PMLA Bail Conditions: Relaxation for Women, Sick & Infirm The Delhi HC recently passed an order to ease the stringent bail conditions under the draconian PMLA

11, Oct 2022 | Tanya Arora

The Delhi High Court (HC), on September 28, ordered that exceptions on granting of bail must be made where the accused is a woman, or below the age of 16 or is ill. The observations were made by the Delhi HC after observing that the Prevention of Money Laundering Act’s (PMLA) strict bail requirements make it challenging for an accused to seek bail.

In a case allegedly involving a Rs 3,269 crore bank loan scam by Delhi-based Shakti Bhog Foods Ltd., the court issued the ruling while giving bail to an accused on medical grounds. The accused’s health was such that he could not be cared for inside of a jail, according to a Justice Jasmeet Singh panel. In September of last year, Garg and another person, Ashok Kumar Goel, were arrested in connection with the case for allegedly supplying phony business entries. Garg’s senior counsel, Siddharth Luthra, argued in court that the restrictions of “twin bail” should not apply to his client because of his major medical issues, including kidney and heart issues that cannot be successfully addressed while he is being held. Garg had previously been released on temporary bail due to health reasons, but Goel and other defendants who were later charged in the case remain in detention.

The PMLA’s twin bail condition, which the Supreme Court recently affirmed and upheld, states that an accused person cannot be released on bail unless there are reasonable grounds to believe that they are innocent and that they are not likely to commit any crimes while out on bail.

In addition to citing Section 45 and other provisions in the Act, the HC cited the PMLA’s Statement of Objects and Reasons regarding “the ill and the infirm,” which reads as follows: “In addition to the above, recommendations of the standing committee of the central government proposes to relax the conditions prescribed for grant of bail so that the court may grant bail to a person who is below 16 years of age, or a woman, or sick or infirm…”

“A bare perusal of the Statement of Objects and Reasons of PMLA shows that inclusion of the above conditions for grant of bail as a proviso to Section 45(1) of the PMLA elucidates the legislature’s intent to incorporate relaxations for persons below 16 years of age; a woman; or one who is sick or infirm,” the bench said, reported the Times of India.

The court ruled that since the PMLA does not define “sick and infirm,” it is up to the judge to determine whether an accused person qualifies for a waiver of the twin criteria based on their medical condition.

Background:

Bail Under PMLA Through Previous Judgments:

1. Nikesh Tarachand Shah Vs. Union Of India &Anr, 2017

Earlier, in this case, the Supreme Court had struck down Section 45(1) of the Prevention of Money Laundering Act, 2002 insofar as it imposed two further conditions for release on bail, for the offences punishable for a term of imprisonment of more than 3 years (under Part A of the Schedule to the PMLA). The SC held that proviso to be unconstitutional as it is violative of Article 14 and Article 21 of Constitution of India.

The 2 conditions provided under the said sub-section were as under:

• The public prosecutor must be given an opportunity to oppose any application for release on bail
• 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”.

This judgment held that classification made based on the length of sentence of imprisonment had no rational basis or relation with the objects of the Prevention of Money Laundering Act 2002. The (mindless) application of Section 45(1) led to situations where the same offenders tried under different cases often ended up with different results (conclusions) depending on whether Section 45(1) has been applied or not. Thus, the twin conditions under Section 45(1) were arbitrary and discriminatory in nature. It was further observed that, in cases of anticipatory bail these twin conditions must not to be applied for granting bail leading to discrimination between those who apply for regular bail and the others who applied for anticipatory bail under Section 45(1). It was further held that in fact, the presumption of innocence, which is attached to any person being prosecuted of an offence, is inverted by the conditions specified in Section 45, whereas for grant of ordinary bail the presumption attaches.

Pursuant to this judgment, in 2018, Government of India amended the provision of bail under Prevention of Money Laundering Act which was earlier held unconstitutional. The part of the Section “punishable for a term of imprisonment of more than three years under Part A of the Schedule” was removed, and instead the phrase “under this Act” was added in the Section.

The judgment can be read here.

 

2. S. Jagan Mohan Reddy v. C.B.I., 2013

The  Supreme Court, in this case,  observed that while granting bail to the accused, the court has to consider the following: nature of the allegations, nature of the evidence, severity of the punishment prescribed under the Act, possibility of securing the presence of the accused at the trail, beyond reasonable apprehension that accused will not tamper the concerned evidence while out on bail.

The judgment can be read here.

3. Chidambaram v. ED, 2019

The Hon’ble Supreme Court has laid down some guidelines that must be considered while refusing or granting bail under PMLA. As per general Indian criminal jurisprudence, bail is the rule and refusal of bail is an exception. In granting bail to the accused, the triple test is a must and is required to be followed along with the severity of the offence also has to be considered.

Triple Test

• Presence of Accused:If accused has made himself available before the agencies and court whenever required in the past and cooperated with an investigative agency. In that case, this factor can be considered for grant of bail under PMLA.
• Nature of evidence:If an investigative agency has already collected the primary document, which is material to the case, the scope of tampering the evidence is next to impossible and accused hasn’t tampered the document before.
• Deep Roots:The accused is staying at his permanent address for a long time and he/she/they are not at flight risk due strong financial position, and the accused is not previously involved in criminal activities.

However, an accused can also make an application under the provision for bail under PMLA to High Courts only when in custody. The ED and other similar agencies are exempted from following the provisions of the Code of Criminal Procedure Code, 1973 (CrPC) in their functioning.

The judgment can be read here.

 

A comparison of section 19 PMLA and section 41(1) CrPC shows as under:

Section 19 PMLA requires that before arresting anybody, the authorized officer must have “reason to believe” based upon “the material in his possession” to be “recorded in writing” that the person is “guilty” of an offence under the Act.	Section 41(1) Cr.P.C requires that before arresting any person, there must be a “reasonable complaint made”, “credible information received” or “a reasonable suspicion must exist” of a person having committed a cognizable offence and
Thus, the prerequisites for an authorised officer to make the arrest of an accused under Section 19 PMLA are: • Reason to believe • Based on material in his possession • To be recorded in writing • That the person is guilty of an offence under the Act.	Police officer has reason to believe on the basis of such complaint, information or suspicion that such person has committed such offence and
	That the arrest is necessary to prevent that person •        from committing any further offence or •        for proper investigation or •        from causing the evidence to disappear or tamper the same or •        from making any inducement or threat to another person or •        • To ensure presence in court

Significantly, these twin bail conditions were struck down by the Supreme Court earlier in 2017 where a bench of Justices Rohinton Nariman and Sanjay Kishan Kaul said the ‘twintest’ was unconstitutional and arbitrary. “We must not forget that Section 45of the PMLA Actis a drastic provision which turns on its head the presumption of innocence which is fundamental to a person accused of any offence. ”The ruling was then negated by an amendment in 2018 which brought back the ‘twin bail’ conditions. Now that has been sanctified by the Supreme Court. It has said the presumption of ‘innocence’ is not a constitutional right, and that “presumption can be interdicted by a law made by Parliament / Legislature.”

4. The Supreme Court in Vijay Madanlal Choudhary vs Union of India, 2022

A bench lead by Justice AM Khanwilkar upheld several provisions of the PMLA. These provisions included the “twin-bail condition” under Section 45 of the Act, which was incidentally struck down by the apex court itself in 2017.

The following provisions of the PMLA were challenged before the Court:

• Sections 5 and 8(4) which grants the ED wide discretionary powers to attach the property of the accused—challenged as arbitrary for violating safeguards meant to protect the accused.
• Section 17 which grants the ED wide powers to enter and search suspected property without judicial permission. Along with Section 19 which grants the power of arrest to the ED, and Section 24 which presumes guilt of the accused until it is disproved, these provisions were challenged for exempting the ED from following the rules of criminal procedure.
• Section 45 of the Act which takes away the presumption of innocence usually afforded to accused persons under criminal law. To be granted bail, the accused must prove prima facie that they were not guilty, and satisfy the Court that they will not commit any further offence. These ‘twin bail conditions’ under PMLA are central to this case.
• Section 50 allows the ED to compel accused to make self-incriminating statements under threat of a fine, was challenged for violating the fundamental rights of the accused under Article 20 of the Constitution. The petitioners contended that the investigation agencies effectively exercise police powers and should be obligated to follow the CrPC while conducting investigations. Crucially, since the ED is not a police agency, statements made by the accused to ED members in the course of an investigation can be used against the accused in judicial proceedings.

In their judgment, the Supreme Court wrote:

“Article 39 of the Constitution mandates the State to prevent concentration of wealth, thus, to realise its socialist goal, it becomes imperative for the State to make such laws, which not only ensure that the unaccounted money is infused back in the economic system of the country, but also prevent any activity which damages the economic fabric of the nation.”

The Supreme Court upheld the twin conditions for bail under amended Section 45 of the Prevention of Money Laundering Act, 2002 and said money laundering is a heinous crime, which not only affects the social and economic fabric of the nation, but promotes other heinous crimes. The bench said the twin conditions, though restrict the right of the accused to grant of bail, don’t impose absolute restraint.The top court said the provision, as applicable post the amendment in 2018, is reasonable and does not suffer from the vice of arbitrariness or unreasonableness.

“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,” it said.

The twin conditions state that when an accused in a money laundering case applies for bail, the court has to first give an opportunity to the public prosecutor to be heard and only when it is satisfied that the accused is not guilty and unlikely to commit a similar offence when released can bail be granted. Noting that offence of money laundering has been regarded as an aggravated form of crime the “world over”, the top court said it is a separate class of offence requiring effective and stringent measures to combat.

“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 homegrown 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,” the bench had further said.

The court said it was because of the seriousness of the crime that stringent measures, including attachment and confiscation of proceeds of crime and to prosecute the people involved, have been provided for in the law.“In view of the gravity of the fallout of money laundering activities having transnational impact, a special procedural law for prevention and regulation, including to prosecute the person involved, has been enacted, grouping the offenders involved in the process or activity connected with the proceeds of crime as a separate class from ordinary criminals,” the bench had observed.

The judgment can be read here.

 

5. The matter of Pravin MadhukarRaut vs. Directorate of Enforcement, Sanjay RajaramRaut vs. Directorate of Enforcement, 2022

Special PMLA court judge M G Deshpande called the arrest of Shiv Sena MP Sanjay Raut a “witch hunt”.  The court in its order rapped the Enforcement Directorate (ED) for the “illegal arrest and detention for an uncertain amount of time” as well as emphasized on their misuse of powers and provisions, and selective targeting.

The court has even gone on to say that “today we are in the era of Vijay Madanlal Choudhari, D.K Base, Arneshkumar and Satender Kumar Antil. But the ED appears to have ignored the same.” (Para 144)

In the said judgment, the judge has highlighted some major violations that took place in this case, such as:

1. Sanjay Raut was imprisoned in a room with only four walls surrounding him after being arrested at such an odd hour in the middle of the night. He had repeatedly told that he has six stents in his heart and has had two angioplasty procedures. He also complained to this court about how he was held in a chamber with no ventilation whatsoever. Only then, with the help of the court, was he able to obtain a room with some ventilation while under ED custody. The court in its judgment noted that all of this suggests, at least on the surface, that his detention is nothing more than a witch hunt and the destruction of his valuable rights. (Para 145)
2. The bench in this case noted that as per the Hon’ble High Court and the Supreme Court, it has been laid down again and again that “the power of arrest is extreme, arrest has got far reaching consequences and needs to be exercised with caution, as a last resort.” But as was observed by the court in this case, the said power of arrest under Section 19 (1) of the PML Act was misused by the ED. (Para 142)

Despite being the main accused and having admitted their wrongdoings in an affidavit, RakeshWadhawan and SarangWadhawan were not detained by the ED and are currently free. However, Sanjay Raut was detained without cause, and Pravin Raut was detained over a civil dispute. All of this demonstrates the ED’s discriminatory and selective behavior.

3. The court then reprimanded on their “extraordinary pace of the ED in causing arrest and not even a snail speed in conducting trials.” The court then pointed at how it seems as if the ED is only be familiar with Sections 19 and 45 of the PML Act, and is unaware that Section 44 of the PML Act provides for the trial of an offense under the same Act. The court also noted in the judgment when an accused person is placed in judicial custody, the pace at which the ED makes an arrest immediately slows to nearly nothing. After the applicant (accused) submits bail requests, ED often takes at least three to four weeks or longer to submit its response. Every time, the court observed, that the ED takes an extremely long time to respond to the straightforward applications submitted by any accused. (Para 146)
4. The court further quoted the decision given in the case of Satender Kumar Antil v/s Central Bureau of Investigation, wherein the top court had noted that every bail application has to be decided as expeditiously as possible, not more than the span provided therein. In the current case, Praveen Raut’s bail application had been pending since more than 6 months while Sanjay Raut’s had been pending since more than 3 months. Even after this, the ED kept them waiting for an uncertain period of time. (Para 148)

After reprimanding the ED, the court said that all these violations prima facie indicated that the arrest of Sanjay Raut and Pravin Raut is nothing a witch hunt and annihilation of his valuable rights. The judge then went on to state that the court is under the legal obligation and duty to undercover the truth, even at the stage of trail.

The judgment can be read here.

 

Why is getting bail so difficult under the PMLA?

According to the 2022SC judgment, the court also upheld the constitutionality of several other provisions of the PMLA and permitted the ED to possess a wide net of powers (which had all faced important challenges) including that:

• Enforcement Case Information Report (ECIR) cannot be equated with an FIR, and ED officers are not mandated under law to register an ECIR before initiating investigation or at any other stage of the case
• Supplying of Enforcement Case Information Report (ECIR) is not mandatory and disclosure of reasons during arrest is enough
• Authorities under the PMLA (ED officers) are not the same as police officers and the evidentiary value granted to statements of witnesses and accused persons recorded by the ED (Section 50) is not ultra vires Article 20 of the Constitution (that provides the right against self incrimination)
• The powers of arrest granted to the ED under Section 19, PMLA are in sync with purpose of the statute
• Mere possession of proceeds of crime (without any integration, layering etc.) are sufficient to allege money laundering

 What happens when the State violates civil liberties, threatens the principles of natural justice, and acts in violation of the fundamental rights guaranteed to a citizen by the country’s Constitution, even in an effort to prevent the concentration of wealth, is the question that follows from the aforementioned judgment.

The ED will now find it simpler to object to anticipatory bail applications as the applicants would find it challenging to demonstrate their threat of arrest as a result of being allowed the privilege to not register an ECIR or any other comparable document at all. In addition, keeping those who have been arrested in jail would be easier if there was no record of the accusations made against them, aside from the reasons for the arrest. It’s also significant to note that the distinction between an inquiry and an investigation is already obliterated in the lack of a properly registered ECIR, and that the absence of one hinders the accused from using the remedy for quashing of proceedings, as provided for in 482 CRPC. This simply makes bail seem more distant.

Additionally, the case is already biased in favor of the prosecution because any statement made by the accused during the inquiry and investigation stage, even before the person is formally branded an accused, is admissible during the legal processes. The “twin criteria” that apply in a PMLA case will make it difficult to get bail in any instance.

The burden of proof still lies with the accused in PMLA cases, which strikes at the very core of the “presumption of innocence” — a general legal principle upheld by courts across the nation and derived from Articles 20 and 21 of the Constitution of India. This is quite astounding in light of the petitioners’ in-depth arguments about how dangerous this was. The PMLA has severely restricted the right to personal liberty by allowing a draconian power of arrest to stand, without requiring ED to even record an ECIR, and then placing tight restrictions on bail.

For women, those under the age of 16, and the sick or infirm, the Delhi High Court’s decision may be a relief, but there is still a long way to go. Instead than leaving it up to the judge’s discretion to decide whether or not the accused should be given bail, the first step should be to define the terms sick and infirm.

Related:

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‘Essence of Tyranny is Harsh Laws Used Selectively Against Opponents’—Sanjay Hegde

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