Nikesh Tarachand Shah v. Union of India
Supreme Court of India · 23 November 2017 · 2 judges
The Court declared Section 45(1) of the Prevention of Money Laundering Act, 2002, insofar as it imposed two further conditions for bail, unconstitutional as violating Articles 14 and 21, and remanded the bail matters.
Facts
Writ petitions and criminal appeals challenged the validity of Section 45 of the Prevention of Money Laundering Act, 2002. Section 45(1) allowed bail, where a Part A scheduled offence punishable with more than three years was involved, only if the Public Prosecutor was heard and, if he opposed, the court was satisfied that there were reasonable grounds for believing the accused was not guilty of such offence and was not likely to commit any offence on bail. Counsel pointed out that in the petitioner's case the scheduled offences under the Indian Penal Code and the Prevention of Corruption Act were being investigated by the CBI, and that once the money laundering offence was added he was denied bail because of the twin conditions. The 2012 amendment had moved the former Part B offences into Part A of the Schedule.
Questions before the Court
- Whether the twin conditions for bail in Section 45(1) of the 2002 Act violate Articles 14 and 21 of the Constitution.
- Whether Section 45 could be saved by reading it down or by treating it as part of a complete code under the 2002 Act.
What the Court held
- The twin conditions relate to the scheduled or predicate offence in Part A of the Schedule, not to the offence of money laundering. A person may be denied bail on grounds germane to a different offence from the one for which he will be punished. The conditions have no nexus with bail for money laundering and are manifestly arbitrary.
- Classifying predicate offences by a sentence of more than three years has no rational relation to the object of the Act, which is to attach proceeds of crime and punish money laundering. Illustrations from the Schedule, the NDPS Act and the Biological Diversity Act showed discriminatory results.
- Whether the twin conditions apply depends on whether the scheduled offence is tried together with money laundering, and they do not apply to anticipatory bail at all. These anomalies produce manifestly arbitrary and unjust results contrary to Articles 14 and 21.
- Section 45 inverts the presumption of innocence. Such a provision can stand only if it furthers a compelling State interest in tackling serious crime. Kartar Singh, which upheld Section 20(8) of TADA, was held not to apply.
- Reading down the conditions would not remove the vice of manifest arbitrariness and discrimination. Section 45(1), insofar as it imposes two further conditions for bail, was declared unconstitutional, and the bail matters were remanded to be heard without those conditions.
Why it matters
The judgment strikes down the twin bail conditions in Section 45(1) of the PMLA using both the classification test and the manifest arbitrariness test under Article 14, read with Article 21. It holds that conditions which reverse the presumption of innocence need a compelling State interest in tackling serious crime, and it distinguishes Kartar Singh on the TADA bail provision.
In the Court's words
Copied from the official judgment; each passage links to its page.
“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.”
“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.”
“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 instead applies its mind to whether such person is guilty of the scheduled or predicate offence.”
“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.”
Provisions interpreted
Related judgments
- Explained in Vijay Madanlal Choudhary v. Union of India (2022)
Case and bench
- Parties
- Nikesh Tarachand Shah v. Union of India
- Case
- Writ Petition (Criminal) No. 67 of 2017
- Decided
- 23 November 2017
- Bench
- R.F. Nariman, Sanjay Kishan Kaul
- Opinions
- Unanimous. Judgment of the Court delivered by R.F. Nariman, J.; Sanjay Kishan Kaul, J. concurred.
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