Bail in money laundering cases, and the ‘twin test’ under PMLA

Sub: Polity

Sec: Legislation in news

Context:

A day after a trial court granted bail to Delhi Chief Minister Arvind Kejriwal who is in jail on charges under the Prevention of Money Laundering Act (PMLA), the Delhi High Court stayed the order.

More on news:

A Bench headed by Justice Sudhir Kumar Jain on Friday heard an urgent plea by the Enforcement Directorate seeking a stay on the bail, and reserved its order until next week.
The ED challenged the trial court’s order on the ground that the court had failed to apply the ‘twin test’ for grantING bail under PMLA.

What is the twin test, and why is bail under PMLA so contentious?

Section 45 and twin test:

Section 45 of the PMLA, which deals with bail, first states that no court can grant bail for offenses under this law, and then proceeds to mention a few exceptions.
The negative language in the provision itself shows that bail is not the rule but the exception under PMLA.
The 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 a twin test.
These two conditions are:
(i) that there are reasonable grounds for believing that [the accused] is not guilty of such offense and
(ii) that he is not likely to commit any offense while on bail.
There are similar provisions in several other laws that deal with serious offenses — for example, Section 36AC of The Drugs and Cosmetics Act, 1940, Section 37 of The Narcotic Drugs and Psychotropic Substances Act, 1985, and Section 43D(5) of the Unlawful Activities Prevention Act, 1967.
The provision in the UAPA, for example, states that no person accused of an offense punishable under Chapters IV (Punishment for Terrorist Activities) and VI (Terrorist Organisations) of this Act shall be released on bail or on his own bond unless the Public Prosecutor has been given an opportunity of being heard, or if the court is of the opinion that there are reasonable grounds for believing that the accusation is prima facie true.

Legal challenges to twin test:

The first blow to the constitutional validity of the twin test came in a 2017 ruling, Nikesh Tarachand Shah v Union of India.
A two-judge Bench comprising Justices Rohinton Nariman and Sanjay Kishan Kaul struck down the bail provision as unconstitutional on the ground that the onerous conditions were not a reasonable classification.
‘Reasonable classification’ is a feature of the right to equality, which is a fundamental right.
By a subsequent amendment, Parliament put these provisions back in the law through the Finance Act, 2018.
This re-insertion was challenged before various High Courts and eventually before the Supreme Court, culminating in a batch of petitions that were heard in 2022 as Vijay Madanlal Choudhary v Union of India.

Current position in law

One key aspect of the challenge to the amendment on bail conditions still remains open even after the Vijay Madanlal Choudhary ruling: the passing of these amendments through the Money Bill route.
A separate larger Bench challenge is pending before the SC on whether certain laws, such as the Aadhaar Act, service conditions of Tribunal members, etc. can be passed as a Money Bill.
A Bench is yet to be constituted on that issue.
Although the Supreme Court has agreed to review its Vijay Madanlal Choudhary ruling itself, it is still valid law since no stay is operating on the judgment.
As per the ruling, the twin test has to be rigorously applied by all courts — special courts trying money laundering offenses as well as constitutional courts. It would also apply in the same way for both regular bail and anticipatory bail.
An accused can still get the benefit available under Section 436A of the Code of Criminal Procedure (CrPC), under which he is entitled to bail after serving half of the maximum sentence as an undertrial.
This means that in most money laundering cases, if the Enforcement Directorate is not able to finish the trial within three and a half years, the accused is entitled to bail, irrespective of the twin test.