Delhi High Court seeks Central government’s stand on plea against making CA, CS ‘reporting entities’ under PMLA

The plea by a chartered accountant said that the government’s decision will effectively make them police their own clients, since non-compliance with these provisions will lead to criminal prosecution.

The Delhi High Court on Monday sought the Central government’s stand on a plea challenging the inclusion of chartered accountants (CA), company secretaries (CS) and cost accountants within the ambit of “reporting entities” under the Prevention of Money Laundering Act (PMLA).

A division bench of Chief Justice Satish Chandra Sharma and Justice Sanjeev Narula today granted Additional Solicitor General Chetan Sharma time to obtain instructions on the matter.

The Court said it will consider the case next on October 4.

The Court was hearing a plea by one Rajat Mohan, a CA who approached the Court challenging the notification dated May 3, 2023 which expanded the definition of the word ‘person’ used in Section 2(1)(sa)(vi) of the PMLA as well as the definition of the word ‘activity’.

The plea stated that the effect of the government’s decision would be that it will virtually prompt CAs and other such professionals to police their own clients with whom they interact in a fiduciary capacity.

Mohan further argued that by bringing CAs and other professionals within the definition of reporting entities, onerous obligations have been put on them.

Non-compliance with these provisions will lead to criminal prosecution, he further highlighted.

“The aforementioned sections give unbridled and unlimited, arbitrary, and whimsical power to the authority under the PMLA to pass any directions against “reporting entities.” The operation of the notification read with the aforementioned provisions of PMLA threaten the petitioner’s fundamental rights guaranteed under Article 14, 19(1)(g), 20 (3) and 21 of the Constitution of India along with the Constitutional right under Article 300A of the Constitution of India, and other civil and statutory rights, including the right of privacy, and the protection accorded to professional, privileged and confidential communications,” the plea contended.

It further said that the notification also violated the object of the PMLA as it creates a framework for a fishing and roving enquiry into every financial transaction of each individual or citizen of the country who engages the services of a chartered accountant without exception, even before a money laundering proceeding has been initiated against any such citizen.

“The scope and application of PMLA is extremely rigorous and strict and even a bona fide oversight shall put the life, liberty careers of the reporting entities under threat. A sword of Damocles would always remain hanging on the head of the petitioner,” the plea added.


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