What’s in today’s article?

• Why in News?
• What is Prevention of Money Laundering Act (PMLA), 2002?
• What is Section 45 of the PMLA?
• What are the legal challenges to twin test?
• Current position

Why in News?

A day after a trial court granted bail to Delhi Chief Minister Arvind Kejriwal, who is in jail for money laundering charges, the Delhi High Court put a hold on that decision. 

The HC Bench heard an urgent request from the Enforcement Directorate to stop the bail and will make a decision next week. The Enforcement Directorate argued that the trial court did not follow the 'twin test' required for granting bail under the Prevention of Money Laundering Act (PMLA).

What is Prevention of Money Laundering Act (PMLA), 2002?

• The Prevention of Money Laundering Act (PMLA), 2002 was enacted in January, 2003. 
• The Act seeks to combat money laundering in India and has three main objectives – 
  • To prevent and control money laundering
  • To confiscate and seize the property obtained from the laundered money; and
  • To deal with any other issue connected with money laundering in India.
• The Act was amended by the Prevention of Money Laundering (Amendment) Act, 2009 and by the Prevention of Money Laundering (Amendment) Act, 2012.
• Most recently, the PMLA was amended through the -
  • Finance Act, 2015 (2015 Amendment)
  • Finance Act, 2018 (2018 Amendment)
  • Finance Act, 2019 (2019 Amendment)

What is Section 45 of the PMLA?

• About
  • Section 45 of the Prevention of Money Laundering Act (PMLA) speaks about the conditions set for bail.
  • It states that no accused person shall be granted bail unless:
    • the Public Prosecutor has been given an opportunity to oppose the application for such release; and
    • 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.
• Stringent norms - twin conditions of bail
  • The twin conditions of bail under Section 45 of the PMLA pose stringent thresholds for an accused. 
  • For one, the person has to prove in court that he or she is prima facie innocent of the offence. 
  • Secondly, the accused should be able to convince the judge he would not commit any offence while on bail. 
  • The burden of proof is entirely on the incarcerated accused, who would be often handicapped to fight the might of the state. 
  • The twin conditions make it almost impossible for an accused to get bail under the PMLA.
• Analysis
  • Bail as an exception
    • Section 45 of the PMLA first states that no court can grant bail except in a few exceptions. 
    • The negative language in the provision itself shows that bail is not the rule but the exception under PMLA.
  • Mandatory to hear the public prosecutor in all bail applications
    • 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.
  • Similar provisions in other statutes 
    • There are similar provisions in several other laws that deal with serious offences:
      • Section 36AC of The Drugs and Cosmetics Act, 1940, 
      • Section 37 of The Narcotic Drugs and Psychotropic Substances Act, 1985, and 
      • Section 43D(5) of the Unlawful Activities (Prevention) Act, 1967.

What are the legal challenges to twin test?

• 2017 Ruling: Nikesh Tarachand Shah v Union of India
  • The first challenge to the constitutional validity of the twin test under PMLA came in the 2017 case Nikesh Tarachand Shah v Union of India. 
  • A two-judge Bench struck down the twin bail provision as unconstitutional, citing it failed the test of 'reasonable classification'. 
• Reintroduction of Provisions: Finance Act, 2018
  • Despite the ruling, Parliament reintroduced the twin test provisions through the Finance Act, 2018. 
  • This led to another round of legal challenges in various High Courts, ultimately culminating in a batch of petitions before the Supreme Court.
• 2022 Ruling: Vijay Madanlal Choudhary v Union of India
  • In 2022, the Supreme Court heard the batch of petitions as Vijay Madanlal Choudhary v Union of India. 
  • Petitioners argued that the reasoning in Nikesh Tarachand Shah was still valid, even if Parliament reinstated the law. 
  • However, a three-judge Bench rejected the previous ruling. The Bench disagreed with the observations in Nikesh Tarachand Shah.
  • It emphasized the perception of Parliament regarding the seriousness of money-laundering and its threats to national sovereignty and integrity.
• Legal Experts' Critique
  • Legal experts have criticized the logic of treating money laundering on par with stringent anti-terror and narcotics laws.
  • They noted that the maximum sentence for money laundering is only seven years, or ten years if it involves narcotics.
• Government's Argument
  • The government argued that those involved in money laundering are influential, intelligent, and resourceful. 
  • The crime is premeditated, making it difficult for investigation agencies to detect and trace evidence. 
  • The government defended the strict bail conditions, stating that the offence involves advanced technology to conceal transactions.

Current Position

• Key Challenge to 2018 Amendment on Bail remains
  • One major challenge to the amendment on bail in the Vijay Madanlal Choudhary ruling involves whether these amendments can be passed through the Money Bill route. 
  • A larger Bench of the SC is set to review if laws like the Aadhaar Act and service conditions for Tribunal members can be passed this way, though the Bench is yet to be constituted.
• Current Validity and Application of the Ruling
  • Although the Supreme Court has agreed to review its ruling in the Vijay Madanlal Choudhary case, the decision remains valid as no stay has been issued. 
  • The ruling mandates that the twin test must be strictly applied by all courts, including special and constitutional courts, for both regular and anticipatory bail.
• Alternative Bail Provision
  • Despite this, an accused can still be eligible for bail under Section 436A of the Code of Criminal Procedure (CrPC). 
  • This provision allows for the release of those who have served half of their maximum sentence. 
  • For instance, in money laundering cases with a seven-year sentence, an accused can seek bail after three-and-a-half years, regardless of the twin test.

Q.1. What is Unlawful Activities (Prevention) Act, 1967?

The Unlawful Activities (Prevention) Act, 1967 (UAPA) is a law in India aimed at preventing unlawful activities and associations. The Act covers a wide range of activities deemed unlawful, including terrorism, secessionist activities, and activities that threaten the sovereignty and integrity of India.

Q.2. What is Code of Criminal Procedure (CrPC)?

The Code of Criminal Procedure (CrPC) is a comprehensive statute in India that outlines the procedures for the administration of criminal law. Enacted in 1973 and coming into force on April 1, 1974, the CrPC lays down the framework for the investigation of crimes, the apprehension of suspects, the collection of evidence, the conduct of trials, the determination of guilt or innocence, and the sentencing of offenders.

Source: Bail in money laundering cases, and the 'twin test' under PMLA | Live Mint | Indian Kanoon

What’s in today’s article?

• Why in News?
• What is the Insolvency and Bankruptcy Code (IBC)?
• What is the Insolvency and Bankruptcy Board of India (IBBI)?
• What is the Process Followed under the IBC?
• What is the Recent Proposal of IBBI?

Why in News?

• The Insolvency and Bankruptcy Board of India (IBBI) has proposed amendments to the Insolvency Resolution Process for Corporate Process regulations.
• These amendments are expected to enhance the efficiency (and reduce costs) and transparency of the Corporate Insolvency Resolution Process (CIRP), and benefit creditors and other stakeholders involved in the CIRP.

What is the Insolvency and Bankruptcy Code (IBC)?

• Insolvency vs Bankruptcy: While insolvency results from an inability to pay debts due to a lack of assets, bankruptcy occurs when an application is presented to an authority declaring insolvency and requesting to be declared bankrupt.
• About the IBC 2016:
  • It is the bankruptcy law of India which seeks to consolidate the existing framework by creating a single law for insolvency and bankruptcy.
  • It is a one stop solution for resolving insolvencies which previously was a long process that did not offer an economically viable arrangement.
  • It aims to protect the interests of small investors and make the process of doing business less cumbersome.

What is the Insolvency and Bankruptcy Board of India (IBBI)?

• It is the regulator for overseeing insolvency proceedings and entities like Insolvency Professional Agencies (IPA), Insolvency Professionals (IP) and Information Utilities (IU) in India.
• It was established on 1 October 2016 and given statutory powers through the IBC 2016.
• It functions under the Ministry of Corporate Affairs and covers Individuals, Companies, Limited Liability Partnerships and Partnership firms.

What is the Process Followed under the IBC?

• When a corporate debtor (CD) or a company which has taken loans to run its business, defaults on its loan repayment, either the creditor or the debtor can apply for the initiation of a CIRP.
  • CIRP stands for Corporate Insolvency Resolution Process (CIRP), which comes under Section 6 of the IBC.
• Earlier, the minimum amount of default after which the creditor or debtor could apply for insolvency was ₹1 lakh.
  • But, considering the stress on companies amid the pandemic, the government increased the minimum amount to ₹1 crore.
• To apply for insolvency, one has to approach a stipulated adjudicating authority (AA) under the IBC.
  • The various benches of the National Company Law Tribunal (NCLT) across India are the designated AAs.
• The Tribunal has 14 days to admit or reject the application or has to provide a reason if the admission is delayed.
  • The CIRP or resolution process begins once an application is admitted by the AA.
  • The amended mandatory deadline for the completion of the resolution process is 330 days.

What is the Recent Proposal of IBBI?

• A comprehensive valuation report for the corporate debtor:
  • The IBBI proposed that the registered valuer should submit a comprehensive valuation report for the corporate debtor as a whole, rather than separate valuations for different asset classes.
  • For companies with an asset size of up to Rs 1,000 crore and MSMEs, the board proposes to appoint only one registered valuer for providing the estimates of the fair value and the liquidation value.
  • However, keeping in view the complexities involved, they can have two valuers.
• Interim resolution professional: To prevent delays in the appointment of authorised representatives (AR) for creditors, the IBBI also proposed to allow the interim resolution professional.
• Issue of release of guarantees in the resolution plan: Such a proposal submitted by the applicant will not extinguish the rights of creditors to proceed against guarantors and enforce realisation of guarantees governed through various agreements.
• Significance of these proposals:
  • These proposals seek to eliminate inconsistencies between the CIRP regulations and the Companies (Registered Valuers and Valuation) Rules.
  • These measures will reduce CIRP costs and expedite the process for small entities.

Q.1. What is the National Company Law Tribunal (NCLT)?

The NCLT is a quasi-judicial body in India established in 2016 under the Companies Act 2013. It adjudicates issues relating to Indian companies and is based on the recommendation of the V. Balakrishna Eradi committee.

Q.2. What are the steps taken by the Indian government to improve ease of doing business?

The Indian government has simplified procedures related to applications, renewals, inspections, etc; rationalised by repealing, amending or subsuming redundant laws; and promoted digitisation to improve ease of doing business in India.

Source: IBBI proposes amendments to insolvency rules; seeks public comments | HBL

What’s in today’s article?

• Why in News?
• What is Burnt memory of EVMs and VVPAT units?
• April 2024 order of the Supreme Court
• Process to be followed for the verification

Why in News?

For the first time, 11 candidates from the recent 2024 Lok Sabha and State Assembly elections have requested verification of the burnt memory of EVMs and VVPAT units. This verification option was made available by the Supreme Court in April. Candidates must cover the verification costs themselves but will be refunded if tampering is detected.

What is Burnt memory of EVMs and VVPAT units?

• The "burnt memory" of EVMs (Electronic Voting Machines) and VVPATs (Voter Verified Paper Audit Trails) refers to the non-volatile memory in these devices where data is stored permanently, even when the device is powered off. 
• This memory contains critical information such as:
  • EVMs: Votes cast during the election, the configuration of the machine, and other operational details.
  • VVPATs: Printed records of the votes cast, which serve as a verifiable paper trail for the electronic votes.
• The process aims to verify the integrity and accuracy of the election results recorded in the EVMs and VVPATs.

April 2024 order of the Supreme Court

• Rejected the plea for 100% verification of VVPAT slips
  • On April 26, 2024, the Supreme Court upheld the EVM-VVPAT system and rejected a plea to return to ballot papers and for 100% counting of VVPAT slips.
• Verification of the burnt memories of EVMs and VVPATs
  • The court directed the Election Commission of India (ECI) to allow verification of EVM and VVPAT burnt memories. 
  • This verification can be requested by second- and third-placed candidates. 
  • It applies to up to 5% of machines in an Assembly constituency or Lok Sabha segment.
    • The burnt memory/microcontroller in 5% of the EVMs, including the control unit, ballot unit, and VVPAT, should be checked for tampering by engineers from the EVM manufacturers upon written request by the second- or third-placed candidates. 
    • Candidates must identify the EVMs by polling station or serial number and can be present during the verification.
• Cost of the process
  • Requests for verification must be made within seven days of the result declaration. 
  • The candidates must bear the verification costs, which will be refunded if tampering is found.

Process to be followed for the verification

• Technical SOP Pending
  • The ECI is yet to finalize the technical standard operating procedure (SOP).
  • The technical SOP, including the methodology, will be released in time for the first set of verifications likely in August.
• Administrative SOP Released
  • On June 1, the ECI released the administrative SOP for checking and verification of the burnt memory of EVMs and VVPATs.
• Responsibilities and Requests
  • The District Election Officer (DEO) will be responsible for the process.
  • Second- and third-placed candidates can request verification of up to 5% of the EVMs and VVPATs per Assembly constituency or Lok Sabha segment.
  • If both candidates request verification, each is allowed to have 2.5% of the EVMs verified.
  • Candidates can choose the units to be verified by polling station number or unique serial number of the Ballot Unit, Control Unit, and VVPAT.
• Application Process
  • Candidates must make the request in writing to the respective DEOs.
  • A deposit of Rs 40,000 (plus 18% GST) per set of EVM (BU, CU, and VVPAT) is required to the manufacturer.
  • DEOs will send a list of applications to the state Chief Electoral Officer.
  • The Chief Electoral Officer will notify the EVM manufacturers, Bharat Electronics Ltd (BEL) and Electronics Corporation of India Ltd (ECIL), within 30 days of result declaration.
• Timing and Conditions for Checking
  • Checking will start at the end of the 45-day period after results are declared, during which Election Petitions can be filed.
  • If no Election Petitions are filed, checking will commence.
  • If a petition is filed, checking will start only after a court order allowing it.
  • The process is to start within 30 days of manufacturers being notified of any Election Petitions.
  • Mid-August is the earliest that results of the checks can be known.
• Verification Process
  • Checking will be done at designated halls within the manufacturers’ facilities.
  • Facilities will have strong rooms and CCTV cameras.
  • Electronic devices, including cell phones and cameras, are not allowed inside the halls.
  • The hall will have a single entry and exit, with armed police force deployed.

Q.1. What is Bharat Electronics Ltd (BEL)?

Bharat Electronics Ltd (BEL) is an Indian state-owned aerospace and defense company, established in 1954, specializing in designing and manufacturing advanced electronic products for the defense sector.

Q.2. What is Electronic Voting Machines (EVMs)?

Electronic Voting Machines (EVMs) are electronic devices used to record and tally votes in elections. They consist of two main units: a Control Unit, operated by election officials, and a Ballot Unit, used by voters to cast their votes. EVMs aim to ensure accurate, efficient, and tamper-proof voting and counting processes.

Source: 11 candidates apply to verify EVM burnt memory: what is this process?