PMLA: Any property of any person can be attached without a final report (read: charge sheet)

A lot of people often wonder if the pre-existence of a final report/charge sheet under section 173 of CrPC is necessary before a property can be attached under the Prevention of Money Laundering Act[1]. Another question that often comes up is whether a property can be attached under section 5(1) of PMLA without the person in possession of such property being accused in a criminal complaint of a scheduled offence under the Act or the offence of money laundering.

The Madras High Court exhaustively examined in Dr. V.M. Ganesan Vs. The Joint Director, Director of Enforcement MANU/TN/2475/2014[2] the scope of Section 5(1), which empowers a duly authorized Enforcement Directorate officer to provisionally attach a property he believes to have been obtained using the proceeds of crime. It ruled that a provisional attachment order can indeed be made without a final report under section 173 of CrPC having been forwarded to a Magistrate in relation to a scheduled offence. The reasons assigned follow below.

The High Court embarked on this exercise by noticing the amendment to Section 5 effected by the PMLA (Amendment) Act, 2012[3], observing that an earlier requirement that the person against whom the said provision is sought to be invoked must have been charged with a scheduled offence has been done away with.

It then noticed the two provisos to Section 5(1), the first of which clearly lays down that no order of attachment is to be made unless a final report under section 173 CrPC has been forwarded to the Magistrate in relation to a scheduled offence or a complaint has been made by the person authorized to investigate a scheduled offence to a Magistrate or Court as the case may be. However, it is the second proviso that changes everything.

The second proviso to Section 5(1) is a non-obstante clause, which equips the Enforcement Directorate officer authorized to act under the said section with a powerful tool to deal with any reasonable apprehension of the likely frustration of any proceedings under the Act if a property is not attached immediately. In such an eventuality calling for swift action, the said officer can attach “any property of any person” (including a person not accused of any offence) without bothering about the pre-existence of a final report under Section 173, which is not necessary under the second proviso.

The Court in Dr. V.M. Ganesan then observed that a provisional attachment order may be made against the following three categories of people:

“(i) person who is not accused of any offence, but who has merely come to possess, under fortunate or unfortunate circumstances, a property that represents the proceeds of a crime;

(ii) person against whom a complaint is lodged, but the investigation is not yet complete and a final report under Section 173 of the Code of Criminal Procedure not yet filed; or

(iii) a person who is accused of committing an offence and against whom a final report has been filed under Section 173 of the Code of Criminal Procedure before the competent Court.”

The first category described by the Ganesan court is clearly covered by the second proviso. It is equal parts interesting and terrifying in that it contemplates action against persons not accused of any scheduled offence or the offence of money laundering. It would appear that the second proviso has some potential for abuse.

The vires of the second proviso were recently challenged in a batch of writ petitions filed with the Delhi High Court[4], which shot down the said challenge on inter alia the ground that a provision cannot be said to be unconstitutional owing merely to the possibility of abuse. The Court pointed out that there were several inherent safeguards in Section 5(1), and that the second proviso could not be interpreted in such a manner as would render said safeguards otiose.

[1]http://www.enforcementdirectorate.gov.in/PreventionOfMoneyLaunderingAct2002.pdf?p1=117281489017600032

[2] https://indiankanoon.org/doc/41493946/

[3] https://dor.gov.in/sites/default/files/PML%20%28Amendment%29%20Act%2C%202012.pdf

[4] https://www.casemine.com/judgement/in/5a621d6d4653d00b3602cc77

Originally published at http://lawsyndicate.in on June 3, 2019.