Money Laundering Serious Offence, Courts Can't Grant Bail Casually Without Considering S.45 PMLA Conditions : Supreme Court

The Supreme Court today (February 13) set aside the bail granted to the individual accused of committing money laundering after noting that the High Court failed to satisfy the twin conditions stipulated under Section 45 of the Prevention of Money Laundering Act, 2002 (“PMLA”).

The Court reiterated that the conditions enumerated in Section 45 will have to be complied with even in respect of application for bail made under Section 439 of Cr.P.C. Also, Section 24 provides that in case of a person charged with the offence of money-laundering under Section 3, the Authority or Court shall, unless the contrary is proved, presume that such proceeds of crime are involved in money-laundering. Therefore, the burden to proof that proceeds of crime are not involved in money laundering would lie on the person charged with the offence.

Criticising the Patna High Court for its "casual and cavalier" order, the Supreme Court observed :

“the High Court in a very casual and cavalier manner, without considering the rigours of Section 45 granted bail to the respondent on absolutely extraneous and irrelevant considerations. There is no finding whatsoever recorded in the impugned order that there were reasonable grounds for believing that the respondent was not guilty of the alleged offence under the Act and that he was not likely to commit any offence while on bail. Noncompliance of the mandatory requirement of Section 45 has, on the face of it, made the impugned order unsustainable and untenable in the eye of law.”, the court observed.

Observing that money laundering was not an ordinary offence and was a serious offence having transnational impact on financial systems including sovereignty and integrity of the countries, the Court stated :

Section 45 PMLA mandatory

The Court reiterated that the twin conditions under Section 45 are "mandatory in nature." Referring to Vijay Madanlal Choudhary and other precedents such as Tarun Kumar v Asst Director ED, the Court observed that "there remains no shadow of doubt that the consideration of the two conditions mentioned in Section 45 is mandatory, and that while considering the bail application, the said rigours of Section 45 have to be reckoned by the court to uphold the objectives of the PMLA."

Allowing the Enforcement Directorate's (ED) appeal against a judgment of the Patna High Court, a bench of Justices Bela M Trivedi and Prasanna B Varale rejected the respondent/accused argument that the Appellant/ED had relied upon the statements of the respondent/accused recorded under Section 50 of the PMLA upon being summoned rendering them inadmissible in evidence.

Article 20(3) won't apply to person summoned as witness

Placing reliance on the case of Vijay Madanlal Choudhary & Ors. Vs. Union of India & Ors. the Court clarified the protection under Article 20(3) of the Constitution (immunity from self-incrimination) would apply only when a formal accusation was made against the person, and not when a person is summoned under Section 50 of PMLA.

“Article 20(3) of the Constitution would not come into play in respect of the process of recording statement pursuant to such summon issued under sub-section (2) of Section 50. The phrase used in Article 20(3) is “to be a witness” and not to “appear as a witness”. It follows that the protection afforded to an accused insofar as it is related to the phrase “to be a witness” is in respect of testimonial compulsion in the court room, and it may also extend to compelled testimony previously obtained from him. It is available therefore to a person against whom a formal accusation relating to the commission of an offence has been levelled, which in the normal course may result in a prosecution.”, the court observed.

Money laundering independent offence

The Court rejected the respondent's argument that since he was not an accused in the predicate offence, he cannot be summoned. The Court observed that the offence of money laundering is an independent offence.

“The impugned order passed by the High Court being in teeth of Section 45 of PMLA and also in the teeth of the settled legal position, we are of the opinion that the impugned order deserves to be set aside, and the matter is required to be remanded to the High Court for fresh consideration. Accordingly, the impugned order is set aside, and the matter is remanded to the High Court for consideration afresh with the request to the Chief Justice to place the matter before the Bench other than the Bench which had passed the impugned order. We may clarify that we have not expressed any opinion on the merits of the case.”, the court added.

Accordingly, the Appeal was allowed.

Case Title: THE UNION OF INDIA THROUGH THE ASSISTANT DIRECTOR VERSUS KANHAIYA PRASAD

Citation : 2025 LiveLaw (SC) 201

Click here to read/download the judgment

Appearance:

Mr. Zoheb Hussain, AoR for the appellant-ED

Mr. Ranjit Kumar, Sr. Adv. for the Respondent