The Prevention of Money Laundering Act, provisions relating to the authority of arrest, attachment, search, and seizure granted to the Enforcement Directorate were affirmed by the Supreme Court in the case of Vijay Madanlal Choudhary v. Union of India.
The provisions of Sections 5, 8(4), 15, 17, and 19 of the PMLA, which deal with the powers of ED's arrest, attachment, search, and seizure, were maintained by the Court as being constitutional. The Court ruled that Section 24 of the Act talks about reverse burden of proof being valid and that it has a "reasonable relationship" with the Act.
The Court also affirmed the "twin-conditions" for bail in Section 45 of the PMLA Act and declared that the Parliament was still authorised to change the provision in 2018 despite the ruling in the Nikesh Tharachand Shah case by the Supreme Court (which had struck down the twin conditions). The panel ruled that the Parliament has the authority to change Section 45 from its current state in order to address the issues raised by the Supreme Court's ruling.
The Court further determined that the ED employees are not police officers and as a result, Article 20(3) of the Constitution, which protects the right to self-incrimination, does not apply to the statements they made under Section 50 of the Act. It is not acceptable to interpret the possibility of fines or arrest as coercion to make a statement. Instead of being an investigation, the Section 50 method is more like an inquiry.
The court further ruled that an Enforcement Case Information Report (ECIR) is just an internal document of the ED and cannot be compared to a police report (FIR). As a result, the FIR-related sections of the CrPC will not apply to ECIR. The revelation of the circumstances for the arrest is sufficient and provides that the ECIR is not required. However, when a person appears in front of a Special Court, the court may request records to determine whether further incarceration is required.
The petitioners' contention that the money laundering offence under Section 3 is only drawn if the property is portrayed as an untainted property was rejected by the court.
According to the Court, "and" in Section 3 must be interpreted as "or."
Section 3 has a broader scope and does not only refer to the actual act of laundering the money; it also covers all activities that are directly or indirectly related to money laundering. Money laundering is the act of merely having criminal proceeds.
Section 3 of the 2002 Act has a wider scope and captures every direct or indirect process and activity in dealing with the proceeds of crime and is not limited to the happening of the ultimate act of integrating tainted property in the official economy.
The Judgment was reversed in March 2022.
Senior Counsels representing the petitioners attacked several elements of the legislation as it is currently written. In addition to the issues with the statute, it was noted that after executing 1700 raids and 1569 particular investigations since 2011, ED officials have only managed to secure 9 convictions. The absence of employees at the PMLA Appellate Tribunal was also brought to the Bench's attention. Only one of the committee's five members was still in office as of February 16, 2022. The Appellate Tribunal's alleged dysfunction poses a significant obstacle in obtaining recourse for unauthorised attachments made by ED personnel.
The Union Government in its defense argued that, according to the Solicitor General, just 313 arrests and 388 searches have been made out of the 4700 cases that have been examined under the PMLA, which is a very low number when compared to other countries like the UK, USA, China, Australia, Hong Kong, Belgium, and Russia. In the past five years, the ED has only chosen to investigate 2186 instances out of 33 lakh predicate offences that were registered.