PMLA : Supreme Court Rejects Challenge Against Madras HC Decision That 2018 Amendment Revived Twin Conditions For Bail Under Section 45

Upon hearing the submissions made by Solicitor General of India, Mr. Tushar Mehta, a Division Bench comprising Justices A.M. Khanwilkar and C.T. Ravikumar refused to interfere with the order of the High Court. But directed the prosecuting agency to expedite the trial.

It is pertinent to note, that Mr. Mehta had adopted the same line of argument defending the constitutionality of amended Section 45 in the batch of petitions filed challenging the validity of provisions of the PMLA. He had contended that the two conditions of Section 45 were not per se unconstitutional. What the Supreme Court had considered to be unconstitutional in Nikesh Tarachand Shah v. Union of India And Anr. (2018) 11 SCC 1 was arbitrarily linking the twin conditions only with the predicate offence or part of the predicate offence ("Part A of the Schedule"). Mr. Mehta had asserted that a provision declared unconstitutional does not get wiped off from the statute book, it merely becomes inoperative. The power to repeal only lies with the legislature. Therefore, if the ground on which the provision was declared unconstitutional, is cured, the provision can be resurrected.

The PMLA was amended by the Finance Act, 2018 with effect from 19.04.2018. The words "punishable for a term of imprisonment of more than three years under Part A of the Schedule" in Section 45 were substituted with the words "under this Act". Mr. Mehta argued that in the light of the same, the defect on the basis of which the Supreme Court had declared it unconstitutional was cured and consequently the twin condition stood revived.

Statutory Provision

Before Amendment (Struck Down As Unconstitutional in Nikesh Tarachand case)

After Amendment

Section 45. Offences to be cognizable and non-bailable. bailable. (1) Notwithstanding 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 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 Provided that a person, who, is under the age of sixteen there are reasonable grounds for years, or is a woman oris sick or infirm, may be released on bail, if the Special Court so directs:

Section 45. Offence to be cognizable and non-bailable. bailable. (1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), no person accused of an offence 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 there are reasonable grounds for years, or is a woman or is sick or infirm, or is a woman or is sick or infirm, or is accused either on his own or along with other co-accused of money laundering a sum of less than one crore rupees may be released on bail, if the Special court so directs:

Contention raised by the appellants before the High Court

Advocate, Mr. R. Jayaprakash, appearing on behalf of the appellants, submitted that since the investigation was complete and the complaint had been filed, there was no scope of tampering with evidence; threatening witnesses and urged that in light of the same bail be granted. Additionally, the passports of the appellants were also ordered to be surrendered and therefore, there was no threat of the appellants fleeing the country. Referring to the judgment of the Apex Court in Nikesh Tarachand Shah v. Union of India And Anr. (2018) 11 SCC 1, he argued that the twin condition under Section 45(1) of the Act has been declared unconstitutional. It was further asserted that once the provision of Section 45 was struck down, the legislature could not have brought about an amendment to Section 45 which was non-existent.

Contention raised by the respondents before the High Court

Special Public Prosecutor, Mr. Rajnish Pathiyil, appearing on behalf of the respondent, submitted that the bail petitions ought to be rejected on the ground that the amended Section 45 bars filing of bail petitions. It was highlighted that the amended provisions of Section 45 of the PMLA Act had been challenged before the Apex Court, which is pending adjudication without any interim order. Thus, binding on the appellants. Moreover, he stated that the appellants did not co-operate with the investigating agency and are not entitled to grant of bail under Section 45(1)(ii). Reliance was placed on a catena of judgments to substantiate his arguments.

Analysis of the High Court

The Court noted that the Apex Court had not granted stay in the Special Leave Petition assailing the amended provisions of Section 45. It stated that the provision not being set aside or stayed was binding on the appellants. The Court observed that the High Court judgments relied upon by the parties have been challenged before the Supreme Court and have been stayed by it. It was of the opinion that Section 45(1), though struck down by the Apex Court, was revived by the 2018 amendment.

"In the Judgment reported in 2018 (11) SCC-1 [cited supra], the Apex Court declared Section 45 of the PMLA as it stood then, as unconstitutional and violative of Articles 14 and 21 of the Constitution of India, but the defects pointed out by the Hon'ble Supreme Court in the said Judgment were cured by the legislature and an amendment to section 45(1) was made vide the Finance Act, 2018 (No.13 of 2018). Under the amendment Act, section 45(1) was revived and for the words "punishable for a term of imprisonment of more than three years under part A of the Schedule", the words "under this Act" were substituted in section 45(1) of the PMLA."

The Court noted that a provision even after being declared unconstitutional does not get repealed, but only becomes unenforceable. If the legislature cures the defect which the Court had pointed out to be unconstitutional, the presumption of constitutionality would be applicable to such amendment.

A division bench comprising Justices M Duraiswamy and Sathya Narayan Prasad held :

"…merely because the entire section is not re-enacted would be of no consequence, since the provision even after being declared unconstitutional, does not get repealed or wiped out from the statute book and it only becomes unenforceable. Therefore, once the Parliament steps in and cures the defect pointed out by a Constitutional Court, the defect appears to be cured and the presumption of constitutionality is to apply to such provision. Therefore, there is a presumption in favour of constitutionality since the amended section 45(1) of the PMLA has not been struck down".

Considering the past conduct of the appellants the Court was not satisfied that they were not guilty of the alleged offences. It noted that if enlarged on bail there was apprehension of them committing offence. Therefore, it refused to grant bail to the appellants.

[Case Title: N. Umashankar @ N.M. Umasankar v. Assistant Director, Directorate of Enforcement, Special Leave Petition (Criminal) No. 620-622 of 2022]

Click here to read/download the Madras HC judgment

Click here to read/download the SC order dismissing the SLP against HC judgment