Recently, the Supreme Court has held the applicable of the general principle of law that ‘bail is rule and jail is exception’ even to money laundering cases under the Prevention of Money Laundering Act (PMLA).
The court noted that statutory provisions should align themselves to the said higher constitutional edict. “From the judgments in cases of Satender Antil, Tarsem Lal and now Prem Prakash, Supreme Court has persisted with upholding the supremacy of the constitutional rights of an individual under Article 21 versus ED’s powers under Section 45 of the PMLA. Tendency to dismiss Bails in PMLA cases purely on carving out an exception for alleged Economic Offences has been corrected. General principle i.e. Bail is the Rule and Jail is the Exception continues to be the norm,” said Rajiv Bhatnagar, Partner, Khaitan & Co.
The court also held that when an accused is in custody under PMLA irrespective of the case for which he is under custody, any statement under Section 50 PMLA to the same Investigating Agency is inadmissible against the maker with this the “SC has given a breather to potential accused by trimming the ambit of presumptions under Section 24 of the PMLA. ED’s opposition to any Bail ought be based on meticulous submission of underlying data satisfying 3 facets set by SC. Cursory affidavits filed by ED creating mere suspicion or purely based on statements of Co-accused would no longer meet the threshold of Section 45 of the PMLA,” said Rajiv Bhatnagar.
Interesting times ahead in pending ED Trials and Bails. Inadmissibility of statements under Section 50 recorded during custody or recorded in another case will have wide ramifications, especially in cases which are pending trial as ED would be unable to rely on them prove the guilt of an Accused.Rajiv Bhatnagar, Partner, Khaitan & Co.
The rationale was that the person in custody pursuant to the proceeding investigated by the same Investigating Agency is not a person who can be considered as one operating with a free mind. Thus, “This verdict marks a departure from the otherwise strict rigours of Section 45 of the PMLA by aligning it with Article 21 of the Constitution of India from where the said principle emanates. The judgment shall also enable Trial Courts and High Courts to grant bail in PMLA cases which they were otherwise reluctant to do so, keeping in view the statutory mandate,” said Rohan Taneja, Senior Associate, Kred Jure.The Supreme Court relied on the judicial precedent of Vijay Madanlal Choudhary and Ors. v. Union of India and Ors. in which court categorically held that while Section 45 of PMLA restricts the right of the accused to grant of bail, it could not be said that the conditions provided under Section 45 impose absolute restraint on the grant of bail. Now, “Supreme Court has ruled that bail is a rule and jail an exception even under PMLA cases. This judgment is not against the spirit of Section 45 of PMLA. The court said that twin conditions in Section 45 is not an absolute bar to grant bail, which seems to be impression at the trial courts. The courts furthered the point that a bail cannot be refused as a matter of punishment. So in case an accused satisfies the twin condition under Section 45, bail will be the rule,” said Sameer Jain, Managing Partner, PSL Advocates & Solicitors.
The court emphasised on the principle of “bail is the rule and jail is the exception” adding that the principle is only a paraphrasing of Article 21 of the Constitution of India. In this case, Hon’ble SC has upheld the importance of personal liberty of an accused irrespective of offence. The accused cannot be denied bail merely on the ground that he is an acucuse of a grave economic offence or under any special Act,” said Tushar Agarwal, Founder and Managing Partner, C.L.A.P. Juris, Advocates and Solicitors.
The Article 21 states that no person shall be deprived of his life or personal liberty except according to the procedure established by law. The liberty of the individual is always a rule and deprivation is the exception. However, the court noted that the deprivation can only be by the procedure established by law, which has to be a valid and reasonable procedure. “Even though Section 45 of the Prevention of Money Laundering Act (PMLA) specifies the conditions for granting bail, it does not override the fundamental legal principle that ‘bail is the rule and jail is the exception.’ This principle is deeply rooted in Article 21 of the Indian Constitution, which mandates that no person shall be deprived of life or personal liberty except through a procedure established by law. The core tenet of this doctrine is that personal liberty is the norm, and its deprivation should occur only through a valid and reasonable legal process,” said Aslam Ahmed, Partner, Singhania & Co.
While Section 45 imposes dual conditions for bail in money laundering cases, these conditions do not alter the foundational principle, nor do they imply that detention is the norm and freedom the exception. Instead, they function as additional safeguards to ensure that the bail process is rigorous and just.Aslam Ahmed, Partner, Singhania & Co.
He adds, “Courts must ensure that any denial of bail adheres to lawful and fair procedures, in alignment with the constitutional guarantee that individual liberty should be curtailed only when absolutely necessary and in strict conformity with established legal norms. In doing so, the judiciary upholds the balance between the need for justice and the preservation of fundamental rights.”
The section 45 of PMLA imposes twin conditions. However, the statutory does not re-write this principle to mean that deprivation is the norm and liberty is the exception. As set out earlier, all that is required is that in cases where bail is subject to the satisfaction of twin conditions, those conditions must be satisfied. Thus, “It is a general principle that the hon’ble supreme court has laid down in the present case. The applicant in Prem Prakash v. UoI wasn’t named in the FIR and prima facie isn’t guilty of having committed the offence. For the likelihood of evidence tampering, per section 45 of the PMLA conditions to enable bail are applicable and here the bail bond of Rs 5 lakh, alongwith two surety of like amount, was deemed sufficient,” said Neelam Singh, Advocate, High Court of Allahabad (Lucknow Bench).
The court found the rigours of Section 45 of PMLA can be suitably relaxed to afford conditional liberty. “The emphasis on Dignity and Liberty of an individual is one of the ingrained tenets of the essence of Fundamental Rights guaranteed by the Indian Constitution. Time and again, the Hon’ble Apex Court has reiterated the rule of “Bail, and not Jail” as the accepted norm. The same, moreover, is consistent with the fundamental principle of Criminal Jurisprudence that upholds,”Innocent until proven guilty””, said Anshuman Singh, Advocate (AOR), Patna High Court
While very often, the Higher Constitutional Courts in the Country adopt a more benevolent and forbearing approach towards granting Bail, it is the Trial Courts that often seem wary in granting Bails for multiple reasons. It must be borne in mind that “Bail” is a vital part of Criminal Justice System and due acknowledgement of it is of cardinal importance.Anshuman Singh, Advocate (AOR), Patna High Court
The court found the words used in Section 45 to be “reasonable grounds for believing” which means that the Court has to see only if there is a genuine case against the accused and the prosecution is not required to prove the charge beyond reasonable doubt. “The issue of bail in PMLA cases has been of great concern. The Hon’ble Madras High Court in the matter of Senthil Balaji has observed that the “Jail is the rule and bail is an exception” in the PMLA cases,” said Manoj Singh, Senior Partner, Lex Panacea.
The Directorate of Enforcement has always taken a plea before the Trial Courts to Hon’ble Supreme Court that they are different and Court should treat them differently. There is no doubt that PMLA is a Special Law. However, it is trite law that basic principles of law shall be applicable untill and unless otherwise is provided under the Act.Manoj Singh, Senior Partner, Lex Panacea
Amir Khan, Associate, Accord Juris said, “The recent supreme court judgement reaffirm the principle that bail is the rule and jail is the exception even under the Prevention of Money Laundering Act (PMLA). The Court also states that stringent condition for the bail under pmla will to override this principle the section 45 of PMLA must be satisfied by the accused for the grant of bail.”
The Section 45 of PMLA restricts the right of the accused to grant of bail. However, “In Prem Prakash vs Union of India the court held that the appellant is not directly guilty of the offences and he is unlikely to tamper the evidence so the court held a fit case for granting of bail. This judgment is once again sets a precedent that the the courts will not let the misuse of strict laws to deny bail, ensuring people aren’t unfairly jailed without trial. By reaffirming that bail is the norm,” said Amir Khan.
The court held that all that is required is that in cases where bail is subject to the satisfaction of twin conditions, those conditions must be satisfied. “The Hon’ble Supreme Court in the present Judgment has established the principle that Bail is a rule and Jail is an exception is applicable in PMLA cases also and Section 45 of the PMLA is not a bar to that principle. The personal liberty of a person should be protected as a rule and any restriction on personal liberty should only be imposed through procedure established by law and that restriction should be lawful and reasonable,” said Arman Sharma, Partner, Anand Sharma and Associates.
The court also noted that the presumption under Section 24 would arise and the burden would shift on the accused only if the public prosecutor takes a considered decision to oppose the bail application with the direction that the application should specifically crystallize albeit briefly the material sought to be relied upon to establish prima facie the foundational facts. “Those following the Supreme Court closely would have noted that time and again emphasised that in order to practice “innocent until proven guilty”, the courts must consider bail as the rule. However, it is pertinent to note that there is a significant hesitation in granting bail under serious offences such as Money Laundering – and rightly so – as Section 24 of the Prevention of Money Laundering Act (PMLA) effectively reverses the presumption of innocence in these cases,” said Kunal Veer Chopra, Associate, SKV Law Offices.
However, the Courts across the country have, on several occasions noted the Enforcement Directorates modus operandi – where they arrest individuals under the PMLA, and the trail is either never commenced or if commenced never finished.Kunal Veer Chopra, Associate, SKV Law Offices.
He adds, “Furthermore, the Supreme Court very recently made it clear in the Manish Sisodia V. Union of India that even in the cases of PMLA – Bail is the rule and Jail is the exception. The Supreme Court also criticised the conduct of the high courts, where the Hon’ble court observed that “High Courts Attempt to play safe in matters of bail”, and how this conduct floods the Supreme court with bail petitions and increases pendency.”
The liberty of the individual is always a rule and deprivation is the exception. Thus, “recent Supreme Court judgments in the field of PMLA have been loosening the perceived strangulation of liberty,” said Kapil Arora, Partner, Cyril Amarchand Mangaldas.
The judgment dated 28.08.2024 in Prem Prakash v Union of India, SLP (Crl) No. 5416/2024 is a continuation of this trend. While considering an appeal against rejection of bail under Prevention of Money Laundering Act, 2002 (PMLA), the Court has applied the age old “bail is rule, jail is exception” even to matters of bail under PMLA. The rationale being that requirement of the ‘twin test’ under the PMLA regime would not exclude the application of this principle.Kapil Arora, Partner, Cyril Amarchand Mangaldas
In the recent case of Manish Sisodia v Union of India, The court relied on the principle that the governing principle is that bail is the rule and jail is the exception. “The judgement in Prem Prakash comes close on the heels of the judgement dated 09.08.2024 in Manish Sisodia v Union of India, Criminal Appeal No. 3295 of 2024 wherein the Apex Court noted delay in trial as a consideration for grant of bail. It was held that a person cannot be inordinately deprived of liberty, while also suffering the prejudice of a delayed trial,” said Kapil Arora.
He adds, “In fact, in Tarsem Lal v Directorate of Enforcement, Criminal Appeal No. 2608 of 2024, the court has limited the applicability of the ‘twin test’ under PMLA only to matters of bail. The court clarified that when an arrest warrant issued against an accused by a court (as a means to compel appearance), the remedy would be to seek cancellation of the warrant and not to seek bail. Consequently, the ‘twin test’ can have no application.”
The key takeaway from the judgment would be that the supreme court “is trying to foster safeguards for liberty, even within the stringent framework of the PMLA,” said Kapil Arora.
