The Supreme Court on Wednesday said that the ED, under the Prevention of Money Laundering Act, can prosecute a person for offence of money laundering only if it has reason to believe, which is required to be recorded in writing that the person is in possession of “proceeds of crime”, and also upheld the validity of the Section 5 of the Act, relating to attachment of property.
On the aspect of Section 3 (definition of money laundering), a bench, headed by Justice A.M. Khanwilkar and comprising Justices Dinesh Maheshwari and C.T. Ravikumar said: “The Authority under the 2002 Act, is to prosecute a person for offence of money laundering only if it has reason to believe, which is required to be recorded in writing that the person is in possession of proceeds of crime.”
It added that “only if that belief is further supported by tangible and credible evidence indicative of involvement of the person concerned in any process or activity connected with the proceeds of crime”.
The bench said the action under the Act can be taken forward for attachment and confiscation of proceeds of crime and until vesting thereof in the Central government, such process initiated would be a standalone process.
It noted the argument that removing the necessity of projection from the definition will render the predicate offence and money laundering indistinguishable. “This, in our view, is ill founded and fallacious. It is only when money is generated as a result of such acts that the 2002 Act steps in as soon as proceeds of crime are involved in any process or activity. Dealing with such proceeds of crime can be in any form – being process or activity. Thus, even assisting in the process or activity is a part of the crime of money laundering,” it said.
The top court also said section 5 of the Act, relating to attachment of property involved in money laundering, is constitutionally valid. It said the provision in the form of Section 5 provides for a balancing arrangement to secure the interest of the person as well as to ensure that the proceeds of crime remain available for being dealt with in the manner provided by the 2002 Act. “This provision, in our opinion, has reasonable nexus with the objects sought to be achieved by the 2002 Act in preventing and regulating money laundering effectively,” added the bench.
It said from the plain language of this provision, it is evident that several inbuilt safeguards have been provided by the Parliament while enacting the 2002 Act.
“The authorised officer cannot resort to action of provisional attachment of property (proceeds of crime) mechanically. Thus, there are inbuilt safeguards provided in the main provision as well as the second proviso to be fulfilled up to the highest-ranking ED official, before invoking such urgent or ‘immediate’ action. We fail to understand as to how such a provision can be said to be irrelevant, much less manifestly arbitrary.”
The petitioners had argued that the twin conditions of bail contained in Section 45 of the 2002 Act would act grossly disproportionate and illogical qua a person who is not directly connected with the scheduled offence but merely an accessory after the fact. However, the top court rejected this argument.
It said Section 45, which deals with offences to be cognisable and non-bailable and have twin conditions for bail, is reasonable and not arbitrary. “The provision in the form of Section 45 of the 2002 Act, as applicable post amendment of 2018, is reasonable and has direct nexus with the purposes and objects sought to be achieved by the 2002 Act and does not suffer from the vice of arbitrariness or unreasonableness,” said the top court.
Section 45 says when the public prosecutor opposes the bail plea of an accused, the court can grant relief only after it is satisfied that the accused is not guilty and is unlikely to commit any offence if granted bail.