Author: Advocate V Govinda Ramanan
The Prevention of Money Laundering Act, 2002 was enacted to protect the financial system of the country.
That from a bare perusal of Section 2(u) (Prior to the amendment of 2019) r/w Section 3 of the PMLA, 2002, inter-alia, it is quite evident that the generation of “Proceeds of crime as a result of the criminal activity, which is relatable to a scheduled offence” is an indispensable pre-requisite in order to constitute the offence of Money Laundering.
VALUE OF ANY SUCH PROPERTY: THE VAJRA-ASTRA (वज्रास्त्र)
An exception to “Proceeds of Crime” has been carved out within the definition under Section 2(u), which is the “Value of such property” and as such it is also the most commonly used “reason to believe” by the Enforcement Directorate (ED) for the purpose of passing of the Provisional Attachment Order (PAO) in terms of Section 5(1) of PMLA, 2002.
That the afore mentioned second limb i.e. “Value of such property” is being used/abused by the Enforcement Directorate (ED) for the purpose of attachment of any property of any individual.
In my humble opinion a bare perusal of the Section 2(u) and 3, the following instances, wherein, the second limb to definition of Proceeds of Crime can be used in comparison to where it is being actually used by the Enforcement Directorate (ED)
- Instances/example where the “second limb” to the definition under Section 2(u) “Proceeds of Crime” can be used:-
(i) Cash is received as bribe and invested in purchase of some house property. House property so acquired will be deemed to be “value of such property” derived from scheduled offence.
- Instances/example where the “second limb” to the definition under Section 2(u) “Proceeds of Crime” cannot be used:- There may be a case where a person who is accused of commission of scheduled offence, on account of destruction or disposal of property, is having no property at all, then in that case, the Enforcement Directorate (ED) cannot attach the property derived from legitimate source on the ground that property derived from scheduled offence is not available. It may be of interest to note that most of the attachments made by the Enforcement Directorate (ED) under Section 5 of the PMLA, 2002 are being made just for the exact same reason, as stated herein above, which, is in complete contrast to the stated purpose for which the second limb was enacted in Section 2(u) of PMLA, 2002.
It is further pertinent to note here that the Hon’ble High Court of Punjab and Haryana via Judgement dated 06.03.2020 in the matter of “Seema Garg and Ors versus The Deputy Director, Directorate of Enforcement” bearing Appeal No. 1, 2 and 3 of 2019 (O&M) had been pleased to lay down the situation in which, the second limb i.e. “Value of Such property” can be used and as such has been pleased to re-affirm the examples/instances as stated herein above for its use by the Enforcement Directorate (ED)
PROPERTY DERIVED OR OBTAINED AS A RESULT OF ANY CRIMINAL ACTIVITY RELATABLE TO THE SCHEDULED OFFENCE: THE BRAHMA-ASTRA (ब्रह्मास्त्र)
Before analysing the Brahma-Astra, which if unchecked will be creating a monster of Frankenstein proportions.
Explanation to Section 2 (u) (inserted via amendment act of 2019) is extracted and reproduced herein below to help interpret the subtle mischief
x x x x x x x x x x x x
“ ….Explanation.—For the removal of doubts, it is hereby clarified that “proceeds of crime” include property not only derived or obtained from the scheduled offence but also any property which may directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offence……”
The mischief that the legislature has played upon the citizens of this country is evident from a close perusal of “Explanation” inserted to Section 2(u) r/w Section 2(y), which, goes on to show that via the said amendment, ED can now attach any property of any individual irrespective of the scheduled offence and as such is also violative of “Right to Property” as enshrined in Article 300-A of the Constitution of India
Such complete dispensation with schedule of PMLA, 2002 will make it prone to misuse and abuse by the whimsical authorities and the powers that be to settle scores with adversaries, political or otherwise.
Thus, it can be safely concluded that the “Brahma-Astra”, given to the Enforcement Directorate (ED) by the Legislature, yields unprecedented and unfettered powers which if not circumscribed and balanced may lead to unleashing a reign of terror and constrictions which would only stifle the spirit of enterprise and trust in society at large. I am not too sure if we are willing to pay that price.
About the Author
Advocate V Govinda Ramanan is a practising lawyer and handles matters relating to White Collar Crimes i.e. PMLA, PBPT, FEMA. He appears regularly before the Delhi High Court, Appellate Tribunal, Adjudicating Authority and other forums.
Disclaimer: The views in the article are those of the author and do not represent the views of MediaCatalyst, its associates or any of its employees.