In this blog, the author has discussed the amendment to the Prevention of Money Laundering Act which was amended in 2018. The famous decision of the Supreme Court that has given dimensions to the amendment and has further declared the same to be unconstitutional; has been discussed. Read on to know more.
In the famous case of Nikesh Tarachand Shah v. Union of India & Ors.[1], Justice Nariman eloquently and descriptively analysing the provisions of the bail under section 45 of the Prevention of Money-Laundering Act, 2002 (hereinafter referred to as the ‘2002 Act’) held the section to be violative of the Article 14 and 21 of the Indian Constitution, 1950. Under Article 45 a person had to fulfill the twin conditions for grant of bail for an offense punishable for a term of imprisonment of more than 3 years under Part A of the Schedule. Conditions that needed to be satisfied are:
(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.
The Apex Court held Section 45 unconstitutional on the grounds, inter alia, that:
It is arbitrary as it does not lay down the proper classification of the scheduled offence. The provision does not provide for bail for an offence under the 2002 Act but for the offences as mentioned under Part A of the Scheduled which are punishable for a term of imprisonment of more than three years.
The original section 45 did not resemble the section 44 of the Money Laundering bill, 1999 tabled in the parliament. Section 44 read as:
“44. Offences to be cognizable and non-bailable—(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974)—
(a) every offence punishable under this Act shall be cognizable;
(b) no person accused of an offence punishable for a term of imprisonment of more than three years 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."
But the original section 45 read as:
"45. Offences to be cognizable and non-bailable.—(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974)—
(a) every offence punishable under this Act shall be cognizable;
(b) 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—"
The arbitrariness was in the clause (b) as in the bill it read ‘no person accused of an offense punishable for a term of imprisonment of more than three years under this Act’ but under the present Act it read ‘no person accused of an offense punishable for a term of imprisonment of more than three years under Part A of the Schedule.’ This means that for bail the court has to look at the offence punishable under Schedule A of the Act punishable with imprisonment of three years or more but not at the offense committed under the Money laundering act. A person who may be punished under the 2002 Act but the Act does not contain any provision relating to bail for the offence under the Act. The only thing that a court would see while granting bail is the offence committed under Schedule A punishable with more than three years and not the offence committed under PML Act.
The Court held that
“....the procedure for bail would become harsh, burdensome, wrongful and discriminatory depending upon whether a person is being tried for an offence which also happens to be an offence under Part A of the Schedule, or an offence under Part A of the Schedule together with an offence under the 2002 Act. Obviously, the grant of bail would depend upon a circumstance which has nothing to do with the offence of money laundering. On this ground alone, Section 45 would have to be struck down as being manifestly arbitrary and providing a procedure which is not fair or just and would, thus, violate both Articles 14 and 21 of the Constitution[2]."
There is deep inequality between a person arrested and other who is not. In cases of PML Act if a person obtains the anticipatory bail, then that person doesn’t need to fulfill the twin conditions as CrPC would govern it, but on the contrary, if a person is arrested, then the person needs to fulfill the harsh twin condition which would violate article 14 and 21 of the Constitution.
But the government keen on overcoming the unconstitutionality passed an ordinance in the year 2018 and substituted the word ‘under the Act’ in place of ‘punishable for a term of imprisonment of more than three years under Part A of the Schedule’. But does it overcome the vices of the section due to which the Supreme Court struck it down? The substitution may have overcome the vice of arbitrariness as mentioned above but not the issue of ‘presumption of innocence’. The section takes away the basic principle of law that is ‘a person is presumed innocent unless proven guilty’. As per the second twin condition, the court must be ‘satisfied that there are reasonable grounds for believing that he is not guilty of such offence’, this condition ‘turns on its head the presumption of innocence which is fundamental to a person accused of any offence[3]’.
It is not that the 2002 Act is the only act that contains draconic twin conditions, the Terrorist and Disruptive Activities (Prevention) Act, 1987, the Narcotic Drugs, FERA, Customs Act, and Psychotropic Substances Act, 1985, also contain such twin conditions. In the case of Kartar Singh v. State of Punjab[4], the similar provision was upheld by the Supreme Court but on the ground that ‘it was necessary for the State to deal with terrorist activities which are a greater menace to modern society than any other.’ ‘It is clear that this Court upheld such a condition only because the offence under TADA was a most heinous offence in which the vice of terrorism is sought to be tackled.’
However, the court left the question regarding the unconstitutionality of the twin condition on the ground of ‘presumption of innocence’ open as in latter parts the court opined that ‘Before application of a section which makes drastic inroads into the fundamental right of personal liberty guaranteed by Article 21 of the Constitution of India, we must be doubly sure that such provision furthers a compelling State interest for tackling serious crime. Absent any such compelling State interest, the indiscriminate application of the provisions of Section 45 will certainly violate Article 21 of the Constitution. Provisions akin to Section 45 have only been upheld on the ground that there is a compelling State interest in tackling crimes of an extremely heinous nature[5].’
Whether the 2018 Amendment has overcome the vices or not it is for the courts to decide on the controversy but looking at the object of 2002 Act it protects the financial system of India, integrity, and sovereignty, thus has compelling ‘State interest.’
References [1] (2018) 11 SCC 1 [2] Ibid, para 34. [3] Idid, para 46. [4] (1994) 3 SCC 569 [5] Ibid note 1, para 46
Submitted by
Gaurav Kumawat,
Law Clerk cum legal researcher to the Chief Justice of Rajasthan High Court,
National University of Study and Research in Law, Ranchi.
(images used for representational purpose only)