[The Viewpoint] Principles of Bail in Financial Crimes- Need for a Bail Act

The laws relating to financial crimes lack in certain aspects and to deal with the issue of bail in financial crimes, certain amendments are required to be made in the current legislations.
Naveen Kumar
Naveen Kumar

“The issue of bail is one of liberty, justice, public safety and burden of the public treasury all of which insist that a developed jurisprudence of bail is integral to a society-sensitized judicial process.”

                                                                                      - Justice V. R. Krishna Iyer

In India, new laws are brought in place to serve several needs that arise from time to time. In the recent case of Satender Kumar Antil v. CBI and anr., the Hon’ble Supreme Court has flagged a very prominent issue in the criminal justice system i.e., streamlining the law on bails. At present, India lacks a separate enactment on Bail inasmuch as it has been dealt only under the Code of Criminal Procedure, 1973 (hereinafter referred to as ‘CrPC’) and some specific laws. This article will shed some light on the existing bail provisions and the requirement for a new bail act for financial crimes.

The Indian laws do not prescribe any definition for the term ‘Bail’, though it is used very often. The Black’s Law Dictionary defines Bail as-

 “A security such as cash or a bond; especially, security required by a court for the release of a prisoner who must appear in court at a future time.”

Wharton’s Law Lexicon, 14th Edn. Pg. 105 defines bail as-

“To set at liberty a person arrested or imprisoned, on security being taken for his appearance on a day and at a place certain, which security is called bail, because the party arrested or imprisoned is delivered into the hands of those who bind themselves or become bail for his due appearance when required, in order that he may be safely protected from prison, to which they have, if they fear his escape, etc., the legal power to deliver him.”

The CrPC, 1973 lays down provisions regarding bail in bailable offences (Section 436), bail for undertrial prisoners (Section 436A), bail in non-bailable offences (Section 437), bail in case of apprehension of arrest (Section 438), and special powers of the High Court or Court of Session regarding bail (Section 439), among other provisions laid down in Chapter XXXIII of the CrPC, 1973.

The biggest challenge that the judicial system is facing these days is the ever-increasing number of pending bail applications. This clogging of bail applications results in the violation of liberty of thousands of innocent. It is observed that jails in India are flooded with undertrial prisoners and most of the inmates of the prisons constitute undertrial prisoners. Amongst these, the majority are charged with offences that do not even require them to be arrested. These undertrial prisoners mostly comprise of persons who are presumed to be poor, illiterate and semi-illiterate people.

According to Prison Statistics India, 2021 by National Crime Records Bureau, a total of 5,48,469 Indian national inmates consisting of 5,26,379 males, 22,012 females and 78 transgenders were confined in various Indian jails at the end of the year 2021. Out of these, 4,23,015 were undertrials. The State of Uttar Pradesh has reported the highest number of undertrial prisoners (90,274), followed by Bihar (59,455) and Maharashtra (31,250). The majority of undertrials were in the age group of 18 years- 30 years.

The above figure represents the number of SC, ST, OBC and other undertrials in India through the years 2011 to 2021.

Many times trial courts while implementing the bail provisions dismiss the applications providing various vague grounds without even dealing with the issue of whether more detention is necessary or not. The usual reluctance of trial courts in bail matters shift their burden of deciding bail to the Supreme Court and the High Court. The primary task of the higher judiciary is to deal with constitutional matters but they are left to decide bail applications.

Moreover, this makes access to justice for poor people increasingly difficult which further leads to overcrowding of prisons. On the other hand, it is a common practice that people from powerful, rich, and influential backgrounds find it easy to seek bail while the same privilege is being denied to the poor and marginalized. Indian bail system acts on sureties and bonds which often proves to be a deterrent for the poor. 

Need for bail legislation in India

While deciding bail applications, judges have a lot of discretionary power in their hands. This discretionary power results in non-uniformity. Every judge applies different principles in different cases making room for chaos. There are no fixed principles that are adopted by courts while granting bail and the present Indian laws fails to adequately deal with the concept of bail.  These provisions have been there in the statute since the colonial era, and hardly any significant advancement has been made in the law. There is a pressing need for amendment of the law relating to bail to make it more adaptable to deal with modern challenges. Clogging of bail applications has posed to be an unsurmountable challenge to the already strained judicial infructuous time which has resulted in the violation of basic right to liberty of thousands of poor.

The 268th Report of the Law Commission of India has highlighted that the Ministry of Law and Justice itself demanded the commission to look into the need for a separate Bail Act on the same lines as legislation of UK. However, later on the Ministry directed the commission to suggest changes in the CrPC itself. Even after the changes, the CrPC still does not adequately deal with the matters pertaining to bail. One of the major steps that can be taken by the Government in this regard would be to bring into place a separate bail legislation. Such legislation should comprehensively codify with principles evolved by court to deal with bail applications. The provisions of bail legislation may provide inter-alia for clear-cut categorization of offences where a bail can be granted on different criterions. The manner in which bail applications should be dealt with, the standards that ensure bail, the conditions that lead to rejection of bail, bail in exceptional circumstances and also separate provisions for bail of indigent persons.

The new Bail Act should contain guidelines for investigating agencies and courts. In order to escape a situation when the goal of the Act is not fulfilled, the Act should adequately deal with the practical aspects of bail applications; (a) the Act may take into account the scarcity of judges; (b) the language of the Act has to be simple; (c) there should be provisions wherein investing authorities can reasonably apply their mind before seeking detention.

The philosophy of our Constitution as well as our criminal law is that ‘Bail is a rule and Jail is the exception’. Therefore, the Act should focus on parameters that justify detention rather than a release because bail should be a rule.

The Hon’ble Supreme Court in the case of Satender Kumar Antil (supra), issued a few directions which were meant for the investigating agencies and also for the Courts. The most important direction given by the Court was the introduction of a separate enactment in the nature of a bail act so as to streamline the grant of bail. The other directions with respect to bail are mentioned hereinbelow-

a) Bail applications ought to be disposed of within a period of two weeks except if the provisions mandate otherwise, with the exception being an intervening application. Applications of anticipatory bail are expected to be disposed of within a period of six weeks with the exception of any intervening application.

b) There need not be any insistence of a bail application while considering the application under section 88, 170, 204 and 209 of the CrPC.

The Apex Court also categorized offences for the purpose of bringing more consistency in bail law. The offences are categorized into the following four categories:

A) Offences punishable with imprisonment of 7 years or less not falling in category B & D.

B) Offences punishable with death, imprisonment for life, or imprisonment for more than 7 years.

C) Offences punishable under Special Acts containing stringent provisions for bail like NDPS, PMLA, UAPA, Companies Act, etc.

D) Economic offences not covered by Special Acts.

These guidelines are laudable however legislation will provide consistency and clarity on the subject. Consequently, India having its own peculiarity cannot afford to copy other developed countries however it would be useful to take clue from other jurisprudences while considering the need and features of enactment on bail.

Monetary bails pose a problematic issue as nearly 22% of the population is below the poverty line; and it is a matter of fact that money often becomes a hindrance in the grant of personal liberty.

Bail legislation in other countries

Australia

New South Wales in Australia introduced a separate enactment, known as the Bail Act 1978to deal with the aspects of bail. It is a reform-oriented Act, which aimed at simplifying the Bail Procedure. The Act had three classes for eligibility for bail- minor offences where people were entitled to bail, offences where bail was favoured, and a third where there was no recommendation for or against bail. It also included the aspects of monetary valuation for granting bail and how the circumstances of every individual have to be taken into consideration. This Bail enactment was frequently amended in order to satisfy the current needs. The Act of 1978 has been repealed and replaced with the Bail Act, 2013. The Act of 2013 uses an “unacceptable risk” test in regard to whether “the accused will fail to appear in any proceedings for the offence, commit a serious offence, endanger the safety of victims, individuals or the community, or interfere with witnesses or evidence.

United Kingdom

In UK, a separate legislation titled the Bail Act was brought in the year 1976. This Act was enacted to create more conditions by which bail could be refused to the defendants and wider parameters were prescribed for granting of bail. The Act created a qualified right to be granted bail before conviction, subject to certain exceptions. It involved a simple procedure for ensuring Bail to the accused which is to be granted to everyone except for those offenses that fall under Schedule- I of the Act. There are two types of bail under the Act i.e., conditional and unconditional. The only requirement prescribed under unconditional bail is to attend court at a specified date and time whereas conditional bail prescribes further conditions to a person’s bail. The main objective of the Act is to reduce the prison inmate population and reinforce the presumption that bail will be granted- which also includes an exception in cases wherein it is believed that the accused will not surrender to custody or commit an offence on bail or interfere with witnesses. Other aspects of the legislation include bail conditions, bail with sureties, police bail and legal aid.

United States of America

In the pre-independence time, bail law of America was based on English law. After the Declaration of Independence in the US in 1776, those states that had not already enacted any bail law enacted their own versions. The Eighth Amendment to the United States Constitution states: “Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted.” This amendment prohibits the federal government from imposing unduly harsh penalties on criminal defendants, either as the price for obtaining pre-trial release or as punishment for crime after conviction. In 1966, Congress enacted the Bail Reform Act of 1966 and the Act expanded the rights of bail of defendants. Moreover they can be released in their personal recognizance or on personal bond, unless a judicial officer finds that such incentives would not be adequate to ensure the appearance of defendants at the trial. The judge can impose further restrictions while granting bail and the defendants who lacked the financial means to apply for bail were not given any benefit through the Act of 1966. Although to overcome the drawbacks of the Act of 1966, it was replaced by the Bail Reform Act, 1984. The Act permits the pre-trial detention of individuals depending upon the danger those individuals pose to the community. However, in the case of United States v. Salerno, the Supreme Court held the pre-trial detention provision of the 1984 Act to be constitutional.

Bail practices in the US vary from state to state. New Jersey and Alaska have enacted reforms that have abolished cash bail for the majority of cases. Four states, Illinois, Kentucky, Oregon and Wisconsin, had abolished commercial/for-profit bail bonds by bail bondsmen and required deposits to courts instead. California uses a bail schedule system and the judges while referring to the bail schedule are required to take into account the defendant’s criminal record. In Tennessee, all offences are bailable, but bail may be denied to those accused of capital crimes.

Bail in Financial Crimes

Economic offences pose grave threats to progress and stability to the nation. They are treated as a separate class of crime. The reason behind this segregation is the fact that economic offences affect and harm the population at large. The economic offences are usually committed by well-educated ones under secrecy and well-planned conspiracies. The principles of bail which may otherwise be relevant for other categories of cases can’t be adequate in case of white-collar crimes.

The approach of the judiciary towards granting bail to economic offenders is that bail should be granted only in exceptional cases after taking into consideration the relevant factors of the case and the prejudice that has been caused to society.

In the case of Mallampati Gandhi S/O. Naga Raju v. The State of Telangana, the Hon’ble Supreme Court observed that bail law on economic and white-collar offences is well delineated and no more res integra. Echoing the concern for economic offences. The court observed that the economic offences are more dangerous and have a far-reaching impact on society. In dealing with such bail applications, the Apex Court as well as the High Court have to analyze and evaluate the relevant factors cautiously.

In the case of V.K Murthy v. The Statethe Hon’ble Supreme Court held that an economic offence is committed with comprehensive calculation and thoughtful design with an eye on personal profit regardless of its consequence on the Community. The Hon’ble Apex Court was of the view that economic offences are a different class and need to be visited with a different approach in the matter of bail.

Special laws have been enacted to deal with economic offences. These special laws have adopted a different approach towards bail and the Prevention of Money Laundering Act, 2002 is one such provision.

The Prevention of Money-Laundering Act, 2002 (PMLA)

Money Laundering is the process of hiding the source of money obtained from illegal sources and converting it to a legal source, thereby avoiding prosecution, conviction, and confiscation of the criminal funds. It is an illegal exercise whereby black money is converted into white money. Money laundering is a heinous crime, which not only affects the social and economic fabric of the nation, but also tends to promote other heinous offences such as terrorism, offences related to NDPS Act, Prevention of Corruption Act, etc.

Section 45 of the PMLA. deals with the provision of bail for offences involving money laundering. The section lays down twin conditions with respect to granting of bail. The following are the conditions under which bail is granted by the special court: 

  1. The public prosecutor is provided with an opportunity to oppose the application for such release; and 

  2. 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.

These twin conditions laid down by the Section cast a duty upon the court that the courts have to ensure that the Public Prosecutor is allowed to oppose the application for such release and on making such opposition, the Court is satisfied that the accused has either not committed the offence or he is not likely to commit any offence if he is granted bail. The order granting bail must also provide a written record of the prima facie satisfaction of the court.

Section 45 of PMLA has been amended in 2005, 2018 as well as 2019. The constitutional validity of the then existing sub-section (1) of Section 45, was contested in the case of Nikesh Tarachand Shah v. Union of India. The section as it stood before the amendments applied only to offences punishable for a term of imprisonment of more than three years under Part A of the Schedule of the PMLA and not even linked to the offences of money laundering under the PMLA. Granting of bail was also subject to the twin conditions i.e., that there are reasonable grounds for believing that he is not guilty of the offence and that he is not likely to commit any offence while on bail. The Supreme Court in the case of Nikesh Tarachand Shah declared twin conditions to be violative of Articles 14 and 21 of the Constitution. The reason behind such a declaration is that firstly the provision contained a classification based on sentencing and secondly, the twin conditions were restricted only to a particular class of offences within the PMLA, such as offences punishable for a term of imprisonment for more than three years under Part A of the Schedule, and not to all the offences under the PMLA.

The amendment of 2018 cured the defects noted by the court in the case of Nikesh Tarachand Shah and substituted the words “punishable for a term of imprisonment of more than three years under Part A of the Schedule” by the words “under this Act”.

In the recent case of Vijay Madanlal Choudhary v. Union of India, an issue was raised before the Hon’ble Supreme Court that whether the twin conditions, in law, continued to remain in the books post the decision of the Supreme Court in the case of Nikesh Tarachand Shah. The Court noted that the defects in the Act highlighted by the case of Nikesh Tarachand Shah were duly cured by the 2018 amendment. The amendment deleted the opening part of the section that was declared as unconstitutional and instead applied the twin conditions to all the offences under the PMLA. Parliament was in a position to cure the defect noted by the Court and to revive the same provision as in the present form, post-amendment Act 13 of 2018.

Another issue that arose in the case of Vijay Madanlal Choudhary was with respect to the application of Section 45 of the Act in respect of anticipatory bail filed under Section 438 CrPC. The Apex Court clarified that if a person applied for bail after arrest, he/she can be granted that relief under Section 45 of the Act after fulfilling the twin conditions prescribed in the section. However, another person who is yet to be arrested for the same offence, will not be required to comply with such twin conditions whilst considering his application for grant of bail under Section 438 of the CrPC. The underlying principles of Section 45 should come into play in respect of bail application either before arrest or after arrest to achieve the objectives of the PMLA.

The Prevention of Corruption Act, 1988

The Prevention of Corruption Act, 1988 (PCA) came into existence to tackle the increasing problem of corruption among public officials in government agencies and business being owned by the government. The Act does not expressly contain any provisions regarding bail however the same are highlighted through judicial decisions. One such case is of YS Jagan Mohan Reddy v. CBI. In this case, the Supreme Court was dealing with the bail application for offences under the Prevention of Corruption Act. The Court was of the view that at granting bail the Court has to keep in mind the nature of accusation, the nature of evidence in support thereof, the severity of the punishment, the character of the accused, reasonable possibility of securing the presence of the accused during the trial, rational apprehension of the witnesses being tampered with and the larger interests of the public/state and other similar considerations.

The Narcotic Drugs and Psychotropic Substances Act, 1985

The Narcotic Drugs and Psychotropic Substances Act of 1985 (“NDPS”) was brought into force to make stern provisions for the control and regulation of activities relating to narcotic drugs and psychotropic substances. The Act prohibits the production, manufacturing, cultivation, possession, sale, transportation, purchasing, and consumption of any narcotic drugs and psychotropic substances.

The bail conditions prescribed by Section 37 of the NDPS Act are similar to the bail conditions laid down in PMLA.

In the recent case of Union of India v. Md. Nawaz Khan, the bench of Dr. DY Chandrachud and BV Nagarathna, JJ. dealt with the principles regulating the grant of bail, especially in cases under the NDPS Act. The Court observed in this case that given the seriousness of offences under the NDPS Act, stringent parameters have been prescribed under the Act for granting of bail.   

Need for a Bail act for financial crimes

Financial crimes are well-planned and organised crimes. They act as facilitators for other crimes. They drain the public wealth and elevate economic inequalities. Keeping in mind the consequences of such offences on the society, the courts have classified them to be of a distinct class. The courts have departed from the basic jurisprudence of bail being the norm and jail being the exception and have put the interests of society first in preventing and punishing economic offenders. Judicial decisions suggest certain factors that are to be kept in mind while exercising discretion in granting of bail. A person who is able to commit an economic offence can easily tamper with evidence and cause obstructions to the investigation process and thus courts should exercise greater caution while dealing with application for bail in such cases.  

The stringent conditions related to bail as provided in the PMLA and NDPS Act are in line with the objective of punishment of economic offenders.

The laws relating to financial crimes lack in certain aspects. Some legislations contain offences but do not contain any provisions with respect to bail. Courts are often in a dilemma as to what conditions should be followed while granting bail to the offenders. It is also suggested by several judgments of the Supreme Court that different principles should be adopted by the courts while granting bail in economic and other offences. The parameters that are to be taken into consideration while granting bail should be clearly mentioned. Consequently, for effectively dealing with the issue of bail in financial crimes, certain amendments are required to be made in the current legislations. A clear classification of bailable and non-bailable offences should be made in these legislations.

In these offences there are high chances of the offender escaping from the clutches of law. Such offences need a different approach in the matter of bail; a new legislation should bring in place a separate mechanism which exhaustively deals with bail in economic offences and also prescribe the conditions that can be imposed while granting bail as well as the principles that are to be taken into consideration in every case before granting bail. It is therefore imperative that a comprehensive legislation is enacted for bringing in clarity, consistency and effective mechanism for dealing with the request for bail in several categories of cases. It will also ensure de-clogging of prisons and courts in order to focus on the protection of fundamental right of liberty.

Naveen Kumar is an Advocate-on Record at the Hon’ble Supreme Court of India and has appeared in several mining related cases before courts/tribunals across India.

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