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
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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-
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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
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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 pre-
conditions 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
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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.
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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
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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
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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
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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
.
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1. Rule 3(3) of Rule 3(3) of Adjudicating Action
Adjudicating Authority Authority Rules, 2007 have been completed.
Rules, 2007 does not amended to specify the `academic Amended
explicitly specify the qualification’ for the Member Rule as per
qualifications of from the field of finance and annexure A
member from the field accounting by inserting a sub-
of finance or clause (b) as follows:
accountancy. "(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."
2. Rule 4 of Appellate Rule 4 of Appellate Tribunal Action
Tribunal Rules, 2007 Rules, 2007 has been amended completed.
which provided for to unambiguously provide that Amended
Method of the appointment of Chairperson Rule as per
Appointment of shall be made on the annexure B
Chairperson do not recommendation of the Chief
give adequate control Justice of India.
to Judiciary.
3. Rule 6(1) of Appellate Rule 6(1) of Appellate Tribunal Action
Tribunal Rules, 2007 Rules, 2007 has been amended completed.
which defines the to provide that the Chairperson Amended
Selection Committee of Appellate Tribunal is Rule as per
for recommending appointed on the annexure C
appointment of recommendation of the CJI and
Members of the the composition of the Selection
Tribunal, would Committee to select Members of
undermine the the Tribunal has been amended
constitutional scheme to provide for a Judge of the
of separation of Supreme Court, nominated by
powers between the Chief Justice of India, to be
judiciary and the Chairperson of the Selection
executives. Committee.
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4. Rule 32(2) of PMLA Appropriate amendment to the Draft Bill is
which provides for Statute is being proposed to under
removal of unambiguously provide that preparation.
Chairperson/Members Chairperson/Members appointed
of Tribunal under in consultation with Chief
PMLA does not Justice of India, shall not be
provide adequate removed without mandatory
safety to the tenure of consultation with Chief Justice
the Chairperson/ of India.
members of the
Tribunal.
5. Rule 6(2) of Appellate Rule 6(2) of the Appellate May be
Tribunal Rules is Tribunal Rules, 2007 may be deleted.
vague to the extent amended to delete the words "or
that it provides for on recommendation of the
recommending names appropriate authorities", a
after "inviting proposal endorsed by ASG, Shri
applications thereof Gopal Subramaniam.
by advertisement or
on the
recommendations of
the appropriate
authorities."
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6. Section 28(1) of PMLA, There are several Acts under There is no
which allows a person which Judges and those requirement
who "is qualified to be `qualified to be a judge' are to amend
a judge of the High equally eligible for selection like either the
Court" to be the for Chairman under NDPS Act Statute or
Chairperson of the and SAFEMA; Judicial member the Rules.
Tribunal, should be under Administrative Tribunal
either deleted or the Act; Chairperson under FEMA
Rules may be etc. The eligibility criteria, for
amended to provide appointment as a judge of a High
that the Chief Justice Court, provided in the
of India shall Constitution of India under
nominate a person for Article 217(2)(b), is that the
appointment as person should have been "for at
Chairperson or least 10 years as an advocate of
Appellate Tribunal a High Court..." Furthermore,
under PMLA "who is since appointment of
or has been a Judge of Chairperson of the Tribunal
the Supreme Court or under PMLA is to be made on the
a High Court" failing recommendation of CJI, it is
which a person who expected that an independent
"is qualified to be a person would be appointed to
judge of the High head the Appellate Tribunal.
Court."
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7. The qualifications for 1. Persons `qualified to be a There is no
Legal Member of the district Judge' are treated at par requirement
Adjudicating Authority with District Judges for the to amend
should exclude "those purposes of qualification for either the
who are qualified to be appointment as member in ATFE Statute or
a District Judge" and under FEMA; as President of the Rules.
only serving or retired District Forum under Consumer
District Judges should Protection Act, 1986 etc. The
be appointed. The eligibility criterion, for
Chairperson of the appointment as a District Judge,
Adjudicating Authority provided in the Constitution of
should be the Legal India under Article 233(2), is that
member. 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
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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.
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