The second proviso to Section 5(1) of the Prevention of Money-laundering Act, 2002 (PMLA) is not violative of Article 14 of the Constitution of India.

S. MURALIDHAR, J.

Introduction

1. In all these writ petitions under Article 226 of the Constitution of India, one prayer is for a declaration that the second proviso to Section 5(1) of the Prevention of Money- laundering Act, 2002 (PMLA) is ultra vires Article 14 of the Constitution of India.

2. All the Petitioners are facing proceedings under the PMLA as a result of an Enforcement Case Information Report (ECIR) filed under Sections 3 and 4 PMLA leading to the filing of original complaints (OC) under Section 5 (5) PMLA. Consequently, provisional attachment orders have been issued under Section 5 (1) PMLA against the Petitioners. The Adjudicating Authority (AA) has served them with show cause notices (SCNs) under Section 8 PMLA. The challenge in these petitions is also, therefore, to the OCs, the SCNs, the provisional attachment orders and to all further proceedings in the aforementioned ECIR.

3. Although the above prayers in the petitions (other than the prayer concerning the challenge to the constitutional validity of the second proviso to Section 5 (1) PMLA) are to be dealt with by learned Single Judges of this Court, since the first prayer concerns the constitutional validity of a statutory provision, these writ petitions have been consolidated before this Division Bench.

4. It may be noticed that there are interim orders in each of the petitions to the effect that further proceedings pursuant to the provisional attachment order including proceedings under Section 8 PMLA for confirmation of the provisional attachment shall remain stayed even while the attachment itself would continue. The said interim orders have been made absolute during the pendency of the writ petitions.

Scope of the proceedings before the DB

5. Consequently, this Division Bench, as clarified by the order dated 6th December 2017, will not be examining the merits of the ECIRs, the OCs, provisional attachment orders or the merits of the individual SCNs challenged in the writ petitions. The scope of the present proceedings before the Division Bench is, therefore, confined to examining:

(a) The maintainability of the writ petitions (which has been raised as a preliminary objection by Union of India in some of the matters).

(b) The constitutional validity of the second proviso to Section 5 (1) PMLA.

(c) Whether a Single Member of the AA can exercise powers and conduct proceedings under Section 8 PMLA?

(d) If the answer to (c) is in the affirmative, does such Single Member necessarily have to be a Judicial Member?

6. This Court has heard the submissions of Mr. Vikram Chaudhary, Mr. Ajit Kumar Sinha, Mr. Dayan Krishnan, Senior counsel and Mr. Nikhil Jain, Ms. Priyanka Sinha, Mr. Mayank Jain and Ms. Madhu Jain, learned counsel appearing for the Petitioners. On behalf of the Union of India, the submissions of Mr. Amit Mahajan, Mr. Sanjeev Narula, Mr. Ajay Digpaul, all Central Government Standing Counsel, have been heard.

Background to the PMLA

7. Before proceeding to note the submissions of counsel for the parties, it is necessary to understand the background to the enactment of the PMLA. The Statement of Objects and Reasons (SOR) of the PMLA (which was passed as an Act of Parliament and notified on 17th January 2003 and came into force on 1st July 2005) acknowledged that there was an urgent need for a comprehensive legislation to prevent money-laundering and connected activities, confiscation of proceeds of crime and setting up of agencies and mechanisms for coordinating measures to combat money-laundering. The SOR also acknowledged the initiatives taken by the international community to counter the threat posed by money-laundering to financial systems as well as to the territorial integrity and sovereignty of nations. This included the United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, to which India is a party. The said Convention calls for the prevention of laundering of the proceeds of drug crime and other connected