India: Whether A Statement Made Before Enforcement Directorate (PMLA) Is Binding On The Accused Without Proof/As Admission?

Last Updated: 8 February 2019
Article by Vijay Pal Dalmia, Partner

Article by Vijay Pal Dalmia, Advocate
Supreme Court of India & High Court
Mobile: +91 9810081079 Email: vpdalmia@vaishlaw.com
and
Maryam Quadri
LL.B. 3rd Year (3 Year Course), Faculty of Law, Delhi University, India
Maryamquadri0204@gmail.com

Under PMLA, a person is required to give truthful statement if such person is summoned by the Director.

  • This power to the director is given under section 50(2) of PMLA which provides that Director (or additional director, joint director, deputy director or assistant director) has the power to summon any person whose attendance he considers necessary whether to give evidence or to produce any records during the course of any investigation or proceeding. All such summoned persons are bound to state the truth or make statements, and produce such documents as may be required (Section 50(3) of PMLA).
  • But it is important to note that at the stage of summoning persons for investigation as under Section 50, the person is not an accused under PMLA. This is substantiated by decision of the Andhra High Court in the case of Dalmia Cement (Bharat) Limited and another v Assistant Director of Enforcement Directorate which held that a person summoned under Section 50 of PMLA is not an accused.
  • Reliance can also be placed on decisions of the court examining Section 108 of the Customs Act and Section 117 of the Sea Customs Act which are identical to the provision of Section 50 of PMLA.
  • In R. C. Mehta v. State of West Bengal (https://indiankanoon.org/doc/690751/ ) , the Hon'ble Supreme Court held that,

    "It is clear that when the statement of the appellant was recorded by the Customs officer under Section 108, the appellant was not a person "accused of any offence" under the Customs Act, 1962.

    An accusation which would stamp him with the character of such a person was, levelled only when the complaint was filed against him, by the Assistant Collector of Customs complaining of the commission of offences under Section 135 (a) and Section 135 (b) of the Customs Act."
  • Thus, a person called upon to make a statement before the authorities under PMLA during investigation cannot be said to be an accused of an offence. The investigation is only for the purpose of collecting evidence with regard to proceeds of crime in the hands of the persons suspected and their involvement in the offence of money laundering. It is only at the stage of filing of complaint for prosecution under PMLA envisaged under Section 44(1)(b) of PMLA can such persons or suspects be termed as accused.
  • The statements made at such stage of course are still admissible in evidence. In the case of Chief Enforcement Officer v D.Uttamchand Jain (https://indiankanoon.org/doc/1828737/ ) , it was held that the statement given before the Enforcement Director is an admissible evidence, though such a statement before a police officer is inadmissible, as per Section 25 of the Indian Evidence Act.
  • The question as to whether the statement made before the Enforcement Directorate is binding without any proof has been answered in the following case which was in respect of Foreign Exchange Regulation Act 1973 (FERA):
    • In A. Tajudeen v Union of India (https://indiankanoon.org/doc/128211521/ ) , the statement made by the accused before the Enforcement Directorate was the primary evidence to be used in order to establish the guilt of the accused. These statements were made at the time of raid and were subsequently resiled by the accused.
      • The Hon'ble Supreme Court in its well-reasoned judgement held the following-
        • The statements made by the accused before the Enforcement Directorate can under no circumstances constitute the sole basis for recording the finding of guilt against the accused.
        • Such statements ought not to be readily believable, unless there is independent corroboration of certain material aspects of the said statements through independent sources.
        • The nature of corroboration required, would depend on the facts of each case.
    • Further, in the case of K.T.M.S. Mohd and Ors v. Union of India (https://indiankanoon.org/doc/1059883/ ) , the Hon'ble Supreme Court held that:-
      • The voluntary nature of any statement made before the officers of Enforcement is a sine quo non to act on it for any purpose.
      • If the statement appears to have been obtained by any inducement, threat, coercion or by any improper means that statement must be rejected brevi manu ( https://dictionary.thelaw.com/traditio-brevi-manu/ ). At the same time, it is to be noted that merely because a statement is retracted, it cannot be recorded as involuntary or unlawfully obtained.

Therefore, the conclusion to be drawn is that a statement made before the Enforcement Directorate is admissible in evidence, but the veracity of such statements will have to judged on case to case basis. The same would depend on the voluntary nature of the statement, retraction of the statement and the surrounding factors.

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