Section 45(1) of PMLA : Declared Unconstitutional by Supreme Court of India

Court :- Supreme Court of India , Citation :- AIR 2017 SC 5500

In the case of Nikesh Tarachand Shah vs Union Of India (MANU/SC/1480/2017   [2018]145SCL96(SC   (2018)11SCC1  2018 (2) SCJ 353) , the question that came before the Supreme Court was of the constitutional validity of Section 45 of PMLA. Section 45(1) imposes two conditions for grant of bail where an offence punishable for a term of imprisonment of more than 3 years under Part A of the Schedule to the Act is involved.

While declaring Section 45(1) of the Prevention of Money Laundering Act, 2002 (PMLA) unconstitutional,the Hon’ble Supreme Court held,

“We declare Section 45(1) of the Prevention of Money Laundering Act, 2002, insofar as it imposes two further conditions for release on bail, to be unconstitutional as it violates Articles 14 and 21 of the Constitution of India.

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 to 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.

 

Accordingly, the Apex Court, in the above case upheld the principles of natural justice and has very rightly has observed that:

  • The provisions of section 45 are arbitrary since it tries the offence of money laundering with the offences enumerated under Schedule A. This is not just and fair and thus violates Articles 14 and 21.
  • There is no rational nexus which exists between the object of the Act(which is to penalize for the offence of money laundering) and the object of Section 45(which is applicable to other offences).
  • Section 45(1) of the Act is in violation of the presumption of innocence which cannot be justified even in light of the scheme of the Act. It is in violation of Article 21. Even though section 24 of the act reverses the burden of proof, it still cannot be read with section 45 as section 45 only applies to schedule A offences.
  • Classification of an offence based on sentence of imprisonment of more than three years in Part A of the Schedule is arbitrary and unjustified as it has no reasonable nexus to the object sought to be achieved by the Act.

 

 

 

The case of Raj Kumar Goel and Ors. v Directorate of Enforcement , Delhi High court ( 2018 (170) DRJ 109) is an example of the implication of the Supreme Court Judgement of Nikesh Tarachand Shah v Union Of India, holding the twin conditions for grant of bail under Section 45(1) PMLA unconstitutional and hence, not required.

The High Court of Delhi held that,

“The major change which is required to be considered by this Court…in the present case is the non-applicability of the twin conditions under Section 45 of PMLA which was the major reason for rejection of the earlier bail application of Rohit Tandon (Petitioner). Second major consideration is that the offence punishable under Section 4 PMLA provides for maximum sentence of imprisonment for seven years with a minimum sentence for imprisonment of three years… Hence the trial is likely to take some time. Thus, this Court deems it fit to grant bail to the petitioners.

 

By:

Vijay Pal Dalmia, Advocate
Supreme Court of India & High Court of Delhi

Mobile: +91 9810081079
Email: vpdalmia@gmail.com

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