PMLA’s Stringent Bail Provisions: Current Controversy and Judicial Evolution

In recent months, the Prevention of Money Laundering Act’s (PMLA) stringent bail provisions have emerged as a focal point of intense legal debate in India. The Supreme Court’s evolving jurisprudence on Section 45 of the PMLA has significant implications for accused persons, enforcement agencies, and the broader criminal justice system.

The Contentious Section 45

Section 45 of the PMLA contains what are commonly referred to as the “twin conditions” for bail:

• The public prosecutor must be given an opportunity to oppose the bail application, and
• The court must be satisfied that there are reasonable grounds to believe that the accused is not guilty of the offense and is unlikely to commit any offense while on bail.

These conditions create an exceptionally high threshold for obtaining bail in PMLA cases, departing significantly from the general bail provisions under the Criminal Procedure Code. The practical effect has been prolonged pre-trial detention for many accused persons, sometimes extending to several years.

Current Controversy: The Judicial Pendulum

The judicial interpretation of Section 45 has witnessed significant shifts. In 2017, the Supreme Court in Nikesh Tarachand Shah v. Union of India struck down the twin conditions as unconstitutional, finding them violative of Articles 14 and 21 of the Constitution. The court held that the classification between scheduled offenses under the PMLA and other similar economic offenses was arbitrary and the bail conditions were disproportionately harsh.

Following this judgment, Parliament amended Section 45 in 2018 to address the Supreme Court’s concerns, primarily by making the twin conditions applicable to all offenses with imprisonment of three years or more under the PMLA, rather than the specific scheduled offenses.

The pendulum swung again in July 2022 when a three-judge bench of the Supreme Court in Vijay Madanlal Choudhary v. Union of India upheld the amended Section 45, finding that the legislative changes had cured the defects identified in Nikesh Tarachand Shah. The court emphasized that money laundering is a serious offense against society and the economy, justifying stringent bail provisions.

However, in recent months, various high courts and even different benches of the Supreme Court have shown varying approaches to applying the twin conditions, creating legal uncertainty. The Delhi High Court, in particular, has raised questions about the appropriate application of Section 45 in light of these seemingly contradictory Supreme Court judgments.

 The Manish Sisodia Matter

The ongoing case of former Delhi Deputy Chief Minister Manish Sisodia exemplifies the current controversy. Arrested in February 2023 in connection with the Delhi Excise Policy case, Sisodia has been unable to secure bail despite multiple attempts, with courts consistently applying the stringent twin conditions of Section 45.

The Supreme Court’s observations in Sisodia’s bail hearings have highlighted the tension between the need for stringent measures against money laundering and concerns about prolonged incarceration without trial. In recent hearings, the court expressed concern over the pace of the trial and the prospect of extended pre-trial detention, questioning whether a continued denial of personal liberty can be justified when the trial is likely to take considerable time.

This high-profile case has brought renewed attention to the balance between the state’s legitimate interest in combating money laundering and the constitutional right to personal liberty and timely justice.

The “Proceeds of Crime” Threshold Issue

A closely related contemporary issue is the determination of what constitutes “proceeds of crime” sufficient to trigger PMLA jurisdiction. The ED’s practice of initiating PMLA cases based on allegations involving relatively small sums has been questioned in recent judicial pronouncements.

In a significant development, several high courts have recently started scrutinizing whether the alleged proceeds of crime meet a threshold of seriousness warranting the application of PMLA’s stringent provisions. The Bombay High Court, in particular, has in recent cases emphasized proportionality in applying PMLA provisions, suggesting that trivial cases should not attract the full force of the act’s stringent measures.

Balancing Enforcement Needs and Constitutional Rights

The ongoing controversy reflects a deeper tension in India’s legal system: how to balance effective enforcement against sophisticated financial crimes while preserving constitutional safeguards.

Proponents of stringent bail provisions argue that money laundering investigations are inherently complex, often involving layered transactions across jurisdictions, and require time to unravel. They contend that premature release of accused persons could result in tampering with evidence or flight from justice.

Critics, however, point to several concerns:

1. Presumption of Innocence: The twin conditions effectively reverse the presumption of innocence by requiring the accused to demonstrate they are “not guilty”—a standard nearly impossible to meet at the pre-trial stage.
2. Disproportionate Impact: Accused persons face prolonged incarceration before trial, effectively serving punishment before conviction.
3. Selective Application: Concerns have been raised about potential selective enforcement of PMLA provisions against political opponents.
4. Trial Delays: Given India’s overburdened judicial system, trials in PMLA cases often take many years to conclude, turning pre-trial detention into de facto punishment.

Recent Judicial Trends

Recent judicial trends suggest a possible recalibration in the application of Section 45. Several high courts have begun distinguishing between different categories of accused persons based on their alleged role in the offense, their flight risk, and the stage of the proceedings.

The Supreme Court’s recent observations in various bail matters indicate growing judicial concern about prolonged pre-trial detention. In several recent cases, the Court has granted bail despite the twin conditions, emphasizing that these conditions must be applied in a manner consistent with constitutional values.

A particularly noteworthy development is the emerging judicial recognition that the application of the twin conditions must account for the likely duration of trial. Where trials are expected to be protracted, courts have shown greater willingness to grant bail despite Section 45’s stringent requirements.

Legislative Reform Possibilities

The ongoing controversy has prompted calls for legislative reconsideration of Section 45. Several legal scholars and former judges have advocated for amendments to introduce

1. A maximum period of pre-trial detention in PMLA cases, after which bail would be granted under normal conditions
2. Different standards for different categories of accused based on their alleged role
3. Periodic judicial review of continued detention
4. Special expedited trial procedures for PMLA cases to ensure timely completion

Some parliamentarians have also suggested introducing a materiality threshold for PMLA cases to ensure that the act’s extraordinary provisions are reserved for serious cases involving substantial proceeds of crime.

Conclusion

The evolution of judicial thought on Section 45 represents a larger question facing India’s legal system: how to modernize enforcement mechanisms to address contemporary challenges while preserving time-honored constitutional safeguards. The resolution of this tension will significantly shape the future of not just money laundering enforcement but criminal justice administration more broadly in India.

As the Chief Justice of India recently observed in a related context, “Liberty is too precious a value to be sacrificed at the altar of mere suspicion.” Finding the appropriate balance between liberty and enforcement effectiveness remains the central challenge in the ongoing PMLA bail controversy.

Contributed By: Hetu (Intern)