Case BriefsSupreme Court

Supreme Court: The 3-judge bench of AM Khanwilkar*, Dinesh Maheshwari and CT Ravikumar, JJ has, in 545-pages-long judgments, has dealt with various aspects of the Prevention of Money Laundering Act, 2002 and has held that the twin conditions provided under Section 45 of the 2002 Act, though restrict the right of the accused to grant of bail, do not impose absolute restraint on the grant of bail. The discretion vests in the Court which is not arbitrary or irrational but judicial, guided by the principles of law as provided under Section 45 of the 2002 Act.

The Twin Conditions under Section 45 for release on bail

  • that there are reasonable grounds for believing that the accused is not guilty of such offence; and
  • that he/she is not likely to commit any offence while on bail.

The Court has held that the provision in the form of Section 45 of the 2002 Act, as applicable post amendment of 2018, is reasonable and has direct nexus with the purposes and objects sought to be achieved by the 2002 Act to combat the menace of money-laundering having transnational consequences including impacting the financial systems and sovereignty and integrity of the countries.

It is also important to note that similar twin conditions have been provided in several other special legislations validity whereof has been upheld by the Supreme Court being reasonable and having nexus with the purposes and objects sought to be achieved by the concerned special legislations. Besides the special legislation, even the provisions in the general law, such as 1973 Code stipulate compliance of preconditions before releasing the accused on bail. The grant of bail, even though regarded as an important right of the accused, is not a mechanical order to be passed by the Courts. The prayer for grant of bail even in respect of general offences, have to be considered on the basis of objective discernible judicial parameters as delineated by this Court from time to time, on case-to-case basis.

Non-cognizable offence

The Court has rejected the argument that the scheduled offence in a given case may be a non-cognizable offence and yet rigors of Section 45 of the 2002 Act would result in denial of bail even to such accused.

Stating that such an argument was founded on clear misunderstanding of the scheme of the 2002 Act, the Court observed that the offence of money-laundering is one wherein a person, directly or indirectly, attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime. The fact that the proceeds of crime have been generated as a result of criminal activity relating to a scheduled offence, which incidentally happens to be a non-cognizable offence, would make no difference.

“The person is not prosecuted for the scheduled offence by invoking provisions of the 2002 Act, but only when he has derived or obtained property as a result of criminal activity relating to or in relation to a scheduled offence and then indulges in process or activity connected with such proceeds of crime. Suffice it to observe that the argument under consideration is completely misplaced and needs to be rejected.”

Anticipatory Bail

Holding that Section 45 applies to anticipatory bail as well, the Court explained that anticipatory bail is nothing but a bail granted in anticipation of arrest, hence, the principles governing the grant of bail in both cases are more or less on the same footing, except that in case of anticipatory bail the investigation is still underway requiring the presence of the accused before investigation authority. Thus, ordinarily, anticipatory bail is granted in exceptional cases where the accused has been falsely implicated in an offence with a view to harass and humiliate him. Therefore, it would not be logical to disregard the limitations imposed on granting bail under Section 45 of the 2002 Act, in the case of anticipatory bail as well.

“Investigation in an economic offence, more so in case of money-laundering, requires a systematic approach. Further, it can never be the intention of the Parliament to exclude the operation of Section 45 of 2002 Act in the case of anticipatory bail, otherwise, it will create an unnecessary dichotomy between bail and anticipatory bail which not only will be irrational but also discriminatory and arbitrary. Thus, it is totally misconceived that the rigors of Section 45 of the 2002 Act will not apply in the case of anticipatory bail.”

The Court went on to state that it would be preposterous and illogical to hold that if a person applies for bail after arrest, he/she can be granted that relief only if the twin conditions are fulfilled in addition to other stipulations predicated in the 1973 Code; but another person, who is yet to be arrested in connection with the same offence of money-laundering, will not be required to fulfil such twin conditions whilst considering application for grant of bail under Section 438 of the 1973 Code.

It was observed that any other view would be counterproductive and defeat the purposes and objects behind the stringent provision enacted by the Parliament for prevention of money-laundering and to combat the menace on account of such activity which directly impacts the financial systems, including the sovereignty and integrity of the country.

Hence, in whatever form the relief is couched including the nature of proceedings, be it under Section 438 of the Criminal Procedure Code, 1973 or for that matter, by invoking the jurisdiction of the Constitutional Court, the underlying principles and rigors of Section 45 of the 2002 must come into play and without exception ought to be reckoned to uphold the objectives of the 2002 Act, which is a special legislation providing for stringent regulatory measures for combating the menace of moneylaundering.

Exception to strict compliance of the twin conditions

The Court held that Section 436A CrPC, which has come into being on 23.6.2006 vide Act 25 of 2005, is an exception to the strict compliance of the twin conditions under Section 45 of the 2002 Act, which was inserted recognizing the deteriorating state of undertrial prisoners so as to provide them with a remedy in case of unjustified detention.

As the Section 436A of the 1973 Code was inserted after the enactment of the 2002 Act, it would not be appropriate to deny the relief of Section 436A of the 1973 Code which is a wholesome provision beneficial to a person accused under the 2002 Act. However, Section 436A CrPC, does not provide for an absolute right of bail as in the case of default bail under Section 167 CrPC. For, in the fact situation of a case, the Court may still deny the relief owing to ground, such as where the trial was delayed at the instance of accused himself.

The Court explained that this provision is comparable with the statutory bail provision or, so to say, the default bail, to be granted in terms of Section 167 CrPC consequent to failure of the investigating agency to file the chargesheet within the statutory period and, in the context of the 2002 Act, complaint within the specified period after arrest of the person concerned. In the case of Section 167 of the 1973 Code, an indefeasible right is triggered in favour of the accused the moment the investigating agency commits default in filing the chargesheet/complaint within the statutory period. The provision in the form of Section 436A CrPC, as has now come into being is in recognition of the constitutional right of the accused regarding speedy trial under Article 21 of the Constitution.

While this was argued before the Court that this view would impact the objectives of the 2002 Act and is in the nature of super imposition of Section 436A CrPC over Section 45 of the 2002 Act and that the same logic may be invoked in respect of other serious offences, including terrorist offences which would be counterproductive, the Court was unimpressed.

It observed,

“For, it is the constitutional obligation of the State to ensure that trials are concluded expeditiously and at least within a reasonable time where strict bail provisions apply. If a person is detained for a period extending up to one-half of the maximum period of imprisonment specified by law and is still facing trial, it is nothing short of failure of the State in upholding the constitutional rights of the citizens, including person accused of an offence.”

It was hence, held that Section 436A CrPC needs to be construed as a statutory bail provision and akin to Section 167 of the 1973 Code.

[Vijay Madanlal Choudhary v. Union of India, SPECIAL LEAVE PETITION (CRIMINAL) NO. 4634 OF 2014, decided on 27.07.2022]


*Judgment by: Justice AM Khanwilkar

For private parties:  Senior Advocates Kapil Sibal, Sidharth Luthra, Dr. Abhishek Manu Singhvi, Mukul Rohatgi, Amit Desai, S. Niranjan Reddy, Dr. Menaka Guruswamy, Aabad Ponda, Senior Counsel 9Siddharth Aggarwal, Mahesh Jethmalani, N. Hariharan, Vikram Chaudhari, and Advocates Abhimanyu Bhandari and Akshay Nagarajan,

For Union of India:  Tushar Mehta, Solicitor General of India and S.V. Raju, Additional Solicitor General of India

Case BriefsHigh Courts

Delhi High Court: While expressing the object of PMLA Act Chandra Dhari Singh, J., expressed that, offence of money laundering is threefold including the stages of placement, whereby the criminals place the proceeds of crime to the general and genuine financial system, layering, whereby such proceeds of crime are spread into various transactions within the financial system and finally, integration, where the criminals avail the benefits of crime as untainted money.

A criminal revision petition was filed by the petitioner under Section 397 of the Penal Code, 1860 read with Section 401 of the Code of Criminal Procedure, 1973 and Section 47 of the Prevention of Money Laundering Act, 2002 (PMLA) seeking setting aside of the order passed by the Special Judge, Patiala House Courts whereby all the accused persons were discharged on the ground that no prima facie case was made out against them.

Background

In the present matter, criminal proceedings under PMLA were initiated against the respondents by the petitioner on the basis of independent intelligence gathered regarding money laundering activities. Therefore, an FIR under Sections 21,25,29 and 61 of the Narcotics Drugs and Psychotropic Substance Act, 1985 and Sections 420, 468, 471, 120B of the Penal Code, 1860 were registered.

Petitioner’s case was that the respondents were found to be involved in an international syndicate of laundering the money generated out of the drug trafficking in Australia and other countries.

While the private Respondents 1 to 3 are based in India, their counterparts, namely, Gulshan Kumar, Mandeep Singh, Sanjeev Kumar Saini and Ravinder Pal Singh were based in Australia and together they had been carrying out cross border criminal activities and their counterparts in Australia had already been apprehended.

Analysis, Law and Decision

High Court firstly stated that the offence of money laundering under the PMLA is layered and multi-fold and includes the stages preceding and succeeding the offence of laundering money as well.

Further, the Bench stated that the offence of money laundering, is not to be appreciated in isolation but is to be read with complementary provisions.

“…the essential ingredients for the offence of Section 3 of the PMLA become, first, the proceeds of crime, second, proceeds of crime arising out of the offences specified in the Schedule of the Act and third, the factum of knowledge while commission of the offence of money laundering.”

High Court expressed that, since no scheduled offence was made out against the respondents, this Court found that an investigation and proceedings into the PMLA could not have been established against the respondents at the first instance.

Section 397 CrPC unequivocally states that the High Court or Sessions Courts which is exercising its revisional jurisdiction shall apprise itself solely of the question of correctness, legality and propriety of the order of the Subordinate Court.

“…the provision of the Cr.P.C. suggests that the Court shall limit itself to the findings, sentence or order passed by the subordinate Court, against which the Revisionist is seeking relief before the Courts concerned and shall not go beyond the analysis and observations made by the subordinate court.”

Additional Sessions Judge is under the challenge before this Court in its revisional jurisdiction.

This Court stated that in its revisional jurisdiction it would not proceed into the enquiry of the records, documents and other evidence in consideration before the Trial Court, but shall constrain itself to the findings of the lower Court in the impugned order and to the question whether there is any patent illegality, error apparent on record or incorrectness.

Bench remarked that the extent of exercise of discretion by the Court was limited to the prima facie satisfaction of the Court and if the Court does not find reasonable grounds of suspicion against the accused, it may discharge him of the offence alleged against him.

Additional Sessions Judge did not find any evidence brought on record to show that the accused persons were involved in the commission of the offences alleged against them.

This Court found force in the submission that since no offences were made out against the respondents. Petitioner could not establish the allegations against the respondents and as such the material produced was not sufficient to find the guilt against them.

High Court found no illegality or impropriety in the lower court’s decision, hence the petition was dismissed. [Directorate of Enforcement v. Gagandeep Singh, 2022 SCC OnLine Del 514, decided on 17-2-2022]


Advocates before the Court:

For the Petitioner:

Anurag Ahluwalia, CGSC with Danish Faraz Khan, Advocates

For the Respondents:

Vikram Chaudhari, Senior Advocate with Rishi Sehgal and Ria Khanna, Advocates