THE UNION OF INDIA THROUGH THE ASSISTANT DIRECTOR versus KANHAIYA PRASAD

Summary

The High Court's order granting regular bail to an accused in a money-laundering prosecution was set aside because it recorded no satisfaction on the mandatory twin conditions in Section 45 PMLA. Statements recorded under Section 50 are not barred by Article 20(3), and money laundering is an independent offence that does not require the accused to be named in the predicate offence. The bail application was remanded to a different Bench and the accused directed to surrender.

Issues

1. Whether bail in a money-laundering case can be granted without recording satisfaction on the twin conditions in Section 45(1) of the PMLA.
2. Whether statements recorded under Section 50 PMLA are rendered inadmissible by Article 20(3) of the Constitution.
3. Whether the accused's not being named in the predicate (scheduled) offence is relevant to the offence of money laundering.
4. Whether filing of the prosecution complaint and taking of cognizance are grounds for bail.

Provisions considered

• Section 45(1), Prevention of Money Laundering Act, 2002The non obstante clause overrides the CrPC. Bail for a Part A scheduled offence punishable with more than three years requires that the Public Prosecutor be heard and, if he opposes, that the court be satisfied there are reasonable grounds to believe the accused is not guilty and not likely to offend on bail. These conditions are mandatory. (¶¶ 11, 12, 16, 17, 20)
• Sections 65 and 71, Prevention of Money Laundering Act, 2002The CrPC applies only so far as consistent with the PMLA, and the PMLA overrides other laws, so the Section 45 conditions apply even to bail applications under Section 439 CrPC. (¶ 13)
• Section 24, Prevention of Money Laundering Act, 2002Raises a presumption that proceeds of crime are involved in money laundering against a person charged under Section 3, placing the burden of disproving it on the accused. (¶ 13)
• Section 50(2) and (3), Prevention of Money Laundering Act, 2002Following Vijay Madanlal Choudhary, a person summoned is bound to attend, state the truth and produce documents. The objection that the respondent's Section 50 statements were inadmissible was rejected. (¶ 18)
• Section 3, Prevention of Money Laundering Act, 2002Money laundering is an independent offence concerning the process or activity connected with proceeds of crime derived from a scheduled offence, so the accused need not be an accused in the predicate offence. (¶ 19)
• Article 20(3), Constitution of IndiaProtection against being compelled 'to be a witness' does not come into play when statements are recorded on summons under Section 50(2) PMLA; it is available to a person against whom a formal accusation has been levelled. (¶ 18)

Held

• The two conditions in Section 45 PMLA are mandatory and must be satisfied before an accused is released on bail, whatever the form of the bail proceeding. Because of Sections 65 and 71, they apply even to applications under Section 439 CrPC. (¶¶ 12, 13, 15, 16)
• The High Court granted bail casually, on extraneous considerations, and recorded no finding that there were reasonable grounds to believe the respondent was not guilty and not likely to offend on bail. That non-compliance made the order unsustainable. (¶¶ 17, 20)
• Filing of the prosecution complaint and taking of cognizance are not by themselves grounds for bail when the Section 45 requirements are not met. (¶ 20)
• Statements recorded under Section 50 PMLA could not be discarded as inadmissible on the strength of Article 20(3); Vijay Madanlal Choudhary v. Union of India was followed. (¶ 18)
• Money laundering is an independent offence regarding the process or activity connected with proceeds of crime, so the respondent's not being shown as an accused in the predicate offence did not help him. (¶ 19)
• Money laundering is a grave offence of a separate class, and cryptic bail orders passed without considering the seriousness of the crime and the rigours of Section 45 cannot be sustained. (¶¶ 10, 21)
• Once the bail order is set aside as unsustainable, its effect cannot continue; the plea to let the respondent remain on bail was rejected. (¶ 23)

Result

Appeal allowed; bail order set aside and matter remanded to the High Court for fresh consideration by a different Bench, without any opinion on merits; respondent to surrender before the Special Court within one week.