"Not arbitrary," Supreme court backs ED on making arrests in money laundering cases

New Delhi, July 27: The Supreme Court while backing the Enforcement Directorate today rejected almost all objections raised against the probe agency regarding initiating an investigation, prior to arrest, search and seizure etc.

The court upheld almost all provisions of the Prevention of Money Laundering Act (PMLA) which was challenged in the court. The court also affirmed the stringent provisions of the Prevention of Money Laundering Act (PMLA) int relation to expansive definition of proceeds of crime, search and seizure, power of arrest, attachment of properties and twin bail conditions.

The Bench headed by Justice A M Khanwilkar further strengthened the probe agency's powers. In today's order the court updated the constitutionality of the provisions of Sections 5, 8(4), 15, 17 and 19 of the PMLA which relate to the powers of the ED to arrest, attachment, search and seizure.

Further the court upheld the reverse burden proof under Section 24 of the Act and said that it has reasonable nexus with the objects of the Act. The court also upheld the twin-conditions for bail in Section 45 of the PMLA Act and said that the Parliament was competent to amend the said provision in 2018 even after the Supreme Court's judgment in the Nikesh Tharachand Shah case which had struck down the twin conditions.

The court also held that the Parliament is competent to amend Section 45 in the present form to cure the defects pointed out in the judgment of the Supreme Court.

The petitioners had argued that unchecked power to arrest an accused without informing them of the grounds of arrest or evidence is unconstitutional. The petitioners further said that the ED recording incriminating statements from an accused during questioning under the threat of being fined for withholding information amounts to compulsion.

The ECIR (Enforcement Case Information Report) copy is not needed as it is an internal document the Supreme Court held. The court rejected the petitioner's challenge that it is similar to an FIR and the accused person is entitled for a copy of the ECIR.

The court said that the supply of ECIR in all cases is not necessary. Informing the accused about the grounds of arrest is sufficient and the trial court may adjudicate this aspect further the Bench also held.
The court held that the ECIR cannot be equated with an FIR and that is only an internal document of the ED. Hence the provisions of the Code of Criminal Procedure (CrPC) relating to the FIR will not apply to ECIR, the Bench held.

Further the court rejected the petitioners' argument that the offences of money laundering under Section 3 is attracted only if the property is projected as an untrained property. It said that 'and' in Section 3 has to be read as 'or.' Section 3 has a wider reach and it deals with direct and indirect proceeds of crime.

The court also directed the Centre to fill up the vacancies in the PMLA Appellate Tribunal.
The court however left open the question whether the 2018 amendments to the PMLA could have been brought through the Finance Act. It left those issues to be decided by a 7 judge Bench which is considering the money bill issue.