The Enforcement Directorate (ED) has transferred on June 23, 2021 Rs 9,371 crore out of the total assets worth Rs 18,170 crore seized under Prevention of Money Laundering Act, 2002 (PMLA) from Vijay Mallya, Nirav Modi and Mehul Choksi to various public sector banks as well as the central government.
Vijay Mallya, Nirav Modi and Mehul Choksi's defrauding have resulted in total loss of Rs 22,585.83 crore to banks. The assets seized thus represent 80 percent of the loss inflicted by the fugitive trio on the Indian banking system and taxpayers. Out of the assets seized Rs 969 crore are located abroad.
Decks were cleared on May 27, 2021 when a Mumbai Court prevailed upon ED to do so. The ED apparently was resisting transfer fearing the ultimate outcome of the cases against the fugitives. The court, therefore, had added a caveat. It had asked the banks to individually submit an undertaking in keeping with the PMLA act, that the properties would be restored to Mallya, if he is not found guilty
Essentially, under PMLA, the burden of proof lies on the person who claims that the proceeds of crime alleged to be involved in moneylaundering, are not involved in moneylaundering. The presumption against the accused or any third party is good enough to discharge the onus of the authorities under PMLA. Thus both ED and banks have law on their side. And such a law described loosely as reverse jurisdiction is necessary to put the fear of God into crooks who have been thumbing their noses at the government and banks, blithely believing that no harm would befall them in the absence of irrefutable proofs of money laundering.
PMLA, Vajpayee-govt initiative
In 2002, the Vajpayee government brought PMLA to cut this Gordian knot. Throwing the gauntlet at the accused has been felt necessary in order to tackle terrorism as well. The normal rule is the onus is on the prosecution, but this salutary rule is reversed under PMLA---the onus is on the accused. And it is just as well because money laundering is done through labyrinthine layers of companies in a manner of wheel within wheels to frustrate investigation.
Seven companies—Devi Investments, Gem Investment and Trading Private Limited, Kamsco Industries Pvt limited, Mallya Pvt limited, Pharma Trading Co Pvt Ltd, Vittal Investments and Mandwa Farms Pvt limited—had challenged the banks’ appeal for the transfer of properties. These companies are believed to be associated with Mallya. The court rejected their request to stay the order.
ED rightly believes that Mallya had parked the funds skimmed from bank loans to these closely-held companies that are his handmaidens. To be sure, these handmaidens carry on genuine business too, so as to lend them verisimilitude of genuineness and are not branded as shell companies. But behind the façade of an operative business lies a sinister plan to nurse and nourish the loot of the men behind such incorporations. Often the audit trail leads the investigators to foreign shores where the Indian government’s writ unfortunately does not run as is being witnessed in numerous economic offences cases.
Exaggerated sham consultancy fees are also a trick in the wide repertoire of deceits practiced by crooks to launder ill-gotten money. Such companies are choc a block in dubious locations like Panama and Camay Island, to name just two. Holding properties benami is also a common method to cocking a snook at the law enforcing agencies.
PMLA, not another paper tiger
The government has through the recent move sent out a chilling message----the PMLA is not just another paper tiger. The seizure of assets from these handmaidens hits where it hurts. It is a piece of the old police trick---detain a near and dear one of the accused so he comes scurrying to the police station to surrender. When properties are thus seized, crooks are likely to shed their obduracy and smugness and start cooperating for the fear of adverse presumption.
Let no one cavil against reverse jurisprudence as ham-handed and draconian because it is the centerpiece of Prevention of Corruption Act, 1988 as well that mainly targets public servants. By retrieving the loot for public sector banks, the ED has walked the talk----acted on the promise held out by the extraordinary PMLA.
(The writer is a senior columnist and tweets @smurlidharan)