Any casual or cursory approach by Courts in PMLA bail matters cannot be vindicated – SC overturns High Court’s order in ₹17.27 crore case, Read Judgment

“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.” With these strong observations, the Supreme Court scrutinized the grant of bail to the respondent, in a high-stakes case involving illegal sand mining and alleged money laundering of ₹17.27 crore.

The case probed into the critical interpretation of PMLA provisions, the admissibility of statements recorded under Section 50, and the broader implications of financial crimes on national security and economic integrity. The judgment provided significant insights into the evolving jurisprudence on money laundering and judicial discretion in granting bail under PMLA.

The Union of India, through the Enforcement Directorate (ED), challenged the Patna High Court’s order dated 06.05.2024, granting bail to respondent Kanhaiya Prasad in Special Trial (PMLA) Case No. 8 of 2023.

The case originated from multiple FIRs in Bihar against M/s Broad Son Commodities Pvt. Ltd. for illegal sand mining, causing a revenue loss of ₹161.16 crore. Since the offenses fell under the Prevention of Money Laundering Act, 2002 (PMLA), an ECIR was registered, leading to an investigation.

The ED alleged that the respondent handled and concealed proceeds of crime worth ₹17.27 crore, using hawala transactions to acquire a resort in Manali and fund school construction under his trust. Despite repeated summons, he failed to appear and was arrested on 18.09.2023. A Prosecution Complaint was filed on 10.11.2023, and cognizance was taken. The High Court granted him bail, prompting the present appeal.

The appellant-ED, represented by Mr. Zoheb Hussain, contended that the High Court's order violated Section 45 of the PMLA and disregarded Supreme Court precedents, particularly Vijay Madanlal Choudhary & Ors. vs. Union of India & Ors. The ED argued that the High Court misinterpreted Article 20(3) of the Constitution concerning Section 50 of the PMLA. It asserted that a prima facie case existed against the respondent, and given the seriousness of the offense, the High Court erred in granting bail without considering the strict provisions of Section 45.

Contentions of the Respondent:

The respondent, represented by Mr. Ranjit Kumar, argued that the case against him is based on inadmissible statements recorded under Section 50 of the PMLA. He asserted that, having already been granted bail by the High Court after due consideration, further interference is unwarranted. He also contended that he cooperated with the ED, appeared in response to summons on 01.09.2023 and 04.09.2023, and has cleared all alleged income tax dues.

The Court emphasized that the PMLA aims to prevent money laundering, which poses a serious threat to the nation's financial system, integrity, and sovereignty. It stated, “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.”

Quoting Section 45 of the PMLA, the Court reiterated that the provision “imposes two conditions for the grant of bail… (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.” The Court further held that “these two conditions are mandatory in nature and they need to be complied with before the accused person is released on bail.”

Referring to Vijay Madanlal Choudhary, the Court reaffirmed that “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.” It noted that “this is not an ordinary offence… a special procedural law has been enacted, grouping the offenders involved in money laundering as a separate class from ordinary criminals.”

The Court found that 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.” It criticized the High Court for failing to record any finding that “there were reasonable grounds for believing that the respondent was not guilty of the alleged offence.”

Rejecting the respondent’s argument on the inadmissibility of statements recorded under Section 50, the Court cited Vijay Madanlal to state that “Article 20(3) of the Constitution would not come into play in respect of the process of recording statements pursuant to summons issued under Section 50.”

The Court also rejected the contention that the respondent was not named in the predicate offence, holding that “the offence of money laundering is an independent offence… involvement in any process or activity connected with the Proceeds of Crime would constitute an offence of money laundering.”

The Court strongly asserted that “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.”

The Court set aside the impugned order passed by the High Court, holding it to be in violation of Section 45 of PMLA and the settled legal position. The matter was remanded to the High Court for fresh consideration, with a direction to the Chief Justice to place it before a different Bench. The Court clarified that it had not expressed any opinion on the merits of the case.

The Court rejected the request to continue the respondent’s bail, stating that since the High Court’s order was found to be unsustainable, its effect could not be continued. The respondent was directed to surrender before the Special Court within one week. The appeal was accordingly allowed.

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