Milords, matters are never concluded: A Critique of Section 45 of the PMLA and the Constitutional Battle Over Bail

Does Section 45 of the Prevention of Money Laundering Act, 2002 (hereinafter, “PMLA”), in its current form, serve the legitimate ends of justice, or does it sacrifice constitutional liberties at the altar of expedient enforcement?^[i] Section 45, PMLA allows for the Enforcement Directorate’s arrest of an accused to be cognizable and non-bailable. This means that a person accused under this act can be arrested without a warrant and cannot demand a bail automatically, or easily, for that matter.

The Act imposes a strict two-fold test, the ‘PMLA Twin Test.’ A person accused under the PMLA can be granted bail only after the public prosecutor has made his representation and the court is satisfied that there are reasonable grounds to believe the accused is not guilty and shall not commit a crime while on bail.

The bar is high and can allow for technicalities to deprive the accused of his or her basic fundamental rights and lead to injustices like prolonged detention and long trial periods. In the case of Jalaluddin Khan vs. Union of India, the Supreme Court (hereinafter, “SC”) held that even when there exist stringent bail provisions under a statute, the “bail is rule, jail is the exception” rule is settled law and still holds true.^[ii]  

Justice R Banumathi, in the case of P Chidambaram vs. ED reiterated the famous triple test that courts have to keep in mind while deciding on bail petitions.^[iii] There are 3 rules- first, the accused should not be at a flight risk, second, there is no chance of tampering with evidence, and third, there is no likelihood that the accused will influence the witnesses.

However, more stringent regulations and laws like the Narcotic Drugs and Psychotropic Substances Act, 1985 (hereinafter, “NDPS”), Unlawful Activities (Prevention) Act, 1967 (hereinafter, “UAPA”) and the PMLA, as discussed, impose stringent and, what many understand as, unconstitutional restrictions on the grant of bail.

2. The Jurisprudential Saga

The PMLA bail jurisprudence begins with the Nikesh Tarachand Shah case (hereinafter, “Tarachand”).^[iv] The first petition filed in 2017 before a division bench held Section 45 of PMLA to be unconstitutional on the basis of the violation of Article 21 of the Constitution.^[v] It held that the constitutional guarantee of not depriving a citizen of his life or personal liberty prevails over any specific law.

Subsequently, the parliament amended the legislation through the Finance Act of 2018, wherein the phrase “an offence punishable for a term of imprisonment of more than three years” was changed to “any offence under the act”.^[vi] This overturned the effect of the Nikesh Tarachand judgement. The judgement delivered in 2017 held Section 45 to be unconstitutional on the basis of reversing the burden of proof regarding the scheduled offences.

A major shift to this bail jurisprudence was seen in 2022 with the Vijay Madanlal Chowdhury decision (hereinafter, “Vijay Madanlal”) of the Supreme Court.^[vii] The Court held Section 45 to be constitutional. In this petition, the petitioners had argued that Section 45 reverses the presumption of innocence and PMLA, which amounts to pre-trial incarceration and violates the principles of affair and reasonable procedure under Article 21 of the Constitution, as also claimed by the petitioners in Tarachand petition.

According to the court, this defect had been cured by the way of the amendment. The court failed to recognise that the fundamental problem with the unamended and the amended provision remains that the burden of proof had been reversed and put on the accused himself, which violates the presumption of innocence and due process safeguards. It made jail, the norm rather than the exception, as is often warned against. It also presumes the guilt of a person accused under the act.

However, the court answered and said that the burden of proof only falls on the accused after the fulfilment of Section 45. Under Section 24 of the PMLA, a person accused of an offence under the money laundering act must prove that the proceeds of the crime are untainted property.^[viii] The court says this only has to be done once the representation by the public prosecutor against the bail has been made and the court is satisfied that the charges against the accused do not have an unfounded basis.

Currently, the Vijay Madanlal case is in review at the Supreme Court in front of the Justice Suryakant, Ravi Kumar and Ujjal Bhuiyan bench. The respondents have contended against the petitioners, bringing up 13 questions of law framed in their review petition saying that near two issues of law were decided in the August 2022 hearing. However, the court has decided not to prematurely disregard these additional questions of law but starts with the questions on maintainability of the review petition, first, as raised by the respondents.

Vijay Madanlal has been brought into review because of the growing concern of the disproportionate power handed over to the Enforcement Directorate, as could be seen in the recent judgement of Karti Chidambaram v. Union of India. This judgement legitimises against and undermined the presumption of innocence and due process safegaurds. In this case, K Chidambaram, a sitting Member of Parliament, challenged Sections 19 and 24 of the PMLA, arguing the violation of Article 21.

In this case, the ED had charged him with money laundering in connection with alleged illegal gratification received during the INX Media transaction when his father, P. Chidambaram, was Finance Minister. Under Section 24(a), the presumption was against him.

This reversal did not remain theoretical. The ED proceeded to attach his properties, including his share in a premium Jor Bagh property in Delhi valued at over Rs. 22 crore, along with multiple bank accounts. The attachment order was grounded precisely on the framework that Vijay Madanlal had sanctioned: the ED could treat the proceeds as presumptively tainted without having to first discharge the burden under ordinary criminal law.

For three years, Karti Chidambaram fought this attachment. But the PMLA Appellant Tribunal held against him, reflecting the unconstitutional spirit that Vijay Madanlal set rolling.

3. Why are the twin conditions problematic in PMLA?

The Vijay Madanlal case piggybacks on Kartar Singh vs. State of Punjab (hereinafter, “Kartar Singh”).^[ix] This judgement of 1994 held similar twin conditions in the Terrorist and Disruptive Activities (Prevention) Act (hereinafter, “TADA”) constitutional. Here, the stringent bail conditions were justified as terrorism is a heinous crime. The bench acknowledged that anti-terror laws create wide exceptions to the usual criminal procedure safeguards.

The court reasoned with the validity of these provisions under TADA by holding that it is a special act required to address grave, national security threats. It used the doctrine of balancing rights i.e. the individual constitutional rights against the compelling state interest, as reasonable restrictions and special procedures to derogate from the normal course of criminal laws in the country. Despite democratic opposition to the legitimacy of the special procedures, such laws providing special treatment in the name of heinous crimes have been upheld by constitutional courts and continue to have the force of law. 

The problem with this comparison is that a financial crime is being compared with a crime that directly attacks the sovereignty and security of a country. This misapplied analogy risks blurring the distinction between economic and national security offences, a move that is doctrinally dangerous and politically convenient. It further disregards proportionality and the varying gravity of crimes under this act.

Further institutionalising stringent bail conditions heightens the risk of prolonged pre-trial detention, which disproportionally affects the marginalised accused and contradicts the right to speedy trial in a fair hearing, potentially undermining the rule of law.^[x]

Additionally, the twin test is irrational and fails to be a balanced law for both the accused and the state. In practice, it is extremely difficult for a judge to be convinced or satisfied that a person, against whom there are charges of a heinous crime, coming out of custody, will not commit an offence.

Further, this puts the judiciary at a deciding pedestal, at the stage of granting bail, and since the legislative intent of PMLA is against the assumption of innocence until guilt is proven, a judge is also likely to keep the same assumption while deciding on granting bail. By forcing a mini trial at the stage of bail, PMLA undermines procedural fairness and converts pre-trial detention into punishment.

4. Exceptions to the Twin test

The proviso under Section 45 provides for exceptions to the twin test on the PMLA. It exempts accused under the age of 16 years, women, sick or infirm from being released on bail on order of the special court. However, another exception that has recently been decided by the Supreme Court is when the arrest itself is illegal.

In the Justice Oka judgement of 2025, the court upheld the High Court finding in the case of ED v. Subhash Sharma, that bail cannot be denied when the accused is arrested illegally.^[xi] The arrest was illegal since the accused was not produced in front of a magistrate within 24 hours from the day and time of rest.

Section 57 of the Code of Criminal Procedure (hereinafter, “CrPC”)^[xii] or Section 57 of the Bharatiya Nagarik Suraksha Sanhita (hereinafter, “BNSS”)^[xiii] also applies to arrest proceedings under the PMLA by virtue of Section 65 of the PMLA.^[xiv] This provision allows the CrPC to operate unless it conflicts with the PMLA. The Court noted that any violation of this safeguard amounts to an infringement of Articles 21 and 22(2) of the Constitution.^[xv] It further held that when an arrest is unlawful, bail must be granted automatically, as the arrest itself stands vitiated.

5. Suggestions & Conclusion

The PMLA twin test brings with it problems that must be tackled with legislative reforms. Even if one was to rely on and accept the SC’s analysis and rationale behind Vijay Madanlal, there still exists a vertical stringency on all PMLA offences, irrespective of how grave one is.

Firstly, a graded-legislative approach must be considered. Herein, the incorporation of a crime and conviction of a person must be based on the seriousness of the offence, graded by the way of the quantum of money allegedly laundered. This must be incorporated within Section 45 as a proviso. Secondly, to tackle the issue of prolonged detention, a provision to review applications periodically must be considered. This must be done for detainees who have spent a defined and considerable period of time in custody.

The struggle over Section 45 is not merely about bail; it is a constitutional debate on law, liberty and resistance.^[xvi] The Supreme Court, has in its hands the opportunity to restore the right to liberty for those detained under the rigours of the PMLA. The stakes could not be higher. And, as the petitioner’s counsel, Senior Advocate Kapil Sibal said on the August 2022 hearing in the revision of the Vijay Madanlal case, ‘Milords, matters are never concluded’.