The Prevention of Money Laundering Act was enacted in 2002 to curb the country's growing instances of money laundering. It came into force in 2005.
Section 3 of the Act defines money laundering as "Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is involved in any process or activity connected with the proceeds of crime and projecting it as untainted property shall be guilty of the offence of money-laundering."
Section 45 deals with the provisions for bail for the offences committed under this Act.
Bail under Section 45 of PMLA: Pre-amendment Provisions & Validity
Before Section 45 of PMLA was amended in 2018, it stated, "Offences to be cognisable and non-bailable.- Notwithstanding anything contained in the CrPC, 1973, 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 his bond unless:
the Public Prosecutor has been allowed to oppose the application for such release and
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 conditions in Section 45 are in addition to the conditions prescribed for bail under Sections 437 and 439 of the CrPC. It means that the accused will have to pass the triple test for bail prescribed under CrPC, then the conditions under Section 45 of the PMLA will apply.
In P.Chidambaram v. Enforcement of Directorate (2019), the honourable Supreme Court reiterated that the accused would have to pass the triple test to claim bail. The three tests are as follows-
The accused is not at a flight risk
The accused will not tamper with the evidence
The accused will not try to influence the witnesses.
In the State of Bihar v. Amit Kumar, the court quashed the bail granted to the accused under Section 439 of CrPC because the offence committed by the accused was an economic offence of high magnitude. The court regarded economic offences as crimes that are highly dangerous to society. PMLA imposes an additional burden on the accused to satisfy the court that the offence is not of high magnitude.
Section 5 of CrPC states, "Nothing contained in this code shall, in the absence of a specific provision to the contrary, affect any special and local law for the time being in force." This section clarifies that the bail conditions imposed under Section 45 of PMLA will have to be considered by the court for granting bail to the accused. Moreover, the Supreme Court in Gautam Kundu v. Directorate of Enforcement declared that the provisions of PMLA will prevail over the provisions of CrPC on the ground that the PMLA is a special law while CrPC is a general law.
Section 45(2) imposes two conditions on the accused to prove in order to claim bail:
There are reasonable grounds for the court to believe that the accused is not guilty of the offence indicted.
The accused is not likely to commit the offence in future.
This imposition of burden is against Article 11 of the Universal Declaration of Human Rights, which states that "Everyone charged with a penal offence has the right to be presumed innocent until proven guilty according to law." Thus, section 45(2) violates the human right of the accused guaranteed under the UDHR.
The two-judge bench of the Apex Court in the landmark case of Nikesh Tarachand Shah v. Union of India (2017) has analysed the twin conditions for bail enumerated under Section 45(2) of the PMLA. The court found the section to not align with the constitution's fundamental rights. Thus, the court declared the twin conditions under Section 45(2) violative of Articles 14 and 21 of the constitution. In this case, the court did not agree with the classification of offences punishable under Part A of the PMLA and the offences punishable under PMLA other than listed under Part A.
Thus, the twin conditions were declared unconstitutional.
PMLA, Section 45: Amendment & Present Scenario
In 2018, the central government introduced an amendment to the PMLA. It replaced "punishable for a term of imprisonment of more than three years under Part A of the schedule" with "under the Act". The amendment removed the classification of offences into two groups for the same reason the Supreme Court quashed the twin conditions under Section 45 of the PMLA. The 2019 amendment broadened the definition of "proceeds of crime" and cast a burden on the accused to prove that the possession that had been seized is not the possession of the crime.
Further, in the case of Serious Fraud Investigation Office v. Nitin Johari (2019), the three-judge bench of the Supreme Court has affirmed the similar twin condition under section 212(6)(ii) of the Companies Act, 2013. The court quashed the bail granted to Nitin Johari by the Delhi High Court on the ground that the court failed to apply the twin condition under Section 212(6)(ii) of the Companies Act. The decision given by the Supreme Court in the Nitin Johari case has rendered per incuriam by the decision given in Nikesh Tarachand Shah case due to the following reasons:
A three-judge bench gave the decision.
The decision was delivered after the amendments in PMLA.
The ratio/basis on which the original section of PMLA was declared unconstitutional was removed by the two amendments.
Thus, the decision given by the court in the Nitin Johari case should prevail, and the twin condition test continues to remain a condition for the grant of bail in offences enumerated under PMLA.
The decision given by the Supreme Court in the Nitin Johari case has made the position regarding the applicability of the twin condition for the grant of bail unclear.
For example, the Patna High Court in the case of Ahilya Devi v. the State of Bihar and the Madhya Pradesh High Court in Vinod Bhandari v. Director has held that the decision rendered in Nitin Johari has in no way affected the decision given in the Tarachand case and maintained the position that the honourable Supreme Court has struck down the twin conditions.
However, the Delhi High Court, in the case of Nitin Johari v. SFIO (2020), had refused to grant bail to Nitin Johari on the ground that there is "no reasonable ground to believe that he is not guilty of the offences alleged against him." Thus, in this case, the Delhi High Court has considered the twin conditions while deciding upon the issue of bail under PMLA.
Hence, it becomes imperative for the honourable Supreme Court to clarify the position for application of the twin conditions for granting bail. While deciding upon this issue, the court must consider that bail is the rule and jail is the exception. Even if the court declares Section 45 constitutional, steps must be taken to dilute the presumption of guilt under Section 45, such as the test of "compelling state interest" may be applied to fix the presumption of guilt on the accused as a presumption of innocence is one of the fundamental human rights essential for the enjoyment of life and liberty in the society.