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Bail provisions under PMLA - A conceptual analysis

NOVEMBER 21, 2022

By L Venkateswara Rao

THE endeavour of any person charged with an offence under the Criminal Procedure Code (Cr.P.C.) would be to get release by securing 'bail'. This proposition would be also applicable to those who are charged with the offence of money-laundering under the Prevention of Money Laundering Act, 2002 (PMLA). It is widely believed that securing 'bail' under PMLA is a near impossible task considering the stringent conditions imposed under the said Act. In this article, an attempt has been made to analyse the statutory provisions incorporated in the PMLA for securing bail conceptually and the interpretation of the said provisions by the Judiciary in orders passed granting bail to persons accused in money- laundering offences more specifically after the pronouncement of Hon'ble Supreme Court's Larger Bench decision in the matter of Vijay Mohanlal Choudhary & others vs. Union of India & others - 2022-TIOL-60-SC-PMLA-LB.

2. "Bail" has neither been defined under PMLA nor under the Criminal Procedure Code (Cr.P.C), 1973 or under the Indian Penal Code, 1860. The dictionary meaning of the expression "bail" denotes a security for appearance of a prisoner for his release. The Hon'ble Supreme Court in the matter of Vaman Narain Ghiya vs. State of Rajasthan [(2009) 2 SCC 281] while giving the meaning of the term "bail", concluded as follows:

"Bail may be regarded as a mechanism whereby the State devolutes upon the community the function of securing the presence of the prisoners and at the same time involves participation of the community in administration of justice."

3. It is pertinent to mention here the various provisions pertaining to constitution of Special Courts for trying PMLA offences including granting of bail, etc.

As per sections 43 & 44 of PMLA, an offence punishable under section 4 of PMLA (Punishment for money-Laundering) and any scheduled offence connected to the offence of money-laundering, are triable by a Court of Sessions designated as Special Court. The Special Court shall hold trial in accordance with the provisions of Cr.P.C. Further, section 45(1) of the PMLA, 2002, with the caption "Offences to be cognizable and non-bailable" states as follows:

(1) 1 Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), no person accused of an offence under this Act 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, 2 [or is accused either on his own or along with other co-accused of money-laundering a sum of less than one crore rupees] may be released on bail, if the Special Court so directs:

[Emphasis Supplied]

Thus, the first proviso section 45(1) of PMLA, 2002, detailed above, provides for release the following persons on bail, if the Special Court so directs viz: a) A person under the age of sixteen, b) a woman, c) a sick person, d) an infirm person and e) an accused either on his own or along with other co-accused is involved in money-laundering a sum less than one crore rupees.

4.On perusal of the aforesaid two mandatory conditions, stipulated under section 45(1) of the PMLA, the issue for consideration would be the fate of bail applications which are not opposed by the Public Prosecutor. In such cases, is the court required to grant bail for non-fulfilment of the first pre-condition without examining the second pre-condition viz: as to whether there are reasonable grounds to believe that the person seeking bail is not guilty of the offence of money-laundering and he is not likely to commit any offence while on bail? The answer will be negative since such a proposition will amount to, surrendering the discretion vested in the statute by the court. The intention of the law makers in imposing the first condition would be to discourage passing of ex-parte bail orders by courts and to give fair opportunity to the Enforcement Directorate officials to present their submissions before the court. Secondly, even in cases which were not opposed by the Public Prosecutor, the court will reach a decision on the bail application after examining the second condition stipulated under section 45(1) of the PMLA.

5. The other point for consideration is what "reasonable grounds" mentioned in the second pre-condition of section 45(1) of PMLA, the court must satisfy before granting bail. This issue has been clarified by the Hon'ble Supreme Court in the matter of Customs - vs- Ahmadalieva Nodira reported in (2004) 18 ILD 274 (SC). In the said decision, the Apex court held that the expression "reasonable grounds" means something more than "prima facie " grounds. It contemplates substantial probable cause for believing that the accused is not guilty of the alleged offence. It requires existence of such facts and circumstances which are sufficient in themselves to justify satisfaction that the accused is not guilty of the alleged offence". Another question that arises is whether the court adjudicating the bail application is required to indicate the "prima facie reasons" order granting bail? The Supreme Court in the matter of Kalyan Chandra Sarkar -vs- Rajesh Ranjan reported in (2004) 7 SCC 528 emphasized the need for giving "prima facie reasons" in orders of granting bail.

6 . It is pertinent to examine the interplay between the Cr .P.C and PMLA provisions in bail cases. The non-obstante clause in section 45(1) of PMLA, stating that "notwithstanding anything contained in the CODE OF CRIMINAL PROCEDURE CODE OF 1973", would give an impression that the Cr.P.C provisions will take back seat since the PMLA provisions will have an over-riding effect on them and that this proposition will be also applicable in bail cases under PMLA also. This issue was adjudicated by the Hon'ble Supreme Court in GAUTUM KUNDU VS MANOJ KUMAR, ASSISTANT DIRECTOR reported in (2015) 64 Taxman. Com 291 (SC) wherein the Supreme Court held that section 45 of the PMLA will have over-riding effect on the general provisions of the Code of Criminal Procedure in case of conflict between them.

7. However, in sub-section 2 of section 45 it has been expressly prescribed that the limitations on granting bail specified in sub-section 1 is in addition to the limitations under the Code of Criminal Procedure or any other law for the time being in force. Further, section 71 of PMLA, which gives over-riding powers to the Act, prescribed overriding effect to PMLA provisions in cases of inconsistency between the provisions of PMLA and other law only. As long as there exists consistency between PMLA and other laws, there is no room for applying the principle of overriding effect of PMLA provisions.

8. Another important issue to be taken up for consideration is the interpretation of the words "shall be released on bail "incorporated in sub- section 1 of section 45 of the PMLA, and the word "may "be released on bail, if the Special Court so directs" included in the first proviso of the said section. The expression "shall" in section 45(1) of the PMLA, entails the courts to grant bail to the accused in money-laundering offences provided the said two conditions are satisfied and the expression "may" have been held to indicate that the discretion by the court to release the accused on bail is not mandatory. If the expression "may" be construed as "shall", then there is no rationale in considering factors like age, etc. Further, the non-obstante clause, "notwithstanding anything contained in the Code of Criminal Procedure, 1973" is intended to restrict the powers to grant bail by making it subject to the conditions specified in section 45(1) of the PMLA. That is to say that the provisions of Cr.P.C should be subject to the provisions of PMLA. This position has been explained elaborately under section 4 of the Cr.P.C.

9.The constitutional validity of section 45 of PMLA, 2002, imposing the twin conditions for grant of bail, as existed before the amendment of section 45 of PMLA 2018, were contested before the Hon'ble Supreme Court in Nikesh Tarachand Shah vs. Union of India - 2017-TIOL-433-SC-PMLA and the Hon'ble Supreme Court, after holding that the twin conditions prescribed were violative of Articles 14 and 21 of the Constitution of India, declared section 45(1) of PMLA, to that extent, to be unconstitutional. Subsequently, section 45(1) of the PMLA was amended w.e.f. 19.04.2018, whereby the words "punishable for a term of imprisonment of more than three years under Part A of the Schedule" were substituted with the words "under this Act" and also restored the two conditions.

10. The amendment dated 19-04-2018 was contested in the matter of Vijay Madanlal Choudary and others vs. Union of India and others - 2022-TIOL-60-SC-PMLA-LB and the Larger Bench, while upholding the amended provisions of section 45 of PMLA, held as under:

"135. We are conscious of the fact that in paragraph 53 of the Nikesh Tarachand Shah, the Court noted that it had struck down Section 45 of the 2002 as a whole. However, in paragraph 54, the declaration is only in respect of further (two) conditions for release on bail as contained in Section 45(1), being unconstitutional as the same violated Articles 14 and 21 of the Constitution. Be that as it may, nothing would remain in that observation or for that matter, the declaration as the defect in the provision [Section 45(1)], as existed then, and noticed by this Court has been cured by the Parliament by enacting amendment Act 13 of 2018 which has come into force with effect from 19.4.2018. We, therefore, confined ourselves to the challenge to the twin conditions in the provision, as it stands to this date post amendment of 2018 and which, on analysis of the decisions referred to above dealing with concerned enactments having similar twin conditions as valid, we must reject the challenge. Instead, we hold that the provision in the form of Section 45 of the 2002 Act, as applicable post amendment of 2018, is reasonable and has direct nexus with the purposes and objects sought to be achieved by the 2002 Act to combat the menace of money-laundering having transnational consequences including impacting the financial systems and sovereignty and integrity of the countries".

11. In light of the above provisions of section 45(1) read with the proviso of the PMLA, we may now examine the various decisions of the Hon'ble High Courts/Supreme Court granting bail to the accused persons in cases of offence of money-laundering, passed after the Supreme Court Larger Bench decision in the matter of Vijay Madanlal Choudary vs. Union of India.

(i) In the matter of SAEED KHAN SHERGUL KHAN VS. UNION OF INDIA [Bail Application No. 218 of 2022], the Hon'ble Bombay High Court while granting bail to the person accused of siphoning off huge amount of money from the Trust for his personal use observed as follows:

"24. Considering the totality of the circumstances, prima facie the offence of cheating is not made out and, in all probability, the Applicant may not be ultimately convicted for offence of money laundering. In the absence of any material as regards criminal antecedents of the Applicant, it can be held that there is no possibility of the Applicant committing such crime in future. Most of the co-accused are either on bail or are not arrested. The Applicant is in custody since September, 2021. The charge sheet has been filed and considering the large pendency, the trial is not likely to commence and conclude in the immediate future. The Applicant is a permanent resident of the State and there is no likelihood of the Applicant absconding or tampering with the evidence. Considering the above facts and circumstances, it is not necessary to detain the Applicant any further. Hence, case is made out for grant of bail."

(ii) The Hon'ble Punjab & Haryana High Court in the matter of PRANJIL BATRA VS. DIRECTORATE OF ENFORCEMENT [CRM-M-23705-2022 (O&M)], while adjudicating the bail application filed by a person accused of an offence of money-laundering, held as follows:

"21. Obesity, as in the case of the petitioner, who weighs 153 kilograms is not just a symptom but is itself a disease which becomes root-cause of several other diseases. With such co-morbidities, the response, the resistance, the resilience and the capacity of the body to fight ailments and recuperate efficaciously, decreases substantially. The jail doctor or for that matter, a civil hospital may not be fully equipped to handle a patient having multiple ailments who apart from medical treatment may require a certain level of monitoring, care and attention which ordinarily is not available in jail. Considering the co-morbidities of the petitioner, it can safely be said that he falls in the exception of being "sick" as carved out in Section 45 of the Act, so as to be entitled to be released on bail. The petitioner, otherwise has been behind bars since the last about 8 months. Supplementary complaint already stands presented against him. There is no occasion for his custodial interrogation now at this stage. The co-accused Radhe Shy am and Bansi Lal were released on bail immediately upon their appearance in Court pursuance to issuance of summons for their appearance".

22. In view of the discussion made above, particularly the precarious medical condition of the petitioner, the petition merits acceptance and is hereby accepted. The petitioner is ordered to be released on regular bail on his furnishing bail bonds/surety bonds to the satisfaction of learned trial Court/Chief Judicial Magistrate/Duty Magistrate concerned".

(iii) The Hon'ble High Court of Bombay adjudicated the Bail Application No. 1021 of 2022 in the case of ANIL VASANTRAO DESHMUKH VS. STATE OF MAHARASHTRA [Bail Application No. 1021 of 2022], at the instance of Assistant Director of Enforcement in a case of alleged money-laundering offence and held as follows:

"Evidently, the exercise of discretion on medical grounds is rooted in facts of a given case. In the case in hand, the Court has considered the entitlement of the Applicant for bail in merits as well, and found prima facie case for exercise of discretion is made out. As the proviso empowers the Court to exercise the discretion in favour of the accused who is otherwise sick or infirm, the Court has considered the material on record and finds, in the totality of circumstances, a case for exercise of the discretion under the proviso as well. The Applicant appears to have roots in society. The possibility of fleeing away from Justice seems remote. The application stands allowed and the Applicant is released on 'bail'."

(iv) The Hon'ble Supreme Court in the matter of ASSISTANT DIRECTORATE OF ENFORCEMENT VS. KAMAL AHSAN AND ANR [SLP (Crl) No. 6755 of 2022], observed as follows:

"In the peculiar facts and circumstance of the case and taking into consideration the fact that the respondent is suffering from Malignancy and Cancer and thereafter when he has been released on bail, the same is not required to be interfered by this court. The Special Leave Petition stands dismissed.

The Department ought not to have filed such a Special Leave Petition wasting the stationery, the legal fees and Court's time. The Special Leave Petition stands dismissed with exemplary cost, to be borne by the concerned officer, who granted the permission to file the Special Leave Petition, quantified at Rs.1,00,000/-, to be recovered from the salary of such an officer. The cost to be deposited by the Department with the Registry of this Court within a period of four weeks from today.

On such deposit, Rs.50,000/- be transferred to National Legal Services Authority, New Delhi and Rs.50,000/- to Mediation and Conciliation Project Committee, Supreme Court of India."

12. On perusal of the above-mentioned orders passed by the Hon'ble High Court/Supreme Court, it is explicit that the courts granted bail to the accused persons in money-laundering cases after being satisfied that there were reasonable grounds to believe that the accused person is not guilty of the offence of money-laundering and that such person is not likely to commit any offence while on bail and also considering the fragile health and sickness of the accused as provided under the second condition read with the proviso to section 45(1) of PMLA. It is to be mentioned here that the Apex Court had not taken the appeal filed by the Directorate of Enforcement against the order passed by the High Court in granting bail to an accused person suffering from Malignancy and Cancer kindly and ordered for recovery of costs amounting to Rs 1,00,000/ (rupees one lakh only) on the officer who granted permission to file appeal against the High Court's order.

13 The Hon'ble Supreme Court of Vijay Mohanlal Choudhary & others vs. Union of India & others - 2022-TIOL-60-SC-PMLA-LB justified the stringent conditions for securing bail under PMLA, and observed as follows:

"Money-laundering is one of the heinous crimes, which not only affects the social and economic fabric of the nation, but also tends to promote other heinous offences, such as terrorism, offences related to NDPS Act, etc. It is a proven fact that international criminal network that support home grown extremist groups relies on transfer of unaccounted money across nation States, thus, by any stretch of imagination, it cannot be said that there is no compelling State interest in providing stringent conditions of bail for the offence of money-laundering. In Ram Jethmalani & Ors. vs. Union of India & Ors., the Court expounded the theory of "soft state" which is used to describe a nation which is not capable of preventing the offence of money-laundering."

[The author is former Commissioner of Customs & Indirect Taxes and the views expressed are strictly personal.]

1This portion beginning with the words "Notwithstanding anything contained and ending with the words "on his own bond unless -'' substituted by the prevention of the Money laundering (Amendment) Act,(w.e.f. 19-04-2018).

2 Inserted by the Finance Act,2018 (w.e.f 19-4-2018)

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