Notes on PMLA Act : Section 45 and the “twin conditions” post amendment

Abhimanyu Bhandari

The draconian provision – Section 45 (1) of the Prevention of Money Laundering Act, 2002 (PMLA), insofar as it imposed two conditions for release of an accused on bail was held to be unconstitutional as it violated Article 14 and 21 of the Constitution in a landmark judgment of Supreme Court in Nikesh Tarachand Shah v. Union of India.

The conditions required that the public prosecutor must be given an opportunity to oppose any application for release on bail and the court must be satisfied, where the public prosecutor opposes the application, that there are reasonable grounds for believing that the accused is “…not guilty of such offence, and that he is not likely to commit any offence while on bail”.

When the Prevention of Money Laundering Bill, 1999 was tabled before the Parliament, Section 44 which corresponds to Section 45 of the present Act provided that the twin conditions for release on bail would apply only insofar as the offences “under the Act” itself are concerned.

The Act, however, unlike the Bill did not refer to offences “under the Act” (Sections 3 and 4 of the Act). Instead, it referred to offences under Part A of the Schedule to the Act which lists a number of offences under various statutes including but not limiting to the Indian Penal Code, Wild Life Protection Act, Customs Act etc.

The Supreme Court in Nikesh Tarachand Shah thus while holding the twin conditions to be unconstitutional observed  that “…this fundamental difference between the Bill and the Act has a great bearing on the constitutional validity of Section 45(1) with which we are directly and immediately concerned.”

The Government now by way of an ordinance has amended Section 45(1) and has now referred to offences “under the Act” instead of the offences referred to in Part A of the Act. Therefore, in cases where the accused has only been charged with money laundering but not a scheduled offence under Part A, will now have to satisfy the twin conditions before grant of bail while before the amendment such a person only charged with money laundering and not a Part A scheduled offence would not have to pass the rigours of the twin conditions as previously the twin conditions did not apply to offences “under the” act but only to Part A offences.

The question now arises is whether this amendment can restore the validity of the twin conditions and will an accused charged with an offence under the Act still have to satisfy the rigours of the “twin condition” notwithstanding the judgment of the Supreme Court in Nikesh Tarachand Shah?

The argument by the Enforcement Directorate (“ED”) probably would be that  before the amendment the twin conditions laid down in the act did not relate to an offence under the PMLA Act (Section 3 or 4) at all, but only to a separate and distinct offence found under Part A of the Schedule. Thus in the case of Nikesh Tarachand Shah the Supreme Court stated,

“Obviously, the twin conditions laid down in Section 45 would have no nexus whatsoever with a bail application which concerns itself with the offence of money laundering, for if section 45 is to apply, the Court does not apply its mind to whether the person prosecuted is guilty of the offence of money laundering, but instead applies its mind to whether such person is guilty of the scheduled or predicate offence”.

Now, this has been remedied as the court will now apply its mind to see whether the person is guilty of an offence of money laundering under the PMLA Act or not.

The twin conditions in their new avatar one could argue “now have a nexus to the offence of money laundering”. The problem with this argument is that it completely ignores the fundamental problem with the twin conditions which allows curtailment of liberty of the accused as it requires an accused to satisfy the court 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.

It was due to this reason, the Supreme Court had frowned upon the twin conditions specifically because these conditions inverted the presumption of innocence as contrary to the principle of criminal jurisprudence. The court specifically reminded us by quoting the great dissent of Justice Marshall with whom Justice Brennan agreed in United States vs. Anthony Salerno & Vincent Cafaro that,

“…at the end of the day the presumption of innocence protects the innocent; the shortcuts we take with those whom we believe to be guilty injure only those wrongfully accused and, ultimately ourselves.”

The warning implicit in these words reminds us of the much talked about 2G scam case, where all accused were eventually found not guilty notwithstanding the grueling media trial they were all subjected to and the prejudice that it had created in our minds.

Had the Supreme Court not granted them bail and clarified the law on bail in Sanjay Chandra v. CBI the accused persons would have spent many years languishing in jail for a crime which they had not committed.

Another anomaly with the imposition of the “twin conditions” is that they only apply for bail and there are no such restrictions when one seeks anticipatory bail. Thus the Supreme Court in Nikesh Tarachand Shah rightly stated that,

“If pre-trial arrest bail is granted to Mr.X, which ensures 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.”

The amendment does not save the twin conditions as the reasons for declaring it unconstitutional was that amongst other reasons it inverted the presumption of innocence.

It would not be out of place to mention that similar legislation in the United Kingdom dealing with money laundering (proceeds of crime) does not have any such twin conditions. Nor such twin conditions have been recommended by any International Financial Task Force amongst nations. Merely tweaking the provision so that it refers to offences “under the act” does not temper the severity of S.45(1) of the PMLA act and its potential to violate the fundamental rights of an accused.

Abhimanyu Bhandari is an advocate practicing in Delhi.