2017 (11) TMI 1336 - SC - Money Laundering

Section 45(1) of Prevention of Money Laundering Act declared unconstitutional for violating fundamental rights and presumption of innocence

Nikesh Tarachand Shah Versus Union of India And Anr.

The SC declared Section 45(1) of the Prevention of Money Laundering Act, 2002 unconstitutional for violating Articles 14 and 21 of the Constitution. The ... Constitutional validity of Section 45 of the Prevention of Money Laundering Act, 2002 - manifestly arbitrary, discriminatory, and violative of Articles 14 and 21 of the Constitution - 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 - Conditions are: (i) the Public Prosecutor must be given an opportunity to oppose any application for release on bail, and (ii) the Court must be satisfied 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. Held that:- We must not forget that Section 45 is a drastic provision which turns on its head the presumption of innocence which is fundamental to a person accused of any offence. Before application of a section which makes drastic inroads into the fundamental right of personal liberty guaranteed by Article 21 of the Constitution of India, we must be doubly sure that such provision furthers a compelling State interest for tackling serious crime. Absent any such compelling State interest, the indiscriminate application of the provisions of Section 45 will certainly violate Article 21 of the Constitution. Provisions akin to Section 45 have only been upheld on the ground that there is a compelling State interest in tackling crimes of an extremely heinous nature. We declare Section 45(1) of the Prevention of Money Laundering Act, 2002, insofar as it imposes two further conditions for release on bail, to be unconstitutional as it violates Articles 14 and 21 of the Constitution of India. All the matters before us in which bail has been denied, because of the presence of the twin conditions contained in Section 45, will now go back to the respective Courts which denied bail. All such orders are set aside, and the cases remanded to the respective Courts to be heard on merits, without application of the twin conditions contained in Section 45 of the 2002 Act. Considering that persons are languishing in jail and that personal liberty is involved, all these matters are to be taken up at the earliest by the respective Courts for fresh decision. The writ petitions and the appeals are disposed of accordingly. Issues Involved:1. Constitutional validity of Section 45 of the Prevention of Money Laundering Act, 2002 (PMLA).Detailed Analysis:1. Constitutional Validity of Section 45 of PMLA:Introduction and Background:The judgment addresses the constitutional validity of Section 45 of the Prevention of Money Laundering Act, 2002. Section 45(1) imposes two conditions for granting bail where an offence punishable with more than three years of imprisonment under Part A of the Schedule to the Act is involved. These conditions are: (i) the Public Prosecutor must be given an opportunity to oppose any application for release on bail, and (ii) the Court must be satisfied 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.Arguments by Petitioners:The petitioners argued that Section 45 is manifestly arbitrary, discriminatory, and violative of Articles 14 and 21 of the Constitution. They contended that the conditions for bail under Section 45 are excessively stringent and unrelated to the offence of money laundering. The petitioners highlighted that the original Bill did not impose such conditions and that the amendments over time have made the provision more onerous without rational justification.Arguments by the State:The Attorney General argued that the stringent conditions under Section 45 are necessary to combat the serious threat posed by money laundering. He contended that the classification based on the severity of the predicate offence is justified and that the provision should be read down to make it constitutional.Court's Analysis:The Court examined the legislative history and the statutory framework of the PMLA. It noted that the original Bill only imposed conditions for bail concerning offences under the Act itself, and not for predicate offences. The Court found that the twin conditions for bail under Section 45 are excessively stringent and do not have a rational nexus with the object sought to be achieved by the Act. The Court highlighted the historical context of bail provisions, emphasizing the presumption of innocence and the right to personal liberty.Manifest Arbitrariness and Discrimination:The Court held that Section 45 leads to manifestly arbitrary and discriminatory results. It pointed out that the provision applies differently depending on whether the predicate offence is included in Part A of the Schedule, leading to inconsistent and unjust outcomes. The Court also noted that the application of Section 45 results in a higher threshold for bail, which is not justified by the nature of the offence of money laundering.Violation of Articles 14 and 21:The Court concluded that Section 45 violates Articles 14 and 21 of the Constitution. It found that the classification based on the term of imprisonment for predicate offences is arbitrary and does not have a rational relation to the object of the Act. The Court also held that the provision imposes an unfair and unjust procedure for granting bail, thus infringing on the right to personal liberty.Decision:The Court declared Section 45(1) of the PMLA, insofar as it imposes two further conditions for release on bail, to be unconstitutional. It directed that all matters in which bail had been denied due to the twin conditions in Section 45 be remanded to the respective Courts for fresh decisions without applying these conditions. The judgment emphasized the importance of personal liberty and directed that these matters be taken up at the earliest.Conclusion:The judgment strikes down the stringent bail conditions under Section 45 of the PMLA as unconstitutional, emphasizing the principles of fairness, justice, and the right to personal liberty. The Court's decision underscores the need for a rational and just approach to bail provisions, aligning with constitutional guarantees.