Three months into the new year, the courts continue to reinterpret and shape the laws on money laundering. Today, it is one of the most feared crimes in India. Why? Because if you are accused of money laundering and end up being a guest of the state for it, you are unlikely to get any leniency from the judiciary when it comes to securing bail. This is despite the fact that the conviction rate for this offence remains below 5 percent. This is apart from the seizure of one’s assets including electronic items and freezing of bank accounts that the ED is empowered to do upon a mere suspicion that they contain evidence of ‘proceeds of crime’. Even before the crime of money laundering is proven.
Make no mistake, money laundering is indeed a serious offence. It can disrupt a country’s economy by robbing it of legitimate revenues and deserves to be treated with a stringent hand. But one concern about the tough law for fighting this crime is the unbridled powers it gives to the machinery that enforces it and the ease with which it can be misused. The trepidation begins the moment one is summoned by the ED. There is no way of knowing what you are being summoned for–whether it is for the commission of an offence or giving evidence as a witness.
The Prevention of Money Laundering Act (PMLA) allows the director, additional director, joint director, deputy director and assistant director of the ED to summon any person—if they deem it necessary to give evidence or produce documents during the course of the investigation (which is “inquiry” as per the Supreme Court when the provision was challenged before it). Those summoned cannot fail to appear, have to be truthful when giving statements, and must produce all documents sought. Hecannot refuse to answer any question, and cannot refuse to sign any statement which he or she has given. Each of these would have their own set of penal consequences.
The bonus the ED gets, which the police in a normal criminal case do not, is that the statements of those summoned as witnesses can be used as evidence in the court. This means the protection granted by the Constitution that no person’s statement can be used against him does not apply here unless the person summoned is a formal accused/is already arrested.
Furthermore, even though one may be summoned for providing evidence, the moment the evidence or statements provided bring to light the commission of some kind of offence, an arrest then and there cannot be ruled out. A notice of summons is often seen as a prequel to an arrest. For an arrest under PMLA, there has to be a scheduled offence. But for summoning a person for inquiry of an offence under the PMLA, a person need not be accused of committing any scheduled offence.
Courts in India often do not entertain challenges to summons issued by the ED. They would only interfere in exceptional circumstances, as seen in the cases mentioned above, where the courts feel that personal liberty is being violated. An apprehension of being coerced into giving statements, or being arrested cannot be grounds for challenging the summons by invoking the writ jurisdiction of the high courts. Last year, the Delhi High Court, in the case of Talib Hassan Darvesh, rejected the challenge to summons on the ground that it was vague (that is, without specifying whether the accused was being summoned as an accused or witness).
Of late, however, the courts have started giving some kind of clarity on some vital concerns that arose out of the power to issue summons by the ED. For example, the Allahabad High Court, in a recent ruling, held that at least some sort of reference or detail of the predicate offence or case must be indicated so that the person concerned could appear before the authority with complete details. This is despite the fact that the statutorily prescribed format of the summons does not provide any such details.
Similarly, the Karnataka High Court, in two recent cases, has made it clear that where no prima facie case has been established showing that an offence has been committed under the PMLA, and no incriminating material has been elicited at the time of search and seizure, the issuance of summons to the petitioner lacks legal authority. In the case of Parvathi Siddaramaiah, wife of Chief Minister Siddaramiah, the state high court held that since the MUDA land parcels which were allotted to her and which formed the alleged proceeds of crime in terms of the petitioner had been returned, the ingredients essential for the offence of money laundering had not been made out, and therefore, she could not have been summoned.
Even earlier, in 2023, the Karnataka High Court had not only held that summoning of a person repeatedly without probable cause or reasonable ground and only on the ground of suspicion alone is not in accordance with the principles of due causes and fairness, but also that such witness cannot be expected to make incriminating statements.
These judgments, although subject to reversal by higher courts, show that the ED’s powers to summon witnesses is not as unbridled as has been perceived—and the courts can restrict them where the need arises
Atul N Menon | Lawyer, Supreme Court
(Views are personal)