India: Twin Conditions For Bail Under The PMLA

The stringent twin conditions for grant of bail to persons arrested under the offence of money laundering are always in debate with frequent changes in jurisprudence around them. This detailed essay scrutinizes these conditions and contrasts them with other laws.

I. Summary of section 45 of PMLA

Section 45 of the Prevention of Money Laundering Act, 2002 ('PMLA') lays down conditions to be satisfied for the purpose of granting bail to an accused charged with the offence of money laundering. The following points are noteworthy in this regard:

• The said section states that no person accused of an offence under the PMLA shall be released on bail 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.

• Further, the section provides that these conditions would not apply in case the person is, inter alia, sick or infirm.
• The section also provides that this limitation on granting of bail is in addition to the limitations under the Code of Criminal Procedure, 1973 ('CrPC') or any other law for the time being in force on granting of bail.

II. Section 45 struck down by the Supreme Court

The section was struck down as a whole by the Hon'ble Supreme Court in its decision in the case cited as Nikesh Tarachand Shah vs UOI (2018) 11 SCC 1, on the basis of being arbitrary and violative of Articles 14 and 21 of the Constitution of India.

The primary reason given by the Hon'ble Supreme Court for striking down the section was that it sought to impose strict conditions for grant of bail in respect of offences listed in Part A of the Schedule to the PMLA, rather than the offences related to money laundering itself. The SC observed that in special statutes like TADA/MCOCA, similar twin conditions were upheld since the conditions were imposed qua the grave offences under the very act and not in respect of any other acts/laws. On this basis, the Hon'ble Supreme Court concluded that the conditions imposed for grant bail under Section 45 would lead to anomalies and therefore are arbitrary and discriminatory.

III. Amendment to section 45 vide Finance Act, 2018

The section was subsequently amended vide Finance Act, 2018, w.e.f. 19.04.2018, wherein the reference to offences under Part A of the Schedule was substituted by the expression "under this Act". Post this amendment, the language of Section 45 was brought on par with other special laws like TADA/MCOCA/Companies Act which provided for twin conditions for grant of bail. A comparison of the pre-amendment and the amended provision is as follows:

Pre-amendment provision:

(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

Amended provision:

(1) 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

IV. Court decisions after the amendment

Subsequent to the amendment, various High Courts have held that the conditions imposed under section 45 would not be applicable even after the amendment because merely substituting certain words in the section, which has been struck down as a whole by the Hon'ble Supreme Court, will not have the effect of reviving the twin conditions laid down for the grant of bail. These decisions are listed as follows:

• Bombay HC: Sameer Bhujbal vs Assistant Director - BA No. 286 of 2018
• Delhi HC: Upendra Rai vs Directorate of Enforcement - 2019 SCC Online Del 9086
• Patna HC: Ahilya Devi vs State of Bihar - Criminal Miscellaneous No. 41413 of 2019
• MP HC: Dr. Vinod Bhandari vs Asst. Director - 2018 SCC Online MP 1559

There are later decisions also following the same interpretation. For instance, in Shivinder Mohan Singh vs Directorate of Enforcement 2020 SCC Online Del 766, the Hon'ble Delhi High Court granted bail to the accused without considering the rigors of section 45. The Court held that although there has been an amendment to section 45 after the above judgment, there is no subsequent decision of the Supreme Court holding the said two conditions to be constitutionally valid, even when brought back by way of the amendment. The Court accordingly treated the said conditions as invalid and struck down.

On the other hand, the Hon'ble Calcutta High Court in the case of Arun Mukherjee vs Enforcement Directorate 2018 SCC Online Cal 15230, held that after the amendment to Section 45 of the PMLA in April 2018, the twin conditions would continue to be applicable for grant of bail in respect of offences under PMLA.

There is no decision of the Hon'ble Allahabad High Court on the status of applicability of the conditions laid down in section 45 of PMLA, after the decision in the case of Nikesh Tarachand (supra) and the consequent amendment to the section.

V. Meaning of striking down

It is relevant to consider the effect of striking down of a law by the Hon'ble Supreme Court. In one opinion, when an Act (or a section contained in an Act) is struck down by a higher Court as a whole, the effect is that the section remains on the statute book but the same is unenforceable. This remains so until the defect in the legislation is cured by the legislature by amending the section. The rationale behind such opinion is that the Courts do not have the power to repeal any law. The rationale builds on the interpretation to be given to the word 'void' as mentioned in Article 13 of the Constitution of India. In such opinion, though the word 'void' would mean void ab initio yet rendering a law void would not amount to removing it from the statute book.

This opinion forms the basis of the argument being taken by the government / State in cases in the past two years wherein it is contended that the amendments to section 45 are sufficient to revive and resurrect the Section (since such Section continued to be on the statute book even after the decision of the SC) and the decision in Nikesh Tarachand (supra) has become ineffective post such amendments.

In another opinion (which seems to find favor with the four High Courts mentioned above), striking down a law means that rendering a law void under Article 13 would mean that such law is unenforceable and inexistent for all purposes, including amendment, on the statute book and the only way to revive the said law is by way of re-enactment. A mere amendment involving substitution of certain words or adding an Explanation to the struck-down law would be meaningless.

VI. Other decisions (SFIO cases)

Section 212(6) of the Companies Act, 2013 also imposes similar conditions on the grant of bail to a person accused of the offence of fraud under section 447 of the said Act. In this regard, two decisions are noteworthy:

In SFIO v Nittin Johari (2019) 9 SCC 165 the Hon'ble Supreme Court held that the High Court should decide on the 'scope and effect' of such twin conditions before granting bail. Earlier, the Hon'ble Delhi High Court had granted bail to the accused without considering the applicability of the twin conditions to the case.

Later on, in Raj Kumar Modi v SFIO 2019 SCC Online P&H 4987 the Punjab &Haryana High Court, having correctly considered the 'scope and effect' of the twin conditions as directed by the Hon'ble Supreme Court in its decision in Nittin Johari (supra), held that twin conditions u/s 212(6) of the Companies Act, 2013 are not mandatory. The court held that if the conditions are treated as mandatory, it would be violative of Articles 14 and 21, and would be inconsistent with the established procedure of criminal trial laid down under CrPC.

The above decisions clearly lay down that the twin conditions cannot be treated as mandatory and hence the Court should not venture into an analysis of the evidence and merits while considering bail. These cases are relevant to appreciate that in section 45 of the PMLA also, the conditions imposed cannot be treated as mandatory.

VII. Other laws where the same conditions exist

(i) Narcotic Drugs and Psychotropic Substances, Act, 1985 [Section 37]

37. 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 offences under section 19 or section 24 or section 27A and also for offences involving commercial quantity 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.

(2) The limitations on granting of bail specified in clause (b) of sub-section (1) are in addition to the limitations under the Code of Criminal Procedure, 1973 (2 of 1974) or any other law for the time being in force on granting of bail.

(ii) U.P. Gangsters and Anti-Social Activities (Prevention) Act, 1986 [Section 19(4)]

19. Modified application of certain provisions of the Code.

...

(4) Notwithstanding anything contained in the Code, no person accused of an offence punishable under this Act or any rule made thereunder shall, if in custody, be released on bail or on his own bond unless:

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

(b) 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.

(iii) Unlawful Activities (Prevention) Act, 1967 [Section 43-D(5)]

43-D. Modified application of certain provisions of the Code.-

...

(5) Notwithstanding anything contained in the Code, no person accused of an offence punishable under Chapters IV and VI of this Act shall, if in custody, be released on bail or on his own bond unless the Public Prosecutor has been given an opportunity of being heard on the application for such release:

Provided that such accused person shall not be released on bail or on his own bond if the Court, on a perusal of the case diary or the report made under Section 173 of the Code is of the opinion that there are reasonable grounds for believing that the accusation against such person is prima facie true.

(6) The restrictions on granting of bail specified in sub-section (5) is in addition to the restrictions under the Code or any other law for the time being in force on granting of bail.

(iv) Maharashtra Control of Organised Crime Act, 1999 [Section 21(4)]

21. Modified application of certain provisions of the code.

...

(4) Notwithstanding anything contained in the Code, no person accused of an offence punishable under this Act shall, if in custody, be released on bail or on his own bond, unless-

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

(b) 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.

(5) Notwithstanding anything contained in the Code, the accused shall not be granted bail if it is noticed by the Court that he was on bail in an offence under this Act, or under any other Act, on the date of the offence in question.

(6) The limitations on granting of bail specified in sub-section (4) are in addition to the limitations under the Code or any other law for the time being in force on the granting of bail.

(v) Terrorist and Disruptive Activities (Prevention) Act, 1987 [Section 20(8)]

20. Modified application of certain provisions of the Code.-

...

(8) Notwithstanding anything contained in the Code, no person accused of an offence punishable under this Act or any rule made thereunder shall, if in custody, be released on bail or on his own bond unless, -

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

(b) 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.

(9) The limitations on granting of bail specified in sub-section (8) are in addition to the limitations under the Code or any other law for the time being in force on granting of bail.

(vi) Drugs and Cosmetics Act, 1940 [Section 36AC]

36AC. Offences to be cognizable and non-bailable in certain cases. - (1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974),-

...

(b) no person accused, of an offence punishable under clauses (a) and (c) of sub-section (1) of section 13, clause (a) of sub-section (2) of section 13, sub-section (3) of section 22, clauses (a) and (c) of section 27, section 28, section 28A, section 28B and sub-sections (1) and (2) of section 30 and other offences relating to adulterated drugs or spurious drugs, 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:

Provided that a person, who, is under the age of sixteen years, or is a woman or is sick or infirm, may be released on bail, if the Special Court so directs.

It is evident from the above reproduction that the above provisions are identical to section 45 of PMLA and impose limitations on the grant of bail. It is therefore relevant to submit that the twin conditions under the said section are not novel or unique in nature, rather have been adopted from statutes which have been in force for a considerable time. It is also relevant to state and appreciate that bails have been granted under these long existing statutes, considering the twin conditions. A perusal of decisions granting bail bring out the following principles as laid down by the higher courts:

a) That the twin conditions cannot take away the right of the accused to be granted bail.

b) That the requirement of finding reasonable grounds for holding the accused not guilty, the appreciation of the evidence at the bail stage cannot and should not be exhaustive, though a more than prima facie determination of merits ought to be done.

c) That further the conclusion drawn in bail proceedings cannot impact the trial and upon the conclusion of the trial, an opposite finding may be reached by the Court.

d) That regarding the requirement of finding that the accused is not likely to commit any offence while on bail, such an offence in futuro must be an offence under the same Act and not any other offence. For this, antecedents of the accused should weigh critically with the court.

Some decisions are quoted below for illustrative reference:

• In Ranjitsing Brahmajeetsing Sharma v. State of Maharashtra, (2005) 5 SCC 294, the Hon'ble Supreme Court, while interpreting Section 21 of MCOCA, which is similar to section 45 of PMLA, held as under:

"44. The wording of Section 21(4), in our opinion, does not lead to the conclusion that the court must arrive at a positive finding that the applicant for bail has not committed an offence under the Act. If such a construction is placed, the court intending to grant bail must arrive at a finding that the applicant has not committed such an offence. In such an event, it will be impossible for the prosecution to obtain a judgment of conviction of the applicant. Such cannot be the intention of the legislature. Section 21(4) of MCOCA, therefore, must be construed reasonably. It must be so construed that the court is able to maintain a delicate balance between a judgment of acquittal and conviction and an order granting bail much before commencement of trial."

• The above decision of the Hon'ble Supreme Court was followed in the case of State of Uttaranchal vs Rajesh Kumar Gupta (2007) 1 SCC 355, which was concerned with grant of bail under Section 37 of the Narcotic Drugs and Psychotropic Substances, Act, 1985 and the Court held as under:

"28. Section 37 of the 1965 Act must be construed in a pragmatic manner. It cannot be construed in such a way so as to negate the right of party to obtain bail which is otherwise a valuable right for all practical purposes.

...

38. The respondent is charged with a grave offence. It was, therefore, all the more necessary to apply the principles of law strictly. A person cannot be denied the right of being released on bail unless a clear case of application of the 1985 Act is made out. He might have committed an offence which repulses our morality. He may ultimately be found guilty even for commission of an offence under the 1985 Act, but in a case of this nature when prima facie the provisions of the said Act are not found applicable, particularly, in view of the fact that he has been in custody for a period of more than two years now, in our opinion, it is not a fit case where we should exercise our discretionary jurisdiction under Article 136 of the Constitution of India."

• The Hon'ble Allahabad High Court, in Atique Ahmad vs State of U.P. 2012 SCC OnLine All 243, and in Kripa Shankar Pandey vs State of U.P. 2014 SCC OnLine All 16314 granted bail to the accused considering the twin conditions under Section 19(4) of the U.P. Gangsters and Anti-Social Activities (Prevention) Act, 1986.

VIII. Conclusion

• Conditions imposed under section 45 of PMLA have been struck down by the Hon'ble Supreme Court in the case of Nikesh Tarachand (supra).
• The amendment made vide Finance Act, 2018, does not revive the said conditions, and as such, the conditions remain inapplicable and invalid.
• Without prejudice to the above:
• The scope and effect of such twin conditions cannot be construed as calling for a mandatory applicability, since this would be violative of Articles 14 and 21 and would be inconsistent with the established procedure of criminal trial laid down under CrPC.
• Such conditions are also mandated in various other central and state laws, wherein bails have been granted regularly by the Courts, on the basis that a delicate balance ought to be maintained between a judgment of acquittal and conviction and an order granting bail much before commencement of trial.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.