Controversial Rule of Jail under the Prevention of Money Laundering Act, 2002

Introduction

The provision of bail goes back to the medieval times of Magna Carta which was drafted 800 years back and described as the keystone of individual liberty and has been consistently followed in India. Clause 39 of the Royal Charter of the Magna Carta provided that “no free man shall be seized or imprisoned or stripped of his rights or possessions, or outlawed or exiled or deprived if his standing in any other way, nor will he be proceeded against with force, except by the lawful judgment of his equals or by the law of the land”.

 

The presumption of innocence is the cardinal rule of our criminal justice system and also finds its roots under Article 21 of the Constitution of India. The  Supreme Court in several judgments have reiterated that “bail is the rule and jail is the exception”. Since presumption of innocence is attached to all the accused persons and as such they may be given the opportunity to look after and defend their own case. The Supreme Court in Sanjay Chandra v. CBI[1] has also echoed that the accused has a better chance to prepare and present his case while he is out on bail in the following words:

 

  1. It makes sense to assume that a man on bail has a better chance to prepare or present his case than one remanded in custody. And if public justice is to be promoted, mechanical detention should be demoted.

 

Furthermore, the Supreme Court in Sanjay Chandra case[2] and State of U.P. v. Amarmani Tripathi[3], has observed that the following factors among others may be considered while deciding the bail application:

 

  1. 11. … (a) The nature of accusation and the severity of punishment in case of conviction and the nature of supporting evidence.

(b) Reasonable apprehension of tampering with the witness or apprehension of threat to the complainant.

(c) Prima facie satisfaction of the court in support of the charge.

 

Most recently the Supreme Court in P. Chidambaram v. Directorate of Enforcement[4] has reiterated the “triple test” that may be satisfied for grant of bail and the same is as under:

  1. That the accused is not at “flight risk.”
  2. That there are no chances of tampering with evidences.
  3. That there is no likelihood that the accused shall influence the witnesses.

 

Offence of Money Laundering and Bail

Short History of PMLA

The Prevention of Money Laundering Act, 2002 (PMLA) was passed by Parliament in the year 2002 and it was notified on 1-7-2005. The primary object of the Act is to make money laundering an offence, and to attach the property involved in the money laundering.

 

Money laundering is a process where proceeds of crime generated out of scheduled offence is introduced as untainted money into the stream of legitimate commerce and finance. Section 2(1)(u)[5] defines proceeds of crime as under:

“proceeds of crime” means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property.

 

Section 45 (Pre-Amendment)

By virtue of Section 45, PMLA departs from the rule of presumption of innocence in as much as it introduces two further pre-conditions that may be satisfied before an accused can be enlarged on bail. Section 45 is reproduced hereinbelow for ease of reference:

 

Offences to be cognizable and non-bailable.— (1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), no person accused of an offence punishable for a term of imprisonment of more than three years under Part A of the Schedule shall be released on bail or on his own bond unless—

(i) the Public Prosecutor has been given an opportunity to oppose the application for such release; and

(ii) where the Public Prosecutor opposes the application, the court is satisfied that there are reasonable grounds for believing that he is not guilty of such offence and that he is not likely to commit any offence while on bail.

 

History of  Section 45

It is submitted that Section 45[6] originally applied to Part A appended of the Schedule appended to the Act that contained only two offences i.e. Sections 121 and 121-A of the Penal Code, 1860 (IPC) that dealt with waging or attempting to wage war or abetting waging of war against the Government of India, and conspiracy to commit such offences. Part B of the Schedule, as originally enacted, referred to certain offences of a heinous nature under the IPC and even the most heinous offences under the IPC were contained only in Part B, so that if bail were asked for such offences, the twin conditions imposed by Section 45(1) would not apply.

 

It is worthwhile to observe that an interesting amendment was made in 2012 by virtue of Act 2 of 2013 whereby the entire Part B of the Schedule was transposed into Part A of the Schedule meaning thereby that the rigours of Section 45 will now apply to all the erstwhile offences that were earlier contained in Part B of the Schedule.

 

Constitutional Validity of the Rigours of Section 45

The Supreme Court had an occasion to consider the constitutional validity of the twin conditions as imposed under Section 45 in Nikesh Tarachand Shah v. Union of India[7] where the Supreme Court was pleased to struck down the said two conditions by declaring the same being violative of Articles 14 and 21 of the Constitution of India. The Supreme Court gave the following reasons while striking down the said provision:

 

  1. A person may be enlarged on bail for the scheduled offence however while considering the bail in the PMLA proceedings, the same accused has to satisfy the test as laid down in Section 45 qua the same schedule offence for which he is already on bail. Even if the accused is acquitted in the schedule offence, even then he has to satisfy the rigours of Section 45 qua the same offence for which is already acquitted.
  1. Section 45(1) leads to a problematic situation as the impugned twin conditions has no nexus to the offences under the PMLA. The Court while granting or rejecting the bail does not apply its mind to whether the person is guilty of the offence of money laundering, but instead applies its mind to whether such person is guilty of the scheduled or predicate offence. This again leads to a manifestly arbitrary, discriminatory and unjust result which would invalidate the section.
  1. There is no provision under PMLA which excludes the grant of pre-arrest bail. This again leads to an extremely anomalous situation as a person may be granted anticipatory bail without satisfying the twin conditions for an offence under money laundering together with an offence under Part A of the Schedule, however if such person happens to be arrested for the same offences, in order to get regular bail, he has to first satisfy the twin conditions under Section 45.
  1. Section 45 is a drastic provision which turns the presumption of innocence on its head, which is fundamentally detrimental to a person accused of any offence. Before application of a section which infringes the personal liberty guaranteed by Article 21 of the Constitution of India, the Court must be doubly sure of the fact that such a provision furthers a compelling State interest for tackling serious crime. In the absence of any such compelling State interest, the indiscriminate application of the impugned conditions of Section 45 will certainly violate Article 21 of the Constitution.

 

In view of the above the Supreme Court declared Section 45(1) of the PMLA, insofar as it imposes twin conditions for release on bail, to be unconstitutional as it violates Articles 14 and 21 of the Constitution of India.

 

Position Subsequent to the Amendment under Section 45, PMLA ACT

Pursuant to the Nikesh Tarachand[8] case, Section 45 was amended w.e.f. 19-4-2018 vide Finance Act, 2018 (No. 13 of 2018) wherein for the words “punishable for a term of imprisonment of more than three years under Part A of the Schedule”, the words “under this Act” were substituted in Section 45(1) of the PMLA.

 

Section 45- Pre-Amendment

Section 45- Post-Amendment

(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), no person accused of an offence punishable for a term of imprisonment of more than three years under Part A of the Schedule shall be released on bail or on his own bond unless:

(i) the Public Prosecutor has been given an opportunity to oppose the application for such release; and

(ii) where the Public Prosecutor opposes the application, the court is satisfied that there are reasonable grounds for believing that he is not guilty of such offence and that he is not likely to commit any offence while on bail….

 

 

Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), no person accused of an offence (under this Act) shall be released on bail or on his own bond unless:

 

(i) the Public Prosecutor has been given an opportunity to oppose the application for such release; and

 

(ii) where the Public Prosecutor opposes the application, the court is satisfied that there are reasonable grounds for believing that he is not guilty of such offence and that he is not likely to commit any offence while on bail….

 

 

Aftermath of the Amendment under Section 45, PMLA

The aforesaid Amendment in Section 45 has again sparked a debate where it is usually argued on behalf of the prosecution that the defects as pointed out in Nikesh Tarachand has been remedied. It is worthwhile to mention that the above argument does not hold any water in view of the following:

  1. Revival or resurrection of the impugned twin conditions by way of an amendment would again result in negating the presumption of innocence which is attached to any person being prosecuted of an offence and would certainly create drastic inroads into the fundamental rights of personal liberty guaranteed by Article 21 of the Constitution of India. The amendment in no manner can be said to remedy the defect qua the violation of Article 21 of the Constitution of India.
  1. The Supreme Court had an occasion to deal with the amended Section 45 in Chidambaram v. Directorate of Enforcement[9] where the Supreme Court took cognizance of amendment ensued to Section 45 and yet the bail was decided without satisfying the rigours of amended Section 45.
  1. It is submitted that the Bombay High Court in Deepak Virendra Kochhar Directorate of Enforcement[10] while dealing with the new amended Section 45 has held as under:

“… In view of clear language used in para 46 of the Supreme Court decision in Nikesh Tarachand Shah[11], Court has no hesitation in reaching a definite conclusion that amendment in sub-section (1) of Section 45 of PMLA introduced after the Supreme Court decision in Nikesh Tarachand Shah[12] does not have effect of reviving twin conditions for grant of bail, which have been declared ultra vires Articles 14 and 21 of Constitution of India….”

  1. Further, a similar view was taken by the Delhi High Court in Sai Chandrasekhar Directorate of Enforcement[13], Patna High Court in Ahilya Devi v. State of Bihar[14], Manipur High Court in Okram Ibobi Singh v. Directorate of Enforcement[15], Madhya Pradesh High Court in Vinod Bhandari v. Director[16] wherein the courts reiterated the observations laid down in Nikesh Tarachand case[17] and held that the Amendment in Section 45 no manner revives or resurrects the twin conditions that were struck down by the Supreme Court in Nikesh Tarachand[18] case.

 

Conclusion

Therefore in view of the above, it can safely be concluded that the twin conditions as imposed by the Section 45 of PMLA cannot be looked into while deciding the bail application as the same are violative of Articles 14 and 21 of the Constitution of India.

EXPERT OPINION

1. In absence of compelling state interest (offences under TADA, NDPS), the laws impinging the presumption of innocence will be in teeth with Article 21 of the Constitution of India.

2. The restrictions imposed by the special statutes on the power of the Court to grant bail must not be pushed too far that it deprives the accused of his Fundamental Rights or else the presumption of innocence secured only after centuries of struggle would lose its meaning.


† Partner, KMA Attorneys.The author can be contacted at kmadan@kmalawoffice.com or +91-9971305252.

††  Associate, KMA Attorneys.

[1] (2012) 1 SCC 40.

[2] Ibid.

[3]  (2005) 8 SCC 21.

[4] (2020) 13 SCC 791.

[5] PMLA Act, 2002

[6] Ibid.

[7] (2018) 11 SCC 1.

[8] Id.

[9] (2019) 9 SCC 24.

[10] Crl. Bail Application No. 1322 of 2020, order dated 25-3-2021 (Bom).

[11] (2018) 11 SCC 1.

[12] Id.

[13] 2021 SCC OnLine Del 1081.

[14] Crl. Misc. No. 41413 of 2019, decided on 28-5-2020 (Pat).

[15] 2020 SCC OnLine Mani 365.

[16] 2018 SCC OnLine MP 1559.

[17] supra note 7.

[18] (2018) 11 SCC 1.

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