Preconditions for ED Proceedings: ED cannot invoke PMLA before police register case
Context:
The Madras High Court ruled that possession of unaccounted property or illegal money alone is not sufficient for the Directorate of Enforcement (ED) to initiate proceedings under the Prevention of Money Laundering Act (PMLA), 2002.
- There must be material evidence indicating that the wealth is the proceeds of a crime related to a scheduled offence under the Act.
Relevance:
GS-02 (Polity)
Key Highlights:
- Requirement of Predicate Offence: The court emphasized that the ED cannot start PMLA proceedings before the jurisdictional police register a case for any criminal offence listed in the PMLA schedule. The ED must wait for the police to act first.
- Rejection of Assumptions: The judges stated that the ED could not take action based on assumptions and presumptions. There must be concrete evidence and legal proceedings initiated by the police for scheduled offences.
- Verdict on Specific Cases: The ruling was given on a batch of 24 writ petitions filed by individuals and companies, including P. Karikalan, S. Ramachandran, K. Rethinam, A. Rajkumar, and K. Govindaraj, who were investigated for alleged illegal sand mining activities in Tamil Nadu. The court quashed the Enforcement Case Information Report (ECIR) and the provisional attachment orders against these petitioners.
- Conditions for Property Attachment: The Bench clarified that the ED could attach properties without a pre-registered case only in exceptional situations requiring urgent action. Such measures should not be taken as a routine practice.
- Information Sharing: The court allowed the ED to share information collected with the jurisdictional police to ensure that any scheduled offence, if present, gets registered and investigated. Until such time, no action could be initiated against the petitioners based on the ECIR.
Prevention of Money Laundering Act (PMLA), 2002:
- Enacted in response to India’s global commitments, the PMLA aligns with international agreements like the United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances 1988.
- It forms a crucial part of India’s legal framework to combat money laundering, applicable to various financial entities.
- Recent Amendments:
- Proceeds of Crime Clarification: The definition broadens to include not only property derived from scheduled offenses but also those from activities related or similar to scheduled offenses.
- Redefining Money Laundering: Formerly dependent on a predicate offense, money laundering is now treated as a standalone crime under Section 3 of PMLA.
- Expanded Offenses: The amendment includes actions like concealment, possession, acquisition, and projecting as untainted property, treating them as integral to the offense.
- Continuing Nature: Money laundering is recognized as a continuing offense until the individual benefits from its associated activities, emphasizing the prolonged accountability of offenders.