The Other Legislations Against Economic Offenders

Section 11 fixes the maximum at one year, or two years in a section 10 case.

The cut-off date is the same as COFEPOSA's, and for the same reason: Parliament allowed both routes past the Advisory Board to lapse rather than renew them.

The rest of the Act. Section 1 gives the extent and provides that the Act shall be deemed to have come into force on 4 July 1988. Section 2 defines the terms. Section 4 allows a detention order to be executed anywhere in India in the manner of a warrant of arrest. Section 5 regulates the place and conditions of detention and the removal of a detenu from one place to another, a State's order for removal to another State requiring that State's consent. Section 6 makes the grounds severable. Section 7 saves an order from being invalid or inoperative on certain grounds. Section 8 deals with absconding persons. Section 12 provides for revocation, section 13 for temporary release, section 14 for protection of action taken in good faith, section 15 stands repealed, and section 16 is the repeal and saving.

Why the list matters. Every one of those provisions has a counterpart in COFEPOSA and in the National Security Act, which is the point of the comparison: the Indian detention statutes are one drafting repeated, and a student who learns the shape once can answer on any of them.

The definition to know is in section 2(e). Illicit traffic covers cultivating coca or the opium poppy or cannabis; producing, manufacturing, possessing, selling, purchasing, transporting, warehousing, concealing, using, consuming, importing, exporting or transhipping narcotic drugs or psychotropic substances; dealing in any other activity in them; and handling or letting premises for any of those; other than what the Narcotic Drugs and Psychotropic Substances Act 1985 permits. It includes financing any of those activities directly or indirectly, abetting or conspiring in furtherance of them, and harbouring persons engaged in them.

Those three inclusions are the point of the Act. The financier and the harbourer are the persons the punitive statute rarely reaches.

Why COFEPOSA cannot be used on a narcotics ground

The proviso to section 3(1) of COFEPOSA forbids an order on a ground on which an order may be made under section 3 of this Act. The two statutes are kept in separate lanes deliberately, so that the choice of statute is not left to the detaining authority.

SAFEMA reaches both

Section 2 of SAFEMA applies the forfeiture machinery to persons detained under COFEPOSA. The narcotics equivalent is chapter VA of the Narcotic Drugs and Psychotropic Substances Act 1985, which provides for forfeiture of illegally acquired property of persons convicted or detained under the narcotics laws, on the same pattern. The device travels with the subject.

The modern successors

A 2026 answer that stops at 1988 is out of date. Four statutes should be named.

The Prevention of Money Laundering Act 2002. The central modern statute. It creates the offence of money laundering in section 3, provides for provisional attachment and confiscation of the proceeds of crime, empowers authorities to summon and record statements, and restricts bail by twin conditions in section 45.

The Benami Transactions (Prohibition) Act 1988, extensively amended in 2016. Confiscation of property held benami, which is the same forfeiture device applied to a different concealment.

The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act 2015. Tax and penalty on undisclosed foreign assets, with prosecution.

The Fugitive Economic Offenders Act 2018. Confiscation of the property of a person who leaves India to avoid criminal prosecution for a scheduled economic offence and refuses to return.

The pattern across all four is that Parliament has moved away from detention and towards confiscation, which is the direction the analysis in the previous chapters predicts.

The bail question, and the two decisions

The money laundering law's section 45 is where the modern argument sits, and it has been decided twice.

Nikesh Tarachand Shah v. Union of India, AIR 2017 SC 5500.

Facts. Section 45(1) of the Prevention of Money Laundering Act 2002, as it then stood, imposed twin conditions on bail: that the court be satisfied that there are reasonable grounds for believing that the accused is not guilty of such offence, and that he is not likely to commit any offence while on bail. The conditions were tied to whether the person was being tried for a scheduled offence punishable with more than three years, and the petitioners said the classification was irrational.

Held. The Court declared section 45(1), in so far as it imposes two further conditions for release on bail, unconstitutional as violating articles 14 and 21. The reasoning was that manifestly arbitrary, discriminatory and unjust results arose from the application or non-application of the section, because the grant of bail came to depend on a circumstance having nothing to do with the offence of money laundering, so that the procedure for bail became harsh, burdensome, wrongful and discriminatory.

Vijay Madanlal Choudhary v. Union of India, decided on 27 July 2022.

Facts. After the 2018 amendment recast section 45, the whole of the 2002 Act was challenged: the definition of proceeds of crime, section 3, the attachment power in section 5, the search provisions in sections 17 and 18, the power of arrest in section 19, the presumption in section 24, the recording of statements under section 50, and section 45 again.

Held. The Act was substantially upheld. On bail, the Court held that the reasons which weighed in Nikesh Tarachand Shah for declaring the twin conditions unconstitutional in no way obliterated the provision from the statute book, and that it was open to Parliament to cure the defect and revive the provision; and that section 45 as applicable after the 2018 amendment is reasonable, has a direct nexus with the purposes of the Act, and does not suffer from arbitrariness or unreasonableness.

Held on the other provisions. Section 5 is constitutionally valid, having a balancing arrangement and procedural safeguards. The challenges to sections 8(4), 17, 18, 19 and 24 were rejected. The process under section 50 is in the nature of an inquiry against the proceeds of crime and not investigation in the strict sense, the authorities are not police officers, and statements recorded by them are not hit by article 20(3) or article 21. The authorities cannot prosecute on the assumption that a scheduled offence has been committed, and if the person is discharged or acquitted of the scheduled offence, or the case against him is quashed, there can be no offence of money laundering against him.

Why the pair matters. Together they show the machinery of this book working in a modern statute. A restrictive bail provision was struck down for irrational classification, Parliament redrafted it, and the redrafted provision was upheld. The lesson is that the vice was in the drafting, not in the idea of a restrictive bail provision as such, which is exactly what Kartar Singh had held about TADA and what the next chapters take up.

A worked example

A person is detained under PIT NDPS for financing the transport of heroin. He is also being prosecuted under the money laundering law for the proceeds.

Is financing within the Act? Yes. Section 2(e) includes financing, directly or indirectly, any of the listed activities.

Could he instead have been detained under COFEPOSA? No. The proviso to section 3(1) of COFEPOSA forbids an order on a ground on which an order may be made under section 3 of the PIT NDPS Act.

What is the maximum period of detention? One year, since section 10 cannot apply to an order made after 31 July 1999.

On what conditions can he get bail in the money laundering prosecution? On the twin conditions in section 45 as amended in 2018, which Vijay Madanlal Choudhary upheld.

Can his statement to the officers be used against him? Yes. On Vijay Madanlal Choudhary the authorities under the 2002 Act are not police officers and statements recorded by them are not hit by article 20(3) or article 21.

What it does NOT mean

PIT NDPS is not the punitive narcotics statute. The Narcotic Drugs and Psychotropic Substances Act 1985 is.

The money laundering law is not a detention statute. It works by attachment, confiscation, prosecution and restricted bail.

Vijay Madanlal Choudhary did not overrule Nikesh Tarachand Shah on its own facts. It held that the striking down did not erase the section, and that the amended section is valid.

Confiscation is not a lesser device than detention. In practice it is the more effective one, which is the argument of this whole block.

Quick revision

• PIT NDPS 1988 is COFEPOSA redrafted for narcotics: s.3 detention on the same officers and the same five and fifteen day rule; s.9 Advisory Boards for arts 22(4)(a) and 22(7)(c) with a five week reference; s.10 the spent route past the Board for orders before 31 July 1999; s.11 one year, or two under s.10.
• s.2(e) defines illicit traffic and expressly includes financing, abetting or conspiring, and harbouring.
• COFEPOSA cannot be used on a PIT NDPS ground, by the proviso to its s.3(1).
• SAFEMA s.2 reaches COFEPOSA detenus; chapter VA of the NDPS Act 1985 does the same for narcotics.
• Modern successors: the Prevention of Money Laundering Act 2002, the Benami Transactions law, the Black Money Act 2015 and the Fugitive Economic Offenders Act 2018.
• Nikesh Tarachand Shah v. Union of India, AIR 2017 SC 5500, struck down the twin bail conditions in s.45(1) as violating articles 14 and 21; Vijay Madanlal Choudhary v. Union of India, 27 July 2022, upheld s.45 as amended in 2018 and substantially upheld the Act.

Test yourself

1. Which statute is COFEPOSA's sister, and how do you show the resemblance? The Prevention of Illicit Traffic in Narcotic Drugs and Psychotropic Substances Act 1988, whose preamble recites the same deleterious effect on the national economy and the same organised and clandestine manner of carrying on the activity, and whose section 3 is drafted in COFEPOSA's terms.

2. What three things does the definition of illicit traffic expressly include? Financing the listed activities directly or indirectly, abetting or conspiring in furtherance of them, and harbouring persons engaged in them.

3. Why can a narcotics ground not found a COFEPOSA order? Because the proviso to section 3(1) of COFEPOSA forbids an order on a ground on which an order may be made under section 3 of the PIT NDPS Act.

4. What happened to the twin bail conditions in the money laundering law? They were declared unconstitutional in Nikesh Tarachand Shah v. Union of India, AIR 2017 SC 5500, as violating articles 14 and 21; Parliament recast the section in 2018; and the recast section was upheld in Vijay Madanlal Choudhary v. Union of India in 2022.

5. What direction has Parliament moved in since 1988? Away from preventive detention and towards attachment and confiscation of the proceeds, which is the device that answers the objection that profit survives punishment.