The Article 11 of the Universal Declaration of Human Rights states that “Everyone charged with a penal offence has the right to be presumed innocent until proved guilty according to law in a public trial at which he has had all the guarantees necessary for his defence.” The Preamble to the Constitution of India states that the people of India have solemnly resolved to secure to all its citizens fraternity assuring the dignity of the individual and the unity and integrity of the nation. The Supreme Court has interpreted the Constitution of India to include ‘the right to live life with dignity’ under the ‘Right to Life’. The dimension of ‘dignity’ within the ‘Right to Life’ found a discussion in the case of Maneka Gandhi v. UOI & Onr. (1978) 1 SCC 248. The Supreme Court in the case of Samatha v. State of A.P. (1997) 8 SCC 191, categorically held that the right to life enshrined in Article 21 of the Constitution of India means something more than mere survival of animal existence. The right to live with human dignity also found resonance within Article 21. Dignity has, since then, been an important consideration in a variety of Judgements that have extended the protection accorded by the fundamental rights while exalting ‘Right to Privacy’ in K.S. Puttaswamy & Onr. (2017) 10 SCC 1 by a bench of nine Judges or in others such as Navtej Singh Johar & Ors. v. UOI (2018) 10 SCC 1.
It would then come as no surprise to anybody that the presumption of innocence goes to the very root of the dignity of an individual. The accusation of a crime, even a white collar one is clearly an assault on the dignity of an individual. To presume, even fractionally, that the person is guilty by shifting a part of the burden off the prosecution on to the defendant itself, is an annihilation of it.
The Supreme Court had, as long back in 1987, elevated economic offenses to the very near to the top of the pyramid of crime. In Gujrat v. Mohanlal Jitmalji Porwal & Ors. (1987) 2 SCC 364, the Court stated that “The entire Community is aggrieved if the economic offenders who ruin the economy of the State are not brought to books. A murder may be committed in the heat of moment upon passions being aroused. An economic offence is committed with cool calculation and deliberate design with an eye on personal profit regardless of the consequence to the Community. A disregard for the interest of the Community can be manifested only at the cost of forfeiting the trust and faith of the Community in the system to administer justice in an even handed manner without fear of criticism from the quarters which view white collar crimes with a permissive eye unmindful of the damage done to the National Economy and National Interest”. As the position stands today, the prosecuting agencies for murder need to prove the crime of the Accused beyond reasonable doubt, but in certain economic offenses, the burden of proof has been shifted onto the accused through the introduction of statutory presumption.
Subsequently, the Court in Ram Narain Popli v. CBI (2003) 3 SCC 641 reiterated its observations in Gujrat v. Mohanlal Jitmalji Porwal & Ors. further observing that “The cause of the community deserves better treatment at the hands of the Court in the discharge of its judicial functions. The Community or the State is not a persona non grata whose cause may be treated with disdain.. ..Unfortunately in the last few years, the country has seen an alarming rise in white-collar crimes which has affected the fibre of the country’s economic structure. These cases are nothing but private gain at the cost of public, and lead to economic disaster.” These judgements have been liberally used in a very general sense by prosecuting agencies to justify their actions in prosecutions in white collar crimes. They have also been cited generously in order to oppose bail of those accused to white collar crimes. They have also managed to, by a single stroke of the brush, paint all economic offenses in a single colour. As the world of business develops and regulation / compliances become increasingly complex, ‘economic offenses’ have greatly increased in number. The comparison of an economic offender with a murderer is telling.
Our Supreme Court has held that economic offenses are a class unto themselves. In Y.S. Jagan Mohan Reddy v. CBI, (2013) 7 SCC 439 while dealing with the Prevention of Corruption Act, the court was pleased to hold that “Economic offences constitute a class apart and need to be visited with a different approach in the matter of bail. The economic offences having deep-rooted conspiracies and involving huge loss of public funds need to be viewed seriously and considered as grave offences affecting the economy of the country as a whole and thereby posing serious threat to the financial health of the country.”
Bail in Economic Offenses
The differential treatment meted out to economic offences and consequently to those accused of indulging in such economic offences extends into the realm of bail. There is a golden rule of criminal jurisprudence that proclaims that Bail is the rule and jail is the exception. In fact courts have time and again considered the effect that refusal of bail has upon the right to life as enshrined by Article 21 of the Constitution of India. The eloquence of Justice Krishna Iyer captures the conundrum of “bail or jail” aptly in Gudikanti Narasimhulu & Ors. v. P.P. (1978) 1 SCC 240.
Justice Krishna Iyer made an erudite attempt to balance the rights enshrined in Article 21 as against the dangers posed to the society observing that “”Bail or jail?- at the pre-trial or post- conviction stage-belongs to the blurred area of the criminal justice system and largely binges on the hunch of the bench, otherwise called judicial discretion. The Code is cryptic on this topic and the court prefers to be tacit, be the order custodial or not. And yet, the issue 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 socially sensitized judicial process.. ..Personal liberty, deprived when bail is refused, is too precious a value of our constitutional system recognised under Article 21 that the curial power to negate it is a great trust exercisable, not casually but judicially, with lively concern for the cost to the individual and the community. To glamorize impressionistic orders as discretionary may, on occasions, make a litigative gamble decisive of a fundamental right. After all, personal liberty of an accused or convict is fundamental, suffering lawful eclipse only in terms of ‘procedure established by law’. The last four words of Article 21 are the life of that human right. The doctrine of Police Power constitutionally validates punitive processes for the maintenance of public order, security of the State, national integrity and the interest of the public generally. Even so, having regard to the solemn issue involved, deprivation of personal freedom, ephemeral or enduring, must be founded on the most serious considerations relevant to the welfare objectives of society, specified in the Constitution.”
The grant of bail to a person accused of economic offences including tax crimes have been vehemently opposed by the prosecuting agencies. The Supreme Court has held that economic offences, being a class unto themselves, deserve to be considered more strictly and the conditions for bail need to be more stringent. In Y.S. Jagan Mohan Reddy v. CBI, (2013) 7 SCC 439, the Supreme Court held that “While granting bail, the court has to keep in mind the nature of accusations, the nature of evidence in support thereof, the severity of the punishment which conviction will entail, the character of the accused, circumstances which are peculiar to the accused, reasonable possibility of securing the presence of the accused at the trial, reasonable apprehension of the witnesses being tampered with, the larger interests of the public/State and other similar considerations.”
An apt example of the difficulty posed by this approach to economic offences can be captured by looking at The Prevention of Money Laundering Act. This act has the distinction of recently regularly featuring in most major newspapers allegedly as a weapon by whichever government of the day that holds the reins of administration at the junior level to be used against those in opposition. Without stoking up any controversies regarding the merits of that claim, the provisions of this act are those that can easily be abused. A prime example would be Section 45, that imposes a twin condition for grant of bail. The Supreme Court in the cases of UOI v. Varinder Singh (2018) 15 SCC 248, Gautam Kundu v. Directorate of Enforcement (2015) 16 SCC 1 and Rohit Tandon v. Directorate of Enforcement (2018) 11 SCC 46 held that adherence to the conditions envisaged in Section 45(1)(ii) of the Act is required for the grant of bail. Subsequently, the Supreme Court, while observing that the earlier Judgements had not examined the constitutional validity of the Section 45(1), declared Section 45(1) of PMLA, insofar as it imposes two further conditions for release on bail, to be unconstitutional as it violated Articles 14 and 21 of the Constitution of India in the case of Nikesh Tarachand Shah v. UOI & Onr. (2018) 11 SCC 1.
The Judgement of Nikesh Tarachand Shah v. UOI & Onr. (2018) 11 SCC 1, is especially important given that Section 45(1)(ii) of the Prevention of Money Laundering Act not only required the accused to satisfy the court that there are reasonable grounds for believing that he/she is not guilty of the offence “punishable for a term of imprisonment of more than three years under Part A of the Schedule” but also that he/she is not likely to commit any offence while on bail. These conditions for refusal of bail as prescribed by Section 45(1)(ii) of the act had loaded the dice in the favour of the prosecution, making offences under the Prevention of Money Laundering Act draconian in nature.
In P. Chidambaram v. Directorate of Enforcement, (2019) 9 SCC 24, the Supreme Court refused bail to the Applicant holding that the “Grant of anticipatory bail at the stage of investigation may frustrate the investigating agency in interrogating the accused and in collecting the useful information and also the materials which might have been concealed. Success in such interrogation would elude if the accused knows that he is protected by the order of the court. Grant of anticipatory bail, particularly in economic offences would definitely hamper the effective investigation.” This Judgement has been quoted widely to oppose anticipatory bail.
It is not difficult to imagine the chilling effect that is produced by making the conditions for bail onerous. A weapon that can be used for defence may often be used offensively. It is similar with law. Any law that can be used can be abused. It is perhaps wise then that statutes that seek to impose greater restrictions on judicial discretion to the grant of bail are whittled down so as to provide a greater discretion to grant thereof. Bail can and should be granted on the merits and facts and circumstances of each case. The jurisprudence with regards to bail has been settled time and again by the Supreme Court so as to maintain the delicate balance between the rights of the society and the rights of the individual. It is perhaps best left undisturbed.
Shifting of the Burden of Proof
The introduction of legal fiction and deeming provisions in criminal statutes or those that are quasi-criminal in nature, mark a seemingly benign but a seismic shift in the burden on proof that the prosecution needs to establish. Yes, the prosecution still does need to prove it’s case beyond reasonable doubt in criminal proceedings, a concept that cannot be diluted so as to ensure that the constitutionality of the legislations stands up to the examination of the constitutional guardians. However, the legislature, through statutory presumptions, have managed to erode that burden somewhat, in a manner most prejudicial to the dignity of the accused. This has been done by shifting the burden for the very basis of criminal trial jurisprudence ‘mens rea’ or ‘mental intention’. The presumption that a person was intending to commit a crime when he or she carried out the actions being tried, is without doubt the greatest affront to the dignity of an individual. The shifting of the onus of proof is sought to be examined through the lens of the Income-tax Act, 1961.
The importance of the existence of the ‘mental intention’ to be convicted in a criminal proceedings is the fundamental cornerstone of criminal law. It has been established that ‘mens rea’ is an indispensable part of prosecution proceedings under the Income Tax Act. Prosecuting someone for a crime without establishing his mental culpability would be against the principles of natural justice. In Selvi J. Jayalalitha v. UOI  288 ITR 225 (Madras) the Hon’ble Madras High Court when confronted with the argument that while the element of ‘mens rea’ being the basis for prosecution under the Income Tax Act, it should be the onus of the prosecution to prove the existence of the same, held that the Provisions of Sec. 278E is constitutionally valid. In doing so, it held that presumptions are regulations of burden of proof and not presumption of guilt. It discussed the observation of the Hon’ble Apex court in Shambhu Nath Mehra v. State of Ajmer AIR 1956 SC 404 that the burden which lies on the prosecution never shifts but that that in certain exceptional cases where it is impossible and disproportionately difficult for the prosecution to establish facts which are especially within the knowledge of the accused and which can be proved by him without difficulty or inconvenience, the burden to prove or establish those facts can be shifted and that it is well-established rule of law that, save in a very exceptional class of case, the burden is on the prosecution and never shifts.
The Apex Court in the case of Sasi Enterprises v. ACIT  361 ITR 163 (SC) while discussing the scope of Section 278E of the Act held that the court has to presume the existence of ‘mens rea’ and it is for the accused to prove the contrary and that too beyond reasonable doubt. The Hon’ble Supreme Court has also issued notice in the Special leave petition Nelofar Cirrimbhoy v. ACIT  228 Taxman 57 (SC) against the Judgement of the Hon’ble Delhi High Court holding that once the presumption u/s 278E is raised, the respondent would have to show during trail that there was no willful default. Also, in Prakash Nath Khanna v. CIT  266 ITR 1 (SC) the Hon’ble Supreme Court held that whether there was wilful failure to furnish the return is a matter which is to be adjudicated factually by the Court which deals with the prosecution case. The Court has to presume the existence of culpable mental state, and absence of such mental state can be pleaded by an accused as a defence in respect to the act charged as an offence in the prosecution during trial. Thus, the partial shifting of the burden of proof has been upheld by the Hon’ble Supreme Court.
Section 278E (2) of the Income Tax Act, 1961, states that for the purposes of Section 278E, a fact is said to be proved only when the court believes it to exist beyond reasonable doubt and not merely when its existence is established by a preponderance of probability. It is considered that there are two thresholds of ‘burden of proof’, one being ‘preponderance of probability’ and the other being ‘beyond reasonable doubt’, the former being a lower threshold than the latter. The Apex court in Sasi Enterprises v. ACIT  361 ITR 163 (SC) held that the absence of ‘mens rea’ must be established beyond reasonable doubt for the purposes on Sex. 278E. The Hon’ble Madras High Court in Selvi J. Jayalalitha v. UOI  288 ITR 225 (Madras HC) held that “there is no ambiguity with regard to what the Assessee has to prove—the Assessee has to prove that there were reasons for not filing the return in due time. If he proves that, then the prosecution fails, and the manner in which the words ‘beyond reasonable doubt’ should be construed has also been explained in various decisions; so, the non-usage of ‘preponderance of possibilities’ cannot be a vitiating factor. It is not the doubt of a vacillating mind or a timorous mind, but if from the circumstances which are proved by the Assessee that he was prevented from filing the return, then the Assessee would have rebutted the presumption of culpable mental state.”
In todays world, leaving a digital footprint is perhaps inevitable. With the rapid advances in technology, it is easier than ever perhaps to perpetrate an economic offence but it is also easier to gather evidence. Given the sheer number of statutory compliances that have been put in place in the last few years, the integration of data between different government departments and the fact that most economic activities leave a trail of documents, are all arguments to perhaps envisage a shift of the onus of proof back onto the prosecution. The assumption of the presence of a mental intention to commit a crime that needs to be rebutted beyond reasonable doubt is in my humble opinion an afront to an individual’s dignity and therefore this shifting of the burden perhaps merits if not a re-consideration, then a recalibration.
The scourge of economic offences seems to be unending. A casual perusal of newspapers would be enough for one to conclude that economic offences are a cancer that threaten to devour the utopian society that we as Indian citizens strive to establish. Of course, the malady is not new. Economic offences are as old as any other offence. What is striking however is the sophistication and the quantum at which modern-day economic offenders operate. In a highly globalised world that is rapidly converging with the advent of seamless integration thanks to the Internet and other aspects of technology, economic offences are perhaps the biggest global threat, given that many channels that are used for layering, placing and integrating the monies so obtained are also conduits for organised crime and terrorist activity.
It would then perhaps be a no-brainer that economic offences are taken seriously. On a global scale, countries have been constantly moving towards more compliance and transparency in order to combat this ominous scourge. The zeal and the sophistication that is displayed by modern-day law enforcement and the plethora of new age legislations to combat this malaise is praiseworthy. However, one may do well to remember that economic offences at the end of the day are still offences and in a civilised society, the short-circuiting of due process of law is as grave threat to the general public as it is to the economic offenders. We see that many legislations that have spawned to control economic offences, fall short of the high benchmarks that we have set out for dealing with the criminal elements in our society. Conditions for bail have, in certain cases been made more stringent than for offences that involve substantial body harm and in a few scenarios, we see that the onus of proof has shifted substantially onto the accused. The effort to curb economic offences may have perhaps led to some laws being quite unfair while others may border line on being considered draconian. The examples taken in this article are perhaps not even the tip of the colloquial iceberg. The provocation is to give rise to a constructive discussion. If not a rethink, perhaps a recalibration may be required.