By Vijay Pal Dalmia, Advocate
Supreme Court of India and Delhi High Court
Partner Vaish Associates Advocates
And Satyam Sharma, Symbiosis Law School, Pune
The offence of Money Laundering has been defined u/s 3 of the Prevention of Money Laundering Act, 2002 (hereinafter, PMLA) as an act where:
"someone directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property shall be guilty of offence of money-laundering".
It is generally known that the PMLA equivalent for First Information Report (hereinafter, FIR) is the Enforcement Case Information Report (hereinafter, ECIR) but the relevant procedure and at what stage it needs to be filed still remains a point of contention.
This article would be dealing with mainly two questions firstly, whether an ECIR is necessary to initiate the process under PMLA. And secondly, whether an ECIR can be registered by the Enforcement Directorate (hereinafter, ED) without an FIR being registered in regards to the scheduled offence.
To answer the first question, the applicability of the Criminal Procedure Code, 1973 (hereinafter, CrPC) especially Chapter XII under PMLA needs to be answered. S. 65 of the PMLA although states that:
the provisions of the Code of Criminal Procedure, 1973 (2 of 1974) shall apply, insofar as they are not inconsistent with the provisions of this Act, to arrest, search and seizure, attachment, confiscation, investigation, prosecution and all other proceedings under this Act.
Despite this, applicability of Chapter XII of CrPC under PMLA remains a controversial subject. The main reason behind this can be attributed to the diverse interpretations given by the courts which have made it increasingly difficult to put a finger on the current judicial standing with regards to the issue at hand.
As per the provisions of S. 4(2) of the CrPC, the procedure applies with respect to the special statutes as well, unless the applicability of the provisions is expressly barred.
Moreover, Sections 44 to 46 of the PMLA Act specifically incorporate the provisions of CrPC to the trials under the PMLA Act. Thus, not only there is no provision in the PMLA Act excluding the applicability of CrPC, but, provisions of CrPC have been incorporated under PMLA by specific inclusion.1 The Delhi High Court in the case of Gurucharan Singh v. Union of India2 without deciding whether the offence of money laundering is cognizable or non-cognizable held that it is mandatory to comply with the provision of Sections 155, 177(1) and 172 of CrPC in case the offence under PMLA is non-cognizable. And in case the offence is cognizable, Sections 154 and 157 of CrPC need to be complied with mandatorily. The Supreme Court in Ashok Munilal Jain v. Assistant Director,3 although didn't answer this question conclusively, held that S. 167(2) of CrPC for statutory bail would be applicable to the proceedings under the PMLA act as well. Even though there have been contradictory judgments including those that restrict the applicability of Chapter XII by various High Courts, they majorly pertain to the applicability of S. 167 of CrPC for statutory bail for an arrest made under S. 19 of PMLA which has already been answered by the SC. Therefore, the judgment in Ashok Munilal Jain has in turn rendered judgments of the Delhi High Court in Vakamulla Chandrashekhar v. ED4 and the Jharkhand High Court in Hari Narayan Rai v. UOI5 as bad law.
The question of the extent of the applicability still remains a question that hasn't been settled by the courts. It is pending before the SC in the case of Rajbhushan Omprakash Dixit v. UOI,6 even though it still appears that there is no alternative to the ED but to follow the CrPC, except where there are specific provisions in the PMLA that provide for an alternative procedure.
Given the mandate of Articles 21 and 22 of the Constitution the powers under the PMLA in relation to the offences under the PMLA, have to be governed by the CrPC, if not by the PMLA. This is expressly recognised and acknowledged by S. 65 of PMLA. Therefore, it is not open to the ED to choose to not follow the CrPC in an area where the PMLA is silent, making the applicability of Chapter XII inevitable in such cases. This in turn makes registration of an ECIR necessary to initiate the process under PMLA.
The second question that needs to be answered is whether an ECIR can be registered by the ED without an FIR being registered in relation to the predicate offence.
The Delhi High Court in the case of Vir Bhadra Singh v. ED7 observed that registration of an FIR is not necessary for exercising the powers given to the empowered officers under PMLA.
This seems to be a little contradictory to the whole idea of PMLA being a predicate offence oriented statute. In case the predicate offence being a non-cognizable offence. e.g. for offences such as Cheating (S. 417, Indian Penal Code), Fraudulent removal or concealment of property (S. 421, Indian Penal Code) etc. the question of registration of FIR doesn't seem to arise. These cases fall into the category of complaint cases, being non-cognizable in nature where Police is not empowered to register FIR. Trial of these cases falls into a different category under a different process. In such cases if an ECIR has been filed prior to the filing of the complaint case before the Court, it will result in an anomaly. Furthermore, any attachment, seizure, arrest or summon becomes devoid of the backing of law and directly impinges on the fundamental rights of the victim. The investigation under PMLA is dependent upon commission of a predicate offence.
While in cases where the predicate offence is cognizable filing of an ECIR pursuant to filing of an FIR seems to be reasonable, taking note of the gravity of the offence and situation. Also it needs to be noted that in case the information of the commission of the offence of 'Money Laundering' is in furtherance of a 'cognizable offence', the filing of an FIR for the predicate offence is imperative.8 Therefore if there is no FIR u/s 154 of CrPC, registration of an ECIR under sections 3 and 4 of PMLA seems to be un-justified when the scheduled offence is a cognizable offence.
Consequently, the first question as of now seems to be disputed and would highly depend on the judgment that will be pronounced by the Supreme Court in Rajbhushan Omprakash Dixit. The only thing that is settled is the fact that the provisions of S. 167 of CrPC are applicable to an arrest made under the PMLA and nothing else. Also even though Vir Bhadra Singh talks about the second issue, it fails to consider the scenario in which an FIR might not be registered at all and lays down a very broad observation without deliberating over it. The current legal status as far as the second question goes thus seems to be ambiguous as well and therefore cannot be interpreted by the available judicial pronouncements on the subject as of now.
1. Ashok Munilal Jain and Ors. v. Assistant Director, Directorate of Enforcement, (2018) 16 SCC 158.
2. Gurucharan Singh v. Union of India, 2017 (355) ELT 95 (Del.).
3. Ashok Munilal Jain and Ors. v. Assistant Director, Directorate of Enforcement, (2018) 16 SCC 158.
4. Vakamulla Chandrashekhar v. Enforcement Directorate and Ors., 2017 (356) ELT 395(Del.).
5. Hari Narayan Rai v. Union of India (UOI) and State of Jharkhand through Vigilance, 2010 SCC OnLine Jhar 475
6. Rajbhushan Omprakash Dixit v. Union of India, 2018 (361) ELT 1007 (Del.).
7. Vir Bhadra Singh v. Enforcement Directorate and Ors, 2017 (3) RCR(Criminal) 576.
8. Lalita Kumari v. Govt. of U.P. and Ors., AIR 2014 SC 187.
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