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In a batch of petitions challenging the provisions of the Prevention of Money Laundering Act, 2002 (PMLA), Solicitor General Tushar Mehta referring to money laundering and the recommendations made by the Finance Action Task Force (FATF) and requirement of the provision of money laundering, argued before the top court that Dawood used to invest crores in pirated CDs and generated proceeds of crime but what he was merely accused of was piracy.

A bench of Justice AM Khanwilkar, Justice Dinesh Maheswari and Justice CT Ravikumar observed that probably every point argued has already been dealt with Bombay High Court. The bench was hearing a batch of petitions challenging provisions of the Prevention of Money Laundering Act.

Mehta further argued that in the offenses under PMLA, 'knowledge' is an essential ingredient. "If knowledge is not considered as an ingredient, it would be unfair on my part. A bank might not know the money is proceeds of crime."

"Knowledge of the item being proceeds of crime is necessary, suppose a house has been made from the proceeds of crime, the tenant may not know that it is proceeds of crime," Mehta added.

Mehta giving an example of the Nirav Modi case submitted that in this case bank officials were accused as they were doing it knowingly.

Mehta argued that the 2019 amendment of the PMLA has been made after the recommendations made by FATF, in furtherance to this Mehta argued that India is not the only country against whose provision FATF objected, FATF objected to United States of America, Germany, etc. and mentioned them in the category of partially compliant.

Over the issue whether CrPC applies to PMLA or not, Mehta argued that "There are concepts for this,

(1) CrPC itself says that this procedure will only be applicable if there is no special act;
(2)The special act providing special mechanism; 
(3)The issue which the special law doesn't deal with, will also go by CrPC."

Earlier, Mehta had argued that the petitioners' contention that the legislation is not Code of Criminal Procedure (CrPC) compliant, is faulty. He said that it must be constitutionally compliant and need not be CrPC compliant.

In addition to this, Mehta further argued that PMLA is a complete code whereas, CrPC is a generic law and under CrPC police officers need not record reasons and under PMLA they'll have to give reasons.

Referring to the rules, Mehta submitted that after conviction under money laundering the property and money attached may be returned to the claimant who suffered loss, and that by way of this rule Rs. 18,000 crores have been returned to the banks attached from the absconding businessmen.

Mehta further argued that FATF (Financial Action Task Force) conducts audits, it's 2012 normal evaluation report said that India's money laundering definition isn't consistent with Vienna Convention and the Government complied, as to be compliant, would be necessary for India's international stability.

In addition to this, Sr. Adv. Menaka Guruswamy arguing for the petitioner had submitted that with conviction numbers in PMLA cases being low, appeals by the Enforcement Directorate (ED) should have been higher, however, that is not the case. She cited that in 2010 and 2011, infact, there were no appeals by the ED.

Cause Title: Vijay Madanlal Chaudhary and Ors. vs Union of India & Other