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Thursday, November 23, 2017

Regard being had to the above, 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.

1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL ORIGINAL/APPELLATE JURISDICTION
WRIT PETITION (CRIMINAL) NO. 67 OF 2017
NIKESH TARACHAND SHAH …PETITIONER
VERSUS
UNION OF INDIA & ANR. …RESPONDENTS
WITH
WRIT PETITION (CRIMINAL) NO.103 OF 2017
WITH
WRIT PETITION (CRIMINAL) NO.144 OF 2017
WITH
WRIT PETITION (CRIMINAL) NO.152 OF 2017
WITH
CRIMINAL APPEAL NO. 2012 OF 2017
(ARISING OUT OF SLP (CRL) NO.7326 OF 2017)
WITH
CRIMINAL APPEAL NO. 2013 OF 2017
(ARISING OUT OF SLP (CRL) NO.7786 OF 2017)
WITH
CRIMINAL APPEAL NO. 2014 OF 2017
(ARISING OUT OF SLP (CRL) NO.7789 OF 2017)
2
J U D G M E N T
R.F. Nariman, J.
1. Leave granted.
2. The present writ petitions and appeals raise the question
of the constitutional validity of Section 45 of the Prevention of
Money Laundering Act, 2002. 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. The conditions are that the
Public Prosecutor must be given an opportunity to oppose any
application for release on bail and the Court must be satisfied,
where the Public Prosecutor opposes the application, that there
are reasonable grounds for believing that the accused is not
guilty of such offence, and that he is not likely to commit any
offence while on bail.
3. The Prevention of Money Laundering Act, 2002 was
introduced, as its Statement of Objects and Reasons mentions,
to make money laundering an offence, and to attach property
3
involved in money laundering, so that this serious threat to the
financial system of India is adequately dealt with. It is worth
setting out the Statement of Objects and Reasons of the Act in
full.
“STATEMENT OF OBJECTS AND REASONS
It is being realised, world over, that moneylaundering
poses a serious threat not only to the
financial systems of countries, but also to their
integrity and sovereignty. Some of the initiatives
taken by the international community to obviate
such threats are outlined below:—
(a) the United Nations Convention Against Illicit
Traffic in Narcotic Drugs and Psychotropic
Substances, to which India is a party, calls for
prevention of laundering of proceeds of drug crimes
and other connected activities and confiscation of
proceeds derived from such offence.
(b) the Basle Statement of Principles, enunciated in
1989, outlined basic policies and procedures that
banks should follow in order to assist the law
enforcement agencies in tackling the problem of
money-laundering.
(c) the Financial Action Task Force established at
the summit of seven major industrial nations, held in
Paris from 14th to 16th July, 1989, to examine the
problem of money-laundering has made forty
recommendations, which provide the foundation
material for comprehensive legislation to combat the
problem of money-laundering. The
recommendations were classified under various
heads. Some of the important heads are—
4
(i) declaration of laundering of monies
carried through serious crimes a
criminal offence;
(ii) to work out modalities of disclosure
by financial institutions regarding
reportable transactions;
(iii) confiscation of the proceeds of
crime;
(iv) declaring money-laundering to be an
extraditable offence; and
(v) promoting international co-operation
in investigation of money-laundering.
(d) the Political Declaration and Global Programme
of Action adopted by United Nations General
Assembly by its Resolution No. S-17/2 of 23rd
February, 1990, inter alia, calls upon the member
States to develop mechanism to prevent financial
institutions from being used for laundering of drug
related money and enactment of legislation to
prevent such laundering.
(e) the United Nations in the Special Session on
Countering World Drug Problem Together
concluded on the 8th to the 10th June, 1998 has
made another declaration regarding the need to
combat money-laundering. India is a signatory to
this declaration.
2. In view of an urgent need for the enactment or a
comprehensive legislation inter alia for preventing
money-laundering and connected activities
confiscation of proceeds of crime, setting up of
agencies and mechanisms for coordinating
measures for combating money-laundering, etc., the
Prevention of Money-Laundering Bill, 1998 was
introduced in the Lok Sabha on the 4th August,
1998. The Bill was referred to the Standing
5
Committee on Finance, which presented its report
on the 4th March, 1999 to the Lok Sabha. The
recommendations of the Standing Committee
accepted by the Central Government are that (a)
the expressions “banking company” and “person”
may be defined; (b) in Part I of the Schedule under
Indian Penal Code the word offence under section
477A relating to falsification of accounts should be
omitted; (c) ‘knowingly’ be inserted in clause 3(b)
relating to the definition of money-laundering; (d)
the banking companies, financial institutions and
intermediaries should be required to furnish
information of transactions to the Director instead of
Commissioner of Income-tax (e) the banking
companies should also be brought within the ambit
of clause II relating to obligations of financial
institutions and intermediaries; (f) a definite timelimit
of 24 hours should be provided for producing a
person about to be searched or arrested person
before the Gazetted Officer or Magistrate; (g) the
words “unless otherwise proved to the satisfaction
of the authority concerned” may be inserted in
clause 22 relating to presumption on interconnected
transactions; (h) vacancy in the office of
the Chairperson of an Appellate Tribunal, by reason
of his death, resignation or otherwise, the seniormost
member shall act as the Chairperson till the
date on which a new Chairperson appointed in
accordance with the provisions of this Act to fill the
vacancy, enters upon his office; (i) the appellant
before the Appellate Tribunal may be authorised to
engage any authorised representative as defined
under section 288 of the Income-tax Act, 1961, (j)
the punishment for vexatious search and for false
information may be enhanced from three months
imprisonment to two years imprisonment, or fine of
rupees ten thousand to fine of rupees fifty thousand
or both; (k) the word ‘good faith’ may be
incorporated in the clause relating to Bar of legal
proceedings. The Central Government have broadly
6
accepted the above recommendations and made
provisions of the said recommendations in the Bill.
3. In addition to above recommendations of the
standing committee the Central Government
proposes to (a) relax the conditions prescribed for
grant of bail so that the Court may grant bail to a
person who is below sixteen years of age, or
woman, or sick or infirm, (b) levy of fine for default
of non-compliance of the issue of summons, etc. (c)
make provisions for having reciprocal arrangement
for assistance in certain matters and procedure for
attachment and confiscation of property so as to
facilitate the transfer of funds involved in moneylaundering
kept outside the country and extradition
of the accused persons from abroad.
4. The Bill seeks to achieve the above objects.”
4. Though the Act was passed by Parliament in the year
2002, it was brought into force only on 1.7.2005. Some of the
important provisions, with which we are directly concerned, are
set out hereinbelow:
“Section 2. Definitions.—(1) In this Act, unless the
context otherwise requires,—
(p) “money-laundering” has the meaning assigned
to it in section 3;
(u) “proceeds of crime” means any property derived
or obtained, directly or indirectly, by any person as a
result of criminal activity relating to a scheduled
offence or the value of any such property or where
such property is taken or held outside the country,
7
then the property equivalent in value held within the
country;
(x) “Schedule” means the Schedule to this Act;
(y) “scheduled offence” means—
(i) the offences specified under Part A of the
Schedule; or
(ii) the offences specified under Part B of the
Schedule if the total value involved in such offences
is one crore rupees or more; or
(iii) the offences specified under Part C of the
Schedule.
Section 3. Offence of money-laundering.—
Whosoever directly or indirectly attempts to indulge
or knowingly assists or knowingly is a party or is
actually involved in any process or activity
connected with proceeds of crime including its
concealment, possession, acquisition or use and
projecting or claiming it as untainted property shall
be guilty of offence of money-laundering.
Section 4. Punishment for money-laundering.—
Whoever commits the offence of money-laundering
shall be punishable with rigorous imprisonment for a
term which shall not be less than three years but
which may extend to seven years and shall also be
liable to fine: Provided that where the proceeds of
crime involved in money-laundering relates to any
offence specified under paragraph 2 of Part A of the
Schedule, the provisions of this section shall have
effect as if for the words “which may extend to
seven years”, the words “which may extend to ten
years” had been substituted.
Section 5. Attachment of property involved in
money-laundering.
8
(1) Where the Director or any other officer not below
the rank of Deputy Director authorised by the
Director for the purposes of this section, has reason
to believe (the reason for such belief to be recorded
in writing), on the basis of material in his
possession, that—
(a) any person is in possession of any proceeds of
crime; and
(b) such proceeds of crime are likely to be
concealed, transferred or dealt with in any manner
which may result in frustrating any proceedings
relating to confiscation of such proceeds of crime
under this Chapter, he may, by order in writing,
provisionally attach such property for a period not
exceeding one hundred and eighty days from the
date of the order, in such manner as may be
prescribed:
Provided that no such order of attachment shall be
made unless, in relation to the scheduled offence, a
report has been forwarded to a Magistrate under
section 173 of the Code of Criminal Procedure,
1973 (2 of 1974), or a complaint has been filed by a
person authorised to investigate the offence
mentioned in that Schedule, before a Magistrate or
court for taking cognizance of the scheduled
offence, as the case may be, or a similar report or
complaint has been made or filed under the
corresponding law of any other country:
Provided further that, notwithstanding anything
contained in first proviso, any property of any
person may be attached under this section if the
Director or any other officer not below the rank of
Deputy Director authorised by him for the purposes
of this section has reason to believe (the reasons
for such belief to be recorded in writing), on the
basis of material in his possession, that if such
property involved in money-laundering is not
9
attached immediately under this Chapter, the nonattachment
of the property is likely to frustrate any
proceeding under this Act.
(2) The Director, or any other officer not below the
rank of Deputy Director, shall, immediately after
attachment under sub-section (1), forward a copy of
the order, along with the material in his possession,
referred to in that sub-section, to the Adjudicating
Authority, in a sealed envelope, in the manner as
may be prescribed and such Adjudicating Authority
shall keep such order and material for such period
as may be prescribed.
(3) Every order of attachment made under subsection
(1) shall cease to have effect after the expiry
of the period specified in that sub-section or on the
date of an order made under sub-section (2) of
section 8, whichever is earlier.
(4) Nothing in this section shall prevent the person
interested in the enjoyment of the immovable
property attached under sub-section (1) from such
enjoyment.
Explanation.— For the purposes of this sub-section,
“person interested”, in relation to any immovable
property, includes all persons claiming or entitled to
claim any interest in the property.
(5) The Director or any other officer who
provisionally attaches any property under subsection
(1) shall, within a period of thirty days from
such attachment, file a complaint stating the facts of
such attachment before the Adjudicating Authority.
xxx xxx xxx
Section 43. Special Courts.—
(1) The Central Government, in consultation with
the Chief Justice of the High Court, shall, for trial of
offence punishable under section 4, by notification,
10
designate one or more Courts of Session as Special
Court or Special Courts or such area or areas or for
such case or class or group of cases as may be
specified in the notification.
Explanation.— In this sub-section, “High Court”
means the High Court of the State in which a
Sessions Court designated as Special Court was
functioning immediately before such designation.
(2) While trying an offence under this Act, a Special
Court shall also try an offence, other than an
offence referred to in sub-section (1), with which the
accused may, under the Code of Criminal
Procedure, 1973 (2 of 1974), be charged at the
same trial.
Section 44. Offences triable by Special Courts.—
(1) Notwithstanding anything contained in the Code
of Criminal Procedure, 1973 (2 of 1974),—
(a) an offence punishable under section 4 and any
scheduled offence connected to the offence under
that section shall be triable by the Special Court
constituted for the area in which the offence has
been committed: Provided that the Special Court,
trying a scheduled offence before the
commencement of this Act, shall continue to try
such scheduled offence; or
(b) a Special Court may, upon perusal of police
report of the facts which constitute an offence under
this Act or upon a complaint made by an authority
authorised in this behalf under this Act take
cognizance of offence under section 3, without the
accused being committed to it for trial;
(c) if the court which has taken cognizance of the
scheduled offence is other than the Special Court
which has taken cognizance of the complaint of the
offence of money-laundering under sub-clause (b),
11
it shall, on an application by the authority authorised
to file a complaint under this Act, commit the case
relating to the scheduled offence to the Special
Court and the Special Court shall, on receipt of such
case proceed to deal with it from the stage at which
it is committed.
(d) a Special Court while trying the scheduled
offence or the offence of money-laundering shall
hold trial in accordance with the provisions of the
Code of Criminal Procedure, 1973 (2 of 1974) as it
applies to a trial before a Court of Session.
(2) Nothing contained in this section shall be
deemed to affect the special powers of the High
Court regarding bail under section 439 of the Code
of Criminal Procedure, 1973 (2 of 1974) and the
High Court may exercise such powers including the
power under clause (b) of sub-section (1) of that
section as if the reference to “Magistrate” in that
section includes also a reference to a “Special
Court” designated under section 43.
Section 45. Offences to be cognizable and nonbailable.—
(1) Notwithstanding anything contained in the Code
of Criminal Procedure, 1973 (2 of 1974), no person
accused of an offence punishable for a term of
imprisonment of more than three years under Part A
of the Schedule shall be released on bail or on his
own bond unless—
(i) the Public Prosecutor has been given a
opportunity to oppose the application for such
release; and
(ii) where the Public Prosecutor opposes the
application, the court is satisfied that there are
reasonable grounds for believing that he is not guilty
of such offence and that he is not likely to commit
any offence while on bail: Provided that a person,
12
who, is under the age of sixteen years, or is a
woman or is sick or infirm, may be released on bail,
if the Special Court so directs: Provided further that
the Special Court shall not take cognizance of any
offence punishable under section 4 except upon a
complaint in writing made by—
(i) the Director; or
(ii) any officer of the Central Government or a State
Government authorised in writing in this behalf by
the Central Government by a general or special
order made in this behalf by that Government.
(1A) Notwithstanding anything contained in the
Code of Criminal Procedure, 1973 (2 of 1974), or
any other provision of this Act, no police officer shall
investigate into an offence under this Act unless
specifically authorised, by the Central Government
by a general or special order, and, subject to such
conditions as may be prescribed.
(2) The limitation on granting of bail specified in
sub-section (1) is in addition to the limitations under
the Code of Criminal Procedure, 1973 (2 of 1974) or
any other law for the time being in force on granting
of bail.
Section 46. Application of Code of Criminal
Procedure, 1973 to proceedings before Special
Court.—
(1) Save as otherwise provided in this Act, the
provisions of the Code of Criminal Procedure, 1973
(2 of 1974) (including the provisions as to bails or
bonds), shall apply to the proceedings before a
Special Court and for the purposes of the said
provisions, the Special Court shall be deemed to be
a Court of Session and the persons conducting the
prosecution before the Special Court, shall be
deemed to be a Public Prosecutor: Provided that
the Central Government may also appoint for any
13
case or class or group of cases a Special Public
Prosecutor.
(2) A person shall not be qualified to be appointed
as a Public Prosecutor or a Special Public
Prosecutor under this section unless he has been in
practice as an advocate for not less than seven
years, under the Union or a State, requiring special
knowledge of law.
(3) Every person appointed as a Public Prosecutor
or a Special Public Prosecutor under this section
shall be deemed to be a Public Prosecutor within
the meaning of clause (u) of section 2 of the Code
of Criminal Procedure, 1973 (2 of 1974) and the
provisions of that Code shall have effect
accordingly.
xxx xxx xxx
Section 65. Code of Criminal Procedure, 1973 to
apply.— The provisions of the Code of Criminal
Procedure, 1973 (2 of 1974) shall apply, in so far as
they are not inconsistent with the provisions of this
Act, to arrest, search and seizure, attachment,
confiscation investigation, prosecution and all other
proceedings under this Act.
xxx xxx xxx
Section 71. Act to have overriding effect.—The
provisions of this Act shall have effect
notwithstanding anything inconsistent therewith
contained in any other law for the time being in
force.”
5. Shri Mukul Rohatgi, learned senior advocate appearing
on behalf of the petitioners, has argued before us that Section
45 of the said Act, when it imposes two further conditions
14
before grant of bail is manifestly arbitrary, discriminatory and
violative of the petitioner’s fundamental rights under Article 14
read with Article 21 of the Constitution. According to learned
senior counsel, at the stage that the said Act was a Bill (which
was referred to a Standing Committee on Finance of the
Parliament, and which presented its report on 4.3.1999 to the
Lok Sabha), the Central Government broadly accepted the
recommendations of the Standing Committee, which were then
incorporated in the said Bill along with some other changes. At
this stage, argued Shri Rohatgi, it is interesting to note that
Clauses 43 and 44 of the Bill, which correspond to Sections 44
and 45 of the present Act, were very differently worded and
dealt only with offences under the 2002 Act. The twin
conditions laid down as additional conditions for grant of bail
were, at this stage, only qua offences under the 2002 Act.
When Parliament enacted the 2002 Act, this scheme was
completely changed in that Section 45 of the Act now spoke
only of the predicate/scheduled offence and not the offence
under the 2002 Act. In the present Act, a scheduled offence,
which is an offence under other penal laws contained in Part A
15
of the Schedule, that is tried with offences under the Act, bail
would be granted only after satisfying the twin conditions laid
down in the Section. Also, when the Act was originally enacted,
according to learned senior counsel, part A of the Schedule
was very sparsely populated, in that it comprised of two
paragraphs only consisting of two offences under the Indian
Penal Code, 1860 and 9 offences under the Narcotic Drugs and
Psychotropic Substances Act, 1985. These offences were
considered extremely heinous by the legislature and were,
therefore, classified apart from offences under Part B, which
dealt with certain other offences under the Indian Penal Code
and offences under the Arms Act 1959, Wildlife (Protection) Act
1972, Immoral Traffic (Prevention) Act, 1956 and the
Prevention of Corruption Act, 1988. According to learned
senior counsel, this classification was maintained right until the
Amendment Act of 2012, which then incorporated Part B
offences into Part A of the Schedule, resulting in offences under
26 Acts, together with many more offences under the Indian
Penal Code, all being put under Part A. This, according to
learned senior counsel, was done because the definition of
16
“scheduled offence” in Section 2(y) of the Act made it clear that,
if offences are specified under Part B of the Schedule at the
relevant time, the total value involved for such offences should
be Rs.30 lakhs or more. The idea behind the 2012 Amendment,
as the Statement of Objects of the said Amendment discloses,
is that this limit of Rs.30 lakhs be removed, which is why the
entire Part B of the Schedule was subsumed in Part A. He
further argued that the object was not to deny bail to those
charged with offences under the erstwhile Part B, and that
putting Part B offences together with heinous offences in Part A
would amount to treating unequals equally and would be
discriminatory and violative of Article 14 of the Constitution. In
addition, such lumping together of disparate offences would
have no rational relation to the object sought to be achieved by
the Amendment Act of 2012, that is to obviate the Rs.30 lakh
limit qua Part B offences, and it would violate Article 14 on this
ground as well. According to learned senior counsel, the
change from the original scheme of the Bill to introducing
offences outside the 2002 Act dependent upon which bail would
be granted, with the twin conditions as aforestated first having
17
to be satisfied, is itself manifestly arbitrary, in that the predicate
offence, which is the scheduled offence, and the classification
of such offence as being punishable with three years or more
would again be wholly irrelevant and would have absolutely no
rational relation to the object of granting bail insofar as offences
under the 2002 Act are concerned. Learned senior counsel
also referred to Article 21 of the Constitution and stated that the
aforesaid procedure would be unfair, unjust and would fall foul
of Article 21 inasmuch as it would certainly fall foul of the US
Constitution’s Eighth Amendment which interdicts excessive
bails. Since this Court has recognized that this feature of the
Eighth Amendment would fall within Article 21, it would be a
direct infraction thereof. He also argued that a person will be
punished for an offence contained under the 2002 Act, but will
be denied bail because of a predicate offence which is
contained in Part A of the Schedule, which would again render
Section 45(1) as manifestly arbitrary and unreasonable. He
referred to Nikesh Tarachand Shah’s case, which is Writ
Petition (criminal) No.67 of 2017, in which the scheduled
offences were Sections 120B, 409, 420, 471 and 477A of the
18
Indian Penal Code read with Section 13 of the Prevention of
Corruption Act. These offences were being investigated by the
CBI in CBI Special Case No.91/2009 in which the petitioner
was granted bail by the Sessions Court by an order dated
10.12.2015. When the offence under the 2002 Act was added
to the aforesaid offences, thanks to the applicability of the twin
conditions in Section 45(1), he was denied bail with effect from
27.11.2015, which itself shows that Section 45(1) is being used
in an extremely manifestly arbitrary fashion to deny bail for
offences which extend only to seven years under the 2002 Act,
as opposed to predicate offences which may extend even to life
imprisonment. Also, according to learned senior counsel, the
threshold of three years and above contained in Section 45 of
the 2002 Act is itself manifestly arbitrary in that it has no
reference to the offence of money laundering under the 2002
Act, but only to three years and more of the predicate offence.
There is no condition, so far as the 2002 Act is concerned, of
classification based on the amount of money that is laundered,
which perhaps may be a valid basis for classification. Also,
according to learned senior counsel, if the twin conditions of
19
Section 45(1) are to be satisfied at the stage of bail, the
defendants will have to disclose their defence at a point in time
when they are unable to do so, having been arrested and not
being granted bail at the inception itself. Another conundrum
raised by Section 45 is the fact that, there being no interdict
against anticipatory bail in the 2002 Act, and the Code of
Criminal Procedure applying to offences under the 2002 Act, it
would be clear that anticipatory bail could be granted for both
offences under the 2002 Act and predicate offences. This being
so, unlike the Terrorist and Disruptive Activities (Prevention) Act
1987, where anticipatory bail expressly cannot be granted, the
twin conditions of Section 45 would not apply at the anticipatory
bail stage, which would mean that a person charged of money
laundering and a predicate offence could continue on
anticipatory bail throughout the trial without satisfying any of the
twin conditions, as opposed to a person who applies for regular
bail, who would have to satisfy the twin conditions, which in
practice would mean denial of bail. For all these reasons,
according to learned senior counsel, Section 45 needs to be
struck down. Also, according to learned senior counsel, it is not
20
possible to read down the provision to make it constitutional as
the very scheme of Section 45 is manifestly arbitrary and
irrational. Shri Rohatgi cited various judgments to buttress his
submissions which will be referred to by us in the course of this
judgment.
6. On the other hand, the learned Attorney General Shri K.K.
Venugopal impressed upon us the fact that the Parliamentary
legislation qua money laundering is an attempt by Parliament to
get back money which has been siphoned off from the
economy. According to the learned Attorney General,
scheduled offences and offences under Sections 3 and 4 of the
2002 Act have to be read together and the said Act, therefore,
forms a complete code which must be looked at by itself.
According to the learned Attorney General, it is well settled that
classification which is punishment centric has been upheld by a
catena of judgments and so have the twin conditions been
upheld by various decisions which were referred to by him.
According to him, the expression “any offence” in Section
45(1)(ii) would mean offence of a like nature and not any
offence, which would include a traffic offence as well. According
21
to the learned Attorney General, Section 45 can easily be read
down to make it constitutional in two ways. First, the
expression “there are reasonable grounds for believing that he
is not guilty of such offence” must be read as the making of a
prima facie assessment by the Court of reasonable guilt.
Secondly, according to the learned Attorney General, in any
case the conditions contained in Section 45(1)(ii) are there in a
different form when bail is granted ordinarily insofar as offences
generally are concerned and he referred to State of U.P.
through C.B.I. v. Amarmani Tripathi, (2005) 8 SCC 21 for this
purpose. According to the learned Attorney General, if
harmoniously construed with the rest of the Act, Section 45 is
unassailable. He relied upon Section 24 of the Act, which
inverts the burden of proof, and strongly relied upon Gautam
Kundu v. Directorate of Enforcement (Prevention of MoneyLaundering
Act), (2015) 16 SCC 1 and Rohit Tandon
v. The Enforcement Directorate, Criminal Appeal Nos.1878--
1879 Of 2017 decided on 10th November, 2017. In answer to
Shri Rohatgi’s argument on the object of the 2012 Amendment
Act, according to the learned Attorney General, it is well settled
22
that where the language of the Act is plain, no recourse can be
taken to the object of the Act and he cited a number of
judgments for this proposition. He referred us to Section 106 of
the Indian Evidence Act, 1872 and argued that when read with
Section 24 of the 2002 Act, it would be clear that the twin
conditions contained in Section 45 are only in furtherance of the
object of unearthing black money and that we should, therefore,
be very slow to set at liberty persons who are alleged offenders
of the cancer of money laundering. Ultimately, according to the
learned Attorney General, Section 45 being part of a complete
code must be upheld in order that the 2002 Act work, so that
money that is laundered comes back into the economy and
persons responsible for the same are brought to book.
7. Having heard learned counsel for both sides, it is
important to first understand what constitutes the offence of
money laundering. Under Section 3 of the Act, the kind of
persons responsible for money laundering is extremely wide.
Words such as “whosoever”, “directly or indirectly” and
“attempts to indulge” would show that all persons who are even
remotely involved in this offence are sought to be roped in. An
23
important ingredient of the offence is that these persons must
be knowingly or actually involved in any process or activity
connected with proceeds of crime and “proceeds of crime” is
defined under the Act, by Section 2 (u) thereof, to mean any
property derived or obtained directly or indirectly, by any person
as a result of criminal activity relating to a scheduled offence
(which is referred to in our judgment as the predicate offence).
Thus, whosever is involved as aforesaid, in a process or activity
connected with “proceeds of crime” as defined, which would
include concealing, possessing, acquiring or using such
property, would be guilty of the offence, provided such persons
also project or claim such property as untainted property.
Section 3, therefore, contains all the aforesaid ingredients, and
before somebody can be adjudged as guilty under the said
provision, the said person must not only be involved in any
process or activity connected with proceeds of crime, but must
also project or claim it as being untainted property. Under
Section 4 of the Act, the offence of money laundering is
punishable with rigorous imprisonment for a minimum period of
three years which may extend to 7 years and fine. Also, under
24
the proviso, where the proceeds of crime involved in money
laundering relate to a predicate offence under paragraph 2 of
Part A of the Schedule, the sentence then gets extended from 7
years to 10 years.
8. Under Section 5 of the Act, attachment of such property
takes place so that such property may be brought back into the
economy. Coming now to Chapter VII of the Act with which we
are really concerned, Section 43 lays down that Special Courts
to try offences under the Act are to be designated for such area
or areas or for such case or class or group of cases as may be
specified by notification. Section 44 is very important in that the
Section provides for the trial of a scheduled offence and the
offence of money laundering together by the same Special
Court, which is to try such offences under the Code of Criminal
Procedure as if it were a court of sessions. Under Section 46,
read with Section 65 of the Act, the provisions of the Code of
Criminal Procedure apply to proceedings before the Special
Court and for the purpose of the said provisions, the Special
Court shall be deemed to be a court of sessions.
25
9. When the Prevention of Money Laundering Bill, 1999 was
tabled before Parliament, Section 44, which corresponds to
Section 45 of the present Act, provided that several offences
punishable under “this Act” are to be cognizable, and the twin
conditions for release on bail would apply only insofar as the
offences under the Act itself are concerned. When the Act was
finally enacted in 2002 and notified in 2005, this scheme
changed radically. Now, both the offence of money laundering
and the predicate offence were to be tried by the Special Court,
and bail is granted only if the twin conditions under Section
45(1) are met, where the term of imprisonment is more than
three years for the predicate offence. It is important to note that
Clause 44 of the Bill referred only to offences under Sections 3
and 4 of the Bill, whereas Section 45 of the Act does not refer
to offences under Sections 3 and 4 of the Act at all. Reference
is made only to offences under Part A of the Schedule, which
are offences outside the 2002 Act. This fundamental difference
between the Bill and the Act has a great bearing on the
constitutional validity of Section 45(1) with which we are directly
and immediately concerned.
26
10. The provision for bail goes back to Magna Carta itself.
Clause 39, which was, at that time, written in Latin, is translated
as follows:
“No free man shall be seized or imprisoned or
stripped of his rights or possessions, or outlawed or
exiled, or deprived of his standing in any other way,
nor will we proceed with force against him, or send
others to do so, except by the lawful judgment of his
equals or by the law of the land.”
It is well known that Magna Carta, which was wrung out of King
John by the barons on the 15th of June, 1215, was annulled by
Pope Innocent III in August of that very year. King John died
one year later, leaving the throne to his 9 year old son, Henry
III. It is in the reign of this pious King and his son, Edward I, that
Magna Carta was recognized by kingly authority. In fact, by the
statutes of Westminster of 1275, King Edward I repeated the
injunction contained in clause 39 of Magna Carta. However,
when it came to the reign of the Stuarts, who believed that they
were kings on earth as a matter of divine right, a struggle
ensued between Parliament and King Charles I. This led to
another great milestone in the history of England called the
Petition of Right of 1628. Moved by the hostility to the Duke of
Buckingham, the House of Commons denied King Charles I the
27
means to conduct military operations abroad. The King was
unwilling to give up his military ambition and resorted to the
expedient of a forced loan to finance it. A number of those
subject to the imposition declined to pay, and some were
imprisoned; among them were those who became famous as
“the Five Knights”. Each of them sought a writ of habeas corpus
to secure his release. One of the Knights, Sir Thomas Darnel,
gave up the fight, but the other four fought on. The King’s
Bench, headed by the Chief Justice, made an order sending the
knights back to prison. The Chief Justice’s order was, in fact, a
provisional refusal of bail. Parliament being displeased with
this, invoked Magna Carta and the statutes of Westminster, and
thus it came about that the Petition of Right was presented and
adopted by the Lords and a reluctant King. Charles I reluctantly
accepted this Petition of Right stating, “let right be done as is
desired by the petition”. Among other things, the Petition had
prayed that no free man should be imprisoned or detained,
except by authority of law.
11. In Bushel’s case, decided in 1670, Chief Justice Sir John
Vaughan was able to state that, “the writ of habeas corpus is
28
now the most usual remedy by which a man is restored again to
his liberty, if he have been against law deprived of it.” Despite
this statement of the law, one Jenkes was arrested and
imprisoned for inciting persons to riot in a speech, asking that
King Charles II be petitioned to call a new Parliament. Jenkes
went from pillar to post in order to be admitted to bail. The Lord
Chief Justice sent him to the Lord Chancellor, who, in turn, sent
him to the Lord Treasurer, who sent him to the King himself,
who, “immediately commanded that the laws should have their
due course.” (See Jenke’s case, 6 How. St. Tr. 1189 at 1207,
1208 (1676)). It is cases like these that led to the next great
milestone of English history, namely the Habeas Corpus Act of
1679. This Act recited that many of the King’s subjects have
been long detained in prison in cases where, by law, they
should have been set free on bail. The Act provided for a
habeas corpus procedure which plugged legal loopholes and
even made the King’s Bench Judges subject to penalties for
non-compliance.
12. The next great milestone in English history is the Bill of
Rights of 1689, which was accepted by the only Dutch monarch
29
that England ever had, King William III, who reigned jointly with
his wife Queen Mary II. It is in this document that the
expression “excessive bail ought not to be required….” first
appears in Chapter 2, clause 10.
13. What is important to learn from this history is that clause
39 of Magna Carta was subsequently extended to pre-trial
imprisonment, so that persons could be enlarged on bail to
secure their attendance for the ensuing trial. It may only be
added that one century after the Bill of Rights, the US
Constitution borrowed the language of the Bill of Rights when
the principle of habeas corpus found its way into Article 1
Section 9 of the US Constitution, followed by the Eighth
Amendment to the Constitution which expressly states that,
“excessive bail shall not be required, nor excessive fines
imposed, nor cruel and unusual punishments inflicted”. We may
only add that the Eighth Amendment has been read into Article
21 by a Division Bench of this Court in Rajesh Kumar v. State
through Government of NCT of Delhi (2011) 13 SCC 706, at
paragraphs 60 and 61.
30
14. In Gurbaksh Singh Sibbia v. State of Punjab, (1980) 2
SCC 565 at 586-588, the purpose of granting bail is set out with
great felicity as follows:-
“27. It is not necessary to refer to decisions which
deal with the right to ordinary bail because that right
does not furnish an exact parallel to the right to
anticipatory bail. It is, however, interesting that as
long back as in 1924 it was held by the High Court
of Calcutta in Nagendra v. King-Emperor [AIR 1924
Cal 476, 479, 480 : 25 Cri LJ 732] that the object of
bail is to secure the attendance of the accused at
the trial, that the proper test to be applied in the
solution of the question whether bail should be
granted or refused is whether it is probable that the
party will appear to take his trial and that it is
indisputable that bail is not to be withheld as a
punishment. In two other cases which, significantly,
are the ‘Meerut Conspiracy cases’ observations are
to be found regarding the right to bail which deserve
a special mention. In K.N. Joglekar v. Emperor [AIR
1931 All 504 : 33 Cri LJ 94] it was observed, while
dealing with Section 498 which corresponds to the
present Section 439 of the Code, that it conferred
upon the Sessions Judge or the High Court wide
powers to grant bail which were not handicapped by
the restrictions in the preceding Section 497 which
corresponds to the present Section 437. It was
observed by the court that there was no hard and
fast rule and no inflexible principle governing the
exercise of the discretion conferred by Section 498
and that the only principle which was established
was that the discretion should be exercised
judiciously. In Emperor v. Hutchinson [AIR 1931 All
356, 358 : 32 Cri LJ 1271] it was said that it was
very unwise to make an attempt to lay down any
particular rules which will bind the High Court,
31
having regard to the fact that the legislature itself
left the discretion of the court unfettered. According
to the High Court, the variety of cases that may
arise from time to time cannot be safely classified
and it is dangerous to make an attempt to classify
the cases and to say that in particular classes a bail
may be granted but not in other classes. It was
observed that the principle to be deduced from the
various sections in the Criminal Procedure Code
was that grant of bail is the rule and refusal is the
exception. An accused person who enjoys freedom
is in a much better position to look after his case
and to properly defend himself than if he were in
custody. As a presumably innocent person he is
therefore entitled to freedom and every opportunity
to look after his own case. A presumably innocent
person must have his freedom to enable him to
establish his innocence.
28. Coming nearer home, it was observed by
Krishna Iyer, J., in Gudikanti Narasimhulu v. Public
Prosecutor [(1978) 1 SCC 240 : 1978 SCC (Cri)
115] that: (SCC p. 242, para 1)
“... the issue of bail is one of liberty,
justice, public safety and burden of the
public treasury, all of which insist that a
developed jurisprudence of bail is
integral to a socially sensitized judicial
process. . . . After all, personal liberty of
an accused or convict is fundamental,
suffering lawful eclipse only in terms of
procedure established by law. The last
four words of Article 21 are the life of
that human right.”
29. In Gurcharan Singh v. State (Delhi
Administration) [(1978) 1 SCC 118 : 1978 SCC (Cri)
41] it was observed by Goswami, J., who spoke for
the court, that: (SCC p. 129, para 29)
32
“There cannot be an inexorable formula
in the matter of granting bail. The facts
and circumstances of each case will
govern the exercise of judicial discretion
in granting or cancelling bail.”
30. In AMERICAN JURISPRUDENCE (2d, Volume 8, p.
806, para 39), it is stated:
“Where the granting of bail lies within
the discretion of the court, the granting
or denial is regulated, to a large extent,
by the facts and circumstances of each
particular case. Since the object of the
detention or imprisonment of the
accused is to secure his appearance
and submission to the jurisdiction and
the judgment of the court, the primary
inquiry is whether a recognizance or
bond would effect that end.”
It is thus clear that the question whether to grant
bail or not depends for its answer upon a variety of
circumstances, the cumulative effect of which must
enter into the judicial verdict. Any one single
circumstance cannot be treated as of universal
validity or as necessarily justifying the grant or
refusal of bail.”
15. The stage is now set for an examination of the
constitutional validity of Section 45 of the 2002 Act.
16. At this stage, it is important to advert to the tests for the
violation of Article 14, both in its discriminatory aspect and its
“manifestly arbitrary” aspect. It is settled by a catena of cases
33
that Article 14 permits classification, provided such
classification bears a rational relation to the object sought to be
achieved. In an early judgment of this Court, State of Bombay
and Anr. v. F.N. Balsara (1951) SCR 682 at 708, Fazl Ali, J.
summarized the law as follows:
“(1) The presumption is always in favour of the
constitutionality of an enactment, since it must be
assumed that the legislature understands and
correctly appreciates the needs of its own people,
that its laws are directed to problems made manifest
by experience and its discriminations are based on
adequate grounds.
(2) The presumption may be rebutted in certain
cases by showing that on the face of the statute,
there is no classification at all and no difference
peculiar to any individual or class and not applicable
to any other individual or class, and yet the law hits
only a particular individual or class.
(3) The principle of equality does not mean that
every law must have universal application for all
persons who are not by nature, attainment or
circumstances in the same position, and the varying
needs of different classes of persons often require
separate treatment.
(4) The principle does not take away from the State
the power of classifying persons for legitimate
purposes.
(5) Every classification is in some degree likely to
produce some inequality, and mere production of
inequality is not enough.
(6) If a law deals equally with members of a welldefined
class, it is not obnoxious and it is not open
to the charge of denial of equal protection on the
ground that it has no application to other persons.
34
(7) While reasonable classification is permissible,
such classification must be based upon some real
and substantial distinction bearing a reasonable and
just relation to the object sought to be attained, and
the classification cannot be made arbitrarily and
without any substantial basis.”
Proposition 7 is important for the present purpose. Also, it is
well settled that Article 14 condemns discrimination not only by
substantive law, but also by procedural law. (See Budhan
Choudhry v. State of Bihar, (1955) 1 SCR 1045 at 1049).
17. After adverting to these judgments, Bhagwati J., in
Asgarali Nazarali Singaporawalla v. The State of Bombay,
1957 SCR 678 at 690-692 held:
“The first question which we have to address to
ourselves is whether there is in the impugned Act a
reasonable classification for the purposes of
legislation. If we look to the provisions of the
impugned Act closely it would appear that the
legislature classified the offences punishable under
Sections 161, 165 or 165-A of the Indian Penal
Code or sub-section (2) of Section 5 of the
Prevention of Corruption Act, 1947 in one group or
category. They were offences relating to bribery or
corruption by public servants and were thus
appropriately classified in one group or category.
The classification was founded on an intelligible
differentia which distinguished the offenders thus
grouped together from those left out of the group.
The persons who committed these offences of
bribery or corruption would form a class by
themselves quite distinct from those offenders who
35
could be dealt with by the normal provisions
contained in the Indian Penal Code or the Code of
Criminal Procedure, 1898 and if the offenders falling
within this group or category were thus singled out
for special treatment, there would be no question of
any discriminatory treatment being meted out to
them as compared with other offenders who did not
fall within the same group or category and who
continued to be treated under the normal procedure.
The next question to consider is whether this
differentia had a rational relation to the object
sought to be achieved by the impugned Act. The
preamble of the Act showed that it was enacted for
providing a more speedy trial of certain offences. An
argument was however addressed before us based
on certain observations of Mahajan, J. (as he then
was) at p. 314, and Mukherjea, J. (as he then was)
at p. 328 in Anwar Ali Sarkar’s case [(1952) SCR
284] ) quoted at p. 43 by Patanjali Sastri, C.J. in the
case of Kedar Nath Bajoria v. State of West
Bengal [(1954) SCR 30] that the speedier trial of
offences could not afford a reasonable basis for
such classification. Standing by themselves these
passages might lend support to the contention
urged before us by the learned counsel for the
appellant. It must be noted, however, that this ratio
was not held to be conclusive by this Court in Kedar
Nath Bajoria’s case [(1954) SCR 30] where this
Court held:
“(1) That when a law like the present
one is impugned on the ground that it
contravenes Article 14 of the
Constitution the real issue to be decided
is whether, having regard to the
underlying purpose and policy of the Act
as disclosed by its title, preamble and
provisions, the classification of the
offences for the trial of which the Special
Court is set up and a special procedure
36
is laid down can be said to be
unreasonable or arbitrary and therefore
violative of the equal protection clause;
(2) having regard to the fact that the
types of offences specified in the
Schedule to the Act were very common
and widely prevalent during the post war
period and had to be checked effectively
and speedily tried, the legislation in
question must be regarded as having
been based on a perfectly intelligent
principle of classification, having a clear
and reasonable relation to the object
sought to be achieved, and it did not in
any way contravene Article 14 of the
Constitution.”
In the instant case, bribery and corruption having
been rampant and the need for weeding them out
having been urgently felt, it was necessary to enact
measures for the purpose of eliminating all possible
delay in bringing the offenders to book. It was with
that end in view that provisions were enacted in the
impugned Act for speedier trial of the said offences
by the appointment of Special Judges who were
invested with exclusive jurisdiction to try the same
and were also empowered to take cognizance
thereof without the accused being committed to
them for trial, and follow the procedure prescribed
for the trial of warrant cases by Magistrates. The
proceedings before the Special Judges were thus
assimilated to those before the courts of sessions
for trying cases without a jury or without the aid of
assessors and the powers of appeal and revision
invested in the High Court were also similarly
circumscribed. All these provisions had the
necessary effect of bringing about a speedier trial of
these offences and it cannot be denied that this
intelligible differentia had rational relation to the
object sought to be achieved by the impugned Act.
37
Both these conditions were thus fulfilled and it could
not be urged that the provisions of the impugned
Act were in any manner violative of Article 14 of the
Constitution.”
18. In so far as “manifest arbitrariness” is concerned, it is
important to advert to the majority judgment of this Court in
Shayara Bano v. Union of India and others, (2017) 9 SCC 1.
The majority, in an exhaustive review of case law under Article
14, which dealt with legislation being struck down on the ground
that it is manifestly arbitrary, has observed:
“87. The thread of reasonableness runs through the
entire fundamental rights chapter. What is
manifestly arbitrary is obviously unreasonable and
being contrary to the rule of law, would violate
Article 14. Further, there is an apparent
contradiction in the three-Judge Bench decision
in McDowell [State of A.P. v. McDowell and Co.,
(1996) 3 SCC 709] when it is said that a
constitutional challenge can succeed on the ground
that a law is “disproportionate, excessive or
unreasonable”, yet such challenge would fail on the
very ground of the law being “unreasonable,
38
unnecessary or unwarranted”. The arbitrariness
doctrine when applied to legislation obviously would
not involve the latter challenge but would only
involve a law being disproportionate, excessive or
otherwise being manifestly unreasonable. All the
aforesaid grounds, therefore, do not seek to
differentiate between State action in its various
forms, all of which are interdicted if they fall foul of
the fundamental rights guaranteed to persons and
citizens in Part III of the Constitution.
xxx xxx xxx
101. It will be noticed that a Constitution Bench of
this Court in Indian Express Newspapers (Bombay)
(P) Ltd. v. Union of India [Indian Express
Newspapers (Bombay) (P) Ltd. v. Union of India,
(1985) 1 SCC 641 : 1985 SCC (Tax) 121] stated
that it was settled law that subordinate legislation
can be challenged on any of the grounds available
for challenge against plenary legislation. This being
the case, there is no rational distinction between the
two types of legislation when it comes to this ground
of challenge under Article 14. The test of manifest
arbitrariness, therefore, as laid down in the
aforesaid judgments would apply to invalidate
legislation as well as subordinate legislation under
Article 14. Manifest arbitrariness, therefore, must be
something done by the legislature capriciously,
irrationally and/or without adequate determining
principle. Also, when something is done which is
excessive and disproportionate, such legislation
would be manifestly arbitrary. We are, therefore, of
the view that arbitrariness in the sense of manifest
arbitrariness as pointed out by us above would
apply to negate legislation as well under Article 14.”
39
This view of the law by two learned Judges of this Court was
concurred with by Kurian, J. in paragraph 5 of his judgment.
19. Article 21 is the Ark of the Covenant so far as the
Fundamental Rights chapter of the Constitution is concerned. It
deals with nothing less sacrosanct than the rights of life and
personal liberty of the citizens of India and other persons. It is
the only article in the Fundamental Rights chapter (along with
Article 20) that cannot be suspended even in an emergency
(See Article 359(1) of the Constitution). At present, Article 21
is the repository of a vast number of substantive and procedural
rights post Maneka Gandhi v. Union of India (1978) 1 SCC
248. Thus, in Rajesh Kumar (supra) at 724-726, this Court
held:
“56. Article 21 as enacted in our Constitution reads
as under:
“21. Protection of life and personal liberty.—No
person shall be deprived of his life or personal
liberty except according to procedure established by
law.”
57. But this Court in Bachan Singh [(1980) 2 SCC
684 : 1980 SCC (Cri) 580] held that in view of the
expanded interpretation of Article 21 in Maneka
Gandhi [(1978) 1 SCC 248], it should read as
follows: (Bachan Singh case [(1980) 2 SCC 684 :
1980 SCC (Cri) 580] , SCC p. 730, para 136)
40
“136. … ‘No person shall be deprived of his life or
personal liberty except according to fair, just and
reasonable procedure established by valid law.’
In the converse positive form, the expanded article
will read as below:
‘A person may be deprived of his life or personal
liberty in accordance with fair, just and reasonable
procedure established by valid law.’”
58. This epoch-making decision in Maneka Gandhi
[(1978) 1 SCC 248] has substantially infused the
concept of due process in our constitutional
jurisprudence whenever the court has to deal with a
question affecting life and liberty of citizens or even
a person. Krishna Iyer, J. giving a concurring
opinion in Maneka Gandhi [(1978) 1 SCC 248]
elaborated, in his inimitable style, the transition from
the phase of the rule of law to due process of law.
The relevant statement of law given by the learned
Judge is quoted below: (SCC p. 337, para 81)
“81. … ‘Procedure established by law’, with its lethal
potentiality, will reduce life and liberty to a
precarious plaything if we do not ex
necessitate import into those weighty words an
adjectival rule of law, civilised in its soul, fair in its
heart and fixing those imperatives of procedural
protection absent which the processual tail will wag
the substantive head. Can the sacred essence of
the human right to secure which the struggle for
liberation, with ‘do or die’ patriotism, was launched
be sapped by formalistic and pharisaic
prescriptions, regardless of essential standards? An
enacted apparition is a constitutional, illusion.
Processual justice is writ patently on Article 21. It is
too grave to be circumvented by a black letter ritual
processed through the legislature.”
59. Immediately after the decision in Maneka
Gandhi [(1978) 1 SCC 248] another Constitution
Bench of this Court rendered decision in Sunil
41
Batra v. Delhi Admn. [(1978) 4 SCC 494 : 1979
SCC (Cri) 155] specifically acknowledged that even
though a clause like the Eighth Amendment of the
United States Constitution and concept of “due
process” of the American Constitution is not
enacted in our Constitution text, but after the
decision of this Court in Rustom Cavasjee
Cooper [(1970) 1 SCC 248] and Maneka
Gandhi [(1978) 1 SCC 248] the consequences are
the same. The Constitution Bench of this Court
in Sunil Batra [(1978) 4 SCC 494 : 1979 SCC (Cri)
155] speaking through Krishna Iyer, J. held: (Sunil
Batra case [(1978) 4 SCC 494 : 1979 SCC (Cri)
155] , SCC p. 518, para 52)
“52. True, our Constitution has no ‘due process’
clause or the Eighth Amendment; but, in this branch
of law, after Cooper [(1970) 1 SCC 248]
and Maneka Gandhi [(1978) 1 SCC 248], the
consequence is the same.”
60. The Eighth Amendment (1791) to the
Constitution of the United States virtually emanated
from the English Bill of Rights (1689). The text of
the Eighth Amendment reads, “Excessive bail shall
not be required, nor excessive fines imposed, nor
cruel and unusual punishments inflicted”. The
English Bill of Rights drafted a century ago
postulates, “That excessive bail ought not to be
required, nor excessive fines imposed, nor cruel
and unusual punishments inflicted”.
61. Our Constitution does not have a similar
provision but after the decision of this Court
in Maneka Gandhi case [(1978) 1 SCC 248]
jurisprudentially the position is virtually the same
and the fundamental respect for human dignity
underlying the Eighth Amendment has been read
into our jurisprudence.
62. Until the decision was rendered in Maneka
Gandhi [(1978) 1 SCC 248], Article 21 was viewed
42
by this Court as rarely embodying the Diceyian
concept of the rule of law that no one can be
deprived of his personal liberty by an executive
action unsupported by law. If there was a law which
provided some sort of a procedure it was enough to
deprive a person of his life or personal liberty. In this
connection, if we refer to the example given by S.R.
Das, J. in his judgment in A.K. Gopalan [AIR 1950
SC 27 : (1950) 51 Cri LJ 1383] that if the law
provided the Bishop of Rochester “be boiled in oil” it
would be valid under Article 21. But after the
decision in Maneka Gandhi [(1978) 1 SCC 248]
which marks a watershed in the development of
constitutional law in our country, this Court, for the
first time, took the view that Article 21 affords
protection not only against the executive action but
also against the legislation which deprives a person
of his life and personal liberty unless the law for
deprivation is reasonable, just and fair. And it was
held that the concept of reasonableness runs like a
golden thread through the entire fabric of the
Constitution and it is not enough for the law to
provide some semblance of a procedure. The
procedure for depriving a person of his life and
personal liberty must be eminently just, reasonable
and fair and if challenged before the court it is for
the court to determine whether such procedure is
reasonable, just and fair and if the court finds that it
is not so, the court will strike down the same.
63. Therefore, “law” as interpreted under Article 21
by this Court is more than mere “lex”. It implies a
due process, both procedurally and substantively.”
20. Given the parameters of judicial review of legislation laid
down in these judgments, we have to see whether Section 45
can pass constitutional muster.
43
21. It is important to first set out the genesis of Section 45 as
it appeared in the Prevention of Money Laundering Bill, 1999.
In its original avatar, the precursor to Section 45, which was
Section 44 of the said Bill, read as follows:-
“44. (1) Notwithstanding anything contained in the
Code of Criminal Procedure, 1973,-
(a) every offence punishable under this Act shall be
cognizable;
(b) no person accused of an offence punishable for
a term of imprisonment of more than three years
under this Act shall be released on bail or on his
own bond unless-
(i) the Public Prosecutor has been given an
opportunity to oppose the application for such
release; and
(ii) where the Public Prosecutor opposes
the application, the court is satisfied that there are
reasonable grounds for believing that he is not guilty
of such offence and that he is not likely to commit
any offence while on bail;
Provided that a person who is under the age of
sixteen years, is a woman or is sick or infirm, may
be released on bail, if the Special Court so directs;
Provided further that the Special Court shall not
take cognizance of any offence punishable under
Section 4 except upon a complaint in writing made
by-
(i) the Director; or
(ii) any officer of the Central Government or State
Government authorized in writing in this behalf
by the Central Government by a general or a
44
special order made in this behalf by that
Government.
(2) The limitation on granting of bail specified in
clause (b) of sub-section (1) is in addition to the
limitations under the Code of Criminal Procedure,
1973 or any other law for the time being in force on
granting of bail.”
At this stage, it is clear that this Section referred only to
offences punishable under the Act itself, in which the twin
conditions for grant of bail were imposed, in addition to
limitations for such grant under the Code of Criminal Procedure.
Somehow, this provision did not translate itself into dealing with
offences under the 2002 Act, but became Section 45 of the
2002 Act, which was brought into force in 2005. This provision
originally read as follows:
“45. Offences to be cognizable and nonbailable.-
(1) Notwithstanding anything contained in the Code
of Criminal Procedure, 1973 (2 of 1974),-
(a) every offence punishable under this Act shall be
cognizable;
(b) no person accused of an offence punishable for
a term of imprisonment of more than three years
under Part A of the Schedule shall be released on
bail or on his own bond unless-
(i) the Public Prosecutor has been given an
opportunity to oppose the application for such
release; and
45
(ii) where the Public Prosecutor opposes the
application, the court is satisfied that there are
reasonable grounds for believing that he is not guilty
of such offence and that he is not likely to commit
any offence while on bail:
Provided that a person, who, is under the age of
sixteen years, or is a woman or is sick or infirm,
may be released on bail, if the Special Court so
directs:
Provided further that the Special Court shall not
take cognizance of any offence punishable under
section 4 except upon a complaint in writing made
by- (i) the Director; or (ii) any officer of the Central
Government or a State Government authorised in
writing in this behalf by the Central Government by
a general or special order made in this behalf by
that Government.
(2) The limitation on granting of bail specified in
clause (b) of sub-section (1) is in addition to the
limitations under the Code of Criminal Procedure,
1973 (2 of 1974) or any other law for the time being
in force on granting of bail.”
The change made by Section 45 is that, for the purpose of
grant of bail, what was now to be looked at was offences that
were punishable for a term of imprisonment of three years or
more under Part A of the Schedule, and not offences under the
2002 Act itself. At this stage, Part A of the Schedule contained
two paragraphs – Para 1 containing Sections 121 and 121A of
the Indian Penal Code, which deal with waging or attempting to
46
wage war or abetting waging of war against the Government of
India, and conspiracy to commit such offences. Paragraph 2
dealt with offences under the Narcotic Drugs and Psychotropic
Substances Act, 1985. Part B of the Schedule, as originally
enacted, referred to certain offences of a heinous nature under
the Indian Penal Code, 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, thus, 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 the Narcotic Drugs and Psychotropic
Substances Act. Even the most heinous offences under the
Indian Penal Code were contained only in Part B, so that if bail
were asked for such offences, 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 get attracted
47
only if the total value involved in such offences was Rs.30 lakhs
or more (under Section 2(y) of the Act as it read then).
Thereafter, the Act has been amended several times. The
amendment made in 2005 in Section 45(1) was innocuous and
is not an amendment with which we are directly concerned.
The 2009 Amendment further populated Parts A and B of the
Schedule. In Part A, offences under Sections 489 A and B of
the Indian Penal Code, relating to counterfeiting were added
and offences under the Explosive Substances Act, 1908 and
Unlawful Activities (Prevention) Act, 1967, which dealt with
terrorist activities, were added. In Part B, several other
offences were added from the Indian Penal Code, as were
offences under the Explosives Act 1884, Antiquities and Arts
Treasures Act 1972, Securities and Exchange Board of India
Act 1992, Customs Act 1962, Bonded Labour System
(Abolition) Act 1976, Child Labour (Prohibition and Regulation)
Act 1986, Transplantation of Human Organs Act 1994, Juvenile
Justice (Care and Protection of Children) Act 2000, Emigration
Act 1983, Passports Act 1967, Foreigners Act 1946, Copyright
Act 1957, Trademarks Act 1999, Information Technology Act
48
2000, Biological Diversity Act 2002, Protection of Plant and
Farmers Rights Act 2001, Environmental Protection Act 1986,
Water (Prevention and Control of Pollution Act) 1974, Air
(Prevention and Control of Pollution Act) 1981 and Suppression
of Unlawful Acts Against Safety of Maritime Navigation and
Fixed Platforms of Continental Shelf Act, 2002.
22. By the Amendment Act of 2012, which is Act 2 of 2013, a
very important amendment was made to the Schedule by which
the entire Part B offences were transplanted into Part A. The
object for this amendment, as stated in the Statement of
Objects and Reasons for the amendment in clause 3 (j),
specifically provided:
“(j) putting all the offences listed in Part A and Part
B of the Schedule to the aforesaid Act into Part A of
that Schedule instead of keeping them in two Parts
so that the provision of monetary threshold does not
apply to the offences.”
23. By the Finance Act of 2015, by Section 145, the limit of
Rs.30 lakhs in Section 2(y) was raised to Rs.1 crore and in the
Schedule after Part A, Part B was populated with only one
entry, namely Section 132 of the Customs Act. Certain other
49
amendments were made, by the Finance Act of 2016, to the
2002 Act with which we are not directly concerned.
24. The statutory history of Section 45, read with the
Schedule, would, thus show that in its original avatar, as Clause
44 of the 1999 Bill, the Section dealt only with offences under
the Act itself. Section 44 of the 2002 Act makes it clear that an
offence punishable under Section 4 of the said Act must be
tried with the connected scheduled offence from which money
laundering has taken place. The statutory scheme, as originally
enacted, with Section 45 in its present avatar, would, therefore,
lead to the same offenders in different cases having different
results qua bail depending on whether Section 45 does or does
not apply. The first would be cases where the charge would
only be of money laundering and nothing else, as would be the
case where the scheduled offence in Part A has already been
tried, and persons charged under the scheduled offence have
or have not been enlarged on bail under the Code of Criminal
Procedure and thereafter convicted or acquitted. The proceeds
of crime from such scheduled offence may well be discovered
much later in the hands of Mr. X, who now becomes charged
50
with the crime of money laundering under the 2002 Act. The
predicate or scheduled offence has already been tried and the
accused persons convicted/acquitted in this illustration, and Mr.
X now applies for bail to the Special Court/High Court. The
Special Court/High Court, in this illustration, would grant him
bail under Section 439 of the Code of Criminal Procedure – the
Special Court is deemed to be a Sessions Court – and can,
thus, enlarge Mr. X on bail, with or without conditions, under
Section 439. It is important to note that Mr. X would not have to
satisfy the twin conditions mentioned in Section 45 of the 2002
Act in order to be enlarged on bail, pending trial for an offence
under the 2002 Act.
25. The second illustration would be of Mr. X being charged
with an offence under the 2002 Act together with a predicate
offence contained in Part B of the Schedule. Both these
offences would be tried together. In this case, again, the
Special Court/High Court can enlarge Mr. X on bail, with or
without conditions, under Section 439 of the Code of Criminal
Procedure, as Section 45 of the 2002 Act would not apply. In a
third illustration, Mr. X can be charged under the 2002 Act
51
together with a predicate offence contained in Part A of the
Schedule in which the term for imprisonment would be 3 years
or less than 3 years (this would apply only post the Amendment
Act of 2012 when predicate offences of 3 years and less than 3
years contained in Part B were all lifted into Part A). In this
illustration, again, Mr. X would be liable to be enlarged on bail
under Section 439 of the Code of Criminal Procedure by the
Special Court/High Court, with or without conditions, as Section
45 of the 2002 Act would have no application.
26. The fourth illustration would be an illustration in which Mr.
X is prosecuted for an offence under the 2002 Act and an
offence punishable for a term of imprisonment of more than
three years under Part A of the Schedule. In this illustration, the
Special Court/High Court would enlarge Mr. X on bail only if the
conditions specified in Section 45(1) are satisfied and not
otherwise. In the fourth illustration, Section 45 would apply in a
joint trial of offences under the Act and under Part A of the
Schedule because the only thing that is to be seen for the
purpose of granting bail, under this Section, is the alleged
occurrence of a Part A scheduled offence, which has
52
imprisonment for over three years. The likelihood of Mr. X being
enlarged on bail in the first three illustrations is far greater than
in the fourth illustration, dependant only upon the circumstance
that Mr. X is being prosecuted for a Schedule A offence which
has imprisonment for over 3 years, a circumstance which has
no nexus with the grant of bail for the offence of money
laundering. The mere circumstance that the offence of money
laundering is being tried with the Schedule A offence without
more cannot naturally lead to the grant or denial of bail (by
applying Section 45(1)) for the offence of money laundering and
the predicate offence.
27. Again, it is quite possible that the person prosecuted for
the scheduled offence is different from the person prosecuted
for the offence under the 2002 Act. Mr. X may be a person who
is liable to be prosecuted for an offence, which is contained in
Part A of the Schedule. In perpetrating this offence under Part
A of the Schedule, Mr. X may have been paid a certain amount
of money. This money is ultimately traced to Mr. Y, who is
charged with the same offence under Part A of the Schedule
and is also charged with possession of the proceeds of crime,
53
which he now projects as being untainted. Mr. X applies for bail
to the Special Court/High Court. Despite the fact that Mr. X is
not involved in the money laundering offence, but only in the
scheduled offence, by virtue of the fact that the two sets of
offences are being tried together, Mr. X would be denied bail
because the money laundering offence is being tried along with
the scheduled offence, for which Mr. Y alone is being
prosecuted. This illustration would show that a person who
may have nothing to do with the offence of money laundering
may yet be denied bail, because of the twin conditions that
have to be satisfied under Section 45(1) of the 2002 Act. Also,
Mr. A may well be prosecuted for an offence which falls within
Part A of the Schedule, but which does not involve money
laundering. Such offences would be liable to be tried under the
Code of Criminal Procedure, and despite the fact that it may be
the very same Part A scheduled offence given in the illustration
above, the fact that no prosecution for money laundering along
with the said offence is launched, would enable Mr. A to get bail
without the rigorous conditions contained in Section 45 of the
2002 Act. All these examples show that manifestly arbitrary,
54
discriminatory and unjust results would arise on the application
or non application of Section 45, and would directly violate
Articles 14 and 21, inasmuch as the procedure for bail would
become harsh, burdensome, wrongful and discriminatory
depending upon whether a person is being tried for an offence
which also happens to be an offence under Part A of the
Schedule, or an offence under Part A of the Schedule together
with an offence under the 2002 Act. Obviously, the grant of bail
would depend upon a circumstance which has nothing to do
with the offence of money laundering. On this ground alone,
Section 45 would have to be struck down as being manifestly
arbitrary and providing a procedure which is not fair or just and
would, thus, violate both Articles 14 and 21 of the Constitution.
28. Another interesting feature of Section 45 is that the twin
conditions that need to be satisfied under the said Section are
that there are reasonable grounds for believing that the
accused is not guilty of “such offence” and that he is not likely
to commit any offence while on bail. The expression “such
offence” would be relatable only to an offence in Part A of the
Schedule. Thus, in an application made for bail, where the
55
offence of money laundering is involved, if Section 45 is to be
applied, the Court must be satisfied that there are reasonable
grounds for believing that he is not guilty of the offence under
Part A of the Schedule, which is not the offence of money
laundering, but which is a completely different offence. In
every other Act, where these twin conditions are laid down, be it
the Terrorist and Disruptive Activities (Prevention) Act, 1987 or
the Narcotic Drugs and Psychotropic Substances Act, 1985, the
reasonable grounds for believing that the accused is not guilty
of an offence is in relation to an offence under the very Act in
which such section occurs. (See for example, Section 20(8) of
TADA and Section 37 of the NDPS Act). It is only in the 2002
Act that the twin conditions laid down do not relate to an
offence under the 2002 Act at all, but only to a separate and
distinct offence found under Part A of the Schedule. Obviously,
the twin conditions laid down in Section 45 would have no
nexus whatsoever with a bail application which concerns itself
with the offence of money laundering, for if Section 45 is to
apply, the Court does not apply its mind to whether the person
prosecuted is guilty of the offence of money laundering, but
56
instead applies its mind to whether such person is guilty of the
scheduled or predicate offence. Bail would be denied on
grounds germane to the scheduled or predicate offence,
whereas the person prosecuted would ultimately be punished
for a completely different offence - namely, money laundering.
This, again, is laying down of a condition which has no nexus
with the offence of money laundering at all, and a person who
may prove that there are reasonable grounds for believing that
he is not guilty of the offence of money laundering may yet be
denied bail, because he is unable to prove that there are
reasonable grounds for believing that he is not guilty of the
scheduled or predicate offence. This would again lead to a
manifestly arbitrary, discriminatory and unjust result which
would invalidate the Section.
29. It is important to notice that Section 45 classifies the
predicate offence under Part A of the Schedule on the basis of
sentencing. The learned Attorney General referred to a number
of judgments in which classification on this basis has been
upheld. It is unnecessary to refer to these judgments inasmuch
as the classification of three years or more of offences
57
contained in Part A of the Schedule must have a reasonable
relation to the object sought to be achieved under the 2002 Act.
As has already been pointed out, the 2002 Act was enacted so
that property involved in money laundering may be attached
and brought back into the economy, as also that persons guilty
of the offence of money laundering must be brought to book. It
is interesting to note that even in the recent 2015 amendment,
the Legislature has used the value involved in the offence
contained in Part B of the Schedule as a basis for classification.
If, for example, the basis for classification of offences referred
to and related to offences under the 2002 Act with a monetary
limit beyond which such offences would be made out, such
classification would obviously have a rational relation to the
object sought to be achieved by the Act i.e. to attach properties
and the money involved in money laundering and to bring
persons involved in the offence of money laundering to book.
On the other hand, it is clear that the term of imprisonment of
more than 3 years for a scheduled or predicate offence would
be a manifestly arbitrary and unjust classification, having no
rational relation to the object sought to be achieved by an Act
58
dealing with money laundering. Again a few illustrations would
suffice to prove the point.
30. An extremely heinous offence, such as murder,
punishable with death or life imprisonment, which is now
contained in Part A of the Schedule may yield only Rs.5,000/-
as proceeds of crime. On the other hand, an offence relating to
a false declaration under Section 132 of the Customs Act,
punishable with a sentence of upto 2 years, which is an offence
under Part B of the Schedule, may lead to proceeds of crime in
crores of rupees. In short, a classification based on sentence
of imprisonment of more than three years of an offence
contained in Part A of the Schedule, which is a predicate
offence, would have no rational relation to the object of
attaching and bringing back into the economy large amounts by
way of proceeds of crime. When it comes to Section 45, it is
clear that a classification based on sentencing qua a scheduled
offence would have no rational relation with the grant of bail for
the offence of money laundering, as has been shown in the
preceding paragraphs of this judgment. Even in the judgments
citied by the learned Attorney General, it is clear that a
59
classification is justified only if it is not manifestly arbitrary. For
example, in Special Courts Bill, 1978, In re, (1979) 1 SCC
380, a judgment cited by the learned Attorney General,
proposition 9 contained at page 425 states:
“If the legislative policy is clear and definite and as
an effective method of carrying out that policy a
discretion is vested by the statute upon a body of
administrators or officers to make selective
application of the law to certain classes or groups of
persons, the statute itself cannot be condemned as
a piece of discriminatory legislation. In such cases,
the power given to the executive body would import
a duty on it to classify the subject-matter of
legislation in accordance with the objective
indicated in the statute. If the administrative body
proceeds to classify persons or things on a basis
which has no rational relation to the objective of the
Legislature, its action can be annulled as offending
against the equal protection clause. On the other
hand, if the statute itself does not disclose a definite
policy or objective and it confers authority on
another to make selection at its pleasure, the
statute would be held on the face of it to be
discriminatory, irrespective of the way in which it is
applied.”
It is clear from a reading of this judgment that offences based
on sentencing of the scheduled offence would have no rational
relation to the object of the 2002 Act and to the granting of bail
for offences committed under the Act, and, therefore, have to
be annulled on the basis of the equal protection clause.
60
31. When we go to Part A of the Schedule as it now exists, it
is clear that there are many sections under the Indian Penal
Code punishable with life imprisonment which are not included
in Part A of the Schedule, and which may yet lead to proceeds
of crime. For example, Sections 232 and 238 of the Indian
Penal Code, which deal with counterfeiting of Indian coin and
import or export of counterfeited Indian coin, are punishable
with life imprisonment. These sections are not included in Part
A of the Schedule, and a person who may counterfeit Indian
coin is liable to be tried under the Code of Criminal Procedure
with conditions as to bail under Section 439 being imposed by
the High Court or the Sessions Court. As against this, a
person who counterfeits Government stamps under Section
255 is roped into Part A of the Schedule, which is also
punishable with life imprisonment. If such person is to apply for
bail, the twin conditions contained in Section 45 would apply to
him. Similar is the case with offences where a punishment of
maximum of 10 years is given. Section 240 dealing with
delivery of Indian coin possessed with knowledge that it is
counterfeit; Section 251 dealing with delivery of Indian coin
61
possessed with knowledge that it is altered; Sections 372 and
373 which deal with the selling and buying of minors for the
purpose of prostitution, are all offences which are outside Part
A of the Schedule and are punishable with the maximum of 10
years sentence. Each of these offences may involve money
laundering, but not being in Part A of the Schedule, a person
prosecuted for these offences would be able to obtain bail
under Section 439 of the Code of Criminal Procedure, without
any further conditions attached. On the other hand, if a person
is charged with extortion under Sections 386 or 388, (such
sections being included in Part A of the Schedule) and Section
4 of the 2002 Act, the person prosecuted under these sections
would only be able to obtain bail after meeting the stringent
conditions specified in Section 45. This is yet another
circumstance which makes the application of Section 45 to the
offence of money laundering and the predicate offence
manifestly arbitrary.
32. When we come to paragraph 2 of Part A of the Schedule,
this becomes even more apparent. Sections 19, 24, 27A and
29 of the Narcotic Drugs and Psychotropic Substances Act,
62
1985 are all sections which deal with narcotic drugs and
psychotropic substances where a person is found with, what is
defined as, “commercial quantity” of such substances. In each
of these cases, under Section 37 of the NDPS Act, a person
prosecuted for these offences has to meet the same twin
conditions which are contained in Section 45 of the 2002 Act.
Inasmuch as these Sections attract the twin conditions under
the NDPS Act in any case, it was wholly unnecessary to include
them again in paragraph 2 of Part A of the Schedule, for when
a person is prosecuted for an offence under Sections 19, 24,
27A or 29 of the NDPS Act, together with an offence under
Section 4 of the 2002 Act, Section 37 of the NDPS Act would, in
any case, be attracted when such person is seeking bail for
offences committed under the 2002 Act and the NDPS Act.
33. Also, the classification contained within the NDPS Act is
completely done away with. Unequals are dealt with as if they
are now equals. The offences under the NDPS Act are
classified on the basis of the quantity of narcotic drugs and
psychotropic substances that the accused is found with, which
are categorized as: (1) a small quantity, as defined; (2) a
63
quantity which is above small quantity, but below commercial
quantity, as defined; and (3) above commercial quantity, as
defined. The sentences of these offences vary from 1 year for
a person found with small quantity, to 10 years for a person
found with something between small and commercial quantity,
and a minimum of 10 years upto 20 years when a person is
found with commercial quantity. The twin conditions specified
in Section 37 of the NDPS Act get attracted when bail is asked
for only insofar as persons who have commercial quantities
with them are concerned. A person found with a small quantity
or with a quantity above small quantity, but below commercial
quantity, punishable with a one year sentence or a 10 year
sentence respectively, can apply for bail under Section 439 of
the Code of Criminal Procedure without satisfying the same
twin conditions as are contained in Section 45 of the 2002 Act,
under Section 37 of the NDPS Act. By assimilating all these
three contraventions and bracketing them together, the 2002
Act treats as equal offences which are treated as unequal by
the NDPS Act itself, when it comes to imposition of the further
twin conditions for grant of bail. This is yet another manifestly
64
arbitrary and discriminatory feature of the application of Section
45.
34. A reference to paragraph 23 of Part A of the Schedule
would also show how Section 45 can be used for an offence
under the Biological Diversity Act, 2002. If a person covered
under the Act obtains, without the previous approval of the
National Biodiversity Authority, any biological resources
occurring in India for research or for commercial utilization, he
is liable to be punished for imprisonment for a term which may
extend to 5 years under Section 55 of the Act. A breach of this
provision, when combined with an offence under Section 4 of
the 2002 Act, would lead to bail being obtained only if the twin
conditions in Section 45 of the 2002 Act are satisfied. By no
stretch of imagination can this kind of an offence be considered
as so serious as to lead to the twin conditions in Section 45
having to be satisfied before grant of bail, even assuming that
classification on the basis of sentence has a rational relation to
the grant of bail after complying with Section 45 of the 2002
Act.
65
35. Another conundrum that arises is that, unlike the Terrorist
and Disruptive Activities (Prevention) Act, 1987, there is no
provision in the 2002 Act which excludes grant of anticipatory
bail. Anticipatory bail can be granted in circumstances set out
in Siddharam Satlingappa Mhetre v. State of Maharashtra,
(2011) 1 SCC 694 (See paragraphs 109, 112 and 117). Thus,
anticipatory bail may be granted to a person who is prosecuted
for the offence of money laundering together with an offence
under Part A of the Schedule, which may last throughout the
trial. Obviously for grant of such bail, Section 45 does not need
to be satisfied, as only a person arrested under Section 19 of
the Act can only be released on bail after satisfying the
conditions of Section 45. But insofar as pre-arrest bail is
concerned, Section 45 does not apply on its own terms. This,
again, would lead to an extremely anomalous situation. If prearrest
bail is granted to Mr. X, which enures throughout the trial,
for an offence under Part A of the Schedule and Section 4 of
the 2002 Act, such person will be out on bail without his having
satisfied the twin conditions of Section 45. However, if in an
identical situation, Mr. Y is prosecuted for the same offences,
66
but happens to be arrested, and then applies for bail, the twin
conditions of Section 45 will have first to be met. This again
leads to an extremely anomalous situation showing that Section
45 leads to manifestly arbitrary and unjust results and would,
therefore, violate Articles 14 and 21 of the Constitution.
36. However, the learned Attorney General has argued
before us that we must uphold Section 45 as it is part of a
complete code under the 2002 Act. According to him, Section
45, when read with Sections 3 and 4, would necessarily lead to
the conclusion that the source of the proceeds of crime, being
the scheduled offence, and the money laundering offence,
would have to be tried together, and the nexus that is provided
is because the source of money laundering being as important
as money laundering itself, conditions under Section 45 would
have to be applied. We are afraid that, for all the reasons
given by us earlier in this judgment, we are unable to agree.
The learned Attorney General asked us to read down Section
45 in that when the Court is satisfied that there are reasonable
grounds for believing that a person is not guilty of an offence, it
only meant that the Court must prima facie come to such a
67
conclusion. Secondly, the fact that he is not likely to commit
“any offence” while on bail would only be restricted to any
offence of a like nature. Again, we are afraid that merely
reading down the two conditions would not get rid of the vice of
manifest arbitrariness and discrimination, as has been pointed
out by us hereinabove. Also, we cannot agree with the learned
Attorney General that Section 45 imposes two conditions which
are akin to conditions that are specified for grant of ordinary
bail. For this purpose, he referred us to Amarmani Tripathi
(supra) at para 18, in which it was stated that, for grant of bail,
the Court has to see whether there is prima facie or reasonable
ground to believe that the accused has committed the offence,
and the likelihood of that offence being repeated has also be
seen. It is obvious that the twin conditions set down in Section
45 are a much higher threshold bar than any of the conditions
laid down in paragraph 18 of the aforesaid judgment. In fact,
the presumption of innocence, which is attached to any person
being prosecuted of an offence, is inverted by the conditions
specified in Section 45, whereas for grant of ordinary bail the
presumption of innocence attaches, after which the various
68
factors set out in paragraph 18 of the judgment are to be looked
at. Under Section 45, the Court must be satisfied that there are
reasonable grounds to believe that the person is not guilty of
such offence and that he is not likely to commit any offence
while on bail.
37. In United States v. Anthony Salerno & Vincent Cafaro
481 US 739 (1987), a provision of the Bail Reform Act of 1984,
which allowed a Federal Court to permit pre-trial detention on
the ground that the person arrested is likely to commit future
crimes, had been declared unconstitutional as offending
substantive due process by the United States Court of Appeals
for the Second Circuit. A majority of the US Supreme Court
reversed this judgment with reference to both substantive due
process and to the 8th amendment to the US Constitution. The
majority judgment concluded:
“In our society liberty is the norm, and detention
prior to trial or without trial is the carefully limited
exception. We hold that the provisions for pretrial
detention in the Bail Reform Act of 1984 fall within
that carefully limited exception. The Act authorizes
the detention prior to trial of arrestees charged with
serious felonies who are found after an adversary
hearing to pose a threat to the safety of individuals
or to the community which no condition of release
69
can dispel. The numerous procedural safeguards
detailed above must attend this adversary hearing.
We are unwilling to say that this congressional
determination, based as it is upon that primary
concern of every government—a concern for the
safety and indeed the lives of its citizens—on its
face violates either the Due Process Clause of the
Fifth Amendment or the Excessive Bail Clause of
the Eighth Amendment.”
In a sharply worded minority judgment of Justice Marshall, with
whom Justice Brennan agreed, the minority held that the Bail
Reform Act, which permitted pre-trial detention on the ground
that the person arrested is likely to commit future crimes would
violate substantive due process and the 8th amendment to the
US Constitution. This it did with reference to an earlier
judgment, namely, Stack v. Boyle, 342 US 1, where Chief
Justice Vinson stated that unless pre-trial bail is preserved, the
presumption of innocence secured only after centuries of
struggle would lose its meaning. The dissenting judgment
concluded:
"It is a fair summary of history to say that the
safeguards of liberty have frequently been forged in
controversies involving not very nice people."
United States v. Rabinowitz, 339 U.S. 56, 69, 70
S.Ct. 430, 436, 94 L.Ed. 653 (1950) (Frankfurter, J.,
dissenting). Honoring the presumption of innocence
is often difficult; sometimes we must pay substantial
social costs as a result of our commitment to the
70
values we espouse. But at the end of the day the
presumption of innocence protects the innocent; the
shortcuts we take with those whom we believe to be
guilty injure only those wrongfully accused and,
ultimately, ourselves.”
Justice Stevens also dissented, agreeing with Justice
Marshall’s analysis.
38. We must not forget that Section 45 is a drastic provision
which turns on its head the presumption of innocence which is
fundamental to a person accused of any offence. Before
application of a section which makes drastic inroads into the
fundamental right of personal liberty guaranteed by Article 21 of
the Constitution of India, we must be doubly sure that such
provision furthers a compelling State interest for tackling
serious crime. Absent any such compelling State interest, the
indiscriminate application of the provisions of Section 45 will
certainly violate Article 21 of the Constitution. Provisions akin to
Section 45 have only been upheld on the ground that there is a
compelling State interest in tackling crimes of an extremely
heinous nature.
71
39. The judgment in Kartar Singh v. State of Punjab, (1994)
3 SCC 569 at 707 is an instance of a similar provision that was
upheld only because it was necessary for the State to deal with
terrorist activities which are a greater menace to modern
society than any other. It needs only to be mentioned that,
unlike Section 45 of the present Act, Section 20(8) of TADA,
which speaks of the same twin conditions to be applied to
offences under TADA, would pass constitutional muster for the
reasons stated in the aforesaid judgment. Ultimately, in
paragraph 349 of the judgment, this Court upheld Section 20(8)
of TADA in the following terms:
“349. The conditions imposed under Section
20(8)(b), as rightly pointed out by the Additional
Solicitor General, are in consonance with the
conditions prescribed under clauses (i) and (ii) of
sub-section (1) of Section 437 and clause (b) of
sub-section (3) of that section. Similar to the
conditions in clause (b) of sub-section (8), there are
provisions in various other enactments — such as
Section 35(1) of Foreign Exchange Regulation Act
and Section 104(1) of the Customs Act to the effect
that any authorised or empowered officer under the
respective Acts, if, has got reason to believe that
any person in India or within the Indian customs
waters has been guilty of an offence punishable
under the respective Acts, may arrest such person.
Therefore, the condition that “there are grounds for
believing that he is not guilty of an offence”, which
72
condition in different form is incorporated in other
Acts such as clause (i) of Section 437(1) of the
Code and Section 35(1) of FERA and 104(1) of the
Customs Act, cannot be said to be an unreasonable
condition infringing the principle of Article 21 of the
Constitution.”
It is clear that this Court upheld such a condition only because
the offence under TADA was a most heinous offence in which
the vice of terrorism is sought to be tackled. Given the heinous
nature of the offence which is punishable by death or life
imprisonment, and given the fact that the Special Court in that
case was a Magistrate and not a Sessions Court, unlike the
present case, Section 20(8) of TADA was upheld as being in
consonance with conditions prescribed under Section 437 of
the Code of Criminal Procedure. In the present case, it is
Section 439 and not Section 437 of the Code of Criminal
Procedure that applies. Also, the offence that is spoken of in
Section 20(8) is an offence under TADA itself and not an
offence under some other Act. For all these reasons, the
judgment in Kartar Singh (supra) cannot apply to Section 45 of
the present Act.
73
40. A similar provision in the Maharashtra Control of
Organised Crime Act, 1999, also dealing with the great menace
of organized crime to society, was upheld somewhat grudgingly
by this Court in Ranjitsing Brahmajeetsing Sharma v. State
of Maharashtra and Anr, (2005) 5 SCC 294 at 317, 318-319
as follows:
“38. We are furthermore of the opinion that the
restrictions on the power of the court to grant bail
should not be pushed too far. If the court, having
regard to the materials brought on record, is
satisfied that in all probability he may not be
ultimately convicted, an order granting bail may be
passed. The satisfaction of the court as regards his
likelihood of not committing an offence while on bail
must be construed to mean an offence under the
Act and not any offence whatsoever be it a minor or
major offence. If such an expansive meaning is
given, even likelihood of commission of an offence
under Section 279 of the Indian Penal Code may
debar the court from releasing the accused on bail.
A statute, it is trite, should not be interpreted in such
a manner as would lead to absurdity. What would
further be necessary on the part of the court is to
see the culpability of the accused and his
involvement in the commission of an organised
crime either directly or indirectly. The court at the
time of considering the application for grant of bail
shall consider the question from the angle as to
whether he was possessed of the requisite mens
rea. Every little omission or commission, negligence
or dereliction may not lead to a possibility of his
having culpability in the matter which is not the sine
qua non for attracting the provisions of MCOCA. A
person in a given situation may not do that which he
74
ought to have done. The court may in a situation of
this nature keep in mind the broad principles of law
that some acts of omission and commission on the
part of a public servant may attract disciplinary
proceedings but may not attract a penal provision.”
The Court then went on to say:
“44. The wording of Section 21(4), in our opinion,
does not lead to the conclusion that the court must
arrive at a positive finding that the applicant for bail
has not committed an offence under the Act. If such
a construction is placed, the court intending to grant
bail must arrive at a finding that the applicant has
not committed such an offence. In such an event, it
will be impossible for the prosecution to obtain a
judgment of conviction of the applicant. Such cannot
be the intention of the legislature. Section 21(4) of
MCOCA, therefore, must be construed reasonably.
It must be so construed that the court is able to
maintain a delicate balance between a judgment of
acquittal and conviction and an order granting bail
much before commencement of trial. Similarly, the
court will be required to record a finding as to the
possibility of his committing a crime after grant of
bail. However, such an offence in futuro must be an
offence under the Act and not any other offence.
Since it is difficult to predict the future conduct of an
accused, the court must necessarily consider this
aspect of the matter having regard to the
antecedents of the accused, his propensities and
the nature and manner in which he is alleged to
have committed the offence.”
41. The learned Attorney General relied heavily on Section 24
of the 2002 Act to show that the burden of proof in any
proceeding relating to proceeds of crime is upon the person
75
charged with the offence of money laundering, and in the case
of any other person i.e. a person not charged with such offence,
the Court may presume that such proceeds are involved in
money laundering. Section 45 of the Act only speaks of the
scheduled offence in Part A of the Schedule, whereas Section
24 speaks of the offence of money laundering, and raises a
presumption against the person prosecuted for the crime of
money laundering. This presumption has no application to the
scheduled offence mentioned in Section 45, and cannot,
therefore, advance the case of the Union of India.
42. The learned Attorney General then relied strongly on
Gautam Kundu (supra) and Rohit Tandon (supra). Gautam
Kundu (supra) is a judgment relating to an offence under the
SEBI Act, which is a scheduled offence, which was followed in
Rohit Tandon (supra). In Rohit Tandon (supra),
Khanwilkar, J., speaking for the Bench, makes it clear that the
judgment does not deal with the constitutional validity of
Section 45 of the 2002 Act. Both these judgments proceed on
the footing that Section 45 is constitutionally valid and then go
on to apply Section 45 on the facts of those cases. These
76
judgments, therefore, are not of much assistance when it
comes to the constitutional validity of Section 45 being
challenged.
43. Shri Rohatgi’s alternate argument, namely, that if Section
45 were not to be struck down, the 2012 Amendment Act
should be read down in the manner indicated in Gorav
Kathuria v. Union of India and Ors., 2017 (348) ELT 24 (P &
H) and having been expressly approved by this Court, must
apply to the facts of these cases.
44. In Gorav Kathuria (supra), the 2012 Amendment Act was
read down having regard to the object sought to be achieved by
the amendment, namely, that Part B of the Schedule is being
made Part A of the Schedule, so that the provision of a
monetary threshold limit does not apply to the offences
contained therein. The High Court concluded:
“12.20 Guided by the aforesaid principles laid down
by the Hon'ble Supreme Court regarding statutory
interpretation and the duty of the Court to secure
the ends of justice, we have no hesitation in holding
that in 2013, Part B of the Schedule was omitted
and the Scheduled Offences falling thereunder were
incorporated in Part A with the sole object to
overcome the monetary threshold limit of Rs. 30
lakhs for invocation of PMLA in respect of the
77
laundering of proceeds of crime involved in those
offences. No substantive amendment was proposed
with express intention to apply limitations on grant
of bail as contained in Section 45(1) in respect of
persons accused of such offences which were
earlier listed in Part B. Therefore, twin limitations in
grant of bail contained in Section 45(1) as it stands
today, are not applicable qua a person accused of
such offences which were earlier listed in Part B.”
The matter came to this Court by a certificate of fitness granted
by the High Court. Sikri, J and Ramana, J., by their order dated
12th August, 2016, stated:
“Though the High Court has granted certificate to
appeal, we have heard the learned counsel for
some time and are of the opinion that the impugned
judgment of the High Court is correct.
This appeal is, accordingly, dismissed.”
The complaint of the learned Attorney General is that this was
done at the very threshold without hearing the Union of India.
Be that as it may, we are of the opinion that, even though the
Punjab High Court judgment appears to be correct, it is
unnecessary for us to go into this aspect any further, in view of
the fact that we have struck down Section 45 of the 2002 Act as
a whole.
78
45. Regard being had to the above, 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. The writ petitions and
the appeals are disposed of accordingly.
…………………………......J.
(R.F. Nariman)
…………………………......J.
(Sanjay Kishan Kaul)
New Delhi;
November 23, 2017.