Pareena Swarup Vs.
Union of India  INSC 1669 (30 September 2008)
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)
P. Sathasivam, J.
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
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.
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.
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 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.
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.
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.
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
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
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.
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.
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.
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.
Amended/Proposed provision Remarks .
1. Rule 3(3) of Rule
3(3) of Adjudicating Action Adjudicating Authority Authority Rules, 2007 have
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:
"(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
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
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.
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 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
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."
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."
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
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 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.
(LOKESHWAR SINGH PANTA)