Retrospective application of a mitigated penalty provision under the PMLA upheld for earlier defaults

The Delhi HC noted that the appellant failed to establish any factual basis for applying the pre-amendment penalty regime under Section 13(2) of the Prevention of Money-Laundering Act, 2002, because the alleged defaults were not shown to have occurred before 15.02.2013. It further held that the substituted Section 13(2), which allows a written warning or other lesser directions instead of a mandatory monetary penalty, could apply retrospectively to earlier defaults. On that construction, the Tribunal was justified in reducing the penalty to a warning in writing.

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Issues: (i) Whether the appellant could rely on the unamended penalty regime under Section 13(2) of the Prevention of Money-Laundering Act, 2002 in the absence of proof that the alleged defaults occurred before 15.02.2013; and (ii) whether the substituted Section 13(2) of the Prevention of Money-Laundering Act, 2002, which permits a warning in writing and other lesser measures, applies retrospectively to defaults allegedly committed before its commencement.

Issue (i): Whether the appellant could rely on the unamended penalty regime under Section 13(2) of the Prevention of Money-Laundering Act, 2002 in the absence of proof that the alleged defaults occurred before 15.02.2013.

Analysis: The factual basis for invoking the pre-amendment provision was not established. The record did not show that the sting operation or the alleged non-compliance occurred before 15.02.2013, and one respondent's assertion that the relevant events took place after that date was not controverted. In that situation, the appellant could not insist on application of the earlier penalty regime.

Conclusion: The contention based on the unamended penalty provision failed.

Issue (ii): Whether the substituted Section 13(2) of the Prevention of Money-Laundering Act, 2002, which permits a warning in writing and other lesser measures, applies retrospectively to defaults allegedly committed before its commencement.

Analysis: The amendment reduced the rigour of the earlier provision by conferring discretion on the Director to issue a warning in writing or other directions instead of mandatorily imposing a monetary fine. The governing principle is that where a later enactment mitigates the burden or punishment, and no contrary legislative intent appears, it may be applied retrospectively on grounds of fairness and beneficial construction. The Court therefore held that the substituted provision could be applied even to earlier defaults.

Conclusion: The substituted Section 13(2) applied retrospectively and the Tribunal was justified in reducing the penalty to a warning in writing.

Final Conclusion: The appeals failed because the appellant did not establish a factual foundation for the pre-amendment regime and, in any event, the amended penalty provision operated retrospectively in favour of the respondent banks.

Ratio Decidendi: Where a statutory amendment merely mitigates punishment or confers a lesser penal option without a contrary indication, it may be applied retrospectively on the principle of beneficial construction and fairness.

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