Thread by @lawbarandbench

#SupremeCourt to commence hearing a batch of petitions concerned with the interpretation of the Prevention of Money Laundering Act #PMLA @dir_ed

Justice Khanwilkar: The other day some junior counsel used the term housekeeping. I told him that we are not in the hospitality industry.

Sr Adv Kapil Sibal: I was following the solicitor.

Khanwilkar J: It's a lighter moment

Sibal: As you know the PMLA has been amended many times and it has been included in the Finance Act so there is a constitutional argument.
The second point is the interpretation by Toofan Singh to the fact that PMLA is not a regulatory statute, it's a penal statute

Sibal: Vol 4 is the view of various HCs on the nature of the events. Is it cognizable, non cognizable or sui generis.
Vol 5 deals with case law in Section 50 where you can call the person without telling him he's a witness or an accused and the proceed like a court of law.

Sibal: Vol 6 deals with self incrimination and confessions to a police officer.
Vol 7 is the international treaties.
Vol 8 is a case law compilation and deals with the whole issue of FIR, ECIR.
Vol 9 that you'll get talks about the context of Roger Matthew and the law whether

Sibal: these amendments could be passed that it is not a money bill. The Roger Matthew has been referred to a seven judge bench.
This is the broad canvas.
Before I start I want to make some preliminary submissions.

Sibal: Over the years we have seen that amendments have been made to statutes that gives enormous powers to the executive. According to us, and I'll try to prove that, these powers are so draconian that it attacks the core of criminal procedure.

Sibal: It has given powers that the constitution never imagined. I'll show they violate the basic tenets of the criminal justice system.
I'll demonstrate that some of the bail provisions are such that it is impossible for an individual to get a bail coz he doesn't have the

Sibal: wherewithal for it. Unless I'm proved innocent I will not get bail.

The whole concept of bicameral legislature- laws passed as money bills by bypassing the Rajya Sabha. This of course has been referred to seven judges.

Sibal: Then of course a person is called without telling him he's a witness or an accused, take his statement and use it in the court of law.

The whole point of PMLA was to ensure drug money doesn't get funneled to organisations that work against the country like terrorists

Sibal: The point is what is tainted should not become untainted passing through the banks.

I'll come to Vol 9 later but let me start with some basic issues.

Under the PMLA, there is a predicate offence say 420 and an FIR is filed. Thereafter, the ED registers what is called an

Sibal: Enforcement Case Information Report- ECIR. The individual que whom the ECIR is registered knows nothing about it. Doesn't have a clue. Without that clue he can be called by the ED and arrested. He need not be told what the ECIR contains. The first question that you'll

Sibal: have to consider is can there be a procedure in law where penal proceedings can be started against the individual without informing him what it's about.

Any process involving a criminal investigation has to be open.

SC: This opening known can be shared with all counsels

Sibal: That's correct.

SC: There are 9 volumes, we'll not entertain others

Sibal: We are exhaustive. That's correct, nothing will be repeated.

SC: Yes. This is a matter of law, we don't have to decide on facts.

Justice Ravikumar's office struggles to find a copy of the concerned paperbook.

Sibal: As luck would have it, my entire staff is down with covid. I have no help at all. Luckily we prepared earlier.

Sibal: *Reads his note*
Unless you have some evidence about the act, how can you file an ECIR. And you don't even tell the accused. How will he get to know?
Under 173(2) chargesheet is filed, which is available to the accused. Then documents are supplied and ,207 comes in play.

SC: Analogy of 207 may not be appropriate at this stage. That happens after investigation.

Sibal: Yes, yes. This aspect of the accused getting the FIR is clarified by the SC that the accused is entitled to get a copy of the FIR way before 207.
Please look at Vol 8

Confusion ensues regarding required availablity of documents at the respective residences of the judges.

Sibal: Informing the accused what the accusations against him are is basic to the criminal justice system. There's another judgement, it's of Del HC. Court on its own motion.
It goes ahead to say-
"My paradise, my prison, I'd love to leave the crystal walls"

Sibal: Under PMLA, they take the statement and convict him on the statement because he's bound to tell the truth. The complaint is filed later. He doesn't know why he's there, if he's a witness or an accused. How is this consistent with the SC case?

Sibal: The next judgement which is also Vol 8. This is the extent your lordships have gone to protect the accused and PMLA is just averse to that.

SC: Does the PMLA explicitly exclude these provisions of CrPC?Even in case of detention, immediately after arrest, detenue is entitled to receive all documents. This offence can be considered as sui generis but the procedure remains the same.

Sibal: Yes, that's exactly what we are arguing. "The provisions of CrPC apply as long as it is compliant with this Act"
Which is why I said this is against the basic tenets of criminal jurisprudence.

SC: We will assume that it's a sui generis procedure and offence.

SC: The transparency cannot be done away with under 22(1).

Sibal: Kindly see 71 also. There's nothing inconsistent as there is no reference to 154. It is clear that you cannot bypass the criminal procedure.
Under search and seizure, the provisions are inconsistent with CrPC

Sibal: where provisions of that Act will apply.

SC: Yes, that's not a problem.

Sibal: I'll come to it. Some of them are inconsistent with the procedure so 71 will apply.
The argument of the other side is that the scheme of the act is such that you must exclude these provisions

Sibal: from criminal procedure.
Please come back to the note on page 4.157 is not applicable, they don't go to jurisdictional magistrate.
On some occasions, they provide it during adjudicational proceedings.

Justice Ravikumar: Vol 8 I'm not getting, rest are there.

Sibal: It was sent yesterday morning.

Justice Khanwilkar: You can send it anyway. Your AOR can take the email of the office of Mr Ravikumar and send there, not the SC.

Sibal: We'll send the soft copy. I'm so sorry

Justice Khanwilkar: This is exceptional circumstances. Not for everything.
*Laughs*

Sibal: There's a case before Justice Mukta Gupta where ED has taken the stance that they will not give.
It's very interesting.

SC: If all parties are contending the ECIR matter, we'll see to it. What is the other grievance?

Sibal: We are talking about criminal justice system,

Sibal: that's what my lord is telling me.

SC: Unless some inconsistent are there in the PMLA act...

Sibal: I agree. I agree. If it's a cognizable offence 154 will apply, non cognizable 155 will apply. But you can't get away from 154 and 155.

SC: Yes unless something else is

SC: postulated but the Act.

Sibal: That's the arguments I'm canvassing.
Please look at S2(u) proceed of crimes. Property held outside the country was incorporated by finance act, in a money bill. That's a separate issue which I'll come to later.

SC: We don't know if all of you

SC: are taking the position that we should remark.

Sibal: With respect, no because it is pending before 7 judges.

SC: We say mutandis applies then there's no question of going into the money bill argument.

Sibal: You will still have to because they are stillborn. I will point

Sibal: out in Vol 9 when you get it.
Kindly see Section 3. How will your lordship decide this? This explanation according to us is stillborn. You'll see many such incorporations which have got nothing to do with money bill.

SC: After hearing both sides perhaps we'll be able to

SC: cull out that.

Sibal: Most of them are after 2015 amendment.

SC: Mr Solicitor General, can we get a chart which cases come under which amendment. Prior to 2015 amendment and post. Same with 2019.

ASG Raju: It will be done.

Sibal: My hunch is most cases will be covered by

Sibal: 2015 amendment.

SC: Is it retrospective or prospective?

Sibal: Yes, yes. Retrospectivity is the order of the day.

Sibal: The offence is projecting something tainted as untainted. The explanation says 'or' instead of 'and' project as untainted. This changes the meaning. It is done through a finance bill.

SC: Can you give us legislative history?

Sibal: I have a separate volume for that.

Sibal: Vol 1, my lords.
*Reads pg 68*
The limit was 30lakhs then they made it 1 crore and then no limit. So you'll have to ask the solicitor to see which cases are covered by what.

Sibal: The legislative parameter I must tell the truth..

SC: That's confession.

Sibal: That will be covered later. First you have to see if you're summoned as a witness or an accused. That they are not being told.

SC: This will come first, then arrest then Investigation.

Sibal: They can be arrested before only. Under the PMLA they can.

Please come to S20(5) which you'll find at page 79. We are not concerned with that .
Come now to 151. The schedule. It's draconian.
I don't want to make an uncharitable common but let's lose a lot of things.

Sibal: The important thing is the addition of Customs Act which is also incorporated by Finance Act 2015.

Sibal: See the offences under the Companies Act. 447 is added. Under Companies Act, PMLA doesn't apply.
If those who indulge in such activities should be prosecuted but under the law there should be some protections given to the accused. We aren't saying they shouldn't be

Sibal: prosecuted. I'm on constitutional matter. You can do anything you want but in context of law. You can take care of mischief but do it in accordance with law.
Constitutionally, can you regard it as law?

Sibal: Finance bills have been given special status because there has to be allocation on funds and all.

SC: Chidambaram gave a note in the Aadhar case.

Sibal: Yet it was decided against him. It was brilliant. He is our guru in finance matters.

Sibal: Let's see if I buy jewelry. They don't know if it's tainted money. How do you justify this? And then you introduce this in finance act

Sibal: I'm sorry to say, I'm also a part of it. I'm a member of the Parliament. We have never seen anybody to have such kinds of powers.
Section 3 of the principle act.
*reads*

Sibal: The offence is not proceeds of crime, the offence is money laundering.

SC: Act of giving the money to third party and third party making it untainted is money laundering.

Sibal: The day I convert my undisclosed income to untainted is money laundering. What happens after

Sibal: to it is not relevant. The offence is circumscribed by time.
But this makes money laundering a continuous act.

SC: Let's say a person buys the house with tainted money and rents it out, he gets rent then what?

Sibal: The moment he buys the house is money laundering m

Sibal: It cannot be a continuing act.

SC: How does it become untainted? It continues to be tainted. By passing from X to Y it's money laundering, passing from Y to Z is also money laundering.

Sibal: If I rob someone, the moment I invest the money in something to project it

Sibal: as untainted money that is money laundering.

SC: There has to be tainted money and then projecting or using it as untainted money. We get that.

Sibal: Yes yes. That's what I'm saying. That's the offence. It's not continuing.

SC: Mr Chidambaram wants to come in.

P Chidambaram: And cannot be read as Or. It's using and projecting as untainted. It would be grammatically incorrect otherwise.

SC: The original was or then they changed it to and because they saw this problem coming. Maybe Mr Chidambaram suggested that.

Sibal: They should listen to him more often

Sibal: Please come to page 65, Justice Gogoi's judgement. This was about putting matters related to appointment of certain offices etc and the judgement states that you can't put them in a money bill
*Reads*

SGI Tushar Mehta: I request Mr Sibal to read everything.

Sibal: I am reading everything.

Sibal: While the 7 judge matter is pending, the amendments may not be considered valid.

SC: That will not be according to law. We'll have to first rule that none of the amendments are invalid wrt 102.
For that we'll have to see provisions.

Sibal: please refer to vol 9.
Roger Matthew is dealt with.
Right on top of page 5.
*Reads*

SC: If we have to say dominant purpose, we have to see larger bench.

Sibal: Of the 8 PMLAs proposed 6 are only on adding explanation. What does it have to do the finance bill amendment?

Sibal: It cannot be said that these explanations have anything to go with 101.
There was no nexus between PMLA and the finance act.
Please go to my note now.

Sibal: The movement of tainted money from illegitimate person to legitimate with the intention to make it look untainted, is money laundering. Otherwise it will become proceeds.
The laundrying term is this

Sibal: That the original source cannot be tracked. Otherwise it will be proceeds of crime