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UPSC » Daily News Analysis ‘Bail in money laundering cases, and the ‘twin test’ under PMLA ‘: 22 June

Daily News Analysis ‘Bail in money laundering cases, and the ‘twin test’ under PMLA ‘: 22 June

Delhi Chief Minister was granted bail by trial court, who is in jail on charges under the Prevention of Money Laundering Act (PMLA), Delhi HC stayed the order.

Table of Content

About the Prevention of Money Laundering Act (PMLA):

  • 2002: enacted, amended several times
  • Aims to combat money laundering and confiscate property derived from or involved in money laundering.
  • Money laundering involves the concealment of the origins of illegally obtained money, typically by means of transfers involving foreign banks or legitimate businesses.

Bail in Money Laundering Cases

Bail Criteria:

  • Bail in money laundering cases is challenging due to the stringent provisions of the PMLA.
  • Courts consider the gravity of the offence, the evidence against the accused, and the potential for the accused to influence witnesses or tamper with evidence.

Regular and Anticipatory Bail:

    • Regular Bail: Granted after the accused is arrested.
  • Anticipatory Bail: Sought before the arrest, providing protection from arrest under specific conditions.

The ‘Twin Test’ under PMLA

The “twin test” is a set of stringent conditions that an accused must satisfy to be granted bail in money laundering cases under the PMLA. It is derived from Section 45 of the PMLA, which was amended to make the bail process more stringent for individuals accused of money laundering.

First Test: Prima Facie Case:

  • The court must be satisfied that there are reasonable grounds to believe that the accused is not guilty of the offense.
  • This involves a preliminary assessment of the evidence presented by the prosecution. If the court finds substantial evidence suggesting the involvement of the accused in money laundering activities, bail is likely to be denied.

Second Test: Non-Tampering with Evidence and Non-Threatening of Witnesses:

  • The court must be satisfied that the accused will not commit any offense while on bail, will not tamper with evidence, or intimidate witnesses.
  • The court evaluates the likelihood of the accused using their position or influence to obstruct the investigation or trial process.

Judicial Interpretation and Landmark Judgments

  • Nikesh Tarachand Shah v. Union of India (2017):
  • The Supreme Court of India held that the stringent conditions of Section 45 of the PMLA, as it existed then, were unconstitutional and violative of Articles 14 and 21 of the Constitution. The court struck down the provision as it placed an unreasonable burden on the accused seeking bail.
  • The decision led to an amendment in 2018, reintroducing the twin test with slight modifications.
  • Enforcement Directorate (ED) v. Dr. Vijay Madanlal Choudhary & Ors (2022):
  • The Supreme Court upheld the constitutionality of the amended Section 45 of the PMLA, reaffirming the application of the twin test for granting bail in money laundering cases.
  • The court emphasised the importance of stringent provisions to effectively combat money laundering, considering its severe impact on the economy and financial system.

Practical Implications

  • High Threshold for Bail:
  • The twin test sets a high threshold for granting bail, making it difficult for accused individuals to secure release during the trial.
  • Courts must ensure strict compliance with the twin test criteria, balancing the rights of the accused with the need to prevent money laundering.
  • The burden on Accused:
    • The accused must demonstrate, prima facie, that they are not guilty and that their release will not jeopardize the investigation or trial.
  • This places a significant burden on the defence to provide convincing evidence and arguments at the bail stage.

Why in the News?

Delhi Chief Minister was granted bail by trial court, who is in jail on charges under the Prevention of Money Laundering Act (PMLA), Delhi HC stayed the order.