2025 INSC 210
SUPREME COURT OF INDIA
(HON’BLE BELA
M. TRIVEDI, J. AND HON’BLE PRASANNA B. VARALE, JJ.)
UNION OF INDIA
Petitioner
VERSUS
KANHAIYA PRASAD
Respondent
Criminal
Appeal No. 728 OF 2025 @ Special Leave Petition (Crl.) No. 7140 OF 2024)-Decided
on 13-02-2025
Criminal, PMLA, Bail
Prevention of Money
Laundering Act, 2002, Section 2(1)(y), 3, 4, 17, 45, 50 – Bail – Challenge
as to –
Offence of money laundering- Held 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 - 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 - Non- compliance 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 - 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 deserves to be set aside and matter 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.
(Para
16, 17 and 22)
JUDGMENT
Bela M. Trivedi, J. :- Leave granted.
2.
The appellant-Union of India through the Enforcement Directorate has challenged
the legality of the impugned judgment and order dated 06.05.2024 passed by the
High Court of Judicature at Patna in Criminal Miscellaneous No. 17738/2024,
whereby the High Court had allowed the said petition and released the
respondent Kanhaiya Prasad on bail, in connection with the Special Trial
(PMLA) Case No. 8 of 2023 arising out of ECIR No. PTZO/14/2023.
3.
As per the case of the appellant-ED, some 20 FIRs were registered at the
various Police Stations at Patna, Saran and Bhojpur Districts
under Sections
38, 120B, 378, 379, 406, 409, 411, 420, 467, 468 and 471 of
IPC, and under Section 39(3) of the Bihar Mineral, (Concession,
Prevention of Illegal Mining, Transportation & Storage) Rule, 2019. It was
alleged inter alia that M/s Broad Son Commodities Private Ltd and its Directors
were engaged in illegal mining and selling of sand without using the
departmental pre-paid transportation E-challan, issued by the Mining Authority
Bihar, and thus had caused revenue loss of Rs.161,15,61,164/- to the Government
Exchequer. Since the said FIRs contained Scheduled offences as defined
under Section 2(1)(y) of the Prevention of Money Laundering Act, 2002
(hereinafter referred to as the ‘’PMLA’’), an ECIR bearing No.
ECIR/PTZO/14/2023 dated 15.03.2023, addendum ECIR No. ECIR/PTZO/14/2023 dated
08.11.2023 and dated 04.05.2024 came to be registered, and the investigation
for the offences of Money Laundering was initiated.
4.
During the course of investigation and pursuant to the information made
available, search operations were carried out under Section 17 of
PMLA at the various locations and premises related with the said Company
and its Directors, including four premises of Radha Charan Sah, (father of the
respondent). During the course of inquiry, the statements of the
respondent-Kanhaiya Prasad, being son of the said Radha Charan Sah came to be
recorded on 01.09.2023 and 04.09.2023 under Section 50 of the PMLA.
It has been alleged by the appellant-ED that thereafter the respondent was
issued summons to appear before the Directorate on 11.09.2023, 12.09.2023 and
13.09.2023, however, he failed to appear on the said dates. The respondent
thereafter was arrested at the ED, Patna Zonal Office, Bihar on 18.09.2023. On
production of the respondent before the concerned court, his custody was handed
over to the appellant- ED on 22.09.2023.
5.
From the documents seized from the premises of the Radha Charan Sah and from
the statements recorded under Section 50 of the Witnesses, of the
respondent and of his father, it was found that the respondent-accused was
actually involved in the process of concealing and the possession of the
proceeds of crime amounting to Rs.17,26,85,809/- which were used for carrying
out the renovation work in the resort at Manali and for the construction work
of the school owned by his trust. It was also found that the respondent-accused
had handled the said proceeds of crime and transferred it by using hawala
network for acquisition of the resort at Manali. It was also alleged that the
entire work of family-owned LLP’s and of Maa Sharda Devi Buildings and
Construction, was handled by the respondent to route the proceeds of crime
generated by his father to portray it as untainted money. The respondent thus
had allegedly layered and laundered the proceeds of crime generated by his
father, being a syndicate member involved in illegal sale of sand using hawala
network. The respondent also had allegedly concealed the proceeds of crime by
way of purchasing properties, carrying out renovation work and constructions in
the family- owned trust property using the said proceeds of crime.
6.
The appellant-ED therefore filed Prosecution Complaint against the respondent
and other accused on 10.11.2023 for the offences under Section 3 read
with Section 4 of the PMLA. The specific role of the
respondent-accused has been mentioned in paragraph 11.6 of the said Prosecution
Complaint. The concerned PMLA Court had taken cognizance of the alleged offences
on 10.11.2023.
7.
The respondent filed the application being Criminal Misc. No.17738/2024 before
the High Court of Judicature at Patna seeking regular bail in connection with
the said Prosecution Complaint registered
as Special Trial (PMLA Case No.8/2023) before
the Special Judge, PMLA. The said application has been allowed by the High
Court vide the impugned order.
8.
The bone of contention raised by the learned counsel Mr. Zoheb Hussain
appearing for the appellant-ED is that the impugned order passed by the High
Court is in the teeth of Section 45 of the PMLA as also of various
pronouncements made by this Court with regard to the mandatory requirement of
the said provision. According to him, the High Court has thoroughly
misinterpreted and misread the ratio of the judgments particularly of the
judgment of the three-judge bench in Vijay Madanlal Choudhary & Ors.
Vs. Union of India & Ors. [2022 SCC
OnLine 929], while holding that the provisions of Article
20(3) of the Constitution shall prevail upon Section 50 of the
PMLA. Mr. Zoheb Hussain relying upon the Prosecution Complaint and other
material on record submitted that there was a prima-facie case made out by the
appellant against the respondent, and the offence under the PMLA being very
serious and grave, High Court had committed an error in granting bail to the
respondent without considering the rigours of Section 45.
9.
However, the Learned Senior Counsel Mr. Ranjit Kumar appearing for the
respondent relying upon the various decisions of this Court submitted that the
case against the respondent was made out by the appellant on the basis of
inadmissible statements recorded under Section 50 of the PMLA, and
that the respondent having already been released on bail by the High Court considering
the material placed on record, this Court should not interfere with the
impugned order. He further submitted that the respondent had cooperated with
the ED during the course of enquiry, in as much as the respondent had remained
present pursuant to the summons issued under Section 50 of the PMLA
on 01.09.2023 and 04.09.2023 and had also paid the entire income-tax dues as
were found to be allegedly due by the authorities.
10.
At the outset, it hardly needs to be stated that the objective of the PMLA is
to prevent money laundering which has posed a serious threat not only to the
financial systems of the country but also to its integrity and sovereignty. The
offence of money laundering is a very serious offence which is committed by an
individual with a deliberate desire and the motive to enhance his gains,
disregarding the interest of the nation and the society as a whole, and such
offence by no stretch of imagination
can be regarded as an offence of trivial
nature. The stringent provisions have been made in the Act to combat the menace
of money laundering.
11.
Since, the entire controversy revolves around Section 45 of the PMLA,
it would be beneficial to reproduce the said provision: -
“Section 45 -
Offences to be cognizable and non-bailable.
(1) Notwithstanding
anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), -
(a) every offence
punishable under this Act shall be cognizable;
(b) no person accused
of an offence punishable for a term of imprisonment of more than three years
under Part A of the Schedule shall be released on bail or on his own bond
unless
(i) the Public
Prosecutor has been given an opportunity to op- pose the application for such
release; and
(ii) 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:
Provided that a
person, who, is under the age of sixteen years, or is a woman or is sick or
infirm or is accused either on his own or along with other co-accused of money
laundering a sum of less than one crore rupees, may be released on bail, if the
Special Court so directs Provided further that the Special Court shall not take
cognizance of any offence punishable under section 4 except upon a
complaint in writing made by-
(i) the Director; or
(ii) any officer of the Central Government or
State Government authorised in writing in this behalf by the Central Government
by a general or a special order made in this behalf by that Government.
(1A) Notwithstanding
anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), or
any other provision of this Act, no police officer shall investigate into an
offence under this Act unless specifically authorised, by the Central
Government by a
general or special order, and, subject to such
conditions as may be prescribed.
(2) The limitation on
granting of bail specified in sub-section (1) is in addition to the limitations
under the Code of Criminal Procedure, 1973 (2 of 1974) or any other law
for the time being in force on granting of bail.”
12.
It is well settled position of law that Section 45 of the PMLA
starting with a non-obstante clause has an overriding effect on the general
provisions of the Code of Criminal Procedure in case of conflict
between them. Section 45 imposes two conditions for the grant of bail
to any person, accused of an offence punishable for a term of imprisonment of
more than 3 years under Part A of the Schedule. The two conditions are that (i)
the prosecutor must be given an opportunity to oppose the application for bail;
and (ii) the Court must be satisfied that there are reasonable grounds for
believing that the accused person is not guilty of such offence and that he is
not liable to commit any offence while on bail. As well settled, these two
conditions are mandatory in nature and they need to be complied with before the
accused person is released on bail.
13.
It is further required to be noted that Section 65 of PMLA requires
that the provisions of Cr.P.C. shall apply insofar as they are not
inconsistent with the provisions of the PMLA and Section 71 provides
that the provisions of PMLA shall have overriding effect
notwithstanding anything inconsistent therewith contained in any other law
for the time being in force. Hence 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. Further, 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.
14.
The aforesaid position of law has been reiterated time and again in catena of
judgments by this Court. To cite a few judgments are in case of Gautam
Kundu Vs. Directorate of Enforcement[(2015)
16 SCC 1] , Rohit Tandon Vs. Directorate of Enforcement[(2018) 11 SCC 46] , Tarun Kumar
Vs. Assistant Director Directorate of Enforcement[(2023) SCC OnLine 1486], etc.
15. In
case of Vijay Madanlal (supra), whereby the various provisions of the
Act including Section 45 were sought to be challenged, it has been
specifically held:
“387………….The provision
post the 2018 Amendment, is in the nature of no bail in relation to the offence
of money laundering unless the twin conditions are fulfilled. The twin
conditions are that there are reasonable grounds for believing that the accused
is not guilty of offence of money laundering and that he is not likely to
commit any offence while on bail. Considering the purposes and objects of the
legislation in the form of the 2002 Act and the background in which it had been
enacted owing to the commitment made to the international bodies and on their
recommendations, it is plainly clear that it is a special legislation to deal
with the subject of money laundering activities having transnational impact on
the financial systems including sovereignty and integrity of the countries.
This is not an ordinary offence. To deal with such serious offence, stringent
measures are provided in the 2002 Act for prevention of money laundering and
combating menace of money laundering, including for attachment and confiscation
of proceeds of crime and to prosecute persons involved in the process or
activity connected with the proceeds of crime. In view of the gravity of the
fallout of money laundering activities having transnational impact, a special
procedural law for prevention and regulation, including to prosecute the person
involved, has been enacted, grouping the offenders involved in the process or
activity connected with the proceeds of crime as a separate class from ordinary
criminals.
The offence of money
laundering has been regarded as an aggravated form of crime “world over”. It
is, therefore, a separate class of offence requiring effective and stringent
measures to combat the menace of money laundering.
388 to 411………………..
412. As a result, we
have no hesitation in observing that in whatever form the relief is couched
including the nature of proceedings, be it under Section 438 of the 1973 Code
or for that matter, by invoking the jurisdiction of the constitutional court,
the underlying principles and rigours of Section 45 of the 2002 Act
must come into play and without exception ought to be reckoned to uphold the
objectives of the 2002 Act, which is a special legislation providing for
stringent regulatory measures for combating the menace of money laundering.”
16.
In view of the above, 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.
17.
So far as facts of the present case are concerned, 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. Non- compliance 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.
18.
Though it was sought to be submitted by learned senior Advocate Mr. Ranjit
Kumar for the respondent that the appellant had relied upon the statements of
the respondent recorded under Section 50 of the Act which were
inadmissible in evidence, the said submission cannot be accepted in view of the
position of law settled by this Court in Vijay Madanlal (supra)
in which it has been held inter alia that the person summoned
under Section 50(2) is bound to attend in person or through
authorized agents before the authority and to state truth upon any subject
concerning which he is being examined or is expected to make statements and to
produce the documents as may be required by virtue of sub-section (3)
of Section 50. It has been further observed that 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.
19.
We also do not find any substance in the submission made by learned Senior
Advocate Ranjit Kumar for the respondent that the respondent has not been shown
as an accused in the predicate offence. It is no more res integra that the
offence of money laundering is an independent offence regarding the
process or activity connected with the proceeds of crime, which had been
derived or obtained as a result of criminal activity relating to or in relation
to a schedule offence. Hence, involvement in any one of such process or
activity connected with the Proceeds of Crime would constitute offence of money
laundering. This offence otherwise has nothing to do with the criminal activity
relating to a schedule offence, except the Proceeds of Crime derived or
obtained as a result of that crime. The precise observations made in Vijay
Madanlal (supra) in this regard may be reproduced hereunder: -
“270. Needless to
mention that such process or activity can be indulged in only after the
property is derived or obtained as a result of criminal activity (a scheduled
offence). It would be an offence of money laundering to indulge in or to assist
or being party to the process or activity connected with the proceeds of crime;
and such process or activity in a given fact situation may be a continuing
offence, irrespective of the date and time of commission of the scheduled
offence. In other words, the criminal activity may have been committed before
the same had been notified as scheduled offence for the purpose of the 2002
Act, but if a person has indulged in or continues to indulge directly or
indirectly in dealing with proceeds of crime, derived or obtained from such
criminal activity even after it has been notified as scheduled offence, may be
liable to be prosecuted for offence of money laundering under the 2002 Act —
for continuing to possess or conceal the proceeds of crime (fully or in part)
or retaining possession thereof or uses it in trenches until fully exhausted.
The offence of money laundering is not dependent on or linked to the date on
which the scheduled offence, or if we may say so, the predicate offence has
been committed. The relevant date is the date on which the person indulges in
the process or activity connected with such proceeds of crime.
These ingredients are intrinsic in the original provision (Section 3, as
amended until 2013 and were in force till 31-7-2019); and the same has been
merely explained and clarified by way of Explanation vide Finance (No. 2) Act,
2019. Thus understood, inclusion of clause (ii) in the Explanation inserted in
2019 is of no consequence as it does not alter or enlarge the scope
of Section 3 at all.
271 to 405……………
406. It was urged that
the scheduled offence in a given case may be a non-cognizable offence and yet
rigours of Section 45 of the 2002 Act would result in denial of bail
even to such accused. This argument is founded on clear misunderstanding of the
scheme of the 2002 Act. As we have repeatedly mentioned in the earlier part of
this judgment that the offence of money laundering is one wherein a person,
directly or indirectly, attempts to indulge or knowingly assists or knowingly
is a party or is actually involved in any process or activity connected with
the proceeds of crime.
The fact that the
proceeds of crime have been generated as a result of criminal activity relating
to a scheduled offence, which incidentally happens to be a non-cognizable
offence, would make no difference. The person is not prosecuted for the
scheduled offence by invoking provisions of the 2002 Act, but only when he has
derived or obtained property as a result of criminal activity relating to or in
relation to a scheduled offence and then indulges in process or activity
connected with such proceeds of crime. Suffice it to observe that the argument
under consideration is completely misplaced and needs to be rejected.”
20.
The High Court has utterly failed to consider the mandatory requirements
of Section 45 and to record its satisfaction whether any reasonable
ground existed for believing that the respondent was not guilty of the alleged
offence, and that he was not likely to commit any offence while on bail. Merely
because the prosecution complaint had been filed and the cognizance was taken
by the court that itself would not be the ground or consideration to
release the respondent on bail, when the mandatory requirements as contemplated
in Section 45 have not been complied with.
21.
As well settled, the offence of money laundering is not an ordinary offence.
The PMLA has been enacted to deal with the subject of money laundering
activities having transnational impact on financial systems including
sovereignty and integrity of the countries. The offence of money laundering has
been regarded as an aggravated form of crime world over and the offenders
involved in the activity connected with the Proceeds of Crime are treated as a
separate class from ordinary criminals. Any casual or cursory approach by the
Courts while considering the bail application of the offender involved in the
offence of money laundering and granting him bail by passing cryptic orders
without considering the seriousness of the crime and without considering the
rigours of Section 45, cannot be vindicated.
22.
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.
23.
Though, the learned Senior Counsel Mr. Ranjit Kumar has submitted that the
respondent having already been released on bail, the same be continued in a
peculiar and piquant situation, we are not inclined to accept the said
submission. The impugned order passed by the High Court having been held to be
unsustainable and untenable by us, the effect of the same cannot be continued. The
respondent shall surrender before the Special Court within one week from today.
24.
The Appeal stands allowed accordingly.
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