Beyond the News: How Supreme Court eased bail in money laundering charge

Beyond the News: How Supreme Court eased bail in money laundering charge

Context

The SC striking down provisions denying bail to those accused under the Prevention of Money Laundering Act (PMLA), 2002 marks a major change

What has happened?

On November 23^rd, the Supreme Court struck down a stringent provision of the Prevention of Money Laundering Act (PMLA), 2002 that denied bail to an accused unless the court was convinced that he was not guilty. The apex court also ordered a fresh trial in all cases where bail under such provisions had been denied to the accused

Impact of the decision

The ruling could have widespread ramifications for those accused under the Act — and for cases under investigation by the Enforcement Directorate (ED), the agency responsible for probing money laundering offences

• It is being viewed as a setback in fight against black money, by the government

How the PMLA came about?

In many ways, the PMLA was a result of the opening of the Indian economy in the early 1990s.

• Creation of FERA: As the economy opened to foreign investment and forex reserves began to rise, the government felt a need for an easing of forex regulations in the country. A Bill was thus brought to remove the draconian provisions of the Foreign Exchange Regulation Act (FERA), which made even spending freely abroad difficult for an Indian. Thus, the Foreign Exchange Management Act (FEMA) was born in 2002
• Most important change: The most important change was that a forex violation was turned into a civil offence from a criminal one, allowing for compounding of the offence by way of a fine. This did not require the arrest of an offender
• Creation of FEMA: But, as FEMA was being drafted, agencies enforcing forex regulations pressed for a new law, FEMA turning the anti-money laundering apparatus in the country almost toothless. This was also when internationally, there was a thrust on choking terror financing and the free movement of illicit money across borders
  • Creation of FATF: The Financial Action Task Force (FATF) was created in 1989 to coordinate anti-money laundering efforts across the world — as a member, India was under pressure to do its bit
  • Creation of PMLA:The PMLA was also created as a response to the political declaration adopted by the special session of the United Nations General Assembly (UNGA) held on June 8 and 10, 1998, calling on member states to adopt anti-money laundering legislations. The Prevention of Money Laundering Act was finally passed in 2002. It, however, came into force only on July 1, 2005. The Act was further amended in 2009 and 2013, increasing its ambit

Issues with PMLA

Over the years, there have been debates over its provisions dealing with bail. The issue has also been debated in courts while arguing for accused parties.

Section 45

The PMLA’s Section 45 (1) required that the public prosecutor must be given an opportunity to oppose any application for release on bail. Where the public prosecutor opposes bail, the court must be satisfied that there were reasonable grounds to believe that the accused was not guilty and was unlikely to commit an offence if granted bail

Section applied to?

Originally, the Section applied to those charged for money laundering as well as scheduled offences under part A of the Act which covered cases involving waging war against the Government of India and offences under the Narcotic Drugs and Psychotropic Substances (NDPS) Act

• Amendment in 2013

Through the 2013 amendment to the Act, the government brought Part B of the Act also under the Section’s ambit. This further enhanced the section’s scope, making bail difficult for those accused under comparatively minor offences

• • The tough bail condition now applied to offences under the Wildlife (Protection) Act, the Immoral Traffic (Prevention) Act, the Prevention of Corruption Act, 1988, the Antiquities and Arts Treasures Act, the Transplantation of Human Organs Act 1994, the Passports Act, the, Information Technology Act and other laws
  • Getting bail made very difficult: The result was that those accused under the PMLA rarely got bail before an incarceration that could last anywhere between two to three years. Given that money laundering offences attract between three to seven years of punishment in jail, this was considered practically like serving the sentence. Almost no one got bail until a chargesheet in the case was filed.

PMLA: A very strict act

PMLA in totality is a very stringent Act. Apart from bail, the Act has very tough provisions on the attachment of property, the recording of statements and arrest and prosecution

• Statement of the officer is admissible as evidence: The PMLA is among very few Acts in the country wherein a statement recorded by an authorised agency officer is admissible as evidence in court. Such powers are not available to the police under the Criminal Procedure Code (CrPC)
• Attachment of property:The Director, ED, can pass orders to provisionally attach a property belonging to an accused if she/he is convinced that this has been purchased with the proceeds of a crime under a scheduled offence
• The PMLA also puts the burden of proof on the accused as it presumes intent
  • Section 24 states:
    • “a) in the case of a person charged with the offence of money laundering under section 3, the Authority or Court shall, unless the contrary is proved, presume that such proceeds of crime are involved in money laundering; and
    • b) in the case of any other person the Authority or Court may presume that such proceeds of crime are involved in money laundering”
  • Section 22 states that where any property or records are seized from any person under this Act, it shall be presumed that such a person is the owner of such property or records

SC’s stance

The Supreme Court has now said that the Section stood in violation of Article 21 (the right to life, liberty and security of a person) and Article 14 (the right to equality)