QUESTIONABLE SEARCHES UNDER THE MONEY LAUNDERING ACT

General Studies Paper -2 

CONTEXT:

• The Prevention of Money Laundering Act (PMLA) 2002, interpreted by the Supreme Court, focuses on “proceeds of crime” related to scheduled offences.

BACKGROUND:

• Prevention of Money Laundering Act, 2002 (PMLA) enacted to combat drug and terrorism
• Supreme Court’s interpretation in Vijay Madanlal Choudhary case limits PMLA to “wrongful and illegal gain” related to scheduled offences.

KEY SUPREME COURT RULING:

• Application limited to “proceeds of crime” under Section 2(1)(u) of the PMLA.
• Only triggered if property derived from criminal activity related to a scheduled
• Undisclosed income, regardless of volume, not covered unless linked to criminal activity

ENFORCEMENT DIRECTORATE CRITICISM:

• Media reports reveal ED actions beyond its powers, leading to Supreme Court criticism.
• Damning observations on ED’s conduct, emphasizing the need for probity, dispassion, and fairness.

RECENT JUDICIAL DEVELOPMENTS:

• In Pavana Dibbur vs The Directorate of Enforcement, Court reinforces the importance of “proceeds of crime” for PMLA offences.
• Instances of procedural violations and changes in notice-issuing Bench raise

SELECTIVE TARGETING AND FEDERALISM:

• Instances of ED targeting Opposition-governed States for inquiries not related to scheduled
• Abuse of authority and court processes noted in Jharkhand case, raising questions about federalism
• ED’s inactivity in BJP-governed States with serious illegal mining cases raises disturbing

CONCERNS AND IMPLICATIONS:

• Violation of constitutional principles and abuse of authority by central investigating
• Courts permitting investigations not related to scheduled offences or proceeds of crime in certain
• Federalism foundation eroding; calls for curbing such abuses to preserve

CONCLUSION:

• The recent legal developments highlight concerns over the limited scope of the Prevention of Money Laundering Act, potential misuse by investigating agencies, and the erosion of federalism, underscoring the need for corrective measures to preserve constitutional principles and democratic