ED's power to arrest in money laundering cases upheld by Supreme Court [28.7.22]

The Supreme Court has affirmed the Enforcement Directorate’s power to arrest and summon people under the Prevention of Money Laundering (PMLA) Act.

The Supreme Court on Wednesday upheld the Enforcement Directorate’s power to inquire, arrest and attach property under the Prevention of Money Laundering (PMLA) Act.

A bench led by Justice AM Khanwilkar delivered the verdict on a batch of petitions challenging the process of arrest, seizure and investigation carried out by the ED and seeking interpretation of provisions of the PMLA.

The court upheld the constitutionality of the provisions of Sections 5, 8(4), 15, 17 and 19 of the PMLA, which relate to the powers of ED's power of arrest, attachment and search and seizure. It also affirmed the "twin conditions" for bail in Section 45 of the PMLA.

In its verdict, the bench noted that probe agencies like the ED, Serious Fraud Investigation Office (SFIO) and Directorate of Revenue Intelligence (DRI) are not "police", and therefore, statements recorded by them during inquiry are valid evidence.

"ED officials are not police officers under CrPC. Statements recorded before ED officials are valid as evidence," said the bench.

It also specified that it is not mandatory for ED officers to disclose the ground of arrest at the time of detaining an accused in a money laundering case. The court also stated that it is not necessary to give ECIR (copy of complaint) to the accused.

Noting that money laundering is a standalone offence under the PMLA, the bench said, "Nature or class of predicate offence has no bearing on schedule. ECIR is not equal to FIR. FIR not being recorded in predicate offence does not come in the way of ED inquiry."

The top court upheld the validity of various provisions of the PMLA and said that the twin provisions for bail under the Act are legal and not arbitrary. Petitioners had argued that these conditions for grant of bail were very stringent.

The question as to whether some of the amendment to the PMLA could not have been by way of the Finance Act has not been decided by this bench. A larger seven-judge bench will hear the issue of whether amendments could have passed as Money Bill.

Over a hundred petitions on various aspects of the PMLA were grouped together and heard by the bench headed by Justice AM Khanwilkar.

Under the stringent PMLA law, the power of arrest, granting bail, seizure of property are all outside the ambit of the Code of Criminal Procedure (CrPC).

The petitioners contended that the investigation agencies effectively exercise police powers, so they should be obligated to follow the CrPC while conducting investigations. Since the ED is not a police agency, statements made by the accused to the ED during an investigation can be used against the accused in judicial proceedings, which is against the legal rights of the accused.

The petitioners have argued about how the procedure for initiating an investigation, summoning witnesses or accused persons for questioning, recording of statements, attachment of assets violate the fundamental right of liberty.

Though the punishment for money laundering is a maximum term of seven years, securing bail is very difficult under the statute.

Petitioners have also argued that the power the ED officers are entrusted with under Section 50 of the PMLA to summon anyone and record their statement and force them to sign their statement, makes the defendant devoid of the safeguards and is a gross violation of the Constitution.

The government has, however, defended the Act, stating that it is a special law and has its own procedures and safeguards in it.

The Centre has also argued that money laundering is a serious threat to the economic strength of the country and sought to provide a stringent regime for dealing with it.


28 Jul 2022