2025 (4) TMI 1745 - HC - Money Laundering

Money-laundering alleged proceeds of crime from scheduled offence: bail denied for failing Section 45 twin conditions, Section 2(1)(u) scope

Regular bail under the PMLA was sought in a money-laundering case alleging involvement with 'proceeds of crime' arising from criminal activity relatable ... Money Laundering - Seeking grant of regular bail to the petitioner - proceeds of crime - scheduled offence - submission of forged papers for obtaining holding number - case of petitioner is that present petitioner is in custody since 14.04.2023 and there is no probability of conclusion of trial in near future - HELD THAT:- The reason for giving explanation under Section 2(1)(u) is by way of clarification to the effect that whether as per the substantive provision of Section 2(1)(u), the property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property or where such property is taken or held outside the country but by way of explanation the proceeds of crime has been given broader implication by including property not only derived or obtained from the scheduled offence but also any property which may directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offence - It is evident that the “scheduled offence” means the offences specified under Part A of the Schedule; or the offences specified under Part B of the Schedule if the total value involved in such offences is [one crore rupees] or more; or the offences specified under Part C of the Schedule. The various provisions of the Act, 2002 along with interpretation of the definition of “proceeds of crime” has been dealt with by the Hon’ble Apex Court in the case of Vijay Madanlal Choudhary and Ors. Vs. Union of India and Ors. [2022 (7) TMI 1316 - SUPREME COURT (LB)] wherein the Bench comprising of three Hon’ble Judges of the Hon’ble Supreme Court have decided the issue by taking into consideration the object and intent of the Act, 2002 - The predicate offence has been considered in the aforesaid judgment wherein by taking into consideration the explanation as inserted by way of Act 23 of 2019 under the definition of the “proceeds of crime” as contained under Section 2(1)(u), whereby and whereunder, it has been clarified for the purpose of removal of doubts that, the 'proceeds of crime' include property not only derived or obtained from the scheduled offence but also any property which may directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offence, meaning thereby, the words “any property which may directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offence” will come under the fold of the proceeds of crime. In the judgment rendered by the Hon’ble Apex Court in Vijay Madanlal Choudhary and Ors. Vs. Union of India and Ors. [2022 (7) TMI 1316 - SUPREME COURT (LB)], it has been held that the Authority under the 2002 Act, is to prosecute a person for offence of money-laundering only if it has reason to believe, which is required to be recorded in writing that the person is in possession of “proceeds of crime”. Only if that belief is further supported by tangible and credible evidence indicative of involvement of the person concerned in any process or activity connected with the proceeds of crime, action under the Act can be taken forward for attachment and confiscation of proceeds of crime and until vesting thereof in the Central Government, such process initiated would be a standalone process. The conditions enumerated in Section 45 of PMLA will have to be complied with even in respect of an application for bail made under Section 439 CrPC. That coupled with the provisions of Section 24 provides that unless the contrary is proved, the authority or the Court shall presume that proceeds of crime are involved in money-laundering and the burden to prove that the proceeds of crime are not involved, lies on the appellant. In the instant case, it has been found that during the course of investigation from the statements of witnesses recorded under Section 50 that the petitioner had indulged, knowingly as the party and is actually involved in all the activities connected with the offence of money laundering - It needs to refer herein that as per the judgment rendered by the Hon’ble Apex Court in the case of Tarun Kumar v. Assistant Director [2023 (11) TMI 904 - SUPREME COURT] the statements of witnesses/accused are admissible in evidence in view of Section 50 of the said Act and such statements may make out a formidable case about the involvement of the accused in the commission of a serious offence of money laundering. It is evident that since the earlier bail application of this petitioner has been rejected on merit, therefore, facts of the case need no reiteration. The main question for consideration is if there is any change of circumstance (factual or legal) which requires re-consideration of the bail application of the petitioner and this Court, based upon the discussion made hereinabove, is of the considered view that there is no change of circumstance (factual or legal) is available herein, therefore, this Court is of the view that it is not a case where the prayer for bail of the petitioners is to be granted. The application stands dismissed. 1. ISSUES PRESENTED AND CONSIDERED (i) Whether a second application for regular bail in a money-laundering prosecution should be entertained where an earlier bail rejection on merits has attained finality and the applicant fails to demonstrate any change in circumstances (factual or legal) warranting re-consideration. (ii) Whether reliance on the Supreme Court decision concerning inadmissibility of certain statements recorded under Section 50 of the Prevention of Money Laundering Act, 2002 constitutes a change in legal circumstance in the applicant's case so as to revisit bail, and whether such decision applies to the applicant's factual situation. (iii) Whether, in the facts found from the prosecution materials, the applicant satisfies the twin conditions for bail applicable to money-laundering offences, and whether long incarceration/delay in trial alone can justify bail in such a special offence. 2. ISSUE-WISE DETAILED ANALYSIS A. Successive bail application-requirement of change in circumstances Legal framework (as discussed by the Court): The Court proceeded on the basis that bail in money-laundering matters is controlled by the stringent statutory regime requiring satisfaction of the special bail conditions, and that when bail has earlier been rejected on merits, a subsequent bail plea requires a demonstrated change of circumstance (factual or legal) justifying re-consideration. Interpretation and reasoning: The Court examined its earlier order rejecting bail and noted that the earlier rejection was after considering the prosecution complaint/ECIR materials and the applicant's alleged role, and after concluding that the statutory rigours (including the twin conditions) were not met. The Court accepted the objection that the earlier merit-based adjudication stood against re-opening the matter, unless the applicant could show a subsequent and material change. The Court identified the only potentially new ground urged as a later Supreme Court decision about Section 50 statements, and assessed whether that ground actually altered the applicant's position. Conclusion: The Court held that the applicant failed to establish any change of circumstance (factual or legal) sufficient to justify reconsideration of bail after the earlier rejection on merits, and therefore declined bail. B. Applicability of the Supreme Court ruling on Section 50 statements (claimed change in law) Legal framework (as discussed by the Court): The Court analysed Section 50 and the evidentiary status of statements recorded thereunder, and considered the applicant's reliance on a Supreme Court ruling holding that when a person is in custody and a statement is recorded by the same investigating agency, such statement is inadmissible against the maker due to concerns of free will and fairness. The Court also noted precedent within its reasoning that Section 50 statements are generally treated as admissible and capable of making out a 'formidable case' regarding involvement. Interpretation and reasoning: The Court found that the applicant cited the Supreme Court observation selectively and that the Supreme Court's holding was tied to a specific factual situation: a person already in custody in another case investigated by the same agency, from whom statements were recorded for a new matter where arrest was not yet shown. The Court contrasted that scenario with the applicant's facts as found from the record: the applicant's statement under Section 50 was recorded on 13.04.2023, and he was arrested subsequently on 14.04.2023; another statement was recorded later on 22.04.2023. On this basis, the Court concluded that the precise custody-related infirmity addressed by the Supreme Court decision was not attracted on the applicant's facts. The Court further treated Section 50 statements (and other materials) as admissible/credible for the limited purpose of forming a prima facie view at the bail stage and held that the prosecution had relied on such statements and documents to show involvement. Conclusion: The Court held that the relied-upon Supreme Court ruling on inadmissibility did not apply to the applicant's situation and therefore did not constitute a legal change of circumstance justifying a different bail outcome. C. Satisfaction of the twin conditions for bail under the money-laundering regime; effect of long custody/delay Legal framework (as discussed by the Court): The Court discussed the definition of 'proceeds of crime' and the offence of money-laundering as a continuing activity, and emphasised the stringent bail threshold requiring the Court to be satisfied that there are reasonable grounds for believing the accused is not guilty and not likely to commit an offence while on bail. The Court also addressed the submission that long incarceration/delay in trial alone can justify bail, and considered the proposition that for special/scheduled offences, seriousness and societal impact are relevant and delay alone is insufficient. Interpretation and reasoning: Referring to the earlier bail-rejection reasoning and the prosecution materials summarised therein, the Court noted that the allegations against the applicant included participation in a land-related racket involving forged/manipulated records and the use of bank accounts for placement/layering/integration of alleged proceeds, including substantial credits and significant cash withdrawals, and transactions linked with other accused. The Court treated these materials as forming the basis for its earlier conclusion that the statutory rigours were not satisfied and found that this position remained unchanged. On the custody argument (about 24 months), the Court held that long incarceration or delay in trial alone cannot justify bail in such special offences; it balanced personal liberty against societal impact and accepted the assurance that efforts would be taken to expedite trial. Conclusion: The Court held that the applicant still did not meet the twin conditions for bail and that long custody/delay in trial alone did not warrant release. Bail was therefore refused and the application dismissed.