Supreme Court Reaffirms: ‘Bail is the Rule, Jail the Exception’ Even Under PMLA

(Source: Indian Express; Section: Cover Page; Page: 01)

Topic: GS2 – Governance

Context:

The Supreme Court reaffirmed that the legal principle “bail is the rule and jail is the exception” applies even in cases registered under the Prevention of Money Laundering Act (PMLA) 2002.

 Analysis of News:  

What is PMLA, 2002?

• The Prevention of Money Laundering Act, 2002 (PMLA) is an Act of the Parliament of India enacted to prevent money laundering and provide for the confiscation of property derived from money laundering.
• It aims to combat money laundering related to illegal activities such as drug trafficking, smuggling, and terrorism financing.

• Objectives of PMLA:

• • Prevention: To prevent money laundering by implementing stringent measures and monitoring financial transactions.

• • Detection: To detect and investigate instances of money laundering through proper enforcement and regulatory mechanisms.

• • Confiscation: To confiscate properties derived from money laundering activities to deter offenders and disrupt illicit financial flows.

• • International Cooperation: To facilitate international cooperation in combating money laundering and terrorist financing activities.                                              

Reference to Previous Rulings

• In granting bail to Prem Prakash, the bench referred to the July 27, 2022, ruling in Vijay Madanlal Choudhary and Ors. vs. Union of India and Ors., which upheld the constitutional validity of PMLA and the powers of the Enforcement Directorate (ED).
• The Court highlighted that Section 45 of PMLA does not impose an absolute restraint on granting bail.

Significance of Article 21

• The bench emphasized that the principle of “bail is the rule and jail is the exception” aligns with Article 21 of the Constitution, which guarantees that no person shall be deprived of their life or personal liberty except by lawful procedures.

Application of Section 45 of PMLA

• While Section 45 of PMLA imposes twin conditions for bail, these conditions do not override the constitutional principle.
• The Court noted that prolonged pre-trial incarceration should not be used as a punishment, and the conditions for bail can be relaxed in cases where the accused has been in custody for a long time.

Role of the Public Prosecutor

• The judgment underlined that when opposing bail, the Public Prosecutor must present a cogent case showing how the foundational facts required by the Vijay Madanlal Choudhary ruling are established.
• Only after this can the presumption under Section 24 arise, shifting the burden onto the accused.

Inadmissibility of Statements under Section 50 PMLA

• The bench also held that any statement made under Section 50 of PMLA by a person in custody to the same Investigating Agency is inadmissible, as the individual cannot be considered to be operating with a free mind.

What Factors Necessitated the Adoption of PMLA, 2002?

Flourishing Drug Trade at Global Level: The United Nations took serious note of this, and in 1988, held the United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances. All countries were urged to take urgent steps to prevent the laundering of the proceeds of drug crimes and other connected activities. Formation of Financial Action Task Force: Seven major industrial nations held a summit in Paris in 1989 and established the Financial Action Task Force (FATF) to examine the problem of money laundering and recommend measures to tackle this menace. Thereafter, in 1990, the United Nations General Assembly (UNGA) adopted a resolution, namely, the Political Declaration and Global Programme of Action which called upon all member-countries to enact suitable pieces of legislation to effectively prevent the laundering of drug money. Adoption by Indian Parliament: In pursuance of this resolution of the UN General Assembly, the Government of India used the recommendations of the FATF to formulate a legislation to prevent drug money laundering. As drug trafficking is a trans-border operation, the UN held a special session in 1998 on the theme ‘Countering World Drug Problem Together’ and made another declaration on the urgent need to combat money laundering. Accordingly, the Indian Parliament enacted the Prevention of Money Laundering Act in 2002. But it was brought into force in 2005. Recommendations of the Narasimham Committee: The Narasimham Committee on Banking Sector Reforms, commissioned by the Reserve Bank of India (RBI) in 1998, underscored the importance of addressing money laundering concerns within the Indian financial system. These recommendations spurred legislative action. Adhering to Provisions of Erstwhile Legislations: The main focus of the law is on combating the laundering of drug money. Accordingly, the Act of 2002 contained a few offences listed in the Indian Penal Code (IPC) and the Narcotic Drugs and Psychotropic Substances Act, 1985. The UN resolutions, and the FATF recommendations are all focused on the prevention of money from the laundering of drugs. However, the PMLA of India acquired a different character through amendments from time to time.

PYQ: Discuss how emerging technologies and globalisation contribute to money laundering. Elaborate measures to tackle the problem of money laundering both at national and international levels. (150 words/10m) (UPSC CSE (M) GS-3 2021)

Practice Question:  Discuss the implications of the Supreme Court’s reaffirmation that “bail is the rule and jail is the exception” in the context of the Prevention of Money Laundering Act (PMLA). How does this principle align with Article 21 of the Constitution? (250 words/15 m)