'Explained: PMLA'- 1200 words

Introduction: PMLA court allows plea to utilize Mallya's assets (news)

What is money laundering?

Money laundering is the practice of concealing the source of money attained by illegal
means. It is the procedure of creating the appearance that large amounts of money obtained
from serious crimes, such as drug trafficking or terrorist activity, originated from a legitimate
source.1 The INTERPOL has defined money laundering as follows -

“any act or attempted act to conceal or disguise the identity of illegally obtained proceeds so
that they appear to have originated from legitimate sources”.2

Money laundering has also been envisaged in Article 1 of EC Directives which states as
follows –

“The conversion of property, knowing that such property is derived from serious crime, for
the purpose of concealing or disguising the illicit origin of the property or of assisting any
person who is involved in committing such an offence(s) to evade the legal consequences of
his action, and the concealment or disguise of the true nature, source, location, disposition,
movement, rights with respect to, or ownership of property, knowing that such property is
derived from serious crime.”3

It is an act that is done with the intention to hide money or other assets from the State so as to
prevent its loss through taxation, judgement enforcement or confiscation. The criminals here
in tries to disguise the source of money obtained through illegal activities to look like it was
obtained from legal sources for them to be able to use it, without being seized by law
enforcement officials.

It has been observed that money launderers can be found in all walks of life. People helping a
criminal innocently, without knowing the source of money will also be considered as a
‘money launderer’. Thus, it can be said that bankers, lawyers, accountants, car dealers and
others can also be considered as money launderers if they allow their businesses to be used by

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Interpol General Secretariat Assembly in 1995, <http://www.interpol.int/Crime-areas/Financial-
crime/Moneylaundering>
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someone else to launder the proceeds of a crime. Also, people possessing assets out of the
proceeds of crime are considered to be money launderers.

In curb this serious problem in India, the ‘The Prevention of Money Laundering Act
(PMLA), 2002 was passed in the Parliament.

Salient features of PMLA

‘The Prevention of Money Laundering Act (PMLA), 2002’ was enforced to stop money
laundering and connected activities, confiscation of proceeds of crime, setting up of agencies
and mechanisms for coordinating measures for curbing money laundering etc.4

The objective of the Act is to is to prevent money-laundering and to provide for confiscation
of property derived from, or involved in, money-laundering and for matters connected
therewith or incidental thereto.5 The offences under the Act are to be cognizable and non-
bailable.6 The burden of proof will be on the accused to prove that he is not guilty of an
offence under this Act.7

Some of the salient features of the Act include –

 An offence of money laundering is said to be committed when a person in any way

deals with the proceeds of crime.8 The proceeds of the crime referred here include the
normal crimes9 and the scheduled crimes10.11 The prescribed punishment is 3-7 years
rigorous imprisonment for an offence of money laundering with fine. 12 In case of an
offence mentioned under Part A13, imprisonment would extend up to 10 years.14
 The provision for confiscation of the property is stated in Chapter III of the said Act.
An official not below the rank of Deputy Director can order attachment of proceeds of
crime for a period of 180 days, after informing the Magistrate. Then, he will send a
report containing material information relating to such attachment to the Adjudicating
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 Authority.15 After the official sends the report to the Adjudication Authority, this
Authority shall send a show cause notice to the concerned person(s) within 30 days.
After considering the response and all related information, the Authority can give
finality to the order of attachment and make a confiscation order, which will thereafter
be confirmed or rejected by the Special Court.16
 The Central Government, after consulting the High Court is empowered to designate
Court of Sessions as Special Courts.17The Special courts can try all scheduled
offences and that under section 4 and also offence under section 3, but after the
authority requests in this behalf.18
 All appeals from an order made by the Adjudicating Authority will lie to an Appellate
Tribunal constituted by the Central Government.19
 There shall be the following classes of authorities for the purposes of this Act,
namely, the Director or Additional Director or Joint Director, the Deputy Director, the
Assistant Director, and such other class of officers as may be appointed for the
purposes of this Act.20
 A property confiscated or frozen under this Act can be retained for 180 days. This
period can be extended by the Adjudicating Authority after being satisfied of the
merits of the case. The Court or the Adjudicating Authority can subsequently also
order the release of such property.21

Mallya's case

Vijay Mallya is the Chairman of United Breweries (Holding) Limited. He started the luxury
airline company called ‘Kingfisher Airlines’ in the year 2005. In the year 2007, he acquired
Air Deccan, which was a low-cost airline. The Kingfisher Airline faced a loss of Rs. 934
crore (US $133 million) for reasons like hike in oil prices, takeover of a financially unsound
airline etc.22 In 2009, the consolidated debt of the airline accumulates to a massive Rs5,665
crore (US$810 million) that increases to Rs7,000 crores (US$1 billion). IDBI bank issues a

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loan of Rs 900 crores (US$128 million) to the airline.23 In 2010, the banks gave the airline an
ultimatum of nine months to pay back the entire loan amount that stands at $1.3 billion. The
Mumbai International Airport Pvt. Limited sent a notice to the airline to pay its outstanding
dues of Rs 90 crore (US$12 million). The Income Tax Department froze 11 accounts

 Significance of current development

 Conclusion: Way forward

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