Supreme Court’s observations on the PMLA – Questionable searches under the Money Laundering Act

Source: The post Supreme Court’s observations on the PMLA has been created on the article “Questionable searches under the Money Laundering Act” published in “The Hindu” on 22nd December 2023.

UPSC Syllabus Topic: GS paper3- security- money-laundering and its prevention

News: Supreme Court (SC) of India’s narrowing interpretation of the Prevention of Money Laundering Act (PMLA), has sparked criticism due to the perceived overreach of the Enforcement Directorate. This overreach is particularly noted in opposition-governed states, raising significant concerns about the impact on federalism and democratic values.

What is the PMLA Act?

Read here

What are the Supreme Court’s observations on the PMLA?

1. Proceeds of Crime definition: In Vijay Madanlal Choudhary vs Union of India (2022), the Supreme Court noted that only property derived from criminal activity related to a scheduled offence qualifies as “proceeds of crime” under Section 2(1)(u) of the PML act 2002.
2. ED’s style of functioning: a) ED’s Overreach- Criticism of the Enforcement Directorate’s overreach was especially noted in the case Pankaj Bansal vs Union of India, where the Supreme Court highlighted issues with the ED’s approach, b) Need for Fairness- In the same case, the Court emphasized the need for the ED to act with fairness, highlighting inconsistencies and lack of transparency in its operations.
3. Violations of Procedure: Judicial Misuse- In the handling of cases like Pavana Dibbur vs The Directorate of Enforcement, 2023 INSC 1029, the Supreme Court observed procedural violations and misuse, pointing out the need for strict adherence to legal standards by the ED and other authorities.

For more information on SC Judgment on various Sections of the PMLA read here

What are the concerns related to the misuse of the PMLA Act?

Impact on Federal Structure: Actions perceived as biased or overreaching by central agencies like the ED are seen as eroding the federal structure and democratic principles of the country.

Question for practice:

Discuss the concerns related to the misuse of the PMLA Act and its impact on the federal structure and democratic principles of India.