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PMLA Encroachment On Fundamental Rights Vis-a-vis: Right To Bail

For a Country to prosper it is important that its laws and regulations are just, fair and reasonable. In India, Parliament has power to bring in legislation(s) and the Parliament needs to ensure that the laws promulgated are not in violation of the fundamental rights as enshrined in the Constitution of India. It is the responsibility of the judiciary to interpret the laws rolled out by the Parliament for determining that the laws are not against the basic structure of the Constitution.
In 2002 the Parliament introduced -The Prevention of Money Laundering Act, 2002 (PMLA) as there was a need to combat the menace of money laundering generated through illegal activities like sale of drugs, illegal substance, corruption, round-tripping, and to punish those involved in the crime. Therefore, the PMLA was enacted to seize and punish those involved in the said illegal activities and to save the financial system of the country.
PMLA was enacted to not only stop huge illegal money that was making its way into the economy but also as a response to the India's commitment to the Geneva Convention to combat the economic crimes, impacting financial system and integrity of country. PMLA made it clear that the agency under PMLA is not a "police agency" and therefore, the provisions of the Criminal Procedure Code (CrPC) are not made applicable. Since the introduction of the PMLA the Country has witnessed a tussle over the enforcement of the provisions of PMLA dealing with - issuance of summons, search, seizure and statements made before these authorities under PMLA to be in direct violation of the fundamental rights of the persons defined in PMLA.
The provisions of the PMLA are being invoked against the corporates, entrepreneurs and the politicians. Recently, the politicians claimed that invocation of PMLA against them as a political vendetta while the corporates portrayed it to be punishment for claiming acquiescence with the non-ruling parties.  The prominent politicians who have been subjected to the enquiry under PMLA being Mr. Rahul Gandhi, Mrs. Sonia Gandhi, Mr. Karti  P. Chidambaram and Mrs. Kalvakuntla Kavitha and many others. The Hon'ble Supreme Court and the High Courts have been flooded with petitions challenging the constitutional validity of various provisions of PMLA.
PMLA upheld by Hon'ble Supreme Court: 
The Hon'ble Supreme Court in Vijay Madanlal Choudhary v. Union of India[2]  has upheld the provisions of the PMLA. The provisions of PMLA though have been upheld there is a need to relook the provisions dealing with bails for the person arrested or impending arrest under the PMLA. It is imperative that we analyze and ascertain if the present provision dealing with bail under PMLA can sustain today's need of the hour. There is a need to have a detailed deliberation with respect to various provisions that have direct impact on the grant of bail to the person arrested or to be arrested under the provisions of the PMLA.
Bail under PMLA 
In criminal jurisprudence the presumption of innocence is in favour of the person unless he is proved otherwise in the court of law. The Hon'ble Supreme Court in  State of Rajasthan v. Balchand[3]   held that "The basic rule may perhaps be tersely put as bail, not jail". The Hon'ble Supreme Court also provided the guiding factors to protect the accused from illegal arrest as detailed in Arnesh Kumar Vs. State of Bihar[4]. However, these settled principles of criminal law have literally no force while the case is being prosecuted under the provisions of the PMLA.

The Hon'ble Supreme Court in Satender Kumar Antil V. Central Bureau of Investigation and Another[5]  reiterated the rights of the accused and the constitutional guarantee available to the accused facing prosecution under the provisions of the criminal law. PMLA has ignored basic rights of the accused that are required to be protected under the Constitution, few of such rights that needs to be re-considered in the light of the recent judgment passed by the Hon'ble Supreme Court in Vijay Madanlal Choudhary v. Union of India are detailed below:
  1. Presumption of innocence: This presumption is taken away under Section 45 of the PMLA. This word "presumption" is an alien word under PMLA. The accused needs to prove his innocence beyond doubt to secure a bail. While the person as defined under Section 2(s) of the PMLA when subjected to the proceedings under PMLA is also deprived of constitutional protection under Article 20(3) of the Constitution of India for making statements that are self -incriminating.
  2. Bail is Rule and Jail is exception: The rule of bail has seen a sea change while it is being applicable to the cases prosecuted under the provisions of the PMLA. The famous twin conditions under Section 45 of PMLA are to be satisfied by the accused charged of money laundering to be released on bail. The section itself prescribes the conditions to be satisfied being:
    1. that the public prosecutor is given opportunity to oppose the application for release of the accused and
    2. where the public prosecutor oppose the application, the Court should be satisfied that the accused is not guilty of the offence and he is not likely to commit the offence while on bail.

     Initially the Hon'ble Supreme Court in Nikesh Tarachand Shah vs UOI[6]  stuck down Section 45 of PMLA stating it is arbitrary, discriminatory and violation of Article 14 and 21 of the Constitution of India.  Section 45 of PMLA then underwent an amendment on 19/4/2018 whereby the reference to offence under "Part-A of the Schedule" was substituted by the expression "under the Act".  Though the amendment was brought into force considering the judgement passed in Nikesh Tarachand Shah, there is no change in the rule regarding bail and the accused still needs to pass the twin condition to be released on bail.
  3. Subjective satisfaction: The power of the Enforcement Directorate to arrest a person arises under Section 19 of the PMLA. The reading of Section 19 of PMLA clearly demonstrates that any person can be arrested on subjective satisfaction of the Director, Deputy Director, or Assistant Director based on the information and material available.

    The accused so named in the warrant of arrest will have no scope to counter or produce any document to avoid the arrest. Once arrest is effected the only way the accused can be rescued is through bail which occurs only when the twin conditions are satisfied. Therefore, there are absolutely no grounds to avoid arrest under PMLA except for satisfying the conditions mentioned in Section 45 of the PMLA.

    The fact that under Section 50 of the PMLA the statements made by the accused person to the officials of the Enforcement Directorate during investigation will be admissible as evidence, will be an additional reason for denial of bail. Though the Hon'ble Supreme Court held that the statement recorded by the authorities under PMLA cannot be hit by Article 20(3) or Article 21 of the Constitution of India, but this statements will definitely act against the interest of the person and create a hurdle while granting bail and thereby cause injustice to the accused.
  4. Amendment vide Finance Bill: The amendment made to Section 45 in 2018 vide Act 13 of 0218, was challenged and the Hon'ble Supreme Court in Vijay Madanlal Choudhary & Ors. Vs. Union of India upheld the said amendment and clarified that there is no absolute restraint on grant of bail under Section 45. In the judgment the Hon'ble Supreme Court has clarified that bail can be obtained as "The discretion vests in the Court which is not arbitrary or irrational but judicial, guided by the principles of law as provided under Section 45 of the 2002 Act"

Though the Hon'ble Supreme Court has upheld Section 45 of the PMLA with a rider; the rights of the person to obtain the bail suffers from settled principles of law in criminal jurisprudence. The person seeking bail is for majority of time will not even have a copy of Enforcement Case Information Report (ECIR) which would detail the charge made against the person. In the absence of such crucial document/ ECIR asking the person to prove his/her innocence is against the settled principles of law "innocent until proven guilty". Proving innocence at a stage of granting bail will be a herculean task more so when the statute makes a presumption of guilt.   
The Hon'ble Supreme Court upheld various provisions of the PMLA, including Section 45, however, it appears that the twin condition that was originally stuck down is not taken to its logical end.  The amendment has not addressed the reasoning of the Hon'ble Supreme Court in Nikesh Tarachand Shah vs UOI wherein the Section 45 was stuck down as Section 45 had reversed the settled law of "presumption of innocence"
The judicial activism is seen as the need of the hour more specifically to restore the settled law of presumption of innocence while dealing with bails under the provisions of the PMLA. The Hon'ble Supreme Court in Binoy Vishwam V. Union of India & Ors.[7] has held that the Courts can strike down legislation either on the basis that it contravenes fundamental rights or other constitutional rights/ provisions of the Constitution of India. The legal fraternity is hopeful that these issues will be addressed in the review petition R.P (Crl.) No. 219/2022 (2022 SCC OnLine SC 1084) filed against the judgment Vijay Madanlal Choudhary v. Union of India now pending before the Hon'ble Supreme Court.  
  1. Herur Rajesh Kumar, Advocate, Practising at High Court for the State of Telangana Herur Associates- Views are personal.
  2. 2022 SCC OnLine SC 929
  3. 1977 (4) SCC 308
  4. AIR 2014 SC 2756
  5. 2022 SCC OnLine SC 825
  6. 2018 (11) SCC 1
  7. 2017 (7) SCC 59

Award Winning Article Is Written By: Mr.Herur Rajesh Kumar
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Authentication No: OT327851460413-5-1023

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