# I~ S.C.R. 358 NIKESH TARACHAND SHAH v. UNION OF INDIA & ANR

- **Citation:** [2017] 12 S.C.R. 358
- **Court:** Supreme Court of India
- **Decided:** 2017-11-23
- **Bench:** R. F. Nariman, San.Jay Kishan Kaul
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/i-s-c-r-358-nikesh-tarachand-shah-v-union-of-india-anr-31533
- **Pages:** 56

## Headnote

Prevention of Money Laundering Act, 2002 - s.45( I)
Constitutional validity _of- Grant of bail u/s. 45( 1) - Twin conditions
to be satisfied u/s. 45 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 - For purpose of grant
of bail u/s. 45( I), offence relatable to offences punishable for a
term of imprisonment of more than 3 years under Part A of the
Schedule to the Act and not in relation to offences under the 2002
Act itself - Held: Section 45 (I) is unconstitutional as it imposes
two further conditions for release on bail, thus, violative of Arts. 14
and 21 - Expression "such offence" would be relatab/e only to an
offence in Part A of the Schedule - In an application made for bail,
where the offence of money laundering is involved, ifs. 45 is to be
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applied, the Court must be satisfied that there are reasonable grounds
for believing that he is not guilty of the offence under Part A of the
Schedule, which is not the offence of money laundering, but which
is a completely different offence - Thus, the twin conditions laid
down in s. 45 would have no nexus whatsoever with a bail
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application which concerns itself with the offence of money
laundering - Further, the term of imprisonment of more than 3 years
for a scheduled or predicate offence would be a mcmifestly arbitrary
and unjust classification, having no rational relation to the object
sought to be achieved by an Act dealing with money laundering -
This would lead to a manifestly arbitrary, discriminatory and unjust
result which would invalidate the Section - Constitution of India -
Arts. 14 and 21.
Disposing of the writ petitions and the appeals, the Court
HELD: 1. Section 45(1) of the Prevention of Money
Laundering Act, 2002, insofar as it imposes two further conditions
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NlKESH TARACHAND SHAH v. UNION OF INDIA & ANR.
for release on bail, is declared to be unconstitutional as it violates
Articles 14 and 21 of the Constitution. [Para 45] [412-F-H]
2.1 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 refened 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. [Para 9] [382-G-H; 383-A-C]
2.2 Section 44 of the Prevention of Money Laundering Bill
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. The change made by
Section 45 is that, for the purpose of grant of bail, what was now
to be looked at was offences that were punishable for a term of
imprisonment of three years or more under Part A of the Schedule,
and not offences under the 2002 Act itself. At this stage, Part A of
the Schedule contained two paragraphs-Para 1 containing Sections
121 and 121A of the Penal Code, which deal with waging or
attempting to wage war or abetting waging of war agai

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[2017] I~ S.C.R. 358
NIKESH TARACHAND SHAH
v.
UNION OF INDIA & ANR.
(Writ Petition (Criminal) No. 67 of 2017 Etc.)
NOVEMBER 23, 2017
[R. F. NARIMAN AND SAN.JAY KISHAN KAUL, JJ.]
Prevention of Money Laundering Act, 2002 - s.45( I)
Constitutional validity _of- Grant of bail u/s. 45( 1) - Twin conditions
to be satisfied u/s. 45 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 - For purpose of grant
of bail u/s. 45( I), offence relatable to offences punishable for a
term of imprisonment of more than 3 years under Part A of the
Schedule to the Act and not in relation to offences under the 2002
Act itself - Held: Section 45 (I) is unconstitutional as it imposes
two further conditions for release on bail, thus, violative of Arts. 14
and 21 - Expression "such offence" would be relatab/e only to an
offence in Part A of the Schedule - In an application made for bail,
where the offence of money laundering is involved, ifs. 45 is to be
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applied, the Court must be satisfied that there are reasonable grounds
for believing that he is not guilty of the offence under Part A of the
Schedule, which is not the offence of money laundering, but which
is a completely different offence - Thus, the twin conditions laid
down in s. 45 would have no nexus whatsoever with a bail
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application which concerns itself with the offence of money
laundering - Further, the term of imprisonment of more than 3 years
for a scheduled or predicate offence would be a mcmifestly arbitrary
and unjust classification, having no rational relation to the object
sought to be achieved by an Act dealing with money laundering -
This would lead to a manifestly arbitrary, discriminatory and unjust
result which would invalidate the Section - Constitution of India -
Arts. 14 and 21.
Disposing of the writ petitions and the appeals, the Court
HELD: 1. Section 45(1) of the Prevention of Money
Laundering Act, 2002, insofar as it imposes two further conditions
358
NlKESH TARACHAND SHAH v. UNION OF INDIA & ANR.
for release on bail, is declared to be unconstitutional as it violates
Articles 14 and 21 of the Constitution. [Para 45] [412-F-H]
2.1 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 refened 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. [Para 9] [382-G-H; 383-A-C]
2.2 Section 44 of the Prevention of Money Laundering Bill
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. The change made by
Section 45 is that, for the purpose of grant of bail, what was now
to be looked at was offences that were punishable for a term of
imprisonment of three years or more under Part A of the Schedule,
and not offences under the 2002 Act itself. At this stage, Part A of
the Schedule contained two paragraphs-Para 1 containing Sections
121 and 121A of the Penal Code, which deal with waging or
attempting to wage war or abetting waging of war against the
Governme11t of India, and conspiracy to commit such offences.
Paragraph 2 dealt with offences under the Narcotic Drugs and
Psychotropic Substances Act, 1985. Part B of the Schedule, as
originally enacted, referred to certain offences of a heinous nature
under the Penal Code, which included murder, extortion,
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kidnapping, forgery and counterfeiting. Paragraphs 2 to 5 of Part
B dealt with certain offences under the Arms Act 1959, Wildlife
(Protection) Act 1972, Immoral Traffic (Prevention) Act, 1956
and the Prevention of Corruption Act, 1988.-When the Act was
originally enacted, it was, thus, clear that the twin conditions
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applicable under Sectiiln 45(1) would only be in cases involving
waging of war against the Government of India and offences under
the Narcotic Drugs and Psychotropic Substances Act. Even the
most heinous offences under the Penal Code were contained only
in Part B, so that if bail were asked for such offences, the twin
conditions imposed by Section 45(1) would not apply. Incidentally,
one of the reasons for classifying offences in Part A and Part B of
the Schedule was that offences specified under Part B would get
attracted only if the total value involved in such offences was
Rs.30 lakhs or more (under Section 2(y) of the Act as it read
then). Thereafter, the Act has been ·amended several times. The
amendment made in 2005 in Section 45(1) was innocuous. The
2009 Amendment further populated Parts A and B of the Schedule.
In Part A, offences u/ss. 489A and B of the Penal Code, relating
to counterfeiting were added and offences under the Explosive
Substances Act, 1908 and Unlawful Activities (Prevention) Act,
1967, which dealt with terrorist activities, were added. In Part B,
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several other offences were added from the Penal Code, as were
offences under the Explosives Act 1884, Antiquities and Arts
Treasures Act 1972, Securities and Exchange Board of India Act
1992, Customs Act 1962, Bonded Labour System (Abolition) Act
1976, Child Labour (Prohibition and Regulation) Act 1986,
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Transplan,tation of Human Organs Act_ 1994, Juvenile Justice
(Care and Protection of Children) Act 2000, Emigration Act 1983,
Passports Act 1967, Foreigners Act 1946, Copyright Act 1957,
Trademarks Act 1999, Information Technology Act 2000,
Biological Diversity Act 2002, Protection of Plant and Farmers
Rights Act 2001, Environmental Protection Act 1986, Water
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(Prevention and Control of Pollution Act) 1974, Air (Prevention
and Control of Pollution Act) 1981 and Suppression of Unlawful
Acts Against Safety of Maritime Navigation and Fixed Platforms
of Continental Shelf Act, 2002. [Para 20, 21] [394-D-E; 395-D-E;
397-A-E]
2.3 Interesting feature of Section 45 is that the twin
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conditions that need to be satisfied under the said Section arc
NIKESH TARACHAND SHAH v. UNION OF INDIA & ANR.
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. The expression "such offence" would
be relatable only to an offence in Part A of the Schedule. Thus, in
an application made for bail, where the offence of money
laur1d::ring is involved, if Section 45 is to be applied, the Court
must be satisfied that there are reasonable grounds for believing
that he is not guilty of the offence under Part A of the Schedule,
which is not the offence of money laundering, but which is a
completely different offence. In every other Act, where these
twin conditions are laid down, be it the Terrorist and Disruptive
Activities (Prevention) Act, 1987 or the Narcotic Drugs and
Psychotropic Substances Act, 1985, the reasonable grounds for
believing that the accused is not guilty of an offence is in relation
to an offence under the very Act in which such section occurs.
Section 20(8) of TADA and Section 37 of the NDPS Act. It is only
in the 2002 Act that the twin conditions laid down do not relate to
an offence under the 2002 Act at all, but only to a separate and
distinct offence found under Part A of the Schedule. Obviously,
the twin conditions laid down in Section 45 would have no nexus
whatsoever with a bail application which concerns itself with the
offence of money laundering, for if Section 45 is to apply, the
Court does not apply its mind to whether the person prosecuted
is guilty of the offence of money laundering, but instead applies
its mind to whether such person is guilty of the scheduled or
predicate offence. Bail would be denied on grounds germane to
the scheduled or predicate offence, whereas the person
prosecuted would ultimately be punished for a completely different
offence-namely, money launderinj!. This, again, is laying down of
a condition which has no nexus with the offence of money
laundering at all, and a person who may prove that there are
reasonable grounds for believing that he is not guilty of the
offence of money laundering may yet be denied bail, because he
is unable to prove that there are· reasonable grounds for believing
that he is not guilty of the scheduled or predicate offence. This
would again lead to a manifestly arbitrary, discriminatory and
unjust result which would invalidate the Section. [Para 28]
[ 400-F-H; 401-A-E]
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2.4 Section 45 classifies the predicate offence under Part
A of the Schedule on the basis of sentencing. The classification
of three years or more of offences contained in Part A of the
Schedule must have a reasonable relation to the object sought to
be achieved under the 2002 Act. The 2002 Act was enacted so
that property involved in money laundering may be attached and
brought back into the economy, as also that persons guilty of the
offence of money laundering must be brought to book. Even in
the recent 2015 amendment, the Legislature has used the value
involved in the offence contained in Part B of the Schedule as a
basis for classification. If, the basis for classification of offences
referred to and related to offences under the 2002 Act with a
monetary limit beyond which such offences would be made out,
such classification would obviously have a rational relation to the
object sought to be achieved by the Act i.e. to attach properties
and the money involved in money laundering and to bring persons
involved in the offence of money laundering to book. On the other
hand, it is clear that the term of imprisonment of more than 3
years for a scheduled or predicate offence would be a manifestly
arbitrary and unjust classification, having no rational relation to
the object sought to be achieved by an Act dealing with money
laundering. [Para 29] [401-F-H; 402-A-B]
2.5 An extremely heinous offence, such as murder,
punishable with death or life imprisonment, which is now contained
in Part A of the Schedule may yield only Rs.5,000/- as proceeds
of crime. On the other hand, an offence relating to a false
declaration under Section 132 of the Customs Act, punishable
with a sentence of upto 2 years, which is an offence under Part B
of the Schedule, may lead to proceeds of crime in crores of rupees.
In short, a classification based on sentence of imprisonment of
more than three years of an offence contained in Part A of the
Schedule, which is a predicate offence, would have no rational
relation to the object of attaching and bringing back into the
economy large amounts by way of proceeds of crime. When it
comes to Section 45, it is clear that a classification based on
sentencing qua a scheduled offence would have no rational relation
with the grant of bail for the offence of money laundering. It is .
clear that a classification is justified only if it is not manifestly
arbitrary. [Para 30] [402-C-F]
NIKESH TARACHAND SHAH v. UNION OF INDIA & ANR.
363
2.6 Going through Part A of the Schedule as it now exists,
it is clear that there are many sections under the Penal Code
punishable with life imprisonment which are not included in Part
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A of the Schedule, and which may yet lead to proceeds of crime.
For example, Sections 232 and 238 of the Penal Code, which
deal with counterfeiting of Indian coin and import or export of B
counterfeited Indian coin, are punishable with life imprisonment.
These sections are not included in Part A of the Schedule, and a
person who may counterfeit Indian coin is liable to be tried under
the Cr.P.C. with conditions as to bail under Section 439 being
imposed by the High Court or the Sessions Court. As against
this, a person who counterfeits Government stamps under Section
255 is roped into Part A of the Schedule, which is also punishable
with life imprisonment. If such person is to apply for bail, the
twin conditions contained in Section 45 would apply to him. Similar
is the case with offences where a punishment of maximum of 10
years is given. Section 240 dealing with delivery of Indian coin
possessed with knowledge that it is counterfeit; Section 251
dealing with delivery of Indian coin possessed with knowledge
that it is altered; Sections 372 and 373 which deal with the selling
and buying of minors for the purpose of prostitution, are all
offences which are outside Part A of the Schedule and are
punishable with the maximum of 10 years sentence. Each of these
offences may involve money laundering, but not being in Part A
of the Schedule, a person prosecuted for these offences would
be able to obtain bail under Section 439 Cr.P.C., without any
further conditions attached. On the other hand, if a person is
charged with extortion under Sections 386 or 388, (such sections
being included in Part A of the Schedule) and Section 4 of the
2002 Act, the person prosecuted under these sections would only
be able to obtain bail after meeting the stringent conditions
specified in Section 45. This is yet another circumstance which
makes the application of Section 45 to the offence of money
laundering and the predicate offence manifestly arbitrary. [Para
31] [403-C-H; 404-A]
2.7 Sections 19, 24, 27A and 29 of the Narcotic Drugs and
Psychotropic Substances Act, 1985 are all sections which deal
with narcotic drugs and psychotropic substances where a person
is found with, what is defined as, "commercial quantity" of such
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substances. In each of these cases, under Section 37 of the NDPS
Act, a person prosecuted for these offences has to meet the same
twin conditions which are contained in Section 45 of the 2002
Act. Inasmuch as these Sections attract the twin conditions under
the NDPS Act in any case, it was wholly unnecessary to include
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them again in paragraph 2 of Part A of the Schedule, for when a
person is prosecuted for an offence under Sections 19, 24, 27A
or 29 of the NDPS Act, together with an offence under Section 4
of the 2002 Act, Section 37 of the NDPS Act would, in any case,
be attracted when such person is seeking bail for offences
committed under the 2002 Act and the NDPS Act. Also, the
classification contained within the NDPS Act is completely done
away with. Unequals are dealt with as if they are now equals. The
offences under the NDPS Act are classified on the basis of the
quantity of narcotic drugs and psychotropic substances that the
accused is found with, which are categorized as: a small quantity,
as defined; a quantity which is above small quantity, but below
commercial quantity, as defined; and commercial quantity, as
defined. The sentences of these offences vary from 1 year for a
person found with small quantity, to 10 years for a person found
with something between small and commercial quantity, and a
minimum of 10 years upto 20 years when a person is found with
commercial quantity. The twin conditions specified in Section 37
of the NDPS Act get attracted when bail is asked for only insofar
as persons ~ho have commercial c1uantities with them are
concerned. A per11on found with a small quantity or with a quantity
above small <1uantity, but below commercial quantity, punishable
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with a one year sentence or a 10 year sentence respectively, can
. apply for bail under Section 439 Cr.P.C. without satisfying the
same twin conditions as are contained in Section 45 of the 2002
Act, under Section 37 of the NDPS Act. By assimilating all these
three contraventions and bracketing them together, the 2002 Act
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treats as equal offences which are treated as unec1ual by the NDPS
Act itself, when it comes to imposition of the further twin
conditions for grant of bail. This is yet another manifestly arbitrary
and discriminatory feature of the application of Section 45. [Para
32, 33] [404-B-H; 405-A-B]
2.8 A reference to paragraph 23 of Part A of the Schedule
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would also show how Section 45 can be used for an offence under
NIKESH TARACHAND SHAH v. UNION OF INDIA & ANR.
365
the Biological Diversity Act, 2002. If a person covered under the
Act obtains, without the previous approval of the National
Biodiversity Authority, any biological'resources occurring in India
for research or for commercial utilization, he is liable to be
punished for imprisonment for a term which may extend to 5 years
under Section 55 of the Act. A breach of this provision, when
combined with an offence under Section 4 of the 2002 Act, would
lead to bail being obtained only if the twin conditions in Section
45 of the 2002 Act are satisfied. By no stretch of imagination can
this kind of an offence be considered as so serious as to lead to ·
the twin conditions in Section 45 having to be satisfied before
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. grant of bail, even assuming that classification on the basis of C
sentence has a rational relation to the grant of bail after complying
with Section 45 of' the 2002 Act. [Para 34] [405-C-D]
2.9 Anticipatory bail may be granted to a person who is
prosecuted for the offence of money laundering together with an
offence under Part A of the Schedule, which may last throughout
the trial. Obviously for grant of such bail, Section 45 .does not
need to be satisfied, as only a person arrested under Section 19
of the Act can only be released on bail after satisfying the
conditions of Section 45. But insofar as pre-arrest bail is
concerned, Section 45 does not apply on its own terms. This,
again, would lead to an extremely anomalous situation. [Para 35]
[405-E-G]
2.10 The submission that Section 45 is to be upheld as it is
part of a complete code under the 2002 Act; Section 45 when
read with. Sections 3 and 4, would necessarily lead to the
conc.Iusion that the source of the proceeds of crime, being the
scheduled offence, and the money laundering offence, would have
to be tried together, and the nexus that is provided is because
the source of money laundering being as important as money
laundering itself, conditions under Section 45 would have to be
applied cannot be accepted. It was submitted that Section 45 is
to be read down in that when the Court is satisfied t.hat there are
reasonable grounds for believing that a person is not guilty of an
offence, it only meant that the Court must prima facie come to
such a conclusion; and the fact that he is not likely to commit
"any offence" while on bail would only be restricted to any offence
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[2017] 12 S.C.R.
of a like nature. Merely reading down the two conditions would
not get rid of the vice of manifest arbitrariness and discrimination.
Also, it cannot be accepted that Section 45 imposes two conditions
which are akin to conditions that are specified for grant of ordinary
bail. It is obvious that the twin conditions set down in Section 45
are a much higher threshold bar than any of the conditions laid
down in Amarmani Tripatlzi case. ln fact, the presumption of
innocence, which is attached to any person being prosecuted of
an offence, is inverted by the conditions specified in Section 45,
whereas for grant of ordinary bail the presumption of innocence
attaches, after which the various factors set out are to be looked
at. Under Section 45, the Court must be satisfied that there are
reasonable grounds to believe that the person is not guilty of
such offence and that he is not likely to commit any offence while
on bail. [Para 36] (406-C-H; 407-A]
2.11 Section 45 is a drastic provision which turns on its
head the presumption of innocence which is fundamental to a
person accused of any offence. Before application of a section
which makes drastic inroads into the fundamental right of personal
liberty guaranteed by Article 21, this Court must be doubly sure
that such provision furthers a compelling State interest for tackling
serious crime. In absence of any such compelling State interest,
the indiscriminate application of the provisions of Section 45 will
certainly violate Article 21 of the Constitution. Provisions akin
to Section 45 have only been upheld on the ground that there is
a compelling State interest in tackling crimes of an extremely
heinous nature. [Para 38] (408-C-E]
2.12 Section 45 only speaks of the scheduled offence in
Part A of the Schedule, whereas Section 24 speaks of the offence
of money laundering, and raises a presumption against the person
prosecuted for the crime of money laundering. This presumption
has no application to the scheduled offence mentioned in Section
G 45. [Para 41] (411-B-C]
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3. All the matters in which bail has been denied, because of
the presence of the twin conditions contained in Section 45, would
now go back to the respective courts which denied bail. All such
orders arc set aside, and the cases remanded to the. respective
NIKESH TARACHAND SHAH v. UNION OF INDIA & ANR.
367
courts to be heard on merits at the earliest without application of A
the twin conditions contained in Section 45 of the 2002 Act. [Para
45] [412-G-H]
State of U.P. through C.B.l. v. Amarnwni Tripathi.
[2005] 3 Suppl. scR 454 : (2005) 8 sec 21 ;
Gautam Kundu v.
Directorate of Enforcement
(2015) 16 SCC 1 ; Rohit Ta11do11 v. Tlze Enforcement
Directorate 2017(13) SCALE 385 ; Rajesh Kumar 11.
State through Government of NCT of Delhi (2011) 13
SCC 706 ; Gurba/.:slz Singh Sibbia v. State of Punjab
2017(13) SCALE 385 : (1980) 2 SCC 565 : State of
Bombay and Anr. v. F.N. Balsara [1951] SCR 682 ;
Budhan Choudhry 11. State of Bihar [1955] 1 SCR
1045 ; Asgarali Nazarali Singaporawalla v. The State
of Bombay [1957] SCR 678 ; Shayara Bano v. Union
of India a11d others (2017) 9 SCC 1 ; Maneka Gandhi
v. Union of India [1978] 2 SCR 621 : (1978) 1 SCC
248 ; Special Courts Bill, 1978, In re [1979] 2 SCR
476 : (1979) 1 SCC 380 ; Siddfwram Satlingappa
Mhetre v. State of Maharashtra [2010] 15 SCR 201 :
(2011) 1 SCC 694 ; Ranjitsing Brahmajeetsing Sharma
v. State of Maharashtra and Anr. [2005] 3 SCR 345 :
(2005) 5 SCC 294 ; Gora\! Kathuria v. Union of India
and Ors .. 2017 (348) ELT 24 (P & H) - referred to.
Kartar Singh v. State of Punjab [1994] 2 SCR 375 :
(1994) 3 sec 569 - held inapplicable.
U11ited States v. Anthony Salerno & Vincent Cafaro
481 US 739 (1987) ; Stack v. Boyle, 342 US 1 -
referred to.
Case Law Reference
[2005] 3 Suppl. SCR 454
. referred to
(2015) 16 sec 1
2017(13) SCALE 385
(2011) 13 sec 706
referred to
referred to
referred to
Para6
Para6
Para6
Para 13
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(1980) 2 sec 565
referred to
Para 14
[1951] SCR 682
referred to
Para 15
[1955] 1 SCR 1045
referred to
Para 16
[1957] SCR 678
referred to
Para 17
(2017) 9 sec 1
referred to
Para 18
[1978] 2 SCR 621
referred to
Para 19
[1979] 2 SCR 476
referred to.
Para 30
[2010] 15 SCR 201
referred to
Para 35
[1994] 2 SCR 375
held inapplicable
Para 39
[2005] 3 SCR 345
referred to
Para 40
2017 (348) ELT 24 (P & H) referred to
Para 43
CRIMINAL ORIGINAL/APPELLATE JURISDICTION : Writ
Petition (Criminal) No. 67 of2017.
E
UnderArticle 32 of the Constitution oflndia.
WITH
W. P. (Crl.) Nos. 103, 144 and 152 of2017
F
Criminal Appeal Nos. 2012, 2013 and 2014 of2017.
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Mukul Rohatgi, Vikram Chaudhri, Sr. Advs, Saurabh Kirpal, San jay
Agarwal, Nikhil Jain, Sangram S. Saron, Ashish Batra, Harshit Sethi,
Sajal Yadav, Rishi Sehgal, Vamshi Rao, Sameer Rohatgi, Ms. Preeti Singh,
Amit K. Nain, Advs for the Petitioner.
K.K.Venugopal, AG, Ms. Pinky Anand, ASG, A. K. Panda,
Sr. Advs, Ms. Binu Tamta, P. K. Dey, Ms. Shirin Khajuria, Hemant
Arya, Pankaj Pandey, B. Krishna Prasad, Ms. Sushma Manchanda, A.C.
Singh, Manoj Singh, Rohit Bhatt, Dhruv Tamta, Advs for the
Respondents.
NIKESH TARACHAND SHAH v. UNION OF INDIA & ANR.
369
[R.F. NARIMAN, J.]
The Judgment of the Court was delivered by
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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
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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 c
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 oflndia is
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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 ~eing realised, world over, that money-laundering poses a
serious threat not only to the financial systems of countries, but
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also to their integrity and sovereignty. Some of the initiatives taken
by the international community to obviate such threat~ are outlined
below:-
( a) the United Nations Convention Against Illicit Traffic in Narcotic
Drugs and Psychotropic Substances, to which India is a party,
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calls for prevention of laundering of proceeds of drug crimes and
other connected activities and confiscation of proceeds derived
from such offence.
(b) the Basie Statement of Principles, enunciated iri 1989, outlined
basic policies and procedures that banks should follow in order to
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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,
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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 moneylaundering. The recommendations were classified under various
heads. Some of the important heads areB
(i) declaration oflaundering of monies carried through serious
crimes a criminal offence;
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(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 MoneyLaundering 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 rep01t 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
NIKESH TARACHAND SHAH v. UNION OF INDIA & ANR.
371
[R.F. NARIMAN, J.]
section 477 A 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 co111pa11ies, financial
institutions and intermediaries should be required to. furnish
information of transactions to the Director instead of Commissioner
ofincome-tax (e) the banking companies should also be brought
within the ambit of clause II relating to obligations of financial
institutions and intermediaries; (t) a definite time-limit of24 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 inter-connected transactions; (h) vacancy in the
office of the Chairperson of an Appellate Tribunal, by reason of
his death, resignation or otherwise, the senior-most 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
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two years imprisonment, or fine of rupees ten thousand to fine of E
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.
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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
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arrangement for assistance in certain matters and procedure for
attachment and confiscation of property so as to facilitate the
transfer of funds involved in money-laundering kept outside the
country and extradition of the accused persons from abroad.
4. The Bill seeks to achieve the above objects."
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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" meansD
(i) the·offences specified under Part A of the Schedule; or
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(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
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is a party or is actually involved in any process or activity connected
with proceeds or'crime including its concealment, possession,
acquisition or use and projecting or claiming it as untainted property
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shall be guilty of offence of money-laundering.
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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; \he 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.
NIKESH TARACHAND SHAH v. UNION OF INDIA & ANR.
373
[R.F. NARIMAN, J.]
Sec_tion 5. Attachment of property involved Jn moneyA
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,
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that-
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(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
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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 E
the scheduled offence, as the case may be, or a similar report or
complaint has been made or filed under the corresponding law o(
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 attached immediately
under this Chapter, the non-attachment 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
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(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.
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(3) Every order of attachment made under sub-section (I) 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
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the enjoyment of the immovable property attached under subsection (I) 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.
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(5) The Director or any other officer who provisionally attaches
any property under sub-section (I) shall, within a period of thirty
days from such attachment, file a complaint stating the facts of
such attachment before the Adjudicating Authority.
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Section 43. Special Courts.-
(!) The Central Government, in consultation with the Chief Justice
of the High Court, shall, for trial of offence punishable under section
4, by notification, 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 subsection (I), with which the accused may, under the Code of
Criminal Procedure, 1973 (2 of 1974), be charged at the same
trial.
NIKESH TARACHAND SHAH v. UNION OF INDIA & ANR.
375
[R.F. NARIMAN, J.]
Section 44. Offences triable by Special Courts.-
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(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
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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
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made by an .iuthority 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
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of the complaint of the offence of money-laundering under subclause (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
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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 (2of1974)
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 (2of1974) and the High
Court may exercise such powers including the power under clause
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(b) of sub-section (I) of that section as if the reference to
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"Magistrate" in that section includes also a reference to a "Special
Court" designated under section 43.
Section 45.