2022 (2) TMI 949 - HC - Money Laundering

Legislative Amendment Revives Money-Laundering Bail Conditions

Ajay Kumar Versus Directorate of Enforcement Through the Assistant Director, Sub-Zonal Officer, Nagpur.

The court concluded that the twin conditions in Section 45(1) of the Prevention of Money-Laundering Act, previously declared unconstitutional by the ... Interpretation of statute - constitutional validity of section 45 of PMLA - Effect of post-amended section 45 of the Prevention of Money-Laundering Act, 2002 (PML Act) in terms of amendment introduced w.e.f. 19.04.2018 - situation post decision of the Supreme Court in the case of NIKESH TARACHAND SHAH VERSUS UNION OF INDIA AND ANR. [2017 (11) TMI 1336 - SUPREME COURT] - HELD THAT:- The Legislative competence of introducing Amending Act has not been disputed, nor countered on any count. Certainly the legislature cannot by way of amendment undo the decision of Courts. However, the Legislature has power to rectify through amendment the defect noticed or highlighted by the decision of the Court. The purpose behind amendment is not to over rule the decision of the Court but simply to correct it and to remove the basis on which the provision has been declared as unconstitutional - when the Prevention of Money Laundering Bill, 1999 was tabled before the Parliament, the twin conditions for release on bail would apply only insofar as offence under the PML Act itself. The Amending Act has changed the entire complexion. Notably section 45 of the Act has not been repelled from the statute book. Therefore, in our view, the section as it stood after amendment has to be read as it stands. It is not found necessary that the entire section has to be resurrected afresh. The very effect of the amendment has changed the periphery of its applicability. The section which stands after amendment has to be read as a whole - Absence of reference in notification dated 29.03.2018 thereby amending section 45(1) of the Act about its retrospective applicability does not take away the force and impact of amendment. It is for the Legislature to give effect to the amending provisions prospectively or retrospectively. However, that cannot be reason for ineffecting the amending provisions of the Act. The reference arose out of statutory jurisdiction and not constitutional jurisdiction of this Court. Unless there is proper challenge and pleadings, the issue of constitutional validity cannot be undertaken. Undoubtedly, the Legislature has power and competence to amend the provisions of the Act. Unless the amended provision is struck down by the Courts, it cannot be watered down. Since after the amendment the entire complexion of section 45 has been changed, the contention that the entire section has to be reenacted by way of amendment after decision in the case of Nikesh Shah, not agreed. Therefore, the twin conditions would revive and operate by virtue of Amendment Act, which is on date in force. The twin conditions in section 45(1) of the 2002 Act, which was declared unconstitutional by the judgment of the Apex Court in Nikesh T.Shah Vs. Union of India, stand revived in view of the Legislative intervention vide Amendment Act 13 of 2018 - Registry shall place the bail application before the concerned Court for further consideration. Issues Involved:1. Applicability of twin conditions under Section 45(1) of the Prevention of Money-Laundering Act, 2002 (PML Act) post-amendment of 2018.2. Legislative competence to amend laws declared unconstitutional.3. Impact of the Supreme Court's decision in Nikesh Tarachand Shah vs. Union of India on the amended Section 45(1) of the PML Act.Detailed Analysis:1. Applicability of Twin Conditions under Section 45(1) of the PML Act Post-Amendment of 2018:The main issue revolves around whether the twin conditions for bail under Section 45(1) of the PML Act, which were declared unconstitutional by the Supreme Court in Nikesh Tarachand Shah vs. Union of India, stand revived following the legislative amendment in 2018. The applicant argued that the Supreme Court's judgment rendered the entire section unconstitutional, and the amendment did not cure all defects pointed out by the Court. Conversely, the prosecution contended that the amendment had rectified the defects, thereby reviving the twin conditions.The court noted that the amendment substituted the words 'punishable for a term of an imprisonment of more than three years under Part-A of the Schedule' with 'under this Act,' thus addressing the Supreme Court's concern that the twin conditions were linked to predicate offences unrelated to money laundering. The court concluded that the amendment effectively revived the twin conditions for bail under Section 45(1) of the PML Act.2. Legislative Competence to Amend Laws Declared Unconstitutional:The court examined whether the legislature has the authority to amend laws declared unconstitutional by the judiciary. It referred to several Supreme Court judgments, including B.K. Pavitra and Ors. vs. Union of India and State of Karnataka vs. Karnataka Pawn Brokers Association, which affirm that the legislature can amend laws to remove the basis of judicial invalidity, provided the amendments correct the errors identified by the court.The court emphasized that the legislature's power to amend laws includes the ability to validate laws by removing the causes of invalidity. The amendment to Section 45(1) of the PML Act was deemed a valid exercise of legislative power aimed at rectifying the defects identified by the Supreme Court in the Nikesh Shah case.3. Impact of the Supreme Court's Decision in Nikesh Tarachand Shah vs. Union of India on the Amended Section 45(1) of the PML Act:The court analyzed the impact of the Supreme Court's decision in Nikesh Shah on the amended Section 45(1) of the PML Act. It noted that the Supreme Court had declared the twin conditions unconstitutional because they indiscriminately applied to all offences under Part-A of the Schedule, which included offences unrelated to money laundering.The court observed that the amendment delinked the twin conditions from predicate offences and made them applicable solely to offences under the PML Act. This change was seen as addressing the Supreme Court's concerns and thereby reviving the twin conditions.The court also referenced various High Court decisions that had interpreted the impact of the amendment differently. However, it concluded that the legislative amendment effectively cured the defects pointed out by the Supreme Court, thereby reviving the twin conditions for bail under Section 45(1) of the PML Act.Conclusion:The court concluded that the twin conditions in Section 45(1) of the PML Act, declared unconstitutional by the Supreme Court in Nikesh T. Shah vs. Union of India, stand revived following the legislative amendment of 2018. The amendment corrected the defects identified by the Supreme Court, thereby reinstating the twin conditions for bail under the PML Act. The court emphasized that the legislative amendment is presumed constitutional unless struck down by the judiciary. The bail application was directed to be placed before the concerned court for further consideration.