Penalties under the Prevention of Money Laundering Act, 2002.

The act prescribes that any person found guilty of money-laundering shall be punishable with
rigorous imprisonment from three years to seven years and where the proceeds of crime involved
relate to any offence under paragraph 2 of Part A of the Schedule (Offences under the Narcotic
Drugs and Psychotropic Substance Act, 1985), the maximum punishment may extend to 10 years
instead of 7 years.

It is pertinent to mention here, that where there is an instance of holding immovable property
outside the country, which may not be accounted for, and for generation of income from
overseas, which may be seen as untraceable or unaccounted for, the penalty shall be seizure of
such proceeds and immovable property and a penalty amounting to three times the proceeds or
three times of the valuation of such immovable property held overseas.

In the case of bogus exports of Saffron to Dubai, it was found that one particular consignment
that was being exported contained rags and other waste material, and not saffron. Consequently,
Mohan Mikit was fined with a penalty of three times the amount that was procured through such
bogus operations over a period of time, for the purpose of routing unaccounted money to India,
without being traced or detected.

The PMLA also does not take the presumption of innocence into consideration, which is one of
the pillar-stones of the right to life and personal liberty, which also entails the right to remain
silent. This means that there is no ‘Mens Rea’ necessary in cases which involve practices that
amount to or may be considered as money laundering. Mere ‘Actus Reus’ is sufficient to hold
the accused guilty of the offence of money laundering and penalize them with fine and
imprisonment to the extent that may have been prescribed in the Prevention of Money
Laundering Act of 2002.

Presumption of innocence and the right to silence are not “mere procedure”. They are vital rights
affecting life and liberty. However, in the recent case of Vijay Madanlal Chaudhry vs Union of
India, batch of cases, the presumption of guilt against the accused as provided for under Section
24 of PMLA, was challenged as violating the right to life, liberty and fair procedure guaranteed
by Articles 21 and 14 of the constitution.

However, one instance of such operations or of such conduct shall not be considered sufficient
for the accused to be considered guilty. This could be understood from the case of Raghunandan
Jalan vs Collector of Central Excise and others, decided by the Calcutta High court. The
judgement by Justice P.K Banerjee follows-

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Judgement

“1.This Rule is directed against a show cause notice as well as the order of confiscation and
penalty being annexure B and I of the petition. The fact appears from the show cause notice is
that on receipt of some information the respondent the Customs officer searched the premises
and recovered it is alleged five pieces of gold bars of foreign alleged to have been imported
without a valid permit from the respective party of India under Section 8(1) of the Foreign
Exchange Regulation Act, 1947. Along with the show cause notice there was brief outline stated
in paragraph as follows : -

"From the facts and circumstances of the case it is abundantly clear that five pieces of gold bars
mentioned above were illicitly imported into India from a foreign territory in violation of
Government of India, Ministry of Finance (Department of Revenue) notification no. 12 (II) F
1/48 dated 25-8-68 (as amended) issued under Section 8(1) of the Foreign Exchange Regulation
Act, 1947 the gold bars are, therefore, liable to confiscation under the provisions of law as
mentioned in the show cause notice. The Indian currency notes amounting to Rs. 6996.00 which
were recovered from the premises of M/s. Babulal Pyarelal as sale proceeds of the contraband
gold are also liable to be confiscated under the provisions of law as mentioned in the show cause
notice."

The petitioner showed cause and thereafter was found guilty and was asked to pay penalty by
order being Annexure I to the petition. By the said order the contraband gold was confiscated
and the sum of Rs. 6996.00 was also confiscated as part of contraband gold under Section 121 of
the Customs Act, 1962. The petitioner was further penalised to pay Rs. 5000. It appears to me
after stating the same facts the relevant for the purpose of drawing up the charge, the officer
concerned should draw up the charge sheet held in paragraph 21 with it is "abundantly clear that
five pieces of gold bars mentioned above were illicitly imported into from foreign territory in
violation of the Government of India, Ministry of Finance (Department of Revenue) notification
issued under Section 8(1) of the Foreign Exchange Regulation Act, 1947 and therefore appear to
be confiscated under the provisions of the law mentioned in the show cause notice." In my
opinion, this show cause notice along with the brief outlines of the charge, the show cause notice
is passed it is clear that there is nothing left for the Enquiry officer to enquire for the
departmental enquiry under Section 121 of the Customs Act,1962. It appears that the Customs
officer has already made up their minds that the five pieces of gold bars were illicitly imported
into India from a foreign country. If that is so, the question,of giving a hearing or explanation to
the show cause notice become an idle formality and mere farce. It is incumbent on the part of the
enquiry officer to keep open mind till it comes to a decision regarding the illicitly importation of
gold into India. If it is found that they have already closed their minds in respect thereto the
quasi-judicial proceeding it cannot be held to be in accordance with law or in compliance with
the principles of natural justice.

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2. In the circumstances aforesaid a show cause notice as well as a penalty order and the order of
confiscation of the gold bar cannot be sustained and must be quashed and I quash the same. The
respondents are however at liberty to proceed again in accordance with law if they are so advised
and is not otherwise barred.

3. The Rule is made absolute to the extent indicated above. There will be no order as to costs.

4. Let the operation of the order be stayed for eight weeks from date.”

It may thus be interpreted from the above judgement that the accused who was charged for
offences of money laundering under the PMLA, 2002; was acquitted by virtue of being a first-
timer in the act of carrying contraband gold, which may have otherwise been considered to
amount to an offence related to money laundering in accordance with the provisions of the
PMLA of 2002.