Bail and twin test in money laundering case

Reference

• Just a day after the trial court recently granted bail to the Delhi Chief Minister, jailed under the Prevention of Money Laundering Act (PMLA), the Delhi High Court had stayed the trial court order.
• Notably, the Enforcement Directorate had challenged the order of the trial court on the ground that the trial court had not followed the 'twin test' required for granting bail under PMLA.

About PMLA

• The Prevention of Money Laundering Act, 2002 (PMLA) is the core of the legal framework created by the Government of India to combat money laundering.
  • The rules notified under this Act came into force from July 1, 2005.
• The Financial Intelligence Unit – India (FIU-IND) and the Enforcement Directorate have been granted exclusive and concurrent powers under the relevant sections of the Act to enforce the provisions of PMLA.
• Objective:
  • Preventing and controlling money laundering
  • confiscation and confiscation of property acquired by money obtained by criminal means
  • Apart from this, to deal with any other issue related to money laundering in India.

About Section 45 of PMLA and the Twin Test

• Section 45 of PMLA:  This section deals with bail and according to it, no court can grant bail for offences under the PMLA law.
  • However, it also mentions some exceptions under which bail can be granted. In fact, bail under PMLA is not the rule but the exception.
• Bail condition: As per section 45 of PMLA, no accused person shall be granted bail unless;
  • In all bail applications the Public Prosecutor is given an opportunity to be heard and to oppose the bail, and
  • When the application is opposed, the court must be convinced that there are reasonable grounds to believe that the accused is not guilty of the offence and is not likely to commit any offence while out on bail.
• This provision makes it mandatory to hear the public prosecutor in all bail applications, and when the prosecutor opposes bail, the court is required to apply the twin test.
• Twin Test: Section 45 states that two conditions are prescribed for grant of bail;
  • First; the accused has to prove to the court that he is prima facie innocent of the crime.
  • Second; the judge has to be convinced that the person will not commit any crime while on bail.
• Notably, the burden of proof rests entirely on the incarcerated accused, who are often incapable of resisting the power of the state.
• Both these conditions make it almost impossible for an accused to get bail under PMLA.

Legal challenges to the twin test

Nikesh Tarachand Shah v. Union of India: In this 2017 Supreme Court decision, a two-judge bench held the provision of bail based on the twin test unconstitutional on the ground that the bail conditions failed the test of reasonable classification.

• • Notably, fair classification is a feature of the right to equality, which is a fundamental right.
• Return of Twin Test by Finance Act, 2018: Despite the decision in Nikesh Tarachand Shah vs Union of India, Parliament re-introduced the Twin Test provisions through the Finance Act, 2018.
  • This attempt by the government was challenged in the Supreme Court, which was heard in the year 2022 as Vijay Madanlal Choudhary vs Union of India.
  • The three-judge bench refused to adhere to the decision in Nikesh Tarachand Shah vs Union of India.

Criticism by experts

• Legal experts have criticised the logic of treating money laundering on a par with stringent anti-terrorism and narcotics laws.
• The maximum sentence for money laundering is only seven years, or ten years if narcotics are involved.
• Whereas, anti-terrorism laws provide for life imprisonment and even death penalty.

Government's side

• The government argues that people involved in money laundering are influential, intelligent and resourceful.
• The crimes are pre-planned by them, which makes it difficult for the investigating agencies to find evidence.
• The government has defended the tough bail conditions on the ground that the crime was committed "with the help of advanced technology to conceal the transactions".

Current state of the law

• Challenge to amendment of bail conditions: A major challenge to the amendment of bail conditions in the Vijay Madanlal Choudhary judgment is whether these amendments can be passed through the Money Bill route.
  • A higher bench of the Supreme Court is to review whether certain laws, such as the Aadhaar Act, service conditions of tribunal members, etc., can be passed as money bills.
  • However, the bench has not been constituted on that issue yet.
• Current validity and application of the judgment: The Supreme Court has agreed to review its Vijay Madanlal Choudhary judgment, but the twin test is still valid law as there is no stay on the judgment.
  • According to the verdict, the twin test should be strictly applied by all special courts trying money laundering offences as well as constitutional courts.
  • This will apply equally to both regular bail and anticipatory bail.

Alternative bail relief

• The accused can get benefit under Section 436A of the Code of Criminal Procedure (CrPC).
• Under this, he is entitled to bail after completing half the period of maximum sentence as an undertrial prisoner.
• This means that in most money laundering cases, if the Enforcement Directorate is unable to complete the trial within three and a half years, the accused is entitled to bail despite the twin test.