Prevention of Money Laundering Act

Context:

Explore the stringent bail conditions under Section 45 of the PMLA for money laundering cases.

Relevance:

GS II: Polity and Governance

Dimensions of the Article:

1. Prevention of Money Laundering Act (PMLA), 2002
2. Section 45 of the PMLA
3. Legal Challenges to the Twin Test
4. Current Position

Prevention of Money Laundering Act (PMLA), 2002

• According to the Prevention of Money Laundering Act (PMLA) 2002, Money laundering is concealing or disguising the identity of illegally obtained proceeds so that they appear to have originated from legitimate sources.
  •  It is frequently a component of other, much more serious, crimes such as drug trafficking, robbery or extortion.
• Money laundering is punishable with rigorous imprisonment for a minimum of 3 years and a maximum of 7 years and Fine under the PMLA.
• The Enforcement Directorate (ED) is responsible for investigating offences under the PMLA.
• The Financial Intelligence Unit – India (FIU-IND) is the national agency that receives, processes, analyses and disseminates information related to suspect financial transactions.
• After hearing the application, a special court (designated under the Prevention of Money Laundering Act PMLA, 2002) may declare an individual as a fugitive economic offender and also confiscate properties which are proceeds of crime, Benami properties and any other property, in India or abroad.
• The authorities under the PMLA, 2002 will exercise powers given to them under the Fugitive Economic Offenders Act.
  • These powers will be similar to those of a civil court, including the search of persons in possession of records or proceeds of crime, the search of premises on the belief that a person is an FEO and seizure of documents.

Section 45 of the PMLA

• Overview:
  • Section 45 of the Prevention of Money Laundering Act (PMLA) sets stringent conditions for granting bail.
  • Bail cannot be granted unless:
    • The Public Prosecutor is given a chance to oppose the bail application.
    • The court, upon opposition, is convinced that:
      • The accused is not guilty of the offence.
      • The accused is unlikely to commit any offence while on bail.
• Conditions for Bail:
  • The accused must prove prima facie innocence in court.
  • The accused must convince the judge that no offence will be committed while on bail.
  • The burden of proof lies heavily on the accused, making it difficult to secure bail under the PMLA.
• Analysis:
  • The language of Section 45 indicates that bail is an exception, not the rule.
  • It mandates that the Public Prosecutor be heard in all bail applications, enforcing a twin test.
  • Similar stringent provisions exist in other laws dealing with serious offences:
    • Section 36AC of The Drugs and Cosmetics Act, 1940.
    • Section 37 of The Narcotic Drugs and Psychotropic Substances Act, 1985.
    • Section 43D(5) of the Unlawful Activities (Prevention) Act, 1967.

Legal Challenges to the Twin Test

• Initial Challenge:
  • The first major challenge to the twin test’s constitutionality under the PMLA came in the 2017 case Nikesh Tarachand Shah v Union of India.
  • A two-judge Bench struck down the twin bail provision, declaring it unconstitutional for failing the ‘reasonable classification’ test.
• Reintroduction and Further Challenges:
  • Despite the ruling, Parliament reinstated the twin test provisions through the Finance Act, 2018.
  • This move led to further legal challenges in various High Courts, culminating in a batch of petitions before the Supreme Court.
• Supreme Court Ruling (2022):
  • In 2022, the Supreme Court revisited the issue in Vijay Madanlal Choudhary v Union of India.
  • Petitioners argued that the reasoning in the Nikesh Tarachand Shah case still held, even with the law’s reinstatement by Parliament.
  • However, a three-judge Bench rejected the earlier ruling, emphasizing the seriousness of money-laundering and its threat to national sovereignty and integrity.
• Criticisms from Legal Experts:
  • Legal experts have criticized equating money laundering with stringent anti-terror and narcotics laws.
  • They pointed out that the maximum sentence for money laundering is seven years, or ten years if narcotics are involved.
• Government’s Stance:
  • The government argued that money launderers are often influential, intelligent, and resourceful.
  • The premeditated nature of the crime makes it challenging for investigators to detect and trace evidence.
  • The government defended the strict bail conditions, highlighting the advanced technology used to conceal transactions.

Current Position

• Money Bill Route:
  • A significant challenge to the amendment on bail in the Vijay Madanlal Choudhary ruling concerns whether these amendments can pass through the Money Bill route.
  • A larger Bench of the Supreme Court is set to review if laws like the Aadhaar Act and service conditions for Tribunal members can be passed this way, though the Bench is yet to be constituted.
• Supreme Court Review:
  • The Supreme Court has agreed to review its ruling in the Vijay Madanlal Choudhary case, but the decision remains valid as no stay has been issued.
  • The ruling requires strict application of the twin test by all courts, including special and constitutional courts, for both regular and anticipatory bail.
• Eligibility for Bail under Section 436A (CrPC):
  • Despite the ruling, an accused can still be eligible for bail under Section 436A of the Code of Criminal Procedure (CrPC).
  • This provision allows for the release of those who have served half of their maximum sentence.
  • For instance, in money laundering cases with a seven-year sentence, an accused can seek bail after three-and-a-half years, regardless of the twin test.

-Source: The Hindu