Twin Conditions For Bail U/S 45 PMLA Declared Unconstitutional By SC Restored By 2018 Amendment: Kerala High Court

The Kerala High Court has recently ruled that while considering a bail application under the Prevention of Money Laundering Act, the twin conditions specified in Section 45(1) of PMLA and the general principles governing the grant of bail under Section 439 of CrPC should be considered.

After examining Sections 65 and 71 of the PMLA, Justice Kauser Edappagath found that PMLA has an overriding effect and the provisions of the CrPC would apply only if they are not inconsistent with the provisions of the said Act.

"The conditions enumerated in Section 45 of the PMLA will have to be complied with even in respect of an application for bail made under Section 439 of Cr.P.C.Sub-section (2) of Section 45 says that the limitation on granting of bail specified in sub-section (1) is in addition to the limitations under the Cr.P.C. or any other law for the time being in force on granting of bail. Thus, the power to grant bail to a person accused of having committed an offence under the PMLA is not only subject to the limitations imposed under Section 439 of Cr.P.C, but also subject to the restrictions imposed by the twin conditions of sub-section (1) of Section 45 of PMLA."

The petitioner had allegedly committed the offences punishable under Sections 3 and 4 of PMLA by being involved in an investment scam that defrauded people of a total of Rs.1200 crore.

He was arraigned as the 12th accused in the case, arrested in March 2022 and remanded to judicial custody. The bail application he filed before the Special Court was dismissed in April 2022 and therefore, he approached the High Court with another bail application.

Senior Advocate George Thomas appeared for the petitioner assisted by Advocate Amal George submitted that the twin conditions under Section 45(1) PMLA were struck down and declared unconstitutional by the Apex Court in Nikesh Tarachand Shah v. Union of India & Anr (AIR 2017 SC 5500) and hence, the embargo under Section 45 would not apply to the case.

However, Central Government Counsel Suvin R Menon submitted that there are materials on record to show his involvement in the crime and that he has actively and knowingly involved and assisted in the investment scheme mooted by the accused No.1. He added that for money launders, 'jail is the rule and bail is an exception',  as confirmed in many landmark judgments of the Apex Court. 

The Court observed that the jurisdiction of the Court to grant bail to a person accused of an offence under PMLA was circumscribed by Section 45 as amended in 2018. The twin conditions under Section 45(1) before amendment were applicable only to offences punishable with imprisonment of more than three years under part A of the Schedule.

After the Supreme Court declared the twin test unconstitutional in Nikesh Shah (supra), Section 45(1) was amended and the words "punishable for a term of imprisonment of more than three years under part A of the Schedule" were replaced with "under this Act". 

The petitioner argued that although after the amendment, the original Section 45(1) (ii) has not been revived or resurrected by amending the Act and therefore, as of today, there is no rigour of the said two further conditions under the original Section 45(1)(ii) of PMLA for releasing the accused on bail.

However, the Central Government Counsel submitted that as per the amendment the original Section 45 (1)(ii) has to be inferred and treated as still exists in the statute and holds the field as of today for deciding a bail application by an accused under PMLA. He added that by amending Section 45(1), the judgment delivered by the Apex Court has virtually become ineffective and therefore, the prayer for bail of the petitioner has to be considered in view of the amended provisions of Section 45(1) of the PMLA.

The question before the Court was whether the 2018 amendment can restore the validity of the twin conditions and will an accused charged with an offence under the Act still have to satisfy the rigours of the "twin conditions" notwithstanding the judgment of the Apex Court in Nikesh Shah.

Justice Edappagath found that the Apex Court declared Section 45(1)(ii) ultra vires not because of any inherent defect in those two conditions in themselves, but because of its dependence on the applicability, relatable only to the offences in Part A of the Schedule; for the reason that the offences under Part A of the schedule are not offences of money laundering but different predicate offences.

The Court pointed out that the amendment was introduced taking note of the same, to cure the lacuna the Apex Court found. Thus, it was held that the twin conditions for bail declared unconstitutional by the Apex Court in Nikesh Shah (supra) stood restored by Amendment in 2018.

As such, applying this principle to the facts of the case, the bail application was dismissed. 

Also Read: S.45 PMLA: Twin Conditions For Bail Declared Unconstitutional By SC Stand Revived By 2018 Amendment Act: Jharkhand High Court

Case Title: Abdul Gafoor @ Kunhumon v. Asst. Director, Directorate of Enforcement & Ors.

Citation: 2022 LiveLaw (Ker) 258

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