Delhi HC upholds Section 50(2) of Prevention of Money Laundering Act against constitutional challenge

Delhi HC dismissed petitions challenging constitutional validity of Section 50(2) of Prevention of Money Laundering Act, 2002. Petitioners argued it violated Articles 14, 20, and 21 of Constitution and Section 132 of Evidence Act. During ED investigation, accused admitted paying crores through hawala transactions to influence public servants. HC relied on SC's decision in Vijay Madanlal Choudhary, holding Article 20(3) applies only when person is accused at relevant time, not witness. Court found petitioners prima facie committed money laundering offence under Section 3 PMLA by knowingly assisting in concealment and use of proceeds of crime. Summoning was deemed proper to unearth money trail.

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Issues Involved:
1. Constitutionality of Section 50(2) of the Prevention of Money Laundering Act (PMLA), 2002.
2. Validity of summons issued under Section 50 of PMLA.
3. Legality of changing the status of individuals from witnesses to accused.
4. Issuance and validity of Look Out Circular (LOC).

Detailed Analysis:

1. Constitutionality of Section 50(2) of the Prevention of Money Laundering Act (PMLA), 2002:
The petitioners challenged the constitutionality of Section 50(2) of PMLA, arguing it violates Articles 14, 20(3), and 21 of the Constitution of India, and Section 132 of the Indian Evidence Act (IEA). The court referred to the Supreme Court's decision in Vijay Madanlal Choudhary v. Union of India, which upheld the validity of Section 50 of PMLA. The court reiterated that Section 50(2) empowers authorities to summon any person during an investigation, and such proceedings are deemed judicial under Sections 193 and 228 of the Indian Penal Code (IPC). The court found no merit in the petitioners' challenge to the constitutionality of Section 50(2) of PMLA.

2. Validity of Summons Issued Under Section 50 of PMLA:
The petitioners argued that the repeated summons under Section 50 of PMLA were illegal, especially after they were initially cited as witnesses. The court noted that the investigation under PMLA is ongoing and new facts can emerge, necessitating further summoning. The court emphasized that Section 50(2) of PMLA allows authorities to summon any person whose attendance is necessary for the investigation. The court found that the issuance of summons was justified and within the legal framework.

3. Legality of Changing the Status of Individuals from Witnesses to Accused:
The petitioners contended that changing their status from witnesses to accused was illegal and violated their rights. The court observed that during the investigation, if evidence indicates a person's involvement in money laundering, their status can be changed from a witness to an accused. The court cited the Supreme Court's ruling in Vijay Madanlal Choudhary, which clarified that proceedings under scheduled offenses and PMLA are separate and distinct. The court found that the change of status was legally permissible based on the evidence gathered during the investigation.

4. Issuance and Validity of Look Out Circular (LOC):
Petitioner-Pradeep Koneru challenged the issuance of the LOC against him, arguing it was done without proper justification. The court noted that the LOC was issued based on apprehensions that the petitioner might flee the country. The court referred to the Office Memorandum (OM) dated 27.10.2010, which permits investigating agencies to issue LOCs in cognizable offenses. The court found that the issuance of the LOC was justified given the circumstances and the ongoing investigation.

Conclusion:
The court dismissed the petitions, finding no merit in the arguments presented by the petitioners. The court upheld the constitutionality of Section 50(2) of PMLA, validated the issuance of summons under PMLA, justified the change of status from witnesses to accused based on evidence, and found the issuance of the LOC to be legally sound. The interim protection granted to the petitioners was extended for two weeks.

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