Date : 23/12/2023

Relevance: GS Paper 3- Security- Government Policies & Interventions

Keywords: Issue of Money Laundering, Powers of ED, Judicial Review, PMLA

Context-

The Prevention of Money Laundering Act, 2002 (PMLA), a crucial legislative tool in India's commitment to combating drug menace and terrorism, has recently faced challenges in its interpretation by the Supreme Court. Here we explore the implications of the Supreme Court's decisions in key cases, shedding light on concerns related to searches, seizures, and arrests by the Enforcement Directorate (ED).

Supreme Court's Interpretation in Vijay Madanlal Choudhary Case (2022)

In the landmark case of Vijay Madanlal Choudhary and Ors vs Union of India and Ors. (2022), the Supreme Court limited the application of the PMLA to wrongful and illegal gains related to scheduled offenses. The Court emphasized that the authority of the Authorized Officer to prosecute for money laundering is contingent on the existence of proceeds of crime as defined in Section 2(1)(u) of the 2002 Act. The media has reported instances of ED actions outside its powers, prompting criticism from the Supreme Court, as highlighted in the recent case of Pankaj Bansal vs Union of India. The Court emphasized the need for the ED to act with utmost probity, dispassion, and fairness.

Judicial Scrutiny in Pavana Dibbur Case (2023)

In November 2023, Justices Abhay S. Oka and Pankaj Mithal, in Pavana Dibbur vs The Directorate of Enforcement, addressed critical aspects of the PMLA. They emphasized that the existence of "proceeds of crime" is a prerequisite for any offense under Section 3 of the PMLA, highlighting the sine qua non-nature of this requirement.

Damaging Effects on Federalism

• Misuse of Power in Non-Scheduled Offenses: Despite the clarity provided by the Supreme Court, concerns arise regarding the misuse of power in states governed by the Opposition. The Mines and Minerals (Development and Regulation) Act, 1957, not covered by the PMLA's schedule, has seen ED inquiries into the alleged illegal mining of sand, a minor mineral under state jurisdiction. This raises questions about federalism and the boundaries of ED's authority.
• Case Study: Jharkhand: In Jharkhand, the ED's actions in registering an enforcement case investigation report in the absence of scheduled offenses or proceeds of crime have raised eyebrows. The ED's involvement in cases not falling under its jurisdiction has led to allegations of abuse of the legal process.
• Partisan Actions by Investigative Agencies: It looks into the selective targeting by investigative agencies, with a focus on states governed by the Opposition. The ED's purported targeting of political figures in Jharkhand and alleged inactivity in BJP-governed states, despite higher instances of illegal mining, raise concerns about the impartiality of enforcement actions.
• Manipulation of Legal Processes: It highlights instances of the abuse of legal processes, such as changes in the notice-issuing bench and disregard for procedural rules in subsequent judicial developments. This manipulation of legal processes allows investigative agencies like the CBI and the ED to operate beyond the scope defined by Supreme Court judgments.
• Constitutional Implications: The misuse of authority by central investigating agencies and the abuse of the court process poses disturbing questions about the state of democracy and constitutional principles in India. The erosion of federalism, a fundamental aspect of the Constitution, is evident in the willingness of the courts to condemn administrations in Opposition-governed states while overlooking similar actions elsewhere.

Reflections on Constitutional Values: it concludes by reflecting on the need to curb such

machinations promptly to prevent further erosion of constitutional values. It calls for a reevaluation of the actions of investigative agencies and courts to safeguard the principles that form the bedrock of India's democracy.

Conclusion

This comprehensive analysis brings to light the challenges and concerns surrounding the enforcement of the PMLA in India. The delicate balance between combating money laundering and preserving constitutional values, particularly federalism, is at the forefront of the ongoing debate. As the nation grapples with these issues, the hope is that constitutional institutions will prioritize fairness, transparency, and adherence to the rule of law to protect the democratic fabric of the country.

Source- The Hindu