Delhi High Court Upholds Constitutionality of Second Proviso to Section 5(1) PMLA

Delhi High Court Upholds Constitutionality of Second Proviso to Section 5(1) PMLA

Introduction

The case of J. Sekar Petitioner v. Union Of India & Ors. was adjudicated by the Delhi High Court on January 11, 2018. The petitioners, including Aprajita Singh and others, challenged the constitutional validity of the second proviso to Section 5(1) of the Prevention of Money-laundering Act, 2002 (PMLA). They contended that this proviso was ultra vires Article 14 of the Constitution of India, alleging it rendered the law arbitrary and violative of the right to equality.

Summary of the Judgment

The Delhi High Court, represented by Justices S. Muralidhar and I.S. Mehta, dismissed prayer (b) in the consolidated petition, which sought to declare the second proviso to Section 5(1) PMLA unconstitutional. The Court upheld the validity of the proviso, asserting that it does not violate Article 14 of the Constitution. The matter was scheduled to be heard by a Single Judge for further prayers on February 6, 2018.

Analysis

Precedents Cited

The judgment extensively referenced several landmark cases to support its stance:

These cases collectively reinforced the judiciary's approach towards balancing governmental powers with individual rights, emphasizing that mere potential misuse does not invalidate a legal provision if adequate safeguards are in place.

Legal Reasoning

The Court delved into the structural provisions of the PMLA, particularly focusing on the second proviso to Section 5(1). The primary contention was whether this proviso contravened the principle of non-arbitrariness under Article 14 by allowing discretionary power without sufficient checks.

The Court analyzed the scope and intent behind the proviso, noting that it was designed to enable authorities to act swiftly in exceptional circumstances where there was a genuine threat of property concealment or transfer that could impede confiscation proceedings. It highlighted several built-in safeguards:

  • Requirement for the authority to be at least a Deputy Director.
  • Mandatory documentation of "reasons to believe" based on material in possession.
  • Subsequent review by the Adjudicating Authority (AA) and potential appeal to the Appellate Tribunal (AT) and High Court.

These layers of review and the need for documented justification were deemed sufficient to prevent arbitrary use of power, thereby upholding the provision's constitutionality.

Impact

The judgment reinforces the constitutionality of the PMLA's provisions related to provisional attachment of property. It underscores the judiciary's support for robust anti-money laundering frameworks while ensuring that citizens' rights are not unduly compromised. Future cases involving PMLA provisions will likely reference this judgment to validate the balance between enforcement efficacy and constitutional safeguards.

Complex Concepts Simplified

Prevention of Money-laundering Act, 2002 (PMLA)

The PMLA is a comprehensive legislation aimed at preventing money laundering and facilitating the investigation and prosecution of such offenses. It empowers authorities to attach and confiscate property derived from criminal activities.

Provisional Attachment under Section 5(1)

Provisional attachment allows authorities to seize property believed to be involved in money laundering, pending further investigation or trial. The second proviso to this section relaxes certain conditions, enabling quicker action in urgent situations.

Article 14 of the Constitution of India

Article 14 ensures equality before the law and prohibits arbitrary actions by the state. Any legislation or provision must have a rational basis to uphold this constitutional mandate.

Adjudicating Authority (AA)

The AA is responsible for reviewing provisional attachment orders and determining whether continued action is warranted based on the evidence presented.

Conclusion

The Delhi High Court's judgment in J. Sekar Petitioner v. Union Of India & Ors. stands as a reaffirmation of the constitutionality of the second proviso to Section 5(1) PMLA. By meticulously analyzing the statutory framework and existing judicial precedents, the Court ensured that while anti-money laundering measures remain effective, they do not trample upon fundamental constitutional rights. This balance is pivotal for the rule of law, ensuring that measures against financial crimes are both robust and just.

Case Details

Year: 2018
Court: Delhi High Court

Judge(s)

S. MuralidharI.S. Mehta, JJ.

Advocates

Mr. Vikram Chaudhary, Sr. Advocate with Mr. Abdul Saleem, Mr. S. Elambharathi, Mr. Harshit Sethi and Mr. Rishi Sehgal, AdvocatesMr. Amit Mahajan, CGSC for UOI with Mr. Sanjeev Narula, CGSC, Mr. Kunal Dutt, Mr. Abhishek Ghai and Ms. Anumita Chandra, AdvocatesMr. Vikram Chaudhary, Sr. Advocate with Mr. Abdul Saleem, Mr. S. Elambharathi, Mr. Harshit Sethi and Mr. Rishi Sehgal, AdvocatesMr. Amit Mahajan, CGSC for UOI with Mr. Sanjeev Narula, CGSC, Mr. Kunal Dutt, Mr. Abhishek Ghaiand and Ms. Anumita Chandra, AdvocatesMr. Vikram Chaudhary, Sr. Advocate with Mr. Abdul Saleem, Mr. S. Elambharathi, Mr. Harshit Sethi and Mr. Rishi Sehgal, AdvocatesMr. Amit Mahajan, CGSC for UOI with Mr. Sanjeev Narula, CGSC, Mr. Kunal Dutt, Mr. Abhishek Ghai and Ms. Anumita Chandra, AdvocatesMr. Vikram Chaudhary, Sr. Advocate with Mr. Abdul Saleem, Mr. S. Elambharathi, Mr. Harshit Sethi and Mr. Rishi Sehgal, AdvocatesMr. Vinod Diwakar, CGSC with Mr. Sanjay Pal and Mr. Akshaya Agarwal, AdvocatesMr. Naveen Malhotra, AdvocateMr. Amit Mahajan, CGSC for UOI with Mr. Sanjeev Narula, CGSC, Mr. Kunal Dutt, Mr. Abhishek Ghai and Ms. Anumita Chandra, AdvocatesMr. Vikram Chaudhary, Sr. Advocate with Mr. Abdul Saleem, Mr. S. Elambharathi, Mr. Harshit Sethi and Mr. Rishi Sehgal, AdvocatesMr. Amit Mahajan, CGSC for UOI with Mr. Sanjeev Narula, CGSC, Mr. Kunal Dutt, Mr. Abhishek Ghai and Ms. Anumita Chandra, AdvocatesMr. Vikram Chaudhary, Sr. Advocate with Mr. Abdul Saleem, Mr. S. Elambharathi, Mr. Harshit Sethi and Mr. Rishi Sehgal, AdvocatesMr. Amit Mahajan, CGSC for UOI with Mr. Sanjeev Narula, CGSC, Mr. Kunal Dutt, Mr. Abhishek Ghai and Ms. Anumita Chandra, AdvocatesMr. Vikram Chaudhary, Sr. Advocate with Mr. Abdul Saleem, Mr. S. Elambharathi, Mr. Harshit Sethi and Mr. Rishi Sehgal, AdvocatesMr. Amit Mahajan, CGSC for UOI with Mr. Sanjeev Narula, CGSC Mr. Kunal Dutt, Mr. Abhishek Ghai and Ms. Anumita Chandra, AdvocatesMr. Vikram Chaudhary, Sr. Advocate with Mr. Abdul Saleem, Mr. S. Elambharathi, Mr. Harshit Sethi and Mr. Rishi Sehgal, AdvocatesMr. Amit Mahajan, CGSC for UOI with Mr. Sanjeev Narula, CGSC, Mr. Kunal Dutt, Mr. Abhishek Ghai and Ms. Anumita Chandra, AdvocatesMr. Vikram Chaudhary, Sr. Advocate with Mr. Abdul Saleem, Mr. S. Elambharathi, Mr. Harshit Sethi and Mr. Rishi Sehgal, AdvocatesMr. Amit Mahajan, CGSC for UOI with Mr. Sanjeev Narula, CGSC, Mr. Kunal Dutt, Mr. Abhishek Ghai and Ms. Anumita Chandra, AdvocatesMr. Vikram Chaudhary, Sr. Advocate with Mr. Abdul Saleem, Mr. S. Elambharathi, Mr. Harshit Sethi and Mr. Rishi Sehgal, AdvocatesMr. Amit Mahajan, CGSC for UOI with Mr. Sanjeev Narula, CGSC, Mr. Kunal Dutt, Mr. Abhishek Ghai and Ms. Anumita Chandra, AdvocatesMr. Vikram Chaudhary, Sr. Advocate with Mr. Abdul Saleem, Mr. S. Elambharathi, Mr. Harshit Sethi and Mr. Rishi Sehgal, AdvocatesMr. Amit Mahajan, CGSC for UOI with Mr. Sanjeev Narula, CGSC, Mr. Kunal Dutt, Mr. Abhishek Ghai and Ms. Anumita Chandra, AdvocatesMr. Vikram Chaudhary, Sr. Advocate with Mr. Abdul Saleem, Mr. S. Elambharathi, Mr. Harshit Sethi and Mr. Rishi Sehgal, AdvocatesMr. Amit Mahajan, CGSC for UOI with Mr. Sanjeev Narula, CGSC, Mr. Kunal Dutt, Mr. Abhishek Ghai and Ms. Anumita Chandra, AdvocatesMr. Vikram Chaudhary, Sr. Advocate with Mr. Harshit Sethi, Ms. Aakriti Mathur, Mr. Faraz Khan and Mr. Rishi Sehgal, AdvocatesMr. Ajay Digpaul, CGSC with Ms. Mohita Srivastava, Advocate for UOIMr. Ajit Kumar Sinha, Sr. Advocate with Ms. Priyanka Sinha and Mr. Srijan Sinha, AdvocatesMr. Amit Mahajan, CGSC for UOI with Mr. Sanjeev Narula, CGSC, Mr. Kunal Dutt, Mr. Abhishek Ghai and Ms. Anumita Chandra, AdvocatesMr. Vikram Chaudhary, Sr. Advocate with Mr. Harshit Sethi, Mr. Sangram S. Saron and Mr. Rishi Sehgal, AdvocatesMr. Vinod Diwakar, CGSC with Mr. Sanjay Pal and Mr. Akshaya Agarwal, AdvocatesMr. Dayan Krishnan, Sr. Advocate with Mr. Parmata Singh, Mr. Madhur Jain, Mr. Mayank Jain and Mr. Aditya Jain, AdvocatesMr. Amit Mahajan, CGSC for UOI with Mr. Sanjeev Narula, CGSC, Mr. Kunal Dutt, Mr. Abhishek Ghai and Ms. Anumita Chandra, AdvocatesMr. Dayan Krishnan, Sr. Advocate with Mr. Parmata Singh, Mr. Madhur Jain, Mr. Mayank Jain and Mr. Aditya Jain, AdvocatesMr. Amit Mahajan, CGSC for UOI with Mr. Sanjeev Narula, CGSC, Mr. Kunal Dutt, Mr. Abhishek Ghai and Ms. Anumita Chandra, AdvocatesMr. Dayan Krishnan, Sr. Advocate with Mr. Parmata Singh, Mr. Madhur Jain, Mr. Mayank Jain and Mr. Aditya Jain, AdvocatesMr. Amit Mahajan, CGSC for UOI with Mr. Sanjeev Narula, CGSC, Mr. Kunal Dutt, Mr. Abhishek Ghai and Ms. Anumita Chandra, Advocates

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