Impropriety in Arraignment of Aam Aadmi Party as Accused under Section 70 of the PMLA

The arraignment of the Aam Aadmi Party as one of the accused in the 9th supplementary charge-sheet filed by the Enforcement Directorate (ED) in the Delhi Liquor Policy scam case poses a moot question: Whether a political party can be arraigned as accused under the provisions of the Prevention of Money-Laundering Act, 2002¹ (PMLA)? As a natural corollary to this issue lies a larger issue whether a political party can be arraigned as accused at all in any criminal case. The speculations are also large that the Communist Party of India (Marxist) [CPI(M)] will be arraigned as an accused in the Karuvannur Service Cooperative Bank Loan fraud case which is being probed by the ED.² Until now, ED has provisionally attached party office land and Rs 60 lakhs cash deposit at different bank accounts held by the CPI(M).

ED bases its case on Section 70 of the PMLA³ which makes all the persons in charge of and responsible for the affairs of a company liable under the PMLA if the accused committing the offence of money laundering is a company. Section 70 enumerates that where a person committing an offence under the Act is a company, every person who at the time the contravention was committed, was in charge of, and was responsible to the company, for the conduct of the business of the company as well as the company, shall be deemed to be guilty of the offence. Specifically, ED relies on the Explanation appended to said Section 70 which states that a company means anybody corporate and includes a firm or other association of individuals. It is ED’s contention that the term “association of individuals” includes within itself political parties and hence, political parties can be made liable for the offence of money laundering.

Except a passing reference by the Delhi High Court in the order rejecting Arvind Kejriwal’s plea challenging his arrest by ED, there is no direct and substantial judicial ruling from constitutional courts on the applicability of the said provision to the political parties and vicarious liability of their functionaries/members/office or post bearers as this is the first time since the enactment of the PMLA that any political party has been implicated as accused for money laundering.

It was the case of ED before the Delhi High Court that since Mr Kejriwal is the national convenor of the party, he is intrinsically involved in the functioning of the party. The High Court was seemingly convinced with the said reasoning and held that since it prima facie appears that Mr Kejriwal is in charge of and responsible for the conduct of the business of Aam Aadmi Party, he would be prima facie liable so as to attract Section 70(1) of the PMLA. The said order of the High Court cannot be treated as a precedent to implicate political parties for the offence of money laundering under the PMLA.

Firstly, the order of the Delhi High Court only makes a passing reference to the issue and does not delve deeper into the interpretation of Section 70(1) and the Explanation. Even though a political party is defined as an association of individuals under Section 2(f) of the Representation of the People Act, 1951⁴ (RPA) as an association or body of individual citizens of India registered as a political party with the Election Commission under Section 29-A⁵, it cannot be said to be included within the ambit of “association of individuals” under the Explanation to Section 70 of the PMLA primarily for two reasons. First, a political party as defined under the RPA is not merely an association of individuals but such an association which is registered as a political party with the Election Commission of India. Secondly, it was not the intention of legislature to include political party within the definition of company under Section 70 as it clearly mentions that the term “company” means anybody corporate and the said definition is thereafter qualified by inclusion of a firm or such other association of individuals. It is a rule of interpretation of statutes that the word “means” followed by “includes” implies that the definition is meant to be exhaustive.⁶ Moreover, applying the rule of noscitur a sociis, the general words must be interpreted in context and in light of the specific words preceding them. Hence, interpreting the term “association of individuals” in the Explanation to Section 70 in light of its preceding words i.e. firm, body corporate and company, it is not out of place to state that such an association must be of similar nature with its primary structure and operations related to corporate, business, trade, etc., and hence, its amply clear that a political party does not come within the ambit of the said definition of a company under the PMLA inasmuch as the primary nature and composition of a political party is not that of a corporate or money generating entity.

Even otherwise, the order of the High Court misses a crucial point. The ED has proceeded on a wrong premise all throughout by misinterpreting the Section 70 of the PMLA. The intent of the provision is to arraign the persons in charge of and responsible for the conduct of a company as vicariously liable for the acts of the company analogous to the provision of Section 141 of the Negotiable Instruments Act, 1881⁷ wherein all the persons in charge of the affairs of the company at the time of the dishonour of the cheque are held responsible for the offence. Thus, the arraignment of the “company” as an accused for the offence of money laundering is a prerequisite and an essential precondition to implicate the persons in charge of and responsible for its control and affairs as it is through the “company” that the said persons are held vicariously liable. Whereas, as on the date of arrest of Mr Kejriwal by the ED, hearing of his bail plea before the Delhi High Court and even his implication as accused in the Delhi Excise Policy case, the Aam Aadmi Party was not named as an accused in the Delhi Excise Policy case. A similar query was also put forth by Justice Sanjiv Khanna during the hearing of the bail plea of Mr Manish Sisodia, another leader of the Aam Aadmi Party, before the Supreme Court whether the ED was planning to arraign the party as accused for money laundering.⁸ The ED, in doing so, puts the cart before the horse as it is through the individual accused that the political party is sought to be implicated as the ED has roped in the Aam Aadmi Party through its individual office bearers and members. Therefore, arguendo, even if political party is included in the definition of company under Section 70 of the PMLA as is the case of ED, the manner of the implication of Aam Aadmi Party as accused is completely illogical and contrary to procedure and turns the vicarious liability under Section 70 on its head.

Further, there already exist mechanisms in law to fix liability upon political parties and its members/office-bearers in their individual capacity or official capacity (if holding a constitutional or statutory post) for any act of delinquence like imposition of fine, derecognition, barring from contesting elections, attaching and freezing the assets of the party, etc. It is also pertinent to consider and take into account the larger implications and ramifications of the arraignment of the political party as accused for money laundering or other offences.

It is clear that the ED is treating the case of Aam Aadmi Party as a precedent to arraign political parties as accused without any direct and substantial judicial ruling on the issue and hence, it becomes utmost necessary for the constitutional courts to give an effective ruling to nip it in the bud. The trial court is yet to take cognizance of the 9th supplementary charge-sheet in the Delhi Excise Policy scam case wherein the Aam Aadmi Party has been arraigned as accused and it is yet to be seen whether any objection on the arraignment of the political party itself is taken at the stage of cognizance or subsequently at the stage of framing of charge. There has been no challenge to the said charge-sheet itself until now to the best of the knowledge and belief of the author.