SC upholds ED's power to arrest in money laundering cases

The Supreme Court on Wednesday upheld the Enforcement Directorate's power to inquire, arrest and attach property under the Prevention of Money Laundering (PMLA) Act.

A bench led by Justice AM Khanwilkar delivered the verdict on a batch of petitions challenging the process of arrest, seizure and investigation carried out by the ED and seeking interpretation of provisions of the PMLA.

The court upheld the constitutionality of the provisions of Sections 5, 8(4), 15, 17 and 19 of the PMLA, which relate to the powers of ED's power of arrest, attachment and search and seizure. It also affirmed the "twin conditions" for bail in Section 45 of the PMLA.

Section 19 does not suffer from the "vice of arbitrariness", it said, adding that Section 5 of the Act relating to the attachment of property of those involved in money laundering is constitutionally valid.

Money laundering not only affects the social and economic fabric of the nation but also tends to promote other heinous offences such as terrorism, offences related to NDPS Act (The Narcotic Drugs and Psychotropic Substances Act) etc., the court said.

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

The supply of ECIR (Enforcement Case Information Report) copy in every case is not mandatory as it is an internal document, the top court said, rejecting the petitioners' challenge that it is similar to an FIR and the accused is entitled to a copy of the ECIR. It is enough if Enforcement Directorate, at the time of arrest, discloses grounds for such arrest, it said.

The petitioners said that putting the burden of proof on the accused violates fundamental rights like the right to equality and the right to life. The Centre, represented by Solicitor General Tushar Mehta, responded by saying that owing to the serious nature of the money laundering offences and the societal need to curb it, putting the burden of proof on the accused is justified.

Another major challenge, that filing PMLA charges on cases that occurred before 2002 (when PMLA came into existence) is unconstitutional, was also turned down.

The Centre justified it by saying that money laundering is a continuing offence, and not a single act but a chain. Proceeds of crime could have been generated before 2002 but could have still been in possession or in use by the accused post-2002.