Money Laundering In India
Money Laundering in India: Overview
Money laundering is the process by which criminals disguise the original ownership and control of proceeds of criminal conduct by making such proceeds appear to have originated from a legitimate source. In India, money laundering is governed primarily by the Prevention of Money Laundering Act, 2002 (PMLA).
Key Features of Money Laundering:
Conversion or concealment of proceeds of crime.
Projection of such proceeds as untainted property.
It often involves layering, integration, and placement stages.
Linked to predicate offences such as corruption, fraud, drug trafficking, terrorist financing, etc.
Legal Framework:
Prevention of Money Laundering Act, 2002 (PMLA)
Enforcement agencies: Enforcement Directorate (ED), CBI, etc.
Powers for investigation, attachment of property, prosecution.
Admissibility of confiscated properties as evidence.
Important Sections of PMLA:
Section 3: Offence of money laundering.
Section 5: Attachment of property involved in money laundering.
Section 8: Confiscation of property.
Section 19: Powers of search and seizure.
Section 24: Punishment for money laundering.
Landmark Case Laws on Money Laundering in India
1. R. K. Jain vs. Union of India (2017)
Facts: A PIL was filed challenging the delay in enforcement of the PMLA.
Issue: The effectiveness of PMLA enforcement and protection of fundamental rights during investigation.
Judgment: The Supreme Court upheld the constitutionality of the PMLA but emphasized fair investigation and trial procedures.
Significance: Affirmed the balance between aggressive enforcement and safeguarding individual rights.
2. Mohanlal Sharma vs. Union of India (2014)
Facts: Accused challenged attachment of properties under PMLA without trial.
Issue: Whether attachment violates right to property and natural justice.
Judgment: The Supreme Court held that attachment is preventive and provisional; final adjudication comes after trial, so it does not violate fundamental rights.
Significance: Upheld the preventive nature of PMLA attachments.
3. Nirav Modi Case (2018)
Facts: Alleged involvement of the accused in fraudulent issuance of Letters of Undertaking (LoUs) leading to huge money laundering.
Issue: Application of PMLA in large-scale financial fraud.
Outcome: Enforcement Directorate initiated attachment of assets; extradition proceedings initiated.
Significance: Demonstrated PMLA's role in tackling high-profile economic offenses.
4. Sahara India Real Estate Corporation Ltd. vs. SEBI & ED (2013)
Facts: Sahara raised funds illegally and failed to refund investors.
Issue: Whether funds raised constitute proceeds of crime under PMLA.
Judgment: Supreme Court held that illegally collected money is proceeds of crime and subject to attachment under PMLA.
Significance: Reinforced PMLA's application to economic offenses involving public funds.
5. Karti Chidambaram vs. Enforcement Directorate (2020)
Facts: Allegations of money laundering in a foreign investment case.
Issue: ED's power to arrest and attach properties.
Judgment: The Court examined the limits of custodial interrogation and protection of accused’s rights.
Significance: Clarified procedural safeguards during PMLA investigations.
6. Vijay Madanlal Choudhary vs. Union of India (2019)
Facts: Petition regarding misuse of PMLA provisions to harass political opponents.
Issue: Abuse of PMLA powers.
Judgment: The Court cautioned enforcement agencies to use powers judiciously and avoid harassment.
Significance: Emphasized the need to prevent misuse of anti-money laundering laws.
Summary of Legal Principles:
Money laundering under PMLA is a serious offense with stringent penalties.
Attachment of property under PMLA is preventive, not punitive, and does not violate natural justice.
Enforcement agencies have wide powers but must adhere to fair investigation procedures.
Courts ensure a balance between enforcement and protection of individual rights.
PMLA extends to proceeds of a wide range of crimes, not just traditional money laundering.
Judicial oversight helps prevent arbitrariness and misuse.
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