VIJAY MADANLAL V.

UNION OF INDIA
SHORT HITORY :-
The history of the PMLA can be traced back to the later part of
the 1980s, when an urgent need was felt among various
nations to protect their financial systems from money-
laundering. In 1990, the United Nations General
Assembly2 called upon its member nations to develop
mechanisms to prevent financial institutions from crumbling
due to money-laundering, and to achieve the same by enacting
laws in the respective countries. Eventually, in 1998, the United
Nations in the 'Special Session on Countering World Drug
Problem Together' passed a declaration on the need to combat
money-laundering, to which India is a signatory.
The Prevention of Money Laundering Bill was put forward in
Parliament in 1998. Further, the PMLA Bill was referred to the
Standing Committee on Finance. The Standing Committee then
handed out its report to the Lok Sabha in 1999. Later, in 1999,
the Government introduced the Prevention of Money
Laundering Bill, 1999, in the Parliament after including all the
suggestions laid down by the Standing Committee. Further, the
Bill received the assent of the President and came to be known
as the Prevention of Money Laundering Act, 2002. The Act
became enforceable on July 1, 2005.

INTRODUCTION :-
The Supreme Court of India, in the case of Vijay Madanlal
Choudhary v. Union of India & Ors., (2022) 8 SCC 1, addressed
the constitutionality and interpretation of various provisions
under the Prevention of Money Laundering Act, 2002 (PMLA).
The case involved a batch of writ petitions and Special Leave
Petitions (SLPs) challenging the provisions of PMLA, and the
Court delivered a detailed 545-page judgment. The three-judge
bench, comprising Justices A.M. Khanwilkar, Dinesh
Maheshwari, and C.T. Ravikumar, upheld the validity of several
contested provisions, reasoning that they are reasonably
connected to the objective of combating money laundering.
The Court specifically examined the powers of the Enforcement
Directorate (ED) in investigating money laundering offenses,
which have been central to the debate over the erosion of
constitutional safeguards, particularly those related to
protection against forced confessions and self-incrimination.
This judgment is significant not only for its constitutional
analysis but also for its impact on the balance between law
enforcement powers and individual rights in economic crime
investigations.S

SEMINAL LEGAL CONTENTIONS :-

1. Whether that only upon projecting or claiming the property
in question as untainted
2. d property that the offence of Section 3 would be
complete?
- The court rejects the contention

3. The challenge to the validity of sub-section (4) of Section 8

of the 2002 Act
- The court uphelds the validity of section 8

4. The challenge to deletion of proviso to sub-section (1) of

Section 17 of the 2002 Act.
- The court upheld the validity of section 17(1)

5. Whether the purpose of section 24 is arbitrary and

unconstitutional
- Section 24 of the 2002 Act has reasonable nexus with
the purposes and objects sought to be achieved by the
2002 Act and cannot be regarded as manifestly
arbitrary or unconstitutional.

6. Whether ECIR can equate to an FIR

- In view of special mechanism envisaged by the 2002
Act, ECIR cannot be equated with an FIR under the 1973
Code.

7. Whether vacancies in appallete court can casue injustice

The petitioners are justified in expressing serious concern bordering on causing
injustice owing to the vacancies in the Appellate Tribunal.

SECTION 3 :-
The purpose of Section 3 is widely viewed as to not only
investigate the offence of money-laundering but also to prevent
and regulate that offence.
Section 3 of the Prevention of Money Laundering Act, 2002,
defines The term “money laundering” which typically refers to
the process involving the placement, layering, and integration
of tainted property into the formal economy
However, Section 3 has a wider reach. The offence, as defined,
captures every process and activity in dealing with the
proceeds of crime, directly or indirectly, and not limited to the
happening of the final act of integration of tainted property in
the formal economy to constitute an act of money-laundering.
The rudimentary understanding of ‘money-laundering’ is that
there are three generally accepted stages to money-
laundering, they are:
(a) Placement: which is to move the funds from direct
association of the crime.
(b) Layering: which is disguising the trail to foil pursuit.
(c) Integration: which is making the money available to the
criminal from what seem to be legitimate sources.
Essential Ingredients :-
Existence of Proceeds of Crime: The offense of money
laundering is predicated on the existence of "proceeds of
crime," which refers to property derived or obtained, directly or
indirectly, by any person as a result of criminal activity relating
to a scheduled offense. All or whole of the crime property linked
to scheduled offence need not be regarded as proceeds of
crime, but all properties qualifying the definition of “proceeds of
crime” under Section 2(1)(u) will necessarily be crime
properties.

Processes or Activities: The section criminalizes various

processes or activities, including:
 Concealment
 Possession
 Acquisition
 Use
Mens Rea: The section requires a mental element of
"knowledge" or "intent." A person must knowingly assist, be a
party to, or be involved in the laundering process. This includes
both direct and indirect involvement. in P. Chidambaram v.
Directorate of Enforcement (2019), the Supreme Court
highlighted that the accused must have knowingly participated
in the laundering process.
Continuous Offense: The 2019 amendment clarified that
money laundering is a continuous offense. A person remains
guilty of money laundering as long as they enjoy the proceeds
of crime, even if the original act of laundering occurred in the
past.
The offence of money-laundering is not dependent on or linked
to the date on which the scheduled offence or if we may say so
the predicate offence has been committed. The relevant date is
the date on which the person indulges in the process or activity
connected with such proceeds of crime.
The principle underlying this analysis by the Constitution Bench
applies proprio vigore to the interpretation of Section 3 of the
2002 Act; the expression “and” in Section 3 as “or”, to give full
play to the said provision so as to include “every” process or
activity indulged into by anyone, including projecting or
claiming the property as untainted property to constitute an
offence of money-laundering on its own. The act of projecting or
claiming proceeds of crime to be untainted property
presupposes that the person is in possession of or is using the
same (proceeds of crime), also an independent activity
constituting offence of money-laundering.
This offence otherwise has nothing to do with the criminal
activity relating to a scheduled offence — except the proceeds
of crime derived or obtained as a result of that crime. However,
this proceeds of crime can only be derived after committing a
scheduled offence.
To the same end, this Court in the case of Ishwar Singh
Bindra & Ors. vs. The State of U.P.465, Joint Director of
Mines Safety466 and Gujarat Urja Vikas Nigam Ltd. vs.
Essar Power Ltd.467, interpreted the word “and” in the
concerned legislation(s) as word “or” to give full effect to the
legislative intent
The PMLA explicitly provides for extraterritorial jurisdiction to
address proceeds of crime located outside India. The PMLA
defines "proceeds of crime" to include property derived;
whether even located in India. In Vijay Madanlal Choudhary v.
Union of India, the Supreme Court clarified that the definition of
"proceeds of crime" under the PMLA is broad enough to include
property of equivalent value, whether located in India or
abroad.
The definition also includes property of equivalent value held
within India or abroad if the original proceeds of crime are
taken or held outside the country . The Delhi High Court
in Adnan Nisar v. Directorate of Enforcement (2024) upheld the
extraterritorial application of the PMLA, stating that offences
committed outside India can be prosecuted under the PMLA if
they correspond to scheduled offences under Indian law and
have cross-border implications. The Court also highlighted the
importance of international cooperation in combating financial
crimes, particularly in cases involving cryptocurrencies and
other cross-border transactions
It was held by the SC that 'projecting' or 'claiming' the proceeds
of crime as untainted property is an independent act of
indulging in money laundering and that it need not be coupled
with concealment, possession, acquisition, or use of proceeds
of crime. It was also clarified that to proceed against an
individual alleged to have committed offences under the PMLA,
a predicate offence, i.e., an offence based on which proceeds of
crime were generated, must have been registered with the
jurisdictional police or before the competent forum.

SECTION 5 :-
Section 5 deals with attachment, adjudication and confiscation.
This provision empowers the Director or officer not below the
rank of Deputy Director authorised by the Director for the
purposes of attachment of property involved in money-
LAUNDERING.
In a crux the Court upheld the constitutional Validity.
The curt opined Section 5 of the 2002 Act is constitutionally
valid. It provides for a balancing arrangement to secure the
interests of the person as also ensures that the proceeds of
crime remain available to be dealt with in the manner provided
by the 2002 Act. The procedural safeguards as delineated by us
hereinabove are effective measures to protect the interests of
person concerned.
Key Essentials:-
1. Predicate Offence Report (Section 5(1))
Before any attachment can occur under Section 5, there is a
prerequisite condition of having a predicate offence:
The attachment process cannot be initiated unless a report
under Section 173 of the Code of Criminal Procedure
(CrPC), or a complaint regarding a scheduled offence (the
underlying offence linked to money laundering), has been filed
with a magistrate. In Rajiv Chanana v. Dy. Director of
Enforcement, the Delhi High Court held that the trial for money
laundering under Section 3 of the PMLA cannot survive if the
accused is acquitted of the predicate offence.
The Courts have also applied the principle of harmonious
construction to reconcile the dependency of money laundering
offences on predicate offences.
Even if a scheduled offence has not yet been registered by the
police or a complaint has not yet been filed, the authorised
officer can proceed with provisional attachment while
concurrently informing the police about the need to register the
case. If the police fail to act, the authorised officer may pursue
further legal remedies to ensure the proceeds of crime are
properly secured.
2. Satisfaction of Twin Conditions (Section 5(1))
Before initiating the provisional attachment of any asset,
Section 5(1) of the PMLA requires the authorized officer, to
record their satisfaction on two key conditions:
 First Condition: The officer must be satisfied that there is a
reasonable belief that the property in question is
connected to or derived from the proceeds of crime. This
belief cannot be based on mere assumptions but must be
grounded in substantial material evidence or information.
The court in P. Chidambaram v. Directorate of
Enforcement emphasized the importance and clarified that
the ED must have sufficient cause to believe that the
property is involved in money laundering, and this belief
must be based on tangible evidence 3(i.e. proceeds of
Crime).
 Second Condition: The officer must be convinced that
immediate attachment of the property is necessary to
prevent the accused from disposing of the property, thus
ensuring that it is available for eventual confiscation if the
person is found guilty of money laundering.
3. Recording of Reasons and Formation of Opinion
Once the officer forms the satisfaction as mentioned in Section
5(1), they must record the reasons in writing for their belief that
the property constitutes proceeds of crime. The recorded
reasons must clearly articulate:
 The evidence or intelligence gathered by the officer.
 How the property is linked to the crime or criminal activity.
 Why provisional attachment is deemed necessary to
prevent the offender from moving or concealing the
assets.
This ensures that the order of provisional attachment is not
arbitrary and is based on concrete, fact-based reasoning.
4. Issuance of Provisional Attachment Order
Upon being satisfied that both conditions are met, the
authorized officer proceeds to issue a provisional attachment
order. This order freezes or attaches the assets, preventing the
person under investigation from transferring or disposing of
them. Order of provisional attachment is temporary, lasting for
a period not exceeding 180 days from the date of issuance.
4A – Issuance of Urgent Provisional Attachment Order
the 2015 amendment modified the second proviso to allow an
authorised officer to issue a provisional attachment order
without waiting for the registration or substantial progress of
the scheduled offence. The amendment allows the officer to act
immediately if they believe that the non-attachment of the
property would frustrate the proceedings under the PMLA. This
change reflects the urgency of securing proceeds of crime to
prevent them from being dissipated or concealed before a
formal investigation can be completed. However, the officer is
still required to Record their satisfaction in writing and Base
their decision on available evidence, showing that immediate
attachment is necessary to prevent the frustration of legal
proceedings under the PMLA.
5 Forwarding the Order to the Adjudicating Authority
(Section 5(2))
After the provisional attachment order is issued, the authorized
officer must forward a copy of the order to the three-member
Adjudicating Authority (appointed under Section 6(1) of the
PMLA), within 30 days. This is done in a sealed envelope to
maintain confidentiality.
The Adjudicating Authority includes a qualified person, typically
someone eligible to be appointed as a District Judge, ensuring
judicial oversight over the process.
6. Provisional Attachment Order Ceases (Section 5(5))
Under Section 5(5), if the Adjudicating Authority confirms the
provisional attachment, the property remains attached. If not,
the order will cease to operate, and the attached property
may be released:
 Complaint by Authorized Officer: Within 30 days from
the provisional attachment, the authorized officer must file
a complaint before the Adjudicating Authority for further
proceedings related to the property. If the attachment is
confirmed, the property may eventually be confiscated
after a final adjudication under the PMLA.
7. Intimation to the Person Concerned: Once the
provisional attachment order is issued, the person whose
property is being attached is informed about the action taken
against their property.
8 Further Investigation and Filing of a Complaint: Within
180 days, they are required to file a complaint before the
Special Court under Section 7 of the PMLA, along with the
supporting evidence. If the investigation and legal process
prove the property to be proceeds of crime, the Special Court
can pass an order for confiscation of the attached property
after due consideration of the case.
8. Judicial Oversight: Although the provisional attachment
order is issued by the authorized officer, it is subject to
 judicial oversight. The person aggrieved by the provisional
attachment order has the right to appeal against the
decision. The attached property cannot be sold,
transferred, or otherwise disposed of during the period of
attachment unless the judicial authorities permit it.
Could properties which are alleged to be proceeds of crime be
attached, provisionally or otherwise, without registration of
predicate offence?
The SC held that unlike criminal proceedings 3, under the PMLA,
registration of predicate offence is a prerequisite, for initiating
action for provisional attachment of properties, registration of
predicate offence is not mandatory. However, an action for
provisional attachment of property can be initiated only on the
basis of material in possession of the authorised officer
indicative of a person being in possession of proceeds of crime.
Only those properties which appear to be proceeds of crime
could be attached, and not all properties belonging to an
accused.

SECTION 8 :-
Section 8 of PMLA, in particular, discusses the procedural grounds for
confiscation of properties involved in money laundering, empowering the
adjudicating authority to order such confiscation to the Central Government.
Section 8 of the Prevention of Money Laundering Act (PMLA),
2002 involves the judicial review and confirmation of the
provisional attachment of property. This section ensures that
provisional attachments made under Section 5 are subject to
confirmation, and provides a process for handling disputes and
the eventual confiscation of property if found to be proceeds of
crime.
1. Issuance of Show Cause Notice (8(1))
Upon receiving a complaint or application regarding attached
property, the Adjudicating Authority must issue a show cause
notice to the person whose property is attached. Contents of
the Notice:
The notice will request that the individual explain how the
property was acquired. The individual must provide details on
the sources of income, assets, and evidence supporting the
legitimacy of the property. The individual must justify why the
property should not be declared as proceeds of crime and why
the attachment should not be confirmed.
Third-party Claims: If a third party claims ownership, notices
will be sent to them as well to clarify their claim.
2. Response and Hearing (8(2))
The Adjudicating Authority will review any responses received
to the show cause notice. The person whose property is
attached, as well as the Director or authorized officer, will be
heard. The Adjudicating Authority will also consider any
evidence presented by both parties. After considering the
replies and evidence, the Adjudicating Authority will determine
whether the property is involved in money laundering. If
another party claims ownership, they will also be given a
chance to provide proof that the property is not linked to
money laundering.
3. Confirmation or Continuation of Attachment (8(3))
If the property is found to be involved in money laundering, the
Adjudicating Authority will confirm the provisional attachment
order. The attachment will remain in place until a final
confiscation order is passed.
Duration: The attachment will continue for a period not
exceeding 365 days or until the proceedings relating to the
money-laundering offence are concluded, whichever is earlier.
The authority may continue the attachment even if the
investigation or proceedings are ongoing. The confirmation
order remains valid until a confiscation order is passed under
the relevant sections, such as Section 8(5), Section 8(7), or
other related provisions.
[Link] Possession of Property (8(4))
Once the provisional attachment is confirmed and the
confiscation order is passed, the authorized officer will take
possession of the property. If it is not possible to physically
seize the property (e.g., if it is frozen), the confiscation order
will still be valid as though the property had been physically
seized.
Exceptional Circumstances: The law stresses that taking
possession should be the exception, not the rule. Possession is
usually taken only when it is necessary to give effect to a
confiscation order. Otherwise, the person whose property is
attached may still enjoy the property unless the formal
confiscation process is concluded.
5. Trial Outcome and Special Court Orders (8(5) 8(6))
Trial in Special Court: After the property is attached and the
investigation concludes, the matter is taken up by a Special
Court.
Confiscation or Release:
If the Special Court determines that the property is involved in
money laundering, it will order confiscation of the property,
which will then be transferred to the Central Government. If the
Special Court concludes that money laundering did not occur,
or the property was not involved in the offence, the property
will be returned to the rightful owner. In cases where a third
party has legitimate ownership, the property will be restored to
the party, provided they prove good faith and non-involvement
in the crime.
6. Outcome of Trial in Case of Death or Inability to Proceed
(8(7))
If the trial cannot proceed due to the death of the accused or
other reasons, the Special Court will determine the fate of the
confiscated or frozen property. The decision will depend on the
available evidence and whether the property is involved in
money laundering.
7. Restoration of Property (8(8))
Restoration: If the property has been confiscated, the Special
Court may order the restoration of the property (or part of it) to
a person who has a legitimate interest. This could include
victims of the crime or anyone who can prove that they were
not involved in money laundering and acted in good faith. The
person claiming restoration must show that they were not
complicit in the laundering process.
Exception vs. Rule:
The Court notes that while Section 8(4) of the PMLA allows for
the possession of property to be taken based on the
confirmation of the provisional attachment order, this should be
an exception and not a standard procedure. The Court
emphasizes that each case should be evaluated individually to
determine whether the property should be taken into
possession before a formal order of confiscation is issued.

Section 16 :-
Section 16 of the Prevention of Money Laundering Act (PMLA),
2002 provides authorities with the legal power to survey and
inspect places where activities relating to money laundering are
suspected to be occurring. It is part of the law’s framework to
investigate and prevent money laundering.
1. Initial Grounds for Action (Section 16(1))
An authorized authority must have material evidence or
information leading them to believe (Reason to Believe) that an
offense under Section 3 of PMLA (money laundering) has been
committed. The authority must record the reasons for belief in
writing before taking any action.
Scope of Authority's Power:
The authority is permitted to enter any place within their
assigned jurisdiction, or any place they are authorized to enter,
based on the materials in their possession. The authority can
enter a place where any activity constituting money laundering
is occurring.
The “place” is not limited to the location where the act of
money laundering is actively taking place, but also includes any
other location where the accused maintains records or property
related to such activity. This could be a secondary location like
an office, warehouse, or even a private residence.
2. Inspection and Verification (Section 16(1)(i)-(iii))
Once the authority which shall include Senior officials, such as
the Director or Deputy Director, must be involved in the
enforcement actions enters the premises, they
The authority can inspect records found on the premises that
may be relevant to the suspected money laundering activity.
The authority can check and verify the proceeds of crime or any
transaction that is linked to criminal activities.
The authority can demand that any individual present on the
premises (such as a proprietor, employee, or other individuals
involved in the act) provide information that is relevant to the
investigation under the PMLA.
3. Forwarding of Reasons and Material (Section 16(2))
After the survey (inspection) has been completed; The authority
must immediately forward a written record of reasons for their
belief and the material evidence in their possession to the
Adjudicating Authority in a sealed envelope. The Adjudicating
Authority is responsible for safeguarding the reasons and
material for a period specified by law, ensuring transparency
and accountability. the reasons for action must be forwarded to
the Adjudicating Authority immediately after a survey is
completed
4. Powers to Mark and Make Copies (Section 16(3))
In addition to inspecting records and verifying criminal
transactions, the authority can also :-
place marks of identification on the records they inspect,
ensuring that the records remain identifiable and protected.
make extracts or copies of records that are relevant to the
investigation.
Make An inventory of any property that is checked or verified
must be made, ensuring that all assets related to the crime are
documented.
also record the statements of individuals present at the
location, especially if their testimony is deemed useful for the
ongoing investigation under the PMLA.
It was held by the SC that the provisions under the PMLA for
search and seizure of properties and search of persons have
inbuilt safeguards, not only by mandating exercise of power
only by high-ranking officials but also by requiring them to
follow processes guaranteeing fairness, transparency, and
accountability regarding the entire process of search and
seizure

SECTION 19 :-
Section 19 of the Prevention of Money Laundering Act (PMLA),
2002, provides specific powers to designated authorities to
arrest individuals suspected of involvement in money
laundering.
Section 19 of the PMLA grants powers to the Director, Deputy
Director, Assistant Director, or any officer authorized by the
Central Government,
(Premium Granites The Supreme Court in this case affirmed
that discretionary powers granted to senior officers under the
PMLA are subject to judicial review, ensuring that arrests are
made only when there is sufficient evidence to support the
arrest.)
to arrest individuals suspected of being involved in money
laundering. This power can only be exercised when the officer
has material that leads to a reasonable belief that a person has
committed an offence under the PMLA. The officer must record
the reasons for this belief in writing and inform the arrested
individual of the grounds for their arrest at the time of the
arrest.
The authorized officer must record the reasons for their belief
that the individual has committed the offence.
After the arrest, the officer is required to forward a copy of the
arrest order, along with supporting materials, to the
Adjudicating Authority in a sealed envelope. The Adjudicating
Authority is responsible for preserving these materials for a
specified period, as per the rules, and ensuring that the arrest
was made in accordance withthelaw.
The court in Its Judgment upheld that:
The PMLA is primarily focused on preventing money laundering,
confiscating proceeds of crime, and prosecuting those involved
in money laundering activities. The inquiry process under the
PMLA is not about investigating a traditional criminal offence,
but rather about gathering evidence for the confirmation of
provisional attachment orders and eventual confiscation of
criminal proceeds. Thus, the arrest is part of the investigative
process, which is distinct from the criminal investigation
process under the CrPC.
Post-Arrest Procedures
Following an arrest, the individual is placed in custody and may
be presented before a Special Court or Magistrate within 24
hours. The accused person has the right to apply for bail, and
the court will consider factors such as the severity of the
offence, the evidence presented, and the risk of tampering with
evidence when deciding on the bail application. This judicial
oversight ensures that the power of arrest is not misused and
that individuals' rights are protected.
The court in its judgement upheld that
The term "proceeds of crime" is central to the PMLA. Under the
Act, proceeds of crime refer to any property obtained through
criminal activities, including money or assets acquired illegally.
The primary purpose of the PMLA is to trace, attach, and
confiscate such proceeds, and arrest under Section 19 is one of
the key tools in this process. The arrest of individuals suspected
of involvement in money laundering is intended to prevent the
further movement of illicit assets and facilitate the eventual
confiscation of proceeds of crime.

SECTION 24 :-
Section 24 of the PMLA deals with the burden of proof in
proceedings associated with proceeds of crime. This section is
pivotal as it shifts the burden of proof onto the accused in
specific circumstances, which is a deviation from the general
criminal law principle where the burden of proof is on the
prosecution. The essentials of Section 24 can be broken down
as follows:
In the Case of a Person Charged with Money-Laundering
(Section 3): The Authority or Court shall presume that the
proceeds of crime are involved in money-laundering unless the
contrary is proved by the accused.

In the Case of Any Other Person: The Authority or Court

may presume the involvement of such proceeds of crime in
money-laundering.

This section notably makes a distinction between a person

charged under Section 3 for money-laundering and any other
person, providing a lesser burden of proof in the latter case.

The Court held that - In any case, as the burden on the accused
would be only an evidentiary burden, it can be discharged by
the accused by producing evidence regarding the facts within
his personal knowledge. Again, in the case of Seema Silk &
Sarees, this Court restated that a legal provision does not
become unconstitutional only because it provides for reverse
burden as it is only a rule of evidence. So long as the accused is
entitled to show that he has not violated the provisions of the
Act, such a legal provision cannot be regarded as
unconstitutional.
This provision (Section 24) must, however, apply to proceeding
before the Adjudicating Authority regarding confirmation of
provisional attachment order and eventually for ordering
confiscation of the attached property for vesting in the Central
Government under Section 9 of the 2002 Act. This is reinforced
from the purport of Section 23 of the 2002 Act.

The expression “Authority” occurring in this provision must be

given its proper meaning indicative of the Adjudicating
Authority appointed under Section 6 of the 2002 Act to
adjudicate on matters concerning confirmation of provisional
attachment order and eventual confiscation and vesting of the
property, if the fact situation so warrant.

It is, thus, clear that this special provision regarding burden of

proof in any proceeding relating to proceeds of crime under this
Act would apply to stated proceeding before the Adjudicating
Authority and not limited to the proceeding before the Special
Court.

In civil actions, it can be preponderance of probability but in

criminal actions, unless the law provides to the contrary, the
onus is on the prosecution to establish the allegations and facts
in issue beyond reasonable doubt. Furthermore, the burden or
onus of establishing the facts in issue, keeps on shifting and is
on the party who asserts a particular fact.

However, that presumption can be interdicted by a law made

by the Parliament/Legislature. It is well-settled that statutory
provisions regarding presumptions are nothing but rule of
evidence. As observed by this Court in State of W.B. vs. Mir
Mohammad Omar & Ors.543, the pristine rule that the
burden of proof is on the prosecution to prove the guilt of the
accused should not be taken as a fossilised doctrine as though
it admits no process of intelligent reasoning.
The Court quoted with approval paragraph 33 of the decision in
Shambhu Nath Mehra547, which reads thus:
“33. Presumption of fact is an inference as to the existence of
one fact from the existence of some other facts, unless the
truth of such inference is disproved. Presumption of fact is a
rule in law of evidence that a fact otherwise doubtful may be
inferred from certain other proved facts. When inferring the
existence of a fact from other set of proved facts, the court
exercises a process of reasoning and reaches a logical
conclusion as the most probable position. The above principle
has gained legislative recognition in India when Section 114 is
incorporated in the Evidence Act.

The provision relating to burden of proof in any proceeding

relating to proceeds of crime under the PMLA apply to
proceedings before both the Adjudicating Authority with respect
to attachment of properties (which is civil in nature) and the
criminal proceedings before the Special Courts. The legal
presumption of guilt under the PMLA is about the fact that the
proceeds of crime are involved in money laundering, which,
however, can be rebutted by the person accused by producing
evidence within his personal knowledge. Such legal
presumption has reasonable nexus with the legislative intent of
the PMLA.

SECTION 45 :-
HISTORY (amendment) to Section 45 of the PMLA (2018)
In 2018, through Act 13 of 2018, the Indian Parliament
amended Section 45(1) of the PMLA, addressing the
constitutional defects pointed out by the Supreme Court.
Initially, Section 45 imposed stringent conditions for granting
bail to individuals accused of money laundering. However, in
the Nikesh Tarachand Shah case (2017), the Supreme Court
declared the twin bail conditions in Section 45 unconstitutional,
arguing that they were arbitrary and discriminatory when
applied to certain classes of offences.
The original provision in Section 45 required that bail could not
be granted unless the accused demonstrated:
 1. There were reasonable grounds for believing they were
not guilty of the offence.
2. The accused was not likely to commit further offences.
However, this was limited only to offences punishable with
imprisonment for more than three years, specifically under
Part A of the Schedule to the Act.
Post-2018 Amendment: The amendment removed the words
“punishable for a term of imprisonment of more than three
years under Part A of the Schedule” and replaced them with
“under this Act,” thus broadening the application of the twin
conditions for all offences under the PMLA. The amended
provision aims to ensure consistency in the application of
stringent bail conditions, addressing the concerns raised by the
Supreme Court about arbitrariness.
Section 45(1) of the PMLA states that no person accused of
money laundering shall be released on bail unless:
1. The Public Prosecutor has been given an opportunity to
oppose the bail application.
2. The court is satisfied that there are reasonable grounds for
believing the accused is not guilty and is not likely to
commit any further offence.
Section 45(2) clarifies that these conditions are additional to
any other conditions under the CrPC or any other law in force.
The Test under PMLA
Under PMLA, obtaining bail is challenging due to the stringent
conditions laid out in Section 45. The section mandates that
before granting bail, the following ingredients must be fulfilled:
1. The Public Prosecutor has been given an opportunity to
oppose the bail application;
2. Where the Public Prosecutor opposes the application, the
court is satisfied that there are reasonable grounds for
believing that the accused is not guilty of such offence
 and that he is not likely to commit any offence while on
bail.
The court opined in regards to section 45 the time of seeking
bail under the PMLA, the following two conditions are to be
satisfied: (i) an accused must show that he/ she is prima
facie not guilty of offence, and (ii) that there is no threat of
commission of offence when enlarged on bail. The said
conditions apply to anticipatory bails as well.
For (i) above, the Court is not required to record a positive
finding that the accused had not committed an offence under
the PMLA. The Court at this stage, is not required to appreciate
the evidence meticulously but needs to only arrive at a finding
based on broad probabilities.
The provision is reasonable and has direct nexus with the
purposes and objects sought to be achieved by the PMLA and
does not suffer from the vice of arbitrariness or
unreasonableness.

In Nikesh Tarachand Shah v. Union of India, [9] it was held that

bail aims to ensure the attendance of the accused at trial and
should not be used as a punitive measure as it is intended to
facilitate the presence of the accused at trial rather than as
punishment.
In Sanjay Chandra v. CBI,[11] the Supreme Court reiterated that
bail's primary purpose is to ensure the accused appears at trial,
not to punish him and the object of pre-trial detention should
not be punitive. It should be justified only by the necessity to
secure the attendance of the accused at trial.
In P. Chidambaram v. Directorate of Enforcement, [12] the
Supreme Court held that the economic offences, given their
potential societal impact, can be classified as grave offences,
and when assessing bail applications in such cases, courts must
be sensitive to the nature of the allegations. The gravity of the
offense can also be gauged by the severity of the sentence
prescribed for the alleged crime. It was emphasized that even
in cases of severe economic offenses, bail should not be
automatically denied, as no legislation or established bail
jurisprudence mandates such a blanket rule. Each case must be
evaluated individually based on its specific facts, with the
ultimate goal of ensuring the presence of an accused for trial.
BEYOND THE VIJAY MADAN LAL JUDGEMENTS SCOPE ANOTHER
IMPORTANT CASE LAW APPEARS TO BE:-
The Supreme Court's reasoning in the Manish
Sisodia (supra) judgment
Right to Bail in the Context of Delays: The court referred to
its earlier order, which stated that the right to bail should be
read into Section 45 of PMLA in cases where there is a
prolonged delay in trial. This interpretation aligns with the
principle that bail is a rule, and jail is an exception, particularly
when the trial's delay is not the fault of the accused.
Magnitude of the Case: The court acknowledged the
complexity of the case, which involved thousands of pages of
documents, over a lakh pages of digitized documents and over
493 witnesses. However, it stressed that the sheer volume of
evidence should not justify indefinite incarceration, especially
when the trial is not progressing.
Bail Conditions to Address Concerns: The court addressed
the prosecution's concerns about the possibility of the appellant
tampering with evidence or influencing witnesses. It suggested
that these concerns could be mitigated by imposing stringent
conditions on the appellant's bail, such as reporting to the
Investigating Officer and no attempt be made to influence the
witnesses or to tamper with the evidence.

Section 50 :-
Section 50 of the PMLA allows designated officials such as the
Director or Assistant Director to issue summons to individuals
to gather information and documents as part of an inquiry into
proceeds of crime.
The PMLA’s investigative powers are unique, and its dual
function includes both civil enforcement (such as the
attachment and confiscation of assets) and criminal
prosecution for money laundering].
The Supreme Court affirmed in this case that the powers of ED
under Section 50 of PMLA, 2002 are equivalent to those of a
civil court under the Code of Civil Procedure, 1908. The
Supreme Court, after observing that "the process envisaged by
Section 50 of the 2002 Act is in the nature of an inquiry against
the proceeds of crime and is not "investigation" in the strict
sense of the term for initiating prosecution; and the Authorities
under the 2002 Act (referred to in Section 48), are not police
officers as such," rejected the challenge to the constitutionality
of Section 50 of PMLA.
The power of the ED to extract signed statements
notwithstanding their incriminatory tendency on pain of
criminal sanction does not amount to testimonial compulsion
because the proceedings of the ED are not necessarily to
collect evidence for prosecution under Section 3 of PMLA, and
can also be towards the attachment of property. Footnote77 Here,
again, the Court relies on the distinction between the ED’s
exercise of regulatory functions on the one hand and penal
functions on the other
Section 50(2) confers powers upon the Director, Additional
Director, Joint Director, Deputy Director or Assistant Director to
summon any person whose attendance they consider
necessary whether to give evidence or to produce any records
during the course of any investigation or proceeding under this
Act. Section 50(3) of the PMLA provides that all such
summoned persons shall be bound to attend in person or
through an authorised officer and shall further be bound to
state the truth upon any subject respecting which they are
examined or make statements and produce such documents as
may be required. Section 50(4) of PMLA provides that
proceedings under sub-Section (2) and (3) shall be deemed to
be a judicial proceeding with the meaning of Section 193 and
Section 228 of the Penal Code, 1860.

Section 50(1) authorizes the Director (any) or any other

officer authorized by the Directorate of Enforcement to
summon any individual to appear before them for examination.
This individual may be anyone who has information relevant to
the investigation or is suspected to have knowledge of
activities related to money laundering. The officer then
records the statement of the summoned person under oath.
The statement must be recorded in writing, and the individual
is required to sign it. These statements are considered
important evidence in the investigation process.
The person summoned has the right to be informed of the
purpose of their questioning. They can also be represented by a
legal practitioner while being questioned. However, it is
important to note that they are not entitled to legal
representation during the recording of their statement, unless it
is a formal proceeding in court.

If the summoned person fails to comply with the summons

or refuses to appear before the authority, they may be
penalized. If a person fails to attend or refuses to answer
questions or provide necessary information, the authority can
impose a penalty under Section 63 of the PMLA for non-
compliance with the summons.
The authorities have the power to seize or take copies of
documents that may be relevant to the investigation. This
includes financial records, documents, or other materials
that may show evidence of money laundering activities.
The court notes that evidence gathered under this section can
be used in criminal prosecutions, but rejects the application of
Article 20(3) of the Indian Constitution, which protects accused
persons from self-incrimination, to individuals summoned by
the Enforcement Directorate (ED). The court argues that Article
20(3) only applies to those officially accused, and individuals
summoned by the ED are not considered "accused" until
arrested. This creates ambiguity around when legal protections
for an accused person, such as the right against self-
incrimination, would apply during an investigation. The court's
ruling raises further questions about the application of
protections under the Indian Evidence Act (IEA), particularly
Section 25, which only applies to confessions made to police
officers, but the ED is not considered a police force.
The Court highlights that the summons issued under
Section 50 of the PMLA is not part of a formal criminal
prosecution but is a procedural step in the investigation to
trace the proceeds of crime. At the time the summons is issued,
individuals are not necessarily accused of committing any
offence. Instead, the purpose of the inquiry is to gather
information that may later lead to identifying whether money
laundering or other criminal activities are involved.
The Court relies on prior judgments, including M.P. Sharma v.
Satish Chandra and Mohammad Dastagir, to emphasize
that the right against forced self-incrimination is not applicable
during inquiries or investigations unless the individual is
formally accused or arrested. Summons issued under Section
50 are part of an evidence-gathering process that may
eventually lead to charges, but they are not a criminal
accusation in themselves. Reliance was also placed on Kathi
Kalu Oghad v. State of Maharashtra (1961) reinforced that
constitutional protection against self-incrimination applies only
when the person is formally accused.
the Court explains, a person summoned at this stage is not yet
an accused, and their involvement is simply as a witness or
as a person possessing information crucial to the
investigation. Thus, such individuals do not have the right to
invoke Article 20(3) to avoid answering questions during the
inquiry.
The Court draws a crucial distinction between the inquiry and
the investigation stages under the PMLA. While the term
“investigation” is often used, the inquiry phase, triggered by
summons under Section 50, is distinct. It does not yet involve
formal charges or accusations, and its purpose is solely to
ascertain whether the proceeds of crime exist. Only when the
evidence gathered during this inquiry leads to the formal arrest
and charging of a person does the investigation transform into
a criminal one, thereby invoking the protections of Article
20(3).

ECIR REPORT :-
The Prevention of Money-Laundering Act (PMLA) does not have
a provision for the registration of an FIR or a comparable
requirement for the registration of an offence of money-
laundering. The PMLA has a distinct procedural framework for
the investigation and inquiry of money-laundering, which is
primarily focused on the attachment and confiscation of
proceeds of crime, rather than the typical registration of a
criminal case.
An ECIR (Enforcement Case Information Report) is a
document created internally by the Enforcement Directorate
(ED) for initiating inquiries into potential money-laundering
activities. Unlike an FIR, the ECIR is not a statutory document
and is not subject to the same procedural requirements. No law
mandates the creation or disclosure of the ECIR under the
PMLA, nor does it require a copy to be provided to the accused
at the time of its filing.

SECTION 63 :-
1. False Information Leading to Arrest or Search - 63(1)
It applies to individuals who wilfully and maliciously give false
information that results in an arrest or search under the
provisions of the Act. Such individuals can face penalties that
include:
 Imprisonment for up to two years, or
  A fine of up to fifty thousand rupees, or
 Both imprisonment and a fine.
The focus here is on ensuring that the integrity of the
investigative process is maintained, preventing deliberate
attempts to mislead the authorities, which could otherwise
derail legitimate actions in the investigation.
2. Failure to Cooperate with Authorities 63(2)
Non-cooperation with the authorities investigating money
laundering offenses is another critical concern addressed under
Sub-section 2. If an individual fails to:
 Answer questions regarding an offense under Section 3
of the PMLA,
 Sign legally required statements,
 Attend proceedings or
 Produce documents (such as books of accounts) when
summoned under Section 50 of the Act,
they are liable to face a fine ranging from 500 rupees to
10,000 rupees for each instance of non-compliance. This fine
is intended to penalize individuals who obstruct the
investigation process by refusing to cooperate or fulfill their
legal obligations, thereby preventing the enforcement
authorities from gathering essential evidence.
Amendment Act 2 of 2013, insertion of clause enabling action
under section 174 of the Indian Penal Code for intentional
disobedience to directions issued under section 50 1.
3. Right to be Heard 63(3)
Before any penalty is imposed for non-compliance, the
individual concerned must be given an opportunity to be
heard. This provision ensures that the individual’s rights are
respected and that any penalty imposed is based on due
process. It reinforces the principle of fairness in legal
proceedings, preventing arbitrary or unjust penalties.
4. Additional Consequences for Disobedience 63(4)
Sub-section 4 adds a further layer of accountability by stating
that if a person intentionally disobeys a direction issued under
Section 50 of the PMLA, such as failing to attend or produce
documents as required, they may also be prosecuted under
Section 174 of the Indian Penal Code (IPC). Section 174 of
the IPC pertains to the disobedience of a public servant’s order,
which can carry additional penalties beyond those specified in
Section 63 of the PMLA.
The power granted to the authorities under Section 63 is
analogous to the powers of a civil court, particularly with regard
to the summons and production of documents as per
Section 50 of the Act. This ensures that investigators can
compel individuals to cooperate in the investigation process,
thus upholding the integrity of the law and preventing
individuals from evading responsibility.
The court held in regards to reasonability of section 63 in the
instant case. The penalties prescribed under this section have
been recognized as reasonable and proportionate to the
objectives of the PMLA. The section is not deemed arbitrary or
unreasonable, as it is rationally connected to the goal of
preventing money laundering and ensuring that individuals
comply with their legal obligations.
The opportunity to be heard provided under Sub-section 3
serves as an important safeguard, ensuring that individuals are
not penalized without a fair opportunity to present their case.
This element of procedural fairness ensures that the penalties
imposed under Section 63 align with the principles of justice
and are not applied unjustly.
Nikesh Tarachand Shah vs Union of India (2017): The
judgment reinforced the need for stringent measures to combat
money laundering, acknowledging the importance of provisions
like Section 63 in maintaining the integrity of the investigation
process.
Ramesh Mehan v. Assistant Director, Directorate of
Enforcement (2018): This judgment clarified procedural
aspects related to the enforcement of PMLA provisions,
indirectly echoing the necessity for compliance with legal duties
as mandated under Section 63. The case highlighted the
significance of individuals fulfilling their obligations during
investigations into money laundering offenses.
This court in this case further examined the application of PMLA
provisions in the context of economic offenses. It underscored
the broad ambit and stern nature of the Act, including
preventive measures under Section 63, to ensure that
individuals comply with the regulatory framework and prevent
money laundering activities.