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OBTAINING A CLEARER INSIGHT ON SECTION 45 OF THE PREVENTION OF MONEY LAUNDERING ACT, 2002

- Jay Gajbhiye & Ankesh


INTRODUCTION

The Prevention of Money Laundering Act, 2002[i] was enacted by the Parliament to restrict the occurrence of money-laundering and to seize the property that was going to be confiscated in the process. “Money Laundering” refers to the act of conversion of black money (illegally obtained money) into money which appears to be from a legitimized source.


Now, it has always been an ambiguous spot as when the case has not been gone to trial in front of the judge whether bail should be granted or not. The courts in India have certainly tried to follow up with the US Constitution[ii] and had also tried to be as just as possible. Presently people do opt for the Bail in the pre-trial stage, but the conditions to be fulfilled for the same are foisted by “certain special-legislations” apparently based on the “interest” of state and society at large.[iii] The validity of these conditions is not yet clear but from time to time, courts have tried to justify it, amend it, or even add some conditions. In a situation when SC had a similar issue in front of it, whereby under Section 45(1) of the PMLA, the two essential conditions for granting of bail (to the accused) was in question. Although the Apex Court struck down the section as it violated “Article 14 and 21 of the Indian Constitution”, and thereby the conditions were not followed in the granting of bail (Nikesh Tarachand Shah v. Union of India).


The debate “Bail or Jail”? at the pre-trial phase, as indicated by the well-known judge, “Hon’ble V R Krishna Iyer”, shall invariably accord to the “blurred area of the criminal justice system”[iv]. The courts in India, recognized that bail, not jail, is the criterion[v] but also established concepts like “collective interest of the community and the safety of the nation”[vi]to stabilize the interests of the state attentively, and the privileges of arraigned while deciding bail proposals composed by alleged perpetrators.


THE PATTERN OF THE PMLA

In the case (Nikesh Tarachand Shah v. UOI), the PMLA’s layout and framework was questioned before the SC. As per S.3 of the PMLA, a “money laundering” crime shall only take place when (a) the execution of actions referred to in Part A, B, or C of Schedule (b) and the estimation of the assets gained by such act as “untainted”.


In the above-mentioned cases, “special courts” had been created under Section 4 of PMLA. In this regard, S. 45(1) of PMLA issued for no individual charged with wrongdoing under “Part A of the schedule of the PMLA”, who was liable for the incarceration of more than “three years” shall be granted bail, unless the mentioned two requirements or the “Twin Principle” have been fulfilled:


  • “The public prosecutor was allowed to oppose the application for such release”; and

  • “where the public prosecutor opposes such a bail application, the court was satisfied that there were reasonable grounds for believing that the accused was not guilty of such offense and that such person was not likely to commit any offense while on bail”.


THE COURT’S OPINION REGARDS TO THE ISSUES RAISED

The sections in the question of the PMLA were termed as violation of Article 14 and 21. Now, these two sections were ruled to be unfair and thus were held “violative”. As the first condition says that the “public prosecutor” has been given the chance to oppose the bail plea which directly exhibits arbitrariness from Article 14 of the Indian Constitution. It is because there might be a scenario where the public prosecutor didn’t oppose the bail plea or he couldn’t oppose it thereby restraining the right of the plaintiff. Article 14 provides equality before the law and this would not be one such instance. The case of the plaintiff should not depend on any action of the Public Prosecutor, and the question of whether bail should be given or not must be seen by the magistrate.


The court in the Judgement[vii] stated “The Grant of bail is the rule and refusal is the exception. An accused person who enjoys freedom is in a much better position to look after his case and to properly defend himself than if he were in custody. As a presumably innocent person, he is therefore entitled to freedom and every opportunity to look after his case. A presumably innocent person must have his freedom to enable him to establish his innocence. There cannot be an inexorable formula in the matter of granting bail. The facts and circumstances of each case will govern the exercise of judicial discretion in granting or canceling bail.”[viii]


While dealing with the matter of Article 21, since the provision breached Article 14, the Court proposed that it cannot be identified as a “procedure established by law” and thus infringed Article 21. However, the Court continued to address the quarrel towards the conclusion of the judgment. It describes Section 45 as a “drastic provision which turns on its head the presumption of innocence which is fundamental to a person accused of any offense”[ix]. It also says that “Before incorporating a provision which significantly infringes the fundamental right to personal freedom provided for in Article 21 of the Indian Constitution, we must be sure that such a provision will cultivate a compelling State interest in countering violent crime. The indiscriminate implementation of section 45 would certainly infringe Article 21 of the Constitution without any other motivating interest by the establishment.” Provisions similar to section 45 were only maintained on the basis that there is a legitimate concern of the state in addressing particularly horrific offenses.[x]


ISSUES CONCERNING SECTION 45(1) OF THE ACT

Firstly, it was said that due to the use of such conditions in the Act, more complex situations arose in addition to the existing conditions to obtain bail.


Secondly, it was claimed that crimes in compliance with the PMLA must now be determined in conjunction with the “twin principle” whereas crimes are normally handled with the “provisions of the Criminal Procedure Code” (CrPC) alone.


It was further noted, while there was no statutory purpose to handle people convicted under Schedule A of the act separately, Section 45(1), essentially causes disparities in the treatment of an individual convicted under Schedule A, which varies from an individual convicted under Schedule B or C of the act.[xi]


The conditions allowing the validity of Section 45(1) only to crimes requiring three years or more of detention are unreasonable and unfair. This led to cases where “denials” were focused on the circumstances already challenged.

Ultimately, the twin requirements themselves were contended to be irrational and unjust.


S. 45: POST THE JUDGMENT

In compliance with this ruling, the GOI amended S. 45(1) of the PMLA, by attaching to “Sub-section (1)” of S. 45 the terms, “under this Act”, and removing the terms “punishable for a term of imprisonment of more than 3 years under Part A of the Schedule”.


Among some reasons for quashing the section in the ruling was that the pertinent Court while determining the bail petition should have a rational basis for assuming that the “accused” is not liable for a “predicate” crime rather than a crime under PMLA.


CONCLUSION

It can be claimed that in PMLA issues, the strictness laid down for the award of “bail” under “Section 45(1)” of the act is not suitable, since that section was not “revived” and solely the “provisions of Section 437 of the Code of Criminal Procedure, 1973” is relevant in determining the bail of the accused.[xii] The Hon’ble court’s decision in the Nikesh Tarachand case challenges the validity of pre-bail requirements of bail regarding economic abuses.


The SC dismissed the “scheme of provisions”.[xiii] The fact that an economic crime such as money laundering warranted these strict requirements and that the privileges of a citizen in the event of such an economic crime may be curtailed by the state continues to be addressed.

Therefore, in the matters of economic violations, the validity of the pre-bail provisions was not especially discussed by the SC in the “Nikesh Tarachand case”. The legitimacy and equity of pre-bail terms are still “elusive” and require judicial clarity.


[i] Prevention of Money Laundering Act, Acts of Parliament, (2002) [ii] 8th US Constitutional Amendment https://www.britannica.com/topic/Eighth-Amendment#:~:text=The%20House%20approved%2017%20of,law%20on%20December%2015%2C%201791 (1791) [iii] Abhimanyu Bhandari, PMLA 2002 Act, BAR AND BENCH (2018) https://www.barandbench.com/columns/pmla-act-section-45-post-amendment [iv] Gudikanti Narasimhulu v. Public Prosecutor, 1 SCC 240 (1978). [v] Dataram Singh v. State of Uttar Pradesh, SLP (Criminal) No. 151 (2018). [vi] Kartar Singh v. State of State of Punjab, 3 SCC 599 (1994). [vii] Nikesh Tarachand Shah v. Union of India, 11 SCC 1 (2018). [viii] Gurcharan Singh v. State (Delhi Administration) 1 SCC 118 (1978). [ix] Abhimanyu Bhandari, PMLA 2002 Act, BAR AND BENCH (2018) https://www.barandbench.com/columns/pmla-act-section-45-post-amendment [x] Akil Hirani, Indian Prevention of Money Laundering Bill 1998: a Critique, 27 INT'l Bus. LAW. 75 (1999). [xi] Gorav Kathuria v. Union of India, 348 ELT 24 (2017). [xii] Kalyan Chandra Sarkar v. Rajesh Ranjan, 7 SCC 528 (2004SCC 21 (2005). [xiii] Devesh Pandey, Changes in PMLA, THE HINDU https://www.thehindu.com/news/national/changes-in-pmla-act-empower-ed/article28916974.ece

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