The decision under discussion is the latest ruling of the Hon’ble Supreme Court in Nikesh Tarachand Shah v. State (2017 SC) (accessible at : http://sci.gov.in/supremecourt/2017/13393/13393_2017_Judgement_23-Nov-2017.pdf).
To start at the start, this case concerns the Prevention of Money Laundering Act (“PMLA”).
For those who arrived late, here’s a birds eye view of PMLA :
PMLA is a legislation that targeted to fight the evils of black money and money laundering. Money laundering, as the name itself suggests, means washing and laundering of tainted money, to make it appear legit and to infuse the same in formal economy as money earned through legitimate sources by hiding and obfuscating its true illegal origins. This process and act of ‘money laundering’ is made culpable as money laundering shrouds the real source of wealth and often – the criminal modes through which it is generated. Money Laundering, therefore, simply put, is the process of conversion of such proceeds of crime, that is to say the ‘dirty money’, to make it appear as ‘legitimate’ money. Terrorism, drug-trafficking, corruption, extortion, financial fraud are often the genesis of, and precede the offence of money laundering. Money laundering laws aim to check the use and dissemination of monies obtained through these crimes, so as to disincentivise criminal conduct.
In India the offence of money laundering is what is known as an auxiliary offence; that is to say, an offence connected with another one. Simply put, the offence of money laundering takes place in India, when what is known as ‘proceeds of crime’ are laundered/used/possessed etc. A property would be called ‘proceeds of crime’ when the same is obtained as a result of, or in the process of a crime. This crime is what is known as ‘scheduled offence’ or ‘predicate offence’. You guessed it right : there can be no offence under the PMLA without there being a scheduled offence. A PMLA offence, in other words, is always dependant on another offence called the ‘scheduled offence’. Differently put, if a property (say, bribe) is obtained as a result of corruption (punishable under Prevention of Corruption Act), the same would qualify as ‘proceeds of crime’ and, possession, usage of such property as legit money, may render one punishable under the PMLA, even if one did not demand or receive the bribe, and therefore, did not commit the scheduled offence.
Now what all offences are ‘scheduled offences’ for the purpose of PMLA can be found out from the schedule to the Act. To quote a few : IPC offences relating to property, offences under the prevention of corruption act, NDPS, customs act offences are ‘scheduled offences’ (amongst others) and possession or usage and portrayal of property obtained through these offences as genuine (earned through lawful sources) may expose the accused to a prosecution under the PMLA as well (in addition to the prosecution for the scheduled offence).
The interconnectedness of ‘scheduled offence’ and PMLA offence is, therefore, writ large. I shall revert back to it in a different article, some time later.
Coming back to the issue at hand : In its zealousness to deal with the menace of black money and scourge of money laundering with an iron hand, India greatly strengthened its money laundering laws in the recent years, to the extent of making them rather strict, and some may argue, even draconian. For instance, statements given to investigators (the investigative authority for PMLA offences is the Enforcement Directorate “ED”) in investigation for a PMLA offence, is admissible in evidence (as opposed to a regular investigation for an IPC offence, for example. Section 162 of the CrPC, in such case would bars use of statements made to police officer(s) during investigation). As opposed to this, even an accused can be made to give statements to the cops and the same may be employable/admissible in evidence.
Another provision in PMLA which stands (or rather stood) on an extremely weak constitutional footing is Section 45 of the PMLA. For ease of reference, Section 45 reads as under:
45. Offences to be cognizable and non-bailable.—
(1) [Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), 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 State Government authorised in writing in this behalf by the Central Government by a general or a special order made in this behalf by that Government.[(1A) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), or any other provision of this Act, no police officer shall investigate into an offence under this Act unless specifically authorised, by the Central Government by a general or special order, and, subject to such conditions as may be prescribed.](2) The limitation on granting of bail specified in 29 [***] 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.
A bare perusal of the above reveals that it places an extremely high threshold for getting bail. In order to obtain bail, the accused has to somehow convince the court to such a level that it makes a finding as to existence of “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..” As you may have guessed, this is an extremely high benchmark to satisfy, especially at the time of bail, when the investigation is still underway. Its almost akin to a ‘trial within a trial’. This also throws the much celebrated ‘presumption of innocence’ to the winds and almost puts in place what may be called a ‘reverse onus’ and expects the accused to satisfy the court, and mind you, at the time of hearing on bail, that he is not guilty of the offence.
This is just one of the ills of this provision. The other ill is the arbitrary classification it makes between different kinds of offences; such a stringent condition is applicable only qua Schedule A offences and not the others. A perusal of the wholesale inclusion/population of the list of offences in the schedule reveals that the classification (and offences included in schedule A) bears no rational nexus with the object sought to be achieved by the Act. Offences punishable with > 3 years are included, whereas offences such as counterfeiting of coins punishable with life imprisonment are left out. Similarly, a rather innocuous (in comparison with other offences) Biodiversity Act offence is made subject to this bail provision being a part of Schedule ‘A’. This appears to be a result of wholesale transportation of Schedule B offences into Schedule A without examining whether these offences actually have a commonality running underneath and whether the nature of these offences justifies putting them to the strict standard of Section 45 PMLA. Unequals are treated equally for the purpose of imposing the above two twin conditions, which opens the act to constitutional challenge on the anvil of equality and fair treatment. However, we shall reserve this part of the challenge for a different discussion and confine ourselves with the manifest arbitrariness of bold portion of Section 45, as reproduced above.
The Court ruled that Section 45 (twin conditions) are violative of Article 14 and 21 of the Constitution. The Hon’ble Court, speaking through Rohinton J, re-traced the concept of bail, right from the point of Magna Carta. (for the uninitiated : Magna Carta dates back to the 13th century and has, over the years, acquired a special status as the cornerstone of liberty. Magna Carta retains enormous symbolic power as an ancient defence against arbitrary and tyrannical rulers, and as a guarantor of individual liberties). The Court observed that a bail provision such as the above would never satisfy the test of ‘due process’ and not pass constitutional muster as it places an extraordinary burden on the accused and makes bail (which is the rule and not the exception) almost illusory. In this, the court drew heavily from our rich jurisprudence on Article 21, the fantastic interpretation of the phrase ‘procedure established by law’ (and its practical equivalence to a much wider ‘due process’ by the Indian Supreme Court and US Constitution’s clear edict against ‘cruel and unjust punishment’. The following observations of the Court are extremely instructive and should be essential reading for any student of Criminal Law :
“38. 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.”
Other instances of a similar provision being upheld:
It would be apposite to note that : Kartar Singh v. State of Punjab, (1994) 3 SCC 569 at 707 is an instance of a similar provision (under TADA) that was upheld only because it was necessary for the State to deal with terrorist activities which are a greater menace to modern society than any other. The observations in Kartar Singh to this effect are instructive : “It is clear that this Court upheld such a condition only because the offence under TADA was a most heinous offence in which the vice of terrorism is sought to be tackled”
A similar provision in the Maharashtra Control of Organised Crime Act, 1999, also dealing with the great menace of organized crime to society, was upheld somewhat grudgingly by this Court in Ranjitsing Brahmajeetsing Sharma v. State of Maharashtra and Anr, (2005) 5 SCC 294.
The court did not find any similar compelling reason in case of PMLA, and also shot it down for the reason that, unlike the TADA, the court trying a PMLA offence, has to be satisfied as to the accused not having committed the scheduled offence, as opposed to the PMLA offence, which is what on which the Court’s jurisdiction is entirely based. This sets the case apart from the TADA case.
Students of criminal law should read these decisions and try and discern the reasons for a different approach having been taken.
Finally, the operative part of the Court’s order reads :
45. Regard being had to the above, we declare Section 45(1) of the Prevention of Money Laundering Act, 2002, insofar as it imposes two further conditions for release on bail, to be unconstitutional as it violates Articles 14 and 21 of the Constitution of India. All the matters before us in which bail has been denied, because of the presence of the twin conditions contained in Section 45, will now go back to the respective Courts which denied bail. All such orders are set aside, and the cases remanded to the respective Courts to be heard on merits, without application of the twin conditions contained in Section 45 of the 2002 Act. Considering that persons are languishing in jail and that personal liberty is involved, all these matters are to be taken up at the earliest by the respective Courts for fresh decision. The writ petitions and the appeals are disposed of accordingly.
(For those interested in understanding the finer points of the law of Money laundering in India may read a longer piece titled ‘demystifying anti-money laundering laws in india – https://www.linkedin.com/pulse/demystifying-anti-money-laundering-law-india-bharat-chugh/).