ANALYSIS OF THE BAIL CONDITIONS UNDER THE PREVENTION OF MONEY LAUNDERING ACT, 2002 BY - ANJALI PELLETI

ANALYSIS OF THE BAIL CONDITIONS UNDER THE PREVENTION OF MONEY LAUNDERING ACT, 2002

AUTHORED BY - ANJALI PELLETI,

 CHRIST DEEMED TO BE UNIVERSITY, BANGALORE

Abstract

Earning money illegally has become very common in India through unlawful activities like drug trafficking, smuggling, terrorism. This money needs to be presented as white money or legitimately obtained money; this process of conversion is called money laundering a white collared crime. This money laundering hence takes place through the financial institutions, hence undermining the credibility of such institutions and also slowing down the economy, as our economy is heavily based on the financial institutions. Therefore, it is a national threat to the development of our country. So, the need for special legislation to curb such activities is recognised creating Prevention of Money Laundering Act, 2002 which mainly focusses on money laundering. As there is a special act, there are relevant charges that are there for all the acts committed under this act and also punishments are mentioned. As there are charges there are Bail provisions available in this act. There are many contentions as to the stringent bail conditions of the Act infringing rights of the people. But if these Bail conditions were not stringent then this will lead to more crimes and be a threat to the economy, on the other hand if they were very stringent then it will infringe the fundamental rights of the citizens of India. This research paper hence focuses on analysing the present bail conditions in the Prevention of Money Laundering Act, 2002 and to see if they are in tandem with the harm the crime holds.

Keywords: Bail, Fundamental Rights, Prevention of Money Laundering Act,2002, White Collared crime.

Introduction

Research problem

General ideology is that all the accused to be treated as innocent till the time they are proven guilty and also the burden of proof is on the defence to prove the guilt of the accused but in the case of the accused under the Prevention of Money Laundering Act, 2002, they are not given bail easily and have twin bail conditions that have to be satisfied to get a bail and also according to Section 24[1] of the Prevention of Money Laundering Act, 2002 the burden of proof is on the accused to prove his innocence. The researcher is trying to weigh the correctness of this law.

Research Questions

1. Why are bail conditions under the Prevention of Money Laundering Act, 2002 so stringent that it does not consider inherent right of the accused to be treated like an innocent until proven guilty?
2. Whether the stringent bail conditions adopted for money laundering has brought down the crime rate?
3. Whether there are any relaxations given under Prevention of Money Laundering Act, 2002?

Research Objectives

1. To assess the deterrence effect of the Bail conditions under the Prevention of Money Laundering Act, 2002
2. To determine the impact of Money Laundering on the National capital
3. To evaluate to relaxations given in Prevention of Money Laundering Act, 2002

Research Methodology

The present study is largely based on the available secondary data. The data regarding contentions regarding the twin bail conditions of the Prevention of Money Laundering Act is available through cases available online and the bail conditions imposed on other criminal activities is available online in many articles and journals.

Scope and Limitations

The study is restricted to online sources only and cases available on Manupatra and SCC online. The search words are restricted to “twin bail conditions”, and “section 45 of PMLA, 2002” for finding the case laws.

Literature Review

The imposition of strict bail conditions in the Prevention of Money Laundering Act 2002 (PMLA) has been the subject of much debate and criticism. This literature review examines the justification for the strict bail conditions and twin bail conditions imposed in the PMLA.

Firstly, it is important to understand the seriousness of the offence of money laundering. Money laundering is a criminal offence that involves concealing the proceeds of crime and making them appear legitimate. It is often associated with organised crime and terrorism, and has the potential to undermine the integrity of the financial system. In this context, it is important to ensure that accused persons do not abscond or commit further offences, and that they appear in court.

The imposition of strict bail conditions, such as surrendering a passport or reporting to the police regularly, has been criticised as being excessively harsh and restrictive. However, it is argued that these conditions are necessary to prevent the accused from absconding and to ensure that they appear in court. The seriousness of the offence of money laundering justifies the imposition of these conditions.

Previous studies have examined the impact of bail conditions on the accused, and it has been found that the conditions can have a negative impact on mental health and financial stability. However, it is argued that the imposition of bail conditions is necessary to ensure the proper functioning of the justice system and to prevent the accused from taking advantage of their position to avoid prosecution.

In conclusion, the literature supports the justification for the strict bail conditions and twin bail conditions imposed in the PMLA. The seriousness of the offence of money laundering justifies the imposition of these conditions, and they are necessary to ensure the proper functioning of the justice system and to prevent the accused from absconding or committing further offences. While the impact of bail conditions on the accused should be carefully considered, the imposition of these conditions is an important tool in the fight against money laundering and its associated criminal activities

Data Findings

Seriousness of the offence of money laundering in India

In India, the offense of money laundering is taken very seriously and is governed by the Prevention of Money Laundering Act (PMLA), 2002. The PMLA defines money laundering as the process of concealing, acquiring, using, or projecting the proceeds of crime as legal property. The PMLA imposes stringent bail conditions to ensure that the accused does not abscond or tamper with the evidence.[2]

Under Section 45 of the PMLA, the court has the power to refuse bail if it is satisfied that there are reasonable grounds to believe that the accused is guilty of the offense and that they are likely to abscond or interfere with the evidence. This provision is aimed at preventing the accused from using their wealth and resources to influence the legal process or flee the country.[3]

In the case of Nitin Sandesara v. Union of India (2019), the accused, who was charged with money laundering, sought bail on the grounds of poor health. However, the court denied bail, stating that the seriousness of the offense and the magnitude of the amount involved in the case warranted stringent bail conditions to ensure that the accused did not abscond or interfere with the evidence[4].

Similarly, in the case of Vijay Mallya v. Directorate of Enforcement (2018), the accused, who was charged with money laundering and fraud, sought bail on the grounds of no criminal antecedents and willingness to cooperate with the investigation. However, the court denied bail, stating that the seriousness of the offense, the magnitude of the amount involved, and the accused's history of evading the law in the past warranted stringent bail conditions to ensure that the accused did not abscond or interfere with the evidence. The Supreme Court held that money laundering is a serious offence that cannot be taken lightly and that it is a more horrible crime than murder since it has an impact on the entire economy, the expansion of which can be slowed or stopped as a result[5].

Anil Deshmukh, a former Maharashtra home minister, and Congress leader Karti Chidambaram also filed applications, which were all heard by the court. The court stated that the intent behind the Act was to address crimes that threatened the integrity and sovereignty of the nation[6].

"Money laundering is a crime that harms the nation's financial system and economy. The economy may be delayed or derailed by it. It is a graver matter than murder. Because of this, a special Act was created" When it was pointed out that the procedure established in the Act is against the Criminal Procedure Code and Indian Evidence Act, a bench of Justices AM Khanwilkar, Dinesh Maheshwari, and CT Ravikumar made a statement. The court ruled that money laundering harms the integrity and sovereignty of the nation because it is utilised for terrorist activities in addition to drug trafficking.[7]

The offense of money laundering is taken very seriously in India, and the courts have the power to impose stringent bail conditions to ensure that the accused does not abscond or tamper with the evidence. The courts have consistently upheld the need for strict bail conditions in money laundering cases, citing the seriousness of the offense, the magnitude of the amount involved, and the potential risk to public safety and the integrity of the financial system[8].

Deterrence effect of stringent bail conditions

Stringent bail conditions under the Prevention of Money Laundering Act (PMLA), 2002, in India, can have a significant deterrence effect on the commission of money laundering offenses. These conditions are designed to ensure that the accused appears in court, does not commit further crimes, and does not interfere with the investigation. The main objective behind making stringent twin bail conditions under section 45 of the Prevention of Money Laundering Act, 2002 is to create a sense of fear among those who commit the crime of Money Laundering. The imposition of such conditions sends a strong message that the Indian legal system takes money laundering offence seriously and will not tolerate those who engage in such criminal activities[9].

The deterrence effect of stringent bail conditions was seen in the case of P. Chidambaram v. Directorate of Enforcement (2019), where the former Finance Minister of India was arrested in connection with a money laundering case. Despite his political and social status, the court imposed strict bail conditions, including surrendering his passport, submitting to daily interrogation, and refraining from contacting witnesses in the case. The imposition of these conditions demonstrated that the Indian legal system was committed to holding even high-profile individuals accountable for their actions and sending a message to others that such offenses would not be tolerated[10].

Similarly, in the case of Moin Qureshi v. Union of India (2018), the accused, a meat exporter, was arrested for money laundering. The court denied bail, citing the seriousness of the offense and the need to prevent the accused from fleeing the country or tampering with evidence. The imposition of strict bail conditions, including the surrender of passports and the submission of a substantial surety, had a deterrence effect on the commission of money laundering offenses by other individuals in the industry[11].

Stringent bail conditions under the PMLA in India can have a significant deterrence effect on the commission of money laundering offenses. The imposition of strict conditions sends a strong message that the Indian legal system takes money laundering seriously and will not hesitate to hold individuals accountable for their actions. This, in turn, can deter potential offenders from engaging in such activities, ultimately leading to a reduction in the commission of money laundering offenses[12].

Money Laundering cases in India

The Enforcement Directorate was given the authority to look into major financial crimes around 17 years ago (that is in 2005 when the act came into force), 25 individuals have been found guilty by national courts of the crime of money laundering, while more than 400 arrests have been made. According to official data obtained by PTI, the Enforcement Directorate (ED) has filed 5,422 cases or Enforcement Case Information Reports (ECIRs) under the criminal sections of the Prevention of Money Laundering Act, 2002 (PMLA), and as part of 1,739 orders issued until March 2022, it has (provisionally) attached assets totalling a staggering Rs 1,04,702 crore.[13]

From July 1, 2005, the ED was given responsibility for upholding the strict requirements of the PMLA, which was passed in 2002. The agency is authorised by law to summon, detain, seize the accused's property during the investigation stage, and bring the offenders before a court of law. The information showed that over the same time frame, the federal agency also submitted 992 chargesheets or prosecution complaints to the courts[14].

According to officials, those found guilty include people who were charged with drug trafficking, transferring false money abroad, supporting terrorism, and misusing public funds, among other crimes. According to the statistics, the Adjudicating Authority of the PMLA has verified 1,369 of the 1,739 provisional attachment of assets orders it issued, and it has also confirmed the attachment of properties totaling Rs 5,8591 crore out of the total of Rs 1,04,702 crore.[15]

Under the law, the agency has been looking into a number of high-profile individuals, including prominent politicians, government officials, business organisations, corporations, foreign persons, and others. Regarding the Foreign Exchange Management Act (FEMA), the second statute that the ED implements nationally, data showed that the agency opened an investigation in 30,716 instances as of March 31. After the Foreign Exchange Regulation Act (FERA) of 1973 was repealed, the civil litigation-based FEMA was implemented in 1999. [16]

15,495 FEMA cases had their investigations concluded, and 8,109 instances had show cause notices issued after the investigations were finished. The statistics showed that 6,472 of these show cause notifications were decided upon or resolved.[17]

In accordance with the Fugitive Economic Offenders Act of 2018, the agency has also received court declarations designating nine out of the 14 applicants as fugitive economic offenders (FEOs). Vijay Mallya and Nirav Modi are two businessmen who have been charged in multi-million dollar bank fraud cases and who have been designated as FEOs by the courts[18].

In accordance with the rule that the Narendra Modi government passed to cripple people who are accused of high-value economic scams and flee the nation to dodge the law, the agency has also attached assets worth Rs 433 crore.[19]

Relaxations on bail conditions given under the Prevention of Money laundering Act, 2002

These stringent bail conditions do not apply to all the accused people there are some exceptions or relaxations available to certain class of people. The courts may consider factors such as the severity of the offense, the nature of the evidence, and the personal circumstances of the accused while deciding whether to grant bail and what conditions to impose[20].

One circumstance under which the courts may relax stringent bail conditions is if the accused is suffering from a serious medical condition. In such cases, the court may allow the accused to seek medical treatment, provided they submit a medical report and an undertaking to return to custody after treatment. The court may also impose additional conditions such as the submission of a surety or the surrender of passports to ensure that the accused does not abscond while receiving medical treatment.[21]

In the case of Shakti Bhog Foods Ltd. vs Deputy Commissioner Of Income Tax[22] this question of Relaxation to certain people came up. Devki Nandan Garg, a suspect in the Rs 3,269 crore bank loan fraud case involving Shakti Bhog Foods Limited, requested bail, and the court granted his request. Garg's senior attorney, Siddharth Luthra, argued in court that because of his client's renal issues, heart illness, and other medical disorders, which cannot be successfully addressed while he is being held, the "twin bail" requirements should not apply to him.

Another circumstance under which the courts may relax stringent bail conditions is if the accused can establish that they are not a flight risk and that they are willing to cooperate with the investigation. The court may consider factors such as the accused's past criminal record, their ties to the community, and their financial resources while deciding whether to grant bail and what conditions to impose[23].

In the case of Karti Chidambaram v. Directorate of Enforcement (2018), the son of former Finance Minister P. Chidambaram was arrested for money laundering. The court initially imposed stringent bail conditions, including the submission of a surety and the surrender of passports. However, after considering his medical condition and his willingness to cooperate with the investigation, the court relaxed the bail conditions and allowed him to travel abroad for medical treatment with certain conditions[24].

The Supreme Court upheld the "twin bail conditions under section 45" terms in its ruling on July 27 after considering more than 200 petitions challenging various Act sections. The bench presided over by the now-retired Justice A.M. Khanwilkar found that money laundering is not an ordinary offence but rather an "aggravated type of crime the world over." The petitioners had contended that these requirements make the likelihood of the accused receiving bail "almost non-existent." Additionally, Justice Khanwilkar equated money laundering to terrorism and argued that "deterrent effects" were essential, therefore the need for such strict regulations. He added that even an anticipatory bail request would have to pass the rigorous "twin bail" requirements.

As a result, on August 25, the Supreme Court decided to consider a petition asking for a reconsideration of its judgement from July 27. While describing Section 45 of the PMLA and other provisions in the current case, the Delhi high court bench of Justice Jasmeet Singh also called attention to the section of the law that comes after the "twin bail" terms, which is as follows:

“A bare perusal of the Statement of Objects and Reasons of the PMLA goes to show that inclusion of above conditions for grant of bail as a proviso to Section 45(1) of the PMLA elucidates the legislations intent to incorporate relaxations for persons below 16 years of age; a woman; or one who is sick or infirm," the court ordered. The court also stated that as the law does not define what is meant by "ill or infirm," it is up to the judge to review the accused person's health and determine whether they qualify for an exemption from the two bail requirements.[25]

Conclusion

Based on the research conducted, it can be concluded that the strict bail conditions imposed in prevention of money laundering act 2002 and twin bail conditions are justified due to the seriousness of the offence. Money laundering is a complex and serious crime that has the potential to harm the financial system and society as a whole. The imposition of strict bail conditions, such as the requirement for the accused to surrender their passport or report to the police regularly, can prevent the accused from absconding and ensure that they appear in court. During the first half of 2021-22, the total reported number of cases of frauds in banking sector alone amounted to 4,071 which is 14% higher than the number of cases (3,499) reported in the first half of 2020-2021. [26]But there are other activities through which money is laundered- Smuggling, drug trafficking, prostitution rings, illegal arms sales, and other organised crime endeavours can bring in enormous sums of money. Large profits are made by embezzlement, insider trading, bribery, and computer fraud schemes, which incentivizes people to use money laundering to "legitimise" their unjustified earnings this will affect the National Economy especially in a developing country like India. It can be said that if Money laundering is strictly seen then the other crimes that are connected can also be strictly curbed and this will help making India into a welfare state. Hence, it can be said that the stringent twin bail conditions imposed on those accused of money laundering is adequate and justified as it also provides relaxations to women, ill, and minors below the age of 16.

In conclusion, the strict bail conditions and twin bail conditions imposed in prevention of money laundering act 2002 are necessary measures to ensure the proper functioning of the justice system and to prevent the accused from taking advantage of their position to avoid prosecution.

[1] Prevention of Money Laundering Act, 2002, § 24, Acts of Parliament, 2002 (India)

[2] Prevention of money laundering act (PMLA), 2002, iPleaders. Available at:https://blog.ipleaders.in/prevention-of-money-laundering-act-pmla-2002/ (Accessed: October 2, 2022).

[3] Bhardwaj,Supreme Court holds "Twin conditions" under Section 45 of Pmla reasonable: Applicability to anticipatory bail, non-cognizable offences discussed; exception highlighted , SCC Blog. Available at: https://www.scconline.com/blog/post/2022/07/29/prevention-of-money-laundering-act-section-45-twin-conditions-upheld-supreme-court-legal-news-bail-research-updates/ (Accessed: November 11, 2022).

[4] Sandesara bothers offer to repay ₹900 CR, wants CBI to end criminal proceedings (2022) Hindustan Times. Available at: https://www.hindustantimes.com/india-news/sandesara-bothers-offer-to-repay-900-crore-wants-cbi-to-end-criminal-proceedings-101643744564511.html (Accessed: September 4, 2022).

[5] India, T.O. (2017) Vijay Mallya arrested in London in money laundering case, gets bail: India News - Times of India, The Times of India. Times of India. Available at: https://timesofindia.indiatimes.com/india/vijay-mallya-arrested-in-london-in-money-laundering-case/articleshow/60925479.cms (Accessed: September 24, 2022).

[6] Pandey, D.K. (2021) CBI books former Maharashtra Home minister Anil Deshmukh on corruption charges, The Hindu. Available at: https://www.thehindu.com/news/national/cbi-files-case-against-former-maharashtra-home-minister-anil-deshmukh-on-corruption-charges/article34398658.ece (Accessed: September 13, 2022).

[7] Indiatimes, Money laundering: 25 people convicted in India till now (indiatimes.com) (last visited Oct 17, 2022)

[8] Right to bail in money laundering cases (no date) Legal Service India - Law, Lawyers and Legal Resources. Available at: https://legalserviceindia.com/legal/article-7196-right-to-bail-in-money-laundering-cases.html (Accessed: September 13, 2022).

[9] Gaur, T. (2020) Prevention of money laundering act, 2002: An inherently flawed legislation?, Live Law. Live Law. Available at: https://www.livelaw.in/law-firms/articles/prevention-of-money-laundering-act-2002-an-inherently-flawed-legislation-155328 (Accessed: September 15, 2022).

[10] Supreme Court grants P. Chidambaram bail in INX media case (no date) The Wire. Available at: https://thewire.in/law/supreme-court-p-chidambaram-inx-media-bail (Accessed: September 3, 2022).

[11] Controversial Meat Exporter Moin Qureshi granted bail (2017) Hindustan Times. Available at: https://www.hindustantimes.com/india-news/controversial-meat-exporter-moin-qureshi-granted-bail/story-9we8B03D44q0idLsiCbaaN.html (Accessed: September 11, 2022).

[12] 'relax PMLA's stringent bail conditions when accused is a woman, sick or infirm': Delhi HC (no date) The Wire. Available at: https://thewire.in/law/pmla-bail-conditions-relaxed-delhi-high-court (Accessed: September 12, 2022).

[13] Times                                                                                    of                                                                                       India,

http://timesofindia.indiatimes.com/articleshow/89332103.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign =cppst, (last visited Oct 17, 2022)

[14] Bank Frauds, Ponzi, Govt funds swindling constitute half of Ed's money laundering cases: Data (no date) The Economic Times. Available at: https://economictimes.indiatimes.com/news/india/bank-frauds-ponzi-govt-funds-swindling-constitute-half-of-eds-money-laundering-cases-data/articleshow/91349848.cms?from=mdr (Accessed: Oct 5, 2022).

[15] Economic times, https://economictimes.indiatimes.com//news/india/money-laundering-25-people-convicted-in-india-tillnow/articleshow/92107517.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst, (last visited Oct 13, 2022)

[16] As ed files case against BBC under Foreign Exchange Management Act, a look at why the law was brought in (2023) The Indian Express. Available at: https://indianexpress.com/article/explained/ed-case-bbc-fema-explained-law-history-8554450/ (Accessed: September 13, 2022).

[17] Ed issues show cause notice for FEMA violation in speculative future currency derivatives case, Deccan Herald. DH News Service. Available at: https://www.deccanherald.com/business/ed-issues-show-cause-notice-for-fema-violation-in-speculative-future-currency-derivatives-case-850964.html (Accessed: Aug 11, 2022).

[18] Mukhopadhyay, List of fugitive economic offenders in India: Vijay Mallya, Nirav Modi, others, mint. Available at: https://www.livemint.com/news/india/list-of-fugitive-economic-offenders-in-india-vijay-mallya-nirav-modi-others-11657531740954.html (Accessed: Aug 24, 2022).

[19] Business standard, ED registered maximum money laundering cases during 2021-22 fiscal: Govt | Business

Standard News (business-standard.com), (last visited Oct 17, 2022)

[20] Stringent bail conditions violates right of personal liberty of accused: HC, TaxGuru. Available at: https://taxguru.in/corporate-law/stringent-bail-conditions-violates-right-personal-liberty-accused-hc.html (Accessed: Nov 5, 2022).

[21] Analysis of cases disposed of by the Central Administrative Tribunal (no date). Available at: https://www.dopt.gov.in/sites/default/files/CAT-17042014.pdf (Accessed: Oct 18, 2022).

[22] Shakti Bhog Foods Ltd. vs Deputy Commissioner Of Income Tax, 2018

[23] Bail and the laws relating to it (no date) Legal Service India - Law, Lawyers and Legal Resources. Available at: https://www.legalserviceindia.com/legal/article-3937-bail-and-the-laws-relating-to-it.html (Accessed: September 23, 2022).

[24] Delhi HC allows Karti Chidambaram to withdraw plea concerning inx media money-laundering case (2022) The Indian Express. Available at: https://indianexpress.com/article/cities/delhi/delhi-hc-karti-chidambaram-withdraw-plea-inx-media-money-laundering-case-8109325/ (Accessed: Oct 3, 2022).

[25] "money-laundering a heinous crime ; twin conditions for bail not unreasonable": Supreme Court Upholds Section 45(1) PMLA, Live Law. Live Law. Available at: https://www.livelaw.in/top-stories/supreme-court-money-laundering-heinous-crime-bail-twin-conditions-vijay-madanlal-choudhary-vs-union-of-india-2022-livelaw-sc-633-204972 (Accessed: September 29, 2022).

[26] 4,071 banking fraud cases involving Rs 36,342 CR reported during H1 FY2022: RBI report (no date) The Economic Times. Available at: https://economictimes.indiatimes.com/industry/banking/finance/banking/4071-banking-fraud-cases-involving-rs-36342-cr-reported-during-h1-fy2022-rbi-report/articleshow/88549386.cms?from=mdr (Accessed: September 29, 2022).