2025 (8) TMI 1349 - HC - Money Laundering

Regular bail granted under Section 45 PMLA as twin condition met; weak documentary nexus and uncorroborated statements

Kanhaiya Prasad Versus The Union of India through the Assistant Director, Zonal Office, Enforcement Directorate, Patna, Bihar.

Kanhaiya Prasad Versus The Union of India through the Assistant Director, Zonal Office, Enforcement Directorate, Patna, Bihar. - TMI ISSUES PRESENTED AND CONSIDERED 1. Whether the petitioner is entitled to regular bail under the twin-conditions of Section 45 of the Prevention of Money Laundering Act (PMLA) where a prosecution complaint/charge-sheet has been filed. 2. Whether the materials on record furnish reasonable grounds to believe, prima facie, that the petitioner was involved in concealing, layering or laundering proceeds of crime - specifically: (a) nexus between the petitioner and alleged syndicate/illegal mining proceeds; (b) the nature and sufficiency of documentary/digital evidence (ledgers, bank counterfoils, WhatsApp chats, cash transactions, LLP investments, property acquisitions); and (c) reliance on uncorroborated statements of co-accused. 3. Whether completion of investigation with filing of prosecution complaint, and the stage of trial, negate necessity for custodial interrogation and weigh in favour of bail. 4. Whether there is a real likelihood of tampering with evidence, influencing witnesses or of the petitioner absconding such as to justify denial of bail despite procedural/constitutional considerations (Article 21). 5. The legal significance of predicate FIRs being quashed/closed or not having resulted in chargesheets for many of the predicate offences relied upon to found the PMLA prosecution. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Entitlement to bail under Section 45 PMLA (twin-conditions) Legal framework: Section 45 of PMLA requires the Court, before granting bail, to be satisfied on two conditions: (i) that the accused is not guilty of an offence punishable under the PMLA and (ii) that he is not likely to commit any offence while on bail. The Court must form a prima facie view based on material in the charge-sheet/complaint. Precedent treatment: The Court relied on established authorities recognizing that Section 45 imposes stringent but not absolute restrictions and that a court must form a view based on reasonable material without delving into exhaustive evidence; also that Article 21 protections and the principle 'bail is the rule, jail is the exception' remain relevant. Interpretation and reasoning: The Court examined the prosecution complaint and material forming part of the charge-sheet to see if reasonable grounds exist to believe the accusation prima facie true. The Court emphasized that it need not weigh evidence meticulously but must consider broad probabilities from documentary and testimonial material on record. Ratio vs. Obiter: Ratio - the Court applied the statutory standard to conclude whether twin-conditions are met on available material. Obiter - general comments on harmonizing Section 45 with Article 21 and the necessity to avoid absolute restraint. Conclusion: The Court held that the petitioner satisfied the twin-conditions under Section 45 PMLA and that bail could be granted subject to conditions; the prosecution had not established reasonable grounds for the Court to believe prima facie that the petitioner was guilty of money-laundering. Issue 2 - Sufficiency of materials to establish prima facie involvement (nexus, documents, co-accused statements) Legal framework: For PMLA offences, prosecution must show proceeds of crime derived from scheduled offences and involvement in processes such as concealment, layering or use; at bail stage the Court looks for reasonable grounds based on charge-sheet material. Precedent treatment: The Court reiterated that uncorroborated statements of co-accused cannot, by themselves, furnish sufficient basis for conviction or for satisfying the prima facie standard at bail stage. Authorities cited confirm that independent corroboration is required for imputing complicity. Interpretation and reasoning: The Court found that documents allegedly seized (ledgers, account statements, correspondence) did not reference the petitioner; the asserted syndicate link rested primarily on co-accused statements under Section 50 PMLA without independent corroboration. The alleged investment in an LLP and bank counterfoils recovered from a third-party premises were treated as inferential and speculative absent evidence identifying or hearing the purported 142 partners. The Court noted independent explanations - voluntary income disclosures to Income Tax authorities, an Income Tax assessment accepting income as lawful (albeit with inflated billing adjustments), and auditor testimony denying any involvement of the petitioner or his father with the company - which undermined the prosecution's prima facie case. Ratio vs. Obiter: Ratio - where charge-sheet material lacks documentary or digital linkage to the accused and depends on uncorroborated co-accused statements and conjecture, reasonable grounds to believe the accused guilty on a PMLA charge may be absent for bail denial. Obiter - observations on the need to test alleged after-the-fact disclosures and on the limits of inferring syndicate membership from tenuous documentary traces. Conclusion: The Court concluded there were no reasonable grounds on the record to believe prima facie that the petitioner participated in concealing, layering or laundering proceeds of crime; allegations rested on conjecture, uncorroborated statements and circumstantial inferences insufficient to deny bail. Issue 3 - Completion of investigation and custodial interrogation Legal framework: Custodial interrogation is justified only while investigation necessitates it; once investigation is complete and prosecution complaint filed, custodial interrogation ordinarily ceases to be necessary for accused's statement or interrogation. Precedent treatment: The Court referred to principles that completed investigation and filing of charge-sheet reduce the need for custodial interrogation and support consideration for bail. Interpretation and reasoning: The Court observed that investigation in respect of the petitioner was complete and the prosecution complaint had been filed (pre-trial stage). The materials important to the ED were documentary and largely seized; therefore custodial interrogation was not necessary to further the investigation against the petitioner. Ratio vs. Obiter: Ratio - completion of investigation and filing of complaint militates in favour of bail where further custodial interrogation is not required. Obiter - references to authority supporting this view. Conclusion: The Court held custodial interrogation was unnecessary and that this factor favored grant of bail. Issue 4 - Risk of tampering, influencing witnesses or absconding Legal framework: Bail may be refused where there is real likelihood of tampering with evidence, influencing witnesses or abscondence; courts may impose conditions to allay such risks. Precedent treatment: The Court applied the 'triple test' - not a flight risk, not tampering with evidence, not influencing witnesses - as a guiding standard for bail suitability. Interpretation and reasoning: The Court found documentary evidence central to the prosecution had already been seized, reducing tampering risk. The petitioner's previous compliance with bail conditions and surrender indicated low flight risk. Potential witness influence risk was addressed by imposing express bail conditions prohibiting contact with witnesses and requiring cooperation and disclosure of contact details/address. Ratio vs. Obiter: Ratio - absence of realistic tampering/absconding risk where documentary evidence is seized and accused cooperates supports bail, subject to appropriate conditions. Obiter - procedural measures that courts can impose to mitigate residual risks. Conclusion: The Court concluded risks were manageable by stringent bail conditions and did not justify continued detention. Issue 5 - Relevance of quashed/closed predicate FIRs and temporal connection Legal framework: A scheduled offence need not result in conviction for PMLA prosecution to proceed, but existence of live predicate offence and temporal nexus between generation of proceeds and alleged use is relevant to findings on proceeds of crime. Precedent treatment: The Court acknowledged authorities holding PMLA offence is independent of scheduled offence but noted also that absence of subsisting predicate offences or temporal disconnection can weaken prosecution's foundation. Interpretation and reasoning: The Court noted many predicate FIRs on which the ECIR relied had been quashed or closed and that charge-sheets were not filed in several remaining predicate FIRs; the temporal link between alleged illegal receipts and petitioner's investments was not satisfactorily demonstrated. The Court treated the absence of a live predicate nexus and the timing of transactions as factors undermining the prosecution's prima facie case for bail denial. Ratio vs. Obiter: Ratio - where predicate FIRs foundational to alleged proceeds are quashed/closed or lack charges, and temporal nexus with accused's transactions is not established, the prosecution's case for PMLA culpability is weakened at bail stage. Obiter - discussion of independent PMLA offence doctrine and its limits. Conclusion: The Court found the defective predicate foundation and lack of temporal nexus to be material in concluding there were no reasonable grounds to deny bail. Overall Conclusion On a prima facie assessment of the charge-sheet material, documentary record, independent disclosures to tax authorities, lack of corroboration for core allegations, completion of investigation, and the ability to mitigate risk through stringent bail conditions, the Court concluded the twin-conditions of Section 45 PMLA were satisfied and granted regular bail subject to specified conditions. The conclusions represent the Court's ratio in relation to bail; ancillary observations concerning precedent and constitutional balance are explanatory (obiter) to the extent they frame the legal approach.