Editorials & Articles : 17 May 2024
Supreme Court limits ED’s power to arrest PMLA accused
Why in news?
In a landmark judgment, the Supreme Court of India ruled that the Enforcement Directorate cannot arrest someone under Section 19 of the PMLA after the Special Court has taken cognizance of the complaint.
What’s in today’s article?
- Prevention of Money Laundering Act (PMLA)
- Section 45 of the PMLA
- Background of the case
- Key highlights of the judgement
Prevention of Money Laundering Act (PMLA), 2002
- Enacted in January 2003, the Act has three main objectives –
- To prevent and control money laundering
- To confiscate and seize the property obtained from the laundered money; and
- To deal with any other issue connected with money laundering in India.
- Sec. 3 of the Act defines offence of money laundering as –
- whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime and projecting it as untainted property shall be guilty of offence of money-laundering.
- The Act was amended by the Prevention of Money Laundering (Amendment) Act, 2009 and by the Prevention of Money Laundering (Amendment) Act, 2012.
- Most recently, the PMLA was amended through the –
- Finance Act, 2015; Finance Act, 2018; Finance Act, 2019
Section 45 of the PMLA
- About
- It states that no accused person shall be granted bail unless:
- the Public Prosecutor has been given an opportunity to oppose the application for such release; and
- where the Public Prosecutor opposes the application, the Court is satisfied that:
- there are reasonable grounds for believing that he is not guilty of such offence and
- that he is not likely to commit any offence while on bail.
- It states that no accused person shall be granted bail unless:
- Stringent norms
- The twin conditions of bail under Section 45 of the PMLA pose stringent thresholds for an accused.
- For one, the person has to prove in court that he or she is prima facie innocent of the offence.
- Secondly, the accused should be able to convince the judge he would not commit any offence while on bail.
- The burden of proof is entirely on the incarcerated accused, who would be often handicapped to fight the might of the state.
- The twin conditions make it almost impossible for an accused to get bail.
- The twin conditions of bail under Section 45 of the PMLA pose stringent thresholds for an accused.
Background of the case:
- The current judgment was based on an appeal filed by Tarsem Lal against the ED challenging a Punjab and Haryana High Court denying him anticipatory bail.
- The questions of law in the case were whether an accused, appearing in the special court pursuant to its summons, can apply for bail under the regular provisions of the CrPC.
- If so, whether such a bail plea would also have to satisfy the twin conditions imposed by Section 45 of the PMLA.
Key highlights of the judgement
- Gave a fillip to the right to personal liberty
- SC held that a person summoned by a designated special court under the PMLA, is presumed to be not in custody.
- Hence, they need not apply for bail under the draconian conditions posed by the anti-money laundering law.
- Limits the power of arrest by the ED
- The judgment limits the power of arrest by the ED after a special court takes cognisance of a case.
- The Bench said the ED would have to separately apply for the custody of a person once he appears in court.
- The central agency would have to show specific grounds that necessitated custodial interrogation.
- Accused can be directed to furnish bonds
- The special court can require the accused to provide a bond under Section 88 of the Code of Criminal Procedure.
- Section 88 of the CrPC gives a court officer the power to require a person to sign a bond for their appearance in court.
- The bond can be with or without sureties.
- SC observed that bond under Section 88 is just a promise to appear in court. It is just an undertaking
- Hence, an order accepting bond under Section 88 does not amount to grant of bail and hence the twin conditions of Section 45 of the PMLA are not applicable to it.
- The special court can require the accused to provide a bond under Section 88 of the Code of Criminal Procedure.
- Provided further relief to the accused
- The judgment said an accused, who appears in a special court pursuant to its summons, could be exempted from personal appearance in the future.
- On the other hand, if an accused does not appear after a summons is served, the special court could issue a bailable warrant followed by a non-bailable one.
- ED may arrest a person not shown as an accused
- When ED wants to conduct further investigation concerning the same offence, it may arrest a person not shown as an accused in the complaint already filed, provided the requirements of Section 19 are fulfilled.
- Section 19 of the PMLA deals with the procedures of arrest.
- When ED wants to conduct further investigation concerning the same offence, it may arrest a person not shown as an accused in the complaint already filed, provided the requirements of Section 19 are fulfilled.
ECI’s Report on the Enforcement of the Model Code of Conduct (MCC)
Why in News?
- In its report on the enforcement of the Model Code of Conduct (MCC), the Election Commission of India (ECI) made it clear that it expects star campaigners to lead by example rather than undermining social fabric. The report also highlighted issues related to the Registered Unrecognised Political Parties (RUPPs).
What’s in Today’s Article?
- ECI’s Report on the Enforcement of the MCC
- Issues Related to the Registered Unrecognised Political Parties (RUPPs) Highlighted in the ECI Report
- Way Ahead
ECI’s Report on the Enforcement of the MCC:
- In its second suo motu report, the ECI stressed the responsibility of the party leaders to “correct the course” of their statements in the remaining phases of the election.
- The purpose of the report is to increase the political party’s accountability for adhering to the MCC by all of its cadres.
- The ECI also clarified the move to send notices to party chiefs instead of leaders who allegedly violated the poll code with their divisive statements.
- The political parties have prime responsibility to stop their star campaigners from committing such violations.
Issues Related to the Registered Unrecognised Political Parties (RUPPs) Highlighted in the ECI Report:
- What are registered parties?
- Section 29A of the Representation of the People Act 1951 (RP Act) lays down the requirements for registration of a political party with the ECI. There are 2,790 active registered political parties in India.
- These political parties enjoy the following legal benefits –
- Tax exemption for donations received under Section 13A of the Income Tax Act 1961;
- Common symbol for contesting general elections to the Lok Sabha/State Assemblies; and
- 20 ‘star campaigners’ during the election campaign.
- What are RUPPs?
- Political parties are recognised as a ‘national’ or ‘State’ party under the provisions of the Election Symbols (Reservation and Allotment) Order 1968 (Symbols Order) by the ECI.
- They are so recognised based on winning the requisite number of seats and/or obtaining the required percentage of votes in a general or State Assembly election.
- At present, there are 6 national and 61 State parties that have been recognised. These recognised parties enjoy additional concessions of having a reserved symbol during elections and 40-starcampaigners.
- A registered party not recognised as a ‘national’ or ‘State’ party is referred to as a RUPPs.
- Political parties are recognised as a ‘national’ or ‘State’ party under the provisions of the Election Symbols (Reservation and Allotment) Order 1968 (Symbols Order) by the ECI.
- What are the issues with the RUPPs?
- It has been noticed that less than a third of RUPPs contest elections.
- The RUPPs that don’t contest elections raise concerns over the possible misuse of income tax exemption and donations collected being used for money laundering.
- ECI’s power to de-register a RUPP:
- The RP Act does not confer explicit powers on the ECI to de-register a political party, which fails to
- Contest elections,
- Conduct inner-party elections or lodge requisite returns.
- The SC (2002) had held that the ECI does not have power to de-register any political party under the RP Act.
- It may de-register only under exceptional circumstances like –
- Registration being obtained by fraud or
- The political party ceasing to have allegiance to the Constitution or
- If it is declared unlawful by the Government.
- The RP Act does not confer explicit powers on the ECI to de-register a political party, which fails to
Way Ahead:
- Memorandum for electoral reforms (2016): The ECI has suggested an amendment to the law that would empower the ECI to deregister a party.
- Under the Symbols order, the ECI has the power to suspend or withdraw recognition of only a recognised political party for its failure to observe MCC or follow lawful directions of the Commission.
- 255th report of the Law Commission (2015): It has also recommended amendments for de-registration of a political party if it fails to contest elections for 10 consecutive years. These recommendations should be implemented.
Land Acquisition Valid Only if it Passes Constitutional Test
Why in News?
- In a landmark verdict to protect the interests of landowners against acquisition of their property by the government, the Supreme Court of India ruled that all acquisitions would have to pass the test of Article 300A. The SC quashed the decision of Kolkata Municipal Corporation to acquire private land to build a public park, as the law does not authorise the body to acquire the land and the acquisition was illegal.
What’s in Today’s Article?
- The Right to Property in India
- What were the Observations Made by the SC in the Recent Case?
The Right to Property in India:
- Before the enactment of the 44th Constitutional Amendment (1978):
- Part III of the Indian Constitution (Fundamental Rights) included Article 19 (1) (f) and Article 31.
- Indian residents were given the right to purchase, possess, and dispose of their property under Article 19(1)(f).
- Article 31 safeguarded the right against being deprived of one’s property. The right was absolute and could not be denied in any circumstance.
- However, there was a clash, because the above provisions limited the state’s ability to acquire any movable property in the public interest because the right to property was a fundamental right.
- The 44th Amendment to the Indian Constitution:
- It abolished Article 19 (1) (f) and Article 31, and a modified version of it (Article 31) was inserted as Article 300-A.
- This changed the very nature of the right to property in India from being a fundamental right to a legal/constitutional right.
- What is stated in Article 300-A?
- Article 300-A states that “no person shall be deprived of his property except by authority of law”.
- The article gives the government the authority to seize someone else’s property for the benefit of the general welfare.
- How the courts interpreted Article 300-A?
- The Madhya Pradesh HC (2022) clarified that the law requiring the property acquisition needed to be legitimate and that the state’s acquisition of land had to be for the benefit of the public.
- In Vidya Devi v. the State of Himachal Pradesh (2022), the SC ruled that under a welfare state, even the government authorities cannot seize property without following the necessary legal process.
- In Vimlaben Ajitbhai Patel vs. Vatslaben Ashokbhai Patel, the SC ruled that although it may no longer be a fundamental right, the right to property is still a human right.
What were the Observations Made by the SC in the Recent Case?
- Nature of right to property: Under the current constitutional scheme, the right to property is protected as a constitutional right and has even been interpreted to be a human
- Seven basic rights:
- The court said Article 300A confers seven basic procedural rights to landowners and similar duties upon the state which must be followed and fulfilled for any valid acquisition. These are:
- First, duty of State to inform the owners that it intends to acquire his property – right to notice;
- Second, duty of State to hear objections – right to be heard;
- Third, duty of State to inform its decision on acquisition – right to a reasoned decision;
- Fourth, duty of State to demonstrate that acquisition is for public cause – acquisition only for public purpose;
- Fifth, duty of State to restitute and rehabilitate – right to fair compensation;
- Sixth, duty of State to conduct the process of acquisition efficiently and within prescribed timelines – right to an efficient conduct; and
- Seventh, final conclusion of the proceedings – the right of conclusion.
- Procedural justice – A significant mandate of Article 300A: The existence of and adherence to procedural safeguards is crucial for the protection of the right to property as they ensure –
- Fairness,
- Transparency,
- Natural justice, and
- Non-arbitrary exercise of power in the process of acquisition.
Draft Digital Competition Bill, 2024
Why in news?
- The Internet and Mobile Association of India (IAMAI) has expressed apprehensions about the draft Digital Competition Bill 2024. It suggested that this bill could have adverse effects on Indian startups and other digital enterprises.
- IAMAI is a key industry body that represents numerous digital entities, including big tech firms.
What’s in today’s article?
- Digital Competition Bill, 2024
- Key proposals of the draft digital competition Bill
- Criticism of the bill
Digital Competition Bill, 2024
- About
- The bill seeks to further regulate large digital enterprises, including news aggregators, as part of efforts to ensure a level-playing field and fair competition in the digital space.
- It was proposed in March 2024.
- The new law could prevent big tech companies like Google, Facebook, and Amazon from favoring their own services or using data collected from one of their businesses to help another one of their businesses.
- It has provisions to set presumptive norms to curb anti-competitive practices before they actually take place.
- It promises to impose heavy penalties — which could amount to billions of dollars — for violations.
- The bill seeks to further regulate large digital enterprises, including news aggregators, as part of efforts to ensure a level-playing field and fair competition in the digital space.
- Similarity with EU’s Digital Markets Act (DMA)
- The new law is similar to the EU’s Digital Markets Act (DMA), which went into complete effect earlier this year.
- DMA requires large tech firms like Alphabet, Amazon and Apple to open their services, and not favour their own at the expense of rivals.
- Nodal ministry: The Ministry of Corporate Affairs (MCA) is handling the draft.
Need for such bill
- Ex post antitrust framework being followed in India
- Currently, India follows an ex post antitrust framework under the Competition Act, 2002.
- One of the biggest criticisms of the law has been that regulating after the incidence of market abuse involves delays.
- By the time the offending company has been penalised, market dynamics change to rule out smaller competitors.
- Growing need for an ex-ante framework to deal with the complexities of digital markets
- Due to the complex world of digital markets, regulating for market abuse after it takes place (as in an ex-post framework) is not optimal.
- A forward-looking, preventive, and presumptive law (an ex ante framework), which foresees the potential harms that can arise out of antitrust issues and prescribes pre-determined no-go areas is perhaps the way forward.
- Big tech companies have shown a history of engaging in anti-competitive practices
- In 2023, Google was fined Rs 1.337 crore by the CCI for its anti-competitive conduct in the Android ecosystem.
- High market barriers for new entrants
- Many analysts believe that majority of the innovation has been confined to within the stables of a handful of big tech companies, mostly from the US.
- A big reason for this is the high market barriers for new entrants in the sector — in the online market.
- Once a company gets a significant portion of the market, their product becomes the default way to access that particular service, with rivals finding it increasingly difficult to challenge their dominance.
Key proposals of the draft digital competition Bill
- List of Core Digital Services (CDS)
- The list of core digital services has been mentioned under Schedule I of the bill.
- It consists of
- online search engines,
- online social networking services,
- video-sharing platform services,
- interpersonal communications services,
- operating systems, web browsers, cloud services, advertising services, and
- online intermediation services (includes web-hosting, service providers, payment sites, auction sites, app stores, e-commerce marketplaces and aggregators, etc.)
- Significant entities
- The Bill proposes to designate certain enterprises as Systemically Significant Digital Enterprises (SSDEs).
- SSDEs are those enterprises that provide core digital services in India and have a significant presence and significant financial strength in the country.
- The Bill proposes to designate certain enterprises as Systemically Significant Digital Enterprises (SSDEs).
- Parameters to determine whether the enterprise may be designated as SSDE
- If an enterprise is engaged in a CDS, the Bill proposes two tests – the financial strength test and spread test (user base test) to determine whether the enterprise may be designated as SSDE.
- The quantitative parameters for a company to be designated a SSDE are:
- If in the last 3 financial years, its turnover in India is not less than Rs 4,000 crore; or its global turnover is not less than $30 billion; or
- Its gross merchandise value in India is not less than Rs 16,000 crore; or
- Its global market capitalisation is not less than $75 billion; or
- The core digital service provided by these companies should also have at least 1 crore end users, or 10,000 business users.
- Entities that donot fall under these parameters can still be designated as SSDEs if the CCI believes that they have a significant presence in any given core digital service.
- Obligations imposed on SSDE
- Entities which are designated as SSDEs, have been prohibited from engaging in practices such as self-preferencing, anti-steering, and restricting third party applications.
- If they violate these requirements, they can be fined up to 10% of their global turnover.
- Associate Digital Enterprises
- The Bill proposes to designate associate digital enterprises (ADEs) to understand the role that data collected by one company of a major technology group can play in benefiting other group companies.
- If an entity of a group is determined to be an associate entity, they would have the same obligations as SSDEs.
- However, this will depend on the level of their involvement with the core digital service offered by the main company.
- For example, Google Maps could be seen as an associate entity because Google Search directs users to it.
- The same goes for YouTube, depending on how much data is shared between Google Search and YouTube, affecting the video recommendations YouTube makes to users.
Criticism of the bill
- Significant compliance burden
- An ex-ante framework with its strict prescriptive norms could lead to significant compliance burden for big tech companies.
- It may lead to shift of focus from innovation and research to ensuring that companies do not presumptively engage in an anti-competitive practice.
- Stringent requirements of the EU’s DMA and associated impact
- Experts have highlighted the fact that because of the stringent requirements of the EU’s DMA, there has been an increase of 4,000 per cent in the time it takes to find things via Google search.
- Broad definition of who a significant platform could be
- Companies are concerned about the broad definition — both quantitative and qualitative — of who a significant platform could be.
- Unlike EU’s DMA which specifically names the ‘gatekeeper’ entities, that decision in India’s draft law has been left to the discretion of the CCI.
- Companies believe that could lead to arbitrary decision making, which could potentially also impact start-ups.
- May affect smaller businesses
- Companies are claiming that the bill would force them to make the changes to their platform and cut down on data sharing.
- It could also impact smaller businesses who rely on their platforms to reach a big target audience.