2017 (7) TMI 109 - HC - Money Laundering

Court affirms Enforcement Directorate's authority under PMLA, upholds investigative powers

Virbhadra Singh & Another Versus Enforcement Directorate & Another, Chunni Lal Chauhan Versus Assistant Director, Enforcement Directorate & Another, Vikramaditya Singh Versus Assistant Director, Enforcement Directorate And Picheswar Gadde Versus Enforcement Directorate Ministry of Finance & Others

The court upheld the cognizability of offences under the Prevention of Money Laundering Act (PMLA) and affirmed the Enforcement Directorate's (ED) ... Malaise of money-laundering - Enforcement officers empowered by PMLA to make investigation - Held that:- There is no requirement in law that an officer empowered by PMLA may not take up investigation of a PMLA offence or may not arrest any person as permitted by its provisions without obtaining authorization from the court. Such inhibitions cannot be read into the law by the court. The prime argument of the petitioners is of political vendetta. This argument is not supported by any material. These proceedings are not the appropriate forum for the court to examine such plea which, in the interest of the petitioners themselves, must be left for it to be pressed, if they were so advised and if they have material to substantiate the same, at some appropriate stage in future. Suffice it to observe in this context, and at this stage, that those in public life are expected to be open to probity. Higher the position in life (or polity), higher the obligation (moral, if not legal) to be accountable. Endeavours to stall investigation into their affairs by the law enforcement agencies, particularly on technical grounds, have the potency of giving the impression that there is something to hide. There is nothing shown to the court from which it could be inferred that the issuance of summons by the respondents to the petitioners for investigation into the ECIR, in exercise of statutory powers, has caused, or has the effect of causing, any prejudice to any of them. Issues Involved:1. Whether the offences under the Prevention of Money Laundering Act, 2002 (PMLA) are cognizable or non-cognizable.2. Whether the Enforcement Directorate (ED) can undertake investigation and arrest without prior authorization from the court.3. Validity and legality of the summons issued under Section 50(2) and (3) of PMLA.4. Allegations of political vendetta and misuse of investigative powers by the ED.5. Compliance with procedural safeguards and the applicability of the Code of Criminal Procedure (Cr.P.C.) to investigations under PMLA.Detailed Analysis:1. Cognizability of Offences under PMLA:The court examined whether the offences under PMLA are cognizable, particularly after the amendment of 2005, which deleted Section 45(1)(a) that previously declared every offence under PMLA to be cognizable. Despite this deletion, the court concluded that the offences under PMLA continue to be cognizable. This conclusion was based on the overall scheme of PMLA, which confers extensive investigative powers on the Enforcement Directorate (ED), including the power to arrest without a warrant. The court observed that the marginal heading of Section 45, which remains unamended, still declares the offences to be cognizable, indicating the legislative intent to treat them as such.2. Authority of ED to Investigate and Arrest:The court held that the ED, empowered by PMLA, does not require prior authorization from the court to undertake investigations or effect arrests. The law confers upon the ED officers the requisite powers to conduct an effective investigation, including the power to summon any person, compel attendance, and arrest without warrant. The court emphasized that these powers are essential for the ED to fulfill its mandate under PMLA and that requiring prior court authorization would undermine the effectiveness of the investigative process.3. Validity of Summons under Section 50(2) and (3) of PMLA:The court upheld the validity of the summons issued under Section 50(2) and (3) of PMLA, which require individuals to appear before the ED for questioning. It was clarified that mere issuance of summons does not render a person an accused; rather, it is part of the investigative process aimed at gathering evidence. The court referenced precedents where similar powers of other investigative agencies, such as the Customs Department, were upheld, reinforcing that such summons do not violate constitutional protections against self-incrimination.4. Allegations of Political Vendetta:The petitioners argued that the investigation was politically motivated. However, the court found no material evidence to support this claim and deemed the argument inappropriate for adjudication in the current proceedings. The court suggested that such allegations, if substantiated, could be raised at an appropriate stage in future proceedings. The court emphasized that public figures are expected to be open to scrutiny and probity, and attempts to stall investigations on technical grounds could imply an intention to conceal wrongdoing.5. Compliance with Procedural Safeguards:The court addressed concerns about procedural safeguards, particularly the applicability of the Cr.P.C. to PMLA investigations. It was clarified that PMLA is a complete code with its own procedural safeguards, which correspond to those in the Cr.P.C. These include requirements for recording reasons for belief, reporting to the Adjudicating Authority, and ensuring the rights of the arrested person, such as being informed of the grounds of arrest and being produced before a judicial magistrate within 24 hours. The court reiterated that the investigative powers under PMLA are distinct from those of the police under the Cr.P.C., and the safeguards under PMLA are sufficient to ensure fairness and transparency.Conclusion:The court dismissed the petitions, finding them devoid of substance. It upheld the investigative powers of the ED under PMLA, including the authority to issue summons and effect arrests without prior court authorization. The court emphasized the sufficiency of procedural safeguards under PMLA and rejected the allegations of political vendetta due to lack of evidence.