Bail rule, jail exception even in PMLA cases, stresses SC

The court also ruled that the prosecution’s case cannot be based either a statement made by the accused in another case, or a confessional statement by a co-accused

The Supreme Court on Wednesday ruled that the principle “bail is the rule, and jail is the exception” applies even in cases under the stringent Prevention of Money Laundering Act (PMLA), in a decision that seeks to safeguard against the erosion of liberty by overly restrictive interpretations of bail provisions under the harsh law that requires the proof of innocence, and not that of guilt.

The court on Wednesday held that Section 45 needs to be understood and applied considering the basic tenet that liberty is the norm, and incarceration is the exception. (HT Photo)

By requiring the opposition of the bail to be based on establishing the commission of a PMLA offence, the existence of proceeds of the crime, and the involvement of the accused, the court has shifted the onus of proof back to the prosecution.

The court also ruled that the prosecution’s case cannot be based either on a statement made by the accused but in connection with another case, or a confessional statement by a co-accused.

A bench of justices Bhushan R Gavai and KV Viswanathan held that Section 45 of PMLA, which requires the accused to prove their innocence for securing bail, does not override the fundamental principle rooted in Article 21 of the Constitution -- that personal liberty is the rule, and its deprivation, the exception.

“The principle that, ‘bail is the rule, and jail is the exception’ is only a paraphrasing of Article 21 of the Constitution of India, which states that no person shall be deprived of his life or personal liberty except according to the procedure established by law. Liberty of the individual is always the rule and deprivation is an exception. Deprivation can only be by the procedure established by law, which has to be a valid and reasonable procedure,” said the bench.

Drawing upon its August 9 judgment that granted bail to former Delhi deputy chief minister Manish Sisodia in a distinct PMLA case, the court clarified that Section 45 of the PMLA by imposing twin conditions does not rewrite this principle to mean that deprivation is the norm and liberty is the exception.

“All that is required is that in cases where bail is subject to the satisfaction of twin conditions, those conditions must be satisfied...keeping persons behind the bars for unlimited periods of time in the hope of speedy completion of trial would deprive the fundamental right of persons under Article 21 of the Constitution and that prolonged incarceration before being pronounced guilty ought not to be permitted to become the punishment without trial,” held the bench.

Section 45 of PMLA stipulates that the public prosecutor must be given an opportunity to oppose the bail application of the accused. Furthermore, it requires the court to be convinced that there are reasonable grounds to believe the accused is not guilty and is not likely to commit any offence while on bail. These conditions generally make it challenging for an accused in a money laundering case to secure bail.

The court on Wednesday held that Section 45 needs to be understood and applied considering the basic tenet that liberty is the norm, and incarceration is the exception. “Article 21 being a higher constitutional right, statutory provisions should align themselves to the said higher constitutional edict,” declared the court as it granted bail to Prem Prakash, an aide of Jharkhand CM Hemant Soren, in a money-laundering case arising out of alleged sham land deals. To be sure, Soren also faces money laundering charges separately in a similar alleged land scam, and some of the accused in the two cases are common.

The 44-page judgment also added another significant procedural safeguard during the bail proceedings in PMLA cases. Emphasising the critical role of the prosecution’s response to bail applications, the bench said that the Enforcement Directorate’s counter affidavit must effectively demonstrate the foundational facts necessary to oppose bail.

The court made it clear that when the public prosecutor decides to oppose a bail application, the counter affidavit must present a cogent and well-substantiated case showing how the three foundational facts -- the commission of a PMLA offence, existence of proceeds of crime and the involvement of the accused -- are prima facie established. Only after these facts are clearly laid out does the presumption under Section 24 of the PMLA arise, shifting the burden to the accused to prove their innocence, held the bench.

“It is after the foundational facts are set out that the accused will assume the burden to convince the court within the parameters of the enquiry at the Section 45 stage that for the reasons adduced by him there are reasonable grounds to believing that he is not guilty of such offence,” it said.

The Supreme Court’s affirmation of the principle that “bail is the rule, and jail is the exception” assumes paramount importance in upholding the constitutional right to personal liberty in a legal landscape where stringent laws such as PMLA and the Unlawful Activities Prevention Act (UAPA) operate, enhancing the risk of prolonged and unjust incarceration. This affirmation serves as a critical reminder that the justice system must always err on the side of liberty, ensuring that the denial of bail is a measured and justified decision, rather than a default stance. Equally crucial is the court’s insistence on the importance of a well-substantiated counter affidavit in PMLA bail matters. By highlighting the need for the prosecution to clearly establish the foundational facts required to oppose bail, the court is seeking to ascertain that the decision to deny bail is rooted in solid evidence and legal reasoning, rather than a default stance.

The verdict on Wednesday is in line with some other recent court rulings that have underlined the value of personal liberty, the right to speedy justice and the prosecution’s duty to be fair even under severe statutory restrictions imposed by laws such as PMLA and UAPA. The Supreme Court’s judgments granting bail to Aam Aadmi Party leaders Sanjay Singh and Sisodia in recent orders, and to Bharat Rashtra Samithi (BRS) leader K Kavitha on Tuesday, in the Delhi excise policy case, upheld the constitutional right to personal liberty in cases where the investigation was complete, and the trial was likely to be delayed. The bail orders for Sisodia and Kavitha were also passed by the bench comprising justices Gavai and Viswanathan. On August 13, the Supreme Court held that bail should be the rule and jail an exception even under the UAPA as it granted bail to a man accused of renting his premises to members of a banned outfit.

The verdict came while granting bail to Prakash, a Ranchi-based businessman who was arrested in the present case in August 2023 while he was already jailed in connection with another money laundering case linked to illegal mining and arms.

The top court noted that Prakash was arrested in the present case based on certain incriminating statements he made during his custody in the other case, and it ruled that such statements cannot be held admissible as evidence against him under PMLA.

“Taken as he was from the judicial custody to record the statement, it will be a travesty of justice to render the statement admissible against the appellant...We have no hesitation in holding that when an accused is in custody under PMLA, irrespective of the case for which he is under custody, any statement under Section 50 PMLA to the same investigating agency is inadmissible against the maker,” held the bench.

With a man already under arrest by the same agency in another case, the court said, it would be “extremely unsafe” to render such statements admissible against the maker and that such a course of action would be “contrary to all canons of fair play and justice”.

“A person in judicial custody, not being a free person, cannot be summoned and any statement to be recorded will be after obtaining the permission of the Court which has remanded him to judicial custody in the other case,” said the bench. It also examined the statements of the co-accused recorded by the ED to hold that there was nothing on record to show Prakash’s complicity in the offences relating to money laundering.

The court further held that a confessional statement by a co-accused will not have the character of substantive evidence, and that the prosecution cannot start with such a statement to establish its case. It noted that the prosecution is required to first marshal the other evidence and can at best look at the confessional statement for “lending assurance” to prove the guilt.