Nikesh Tarachand Shah vs. Union of India

Nikesh Tarachand Shah vs. Union of India

 

IN THE SUPREME COURT OF INDIA
(2018) 11 SCC 1
Petitioner
Nikesh Tarachand Shah
Respondent
Union of India
Date of Judgement
23rd November, 2017
Bench
Hon’ble Justice F Nariman; Sanjay Kishan Kaul, JJ.

Introduction:

As noted by Hon’ble V.R. Krishna Iyer the question of whether to grant bail or jail in the pre-trial stage will consistently belong to the blurred area.[1] Indian Courts have recognized that “bail, not jail, is the norm“, according to the Eighth Amendment to the United States Constitution.[2]

In this context, the pre-bail conditions imposed by certain special laws, presumably based on the “interest of the State”, have presented a new challenge to the Courts. The extent to which such conditions could infringe the rights of the accused is an important topic of discussion. Recently, one of those challenges (“Nikesh Tarachand Case”) was presented to the Supreme Court of India (“Supreme Court”), where the petitioners had challenged the constitutional validity of Section 45 (1) of the Prevention of Money Laundering Act of 2002 (“PMLA”), to the extent that it imposed two additional conditions (explained in detail below) for granting bail to a person accused of a crime under Part A of the List at PMLA.

Background:

Judicial Background:

In India, the right of bail is available against crimes that are not punishable by death or life imprisonment and only for women and children in non-fictitious crimes punishable by death or life imprisonment.

The under-trial prisoners formed 80 percent of the prison population and in some cases in which the period of incarceration of the sub-treaties exceeded the period of incarceration prescribed for the crimes charged to them; these problems were brought before the Supreme Court in Hussainara Khatoon v. Bihar State.[3] Following Maneka Gandhi v. Union of India,[4] as provided for in Article 21 the Court ordered the release of persons whose prison period had exceeded the prison period for their crimes.  In Mantoo Majumdar v. State of Bihar,[5] the Supreme Court once again confirmed the right to personal liberty of the accused and ordered the petitioners to be released on their own bail and without guarantees, since they had spent six years awaiting trial in prison. The Court regretted the delay in the police investigation and the mechanical operation of the preventive detention process by the magistrates as insensitive to the personal liberty of the subsequent ones, sent by them to prison. The Court deplored the delay in the police investigation and the mechanical operation of the pre-trial detention process by the magistrates as insensitive to the personal liberty of the sub-treaties, and the magistrate’s decision to control the detention of the under-trials imprisoned by them.[6]

Constitutional and Statutory Provisions Discussed:

  • Prevention of Money Laundering Act- Sections 45, 43, 44, 45, 46, 2, 3, 4, 5, 65 and 71.
  • Constitution of India- Article 21 and 14.
  • Code of Criminal Procedure- Sections 436, 437, 438 and 439.

Facts:

An appeal was filed which questioned the constitutional validity of Section 45 of the Prevention of Money Laundering Act. Section 45 imposes two conditions for the granting of the bond. The conditions being that, the prosecutor must have the occasion to oppose any request for bail also, the Court must be pleased that the defendant was not guilty of such a crime and that he will not commit any crime while on bail.

Issues:

  • Whether section 45 of the Prevention of Money Laundering Act, 2002 is constitutionally valid?

Arguments:

Arguments of the Petitioners:

  • Shri Mukul Rohatgi, the senior advocate, argued that Section 45 PMLA, when it imposes two additional conditions before the granting of the bond is manifestly arbitrary, discriminatory and in violation of fundamental rights of the petitioner under Article 14 read with Article 21 of the Constitution. He further argued that the objective was not to deny bail to those accused of crimes under Part B above and that putting the crimes of Part B together with the heinous crimes in Part A would be tantamount to treating unequals equally and it would be discriminatory and violating Article 14 of the Constitution.

Arguments of the Respondents:

  • Attorney General Shri K.K. Venugopal on behalf of the respondents argued that the scheduled crimes and the crimes provided for in Sections 3 and 4 of 2002 must be read together and it forms a complete code in itself.
  • The Attorney General argued that the expression “any crime” in Section 45 (1) (ii) would mean a crime of a similar nature and not any crime, which would also include a traffic offense.
  • It was argued, the expression in Section 45 that “there are reasonable grounds to believe that you are not guilty of such a crime” should be construed as a prima facie assessment of the Court of reasonable culpability. Second, according to the wise Attorney General, in any case, the conditions contained in Section 45 (1) (ii) are there in a different form when the bonus is generally granted with respect to crimes in general and referred to the State of UP through C.B.I. v. Amarmani Tripathi[7], for this purpose. According to the wise Attorney General, applying the rule of harmonious construction Section 45 is irrefutable. It was based on Section 24 of PMLA, which reverses the burden of proof, and relied heavily on Gautam Kundu v. Directorate of Enforcement[8], and Rohit Tandon v. The Directorate of Enforcement[9], Criminal Appeals Nos. 1878-1879 of 2017 decided on November 10, 2017.
  • In response to Shri Rohatgi’s argument about the purpose of the 2012 Amendment Act, according to the wise Attorney General, it is well established that where the language of the Law is clear, the object of the Law cannot be used and he cited several trials for this proposition.

Judgment:

Ratio Decidendi:

  • Article 14 allows classification, provided that said classification has a rational relationship with the object to be achieved. While a reasonable classification is allowed, such classification must be based on some real and substantial distinction that has a reasonable and fair relationship with the object to be achieved, and the classification cannot be done arbitrarily and without any substantial loss.[10]
  • After the decision in Maneka Gandhi case[11] 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.

Obiter Dicta:

  • Both the money laundering offense and the predicate offense were to be tried by the Special Court, and bail is granted only if the twin conditions are met under Section 45 (1). 
  • The doctrine of arbitrariness would only imply that a law was disproportionate, excessive or manifestly unreasonable. All the aforementioned reasons do not seek to differentiate between the actions of the State in its various forms, all of which are intercepted if they violate the fundamental rights guaranteed to individuals and citizens in Part III of the Constitution. 
  • The test of manifest arbitrariness as established in the aforementioned sentences would be applied to invalidate the legislation, as well as the subordinate legislation under Article 14.
  • A classification based on the imprisonment of more than three years of a crime contained in Part A of the List, which is a determining crime, would not have a rational relationship with the object of attaching and returning large amounts to the economy for the proceeds of crime.

Conclusion:

The Supreme Court ruling in the Nikesh Tarachand case[12] the legality of pre-bail conditions is very important and inconsistencies in the scope and applicability of pre-bail conditions under the prevention of money laundering act made a very strong case. With the ruling regarding the constitutionality of the conditions precedent to bail (especially in economic crimes), it may be worth considering whether the Supreme Court would have eliminated the conditions otherwise severely challenged, but because of the ambiguity caused by the Amendment Act, 2012.

Given the (incorrect) scheme of crimes scheduled under the PMLA Act, it was obvious that the Supreme Court could not have reached any other conclusion. It remains to be answered if an economic crime, such as money laundering, demanded strict/drastic conditions, such as contested conditions, and if the state could restrict the rights of a person in the case of such crime.

Edited by Parul Soni

Approved & Published – Sakshi Raje

Reference

[1] Gudikanti Narasimhulu v. Public Prosecutor, (1978) 1 SCC 240.

[2] Dataram Singh v. State of Uttar Pradesh, SLP (Criminal) No. 151 of 2018.

[3] Hussainara Khatoon v. Bihar State, AIR 1979 SC 1360.

[4] Maneka Gandhi v. Union of India, AIR 1978 SC 597.

[5] Mantoo Majumdar v. State of Bihar, AIR 1980 SC 846.

[6] J. N. Pandey, Constitutional Law of India, Thirty Second Edn., Central Law Agency, Allahabad.

[7] C.B.I. v. Amarmani Tripathi,  (2005) 8 SCC 21.

[8] Gautam Kundu v. Directorate of Enforcement, (2015) 16 SCC 1.

[9]Rohit Tandon v. The Directorate of Enforcement, Criminal Appeals Nos. 1878-1879 of 2017 decided on November 10, 2017.

[10] State of Bombay v. F.N. Balsara, 1951 SCR 682.

[11] Supra note 8.

[12] Supra note 4.

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I am Abhishek Kumar, an enthusiastic law student at the National University of Study & Research in Law, Ranchi. Bearing an interest in the field of criminal law is what compelled me to take it as an Honors subject. I love to play guitar in my free time and being a sports aficionado I love to play Table Tennis and Volleyball. I also like to spend quality time reading articles of The Hindu Editorial page which helps me to be updated with the current issues.