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Nikesh Tarachand Shah Vs. Union of India & ANR. [November 23, 2017]
2017 Latest Caselaw 823 SC

Citation : 2017 Latest Caselaw 823 SC
Judgement Date : Nov/2017

    

Nikesh Tarachand Shah Vs. Union of India & ANR.

[Writ Petition (Criminal) No. 67 of 2017]

[Writ Petition (Criminal) No. 103 of 2017]

[[Writ Petition (Criminal) No.144 of 2017]

[Writ Petition (Criminal) No.152 of 2017]

[Criminal Appeal No. 2012 of 2017 arising out of SLP (CRL) No.7326 of 2017]

[Criminal Appeal No. 2013 of 2017 arising out of SLP (CRL) No.7786 of 2017]

[Criminal Appeal No. 2014 of 2017 arising out of SLP (CRL) No.7789 of 2017]

R.F. Nariman, J.

1. Leave granted.

2. The present writ petitions and appeals raise the question of the constitutional validity of Section 45 of the Prevention of Money Laundering Act, 2002. Section 45(1) imposes two conditions for grant of bail where an offence punishable for a term of imprisonment of more than 3 years under Part A of the Schedule to the Act is involved. The conditions are that the Public Prosecutor must be given an opportunity to oppose any application for release on bail and the Court must be satisfied, where the Public Prosecutor opposes the application, that there are reasonable grounds for believing that the accused is not guilty of such offence, and that he is not likely to commit any offence while on bail.

3. The Prevention of Money Laundering Act, 2002 was introduced, as its Statement of Objects and Reasons mentions, to make money laundering an offence, and to attach property involved in money laundering, so that this serious threat to the financial system of India is adequately dealt with. It is worth setting out the Statement of Objects and Reasons of the Act in full.

"STATEMENT of OBJECTS AND REASONS

It is being realised, world over, that moneylaundering poses a serious threat not only to the financial systems of countries, but also to their integrity and sovereignty. Some of the initiatives taken by the international community to obviate such threats are outlined below:-

(a) the United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, to which India is a party, calls for prevention of laundering of proceeds of drug crimes and other connected activities and confiscation of proceeds derived from such offence.

(b) the Basle Statement of Principles, enunciated in 1989, outlined basic policies and procedures that banks should follow in order to assist the law enforcement agencies in tackling the problem of money-laundering.

(c) the Financial Action Task Force established at the summit of seven major industrial nations, held in Paris from 14th to 16th July, 1989, to examine the problem of money-laundering has made forty recommendations, which provide the foundation material for comprehensive legislation to combat the problem of money-laundering. The recommendations were classified under various heads. Some of the important heads are-

(i) declaration of laundering of monies carried through serious crimes a criminal offence;

(ii) to work out modalities of disclosure by financial institutions regarding reportable transactions;

(iii) confiscation of the proceeds of crime;

(iv) declaring money-laundering to be an extraditable offence; and

(v) promoting international co-operation in investigation of money-laundering.

(d) the Political Declaration and Global Programme of Action adopted by United Nations General Assembly by its Resolution No. S-17/2 of 23rd February, 1990, inter alia, calls upon the member States to develop mechanism to prevent financial institutions from being used for laundering of drug related money and enactment of legislation to prevent such laundering.

(e) the United Nations in the Special Session on Countering World Drug Problem Together concluded on the 8th to the 10th June, 1998 has made another declaration regarding the need to combat money-laundering. India is a signatory to this declaration.

2. In view of an urgent need for the enactment or a comprehensive legislation inter alia for preventing money-laundering and connected activities confiscation of proceeds of crime, setting up of agencies and mechanisms for coordinating measures for combating money-laundering, etc., the Prevention of Money-Laundering Bill, 1998 was introduced in the Lok Sabha on the 4th August, 1998. The Bill was referred to the Standing Committee on Finance, which presented its report on the 4th March, 1999 to the Lok Sabha. The recommendations of the Standing Committee accepted by the Central Government are that

(a) the expressions "banking company" and "person" may be defined;

(b) in Part I of the Schedule under Indian Penal Code the word offence under section 477A relating to falsification of accounts should be omitted;

(c) 'knowingly' be inserted in clause 3(b) relating to the definition of money-laundering;

(d) the banking companies, financial institutions and intermediaries should be required to furnish information of transactions to the Director instead of Commissioner of Income-tax

(e) the banking companies should also be brought within the ambit of clause II relating to obligations of financial institutions and intermediaries;

(f) a definite timelimit of 24 hours should be provided for producing a person about to be searched or arrested person before the Gazetted Officer or Magistrate;

(g) the words "unless otherwise proved to the satisfaction of the authority concerned" may be inserted in clause 22 relating to presumption on interconnected transactions;

(h) vacancy in the office of the Chairperson of an Appellate Tribunal, by reason of his death, resignation or otherwise, the seniormost member shall act as the Chairperson till the date on which a new Chairperson appointed in accordance with the provisions of this Act to fill the vacancy, enters upon his office;

(i) the appellant before the Appellate Tribunal may be authorised to engage any authorised representative as defined under section 288 of the Income-tax Act, 1961,

(j) the punishment for vexatious search and for false information may be enhanced from three months imprisonment to two years imprisonment, or fine of rupees ten thousand to fine of rupees fifty thousand or both;

(k) the word 'good faith' may be incorporated in the clause relating to Bar of legal proceedings. The Central Government have broadly accepted the above recommendations and made provisions of the said recommendations in the Bill.

3. In addition to above recommendations of the standing committee the Central Government proposes to (a) relax the conditions prescribed for grant of bail so that the Court may grant bail to a person who is below sixteen years of age, or woman, or sick or infirm,

(b) levy of fine for default of non-compliance of the issue of summons, etc.

(c) make provisions for having reciprocal arrangement for assistance in certain matters and procedure for attachment and confiscation of property so as to facilitate the transfer of funds involved in moneylaundering kept outside the country and extradition of the accused persons from abroad.

4. The Bill seeks to achieve the above objects."

4. Though the Act was passed by Parliament in the year 2002, it was brought into force only on 1.7.2005. Some of the important provisions, with which we are directly concerned, are set out hereinbelow:

"Section 2. Definitions.-

(1) In this Act, unless the context otherwise requires,-

(p) "money-laundering" has the meaning assigned to it in section 3;

(u) "proceeds of crime" means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property or where such property is taken or held outside the country, then the property equivalent in value held within the country; (x) "Schedule" means the Schedule to this Act;

(y) "scheduled offence" means-

(i) the offences specified under Part A of the Schedule; or

(ii) the offences specified under Part B of the Schedule if the total value involved in such offences is one crore rupees or more; or

(iii) the offences specified under Part C of the Schedule.

Section 3. Offence of money-laundering.- Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property shall be guilty of offence of money-laundering.

Section 4. Punishment for money-laundering.- Whoever commits the offence of money-laundering shall be punishable with rigorous imprisonment for a term which shall not be less than three years but which may extend to seven years and shall also be liable to fine: Provided that where the proceeds of crime involved in money-laundering relates to any offence specified under paragraph 2 of Part A of the Schedule, the provisions of this section shall have effect as if for the words "which may extend to seven years", the words "which may extend to ten years" had been substituted.

Section 5. Attachment of property involved in money-laundering.

(1) Where the Director or any other officer not below the rank of Deputy Director authorised by the Director for the purposes of this section, has reason to believe (the reason for such belief to be recorded in writing), on the basis of material in his possession, that-

(a) any person is in possession of any proceeds of crime; and

(b) such proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime under this Chapter, he may, by order in writing, provisionally attach such property for a period not exceeding one hundred and eighty days from the date of the order, in such manner as may be prescribed:

Provided that no such order of attachment shall be made unless, in relation to the scheduled offence, a report has been forwarded to a Magistrate under section 173 of the Code of Criminal Procedure , 1973 (2 of 1974), or a complaint has been filed by a person authorised to investigate the offence mentioned in that Schedule, before a Magistrate or court for taking cognizance of the scheduled offence, as the case may be, or a similar report or complaint has been made or filed under the corresponding law of any other country:

Provided further that, notwithstanding anything contained in first proviso, any property of any person may be attached under this section if the Director or any other officer not below the rank of Deputy Director authorised by him for the purposes of this section has reason to believe (the reasons for such belief to be recorded in writing), on the basis of material in his possession, that if such property involved in money-laundering is not 9 attached immediately under this Chapter, the nonattachment of the property is likely to frustrate any proceeding under this Act.

(2) The Director, or any other officer not below the rank of Deputy Director, shall, immediately after attachment under sub-section (1), forward a copy of the order, along with the material in his possession, referred to in that sub-section, to the Adjudicating Authority, in a sealed envelope, in the manner as may be prescribed and such Adjudicating Authority shall keep such order and material for such period as may be prescribed.

(3) Every order of attachment made under subsection (1) shall cease to have effect after the expiry of the period specified in that sub-section or on the date of an order made under sub-section (2) of section 8, whichever is earlier. (4) Nothing in this section shall prevent the person interested in the enjoyment of the immovable property attached under sub-section (1) from such enjoyment.

Explanation.- For the purposes of this sub-section, "person interested", in relation to any immovable property, includes all persons claiming or entitled to claim any interest in the property.

(5) The Director or any other officer who provisionally attaches any property under subsection (1) shall, within a period of thirty days from such attachment, file a complaint stating the facts of such attachment before the Adjudicating Authority.

xxx xxx xxx

Section 43. Special Courts.-

(1) The Central Government, in consultation with the Chief Justice of the High Court, shall, for trial of offence punishable under section 4, by notification, 10 designate one or more Courts of Session as Special Court or Special Courts or such area or areas or for such case or class or group of cases as may be specified in the notification.

Explanation.- In this sub-section, "High Court" means the High Court of the State in which a Sessions Court designated as Special Court was functioning immediately before such designation.

(2) While trying an offence under this Act, a Special Court shall also try an offence, other than an offence referred to in sub-section (1), with which the accused may, under the Code of Criminal Procedure, 1973 (2 of 1974), be charged at the same trial.

Section 44. Offences triable by Special Courts.-

(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974),-

(a) an offence punishable under section 4 and any scheduled offence connected to the offence under that section shall be triable by the Special Court constituted for the area in which the offence has been committed: Provided that the Special Court, trying a scheduled offence before the commencement of this Act, shall continue to try such scheduled offence; or

(b) a Special Court may, upon perusal of police report of the facts which constitute an offence under this Act or upon a complaint made by an authority authorised in this behalf under this Act take cognizance of offence under section 3, without the accused being committed to it for trial;

(c) if the court which has taken cognizance of the scheduled offence is other than the Special Court which has taken cognizance of the complaint of the offence of money-laundering under sub-clause (b), it shall, on an application by the authority authorised to file a complaint under this Act, commit the case relating to the scheduled offence to the Special Court and the Special Court shall, on receipt of such case proceed to deal with it from the stage at which it is committed.

(d) a Special Court while trying the scheduled offence or the offence of money-laundering shall hold trial in accordance with the provisions of the Code of Criminal Procedure, 1973 (2 of 1974) as it applies to a trial before a Court of Session.

(2) Nothing contained in this section shall be deemed to affect the special powers of the High Court regarding bail under section 439 of the Code of Criminal Procedure , 1973 (2 of 1974) and the High Court may exercise such powers including the power under clause (b) of sub-section (1) of that section as if the reference to "Magistrate" in that section includes also a reference to a "Special Court" designated under section 43.

Section 45. Offences to be cognizable and nonbailable.-

(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), no person accused of an offence punishable for a term of imprisonment of more than three years under Part A of the Schedule shall be released on bail or on his own bond unless-

(i) the Public Prosecutor has been given a opportunity to oppose the application for such release; and

(ii) 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: Provided that a person, who, is under the age of sixteen years, or is a woman or is sick or infirm, may be released on bail, if the Special Court so directs: Provided further that the Special Court shall not take cognizance of any offence punishable under section 4 except upon a complaint in writing made by-

(i) the Director; or

(ii) any officer of the Central Government or a State Government authorised in writing in this behalf by the Central Government by a general or special order made in this behalf by that Government.

(1A) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), or any other provision of this Act, no police officer shall investigate into an offence under this Act unless specifically authorised, by the Central Government by a general or special order, and, subject to such conditions as may be prescribed.

(2) The limitation on granting of bail specified in sub-section (1) is in addition to the limitations under the Code of Criminal Procedure, 1973 (2 of 1974) or any other law for the time being in force on granting of bail.

Section 46. Application of Code of Criminal Procedure, 1973 to proceedings before Special Court.-

(1) Save as otherwise provided in this Act, the provisions of the Code of Criminal Procedure, 1973 (2 of 1974) (including the provisions as to bails or bonds), shall apply to the proceedings before a Special Court and for the purposes of the said provisions, the Special Court shall be deemed to be a Court of Session and the persons conducting the prosecution before the Special Court, shall be deemed to be a Public Prosecutor: Provided that the Central Government may also appoint for any 13 case or class or group of cases a Special Public Prosecutor.

(2) A person shall not be qualified to be appointed as a Public Prosecutor or a Special Public Prosecutor under this section unless he has been in practice as an advocate for not less than seven years, under the Union or a State, requiring special knowledge of law.

(3) Every person appointed as a Public Prosecutor or a Special Public Prosecutor under this section shall be deemed to be a Public Prosecutor within the meaning of clause (u) of section 2 of the Code of Criminal Procedure , 1973 (2 of 1974) and the provisions of that Code shall have effect accordingly.

xxx xxx xxx

Section 65. Code of Criminal Procedure, 1973 to apply.- The provisions of the Code of Criminal Procedure, 1973 (2 of 1974) shall apply, in so far as they are not inconsistent with the provisions of this Act, to arrest, search and seizure, attachment, confiscation investigation, prosecution and all other proceedings under this Act.

xxx xxx xxx

Section 71. Act to have overriding effect.-The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force."

5. Shri Mukul Rohatgi, learned senior advocate appearing on behalf of the petitioners, has argued before us that Section 45 of the said Act, when it imposes two further conditions 14 before grant of bail is manifestly arbitrary, discriminatory and violative of the petitioner's fundamental rights under Article 14 read with Article 21 of the Constitution. According to learned senior counsel, at the stage that the said Act was a Bill (which was referred to a Standing Committee on Finance of the Parliament, and which presented its report on 4.3.1999 to the Lok Sabha), the Central Government broadly accepted the recommendations of the Standing Committee, which were then incorporated in the said Bill along with some other changes.

At this stage, argued Shri Rohatgi, it is interesting to note that Clauses 43 and 44 of the Bill, which correspond to Sections 44 and 45 of the present Act, were very differently worded and dealt only with offences under the 2002 Act. The twin conditions laid down as additional conditions for grant of bail were, at this stage, only qua offences under the 2002 Act. When Parliament enacted the 2002 Act, this scheme was completely changed in that Section 45 of the Act now spoke only of the predicate/scheduled offence and not the offence under the 2002 Act. In the present Act, a scheduled offence, which is an offence under other penal laws contained in Part A 15 of the Schedule, that is tried with offences under the Act, bail would be granted only after satisfying the twin conditions laid down in the Section.

Also, when the Act was originally enacted, according to learned senior counsel, part A of the Schedule was very sparsely populated, in that it comprised of two paragraphs only consisting of two offences under the Indian Penal Code, 1860 and 9 offences under the Narcotic Drugs and Psychotropic Substances Act, 1985. These offences were considered extremely heinous by the legislature and were, therefore, classified apart from offences under Part B, which dealt with certain other offences under the Indian Penal Code and offences under the Arms Act 1959, Wildlife (Protection) Act 1972, Immoral Traffic (Prevention) Act, 1956 and the Prevention of Corruption Act, 1988. According to learned senior counsel, this classification was maintained right until the Amendment Act of 2012, which then incorporated Part B offences into Part A of the Schedule, resulting in offences under 26 Acts, together with many more offences under the Indian Penal Code, all being put under Part A.

This, according to learned senior counsel, was done because the definition of 16 "scheduled offence" in Section 2(y) of the Act made it clear that, if offences are specified under Part B of the Schedule at the relevant time, the total value involved for such offences should be Rs.30 lakhs or more. The idea behind the 2012 Amendment, as the Statement of Objects of the said Amendment discloses, is that this limit of Rs.30 lakhs be removed, which is why the entire Part B of the Schedule was subsumed in Part A. He further argued that the object was not to deny bail to those charged with offences under the erstwhile Part B, and that putting Part B offences together with heinous offences in Part A would amount to treating unequals equally and would be discriminatory and violative of Article 14 of the Constitution.

In addition, such lumping together of disparate offences would have no rational relation to the object sought to be achieved by the Amendment Act of 2012, that is to obviate the Rs.30 lakh limit qua Part B offences, and it would violate Article 14 on this ground as well. According to learned senior counsel, the change from the original scheme of the Bill to introducing offences outside the 2002 Act dependent upon which bail would be granted, with the twin conditions as aforestated first having to be satisfied, is itself manifestly arbitrary, in that the predicate offence, which is the scheduled offence, and the classification of such offence as being punishable with three years or more would again be wholly irrelevant and would have absolutely no rational relation to the object of granting bail insofar as offences under the 2002 Act are concerned.

Learned senior counsel also referred to Article 21 of the Constitution and stated that the aforesaid procedure would be unfair, unjust and would fall foul of Article 21 inasmuch as it would certainly fall foul of the US Constitution's Eighth Amendment which interdicts excessive bails. Since this Court has recognized that this feature of the Eighth Amendment would fall within Article 21, it would be a direct infraction thereof.

He also argued that a person will be punished for an offence contained under the 2002 Act, but will be denied bail because of a predicate offence which is contained in Part A of the Schedule, which would again render Section 45(1) as manifestly arbitrary and unreasonable. He referred to Nikesh Tarachand Shah's case, which is Writ Petition (criminal) No.67 of 2017, in which the scheduled offences were Sections 120B, 409, 420, 471 and 477A of the 18 Indian Penal Code read with Section 13 of the Prevention of Corruption Act.

These offences were being investigated by the CBI in CBI Special Case No.91/2009 in which the petitioner was granted bail by the Sessions Court by an order dated 10.12.2015. When the offence under the 2002 Act was added to the aforesaid offences, thanks to the applicability of the twin conditions in Section 45(1), he was denied bail with effect from 27.11.2015, which itself shows that Section 45(1) is being used in an extremely manifestly arbitrary fashion to deny bail for offences which extend only to seven years under the 2002 Act, as opposed to predicate offences which may extend even to life imprisonment. Also, according to learned senior counsel, the threshold of three years and above contained in Section 45 of the 2002 Act is itself manifestly arbitrary in that it has no reference to the offence of money laundering under the 2002 Act, but only to three years and more of the predicate offence.

There is no condition, so far as the 2002 Act is concerned, of classification based on the amount of money that is laundered, which perhaps may be a valid basis for classification. Also, according to learned senior counsel, if the twin conditions of 19 Section 45(1) are to be satisfied at the stage of bail, the defendants will have to disclose their defence at a point in time when they are unable to do so, having been arrested and not being granted bail at the inception itself. Another conundrum raised by Section 45 is the fact that, there being no interdict against anticipatory bail in the 2002 Act, and the Code of Criminal Procedure applying to offences under the 2002 Act, it would be clear that anticipatory bail could be granted for both offences under the 2002 Act and predicate offences.

This being so, unlike the Terrorist and Disruptive Activities (Prevention) Act 1987, where anticipatory bail expressly cannot be granted, the twin conditions of Section 45 would not apply at the anticipatory bail stage, which would mean that a person charged of money laundering and a predicate offence could continue on anticipatory bail throughout the trial without satisfying any of the twin conditions, as opposed to a person who applies for regular bail, who would have to satisfy the twin conditions, which in practice would mean denial of bail.

For all these reasons, according to learned senior counsel, Section 45 needs to be struck down. Also, according to learned senior counsel, it is not 20 possible to read down the provision to make it constitutional as the very scheme of Section 45 is manifestly arbitrary and irrational. Shri Rohatgi cited various judgments to buttress his submissions which will be referred to by us in the course of this judgment.

6. On the other hand, the learned Attorney General Shri K.K. Venugopal impressed upon us the fact that the Parliamentary legislation qua money laundering is an attempt by Parliament to get back money which has been siphoned off from the economy. According to the learned Attorney General, scheduled offences and offences under Sections 3 and 4 of the 2002 Act have to be read together and the said Act, therefore, forms a complete code which must be looked at by itself. According to the learned Attorney General, it is well settled that classification which is punishment centric has been upheld by a catena of judgments and so have the twin conditions been upheld by various decisions which were referred to by him. According to him, the expression "any offence" in Section 45(1)(ii) would mean offence of a like nature and not any offence, which would include a traffic offence as well.

According 21 to the learned Attorney General, Section 45 can easily be read down to make it constitutional in two ways. First, the expression "there are reasonable grounds for believing that he is not guilty of such offence" must be read as the making of a prima facie assessment by the Court of reasonable guilt. Secondly, according to the learned Attorney General, in any case the conditions contained in Section 45(1)(ii) are there in a different form when bail is granted ordinarily insofar as offences generally are concerned and he referred to State of U.P. through C.B.I. v. Amarmani Tripathi, (2005) 8 SCC 21 for this purpose. According to the learned Attorney General, if harmoniously construed with the rest of the Act, Section 45 is unassailable. He relied upon Section 24 of the Act, which inverts the burden of proof, and strongly relied upon Gautam Kundu v. Directorate of Enforcement (Prevention of Money- Laundering Act), (2015) 16 SCC 1 and Rohit Tandon v. The Enforcement Directorate, Criminal Appeal Nos.1878-- 1879 of 2017 decided on 10th November, 2017.

In answer to Shri Rohatgi's argument on the object of the 2012 Amendment Act, according to the learned Attorney General, it is well settled 22 that where the language of the Act is plain, no recourse can be taken to the object of the Act and he cited a number of judgments for this proposition. He referred us to Section 106 of the Indian Evidence Act, 1872 and argued that when read with Section 24 of the 2002 Act, it would be clear that the twin conditions contained in Section 45 are only in furtherance of the object of unearthing black money and that we should, therefore, be very slow to set at liberty persons who are alleged offenders of the cancer of money laundering.

Ultimately, according to the learned Attorney General, Section 45 being part of a complete code must be upheld in order that the 2002 Act work, so that money that is laundered comes back into the economy and persons responsible for the same are brought to book. 7. Having heard learned counsel for both sides, it is important to first understand what constitutes the offence of money laundering. Under Section 3 of the Act, the kind of persons responsible for money laundering is extremely wide. Words such as "whosoever", "directly or indirectly" and "attempts to indulge" would show that all persons who are even remotely involved in this offence are sought to be roped in. An important ingredient of the offence is that these persons must be knowingly or actually involved in any process or activity connected with proceeds of crime and "proceeds of crime" is defined under the Act, by Section 2 (u) thereof, to mean any property derived or obtained directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence (which is referred to in our judgment as the predicate offence).

Thus, whosever is involved as aforesaid, in a process or activity connected with "proceeds of crime" as defined, which would include concealing, possessing, acquiring or using such property, would be guilty of the offence, provided such persons also project or claim such property as untainted property. Section 3, therefore, contains all the aforesaid ingredients, and before somebody can be adjudged as guilty under the said provision, the said person must not only be involved in any process or activity connected with proceeds of crime, but must also project or claim it as being untainted property.

Under Section 4 of the Act, the offence of money laundering is punishable with rigorous imprisonment for a minimum period of three years which may extend to 7 years and fine. Also, under 24 the proviso, where the proceeds of crime involved in money laundering relate to a predicate offence under paragraph 2 of Part A of the Schedule, the sentence then gets extended from 7 years to 10 years.

8. Under Section 5 of the Act, attachment of such property takes place so that such property may be brought back into the economy. Coming now to Chapter VII of the Act with which we are really concerned, Section 43 lays down that Special Courts to try offences under the Act are to be designated for such area or areas or for such case or class or group of cases as may be specified by notification. Section 44 is very important in that the Section provides for the trial of a scheduled offence and the offence of money laundering together by the same Special Court, which is to try such offences under the Code of Criminal Procedure as if it were a court of sessions.

Under Section 46, read with Section 65 of the Act, the provisions of the Code of Criminal Procedure apply to proceedings before the Special Court and for the purpose of the said provisions, the Special Court shall be deemed to be a court of sessions.

9. When the Prevention of Money Laundering Bill, 1999 was tabled before Parliament, Section 44, which corresponds to Section 45 of the present Act, provided that several offences punishable under "this Act" are to be cognizable, and the twin conditions for release on bail would apply only insofar as the offences under the Act itself are concerned. When the Act was finally enacted in 2002 and notified in 2005, this scheme changed radically. Now, both the offence of money laundering and the predicate offence were to be tried by the Special Court, and bail is granted only if the twin conditions under Section 45(1) are met, where the term of imprisonment is more than three years for the predicate offence.

It is important to note that Clause 44 of the Bill referred only to offences under Sections 3 and 4 of the Bill, whereas Section 45 of the Act does not refer to offences under Sections 3 and 4 of the Act at all. Reference is made only to offences under Part A of the Schedule, which are offences outside the 2002 Act. This fundamental difference between the Bill and the Act has a great bearing on the constitutional validity of Section 45(1) with which we are directly and immediately concerned.

10. The provision for bail goes back to Magna Carta itself. Clause 39, which was, at that time, written in Latin, is translated as follows: "No free man shall be seized or imprisoned or stripped of his rights or possessions, or outlawed or exiled, or deprived of his standing in any other way, nor will we proceed with force against him, or send others to do so, except by the lawful judgment of his equals or by the law of the land." It is well known that Magna Carta, which was wrung out of King John by the barons on the 15th of June, 1215, was annulled by Pope Innocent III in August of that very year.

King John died one year later, leaving the throne to his 9 year old son, Henry III. It is in the reign of this pious King and his son, Edward I, that Magna Carta was recognized by kingly authority. In fact, by the statutes of Westminster of 1275, King Edward I repeated the injunction contained in clause 39 of Magna Carta. However, when it came to the reign of the Stuarts, who believed that they were kings on earth as a matter of divine right, a struggle ensued between Parliament and King Charles I.

This led to another great milestone in the history of England called the Petition of Right of 1628. Moved by the hostility to the Duke of Buckingham, the House of Commons denied King Charles I the 27 means to conduct military operations abroad. The King was unwilling to give up his military ambition and resorted to the expedient of a forced loan to finance it. A number of those subject to the imposition declined to pay, and some were imprisoned; among them were those who became famous as "the Five Knights". Each of them sought a writ of habeas corpus to secure his release. One of the Knights, Sir Thomas Darnel, gave up the fight, but the other four fought on. The King's Bench, headed by the Chief Justice, made an order sending the knights back to prison.

The Chief Justice's order was, in fact, a provisional refusal of bail. Parliament being displeased with this, invoked Magna Carta and the statutes of Westminster, and thus it came about that the Petition of Right was presented and adopted by the Lords and a reluctant King. Charles I reluctantly accepted this Petition of Right stating, "let right be done as is desired by the petition". Among other things, the Petition had prayed that no free man should be imprisoned or detained, except by authority of law.

11. In Bushel's case, decided in 1670, Chief Justice Sir John Vaughan was able to state that, "the writ of habeas corpus is now the most usual remedy by which a man is restored again to his liberty, if he have been against law deprived of it." Despite this statement of the law, one Jenkes was arrested and imprisoned for inciting persons to riot in a speech, asking that King Charles II be petitioned to call a new Parliament. Jenkes went from pillar to post in order to be admitted to bail. The Lord Chief Justice sent him to the Lord Chancellor, who, in turn, sent him to the Lord Treasurer, who sent him to the King himself, who, "immediately commanded that the laws should have their due course." (See Jenke's case, 6 How. St. Tr. 1189 at 1207, 1208 (1676)).

It is cases like these that led to the next great milestone of English history, namely the Habeas Corpus Act of 1679. This Act recited that many of the King's subjects have been long detained in prison in cases where, by law, they should have been set free on bail. The Act provided for a habeas corpus procedure which plugged legal loopholes and even made the King's Bench Judges subject to penalties for non-compliance.

12. The next great milestone in English history is the Bill of Rights of 1689, which was accepted by the only Dutch monarch 29 that England ever had, King William III, who reigned jointly with his wife Queen Mary II. It is in this document that the expression "excessive bail ought not to be required...." first appears in Chapter 2, clause 10.

13. What is important to learn from this history is that clause 39 of Magna Carta was subsequently extended to pre-trial imprisonment, so that persons could be enlarged on bail to secure their attendance for the ensuing trial.

It may only be added that one century after the Bill of Rights, the US Constitution borrowed the language of the Bill of Rights when the principle of habeas corpus found its way into Article 1 Section 9 of the US Constitution, followed by the Eighth Amendment to the Constitution which expressly states that, "excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted". We may only add that the Eighth Amendment has been read into Article 21 by a Division Bench of this Court in Rajesh Kumar v. State through Government of NCT of Delhi (2011) 13 SCC 706, at paragraphs 60 and 61.

14. In Gurbaksh Singh Sibbia v. State of Punjab, (1980) 2 SCC 565 at 586-588, the purpose of granting bail is set out with great felicity as follows:- "27. It is not necessary to refer to decisions which deal with the right to ordinary bail because that right does not furnish an exact parallel to the right to anticipatory bail. It is, however, interesting that as long back as in 1924 it was held by the High Court of Calcutta in Nagendra v. King-Emperor [AIR 1924 Cal 476, 479, 480 : 25 Cri LJ 732] that the object of bail is to secure the attendance of the accused at the trial, that the proper test to be applied in the solution of the question whether bail should be granted or refused is whether it is probable that the party will appear to take his trial and that it is indisputable that bail is not to be withheld as a punishment. In two other cases which, significantly, are the 'Meerut Conspiracy cases' observations are to be found regarding the right to bail which deserve a special mention.

In K.N. Joglekar v. Emperor [AIR 1931 All 504 : 33 Cri LJ 94] it was observed, while dealing with Section 498 which corresponds to the present Section 439 of the Code, that it conferred upon the Sessions Judge or the High Court wide powers to grant bail which were not handicapped by the restrictions in the preceding Section 497 which corresponds to the present Section 437. It was observed by the court that there was no hard and fast rule and no inflexible principle governing the exercise of the discretion conferred by Section 498 and that the only principle which was established was that the discretion should be exercised judiciously.

In Emperor v. Hutchinson [AIR 1931 All 356, 358 : 32 Cri LJ 1271] it was said that it was very unwise to make an attempt to lay down any particular rules which will bind the High Court, having regard to the fact that the legislature itself left the discretion of the court unfettered. According to the High Court, the variety of cases that may arise from time to time cannot be safely classified and it is dangerous to make an attempt to classify the cases and to say that in particular classes a bail may be granted but not in other classes. It was observed that the principle to be deduced from the various sections in the Criminal Procedure Code was that grant of bail is the rule and refusal is the exception. An accused person who enjoys freedom is in a much better position to look after his case and to properly defend himself than if he were in custody. As a presumably innocent person he is therefore entitled to freedom and every opportunity to look after his own case. A presumably innocent person must have his freedom to enable him to establish his innocence.

28. Coming nearer home, it was observed by Krishna Iyer, J., in Gudikanti Narasimhulu v. Public Prosecutor [(1978) 1 SCC 240 : 1978 SCC (Cri) 115] that: (SCC p. 242, para 1) "... the issue of bail is one of liberty, justice, public safety and burden of the public treasury, all of which insist that a developed jurisprudence of bail is integral to a socially sensitized judicial process. . . . After all, personal liberty of an accused or convict is fundamental, suffering lawful eclipse only in terms of procedure established by law. The last four words of Article 21 are the life of that human right."

29. In Gurcharan Singh v. State (Delhi Administration) [(1978) 1 SCC 118 : 1978 SCC (Cri) 41] it was observed by Goswami, J., who spoke for the court, that: (SCC p. 129, para 29) 32 "There cannot be an inexorable formula in the matter of granting bail. The facts and circumstances of each case will govern the exercise of judicial discretion in granting or cancelling bail."

30. In AMERICAN JURISPRUDENCE (2d, Volume 8, p. 806, para 39), it is stated: "Where the granting of bail lies within the discretion of the court, the granting or denial is regulated, to a large extent, by the facts and circumstances of each particular case. Since the object of the detention or imprisonment of the accused is to secure his appearance and submission to the jurisdiction and the judgment of the court, the primary inquiry is whether a recognizance or bond would effect that end." It is thus clear that the question whether to grant bail or not depends for its answer upon a variety of circumstances, the cumulative effect of which must enter into the judicial verdict. Any one single circumstance cannot be treated as of universal validity or as necessarily justifying the grant or refusal of bail."

15. The stage is now set for an examination of the constitutional validity of Section 45 of the 2002 Act.

16. At this stage, it is important to advert to the tests for the violation of Article 14, both in its discriminatory aspect and its "manifestly arbitrary" aspect. It is settled by a catena of cases 33 that Article 14 permits classification, provided such classification bears a rational relation to the object sought to be achieved.

In an early judgment of this Court, State of Bombay and Anr. v. F.N. Balsara (1951) SCR 682 at 708, Fazl Ali, J. summarized the law as follows:

"(1) The presumption is always in favour of the constitutionality of an enactment, since it must be assumed that the legislature understands and correctly appreciates the needs of its own people, that its laws are directed to problems made manifest by experience and its discriminations are based on adequate grounds.

(2) The presumption may be rebutted in certain cases by showing that on the face of the statute, there is no classification at all and no difference peculiar to any individual or class and not applicable to any other individual or class, and yet the law hits only a particular individual or class.

(3) The principle of equality does not mean that every law must have universal application for all persons who are not by nature, attainment or circumstances in the same position, and the varying needs of different classes of persons often require separate treatment.

(4) The principle does not take away from the State the power of classifying persons for legitimate purposes.

(5) Every classification is in some degree likely to produce some inequality, and mere production of inequality is not enough.

(6) If a law deals equally with members of a welldefined class, it is not obnoxious and it is not open to the charge of denial of equal protection on the ground that it has no application to other persons.

(7) While reasonable classification is permissible, such classification must be based upon some real and substantial distinction bearing a reasonable and just relation to the object sought to be attained, and the classification cannot be made arbitrarily and without any substantial basis."

Proposition 7 is important for the present purpose. Also, it is well settled that Article 14 condemns discrimination not only by substantive law, but also by procedural law. (See Budhan Choudhry v. State of Bihar, (1955) 1 SCR 1045 at 1049).

17. After adverting to these judgments, Bhagwati J., in Asgarali Nazarali Singaporawalla v. The State of Bombay, 1957 SCR 678 at 690-692 held: "The first question which we have to address to ourselves is whether there is in the impugned Act a reasonable classification for the purposes of legislation. If we look to the provisions of the impugned Act closely it would appear that the legislature classified the offences punishable under Sections 161, 165 or 165-A of the Indian Penal Code or sub-section (2) of Section 5 of the Prevention of Corruption Act, 1947 in one group or category. They were offences relating to bribery or corruption by public servants and were thus appropriately classified in one group or category. The classification was founded on an intelligible differentia which distinguished the offenders thus grouped together from those left out of the group.

The persons who committed these offences of bribery or corruption would form a class by themselves quite distinct from those offenders who 35 could be dealt with by the normal provisions contained in the Indian Penal Code or the Code of Criminal Procedure, 1898 and if the offenders falling within this group or category were thus singled out for special treatment, there would be no question of any discriminatory treatment being meted out to them as compared with other offenders who did not fall within the same group or category and who continued to be treated under the normal procedure.

The next question to consider is whether this differentia had a rational relation to the object sought to be achieved by the impugned Act. The preamble of the Act showed that it was enacted for providing a more speedy trial of certain offences. An argument was however addressed before us based on certain observations of Mahajan, J. (as he then was) at p. 314, and Mukherjea, J. (as he then was) at p. 328 in Anwar Ali Sarkar's case [(1952) SCR 284] ) quoted at p. 43 by Patanjali Sastri, C.J. in the case of Kedar Nath Bajoria v. State of West Bengal [(1954) SCR 30] that the speedier trial of offences could not afford a reasonable basis for such classification. Standing by themselves these passages might lend support to the contention urged before us by the learned counsel for the appellant. It must be noted, however, that this ratio was not held to be conclusive by this Court in Kedar Nath Bajoria's case [(1954) SCR 30] where this Court held:

"(1) That when a law like the present one is impugned on the ground that it contravenes Article 14 of the Constitution the real issue to be decided is whether, having regard to the underlying purpose and policy of the Act as disclosed by its title, preamble and provisions, the classification of the offences for the trial of which the Special Court is set up and a special procedure 36 is laid down can be said to be unreasonable or arbitrary and therefore violative of the equal protection clause;

(2) having regard to the fact that the types of offences specified in the Schedule to the Act were very common and widely prevalent during the post war period and had to be checked effectively and speedily tried, the legislation in question must be regarded as having been based on a perfectly intelligent principle of classification, having a clear and reasonable relation to the object sought to be achieved, and it did not in any way contravene Article 14 of the Constitution." In the instant case, bribery and corruption having been rampant and the need for weeding them out having been urgently felt, it was necessary to enact measures for the purpose of eliminating all possible delay in bringing the offenders to book.

It was with that end in view that provisions were enacted in the impugned Act for speedier trial of the said offences by the appointment of Special Judges who were invested with exclusive jurisdiction to try the same and were also empowered to take cognizance thereof without the accused being committed to them for trial, and follow the procedure prescribed for the trial of warrant cases by Magistrates.

The proceedings before the Special Judges were thus assimilated to those before the courts of sessions for trying cases without a jury or without the aid of assessors and the powers of appeal and revision invested in the High Court were also similarly circumscribed. All these provisions had the necessary effect of bringing about a speedier trial of these offences and it cannot be denied that this intelligible differentia had rational relation to the object sought to be achieved by the impugned Act. Both these conditions were thus fulfilled and it could not be urged that the provisions of the impugned Act were in any manner violative of Article 14 of the Constitution."

18. In so far as "manifest arbitrariness" is concerned, it is important to advert to the majority judgment of this Court in Shayara Bano v. Union of India and others, (2017) 9 SCC 1. The majority, in an exhaustive review of case law under Article 14, which dealt with legislation being struck down on the ground that it is manifestly arbitrary, has observed:

"87. The thread of reasonableness runs through the entire fundamental rights chapter. What is manifestly arbitrary is obviously unreasonable and being contrary to the rule of law, would violate Article 14. Further, there is an apparent contradiction in the three-Judge Bench decision in McDowell [State of A.P. v. McDowell and Co., (1996) 3 SCC 709] when it is said that a constitutional challenge can succeed on the ground that a law is "disproportionate, excessive or unreasonable", yet such challenge would fail on the very ground of the law being "unreasonable, unnecessary or unwarranted". The arbitrariness doctrine when applied to legislation obviously would not involve the latter challenge but would only involve a law being disproportionate, excessive or otherwise being manifestly unreasonable.

All the aforesaid grounds, therefore, do not seek to differentiate between State action in its various forms, all of which are interdicted if they fall foul of the fundamental rights guaranteed to persons and citizens in Part III of the Constitution.

xxx xxx xxx 101. It will be noticed that a Constitution Bench of this Court in Indian Express Newspapers (Bombay) (P) Ltd. v. Union of India [Indian Express Newspapers (Bombay) (P) Ltd. v. Union of India, (1985) 1 SCC 641 : 1985 SCC (Tax) 121] stated that it was settled law that subordinate legislation can be challenged on any of the grounds available for challenge against plenary legislation. This being the case, there is no rational distinction between the two types of legislation when it comes to this ground of challenge under Article 14.

The test of manifest arbitrariness, therefore, as laid down in the aforesaid judgments would apply to invalidate legislation as well as subordinate legislation under Article 14. Manifest arbitrariness, therefore, must be something done by the legislature capriciously, irrationally and/or without adequate determining principle. Also, when something is done which is excessive and disproportionate, such legislation would be manifestly arbitrary. We are, therefore, of the view that arbitrariness in the sense of manifest arbitrariness as pointed out by us above would apply to negate legislation as well under Article 14."

This view of the law by two learned Judges of this Court was concurred with by Kurian, J. in paragraph 5 of his judgment. 19. Article 21 is the Ark of the Covenant so far as the Fundamental Rights chapter of the Constitution is concerned. It deals with nothing less sacrosanct than the rights of life and personal liberty of the citizens of India and other persons. It is the only article in the Fundamental Rights chapter (along with Article 20) that cannot be suspended even in an emergency (See Article 359(1) of the Constitution). At present, Article 21 is the repository of a vast number of substantive and procedural rights post Maneka Gandhi v. Union of India (1978) 1 SCC 248.

Thus, in Rajesh Kumar (supra) at 724-726, this Court held: "56. Article 21 as enacted in our Constitution reads as under: "21. Protection of life and personal liberty.-No person shall be deprived of his life or personal liberty except according to procedure established by law." 57. But this Court in Bachan Singh [(1980) 2 SCC 684 : 1980 SCC (Cri) 580] held that in view of the expanded interpretation of Article 21 in Maneka Gandhi [(1978) 1 SCC 248], it should read as follows: (Bachan Singh case [(1980) 2 SCC 684 : 1980 SCC (Cri) 580] , SCC p. 730, para 136) 40 "136. ... 'No person shall be deprived of his life or personal liberty except according to fair, just and reasonable procedure established by valid law.' In the converse positive form, the expanded article will read as below: 'A person may be deprived of his life or personal liberty in accordance with fair, just and reasonable procedure established by valid law.'"

58. This epoch-making decision in Maneka Gandhi [(1978) 1 SCC 248] has substantially infused the concept of due process in our constitutional jurisprudence whenever the court has to deal with a question affecting life and liberty of citizens or even a person. Krishna Iyer, J. giving a concurring opinion in Maneka Gandhi [(1978) 1 SCC 248] elaborated, in his inimitable style, the transition from the phase of the rule of law to due process of law.

The relevant statement of law given by the learned Judge is quoted below: (SCC p. 337, para 81) "81. ... 'Procedure established by law', with its lethal potentiality, will reduce life and liberty to a precarious plaything if we do not ex necessitate import into those weighty words an adjectival rule of law, civilised in its soul, fair in its heart and fixing those imperatives of procedural protection absent which the processual tail will wag the substantive head. Can the sacred essence of the human right to secure which the struggle for liberation, with 'do or die' patriotism, was launched be sapped by formalistic and pharisaic prescriptions, regardless of essential standards? An enacted apparition is a constitutional, illusion. Processual justice is writ patently on Article 21. It is too grave to be circumvented by a black letter ritual processed through the legislature."

59. Immediately after the decision in Maneka Gandhi [(1978) 1 SCC 248] another Constitution Bench of this Court rendered decision in Sunil 41 Batra v. Delhi Admn. [(1978) 4 SCC 494 : 1979 SCC (Cri) 155] specifically acknowledged that even though a clause like the Eighth Amendment of the United States Constitution and concept of "due process" of the American Constitution is not enacted in our Constitution text, but after the decision of this Court in Rustom Cavasjee Cooper [(1970) 1 SCC 248] and Maneka Gandhi [(1978) 1 SCC 248] the consequences are the same. The Constitution Bench of this Court in Sunil Batra [(1978) 4 SCC 494 : 1979 SCC (Cri) 155] speaking through Krishna Iyer, J. held: (Sunil Batra case [(1978) 4 SCC 494 : 1979 SCC (Cri) 155] , SCC p. 518, para 52)

"52. True, our Constitution has no 'due process' clause or the Eighth Amendment; but, in this branch of law, after Cooper [(1970) 1 SCC 248] and Maneka Gandhi [(1978) 1 SCC 248], the consequence is the same."

60. The Eighth Amendment (1791) to the Constitution of the United States virtually emanated from the English Bill of Rights (1689). The text of the Eighth Amendment reads, "Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted". The English Bill of Rights drafted a century ago postulates, "That excessive bail ought not to be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted".

61. Our Constitution does not have a similar provision but after the decision of this Court in Maneka Gandhi case [(1978) 1 SCC 248] jurisprudentially the position is virtually the same and the fundamental respect for human dignity underlying the Eighth Amendment has been read into our jurisprudence.

62. Until the decision was rendered in Maneka Gandhi [(1978) 1 SCC 248], Article 21 was viewed 42 by this Court as rarely embodying the Diceyian concept of the rule of law that no one can be deprived of his personal liberty by an executive action unsupported by law. If there was a law which provided some sort of a procedure it was enough to deprive a person of his life or personal liberty. In this connection, if we refer to the example given by S.R. Das, J. in his judgment in A.K. Gopalan [AIR 1950 SC 27 : (1950) 51 Cri LJ 1383] that if the law provided the Bishop of Rochester "be boiled in oil" it would be valid under Article 21.

But after the decision in Maneka Gandhi [(1978) 1 SCC 248] which marks a watershed in the development of constitutional law in our country, this Court, for the first time, took the view that Article 21 affords protection not only against the executive action but also against the legislation which deprives a person of his life and personal liberty unless the law for deprivation is reasonable, just and fair. And it was held that the concept of reasonableness runs like a golden thread through the entire fabric of the Constitution and it is not enough for the law to provide some semblance of a procedure. The procedure for depriving a person of his life and personal liberty must be eminently just, reasonable and fair and if challenged before the court it is for the court to determine whether such procedure is reasonable, just and fair and if the court finds that it is not so, the court will strike down the same.

63. Therefore, "law" as interpreted under Article 21 by this Court is more than mere "lex". It implies a due process, both procedurally and substantively."

20. Given the parameters of judicial review of legislation laid down in these judgments, we have to see whether Section 45 can pass constitutional muster.

21. It is important to first set out the genesis of Section 45 as it appeared in the Prevention of Money Laundering Bill, 1999. In its original avatar, the precursor to Section 45, which was Section 44 of the said Bill, read as follows:-

"44.

(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973,-

(a) every offence punishable under this Act shall be cognizable;

(b) no person accused of an offence punishable for a term of imprisonment of more than three years under this Act shall be released on bail or on his own bond unless-

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

(ii) 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; Provided that a person who is under the age of sixteen years, is a woman or is sick or infirm, may be released on bail, if the Special Court so directs; Provided further that the Special Court shall not take cognizance of any offence punishable under Section 4 except upon a complaint in writing made by-

(i) the Director; or

(ii) any officer of the Central Government or State Government authorized in writing in this behalf by the Central Government by a general or a 44 special order made in this behalf by that Government.

(2) The limitation on granting of bail specified in clause (b) of sub-section (1) is in addition to the limitations under the Code of Criminal Procedure, 1973 or any other law for the time being in force on granting of bail."

At this stage, it is clear that this Section referred only to offences punishable under the Act itself, in which the twin conditions for grant of bail were imposed, in addition to limitations for such grant under the Code of Criminal Procedure. Somehow, this provision did not translate itself into dealing with offences under the 2002 Act, but became Section 45 of the 2002 Act, which was brought into force in 2005. This provision originally read as follows:

"45. Offences to be cognizable and nonbailable.-

(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974),-

(a) every offence punishable under this Act shall be cognizable;

(b) no person accused of an offence punishable for a term of imprisonment of more than three years under Part A of the Schedule shall be released on bail or on his own bond unless-

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