Sunday, May 28, 2017

Snippet - PMLA Amendments Repealed? Not really - Updated

While working on the Prevention of Money Laundering Act 2002, I came across the omnibus Repeal and Amending Act of 2016 (part of the set of statutes available here). The acts specified in the First Schedule to the Repealing Act have been hereby repealed to the extent specified there. This Schedule, notably, states that the Prevention of Money Laundering (Amendment) Act 2012 [Act 2 of 2013] has been repealed in its entirety. You can access the Act here by searching on the page.

The 2012 amendments to the Money Laundering Act were substantial. These were India's efforts at accepting the Financial Action Task Force recommendations, soon after India was made a member of the Task Force in 2010

Below is a summary of the more important changes brought in by the 2012 Amendment Act:
  • It expanded the scope of the statute to cover beneficial owners, and placed positive obligations on various enterprises notorious for money laundering such as real estate agents and dealers in precious stones;
  • It expanded the money laundering offence under Section 3 from merely generating proceeds of crime and projecting them as untainted, to also cover the concealment, acquisition, use, or possession of proceeds of crime and their projection as untainted;
  • It allowed for a provisional attachment of property under Section 5 to happen even without a Chargesheet being filed for the Scheduled Offence;
  • It severed the connection between the trial for a Scheduled Offence and the attachment of property under Section 8. So, an acquittal for the Scheduled Offence did not automatically result in releasing attached properties anymore;
  • It imposed an advanced set of positive obligations on entities under Section 12 to proactively combat money laundering;
  • It created a mechanism for the retention of property seized or frozen during searches conducted under the Act by amending Sections 20 and 21;
  • It relaxed the strict reversal of the persuasive burden of proof and introduced a concept of rebuttable presumptions under Section 24 of the Act;
  • It allowed for a transfer of prosecutions for Scheduled Offences pending before other courts to the Special Court adjudicating the money laundering offence under Section 44;
  • It instituted additional penalties through Section 63 PMLA for non-compliance with notices to furnish information issued under Section 50 PMLA.
The validity of the amendments was subjected to an omnibus challenge in K. Sowbhagya v Union of India (decided on 28 January 2016), but the Karnataka High Court dismissed the petition in a lengthy decision. A few months later, we have the Repealing Act come in May, 2016, striking out the changes from the statute books. Why? None of the four Law Commission of India reports on repealing obsolete laws refer to the 2012 Amendment Act, and I have not found any discussion in the public domain elaborating upon this process (the Press Information Bureau merely carried this note).  The best I found was a draft for the Repealing and Amending Act 2014, where the 2005, 2009 and 2012 amendment acts were all mentioned. That doesn't explain much either.

From what I have been able to find out, then, with effect from 6 May 2016, none of those changes to the PMLA remain in force, and for all prosecutions instituted after this date, the legislation  must operate as it existed prior to the 2012 amendments. Given the magnitude that this possibility carries, I think I might be mistaken, and would definitely appreciate any assistance in this regard in discovering if something has been missed out.


A helpful friend pointed out Section 6-A of the General Clauses Act 1897, which as interpreted by the Indian Supreme Court in Jethanand Betab (AIR 1960 SC 89) suggests a Repealing and Amending Act merely prunes the statute book, and the effect of the amending act continues. Why only repeal the latest edition of the amending acts? I don't know. But this sure puts the controversy to rest!

(This post was updated on 28 May 2017 at 11 PM IST to add the post-script. Thanks to Nidhisha Phillip for pointing out where I was going wrong!)

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