Govt to Amend PMLA: Restitution of Attached Properties

The Union government is considering introducing a new bill in Parliament to amend the Prevention of Money Laundering Act (PMLA), aligning it with amended criminal laws and formally introducing a “restitution of attached properties” clause under which assets of alleged economic offenders are turned over to the banks that lent them money, according to senior officials involved in the consultations.

Discussions on the Prevention of Money Laundering (Amendment) Bill, 2024, began before the Lok Sabha elections with the finance ministry seeking comments from the ministry of home affairs (MHA), the Enforcement Directorate (ED), the Financial Intelligence Unit (FIU), the Central Board of Indirect Taxes and Customs (CBIC), and other stakeholders.

A key procedural change in the amendment bill would be the reduction in the number of offences in Part A of Scheduled Offences of PMLA, from 43 (of IPC) earlier to 31 now (of BNS), primarily due to merging of various sections in the Bharatiya Nyaya Sanhita, which replaces the Indian Penal Code from July 1.

Other special acts under which ED takes up cases, such as the Unlawful Activities (Prevention) Act, Explosives Act, Arms Act, Narcotics Drugs and Psychotropic Substances (NDPS) Act, the Wildlife Protection Act, Prevention of Corruption A, the Information Technology Act etc. will remain as it is in the PMLA schedule.

“Consultations are currently going on PML (Amendment) Bill, 2024. A draft document was prepared by the ministry of finance and comments have been sought from all stakeholders,” said a senior government official, who did not want to be named.

Asked about the timeline for introduction of new bill on the PMLA, the officer said: “Soon. Maybe by the monsoon session.”

Officials further highlighted that some new sections introduced in BNS, such as organised crime (section 109) and terrorism activities (section 113), may be included in the PMLA schedule as well.

Besides, “restitution of attached assets” — a strategy lately adopted by the Enforcement Directorate (ED) — is also being discussed if it can be formally introduced in the amended PMLA, said the first official cited above.

The federal agency has actively taken steps to handover attached assets to the investors or banks in the money laundering probes. So far, public sector banks have already received ₹15,184 crore out of total ₹22,586 crore defrauded by three fugitive businessmen, Vijay Mallya, Nirav Modi and Mehul Choksi.

Prime Minister Narendra Modi, during the Lok Sabha elections campaign, said in interviews that he was seeking legal advice on how to return the money seized by the ED to the people.

The Supreme Court is currently reviewing several provisions of PMLA, including its powers to conduct inquiries, arrest, and attach property. Over 200 pleas were filed challenging the apex court’s July 2022 decision, which upheld the constitutional validity of various PMLA provisions. It has been argued that ED’s powers to arrest, force confessions, and seize property are excessive. The matter is expected to be taken up by the top court next month.

In recent years, the Supreme Court has been asked to align PMLA provisions with constitutional principles, particularly following the 2022 Vijay Madanlal Choudhary judgment, which affirmed ED’s extensive powers and held that PMLA provisions were not violative of fundamental rights. The three-judge bench, led by Justice AM Khanwilkar (now retired and appointed as the Lokpal chairperson), emphasised the need for stringent measures to tackle money laundering and acknowledged PMLA’s role in fulfilling India’s obligations under the Financial Action Task Force (FATF).

While the judgment strengthened ED’s powers, it attracted criticism from legal experts and human rights advocates who argued that it gave undue leeway to the federal agency, potentially at the expense of personal liberties and procedural safeguards.

A month after this judgment, another three-judge bench admitted a batch of review petitions against it and agreed to reconsider at least two aspects — denying a copy of the Enforcement Case Information Report (ECIR) to the accused, and shifting the burden of proving innocence from the prosecution to the accused. While the review petition against the 2022 judgment remains pending, the top court has interpreted PMLA provisions in various other cases, clarifying and sometimes limiting the extent of enforcement powers. Several subsequent judgments have ensured that enforcement does not infringe upon constitutional liberties, with some even taking a view contrary to the Vijay Madanlal Choudhary verdict.

For instance, in October 2023, a two-judge bench took a divergent view and held that made it compulsory for ED to provide a copy of the grounds of arrest to accused in money laundering cases, adding that a mere verbal information would be construed as a breach of constitutional right.

Similarly, in the judgment delivered on the medical bail plea of Tamil Nadu minister V Senthil Balaji in August 2023, the Supreme Court Moreover, stressed on cautious exercise of arrest powers under Section 19 of PMLA, demanding substantial evidence before detention. The judgment obligated magistrates to immediately release an arrested person if there are procedural or substantive violations.

Another judgment in October 2023 on a bail plea moved by former Delhi deputy chief minister Manish Sisodia further highlighted the mandate of speedy trial as a fundamental right while clarifying that Section 45 of PMLA – which places a reverse proof of burden on an accused to prima facie show he or she is not guilty of the charges, is not an absolute bar on the grant of bail because “the constitutional mandate is the higher law”.

In a November 2023 ruling in the Pavana Dibbur case, the top court declared that criminal conspiracy, punishable under Section 120B of the Indian Penal Code, cannot be the only offence for opening of a money laundering probe and that the conspiracy must relate to a crime enlisted as a scheduled offence under the 2002 Act.

Former ED director, said: “The PMLA schedule needs changing to bring it in sync with the three new criminal laws. On restitution of properties, there has to be thorough discussions since there are different parties involved like the ED, victims of fraud, banks, who are also victims, and NCLT (National Company Law Tribunal) etc once a property is attached.”