Provision Declared Unconstitutional Doesn't Get Wiped Out From Statute Book; Only Becomes Unenforceable; Can Be Re-Enforced Once Defects Are Cured : Delhi High Court

The Delhi High Court has held that when a provision is declared unconstitutional, it does not get repealed or wiped out; if the defects are cured through amendment, it will become enforceable. The Court noted that if defects are cured the entire Section doesn't need to be re-enacted to be re-enforced. 

The Court made these observations in relation to Section 45 of the Prevention of Money Laundering Act, which imposes twin-conditions on grant of bail. The provision was declared unconstitutional by the Supreme Court in 2018 in the case Nikesh Tarachand Shah v. Union of India. Following that, the Parliament amended the provision.

In the present case, the petitioners, seeking bail in an offence under PMLA, raised an argument that Section 45 PMLA was not enforceable after being struck down as unconstitutional.

Rejecting this argument, the order delivered by Justice Yogesh Khanna observed :

"...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not re-enacted would be of no consequence since the provision even after being declared unconstitutional, does not get repealed or wiped out from the statute book and it only becomes unenforceable.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".

Referring to the decision of Nagaland Senior Govt. Employees Welfare Assn. v. State of Nagaland (2010), the High Court has held that there is a presumption favouring constitutionality since the amended Section 45(1) of the Prevention of Money Laundering Act, 2002 has not been struck down.

In 2017, the Directorate of Enforcement (respondents) commenced an enquiry under Foreign Exchange Management Act, 1999, against the petitioners and others. The ED then registered FIR with EOW Cell for Scheduled Offences under the PMLA 2002, leading to the petitioners' arrests.

Senior Advocate Vikram Chaudhari pur forth three-fold arguments: (a) that at the time of making the arrest, the procedure under Section 19 PMLA was not followed; (b) the Enforcement Directorate cannot be the complainant and the Investigating Officer at the same time; (c) effect of a declaration of twin conditions under Section 45 of the PMLA have been declared unconstitutional and ultra vires given the decision in Nikesh Tarachand Shah v. Union of India (2018).

Findings

The High Court observed that since the arrest of petitioners was in execution of the Non-Bailable Warrants [NBW], the provision under Section 19 of the PMLA could not be adhered to. One of the petitioners, Bimal Jain, was arrested in execution of the NBW by the learned Special Judge, PMLA while taking cognizance of the prosecution complaint filed by the Enforcement Directorate. Thus there was no occasion to comply with the requirement of Section 19 of the PMLA. The Court noted,

"The very fact the complaint was filed by the Enforcement Directorate arraying petitioner Bimal Jain as accused No.2, prima facie show there were reasons to believe the person was guilty of an offence punishable under Section PMLA as the complaint is filed only against a person who is presumed to be guilty. Admittedly, the learned Special Judge, PMLA, took cognizance of the complaint filed by the Enforcement Directorate as he reasonably believed petitioner Bimal Jain, being guilty of the offence of money laundering."

To answer the argument that the complaining and the Investigating Agency cannot be the same, the Court referred to Mukesh Singh vs State (NCT) of Delhi [2020]. It was held that merely because the informant is the investigator, the investigation would not suffer the vice of unfairness or bias. Therefore, on the sole ground that the informant is the investigator, the accused is not entitled to acquittal.

For the argument on the effect of declaring Section 45 of the PMLA as unconstitutional, the petitioners referred to the Nikesh Tarachand Shah Case (2018). In the said case, Section 45 of the PMLA 2002 was declared unconstitutional for being violative of Articles 14 and 21 of the Constitution of India. However, the defects pointed out by the Supreme Court were cured by the Legislature and an amendment to section 45(1) was made vide the Finance Act, 2018. Through an amendment to Section 45(1) was revived, the words "punishable for a term of imprisonment of more than three years under part A of the Schedule" were substituted by the words "under this Act".

The Court held that there is no doubt that the legislature has the power to cure the underlying defect pointed out by a Court, while striking down a provision of law and pass a suitable amendment. Referring to a catena of judicial precedents, the Court remarked that merely because the entire Section was not re-enacted would be of no consequence since the provision, even after being declared unconstitutional, does not get repealed or wiped out statute book, and it only becomes unenforceable.

The Court denied bail to both the petitioners, on the parameter of Section 439 Cr P C ignoring Section 45(1) of the PMLA, 2002 based on the facts, allegations and evidence collected so far.

Title: Naresh Jain v. Directorate of Enforcement (2021)

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