By: Ram Chander Sankhla, Advocate | Former Chief Commissioner, GST & Customs| Managing Partner, Sankhla Law associates.

 

Author can be reached at www.rrsla.com

——————————— CONTINUED FROM PART I ; II; III; IV & V——————————

 

SECTION 50:

73. Section 50 forms part of Chapter VIII of the PMLA, 2002 Act which deals with matters connected with authorities referred to in Section 48 in the same Chapter. By this provision, the Director has been empowered to exercise the same powers as are vested in a civil Court under the 1908 Code (Civil Procedure Code) while trying a suit in respect of matters specified in sub-section (1). This is in reference to Section 13 of the 2002 Act dealing with powers of Director to impose fine in respect of acts of commission and omission by the banking companies, financial institutions and intermediaries. From the setting in which Section 50 has been placed and the expanse of empowering the Director with same powers as are vested in a civil Court for the purposes of imposing fine under Section 13, is obviously very specific and not otherwise. Further, sub-section (2) of Section 50 enables the Director, Additional Director, Joint Director, Deputy Director or Assistant Director to issue summon to any person whose attendance he considers necessary for giving evidence or to produce any records during the course of any investigation or proceeding under this Act. Indeed, the person so summoned, is bound to attend in person or through authorised agent and to state truth upon any subject concerning which he is being examined or is expected to make statement and produce documents as may be required by virtue of sub-section (3) of Section 50 of the 2002 Act. Sub section (4) provides that every proceeding under sub-sections (2) and (3) shall be deemed to be a judicial proceeding within the meaning of Sections 193 and 228 of the IPC.

74. Section 50 thus reads,

“50. Powers of authorities regarding summons, production of documents and to give evidence, etc.— (1) The Director shall, for the purposes of section 13, have the same powers as are vested in a civil court under the Code of Civil Procedure, 1908 (5 of 1908) while trying a suit in respect of the following matters, namely:— (a) discovery and inspection; (b) enforcing the attendance of any person, including any officer of a [reporting entity], and examining him on oath; (c) compelling the production of records; (d) receiving evidence on affidavits; (e) issuing commissions for examination of witnesses and documents; and (f) any other matter which may be prescribed.

(2) The Director, Additional Director, Joint Director, Deputy Director or Assistant Director shall have power to summon any person whose attendance he considers necessary whether to give evidence or to produce any records during the course of any investigation or proceeding under this Act.

(3) All the persons so summoned shall be bound to attend in person or through authorised agents, as such officer may direct, and shall 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.

(4) Every proceeding under sub-sections (2) and (3) shall be deemed to be a judicial proceeding within the meaning of section 193 and section 228 of the Indian Penal Code (45 of 1860).

(5) Subject to any rules made in this behalf by the Central Government, any officer referred to in sub-section (2) may impound and retain in his custody for such period, as he thinks fit, any records produced before him in any proceedings under this Act:

Provided that an Assistant Director or a Deputy Director shall not— (a) impound any records without recording his reasons for so doing; or (b) retain in his custody any such records for a period exceeding three months, without obtaining the previous approval of the [Joint Director].”

75. The validity of this provision has been challenged on the ground of being violative of Articles 20(3) and 21 of the Constitution. However, this challenge was repelled by the Court stating that to invoke the protection under Article 20(3), the person must be formally accused of the offence. For this, it relied on its earlier judgement in case of Mohammed Dastagir vs. The State of Madras- AIR 1960 SC 756, as,

“(9) … “Considered in this light, the guarantee under Art. 20(3) would be available in the present cases these petitioners against whom a First Information Report has been recorded as accused therein.”

76. The same question came up for consideration before the eleven Judges of Supreme Court in State of Bombay vs. Kathi Kalu Oghad- AIR 1961 SC 1808, wherein the Court noted that the person on whom summon has been served, must fulfil the character of an accused person at the time of making the statement. The Court expounded thus:

“(15) In order to bring the evidence within the inhibitions of cl. (3) of Art. 20 it is must be shown not only that the person making the statement was an accused at the time he made it and that it had a material bearing on the criminality of the maker of the statement, but also that he was compelled to make that statement. ‘Compulsion’ in the context, must mean what in law is called ‘duress.”

The Court also relied on Romesh chander Mehta vs State of West Bengal-(1969) 2 SCR 461, in support of its reasoning.

77. In fact, PMLA is a special Act which deals with both civil and criminal consequences as against the offender. The power invested in the officials is, one for conducting inquiry into the matters relevant for ascertaining existence of proceeds of crime and the involvement of persons in the process or activity connected therewith so as to initiate appropriate action against such person including of seizure, attachment and confiscation of the property eventually vesting in the Central Government.

78. It must be noted that the purposes and objects of the PMLA is not limited to punishment for offence of money laundering, but also to provide measures for prevention of money laundering. It is worthwhile to reproduce observation of the Hon’ble Court with respect to importance, meaning and purport of Section 50:

“We are conscious of the fact that the expression used in Section 2(1)(na) of the 2002 Act is “investigation”, but there is obvious distinction in the expression “investigation” occurring in the 1973 Code. Under Section 2(h) of the 1973 Code, the investigation is done by a “police officer” or by any person (other than a Magistrate) who is authorised by a Magistrate thereby to collect the evidence regarding the crime in question. Whereas, the investigation under Section 2(1)(na) of the 2002 Act is conducted by the Director or by an authority authorised by the Central Government under the 2002 Act for the collection of evidence for the purpose of proceeding under this Act. Obviously, this investigation is in the nature of inquiry to initiate action against the proceeds of crime and prevent activity of money-laundering. In the process of such investigation, the Director or the authority authorised by the Central Government referred to in Section 48 of the 2002 Act is empowered to resort to attachment of the proceeds of crime and for that purpose, also to do search and seizure and to arrest the person involved in the offence of money-laundering. While doing so, the prescribed authority (Director, Additional Director, Joint Director, Deputy Director or Assistant Director) alone has been empowered to summon any person for recording his statement and production of documents as may be necessary by virtue of Section 50 of the 2002 Act. Sensu stricto, at this stage (of issuing summon), it is not an investigation for initiating prosecution in respect of crime of money-laundering as such. That is only an incidental matter and may be the consequence of existence of proceeds of crime and identification of persons involved in money-laundering thereof. The legislative scheme makes it amply clear that the authority authorised under this Act is not a police officer as such.”

SECTION 63:

79. This provision reads as,

“63. Punishment for false information or failure to give information, etc — (1) Any person wilfully and maliciously giving false information and so causing an arrest or a search to be made under this Act shall on conviction be liable for imprisonment for a term which may extend to two years or with fine which may extend to fifty thousand rupees or both.

(2) If any person,—

(a) being legally bound to state the truth of any matter relating to an offence under section 3, refuses to answer any question put to him by an authority in the exercise of its powers under this Act; or

(b) refuses to sign any statement made by him in the course of any proceedings under this Act, which an authority may legally require to sign; or

(c) to whom a summon is issued under section 50 either to attend to give evidence or produce books of account or other documents at a certain place and time, omits to attend or produce books of account or documents at the place or time,

he shall pay, by way of penalty, a sum which shall not be less than five hundred rupees but which may extend to ten thousand rupees for each such default or failure.

(3) No order under this section shall be passed by an authority referred to in sub-section (2) unless the person on whom the penalty is proposed to be imposed is given an opportunity of being heard in the matter by such authority.

[(4) Notwithstanding anything contained in clause (c) of sub-section (2), a person who intentionally disobeys any direction issued under section 50 shall also be liable to be proceeded against under section 174 of the Indian Penal Code (45 of 1860).]”

80. Thus, this provision is only an enabling provision and applies to situations referred to therein. It is in the nature of providing consequences for not discharging the burden or cooperating with the authorities during the proceedings before the Authority in pursuance to summons, production of documents and to give evidence. The power exercised by the Authority is analogous to power vested in a civil Court under the 1908 Code while trying a suit in respect of matters referred to in Section 50 of the 2002 Act. Absent such authority given to the Director under the 2002 Act, the inquiry or investigation required to be done for fulfilling the mandate predicated under the 2002 Act, would eventually result in paper inquiry and no meaningful purpose would be served much less to combat the menace of money-laundering.

81. For the sake of better understanding, it is clarified that Section 174 IPC provides punishment for non-obeying summons, orders, notices issued by legally competent authority. The punishment of simple imprisonment under section 174 IPC is commonly known as Simple Imprisonment. To reproduce this,

“Whoever, being legally bound to attend in person or by an agent at a certain place and time in obedience to a summons, notice, order, or proclamation proceeding from any public servant legally competent, as such public servant, to issue the same, intentionally omits to attend at that place or time, or departs from the place where he is bound to attend before the time at which it is lawful for him to depart, shall be punished with simple imprisonment for a term which may extend to one month, or with fine which may extend to five hundred rupees, or with both;

Or, if the summons, notice, order or proclamation is to attend in person or by agent in a Court of Justice, with simple imprisonment for a term which may extend to six months, or with fine which may extend to one thousand rupees, or with both.”

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———————————TO BE CONTINUED PART VII———————————