Holding

Section 45(1) of the Prevention of Money Laundering Act, 2002 is unconstitutional as it imposes additional bail conditions that violate Articles 14 and 21.

Summary

The Supreme Court examined the constitutional validity of Section 45(1) of the Prevention of Money Laundering Act, 2002, which imposes two additional conditions for granting bail when the offence involves a scheduled offence punishable with imprisonment of more than three years under Part A of the Schedule. The Court held that the twin conditions – requiring the court to be satisfied that the accused is not guilty of "such offence" (a scheduled offence) and is not likely to commit any offence while on bail – have no nexus with the money‑laundering offence itself and are therefore arbitrary, discriminatory and violative of Articles 14 and 21 of the Constitution. Consequently, Section 45(1) was declared unconstitutional. All orders denying bail on the basis of Section 45 were set aside and the matters remanded to the respective courts for fresh consideration without applying the struck‑down provision.

Issues considered

The constitutionality of Section 45(1) of the Prevention of Money Laundering Act, 2002 in light of Articles 14 and 21.
Whether the twin bail conditions under Section 45(1) have a rational nexus with the offence of money laundering.
Whether classification of offences based on a three‑year imprisonment threshold is arbitrary and violative of the equal protection clause.

Legislation cited

Biological Diversity Act, 2002s. 55
Code of Criminal Procedure, 1973s. 439
Customs Act, 1962s. 132
Indian Penal Code, 1860s. 121, s. 121A, s. 232, s. 238, s. 255, s. 489A, s. 489B
Narcotic Drugs and Psychotropic Substances Act, 1985s. 19, s. 24, s. 27A, s. 29, s. 37
Prevention of Money Laundering Act, 2002s. 24, s. 2(y), s. 3, s. 4, s. 44, s. 45(1), s. 46, s. 65

Subjects

Constitutional validitySection 45Prevention of Money Laundering ActBail conditionsArticle 14Article 21Equal protectionManifest arbitrarinessScheduled offencePredicate offenceSpecial Courts

Judgment

[2017] I~ S.C.R. 358

A NIKESH TARACHAND SHAH
v.
UNION OF INDIA & ANR.
(Writ Petition (Criminal) No. 67 of 2017 Etc.)
B NOVEMBER 23, 2017
[R. F. NARIMAN AND SAN.JAY KISHAN KAUL, JJ.]
Prevention of Money Laundering Act, 2002 - s.45( I)
Constitutional validity _of- Grant of bail u/s. 45( 1) - Twin conditions
c tothatbe the
satisfied u/s. 45 that there are reasonable grounds for believing
accused is not guilty of such offence and that he is not
likely to commit any offence while on bail - For purpose of grant
of bail u/s. 45( I), offence relatable to offences punishable for a
term of imprisonment of more than 3 years under Part A of the
Schedule to the Act and not in relation to offences under the 2002
D Act itself - Held: Section 45 (I) is unconstitutional as it imposes
two further conditions for release on bail, thus, violative of Arts. 14
and 21 - Expression "such offence" would be relatab/e only to an
offence in Part A of the Schedule - In an application made for bail,
, where the offence of money laundering is involved, ifs. 45 is to be
E 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 - Thus, the twin conditions laid
down in s. 45 would have no nexus whatsoever with a bail
application which concerns itself with the offence of money
F laundering - Further, the term of imprisonment of more than 3 years
for a scheduled or predicate offence would be a mcmifestly arbitrary
and unjust classification, having no rational relation to the object
sought to be achieved by an Act dealing with money laundering -
This would lead to a manifestly arbitrary, discriminatory and unjust
result which would invalidate the Section - Constitution of India -
G
Arts. 14 and 21.
Disposing of the writ petitions and the appeals, the Court
HELD: 1. Section 45(1) of the Prevention of Money
Laundering Act, 2002, insofar as it imposes two further conditions
H
358
NlKESH TARACHAND SHAH v. UNION OF INDIA & ANR. 359

for release on bail, is declared to be unconstitutional as it violates A
Articles 14 and 21 of the Constitution. [Para 45] [412-F-H]
2.1 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 B
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, c
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 refened 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 D
under Part A of the Schedule, which are offences outside the 2002
Act. [Para 9] [382-G-H; 383-A-C]
2.2 Section 44 of the Prevention of Money Laundering Bill
referred only to offences punishable under the Act itself, in which
the twin conditions for grant of bail were imposed, in addition to E
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. 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 F
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 Penal Code, which deal with waging or
attempting to wage war or abetting waging of war against the
G
Governme11t 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 Penal Code, which included murder, extortion,
H
360 SUPREME COURT REPORTS [2017] 12 S.C.R.

A 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 Sectiiln 45(1) would only be in cases involving
B
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 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,
c 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 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. The
D
2009 Amendment further populated Parts A and B of the Schedule.
In Part A, offences u/ss. 489A and B of the 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,
E several other offences were added from the 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,
Transplan,tation of Human Organs Act_ 1994, Juvenile Justice
F
(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 2000,
Biological Diversity Act 2002, Protection of Plant and Farmers
Rights Act 2001, Environmental Protection Act 1986, Water
G (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. [Para 20, 21] [394-D-E; 395-D-E;
397-A-E]
2.3 Interesting feature of Section 45 is that the twin
H conditions that need to be satisfied under the said Section arc
NIKESH TARACHAND SHAH v. UNION OF INDIA & ANR. 361

that there are reasonable grounds for believing that the accused A
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 offence of money
laur1d::ring is involved, if Section 45 is to be applied, the Court
B
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 c
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.
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
D
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 E
is guilty of the offence of money laundering, but 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
F
offence-namely, money launderinj!. 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 G
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. [Para 28]
[400-F-H; 401-A-E]

H
362 SUPREME COURT REPORTS (2017] 12 S.C.R.

A 2.4 Section 45 classifies the predicate offence under Part
A of the Schedule on the basis of sentencing. The classification
of three years or more of offences contained in Part A of the
Schedule must have a reasonable relation to the object sought to
be achieved under the 2002 Act. The 2002 Act was enacted so
that property involved in money laundering may be attached and
B
brought back into the economy, as also that persons guilty of the
offence of money laundering must be brought to book. 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, the basis for classification of offences
c 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
D
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 dealing with money
laundering. [Para 29] [401-F-H; 402-A-B]
E 2.5 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
F 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
G 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. It is .
clear that a classification is justified only if it is not manifestly
H arbitrary. [Para 30] [402-C-F]
NIKESH TARACHAND SHAH v. UNION OF INDIA & ANR. 363

2.6 Going through Part A of the Schedule as it now exists, A
it is clear that there are many sections under the 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 Penal Code, which
deal with counterfeiting of Indian coin and import or export of B
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 Cr.P.C. 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 c
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
D
possessed with knowledge that it is counterfeit; Section 251
dealing with delivery of Indian coin 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 E
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 Cr.P.C., without any
further conditions attached. On the other hand, if a person is
charged with extortion under Sections 386 or 388, (such sections
F
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. [Para G
31] [403-C-H; 404-A]
2.7 Sections 19, 24, 27A and 29 of the Narcotic Drugs and
Psychotropic Substances Act, 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 H
364 SUPREME COURT REPORTS (2017] 12 S.C.R.

A 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
B
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. Also, the
c 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: a small quantity,
as defined; a quantity which is above small quantity, but below
D commercial quantity, as defined; and 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
E commercial quantity. The twin conditions specified in Section 37
of the NDPS Act get attracted when bail is asked for only insofar
as persons ~ho have commercial c1uantities with them are
concerned. A per11on found with a small quantity or with a quantity
above small <1uantity, but below commercial quantity, punishable
F with a one year sentence or a 10 year sentence respectively, can
. apply for bail under Section 439 Cr.P.C. 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 unec1ual by the NDPS
G Act itself, when it comes to imposition of the further twin
conditions for grant of bail. This is yet another manifestly arbitrary
and discriminatory feature of the application of Section 45. [Para
32, 33] [404-B-H; 405-A-B]
2.8 A reference to paragraph 23 of Part A of the Schedule
H would also show how Section 45 can be used for an offence under
NIKESH TARACHAND SHAH v. UNION OF INDIA & ANR. 365

the Biological Diversity Act, 2002. If a person covered under the A
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
B
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 C
sentence has a rational relation to the grant of bail after complying
with Section 45 of' the 2002 Act. [Para 34] [405-C-D]
2.9 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 D
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. [Para 35] E
[405-E-G]
2.10 The submission that Section 45 is to be upheld as it is
part of a complete code under the 2002 Act; Section 45 when
read with. Sections 3 and 4, would necessarily lead to the
conc.Iusion that the source of the proceeds of crime, being the F
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 cannot be accepted. It was submitted that Section 45 is G
to be read down in that when the Court is satisfied t.hat 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 conclusion; and the fact that he is not likely to commit
"any offence" while on bail would only be restricted to any offence
H
366 SUPREME COURT REPORTS [2017] 12 S.C.R.

A of a like nature. Merely reading down the two conditions would
not get rid of the vice of manifest arbitrariness and discrimination.
Also, it cannot be accepted that Section 45 imposes two conditions
which are akin to conditions that are specified for grant of ordinary
bail. It is obvious that the twin conditions set down in Section 45
are a much higher threshold bar than any of the conditions laid
B
down in Amarmani Tripatlzi case. ln 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 factors set out are to be looked
c 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. [Para 36] (406-C-H; 407-A]
2.11 Section 45 is a drastic provision which turns on its
D 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, this Court must be doubly sure
that such provision furthers a compelling State interest for tackling
serious crime. In absence of any such compelling State interest,
E 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. [Para 38] (408-C-E]
F 2.12 Section 45 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
G 45. [Para 41] (411-B-C]
3. All the matters in which bail has been denied, because of
the presence of the twin conditions contained in Section 45, would
now go back to the respective courts which denied bail. All such
orders arc set aside, and the cases remanded to the. respective
H
NIKESH TARACHAND SHAH v. UNION OF INDIA & ANR. 367

courts to be heard on merits at the earliest without application of A
the twin conditions contained in Section 45 of the 2002 Act. [Para
45] [412-G-H]
State of U.P. through C.B.l. v. Amarnwni Tripathi.
[2005] 3 Suppl. scR 454 : (2005) 8 sec 21 ;
Gautam Kundu v. Directorate of Enforcement B
(2015) 16 SCC 1 ; Rohit Ta11do11 v. Tlze Enforcement
Directorate 2017(13) SCALE 385 ; Rajesh Kumar 11.
State through Government of NCT of Delhi (2011) 13
SCC 706 ; Gurba/.:slz Singh Sibbia v. State of Punjab
2017(13) SCALE 385 : (1980) 2 SCC 565 : State of
Bombay and Anr. v. F.N. Balsara [1951] SCR 682 ;
c
Budhan Choudhry 11. State of Bihar [1955] 1 SCR
1045 ; Asgarali Nazarali Singaporawalla v. The State
of Bombay [1957] SCR 678 ; Shayara Bano v. Union
of India a11d others (2017) 9 SCC 1 ; Maneka Gandhi
v. Union of India [1978] 2 SCR 621 : (1978) 1 SCC D
248 ; Special Courts Bill, 1978, In re [1979] 2 SCR
476 : (1979) 1 SCC 380 ; Siddfwram Satlingappa
Mhetre v. State of Maharashtra [2010] 15 SCR 201 :
(2011) 1 SCC 694 ; Ranjitsing Brahmajeetsing Sharma
v. State of Maharashtra and Anr. [2005] 3 SCR 345 :
E
(2005) 5 SCC 294 ; Gora\! Kathuria v. Union of India
and Ors .. 2017 (348) ELT 24 (P & H) - referred to.

Kartar Singh v. State of Punjab [1994] 2 SCR 375 :
(1994) 3 sec 569 - held inapplicable.

U11ited States v. Anthony Salerno & Vincent Cafaro F
481 US 739 (1987) ; Stack v. Boyle, 342 US 1 -
referred to.

Case Law Reference

[2005] 3 Suppl. SCR 454 . referred to Para6 G

(2015) 16 sec 1 referred to Para6
2017(13) SCALE 385 referred to Para6

(2011) 13 sec 706 referred to Para 13
H
368 SUPREME COURT REPORTS [2017] 12 S.C.R.

A (1980) 2 sec 565 referred to Para 14
[1951] SCR 682 referred to Para 15
[1955] 1 SCR 1045 referred to Para 16
[1957] SCR 678 referred to Para 17
B
(2017) 9 sec 1 referred to Para 18
[1978] 2 SCR 621 referred to Para 19
[1979] 2 SCR 476 referred to. Para 30
c [2010] 15 SCR 201 referred to Para 35
[1994] 2 SCR 375 held inapplicable Para 39
[2005] 3 SCR 345 referred to Para 40

D 2017 (348) ELT 24 (P & H) referred to Para 43

CRIMINAL ORIGINAL/APPELLATE JURISDICTION : Writ
Petition (Criminal) No. 67 of2017.

E UnderArticle 32 of the Constitution oflndia.

WITH

W. P. (Crl.) Nos. 103, 144 and 152 of2017

F Criminal Appeal Nos. 2012, 2013 and 2014 of2017.

Mukul Rohatgi, Vikram Chaudhri, Sr. Advs, Saurabh Kirpal, Sanjay
Agarwal, Nikhil Jain, Sangram S. Saron, Ashish Batra, Harshit Sethi,
Sajal Yadav, Rishi Sehgal, Vamshi Rao, Sameer Rohatgi, Ms. Preeti Singh,
Amit K. Nain, Advs for the Petitioner.
G
K.K.Venugopal, AG, Ms. Pinky Anand, ASG, A. K. Panda,
Sr. Advs, Ms. Binu Tamta, P. K. Dey, Ms. Shirin Khajuria, Hemant
Arya, Pankaj Pandey, B. Krishna Prasad, Ms. Sushma Manchanda, A.C.
Singh, Manoj Singh, Rohit Bhatt, Dhruv Tamta, Advs for the
Respondents.
H
NIKESH TARACHAND SHAH v. UNION OF INDIA & ANR. 369
[R.F. NARIMAN, J.]

The Judgment of the Court was delivered by A
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 B
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 c
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 involved in money
laundering, so that this serious threat to the financial system oflndia is D
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 ~eing realised, world over, that money-laundering poses a
serious threat not only to the financial systems of countries, but E
also to their integrity and sovereignty. Some of the initiatives taken
by the international community to obviate such threat~ are outlined
below:-
(a) the United Nations Convention Against Illicit Traffic in Narcotic
Drugs and Psychotropic Substances, to which India is a party, F
calls for prevention of laundering of proceeds of drug crimes and
other connected activities and confiscation of proceeds derived
from such offence.
(b) the Basie Statement of Principles, enunciated iri 1989, outlined
basic policies and procedures that banks should follow in order to G
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,
H
370 SUPREME COURT REPORTS [2017] 12 S.C.R.

A 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-
B (i) declaration oflaundering 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;
c
(iv) declaring money-laundering to be an extraditable offence;
and
(v) promoting international co-operation in investigation of
money-laundering.
D (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
(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.
F 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
G August, 1998. The Bill was referred to the Standing Committee
on Finance, which presented its rep01t 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
H the Schedule under Indian Penal Code the word offence under
NIKESH TARACHAND SHAH v. UNION OF INDIA & ANR. 371
[R.F. NARIMAN, J.]

section 477 A relating to falsification of accounts should be omitted; A
(c) 'knowingly' be inserted in clause 3(b) relating to the definition
of money-laundering; (d) the banking co111pa11ies, financial
institutions and intermediaries should be required to. furnish
information of transactions to the Director instead of Commissioner
ofincome-tax (e) the banking companies should also be brought
B
within the ambit of clause II relating to obligations of financial
institutions and intermediaries; (t) a definite time-limit of24 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 c
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
D
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 E
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 accepted the above
recommendations and made provisions of the said
recommendations in the Bill.
F
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 G
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." H
372 SUPREME COURT REPORTS [2017] 12 S.C.R.

A 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,-
B (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
c or where such property is taken or held outside the country, then
the property equivalent in value held within the country;
(x) "Schedule" means the Schedule to this Act;
(y) "scheduled offence" means-
D (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.
E
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 or'crime including its concealment, possession,
acquisition or use and projecting or claiming it as untainted property
F 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
G 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; \he 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.
H
NIKESH TARACHAND SHAH v. UNION OF INDIA & ANR. 373
[R.F. NARIMAN, J.]

Sec_tion 5. Attachment of property involved Jn money- A
laundering.
( 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, B
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 c
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, D
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 E
the scheduled offence, as the case may be, or a similar report or
complaint has been made or filed under the corresponding law o(
any other country:
Provided further that, notwithstanding anything contained in first
proviso, any property of any person may be attached under this
F
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 attached immediately
under this Chapter, the non-attachment of the property is likely to G
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

H
374 SUPREME COURT REPORTS [2017] 12 S.C.R.

A (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.
B (3) Every order of attachment made under sub-section (I) 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
c the enjoyment of the immovable property attached under sub-
section (I) 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.
D (5) The Director or any other officer who provisionally attaches
any property under sub-section (I) shall, within a period of thirty
days from such attachment, file a complaint stating the facts of
such attachment before the Adjudicating Authority.
xxxxxxxxx
E
Section 43. Special Courts.-
,
(!) The Central Government, in consultation with the Chief Justice
of the High Court, shall, for trial of offence punishable under section
4, by notification, designate one or more Courts of Session as
Special Court or Special Courts or such area or areas or for such
F
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.
G
(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 (I), with which the accused may, under the Code of
Criminal Procedure, 1973 (2 of 1974), be charged at the same
trial.
H
NIKESH TARACHAND SHAH v. UNION OF INDIA & ANR. 375
[R.F. NARIMAN, J.]

Section 44. Offences triable by Special Courts.- A
(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 B
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 C
made by an .iuthority 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 D
of the complaint of the offence of money-laundering under sub-
clause (b ), 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 E
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 (2of1974)
as it applies to a trial before a Court of Session. F
(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 (2of1974) and the High
Court may exercise such powers including the power under clause
(b) of sub-section (I) of that section as if the reference to G
"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
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376 SUPREME COURT REPORTS (2017] 12 S.C.R.

A 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
B 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
c 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
madeby-
D (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.
(1 A) Notwithstanding anything contained in the Code of Criminal
E . Procedure, 1973 (2of1974), 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.
F (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 la'!V for the time being in force on
granting of bail.
Section 46. Application of Code of Criminal Procedure, 1973
G to proceedings before Special Court.-
(l) 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,
H
NIKESH TARACHAND SHAI-i v. UNION OF INDIA & ANR. 377
[R.F. NARIMAN, J.]

the Special Court shall be deemed to be a Court of Session and A
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 case or class or group of
cases a Special Public Prosecutor.
(2) A person shall not be qualified to be appointed as a Public B
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 c
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 of1974) and the provisions
of that Code shall have effect accordingly.
xxx xxx xxx D
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 E
under this Act.
xxxxxx 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." F
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 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 G
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
H
378 SUPREME COURT REPORTS [2017] 12 S.C.R.

A 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,
B
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 of the Schedule, that
is tried with offences under the Act, bail would be granted only after
c 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
D
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 Amis Act 1959, Wild! ife
(Protection) Act 1972, Immoral Traffic (Prevention) Act, 1956 and the
Prevention of Corruption Act, 1988. According to learned senior counsel,
E this classification was maintained right until the Amendment Act of2012,
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 "scheduled
offence" in Section 2(y) of the Act made it clear that, if offences are
F 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 ofRs.30 lakhs be removed,
which is why the entire Part B of the Schedule was subsumed in Part A.
G 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 PartA 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

H
NIKESH TARACHAND SHAH v. UNION OF INDIA & ANR. 379
[R.F. NARIMAN, J.]

would have no rational relation to the object sought to be achieved by A
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 B
having 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 C
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
D
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 of2017, in which the scheduled offences E
were Sections 120B, 409, 420, 471and477A of the 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
F
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 G
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

H
380 SUPREME COURT REPORTS [2017] 12 S.C.R.

A 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 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
B
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,
c 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
D
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 possible to read down the provision to
make it constitutional as the very scheme of Section 45 is manifestly
E 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
F 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
G 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 to the learned
H
NIKESH TARACHAND SHAH v. UNION OF INDIA & ANR. 381
[R.F. NARIMAN, J.]

Attorney General, Section 45 can easily be read down to make it . A
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
B
when bail is granted ordinarily insofar as offences generally are
v.
concerned and he referred to State ofU.P. through C.B.I. 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. c
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,
D
it is well settled that where the language of the Act is plain, no recourse
can be takeri 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 Section24 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 E
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
F
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 G
remotely involved in this offence are sought to be roped in. An 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)
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382 SUPREME COURT REPORTS [2017) 12 S.C.R.

A 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
B
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 .
c 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 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
D
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
E 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
·p' 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.

G 9. When the Prevention of Money Laundering Bill, 1999 was tabled
before Pi1rliament, 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.

H
NIKESH TARACHAND SHAH v. UNION OF INDIA & ANR. 383
[R.F. NARIMAN, J.]

When the Act was finally enacted in 2002 and notified in 2005, this A
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 ifthe 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 B
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. C
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 D
him, or send others to do so, except by the lawful judgment of his
equals or by the Jaw of the land."
It is well known that Magna Carta, which was wrung out of King
John by the barons on the 15'h of June, 1215, was annulled by Pope
Innocent III in August of that very year. King John died one year later, E
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 F
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 means to conduct military operations
abroad. The King was unwilling to give up his military ambition and G
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
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384 SUPREME COURT REPORTS [2017] 12 S.C.R.

A of the Knights, SirTh9mas 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
B
Lords an.d 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 Jaw.
11. In Bushel's case, decided in 1670, Chief Justice Sir John
c Vaughan was able to state that, "the writ of habeas. corpus is now the ".
most usual remedy by which a man is restored again to his liberty, ifhe
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 nev/Parliament.
D 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 Jed to the next great milestone of English history, namely the Habeas
E 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.
F 12. The next great milestone in English history is the Bill of Rights
of 1689, which was accepted by the only Dutch monarch 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:
G 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
H
N1KESH TARACHAND SHAH v. UNION OF INDIA& ANR. 385
[R.F. NARIMAN, J.]

when the principle of habeas corpus found its way into Articlec l Section A
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. B
State through Government of NCT of Delhi (2011) 13 SCC 706, at
paragraphs 60 and 61.
14. In Gurbaksh Singh Sibbia v. State of Punjab, (1980) 2
sec 565 at 586-588, the purpose of granting bail is set out with great
felicity as follows:-
c
"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 D
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, E
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 F
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 G
established was that the discretion should be exercised judiciously.
In Emperor v. Hutchimon [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, having
regard to the fact that the legislature itself left the discretion of
H
386 SUPREME COURT REPORTS [2017] 12 S.C.R.

A 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
B
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
c 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 [(I 978) 1 SCC
240 : 1978 SCC (Cri) 115] that: (SCC p. 242, para 1)
D " ... the issue of bail is one ofliberty,justice;public safety and
burden of the public treasury, all of which insist that a developed
jurisprudence of bail is integral to a socially sensiti·zedjudicial
process .... After all, personal liberty of an accused or convict
is fundamental, suffering lawful eclipse only in terms of
E 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)
F "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:
G "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
H
NIKESH TARACHAND SHAH v. UNION OF INDIA & ANR. 387
[R.F. NARIMAN, J.]

the judgment of the court, the primary inquiry is whether a A
recognizance or bond would effect that end."
It is thus clear that the question whether to grant bail ·ornot 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 B
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 arbitrnry" c
aspect. It is settled by a catena of cases 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 andAnr. v. F.N. Balsara (1951) SCR 682 at 708, Faz! Ali,
J. summarized the law as follows: D
"(I) 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. E
(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, arid yet the law hits only a particular
individual or class. F
(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.
G
(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.
H
388 SUPREME COURT REPORTS [2017] 12 S.C.R.

A a
(6) If a law deals equally with members of 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.
(7) While reasonable classification is permissible, such classification
must be based upon some real and substantial distinction bearing
B 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
c law, but also by procedural law. (See Budhan Choudhry v. State of
Bihar, (1955) I 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:
D "The first question which we have to address to ourselves is
whether there is in the impugned Act a reasonable classification
for the purposes oflegislation. If we look to the provisions of the
impugned Act closely it would appear that the legislature classified
the offences punishable under Sections 161, 165or165-A of the
E 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
F 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 could be dealt with by the normal
provisions·contained in the Indian Penal Code or the Code of
Criminal Procedure, 1898 and ifthe offenders falling within this
G group or category were thus singled \)Ut 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.

H
NIKESH TARACHAND SHAH v. UNION OF INDIA & ANR. 389
[R.F. NARIMAN, J.]

The next question to consider is whether this differentia had a 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 B
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 clas_sification. Standing by themselves these
passages might lend support to the contention urged before us by C
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 t}lis Court held:
"(/)That when a law like the present one is impugned on the
ground that it contravenes Article 14 of the Constitutio_n the D
real issue to, be decided is whether,1 having regard to the
underlying purpose and policy cif 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 is laid down can be said to be unreasonable or
arbitrary and therefore violative of the equal pro_tection clause; E
(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 F
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 G
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 -
ft.ct for ~peedier trial of the said offences 1by the appointment of
Special Judges who were invested with exclusive jurisdiction to H _
390 SUPREME COURT REPORTS (2017] 12 S.C.R.

A 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
B
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 sougbt to be achieved by the impugned Act. Both these
c 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
D Dano 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
E fundamental rights chapter. What is manifestly arbitrary is
obviously unreasonable and being contrary to the rule oflaw, 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
F "disproportionate, excessive or unreasonable", yet such challenge
would fail on the very ground of the law being "unreasonable,
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,
G 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.

H xxx xxxxxx
NIKESH TARACHAND SHAH v. UNION OF INDIA & ANR. 391
[R.F. NARIMAN, J.]

IO 1. It will be noticed that a Constitution Bench of this Court in A
Indian Express Newspapers (Bombay) (P) Ltd. v. Union of
India [Indian Express Newspapers (Bombay) (P) Ltd. v. Union
of India, (1985) I 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
B
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 c
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
0
apply to negate legislation as well under Article 14."
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 E
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. F
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 G
p·rocedure 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) l SCC 248], it should read
H
392 SUPREME COURT REPORTS [2017] 12 S.C.R.

A as follows: (Bachan Singh case [(1980) 2 SCC 684 : 1980 SCC
(Cri) 580], SCC p. 730, para 136)
"136. ... 'No person shall be deprived of his life or personal liberty
except according to fair, just and reasonable procedure established
by valid law.'
B 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."'
c
58. This epoch-1i:rnking decision in Maneka Gandhi [( 1978) I
sec 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
D Gandhi [(1978) 1SCC248] elaborated, in his inimitable style, the
transition from the phase of the rule of law to due process of law.
The relevant statement oflaw given by the learned Judge is quoted
below: (SCC p. 337, para 81)
"81 . ... 'Procedure established by law'. with its lethal potentiality,
E 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
F
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."
G
S9. Imnlediately after the decision in Maneka Gandhi ((1978) I
SCC 248] another Constitution Bench of this Court rendered
v.
decision in Sunil Batra Delhi Admn. ((1978) 4 SCC 494: 1979
SCC (Cri) 155) specifically acknowl~dged that even though a
clause like the Eighth Amendment of the United States Constitution
H
NIKESH TARACHAND SHAH v. UNION OF INDIA & ANR. 393
[R.F. NARIMAN. J.]

and concept of "due process" of the American Constitution is not A
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.
B
held: (Sunil Batra case [(1978) 4 SCC 494: 1979 SCC (Cri)
155] ; sec 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."
c
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 D
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 E
sec 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)
l SCC 248], Article 21 was viewed by this Court as rarely F
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 G
given by S.R. Das, J. in his judgri1ent in A.K. Gopalan [AIR 1950
SC 27: (1950) 51CriLJ1383] that ifthe law provided the Bishop
of Rochester "be boiled in oil" it would be valid under A1ticle 21.
But after the decision in Maneka Gandhi [(1978) 1 SCC 248]
which marks a watershed in the deveJopment
(
of constitutional
H
394 SUPREME COURT REPORTS [2017] 12 S.C.R.

A 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
B
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
c 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 oflegislation laid down
D in these judgments, we have to see whether Section 45 can pass
constitutional muster.
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
E 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;
F (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
G (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;

H
NIKESH TARACHAND SHAH v. UNION OF INDIA & ANR. 395
[R.F. NARIMAN, J.]

Provided that a person who is under the age of sixteen years, is a A
woman or is sick or infirm, may be released on bail, ifthe 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- B
(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 special order made in this behalf by that
Government. C
(2) The limitation on granting of bail specified in clause (b) of sub-
section (I) 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."
D
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 E
originally read as follows:
"45. Offences to be cognizable and non-bailable.-
(1) Notwithstanding anything contained in the Code of Criminal
Procedure, 1973 (2of1974),-
F
(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 G
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

H
396 SUPREME COURT REPORTS (2017] 12 S.C.R.

A 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 ori bail, if the
Special Court so directs:
B 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 Cen.tral Government by a general or special
c order made in this behalf by that Government.
(2) The limitation on granting of bail specified in clause (b) of sub-
section (I) is in addition to the limitations under the Code of Criminal
Procedure, 1973 (2of1974) or any other law forthe time being in
force on granting of bail."
D 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
E 121 and 121A of the Indian Penal Code, which deal with waging or
attempting to 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
F 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
G
against the Government ofindia 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 Section45(1)
NIKESH TARACHAND SHAH v. UNION OF INDIA & ANR. 397
[R.F. NARIMAN, J.]

would not apply. Incidentally, one of the reasons for classifying offences A
in Part A and Part B of the Schedule was that offences specified under
Part B would get attracted only ifthe total value involved in such offences
was Rs.30 Jakhs 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( I) was innocuous and is not an ainendment B
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, I 967, which dealt with terrorist
activities, were added. In Part B, several other offences were added C
from the Indian Penal Code, as were offences under the Explosives Act
1884, Antiquities andArts 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 D
Protection of Children) Act 2000, Emigration Act 1983, Passports Act
1967, Foreigners Act 1946, Copyright Act 1957, Trademarks Act 1999,
Information Technology Act 2000, Biological Divers.ity Act 2002,
Protection of Plant and Farmers Rights Act 2001, Environmental
Protection Act 1986, Water (Prevention and Control of Pollut.ion Act)
1974, Air (Prevention and Control of Pollution Act) 1981 and Suppression E
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 F
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 G
threshold does not apply to the offences."
23. By the Finance Act of2015, by Section 145, the limitofRs.30
Jakhs in Section 2(y) was raised to Rs. I crore and in the Schedule after

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398 SUPREME COURT REPORTS [2017] 12 S.C.R.

A Part A, Part B was populated with only one entry, namely Section 132 of
the Customs Act. Certain other 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,
B 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
c 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
D 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 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
E 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
F 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 underthe 2002 Act together with a predicate offence contained
in Part B of the Schedule. Both these offences would be tried together.
G 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 together with a
predicate offence contained in Part A of the Schedule in which the term

H
NIKESH TARACHAND SHAH v. UNION OF INDIA & ANR. 399
[R.F. NARIMAN, J.]

for imprisonment would be 3 years or less than 3 years (this would apply .A
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 Cdminal Procedure by the Special
Court/High Court, with or without conditions, as Section 45 of the 2002
B
Act would have no application.
26. The fourth illustration would be an illustration in which Mr. X
is prosecuted for an offence under the 2002Act and an offence punishable
for a term of imprisonment of more than three years under Part Aof 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 C
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 imprisonment for over three years. The likelihood of D
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 E
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 F
under th~ 2002 Act. Mr. X may be a person who is liable to be prosecuted
for an offence, whi<:h 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. Thismoney is ultimately traced to
Mr. Y, who is charged with the same offence under Part A of the Schedule G
and is also charged with possession of the proceeds of c~ime, 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

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400 SUPREME COURT REPORTS (2017] 12 S.C.R.

A 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
B
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
c 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, discriminatory and unjust results would arise on the
application or non application of Section 45, and would directly violate
D 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
E 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
F 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 offence of money laundering is involved, if Section 45 is to be applied,
G 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
H
NIKESH TARACHAND·SHAH v. UNION OF INDIA & ANR. 401
[R.F. NARIMAN. J.]

Narcotic Drugs and P~ychqtropic Substances Act, 1985, the reasonable A
grounds for believirtg. that the accused is not guilty of an offence is in
relation to an offence under the very Act in which such section o~C.\JrS,
(See for example, Section 20(8) of TADA and Section 37 oftht;;:t\fD:PS'.
. ····:· '
Act). It is only in the 2002 Act that the twin conditions laid down <.'lo ·nql ·
relate to an offence under the 2002 Act at all, but only to a separate and
B
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 it~ mind
to whether the person prosecuted is guilty of the offence of nioriey
laundering, but instead applies its mind to whether such person 1s guilty· C
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 4!ffei¢nt.
. ,•" .... ,_.
~ ~ ~·

offence - namely, money laundering. This; again, is laying dowifof'a ·
condition which has no nexus· with the offence of money laund~riilg at·
all, and a person who m11y prove that there are reasonable groimds for
believing that he is not guilty of th,e offence of money laundefing may
yet be denied bail, because he is unable to prove that there are rea~onable'
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. E
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 F
offences 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 G
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
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402 SUPREME COURT REPORTS •[2017] 12 S.C.R.

,
A which such offences would be made out, such classification would
obviously have a rational relation to the object sought to be ach.ieved 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
B
would be a manifestly arbitrary and unjust classification, having no rational
relation to the object sought to be achieved by an Act 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
c ~chedule 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
D 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
E 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 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
F 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
G 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 oflegislation
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
H
NIK.ESH TARACHAND SHAH v. UNION OF INDIA & ANR. 403
[R.F. NARIMAN, J.] .

Legislature, its action can be annulled as offending against the· A
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."
B
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 offenc,~s
committed under the Act, and, therefore, have to be annulled on the
basis of the equal protection clause.
c
31. When we go to Part A of the Schedule as it now exists, it is
dear. 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 D
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 E
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,
42
the twin conditions contained in Section would apply to him. Similar
is the case with offences where a punishment of maximum of JO years
is given. Section 240 dealing with delivery oflndian coin possessed with
knowledge that it is counterfeit; Section 251 dealing with delivery of F
Indian coin 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 PartA of the Schedule
and are punishable with the maximum of I 0 years sentence. Each of
these offences may involve money laundering, but not being in Part A of G
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 extortio.n under Sections 386 or 388, (such sections being included
in Part A of the Schedule) and Section 4 uf the 2002 Act, the person
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404 SUPREME COURT REPORTS [2017] 12 S.C.R.

A 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.
B 32. When we come to paragraph 2 of Part A of the Schedule, this
becomes even more apparent. Sections 19, 24, 27 A and 29 of the
Narcotic Drugs and Psychotropic Substances Act, 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,
c a person prosecuted for these offences has to meet the same twin
conditions which are contained in Section 45 of the 2002Act. 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
D under Sections 19, 24, Z7A 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
E 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 quantity which is above small quantity, but below commercial
quantity, as defined; and (3) above commercial quantity, as defined. The
F sentences of these offences vary from 1 year for a person found with
.small.c1u;mtity, to 10 years for a person found witli 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
G 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

H
NIKESH TARACHAND SHAH v. UNION OF INDIA & ANR. 405
[R.F. NARIMAN, J.]

the same twin conditions as are contained in Section 45 of the 2002 Act, A
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 tre<ited 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 arbitrary and discriminatory feature B
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, c
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 Section45 of the"2002
Act are satisfied. By no stretch of imagination can this kind ·of an D
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.
35. Another conundrum that arises is that, unlike the Terrorist and E
Disruptive Activities (Prevention) Act, 1987, there is no provision in, th~
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, anticipator'y"bail may be granted to a person
who is prosecuted for the offence of money laundering together with an F
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 G
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 wiil _be out on bail without his having satisfied the twin

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406 SUPREME COURT REPORTS [2017] 12 S.C.R.

A conditions of Section 45. However, if in an identical situation, Mr. Y is
prosecuted for the same offences, 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 extrem.ely anomalous situation showing that
Section 45 leads to manifestly arbitrary and unjust results and would,
therefore, violate Articles 14 and 21 of the Constitution.
B
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, :md the money laundering offence,
c 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
D 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 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
E of the vice of manifest arbitrariness and discrirnination, as has been
pointed out by us hereinabove. Also, we cannot agree ~ith the iearned
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
F 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
G 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 factors set out in paragraph 18 of the
judgment are to be looked at. Under.Section 45, the Court must be
H
NIKESH TARACHAND SHAH v. UNION OF INDIA & ANR. 407
[R.F. NARIMAN, J.]

satisfied that there are reasonable g.rounds to believe that the person is A
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 B
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 81h amendment to the US Constitution. The majority
judgment concluded: c
"In our society liberty is the norm, and detention prior to trial or
wi_thout trial is the carefully limited exception. We hold that the
pr,ovisions 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 D
who are found after an adversary hearing to pose -a threat to the
safety of individuals or t? the community which no condition of
release can dispel. The numerous procedural safeguards·detailed
above must attend this adversary he~ring. We are unwilling to
say that this congressional determination, based as it is upon that E
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 Fiftll Amendment or the Excessive
Bail Clause of the Eighth Amendment."
In a sharply worded minority judgme_nt of Justice Marshall, with F
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 811J amendment to the US Constitution. This it did with
r~ference to an earlier judgment, namely, Stack v. Boyle, 342 US 1,
where Chief Justice Vinson stated that unless pre-trial bail is preserved, G
the pre&umption 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_
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408 SUPREME COURT REPORTS [2017] I 2 S.C.R.

A 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 subst'dntial social costs as a result of our
commitment to the values we espouse. But at the end of the day
the presumption of innocence protects the innocent; the shortcuts
B
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.

c 38. We must not forget that Section 45 is a drastic provision which
turns on its head the presumption ofinnocence 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 guar-
anteed by Article 21 ofthe Constitution o(India, we must be doubly sure
that such provision furthers a compelling State interest for tackling seri-
D ous 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.
E 39. The judgment in Kartar Singh v. State of Punjab, (1994) 3
sec 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
F · 20(8) of TADA, which speaks of the same twin conditions to be applied
to offences under TADA, would pass constitutfonal muster for the
reas·ons stated in the aforesaid judgment. Ultimately, in paragraph 349
of the judgment, this Court upheld Section 20(8) ofTADA in the following
terms:
"349. The conditions imposed under Section 20(8)(b), as rightly
G
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
H
NIKESH TARACHAND SHAH v. UNION OF INDIA & ANR. 409
[R.F. NARIMAN, J.]
'
Section 35(1) of Foreign Exchange Regulation Act and Section A
104( I) 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
B
that "there are grounds for believing that he is not guilty of an
offence", which condition in different form is incorporated in other
Acts such as clause (i) of Section 437(1) of the Code and Section
35( I) of FERA and I 04( I) of the Customs Act, cannot be said to
be an unreasonable condition infringing the principle of Article 21
of the Constitution." c
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 D
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, E
the judgment in Kartar Singh (supra) cannot apply to Section 45 of the
present Act.
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 F
Brahmajeetsing Sharma v. State of Maharashtra and Anr, (2005) 5
sec 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 G
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
H
410 SUPREME COURT REPORTS [2017] 12 S.C.R.

A any offence whatsoever be it a minor or major offence. If such
an expansive meaning is given, even likelihood of com.mission 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
B
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
c 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 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
D
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
E the conclusion that the court must arrive at a positive finding that
the applicant for bail has hot committed an offer;ice 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 offenc.e. In such an event, it will be impossible for the
prosecution to obtain a judgment of conviction of the applicant.
F Such cannot be the intention o(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
G 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
H
NIKESH TARACHAND SHAH v. UNION OF INDIA & ANR. 411
[R.F. NARIMAN, J.]

propensities and the nature and manner in which he is alleged to A
· 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 charged with the offence of
money laundering, and in the case of any other person i.. e. a person not B
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 pres.umption
against the person prosecuted for the crime of money laundering. This
presumption has no application to the scheduled offence mentioned in c
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 SEBIAct, which is a scheduled D
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 E ·
of those cases. These 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 lridia p
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 G
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
Sµpreme Court regarding statutory interpretation and the duty of
H
412 SUPREME; COURT REPORTS [2Pl7J 12 S.C.R.

A the Court to secure the ends of justice'. we have n.o hesitatior'I in
holding that in 2013, Part B of thlSchedl'!Je·wns oinitt'edtlnd the
Scheduled Offences' falling thereunder.w.ere.1l1dorporated in !'.'a.rt
· · · A with the sole obj~ct to overcome the·mor1etaiy threshold lini·it ·
of Rs. 30 lakhs for invocation of PMLA in respect of the laundering
of proceeds of crime involved in' those offences. No subsfantive.
B
.amendment w~s proppsed with express intention to apply
limitatipns 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 ~(bail cont~ined in
a
Section 45(1) as it stands today, are not applicable qua person
c accused .of such offences which were earlier listed in Part B."
. ;_ ', '' ';•.' !

·'The matter cameto this Court by a certificate of fitness granted ..
by 'the High Couri:Sikr1; J; and Ramana, J., by tl;eir order dated 12'h ·
August,
.
2016, stated:
I .

D . ·''Though the High Court has granted .cer~ifo~ate,. to appeal, we
have heard the learned counsel for s.ome time .and are of tqe
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
E
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.
F
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 oflndia. All the matters
before us in which bail h<h been denied, because of the presence of the
G 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
H
NIKESH TARACHAND SHAH v. UNION OF INDIA & ANR. 413
[R.F. NARIMAN, J.]

liberty is involved, all these matters are to be taken up at the earliest by A
the respective Courts for fresh decision. The writ petitions and the appeals
are disposed of accordingly.

Nidhi Jain Writ Petitions and Appeals disposed of.