Introduction

Supreme Court Bench of Justices Rohinton Fali Nariman and Sanjay Kaul struck down Section 45(1) of Prevention of Money Laundering Act, 2002 insofar as it imposes the twin conditions for release on bail. Former Attorney General Mukul Rohtagi appeared for the petitioner Nikesh Tarachand Shah while present Attorney General KK Venugopal appeared for the Central Government.

Analysis of the Judgment

Section 45(1) imposes the following two conditions for grant of bail where an offence punishable for a term of imprisonment of more than 3 years under Part A of the Schedule to the Act is involved: (1) The Public Prosecutor must have been given an opportunity to oppose the application for such release, and (2) where the Public Prosecutor had opposed the application the court must be satisfied that there are reasonable grounds to believe that the applicant is not guilty of such offence and that he is not likely to commit any offence while on bail.

Prior to the Amendment Act 0f 2012, there were two classes of offences contained in Part A and Part B. Part A of the schedule only consisted of two offences under Indian Penal Code, 1860 and nine offences under the Narcotic Drugs and Psychotropic Substances Act, 1985. These offences were considered extremely heinous by the legislature and were, therefore, classified separately as against offences under Part B, which dealt with other offences under the Indian Penal Code and offences under the Arms Act1959, Wildlife (Protection) Act 1972, Immoral Traffic (Prevention) Act, 1956 and the Prevention of Corruption Act, 1988. The Amendment Act however incorporated Part B offences into Part A of the schedule, resulting in offences under twenty-six Acts, together with many more offences under the Indian Penal Code, all being put under Part A.

According to senior counsel Mukul Rohtagi, putting Part B offences together with heinous offences in Part A would amount to treating unequals equally and would be discriminatory and violative of Article 14 of the Constitution. A person will be punished for an offence contained under the PMLA Act, 2002, but will be denied bail because of a predicate offence which is contained in Part A of the schedule rendering Section 45(1) as manifestly arbitrary and unreasonable.

If the twin conditions are to be satisfied at the stage of bail, the applicants will have to disclose their defence at a point in time when they are unable to do so, having been arrested and not being granted bail at the inception itself.

He further raised the issue that since there is no prohibition against anticipatory bail in the 2002 Act, it could be granted for both offences under the 2002 Act and the predicate offence. This would mean that a person charged of money laundering and a predicate offence could continue on anticipatory bail throughout the trial without satisfying any of the twin conditions, as opposed to a person who applies for regular bail, who would have to satisfy the twin conditions, which in practice would mean denial of bail.

Section 44 of the Act conferred powers on Special Court to try both the offence of Money laundering and the predicate offence.

The Court cited clause 39 of Magna Carta stating that “No free man shall be seized or imprisoned or stripped of his rights or possessions, or outlawed or exiled, or deprived of his standing in any other way except by the lawful judgment of his equals or by the law of the land.”

Finding of the Court

The Court explained how the twin conditions are manifestly arbitrary and discriminatory. It held:

“manifestly arbitrary, discriminatory and unjust results would arise on the application or non application of Section 45, and would directly violate Articles 14 and 21, inasmuch as the procedure for bail would become harsh, burdensome, wrongful and discriminatory depending upon whether a person is being tried for an offence which also happens to be an offence under Part A of the Schedule, or an offence under Part A of the Schedule together with an offence under the 2002 Act. Obviously, the grant of bail would depend upon a circumstance which has nothing to do with the offence of money laundering. On this ground alone, Section 45 would have to be struck down as being manifestly arbitrary and providing a procedure which is not fair or just and would, thus, violate both Articles 14 and 21 of the Constitution.”

Conclusion

The Court declared the Section 45(1), so far as the twin conditions are concerned as manifestly arbitrary, unreasonable and discriminatory and struck it down for being unconstitutional and violative of Articles 14 and 21.

 The court further directed that all those matters in which the bail was denied due to the presence of the twin conditions were to go back to the respected courts.