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The Supreme Court has emphasised that consideration of the two conditions mentioned in Section 45 of the Prevention of Money Laundering Act is mandatory, and the said rigours have to be reckoned by the court to uphold the objectives of the law while considering the bail application.

The bench of Justices Bela M Trivedi and Prasanna B Varale said any casual or cursory approach by the courts while considering the bail application of the offender involved in the offence of money laundering and granting him bail by passing cryptic orders without taking into account the seriousness of the crime and the rigours of Section 45, cannot be vindicated.

Acting on a plea by the Union government through the Enforcement Directorate, the court set aside Patna High Court's order of May 6, 2024, which granted bail to Kanhaiya Prasad, who was arrested on September 18, 2023 in a money laundering case, lodged after registration of 20 FIRs for alleged illegal mining and causing revenue loss to Rs 161,15,61,164 to the government exchequer.

The ED counsel contended the high court had thoroughly misinterpreted and misread the ratio of the judgments particularly of the judgment of the three-judge bench in Vijay Madanlal Choudhary & Ors Vs Union of India & Ors (2022) while holding that the provisions of Article 20(3) of the Constitution shall prevail upon Section 50 of the PMLA.

The bench pointed out that the objective of the PMLA is to prevent money laundering which has posed a serious threat not only to the financial systems of the country but also to its integrity and sovereignty.

"The offence of money laundering is a very serious offence which is committed by an individual with a deliberate desire and the motive to enhance his gains, disregarding the interest of the nation and the society as a whole, and such offence by no stretch of imagination can be regarded as an offence of trivial nature. The stringent provisions have been made in the Act to combat the menace of money laundering," the bench said.

The court also emphasised it is well settled position of law that Section 45 of the PMLA starting with a non-obstante clause has an overriding effect on the general provisions of the Code of Criminal Procedure in case of conflict between them.

Section 45 imposes two conditions for the grant of bail to any person, accused of an offence punishable for a term of imprisonment of more than 3 years under Part A of the Schedule. The two conditions are that (i) the prosecutor must be given an opportunity to oppose the application for bail; and (ii) the court must be satisfied that there are reasonable grounds for believing that the accused person is not guilty of such offence and that he is not liable to commit any offence while on bail, the bench pointed out.

"As is well settled, these two conditions are mandatory in nature and they need to be complied with before the accused person is released on bail," the bench said.

Court also pointed out that Section 65 of PMLA requires that the provisions of CrPC shall apply insofar as they are not inconsistent with the provisions of the PMLA and Section 71 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.

"Hence, the conditions enumerated in Section 45 will have to be complied with even in respect of application for bail made under Section 439 of CrPC. Further, Section 24 provides that in case of a person charged with the offence of money-laundering under Section 3, the Authority or Court shall, unless the contrary is proved, presume that such proceeds of crime are involved in money-laundering," the bench said.

Therefore, the burden to proof that proceeds of crime are not involved in money laundering would lie on the person charged with the offence, the court added.

The bench found, in the present case, the high court in a very casual and cavalier manner, without considering the rigours of Section 45 had granted bail to the respondent on absolutely extraneous and irrelevant considerations.

"There is no finding whatsoever recorded in the impugned order that there were reasonable grounds for believing that the respondent was not guilty of the alleged offence under the Act and that he was not likely to commit any offence while on bail. Non compliance of the mandatory requirement of Section 45 has, on the face of it, made the impugned order unsustainable and untenable in the eye of law," the bench said.

The court cited Vijay Madanlal, which states that Article 20(3) of the Constitution would not come into play in respect of the process of recording statement pursuant to such summon issued under sub-section (2) of Section 50.

It rejected a contention by the respondent that he had not been shown as an accused in the predicate offence.

"It is no more res integra that the offence of money laundering is an independent offence regarding the process or activity connected with the proceeds of crime, which had been derived or obtained as a result of criminal activity relating to or in relation to a schedule offence. Hence, involvement in any one of such process or activity connected with the proceeds of crime would constitute offence of money laundering. This offence otherwise has nothing to do with the criminal activity relating to a schedule offence, except the proceeds of crime derived or obtained as a result of that crime," the bench said.

The court held that the impugned order passed by the high court was in teeth of Section 45 of PMLA and also in the teeth of the settled legal position.

It remanded the matter to the high court for consideration afresh with a request to the chief justice to place the matter before the bench other than the one that had passed the impugned order. The court clarified that it had not expressed any opinion on the merits of the case.

Court ordered the respondent to surrender before the special court within a week, saying since the impugned order passed by the high court had been held to be unsustainable and untenable, its effect could not be continued.

Case Title: The Union of India Through The Assistant Director Vs Kanhaiya Prasad