The Delhi High Court has upheld the constitutional validity of the second proviso to Section 5 (1) of the Prevention of Money-laundering Act, 2002 (PMLA).
The division bench was hearing 19 pleas, including that of former Himachal Pradesh Chief Minister Virbhadra Singh’s wife Pratibha Singh, daughter Aprajita Singh, and mining baron and former Tirumala Tirupathi Devasthanams (TTD) Board member J Sekar Reddy and his business associates S Ramachandran and K Rethinam. wherein the petitioners challenged the constitutional validity of section 5(1) second proviso, which deals with the power of an officer not below the rank of deputy director in the ED to provisionally attach a person’s property suspected to be brought from proceeds of crime, if he has “reasons to believe” that not doing so could frustrate the PMLA proceedings.
All the Petitioners are facing proceedings under the PMLA as a result of an Enforcement Case Information Report (ECIR) filed under Sections 3 and 4 PMLA leading to the filing of original complaints (OC) under Section 5 (5) PMLA. Consequently, provisional attachment orders have been issued under Section 5 (1) PMLA against the Petitioners. The Adjudicating Authority (AA) has served them with show cause notices (SCNs) under Section 8 PMLA. The challenge in these petitions is also, therefore, to the OCs, the SCNs, the provisional attachment orders and to all further proceedings in the aforementioned ECIR.
A division bench comprising of Justice S. Muralidhar and Justice I.S Mehta observed that, “The second proviso to Section 5(1) PMLA is not violative of Article 14 of the Constitution of India; the challenge in that regard in these petitions is hereby negative”.
Th Court also observed that, The expression reasons to believe‘ has to meet the safeguards inbuilt in the second proviso to Section 5(1) PMLA read with Section 5(1) PMLA. The expression reasons to believe‘ in Section 8(1) PMLA again has to satisfy the requirement of law as explained in this decision. There has to be a communication of the ‗reasons to believe‘ at every stage to the noticee under Section 8(1) PMLA.
The noticee under Section 8(1) PMLA is entitled access to the materials on record that constituted the basis for reasons to believe‘ subject to redaction in the manner explained hereinbefore, for reasons to be recorded in writing, the Court also said.
While dismissing the petition, the Court also said that, “There can be single-member benches of the AA and the AT under the PMLA. Such single-member benches need not mandatorily have to be JMs and can be AMs as well”.Subscribe Taxscan AdFree to view the Judgment