When Exception Becomes The Norm: Re-visiting PMLA Bail Provisions

Indian criminal law jurisprudence fundamentally anchors the principle of liberty: “Bail is the rule and jail the exception.” Article 21 of the Constitution is the Grundnorm. Any departure from this settled principle demands must be judicially justified.

The Prevention of Money Laundering Act, 2002 (PMLA), however, departs from this position by introducing an embargo under Section 45. The recent developments in PMLA cases involving former Delhi CM Arvind Kejriwal and other AAP politicians have lifted the lid on enforcement overreach versus its compatibility with constitutional guarantees.

With about 6500 cases registered by the Enforcement Directorate (ED) since 2014, only 56 cases have seen the light of day, i.e. settled on merit.

While the bail scheme under a special statute, such as the PMLA, is normatively justified, its mechanical operation institutionalizes punitive pre-trial incarceration. This necessitates examining the applicability of bail standards against the yardstick of constitutional proportionality.

Historical Journey of Bail Conditions Under Section 45:

Money laundering is viewed as a systematic threat to a nation’s financial integrity and economic sovereignty. The policy presumption, in such a case, is that ordinary bail conditions do not meet the requirement of extraordinary circumstances. The legislation classifies PMLA offences as a separate class of economic offences, warranting stringent bail conditions.

Section 45(1) begins with a non-obstante clause and introduces twin conditions for the grant of bail.

It requires the court to be satisfied on two grounds: (i) that there are reasonable grounds to believe that the accused is not guilty of the offence, and (ii) that there is no likelihood of the accused committing any offence when enlarged on bail.

Section 45, originally, imposed twin conditions on the offences classified based on the term of imprisonment of the predicate offence listed in Part A of the Schedule.

This classification was held to be arbitrary and invalid by the Supreme Court in the Nikesh Tarachand Shah v. Union of India and another ⁽¹⁾ case.

The Court noted that the mechanism of bail exceptionalism must draw a rational nexus with the objective of the Act, in addition to satisfying the mandate of Articles 14 and 21. Not forgeting, such an application invites adjudication of guilt at the preliminary stage.

The Legislation, while retaining its policy stance and curing the defect, in 2018, by way of an amendment, introduced the applicability of Section 45 to all offences under the Act. This amendment reinforces a repetitive theme in criminal statutes – emphasizing extra procedural checks over bolstering investigation rigour and certainty.

The Supreme Court, however, in the Vijay Madanlal Choudhary and Ors. Vs. Union of India (UOI) case ⁽²⁾, upheld the amendment as fair, reasonable and having nexus with the purposes and objects of PMLA. The court weighed on the nature of economic offences and the legislative rationale to keep them under a distinct class.

It is now a settled principle that the rigour of Section 45 is attracted to the offences under Section 3 PMLA in case of an anticipatory bail application under Section 438 CrPC. ⁽³⁾ Therefore, for any bail to be granted, the judiciary has to apply the twin tests.

With the Vijay Madanlal case, the focus shifts from whether Section 45 is constitutionally valid to how mechanical bail denial can harm the constitutional safeguards of an individual.

Process Should Not Be The Punishment:

The prevailing trend in PMLA cases underpins the need for institutional checks and stronger accountability mechanisms for investigating agencies. Section 45 warrants the accused to rebut the statutory presumption of guilt at the bail stage, despite limited access to investigative material. Thus, making bail hearings into surrogate trials.

In Manish Sisodia v. Enforcement Directorate, ⁽⁴⁾the court observed and said that the high courts and trial courts are playing safe and breaching the settled rule of bail.

Where there’s a prolonged incarceration and delay in trial, the accused’s right to bail must be read into Section 439 CrPC and Section 45 of the PML Act, depending upon the nature of the allegation. The bail application becomes meritorious if, even after assurances, the trial gets protracted and unforeseeable.

It can be inferred from the judgment that the heavy punitive procedures, especially at the pre-trial stage, make the process a punishment. Further, the investigating agencies face low ex ante discipline.

This manifests the need for legislative and judicial recalibration. Instead of the mechanical application of twin tests, there must be a time-bound investigation and custody review of PMLA cases.

The accused’s right to a speedy trial cannot be eclipsed by the prosecution’s prerogative to investigate at their own pace. This finds footing in judicial reasoning in the UAPA case, Javed Gulam Nabi Shaikh v. State of Maharashtra and Another, ⁽⁵⁾ where the court drawing reasoning from various judgments⁽⁶⁾ observed that, if the State or any prosecuting agency can not protect the right of speedy trial of accused then they should also not oppose the plea for bail on the ground of gravity of offence.

The apex court in P. Chidambaram v. Directorate of Enforcement ⁽⁷⁾ rejected the claim of flight risk or possible witness tampering by the accused. The court reiterated that the primary objective of bail is to secure the presence of the accused in the trial. Itlaid down that even if the allegation is one of a grave economic offence, it is not a rule that bail should be denied in every case. ⁽⁸⁾

However, the reality demonstrates a different phenomenon. Courts have become cautious in granting bail, overlooking the aspect that granting bail is not the conclusion of the trial. The accused is still not discharged or guilty, and is bound to appear on trial. The courts, in such circumstances, can order stringent bail orders, if at all the facts and circumstances permit.

Comparative Analysis:

In the United Kingdom, bail in money laundering offences under the Proceeds of Crime Act, 2002 (POCA) follows ordinary criminal procedure. Authorities are assertive about asset freezing, Unexplained Wealth Orders, and financial surveillance, focusing on financial incapacitation, not detention. Similarly, there is no exception bail regime in money-laundering cases in the European Union, and pre-trial detention is strictly governed by ECHR proportionality standards.

In the United States, Anti-money laundering enforcement is premised on financial surveillance and asset restraint, instead of post-facto detention. The pre-trial detention for financial crimes under the Bail Reform Act is invoked only under exceptional circumstances, not as a matter of course.

The Concluding Remark: Policy Considerations

India can learn from the legislative frameworks of the US, UK and EU, where focus is heavily on financial surveillance and asset recovery, rather than seeking arrest as the first recourse.

The rigours of PMLA weaken where incarceration continues, and the trial never sees the light of day at the instance of the investigative authorities. Unarguably, Investigations run for years; unlike the ordinary bail regime, the accused is not entitled to ordinary bail as designed under Section 167 CrPC. To prevent the abuse of justice, the coercive actions emanating from ECIR must be subject to periodic judicial review, and the investigations must be statutorily time-bound as provided under the NDPS Act.

The design of PMLA considers money laundering as a continuous and special economic offence, warranting stringent bail conditions. However, the uncritical application of its bail conditions can turn the process of obtaining bail into a punishment.

References:

(2018) 11 SCC 1
(2023) 12 SCC 1
Directorate of Enforcement v M. Gopal Reddy, 2022 SCC OnLine SC 1862
2024 SCC OnLine SC 1498
2024 SCC OnLine SC 1693
Gudikanti Narasimhulu and Others v. Public Prosecutor, High Court of Andhra Pradesh (1978) 1 SCC 240: 1977 INSC 232, Shri Gurbaksh Singh Sibbia and Others v. State of Punjab (1980) 2 SCC 565: 1980 INSC 68, Hussainara Khatoon and Others (I) v. Home Secretary, State of Bihar (1980) 1 SCC 81: 1979 INSC 34, Union of India v. K.A. Najeeb (2021) 3 SCC 713: 2021 INSC 50, and Satender Kumar Antil v. Central Bureau of Investigation and Another(2022) 10 SCC 51 : 2022 INSC 690
(2020) 13 SCC 791
Also see, Shri Gurbaksh Singh Sibbia and Others v. State of Punjab (1980) 2 SCC 565, and Sanjay Chandra v. Central Bureau of Investigation (2012) 1 SCC 40