Money laundering is a recent white-collared and socio-economic offence that deals with laundering of money or, in other words, layering of money. The application of the Prevention of Money Laundering Act (PMLA), 2002, demands a sincere approach to segregate as to which offences constitute “parent offences” and which are “propagated offences”. Recently, in our country, there is a remarkable increase in litigations pertaining to money laundering. The question I ask myself while appearing for my clients is: Whether putting the accused behind bars for money laundering crimes and attaching their properties for unlimited years is a solution to curb this menace in the society? Somewhere, my brain says “no”.

Striking down the harsh restrictions imposed upon bail under Section 45 of the Act, the Supreme Court, in the case Nikesh Tarachand Shah vs Union of India, recently held that imposing such harsh conditions on grant of bail violates the fundamental rights of Articles 14 and 21 of the Constitution, guaranteeing right to equality and right to personal liberty. In the matter of money laundering, the bail shall be granted in accordance with Sections 439 and 437 of the Code of Criminal Procedure, 1973. Under Section 5 of the PMLA, a director or any officer not below the rank of deputy director, who is authorised by such director, has the power to provisionally confiscate the property if such officer has the reason to believe—which is subject to twin conditions: firstly, that such person is having possession over the “proceeds of crime” and, secondly, such proceeds of crime are to be concealed, transferred or dealt with in any manner that can result in frustrating any proceeding relating to the confiscation of such proceeds of crime.

The officer has to record his beliefs in writing and via written order can confiscate such property provisionally, for not more than 180 days from the date of such order. After the property is confiscated provisionally, the officer has to forward the complaint to the adjudicating authority in order to adjudicate and confirm such order of attachment. The term “reason to believe” is a vague term, which is not defined in the PMLA, thus giving wide powers to the enforcement directorate to attach the properties. Rather, to curb this menace in the society, we have to break the backbone of such crimes, which is eventually possible by depriving the “parent money launderer” of their assets and monies, and utilise those for the welfare of the society, on the growth and education of children, and for the benefit of the derived or disabled.

What I have observed in the courts is that the enforcement directorate appearing and arguing the matters appear more interested in putting the accused behind bars and attaching their properties, thus bringing a big stretch of offences covered under Indian Penal Code, Income-tax Act, Wildlife Act, Copyright Act, etc, as shoots of the parent money laundering offences and bringing everything to a standstill. Such a generalised conception of “money laundering offences” could be a great threat to our democratic system. The accused behind bars and struggling for bail are somewhere physically and mentally tortured, but economically relaxed that neither banks nor any other creditor will be able to liquidate their properties as the same have been attached and brought into a “secure zone”. Banks also become the “victims of crimes” as they are not able to alienate or dispose of secured assets into their hands to recover the money and bring liquidity and finances into the market, thus increasing NPAs and bad debt.

Banks are facing tremendous litigation as if they are the accused and have committed offences. This has brought the Indian economy into a fix and has affected the mobility of money in the market. First, holding the properties attached for unlimited years is, in fact, cumbersome for bringing the liquidity into the market as well as for realisation of banks’ dues, workmen’s dues and other financial creditors whose huge stakes are involved. Second, we have to see whether the purpose of the enactment is to punish the offenders by taking a generalised view and sweeping across all the crimes like cheating, forgery, misappropriation of funds for which we have specific punishments and convictions in the Indian Penal Code, Negotiable Instruments Act and Income-tax Act (penalising the assessee for tax evasion), etc, or to punish those culprits who intentionally are laundering or layering the money into the market and spreading the heinous crime in the society. Also, the question arises as to whether extending the tentacles of the Act to Copyright Act, Wildlife Act and so many other Acts for which we have a special Act with stringent punishments is not overlapping the said Acts and collision of so many statutory enactments that leads to “mess-litigation” on one hand and giving way to the accused to enjoy the fruits of that mess.

The legislature, while enacting the PMLA, intended to curb the black money in the market, which, in today’s scenario, seems difficult, as the purpose of money laundering is deviated and even those who had cash in their hands or dealt in cash transactions before demonetisation have also been targeted for the said offences of money laundering and targeted with arrests. Dealing in cash in the pre-demonetisation regime was not an offence, and so this may, in certain cases, trap the genuine citizens and attack the freedom of trade and commerce, which is a constitutionally guaranteed right. To conclude, we have to interpret the legislative enactment and provisions of money laundering to their logical conclusion, and not as a tool in the hands of government officials to victimise the innocent citizens. In view of the same, I believe the PMLA needs certain amendments or interpretations from courts to maintain the constitutional flavour as well as to bring it to its logical end.

Source : Economic Times