Author: Debamalya Das, Student of Karimganj Law College (Affiliated to Assam University).
Abstract:
The Prevention of Money Laundering Act, 2002 is a deterrent law which has been enacted by the Indian Parliament to prevent money-laundering and to provide for confiscation of property derived from, or involved in, money-laundering and for matters connected therewith or incidental thereto. This Act aims to combat money laundering related to illicit activities such as drug trafficking, smuggling and terrorism financing. Though this Act is very much essential for preventing money laundering but it contains some stringent provisions which violates the principles of natural justice and also its provisions have been seen as excessively harsh, infringing on fundamental rights, and granting disproportionate powers to the authorities for which it has been labelled as a “draconian law”. Therefore, the stringent provisions of this Act should be reviewed by the Jurists, Law Commission and Judges of the Apex Court and to make it fair as per the provisions of the Indian Constitution.
Keyword: Prevention of Money Laundering Act, draconian law, Indian Constitution.
Introduction:
India adopted the PMLA, 2002 after the United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances which held in 1988. And in that convention the state parties were urged to take actions to prevent the laundering of proceeds of drug crimes and other related activities. In 1989 seven major industrial nations took part in a summit held in Paris and thereby established the Financial Action Task Force (FATF) for examining the problem of money laundering and recommended measures to tackle this menace. After that in 1990, the United Nations General Assembly (UNGA) adopted a resolution on the Political Declaration and Global Programme of Action which called upon all the member states to legislate suitable laws for effective prevention of laundering of drug money. By considering the resolution of the United General Assembly, the Government of India used the recommendations of the FATF to formulate a legislation to prevent drug money laundering and accordingly, the Indian Parliament enacted the Prevention of Money Laundering Act, 2002 in consideration with Article 253 of the Indian Constitution which empowers to make laws for implementing the International Conventions. Despite the efficacy of this Act, its provisions still raise some concerns related to due process, individual rights, and the potential for misuse of the law.
Why Prevention of Money Laundering Act, 2002 is termed as a draconian law?
The Prevention of Money Laundering Act (PMLA), 2002 is often termed as a draconian law due to its stringent and unconstitutional provisions and the excessive powers it grants to authorities, which many argue infringe upon individual rights and due process. Hence, there are some concerns highlighted below regarding the PMLA for which it has been considered as draconian:
- Violation of Fundamental Rights-Certain provisions of the PMLA violates the fundamental rights guaranteed by the Indian Constitution, such as the Article 21 i.e. Protection of life and personal liberty, Article 14 i.e. Equality before law, Article 22(1) i.e. Protection against arrest and detention in certain cases and Article 20(3) and 20(2) i.e. Protection in respect of conviction for offences.
- Violation of Principles of Natural Justice- The reversal of the burden of proof, stringent bail conditions, and the admissibility of confessions made to the Enforcement Directorate (ED) officials are seen as violations of the principles of natural justice.
- Overturn of the fundamental principle of “Innocent until proven guilty”- The PMLA places the burden of proof on the accused to prove their innocence, which is contrary to the established principle of “innocent until proven guilty”. As in most of the criminal cases we can see that the burden of proof lies on the prosecution to prove the guilt of the accused but under the PMLA, this principle is reversed. The accused have to prove that their assets are not connected to money laundering activities. This reversal contradicts the fundamental legal principle of “innocent until proven guilty” and places an unfair burden on individuals to prove their innocence.
- Stringent bail conditions- The PMLA imposes stringent bail conditions, particularly the “twin conditions” under Section 45 of the Act, which brings the liability towards the accused to prove that they are not guilty and are unlikely to commit an offense if released. These conditions make it extremely difficult for the accused to get bail, leading to prolonged periods of detention without trial. Although inability to get bail easily can result in people being incarcerated for extended periods without a conviction, which is seen as a violation of their right to liberty.
Case Law- In Gudikanti Narasimhulu and Ors vs Public Prosecutor, High Court of Andhra Pradesh (1978) AIR 1 SCC 240, Justice Krishna Iyer raised the significance of personal liberty by stating that denying of bail is a serious judicial responsibility under Article 21 of the Indian Constitution, requiring careful consideration of its impact on the individual and society.
- Unauthorised powers of the Enforcement Directorate (ED)- The PMLA grants unauthorised powers to the Enforcement Directorate (ED) such as arrest without warrant, conducting of search and seizure without the order of the court. The ED can also provisionally attach properties of the accused before any formal conviction, which raises concerns about potential misuse and arbitrary actions.
- Lack of Transparency- There also raises a concern regarding lack of transparency in which the Enforcement Directorate doesn’t disclose the ground of apprehension or doesn’t share the Enforcement Case Information Report (ECIR) with the accused which creates an opaque investigative procedure, where individuals are left in the dark about the charges against them.
- Admissibility of Confessions- The statements made by the accused to ED officials U/s 50 the said Act during investigations and interrogations are admissible in the court of law, unlike confessions made to police officers under regular criminal law, which are generally inadmissible which raises concerns about potential coercion and the violation of the right against self-incrimination.
- Attachment of Property Without Conviction- Under Section 5(1) of the PMLA, the Enforcement Directorate can attach and seize properties allegedly involved in money laundering even before a trial concludes, which causes significant financial and reputational damages to individual and businesses, even if they are later acquitted. The ability to take such action based merely on suspicion, without a final court verdict, is seen as excessively harsh. Moreover, suspicion however strong cannot form the basis of a conviction in the absence of proof.
- Overlapping and lack of proper jurisdiction- The PMLA overlaps with other laws, such as the Income Tax Act 1961, the Benami Transactions (Prohibition) Act, 1988 and the Companies Act, 2013 which creates a complex legal framework where multiple agencies may be involved in investigating the same set of cases which leads to double jeopardy, inconsistent application of the law, and harassment of individuals and businesses.
- Prolonged Detentions and Delays in Trials- Due to the complexity of money laundering cases and the stringent bail provisions, accused individuals often face long periods of detention without a trial which attracts the famous maxim ‘justice delayed is justice denied’. The slow pace of judicial proceedings can lead to situations where people are effectively punished through prolonged incarceration before their guilt or innocence is determined.
- Impact on economy- The PMLA’s powers to freeze assets and seize properties have created a sense of fear among businesses and investors. The possibility of having assets attached based on allegations of money laundering, even before any wrongdoing is proven, can disrupt business operations and deter investment. This has raised concerns about the law’s impact on economic freedom and entrepreneurship.
Conclusion:
Thus, Prevention of Money Laundering Act,2002 is considered as a draconian law because it grants extensive powers to the authorities while reducing the protections typically afforded to the accused in criminal proceedings. Its provisions, such as the reversal of the burden of proof, stringent bail conditions, and the ability to seize assets without conviction, are seen as excessively harsh and susceptible to misuse. Supreme Court Judge Justice Ujjal Bhuyan once spoke on the need to judiciously use the powers under Prevention of Money Laundering Act (PMLA) and cautioned that if the law is misused, negative perceptions may arise against the Enforcement Directorate.
Proof
Use of Legal Jargon
Legal jargon includes ‘draconian law’, ‘justice delayed is justice denied’, ‘self-incrimination’, ‘double jeopardy’ and ‘innocent until proven guilty’.
FAQs
What is PMLA?
Prevention of Money Laundering Act (PMLA) is a deterrent law which aims to combat money laundering and empowers the concern authority to confiscate property derived from or involved in money laundering.
Why PMLA is considered draconian?
The PMLA is considered draconian due to various provisions such as arrest without warrant, reversal burden of proof, attachment of property without conviction and also not but the least the stringent bail provisions.
Can an arrested person challenge the actions of the Enforcement Directorate (ED) under the PMLA?
An arrested person can challenge the actions of the ED regarding attachment orders, arrests, or prosecution before the Appellate Authority such as High Court and Supreme Court under the PMLA.
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