Nachiketa Narain & Aredla Praneet Reddy
Introduction
“Bail is the rule, jail is the exception” is what the division bench of the Supreme Court of India (SC), ruled in Prem Prakash v. Union of India (Prem Prakash) pertaining to bail provision under Prevention of Money Laundering Act, 2002 (PMLA).
It is pertinent to note that the simplest of applications such as bail, which ought to be settled in the courts of original jurisdiction, are reaching the apex court. This poses a severe burden on the SC by virtue of it being obligated to deal with cases of such ordinary nature due to the anomalies present in the law as well as ambiguity in its interpretation.
In this essay, the authors shall, firstly, deconstruct section 45 of PMLA to infer the exact nature and meaning of the said provision; secondly, analyse the SC’s interpretation of the said provision while referring to rulings of particular concern along with legislative intent regarding the same; thirdly, identifying points of clashes between the SC’s interpretation and the legislative intent; fourthly, prescribe potential long-term solutions to refine the concerned provision.
Deconstruction of Section 45
The provision for bail under PMLA is section 45. This provision lays down two essentials which are to be fulfilled for grant of bail. These conditions are called the ‘twin conditions’. The two conditions that are to be established are that firstly, there are reasonable grounds for believing that the accused is not guilty of such offence and secondly, the accused is not likely to commit an offence while on bail.
Under the Code of Criminal Procedure (CrPC), it is the duty of the Public Prosecutor to prove to the court that the accused is likely to commit an offence while on bail. However, in PMLA, there is a key differentiating factor. It is stated in the provision that no person accused of an offence shall be released on bail unless they fulfil the two conditions. This line effectively shifts the burden of proof onto the accused to prove to the court that they are prima facie innocent and are not likely to commit any offence while on bail. This leads to a very stringent approach for grant of bail which is at loggerheads with the approach of criminal jurisprudence in general.
‘Supreme Court v. Union of India’
Supreme Court Reading Down Section 45:
In Nikesh Tarachand Shah v. Union of India (Tarachand), the SC decided on the constitutionality of section 45 of PMLA, 2002 and the twin-conditions of bail attached to it. It held the same to be unconstitutional in the light of article 21 of the Constitution which stipulates for “no person shall be deprived of his life or personal liberty except according to the procedure established by the law”; essentially holding that constitutional provisions prevail over laws such as PMLA.
Revival Of An Unconstitutional Provision: Legislative Rationale
Finance Act of 2018 revived section 45 of PMLA. The main rationale, as per the central government, behind this particular revival of section 45 was to “enhance the effectiveness of the Act and widen its scope”.
The primary legislative intent derived from such revival and strengthening is that the central government is construing money laundering as a serious offence that ought to be treated as an exception to the general principles of criminal jurisprudence and the constitutional provisions that endorse ‘bail being the rule, and jail an exception’.
It is pertinent to note that the amendment did not just revive section 45 but also made the applicability of bail conditions uniform to all the offences under PMLA, including even those offences which were not exceeding the term of 3 years of imprisonment. Widening of the ambit of section 45 of PMLA can be construed and inferred from the obligations arising out of the Palermo Convention (United Nations Convention Against Transnational Organized Crime, 2000) [refer ¶ 25] that specifically advocated for the widening of definition of predicate offences considering the complex web-like nature of money laundering. Hence, through cascading effect, the bail conditions expanded as well.
Another important facet that the law makers considered to be of prime importance is to align the PMLA with the international obligations concerning money laundering such as Financial Action Task Force (FATF) mandatory recommendations coupled with the report of FATF concerning India (Mutual Evaluation of the anti-money laundering (AML) and combating the financing of terrorism (CFT) regime of India). Such prompts by the FATF endorsed a strict view of offences concerning money laundering.
The 2022 Verdict Upholding Section 45 of PMLA:
In Vijay Madanlal Choudhary v. Union of India (Vijay Madanlal) case of 2022, 3-judge bench of the SC decided on the constitutionality of various provisions of PMLA including section 45, as revived in 2018. The court arrived at the conclusion that even though the provision is very stringent and that it goes against the principle of bail being a rule, it is perfectly valid.
The inference from this verdict leads us to the fact that the court viewed section 45 of PMLA to be a provision that aims to achieve the purpose of the legislation; that is, to prevent the serious crime of money laundering. Essentially, the court views this provision from a narrow lens of ‘seriousness of the crime’ rather than the wider constitutional validity.
Reinterpreting Section 45 through constitutional lens:
In the recent Prem Prakash judgement, the SC has chosen a more constitutional approach rather than following the statute and precedents. In essence, the rationale behind these decisions is substantially the same but there exists a crucial difference. In the judgement, section 45 of the PMLA is not deemed unconstitutional. However, the rigours of the provision are relaxed. The verdict takes cues from section 436A of CrPC (now section 479 BNSS) which stipulates that if a person has been detained for half of the maximum period of imprisonment for that particular offence, they ought to receive bail in the form of conditional liberty i.e., bail but certain conditions are placed on the accused. This provision of CrPC was held to be applicable on PMLA cases as well in Ajay Ajit Peter Kerkar v. Directorate of Enforcement.
The SC bench states that it is merely interpreting the statute and not passing a conflicting order. However, this claim can lead to new complications. The statute is stringent by nature, hence leaving no room for interpretation by the courts. Hence, even a mere relaxation of the section can be construed as a rejection of the provision as a whole.
Clash of Intentions
Analysing the aforementioned information, it would be timely to address the elephant in the room i.e., the blatant clash of intention between the SC and the legislature. It is no secret that the SC prefers to prioritise the right to life and personal liberty of the individuals, as is shown in the Tarachand and Prem Prakash judgement. It is of the view that deprivation is an extreme measure and liberty should be the rule of law.
Subsequent to the Tarachand judgement declaring section 45 to be unconstitutional, the legislature passed a bill retaining the stringent bail conditions. Though it is within the power of the court to deem a provision unconstitutional through judicial review, it can be inferred that the legislature was dissatisfied with the order. The amendment emphasised on the point that the bail conditions should be followed with uniformity for all offences. The legislature intends to follow a zero-tolerance policy towards money laundering. This is pertinently so because of the fact that offences pertaining to money laundering are deemed to be of high seriousness besides being complex offences that involve a threat not only to the financial institutions but also to the sovereignty and integrity of the nation as enunciated in the statement of objects and reasons of the Act itself.
In light of the recent Prem Prakash case, a different approach can be observed to combat the controversial provision. Rather than deeming the section outright unconstitutional, the SC has diluted the definition by allowing for a relaxation of the provision according to the circumstances of the case. Through clever wordplay, the court claims to interpret a seemingly uninterpretable statute as a short-term measure to protect the liberty of an individual.
Though not direct, there is once again an unavoidable clash between the SC and the law-makers. It is yet to be seen how the legislature will respond to this, but there is an urgent need for a long-term solution to avoid this tussle.
A Dire Need For Long-Term Solutions
As highlighted in the aforementioned paragraphs, there are pertinent problems with section 45 that need to be resolved. The authors are inclined with the view of the SC as contemplated in Tarachand and Prem Prakash.
It is true that money laundering that is connected to terror financing and other such serious offences ought to be treated with great caution and stringency but there are offences which are not as serious as the former. While the fight against terror funding is a step in the right direction by the legislature, there are several cases where the rights of the accused are being violated due to the actions of a few outliers.
There exists a need to move from the current one-size-fits-all approach towards an approach that underscores the differences between the offences on the basis of their gravity and seriousness. The SC, in the case P. Chidambaram v. Directorate of Enforcement of 2019, stated that in determining whether to grant bail both the seriousness of the crime, and the severity of the punishment are to be taken into account. In the case, bail was granted on the following grounds – firstly, the allegations against the accused were not severe; secondly, possibility of the accused tampering with evidence was low; and thirdly, humanitarian grounds like the health of the accused were considered.
From the above, it is understood that there are various aspects that are to be observed before simply denying bail. A provision like section 45, being as rigid as it is, does not allow for such an analysis. In the interest of upholding the fundamental rights of the citizens, the legislature must relax the provision to provide wiggle room to the courts to determine bail on a more case-to-case basis. This would prevent minor bail cases reaching the apex court as the lower courts are hesitant to oppose the inflexible provision. Nevertheless, the court should also recognize the legislature’s wariness towards money laundering and pass orders such that it balances caution with liberty.
The Way Forward
It must be noted that change in provision will not be a cure-all; there are systemic issues such as under-trial prisoners suffering for long periods of time due to delay of proceedings, futile adjournments, etc. To bring about change, there needs to be a combined effort. Additionally, the international obligations that bind India cannot be isolated and are ought to be integrated in this discourse.
In conclusion, while it may be important to curb the vice of money laundering, it must also be ensured that provisions like section 45 do not undermine fundamental rights. A balanced approach which harmonises judicial interpretations and legislative intent must be adopted without compromising on justice, fairness and liberty. The balance can be achieved by undertaking thorough research for collocation or stratification of money laundering offences based on their gravity and seriousness.
The authors are second-year law students at Rajiv Gandhi National University of Law, Punjab.
NUALS Law Journal 