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Assessing The Constitutionality Of Section 24 Of PMLA: Allocating The Burden Of Proof Onto The Accused

According to Section 24 of the Prevention of Money Laundering Act, 2002, the responsibility of proving the source of proceeds of crime falls on the accused. In cases where an individual is charged with the offense of money laundering under Section 3, the Authority or Court will automatically assume that the proceeds of crime are linked to money laundering, unless the accused can prove otherwise. Similarly, in the case of any other person, the Authority or Court may presume that the proceeds of crime are involved in money laundering, unless proven otherwise.

The constitutionality of Section 24 of the Prevention of Money Laundering Act (PMLA), 2002 has been a contentious issue as it imposes the burden of proof on the accused in specific situations. This provision declares that if an individual is charged with the offense of money laundering under Section 3, they must prove that the proceeds of the crime are not tainted property. The validity of this provision has been a matter of discussion and examination, with both supporters and detractors voicing their opinions.

Arguments in favour of its constitutionality:
Presumption of innocence: It is a fundamental aspect of criminal law that the prosecution must provide sufficient evidence to prove the guilt of the accused beyond a reasonable doubt. This responsibility lies with the prosecution as they have the burden of proof. However, in the case of the Prevention of Money Laundering Act (PMLA), Section 24 only requires the accused to prove a specific fact, rather than reversing the entire burden of proof. This is in accordance with Article 20(3) of the Indian Constitution, which prohibits forcing an accused individual to incriminate themselves, but does not forbid placing the burden of proving certain facts on them.

Deterrence: Money laundering is a convoluted offense that frequently entails elaborate monetary dealings designed to conceal the unlawful source of funds. Imposing the responsibility of proving innocence onto the alleged perpetrator encourages them to provide a credible account of the origins of their riches during the initial phases of the inquiry. This can assist in uncovering and charging individuals for money laundering crimes and discourage them from participating in such actions.

Arguments against its constitutionality:
  • Violation of Article 20(3): Opponents assert that Section 24 of the Indian Constitution infringes upon the protection against self-incrimination as stated in Article 20(3). This is because the accused is required to prove the origin of their funds, essentially forcing them to incriminate themselves, which goes against the fundamental principle that an accused individual should not be compelled to testify against themselves.
  • Erosion of the presumption of innocence: The presumption of innocence until proven guilty is undermined by the requirement for the accused to demonstrate the purity of their assets. This places the burden of proof on the accused, going against the traditional approach, and can result in individuals being treated as guilty until proven innocent, which goes against the fundamental principles of criminal justice.
  • Potential for abuse: The possibility exists that the provision may be exploited by law enforcement authorities to unfairly target individuals without sufficient proof of wrongdoing, resulting in arbitrary deprivation of assets and violations of due process rights. Ultimately, the constitutionality of Section 24 of the PMLA will be determined by the judiciary on a case-by-case basis, weighing the need to combat money laundering against safeguarding the rights of the accused.

Court Judgments:
  • In the matter of Vijay Madanlal Choudhary v. Union of India in July 2022, the Supreme Court, with Justices Khanwilkar, Dinesh Maheshwari, and C.T. Ravikumar, reaffirmed the Enforcement Directorate's authority to make arrests in money laundering cases. The Court also acknowledged that the amendment to section 24 of the PMLA was in accordance with international Conventions and recommendations. Furthermore, it concluded that the provision allowing the accused to present information and evidence to challenge the legal presumption during proceedings before the Authority or Special Court is not unconstitutional. This provision serves a valid purpose and is not blatantly arbitrary.

    On October 18, 2023, a unique panel consisting of three justices from the Supreme Court seemed open to the idea of discussing the possibility of referring the July 2022 ruling in the above case to a larger Constitution bench of five judges. The verdict, which was issued by a three-judge bench headed by former Justice A.M. Khanwilkar, who has since retired, was met with widespread controversy due to the negative impact it had on the fundamental rights of citizens. A bench consisting of Justices Sanjay Kishan Kaul, Sanjiv Khanna, and Bela M Trivedi will now hear the case.
  • Based on the decisions made in State of Maharashtra v. Mohd. Yakub and Joti Parshad v. State of Haryana, the Single Judge Bench of HM Justice Anil S. Kilor ruled in the case of Ajay Kumar Chandraparkash Baheti v. Directorate of Enforcement that for a person to be considered involved in money laundering, they must have knowledge that the property in question is tainted and obtained through criminal activity.

    This knowledge is necessary for the accused to be held accountable. Section 24 does not presume a person's guilt in money laundering simply for possessing or having a connection to the proceeds of crime, unless they are aware that the property is obtained through criminal means.

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