PAREENA SWARUP versus UNION OF INDIA

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 corn position 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.

p. 1220, margin A

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 Adjudieating Authorities) Rules, 2007.

pp. 1220–1221, margin D

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, re lating 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.

p. 1221, margin B

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.

p. 1221, margin F

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.

p. 1222, margin A

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 PMLAdoes 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 ~ninate 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."

pp. 1222–1223, margin C

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.

p. 1223, margin C

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 dew 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 ofL 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 pow- 8 ers 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 ifthere 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.

pp. 1223–1224, margin E

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. Issues Amended/Pro- Remarks posed provision . 1. · Rule 3(3) of Rule 3(3) of Adjudicat- Action com- Adjudicating ing Authority Rules, p I e t e d . Authority 2007 have been Am e.n d e d Rules, 2007 amended to specify Rule as per does not ex- the 'academic qualifi- annexureA plicitly specify cation' for the Mem~ the qualifica- ber from the field of fitions of mem- nance and accounting ber from the by inserting a subfield of finance clause (b) as follows: or accoun- "(b) From among such tancy. persons, the Selection · Committee shall have due regard to the academic qualificatiol'ls of chartered accountancy or a degree in fi· nance, economics or accountancy or having special experience ih finance or ac- · counts 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 Ap- Rule 4 of Appellate Tri- Action pellate Tribunal bunal Rules, 2007 has pleted. Rules, 2007 been amended to un- Amended which provided ambiguously provide Rule for Method of that the appointment of annexure Appointment Chairperson shall be of Chairperson made on the recomdo not give ad- mendation of the Chief equate control Justice of India. to Judiciary. 3. Rule 6(1) of Rule 6(1) of Appellate Action Appellate Tri- Tribunal Rules, 2007 pleted. bunal Rules, has been amended to Amended 2007 which provide that the Chair- Rule defines the person of Appellate annexure Selection Tribunal is appointed Committee for on the recommendarecommend- tion of the CJI and the ing appoint- composition of the men! of Mem- Selection Committee bers of the Tri- to select Members of bunal, would the Tribunal has been undermine the amended to provide constitutional for a Judge of the Suscheme of preme Court, nomiseparation of nated by the Chief Juspowers be- tice of India, to be the tween judiciary Chairperson of the Seand execu- lection Committee. lives. 4. Section 32(2) Appropriate amend- Draft Bill is unof PMLA which ment to the Statute is der provides for re· being proposed to un- tion. moval of Chair- ambiguously provide person/Mem- that Chairperson/ bers of Tribu- Members appointed Draft Bill na I under in consultation with der prepara- PMLA does Chief Justice of India, tion. not provide ad~ shall not be removed , equate safety without ·mandatory to the tenure of consultation with Chief the Chairper- Justice of lndic;i. son/members . of the Tribunal. 5. Rule 6(2) of Rule 6(2) of the Appel- May be de- Appellate Tri- late Tribunal Rules, leted. bunal Rules is 2007 may be vague to the amended to delete the extent that it words "or on recomprovides for mendation of the ap-. recommend- propriate authorities", ing names af- a proposal endorsed ter "inviting ap- by ASG, Shri Gopal p Ii cations Subramaniam. thereof by advertisement or on the recommendations of the appropriate authorities." 6. . Section 28(1) There are several Acts There is of PMLA, under which Judges quirement which allows a and those 'qualified to amend either person who "is be a judge' are equally the Statute of qualified to be eligible for selection the Rules. a judge of the like for Chairman un- High Court" to der NDPS Act and be the Chair- SAFEMA; Judicial person of the member under Admin Tribunal, istrative Tribunal Act; should be ei- Chairperson under ther deleted or FEMA etc. The eligibilthe Rules may ity criteria, for appointbe amended ment as a judge of a to provide that High Court, provided the Chief Jus- in the Constitution of tice of India India under Article shall nominate 217(2)(b), is that the a person for person should have appointment been "for at least 1 O 3. as Chairper- years as an advocate son or Appel- of a High Court ... " Furlate Tribunal thermore, since apunder PMLA pointment of Chairper- "who is or has son of the Tribunal unbeen a Judge der PMLA is to be of the Su- made on the recompreme Court or mendation of CJI, it is a High Court" expected that an indefailing which a pendent person would person who "is be appointed to head qualified to be the Appellate Tribunal. a judge of the High Court." 7. The qualifica- 1. Persons 'qualified to tions for Legal be a district Judge' are Member of the treated at par with Dis- Adjudicating trict Judges for the pur- Authority poses of qualification should exclude for appointment as "those who are member in ATFE under qualified to be FEMA; as President of a District District Forum under Judge" and Consumer Protection onlv servina or Act. 1986 etc. The eliretired District gibility criterion, for ap- Judges should pointment as a District be appointed. Judge, provided in the The Chairper- Constijution of India unson of the Ad- der Article 233(2), is that judicating Au- B the person should have thority should been an advocate "for not be the Legal less than seven years''. member. 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 know!edge 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 ir1 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 and in the last four years i.e. 2004-2008, Competent Authority has taken 137 4 new cases, issued 275 SCNs, forfeited 162 properties and disposed of 30 properties without any judicial objections. Similar adjudications are done by Custom Authorities under Custom Act or by Authorities under F FE MA/FERA. 5. The Adjudicating Authority, being a body .of experts from different fields, with a role as described in para 3 above, appointment of its Chairperson should be left to • the recommendation of the Selection Committee.

pp. 1224–1230, margin F

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 Addi. Solicitor General. R.P . Writ Petition disposed of.

p. 1231, margin A