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Prevention of Money Laundering Act: Relief in Sight

Prevention of Money Laundering Act: Relief in Sight
Former Maharashtra deputy chief minister Chhagan Bhujbal. Photo: UNI
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Above: Jignesh Kishorebhai Bhajiawala, son of Surat-based financier Kishore Bhajiawala

In a judgment that has brought hope to many undertrials facing prosecution for money laundering, the apex court struck down Section 45(1) of the Act which imposed stringent conditions for bail

~By Venkatasubramanian

In a laudatory move, the Supreme Court recently struck down a provision of an act which denied presumption of innocence of the accused and, therefore, bail. Presumption of innocence is the cornerstone of the rule of law and intrinsic to the right to life, liberty and equality.

Section 45(1) of the Prevention of Money Laundering Act, 2002 imposed two conditions for grant of bail where an offence is punishable with more than three years in jail. One was that the Public Prosecutor (PP) must be given a chance to oppose any bail application. The second was that the court must be satisfied, where the PP opposes the application, that there are reasonable grounds for believing that the accused is not guilty of the money laundering offence, and that he is not likely to commit any off­ence while on bail.

The presumption of innocence, which is attached to any person being prosecuted for an offence, was inverted by the conditions specified in Section 45. Under the provision, the court was to be satisfied that there were reasonable grounds to believe that the person was not guilty, and that he was not likely to commit any offence while on bail. The court thus held that Section 45 was a drastic provision which turned on its head this fundamental presumption.


On November 23, a Supreme Court bench of Justices Rohinton Fali Nariman and Sanjay Kishan Kaul struck down this provision as unconstitutional and violative of Articles 14 and 21 of the Constitution.

The bench said: “All the matters before us in which bail has been denied, because of the presence of the twin conditions contained in Section 45, will now go back to the respective courts which denied bail. All such orders are set aside, and the cases remanded in the respective courts to be heard on merits, without application of the twin conditions contained in Section 45 of the 2002 Act. Considering that persons are languishing in jail and that personal liberty is involved, all these matters are to be taken up at the earliest by the respective courts for fresh decision.”

Separatist leader Shabbir Shah
Separatist leader Shabbir Shah

As a result of the decision, a number of accused who are facing prosecution under the Act are likely to be found eligible for bail. Among them are Nationalist Congress Party leader Chhagan Bhujbal and Kashmiri separatist leader Shabbir Shah. According to a newspaper report, almost no one got bail until a chargesheet was filed in the PMLA cases. Of the over 120 persons accused by the Enforcement Directorate and arrested under the PMLA since 2005, only three have successfully secured bail within months of their arrest, said another report.

The PMLA was introduced to make money laundering an offence and attach the properties of those involved so that this serious threat to the financial system is adequately dealt with. The Act, passed by parliament in 2002, became effective only on July 1, 2005. Simply put, money laundering involves using the proceeds of crime and claiming it as untainted property. The offence is punishable with rigorous imprisonment from three to seven years (with the maximum imprisonment fixed at 10 years) and is also liable to fine.


The petitioner, Nikesh Tarachand Shah, and others like him before the Supreme Court submitted that Section 45 of the Act, which seeks to impose two additional conditions for grant of bail, is manifestly arbitrary, discriminatory and violative of their fundamental rights under Article 14 read with Article 21 of the Constitution.

Former Maharashtra deputy chief minister Chhagan Bhujbal. Photo: UNI
Former Maharashtra deputy chief minister Chhagan Bhujbal. Photo: UNI

Part A of the Schedule of the Act contained two paragraphs. Para 1, containing Sections 121 and 121A of the IPC, deals with waging or attempting to wage war or abetting waging of war against the Government of India and conspiracy to commit such offences. Para 2 dealt with offences under the Narcotic Drugs and Psychotropic Substances Act (NDPSA), 1985.

Part B of the Schedule, as originally enacted, referred to certain offences of a heinous nature, which included murder, extortion, kidnapping, forgery and counter­feiting. Paragraphs 2 to 5 of Part B dealt with certain offences under the Arms Act 1959, Wildlife (Protection) Act, 1972, Immoral Traffic (Prevention) Act, 1956, and the Prevention of Corruption Act, 1988.


When the Act was originally enacted, it was clear that the twin conditions applicable under Section 45(1) would only be in cases involving waging of war against the Government of India and offences under NDPSA. Even the most heinous offences under the IPC were contained only in Part B so that if bail were asked for, the twin conditions imposed by Section 45(1) would not apply.

Incidentally, one of the reasons for classifying offences in Part A and Part B of the Schedule was that offences specified under Part B would be attracted only if the total value involved in such offences was Rs 30 lakh or more.

Thereafter, the Act was amended several times. In 2009, an amendment inserted more offences under Parts A and B of the Schedule. In 2012, a very important amendment was made by which offences under Part B were transplanted into Part A. This made bail difficult to obtain even for those accused of minor offences.

The court held that before application of a section which makes drastic inroads into the fundamental right of personal liberty guaranteed by Article 21, we must be doubly sure that such provision furthers a compelling State interest for tackling serious crime. Provisions akin to Section 45 were upheld earlier on the ground that there was such a compelling State interest, the court added. The court’s upholding of the draconian provisions of the Terrorist and Disruptive Activities (Prevention) Act (TADA), for example, was justified on this ground.

The impact of the ruling on the government’s fight against black money is yet to be observed, although the court has held that the provision being found unconstitutional does not serve the purpose of the PMLA.

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