Context

• The Indian judicial landscape has recently been shaped by a series of Supreme Court judgments emphasising the principle that bail is the rule, and jail is the exception.
• This doctrine, traditionally applied to general criminal law, is now being extended to stringent special laws such as the Unlawful Activities (Prevention) Act, 1967 (UAPA) and the Prevention of Money Laundering Act, 2002 (PMLA).
• This shift in judicial perspective reflects growing concerns over the potential misuse of these laws and therefore, it is important to examine the implications of these developments, analysing the balance between legal enforcement and civil liberties within the framework of the PMLA. 

The Judicial Reaffirmation of Bail as a Fundamental Right and Critique of the Enforcement Directorate's Practices

• The Judicial Reaffirmation of Bail as a Fundamental Right
  • The SC's recent judgments have reiterated the foundational legal principle that pretrial detention should be an exception rather than the norm.
  • This principle is grounded in the protection of individual liberty and the presumption of innocence until proven guilty.
  • In the context of BRS Leader K Kavitha's case, the court observed that undertrial custody should not turn into a punishment.
  • This statement underscores the judiciary's concern that prolonged detention without trial could violate fundamental rights, effectively punishing individuals before their guilt is established.
• Critique of the Enforcement Directorate's Practices
  • The judiciary's concern extends to the ED's application of the PMLA, where instances of overreach have been highlighted.
  • For example, a Delhi Court recently criticised the ED for summoning private doctors under the stringent sections of PMLA, labelling such actions as an abuse of power.
  • The court's remark that strong leaders, laws, and agencies generally come back to bite the very citizens they vow to protect reflects a growing unease with the ED's approach.
  • Similarly, a Mumbai court reminded the ED of its constitutional obligation to ensure an expeditious trial, granting bail to two accused who had been incarcerated since October 2020.
  • These judicial interventions indicate a need for a serious review of the ED's functioning under the PMLA.

The Evolution of PMLA

• Initial Purpose and Framework
  • The PMLA was enacted in 2002 in response to India's commitment to international standards on combating money laundering and financing of terrorism, particularly under the directives of the Financial Action Task Force (FATF).
  • The Act's primary objective was to prevent and control money laundering, confiscate property derived from laundered money, and deal with any other issue connected to money laundering.
  • At its inception, the PMLA was framed with a clear focus on financial crimes, with strict penalties intended to serve as a deterrent against the misuse of illicit funds.
• The 2012 Amendment: Broadening the Definition of Money Laundering
  • The first significant expansion of the PMLA's scope occurred in 2012, when the definition of money laundering was broadened to include activities such as concealment, acquisition, possession, and use of proceeds of crime.
  • This amendment was aimed at addressing the evolving nature of financial crimes, where money laundering schemes had become more complex and sophisticated.
  • By expanding the definition, the amendment sought to cover a wider range of activities associated with money laundering, thereby increasing the law's effectiveness in curbing such crimes.
• The 2015 Amendment: Extending Jurisdiction Beyond Borders
  • The 2015 amendment to the PMLA further extended its reach by including assets located in India as proceeds of crime if the act of money laundering was committed abroad.
  • This amendment was a response to the growing trend of cross-border money laundering, where illicit funds generated from criminal activities in one country were laundered in another.
  • By bringing foreign assets within the ambit of the PMLA, the amendment aimed to prevent India from becoming a haven for laundered money.
• The 2018 Amendment: Reinstating Stringent Bail Conditions
  • In 2018, the PMLA was further amended to revive the "twin conditions" for granting bail under Section 45 of the Act.
  • These conditions required courts to be satisfied that there were reasonable grounds to believe that the accused was not guilty of the offence and that they were unlikely to commit any offence while on bail.
  • This amendment was a significant departure from the earlier, more lenient bail provisions, and it placed a heavy burden on the accused to prove their innocence even before the trial commenced.
• The 2019 Amendment: Expanding the ED's Powers
  • The most controversial amendment to the PMLA came in 2019, when the ED's powers were significantly expanded.
  • This amendment allowed the ED to conduct searches, seizures, arrests, and attachment of property without the need for a FIR or chargesheet.
  • Moreover, money laundering was reclassified as a standalone offence, independent of any scheduled offence, further broadening the ED's jurisdiction.

Challenges Posed by PMLA

• Effectiveness of PMLA in Curbing Money Laundering
  • The effectiveness of the PMLA in curbing money laundering is evident in the significant increase in cases registered and assets attached during the National Democratic Alliance (NDA) regime compared to the previous United Progressive Alliance (UPA) years.
  • The return of confiscated assets worth Rs 15,000 crore to public sector banks is a notable achievement.
  • However, the low conviction rate (only 25 cases have gone through the court processes; 24 of them resulted in a conviction) raises questions about the Act's efficacy.
  • Moreover, the lengthy judicial processes and stringent bail conditions have resulted in prolonged detention of accused individuals, undermining the principle of justice.
• ED’s Ability to Manage Increasing Caseloads
  • The ED's ability to manage its increasing caseload is another area of concern.
  • With a sanctioned strength of only 2,067 officers, the agency has requested a significant increase in manpower to handle the over 11,000 cases of foreign exchange violations initiated in the past three years alone.
  • The question of how the ED prioritises its cases whether sequentially or based on other considerations remains contentious, with accusations of selective enforcement further eroding public trust.

Way Forward

• While the Act was framed in line with the directives of the FATF, it must operate within the spirit of the Indian Constitution.
• The potential for misuse of the PMLA's stringent provisions by any ruling government is significant, threatening the democratic principles of fairness and justice.
• The SC’s upcoming review of the PMLA's provisions is a critical juncture.
• If the Court fails to provide the necessary relief, the responsibility will shift to the public and their elected representatives to advocate for amendments to the Act.
• Ensuring that the PMLA is not only effective in combating financial crimes but also fair and just in its application is essential for upholding the values of democracy.

Conclusion

• The balance between stringent enforcement of financial laws and the protection of individual rights is delicate and requires constant vigilance.
• The SC’s reaffirmation of bail as a fundamental right in the context of special laws like the PMLA is a step in the right direction.
• However, the challenges posed by the ED's expansive powers under the PMLA highlight the need for judicial oversight and potential legislative reform.