Supreme Court sets aside bail in Money Laundering Case: Union of India vs. Kanhaiya Prasad (2025)

Introduction

Date of the Judgment: February 13, 2025

Citation: 2025 INSC 210

Judges: Bela M. Trivedi, J., Prasanna B. Varale, J.

Can a High Court grant bail in a money laundering case without adhering to the stringent conditions of Section 45 of the Prevention of Money Laundering Act (PMLA)? The Supreme Court recently addressed this critical question in the case of Union of India vs. Kanhaiya Prasad. The core issue revolved around whether the High Court of Judicature at Patna erred in granting bail to the respondent without properly considering the mandatory requirements of Section 45 of the PMLA, which imposes strict conditions for granting bail in cases involving offences punishable under the Act.

In a judgment delivered on February 13, 2025, a bench comprising Justice Bela M. Trivedi and Justice Prasanna B. Varale set aside the High Court’s order, emphasizing the stringent nature of the PMLA and the necessity of adhering to Section 45’s conditions. The leading judgment was delivered by Justice Bela M. Trivedi.

Case Background

The case originated from multiple First Information Reports (FIRs) registered across various police stations in Patna, Saran, and Bhojpur districts. These FIRs alleged that M/s Broad Son Commodities Private Ltd and its directors were involved in illegal mining and selling of sand. They purportedly bypassed the mandated departmental pre-paid transportation E-challan issued by the Mining Authority Bihar, leading to a substantial revenue loss of ₹161,15,61,164 to the government.

Given that these FIRs contained scheduled offenses under Section 2(1)(y) of the PMLA, the Enforcement Directorate (ED) registered an Enforcement Case Information Report (ECIR) bearing No. PTZO/14/2023 dated March 15, 2023, with subsequent addenda. This triggered an investigation into potential money laundering offenses.

During the investigation, the ED conducted search operations under Section 17 of the PMLA at various locations linked to the company and its directors, including four premises belonging to Radha Charan Sah, the respondent’s father. Statements from Kanhaiya Prasad, the respondent, were recorded on September 1, 2023, and September 4, 2023, under Section 50 of the PMLA. The ED alleged that despite summons issued for appearances on September 11, 12, and 13, 2023, the respondent failed to comply. Consequently, Kanhaiya Prasad was arrested on September 18, 2023, and later taken into ED custody on September 22, 2023.

The ED’s investigation revealed that Kanhaiya Prasad was allegedly involved in concealing and possessing proceeds of crime amounting to ₹17,26,85,809. These funds were purportedly used for renovating a resort in Manali and constructing a school owned by his trust. The ED further claimed that the respondent managed family-owned Limited Liability Partnerships (LLPs) and Maa Sharda Devi Buildings and Construction to channel his father’s illegal proceeds, portraying them as legitimate funds. It was alleged that Kanhaiya Prasad layered and laundered these proceeds through a hawala network to acquire the resort in Manali and concealed them by purchasing properties and funding construction in family-owned trust properties.

Based on these findings, the ED filed a prosecution complaint against Kanhaiya Prasad and other accused on November 10, 2023, for offenses under Section 3 read with Section 4 of the PMLA. The PMLA Court took cognizance of these offenses on the same day.

Timeline:

Course of Proceedings

Kanhaiya Prasad filed Criminal Miscellaneous No. 17738/2024 before the High Court of Judicature at Patna, seeking regular bail concerning the Prosecution Complaint registered as Special Trial (PMLA) Case No. 8/2023 before the Special Judge, PMLA. The High Court allowed this application through the impugned order.

Legal Framework

The primary legal provision at the heart of this case is Section 45 of the Prevention of Money Laundering Act, 2002 (PMLA). This section outlines the conditions under which bail can be granted in cases involving offenses punishable under the Act. The Supreme Court highlighted the importance of this section, emphasizing its overriding effect on the general provisions of the Code of Criminal Procedure (CrPC) in cases of conflict.

Section 45 of the PMLA states:

“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 oppose 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…”

The provision further includes provisos related to individuals under sixteen years of age, women, or those who are sick or infirm, or accused of money laundering a sum of less than one crore rupees. It also specifies the conditions under which the Special Court can take cognizance of offenses.

In addition to Section 45, the Supreme Court also referenced Section 65 and Section 71 of the PMLA. Section 65 stipulates that the provisions of the CrPC apply insofar as they are not inconsistent with the PMLA, while Section 71 provides that the PMLA’s provisions have an overriding effect, notwithstanding anything inconsistent in any other law.

The court also considered Section 24 of the PMLA, which states that in cases where a person is charged with money laundering under Section 3, the Authority or Court shall presume that such proceeds of crime are involved in money laundering unless the contrary is proven. This places the burden of proof on the accused to demonstrate that the proceeds are not involved in money laundering.

Arguments

The arguments presented by both sides focused on the interpretation and application of Section 45 of the PMLA and the admissibility of evidence obtained during the investigation.

Innovativeness of the argument: The ED’s argument was particularly strong in emphasizing the mandatory nature of Section 45 of the PMLA, highlighting that the High Court’s failure to adhere to these requirements rendered the bail order unsustainable. The respondent’s argument relied heavily on the inadmissibility of statements under Section 50, which the Supreme Court addressed by referring to the Vijay Madanlal judgment.

Issues Framed by the Supreme Court

1. Whether the High Court erred in granting bail to the respondent without considering the rigors of Section 45 of the PMLA.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The court relied on several key judgments to reinforce its position on the mandatory nature of Section 45 of the PMLA and the stringent requirements for granting bail in money laundering cases.

• Gautam Kundu Vs. Directorate of Enforcement, (2015) 16 SCC 1, Supreme Court of India: This case was cited to support the position that the conditions enumerated in Section 45 must be complied with even for bail applications made under Section 439 of the Cr.P.C.
• Rohit Tandon Vs. Directorate of Enforcement, (2018) 11 SCC 46, Supreme Court of India: This judgment reiterated the legal position concerning Section 45 of the PMLA.
• Tarun Kumar Vs. Assistant Director Directorate of Enforcement, (2023) SCC OnLine 1486, Supreme Court of India: This case was cited to further reinforce the principles related to bail under the PMLA.
• Vijay Madanlal Choudhary & Ors. Vs. Union of India & Ors., 2022 SCC OnLine 929, Supreme Court of India: This landmark judgment upheld the validity of the PMLA and clarified various provisions, including Section 45. The court emphasized that the twin conditions for bail must be fulfilled and that the PMLA is a special legislation designed to combat money laundering, which is an aggravated form of crime with transnational implications.

The court also considered the following legal provisions:

• Section 2(1)(y) of the Prevention of Money Laundering Act, 2002 (PMLA): Defines scheduled offenses.
• Section 3 of the PMLA: Defines the offense of money laundering.
• Section 4 of the PMLA: Provides the punishment for money laundering.
• Section 17 of the PMLA: Grants the power to conduct search and seizure operations.
• Section 24 of the PMLA: Deals with the burden of proof in cases of money laundering.
• Section 45 of the PMLA: Specifies the conditions for granting bail in cases involving offenses punishable under the Act.
• Section 50 of the PMLA: Grants powers to authorities regarding summons, production of documents, and recording of statements.
• Section 65 of the PMLA: States that the provisions of the CrPC apply insofar as they are not inconsistent with the PMLA.
• Section 71 of the PMLA: Provides that the PMLA’s provisions have an overriding effect, notwithstanding anything inconsistent in any other law.
• Article 20(3) of the Constitution of India: Protects individuals from self-incrimination.

Judgment

How each authority was viewed by the Court:

• Vijay Madanlal Choudhary & Ors. Vs. Union of India & Ors.*: The court relied on this case to emphasize that the twin conditions for bail must be fulfilled and that the PMLA is a special legislation designed to combat money laundering, which is an aggravated form of crime with transnational implications.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the mandatory nature of Section 45 of the PMLA and the High Court’s failure to adhere to its requirements. The Court emphasized that the PMLA is a special law designed to combat money laundering, which poses a severe threat to the country’s financial systems and integrity.

The Court also considered the seriousness of the offense of money laundering, noting that it is committed with a deliberate desire to enhance gains, disregarding the interest of the nation and society. The stringent provisions of the PMLA are intended to combat this menace effectively.

Logical Reasoning:

The Court’s reasoning was based on the principle that the PMLA is a special law designed to combat money laundering, and its provisions must be strictly adhered to in order to achieve its objectives.

The Supreme Court quoted:

“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.”

and

“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.”

and

“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.”

There were no minority opinions in this case.

Key Takeaways

• ✓ Courts must strictly adhere to the conditions outlined in Section 45 of the PMLA when considering bail applications in money laundering cases.
• ✓ The offense of money laundering is considered a serious crime with significant implications for the financial systems and integrity of the country.
• ✓ Casual or cursory approaches to granting bail in money laundering cases are not acceptable, and courts must carefully consider the seriousness of the crime and the rigors of Section 45.

The judgment reinforces the importance of the PMLA in combating money laundering and highlights the need for strict adherence to its provisions to ensure that offenders are brought to justice.

Directions

The Supreme Court directed that the matter be remanded to the High Court for fresh consideration, with a request to the Chief Justice to place the matter before a bench other than the one that had passed the impugned order. The respondent was directed to surrender before the Special Court within one week from the date of the judgment.

Development of Law

The ratio decidendi of this case is that courts must strictly adhere to the conditions outlined in Section 45 of the PMLA when considering bail applications in money laundering cases. This judgment reinforces the stringent requirements for granting bail in such cases and emphasizes the seriousness of the offense of money laundering.

There is no change in the previous position of the law, but this case serves as a reminder of the importance of adhering to the existing legal framework in money laundering cases.

Conclusion

In summary, the Supreme Court set aside the High Court’s order granting bail to Kanhaiya Prasad, emphasizing the mandatory nature of Section 45 of the PMLA. The Court directed the High Court to reconsider the matter, ensuring strict adherence to the legal requirements for granting bail in money laundering cases. This judgment underscores the importance of combating money laundering and upholding the integrity of the country’s financial systems.