The proviso to Section 45 contains certain exceptions wherein an accused person may be released on bail, including where the person is under the age of sixteen years, or is a woman, or is sick or infirm. The said proviso appears to be borrowed from a similar exception provided in the Code of Criminal Procedure, 1973 (“CrPC”) (now the Bharatiya Nagarik Suraksha Sanhita) and other statutes.

Prior to the enactment of PMLA, various statutes in India had incorporated the twin tests, including the Drugs and Cosmetics Act, 1940, Terrorist and Disruptive Activities (Prevention) Act, 1987, the Maharashtra Control of Organised Crime, Act, 1999, and the Narcotic Drugs and Psychotropic Substances Act, 1985.

The Supreme Court of India, in November 2017, delivered a landmark judgment which declared Section 45(1) of PMLA, insofar as it imposed two further conditions (the twin tests) for release on bail, to be unconstitutional as the said provision was violative of Articles 14 and 21 of the Constitution of India.

By virtue of the Finance Act, 2018, the words ‘an offence punishable for a term of imprisonment of more than three years under Part A of the Schedule’ in Section 45(1) of PMLA were substituted with the words ‘an offence under this Act’. Therefore, the twin tests appeared to be revived as being applicable to offences committed under PMLA, and not to the scheduled offences as referred to in the unamended provision.

The 2018 amendment in relation to Section 45 was challenged before various High Courts and even the Supreme Court in several matters. Petitions were also filed challenging various provisions of PMLA. The Supreme Court, after tagging and hearing all these matters together, delivered a seminal judgment titled Vijay Madanlal Choudhary v. Union of India, which amongst other provisions of PMLA, dealt with the challenge to Section 45.

The judgment in Vijay Madanlal Choudhary (supra) held that the 2018 amendment, by substituting the class of offences referred to in Section 45(1), removed the anomalies noted in Nikesh Tarachand Shah (supra), and hence the twin tests stood revived.

Holding the offence of money laundering to be at par with the offence of terrorism, it was highlighted that money laundering is a menace to the integrity and sovereignty of a nation, and thus required a stringent regime, including in relation to bail. However, it was clarified that whilst considering bail, the court was not to delve deep into the merits of the case but only place its view based on probability on the basis of reasonable material collected during investigation.

It was clarified that judicial discretion continued to govern the grant of bail under Section 45, guided by the principles provided under Section 45. The twin tests did not impose an absolute restraint on the grant of bail.

Section 45, which was stated to apply to both regular and anticipatory bail, was upheld as having a reasonable and direct nexus with the objects of PMLA. In other words, the said provision was a necessary tool to counter the evils of money laundering.

Whilst considering the interplay between Section 45 of PMLA, the heinous nature of money laundering, and the necessity of a stringent regime, the judgment in Vijay Madanlal Choudhary (supra) did not touch upon the period of incarceration in relation to the offence of money laundering other than upholding the application of Section 436-A of the CrPC to PMLA.

In Manish Sisodia v. Directorate of Enforcement, it was argued by the prosecution that unless the twin tests are satisfied, no person accused of the offence of money laundering shall be released on bail. However, the Supreme Court relied on the prolonged incarceration of the applicant in that case, that is, 17 months, and the fact that the trial had not yet seen light of day, to invoke the principle laid down by Justice Iyer and allow the applicant to be released on bail, subject to conditions. Trial courts and High Courts were reminded to follow the principle of bail being the rule and jail the exception. It was categorically observed that right to bail in cases of delay coupled with prolonged incarceration should be read into Section 45 of PMLA.

It was enunciated that the fundamental right to liberty cannot be denied on the anvil of keeping an individual in custody in the hope of a speedy completion of trial.

The principle laid down by Justice Iyer has since been oft reiterated in various judgments relating to bail under PMLA in 2024. In Prem Prakash (supra), it was observed that it is only once the prosecution in its counter affidavit to a bail application makes out a cogent case in relation to the application of the twin tests that thereafter, the presumption under Section 24 of PMLA applies and the burden of proof shifts on the applicant accused.

The proviso to Section 45, in the context of women, has also been considered by the Supreme Court. It has been clarified that the phrase ‘may be’ used in the proviso confirms the discretionary nature of the said proviso, subject to the facts and circumstances of the case. The Supreme Court, whilst considering the possibility of unscrupulous elements scapegoating persons of tender age and women who are likely to be vulnerable, highlighted that the said concern was to be balanced against the fact that nowadays, educated and well-placed women in society engage themselves in commercial ventures and enterprises. Therefore, judicious use of the discretion contained in the proviso was advised.

The ratio in Saumya Chaurasia (supra) was clarified by the Supreme Court in Kalvakuntla Kavitha v. Directorate of Enforcement, wherein it was held that the proviso to Section 45 did not apply only to a ‘vulnerable woman’. A clear distinction was drawn between women who are likely to be vulnerable and a ‘vulnerable woman’, and it was clarified that Saumya Chaurasia did not deprive a woman of the benefit of the proviso to Section 45, only on account of her being highly educated or sophisticated or being a Member of Parliament or a Member of Legislative Assembly.

Recently, in Udhaw Singh v. Directorate of Enforcement, the Supreme Court relied on the judgment in V. Senthil Balaji (supra) to grant bail to a person who had been incarcerated for 14 months, in view of the fact that the trial was not likely to conclude for a few years, given the number of witnesses.

The aforesaid line of judgments consider aspects that are at the crux of fundamental rights under the Constitution of India. As succinctly put in V. Senthil Balaji (supra), the requirement of expeditious disposal of trials ought to be read into special statutes like PMLA, considering the gravity of the offence and the higher threshold for the grant of bail.

Given the stringent rigours of Section 45, it is welcoming to note that the jurisprudence in relation to bail under the said provision is cognizant of the fundamental tenets of liberty.

This article was originally published in Bar & Bench on 11 March 2025 Co-written by: Alina Arora, Partner; Anoopam Prasad, Counsel. Click here for original article

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