13 February 2025 Criminal Appeals & Suspension of Sentence >> Criminal Law   |   Prevention Of Money Laundering Act >> Criminal Law  

The Supreme Court of India recently delivered a significant judgment in Union of India v. Kanhaiya Prasad, overturning a bail order granted by the Patna High Court in a case involving alleged money laundering. This decision underscores the stringent requirements of Section 45 of the Prevention of Money Laundering Act, 2002 (PMLA) regarding bail in such cases and emphasizes the gravity of money laundering offenses. The ruling serves as a strong message to lower courts, cautioning against casual or cursory approaches to bail applications in PMLA cases.

Background of the Case:

Kanhaiya Prasad was accused of money laundering in connection with illegal sand mining activities allegedly carried out by M/s Broad Son Commodities Private Ltd. The Enforcement Directorate (ED) initiated an investigation following the registration of multiple FIRs related to the illegal mining and subsequent revenue loss. Prasad was alleged to have played a key role in concealing and possessing proceeds of crime, utilizing them for various purposes, including property acquisition and renovations. The ED filed a prosecution complaint, and Prasad was subsequently arrested.

The Patna High Court granted bail to Prasad, which the Supreme Court found to be in violation of Section 45 of the PMLA. The ED appealed the High Court's decision, arguing that it disregarded the mandatory conditions for bail under the PMLA.

The Supreme Court's Decision:

The Supreme Court allowed the ED's appeal, setting aside the High Court's bail order. The apex court reiterated the established legal position that Section 45 of the PMLA has an overriding effect on the general provisions of the Code of Criminal Procedure (CrPC) regarding bail. It emphasized that two specific conditions must be met before bail can be granted in PMLA cases involving offenses punishable by more than three years: (1) the Public Prosecutor must be given an opportunity to oppose the bail application, and (2) the court must be satisfied that there are reasonable grounds to believe the accused is not guilty and is unlikely to commit further offenses while on bail.

The Supreme Court held that these conditions are mandatory and must be strictly adhered to. It criticized the High Court for granting bail to Prasad without recording any findings regarding these mandatory conditions. The apex court emphasized that merely filing a prosecution complaint and taking cognizance of the offense are insufficient grounds for granting bail when the requirements of Section 45 are not met.

The Supreme Court also addressed the argument that statements recorded under Section 50 of the PMLA are inadmissible. Citing its earlier judgment in Vijay Madanlal Choudhary v. Union of India, the Court clarified that such statements are admissible and that Article 20(3) of the Constitution (protection against self-incrimination) does not apply to the process of recording statements under Section 50.

Furthermore, the Court rejected the argument that Prasad was not an accused in the predicate offense. It clarified that money laundering is an independent offense, separate from the scheduled offense that generated the proceeds of crime. The focus is on the handling of the proceeds of crime, not the predicate offense itself.

Implications of the Judgment:

This judgment reinforces the Supreme Court's strict stance against money laundering and its commitment to upholding the stringent provisions of the PMLA. It sends a clear message to lower courts that they must meticulously adhere to Section 45 when considering bail applications in PMLA cases. The decision serves as a reminder of the gravity of money laundering offenses and the need for robust measures to combat this threat.

Conclusion:

The Supreme Court's decision in Union of India v. Kanhaiya Prasad is a significant step in the fight against money laundering. It clarifies the application of Section 45 of the PMLA and sets a precedent for strict scrutiny of bail applications in such cases. The judgment underscores the importance of upholding the objectives of the PMLA and ensuring that those accused of money laundering are not granted bail without fulfilling the stringent requirements of the law. The case also serves as a reminder of the wide ambit of the offence of money laundering and the power of the ED to investigate and prosecute those involved in such activities.

Section 45, PREVENTION OF MONEY LAUNDERING ACT - 2002  

PREVENTION OF MONEY LAUNDERING ACT, 2002