Context

The Prime Minister addressed the opening ceremony of RBI@90, a program marking 90 years of the Reserve Bank of India.

About Reserve Bank of India (RBI)

• The Reserve Bank of India (RBI) was established on April 1, 1935, in accordance with the provisions of the Reserve Bank of India Act, 1934, based on the recommendations of the Hilton Young Commission.
• The Central Office of the Reserve Bank was established in Kolkata but permanently moved to Mumbai in 1937.
• Though originally privately owned, since nationalisation in 1949, the Reserve Bank is wholly owned by the Government of India.
• The first Governor of the RBI was the Australian Sir Osborne Arkell Smith, one of the two managing governors of the Imperial Bank of India.
• Sir C D Deshmukh was the first Indian to become Governor.

RBI Governance

• A central board of directors governs the Reserve Bank’s affairs. 
• The Government of India appoints the board per the Reserve Bank of India Act.
• Appointed/nominated for a period of four years
• Constitution:
  • Official Directors
    • Full-time: Governor and at most Four Deputy Governors.
  • Non-Official Directors
    • Nominated by Government: Ten Directors from various fields and two government officials.
  • Others: Four Directors – one each from four local boards.

Functions Of Reserve Bank of India (RBI)

General superintendence and direction of the Bank’s affairs

Monetary Authority:

• Formulates, implements, and monitors the monetary policy.
• Objective: maintaining price stability while keeping in mind the objective of growth.

Regulator and Supervisor of the Financial System: 

• Banker to other Banks: The RBI, being an apex monetary institution has obligatory powers to guide, help and direct other commercial banks in the country.
• Lender of the last resort: Every commercial bank has to maintain a part of its reserves with its parent viz., the RBI. Similarly, in need or in urgency, these banks approach the RBI for funds. 
• Objective: maintain public confidence in the system, protect depositors’ interest and provide cost-effective banking services to the public.

Banker to the Government: 

• The RBI, being the apex monitory body has to work as an agent of the central and state governments. 
  • It manages government public debts and provides an overdraft facility to the government when it faces a financial crunch. 

Manager of Foreign Exchange: 

• Manages the Foreign Exchange Management Act, 1999.
• Objective: to facilitate external trade and payment and promote orderly development and maintenance of the foreign exchange market in India.

Issuer of currency:

• The RBI has the sole right, authority, or monopoly of issuing currency notes except one rupee note and coins of smaller denomination.
• Objective: to give the public an adequate quantity of good-quality currency notes and coins.

Developmental Role:  

• Performs various promotional functions to support national objectives.

Regulator and Supervisor of Payment and Settlement Systems: 

• Introduces and upgrades safe and efficient modes of payment systems in the country to meet the requirements of the public at large.
• Objective: maintain public confidence in the payment and settlement system

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Context

The Securities & Exchange Board of India (SEBI) has introduced a new version of its complaint redressal system, SEBI Scores 2.0, to strengthen investor complaint redress mechanism in the securities market. 

About SEBI Scores (SEBI Complaints Redress System)

• Grievance Redress System of SEBI: SEBI SCORES is a web based centralized grievance redress system of Securities and Exchange Board of India (SEBI).
• Online Complaint Lodging and Tracking for Investors: It enables investors to lodge and follow up their complaints and track the status of redressal of such complaints online from the above website from anywhere. 
  • This enables the market intermediaries and listed companies to receive the complaints online from investors, redress such complaints and report redressal online. 
• SCORES 2.0 will be integrated with the KYC Registration Agency database for easy registration of the investor on SCORES.

Benefits SEBI Scores

• Increased Efficiency: The process has been made more efficient through auto-routing, auto-escalation, monitoring by the ‘Designated Bodies and reduction of timelines.
• User-Friendly: The new SCORES system has been made more user-friendly.

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Context

Swell waves destroyed the Kerala coast causing panic in coastal communities.

Swell Waves Cause Panic Along Kerala Coast

• Impact on Coastal Communities: The surging water resulted in pools on some beaches. The fishermen complained of water damaging their fishing equipment. 
  • The severity was higher in Thiruvananthapuram, Kollam, Alappuzha and Thrissur.

• • Several parts of Kollam coast experienced devastating tidal waves, resulting in significant damage to homes and affecting numerous residents.
• High Wave Alert Warning: Indian National Centre for Ocean Information Services (INCOIS) issued a high wave alert warning people against visiting the beach.

What Are Swell Waves?

• About: A swell wave is the formation of long wavelength waves on the surface of the seas. They propagate along the interface between water and air. 
  • Thus, they are often referred to as surface gravity waves. 
• Origin: These are not generated by the immediate local wind, instead by distant weather systems, where wind blows for a duration of time over a fetch of water. 
  • Wind-generated waves continue to progress as swell waves even after the wind has ceased or shifted, or the waves have moved away from the wind source.
• Influencing Factors: The speed of the wind, the amount of ocean surface area affected by wind blowing in the same direction (also known as fetch), and the amount of time those winds blow over the same part of the ocean.

Features of Swell Waves

• Narrow range of Frequencies: Swells have a narrower range of frequencies and directions than locally generated wind waves.
  • Swells take on a more defined shape and direction and are less random than locally generated wind waves.
  • In terms of directionality, they are characterised by the direction from where it emanates instead of where it is headed. 
• Wavelength: Swell waves often have a long wavelength but this varies with the size of the water body. Their wavelengths may rarely exceed more than 150 m. 
  • Swell wavelength, also, varies from event to event. Occasionally, swells which are longer than 700 m occur as a result of the most severe storms.

Differences Between a Normal Wave and Swell Waves

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Context

A mysterious health condition known as ‘Havana syndrome’ affected US diplomats and spies across the world.

• Personnel stationed around the globe with “Havana Syndrome” have reported unexplained symptoms such as dizziness.

Havana Syndrome

• About: Havana syndrome refers to a set of mental health symptoms that are said to be experienced by United States intelligence and embassy officials in various countries. 
• Origin: It traces its roots to Cuba in late 2016 after the US opened its embassy in the capital city of Havana when ties between the two countries were normalized in 2015. 
• Havana Syndrome in India: In India, the first such case was reported in 2021 when a US intelligence officer traveling to New Delhi reported symptoms of Havana Syndrome.

Causes of Havana syndrome

• Targeting by Russian Military Unit with Directed Energy Weapons: The investigation claims that members of a Russian military intelligence unit, called 29155, could have targeted the brains of US officials by using “directed energy” weapons. 
  • The 29155 unit, which has been operational for more than a decade, has been previously accused of carrying out foreign assassination, subversion, and sabotage.
• Sonic Attack: It is being argued that the syndrome was a “sonic attack”, which was carried out by Cuba which had been hostile to the US for over five decades.
• High-powered Microwaves: It was suspected that beams of high-powered microwaves were sent through a special gadget called a “microwave weapon”.
  • The pressure built inside the brain generated the feeling of a sound being heard.
  • Greater exposure to high-powered microwaves is said not only to interfere with the body’s sense of balance but also to impact memory and cause permanent brain damage. 
  • Low levels of microwaves are also emitted from mobile phones but they are not targeted.

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Context

Kodaikanal Solar Observatory recently completed 125th years.

Origin of Kodaikanal Solar Observatory (KSO)

• Establishment of Madras Observatory by the British: 

  • In 1792, the British East India Company established the Madras Observatory, a first of its kind in this part of the world.
    • The starting apparatus consisted of two three-inch achromatic telescopes, two astronomical clocks with compound pendulums, and a transit instrument. 
    • Its first capture of a solar eclipse on August 18, 1868 created the subject of solar physics. 
    • The spectroscope was used for the first time to discover the gaseous nature of solar prominences.

• Establishment of Kavalur Observatory: 

  • In 1968 a new field observatory was started at Kavalur, Tamil Nadu for stellar spectroscopy and photometry. 
    • Most of the observations for research on galaxies, stars and the solar system are now obtained from Kavalur.
    • The Kodaikanal Solar Observatory is now spread over numerous buildings and telescopes. It uses a combination of hand-drawn images, photographic plates and films to record its solar observations. 
    • There are approximately 200,000 glass plates in the archives and four telescopes: 
      • H-alpha telescope
      • Twin telescopes 
      • White light Active Region Monitor (WARM) telescope.
    • Its full range of equipment also includes a spectrograph, a photoheliograph, two full-disc spectroheliograph and a radio spectrograph.

Contributions of Kodaikanal Solar Observatory (KSO)

• Confirming Evershed effect: TheKodaikanal Solar Observatory (KSO) was the first to confirm the Evershed effect in 1909—the radial motion in sunspots.
• Data Repository: The KoSO has been imaging the Sun for over a century now, and has a rich repository of data. 
  • This is extremely useful not only to reconstruct the Sun’s historic past but also to link its behavioral changes to better understand and predict its future and its impact on life on Earth and Space weather.
• Solar Observation: It observes and records the Sun and its characteristics, including daily white light photography of the solar disc from the time it was set up.
  • Only two other institutions—the Meudon Observatory in Paris and the Mount Wilson Observatory—have a collection that spans an equivalent time period.
• Monitoring Equatorial Electrojet: Due to its location in the Palani Hills of southern India, the KSO plays a central role in observing changes to the equatorial electrojet, an electric current which travels in the Earth’s ionosphere. 
• Public Outreach: The Kodaikanal Solar Observatory is engaged in public outreach through workshops and educational initiatives.

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Context

The Supreme Court invalidated a notification issued by the Union environment ministry in March 2020. 

• The Environment Ministry, in March 2020, exempted the extraction of ordinary earth for linear projects like roads and railways from requiring Environmental Clearance (EC).

What was the Notification that Exempted Soil Extraction for Linear Projects?

Background: In September 2006, the Environment Ministry outlined activities necessitating prior Environmental Clearance (EC) under The Environment (Protection) Act, 1986.

• Later, a second notification in January 2016 exempted specific project categories from this EC requirement.

The 2020 Exemption: A third notification in March 2020 extended exemptions to include “Extraction or sourcing or borrowing of ordinary earth for linear projects” such as roads and pipelines.

• Objective: The exemption was intended to synchronize with amendments in the Mines and Minerals (Development and Regulation) Act of 1957.
  • These changes allowed new lessees to carry on mining operations for a period of two years by using the clearances and licenses obtained by their predecessors.
• Reasoning for the Exemption:
• • According to The government,  the exemption was important to assist the general public.
  • They claimed it would be beneficial for a variety of groups, including potters, farmers, gram panchayats, and roads in Gujarat.

Challenges Before 2020 Exemption

Reasons for Challenging the Exemption:

• Unrestricted digging of earth: The exemption was questioned in front of the NGT mainly because it allowed unrestricted digging of earth, which was seen as unfair and breaking Article 14 of the Indian Constitution.
• Contradictory rule: The exemption was against the rule that projects should get Environmental Clearance (EC) beforehand, as decided by the Supreme Court in a previous case in 2012.
• Non-inclusion of public opinions: There were challenges because the Ministry didn’t follow the right legal steps by not asking for public opinions before releasing the 2020 notification. 
  • They said this happened during the COVID-19 lockdown, and it seemed to benefit private miners and contractors.

Supreme Court’s Critique of On 2020 Exemption

• Violation of article 14 of the constitution: The SC criticized the exemption as arbitrary and violating Article 14 of the Constitution due to its blanket nature.
• Absence of ‘linear projects’: It highlighted the absence of definitions for ‘linear projects’ and lacked specifications on extraction quantity and area.
  • The court noted the Ministry’s failure to justify bypassing public notice requirements, especially during the COVID-19 lockdown.
    • Even the subsequent August 2023 notification was deemed insufficient, lacking clarity on linear projects and environmental safeguards.

Past Judicial Scrutiny

Similar exemptions under the Environment Protection (EP) Act faced legal scrutiny previously.

• NGT quashing exemptions: Instances include the NGT quashing exemptions for building and construction activities in 2018 and ex-post facto Environmental Clearance (EC) grants in 2015.
  • The SC also intervened in 2021 to halt a Ministry notification granting approvals to projects in violation categories.
• The Kerala High Court:  Similarly,  Kerala High Court quashed a 2014 exemption for educational institutions and industrial sheds in March 2024.

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Context

The Supreme Court refused to grant Kerala relief in its dispute over net borrowing limits with the Centre. 

Why Supreme Court Refused Kerala Relief on Borrowing Cap Set by Centre but Referred Case to Constitution Bench

• Challenge to Centre’s Borrowing Ceiling Imposition: The state government approached the Supreme Court against the Centre imposing a ceiling on the amount it can borrow, saying it was violative of the principles of fiscal federalism.
• Acknowledgment of Union’s Argument on Excessive Borrowing: The court acknowledged the Union’s argument that if there’s excessive borrowing, it may lead to reductions in subsequent years. 
• Referral of State’s Plea to Constitution Bench: However, the court referred the plea filed by the state against the Centre over interference with the state’s powers to borrow and regulate its own finances to a Constitution Bench.
  • The bench noted that since Article 293 of the Constitution has not so far been subjected to any authoritative interpretation by this court”, therefore the questions raised in the suit “are referred for answering by a five judge bench”.

Article 292 and 293: Borrowing Power Under Indian Constitution

The Constitution makes the following provisions with regard to the borrowing powers of the Centre and the states:

• Article 292: Borrowing by the Government of India

  • It deals with the borrowing power of the Central Government.
  • The Central government can borrow either within India or outside upon the security of the Consolidated Fund of India or can give guarantees, but both within the limits fixed by the Parliament. 

• Article 293: Borrowing by the State Governments

  • It deals with the borrowing power of the states. Clauses under it includes:
    • A state government can borrow within India (and not abroad) upon the security of the Consolidated Fund of the State or can give guarantees, but both within the limits fixed by the legislature of that state.
    • The Central government can make loans to any state or give guarantees in respect of loans raised by any state. Any sums required for the purpose of making such loans are to be charged on the Consolidated Fund of India.
    • A state cannot raise any loan without the consent of the Centre, if there is still outstanding any part of a loan made to the state by the Centre or in respect of which a guarantee has been given by the Centre.

International Practice In Subnational Borrowing Regulation

• Mechanisms for Subnational Borrowing Regulation:

• • Various mechanisms employed across the world reveal four broad categories of subnational borrowing regulations. If borrowing by subnational entities has not been prohibited altogether, a country may rely on:
    • Market discipline
    • Centrally-imposed or self-imposed fiscal rules,
    • Centralised administrative regulation
    • Cooperative regulation

• Market Discipline: 

  • It relies on capital markets to send signals to subnational governments regarding the willingness of creditors to lend, with the same signals also indicating when borrowing is becoming unsustainable.

• Fiscal Rules: 

  • A regime relying on fiscal rules constrains the fiscal behaviour of subnational governments so as to ensure that there is predictability and robustness in the fiscal outcomes that emerge. 
    • Rules that have this effect can impose debt ceilings, deficit targets, expenditure rules of both quantitative and qualitative nature, Etc.

• Centralised Administrative Regulation: 

• • It gives the Central Government direct control over subnational borrowing.  This approach is more frequently used by unitary countries and less by federal countries.
    • It can go to the extent of requiring the centre to evaluate and approve each different credit transaction itself, resulting in micromanagement of state debt. 

• Cooperative Regulation: 

  • Mechanisms involving cooperative regulation facilitate the active involvement of subnational governments in determining borrowing controls, including through negotiation processes.
    • Thus, leads to arrival at overall fiscal targets for the general government as well as more specific constraints on separate governments. 
    • While combining the advantages of the other three approaches, cooperative systems promote information symmetry and dialogue between all the stakeholders who have an interest in the common pool of resources of the nation.

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Context

Germany became the largest European Union (EU) member to legalize recreational use of cannabis.

• Malta and Luxembourg legalized recreational use in 2021 and 2023, respectively.

Germany legalises Possession of Cannabis for Personal Use

• The initial phase of the legislation permits adults aged 18 and above to possess up to 25 grams of dried cannabis and grow a maximum of three marijuana plants at home.
• Legal Access: As part of the subsequent phase, individuals will have the option to legally access marijuana through “cannabis clubs” within the nation. 
  • These officially regulated groups can accommodate up to 500 members each and will be authorized to provide a maximum of 50 grams of cannabis per person monthly.
• Significance: The law will help in providing assistance for addiction, implementing preventive measures for children and adolescents, and combating the illicit market.

Concerns with Legislation

• Increase in Use Among Young: Medical groups have raised concerns that legalisation could lead to an increase in use among young people, who face the highest health risks.
• Health Impact: Cannabis use among young people can affect the development of the central nervous system, leading to an increased risk of developing psychosis and schizophrenia.
• Administrative Challenges: Implementation of a retroactive amnesty on cannabis-related offenses could create an administrative challenge for the legal system.

About Cannabis

• It is an herbaceous plant that belongs to the family Cannabinaceae.
• It has been used by humans for over 5,000 years for medicinal and recreational uses, firstly in Central and Northeast Asia and subsequently spreading worldwide.
• Cannabis, or marijuana, is one of the most widely used illicit drugs.
• It has a complex chemical composition that includes cannabinoids which are a group of secondary metabolites, several of which are responsible for the psychotropic effects.

Cultural and Medicinal Significance of Cannabis

• Reduction in Chronic Pain: Medical cannabis/ marijuana may be able to lessen discomfort and inflammation, particularly in cases of cancer and neuropathic pain.
• Vomiting and nausea: Medical marijuana may help avoid or lessen vomiting and nausea brought on by chemotherapy or other drugs.
• Treatment for Epilepsy: Medical marijuana may help lessen the frequency and intensity of seizures, particularly in cases of uncommon epilepsy like Lennox-Gastaut syndrome and Dravet syndrome.
• Alzheimer’s disease: By decreasing the accumulation of amyloid plaques in the brain, Medical marijuana may help slow down the disease’s progression.
• Multiple sclerosis: Medical marijuana may help lessen the pain, stiffness, and spasms in the muscles that are a part of the disease.
• Crohn’s disease: Abdominal pain, diarrhea, and weight loss are just a few of the symptoms that Medical marijuana may help with.
• Glaucoma: Medical marijuana may help reduce intraocular pressure in the eyes, preventing or postponing glaucoma-related visual loss.

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Context

As per the recently published study in the journal Icarus, an international team of scientists has discovered strong evidence indicating the presence of ozone on Jupiter’s moon Callisto.

Ozone Found On Jupiter’s Moon Callisto: Study

• Scientists are currently studying various celestial bodies in the Solar System that show signs of ozone, suggesting the existence of stable atmospheric conditions and, by extension, the possibility of their being able to host life.
• The detection of sulfur dioxide on Callisto’s surface has encouraged this team of scientists to conduct spectroscopic observations to gain a better understanding of the moon’s surface composition and formation.

Key Findings of Study 

• Formation of Ozone: The study outlines the researchers’ investigation into the chemical evolution of “SO2 astrochemical ice”, which is ice primarily composed of sulphur dioxide (SO2) in the presence of ultraviolet irradiation. 
  • This shed light on the chemical processes and composition on the surface of Callisto. 

• Confirmation: The researchers also compared their experimental data with data collected by the Hubble Space Telescope, which had also suggested the presence of sulfur dioxide and ozone on the surface of Callisto in 1997.

About the Conducted Experiment

• Conducted at: The experiments were conducted at the National Synchrotron Radiation Research Centre (NSRRC) in Taiwan, which provided access to high-energy radiation sources required to recreate the radiation coming from the Sun.
• Recreating Conditions on the Earth: Scientists of the Atomic, Molecular, and Optical Physics Division, Physical Research Laboratory, Ahmedabad, set out to investigate the chemical evolution of sulfur dioxide ice under irradiation, leading to the formation of ozone.
  • Scientists have previously demonstrated this process in laboratory experiments. 
• Use of Vacuum Ultraviolet Photons: To recreate the conditions, the researchers used vacuum ultraviolet photons, which mimic the solar radiation that reaches the moon’s surface.
• Experimentation: Recreation of Environment: Researchers placed a substrate of lithium fluoride in a chamber with very low pressure (an environment similar to those found in outer space). 
  • The samples were initially kept at a low temperature of around 9 K (-264.15 degrees C), in line with the conditions on Callisto’s surface. Then, they slowly warmed it up to 120 K to resemble different environmental scenarios.
  • In this process, they irradiated the ice with vacuum-ultraviolet photons (of wavelength 137.7 nanometres) and recorded its ultraviolet absorption spectrum during and after the irradiation using a photomultiplier tube detector. 
    • Photomultiplier Tube Detector measures low levels of electromagnetic radiation by converting photons into electrical signals.
• Deposition of Samples: The sulfur dioxide ice samples were deposited onto the substrate, setting the stage for the final step (observing the absorption spectrum).
• Observation: The absorption spectrum is the unique fingerprint of a substance. It shows the wavelengths of light it absorbs, providing insights into its composition and properties.

About Callisto

• A Moon of Jupiter: After Saturn, Jupiter has the most moons in the Solar System. Callisto is one of Jupiter’s largest moons and the third-largest moon in the Solar System after Ganymede and Titan.

• Composition: Callisto is primarily composed of water ice, rocky materials, sulphur dioxide, and some organic compounds. 
• Cratered Surface: Callisto’s surface is heavily cratered, indicating a long history of being struck by asteroids and comets. 
  • It also lacks the extensive seismic activity seen on some of Jupiter’s other moons, such as Io and Europa.
• Geologically Inactive: The presence of relatively few geological features suggests Callisto’s surface is geologically inactive. 
  • It means, its surface has likely been relatively stable for a long time. 
  • Significance: This stability could be vital to preserve any subsurface ocean or potential habitats beneath the icy crust.

About Ozone and its Importance

• Comprises: The ozone molecule is composed of three oxygen atoms bonded together. 
• Importance: The ozone layer, found in the lower part of the earth’s stratosphere, around 15-35 km above ground, serves as a shield. 
  • Without the ozone layer, ultraviolet radiation levels would be much higher on the planet’s surface, rendering it uninhabitable for many species and disrupting entire ecosystems.

Significance of the Discovery of Ozone on Callisto

• Presence of Oxygen: The discovery of ozone on Callisto suggests the presence of oxygen, a fundamental element for the formation of complex molecules required for life, such as amino acids, raising questions about the moon’s habitability. 
  • This extends to other icy moons in our Solar System, potentially informing our understanding of habitable conditions beyond Earth.
• Valuable Insights into Geological and Atmospheric Processes: This finding could provide valuable insights into geological and atmospheric processes on these moons. 
  • It could help us to understand the precise mechanisms that led to the formation of Jupiter and its moons.

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Context

The Prevention of Money Laundering Act (PMLA), 2002 is under scrutiny as its most serious aspect is the inclusion of offences that have nothing to do with the original motive of combating the laundering of drug money.

Delhi High Court criticizes ED for Faulty Investigation in Money Laundering Case

• Recently, the Delhi High Court slammed the Enforcement Directorate (ED) for a faulty Prevention of Money Laundering Act (PMLA) Probe and said the ED must introspect steps to ensure expeditious and fair investigations.
  • The case dealt with a complaint filed by ED against five individuals for alleged commission of offences under Sections 3 and 4 of the PMLA. One of the individuals died during the trial.

Background of Prevention of Money Laundering Act (PMLA), 2002

• A Distinct Objective: The humongous volume of black money generated through international drug trafficking posed a grave threat to the economy of many countries. 
• Combat the Risk of Destabilisation: There was widespread realisation that the black money generated through the drug trade and integrated into the legitimate economy was likely to destabilise the world economy and endanger the integrity and sovereignty of nations.
• Supporting Data: As per United Office on Drugs and Crime, drug trafficking – the global illicit trade involving the cultivation, manufacture, distribution and sale of substances which are subject to drug prohibition laws is estimated to be a $32 billion industry.

Enactment of the Prevention of Money Laundering Act (PMLA), 2002

• Article 253 of the Indian Constitution: 
  • The Prevention of Money Laundering Act (PMLA) was enacted by India’s Parliament under Article 253 which empowers it to make laws for implementing the international conventions and to give effect to the Recommendations of the Financial Action Task Force (FATF) on addressing the problem of money laundering. 
  • Used to enact the Prevention of Money Laundering Act (PMLA), 2002.
• Deals With: The law on money laundering enacted under Article 253 and Item 13 of the Union list in the context of the UN resolution referred to above can only be on drug money. 
• Crime Proceeds: The PMLA revolves around the “crime proceeds” which are laundered. Not only the persons involved directly in the crime and the generation of the crime proceeds but also persons who have nothing to do with the crime but who have some involvement at a later stage in the laundering process are also guilty under this law.
  • This was considered the most serious economic crime which had the potential to destabilise the world economy and endanger the sovereignty of nations. So, there was global consensus on the need to have a tough law to deal effectively with this crime. 
• Regulating Authority: The ED is responsible for enforcing the provisions of the PMLA and investigating money laundering cases.

Provisions of the Prevention of Money Laundering Act (PMLA), 2002

• Section 3 of Prevention of Money Laundering Act: It defines the offense of money laundering.
  • The existence of a predicate offense is sine qua non to charge someone of money laundering. 
  • The investigation and prosecution of the predicate offense is done by the Central Bureau of Investigation (CBI) or the State Police.
• Section 4 of Prevention of Money Laundering Act: This section deals with punishment.
• Section 50 of the Prevention of Money Laundering Act: It provides powers of a civil court to the ED authorities for summoning persons suspected of money laundering and recording statements. 
• Prescribed Obligation: Prevention of Money Laundering Act (PMLA) prescribes the obligation of banking companies, financial institutions and intermediaries for verification and maintenance of records of the identity of all its clients and also of all transactions and for furnishing information of such transactions in a prescribed form to the Financial Intelligence Unit (FIU-IND). 

• Setting up of Authority: PMLA envisages the setting up of an Adjudicating Authority to exercise jurisdiction, power and authority conferred by it. 
  • It also envisages the setting up of an Appellate Tribunal to hear appeals against the order of the Adjudicating Authority and the authorities like Director FIU-IND.
• Special Courts: Under PMLA, Special Court or Special Courts are used to try the offenses punishable under PMLA and offenses with which the accused may, under the Code of Criminal Procedure 1973, be charged at the same trial. 
• Agreement for Central Government: It allows the Central Government to enter into an agreement with the Foreign Governments for enforcing the provisions of the PMLA, exchange of information or investigation of cases relating to any offense under PMLA.

Flaws and Inadequacies in the Provisions and Working of the Prevention of Money Laundering Act, 2002

• Against the Fundamental Rights: 

  • Under Section 19 of the Prevention of Money Laundering Act (PMLA), the ED, while arresting a person, is merely required to furnish the grounds of arrest, and there is no requirement to disclose the contents of the ECIR (akin to an FIR), which contains the allegations against the accused person. 
    • As has been held in Vijay Madanlal Choudhary, supplying a copy of ECIR to the accused person is not mandatory. 
    • This is against the fundamental right of the accused to be informed of the charges and allegations, which is a universally recognised right, and is a part of the right to life and liberty under Article 21 of the Constitution.
    • Section 50 of the PMLA empowers the authorities to issue summons to “any person”, including the accused, to give evidence or produce records during the course of an investigation is in violation of the right against self-incrimination, which is a fundamental right under Article 20(3) of the Constitution.

• Incorporation of Various Unrelated Subjects: 

  • The UN Resolution on the basis of which the Prevention of Money Laundering Act was enacted in India spoke only about the offence of the laundering of drug money. However, the PMLA of India acquired a different character through amendments from time to time.
    • The schedule has been expanded over the years, including even minor and non-serious offences such as copyright and trademark infringements, thereby considerably expanding the scope of the PMLA.

• On Punishment: 

  • Tough laws were incorporated to deal with most serious economic crime.  However, due to various amendments, now it contains such offences which are either ordinary offences listed in the IPC or for which there are special laws in force. 
    • Example: The Prevention of Corruption Act, 1988, aimed at curbing corruption among public servants. This Act was added to the schedule of offences in 2009. The PMLA now applies with all its rigour to public servants. Thus, a public servant charged with corruption and a hard-core drug trafficker are treated alike. 

• Against the Anglo-Saxon Jurisprudence: 

  • A very disturbing thing about the PMLA is that it turns the Anglo-Saxon jurisprudence principle upside down and an accused under this law is presumed to be guilty until proven innocent.
    • Anglo-Saxon Jurisprudence: Under this principle, a person is presumed innocent until proven guilty. 
      • Presumption of innocence has been acknowledged by the FATF as one of the fundamental principles of domestic law and admitted that misapplication of FATF Standards may have affected due processes and procedural rights, including the presumption of innocence.

• Uncontrolled Discretion of Authorities: 

  • The prosecution under the PMLA can be initiated as long as an FIR in relation to a scheduled offence has been registered with the jurisdictional police, or the same is pending enquiry or trial. The lack of guidelines in this regard gives unbridled discretion to the authorities to invoke the provisions of the PMLA selectively and arbitrarily. 
    • Under the PMLA, the ED, unlike other central police organisations which are required to obtain the consent of the state before carrying out any policing/investigating activity, can carry out investigation without the prior consent of the concerned State.

• Against the Basic Structure of the Constitution: 

  • Post 2019 amendments to the PMLA, the distinction between the offence of money laundering and scheduled offence has been blurred to a great extent and has resulted in the ED investigating into the commission of the scheduled offence itself. 
    • Since there is no requirement to obtain the consent of the state, the exercise of policing power by the ED, a Central agency, within the territory of a state without its consent is against the value of federalism (a part of the basic structure of the Constitution).

• Tough on Bail: 

• • An accused will be denied bail by the entire hierarchy of courts because the bail provision contained in section 45 of the PMLA says that a judge can give bail only when he/she is satisfied that the accused is innocent. 

Supreme Court on Prevention of Money Laundering Act

• Challenge on Provisions: The constitutionality of various provisions of the PMLA were challenged before the Supreme Court on the following grounds:
  • The conditions for bail were disproportionately stringent.
  • The power conferred on the ED to issue summons, record statements, make arrests, and search and seize property was wide and open to misuse.
  • There was a total lack of procedural safeguards.
• Rejection by the Supreme Court: The challenge was rejected by the apex court in its judgment in Vijay Madanlal Choudhury vs Union of India (July 2022). 
  • Grounds: Underpinning the decision is the belief that India’s commitment to the international community to deal sternly with the offence of money laundering is sacrosanct, and even excels considerations of fundamental rights. 
• Review Petition: A review petition has been filed against the judgment, and is pending before the court.

Conclusion

While the Prevention of Money Laundering Act (PMLA) may have been well-intentioned, the inclusion of minor, non-serious offences in the schedule to its disregard for personal liberty, the PMLA raises questions about its compliance with fundamental rights and due process of law. The PMLA requires amendment to bring it in conformity with constitutional principles and ethos.

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