Money laundering refers to the act of conversion of illegally obtained money and
presenting it in such a manner that it appears to be obtained from a legitimate
source. The Prevention of Money Laundering Act, 2002 is the legislation enacted
by the parliament in order to curb money-laundering and to confiscate the
property obtained thereby.
In the pre-trial stage, the question of ‘bail or jail’ has always been a grey
area with respect to the justice system.[i] In the light of 8th US
Constitutional Amendment, the Indian courts have evolved the principle of
balancing the interest of community and rights of the accused while deciding on
a bail application.
In the present context, the pre-bail conditions are imposed by certain
special-legislations presumably on the basis of interest of state and the
society at large. These conditions have been challenged in the courts from time
to time to the extent where the rights of the accused have been violated.
In the case of Nikesh Tarachand Shah v. Union of India
[ii], the SC was
presented with a similar question where the petitioners challenged S. 45(1) of
PMLA insofar it required fulfilment of two essential conditions for the grant of
bail to the accused.
The SC struck down the aforementioned provision on the ground that the same is
violative of the Art. 14 and 21 of the Constitution. The SC thereby directed the
respective courts to decide the bail applications without application of the
conditions contained in S. 45(1).
Structure and scheme of PMLA
The structure and scheme PMLA were challenged before the SC in the said case.
According to S.3 of the PLMA, the offence of ‘money-laundering’ is only
constituted when (a) there is commission of acts mentioned in Part A, B or C of
the schedule (b) and projection of the property obtained through such act as
For the trials in aforementioned cases, special courts were constituted as per
S.4 of the Act. In this context, S. 45(1) of the act[iii] provided for no person
accused of an offence in Part A of the Schedule of the PMLA, which was
punishable for a term of imprisonment of more than three years, shall be
released on bail, unless the following two conditions were satisfied:
- the public prosecutor was given an opportunity to oppose the application
for such release; and
- where the public prosecutor opposes such application for bail, the court
was satisfied that there were reasonable grounds for believing that the
accused was not guilty of such offence and that such person was not likely
to commit any offence while on bail.
Issues raised with respect to the Section
Several issues were raised with respect to Section 45(1) of the Prevention of
Money Laundering Act 2002.
First, it was contended that the now unconstitutional provision imposed further
applicable conditions in addition to the existing conditions in order to receive
Secondly, it was stated that offences under PMLA now had to be assessed with
respect to the twin principles, while offences are ordinarily dealt with the
provisions of Code of Criminal Procedure (CrPC) alone.
It was also stated that while there was no legislative intent to treat persons
convicted under Schedule A of the act differently, Section 45(1) effectively
creates a difference where a person convicted under Schedule A is treated
differently from a person convicted under Schedule B or Schedule C of the same
act, Fourthly, there was no rational basis for fixing the criteria in regards to
the term of the offence.
The criteria inviting applicability of Section 45(1) only regarding offences
which entail imprisonment of three years or more is irrational and
discriminatory in nature. This resulted in situations where denials were based
on the now impugned conditions.
Lastly it was contended that the twin conditions
itself were arbitrary and unfair in nature. The concerns raised were effectively
dealt with in the judgment.
Judgment of the Court
The Supreme Court considered the arguments alleging discriminatory outcomes
created by application of Section 45(1) to various situations, resulting in the
court declaring that Section 45(1) is violative of Article 14 and 21 of the
Indian Constitution and striking down the Section as unconstitutional.
The court also held that-
Classification made based on the length of sentence of imprisonment had no
rational basis or relation with the objects of the Prevention of Money
Laundering Act 2002.
Application of Section 45(1) led to situations where same offenders tried under
different cases which end up with different results depending on whether Section
45(1) is applied or not.
The twin conditions under Section 45(1) were arbitrary and discriminatory in
A difference was created between cases where regular bail was sought rather than
anticipatory bail as in cases of anticipatory bail these twin conditions are not
to be applied for granting bail leading to discrimination between those who
apply for regular bail and anticipatory bail under Section 45(1).
S. 45 Post the judgement
Pursuant to this judgment, the GOI has amended S. 45(1) of the PMLA by adding
the words "under this Act" to Sub-section (1) of S. 45 of the PMLA Act and
deleting the words "punishable for a term of imprisonment of more than 3
years under Part A of the Schedule
", as one of the grounds for striking down
the section in the said judgment was that the appropriate Court while deciding
the bail application should have reasonable grounds for believing that the
accused is not guilty of a predicate offence instead of an offence under PMLA.
Section 45. Offences to be cognizable and non-bailable.
(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973
(2 of 1974), no person accused of an offence under this Act shall be released on
bail or on his own bond unless-
- the Public Prosecutor has been given an opportunity to oppose the
application for such release; and
- where the Public Prosecutor opposes the application, the court is
satisfied that there are reasonable grounds for believing that he is not
guilty of such offence and that he is not likely to commit any offence while
Provided that a person, who, is under the age of sixteen years, or is a woman
or is sick or infirm, or is accused either on his own or along with other
co-accused of money laundering a sum of less than one crore rupees may be
released on bail, if the Special court so directs.
However, in the case of Vinod Bhandari vs. Assistant Director, Directorate of
[iv] the HC held that despite the amendment in the definition,
the S. 45(1)(ii) of the Act has not been resurrected.
In the matters of PMLA, it can be contended that rigors provided under Section
45(1) of the PMLA for the grant of the bail are not applicable as the said
section has not been revived and only the provisions of Section 437 of the Code
of Criminal Procedure, 1973 would be applicable for deciding the bail of the
The judgement of the Hon’ble court in Nikesh Tarachand raises questions on
the legality of pre-bail conditions of bail in similar economic offenses.
quashed the scheme of provisions. Whether an economic offence, such as money
laundering, demanded such stringent conditions and whether the rights of an
individual could be curtailed by the state in the case of such economic offence,
still remains to be answered.
Hence, the justiciability of the pre-bail conditions, in the case of economic
offences, was not particularly addressed by the Supreme Court in the Nikesh
. Therefore, the legality and justiciability of pre-bail
conditions is still elusive and demands judicial clarification. [v]
- Gudikanti Narasimhulu v. Public Prosecutor, (1978) 1 SCC 240
- Nikesh Tarachand Shah v. Union of India, AIR 2017 SC 5500.
- S. 45(1), PMLA Prior to the Amendment
- Vinod Bhandari vs. Assistant Director, Directorate of Enforcement, IV
(2018) CCR 178 (MP).
- Rohit Tandon v. The Enforcement Directorate, 2017 SCC online SC 1304