2025 (2) TMI 563 - SC - Money Laundering

Money laundering bail order set aside for failing to apply mandatory Section 45 PMLA conditions properly

THE UNION OF INDIA THROUGH THE ASSISTANT DIRECTOR Versus KANHAIYA PRASAD

THE UNION OF INDIA THROUGH THE ASSISTANT DIRECTOR Versus KANHAIYA PRASAD - 2025 INSC 210 ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Supreme Court in this judgment are:1. Whether the High Court erred in granting bail to the respondent without adhering to the mandatory conditions prescribed under Section 45 of the Prevention of Money Laundering Act, 2002 (PMLA).2. Whether the statements recorded under Section 50 of the PMLA are admissible, and if Article 20(3) of the Constitution provides protection against self-incrimination in this context.3. Whether the offence of money laundering is independent of the predicate offence, and the implications of such independence on the prosecution of the accused.ISSUE-WISE DETAILED ANALYSIS1. Grant of Bail under Section 45 of the PMLARelevant legal framework and precedents: Section 45 of the PMLA imposes stringent conditions for granting bail to individuals accused of money laundering. The section mandates that the court must be satisfied that there are reasonable grounds for believing the accused is not guilty and is unlikely to commit an offence while on bail. This provision overrides the general bail provisions under the Code of Criminal Procedure.Court's interpretation and reasoning: The Court emphasized that Section 45 is a special provision with an overriding effect, requiring strict compliance with its conditions before granting bail. The High Court failed to record any satisfaction regarding the innocence of the accused or the likelihood of reoffending, making its order unsustainable.Key evidence and findings: The High Court granted bail without addressing the mandatory conditions of Section 45, focusing instead on extraneous considerations.Application of law to facts: The Supreme Court found that the High Court's order did not comply with Section 45, as it did not consider whether the accused was likely to commit further offences or whether there were reasonable grounds to believe in his non-guilt.Treatment of competing arguments: The respondent argued that the statements under Section 50 were inadmissible and that he had cooperated with the investigation. The Court dismissed these arguments, emphasizing the mandatory nature of Section 45.Conclusions: The Supreme Court concluded that the High Court's order granting bail was flawed due to non-compliance with Section 45, warranting its reversal.2. Admissibility of Statements under Section 50 of the PMLARelevant legal framework and precedents: Section 50 of the PMLA empowers authorities to summon individuals and record their statements, which are admissible as evidence. Article 20(3) of the Constitution protects against self-incrimination.Court's interpretation and reasoning: The Court referenced the Vijay Madanlal Choudhary case, clarifying that statements under Section 50 are not protected by Article 20(3) since the protection applies to testimonial compulsion in court, not to statements made during investigations.Key evidence and findings: The respondent's argument that the statements were inadmissible was rejected based on established precedents.Application of law to facts: The Court applied the reasoning from Vijay Madanlal, affirming the admissibility of Section 50 statements and dismissing the respondent's claim of inadmissibility.Treatment of competing arguments: The respondent's reliance on Article 20(3) was dismissed as the Court emphasized the distinction between investigative and testimonial compulsion.Conclusions: The Court upheld the admissibility of statements recorded under Section 50, rejecting the respondent's arguments to the contrary.3. Independence of Money Laundering Offence from Predicate OffenceRelevant legal framework and precedents: The PMLA defines money laundering as an independent offence, distinct from the predicate offence from which proceeds of crime are derived.Court's interpretation and reasoning: The Court reiterated that money laundering is a standalone offence, focusing on the process or activity involving proceeds of crime, irrespective of the status of the predicate offence.Key evidence and findings: The respondent's argument that he was not shown as an accused in the predicate offence was deemed irrelevant, as money laundering is prosecuted independently.Application of law to facts: The Court applied the established principle that involvement in the process or activity related to proceeds of crime constitutes money laundering, independent of the predicate offence.Treatment of competing arguments: The respondent's argument was dismissed, with the Court emphasizing the independence of money laundering from the predicate offence.Conclusions: The Court affirmed the independent nature of money laundering as an offence, rejecting arguments linking it to the predicate offence status.SIGNIFICANT HOLDINGSThe Supreme Court's significant holdings include:- Section 45 of the PMLA imposes mandatory conditions for granting bail, requiring courts to be satisfied of the accused's non-guilt and low likelihood of reoffending. The High Court's failure to adhere to these conditions rendered its bail order unsustainable.- Statements recorded under Section 50 of the PMLA are admissible, and Article 20(3) does not apply to investigative processes under this section.- Money laundering is an independent offence, distinct from the predicate offence, focusing on the process or activity involving proceeds of crime.Final determinations:The Supreme Court set aside the High Court's bail order and remanded the case for fresh consideration, emphasizing the need for compliance with Section 45 of the PMLA. The respondent was directed to surrender, and the matter was to be reconsidered by a different High Court bench.