Section 45 of the Prevention of Money Laundering Act (PMLA) in light of the recent Supreme Court judgment in the case of Tarsem Lal v. Directorate of Enforcement.

 

Section 45 of the PMLA: An Overview

The Prevention of Money Laundering Act (PMLA), 2002, is a critical piece of legislation in India's aimed at combating the menace of money laundering in India and fight against financial crimes. Section 45 of the PMLA deals with bail conditions for an accused in a money laundering case. Unlike ordinary criminal cases where bail is the norm, the PMLA imposes stringent conditions for bail. It lays down specific requirements that an accused must fulfil to be eligible for bail.

The Twin Conditions under Section 45

1. Reasonable Grounds for Belief: The accused must demonstrate reasonable grounds for believing that they are not guilty of the money laundering offense.
2. Execution of Bond: The accused should execute a bond for their appearance before the Special Court in response to the summons issued to them.

Why is Section 45 Considered Stringent?

3.      The "twin conditions" under Section 45 shift the burden of proof onto the accused. In most criminal cases, the prosecution must prove the accused's guilt beyond a reasonable doubt. However, under Section 45, the accused must prove their innocence to secure bail. This reversal of the burden of proof is often criticized as being against the fundamental principles of criminal jurisprudence.

The Supreme Court's Stance on Section 45

The Supreme Court of India has, over the years, grappled with the constitutionality and fairness of Section 45. In several landmark judgments, the court has attempted to strike a balance between the need to curb money laundering and the rights of the accused.

• Nikesh Tarachand Shah v. Union of India (2017): The court upheld the constitutionality of Section 45 but introduced the proviso that the "twin conditions" would not apply if the accused was under 16 years of age, a woman, sick, infirm, or accused of laundering less than one crore rupees.
• P. Chidambaram v. Directorate of Enforcement (2019): The court emphasized that while Section 45 imposes stringent conditions, it does not completely bar the grant of bail. The court must consider the individual circumstances of each case.

Recent Amendments and Their Impact

·       The Finance Act, 2018, further amended Section 45 by removing the monetary threshold of one crore rupees. This means the "twin conditions" now apply to all PMLA cases, irrespective of the amount involved. This amendment has been met with criticism, as it is seen as further tightening the noose around the accused.

 

Recent Supreme Court Judgment

1.      In the Tarsem Lal case, the Supreme Court clarified certain aspects related to Section 45 of the PMLA. Here are the key takeaways:

                                I.            Supreme Court held that when an accused in a case under the Prevention of Money Laundering Act, 2002 (PMLA), who appears before the Special Court pursuant to a summons issued to him, it cannot be considered that he is in custody. Therefore, such an accused is not required to apply for bail under Section 45 of the PMLA. The Special Court can however ask such an accused to furnish bonds to secure presence in terms of Section 88 of the Code of Criminal Procedure. To accept such a bond, it is not necessary that the stringent twin conditions for bail under Section 45 of the PMLA must be satisfied, clarified the Supreme Court.

                 “If the accused appears before the Special Court pursuant to a summons, it cannot be treated that he is in custody. Therefore, it is not necessary for the accused to apply for bail. However, the special court can direct the accused to furnish bonds in terms of Section 88 of the Code of Criminal Procedure. A bond furnished in terms of Section 88 CrPC is only an undertaking. Therefore, the order accepting bond under Section 88 does not amount to grant of bail and hence the twin conditions of Section 45 of the PMLA are not applicable to it.”,

 

                              II.            Power of Arrest after Cognizance: The Court held that the power to arrest vested in the officers of the Directorate of Enforcement (ED) under Section 19 of the PMLA cannot be exercised after the Special Court takes cognizance of the offense punishable under Section 4 of the PMLA. In other words, once the Special Court has taken cognizance, the ED cannot arrest the accused.

                            III.            Appearance Pursuant to Summons: If an accused appears in court following the summons issued by the Special Court, there is no reason to issue a warrant of arrest against them or take them into custody¹. This emphasizes the importance of complying with court summons.

                            IV.            Section 45(1) Not Applicable: The Court further clarified that Section 45(1), which deals with bail conditions, does not apply to an accused who appears before the court as per the summons². Hence, the twin conditions mentioned in Section 45 are not relevant in such cases.

Critical Analysis

The judgment strikes a balance between the rights of the accused and the enforcement agencies. By limiting the power of arrest after cognizance, it ensures that the accused’s liberty is safeguarded. However, it also underscores the significance of timely appearance before the court.

In practice, this ruling will impact how the ED handles cases under the PMLA. Accused individuals who comply with court summons promptly will benefit from this clarification.

In conclusion, the recent Supreme Court judgment in the Tarsem Lal case provides clarity on the applicability of Section 45 of the PMLA and reinforces the importance of adherence to court procedures. As legal practitioners, we must stay informed about such developments to effectively represent our clients.

 

Disclaimer: This article provides a simplified overview of the above-mentioned issue. It is advisable to consult a legal professional for detailed interpretation and application of these provisions to specific cases.

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