31 Jul 2022: UPSC Exam Comprehensive News Analysis

E. Editorials

Category: INTERNAL SECURITY

1. What has the SC said on PMLA’s validity?

Syllabus: Money-laundering and its prevention

Prelims: Prevention of Money Laundering Act provisions

Context: Supreme Court verdict on the provisions of the Prevention of Money Laundering Act (PMLA).

For detailed information on the provisions of the PMLA refer to the following article:

https://byjus.com/free-ias-prep/prevention-of-money-laundering-act-pmla/#:~:text=The%20Prevention%20of%20Money%20Laundering,Act%20empowering%20the%20ED%20further.

Background:

• The functioning of the Enforcement Directorate (ED) and the implementation of the Prevention of Money Laundering Act (PMLA) has come in for much criticism in recent times, as several investigations have been opened against opposition political functionaries of the current ruling dispensation.

Details:

• The Supreme Court has upheld several provisions of the Prevention of Money Laundering Act (PMLA) including several ‘draconian’ provisions, rejecting strong challenges to their validity.
• In this context, the article discusses the Supreme Court observations on the following broad themes.

Validity of the PMLA:

• With respect to the questions on validity and necessity of the PMLA, the Supreme Court accepted the Union government’s argument that PMLA provisions were valid and necessary to fulfil the India’s obligations to abide by international conventions aimed at combating the menace of money-laundering. 
  • The UN Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances (Vienna Convention) adopted in 1988 called upon countries to prohibit the conversion or transfer of property gained through dealing in narcotics to conceal its illicit origin.
  • The UN Convention against Transnational Organized Crime of 2000 (Palermo Convention) called for ‘criminalising the laundering of proceeds of crime’.
  • India is also a member of the Financial Action Task Force (FATF) established in 1989 to tackle money-laundering. 
• The PMLA enacted in 2002 aimed to give effect to India’s obligations to abide by the above international conventions. 

Definition of money-laundering:

• The Supreme Court upheld the definition of money-laundering under Section 3. 
• The Court quashed the challenge that only the projection of tainted money as untainted, and its integration into the economy would constitute the offence. It noted that holding or using the proceeds of crime as much as an offence as the projecting or converting of the proceeds into legal money or property.
• The Court noted the generation of money through crime and its integration with the formal economy as being related and it would be wrong to limit the definition of money laundering to only attempts made to integrate the ill-gotten wealth. 

Functioning of the ED:

• The Enforcement Directorate registers an ‘Enforcement Case Information Report’ (ECIR), the equivalent of an FIR in ordinary cases. Notably, this ECIR is not a public document, and the ED does not share it with the accused. 
• This aspect was challenged based on the argument that this would leave investigation, issue of summons and decision to order a search, seizure or arrest completely at the whim of ED officials and lack of judicial oversight. This provision is prone to misuse.
• The Supreme Court rejected these contentions pointing out to the presence of sufficient safeguards in the entire process of survey, search, seizure and arrest.

Enforcement Directorate’s power to issue summons and inquiry:

• The Supreme Court upheld the powers of the ED to summon any person. The Court noted that the ED has the power of a civil court to enforce the attendance of a person summoned under Section 50 of the act. 
• The Court also upheld the provisions which require the summoned person to mandatorily give statement and produce documents asked for. Failure to do so would constitute an independent offence and giving a false statement amounts to perjury. The statement given by the person summoned must be signed and it can be used against him/her in a trial. 
• The Supreme Court rejected the challenge to this section. This section was challenged on the ground that the section is unconstitutional as it forces people to be witnesses against themselves, thus going against Article 20 of the Constitution.
  • Article 20 (3) of the Indian Constitution states that no person accused of any offence shall be compelled to be a witness against himself.
• The Supreme Court noted that this was not the same as testimonial compulsion and amounted to just an inquiry. The ED can gather material without treating the person as an accused.

Bail provisions:

• Section 45 of PMLA dealing with grant of bail to the accused under the act imposes two conditions. First the court must be satisfied that there are reasonable grounds for believing that the accused is not guilty of an offence and secondly that the accused is not likely to commit any offence while on bail. This provision was challenged based on the ground that it goes against the fundamental right of personal liberty guaranteed by Article 21 of the Constitution of India.
• Noting that the State has a compelling interest in imposing stringent bail conditions for economic offences, the Supreme Court upheld the stringent bail conditions under the Prevention of Money Laundering Act, that impose a reverse burden of proof on the accused.
  • In case of reverse burden of proof, the accused, now presumed guilty must produce evidence beyond reasonable doubt to prove his innocence and be granted an acquittal. This goes against the principle of presumption of innocence which is fundamental to a person accused of any offence.
• The Court relied on Article 39 of the Constitution, part of the Directive Principles of State Policy that mandates the State to prevent concentration of wealth, to uphold the stringent bail conditions under PMLA.
• Notably, the Supreme Court had declared this bail criteria unconstitutional in its earlier judgment.
  • In 2018, the Supreme Court had struck down the bail section, on the ground that the conditions only applied to those offences listed in Part A of the Schedule attracting a prison term of three years and more, but not for the offence of money-laundering itself.
• The Parliament had re-enacted the section with an amendment stating that the bail conditions would apply to all cases under PMLA, without any reference to the scheduled offence. The Supreme Court dismissing the challenge to these amendments, upheld the power of the Parliament to enact a provision to cure a defect highlighted by the Supreme Court. 

Recommendations made by the Supreme Court:

• The Supreme Court suggested the ED to consider the possibility of informing the public through its website about the scope of the authority under the Act, the measures adopted by its functionaries and the options or remedies available to the accused.

For more information on this judgment refer to the following article:

https://byjus.com/free-ias-prep/upsc-exam-comprehensive-news-analysis-jul28-2022/#SC%20upholds%20powers%20of%20arrest,%20raid%20under%20PMLA

Nut Graf: The Supreme Court judgment on the PMLA provisions seeks to provide for a balancing arrangement between the interests of the accused and the state in terms of the need to curb offences such as money laundering and terrorism.

H. UPSC Prelims Practice Questions

Q1. Consider the following statements with respect to Shaheed Udham Singh.
(Level - Medium)

1. He was part of the Ghadar Party.
2. He assassinated Michael O’Dwyer, to avenge the killing of Lala Lajpat Rai.

Which of the following statement/s is/are correct?

1. 1 only
2. 2 only
3. Both 1 and 2
4. Neither 1 nor 2

CHECK ANSWERS:-

Answer: a

Explanation:

• Statement 1 is correct- Udham Singh belonged to the Ghadar Party.Statement 2 is incorrect as he was known for assassinating Michael O’Dwyer, the former lieutenant governor of the Punjab in India, on 13 March 1940. The assassination was done in revenge for the Jallianwala Bagh massacre in Amritsar in 1919.

Q2. Consider the following pairs of elephant reserves and associated state.
(Level- Medium)

Elephant reserve                                               State

Sonitpur                                                             Assam

Intanki                                                               Nagaland

Anamudi                                                            Tamil Nadu

Srivilliputhur                                                       Andhra Pradesh

How many of the above pairs is/are correctly matched?

1. One pair only
2. Two pairs only
3. Three pairs only
4. All the four pairs

CHECK ANSWERS:-

Answer: b

Explanation – 

• Sonitpur Tiger reserve located in the eastern hill forest of Arunachal Pradesh and Assam.
• Intanki Wildlife Sanctuary is home to varied wildlife, located in Kohima of Nagaland.
• Anamudi is a mountain located in Ernakulam district and Idukki district of the Indian state of Kerala. It is the highest peak in the Western Ghats and in South India.
• The Grizzled Squirrel Wildlife Sanctuary (GSWS), also known as Srivilliputhur Wildlife Sanctuary is in Tamil Nadu

Q3. Which of the following statement/s is/are correct with respect to Santhal
 rebellion (1855-56)? (Medium)

1. The revolt was spearheaded by the murmur brothers- Sidhu and Kanhu.
2. The rebellion is also known as Ulgulan.
3. The British created the Damin-i-koh district in the Santhal inhabitated areas after the rebellion to placate the Santhals.

Options:

1. 1 only
2. 2 and 3 only
3. 1 and 3 only
4. 2 only

CHECK ANSWERS:-

Answer: a

Explanation: 

• Statement 1 is correct – on 30 June 1855, two Santal rebel leaders, Sidhu and Kanhu Murmu, mobilized roughly 60,000 Santhals and declared a rebellion against the East India Company .The basic purpose was to collect taxes by making and enforcing his own laws.
• Statement 2 is incorrect -The Ulgulan revolt was a 19th century tribal rebellion led by Birsa Munda. It took place in the region south of Ranchi in 1899-1900.
• Statement 3 is incorrect – Santhal Paragana was the area demarcated for Santhals by the British post the santhal rebellion.

Q4. Consider the following statements with respect to floating solar plants.

1. Ramagundam floating Solar plant in Telangana is the largest such operating plant in India and also the largest in the world.
2. The water body underneath the solar modules helps in maintaining their ambient temperature, thereby improving their efficiency and generation.

Which of the following statement/s is/are correct?(Medium)

1. 1 only
2. 2 only
3. Both 1 and 2
4. Neither 1 nor 2

CHECK ANSWERS:-

Answer: b

Explanation: 

• Statement 1 is incorrect- It is largest in India but not in the world.The largest is in China.
• Statement 2 is correct – The water body underneath the solar modules helps in maintaining their ambient temperature, thereby improving their efficiency and generation.

 Q5. The Service Area Approach was implemented under the purview of (Level- Easy)

1. Integrated Rural Development Programme
2. Lead Bank Scheme (A)
3. Mahatma Gandhi National Rural Employment Guarantee Scheme
4. National Skill Development Scheme

CHECK ANSWERS:-

Answer: b

Explanation- The Service Area Approach (SAA) was introduced in April 1989, in order to bring about an orderly and planned development of rural and semi- urban areas of the country, was extended to all Indian scheduled commercial banks including Regional Rural Banks (RRBs).