PMLA

Bail in Prevention of Money Laundering Act: Case Laws

Any person booked for an offence under the Criminal Procedure Code (CrPc) / the Code would be realised by securing ‘bail’. This proposition is also applicable to the persons booked for the offence of money laundering under the PMLA, i.e. Prevention of Money Laundering Act, 2002. It is widely believed that securing ‘bail’ under PMLA is a nearly impossible task due to the stringent conditions imposed under the said Act. The present article attempts to analyse the statutory provisions regarding bail in PMLA conceptually along with interpreting the same through significant case laws regarding granting bail to persons accused in money- laundering offences.          

Meaning of Bail

The definition of Bail is neither provided under PMLA, CrPc or IPC. In basic English, bail can be defined as security for the appearance of a prisoner for his release. However, the meaning of bail has been provided by the Supreme Court (Apex Court)/ SC in the case titled Vaman Narain Ghiya vs the State of Rajasthan (2009), which is as follows          

“Bail may be regarded as a mechanism whereby the State devolutes upon the community the function of securing the presence of the prisoners and at the same time involves the participation of the community in the administration of justice.

It is worth mentioning the various provisions pertaining to the constitution of Special Courts for trying PMLA offences, including granting of bail, etc.

According to sections 43 & 44 of PMLA¹, an offence punishable under section 4 of PMLA (Punishment for Money Laundering) and any scheduled offence related to the offence of money laundering are triable by a Court of Sessions designated as a Special Court. The Special Court shall conduct the trial as per the provisions of CrPc.

Bail in PMLA: Section 45

Section 45 of the PMLA deals with the offences to be cognizable and non-bailable and states the following in this regard –

• No one accused of an offence under the PMLA shall be released on bail or on his own bond unless an opportunity has been provided to the Public Prosecutor for opposing the application for the release of the accused. 
• Upon the application being opposed by the Public Prosecutor, if the court is satisfied regarding the presence of reasonable grounds for believing regarding the accused not being guilty of the offence and isn’t likely to commit any offence when released on bail. 
• However, if the accused is below the age of 16 years’ , sick, affirm or a woman or,  is accused either by himself or together with other co-accused for the offence of  money laundering a sum of less than 1, 00,00,000 upon the direction of the Special Court
• The Special Court won’t take cognizance of any offence punishable u/s 4 except upon a complaint in writing made by— the Director or (any officer of the Central Govt. or a State Govt.  Authorised in writing on this behalf by the Central Govt. by a special or general order made on this behalf by that Government.
• Notwithstanding anything contained in the CrPc, no police officer should investigate an offence under this Act unless being specifically authorised by the Central Government  by a general or special order, and, as per such conditions as may be enumerated.  
• The limitation on the grant of bail prescribed in 45 (1) is in addition to the limitations as per the CrPc or any other law for the time being in force on the grant of bail.

The analysis of the meaning of “reasonable grounds“ mentioned in the second pre-condition of section 45(1) of PMLA is essential, which the court must satisfy prior to granting bail. The Apex Court clarified this matter of Customs – vs- Ahmadalieva Nodira reported in (2004), wherein it was held that the expression “reasonable grounds” means something more than “prima facie” grounds. It contemplates substantial probable cause for believing that the accused isn’t guilty of the alleged offence. It requires the existence of such facts and circumstances which are sufficient in themselves for justifying the satisfaction with the accused not being guilty of the alleged offence”.

 Another question arising in terms of bail under PMLA is the requirement of the court adjudicating the bail application for indicating the “prima facie reasons” order granting bail, which was dealt with by the Supreme Court (SC) in the matter of Kalyan Chandra Sarkar -vs- Rajesh Ranjan reported in (2004) wherein the SC emphasized the need for giving “prima facie reasons” in orders of granting bail.

It is crucial to examine the interplay between the CrPC and PMLA provisions in bail cases. The non-obstante clause in section 45(1) of PMLA, stating that “notwithstanding anything contained in the Code Of Criminal Procedure Code Of 1973“, would give an impression that the CrPC provisions will take a back seat due to the PMLA provisions having an overriding effect on them, and this proposition will also be applicable in bail cases under PMLA. This issue was adjudicated by the Apex Court in Gautam Kundu Vs. Manoj Kumar, Assistant Director, reported in (2015) wherein the SC held that section 45 of the PMLA will have an overriding effect on the general provisions of the Code in the event of any conflict between them.

However, in Section 45(2), it has been expressly stated that the limitations on granting bail prescribed in 45(1) are in addition to the limitations as per the Code or any other law for the time being in force.

 Further, section 71 of PMLA, which provides overriding powers to the Act, prescribed overriding effect to PMLA provisions in cases of inconsistency between the provisions of PMLA and other laws only. Till the time there is an existence of consistency between PMLA and other laws, there isn’t any room for applying the principle of the overriding effect of PMLA provisions.

Another important issue which must be considered while dealing with bail under PMLA is the interpretation of the words “shall be released on bail “incorporated in sub-section 1 of section 45 of the PMLA, and the word “may “be released on bail, if the Special Court so directs” included in the first proviso of the said section. The expression “shall” in section 45(1) of the PMLA, empowers the courts for granting bail to the accused in money-laundering offences upon the two conditions being satisfied and the expression “may“ have been held that the discretion by the court for release accused on bail isn’t mandatory. If the expression “may“ be construed as “shall”, then there isn’t any rationale in considering factors like age, etc. Further, the non-obstante clause, “notwithstanding anything contained in the Code of Criminal Procedure, 1973″ is intended to restrict the powers to grant bail by making it subject to the conditions specified in section 45(1) of the PMLA which implies that provisions of Cr. Pc. should be subject to the provisions of PMLA. This position has been explained elaborately under section 4 of the Code.

Bail under PMLA: Case Laws

There are certain landmark case laws that have dealt with the provision of bail under PMLA. Some of them are discussed below –

S. Jagan Mohan Reddy v. C.B.I., 2013

It was observed by the SC in this case that while granting bail to the accused, the court must consider the following aspects.

• Nature of the allegations,
• Nature of the evidence
• The severity of the punishment enumerated under the Act,
• Possibility of securing the appearance of the accused at the trial,
• Apprehension beyond reasonable doubt that the accused won’t tamper with the concerned evidence while out on bail

 Nikesh Tarachand Shah vs Union Of India &Anr, 2017

Earlier, in this case, the SC had struck down Section 45(1) of the PMLA 2002 insofar as it imposed two further conditions for release on bail with regard to the offenses punishable for imprisonment for a term of imprisonment of more than 3 years (as per  Part A of the Schedule to the PMLA). That proviso was held to be unconstitutional due to being in violation of Article 14 and Article 21 of the Indian Constitution.

The two conditions prescribed under the said sub-section were as given below.

• The public prosecutor must be provided with an opportunity for opposing any application for release on bail.
• Where the public prosecutor opposes the application, with the existence of reasonable grounds for believing about the accused not being guilty of such offence, and that he isn’t likely to commit any offence while on bail”.

The court held that the classification made on the basis of the length of sentence of imprisonment had no rational basis or connection with the objects of the PMLA. The (mindless) application of Section 45(1) led to situations wherein the same offenders tried under different cases have often ended up with different results (conclusions) based on the applicability of Section 45(1) has or not.

Thus, the twin conditions under Section 45(1) were considered to be discriminatory and arbitrary in nature. It was further stated that, in cases of anticipatory bail, such twin conditions weren’t required to be applied for granting bail leading to discrimination between those applying for regular bail and the others applying for anticipatory bail u/s  45(1). The court further stated that, in fact, the presumption of innocence, which is attached to the prosecution of the accused for an offense, is inverted by the conditions specified in Section 45, whereas for the grant of ordinary bail, the presumption attaches.

Pursuant to this judgment, in 2018, an amendment was made to the provision of bail under the PMLA by the Government of India (GOI), which was earlier held unconstitutional. There was the removal of the part “punishable for a term of imprisonment of more than 3 years under Part A of the Schedule”, and instead, there was the addition of the phrase “under this Act” in the Section.

Chidambaram v. ED, 2019

In this case, certain guidelines were issued by the Apex Court that must be considered while deciding upon the refusal or grant of bail under PMLA. As per general Indian criminal jurisprudence, bail is the rule and refusal of bail is an exception. In granting bail to the accused, it is important to perform the triple test and follow the same along with considering the severity of the offence.

Aspects of the Triple Test

The aspects of the triple test are discussed below –

• Presence of Accused: If the accused has appeared before the agencies and court whenever required in the past and have duly cooperated with an investigative agency. This factor shall be taken into consideration for the grant of bail under PMLA.
• Nature of evidence: If there has been the collection of the primary document, which is material to the case by the investigative agency and the  scope of tampering with the evidence is next to impossible, and the fact that the  accused hasn’t tampered with the document before becomes a vital consideration
• Deep Roots: If the accused has been residing at his permanent address/ location for a long time period and he/she/they aren’t at flight risk due strong financial position, as well as the accused is not previously involved in criminal activities.

However, an application can be filed by the accused under the provision for bail under PMLA to HCs only during custody. The ED and other similar agencies have been from abiding by the provisions of the CrPC in their functioning.

 Vijay Madanlal Choudhary vs Union of India, 2022

A bench led by Justice AM Khanwilkar upheld several provisions of the PMLA. These provisions included the “twin-bail condition” under Section 45 of the Act, which the Apex Court had incidentally struck down by itself in 2017.

The twin conditions with regard to bail under amended Section 45 of the PMLA 2002 were upheld by the Apex Court, whereby the bench said that money laundering is a heinous crime which affects not only the social and economic fabric of the nation but also promotes other heinous crimes. The bench also stated that the twin conditions, though they restrict the right of the accused to grant bail, don’t impose absolute restraint. The apex court said the provision, as applicable after the amendment in 2018, is reasonable and doesn’t suffer from the vice of arbitrariness or unreasonableness.

“We hold 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 said.

The bench noted that the offence of money laundering had been considered an aggravated form of crime the “world over” The apex court said it is a separate class of offence which require effective and stringent measures to combat.

The court further observed that, owing to the seriousness of the crime that stringent measures, like confiscation and attachment of proceeds of crime and prosecution of the people involved, have been provided for in the law.

The Bench  had observed  that “In view of the gravity of the fallout of money laundering activities having a transnational impact, a special procedural law for prevention and regulation, including to prosecute the person involved, has been enacted, grouping the offenders involved in the process or activity connected with the proceeds of crime as a separate class from ordinary criminals,”

The Directorate of Enforcement vs M. Gopal Reddy and Anr. February 2023

The Supreme Court, in this case, has reiterated the fact applicability of the conditions u/s 45 of the PMLA for the grant of bail to anticipatory bail applications u/s 438 of the Code well.

A bench comprising Justices MR Shah and CT Ravikumarmade this observation while setting aside an order of the Telangana High Court, which observed that rigours of Section 45 PMLA aren’t applicable to anticipatory bail applications.

 Directorate of Enforcement vs Aditya Tripathi, May 2023

The Apex Court pronounced the judgment, holding that the mere fact of a charge sheet being filed for the predicate offences isn’t a ground for releasing the accused on bail in relation to the offences under the Prevention of Money Laundering Act.

A bench comprising Justices MR Shah and CT Ravikumar allowed an appeal that the Directorate of Enforcement had filed, challenging the order passed by the Telangana High Court whereby the court granted bail to an accused in a money laundering case. The money laundering case was predicated on a case under the POCA ie  Prevention of Corruption Act 1988, registered in Madhya Pradesh in relation to awarding tender works of the MP Water Corporation.

Conclusion

The judicial system of India has always been quite conscious about the matters of Bail in PMLA and has pronounced all the judgements in respect of the same after analysing them quite meticulously, which has helped in shaping the landscape of the bail provisions in the said Act over the years and is helpful till date.  

Read our Article: Section 45 of PMLA applies to those arrested by ED

                               

1. https://en.wikipedia.org/wiki/Prevention_of_Money_Laundering_Act,_2002