Explained: Bail in money laundering cases, and the ‘twin test’ under PMLA

• A day after a trial court granted bail to Delhi Chief Minister Arvind Kejriwal who is in jail on charges under the Prevention of Money Laundering Act (PMLA), the Delhi High Court stayed the order.
• The ED challenged the trial court’s order on the ground that the court had failed to apply the ‘twin test’ for granting bail under PMLA.

What is the Twin Test

• Section 45 of the PMLA, which deals with bail, first states that no court can grant bail for offenses under this law, and then proceeds to mention a few exceptions.
• The negative language in the provision itself shows that bail is not the rule but the exception under PMLA.
• The provision makes it mandatory to hear the public prosecutor in all bail applications, and when the prosecutor opposes bail, the court is required to apply a twin test.
• These two conditions are: (i) that there are “reasonable grounds for believing that the accused is not guilty of such offence” (ii) that “he is not likely to commit any offence while on bail”.

Legal challenges to twin test

• The first blow to the constitutional validity of the twin test came in a 2017 ruling, Nikesh Tarachand Shah v Union of India.
  • A two-judge Bench comprising struck down the bail provision as unconstitutional on the ground that the onerous conditions were not a reasonable classification.
• ‘Reasonable classification’ is a feature of the right to equality, which is a fundamental right.
• However, by a subsequent amendment, Parliament put these provisions back in the law through the Finance Act, 2018.
• This re-insertion was challenged before various High Courts and eventually before the Supreme Court, culminating in a batch of petitions that were heard in 2022 as Vijay Madanlal Choudhary v Union of India.

Current position in law

• One key aspect of the challenge to the amendment on bail conditions still remains open even after the Vijay Madanlal Choudhary ruling: the passing of these amendments through the Money Bill route.
• Although the Supreme Court has agreed to review its Vijay Madanlal Choudhary ruling itself, it is still valid law since no stay is operating on the judgment.
• As per the ruling, the twin test has to be rigorously applied by all courts special courts trying money laundering offences as well as constitutional courts.
• It would also apply in the same way for both regular bail and anticipatory bail.
• However, an accused can still get the benefit available under Section 436A of the Code of Criminal Procedure (CrPC), under which he is entitled to bail after serving half of the maximum sentence as an undertrial.
• This means that in most money laundering cases, if the Enforcement Directorate is not able to finish the trial within three and a half years, the accused is entitled to bail, irrespective of the twin test.