The Hon'ble Supreme Court's recent judgments on Section 45 of the Prevention of Money Laundering Act, 2002 ("PMLA"), have constituted a marked change in the approach adopted by courts regarding bails in cases concerning the offence of money laundering. Over the past few years, decisions have been predominantly in favour of the Directorate of Enforcement1 ("ED"), with the courts deferring to the ED's wide – ranging investigatory powers and the infamous 'twin conditions'2 under Section 45 of the PMLA. However, from the recent decisions being rendered by the Hon'ble Supreme Court, it seems that the twin conditions contained in Section 45 of the PMLA are now being watered down and being treated with a far less stringent standard.
In this scenario, two questions must be addressed:
1) Have the Hon'ble Supreme Court's pronouncements incorporating the rights under Article 21 of the Constitution into Section 45 of the PMLA had a tangible impact on the ultimate outcome of bail? 2) Have the Hon'ble Supreme Court's judgments meant that courts are permitted to place reliance on an accused's rights under Article 21 of the Constitution while side – stepping the stringent twin conditions under Section 45 of the PMLA?
This article seeks to examine the various decisions recently delivered by the Hon'ble Supreme Court and the Hon'ble High Court of Delhi to attempt to answer the above - mentioned questions.
While it is frequently argued by the ED before trial courts (and, at times, before High Courts) that the twin conditions contemplated under Section 45 of the PMLA would apply to all circumstances wherein bail is sought, there are two exceptions that have already been carved in:
a. The twin conditions do not apply to applications for medical bail under the proviso3 of Section 45 of the PMLA;4
b. The twin conditions do not apply to applications under Section 88 of the Code of Criminal Procedure, 1973 / Section 91 of the Bharatiya Nagarik Suraksha Sanhita, 2023, where the applicant has not been arrested before the filing of the Complaint by the ED.5
The case that is now taking precedence in the new approach being employed by the Hon'ble Supreme Court is Manish Sisodia v. Directorate of Enforcement6. In Manish Sisodia (supra), the ED argued that the accused would not be entitled to a grant of bail unless the twin conditions under Section 45 of the PMLA are fulfilled. The Hon'ble Supreme Court disagreed with this proposed standard. Instead, the Hon'ble Supreme Court held that where there is a delay in the commencement of the trial coupled with the incarceration of the accused for a prolonged period, the aforesaid factors must be read into Section 45 of the PMLA.7 The Hon'ble Supreme Court also held that while trial courts and High Courts are entitled to conduct a merit – based review of the allegations against the applicant, the said courts must always be cognizant of the import of Article 21 of the Constitution.8
The Hon'ble Supreme Court's subsequent judgment in K. Kavitha v. Directorate of Enforcement 2024 SCC OnLine SC 2269 reiterated the observations made in Manish Sisodia (supra) in respect of the requirement to ensure compliance with Article 21 of the Constitution.9 However, it may be argued to distinguish K. Kavitha (supra) that, first, the judgment is predicated solely on the application of the proviso under Section 45 of the PMLA, and second, that the ED conceded that there was no need to record detailed observations on the merits of the case.10
Indeed, such an attempt to distinguish K. Kavitha (supra) may be incorrect, considering that the Hon'ble Supreme Court did not undertake a merits – based review solely on the ED's concession. Rather, the Hon'ble Supreme Court stated that such merits – based review was not required at the stage of adjudicating a bail application.11 Further, distinguishing K. Kavitha (supra) as applicable only in the context of the proviso to Section 45 of the PMLA does not necessarily hold as it was emphasized in the judgment that it would be impossible for the trial to conclude in the near future, and ergo, the safeguards of Article 21 of the Constitution would also came into play.12
Subsequently, in Prem Prakash v. Union of India13, the Hon'ble Supreme Court has held that the twin conditions under Section 45 of the PMLA, do not re – write the principle that bail is the rule and jail is the exception. However, it is pertinent to mention that these observations do not underpin the judgment, and, in fact, the Hon'ble Supreme Court proceeded to conduct an examination on merits regarding the twin conditions under Section 45 of the PMLA. As such, it appears that the concerns pertaining to Article 21 of the Constitution, i.e., period of custody or likelihood of conclusion of trial, did not weigh with the Hon'ble Supreme Court in granting bail to the applicant.14
Thereafter, in Vijay Nair v. Directorate of Enforcement15 (arising out of the same PMLA and scheduled offence proceedings as Manish Sisodia and K. Kavitha), a merits – based approach was once again proposed by the ED before the Hon'ble Supreme Court. While the ED's submission was taken into account, it was observed by the Hon'ble Supreme Court that around 350 witnesses were to be examined, with the Complaint containing more than 25,000 pages of relied – upon documents16, with the ongoing investigation having already taken place over a period of two years.17 Accordingly, while the stringency of the bail conditions was noted, the Hon'ble Supreme Court held that the rigours of the twin conditions could be relaxed if the applicant has been in judicial custody for a considerable period, and there is no likelihood of conclusion of trial within a short span.18
As can be seen from the judgments discussed above hereinabove, the Hon'ble Supreme Court has sought to depart from requiring a merits – based analysis to be the sole determination during the adjudication of a bail application under Section 45 of the PMLA and is now seeking to bring in the protections afforded under Article 21 of the Constitution. Considering the extremely restrictive standards that were applied by courts earlier, this change in approach is, indeed, significant. The import of such judgments has now also influenced the decisions of the Hon'ble High Court of Delhi.
While not widely publicised and discussed, the Hon'ble High Court of Delhi's decision in Gurupada Maji v. Enforcement Directorate19 pronounced shortly after the aforesaid judgments makes for an interesting read. The Hon'ble High Court held that the submissions of both the applicant and the ED must be examined considering the Hon'ble Supreme Court's pronouncements on Article 21 of the Constitution and not solely by applying the twin conditions. Guided by Manish Sisodia (supra), the Hon'ble High Court balanced the twin conditions under Section 45 of the PMLA with the rights under Article 21 of the Constitution and held that a case had been made out for grant of bail in view of the fact that the applicant had undergone incarceration for a period of more than twenty – eight months, coupled with the reality that 64 witnesses were to be examined in addition to examining 3900 pages of relied upon documents.20 Critically, the Hon'ble High Court disagreed with any submissions on merits by the ED, holding that since these submissions were complex issues that would require further evidence, such questions would be best left open to the trial court, as the Court was in this case inclined to grant bail based on the import of Article 21 of the Constitution.21
Gurupada Maji (supra) was the first judgment rendered by the Hon'ble High Court of Delhi reading down the restrictiveness of the twin conditions under Section 45 of the PMLA and is noteworthy for unequivocally refusing to undertake a merits – based analysis. Gurupada Maji (supra) has been followed subsequently by multiple judgments of the Hon'ble High Court of Delhi that have sought to evolve the jurisprudence regarding Section 45 of the PMLA. While the Hon'ble High Court in Chanpreet Singh Rayat v. ED22, Sameer Mahendru v. ED23, and Adnan Nisar v. ED,24 conducted a merits – based review and found that the twin conditions under Section 45 of the PMLA were met, it was also held that even when such twin conditions are not met, bail can be granted under Article 21 of the Constitution. On the other hand, in Arun Pillai v. ED25, Amit Arora v. ED,26 and Amandeep Singh Dhall v. ED27, the Hon'ble High Court did not undertake a merits – based analysis and proceeded to grant bail solely considering the factors under Article 21 of the Constitution. The position insofar as the Hon'ble High Court of Delhi is concerned is that bail under Section 45 of the PMLA could be granted to an applicant notwithstanding the applicability of the twin conditions.
The Hon'ble Supreme Court has also recently granted bail in Mohd. Enamul Haque v. ED28 on the ground that the trial was yet to commence despite two and a half years of incarceration without going into a merit – based analysis.
The loosening of the rigors imposed by the twin conditions has been reaffirmed by the Hon'ble Supreme Court in V. Senthil Balaji v. ED29, along with opening an entirely new discussion on the requirement of completing the trial of the scheduled offence before any adjudication under the PMLA can take place. In Senthil Balaji (supra), the Hon'ble Supreme Court noted that there was no possibility of the trial of scheduled offences concluding at any point in the next three to four years.30 Accordingly, observing that the allegations related to the schedule offence is fundamental to establish the existence of proceeds of crime under the PMLA, the Hon'ble Supreme Court noted that the existence of proceeds of crime at the PMLA trial could only be proved if the scheduled offence is proved during schedule offence trial.31 Considering the prolonged period that both the trial of the scheduled offence as well as the PMLA would inevitably take, the Hon'ble Supreme Court was of the opinion that the applicant ought to be granted bail under Article 21 of the Constitution.32
Thus, the sequitur of the observations laid down by the Hon'ble Supreme Court in this regard may allow for the argument that trials under the PMLA cannot be finally adjudicated until the conclusion of the trial of the scheduled offence. Accordingly, the Hon'ble Supreme Court's decision in Senthil Balaji (supra) is unprecedented because the Hon'ble Supreme Court has, for the first time, made such observations pertaining to the interplay between the establishing of proceeds of crime in the trials relating to the scheduled offence vis – a – vis the proving of the same in PMLA proceedings. It remains to be seen how this pronouncement would be read along with the Hon'ble Supreme Court's judgment in Vijay Madanlal Choudhary and Ors. v Union of India and Ors33, that held that the offence of money – laundering is an independent offence regarding the process or activity connected with the proceeds of crime that have been derived from the scheduled offence.
Consequently, while the invocation of Article 21 of the Constitution cannot be said to render the twin conditions obsolete in all cases, significant import may be placed on the safeguards provided for thereunder when adjudicating bail applications under Section 45 of the PMLA. This shift by the Hon'ble Supreme Court is a welcome departure from the rigidity earlier associated with the adjudication of bail applications under Section 45 of the PMLA. Indeed, it is now open to Courts to solely allow bail applications under Section 45 of the PMLA by relying on the safeguards under Article 21 of the Constitution rather than being required to undertake a merit – based analysis. It will be interesting to see how trial courts interpret and implement the aforesaid decisions.
Footnotes
1 The Enforcement Directorate is an investigation agency tasked with investigating violations of the Prevention of Money Laundering Act, 2002, Foreign Exchange Management Act, 1999, and Fugitive Economic Offenders Act, 2018. While the Enforcement Directorate has been vested with wide – ranging powers, their officers are not considered "police officers" as per the Hon'ble Supreme Court's judgment in Vijay Madanlal Choudhary and Ors. v Union of India and Ors., (2023) SCC OnLine SC 929 (India).
2 Section 45 of the PMLA provides that the "twin conditions" under it requires any court adjudicating a bail application to be satisfied that: (a) there are reasonable grounds for believing that a person is not guilty of an offence under Section 3 of the PMLA; and (b) that the person will not commit any offences after being granted bail. The act of enquiring whether there are "reasonable grounds for believing that a person is not guilty of an offence" would require courts to undertake an extensive merits – based analysis, meaning that adjudicating a bail application would often be tantamount to adjudicating an application seeking discharge before charges are framed.
3 The first proviso to Section 45 of the PMLA provides that if a person is under sixteen years of age, or a woman, or is sick or infirm, the Court adjudicating the bail application may use their discretion to release the said person on bail.
4 Devaki Nandan Garg v Directorate of Enforcement, 2022 SCC OnLine Del 3086 [Para 35] (India), and Sanjay Jain (in Judicial Custody) v Enforcement Directorate, 2023 SCC OnLine Del 3519 [Para 27, 28] (India).
5 Tarsem Lal v Directorate of Enforcement, (2024) 7 SCC 61 [Para 23, 24, 27, 31] (India).
6 2024 SCC OnLine SC 1920 (India).
7 Id., Para 37 and 44.
8 Id, Para 44.
9 Id., Para 12 – 13.
10 Id., Para 4.
11 Id.
12 Id., Para 11 – 13.
13 2024 SCC OnLine SC 2270 [Para 11] (India).
14 Id., Para 45.
15 SLP (Crl) Diary No. 22137/2023 [Para 5] (India), dated 02nd September 2024.
16 The term 'relied – upon documents' refers to the documents that are filed by the ED along with their Prosecution Complaint under Section 44 of the PMLA. These documents are the only materials that a court examines while adjudicating applications of bail under Section 45 of the PMLA.
17Id., Para 8.
18 Id., Para 9 and 12.
19 Bail Appln. 3595/2022 [Para 40] (India) dated 30th August 2024.
20 Id., Para 41 – 43.
21 Id., Para 46.
22 Bail Appln. No. 2095/2024 [Para 80 – 81], dated 09th September 2024.
23 Bail Appln. No. 1063/2024 [Para 56 – 57], dated 09th September 2024.
24 Bail Appln. 3056/2024 [Para 122], dated 17th September 2024.
25 Bail Appln. No. 3322/2023 [Para 65], dated 11th September 2024.
26 Bail Appln. No. 2727/2023 [Para 43 – 45], dated 17th September 2024.
27 Bail Appln. 2761/2024 [Para 65 – 66], dated 17th September 2024.
28 SLP (Crl) No. 11129/2024 [Para 5 – 6] (India), dated 23rd September 2024.
29 SLP (Crl) No. 3986 of 2024 (India), dated 26th September 2024.
30 Id., Para 17.
31 Id., Para 21.
32 Id.
33 (2023) SCC OnLine SC 929 (India).
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