Will Supreme Court's 'Bail is Rule' Principle End Undertrial Incarceration in PMLA Cases?

The maxim "bail is the rule, jail is the exception" has been a guiding principle in Indian criminal jurisprudence, particularly emphasizing the protection of personal liberty guaranteed under Article 21 of the Constitution. This principle underscores that the right to bail should not be lightly denied, and that the deprivation of liberty should be a last resort, exercised only under compelling circumstances.

However, the strictures of the Prevention of Money Laundering Act 2002 (“PMLA”) present a formidable challenge to this principle, as stringent conditions for bail under Section 45 of the PMLA often lead to prolonged undertrial incarceration.

The PMLA imposes rather strict restrictions and requirements to be met for a judge to provide bail for the accused. Section 45(1) of the Act imposes twin conditions on the grant of bail to an accused under the PMLA (i) that the Public Prosecutor has been given an opportunity to oppose the application for release on bail and (ii) where the Public Prosecutor opposes the application – the Court is satisfied that there is reasonable ground for believing the accused is not guilty or would not commit a crime while out on bail.

In these circumstances, the opposition to the bail application from the Investigative agency by itself introduces significant hurdles in the bail procedure – and puts the adjudicating court in a position where they must evaluate “reasonable grounds” for believing that the accused is not guilty without conducting a “mini-trial."

The Hon’ble Supreme Court, in the recent rulings concerning PMLA has reiterated the 'bail is rule' norm. In Prem Prakash V. Union of India (“Prem Prakash Judgement”), Manish Sisodia V. Directorate of Enforcement (“Manish Sisodia Judgement”), and Kalvakuntla Kavitha V. Directorate of Enforcement (“K Kavitha Judgement”), the Hon’ble apex court has underscored the importance of safeguarding the fundamental rights of the accused, ensuring that prolonged pre-trial detention does not become standard practice.

However, this has reignited the debate on whether the judiciary’s reaffirmation of the 'bail is rule' principle can effectively curb the widespread issue of extended pre-trial detention in PMLA cases.

While the aforementioned cases are essentially anecdotal evidence – the statistics are slightly more concerning. According to the website of the Directorate of Enforcement, as of January 31, 2023, the ED has made 513 arrests but completed only 25 trials. This data could be indicative of a pattern where arrests are made, with no haste in trial.

In the Manish Sisodia Judgement, the Hon’ble Supreme Court made significant observations regarding the approach of trial courts and High Courts in granting bail under PMLA. The Hon’ble Court noted that the trial courts and the High Courts often “play it safe” when it comes to bail matters, which can lead to prolonged incarceration of the accused without trial. While the law requires the courts to carefully consider the prosecution's arguments, the Hon’ble Court emphasized that this should not lead to an automatic denial of bail.

However, the discretion of the judicial mind is not the only variable in these cases. The Supreme Court, in Vijay Madanlal Choudhary V. Union of India (“Vijay Chaudhary Judgement”) has outlined three basic and foundational facts that the investigative agency must establish to infer that the offence of money laundering has been committed:

1. Criminal activity relating to a scheduled offence has been committed.

2. Property in question has been derived or obtained (directly or indirectly) by any person because of a scheduled offence.

3. The person concerned is directly or indirectly, involved in any process or activity connected with the said property being proceeds of crime.

The Vijay Choudhary judgement states that only after these 3 foundational facts are established, the burden of proof shifts on to the accused to prove that proceeds of crime are untainted as per Section 24 of the PMLA.

It is worth noting that on the date of the publication of this article, the Vijay Choudhary Judgment is currently under review before the Supreme Court. However, in the absence of a stay, the law laid down in the Vijay Choudhary Judgment still holds the field.

The issue of delay in trials of PMLA cases, particularly concerning cases where the accused is held in custody for extended periods without the trial even commencing, has raised questions about judicial independence. In the Prem Prakash case, the accused had been in custody since August 25, 2022, and yet the trial had not begun. Similarly, in the case of Manish Sisodia, despite the arrest being made on February 26, 2023, the trial was yet to start, with a massive volume of evidence to be examined, including 37,000 pages of documents and 493 witnesses.

The Hon’ble Supreme Court, addressing the situation in Manish Sisodia's case, observed that keeping the accused behind bars for an indefinite period, while waiting for the trial to conclude, would effectively deprive him of his fundamental right to liberty as guaranteed under Article 21 of the Constitution. It was underscored that prolonged incarceration, prior to being found guilty of an offense, should not be allowed to turn into a punishment without trial. It is worth noting that in this case, the Hon’ble Supreme Court had previously denied bail to the accused with liberty to approach the Hon’ble Court afresh if the trial moves at a “snail’s pace."

The Hon’ble Supreme Court’s emphasis on upholding the fundamental right to life and liberty of the accused under-trial is an encouraging development. It is yet to be seen how the above decisions impact the judicial discretion of the High Courts and the trial courts while considering bail applications.

About the authors: Pranav Bhaskar is a Partner, and the Head of Corporate Practice at SKV Law Offices. Nihal Bhardwaj is a Senior Associate and works with the dispute resolution team at the firm.

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