SC Agrees To Review Aspects of PMLA Judgment: Law, Background & What To Expect?

The PMLA judgment from July has various ramifications and was widely criticised.

In a 545-page judgment in Vijay Madanlal Choudhary vs Union of India, the apex court on Wednesday, 22 July, upheld several provisions of the Prevention of Money Laundering Act, 2002, including those which relate to the power of arrest, attachment, and search and seizure conferred on the Enforcement Directorate (ED).

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A (recently retired) CJI NV Ramana-led bench of the Supreme Court on 26 August issued notice on a review petition filed against another recent top court judgment (Vijay Madanlal Choudhary and Ors vs Union of India and Ors). In this judgment – commonly known as the ‘PMLA’ judgment – a Justice Khanwilkar-led bench of the apex court had rejected the challenge to various provisions of the Prevention of Money-Laundering Act (PMLA), 2002. This judgment, however, was heavily criticised.

Meanwhile, the petitioners in the PMLA judgment filed a review petition before the Supreme Court, which issued notice on the same while observing that at least two issues require reconsideration.

However, considering the scope of the court's power of review as well as the impact of the Supreme Court's own observations, will the review be restricted to the aforesaid two issues or is there a possibility that the bench might also consider other issues?

Let us explore the matter in more detail.

First Things First: The PMLA Judgment

A top court bench led by Justice Khanwilkar had in July upheld several provisions of the Prevention of Money-Laundering Act (PMLA), 2002. Some of the key points of the judgment include:

• While interpreting Section 3 of PMLA, the court observed that mere concealment and possession of proceeds of crime would also amount to offence of money laundering. This is even if the proceeds of the crime have not necessarily been projected as untainted money.

• The twin conditions for bail as provided in Section 45 of PMLA were also upheld.

• Statements made to ED are admissible as evidence under Section 50 of PMLA.

• ED is not mandated to supply an Enforcement Case Information Report (ECIR) copy to the accused persons.

• Once it is established that a person is involved directly/indirectly in an activity connected with the proceeds of crime, legal presumption under Section 24 that the said proceeds of crime are used for the purposes of money laundering was upheld.

• Section 8(4) of PMLA, that allows taking of possession of the property solely on the basis of provisional attachment order, was held to be constitutionally valid

Brief Analysis of the PMLA Judgment

The aforesaid judgment has various ramifications and was widely criticised as being contrary to the fundamental principles of criminal jurisprudence on various counts.

Several jurists have expressed their disagreement with the aforesaid Supreme Court judgment, pointing out that it permits wide, unchecked, and brazen powers to the Enforcement Directorate.

Addressing an event, former Supreme Court Justice Nageshwar Rao even said, "Without being critical of the judges or the philosophy behind the judgment, I might have taken a different view."

One of the major issues which was highlighted by the former Supreme Court judge was the issue pertaining to the Supreme Court's observation that ECIR is an internal document of the Enforcement Directorate and hence, the Enforcement Directorate is not obliged to share a copy of the ECIR and that sharing the grounds of arrest is enough.

The aforesaid decision is seen to be contrary to criminal jurisprudence which provides that if a person is accused of an offence, he has the right to know the details of the charges being framed against him. This is why this provision may be argued as being contrary to Article 21 of the Constitution of India as well.

And what about other aspects of the judgment?

Well, one of the pillars of criminal jurisprudence is presumption of innocence. Thus, an accused is treated as innocent until he is proven guilty. However, Section 24 of PMLA casts the burden of proving guilt on to the accused instead of ED (investigating agency). Therefore, this is also seen as a departure from the fundamental principles of criminal law.

Then, there is Section 50 of PMLA which might compel the accused to be a witness against himself. This could be contrary to Article 20(3) of the Constitution of India as it affects fundamental rights against self-incrimination.

Further, one of the fundamental principles of law governing bail is that ‘bail is the rule and jail is an exception.' However, with the upholding of twin conditions under Section 45 of PMLA, getting bail under PMLA would become an even more difficult task. Thus, this is contrary to the established principles of bail.

Finally, the effect and application of the judgment of the Supreme Court are not limited to PMLA alone. Arguably, it has larger ramifications.

In this regard, it is relevant to understand that the observations of the Supreme Court in interpreting a statute (PMLA in this case) influences how courts across the country interpret other statutes too. Thus, law laid down by the Supreme Court in the PMLA judgment will have wide reaching effects on other statutes too.

When the Court Commented on PMLA While Dealing With a Different Matter...

The effect and implication of the PMLA judgment are not limited to PMLA alone. Here's a striking example of the same:

Recently, the CJI Ramana-led bench of the Supreme Court in yet another matter (Union of India and Anr vs M/s Ganpati Dealcom Pvt Ltd) was called upon to decide an issue pertaining to the Benami Transactions (Prohibition) Amendment Act, 2016.

While this issue was being considered by the Supreme Court, the PMLA judgment was cited by one of the parties to buttress a certain point which led to a brief discussion as regards to Section 8(4) of PMLA (concerning interim possession by authority before conclusion of final trial in exceptional cases).

However, CJI Ramana's bench, while considering the issue, opined that the aforesaid ‘ratio requires further expounding in an appropriate case, without which, much scope is left for arbitrary application.’

Still, in a matter not pertaining to the PMLA, the issue of PMLA was brought up and the need for reconsidering certain issues was vocalised.

The Review Petition in SC

The petitioners seeking review of the PMLA judgment also thereafter sought an oral hearing of the review petition.

At this juncture, it is relevant to note that the Supreme Court generally decides review petitions in judges' chambers and not in open court. The reason for not frequently affording a full-fledged oral hearing in a review petition is linked to the limited scope of review jurisdiction, which can be exercised only in the following situations:

• Discovery of new important matters of evidence

• Mistake or error on the face of record

• Any other sufficient reason

Thus, evidently, the scope of ‘review’ is limited to the aforementioned situations only. In view of this limited scope, the power of review is exercised only in limited cases.

The review petition in PMLA judgment was also objected to by the solicitor general of India on the ground that a mere error in judgment/orders cannot be a ground for review and that it is only in the contours of the review jurisdiction that a judgment can be reviewed.

However, an oral hearing was granted in this plea and the Supreme Court, in their order dated 25 August, held:

"Prima facie, we are of the view that at least two of the issues raised in the instant petition require consideration."

These two conditions, as per the courtroom exchange reported in news media, pertain to:

• Providing the accused with a copy of the Enforcement Case Information Report

• Reversal of presumption of innocence

But Wait...

But, it is pertinent to note here that neither the Supreme Court has enlisted these limited issues in its order nor has it said that the review shall be maintainable only on these two grounds. Instead what it said was:

"Having heard learned Senior counsel appearing on behalf of the petitioner as also learned Solicitor General appearing on behalf of the respondent, prima facie, we are of the view that at least two of the issues raised in the instant petition requires consideration."

Would the aforementioned order then mean that the review petition will be considered by the new bench only on the two limited grounds or is the review of the order dated 25 August not restricted?

Let us delve a little deeper into this...

The Judicial Premise of Review

The judicial premise of review was recently discussed by the Supreme Court in Yashwant Sinha and Ors vs Central Bureau of Investigation and Ors. The court in its order said:

"While a review petition has not been understood as an appeal in disguise and a mere erroneous decision may not justify a review, a decision which betrays an error which is apparent, does entitle the court to exercise its jurisdiction Under Article 137 of the Constitution..."

Further, the court noticed that there are "two values" that a system of law may consider:

• "Recognising that men are not infallible and the courts are manned by men, who are prone to error, there must be a safety valve to check the possibility of grave injustice being reached to a litigant, consequent upon an error, which is palpable or as a result of relevant material despite due diligence by a litigant not being made available or other sufficient reason."

• "...finality to litigation. Be it judgments of a final court, if it becomes vulnerable to indiscriminate reopening, unless a strong ground exists, which itself is based on manifest error disclosed by the judgment or the other two grounds mentioned in Order XLVII of the Code of Civil Procedure in a civil matter, it would spawn considerable inequity."

The Supreme Court in the said decision essentially observed that the remedy of review is different from that of an appeal. A review court is not required to revisit the decision and reconsider all the aspects. However, the top court also highlighted that unlike decisions of other courts, wherein a litigant has an opportunity to appeal, the Supreme Court is the last hope of the litigant.

Thus, this judgment makes it clear that the power of review is an exception to the otherwise finality of litigation before the Supreme Court (which is the final court of law).

What Does It Mean for the PMLA Judgment?

In the context of the above judgment, it would now be relevant to read into the effect of the order of CJI Ramana's bench in the petition seeking review of the PMLA judgment. The order states that at least two issues require consideration.

In my view, the term "at least" connotes inclusiveness and not exhaustive-ness, thereby meaning that the two issues agreed to be considered by the Supreme Court are not exhaustive in nature and other issues too may be considered by it at their discretion.

Further, the matter will now come up before a new bench and thus, the new bench might want to consider other aspects of the PMLA judgment (falling within the contours of review jurisdiction).

In such circumstances, the newly formed bench should have complete autonomy in considering the issues it deems important in its opinion and wisdom.

Personally though, in view of fundamental principles that govern the administration of law and justice, one can hope that the Supreme Court, while considering the review petition, may consider other issues as well. These include those pertaining to:

• The non-furnishing of ECIR to the accused

• Section 50 of PMLA with regard to admissibility of the statement by accused

• Reversal of burden of proof

• Twin conditions of bail under Section 45 of PMLA

(Tejasv Anand is a Senior Associate at Khaitan & Co. This is an opinion piece and the views expressed are the author's own, The Quint neither endorses them nor is responsible for them.)