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Vijay Madanlal Choudhary v. Union of India

Supreme Court of India · 27 July 2022 · 3 judges

The Court upheld the challenged PMLA provisions, including Sections 5, 19, 24, 45 and 50, read down the proviso to Section 44(1)(a), gave Section 3 a wide reading, and held that ED officers are not police officers.

Facts

After Nikesh Tarachand Shah v. Union of India declared the twin bail conditions in Section 45(1) of the PMLA unconstitutional, Parliament amended Section 45 by Act 13 of 2018 to cure the defect and revive the twin conditions. The amendment and several other provisions of the PMLA, and the procedure followed by the Enforcement Directorate in inquiring into and investigating offences, were challenged in writ petitions in the Supreme Court and in High Courts. Appeals arising from bail and other orders, transfer petitions and transferred cases were tagged together. The Court confined itself to the validity and interpretation of the PMLA provisions, leaving individual reliefs and challenges to other statutes to be dealt with separately.

Questions before the Court

  1. What is the scope of the offence of money-laundering under Section 3, and does it depend on the scheduled offence?
  2. Are the provisions on attachment, search and seizure, arrest and burden of proof (Sections 5, 17, 18, 19 and 24) constitutionally valid?
  3. Are the twin conditions for bail in Section 45, as amended in 2018, valid after Nikesh Tarachand Shah?
  4. Are ED officers police officers, so that statements under Section 50 are barred by Article 20(3), and must an ECIR be treated like an FIR?

What the Court held

  • Section 3 has a wide reach and captures every process or activity connected with proceeds of crime, not only final integration into the economy. "And" in Section 3 is read as "or", and the 2019 Explanation is clarificatory.
  • The offence depends on proceeds of a scheduled offence that is registered or pending. The ED cannot prosecute on the assumption that a scheduled offence was committed; if the accused is finally discharged or acquitted of it, or the case is quashed, there can be no offence of money-laundering.
  • Sections 5, 8(4), 17, 18, 19, 24 and 63 are valid, subject to the safeguards and readings in the judgment. The proviso to Section 44(1)(a) is directory and read down to leave the Special Court discretion.
  • Nikesh Tarachand Shah did not obliterate Section 45 from the statute book; Parliament could cure the defect. Section 45 as amended in 2018 is reasonable and not arbitrary, and its rigours may apply even under Section 438 CrPC or in constitutional courts. Section 436A CrPC remains available.
  • Section 50 proceedings are an inquiry, not investigation in the strict sense; ED authorities are not police officers, and statements recorded by them are not hit by Article 20(3) or Article 21.
  • An ECIR is an internal document and cannot be equated with an FIR; supplying it is not mandatory, and disclosing the grounds of arrest at the time of arrest is enough. Whether some amendments could be made through a Finance Act was left open for the larger Bench in Rojer Mathew.

Why it matters

The judgment decides the validity and interpretation of the main provisions of the PMLA. It upholds the 2018 revival of the Section 45 twin bail conditions after Nikesh Tarachand Shah, disagrees with the observations in that case doubting the seriousness of money-laundering, distinguishes Tofan Singh in holding ED officers are not police officers, and holds that there can be no offence of money-laundering once the person is finally discharged or acquitted of the scheduled offence or that case is quashed.

In the Court's words

Copied from the official judgment; each passage links to its page.

“The Authorities under the 2002 Act cannot prosecute any person on notional basis or on the assumption that a scheduled offence has been committed, unless it is so registered with the jurisdictional police and/or pending enquiry/trial including by way of criminal complaint before the competent forum. If the person is finally discharged/acquitted of the scheduled offence or the criminal case against him is quashed by the Court of competent jurisdiction, there can be no offence of money-laundering against him or any one claiming such property being the property linked to stated scheduled offence through him.”
A.M. Khanwilkar, J.Page 533 of the judgment
“Section 3 of the 2002 Act has a wider reach and captures every process and activity, direct or indirect, in dealing with the proceeds of crime and is not limited to the happening of the final act of integration of tainted property in the formal economy.”
A.M. Khanwilkar, J.Page 532 of the judgment
“The provision in the form of Section 45 of the 2002 Act, as applicable post amendment of 2018, is reasonable and has direct nexus with the purposes and objects sought to be achieved by the 2002 Act and does not suffer from the vice of arbitrariness or unreasonableness.”
A.M. Khanwilkar, J.Page 537 of the judgment
“Thus, it must follow that the authorities under the 2002 Act are not Police Officers. Ex-consequenti, the statements recorded by authorities under the 2002 Act, of persons involved in the commission of the offence of money-laundering or the witnesses for the purposes of inquiry/investigation, cannot be hit by the vice of Article 20(3) of the Constitution or for that matter, Article 21 being procedure established by law.”
A.M. Khanwilkar, J.Page 499 of the judgment

Provisions interpreted

Related judgments

Case and bench

Parties
Vijay Madanlal Choudhary v. Union of India
Case
Special Leave Petition (Criminal) No. 4634 of 2014
Decided
27 July 2022
Bench
A.M. Khanwilkar, Dinesh Maheshwari, C.T. Ravikumar
Opinions
Unanimous. Judgment of the Court delivered by A.M. Khanwilkar, J.

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