– Adv. Pankaj Jain
On July 27, 2022, the Supreme Court of India delivered a landmark judgement in “Vijay Madanlal Choudhary vs Union Of India”, endorsing expansive investigatory and enforcement powers under the Prevention of Money Laundering Act (PMLA), 2002. This ruling has ignited considerable debate, largely because it appears to grant near-draconian powers to the Enforcement Directorate (ED), potentially at the expense of fundamental civil liberties.
Key Sections Upheld by the Supreme Court
Section 3: Defines the offense of money laundering. The Supreme Court’s interpretation broadened the scope of what constitutes money laundering, making any act that directly or indirectly attempts to involve proceeds of crime in any activity punishable under the PMLA. This includes concealment, possession, acquisition, or use of proceeds of crime as well as projecting or claiming it as untainted property.
Section 5: Allows for the attachment of property believed to be involved in money laundering, prior to the adjudication process. This pre-emptive measure was upheld as a necessary tool to prevent the disposal or concealment of illicitly acquired assets before they can be seized legally.
Section 17: Provides ED officers the authority to search premises and seize records without a warrant if they believe the person has possession of proceeds of crime. The court upheld this as a critical enforcement capability necessary for effective action against sophisticated money laundering schemes.
Section 19: Gives ED the power to arrest an individual without a warrant based on the belief that the person is involved in money laundering. This was upheld to facilitate immediate action in restraining suspects who might otherwise evade law enforcement.
Section 24: Imposes the reverse burden of proof on the accused, requiring them to prove that alleged proceeds of crime are legitimate. The court defended this provision as an essential element to counter the challenges posed by the complex nature of financial crimes.
Endorsement of Expansive Enforcement Powers
The court’s affirmation of the ED’s powers to summon, arrest, and attach properties without a prior FIR sets a precedent that might be described as excessively authoritarian. Such powers are extraordinary, particularly in a democratic system where checks and balances are designed to prevent the abuse of authority. By sidestepping the need for an FIR, the judgement potentially opens the door for misuse of power under the guise of law enforcement, especially in politically sensitive contexts.
The Reverse Burden of Proof: A Draconian Deviation
The Supreme Court’s support for the reverse burden of proof is particularly alarming. This fundamental shift in the presumption of innocence undercuts the bedrock of legal justice and places an oppressive burden on the accused. In the context of PMLA, where financial transactions can be complex and numerous, proving the legality of every asset can be an insurmountable task for the defendants, leading to potential injustices and abuse of power.
Broadened Definition of Money Laundering
The court’s broad interpretation of Section 3 enhances the reach of the PMLA, bringing a wide array of activities under its purview. This expanded definition potentially increases the number of individuals and transactions that could be scrutinized under the act, thereby increasing the risk of encroaching on legitimate business activities and personal financial transactions.
Erosion of Civil Liberties
The ruling effectively endorses an authoritarian model of governance under the guise of fighting money laundering. The powers to detain individuals based on mere suspicion and to seize assets without clear and present proof of wrongdoing echo measures that are more typical of oppressive regimes than a democracy that values individual rights.
Conclusion
While the judgement in “Vijay Madanlal Choudhary vs Union Of India” was intended to strengthen India’s capabilities against financial crimes, it has instead raised profound concerns about the balance between state power and individual rights. The powers now vested in the ED are not just expansive but draconian, threatening the core values of justice and fairness in India’s legal system.
As the implications of this ruling continue to unfold, it becomes increasingly necessary for the legal community and civil society to scrutinize and challenge its application. Only through vigilant oversight and relentless advocacy can the potential for abuse be mitigated, ensuring that the fight against corruption does not become a pretext for undermining democratic freedoms.
Concerned by the draconian powers vested to Enforcement Directorate that were ratified through this judgement, a review has been filed before Hon’ble Supreme Court of India, against certain parts of this judgement. However the same is pending before the Court, and it remains to be seen as to whether the Revision will dilute the rigours of PMLA Act or further strengthen them.