S.45 PMLA: Twin Conditions For Bail That Were Declared Unconstitutional By SC Stand Revived By 2018 Amendment Act: Bombay High Court

In a recent case, a two-judge bench of the Bombay High Court noted that the twin conditions for bail in section 45(1) of the Prevention of Money Laundering Act, 2002 which were declared unconstitutional by the judgment of the Apex Court in Nikesh T.Shah Vs. Union of India (2018) 11 SCC 1, stand revived in view of the Legislative intervention vide Amendment Act 13 of 2018.

In doing so, the division bench has departed from the view earlier expressed by a single bench of the Bombay High Court in Sameer M. Bhujbal Vs. Assistant Director, Directorate of Enforcement. 

It may be noted that a Supreme Court bench of Justices Sanjay Kishan Kaul and M.M.Sundaresh had recently reiterated that twin conditions for the grant of Bail under Section 45 were inapplicable. While hearing application seeking clarification to its order dated 07.10.2021, issuing guidelines on the aspect of the grant of bail to accused who are not arrested during the investigation on charge sheet being filed, the Supreme Court clarified that the twin conditions for grant of bail specified in Section 45 of Prevention of Money Laundering Act (PMLA) have been struck down.

The two conditions are:

the Public Prosecutor has been given an opportunity to oppose the application for such release; and

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:…

The division bench of the Bombay High Court was hearing a reference from a single-judge bench's decision which held that the basis and foundation of the declaration of unconstitutionality stood removed in view of the Legislative intervention and therefore expressed his inability to concur with the view expressed by the learned Single Judges of the Court in the cases of Sameer Bhujbal and Yogesh Deshmukh.

The Question referred to the Division Bench was:

"Whether the twin conditions in section 45(1) of the 2002 Act, which was declared unconstitutional by the judgment of the Apex Court in Nikesh T.Shah Vs. Union of India (2018)11 SCC 1, stand revived in view of the Legislative intervention vide Amendment Act 13 of 2018?"

The applicants had argued that the rigor of complying with the duel conditions in Section 45 (1) of the PMLA would not apply in view of the decision of the Apex Court in Nikesh Shah. They further argued that the Legislative amendment of the year 2018 has not cured the entire defects pointed out by the Supreme Court and therefore the twin conditions would not revive and that the Parliament cannot nullify the effect of the judgment of the Supreme Court by introducing the said amendment.

The applicants placed reliance on the Bombay High Court decisions in the case of Sameer M. Bhujbal Vs. Assistant Director, Directorate of Enforcement, (B.A. No.286/2018 – Bombay High Court) and the case of Union of India Vs. Yogesh Narayanrao Deshmukh (2021) SCC Online Bom 2905. 

In Sameer Bhujbal, the Bombay High Court had expressed that even after amendment original section 45(1)(ii) has neither been revived or resurrected by the Amending Act. Moreover, the notification dated 29.03.2018 thereby amending section 45(1) of the PML Act was silent about its retrospective effect, therefore, there is no rigor of said twin conditions. In Yogesh Deshmukh, the Bombay High Court retierated the stand taken in Sameer Bhujbal. 

To the contrary, the respondents argued that due to the subsequent amendment introduced vide Act No.13 of 2018, the twin conditions have been revived and therefore the statutory mandate would apply while considering the bail application. In that regard she relied on the decision of the Supreme Court in P. Chidambaram v Directorate of Enforcement (2020) 12 SCC 791 and the Delhi High Court in cases of Bimal Kumar Jain Vs. Director of Enforcement, 2021 SCC Online Del 3847. 

Answering the reference, the judgment authored by Justice Vinay Joshi observes that while the legislature cannot by way of amendment undo the decision of the Court, it has the power to rectify the through amendment the defect noticed of highlighted by the decision of the Court. 

It further observes that the constitutional validity of the Amendment is not under challenge before the High Court. In fact, pending its constitutional validity before the Supreme Court, it must be presumed to be constitutionally valid. It notes: 

"The issue whether the Amendment Act 13 of 2018 has cured all the defects directly connects to the aspect of validity of the Amendment Act 13 of 2018, which is not the matter for consideration nor can be dealt under this reference arising out of bail application filed under the statutory provision." (Para 39) 

"After decision of Nikesh Shah (supra) the Parliament has introduced an amendment to Section 45 of the Act, which has changed the entire complexion. Merely because the entire section is not re-enacted, has no consequence. Admittedly, the Amending Act is not struck down yet by the Courts as the said challenge is pending. Since the Legislative amendment on date is in existence, the presumption of constitutionality would apply." (Para 45)

The Court further takes notes of the fact that despite the constitutional challenge to the Amendment Act pending, the Apex Court in P. Chidambaram did not lay down that the twin conditions would not survive in view of the Nikesh Shah case. It notes: 

"In the subsequent pronouncement of P. Chidambaram's case (supra), the Supreme Court took a note of its earlier decision in case of Nikesh Shah (supra) and subsequent amendment, but never expressed that despite amendment, twin conditions do not survive. Our view is fortified by recent decision of the Supreme Court in the case of Assistant Director, Directorate of Enforcement Vs. V.C. Mohan decided on 04.01.2022. In said case, High Court of Telangana at Hyderabad has granted anticipatory bail in connection with offence under the PML Act. It is observed that though offence under the PML Act is dependent on the predicate offences that does not mean that while considering the prayer for bail, in connection with offence under the PML Act, the mandate of section 45 of the PML Act would not come into play. Pertinent to note that the judgment in Nikesh Shah's case was brought to the notice of the Supreme Court. However, it is observed that the underlying principles and rigor of section 45 of the Act must get triggered although the application is under section 438 of the Cr.P.C. The reading of the judgement conveys that the Supreme Court in its above pronouncement even after taking note of the decision of Nikesh Shah (supra) has expressed that the rigor of Section 45 of the PML Act would be attracted while dealing with bail application." (Para 45)

The Court then distinguishes the opinion expressed by the Bombay High Court in Sameer Bhujbal's case by noting that: 

"Absence of reference in notification dated 29.03.2018 thereby amending section 45(1) of the Act about its retrospective applicability (as observed in Sameer Bhujbal's case), does not take away the force and impact of amendment. It is for the Legislature to give effect to the amending provisions prospectively or retrospectively. However, that cannot be reason for ineffecting the amending provisions of the Act." (Para 48)

"The Amending Act has changed the entire complexion. Notably section 45 of the Act has not been repelled from the statute book. Therefore, in our view, the section as it stood after amendment has to be read as it stands. We do not find it necessary that the entire section has to be resurrected afresh. The very effect of the amendment has changed the periphery of its applicability. The section which stands after amendment has to be read as a whole." (Para 47)

For these reasons, the Court answers the reference by noting that the twin conditions for bail under Section 45 of the PMLA, 2002 would revive and operate by virtue of the Amendment Act, which is on date in force. It notes: 

"Undoubtedly, the Legislature has power and competence to amend the provisions of the Act. Unless the amended provision is struck down by the Courts, it cannot be watered down. Since after the amendment the entire complexion of section 45 has been changed, we are not in agreement with the contention that the entire section has to be reenacted by way of amendment after decision in the case of Nikesh Shah (Supra). Therefore, in our opinion, the twin conditions would revive and operate by virtue of Amendment Act, which is on date in force. In view of that, we answer the reference by stating that the twin conditions in section 45(1) of the 2002 Act, which was declared unconstitutional by the judgment of the Apex Court in Nikesh T.Shah Vs. Union of India (2018) 11 SCC 1, stand revived in view of the Legislative intervention vide Amendment Act 13 of 2018. " (Para 49)

Accordingly, the concerned Court has been directed to consider the bail application of the appellant in light of the above observations. 

Also Read: Bail Under PMLA 2002: The Post Amendment Scenario

Case Title: Ajay Kumar v Directorate of Enforcement

Citation: 2022 LiveLaw (Bom) 27

Coram: Justice Vinay Joshi, Justice V.M.Deshpande

Read/Download the Judgement here