Unit was renamed as ‘Enforcement Directorate’, and another branch was opened at Madras (now Chennai).

–       In 1960, the administrative control of the Directorate was transferred from the Department of Economic Affairs to the Department of Revenue.