Decoding Bail under PMLA: A Tug-of-War between Rights and Regulation

PMLA - The Act which was enacted to curb money laundering in India is being used as a political Vedanta. Many opposition political leaders including former Home Minister P. Chidambaram, former Delhi CM Arvind Kejriwal & Jharkhand CM Hemant Soren were slapped with PMLA and incarcerated for months without trial. The reverse mechanism of bail under PMLA and the twin test mentioned under section 45 made it nearly impossible to get bail. Still, the Supreme Court clarified that conditions provided under section 45 do not impose absolute restraint on bail.

Introduction

“Money laundering poses a serious threat not only to the financial systems of countries but also to their integrity and sovereignty.”

Prevention of Money Laundering Act (PMLA) was enacted in 2002 and became operative in 2005 to prevent money laundering and to confiscate property derived from criminal activities. Preventing money laundering is important as laundered money collected from illicit or illegitimate businesses re-enters the economy in the form of luxury items, real estate, or companies. PMLA seeks to combat money laundering with three objectives: firstly control and prevention of money laundering, secondly seize the property obtained from laundered money and thirdly deal with other issues. Enforcement Directorate (ED) which was established under the Foreign Exchange Regulation Act, 1947 (FERA) has been given the responsibility for enforcing the provision of PMLA.

Section 4 of the Act talks about punishment and says the offence of money laundering shall be punishable with rigorous imprisonment for a term not less than three years extending to seven years and shall also be liable to a fine. It was amended subsequently in 2009, 2013, and 2019. The amendments were carried out by due consideration of standing committees to unplug the loopholes and changes. Money laundering in India involves 3 stages i.e. Placement, Layering, and Integration. This act imposes obligations on financial institutions to maintain records and provide information in the prescribed form to the Financial Intelligence Unit - India ( FIU-IND ). Money Laundering is a cognizable and non-bailable offence under section 45 of the Act.

Understanding the PMLA Framework:

Section 45 of the Act declares the offence committed under the act as a cognizable and non-bailable offence. That means a person against whom a charge under the Act has been alleged can be arrested without a court order and bail can be granted by the court. Sec 45 also laid down 2 conditions which should be satisfied to get the bail. First, the Public Prosecutor has been given a chance to resist the application for such release and second, there are reasonable grounds for believing that he is not guilty of such an offence that he is not likely to commit any offence while on bail. PMLA has a reverse burden of proof mechanism. That means the prosecution need not prove guilt beyond a reasonable doubt as it happens in criminal cases mentioned under Bhartiya Nyaya Sanhita (IPC) but the accused has to do so.

Because of this, it was assumed and believed that it is nearly impossible to get bail in a PMLA case. It is considered that Bail is the rule and jail is the exception. The Supreme Court in many cases said the bail rule is nothing but a paraphrase of Article 21. The Apex Court in Vijay Madanlal Choudhary & Ors. vs. Union of India & Ors. , held that Sec 45 of the PMLA restricts the rights of the accused to grant bail, it could not be said that the conditions provided under Section 45 impose absolute restraint.

Before the Vijay Madanlal Case, the Supreme Court laid down the Triple Test Rule which is also a guideline for granting or refusing grant or regular bail under PMLA in the case P. Chidambaram v. ED.

In dealing with bail applications under PMLA, the Triple Test Rule is also required to be followed as under:

1. Availability of the accused:- • In doing so the courts are guided by the conduct of the accused. If the accused has made himself present at all times whenever required in the past and is collaborating with the investigation, the courts take this factor in support of the accused while granting bail.

2. Nature of evidence involved:- • If the case is mainly based on documents and all the documents were already in the custody of the investigating agency, the scope of altering becomes impossible and the accused be released on bail, also keeping in mind that since the accused had not tampered the documents at any point of time in past, the courts take this factor in favour of the accused while granting bail.

3. Deep Roots in the society:- • The court takes judicial notice of the fact that the accused has deep roots in society, has been staying at his permanent address for a long, has all properties and family within the local limits, and is not earlier involved in any criminal matter.

The Tug-of-War: Rights vs. Regulation

In most of the PMLA cases, the accused are incarcerated for months and months without any hope of completion of trial in the near future. Lakhs of pages of documents are filed in PMLA matters. Therefore, it is not possible to conclude the trial soon after the arrest was done. On one hand, Sec 45 of the PMLA Act says bail may be granted but only when the twin mentioned in the act is satisfied. On the other hand, Article 21 of the Constitution of India states that no person shall be deprived of his life or personal liberty except according to the procedure established by law. The procedure to curtail rights mentioned under Article 21 should be reasonable.

Keeping the accused behind bars should not be permitted to become the punishment without trial. Supreme Court in Arnab Manoranjan Goswami v. State of Maharashtra and Others held that deprivation of liberty even for a single day is one day too many. Later, the apex court in Prem Prakash vs Enforcement Directorate, held Section 45 of PMLA by imposing twin conditions does not re-write the principle to mean that deprivation is the norm and liberty is the exception.

Judicial Interpretations and Challenges

In the case of Manish Sisodia (I) vs. CBI(2023), The Supreme Court held that detention or jail before being pronounced guilty of an offence under the PMLA Act should not become punishment without trial. In the case of Arvind Kejriwal vs. Directorate of Enforcement, 2024, The Supreme Court held that the PMLA Act does not stipulate any stage for bail application. Under section 45 of PMLA, it can be held at any stage of the proceeding either before the complaint or after that.

In the case of Prem Prakash vs Enforcement Directorate), the Apex court held that the Authorities under the Act cannot prosecute any person on a notional basis or on the assumption that a planned offence has been committed unless it is so registered with the jurisdictional police and/or pending enquiry/trial including by way of criminal complaint before the competent forum.

In Prabir Purkayastha v. State (NCT of Delhi) 2024, The Supreme Court held that Section 19 of PMLA provides that the ED must inform the accused of the grounds of his arrest when the ED has a reason to believe that person has been guilty of an offence punishable under this Act. In the case of Pankaj Bansal v Union of India (2023), The Supreme Court held that ED does not have the power to arrest the accused without giving reason in writing. It put an end to the practice of orally providing grounds for arrest to the accused.

In a nutshell, we can analyse that section 45 of PMLA and Article 21 of the Indian Constitution are contradicting each other. Under Article 21 it is our right to have personal liberty which has been curtailed by section 45. Earlier, it was believed that it is really impossible to get bail under PMLA but gradually the jurisprudence of the concept of bail evolved under PMLA as well. The apex court has recognised that the freedom guaranteed under Article 21 cannot be taken away just by enacting a statute.

Md Afan Abdullah is a student pursuing Law from Jamia Millia Islamia.

Edited by Sana Faiz

Disclaimer: The opinions expressed in this publication are those of the author. They do not purport to reflect the opinions or views of The Jamia Review or its members.