SC overrides own 2017 ruling to justify ‘drastic’ PMLA provision for bail

Published
28th Jul, 2022

Context

Supreme Court recently upheld the Prevention of Money Laundering Act, including its stringent bail conditions that impose a reverse burden of proof on the accused.

About

Earlier Judgement:

In Nikesh Tarachand Shah vs Union of India (2017), the two-judge bench of Justices Rohinton Nariman and Sanjay Kishan Kaul, had declared the ‘twin test’ of bail under PMLA as unconstitutional since it was manifestly arbitrary.

Key Highlights of the recent Ruling:

SC in recent ruling, states that “declaration by the Parliament itself is testimony of compelling necessity to have stringent regime (enactment) for prevention and control of the menace of money-laundering”.
It also expounded the theory of “soft state” which the Court said is used to “describe a nation which is not capable of preventing the offence of money laundering”.
The Court relied on Article 39 of the Constitution, part of the Directive Principles of State Policy that mandates the State to prevent concentration of wealth, to uphold the stringent bail conditions under PMLA.
On Twin Bail
On the issue of twin bail conditions under the PMLA, the court ruled that the stringent conditions for bail under the Act are legal and not arbitrary.
Enforcement Directorate, Serious Fraud Investigation Office (SFIO), Directorate of Revenue Intelligence (DRI) officials, and not ‘police’, statements recorded during an inquiry are valid evidence.
Quantum of penalty
Money-laundering is one of the heinous crimes, which not only affects the social and economic fabric of the nation, but also tends to promote other heinous offences, such as terrorism, offences related to NDPS Act, etc.
It is a proven fact that international criminal network that support home grown extremist groups relies on transfer of unaccounted money across nation, thus, by any stretch of imagination, it cannot be said that there is no compelling State interest in providing stringent conditions of bail for the offence of money-laundering.

About Prevention of Money Laundering Act 2002 (PMLA):

The Prevention of Money Laundering Act (PMLA) was enacted by the Indian Parliament in 2002 to prevent money laundering in India.
PMLA Objectives:
Preventing money laundering.
Combating the channelizing of money into illegal activities and economic crimes.
Providing for the confiscation of property derived from or involved in money laundering.
Providing for any other matters connected with or incidental to the act of money laundering.
Investigative agencies under PMLA: The Enforcement Directorate (ED) is responsible for investigating offences under the PMLA.
Also, the Financial Intelligence Unit-India (FIU-IND) is the national agency that receives, processes, analyses and disseminates information related to suspect financial transactions.

THE VIENNA CONVENTION on Money Laundering:

It was the first major initiative in the prevention of money laundering held in December 1988.
This convention laid down the groundwork for efforts to combat money laundering by obliging the member states to criminalize the laundering of money from drug trafficking.
It promotes international cooperation in investigations and makes extradition between member states applicable to money laundering.
The convention also establishes the principle that domestic bank secrecy provisions should not interfere with international criminal investigations.