Restrictions on grant of bail under PMLA if valid

Section 45 of Prevention of Money Laundering Act is unconstitutional.

Section 45 of the 2002 Act, which was brought into force in 2005, originally read as follows:

“45. 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 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:

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:

Provided further that the Special Court shall not take cognizance of any offence punishable under section 4 except upon a complaint in writing made by- (i) the Director; or (ii) any officer of the Central Government or a State Government authorised in writing in this behalf by the Central Government by a general or special order made in this behalf by that Government.

(2) The limitation on granting of bail specified in clause (b) of sub-section (1) is 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.”

The change made by Section 45 is that, for the purpose of grant of bail, what was now to be looked at was offences that were punishable for a term of imprisonment of three years or more under Part A of the Schedule, and not offences under the 2002 Act itself. At this stage, Part A of the Schedule contained two paragraphs – Para 1 containing Sections 121 and 121A of the Indian Penal Code, which deal with waging or attempting to wage war or abetting waging of war against the Government of India, and conspiracy to commit such offences. Paragraph 2 dealt with offences under the Narcotic Drugs and Psychotropic Substances Act, 1985. Part B of the Schedule, as originally enacted, referred to certain offences of a heinous nature under the Indian Penal Code, which included murder, extortion, kidnapping, forgery and counterfeiting. Paragraphs 2 to 5 of Part B dealt with certain offences under the Arms Act 1959, Wildlife (Protection) Act 1972, Immoral Traffic (Prevention) Act, 1956 and the Prevention of Corruption Act, 1988. When the Act was originally enacted, it was, thus, clear that the twin conditions applicable under Section 45(1) would only be in cases involving waging of war against the Government of India and offences under the Narcotic Drugs and Psychotropic Substances Act. Even the most heinous offences under the Indian Penal Code were contained only in Part B, so that if bail were asked for such offences, the twin conditions imposed by Section 45(1) would not apply. Incidentally, one of the reasons for classifying offences in Part A and Part B of the Schedule was that offences specified under Part B would get attracted only if the total value involved in such offences was Rs.30 lakhs or more (under Section 2(y) of the Act as it read then). Thereafter, the Act has been amended several times. The amendment made in 2005 in Section 45(1) was innocuous and is not an amendment with which we are directly concerned. The 2009 Amendment further populated Parts A and B of the Schedule. In Part A, offences under Sections 489 A and B of the Indian Penal Code, relating to counterfeiting were added and offences under the Explosive Substances Act, 1908 and Unlawful Activities (Prevention) Act, 1967, which dealt with terrorist activities, were added. In Part B, several other offences were added from the Indian Penal Code, as were offences under the Explosives Act 1884, Antiquities and Arts Treasures Act 1972, Securities and Exchange Board of India Act 1992, Customs Act 1962, Bonded Labour System (Abolition) Act 1976, Child Labour (Prohibition and Regulation) Act 1986, Transplantation of Human Organs Act 1994, Juvenile Justice (Care and Protection of Children) Act 2000, Emigration Act 1983, Passports Act 1967, Foreigners Act 1946, Copyright Act 1957, Trademarks Act 1999, Information Technology Act 2000, Biological Diversity Act 2002, Protection of Plant and Farmers Rights Act 2001, Environmental Protection Act 1986, Water (Prevention and Control of Pollution Act) 1974, Air (Prevention and Control of Pollution Act) 1981 and Suppression of Unlawful Acts Against Safety of Maritime Navigation and Fixed Platforms of Continental Shelf Act, 2002.

By the Amendment Act of 2012, which is Act 2 of 2013, a very important amendment was made to the Schedule by which the entire Part B offences were transplanted into Part A.

Unreasonable classification

The classification of three years or more of offences contained in Part A of the Schedule must have a reasonable relation to the object sought to be achieved under the 2002 Act. The 2002 Act was enacted so that property involved in money laundering may be attached and brought back into the economy, as also that persons guilty of the offence of money laundering must be brought to book. It is interesting to note that even in the recent 2015 amendment, the Legislature has used the value involved in the offence contained in Part B of the Schedule as a basis for classification. If, for example, the basis for classification of offences referred to and related to offences under the 2002 Act with a monetary limit beyond which such offences would be made out, such classification would obviously have a rational relation to the object sought to be achieved by the Act i.e. to attach properties and the money involved in money laundering and to bring persons involved in the offence of money laundering to book. On the other hand, it is clear that the term of imprisonment of more than 3 years for a scheduled or predicate offence would be a manifestly arbitrary and unjust classification, having no rational relation to the object sought to be achieved by an Act dealing with money laundering.

Arbitrary selection of offences

When we go to Part A of the Schedule as it now exists, it is clear that there are many sections under the Indian Penal Code punishable with life imprisonment which are not included in Part A of the Schedule, and which may yet lead to proceeds of crime. For example, Sections 232 and 238 of the Indian Penal Code, which deal with counterfeiting of Indian coin and import or export of counterfeited Indian coin, are punishable with life imprisonment. These sections are not included in Part A of the Schedule, and a person who may counterfeit Indian coin is liable to be tried under the Code of Criminal Procedure with conditions as to bail under Section 439 being imposed by the High Court or the Sessions Court. As against this, a person who counterfeits Government stamps under Section 255 is roped into Part A of the Schedule, which is also punishable with life imprisonment. If such person is to apply for bail, the twin conditions contained in Section 45 would apply to him. Similar is the case with offences where a punishment of maximum of 10 years is given. Section 240 dealing with delivery of Indian coin possessed with knowledge that it is counterfeit; Section 251 dealing with delivery of Indian coin possessed with knowledge that it is altered; Sections 372 and 373 which deal with the selling and buying of minors for the purpose of prostitution, are all offences which are outside Part A of the Schedule and are punishable with the maximum of 10 years sentence. Each of these offences may involve money laundering, but not being in Part A of the Schedule, a person prosecuted for these offences would be able to obtain bail under Section 439 of the Code of Criminal Procedure, without any further conditions attached. On the other hand, if a person is charged with extortion under Sections 386 or 388, (such sections being included in Part A of the Schedule) and Section 4 of the 2002 Act, the person prosecuted under these sections would only be able to obtain bail after meeting the stringent conditions specified in Section 45. This is yet another circumstance which makes the application of Section 45 to the offence of money laundering and the predicate offence manifestly arbitrary.

Treating unequals as equals

Sections 19, 24, 27A and 29 of the Narcotic Drugs and Psychotropic Substances Act, 1985 are all sections which deal with narcotic drugs and psychotropic substances where a person is found with, what is defined as, “commercial quantity” of such substances. In each of these cases, under Section 37 of the NDPS Act, a person prosecuted for these offences has to meet the same twin conditions which are contained in Section 45 of the 2002 Act. Inasmuch as these Sections attract the twin conditions under the NDPS Act in any case, it was wholly unnecessary to include them again in paragraph 2 of Part A of the Schedule, for when a person is prosecuted for an offence under Sections 19, 24, 27A or 29 of the NDPS Act, together with an offence under Section 4 of the 2002 Act, Section 37 of the NDPS Act would, in any case, be attracted when such person is seeking bail for offences committed under the 2002 Act and the NDPS Act.

Also, the classification contained within the NDPS Act is completely done away with. Unequals are dealt with as if they are now equals. The offences under the NDPS Act are classified on the basis of the quantity of narcotic drugs and psychotropic substances that the accused is found with, which are categorized as: (1) a small quantity, as defined; (2) a quantity which is above small quantity, but below commercial quantity, as defined; and (3) above commercial quantity, as defined. The sentences of these offences vary from 1 year for a person found with small quantity, to 10 years for a person found with something between small and commercial quantity, and a minimum of 10 years upto 20 years when a person is found with commercial quantity. The twin conditions specified in Section 37 of the NDPS Act get attracted when bail is asked for only insofar as persons who have commercial quantities with them are concerned. A person found with a small quantity or with a quantity above small quantity, but below commercial quantity, punishable with a one year sentence or a 10 year sentence respectively, can apply for bail under Section 439 of the Code of Criminal Procedure without satisfying the same twin conditions as are contained in Section 45 of the 2002 Act, under Section 37 of the NDPS Act. By assimilating all these three contraventions and bracketing them together, the 2002 Act treats as equal offences which are treated as unequal by the NDPS Act itself, when it comes to imposition of the further twin conditions for grant of bail. This is yet another manifestly arbitrary and discriminatory feature of the application of Section

Discrimination with pre-arrest bail

Thus, anticipatory bail may be granted to a person who is prosecuted for the offence of money laundering together with an offence under Part A of the Schedule, which may last throughout the trial. Obviously for grant of such bail, Section 45 does not need to be satisfied, as only a person arrested under Section 19 of the Act can only be released on bail after satisfying the conditions of Section 45. But insofar as pre-arrest bail is concerned, Section 45 does not apply on its own terms. This, again, would lead to an extremely anomalous situation. If pre- arrest bail is granted to Mr. X, which enures throughout the trial, for an offence under Part A of the Schedule and Section 4 of the 2002 Act, such person will be out on bail without his having satisfied the twin conditions of Section 45. However, if in an identical situation, Mr. Y is prosecuted for the same offences, but happens to be arrested, and then applies for bail, the twin conditions of Section 45 will have first to be met. This again leads to an extremely anomalous situation showing that Section 45 leads to manifestly arbitrary and unjust results and would, therefore, violate Articles 14 and 21 of the Constitution.

Presumption of Innocence

the presumption of innocence, which is attached to any person being prosecuted of an offence, is inverted by the conditions specified in Section 45, whereas for grant of ordinary bail the presumption of innocence attaches, after which the various factors set out in paragraph 18 of the judgment are to be looked at. Under Section 45, the Court must be satisfied that there are reasonable grounds to believe that the person is not guilty of such offence and that he is not likely to commit any offence while on bail.

We must not forget that Section 45 is a drastic provision which turns on its head the presumption of innocence which is fundamental to a person accused of any offence. Before application of a section which makes drastic inroads into the fundamental right of personal liberty guaranteed by Article 21 of the Constitution of India, we must be doubly sure that such provision furthers a compelling State interest for tackling serious crime. Absent any such compelling State interest, the indiscriminate application of the provisions of Section 45 will certainly violate Article 21 of the Constitution. Provisions akin to Section 45 have only been upheld on the ground that there is a compelling State interest in tackling crimes of an extremely heinous nature.

[Source: Nikesh Tarachand Shah vs. Union of India decided by SC on Nov 23, 2017]
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