Date of judgement:
23rd November, 2017
Bench:
Honourable Justice R.F. Nariman
Parties:
Petitioner – Nikesh Tarachand Shah
Respondent – Union of India
SUBJECT
In this case, Section 45(1) of the Money Laundering Act, 2002 was challenged as being violative of Articles 14 and 21 of the Constitution of India. The Court held that the classification made under Section 45 was unreasonable and treated un-equals as equals.
OVERVIEW
- In this case, certain writ petitions were filed before the Supreme Court challenging the constitutional validity of Section 45 of the Prevention of Money Laundering Act, 2002.
- Section 45 lays down two conditions for granting bail in an offense provided under part A of the schedule to the Act which is punishable with imprisonment for a term of 3 years or more.
- Firstly the public prosecutor must be provided with an opportunity to oppose the bail application and secondly, the court must be satisfied that there are reasonable grounds for believing that the accused has neither committed the concerned offense nor is likely to commit it when released on bail.
ARGUMENTS BY THE PETITIONERS
- The petitioners argued that the twin conditions laid down by section 45 are discriminatory, arbitrary and violative of Articles 14 and 21 of the constitution.
- The petitioners argued that the Money Laundering Bill was based on the recommendations of the Standing Committee on Finance. However, the twin conditions as laid down in the Bill recommended by the Standing Committee were qua offenses under the 2002 Act. When the Bill was enacted into an Act, the scheme of the Bill we changed and Section 45 dealt with predicate or scheduled offense.
- Scheduled offense is an offense under other penal laws contained in Part A of the schedule.
- The petitioner pointed out that at the time of its enactment Part A of the Schedule contained only two offenses under IPC and 9 offenses under the NDPS Act. These offenses were considered heinous by the legislature.
- However, after the 2012 Amendment, certain other offenses were added to Part A of the schedule. Resultantly, offenses under 26 acts and IPC were put under Part A.
- The petitioner pointed out that the object behind the 2012 Amendment was to remove the 30 lakh limit attached to the offenses under Part B. The object of the amendment was not to deny bail to the persons accused of offenses provided under Part B.
- Thus, putting the offenses provided under Part B together with offenses under Part A will amount to equal treatment of unequals and thus it would be violative of Article 14 of the Constitution.
- The petitioner pointed out that Nilesh Tarachand was accused of certain offenses under IPC and Section 13 of the Prevention of Corruption Act. He was granted bail by the Sessions Court in relation to these offenses. However, later the 2002 Act was added to the offenses and due to the twin conditions provided under Section 45, he was denied till.
ARGUMENTS BY THE RESPONDENTS
- The respondents pointed out that the primary objective of the Act was to recover the money that is siphoned off from the economy through money laundering.
- The respondents contended that classification based on punishment has been upheld in previous occasions by the Court.
- That respondent contended that Section 45 should be construed harmoniously with the rest of the Act and the expression "there are reasonable grounds for believing that he is not guilty of such offense" must be read as making prima facie assessment of reasonable guilt by the Court.
RELEVANT PROVISIONS
The Prevention of Money-Laundering Act, 2002
- Section 3: Offence of money-laundering
- Section 4: Punishment for money-laundering
- Section 5: Attachment of property involved in money-laundering
ANALYSIS BY THE COURT
- The court noted that when the Prevention of Money Laundering Bill, 1999 was presented before the Parliament, Section 44 corresponded to Section 45 of the present Act. However the wording of the Section was changed radically when the Act was finally passed in 2002 and notified in 2005.
- The court pointed that Article 14 permits classification subject to the condition that the classification must have a rational relation to the object sought to be achieved by the statute in question. The court also referred to the case of State of Bombay and Anr. v. F.N. Balsara.
- The sanction of article 14 applies not only to substantial law but also procedural law. If a legislation is manifestly arbitrary, it must be struck down
- Prior to the 2009 and 2012 Amendment, the twin conditions laid down in section 45(1) where to apply only to cases involving waging of war against the government of India and offenses under the NDPS Act.
- By the 2009 Amendment, certain offenses under the Explosive Substances Act, 1908 and Unlawful Activities (Prevention) Act, 1967 and Offenses under section 489 A and B of the Indian Penal Code were added to part A of the 2002 Act.
- By the 2012 Amendment, all the offenses contained in Part B were transplanted to Part A.
- “The statutory scheme, as originally enacted, with Section 45 in its present avatar, would, therefore, lead to the same offenders in different cases having different results qua bail depending on whether Section 45 does or does not apply.”
- The Court held that the procedure for getting bail would become harsh and burdensome merely on the basis of whether a person is being tried for an offense which is also an offense under Part A or an offense under Part A along with the offense under the 2002 Act. The act was 10 held to be manifestly arbitrary and violative of Articles 14 and 21 of the Constitution.
- The court noted that since Part A also consisted of offences provided under other Acts, the expression "such offense" used in Section 45 would apply to offences which are not related to Money Laundering Act but to some other Act. Thus, it was a unique feature of the 2002 Act that the twin conditions laid down under Section 45 did not relate to an offense under the 2002 Act itself.
- The classification of predicate offences under Part A was based on sentencing. The Court pointed out that the classification on the basis of sentencing did not have any rational relation with the object sought to be achieved by this classification.
- The objective of the 2002 Act was to prevent money laundering and to ensure that the persons engaged in money laundering were brought to book. Thus, if the classification was based on the monetary limit of the offence it would have qualified as a reasonable classification.
- The Court pointed out that under the NDPS Act, the classification is done on the basis of the narcotic substances that the accused is found with. Section 37 of the NDPS Act is attracted only when a person is found with commercial quantities of the narcotic substance.
- Where a person is found in possession of narcotic substance which is below the commercial quantity, he can apply for bail under Section 439 of the Code of Criminal Procedure without satisfying the twin conditions under Section 45 of the 2002 Act or Section 37 of the NDPS Act.
CONCLUSION
Thus, the Court declared Section 45(1) of the Money Laundering Act, 2002 to be unconstitutional and violative of Articles 14 and 21 of the Constitution in so far as it imposed the twin conditions on the granting of bail.
Click here to download the original copy of the judgement
Learn the practical aspects of CrPC HERE, CPC HERE, IPC HERE, Evidence Act HERE, Family Laws HERE, DV Act HERE
