REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL ORIGINAL JURISDICTION
WRIT PETITION NO.634 OF 2007
Pareena Swarup
.... Petitioner (s)
Versus
Union of India
.... Respondent(s)
JUDGMENT
P. Sathasivam, J.
1) Ms. Pareena Swarup, member of the Bar, has filed this writ petition under Art. 32 of the Constitution of India by way of Public Interest Litigation seeking to declare various sections of the Prevention of Money Laundering Act, 2002 such as Section 6 which deals with adjudicating authorities, composition, powers etc., Section 25 which deals with the establishment of Appellate Tribunal, Section 27 which deals with composition etc. of the Appellate Tribunal, Section 28 which deals with qualifications for appointment of Chairperson and Members of the Appellate Tribunal, Section 32 which deals with resignation and removal, Section 40 which deals with members etc. as ultra vires of Arts. 14, 19 (1) (g), 21, 50, 323B of the Constitution of India. It is also pleaded that these provisions are in breach of scheme of the Constitutional provisions and power of judiciary.
2)
Brief facts in a nutshell are:
The Prevention of Money Laundering Act, 2002 (hereinafter referred to as “the Act”) was introduced for providing punishment for offence of Money Laundering. The Act also provides measures of prevention of money laundering. The object sought to be achieved is by provisional attachment of the proceeds of crime, which are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds under the Act. The Act also casts obligations on banking companies, financial institutions and intermediaries to maintain record of the transactions and to furnish information of such transactions within the prescribed time. In exercise of powers conferred by clause (s) of sub-section (2) of Section 73 read with Section 30 of the Prevention of Money- Laundering Act, 2002 (15 of 2003), the Central Government framed rules regulating the appointment and conditions of service of persons appointed as Chairperson and Members of the Appellate Tribunal. These rules are the Prevention of Money-Laundering (Appointment and Conditions of Service of Chairperson and Members of Appellate Tribunal) Rules, 2007. The Central Government has also framed rules called the Prevention of Money Laundering (Appointment and Conditions of Service of Chairperson and Members of Adjudicating Authorities) Rules, 2007.
3) It is highlighted that the provisions of the Act are so provided that there may not be independent judiciary to decide the cases under the Act but the Members and the Chairperson are to be selected by the Selection Committee headed by the Revenue Secretary. It is further pointed out that the Constitutional guarantee of a free and independent judiciary, and the constitutional scheme of separation of powers can be easily and seriously undermined, if the legislatures were to divest the regular Courts of their jurisdiction in all matters, entrust the same to the newly created Tribunals. According to the petitioner, the statutory provisions of the Act and the Rules, more particularly, relating to constitution of Adjudicating Authority and Appellate Tribunal are violative of basic constitutional guarantee of free and independent judiciary, therefore, beyond the legislative competence of the Parliament. The freedom from control and potential domination of the executive are necessary preconditions for the independence. With these and various other grounds, the petitioner has filed this public interest litigation seeking to issue a writ of certiorari for quashing the abovesaid provisions which are inconsistent with the separation of power and interference with the judicial functioning of the Tribunal as ultra vires of the Constitution of India.
4) The respondent-Union of India has filed counter affidavit repudiating the claim of the petitioner. The Department highlighted that the impugned Act has not ousted the jurisdiction of any courts and sufficient safeguards are provided in the appointment of officers of the Adjudicating Authorities, Members and Chairperson of the Appellate Tribunal.
5) We have carefully verified the provisions of the Act and the Rules, particularly, relating to constitution and selection of Adjudicating Authorities, Members and Chairperson of the Appellate Tribunal. Considering the stand taken by the petitioner with reference to those provisions, we requested Mr. K.K. Venugopal, learned senior counsel, to assist the Court. Pursuant to the suggestion made by the Court, Mr. K.K. Venugopal and Mr. Gopal Subramaniam, learned Additional Solicitor General, discussed the above issues and by consensus submitted certain proposals.
6) The petitioner has highlighted the following defects in the Adjudicating Authority Rules, 2007 and the Appellate Tribunal Rules, 2007:-
1. Rule 3(3) of Adjudicating Authority Rules, 2007 does not explicitly specify the qualifications of member from the field of finance or accountancy.
2. Rule 4 of Appellate Tribunal Rules, 2007 which provided for Method of Appointment of Chairperson do not give adequate control to Judiciary.
3. Rule 6(1) of Appellate Tribunal Rules, 2007 which defines the Selection Committee for recommending appointment of Members of the Tribunal, would undermine the constitutional scheme of separation of powers between judiciary and executives.
4. Rule 32(2) of PMLA which provides for removal of Chairperson/Members of Tribunal under PMLA does not provide adequate safety to the tenure of the Chairperson/Members of the Tribunal.
5. Rule 6(2) of Appellate Tribunal Rules is vague to the extent that it provides for recommending names after “inviting applications thereof by advertisement or on the recommendations of the appropriate authorities.”
6. Section 28(1) of PMLA, which allows a person who “is qualified to be a judge of the High Court” to be the Chairperson of the Tribunal, should be either deleted or the Rules may be amended to provide that the Chief Justice of India shall nominate a person for appointment as Chairperson of Appellate Tribunal under PMLA “who is or has been a Judge of the Supreme Court or a High Court” failing which a person who “is qualified to be a judge of the High Court.”
7. The qualifications for Legal Member of the Adjudicating Authority should exclude “those who are qualified to be a District Judge” and only serving or retired District Judges should be appointed. The Chairperson of the Adjudicating Authority should be the Legal member.
7) As regards the above defects in the rules, as observed earlier, on the request of this Court, Mr. K.K. Venugopal, learned senior counsel, Mr. Gopal Subramaniam, learned ASG as well as Ms. Pareena Swarup who has filed this PIL suggested certain amendments in the line of the constitutional provisions as interpreted by this Court in various decisions.
8) It is necessary that the Court may draw a line which the executive may not cross in their misguided desire to take over bit by bit and judicial functions and powers of the State exercised by the duly constituted Courts. While creating new avenue of judicial forums, it is the duty of the Government to see that they are not in breach of basic constitutional scheme of separation of powers and independence of the judicial function. We agree with the apprehension of the petitioner that the provisions of Prevention of the Money Laundering Act are so provided that there may not be independent judiciary to decide the cases under the Act but the Members and the Chairperson to be selected by the Selection Committee headed by Revenue Secretary. It is to be noted that this Court in the case of L. Chandra Kumar vs. Union of India and Ors., (1997) 3 SCC 261 has laid down that power of judicial review over legislative action vested in the High Courts under Article 226 as well as in this Court under Article 32 of the Constitution is an integral and essential feature of the Constitution constituting part of the its structure. The Constitution guarantees free and independent judiciary and the constitutional scheme of separation of powers can be easily and seriously undermined, if the legislatures were to divest the regular courts of their jurisdiction in all matters, entrust the same to the newly created Tribunals which are not entitled to protection similar to the constitutional protection afforded to the regular Courts. The independence and impartiality which are to be secured not only for the Court but also for Tribunals and their members, though they do not belong to the ‘Judicial Service’ are entrusted with judicial powers. The safeguards which ensure independence and impartiality are not for promoting personal prestige of the functionary but for preserving and protecting the rights of the citizens and other persons who are subject to the jurisdiction of the Tribunal and for ensuring that such Tribunal will be able to command the confidence of the public. Freedom from control and potential domination of the executive are necessary pre-conditions for the independence and impartiality of judges. To make it clear that a judiciary free from control by the Executive and Legislature is essential if there is a right to have claims decided by Judges who are free from potential domination by other branches of Government. With this background, let us consider the defects pointed out by the petitioner and amended/proposed provisions of the Act and the Rules.
9) Mr. Gopal Subramaniam has informed this Court that the suggested actions have been completed by amending the Rules. Even other wise, according to him, the proposed suggestions formulated by Mr. K.K. Venugopal would be incorporated on disposal of the above writ petition. For convenience, let us refer the doubts raised by the petitioner and amended/proposed provisions as well as the remarks of the department in complying with the same.
S.No .
Issues Amended/Proposed provision Remarks
1.
Rule
3(3)
of
Adjudicating Authority
Rules, 2007 does not
explicitly specify the
qualifications
of
member from the field
of
finance
or
accountancy.
Rule 3(3) of Adjudicating
Authority Rules, 2007 have been
amended to specify the ‘academic
qualification’ for the Member
from the field of finance and
accounting by inserting a sub-
clause (b) as follows:
“(b) From among such persons,
the Selection Committee shall
have due regard to the academic
qualifications
of
chartered
accountancy or a degree in
finance,
economics
or
accountancy or having special
experience in finance or accounts
by virtue of having worked for at
least two years in the finance or
revenue department of either the
Central Government or a State
Government or being incharge of
the finance or accounting wing of
a corporation for a like period.”
Action
completed.
Amended
Rule as per
annexure A
2.
Rule 4 of Appellate
Tribunal Rules, 2007
which provided for
Method
of
Appointment
of
Chairperson do not
give adequate control
to Judiciary.
Rule 4 of Appellate Tribunal
Rules, 2007 has been amended
to unambiguously provide that
the appointment of Chairperson
shall be made on the
recommendation of the Chief
Justice of India.
Action
completed.
Amended
Rule as per
annexure B
3.
Rule 6(1) of Appellate
Tribunal Rules, 2007
which defines the
Selection Committee
for
recommending
appointment
of
Members
of
the
Tribunal,
would
undermine
the
constitutional scheme
of
separation
of
powers
between
judiciary
and
executives.
Rule 6(1) of Appellate Tribunal
Rules, 2007 has been amended
to provide that the Chairperson
of
Appellate
Tribunal
is
appointed
on
the
recommendation of the CJI and
the composition of the Selection
Committee to select Members of
the Tribunal has been amended
to provide for a Judge of the
Supreme Court, nominated by
the Chief Justice of India, to be
the Chairperson of the Selection
Committee.
Action
completed.
Amended
Rule as per
annexure C
4.
Rule 32(2) of PMLA
which provides for
removal
of
Chairperson/Members
of Tribunal under
PMLA
does
not
provide
adequate
safety to the tenure of
the
Chairperson/
members
of
the
Tribunal.
Appropriate amendment to the
Statute is being proposed to
unambiguously provide that
Chairperson/Members appointed
in consultation with Chief
Justice of India, shall not be
removed without mandatory
consultation with Chief Justice
of India.
Draft Bill is
under
preparation.
5.
Rule 6(2) of Appellate
Tribunal Rules is
vague to the extent
that it provides for
recommending names
after
“inviting
applications thereof
by advertisement or
on
the
recommendations of
the
appropriate
authorities.”
Rule 6(2) of the Appellate
Tribunal Rules, 2007 may be
amended to delete the words “or
on recommendation of the
appropriate
authorities”,
a
proposal endorsed by ASG, Shri
Gopal Subramaniam.
May
be
deleted.
6.
Section 28(1) of PMLA,
which allows a person
who “is qualified to be
a judge of the High
Court” to be the
Chairperson of the
Tribunal, should be
either deleted or the
Rules
may
be
amended to provide
that the Chief Justice
of
India
shall
nominate a person for
appointment
as
Chairperson
or
Appellate
Tribunal
under PMLA “who is
or has been a Judge of
the Supreme Court or
a High Court” failing
which a person who
“is qualified to be a
judge of the High
Court.”
There are several Acts under
which Judges and those
‘qualified to be a judge’ are
equally eligible for selection like
for Chairman under NDPS Act
and SAFEMA; Judicial member
under Administrative Tribunal
Act; Chairperson under FEMA
etc. The eligibility criteria, for
appointment as a judge of a High
Court,
provided
in
the
Constitution of India under
Article 217(2)(b), is that the
person should have been “for at
least 10 years as an advocate of
a High Court…” Furthermore,
since
appointment
of
Chairperson of the Tribunal
under PMLA is to be made on the
recommendation of CJI, it is
expected that an independent
person would be appointed to
head the Appellate Tribunal.
There is no
requirement
to amend
either the
Statute or
the Rules.
7.
The qualifications for
Legal Member of the
Adjudicating Authority
should exclude “those
who are qualified to be
a District Judge” and
only serving or retired
District Judges should
be appointed. The
Chairperson of the
Adjudicating Authority
should be the Legal
member.
1. Persons ‘qualified to be a
district Judge’ are treated at par
with District Judges for the
purposes of qualification for
appointment as member in ATFE
under FEMA; as President of
District Forum under Consumer
Protection Act, 1986 etc. The
eligibility
criterion,
for
appointment as a District Judge,
provided in the Constitution of
India under Article 233(2), is that
the person should have been an
advocate “for not less than seven
years”.
2. PMLA is a specialized and new
Act and District Judges may not
be available with experience in
related issues whereas Advocates
or officers of Indian Legal
Service, who are eligible to be
District Judges, may often have
greater
knowledge
of
its
provisions and working.
3. The Adjudicating Authority is
a body of experts from different
fields to adjudicate on the issue
of confirmation of provisional
attachment of property involved
in money laundering.
The
functions
of
Adjudicating
Authority are civil in nature to
the extent that it does not decide
on the criminality of the offence
nor does it have power to levy
penalties or impose punishment.
4. Adjudication is a function
which is performed by Executives
under many statutes.
The
Competent Authority under
NDPS/SAFEMA
have
been
conducting
Adjudication
proceedings routinely since 1978
There is no
requirement
to amend
either the
Statute or
the Rules.
10) Inasmuch as the amended/proposed provisions, as mentioned in para 9, are in tune with the scheme of the Constitution as well as the principles laid down by this Court, we approve the same and direct the respondent-Union of India to implement the above provisions, if not so far amended as suggested, as expeditiously as possible but not later than six months from the date of receipt of copy of this judgment. The writ petition is disposed of accordingly. No costs. This Court records its appreciation for the valuable assistance rendered by Mr. K.K. Venugopal, learned senior counsel and Mr. Gopal Subramaniam, learned Addl. Solicitor General.
…….…….……………………CJI. (K.G. BALAKRISHNAN)
...…………………………………J.
(LOKESHWAR SINGH PANTA)
...…………………………………J (P. SATHASIVAM)
NEW DELHI;
September 30, 2008.