JUDGEMENT REVIEW : SUPREME COURT ASKS FOR STRICTER BAIL PROCESS IN PMLA CASE

Case Name: The Union of India Through The Assistant Director vs. Kanhaiya Prasad
Court: Supreme Court of India
Citation: 2025 INSC 210
Bench: Justice Bela M. Trivedi and Justice Prasanna B. Varale
Date of Judgment: February 13, 2025

FACTS OF THE CASE

The case talks about an appeal filed by the Union of India, through the Enforcement Directorate (ED), challenging the Patna High Court’s order granting bail to the respondent, Kanhaiya Prasad, in connection with an alleged money laundering case under the Prevention of Money Laundering Act, 2002 (PMLA). The respondent was involved in a sand mining scam with several FIR were lodged in Patna, Saran, and Bhojpur districts; and M/s Broad Son Commodities Pvt. Ltd. and its Directors were accused, by others, of illegitimately mining and selling sand without any permission from the government. The alleged scam has caused a loss of 161.15 crores to the government. In the course of investigation, on the basis of statements recorded by the ED under Section 50 of the PMLA, he was found to have concealed and used proceeds of crime in the amount of Rs. 17.26 crore. The money is believed to have been used for the construction of a resort in Manali and a school under a family trust. He was arrested on the basis of such evidence, and a prosecution complaint was preferred before the Special Court under PMLA, before which the matter was taken cognizance of. The respondent was granted bail by the High Court, giving rise to the present appeal before the Supreme Court. 

 

KEY ISSUES

1. Did the Patna High Court err in granting bail without considering the rigors of Section 45 of the PMLA?
2. Is the evidence collected under Section 50 of the PMLA admissible, despite claims of testimonial compulsion under Article 20(3) of the Constitution?
3. Does the involvement in a money laundering offense warrant stricter bail conditions given its impact on the financial system and national integrity?

 

LEGAL PROVISIONS

1. Section 3 of the PMLA – Defines money laundering and its scope.
2. Section 4 of the PMLA – Specifies the punishment for money laundering.
3. Section 45 of the PMLA – Lays down stringent conditions for bail in money laundering cases.
4. Section 50 of the PMLA – Empowers ED officers to summon individuals and record statements.
5. Article 20(3) of the Constitution of India – Protection against self-incrimination.
6. Section 439 of the CrPC – General provisions for bail in non-bailable offenses.
7. Vijay Madanlal Choudhary & Ors. vs. Union of India (2022 SCC OnLine 929): This established that Section 50 of the PMLA does not violate Article 20(3).

 

ARGUMENTS

Petitioners Arguments:

1. Not in compliance with Section 45 of the PMLA: The High Court granted bail without ensuring that the respondent was not guilty of the offense and also did not consider that he would not commit further offenses while on bail.
2. Severity of the offense: Money laundering is a grave economic offense, and the respondent’s involvement in layering illicit funds through a hawala network justifies a stricter approach.
3. Admissibility of  statements: The ED argued that statements recorded under Section 50 of the PMLA are admissible as evidence and do not violate Article 20(3) as clarified in the Vijay Madanlal Choudhary case.

 

Respondent’s Arguments:

1. Statement is inadmissible: The statement should be ignored because the respondent consistently claimed that he was testifying due to force of investigation, which, in turn, violated his constitutional rights. 
2. No direct involvement in the offense report: The defense said that he was not named in the original FIRs, and his involvement was derived  from his association with the financial transactions. 
3. Compliance with authorities: The respondent cooperated with ED summons and paid all outstanding income tax dues, proving no intention to evade liability.

 

ANALYSIS

The Supreme Court made sure to talk about the High Court’s mistake for ordering bail in a manner which is unethical. Section 45 of the PMLA mandates rigorous conditions for granting bail. The Court again emphasized that money laundering is a serious economic crime which impacts national financial security and stability. The Court ruled that the statements made under Section 50 of the PMLA are admissible as evidence, based on the Vijay Madanlal Choudhary ruling that the provisions of PMLA were constitutional. The Court also dismissed the contention that failing to be included in the predicate offense frees one from liability, explaining that money laundering is a standalone offense even if the accused was not included in the original crime that generated illicit funds. In addition, the Court again stated the two requirements of Section 45The High Court did not take these into account, and thus its order granting bail was legally untenable. The Supreme Court suspended the order of bail and sent the case back to the High Court.

 

JUDGEMENT

1. Patna High Court’s bail order set aside.
2. Case remanded to a new bench for reconsideration.
3. Reaffirmed that money laundering is a severe offense requiring strict bail conditions.
4. Section 50 statements are admissible and do not violate Article 20(3).
5. The respondent must surrender before the Special Court within a week.

 

CONCLUSION

This judgment again commented that the applicaiton of provisions of PMLA should be rare in cases of economic crimes. They also commented that courts cannot grant bail as to serious offences of economic nature. This judgment says that strict bail rules are required when the crime is economic in nature and can have an effect on the economy.   By holding that money laundering is an independent offense, the Court closes legal loopholes that allow accused persons to claim immunity by disassociating from the predicate offense. The ruling further strengthens the ED’s investigative authority and reinforces the binding nature of statements recorded under Section 50. This decision sets a strong precedent for future cases, emphasizing that judicial discretion must align with the legislative intent of the PMLA. Courts must carefully evaluate bail applications to ensure compliance with the twin conditions of Section 45, thereby preventing economic offenders from evading accountability. The judgment upholds India’s commitment to combating financial crimes, ensuring that offenders face due legal consequences.

 

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WRITTEN BY TANMAYEE VELLORE RAGHUNANDAN