Sanjay Singh’s Bail: Judicial Evasion by Non-Order?

On 2nd April, the Supreme Court granted bail to Aam Aadmi Party [“AAP”] MP Sanjay Singh, in what has come to be known as the “liquor scam” case. At the time of writing, Singh had spent around six months in jail.

While the order is undoubtedly significant in that this is the first time that one of the accused in the “liquor scam” case has received bail, the manner in which it has been passed raises a number of crucial issues pertaining to the role and function of the Supreme Court as a court of law. Let us set out the order:

Mr. S.V. Raju, learned Additional Solicitor General appearing for the respondent – Directorate of Enforcement was asked in the morning session to obtain instructions. He states that the respondent – Directorate has no objection in case the appellant – Sanjay Singh is released on bail during the pendency of the proceedings arising out of ECIR no. HIU-II/14/2022 dated 22.08.2022 instituted in respect of offences under Sections 3 and 4 of the Prevention of Money Laundering Act, 2002.

We must record that the concession has been made on behalf of the respondent – Directorate before commencement of arguments on their side. In view of the statement made, we allow the present appeal
and direct that the appellant – Sanjay Singh will be released on bail … []

We clarify that the concession given in the Court today would not be treated as a precedent. We also clarify that we have not made any comments on the merits of the case.

There are three issues with this Order – better called a “non-Order” in my view – that I discuss below.

First, a perusal of the oral arguments reveals that in the morning session (referred to in the Order), the Court made it clear in its remarks that it believed there was no case to be made out against Sanjay Singh. The Court itself encouraged the lawyers for Enforcement Directorate to take instructions from the Agency, and noted that if it came to the examining the case, it would have to pass certain observations about Section 45 of the PMLA (presumably to the detriment of the ED’s powers). As a result, in the afternoon session, the ED’s lawyers came back and told the Court that they had no objection to Sanjay Singh being released on bail. The Order, thus, was passed on the basis of a concession by the State.

However, if you pause to think about this for a moment, there is something bizarre about a Court actively seeking the State’s cooperation so as to avoid ruling against the State. This is no part of the functions of a Court of law. Nor is this the kind of inter-personal dispute where a Court sometimes acts as a mediator. This is a criminal case, where an individual has spent six months in jail, and where multiple courts below have rejected his bail application (needless to say, there was no question of the ED making any concessions as long as it was winning before the lower courts). In other words, it is exactly the kind of case where it is incumbent upon the Court to hold the State to legal and constitutional standards, and to make it abundantly clear – through written, enforceable judicial orders – if the State is failing in its obligations.

Secondly, the concession order has a downstream effect. Recall that the “liquor scam” has seen multiple political leaders behind bars, including the Chief Minister and Deputy Chief Minister of Delhi. While individual cases are, of course, different, there is a common substratum of facts that underlies those cases. While the Court’s reasoned order granting bail to Sanjay Singh need not necessarily have affected those other cases, it might well have done so. The point is, however, that we shall never know, as the Court evaded passing a reasoned order. The result of this is that the other accused in the “liquor scam” case are deprived of even the opportunity of using Sanjay Singh’s bail order in their own, respective future applications for bail. This – for no justifiable reason – tips the balance in favour of the State, and against the individual. And this has become an unfortunate habit of late: recall how, in 2021, the Supreme Court injuncted lower courts from treating the Delhi High Court’s Asif Iqbal Tanha bail order as precedent, for absolutely no reason. The asymmetry here is glaring: when bail applications are rejected, the Supreme Court writes detailed orders explaining why the accused are not entitled to bail (going so far as to observe that “bail is the exception, jail is the rule”), and you can bet that the prosecuting agencies take full advantage of those reasoned orders! But when the boot is on the other foot, we get concession orders or “not to be treated as precedent” remarks, where – at best – one individual might be released from jail, but there is no legal consequence of note that follows.

This brings us to the last point, which is the Supreme Court’s statement that it is not commenting on the merits of the case. This may be a fair comment in general bail cases, but – as we have discussed previously on this blog – when it comes to laws such as UAPA or the PMLA, which encode the “twin test” for bail, this is disingenuous. The reason for this is that the “twin test” statutorily brings in merits considerations into the stage of bail. When the “twin test” says that an accused shall not be released on bail unless “there are reasonable grounds for believing that he is not guilty of such offense,” this is, by definition, merits hearing bundled up into a bail hearing (see the previous discussion, in the context of the UAPA, here). Indeed, the very asymmetry and injustice of the “twin test” lies in the fact that it forces the defence into a merits hearing without the tools normally available to the defence in a criminal case (leading evidence, cross-examination etc). And it is because of that very reason that UAPA/PMLA bails are overwhelmingly rejected, and individuals have to spend months and years in jail without trial.

But this, in turn, means that if an accused individual runs the gauntlet and succeeds in getting bail even under the twin test, he or she should be entitled to benefit from that during the merits phase of the trial as well: what is sauce for the goose is sauce for the gander. Indeed, as I have noted above, it is actually impossible for a “twin test” bail to be granted without an examination of the merits. The concession order, therefore, additionally deprives Sanjay Singh of the very tangible and very real benefits of a reasoned bail order. Again, one would have thought that if you have spent six months in jail without trial, this would be the least you are entitled to from a court of law.

Over the years, it has become increasingly clear that “special laws” such as the UAPA and the PMLA, with their twin test for bail, overwhelmingly stack the deck in favour of the State, and against the individual. In such a context, with the scope of scrutiny of State action already so limited, “concession orders” like the one in Sanjay Singh are disappointing. Arguably, they constitute judicial evasion by another name: an evasion of holding the State to account for its actions that have far-reaching consequences for individual liberty.

Guest Post: The PMLA’s “Adjudicating” Authority as an “Administrative” Body: Appraising the Madras High Court’s Decision

[This is a guest post by Saranya Ravindran.]

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Introduction

The Prevention of Money Laundering Act, 2002 (“PMLA“) allows the confiscation of property allegedly involved in money laundering by the Enforcement Directorate (“ED“) without a hearing, under specified circumstances. To safeguard against potential abuse, Section 6 establishes an Adjudicating Authority (“Authority“) to call upon an aggrieved party to show cause as to why the confiscated property must be released.

The provisional attachment made by the ED is valid for 180 days. However, within 30 days of passing the provisional order, a complaint must be filed before the Authority. If the Authority has reasons to believe that the party is in possession of “proceeds of crime” as defined in Section 2(u) after hearing the officer and the aggrieved party, then it can record a finding to that effect and confirm the provisional attachment. Such an attachment would remain effective until the pendency of proceedings before the Special Courts established under PMLA and a final order of confiscation or release is passed.

Pay Perform India Pvt. Ltd. v. Union of India

The Madras High Court recently was faced with a writ petition questioning whether a single-member bench of the Authority can consist of exclusively executive members (i.e., whether a single-member bench without any judicial member is valid). In RK Jain v. Union of India (“RK Jain“), the Supreme Court held that members of tribunals that exercise quasi-judicial functions should necessarily have experience in law, with qualifications deemed important to effectively adjudicate the dispute.

Relying on RK Jain, the Telangana High Court held that since the Authority is obligated to issue show cause notices, conduct a hearing, appreciate evidence, and give a reasonable opportunity to both parties before passing its order, its functions are similar to a judicial proceeding. On this basis, it concluded that the presence of a judicial member is mandatory. On the other hand, arguing that the Authority makes no final determination on the guilt of the party and merely passes an interim order to continue provisional attachment of properties suspected of being involved in money laundering, the Madras High Court reached the opposite conclusion.

To determine whether power is administrative or quasi-judicial, one must consider various factors, including the nature of the power conferred, the consequences ensuing from the exercise of that power and the manner in which that power is expected to be exercised. Through this analysis, each of these factors would be considered in-turn.

Nature of Power

The petitioners argued that the powers granted to the Authority has all the trappings of a Court. It has the power to summon individuals, inspect records, and has detailed procedures for filing applications, signing pleadings, registering cases, etc. Thus, a holistic understanding of the Authority would make the procedures and powers it has akin to that of civil courts. However, the Court held that these procedures are for “dealing with the ‘administrative case’ and that by itself will not in any manner alter the Adjudicating Authority as ‘the Tribunal or the Court’.” It further held that as per Section 11(3), the proceedings are deemed judicial for the purposes of sections 193 and 228 alone, clearly indicating that it is otherwise an administrative proceeding.

However, instead of determining whether the proceedings are administrative or judicial, the Court operated from the presumption that such a case is administrative. Being administrative, any further guarantee of power akin to that of courts would be irrelevant since the proceeding is prima facie administrative anyhow. Apart from adopting such a circular reason, the Court ignored precedent such as RK Jain and State Gujarat v Utility Users Welfare Association, which noted that the nature of powers conferred is an essential consideration in determining whether a case is administrative or quasi-judicial.

This is why, in Shri Bhawan v. Ram Chand, even the simple function of granting concurrence to a landlord to file an eviction suit against a tenant on non-statutory grounds was deemed quasi-judicial, since the authorities had to consider both sides and determine the relative benefits and harms before making such a determination. This adjudication process led the Court to conclude that the powers exercised were quasi-judicial. In fact, in cases where administrative authorities have exercised similar powers to extend preliminary seizures, such orders have been held as judicial and not administrative.

In Assistant Collector of Customs v. Malhotra, the Supreme Court had to determine whether the power of the collector of customs authorities to extend the period of preliminary confiscation of illegal imports by six months was a quasi-judicial function. The Court held that while the initial seizure was subjectively determined by the authorities, the subsequent extension was not done mechanically but objectively, on facts and investigation. Hence, the power of extending the time limit was deemed quasi-judicial.

Similarly, PL Lakhanpal v. Union of India (“Lakhanpal“) held that a reviewing function of a detaining authority is quasi-judicial. The Court noted that there is a difference in the state’s power to enforce a prima facie detention and to continue them beyond six months. It held that while the initial detention can be made subjectively, further detention has to be based on an objective assessment, evidence, and an opportunity for both parties to be heard. Hence, the latter determination was classified as quasi-judicial. Thus, even if the final subject of detention is the same in both cases, the presence of certain adjudicatory powers can be grounds to classify an act as quasi-judicial. Borrowing from such precedents, an act which extends the provisional attachment of properties beyond the prescribed period must be held as quasi-judicial.

Consequences of exercising power

As per Section 5, the Authority can attach any property believed to be proceeds of crime. This includes property derived either directly or indirectly from crime, with “crime” also defined expansively to include both a scheduled offence and anything related to a scheduled offence. Thus, even links to criminality are sufficient to confiscate property. Hence, as explained previously on this blog here, if some money is invested in a house or a bank account with links to the acts of the offence, those can be attached. While the Madras High Court read this power as relatively inconsequential since the property could be released on final adjudication, the adjudication process could span several years and be an unimaginable burden for someone whose house or bank accounts remain frozen.

If we refer to cases involving similar restriction of rights by customs authorities, orders confiscating goods or imposition of penalty, are commonly regarded as quasi-judicial acts given the severe restriction they impose on property rights of individuals. This is even if such confiscation does not constitute a judgement or order of court for supporting a plea of double jeopardy, or become a conclusive determination of guilt. Under PMLA, the restrictions are even more severe since orders can be passed against persons not even named as the accused of a scheduled offence. Under Section 24, the burden is also on the accused to show how the properties are not involved in laundering. Thus, given the dangerous consequences of the Authority’s powers, discretion to executive in the absence of any judicial member merits rethinking.

Manner of exercising power

The Respondents argued that the Adjudicatory Authority is merely an “additional internal safeguard.” The Authority’s orders are appealable by the Appellate Tribunal and the High Court, with final adjudication of the dispute itself dealt with by the Special Court, which are also appealable to the High Court. Based on this structure, the Madras High Court concluded that the authority “is in place as a check and balance” and “does not also conclusively decide as to whether any property or thing is part of / proceeds of crime or out of any involvement in money-laundering.” Hence, it was held that the Authority was an administrative body.

However, there are two issues with this line of reasoning. Firstly, as seen in cases like Lakhanpal, merely because the order is subject to a final decision does not make the order non-judicial. Civil courts routinely grant interim orders conditional on the final decision. This does not make their acts any less judicial. Thus, conclusive determination is not a necessary criterion for quasi-judicial acts. Secondly, even if a body has Appellate Tribunals and its powers have extensive safeguards, that by itself does not obviate its status as a quasi-judicial entity. Hence, the mere fact that the Authority is present as an institutional safeguard is insufficient to rule out its character as being quasi-judicial, especially given the widespread implications it has for individuals.

Conclusion

The power that the Adjudicating Authority wields is immense, even if it is only exercisable on an interim base. Its exercise has so far been rife with various issues, most recently reflected in Justice Pratibha Singh’s caution to the Authority on passing “templated orders” and to refrain from using “identical templated paragraphs”. Such non-application of mind has the potential to cause serious prejudice to aggrieved parties. Hence, the presence of a balanced coram, mandatorily including judicial members outside the executive, could make a meaningful difference to the operation of the Authority.

Guest Post: Attachment of Property, Freezing Orders, and PMLA Investigations: The Need for Reasonable Exclusions

[This is a guest post by Abhinav Sekhri, first published on the Proof of Guilt Blog.]

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In almost any prosecution, the property used to commit a crime becomes case property (a murder weapon). In some kinds of prosecutions, this extends to locking down the site of criminal acts (a brothel or a gaming house). There are also other prosecutions, such as those for money laundering, where a major focus is on identifying the property generated from criminal acts (flat bought by public servant from bribe money).

Countries across the world take the view that for effective deterrence of crime, law enforcement must also have powers to take away the proceeds of crime besides prosecuting the criminal act itself. In India, this translates into empowering law enforcement agencies with ability to pass orders for attachment / freezing of assets, to restrain anyone from altering / transferring property that is identified as part of the proceeds of crime. The pre-eminent example of this attachment / freezing order regime in India is the Prevention of Money Laundering Act 2002 [“PMLA”].

Broad Powers 

Currently, Section 5 of the PMLA confers upon investigating officers a power to provisionally (for upto 6 months) attach property which is believed to be “proceeds of crime” [Or property that is “involved in money laundering”, which may or may not be understood to mean a different thing]. To appreciate the breadth of this power, take a look at how Section 2(u) of the PMLA defines the phrase “proceeds of crime”:

“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 or where such property is taken or held outside the country, then the property equivalent in value held within the country or abroad;

Explanation. — For the removal of doubts, it is hereby clarified that “proceeds of crime” include property not only derived or obtained from the scheduled offence but also any property which may directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offence;

 

Keeping aside the fact that the exact scope of this definition is still uncertain even to courts and is almost infinitely broad, there are two key takeaways from the definition: (i) Proceeds of crime can either be the actual property obtained through criminal activity or its value; (ii) The criminal activity itself need only be relatable to a scheduled offence [the list of predicate offences which allow invoking the PMLA].

What we have, then, is a power conferred upon investigating officers to take away almost any asset or property that they can show as having links to the alleged acts of criminality in a case. For example, it means the agency can issue warrants of attachment of a house, as the accused would have invested some money in building / buying the house which will be shown to bear a link to the alleged acts of criminality that are connected to the scheduled offence. And where the property itself is not identifiable, then it would probably trigger an attachment order qua certain amounts lodged in bank accounts.

Safeguards

The breadth of provisional attachment powers under the PMLA necessitates the existence of some legal safeguards to prevent undue hardship at the hands of executive officers. Enter, the three-step logic of the PMLA. The argument, essentially, is that the PMLA contains a multi-level system of safeguards to prevent abuse:

1. First level — Provisional Attachment: Provisional attachment orders are time-barred and can only be issued if there are “reasons to believe” that property is the proceeds of crime / involved in money laundering. These reasons must be in writing. Further, such orders cannot interfere with enjoyment of immovable property;
2. Second level — Confirmation: Within thirty days of issuing a provisional attachment order, a complaint must be sent to the Adjudicating Authority which then decides whether or not to confirm the provisional order. This is an independent tribunal which operates totally separately from the criminal court. At this stage, everyone interested in the property has the chance to make their case to show why it shouldn’t be attached, and a reasoned order must be passed by the Authority to justify its conclusions. This process is, again, time-bound.
3. Third level — Appeal: A right of statutory appeal before an Appellate Tribunal for Money Laundering exists for all persons aggrieved by the orders of the Adjudicating Authority.

In almost any writ petition challenging attachment orders, this is a standard response on behalf of the law enforcement agencies to argue that the matter should remain within the PMLA system and not be taken up by the court.

The Need for Reasonable Exclusions

The three-step logic of the PMLA does offer some safeguards, in theory at least. But even so, this setup has critical design flaws.

The broad attachment powers of the PMLA exist in a system where eventual confiscation of the proceeds of crime requires a prior criminal conviction for money laundering offences. Therefore, almost every attachment order will likely subsist for the several years that it takes for any prosecution to complete. It also means that once a person fails to secure any relief through the three-step PMLA process, she will not be entitled to any enjoyment of her own property.

While this might not be a problem for small, replaceable items, such as a watch or a laptop, it becomes an unimaginable problem where the property is a house. Or, far worse, is the situation where the property attached is money lying in bank accounts. Here, the three-step safeguards come to nought as all access to the property is gone the moment a provisional attachment order is passed. What this means, then, is that a person is rendered penniless, and crippled in her ability to sustain the long legal battle required to prove her case first before the tribunals and then later in the criminal trial.

This is not the only drastic scenario that I can imagine. Consider, for instance, a case where money in bank accounts is attached as the actual proceeds of crime have since been sold. But now, these monies are held in the accounts of a company that has nothing to do with any money laundering allegation and offers gainful employment to hundreds of people.

These routine examples from the world of PMLA prosecutions show just how unfair this legal regime is.  It is also squarely unconstitutional. This complete deprivation of property by passing attachment orders for the entire asset is by no means a reasonable or proportionate manner to secure state interests. If anything, it is a classic case of pursuing state interests by trampling upon the most basic rights of affected persons.

A way to make this regime more palatable would be to start recognising reasonable exclusions from the scope of any attachment orders. For instance, allowing persons to remain in possession upon payment of rent; or allowing certain limited withdrawals to continue running a business and paying salaries; or paying lawyers’ fees. These are not revolutionary ideas and are in fact already part of the law in other countries [See, e.g., Section 303Z5 of the U.K. Proceeds of Crime Act, 2002; Luis v. United States, 136 S. Ct. 1083]. By engrafting a process of recognising reasonable exclusions within the PMLA statutory framework — at the stage of provisional attachment orders for movable property and at the confirmation stage for immovable property — the core fairness and proportionality concerns would be answered to some extent. Moreover, it would also help save judicial time, as currently such reliefs are sought either through writ proceedings in High Courts or through interim orders before the Appellate Tribunal.

Conclusions

The PMLA has not been a statute shy of legislative tinkering. Often, this has been a response to some or the other gaps being pointed out in the scheme of the Act. The absence of any reasonable exclusions from the attachment regime is as big a gap as there can be. It leads to a disproportionate deprivation of the basic rights (and needs) of innocent persons, and also wastes valuable judicial time and effort. Ergo, a happy ending? Remember, it is the hope that kills you.