I. Introduction
The Prevention of Money Laundering Act,
2002 (PMLA) serves as a specialized legislation aimed at combating the
laundering of proceeds derived from criminal activity. A foundational principle
of the PMLA is that the offence of money laundering (Section 3) is
derivative—it relies on the existence of a "scheduled offence" (or
predicate offence).
A critical legal question often arises
in cases where the scheduled offence is not recorded via a First Information
Report (FIR) by the police but is instead pursued through a private complaint filed by an
individual before a Magistrate. This analysis examines whether the Directorate
of Enforcement (ED) has the jurisdiction to register an Enforcement Case
Information Report (ECIR) and file a prosecution complaint under the PMLA based
solely on a private complaint
regarding a scheduled offence, absent any police FIR or complaint by an
authorized investigating agency.
Read full judgment here: Click here.
The Core
Question: Does a
private complaint filed by a citizen regarding a scheduled offence—upon which a
Magistrate has taken cognizance—satisfy the threshold requirement for the ED to
commence an investigation and prosecution under the PMLA?
The
Controversy:
·
The Prosecution's Stance: The existence of a scheduled offence
is the only prerequisite. If a competent court has taken cognizance of a
scheduled offence (even via a private complaint), the ED argues it is entitled
to investigate the laundering of proceeds arising from that offence. They
contend that the term "complaint" in legal precedents includes
private complaints under Section 200 of the CrPC (now Section 223 of the BNSS).
·
The Defence's Stance: The PMLA machinery is triggered only
by state action. A private complaint does not equate to a police report (FIR)
or a complaint by an authorized statutory officer. Without a foundational FIR,
the PMLA investigation is void ab initio.
III. Critical Analysis of Legal
Principles
1. Statutory Construction of the PMLA
The PMLA does not explicitly state that
an FIR is mandatory in every section. However, the intent of the statute is
revealed through specific procedural provisions:
·
Section 5(1) (Provisional Attachment): The first proviso to Section 5(1)
dictates that no order of attachment shall be made unless a report has been
forwarded to a Magistrate under Section 173 of the CrPC (police charge sheet)
or a "complaint has been filed by a person authorised to investigate the
offence."
·
Rule 3(2) of PMLA Rules: Similarly, this rule regarding search
and seizure requires a police report or a complaint by an authorized officer as
a prerequisite.
Analysis: The legislature consciously paired the
"police report" (Section 173 CrPC) with a "complaint by an
authorized person." It conspicuously omitted "complaint by a private
person." To interpret the statute as allowing PMLA proceedings based on a
private complaint would render the safeguards in Section 5(1) and Rule 3(2)
nugatory. The "complaint" envisaged by the Act is one filed by an
investigative authority (e.g., SEBI, Customs), not a private litigant.
2. Interpretation of Precedent: Vijay Madanlal Choudhary
The Supreme Court in Vijay Madanlal Choudhary v. Union of India
held that the filing of a "police report or a private complaint" in
relation to the scheduled offence is a precondition for attachment.
Critical
Distinction: While
the judgment uses the phrase "private complaint," a granular analysis
reveals this usage was in the context of summarizing Section 5(1). Since
Section 5(1) restricts "complaint" to those filed by authorized persons, the Supreme Court's
reference must be read in pari materia
with the statute. It cannot be interpreted to expand the scope of the PMLA to
include private disputes. The term "private complaint" in the
judgment likely refers to a non-police complaint filed by a statutory authority
(which is technically a complaint case), rather than a complaint by a private
citizen.
3. The Object of the Act: Public Law
vs. Private Vendetta
The PMLA is a draconian statute with
stringent bail conditions and wide-ranging powers of arrest and attachment. It
is a tool of public law enforcement intended to protect the financial integrity
of the nation.
Risk of
Misuse: Allowing PMLA proceedings to
trigger based on private complaints would open a floodgate where private
individuals could weaponize the ED to settle personal or political scores. A
private complainant does not have the statutory accountability of a police
officer or a public servant. Recognizing a private complaint as a valid trigger
would effectively privatize the initiation of money laundering investigations,
which is contrary to the legislative intent of maintaining state control over
such sensitive prosecutions.
4. Jurisdiction and Cognizance
For a Special Court to take cognizance
of a PMLA complaint:
1. There must be a valid scheduled
offence.
2. The investigation into the money
laundering must have been validly initiated.
If the initiation of the investigation
(the ECIR) was based on a document (private complaint) that the statute does
not recognize as a valid trigger, the subsequent fruits of that investigation
(the prosecution complaint) are legally defective. The Special Court cannot
take cognizance of a complaint that lacks the foundational jurisdictional
trigger.
IV. Guidelines for Adjudication
When presented with a PMLA prosecution
complaint based on a scheduled offence arising from a private complaint, Judges
should apply the following test:
1. Check the
Source of the Scheduled Offence: Was the scheduled offence recorded via an FIR by the police or a
complaint by a statutory/authorized investigating officer?
o If YES: The PMLA investigation is prima facie
maintainable.
o If NO
(Private Complaint only): Proceed
to step 2.
2. Verify
Authorized Status: Is the
complainant in the scheduled offence a "person authorised to
investigate" (e.g., an officer under the Customs Act, SEBI Act, etc.)?
o If NO: If the complainant is a private
citizen, the PMLA complaint lacks the necessary jurisdictional threshold.
3. Applying
the Rule: A
private complaint by a citizen, even if cognizance has been taken by a
Magistrate, does not constitute a
valid basis for the ED to register an ECIR or file a prosecution complaint. The
PMLA machinery requires a preceding FIR or a complaint by a competent statutory
authority.
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