In September 2024, the High Court of Delhi in Adnan Nisar v. Directorate of Enforcement declined to take judicial notice of foreign offences under Title 18 U.S.C. – including Wire Fraud, Access Device Fraud, Computer Fraud and Money Laundering – as predicate offences under India’s Prevention of Money Laundering Act, 2002 (PMLA).
The Court held that (1) it can take judicial notice of domestic law but not of foreign law, (2) foreign law must be proved by evidence at trial, (3) therefore, pre-trial, there was no material to support the claim of a scheduled offence. The Court ultimately granted bail, while deferring hearing other petitions filed to terminate the money-laundering investigation in its entirety.
The Court’s decision in Adnan Nisar is limited to bail. If the Court’s interpretation is taken to its logical conclusion, an offence under foreign law cannot serve as the foundation for a money-laundering investigation without an evidentiary hearing and judicial determination on foreign law.
At Indian law, the offence of money laundering is dependent on predicate criminal activity, or a ‘Scheduled Offence’. Once an initial report in respect of a Scheduled Offence is registered by the jurisdictional investigating agency, India’s Directorate of Enforcement (ED) assumes jurisdiction to register an Enforcement Case Information Report (ECIR). The ECIR is the first step in a money-laundering investigation under the PMLA.
The PMLA was adopted to ratify India’s international treaty obligations. In the decades since, its scope has expanded to include offences with cross-border implications and offences under foreign law. The law gives vast investigative and punitive powers to the ED. However, the draftsmen’s apparent lack of knowledge of Indian Law makes Section 2(1)(ia) of the PMLA unworkable, as exhibited by Adnan Nisar.
The 2013 amendment to the PMLA defines ‘corresponding law’ under Section 2(1)(ia) to include foreign criminal offences as Scheduled Offences but offers no guidance on what constitutes ‘corresponding law’. In contrast, India’s Extradition Act, 1962 clearly defines an ‘extradition offence’ and establishes procedures with reference to the rule of Double Criminality. In extradition law, the rule of Double Criminality states that for an offence to be extraditable, the conduct involved must be a crime under the laws of both the requesting and requested nation states.
Indian law is cautious in depriving liberty based on the law of a foreign state or allegations of extra-territorial crime. This caution is manifest in the Extradition Act, 1962 as well as the extra-territorial application of India’s domestic penal code. A fugitive criminal accused of crime or convicted based on foreign law in a foreign state cannot be subjected to warrantless arrest in India. A judicial magistrate issues warrants either at the request of India’s Central Government, or on their own after due application of mind.
After arrest, the judicial magistrate must decide based on evidence whether there exists a prima facie case justifying the extradition request. Where a prima facie case is not established, the fugitive is discharged. Where treaty states are involved, the Double Criminality rule is baked into the language of the extradition treaty. So far as India’s domestic criminal law is concerned, inquiry or trial of extra-territorial acts require the Central Government’s sanction. Thus, there are clear safeguards against prosecution and detention for criminal acts committed outside India.
On the other hand, Section 2(1)(ia) of the PMLA fails to provide any safeguards or procedures. While a Mutual Legal Assistance Request received by a contracting state under Section 58 of the PMLA could be forwarded to a court (as opposed to the ED as was done in Adnan Nisar), the Act is silent on the procedures the court should adopt. The absence of Double Criminality procedure under the PMLA results instead in Null Criminality.
Adnan Nisar demands that the PMLA conform with the rest of Indian law. It comes as a breath of fresh air at a time when Indian courts have been warping Indian jurisprudence to accommodate the PMLA. A preliminary evidentiary hearing must be a condition precedent for a money-laundering investigation predicated on foreign law. This can be achieved only through legislative action.
In 2002, India’s National Commission to review the working of the Constitution observed:
“Our legislative enactments betray clear marks of hasty drafting and absence of parliamentary scrutiny from the point of view of both the implementers and the affected persons and groups. It is as true of the taxation Bills whose intent and exact implications are sometimes not clear even to those who pilot the legislation, as it is of other categories of laws. The bills are often rushed through Parliament with unbelievable speed and then found wanting in one respect or another. A more systematic approach to the planning of legislation is needed to provide adequate time for consideration in committees and on the floor of the house as also to subject the drafts to thorough and rigorous examination by experts and laymen alike.”
Past amendments to the PMLA have focused on expanding the ED’s powers and sidestepping, if not abrogating, judicial precedent. It is time for the PMLA to be reviewed and rewritten for workability, by draftsmen familiar with Indian law.
Bharucha & Partners – Ambar Bhushan
