Visiting Vijay Madanlal Chaudhary Case : A trailblazer under Money Laundering Act

Introduction

The source of all greed is considered to be money for the luxuries and latent power it holds. In order to have a social and economic standing the crime of money laundering is committed by the offenders. Money laundering is done with the intention to convert the unaccounted money as legally procured one. In order to regulate the offences of laundering of money, the Prevention of Money Laundering Act, 2002 was enacted that provides for special courts to try such cases along with the provisions of confiscation and adjudication.

MONEY LAUNDERING

Money Laundering is the act where the intention is to make black money convert to white money by laundering or washing it. The laundered money is then shown as legally acquired or accrued money by a person irrespective of the source it is obtained. The unobtained money is being classified as untainted money which is legalized through legal channels like Shell Companies, etc.

The Offence of money laundering is per se not an offence because of its reliance on other offences to happen which facilitate for money laundering. The Prevention of Money Laundering Act, 2002 is one such legislation that deals with the offences of money laundering which may be done with respect to the scheduled offences as are given in the schedule of the Act. Section 3 of the Act provides for the offence of money laundering where a person who directly or indirectly have the proceeds of crime or a property of value outside India would be guilty of the offence of money laundering and such attempt is also punishable.

The case of Vijay Madanlal Chaudhary is a milestone judgement that clarifies various aspects of the Prevention of Money Laundering Act, 2002 ( PML Act, henceforth) regarding their constitutional validity along with providing expansive interpretation to the provisions of the Act. The case is a landmark on that prescribes not only about the Enforcement Directorate ( ED henceforth) validity of power it holds along with the upholding the constitutional validity of various other provisions like Section 5, 8(4), 15, 17 and Section 19 of the Act. The case also throws light on the various angles of the Act and provides a stable ground of contention for expansive application of the Act.

The Court also upheld the constitutional validity of Section 24 of the Act which deals with burden of proof. The burden of proof under the PML Act is reverse burden of proof that acknowledges that it is primarily the accused's duty to prove that he is innocent. The Section 24 was challenged on the ground of existence of reverse burden of proof, but the court upheld it on the line that this provision is reasonable and in line with the objectives and aspirations of the PML Act.

Twin Conditions of Bail - The Court's View

The matter before the court was with respect to challenging the Section 45 of the Act in light of the twin condition of bail which was held to be invalidated in the Nikesh Tharachand Shah v. Union of India. The court in this case of Vijay Madanlal Chaudhary upheld the validity of the twin test while determination of bail of a person under the PML Act. The contention of the court for such retention of the twin condition was that the provisions of the Section 45 surfacing twin condition are not arbitrary as a reasonable limitation is being applied where it acknowledges a strict essence in the application and granting of bail under a special legislation.

The twin condition which are as-

1. Reasonable ground for allowing bail
2. The Public Prosecutor has the opportunity to oppose the accusation on the accused along with facilitating that the accused would forbid from any such similar act.

Conundrum between ECIR and FIR

ECIR which stands for Enforcement Case Information Report, was a ground of contention before the court with regards to whether it should be supplied to the accused as the accused has the right to be informed under Article 22(1) of the Constitution of India. The Court held that this is an internal document of the ED [Enforcement Directorate] and ED is tasked with the confidential information and is a special body, thus, specifically it is different from FIR and thus such confidential information need not be in public domain as required under Section 4(b)(v) of the Right to Information Act, 2000. Court further suggested the ED to frame a general manual to display it on its website for the citizens to have a basic information about its procedures that does not stand against the confidentiality touchstone.

Conclusion

The offence of money laundering is a serious and heinous offence as it not only cause harm to the society but also to the economy of the nation. The case of Vijay Madanlal Chaudhary is a trailblazer in reassuring that the provisions under the Act are constitutional and strict so as to have a rigorous impact on the offender and to provide deterrence towards the offence that is so committed. The PML Act acknowledges the various modes through which money laundering could be done apart from the offences that are provided in the Schedule of the Act.

References

1. Vijay Madanlal Chaudhary and ors v. Union of India and ors.
2. Nikesh Tharachand Shah v. Union of India.
3. Supreme Court Upholds ED's Power Of Arrest, Attachment, Search & Seizure And "Twin-Conditions" For Bail; Says PMLA Has Stringent Safeguards