PMLA: Guilty until proven Innocent

Updated: 9/13/2024

Last Updated: 13 Sept 2024

Unlimited powers to ED under PMLA^[1]

-- ED can arrest anyone on suspicion
-- ED and Courts should presume the accused as guilty unless accuse proves themselves as not-guilty

MODI Govt Overrode SC judgement

23 Nov 2017: Twin bail conditions (Section 45, PMLA) declared unconstitutional by the Supreme Court^[2]

Aug 2019: BJP Govt brought back these stringent conditions via Finance Act 2019^[3]

Kejriwal's arrest not only exposed this but also made way for SC to frame checks against Mis-use of PMLA Arrest as listed later

¶ Current STATUS of SC review

1> 25 Aug 2022: SC agreed to review & prima facie concurred 2 aspects require reconsideration but no listing yet^[4]

After reading the judgment, SC agreed to review its July PMLA verdict on atleast two issues
a. Sharing the ECIR
b. Reversal of the presumption of innocence

2> 06 October 2023: SC to review amending PMLA act without going to Rajya Sabha i.e. via Finance Act^[5]

¶ PMLA(ED) vs Normal criminal law

	Normal Criminal Law	PMLA
Assumption of Guilt^[1:1]	Innocent till proven guilty	Guilty till proven Innocent
Burden of proof^[1:2]	Investigation agency has to prove the crime	Burden on Accused to proven he is innocent
Bail	Fundamental principle 'Bail not Jail'^[6]	No Bail unless Court reasonable convinced of Innocence^[7]

¶ SC's Check against Mis-use of PMLA^[8]

“It is mandatory to record the ‘reasons to believe’ to arrive at the opinion that the arrestee is guilty of the offence, and to furnish the reasons to the arrestee. This ensures an element of fairness and accountability,”
“We hold that the power of judicial review shall prevail, and the court/magistrate is required to examine that the exercise of the power to arrest meets the statutory conditions”, rejecting ED's arguement that the power to arrest “is neither an administrative nor a quasi-judicial power as the arrest is made during investigation”, and that judicial scrutiny is “not permissible”
"The right to life and personal liberty is sacrosanct, a fundamental right guaranteed under Article 21 and protected by Articles 20 and 22 of the Constitution.”
The onus to establish satisfaction of the “reasons to believe” will be on the ED and not on the arrestee
“reasons to believe” should be furnished to the arrestee to enable him to exercise his right to challenge the validity of arrest

6.Arrest cannot be made arbitrarily and on the whims and fancies of the authorities

“Power to arrest under Section 19 (1) is not for the purpose of investigation. Arrest can and should wait, and the power in terms of Section 19 (1) of the PML Act can be exercised only when the material with the designated officer enables them to form an opinion, by recording reasons in writing that the arrestee is guilty.”
The officer acting under Section 19(1) of the PML Act cannot ignore or not consider the material which exonerates the arrestee. “all” or “entire” material must be examined and considered by the designated officer to determine the guilt or innocence of a person under the PMLA
The SC also noted the difference between the power to arrest and the need to arrest. "The officer must be satisfied that the arrest is necessary. Where the power is exercised without application of mind, and by disregarding the law, it amounts to abuse of the law

¶ Cases in Points

¶ Mis-use of ED?: LOW in convictions

ED A Political Tool?

¶ Why Bail under PMLA so Difficult?^[7:1]

Imprisonment without conviction: Like UAPA(Anti-terror law), the freedom of a person arrested under PMLA remains suspended unless the court finds “reasonable ground” to believe that he/she is not guilty

“Innocent until proven guilty”: This basic tenet of justice, does NOT apply in these cases, leading to thousands of people being arrested and put in jail for months and years even when the charge against them is yet to be proven

Section 45(1)(ii) of PMLA
“No person accused of an offence shall be released on bail unless the court is satisfied that there are reasonable grounds for believing that he is not guilty of such offence”

Solicitor General Tushar Mehta says, "There’s no doubt that the procedure to be followed by courts for granting bail to offenders under Prevention of Money Laundering Act (PMLA) is stringent" ^[9]

Senior advocate at the Supreme Court of India, Sanjay Hegde says, “If the ED decides someone has to go in (jail) and stay in, it’s a rare court that will come to the aid of the accused. Every case will have to be fought till the Supreme Court.” ^[10]

¶ What is PMLA?

Brought into force in 2005
In line with the recommendations of the Financial Action Task Force (an international body leading global action to tackle money laundering, terrorist, and proliferation financing), which led India to become a member of the FATF in 2010^[11]
The initial version of the act was more aligned with the problem it sought to address
Several amendments (in 2012 and 2019) over time made the provisions of the PMLA exceedingly harsh, oppressive, and prone to misuse at the hands of the agency tasked with its implementation and enforcement^[11:1]

Unlimited powers to ED under PMLA

ED can arrest anyone on suspicion^[1:3]
ED and Courts should presume the accused as guilty unless accuse proves themselves as not-guilty^[1:4]
A case of money laundering can be triggered by the mere allegation^[11:2]
Power to arrest: 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 that any person has been guilty of an offence punishable under this Act, he may arrest such person^[1:5]
Burden of proof: In any proceeding relating to proceeds of crime under this Act, the Authority or Court shall, unless the contrary is proved, presume that such proceeds of crime are involved in money-laundering ^[1:6]

¶ GST under PMLA

7 July 2023: The government has brought the Goods and Services Tax Network (GSTN) under the Prevention of Money-laundering Act (PMLA), as per a notification^[12]

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