2025 (12) TMI 105 - HC - Money Laundering

Pre-arrest bail under PMLA denied as Section 45(1) twin conditions not met for Section 438/482 relief

Aneesh Babu Versus Assistant Director Directorate of Enforcement, Ministry of Finance, Kochi.

The HC dismissed the application for pre-arrest bail under PMLA, holding that its jurisdiction is strictly governed by the twin conditions in Section ... Seeking grant of pre-arrest bail - Money Laundering - scheduled offence - proceeds of crime - conditions of Section 45(1) of the PMLA fulfilled or not - HELD THAT:- The jurisdiction of this court to grant bail to a person accused of an offence under PMLA is circumscribed by the provisions of Section 45 as amended in 2018. As per the said provision, if the Public Prosecutor opposes the application, the bail can be granted only in a case where there are reasonable grounds for believing that the accused is not guilty of an offence under the Act and that he is not likely to commit any offence while on bail. The Supreme Court in Vijay Madanlal Choudhary and Others v. Union of India and Others [2022 (7) TMI 1316 - SUPREME COURT (LB)] and in Directorate of Enforcement v. M. Gopal Reddy and Another [2023 (2) TMI 1045 - SUPREME COURT] has made it clear that the twin conditions under Section 45 of PMLA apply to an application for pre-arrest bail under Section 438 of Cr. P.C.(Section 482 of BNSS) as well. The conditions specified under Section 45 of the PMLA are mandatory and need to be complied with, which is further strengthened by the provisions of Sections 65 and 71 of the PMLA. Section 65 of PMLA requires that the provisions of the Cr.P.C shall apply, insofar as they are not inconsistent with the provisions of this Act, and Section 71 of PMLA provides that the provisions of PMLA shall have overriding effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force. PMLA has an overriding effect, and the provisions of the Cr.P.C. would apply only if they are not inconsistent with the provisions of the said Act. Therefore, the conditions enumerated in Section 45 of the PMLA will have to be complied with even in respect of a bail application made under Section 438 or 439 of Cr.P.C - the power to grant bail to a person accused of having committed an offence under the PMLA is not only subject to the limitations imposed under Section 438 or 439 of Cr. P.C. (Sections 482 or 483 of BNSS), but also subject to the restrictions imposed by the twin conditions of sub-section (1) of Section 45 of PMLA. It is not possible at this stage to record satisfaction that there are reasonable grounds for believing that the applicant is not guilty of the offences alleged. The reasonable ground mentioned in S.45(1)(ii) of PMLA connotes substantial probable causes for believing that the accused is not guilty of the offence charged. The investigation is going on and the same is at a crucial stage. Undoubtedly, the investigating agency may require further time to collect all the materials, particularly the alleged nexus of the applicant with the crimes. In the counter affidavit filed by the respondent, it is stated that though the applicant appeared on summons on a few occasions, he is not cooperating with the investigation. The amount involved is huge. The custodial interrogation of the applicant appears to be necessary. As rightly argued by the learned ASGI, if pre-arrest bail is granted, there is every possibility of the applicant influencing the witnesses and interfering with the investigation. There are no reason to exercise the jurisdiction vested with this Court under Section 482 of the BNSS - bail application dismissed. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether the twin conditions under Section 45(1) of the Prevention of Money-Laundering Act, 2002 apply to an application for pre-arrest bail under Section 482 of the Bharatiya Nagarik Suraksha Sanhita, 2023 in respect of an offence under the PMLA. 1.2 Whether, on the materials placed on record, a prima facie case of 'money-laundering' under Section 3 read with Section 4 of the PMLA, based on the alleged 'proceeds of crime' from scheduled predicate offences, is made out against the applicant. 1.3 Whether, in the facts and circumstances, the applicant satisfies the statutory conditions, including those under Section 45 of the PMLA, so as to be entitled to pre-arrest bail. --- 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Applicability of Section 45 PMLA twin conditions to pre-arrest bail under BNSS Legal framework 2.1 The Court referred to Section 45 of the PMLA (as amended in 2018), which prescribes that when the Public Prosecutor opposes a bail application, bail can be granted only if there are reasonable grounds for believing that the accused is not guilty of the offence under the Act and is not likely to commit any offence while on bail. It also considered Sections 65 and 71 of the PMLA, which respectively provide for the application of the Code of Criminal Procedure (and correspondingly BNSS) insofar as not inconsistent with the PMLA, and for the overriding effect of the PMLA. 2.2 The Court relied on the decisions of the Supreme Court in Vijay Madanlal Choudhary v. Union of India and Directorate of Enforcement v. M. Gopal Reddy, which held that the twin conditions under Section 45 of the PMLA apply equally to applications for pre-arrest bail under Section 438 Cr.P.C. (now Section 482 BNSS). Interpretation and reasoning 2.3 The Court held that, by virtue of Sections 65 and 71 of the PMLA, the provisions of the Cr.P.C./BNSS apply only to the extent they are not inconsistent with the PMLA. The specific restrictions on bail under Section 45(1) PMLA, being special provisions, override the general provisions relating to bail under Cr.P.C./BNSS. 2.4 The Court further observed that Section 45(2) PMLA expressly declares that the limitations on granting bail under Section 45(1) are in addition to the limitations under Cr.P.C. or any other law. Hence, the power to grant bail, whether under Sections 438/439 Cr.P.C. (corresponding to Sections 482/483 BNSS), is subject not only to the usual considerations for bail but also to the stricter twin conditions specified in Section 45(1). Conclusions 2.5 The Court concluded that the twin conditions under Section 45(1) of the PMLA are mandatory, have overriding effect, and apply fully to an application for pre-arrest bail under Section 482 BNSS in respect of offences under the PMLA. --- Issue 2 - Existence of prima facie case of money-laundering under Section 3 PMLA Legal framework 2.6 The Court examined Chapter II of the PMLA and specifically Section 3, which stipulates that 'money-laundering' is an offence when a person directly or indirectly attempts to indulge or knowingly is a party to, or is actually involved in, any process or activity connected with the 'proceeds of crime,' including its concealment, possession, acquisition, use and projecting or claiming it as untainted property. 2.7 The Court referred to Section 2(1)(p) which defines 'money-laundering' as having the meaning assigned in Section 3, and Section 2(u) which defines 'proceeds of crime' as any property derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence, or the value of such property. Interpretation and reasoning 2.8 The Court explained that money-laundering has two components: (i) the predicate offence, being the underlying criminal activity generating the proceeds, and (ii) the 'surface offence' of money-laundering, which is the activity connected with the proceeds of crime. The predicate offences in this case were the scheduled offences alleged in the five police crimes involving cheating, criminal breach of trust and forgery, some of which are scheduled offences under the PMLA. 2.9 The Court held that 'money-laundering' encompasses any process or activity connected with the proceeds of crime, including their concealment, possession, acquisition, use, or projecting/claiming them as untainted. Participation in any one of these processes or activities is sufficient to attract Section 3. The offence under Section 3 is distinct from, and does not otherwise depend on, the underlying scheduled offence except to the extent that the proceeds of crime must originate from such scheduled offence. 2.10 On the factual allegations, the Court noted that the applicant and co-accused allegedly cheated multiple persons under the guise of importing and supplying cashews and by offering job opportunities, thereby obtaining a total of Rs. 25,52,79,015/-, a substantial part of which was transacted through bank transfers. Since the predicate offences involve scheduled offences, the above amount obtained was held to prima facie fall within the definition of 'proceeds of crime.' 2.11 The Court highlighted that investigation had revealed that Rs. 2.03 crores were credited to the applicant's bank account by the complainants, which were not transferred overseas for imports as claimed. It observed that even mere possession of 'proceeds of crime' would attract the offence under Section 3 of the PMLA. Conclusions 2.12 The Court concluded that, on the materials presently available and the nature of transactions disclosed, a prima facie case of money-laundering under Section 3 read with Section 4 of the PMLA is made out against the applicant. --- Issue 3 - Entitlement of the applicant to pre-arrest bail under Section 482 BNSS in light of Section 45 PMLA and the facts Interpretation and reasoning 2.13 The Court considered the applicant's contention that he was falsely implicated, including allegations that the case was a counterblast to a complaint made by him against an Enforcement Directorate officer, and that even if the prosecution case is accepted in toto, no offence under the PMLA is made out. It contrasted this with the respondent's submission regarding the sufficiency of materials, the high magnitude of the alleged economic offence, and the strict constraints of Section 45(1) PMLA. 2.14 Applying Section 45(1) PMLA, the Court examined whether it could at this stage record satisfaction that there are 'reasonable grounds for believing' that the applicant is not guilty of the offences alleged and that he is not likely to commit any offence while on bail. The Court held that 'reasonable grounds' in Section 45(1)(ii) connote substantial probable cause for such belief, and that such satisfaction cannot be recorded on the present materials. 2.15 The Court noted that investigation in all five predicate crimes and in the money-laundering case is ongoing and at a crucial stage, and that further time would be required by the investigating agency to gather all materials, particularly to establish the nexus between the applicant and the alleged crimes. 2.16 The Court took into account the respondent's assertion, borne out by the counter-affidavit, that although the applicant appeared pursuant to summons on some occasions, he was not cooperating with the investigation. The Court also noted the huge amount involved and found that custodial interrogation of the applicant appears necessary. 2.17 The Court accepted the submission that, if pre-arrest bail were granted, there would be a real possibility of the applicant influencing witnesses and interfering with the investigation, especially given the nature of allegations and scale of transactions. Conclusions 2.18 The Court held that the applicant had failed to satisfy the mandatory twin conditions of Section 45(1) PMLA and that, on the facts and at the current stage of investigation, it was not possible to form reasonable grounds for believing that he is not guilty or would not commit any offence while on bail. Consequently, the Court declined to exercise its jurisdiction under Section 482 BNSS to grant pre-arrest bail and dismissed the bail application.