HC rejects Virbhadra's wife, others plea against PMLA clause

The Delhi High Court today upheld the validity of a money laundering law provision while rejecting 19 pleas, including that of former Himachal Pradesh Chief Minister Virbhadra Singh's wife Pratibha Singh, challenging its constitutional validity.
The clause in the Prevention of Money Laundering Act (PMLA) empowers the ED to provisionally attach the properties bought from proceeds of crime.
Besides Virbhadra's wife, others who had challenged the PMLA provision include their daughter Aprajita Singh, sand mining baron and former Tirumala Tirupathi Devasthanams (TTD) Board member J Sekar Reddy and his business associates S Ramachandran and K Rethinam.
The accused had 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.

A bench of Justices S Muralidhar and I S Mehta, in its 48-page judgement, said "the second proviso to Section 5(1) PMLA is not violative of Article 14 of the Constitution and the challenge in that regard in these petitions is hereby negatived."
"Therefore, the court is not satisfied that the second proviso to Section 5(1) of the PMLA is so excessive and disproportionate so as to render it arbitrary," it said.

The court, however, disagreed with the submission of the counsel for the Centre and Enforcement Directorate (ED) that there was no mandatory requirement to communicate to the noticee the 'reasons to believe' (reasons for such belief).

While upholding the validity of the provision of PMLA, the court said that the ED will have to communicate the 'reasons to believe' at every stage to the person to whom an attachment notice was being issued under the Act.
"If there is a violation of the legal requirements, the order of the provisional attachment would be rendered illegal," it said.
It also said the noticee was entitled access to the materials on record that would constitute the basis for 'reasons to believe', subject to redaction for reasons to be recorded in writing.
Central Government Standing Counsel Amit Mahajan had raised preliminary objection on some of these petitions regarding their maintainability on the ground that no cause of action had arisen within the jurisdiction of this court.

Regarding maintainability of the 19 petitions in two separate money laundering cases allegedly involving Virbhadra Singh's wife, daughter and Reddy respectively, the bench said it will be decided by a single judge of the high court and listed it for hearing on February 6.
The various accused in two separate cases have challenged the ED's FIR against them, provisional attachment orders regarding their assets and all further proceedings.
The bench said the expression 'reasons to believe' has to meet the safeguards in-built in the clause and has to satisfy the requirement of the law.
Another question of law before the bench was whether a single member of the adjudicating authority of ED can exercise powers and conduct proceedings relating to provisional attachment of assets and should it be a judicial member.

To this, the court held that there can be single-member benches of the adjudicating authority and appellate tribunal under the PMLA and such single-member benches need not mandatorily have to be judicial members.
In the money laundering case against Virbhadra and his wife, ED had attached assets worth nearly Rs 5.8 crore belonging to Pratibha Singh and Rs 1.34 crore of the former Chief Minister.
The ED had registered a case against the sand mining baron and others soon after the CBI booked them for possessing Rs 33 crore of new denomination of Rs 2,000 currency notes, barely a month after demonetisation in November 2016.

After the accused were released on bail as the CBI failed to file charge sheet within the mandatory 90-day period, the ED arrested them on charges of money laundering. The Madras high court had granted conditional bail to Reddy and others.