Money Laundering Under Pmla
1. Introduction to Money Laundering and PMLA
Money laundering is the process by which criminals conceal the origins of illegally obtained money by transferring it through complex sequences of banking transfers or commercial transactions, making it appear as legitimate income.
The Prevention of Money Laundering Act, 2002 (PMLA) was enacted to:
Prevent money laundering.
Confiscate property derived from or involved in money laundering.
Provide for the investigation and prosecution of offenders.
2. Key Definitions under PMLA
"Proceeds of crime": Any property derived or obtained, directly or indirectly, by any person as a result of criminal activity.
"Money laundering" (Section 3): Involves processes or transactions connected with the proceeds of crime, including concealment, possession, acquisition, or use of such property.
3. Main Offence: Section 3 of PMLA
If a person directly or indirectly attempts to conceal or possess proceeds of crime, commits an offence of money laundering.
Punishment: Rigorous imprisonment for a term not less than 3 years (may extend up to 7 years) and fine. If the offence relates to scheduled offences involving narcotics, punishment may extend to 10 years.
4. Adjudicating and Investigating Authorities
Enforcement Directorate (ED) investigates money laundering offences.
Confiscation and attachment of assets are provided under the Act.
Special courts try offences under PMLA.
5. Important Case Laws on Money Laundering under PMLA
🔹 Case 1: Nirav Modi vs. Enforcement Directorate (2021)
Facts:
Nirav Modi was accused of defrauding Punjab National Bank of ₹14,000 crore through fraudulent Letters of Undertaking (LoUs).
Held:
The Supreme Court upheld the Enforcement Directorate’s power to arrest, attach assets, and prosecute under PMLA.
Significance:
This case reinforced the stringent application of PMLA in high-profile financial frauds, emphasizing the need for timely investigation and attachment of proceeds of crime.
🔹 Case 2: Sahara India Real Estate Corporation Ltd. v. SEBI (2013)
Facts:
Sahara companies failed to refund investors as ordered by SEBI. SEBI initiated proceedings under PMLA.
Held:
The Supreme Court ruled that money collected illegally from investors amounted to proceeds of crime, allowing attachment and confiscation under PMLA.
Significance:
Confirmed that economic offences involving securities violations also attract PMLA action.
🔹 Case 3: Karti Chidambaram v. Enforcement Directorate (2020)
Facts:
ED initiated PMLA proceedings against Karti Chidambaram for alleged irregularities related to INX Media.
Held:
The Supreme Court reiterated that PMLA proceedings can continue independently and rejected plea of violation of natural justice based on non-availability of prosecution sanction.
Significance:
Clarified procedural aspects and upheld ED’s investigative powers.
🔹 Case 4: Ravi Shankaran v. Enforcement Directorate (2022)
Facts:
Ravi Shankaran, businessman, challenged the attachment of assets by ED alleging money laundering.
Held:
The Delhi High Court held that mere attachment under PMLA is not final confiscation, and accused has remedy to contest before Adjudicating Authority.
Significance:
Emphasized procedural safeguards in attachment and adjudication.
🔹 Case 5: Deputy Director Directorate of Enforcement v. Shyam Madanmohan Rao (2018)
Facts:
The accused was charged for laundering money obtained through illicit liquor business.
Held:
The Supreme Court held that the offence of money laundering is a continuing offence, and the burden lies on the accused to prove that proceeds are not from crime.
Significance:
Highlighted the burden of proof reversal in PMLA cases.
🔹 Case 6: Rajiv Saxena v. Enforcement Directorate (2021)
Facts:
Rajiv Saxena, accused in the Aircel-Maxis deal scam, challenged arrest under PMLA.
Held:
The Supreme Court refused to quash the ED's arrest and noted that PMLA is a special legislation with stringent provisions.
Significance:
Reinforced the seriousness of PMLA offences and the ED’s powers to arrest without bail easily granted.
6. Important Observations on PMLA from Case Laws
Burden of Proof: The accused must show that the property is not proceeds of crime.
Attachment vs. Confiscation: Attachment is a preventive step; confiscation is final after adjudication.
Interplay with Other Laws: PMLA investigations often run alongside IPC, FEMA, and SEBI regulations.
Special Courts: Try cases swiftly to ensure quick justice.
Sanction for Prosecution: Required under certain circumstances but not always mandatory.
7. Summary Table of Case Laws
| Case | Key Issue | Holding | Significance |
|---|---|---|---|
| Nirav Modi v. ED (2021) | Large-scale bank fraud & PMLA powers | Upheld ED’s powers to arrest and attach assets | Landmark financial fraud case |
| Sahara India v. SEBI (2013) | Illegal collection & PMLA applicability | Proceeds of crime include securities violations | PMLA extends to economic offences |
| Karti Chidambaram v. ED (2020) | Procedural aspects in PMLA | PMLA proceedings continue independent of sanction | Clarified investigation scope |
| Ravi Shankaran v. ED (2022) | Attachment of assets | Attachment not final; safeguards exist | Due process emphasized |
| Deputy Director v. Shyam Rao (2018) | Burden of proof | Money laundering is continuing offence; burden on accused | Burden shift principle |
| Rajiv Saxena v. ED (2021) | Arrest under PMLA | Arrest upheld; PMLA special law | Stringent approach to bail |
8. Conclusion
The Prevention of Money Laundering Act is a powerful and specialized legislation aimed at curbing illegal money flows in India. Judicial precedents emphasize the strict enforcement of PMLA provisions while also recognizing procedural safeguards to protect accused persons. The Act is a crucial tool for the government to tackle economic crimes and corruption.
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