In the evolving landscape of Indian white-collar crime, few statutes carry as much weight or cause as much apprehension as the Prevention of Money Laundering Act, 2002 (PMLA). Originally designed to curb the flow of illicit funds, the Act has transformed into a powerful legal tool with unique procedural nuances. For individuals caught in the crosshairs of an investigation, the journey from being a mere person of interest to a primary accused can be swift and complex.
A Stand-Alone Offence: Beyond the Predicate Crime
A common misconception is that one must be involved in a specific theft, fraud, or “predicate crime” to be prosecuted under the PMLA. However, the law treats money laundering as a stand-alone offence.
The Enforcement Directorate (ED) can charge an individual even if they are not named as an accused in the original scheduled crime. Under Section 3, the net is cast wide: anyone involved in any activity connected to the “proceeds of crime”, whether it be concealment, possession, or projecting it as untainted property, can be held liable.
The Summons: A Witness or a Target?
The initial point of contact with the ED usually occurs under Section 50(3), which mandates that any person summoned must appear and state the absolute truth. At this stage, the individual’s status is often ambiguous.
- The Initial Approach: A person is generally treated as a witness when first summoned.
- The Judicial Nature: Proceedings under Section 50 are deemed judicial proceedings, meaning statements are recorded under a legal obligation to be truthful.
- The Shift in Status: If a statement reveals that the person knowingly handled proceeds of crime or benefited from them, the ED may immediately convert their status from a witness to an accused.
While some individuals are summoned merely to establish facts against a main target, the practical reality is that the ED frequently uses these Section 50 statements as the foundation for naming someone in a Prosecution Complaint under Section 44.
The Constitutional Catch-22
One of the most striking features of the PMLA is the limited protection offered by Article 20(3) of the Indian Constitution, which protects against self-incrimination.
Since ED officers are not classified as “police officers” under the Evidence Act, confessions or statements made to them are admissible in court. Unlike statements made under Section 313 of the CrPC, which are not on oath and cannot form the sole basis of a conviction, Section 50 statements carry significant weight.
However, the law does provide certain safeguards to ensure these statements are not the only evidence:
- Corroboration: Statements must be supported by independently verified evidence.
- Proof of Knowledge: There must be a clear link showing that the person knowingly participated in the laundering process.
Key Judicial Exceptions and Admissibility
The judiciary has stepped in to define the boundaries of how these statements can be used, particularly regarding the mental state and environment of the person being questioned.
1. The Custody Rule
If a person is already in judicial custody, any statement given under Section 50 is generally inadmissible against the maker. The Supreme Court has noted that such statements are not made with a “free mind” and could violate Article 21 rights. To record a valid statement in such cases, the ED must obtain prior court approval.
2. Comparative Admissibility
The following table summarises how courts view different types of statements under the PMLA:
| Condition | Admissibility Status | Relevant Precedent |
|---|---|---|
| Accused in Custody | Inadmissible against the maker | Prem Prakash v. UOI |
| Retracted Statement | Admissible, but subject to heavy scrutiny | Rohit Tandon v. ED |
| Statement of Co-accused | Not substantive; used only for corroboration | Sanjay Jain v. ED |
Strategic Considerations for the Astute Professional
Navigating a PMLA investigation requires a proactive and vigilant approach. Because the involvement in the underlying “scheduled offence” is not necessary for a PMLA charge, the focus must remain on the process of handling the funds.
For those summoned, understanding that a “mere statement” can be the catalyst for a formal accusation is essential. It is critical to ensure that any information provided is accurate and that the distinction between innocent handling and “knowing involvement” is clearly maintained.
The transition from a witness to an accused is often a matter of a single recorded sentence. In this high-stakes environment, the ability to interpret these procedural safeguards is just as vital as understanding the law itself.
Author: Himanhsu Sachdeva, Senior Associate
Co- Author: Pragati Garg, Intern
