1  

REPORTABLE  

 IN THE SUPREME COURT OF INDIA  

 CRIMINAL ORIGINAL/APPELLATE JURISDICTION  

 WRIT PETITION (CRIMINAL) NO. 67 OF 2017  

NIKESH TARACHAND SHAH        …PETITIONER    

 VERSUS  

 UNION OF INDIA & ANR.                         …RESPONDENTS  

 WITH  

WRIT PETITION (CRIMINAL) NO.103 OF 2017  

WITH  

WRIT PETITION (CRIMINAL) NO.144 OF 2017  

WITH  

WRIT PETITION (CRIMINAL) NO.152 OF 2017  

WITH  

CRIMINAL APPEAL NO.  2012 OF 2017  (ARISING OUT OF SLP (CRL) NO.7326 OF 2017)  

 WITH  

CRIMINAL APPEAL NO. 2013 OF 2017  (ARISING OUT OF SLP (CRL) NO.7786 OF 2017)  

 WITH  

 CRIMINAL APPEAL NO. 2014 OF 2017  

(ARISING OUT OF SLP (CRL) NO.7789 OF 2017)

2  

J U D G M E N T  

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 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 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

3  

involved in money laundering, so that this serious threat to the  

financial system of India is 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 being realised, world over, that money- laundering poses a serious threat not only to the  financial systems of countries, but also to their  integrity and sovereignty. Some of the initiatives  taken by the international community to obviate  such threats are outlined below:—   

(a) the United Nations Convention Against Illicit  Traffic in Narcotic Drugs and Psychotropic  Substances, to which India is a party, calls for  prevention of laundering of proceeds of drug crimes  and other connected activities and confiscation of  proceeds derived from such offence.   

(b) the Basle Statement of Principles, enunciated in  1989, outlined basic policies and procedures that  banks should follow in order to 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, 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 money-laundering. The  recommendations were classified under various  heads. Some of the important heads are—  

4  

(i) declaration of laundering of monies  carried through serious crimes a  criminal offence;   

(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 Money-Laundering Bill, 1998 was  introduced in the Lok Sabha on the 4th August,  1998. The Bill was referred to the Standing

5  

Committee on Finance, which presented its report  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 section  477A 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 companies, financial institutions and  intermediaries should be required to furnish  information of transactions to the Director instead of  Commissioner of Income-tax (e) the banking  companies should also be brought within the ambit  of clause II relating to obligations of financial  institutions and intermediaries; (f) a definite time- limit of 24 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 two years imprisonment, or fine of  rupees ten thousand to fine of 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

6  

accepted the above recommendations and made  provisions of the said recommendations in the Bill.   

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 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.”  

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,

7  

then the property equivalent in value held within the  country;   

(x) “Schedule” means the Schedule to this Act;  

(y) “scheduled offence” means—   

(i) the offences specified under Part A of the  Schedule; or   

(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 is a party or is  actually involved in any process or activity  connected with proceeds of crime including its  concealment, possession, acquisition or use and  projecting or claiming it as untainted property shall  be guilty of offence of money-laundering.   

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, the 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.  

Section 5. Attachment of property involved in  money-laundering.  

8  

(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, that—   

(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 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 the scheduled  offence, as the case may be, or a similar report or  complaint has been made or filed under the  corresponding law of 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

9  

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 (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.   

(3) Every order of attachment made under sub- section (1) 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 the enjoyment of the immovable  property attached under sub-section (1) 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.   

(5) The Director or any other officer who  provisionally attaches any property under sub- section (1) shall, within a period of thirty days from  such attachment, file a complaint stating the facts of  such attachment before the Adjudicating Authority.  

xxx xxx xxx  

Section 43. Special Courts.—  

(1) The Central Government, in consultation with  the Chief Justice of the High Court, shall, for trial of  offence punishable under section 4, by notification,

10  

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 sub-section (1), with which the  accused may, under the Code of Criminal  Procedure, 1973 (2 of 1974), be charged at the  same trial.  

Section 44. Offences triable by Special Courts.—  

(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 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 made by an authority  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 of the complaint of the  offence of money-laundering under sub-clause (b),

11  

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 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 (2 of 1974) 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 (2 of 1974) and the  High Court may exercise such powers including the  power under clause (b) of sub-section (1) of that  section as if the reference to “Magistrate” in that  section includes also a reference to a “Special  Court” designated under section 43.  

Section 45. Offences to be cognizable and non- bailable.—  

(1) Notwithstanding anything contained in the Code  of Criminal Procedure, 1973 (2 of 1974), no person  accused of an offence punishable for a term of  imprisonment of more than three years under Part A  of the Schedule shall be released on bail or on his  own bond unless—  

(i) the Public Prosecutor has been given a  opportunity to oppose the application for such  release; and   

(ii) where the Public Prosecutor opposes the  application, the court is satisfied that there are  reasonable grounds for believing that he is not guilty  of such offence and that he is not likely to commit  any offence while on bail: Provided that a person,

12  

who, is under the age of sixteen years, or is a  woman or is sick or infirm, may be released on bail,  if the Special Court so directs: Provided further that  the Special Court shall not take cognizance of any  offence punishable under section 4 except upon a  complaint in writing made by—   

(i) the Director; or   

(ii) any officer of the Central Government or a State  Government authorised in writing in this behalf by  the Central Government by a general or special  order made in this behalf by that Government.   

(1A) Notwithstanding anything contained in the  Code of Criminal Procedure, 1973 (2 of 1974), or  any other provision of this Act, no police officer shall  investigate into an offence under this Act unless  specifically authorised, by the Central Government  by a general or special order, and, subject to such  conditions as may be prescribed.   

(2) The limitation on granting of bail specified in  sub-section (1) is in addition to the limitations under  the Code of Criminal Procedure, 1973 (2 of 1974) or  any other law for the time being in force on granting  of bail.   

Section 46. Application of Code of Criminal  Procedure, 1973 to proceedings before Special  Court.—   

(1) Save as otherwise provided in this Act, the  provisions of the Code of Criminal Procedure, 1973  (2 of 1974) (including the provisions as to bails or  bonds), shall apply to the proceedings before a  Special Court and for the purposes of the said  provisions, the Special Court shall be deemed to be  a Court of Session and the persons conducting the  prosecution before the Special Court, shall be  deemed to be a Public Prosecutor: Provided that  the Central Government may also appoint for any

13  

case or class or group of cases a Special Public  Prosecutor.  

(2) A person shall not be qualified to be appointed  as a Public Prosecutor or a Special Public  Prosecutor under this section unless he has been in  practice as an advocate for not less than seven  years, under the Union or a State, requiring special  knowledge of law.   

(3) Every person appointed as a Public Prosecutor  or a Special Public Prosecutor under this section  shall be deemed to be a Public Prosecutor within  the meaning of clause (u) of section 2 of the Code  of Criminal Procedure, 1973 (2 of 1974) and the  provisions of that Code shall have effect  accordingly.  

xxx xxx xxx  

Section 65. Code of Criminal Procedure, 1973 to  apply.— The provisions of the Code of Criminal  Procedure, 1973 (2 of 1974) shall apply, in so far as  they are not inconsistent with the provisions of this  Act, to arrest, search and seizure, attachment,  confiscation investigation, prosecution and all other  proceedings under this Act.  

xxx xxx xxx  

Section 71. Act to have overriding effect.—The  provisions of this Act shall have effect  notwithstanding anything inconsistent therewith  contained in any other law for the time being in  force.”    

5. Shri Mukul Rohatgi, learned senior advocate appearing  

on behalf of the petitioners, has argued before us that Section  

45 of the said Act, when it imposes two further conditions

14  

before grant of bail is manifestly arbitrary, discriminatory and  

violative of the petitioner’s fundamental rights under Article 14  

read with Article 21 of the Constitution. According to learned  

senior counsel, at the stage that the said Act was a Bill (which  

was referred to a Standing Committee on Finance of the  

Parliament, and which presented its report on 4.3.1999 to the  

Lok Sabha), the Central Government broadly accepted the  

recommendations of the Standing Committee, which were then  

incorporated in the said Bill along with some other changes. At  

this stage, argued Shri Rohatgi, it is interesting to note that  

Clauses 43 and 44 of the Bill, which correspond to Sections 44  

and 45 of the present Act, were very differently worded and  

dealt only with offences under the 2002 Act.  The twin  

conditions laid down as additional conditions for grant of bail  

were, at this stage, only qua offences under the 2002 Act.  

When Parliament enacted the 2002 Act, this scheme was  

completely changed in that Section 45 of the Act now spoke  

only of the predicate/scheduled offence and not the offence  

under the 2002 Act.  In the present Act, a scheduled offence,  

which is an offence under other penal laws contained in Part A

15  

of the Schedule, that is tried with offences under the Act, bail  

would be granted only after satisfying the twin conditions laid  

down in the Section. Also, when the Act was originally enacted,  

according to learned senior counsel, part A of the Schedule  

was very sparsely populated, in that it comprised of two  

paragraphs only consisting of two offences under the Indian  

Penal Code, 1860 and 9 offences under the Narcotic Drugs and  

Psychotropic Substances Act, 1985.  These offences were  

considered extremely heinous by the legislature and were,  

therefore, classified apart from offences under Part B, which  

dealt with certain other offences under the Indian Penal Code  

and offences under the Arms Act 1959, Wildlife (Protection) Act  

1972, Immoral Traffic (Prevention) Act, 1956 and the  

Prevention of Corruption Act, 1988.  According to learned  

senior counsel, this classification was maintained right until the  

Amendment Act of 2012, which then incorporated Part B  

offences into Part A of the Schedule, resulting in offences under  

26 Acts, together with many more offences under the Indian  

Penal Code, all being put under Part A.  This, according to  

learned senior counsel, was done because the definition of

16  

“scheduled offence” in Section 2(y) of the Act made it clear that,  

if offences are specified under Part B of the Schedule at the  

relevant time, the total value involved for such offences should  

be Rs.30 lakhs or more. The idea behind the 2012 Amendment,  

as the Statement of Objects of the said Amendment discloses,  

is that this limit of Rs.30 lakhs be removed, which is why the  

entire Part B of the Schedule was subsumed in Part A. He  

further argued that the object was not to deny bail to those  

charged with offences under the erstwhile Part B, and that  

putting Part B offences together with heinous offences in Part A  

would amount to treating unequals equally and would be  

discriminatory and violative of Article 14 of the Constitution.  In  

addition, such lumping together of disparate offences would  

have no rational relation to the object sought to be achieved by  

the Amendment Act of 2012, that is to obviate the Rs.30 lakh  

limit qua Part B offences, and it would violate Article 14 on this  

ground as well.  According to learned senior counsel, the  

change from the original scheme of the Bill to introducing  

offences outside the 2002 Act dependent upon which bail would  

be granted, with the twin conditions as aforestated first having

17  

to be satisfied, is itself manifestly arbitrary, in that the predicate  

offence, which is the scheduled offence, and the classification  

of such offence as being punishable with three years or more  

would again be wholly irrelevant and would have absolutely no  

rational relation to the object of granting bail insofar as offences  

under the 2002 Act are concerned.  Learned senior counsel  

also referred to Article 21 of the Constitution and stated that the  

aforesaid procedure would be unfair, unjust and would fall foul  

of Article 21 inasmuch as it would certainly fall foul of the US  

Constitution’s Eighth Amendment which interdicts excessive  

bails. Since this Court has recognized that this feature of the  

Eighth Amendment would fall within Article 21, it would be a  

direct infraction thereof.  He also argued that a person will be  

punished for an offence contained under the 2002 Act, but will  

be denied bail because of a predicate offence which is  

contained in Part A of the Schedule, which would again render  

Section 45(1) as manifestly arbitrary and unreasonable. He  

referred to Nikesh Tarachand Shah’s case, which is Writ  

Petition (criminal) No.67 of 2017, in which the scheduled  

offences were Sections 120B, 409, 420, 471 and 477A of the

18  

Indian Penal Code read with Section 13 of the Prevention of  

Corruption Act.  These offences were being investigated by the  

CBI in CBI Special Case No.91/2009 in which the petitioner  

was granted bail by the Sessions Court by an order dated  

10.12.2015.  When the offence under the 2002 Act was added  

to the aforesaid offences, thanks to the applicability of the twin  

conditions in Section 45(1), he was denied bail with effect from  

27.11.2015, which itself shows that Section 45(1) is being used  

in an extremely manifestly arbitrary fashion to deny bail for  

offences which extend only to seven years under the 2002 Act,  

as opposed to predicate offences which may extend even to life  

imprisonment.  Also, according to learned senior counsel, the  

threshold of three years and above contained in Section 45 of  

the 2002 Act is itself manifestly arbitrary in that it has no  

reference to the offence of money laundering under the 2002  

Act, but only to three years and more of the predicate offence.   

There is no condition, so far as the 2002 Act is concerned, of  

classification based on the amount of money that is laundered,  

which perhaps may be a valid basis for classification.  Also,  

according to learned senior counsel, if the twin conditions of

19  

Section 45(1) are to be satisfied at the stage of bail, the  

defendants will have to disclose their defence at a point in time  

when they are unable to do so, having been arrested and not  

being granted bail at the inception itself.  Another conundrum  

raised by Section 45 is the fact that, there being no interdict  

against anticipatory bail in the 2002 Act, and the Code of  

Criminal Procedure applying to offences under the 2002 Act, it  

would be clear that anticipatory bail could be granted for both  

offences under the 2002 Act and predicate offences. This being  

so, unlike the Terrorist and Disruptive Activities (Prevention) Act  

1987, where anticipatory bail expressly cannot be granted, the  

twin conditions of Section 45 would not apply at the anticipatory  

bail stage, which would mean that a person charged of money  

laundering and a predicate offence could continue on  

anticipatory bail throughout the trial without satisfying any of the  

twin conditions, as opposed to a person who applies for regular  

bail, who would have to satisfy the twin conditions, which in  

practice would mean denial of bail.  For all these reasons,  

according to learned senior counsel, Section 45 needs to be  

struck down. Also, according to learned senior counsel, it is not

20  

possible to read down the provision to make it constitutional as  

the very scheme of Section 45 is manifestly arbitrary and  

irrational.  Shri Rohatgi cited various judgments to buttress his  

submissions which will be referred to by us in the course of this  

judgment.   

6. On the other hand, the learned Attorney General Shri K.K.  

Venugopal impressed upon us the fact that the Parliamentary  

legislation qua money laundering is an attempt by Parliament to  

get back money which has been siphoned off from the  

economy. According to the learned Attorney General,  

scheduled offences and offences under Sections 3 and 4 of the  

2002 Act have to be read together and the said Act, therefore,  

forms a complete code which must be looked at by itself.  

According to the learned Attorney General, it is well settled that  

classification which is punishment centric has been upheld by a  

catena of judgments and so have the twin conditions been  

upheld by various decisions which were referred to by him.  

According to him, the expression “any offence” in Section  

45(1)(ii) would mean offence of a like nature and not any  

offence, which would include a traffic offence as well. According

21  

to the learned Attorney General, Section 45 can easily be read  

down to make it constitutional in two ways.  First, the  

expression “there are reasonable grounds for believing that he  

is not guilty of such offence” must be read as the making of a  

prima facie assessment by the Court of reasonable guilt.  

Secondly, according to the learned Attorney General, in any  

case the conditions contained in Section 45(1)(ii) are there in a  

different form when bail is granted ordinarily insofar as offences  

generally are concerned and he referred to State of U.P.  

through C.B.I. v. Amarmani Tripathi, (2005) 8 SCC 21 for this  

purpose.  According to the learned Attorney General, if  

harmoniously construed with the rest of the Act, Section 45 is  

unassailable.  He relied upon Section 24 of the Act, which  

inverts the burden of proof, and strongly relied upon Gautam  

Kundu v. Directorate of Enforcement (Prevention of Money-

Laundering Act), (2015) 16 SCC 1 and Rohit Tandon  

v. The Enforcement Directorate, Criminal Appeal Nos.1878--

1879   Of  2017 decided on 10th November, 2017. In answer to  

Shri Rohatgi’s argument on the object of the 2012 Amendment  

Act, according to the learned Attorney General, it is well settled

22  

that where the language of the Act is plain, no recourse can be  

taken to the object of the Act and he cited a number of  

judgments for this proposition. He referred us to Section 106 of  

the Indian Evidence Act, 1872 and argued that when read with  

Section 24 of the 2002 Act, it would be clear that the twin  

conditions contained in Section 45 are only in furtherance of the  

object of unearthing black money and that we should, therefore,  

be very slow to set at liberty persons who are alleged offenders  

of the cancer of money laundering. Ultimately, according to the  

learned Attorney General, Section 45 being part of a complete  

code must be upheld in order that the 2002 Act work, so that  

money that is laundered comes back into the economy and  

persons responsible for the same are brought to book.    

7. Having heard learned counsel for both sides, it is  

important to first understand what constitutes the offence of  

money laundering.  Under Section 3 of the Act, the kind of  

persons responsible for money laundering is extremely wide.   

Words such as “whosoever”, “directly or indirectly” and  

“attempts to indulge” would show that all persons who are even  

remotely involved in this offence are sought to be roped in.  An

23  

important ingredient of the offence is that these persons must  

be knowingly or actually involved in any process or activity  

connected with proceeds of crime and “proceeds of crime” is  

defined under the Act, by Section 2 (u) thereof, to mean any  

property derived or obtained directly or indirectly, by any person  

as a result of criminal activity relating to a scheduled offence  

(which is referred to in our judgment as the predicate offence).   

Thus, whosever is involved as aforesaid, in a process or activity  

connected with “proceeds of crime” as defined, which would  

include concealing, possessing, acquiring or using such  

property, would be guilty of the offence, provided such persons  

also project or claim such property as untainted property.   

Section 3, therefore, contains all the aforesaid ingredients, and  

before somebody can be adjudged as guilty under the said  

provision, the said person must not only be involved in any  

process or activity connected with proceeds of crime, but must  

also project or claim it as being untainted property.  Under  

Section 4 of the Act, the offence of money laundering is  

punishable with rigorous imprisonment for a minimum period of  

three years which may extend to 7 years and fine.  Also, under

24  

the proviso, where the proceeds of crime involved in money  

laundering relate to a predicate offence under paragraph 2 of  

Part A of the Schedule, the sentence then gets extended from 7  

years to 10 years.   

8. Under Section 5 of the Act, attachment of such property  

takes place so that such property may be brought back into the  

economy. Coming now to Chapter VII of the Act with which we  

are really concerned, Section 43 lays down that Special Courts  

to try offences under the Act are to be designated for such area  

or areas or for such case or class or group of cases as may be  

specified by notification.  Section 44 is very important in that the  

Section provides for the trial of a scheduled offence and the  

offence of money laundering together by the same Special  

Court, which is to try such offences under the Code of Criminal  

Procedure as if it were a court of sessions.  Under Section 46,  

read with Section 65 of the Act, the provisions of the Code of  

Criminal Procedure apply to proceedings before the Special  

Court and for the purpose of the said provisions, the Special  

Court shall be deemed to be a court of sessions.   

25  

9. 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 referred 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.  This fundamental difference  

between the Bill and the Act has a great bearing on the  

constitutional validity of Section 45(1) with which we are directly  

and immediately concerned.  

26  

10. The provision for bail goes back to Magna Carta itself.   

Clause 39, which was, at that time, written in Latin, is translated  

as follows:  

“No free man shall be seized or imprisoned or  stripped of his rights or possessions, or outlawed or  exiled, or deprived of his standing in any other way,  nor will we proceed with force against him, or send  others to do so, except by the lawful judgment of his  equals or by the law of the land.”   

It is well known that Magna Carta, which was wrung out of King  

John by the barons on the 15th of June, 1215, was annulled by  

Pope Innocent III in August of that very year.  King John died  

one year later, leaving the throne to his 9 year old son, Henry  

III. It is in the reign of this pious King and his son, Edward I, that  

Magna Carta was recognized by kingly authority.  In fact, by the  

statutes of Westminster of 1275, King Edward I repeated the  

injunction contained in clause 39 of Magna Carta.  However,  

when it came to the reign of the Stuarts, who believed that they  

were kings on earth as a matter of divine right, a struggle  

ensued between Parliament and King Charles I. This led to  

another great milestone in the history of England called the  

Petition of Right of 1628. Moved by the hostility to the Duke of  

Buckingham, the House of Commons denied King Charles I the

27  

means to conduct military operations abroad. The King was  

unwilling to give up his military ambition and resorted to the  

expedient of a forced loan to finance it.  A number of those  

subject to the imposition declined to pay, and some were  

imprisoned; among them were those who became famous as  

“the Five Knights”. Each of them sought a writ of habeas corpus  

to secure his release. One of the Knights, Sir Thomas Darnel,  

gave up the fight, but the other four fought on. The King’s  

Bench, headed by the Chief Justice, made an order sending the  

knights back to prison.  The Chief Justice’s order was, in fact, a  

provisional refusal of bail.  Parliament being displeased with  

this, invoked Magna Carta and the statutes of Westminster, and  

thus it came about that the Petition of Right was presented and  

adopted by the Lords and a reluctant King.  Charles I reluctantly  

accepted this Petition of Right stating, “let right be done as is  

desired by the petition”.  Among other things, the Petition had  

prayed that no free man should be imprisoned or detained,  

except by authority of law.   

11. In Bushel’s case, decided in 1670, Chief Justice Sir John  

Vaughan was able to state that, “the writ of habeas corpus is

28  

now the most usual remedy by which a man is restored again to  

his liberty, if he have been against law deprived of it.” Despite  

this statement of the law, one Jenkes was arrested and  

imprisoned for inciting persons to riot in a speech, asking that  

King Charles II be petitioned to call a new Parliament.  Jenkes  

went from pillar to post in order to be admitted to bail.  The Lord  

Chief Justice sent him to the Lord Chancellor, who, in turn, sent  

him to the Lord Treasurer, who sent him to the King himself,  

who, “immediately commanded that the laws should have their  

due course.” (See Jenke’s case, 6 How. St. Tr. 1189 at 1207,  

1208 (1676)). It is cases like these that led to the next great  

milestone of English history, namely the Habeas Corpus Act of  

1679.  This Act recited that many of the King’s subjects have  

been long detained in prison in cases where, by law, they  

should have been set free on bail. The Act provided for a  

habeas corpus procedure which plugged legal loopholes and  

even made the King’s Bench Judges subject to penalties for  

non-compliance.   

12. The next great milestone in English history is the Bill of  

Rights of 1689, which was accepted by the only Dutch monarch

29  

that England ever had, King William III, who reigned jointly with  

his wife Queen Mary II.  It is in this document that the  

expression “excessive bail ought not to be required….” first  

appears in Chapter 2, clause 10.   

13. What is important to learn from this history is that clause  

39 of Magna Carta was subsequently extended to pre-trial  

imprisonment, so that persons could be enlarged on bail to  

secure their attendance for the ensuing trial.  It may only be  

added that one century after the Bill of Rights, the US  

Constitution borrowed the language of the Bill of Rights when  

the principle of habeas corpus found its way into Article 1  

Section 9 of the US Constitution, followed by the Eighth  

Amendment to the Constitution which expressly states that,  

“excessive bail shall not be required, nor excessive fines  

imposed, nor cruel and unusual punishments inflicted”. We may  

only add that the Eighth Amendment has been read into Article  

21 by a Division Bench of this Court in Rajesh Kumar v. State  

through Government of NCT of Delhi (2011) 13 SCC 706, at  

paragraphs 60 and 61.

30  

14. In Gurbaksh Singh Sibbia v. State of Punjab, (1980) 2  

SCC 565 at 586-588, the purpose of granting bail is set out with  

great felicity as follows:-  

“27. It is not necessary to refer to decisions which  deal with the right to ordinary bail because that right  does not furnish an exact parallel to the right to  anticipatory bail. It is, however, interesting that as  long back as in 1924 it was held by the High Court  of Calcutta in Nagendra v. King-Emperor [AIR 1924  Cal 476, 479, 480 : 25 Cri LJ 732] that the object of  bail is to secure the attendance of the accused at  the trial, that the proper test to be applied in the  solution of the question whether bail should be  granted or refused is whether it is probable that the  party will appear to take his trial and that it is  indisputable that bail is not to be withheld as a  punishment. In two other cases which, significantly,  are the ‘Meerut Conspiracy cases’ observations are  to be found regarding the right to bail which deserve  a special mention. In K.N. Joglekar v. Emperor [AIR  1931 All 504 : 33 Cri LJ 94] it was observed, while  dealing with Section 498 which corresponds to the  present Section 439 of the Code, that it conferred  upon the Sessions Judge or the High Court wide  powers to grant bail which were not handicapped by  the restrictions in the preceding Section 497 which  corresponds to the present Section 437. It was  observed by the court that there was no hard and  fast rule and no inflexible principle governing the  exercise of the discretion conferred by Section 498  and that the only principle which was established  was that the discretion should be exercised  judiciously. In Emperor v. Hutchinson [AIR 1931 All  356, 358 : 32 Cri LJ 1271] it was said that it was  very unwise to make an attempt to lay down any  particular rules which will bind the High Court,

31  

having regard to the fact that the legislature itself  left the discretion of the court unfettered. According  to the High Court, the variety of cases that may  arise from time to time cannot be safely classified  and it is dangerous to make an attempt to classify  the cases and to say that in particular classes a bail  may be granted but not in other classes. It was  observed that the principle to be deduced from the  various sections in the Criminal Procedure Code  was that grant of bail is the rule and refusal is the  exception. An accused person who enjoys freedom  is in a much better position to look after his case  and to properly defend himself than if he were in  custody. As a presumably innocent person he is  therefore entitled to freedom and every opportunity  to look after his own case. A presumably innocent  person must have his freedom to enable him to  establish his innocence.  

28. Coming nearer home, it was observed by  Krishna Iyer, J., in Gudikanti Narasimhulu v. Public  Prosecutor [(1978) 1 SCC 240 : 1978 SCC (Cri)  115] that: (SCC p. 242, para 1)  

“... the issue of bail is one of liberty,  justice, public safety and burden of the  public treasury, all of which insist that a  developed jurisprudence of bail is  integral to a socially sensitized judicial  process. . . . After all, personal liberty of  an accused or convict is fundamental,  suffering lawful eclipse only in terms of  procedure established by law. The last  four words of Article 21 are the life of  that human right.”  

29. In Gurcharan Singh v. State (Delhi  Administration) [(1978) 1 SCC 118 : 1978 SCC (Cri)  41] it was observed by Goswami, J., who spoke for  the court, that: (SCC p. 129, para 29)

32  

“There cannot be an inexorable formula  in the matter of granting bail. The facts  and circumstances of each case will  govern the exercise of judicial discretion  in granting or cancelling bail.”  

30. In AMERICAN JURISPRUDENCE (2d, Volume 8, p.  806, para 39), it is stated:  

“Where the granting of bail lies within  the discretion of the court, the granting  or denial is regulated, to a large extent,  by the facts and circumstances of each  particular case. Since the object of the  detention or imprisonment of the  accused is to secure his appearance  and submission to the jurisdiction and  the judgment of the court, the primary  inquiry is whether a recognizance or  bond would effect that end.”  

It is thus clear that the question whether to grant  bail or not depends for its answer upon a variety of  circumstances, the cumulative effect of which must  enter into the judicial verdict. Any one single  circumstance cannot be treated as of universal  validity or as necessarily justifying the grant or  refusal of bail.”  

15. The stage is now set for an examination of the  

constitutional validity of Section 45 of the 2002 Act.   

16. At this stage, it is important to advert to the tests for the  

violation of Article 14, both in its discriminatory aspect and its  

“manifestly arbitrary” aspect.   It is settled by a catena of cases

33  

that Article 14 permits classification, provided such  

classification bears a rational relation to the object sought to be  

achieved.  In an early judgment of this Court, State of Bombay  

and Anr. v. F.N. Balsara  (1951) SCR 682 at 708, Fazl Ali, J.  

summarized the law as follows:    

“(1) The presumption is always in favour of the  constitutionality of an enactment, since it must be  assumed that the legislature understands and  correctly appreciates the needs of its own people,  that its laws are directed to problems made manifest  by experience and its discriminations are based on  adequate grounds.  (2) The presumption may be rebutted in certain  cases by showing that on the face of the statute,  there is no classification at all and no difference  peculiar to any individual or class and not applicable  to any other individual or class, and yet the law hits  only a particular individual or class.  (3) The principle of equality does not mean that  every law must have universal application for all  persons who are not by nature, attainment or  circumstances in the same position, and the varying  needs of different classes of persons often require  separate treatment.  (4) The principle does not take away from the State  the power of classifying persons for legitimate  purposes.  (5) Every classification is in some degree likely to  produce some inequality, and mere production of  inequality is not enough.  (6) If a law deals equally with members of a well- defined class, it is not obnoxious and it is not open  to the charge of denial of equal protection on the  ground that it has no application to other persons.

34  

(7) While reasonable classification is permissible,  such classification must be based upon some real  and substantial distinction bearing a reasonable and  just relation to the object sought to be attained, and  the classification cannot be made arbitrarily and  without any substantial basis.”    

Proposition 7 is important for the present purpose.  Also, it is  

well settled that Article 14 condemns discrimination not only by  

substantive law, but also by procedural law.  (See Budhan  

Choudhry v. State of Bihar, (1955) 1 SCR 1045 at 1049).  

 17. After adverting to these judgments, Bhagwati J., in  

Asgarali Nazarali Singaporawalla v. The State of Bombay,  

1957 SCR 678 at 690-692 held:  

“The first question which we have to address to  ourselves is whether there is in the impugned Act a  reasonable classification for the purposes of  legislation. If we look to the provisions of the  impugned Act closely it would appear that the  legislature classified the offences punishable under  Sections 161, 165 or 165-A of the Indian Penal  Code or sub-section (2) of Section 5 of the  Prevention of Corruption Act, 1947 in one group or  category. They were offences relating to bribery or  corruption by public servants and were thus  appropriately classified in one group or category.  The classification was founded on an intelligible  differentia which distinguished the offenders thus  grouped together from those left out of the group.  The persons who committed these offences of  bribery or corruption would form a class by  themselves quite distinct from those offenders who

35  

could be dealt with by the normal provisions  contained in the Indian Penal Code or the Code of  Criminal Procedure, 1898 and if the offenders falling  within this group or category were thus singled out  for special treatment, there would be no question of  any discriminatory treatment being meted out to  them as compared with other offenders who did not  fall within the same group or category and who  continued to be treated under the normal procedure.  The next question to consider is whether this  differentia had a rational relation to the object  sought to be achieved by the impugned Act. The  preamble of the Act showed that it was enacted for  providing a more speedy trial of certain offences. An  argument was however addressed before us based  on certain observations of Mahajan, J. (as he then  was) at p. 314, and Mukherjea, J. (as he then was)  at p. 328 in Anwar Ali Sarkar’s case [(1952) SCR  284] ) quoted at p. 43 by Patanjali Sastri, C.J. in the  case of Kedar Nath Bajoria v. State of West  Bengal [(1954) SCR 30] that the speedier trial of  offences could not afford a reasonable basis for  such classification. Standing by themselves these  passages might lend support to the contention  urged before us by the learned counsel for the  appellant. It must be noted, however, that this ratio  was not held to be conclusive by this Court in Kedar  Nath Bajoria’s case [(1954) SCR 30] where this  Court held:  

“(1) That when a law like the present  one is impugned on the ground that it  contravenes Article 14 of the  Constitution the real issue to be decided  is whether, having regard to the  underlying purpose and policy of the Act  as disclosed by its title, preamble and  provisions, the classification of the  offences for the trial of which the Special  Court is set up and a special procedure

36  

is laid down can be said to be  unreasonable or arbitrary and therefore  violative of the equal protection clause;  (2) having regard to the fact that the  types of offences specified in the  Schedule to the Act were very common  and widely prevalent during the post war  period and had to be checked effectively  and speedily tried, the legislation in  question must be regarded as having  been based on a perfectly intelligent  principle of classification, having a clear  and reasonable relation to the object  sought to be achieved, and it did not in  any way contravene Article 14 of the  Constitution.”  

In the instant case, bribery and corruption having  been rampant and the need for weeding them out  having been urgently felt, it was necessary to enact  measures for the purpose of eliminating all possible  delay in bringing the offenders to book. It was with  that end in view that provisions were enacted in the  impugned Act for speedier trial of the said offences  by the appointment of Special Judges who were  invested with exclusive jurisdiction to try the same  and were also empowered to take cognizance  thereof without the accused being committed to  them for trial, and follow the procedure prescribed  for the trial of warrant cases by Magistrates. The  proceedings before the Special Judges were thus  assimilated to those before the courts of sessions  for trying cases without a jury or without the aid of  assessors and the powers of appeal and revision  invested in the High Court were also similarly  circumscribed. All these provisions had the  necessary effect of bringing about a speedier trial of  these offences and it cannot be denied that this  intelligible differentia had rational relation to the  object sought to be achieved by the impugned Act.

37  

Both these conditions were thus fulfilled and it could  not be urged that the provisions of the impugned  Act were in any manner violative of Article 14 of the  Constitution.”       

18. In so far as “manifest arbitrariness” is concerned, it is  

important to advert to the majority judgment of this Court in  

Shayara Bano v. Union of India and others, (2017) 9 SCC 1.  

The majority, in an exhaustive review of case law under Article  

14, which dealt with legislation being struck down on the ground  

that it is manifestly arbitrary, has observed:  

“87. The thread of reasonableness runs through the  entire fundamental rights chapter. What is  manifestly arbitrary is obviously unreasonable and  being contrary to the rule of law, would violate  Article 14. Further, there is an apparent  contradiction in the three-Judge Bench decision  in McDowell [State of A.P. v. McDowell and Co.,  (1996) 3 SCC 709] when it is said that a  constitutional challenge can succeed on the ground  that a law is “disproportionate, excessive or  unreasonable”, yet such challenge would fail on the  very   ground   of    the   law   being   “unreasonable,   

38  

unnecessary or unwarranted”. The arbitrariness  doctrine when applied to legislation obviously would  not involve the latter challenge but would only  involve a law being disproportionate, excessive or  otherwise being manifestly unreasonable. All the  aforesaid grounds, therefore, do not seek to  differentiate between State action in its various  forms, all of which are interdicted if they fall foul of  the fundamental rights guaranteed to persons and  citizens in Part III of the Constitution.  

xxx xxx xxx   

101. It will be noticed that a Constitution Bench of  this Court in Indian Express Newspapers (Bombay)  (P) Ltd. v. Union of India [Indian Express  Newspapers (Bombay) (P) Ltd. v. Union of India,  (1985) 1 SCC 641 : 1985 SCC (Tax) 121] stated  that it was settled law that subordinate legislation  can be challenged on any of the grounds available  for challenge against plenary legislation. This being  the case, there is no rational distinction between the  two types of legislation when it comes to this ground  of challenge under Article 14. The test of manifest  arbitrariness, therefore, as laid down in the  aforesaid judgments would apply to invalidate  legislation as well as subordinate legislation under  Article 14. Manifest arbitrariness, therefore, must be  something done by the legislature capriciously,  irrationally and/or without adequate determining  principle. Also, when something is done which is  excessive and disproportionate, such legislation  would be manifestly arbitrary. We are, therefore, of  the view that arbitrariness in the sense of manifest  arbitrariness as pointed out by us above would  apply to negate legislation as well under Article 14.”  

39  

This view of the law by two learned Judges of this Court was  

concurred with by Kurian, J. in paragraph 5 of his judgment.   

19. Article 21 is the Ark of the Covenant so far as the  

Fundamental Rights chapter of the Constitution is concerned.  It  

deals with nothing less sacrosanct than the rights of life and  

personal liberty of the citizens of India and other persons.   It is  

the only article in the Fundamental Rights chapter (along with  

Article 20) that cannot be suspended even in an emergency    

(See Article 359(1) of the Constitution).   At present, Article 21  

is the repository of a vast number of substantive and procedural  

rights post Maneka Gandhi v. Union of India (1978) 1 SCC  

248.  Thus, in Rajesh Kumar (supra) at 724-726, this Court  

held:  

“56. Article 21 as enacted in our Constitution reads  as under:  

“21. Protection of life and personal liberty.—No  person shall be deprived of his life or personal  liberty except according to procedure established by  law.”  

57. But this Court in Bachan Singh [(1980) 2 SCC  684 : 1980 SCC (Cri) 580] held that in view of the  expanded interpretation of Article 21 in Maneka  Gandhi [(1978) 1 SCC 248], it should read as  follows: (Bachan Singh case [(1980) 2 SCC 684 :  1980 SCC (Cri) 580] , SCC p. 730, para 136)

40  

“136. … ‘No person shall be deprived of his life or  personal liberty except according to fair, just and  reasonable procedure established by valid law.’  

In the converse positive form, the expanded article  will read as below:  

‘A person may be deprived of his life or personal  liberty in accordance with fair, just and reasonable  procedure established by valid law.’”  

58. This epoch-making decision in Maneka Gandhi  [(1978) 1 SCC 248] has substantially infused the  concept of due process in our constitutional  jurisprudence whenever the court has to deal with a  question affecting life and liberty of citizens or even  a person. Krishna Iyer, J. giving a concurring  opinion in Maneka Gandhi [(1978) 1 SCC 248]  elaborated, in his inimitable style, the transition from  the phase of the rule of law to due process of law.  The relevant statement of law given by the learned  Judge is quoted below: (SCC p. 337, para 81)  

“81. … ‘Procedure established by law’, with its lethal  potentiality, will reduce life and liberty to a  precarious plaything if we do not ex  necessitate import into those weighty words an  adjectival rule of law, civilised in its soul, fair in its  heart and fixing those imperatives of procedural  protection absent which the processual tail will wag  the substantive head. Can the sacred essence of  the human right to secure which the struggle for  liberation, with ‘do or die’ patriotism, was launched  be sapped by formalistic and pharisaic  prescriptions, regardless of essential standards? An  enacted apparition is a constitutional, illusion.  Processual justice is writ patently on Article 21. It is  too grave to be circumvented by a black letter ritual  processed through the legislature.”  

59. Immediately after the decision in Maneka  Gandhi [(1978) 1 SCC 248] another Constitution  Bench of this Court rendered decision in Sunil

41  

Batra v. Delhi Admn. [(1978) 4 SCC 494 : 1979  SCC (Cri) 155] specifically acknowledged that even  though a clause like the Eighth Amendment of the  United States Constitution and concept of “due  process” of the American Constitution is not  enacted in our Constitution text, but after the  decision of this Court in Rustom Cavasjee  Cooper [(1970) 1 SCC 248] and Maneka  Gandhi [(1978) 1 SCC 248] the consequences are  the same. The Constitution Bench of this Court  in Sunil Batra [(1978) 4 SCC 494 : 1979 SCC (Cri)  155] speaking through Krishna Iyer, J. held: (Sunil  Batra case [(1978) 4 SCC 494 : 1979 SCC (Cri)  155] , SCC p. 518, para 52)  

“52. True, our Constitution has no ‘due process’  clause or the Eighth Amendment; but, in this branch  of law, after Cooper [(1970) 1 SCC 248]  and Maneka Gandhi [(1978) 1 SCC 248], the  consequence is the same.”  

60. The Eighth Amendment (1791) to the  Constitution of the United States virtually emanated  from the English Bill of Rights (1689). The text of  the Eighth Amendment reads, “Excessive bail shall  not be required, nor excessive fines imposed, nor  cruel and unusual punishments inflicted”. The  English Bill of Rights drafted a century ago  postulates, “That excessive bail ought not to be  required, nor excessive fines imposed, nor cruel  and unusual punishments inflicted”.  

61. Our Constitution does not have a similar  provision but after the decision of this Court  in Maneka Gandhi case [(1978) 1 SCC 248]  jurisprudentially the position is virtually the same  and the fundamental respect for human dignity  underlying the Eighth Amendment has been read  into our jurisprudence.  

62. Until the decision was rendered in Maneka  Gandhi [(1978) 1 SCC 248], Article 21 was viewed

42  

by this Court as rarely embodying the Diceyian  concept of the rule of law that no one can be  deprived of his personal liberty by an executive  action unsupported by law. If there was a law which  provided some sort of a procedure it was enough to  deprive a person of his life or personal liberty. In this  connection, if we refer to the example given by S.R.  Das, J. in his judgment in A.K. Gopalan [AIR 1950  SC 27 : (1950) 51 Cri LJ 1383] that if the law  provided the Bishop of Rochester “be boiled in oil” it  would be valid under Article 21. But after the  decision in Maneka Gandhi [(1978) 1 SCC 248]  which marks a watershed in the development of  constitutional law in our country, this Court, for the  first time, took the view that Article 21 affords  protection not only against the executive action but  also against the legislation which deprives a person  of his life and personal liberty unless the law for  deprivation is reasonable, just and fair. And it was  held that the concept of reasonableness runs like a  golden thread through the entire fabric of the  Constitution and it is not enough for the law to  provide some semblance of a procedure. The  procedure for depriving a person of his life and  personal liberty must be eminently just, reasonable  and fair and if challenged before the court it is for  the court to determine whether such procedure is  reasonable, just and fair and if the court finds that it  is not so, the court will strike down the same.  

63. Therefore, “law” as interpreted under Article 21  by this Court is more than mere “lex”. It implies a  due process, both procedurally and substantively.”  

 20. Given the parameters of judicial review of legislation laid  

down in these judgments, we have to see whether Section 45  

can pass constitutional muster.

43  

21. It is important to first set out the genesis of Section 45 as  

it appeared in the Prevention of Money Laundering Bill, 1999.   

In its original avatar, the precursor to Section 45, which was  

Section 44 of the said Bill, read as follows:-  

“44. (1) Notwithstanding anything contained in the  Code of Criminal Procedure, 1973,-  

(a) every offence punishable under this Act shall be  cognizable;  

(b) no person accused of an offence punishable for  a term of imprisonment of more than three years  under this Act shall be released on bail or on his  own bond unless-  

(i) the Public Prosecutor has been given an  opportunity to oppose the application for such  release; and  

(ii) where the Public Prosecutor opposes  the application, the court is satisfied that there are  reasonable grounds for believing that he is not guilty  of such offence and that he is not likely to commit  any offence while on bail;  

Provided that a person who is under the age of  sixteen years, is a woman or is sick or infirm, may  be released on bail, if the Special Court so directs;  

Provided further that the Special Court shall not  take cognizance of any offence punishable under  Section 4 except upon a complaint in writing made  by-  

(i) the Director; or  (ii) any officer of the Central Government or State  

Government authorized in writing in this behalf  by the Central Government by a general or a

44  

special order made in this behalf by that  Government.  

(2) The limitation on granting of bail specified in  clause (b) of sub-section (1) is in addition to the  limitations under the Code of Criminal Procedure,  1973 or any other law for the time being in force on  granting of bail.”   

At this stage, it is clear that this Section 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.  This provision  

originally read as follows:  

“45. Offences to be cognizable and non- bailable.-  

(1) Notwithstanding anything contained in the Code  of Criminal Procedure, 1973 (2 of 1974),-   

(a) every offence punishable under this Act shall be  cognizable;   

(b) no person accused of an offence punishable for  a term of imprisonment of more than three years  under Part A of the Schedule shall be released on  bail or on his own bond unless-   (i) the Public Prosecutor has been given an  opportunity to oppose the application for such  release; and  

45  

(ii) where the Public Prosecutor opposes the  application, the court is satisfied that there are  reasonable grounds for believing that he is not guilty  of such offence and that he is not likely to commit  any offence while on bail:   

Provided that a person, who, is under the age of  sixteen years, or is a woman or is sick or infirm,  may be released on bail, if the Special Court so  directs:   

Provided further that the Special Court shall not  take cognizance of any offence punishable under  section 4 except upon a complaint in writing made  by- (i) the Director; or (ii) any officer of the Central  Government or a State Government authorised in  writing in this behalf by the Central Government by  a general or special order made in this behalf by  that Government.   

(2) The limitation on granting of bail specified in  clause (b) of sub-section (1) is in addition to the  limitations under the Code of Criminal Procedure,  1973 (2 of 1974) or any other law for the time being  in force on granting of bail.”  

 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 Indian Penal Code, which deal with waging or attempting to

46  

wage war or abetting waging of war against the Government 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 Indian Penal Code, which included murder, extortion,  

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 applicable under Section 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  

Indian 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

47  

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 and  

is not an amendment with which we are directly concerned.   

The 2009 Amendment further populated Parts A and B of the  

Schedule.  In Part A, offences under Sections 489 A and B of  

the Indian 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, several other  

offences were added from the Indian 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, Transplantation 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

48  

2000, Biological Diversity Act 2002, Protection of Plant and  

Farmers Rights Act 2001, Environmental Protection Act 1986,  

Water (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.   

22. By the Amendment Act of 2012, which is Act 2 of 2013, a  

very important amendment was made to the Schedule by which  

the entire Part B offences were transplanted into Part A.  The  

object for this amendment, as stated in the Statement of  

Objects and Reasons for the amendment in clause 3 (j),  

specifically provided:  

“(j) putting all the offences listed in Part A and Part  B of the Schedule to the aforesaid Act into Part A of  that Schedule instead of keeping them in two Parts  so that the provision of monetary threshold does not  apply to the offences.”  

23. By the Finance Act of 2015, by Section 145, the limit of  

Rs.30 lakhs in Section 2(y) was raised to Rs.1 crore and in the  

Schedule after Part A, Part B was populated with only one  

entry, namely Section 132 of the Customs Act. Certain other

49  

amendments were made, by the Finance Act of 2016, to the  

2002 Act with which we are not directly concerned.  

24. The statutory history of Section 45, read with the  

Schedule, would, thus show that in its original avatar, as Clause  

44 of the 1999 Bill, the Section dealt only with offences under  

the Act itself. Section 44 of the 2002 Act makes it clear that an  

offence punishable under Section 4 of the said Act must be  

tried with the connected scheduled offence from which money  

laundering has taken place.  The statutory scheme, as originally  

enacted, with Section 45 in its present avatar, would, therefore,  

lead to the same offenders in different cases having different  

results qua bail depending on whether Section 45 does or does  

not apply. The first would be cases where the charge would  

only be of money laundering and nothing else, as would be the  

case where the scheduled offence in Part A has already been  

tried, and persons charged under the scheduled offence have  

or have not been enlarged on bail under the Code of Criminal  

Procedure and thereafter convicted or acquitted.  The proceeds  

of crime from such scheduled offence may well be discovered  

much later in the hands of Mr. X, who now becomes charged

50  

with the crime of money laundering under the 2002 Act.  The  

predicate or scheduled offence has already been tried and the  

accused persons convicted/acquitted in this illustration, and Mr.  

X now applies for bail to the Special Court/High Court. The  

Special Court/High Court, in this illustration, would grant him  

bail under Section 439 of the Code of Criminal Procedure – the  

Special Court is deemed to be a Sessions Court – and can,  

thus, enlarge Mr. X on bail, with or without conditions, under  

Section 439.  It is important to note that Mr. X would not have to  

satisfy the twin conditions mentioned in Section 45 of the 2002  

Act in order to be enlarged on bail, pending trial for an offence  

under the 2002 Act.   

25. The second illustration would be of Mr. X being charged  

with an offence under the 2002 Act together with a predicate  

offence contained in Part B of the Schedule.  Both these  

offences would be tried together.  In this case, again, the  

Special Court/High Court can enlarge Mr. X on bail, with or  

without conditions, under Section 439 of the Code of Criminal  

Procedure, as Section 45 of the 2002 Act would not apply. In a  

third illustration, Mr. X can be charged under the 2002 Act

51  

together with a predicate offence contained in Part A of the  

Schedule in which the term for imprisonment would be 3 years  

or less than 3 years (this would apply only post the Amendment  

Act of 2012 when predicate offences of 3 years and less than 3  

years contained in Part B were all lifted into Part A).  In this  

illustration, again, Mr. X would be liable to be enlarged on bail  

under Section 439 of the Code of Criminal Procedure by the  

Special Court/High Court, with or without conditions, as Section  

45 of the 2002 Act would have no application.    

26. The fourth illustration would be an illustration in which Mr.  

X is prosecuted for an offence under the 2002 Act and an  

offence punishable for a term of imprisonment of more than  

three years under Part A of the Schedule. In this illustration, the  

Special Court/High Court would enlarge Mr. X on bail only if the  

conditions specified in Section 45(1) are satisfied and not  

otherwise.  In the fourth illustration, Section 45 would apply in a  

joint trial of offences under the Act and under Part A of the  

Schedule because the only thing that is to be seen for the  

purpose of granting bail, under this Section, is the alleged  

occurrence of a Part A scheduled offence, which has

52  

imprisonment for over three years. The likelihood of Mr. X being  

enlarged on bail in the first three illustrations is far greater than  

in the fourth illustration, dependant only upon the circumstance  

that Mr. X is being prosecuted for a Schedule A offence which  

has imprisonment for over 3 years, a circumstance which has  

no nexus with the grant of bail for the offence of money  

laundering.  The mere circumstance that the offence of money  

laundering is being tried with the Schedule A offence without  

more cannot naturally lead to the grant or denial of bail (by  

applying Section 45(1)) for the offence of money laundering and  

the predicate offence.   

27. Again, it is quite possible that the person prosecuted for  

the scheduled offence is different from the person prosecuted  

for the offence under the 2002 Act.  Mr. X may be a person who  

is liable to be prosecuted for an offence, which is contained in  

Part A of the Schedule.  In perpetrating this offence under Part  

A of the Schedule, Mr. X may have been paid a certain amount  

of money.  This money is ultimately traced to Mr. Y, who is  

charged with the same offence under Part A of the Schedule  

and is also charged with possession of the proceeds of crime,

53  

which he now projects as being untainted.  Mr. X applies for bail  

to the Special Court/High Court.  Despite the fact that Mr. X is  

not involved in the money laundering offence, but only in the  

scheduled offence, by virtue of the fact that the two sets of  

offences are being tried together, Mr. X would be denied bail  

because the money laundering offence is being tried along with  

the scheduled offence, for which Mr. Y alone is being  

prosecuted.  This illustration would show that a person who  

may have nothing to do with the offence of money laundering  

may yet be denied bail, because of the twin conditions that  

have to be satisfied under Section 45(1) of the 2002 Act. Also,  

Mr. A may well be prosecuted for an offence which falls within  

Part A of the Schedule, but which does not involve money  

laundering.  Such offences would be liable to be tried under the  

Code of Criminal Procedure, and despite the fact that it may be  

the very same Part A scheduled offence given in the illustration  

above, the fact that no prosecution for money laundering along  

with the said offence is launched, would enable Mr. A to get bail  

without the rigorous conditions contained in Section 45 of the  

2002 Act. All these examples show that manifestly arbitrary,

54  

discriminatory and unjust results would arise on the application  

or non application        of Section 45, and would directly violate  

Articles 14 and 21, inasmuch as the procedure for bail would  

become harsh, burdensome, wrongful and discriminatory  

depending upon whether a person is being tried for an offence  

which also happens to be an offence under Part A of the  

Schedule, or an offence under Part A of the Schedule together  

with an offence under the 2002 Act. Obviously, the grant of bail  

would depend upon a circumstance which has nothing to do  

with the offence of money laundering. On this ground alone,  

Section 45 would have to be struck down as being manifestly  

arbitrary and providing a procedure which is not fair or just and  

would, thus, violate both Articles 14 and 21 of the Constitution.    

28. Another interesting feature of Section 45 is that the twin  

conditions that need to be satisfied under the said Section are  

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

55  

offence of money laundering 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.  (See for example, 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

56  

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 laundering.  

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.    

29. It is important to notice that Section 45 classifies the  

predicate offence under Part A of the Schedule on the basis of  

sentencing.  The learned Attorney General referred to a number  

of judgments in which classification on this basis has been  

upheld.  It is unnecessary to refer to these judgments inasmuch  

as the classification of three years or more of offences

57  

contained in Part A of the Schedule must have a reasonable  

relation to the object sought to be achieved under the 2002 Act.   

As has already been pointed out, 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.  It  

is interesting to note that 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, for example, 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

58  

dealing with money laundering.  Again a few illustrations would  

suffice to prove the point.    

30. 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, as has been shown in the  

preceding paragraphs of this judgment. Even in the judgments  

citied by the learned Attorney General, it is clear that a

59  

classification is justified only if it is not manifestly arbitrary.  For  

example, in Special Courts Bill, 1978, In re, (1979) 1 SCC  

380, a judgment cited by the learned Attorney General,  

proposition 9 contained at page 425 states:  

“If the legislative policy is clear and definite and as  an effective method of carrying out that policy a  discretion is vested by the statute upon a body of  administrators or officers to make selective  application of the law to certain classes or groups of  persons, the statute itself cannot be condemned as  a piece of discriminatory legislation. In such cases,  the power given to the executive body would import  a duty on it to classify the subject-matter of  legislation in accordance with the objective  indicated in the statute. If the administrative body  proceeds to classify persons or things on a basis  which has no rational relation to the objective of the  Legislature, its action can be annulled as offending  against the equal protection clause. On the other  hand, if the statute itself does not disclose a definite  policy or objective and it confers authority on  another to make selection at its pleasure, the  statute would be held on the face of it to be  discriminatory, irrespective of the way in which it is  applied.”    

It is clear from a reading of this judgment that offences based  

on sentencing of the scheduled offence would have no rational  

relation to the object of the 2002 Act and to the granting of bail  

for offences committed under the Act, and, therefore, have to  

be annulled on the basis of the equal protection clause.  

60  

31. When we go to Part A of the Schedule as it now exists, it  

is clear that there are many sections under the Indian Penal  

Code punishable with life imprisonment which are not included  

in Part A of the Schedule, and which may yet lead to proceeds  

of crime.   For example, Sections 232 and 238 of the Indian  

Penal Code, which deal with counterfeiting of Indian coin and  

import or export of 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 Code of Criminal Procedure  

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

61  

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 of the Code of Criminal Procedure, 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.    

32. When we come to paragraph 2 of Part A of the Schedule,  

this becomes even more apparent.   Sections 19, 24, 27A and  

29 of the Narcotic Drugs and Psychotropic Substances Act,

62  

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 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  

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.  

33. 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: (1) a small quantity, as defined; (2) a

63  

quantity which is above small quantity, but below commercial  

quantity, as defined; and (3) above 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 who have commercial quantities  

with them are concerned.   A person found with a small quantity  

or with a quantity above small quantity, but below commercial  

quantity, punishable with a one year sentence or a 10 year  

sentence respectively, can apply for bail under Section 439 of  

the Code of Criminal Procedure 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 treats as equal offences which are treated as unequal by  

the NDPS Act itself, when it comes to imposition of the further  

twin conditions for grant of bail.  This is yet another manifestly

64  

arbitrary and discriminatory feature of the application of Section  

45.   

34. A reference to paragraph 23 of Part A of the Schedule  

would also show how Section 45 can be used for an offence  

under 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 grant of bail, even assuming that  

classification on the basis of sentence has a rational relation to  

the grant of bail after complying with Section 45 of the 2002  

Act.   

65  

35. Another conundrum that arises is that, unlike the Terrorist  

and Disruptive Activities (Prevention) Act, 1987, there is no  

provision in the 2002 Act which excludes grant of anticipatory  

bail.  Anticipatory bail can be granted in circumstances set out  

in Siddharam Satlingappa Mhetre v. State of Maharashtra,  

(2011) 1 SCC 694 (See paragraphs 109, 112 and 117). Thus,  

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.  If pre-

arrest bail is granted to Mr. X, which enures throughout the trial,  

for an offence under Part A of the Schedule and Section 4 of  

the 2002 Act, such person will be out on bail without his having  

satisfied the twin conditions of Section 45.   However, if in an  

identical situation, Mr. Y is prosecuted for the same offences,

66  

but happens to be arrested, and then applies for bail, the twin  

conditions of Section 45 will have first to be met.  This again  

leads to an extremely anomalous situation showing that Section  

45 leads to manifestly arbitrary and unjust results and would,  

therefore, violate Articles 14 and 21 of the Constitution.   

36. However, the learned Attorney General has argued  

before us that we must uphold Section 45 as it is part of a  

complete code under the 2002 Act.   According to him, Section  

45, when read with Sections 3 and 4, would necessarily lead to  

the conclusion 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.   We are afraid that, for all the reasons  

given by us earlier in this judgment, we are unable to agree.   

The learned Attorney General asked us to read down Section  

45 in that when the Court is satisfied that 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

67  

conclusion.   Secondly, the fact that he is not likely to commit  

“any offence” while on bail would only be restricted to any  

offence of a like nature.  Again, we are afraid that merely  

reading down the two conditions would not get rid of the vice of  

manifest arbitrariness and discrimination, as has been pointed  

out by us hereinabove. Also, we cannot agree with the learned  

Attorney General that Section 45 imposes two conditions which  

are akin to conditions that are specified for grant of ordinary  

bail.  For this purpose, he referred us to Amarmani Tripathi  

(supra) at para 18, in which it was stated that, for grant of bail,  

the Court has to see whether there is prima facie or reasonable  

ground to believe that the accused has committed the offence,  

and the likelihood of that offence being repeated has also be  

seen.   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 paragraph 18 of the aforesaid judgment.  In 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

68  

factors set out in paragraph 18 of the judgment 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.    

37. In United States v. Anthony Salerno & Vincent Cafaro  

481 US 739 (1987), a provision of the Bail Reform Act of 1984,  

which allowed a Federal Court to permit pre-trial detention on  

the ground that the person arrested is likely to commit future  

crimes, had been declared unconstitutional as offending  

substantive due process by the United States Court of Appeals  

for the Second Circuit.   A majority of the US Supreme Court  

reversed this judgment with reference to both substantive due  

process and to the 8th amendment to the US Constitution. The  

majority judgment concluded:  

“In our society liberty is the norm, and detention  prior to trial or without trial is the carefully limited  exception. We hold that the provisions for pretrial  detention in the Bail Reform Act of 1984 fall within  that carefully limited exception. The Act authorizes  the detention prior to trial of arrestees charged with  serious felonies who are found after an adversary  hearing to pose a threat to the safety of individuals  or to the community which no condition of release

69  

can dispel. The numerous procedural safeguards  detailed above must attend this adversary hearing.  We are unwilling to say that this congressional  determination, based as it is upon that primary  concern of every government—a concern for the  safety and indeed the lives of its citizens—on its  face violates either the Due Process Clause of the  Fifth Amendment or the Excessive Bail Clause of  the Eighth Amendment.”  

In a sharply worded minority judgment of Justice Marshall, with  

whom Justice Brennan agreed, the minority held that the Bail  

Reform Act, which permitted pre-trial detention on the ground  

that the person arrested is likely to commit future crimes would  

violate substantive due process and the 8th amendment to the  

US Constitution.  This it did with reference to an earlier  

judgment, namely, Stack v. Boyle, 342 US 1, where Chief  

Justice Vinson stated that unless pre-trial bail is preserved, the  

presumption of innocence secured only after centuries of  

struggle would lose its meaning.  The dissenting judgment  

concluded:  

"It is a fair summary of history to say that the  safeguards of liberty have frequently been forged in  controversies involving not very nice people."  United States v. Rabinowitz, 339 U.S. 56, 69, 70  S.Ct. 430, 436, 94 L.Ed. 653 (1950) (Frankfurter, J.,  dissenting). Honoring the presumption of innocence  is often difficult; sometimes we must pay substantial  social costs as a result of our commitment to the

70  

values we espouse. But at the end of the day the  presumption of innocence protects the innocent; the  shortcuts we take with those whom we believe to be  guilty injure only those wrongfully accused and,  ultimately, ourselves.”  

Justice Stevens also dissented, agreeing with Justice  

Marshall’s analysis.  

 38. We must not forget that 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 of  

the Constitution of India, we must be doubly sure that such  

provision furthers a compelling State interest for tackling  

serious crime.  Absent 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.    

71  

39. The judgment in Kartar Singh v. State of Punjab, (1994)  

3 SCC 569 at 707 is an instance of a similar provision that was  

upheld only because it was necessary for the State to deal with  

terrorist activities which are a greater menace to modern  

society than any other.  It needs only to be mentioned that,  

unlike Section 45 of the present Act, Section 20(8) of TADA,  

which speaks of the same twin conditions to be applied to  

offences under TADA, would pass constitutional muster for the  

reasons stated in the aforesaid judgment. Ultimately, in  

paragraph 349 of the judgment, this Court upheld Section 20(8)  

of TADA in the following terms:  

“349. The conditions imposed under Section  20(8)(b), as rightly pointed out by the Additional  Solicitor General, are in consonance with the  conditions prescribed under clauses (i) and (ii) of  sub-section (1) of Section 437 and clause (b) of  sub-section (3) of that section. Similar to the  conditions in clause (b) of sub-section (8), there are  provisions in various other enactments — such as  Section 35(1) of Foreign Exchange Regulation Act  and Section 104(1) of the Customs Act to the effect  that any authorised or empowered officer under the  respective Acts, if, has got reason to believe that  any person in India or within the Indian customs  waters has been guilty of an offence punishable  under the respective Acts, may arrest such person.  Therefore, the condition that “there are grounds for  believing that he is not guilty of an offence”, which

72  

condition in different form is incorporated in other  Acts such as clause (i) of Section 437(1) of the  Code and Section 35(1) of FERA and 104(1) of the  Customs Act, cannot be said to be an unreasonable  condition infringing the principle of Article 21 of the  Constitution.”  

 It is clear that this Court upheld such a condition only because  

the offence under TADA was a most heinous offence in which  

the vice of terrorism is sought to be tackled. Given the heinous  

nature of the offence which is punishable by death or life  

imprisonment, and given the fact that the Special Court in that  

case was a Magistrate and not a Sessions Court, unlike the  

present case, Section 20(8) of TADA was upheld as being in  

consonance with conditions prescribed under Section 437 of  

the Code of Criminal Procedure.  In the present case, it is  

Section 439 and not Section 437 of the Code of Criminal  

Procedure that applies.  Also, the offence that is spoken of in  

Section 20(8) is an offence under TADA itself and not an  

offence under some other Act. For all these reasons, the  

judgment in Kartar Singh (supra) cannot apply to Section 45 of  

the present Act.  

73  

40. A similar provision in the Maharashtra Control of  

Organised Crime Act, 1999, also dealing with the great menace  

of organized crime to society, was upheld somewhat grudgingly  

by this Court in Ranjitsing Brahmajeetsing Sharma v. State  

of Maharashtra and Anr, (2005) 5 SCC 294 at 317, 318-319  

as follows:    

“38. We are furthermore of the opinion that the  restrictions on the power of the court to grant bail  should not be pushed too far. If the court, having  regard to the materials brought on record, is  satisfied that in all probability he may not be  ultimately convicted, an order granting bail may be  passed. The satisfaction of the court as regards his  likelihood of not committing an offence while on bail  must be construed to mean an offence under the  Act and not any offence whatsoever be it a minor or  major offence. If such an expansive meaning is  given, even likelihood of commission of an offence  under Section 279 of the Indian Penal Code may  debar the court from releasing the accused on bail.  A statute, it is trite, should not be interpreted in such  a manner as would lead to absurdity. What would  further be necessary on the part of the court is to  see the culpability of the accused and his  involvement in the commission of an organised  crime either directly or indirectly. The court at the  time of considering the application for grant of bail  shall consider the question from the angle as to  whether he was possessed of the requisite mens  rea. Every little omission or commission, negligence  or dereliction may not lead to a possibility of his  having culpability in the matter which is not the sine  qua non for attracting the provisions of MCOCA. A  person in a given situation may not do that which he

74  

ought to have done. The court may in a situation of  this nature keep in mind the broad principles of law  that some acts of omission and commission on the  part of a public servant may attract disciplinary  proceedings but may not attract a penal provision.”  

The Court then went on to say:  

“44. The wording of Section 21(4), in our opinion,  does not lead to the conclusion that the court must  arrive at a positive finding that the applicant for bail  has not committed an offence under the Act. If such  a construction is placed, the court intending to grant  bail must arrive at a finding that the applicant has  not committed such an offence. In such an event, it  will be impossible for the prosecution to obtain a  judgment of conviction of the applicant. Such cannot  be the intention of the legislature. Section 21(4) of  MCOCA, therefore, must be construed reasonably.  It must be so construed that the court is able to  maintain a delicate balance between a judgment of  acquittal and conviction and an order granting bail  much before commencement of trial. Similarly, the  court will be required to record a finding as to the  possibility of his committing a crime after grant of  bail. However, such an offence in futuro must be an  offence under the Act and not any other offence.  Since it is difficult to predict the future conduct of an  accused, the court must necessarily consider this  aspect of the matter having regard to the  antecedents of the accused, his propensities and  the nature and manner in which he is alleged to  have committed the offence.”  

41. The learned Attorney General relied heavily on Section 24  

of the 2002 Act to show that the burden of proof in any  

proceeding relating to proceeds of crime is upon the person

75  

charged with the offence of money laundering, and in the case  

of any other person i.e. a person not charged with such offence,  

the Court may presume that such proceeds are involved in  

money laundering.  Section 45 of the Act 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 45, and cannot,  

therefore, advance the case of the Union of India.   

42. The learned Attorney General then relied strongly on  

Gautam Kundu (supra) and Rohit Tandon (supra).  Gautam  

Kundu (supra) is a judgment relating to an offence under the  

SEBI Act, which is a scheduled offence, which was followed in  

Rohit Tandon (supra). In Rohit Tandon (supra),  

Khanwilkar, J., speaking for the Bench, makes it clear that the  

judgment does not deal with the constitutional validity of  

Section 45 of the 2002 Act.  Both these judgments proceed on  

the footing that Section 45 is constitutionally valid and then go  

on to apply Section 45 on the facts of those cases.   These

76  

judgments, therefore, are not of much assistance when it  

comes to the constitutional validity of Section 45 being  

challenged.    

43. Shri Rohatgi’s alternate argument, namely, that if Section  

45 were not to be struck down, the 2012 Amendment Act  

should be read down in the manner indicated in Gorav  

Kathuria v. Union of India and Ors., 2017 (348) ELT 24 (P &  

H) and having been expressly approved by this Court, must  

apply to the facts of these cases.    

44. In Gorav Kathuria (supra), the 2012 Amendment Act was  

read down having regard to the object sought to be achieved by  

the amendment, namely, that Part B of the Schedule is being  

made Part A of the Schedule, so that the provision of a  

monetary threshold limit does not apply to the offences  

contained therein.   The High Court concluded:  

“12.20 Guided by the aforesaid principles laid down  by the Hon'ble Supreme Court regarding statutory  interpretation and the duty of the Court to secure  the ends of justice, we have no hesitation in holding  that in 2013, Part B of the Schedule was omitted  and the Scheduled Offences falling thereunder were  incorporated in Part A with the sole object to  overcome the monetary threshold limit of Rs. 30  lakhs for invocation of PMLA in respect of the

77  

laundering of proceeds of crime involved in those  offences. No substantive amendment was proposed  with express intention to apply limitations on grant  of bail as contained in Section 45(1) in respect of  persons accused of such offences which were  earlier listed in Part B. Therefore, twin limitations in  grant of bail contained in Section 45(1) as it stands  today, are not applicable qua a person accused of  such offences which were earlier listed in Part B.”  

 The matter came to this Court by a certificate of fitness granted  

by the High Court. Sikri, J and Ramana, J., by their order dated  

12th August, 2016, stated:  

“Though the High Court has granted certificate to  appeal, we have heard the learned counsel for  some time and are of the opinion that the impugned  judgment of the High Court is correct.   

This appeal is, accordingly, dismissed.”    

The complaint of the learned Attorney General is that this was  

done at the very threshold without hearing the Union of India.    

Be that as it may, we are of the opinion that, even though the  

Punjab High Court judgment appears to be correct, it is  

unnecessary for us to go into this aspect any further, in view of  

the fact that we have struck down Section 45 of the 2002 Act as  

a whole.   

78  

45. Regard being had to the above, we declare Section 45(1)  

of the Prevention of Money Laundering Act, 2002, insofar as it  

imposes two further conditions for release on bail, to be  

unconstitutional as it violates Articles 14 and 21 of the  

Constitution of India.   All the matters before us in which bail  

has been denied, because of the presence of the twin  

conditions contained in Section 45, will now go back to the  

respective Courts which denied bail.   All such orders are set  

aside, and the cases remanded to the respective Courts to be  

heard on merits, without application of the twin conditions  

contained in Section 45 of the 2002 Act.  Considering that  

persons are languishing in jail and that personal liberty is  

involved, all these matters are to be taken up at the earliest by  

the respective Courts for fresh decision.   The writ petitions and  

the appeals are disposed of accordingly.    

…………………………......J.  (R.F. Nariman)  

…………………………......J.  (Sanjay Kishan Kaul)  

New Delhi;  November 23, 2017.