Pareena Swarup v. Union of India

) A 8 [2008] 13 S.C.R. 1217 ## PAREENA SWARUP _V._ UNION OF INDIA (Writ Petition No. 634 of 2007) SEPTEMBER 30, 2008 # **[K.G. BALAKRISHNAN, CJI, LOKESHWAR SINGH PANTA AND P. SATHASIVAM, JJ]** _Constitution of India, 1950:_ _Article 32_ - _Provisions of Prevention of Money-launder-_[c ] _ing Act, 2002 and the Rules framed thereunder regarding constitution of Adjudicating Authorities and Appellate Tribunal_ - _Challenged as violative of constitutional scheme of separation of powers and constitutional guarantee of independent ;udiciary_ - _Union of India filing amended/proposed provisions_ D - _incorporating the required safeguards HELD: Independence and impartiality are to be secured not only for courts but_ also _for tribunals and their members entrusted with judicial powers_ - _Amended/proposed provisions of the Act and the Rules approved_ - _Judicial Review_ - _Administration of justice_ - _Tri-_ E _bunals entrusted with judicial powers- Independence of- Prevention of Money-laundering Act, 2002_ - _ss. 28 and 32_ - _Prevention of Money-laundering (Appointment and Conditions of Service of Chairperson and Members of Adjudicating Authorities) Rules, 2007_ - _r. 3_ - _Prevention of Money-launder-_ F _ing (Appointment and Conditions of Service of Chairperson and Members of Appellate Tribunal) Rules, 2007_ - _rr. 4 and 6_ - _Public Interest Litigation._ _Basic structure theory_ - _Doctrine of separation of pow-_ ers, _and independence of judiciary_ - _Applicability of, to tribu-_ - _nals entrusted with judicial powers Explained._ G **The petitioner filed the instant writ petition under Artic le 32 of the Constitution of India, by way of public inter-** H 1217 > 1218 SUPREME COURT REPORTS [2008] 13 S.C.R. A est litigation, challenging the provisions of Prevention of Money-laundering Act, 2002, Prevention of Money-laundering (Appointment and Conditions of Service of Chairperson and Members of Adjudicating Authorities) Rules, 2007 and Prevention of Money-laundering (Appointment B and Conditions of Service of Chairperson and Members of Appellate Tribunal) Rules, 2007 in so far as they related to constitution of the Adjudicating Authorities and the Appellate Tribunal. It was contended that the Adjudicating Authorities and the Appellate Tribunal under the Act c were to perform judicial functions, but their Members and Chairperson were to be selected by a Selection Committee headed by the Revenue Secretary and, thus, the relevant provisions of the Act and the Rules were violative of the Constitutional scheme of separation of powers and D constitutional guarantee of a free and independent judiciary. t During the course of hearing, amendment to the Act and the Rules were suggested and, accordingly, the Union of India filed amended/proposed provisions of the Act and E the Rules, which were approved by the Court. Disposing of the writ petition, the Court HELD: 1.1 The Independence in judicial function and impartiality are to be secured not only for courts but also F for tribunals and their members, entrusted with judicial powers, though they do not belong to the 'Judicial Service'. [para 8) [1224,C] 1.2 While creating new avenue of judicial forums, it is the duty of the Government to see that they are not in G breach of basic constitutional scheme of separation of powers and independence of the judicial function. There is substance in the apprehension of the petitioner that the provisions of Prevention of the Money-laundering Act, 2002 are so provided that the Members and the ChairperH son of the Adjudicating Authorities and Appellate Tribu- , ~ PAREENA SWARUP _v._ UNION OF INDIA 1219 nal would be selected by the Selection Committee headed A by Revenue Secretary and, that there may not be independent adjudicatory machinery to decide the cases under the Act. [para 8] [1223,F-H] 1.3 Power of judicial review over legislative action 8 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 its structure. The Constitution guarantees free and independent judiciary and the constitutional scheme of separation of powers can be easily and seriously unC dermined, if the legislatures were to divest the regular courts of their jurisdiction in all matters and entrust the same to the newly created Tribunals which are not entitled to protection similar to the constitutional protection afforded to regular courts. [para 8] [1223,H; 1224,A-B] D _L Chandra Kumar_ vs. _Union of India and Ors._ 1997 (2) SCR 1186 = (1997) 3 sec 261 - relied on. 2. Inasmuch as the amended/proposed provisions, as mentioned in para 9 of the judgment are in tune with E the scheme of the Constitution as well as the principles laid down by this Court, the same are approved and the respondent-Union of India is directed to implement them, as expeditiously as possible. [para 9-1 OJ [1231,A-B] ## Case Law Reference F 1997 (2) SCR 1186 relied on para 8 CIVIL ORIGINAL JURISDICTION: Writ Petition (Civil) No. 634 of 2007 G (Under Article 32 of the Constitution of India) ) K.K. Venugopal, V. shekhar, Ameet Singh and Pramod Swarup for the Petitioner. Gopal Subramanium, A.S.G., M. Chandrashekharan, H 1220 SUPREME COURT REPORTS [2008] 13 S.C.R. ,_ - A A.S.G., Satyakam, Vikas Sharma (for B.V. Balaram Das) and Dinesh Kr. Garg for the Respondent. The Judgment of the Court was delivered by **P. SATHASIVAM, J.** 1. Ms. Pareena Swarup, member of B[the Bar, has filed this writ petition under Art. 32 of the Constitu-] tion 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 c[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 memD[bers 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. + 2. Brief facts in a nutshell are: E 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 F 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 G 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 Cen- • tral Government framed rules regulating the appointment and H[conditions ][of ][service ][of ][persons appointed as Chairperson and ] PAREENA SWARUP _v._ UNION OF INDIA [P. SATHASIVAM, J.] 1221 • I ..._ ~ .. ... ) 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. A B 3. 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 c 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 D 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 E 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 F 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. 4. 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. G H SUPREME COURT REPORTS [2008] 13 S.C.R. 1222 ~ • A 5. 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. B 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. c D E F 6. 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. t .. 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. ## G 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." ~ H 1223 PAREENA SWARUP _v._ UNION OF INDIA [P. SATHASIVAM, J.] 6. Section 28(1) of PMLA, which allows a person who "is A 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 111 .. ~ninate a person for appointment as Chairperson of Appellate Tribunal under PMLA "who B 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." B 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. C 7. As regards the above defects in the rules, as observed o 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. E 8. 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 F 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 G 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 H 1224 SUPREME COURT REPORTS [2008] 13 S.C.R. H A 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 pow8 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 imparC tiality 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 preservD ing 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 indepenE dence 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 F pointed out by the petitioner and amended/proposed provisions of the Act and the Rules. 9. 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 sugG gestions 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. 1225 PAREENA SWARUP _v._ UNION OF INDIA [P. SATHASIVAM, J.] ) |**S.No.**|**S.No.**Issues|**Amended/Pro-**<br>**posedprovision**|**Remarks**<br>.| |---|---|---|---| |1.· Rule 3(3)of<br>Adjudicating<br>Authority<br>Rules, 2007<br>does not ex-<br>plicitly specify<br>the qualifica-<br>tions of mem-<br>berfromthe<br>field of finance<br>or<br>accoun-<br>tancy.<br>Rule3(3)of Adjudicat-<br>ing Authority Rules, p I e t e d .<br>2007<br>have<br>been<br>amended to specify Rule as<br>the 'academic qualifi-<br>cation' for theMem~<br>ber from the field of fi-<br>nanceandaccounting<br>by inserting a sub-<br>clause(b)asfollows:<br>"(b)Fromamong such<br>persons, the Selection ·<br>Committee shall have<br>due regardtothe aca-<br>demic qualificatiol'ls<br>of chartered accoun-<br>tancy or a degreeinfi·<br>nance, economics or<br>accountancy or hav-<br>ingspecialexperi-<br>enceihfinance or ac- <br>counts byvirtueof<br>having worked for at<br>least two yearsinthe<br>finance or revenuede-<br>partment of either the<br>Central Government<br>or a StateGovern-<br>ment<br>or<br>being<br>inchargeofthefi-<br>nance or accounting<br>wing of a corporation<br>for a like period."|||Actioncom-<br>ing Authority Rules, p I e t e d .<br>Ame.n d e d<br>amended to specify Rule asper<br>annexureA<br>Mem~<br>persons, the Selection ·<br> ·| 1226 SUPREME COURT REPORTS [2008] 13 S.C.R. A |2.<br>3.<br>4.|Rule 4ofAp-<br>pellate Tribunal bunal Rules, 2007 has<br>Rules,2007<br>which provided ambiguously provide<br>forMethodof<br>Appointment<br>ofChairperson made on the recom-<br>do not give ad-<br>equate control Justice<br>to Judiciary.|Rule 4ofAp-<br>pellate Tribunal bunal Rules, 2007 has<br>Rules,2007<br>which provided ambiguously provide<br>forMethodof<br>Appointment<br>ofChairperson made on the recom-<br>do not give ad-<br>equate control Justice<br>to Judiciary.| |---|---|---| ||Rule6(1)of<br>AppellateTri- <br>bunalRules,<br>2007<br>which<br>defines<br>the<br>Selection<br>Committee for on the recommenda-<br>recommend- <br>ingappoint- <br>men!ofMem- <br>bersofthe Tri- <br>bunal,would<br>undermine the amended to provide<br>constitutional<br>scheme<br>of<br>separationof<br>powers<br>be- <br>tween judiciary Chairperson of the Se-<br>and<br>execu-<br>lives.|ofRule 6(1)ofAppellate<br> Tribunal Rules, 2007<br>has been amended to<br>whichprovide that the Chair-<br>thepersonofAppellate<br>SelectionTribunalisappointed<br>Committee for on the recommenda-<br> tionofthe CJI and the<br> compositionofthe<br> Selection Committee<br> to select Membersof<br>the Tribunal has been<br>undermine the amended to provide<br>for a Judgeofthe Su-<br>ofpremeCourt,nomi-<br>ofnatedbythe Chief Jus-<br> ticeofIndia, tobethe<br>tween judiciary Chairperson of the Se-<br>lection Committee.| ||Section 32(2)Appropriateamend-<br>ofPMLA which ment to the Statute is<br>provides for re· being proposed to un-<br>movalofChair- ambiguously provide<br>person/Mem-<br>that Chairperson/|| 1227 PAREENA SWARUP _v._ UNION OF INDIA ) [P. SATHASIVAM, J.] |. of the Tribunal.|bers of Tribu-<br>na I<br>under<br>PMLAdoes<br>notprovidead~<br>equate safety<br>tothe tenure of<br>the Chairper-<br>son/members<br>. of the Tribunal.|ad~<br>Members appointed Draft Billisun-<br>in consultation with derprepara-<br>Chief Justice of India,tion.<br>shallnotberemoved ,<br>without·mandatory<br>consultation with Chief<br>Justice oflndic;i.| |---|---|---| |5.|Rule6(2)ofRule6(2) of the Appel-<br>May be de-<br>Appellate Tri- late Tribunal Rules, leted.<br>bunal Rules is 2007<br>may<br>be<br>vague to the amendedtodelete the<br>extentthat it words "oronrecom-<br>providesformendation of theap-.<br>recommend- propriate authorities",<br>ing names af- a proposal endorsed<br>ter "inviting ap- byASG,Shri Gopal<br>pIicationsSubramaniam.<br>thereof by ad-<br>vertisement or<br>onthe recom-<br>mendations of<br>the appropri-<br>ateauthori-<br>ties."<br>.|| |6.<br>. Section 28(1)|. Section 28(1)<br>of<br>PMLA,<br>which allows a<br>person who"is<br>qualifiedtobe<br>a judge of the<br>High Court"to<br>be the Chair-<br>person of the<br>Thereareseveral Acts<br>under which Judges<br>andthose 'qualified to<br>bea judge' are equally<br>eligible for selection<br>like for Chairman un-<br>derNDPSActand<br>SAFEMA;Judicial<br>member under Admin<br>Thereisnore-<br>quirementto<br>amend either<br>the Statute of<br>theRules.|| 1228 SUPREME COURT REPORTS [2008] 13 S.C.R. |3.|Tribunal,<br>shouldbeei- <br>ther deletedor<br>theRulesmay<br>be amended ment<br>toprovide that<br>theChief Jus- <br>ticeofIndia India<br>shall nominate 217(2)(b),<br>a person for person should have<br>appointment<br>as Chairper- <br>son or Appel- <br>late Tribunal thermore, since ap-<br>under PMLA pointment of Chairper-<br>"whoisorhas<br>beena Judge der PMLA is to<br>ofthe<br>Su- <br>premeCourtor<br>a High Court" expected that<br>_failingwhich_a pendent<br>personwho"is<br>qualifiedtobe<br>a judge ofthe<br>High Court."|istrative Tribunal Act;<br> Chairperson under<br>FEMAetc.Theeligibil-<br>itycriteria, for appoint-<br>be amended mentasa judge of a<br>HighCourt, provided<br> intheConstitution of<br>India IndiaunderArticle<br>shall nominate 217(2)(b),isthat the<br>a person for person should have<br>been"foratleast 1 O<br> yearsasanadvocate<br> of aHighCourt... "Fur-<br>late Tribunal thermore, since ap-<br>under PMLA pointment of Chairper-<br>sonoftheTribunalun-<br>a Judge der PMLA is tobe<br> madeonthe recom-<br>mendation ofCJI,itis<br>a High Court" expected thataninde-<br>a pendentpersonwould<br>beappointedtohead<br>theAppellate Tribunal.| |---|---|---| |7.|The qualifica-<br>tions forLegal<br>Member ofthe<br>Adjudicating<br>Authority<br>shouldexclude<br>"thosewhoare<br>qualifiedtobe<br>a<br>District District Forum under<br>Judge"<br>and Consumer Protection<br>onlv servinaor|1.Persons'qualifiedtoThereisnore-<br>bea districtJudge'arequirement to<br>treatedatparwithDis-<br>amend either<br>trictJudgesforthepur-<br>the Statute or<br>Authorityposesof qualificationtheRules.<br>for appointment as<br>memberinATFEunder<br>FEMA;asPresidentof<br>District District Forum under<br>and Consumer Protection<br>Act.1986etc.Theeli-| 1229 [P. SATHASIVAM, J.] ## PAREENA SWARUP _v_ UNION OF INDIA ||retiredDistrictgibilitycriterion,forap-<br>JudgesshouldpointmentasaDistrict<br>beappointed.Judge,providedinthe<br>TheChairper-<br>ConstijutionofIndiaun-<br>sonof the Ad-<br>derArticle233(2),isthat<br>judicating Au-<br>thepersonshouldhave<br>thority shouldbeenanadvocate"fornot<br>bethe Legallessthansevenyears''.<br>member.<br>2.PMLAisa special-<br>izedandnewActand<br>DistrictJudgesmaynot<br>beavailablewithexpe-<br>rienceinrelatedissues<br>whereasAdvocatesor<br>officersofIndianLegal<br>Service,whoareeli-<br>gibletobe District<br>Judges, may often<br>have greater know!-<br>edgeof its provisions<br>andworking.<br>3.TheAdjudicatingAu-<br>thorityisabodyofex-<br>pertsfromdifferentfields<br>toadjudicateontheis-<br>sueofconfirmationof<br>provisionalattachment<br>ofpropertyinvolvedin<br>moneylaundering.The<br>functionsofAdjudicating<br>Authorityarecivilir1na-<br>turetotheextentthatit<br>doesnotdecideonthe<br>criminalityoftheoffence<br>nordoesithavepower| |---|---| [2008] 13 S.C.R. 1230 ## SUPREME COURT REPORTS |||tolevypenaltiesorim-<br>posepunishment.<br>4.Adjudicationisafunc-<br>tionwhichisperformed<br>byExecutives under<br>many statutes. The<br>Competent Authority<br>underNDPS/SAFEMA<br>havebeenconducting<br>Adjudicationproceed-<br>ings routinely since<br>1978andinthelastfour<br>yearsi.e.2004-2008,<br>Competent Authority<br>hastaken1374new<br>cases, issued 275<br>SCNs, forfeited162<br>propertiesanddis-<br>posedof30properties<br>withoutanyjudicialob-<br>jections.Similaradjudi-<br>cations are doneby<br>CustomAuthoritiesun-<br>derCustomActorby<br>Authorities<br>under<br>FEMA/FERA.<br>5.TheAdjudicatingAu-<br>thority,beingabody.of<br>expertsfromdifferent<br>fields,witharoleasde-<br>scribedinpara3above,<br>appointmentofitsChair-<br>personshouldbeleftto<br>therecommendationof<br>theSelectionCommittee.|| |---|---|---|---| 1231 PAREENA SWARUP _v._ UNION OF INDIA [P. SATHASIVAM, J.) 10. Inasmuch as the amended/proposed provisions, as A 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 B 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. c c R.P . Writ Petition disposed of. •