By: Ram Chander Sankhla, Advocate | Former Chief Commissioner, GST & Customs| Managing Partner, Sankhla Law associates |

Author can be reached at www.rrsla.com

——————————— CONTINUED FROM PART I ; II & III——————————

 

ARREST IN PMLA:

43. Section 19 explains the manner in which arrest of person involved in money-laundering can be effected. Sub section (1) of Section 19 envisages that Director, Deputy Director, Assistant Director, or any other officer authorised in this behalf by the Central Government, if has material/ reason to believe that any person has been guilty of an offence punishable under this Act, he may arrest such person. Besides the power being invested in high-ranking officials, Section 19 provides for inbuilt safeguards to be adhered to by the authorised officers, such as of recording reasons for the belief regarding the involvement of person in the offence of money-laundering. That has to be recorded in writing and while effecting arrest of the person, the grounds for such arrest are informed to that person. Further, the authorised officer has to forward a copy of the order, along with the material in his possession, in a sealed cover to the Adjudicating Authority, who in turn is obliged to preserve the same for the prescribed period as per the Rules. This safeguard is to ensure fairness, objectivity and accountability of the authorised officer in forming opinion as recorded in writing regarding the necessity to arrest the person being involved in offence of money-laundering. Not only that, it is also the obligation of the authorised officer to produce the person so arrested before the Special Court or Judicial Magistrate or a Metropolitan Magistrate, as the case may be, within twenty-four hours. This production is also to comply with the requirement of Section 167 of the Cr. P.C. of 1973. There is nothing in Section 19, which is contrary to the requirement of production under Section 167 of the 1973 Code, but being an express statutory requirement under the 2002 Act in terms of Section 19(3), it has to be complied by the authorised officer.

44. The challenges by the petitioners, against section 19 is that, in absence of any formal complaint being filed, arrest under Section 19 is against the purport of Section 167 of the CrPC,1973 Code, where a person can be arrested by the jurisdictional police without warrant under Section 41 of the 1973 Code only upon registration of a complaint under Section 154 of the 1973 Code in connection with cognizable offence or pursuant to the order of the Court. Even, in case of arrest pursuant to the order of the Court, a formal complaint against such person accusing him of being involved in commission of an offence is essential. Moreover, the person produced before the Court would be at a loss to know the grounds for arrest unless a formal FIR or complaint is filed accusing him about his involvement in the commission of an offence. The provision if interpreted to permit the authorised officer to arrest someone being involved in the commission of offence of money-laundering without a formal complaint against him, would be ex facie manifestly arbitrary and unconstitutional.

45. The above challenge was however negated by the Hon’ble court. It held that PMLA is a comprehensive legislation, not limited to provide for prosecution of person involved in the offence of money laundering, but mainly intended to prevent money-laundering activity and confiscate the proceeds of crime involved in money laundering. In other words, this legislation is an amalgam of different facets including setting up of agencies and mechanisms for coordinating measures for combating money-laundering. These provisions in no way invest power in the Authorities referred to in Chapter VIII of the 2002 Act to maintain law and order or for that matter, purely investigating into a criminal offence.

46. The Court relied on similar provisions in other legislations, such as Section 35 of FERA and Section 102 of Customs Act including the decisions of Supreme Court upholding such power of arrest at the inquiry stage bestowed in the Authorities in the respective legislations. In Romesh Chandra Mehta vs state of West Bengal- (1969) 2 SCR 461, the Constitution Bench of Supreme Court enunciated that Section 104 of the Customs Act confers power to arrest upon the Custom Officer if he has reason to believe that any person in India or within the Indian Customs waters has been guilty of an offence punishable under Section 135 of that Act.

47. Again, in the case of UOI vs Padam Narain Aggarwal & ors-(2008) 13 SCC 305, while dealing with the provisions of the Customs Act, it noted that the term “arrest” has neither been defined in the 1973 Code nor in the Indian Penal Code, 1860 nor in any other enactment dealing with offences. This word has been derived from the French word “arrater” meaning “to stop or stay”. It signifies a restraint of a person. It is, thus, obliging the person to be obedient to law. Further, arrest may be defined as “the execution of the command of a court of law or of a duly authorised officer”. Even, this decision recognises the power of the authorised officer to cause arrest during the inquiry to be conducted under the concerned legislations. Accordingly, it was held that this provision is constitutional and not arbitrary.

48. The legal text of section 19 will help in better understanding of this provision:

“19. Power to arrest.—(1) If the Director, Deputy Director, Assistant Director or any other officer authorised in this behalf by the Central Government by general or special order, has on the basis of material in his possession, reason to believe (the reason for such belief to be recorded in writing) that any person has been guilty of an offence punishable under this Act, he may arrest such person and shall, as soon as may be, inform him of the grounds for such arrest. (2) The Director, Deputy Director, Assistant Director or any other officer shall, immediately after arrest of such person under sub-section (1), forward a copy of the order along with the material in his possession, referred to in that sub-section, to the Adjudicating Authority in a sealed envelope, in the manner, as may be prescribed and such Adjudicating Authority shall keep such order and material for such period, as may be prescribed.

 (3) Every person arrested under sub-section (1) shall, within twenty-four hours, be taken to a [Special Court or] Judicial Magistrate or a Metropolitan Magistrate, as the case may be, having jurisdiction:

 Provided that the period of twenty-four hours shall exclude the time necessary for the journey from the place of arrest to the [Special Court or] Magistrate’s Court.”

BURDEN OF PROOF:

49. Section 24 of the PMLA deals with burden of proof. It stands amended in 2013 vide Act 2 of 2013. The amendment of 2013 was necessitated because of the recommendations made by FATF in 2012, wherein it was noted that the countries should adopt measures similar to those set forth in the Vienna Convention, Palermo Convention and Terrorist Financing Convention. Section 24 thus, reads,

“[24. Burden of proof— In any proceeding relating to proceeds of crime under this Act, —

(a) in the case of a person charged with the offence of money-laundering under section 3, the Authority or Court shall, unless the contrary is proved, presume that such proceeds of crime are involved in money-laundering; and

(b) in the case of any other person the Authority or Court, may presume that such proceeds of crime are involved in money-laundering.]”

50. During the discussion on the validity of this provision, It was clarified that this special provision regarding burden of proof in any proceeding relating to proceeds of crime under this Act would apply to stated proceeding before the Adjudicating Authority as well as before the Special Court. Further, standard of proof varies depending on the nature of proceedings. In civil actions, it is preponderance of probability but in criminal actions, unless the law provides to the contrary, the onus is on the prosecution to establish the allegations and facts in issue beyond reasonable doubt. Furthermore, the burden or onus of establishing the facts in issue, keeps on shifting and is on the party who asserts a particular fact.

51. Section 24 deals with two situations. The first part concerns the person charged with the offence of money-laundering under Section 3. The second part [Clause (b)] concerns any other person. Taking the second part first, such other person would obviously mean a person not charged with the offence of money-laundering under Section 3 of the 2002 Act. The two parts, in one sense, are mutually exclusive. If a person is charged with the offence of money-laundering under Section 3 owing to a complaint filed by the authority authorised before the Special Court, Clause (a) would trigger in. As regards the second category [Clause (b)] of person, the expression used is “may presume”. Whereas, qua the first category [Clause (a)] the expression used is “shall, unless the contrary is proved, presume”. In such a case, once the issue of admissibility of materials supporting the factum of grave suspicion about the involvement of the person in the commission of crime under the 2002 Act, is accepted, in law, the burden must shift on the person concerned to dispel that suspicion. It would then not be a case of reversal of burden of proof as such, but one of shifting of burden on him.

52. The Court further observed and to quote,

“Suffice it to observe that the change effected in Section 24 of the 2002 Act is the outcome of the mandate of international Conventions and recommendations made in that regard. Further, keeping in mind the legislative scheme and the purposes and objects sought to be achieved by the 2002 Act coupled with the fact that the person charged or any other person involved in money-laundering, would get opportunity to disclose information and evidence to rebut the legal presumption in respect of facts within his personal knowledge during the proceeding before the Authority or the Special Court, by no stretch of imagination, provision in the form of Section 24 of the 2002 Act, can be regarded as unconstitutional. It has reasonable nexus with the purposes and objects sought to be achieved by the 2002 Act. In any case, it cannot be perceived as manifestly arbitrary as is sought to be urged before us.”

 

DISCLAIMER:  The views and opinions expressed in this article are solely those of the authors and do not necessarily reflect the official policy or position of any other individual, organization, employer or Firm. The information provided in this article is accurate and true to the best of the author’s knowledge, but there may be omissions, errors, or mistakes. The authors shall not be liable for any damages, losses, or injuries arising from the use of or reliance on the information presented in this article. Readers are advised to verify any information provided here and to consult with appropriate professionals for specific advice tailored to their individual circumstances

———————————TO BE CONTINUED PART V———————————