What's New :
ITS 2025: Integrated Test Series & Mentorship Program for Prelims and Mains. Get Details
22nd June 2024 (10 Topics)

Bail in Money Laundering Cases and the 'Twin Test' under PMLA

Context

A trial court recently granted bail to Delhi Chief Minister Arvind Kejriwal, who is facing charges under the Prevention of Money Laundering Act (PMLA). However, the Delhi High Court stayed this order, highlighting the legal complexities surrounding bail in money laundering cases and the 'twin test' mandated by the PMLA.

Key Highlights of the Issue

  • Provision under PMLA: Section 45 of the PMLA makes bail an exception rather than the rule. It mandates hearing the public prosecutor in all bail applications and requires the court to apply the 'twin test' when the prosecutor opposes bail.
  • The Twin Test: The two conditions under the 'twin test' are:
    • Reasonable grounds for believing that the accused is not guilty.
    • The accused is not likely to commit any offence while on bail.
  • Legal Challenges: The 'twin test' has faced several legal challenges, including its constitutional validity and its stringent nature compared to other laws.

Reasons behind the Strict Bail Provisions

  • Severity of the Offence: Money laundering is considered a severe offence, often involving influential, intelligent, and resourceful individuals who commit the crime with premeditation, making detection and evidence gathering challenging.
  • Government's Argument: The government argues that the stringent bail conditions are necessary due to the sophisticated methods used in money laundering, which can pose a significant threat to national security and financial systems.
  • Judicial Precedents: The Supreme Court has upheld the stringent bail conditions, emphasizing the need to apply the 'twin test' rigorously to prevent misuse of bail provisions in serious offences like money laundering.

Impact of the 'Twin Test' on Judicial Proceedings

  • Prolonged Incarceration: The strict application of the 'twin test' often results in prolonged incarceration of the accused, as proving innocence before the trial is challenging.
  • Judicial Discretion: The mandatory application of the 'twin test' limits judicial discretion in granting bail, leading to debates on the balance between individual rights and societal interests.
  • Impact on Legal Strategy: Defense strategies in money laundering cases must account for the rigorous requirements of the 'twin test,' often focusing on disproving the allegations at the bail stage itself.
Required Measures for a Balanced Approach
  • Legal Reforms: There is a need for legal reforms to ensure that the bail provisions under PMLA strike a balance between preventing misuse and protecting individual rights.
  • Judicial Training: Judges need specialized training to handle the complexities of money laundering cases and apply the 'twin test' judiciously without compromising on fairness.
  • Policy Review: Periodic review of the policy and its implementation can help identify areas of improvement and ensure that the stringent bail provisions serve their intended purpose without causing undue hardship to the accused.
Fact Box

Important Judgments:

  • Supreme Court’s view: In its “Vijay Madanlal Choudhary v. Union of India”, the Supreme Court upheld various provisions of the PMLA which relate to the powers of arrest, attachment, search, and seizure conferred upon the ED.
    • The court was of the opinion that all the provisions under PMLA have a reasonable nexus with the objects sought to be achieved by the Act to prevent money-laundering effectively.
  • In P. Chidambaram v. Directorate of Enforcement (2019), the Supreme Court rejected a prayer for anticipatory bail with respect to an offence of money laundering and proceeded to grant custody to the ED.
    • The court reasoned that in a case of money laundering which involves many stages of placement and layering of funds, a ‘systematic and analysed’ investigation is required which would be frustrated if pre-arrest bail is granted.

Enforcement Directorate (ED):

  • Directorate of Enforcement is a Multi-Disciplinary Organization mandated with the task of enforcing the provisions of two special fiscal laws – Foreign Exchange Management Act, 1999 (FEMA) and Prevention of Money Laundering Act, 2002 (PMLA).
  • Whenever any offence is registered by a local police station, which has generated proceeds of crime over and above Rs 1 crore, the ED steps in.
  • As per the Prevention of Money Laundering Act, the ED got its power to investigate under Sections 48 (authorities under act) and 49 (appointment and powers of authorities and other officers).
  • If money has been laundered abroad, the PMLA court (constituted as per the Act) has the right to send a letter of rogatory under Section 105 (reciprocal arrangements regarding processes) of the Code of Criminal Procedure. 
UPSC PYQ (Related)

Q: The jurisdiction of the Central Bureau of Investigation (CBI) regarding lodging an FIR and conducting probe within a particular state is being questioned by various States. However, the power of States to withhold consent to the CBI is not absolute. Explain with special reference to the federal character of India. (UPSC 2021)

Mains Practice Question

Q: "The stringent bail provisions under PMLA reflect the seriousness of money laundering as an offence. Discuss the impact of these provisions on the judicial process and suggest measures to ensure a balanced approach."

Verifying, please be patient.

Enquire Now