Named accused in Delhi excise case, AAP now in uncharted waters over assets, legal status

As the stringent Prevention of Money Laundering Act (PMLA) does not provide for penalising political parties, the ED’s novel case that the AAP or any political party is essentially a “company” and can be tried will have to pass judicial muster.

Pivotal to the ED’s argument is a key sub-clause in Section 70 of the PMLA, which deals with offences by companies, which states that when it involves a “company” accused of money laundering, “every person who, at the time of the contravention was committed, was in charge of and was responsible to the company, for the conduct of business of the company as well as the company, shall be deemed to be guilty of contravention and shall be liable to be proceeded against and punished accordingly…”

While a political party is not a “company” incorporated under the Companies Act, 2013, the provision has a crucial explanation that could bring a political party under PMLA’s ambit. According to this, “company” means “any body corporate and includes a firm or other association of individuals”.

The ED will argue that the phrase “association of individuals” can be construed to include a political party because a party, according to Section 29 A of the Representation of the People Act, is any association or body of individual citizens of India calling itself a political party.

So, Section 70 could put members of the AAP under the scanner.

Additionally, the law provides for attachment of property to recover the allegedly laundered money, which puts both the party’s assets and personal assets of the key party leaders at risk. “Attachment” of assets means prohibition of transfer, conversion, disposition or movement of property.

In its most recent annual audit report submitted to the Election Commission, the AAP declared cash, both in hand and in bank deposits, of Rs 18.75 crore at the end of the 2022-2023 financial year. In terms of assets, the party declared fixed assets, including computers, electronic equipment, office equipment, sound systems, vehicles, furniture, and electrical fittings worth Rs 1.81 crore in total. Taking into account depreciation, the written-down value of these assets was Rs1.44 crore.

Under the PMLA, a guilty verdict for money laundering prescribes a minimum sentence of three years that can be extended up to seven years.

“Registration of such cases will inevitably lead to political parties’ accounts and monies to be frozen; a collectivity of the senior-most officers being imprisoned and the political party being paralysed. Hence, whenever the court decides to finally adjudicate on Section 70 of the PMLA, it will have to consider these larger questions of a level playing field, which have a direct effect on the basic structure of the Constitution. This is also because there is no direct reference in Section 70 for prosecuting political parties,” Singhvi said.

“Seeing this weaponisation of PMLA by the ruling party, a general blanket interpretation of Section 70 must be avoided by the courts,” he added.

While legal consequences of being named an accused are immediate for AAP and will have an impact on its functioning, its recognition as a national party could be affected only based on its electoral performance.

According to a senior Election Commission official, the EC does not have the power to de-register parties registered under Section 29A of the Representation of the People Act, 1951, with a few exceptions. So the AAP is likely to continue as a national party as long as it fulfils the criteria.

“An accused is innocent until proven guilty. Even an accused can contest elections in India. At this moment, there isn’t much scope for EC to act,” a senior official said.

Asked how the EC would react if ED were to write to the Commission informing them of naming AAP as accused, the official said: “We will cross that bridge when we come to it.”