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PMLA - Section 45 - Grant of bail depending upon a circumstance, which have nothing to do with offence of money laundering, violate both Articles 14 and 21 of Constitution: SC

By TIOL News Service

NEW DELHI, NOV 24, 2017: THE issue before the Bench is - Whether grant of bail depending upon a circumstance, which have nothing to do with the offence of money laundering, is manifestly arbitrary and providing a procedure which is not fair or just, hence, violates both Articles 14 and 21 of the Constitution. And the verdict is YES.

Facts of the case

The Prevention of Money Laundering Act, 2002 was introduced, as its Statement of Objects and Reasons mentions, to make money laundering an offence, and to attach property involved in money laundering. The present writ petitions and appeals raise the question of the constitutional validity of section 45 of the Prevention of Money Laundering Act, 2002. Section 45(1) imposes two conditions for grant of bail where an offence punishable for a term of imprisonment of more than 3 years under Part A of the Schedule to the Act is involved. The conditions are 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.

The petitioner was scheduled with offences u/s 120B, 409, 420, 471 and 477A of the Indian Penal Code r/w Section 13 of the Prevention of Corruption Act. Those offences were being investigated by the CBI in which the petitioner was granted bail by the Sessions Court. However, when the offence under the PMLA was added to such offences, by the applicability of the twin conditions in Section 45(1), he was denied bail with effect from 27.11.2015. The petitioner contended that the section 45(1) was being used in an extremely manifestly arbitrary fashion to deny bail for offences which extend only to seven years under the Act, as opposed to predicate offences which might extend even to life imprisonment. According to petitioner, the threshold of three years and above contained in section 45 of the Act is itself manifestly arbitrary in that it had no reference to the offence of money laundering under the Act, but only to three years and more of the predicate offence. It was also contended that there was no condition, so far as the Act was concerned, of classification based on the amount of money that was laundered, which perhaps may be a valid basis for classification. Another conundrum raised by section 45 was the fact that, there being no interdict against anticipatory bail in the Act, and the Code of Criminal Procedure applying to offences under the Act, it would be clear that anticipatory bail could be granted for both offences under the Act and predicate offences. That being so, unlike the Terrorist and Disruptive Activities (Prevention) Act 1987, where anticipatory bail expressly cannot be granted, the twin conditions of section 45 would not apply at the anticipatory bail stage, which would mean that a person charged of money laundering and a predicate offence could continue on anticipatory bail throughout the trial without satisfying any of the twin conditions, as opposed to a person who applies for regular bail, who would have to satisfy the twin conditions, which in practice would mean denial of bail. For all those reasons, according to the petitioner, section 45 needs to be struck down. Also, according to him, it was not possible to read down the provision to make it constitutional as the very scheme of section 45 is manifestly arbitrary and irrational.

After hearing the parties, the Apex Court held that,

++ 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 Finance Act of 2015, by Section 145, the limit of Rs.30 lakhs in Section 2(y) was raised to Rs.1 crore and in the Schedule after Part A, Part B was populated with only one entry, namely Section 132 of the Customs Act. Certain other amendments were made, by the Finance Act of 2016, to the 2002 Act with which we are not directly concerned. The statutory history of Section 45, read with the Schedule, would, thus show that in its original avatar, as Clause 44 of the 1999 Bill, the Section dealt only with offences under the Act itself. Section 44 of the 2002 Act makes it clear that an offence punishable under Section 4 of the said Act must be tried with the connected scheduled offence from which money laundering has taken place. The statutory scheme, as originally enacted, with Section 45 in its present avatar, would, therefore, lead to the same offenders in different cases having different results qua bail depending on whether Section 45 does or does not apply. The first would be cases where the charge would only be of money laundering and nothing else, as would be the case where the scheduled offence in Part A has already been tried, and persons charged under the scheduled offence have or have not been enlarged on bail under the Code of Criminal Procedure and thereafter convicted or acquitted. The proceeds of crime from such scheduled offence may well be discovered much later in the hands of Mr. X, who now becomes charged with the crime of money laundering under the 2002 Act. The predicate or scheduled offence has already been tried and the accused persons convicted/acquitted in this illustration, and Mr. X now applies for bail to the Special Court/High Court. The Special Court/High Court, in this illustration, would grant him bail under Section 439 of the Code of Criminal Procedure – the Special Court is deemed to be a Sessions Court – and can, thus, enlarge Mr. X on bail, with or without conditions, under Section 439. It is important to note that Mr. X would not have to satisfy the twin conditions mentioned in Section 45 of the 2002 Act in order to be enlarged on bail, pending trial for an offence under the 2002 Act;

++ The second illustration would be of Mr. X being charged with an offence under the 2002 Act together with a predicate offence contained in Part B of the Schedule. Both these offences would be tried together. In this case, again, the Special Court/High Court can enlarge Mr. X on bail, with or without conditions, under Section 439 of the Code of Criminal Procedure, as Section 45 of the 2002 Act would not apply. In a third illustration, Mr. X can be charged under the 2002 Act together with a predicate offence contained in Part A of the Schedule in which the term for imprisonment would be 3 years or less than 3 years (this would apply only post the Amendment Act of 2012 when predicate offences of 3 years and less than 3 years contained in Part B were all lifted into Part A). In this illustration, again, Mr. X would be liable to be enlarged on bail under Section 439 of the Code of Criminal Procedure by the Special Court/High Court, with or without conditions, as Section 45 of the 2002 Act would have no application;

++ the fourth illustration would be an illustration in which Mr. X is prosecuted for an offence under the 2002 Act and an offence punishable for a term of imprisonment of more than three years under Part A of the Schedule. In this illustration, the Special Court/High Court would enlarge Mr. X on bail only if the conditions specified in Section 45(1) are satisfied and not otherwise. In the fourth illustration, Section 45 would apply in a joint trial of offences under the Act and under Part A of the Schedule because the only thing that is to be seen for the purpose of granting bail, under this Section, is the alleged occurrence of a Part A scheduled offence, which has imprisonment for over three years. The likelihood of Mr. X being enlarged on bail in the first three illustrations is far greater than in the fourth illustration, dependant only upon the circumstance that Mr. X is being prosecuted for a Schedule A offence which has imprisonment for over 3 years, a circumstance which has no nexus with the grant of bail for the offence of money laundering. The mere circumstance that the offence of money laundering is being tried with the Schedule A offence without more cannot naturally lead to the grant or denial of bail (by applying Section 45(1)) for the offence of money laundering and the predicate offence;

++ it is quite possible that the person prosecuted for the scheduled offence is different from the person prosecuted for the offence under the 2002 Act. Mr. X may be a person who is liable to be prosecuted for an offence, which is contained in Part A of the Schedule. In perpetrating this offence under Part A of the Schedule, Mr. X may have been paid a certain amount of money. This money is ultimately traced to Mr. Y, who is charged with the same offence under Part A of the Schedule and is also charged with possession of the proceeds of crime, which he now projects as being untainted. Mr. X applies for bail to the Special Court/High Court. Despite the fact that Mr. X is not involved in the money laundering offence, but only in the scheduled offence, by virtue of the fact that the two sets of offences are being tried together, Mr. X would be denied bail because the money laundering offence is being tried along with the scheduled offence, for which Mr. Y alone is being prosecuted. This illustration would show that a person who may have nothing to do with the offence of money laundering may yet be denied bail, because of the twin conditions that have to be satisfied under Section 45(1) of the 2002 Act. Also, Mr. A may well be prosecuted for an offence which falls within Part A of the Schedule, but which does not involve money laundering. Such offences would be liable to be tried under the Code of Criminal Procedure, and despite the fact that it may be the very same Part A scheduled offence given in the illustration above, the fact that no prosecution for money laundering along with the said offence is launched, would enable Mr. A to get bail without the rigorous conditions contained in Section 45 of the 2002 Act. All these examples show that manifestly arbitrary, discriminatory and unjust results would arise on the application or non application of Section 45, and would directly violate Articles 14 and 21, inasmuch as the procedure for bail would become harsh, burdensome, wrongful and discriminatory depending upon whether a person is being tried for an offence which also happens to be an offence under Part A of the Schedule, or an offence under Part A of the Schedule together with an offence under the 2002 Act. Obviously, the grant of bail would depend upon a circumstance which has nothing to do with the offence of money laundering. On this ground alone, Section 45 would have to be struck down as being manifestly arbitrary and providing a procedure which is not fair or just and would, thus, violate both Articles 14 and 21 of the Constitution.

(See 2017-TIOL-433-SC-PMLA)


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