2025 INSC 210 1

REPORTABLE

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO. 728 OF 2025

(@ SPECIAL LEAVE PETITION (Crl.) No. 7140 OF 2024)

THE UNION OF INDIA

THROUGH THE ASSISTANT DIRECTOR .... APPELLANT

VERSUS

KANHAIYA PRASAD .... RESPONDENT

J U D G M E N T

BELA M. TRIVEDI, J.

1. Leave granted.

2. The appellant-Union of India through the Enforcement Directorate has

challenged the legality of the impugned judgment and order dated

06.05.2024 passed by the High Court of Judicature at Patna in Criminal

Miscellaneous No. 17738/2024, whereby the High Court had allowed

the said petition and released the respondent Kanhaiya Prasad on bail,

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in connection with the Special Trial (PMLA) Case No. 8 of 2023 arising

out of ECIR No. PTZO/14/2023.

3. As per the case of the appellant-ED, some 20 FIRs were registered at

the various Police Stations at Patna, Saran and Bhojpur Districts under

Sections 38, 120B, 378, 379, 406, 409, 411, 420, 467, 468 and 471 of

IPC, and under Section 39(3) of the Bihar Mineral, (Concession,

Prevention of Illegal Mining, Transportation & Storage) Rule, 2019. It

was alleged inter alia that M/s Broad Son Commodities Private Ltd and

its Directors were engaged in illegal mining and selling of sand without

using the departmental pre-paid transportation E-challan, issued by the

Mining Authority Bihar, and thus had caused revenue loss of

Rs.161,15,61,164/- to the Government Exchequer. Since the said FIRs

contained Scheduled offences as defined under Section 2(1)(y) of the

Prevention of Money Laundering Act, 2002 (hereinafter referred to as

the ‘’PMLA’’), an ECIR bearing No. ECIR/PTZO/14/2023 dated

15.03.2023, addendum ECIR No. ECIR/PTZO/14/2023 dated

08.11.2023 and dated 04.05.2024 came to be registered, and the

investigation for the offences of Money Laundering was initiated.

4. During the course of investigation and pursuant to the information made

available, search operations were carried out under Section 17 of PMLA

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at the various locations and premises related with the said Company

and its Directors, including four premises of Radha Charan Sah, (father

of the respondent). During the course of inquiry, the statements of the

respondent-Kanhaiya Prasad, being son of the said Radha Charan Sah

came to be recorded on 01.09.2023 and 04.09.2023 under Section 50

of the PMLA. It has been alleged by the appellant-ED that thereafter the

respondent was issued summons to appear before the Directorate on

11.09.2023, 12.09.2023 and 13.09.2023, however, he failed to appear

on the said dates. The respondent thereafter was arrested at the ED,

Patna Zonal Office, Bihar on 18.09.2023. On production of the

respondent before the concerned court, his custody was handed over to

the appellant- ED on 22.09.2023.

5. From the documents seized from the premises of the Radha Charan

Sah and from the statements recorded under Section 50 of the

Witnesses, of the respondent and of his father, it was found that the

respondent-accused was actually involved in the process of concealing

and the possession of the proceeds of crime amounting to

Rs.17,26,85,809/- which were used for carrying out the renovation work

in the resort at Manali and for the construction work of the school owned

by his trust. It was also found that the respondent-accused had handled

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the said proceeds of crime and transferred it by using hawala network

for acquisition of the resort at Manali. It was also alleged that the entire

work of family-owned LLP’s and of Maa Sharda Devi Buildings and

Construction, was handled by the respondent to route the proceeds of

crime generated by his father to portray it as untainted money. The

respondent thus had allegedly layered and laundered the proceeds of

crime generated by his father, being a syndicate member involved in

illegal sale of sand using hawala network. The respondent also had

allegedly concealed the proceeds of crime by way of purchasing

properties, carrying out renovation work and constructions in the family-

owned trust property using the said proceeds of crime.

6. The appellant-ED therefore filed Prosecution Complaint against the

respondent and other accused on 10.11.2023 for the offences under

Section 3 read with Section 4 of the PMLA. The specific role of the

respondent-accused has been mentioned in paragraph 11.6 of the said

Prosecution Complaint. The concerned PMLA Court had taken

cognizance of the alleged offences on 10.11.2023.

7. The respondent filed the application being Criminal Misc.

No.17738/2024 before the High Court of Judicature at Patna seeking

regular bail in connection with the said Prosecution Complaint registered

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as Special Trial (PMLA Case No.8/2023) before the Special Judge,

PMLA. The said application has been allowed by the High Court vide

the impugned order.

8. The bone of contention raised by the learned counsel Mr. Zoheb

Hussain appearing for the appellant-ED is that the impugned order

passed by the High Court is in the teeth of Section 45 of the PMLA as

also of various pronouncements made by this Court with regard to the

mandatory requirement of the said provision. According to him, the High

Court has 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.

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, while holding

that the provisions of Article 20(3) of the Constitution shall prevail upon

Section 50 of the PMLA. Mr. Zoheb Hussain relying upon the

Prosecution Complaint and other material on record submitted that there

was a prima-facie case made out by the appellant against the

respondent, and the offence under the PMLA being very serious and

grave, High Court had committed an error in granting bail to the

respondent without considering the rigours of Section 45.

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2022 SCC OnLine 929

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9. However, the Learned Senior Counsel Mr. Ranjit Kumar appearing for

the respondent relying upon the various decisions of this Court

submitted that the case against the respondent was made out by the

appellant on the basis of inadmissible statements recorded under

Section 50 of the PMLA, and that the respondent having already been

released on bail by the High Court considering the material placed on

record, this Court should not interfere with the impugned order. He

further submitted that the respondent had cooperated with the ED during

the course of enquiry, in as much as the respondent had remained

present pursuant to the summons issued under Section 50 of the PMLA

on 01.09.2023 and 04.09.2023 and had also paid the entire income-tax

dues as were found to be allegedly due by the authorities.

10. At the outset, it hardly needs to be stated 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

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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.

11. Since, the entire controversy revolves around Section 45 of the PMLA,

it would be beneficial to reproduce the said provision: -

“Section 45 - Offences to be cognizable and non-bailable.

(1) Notwithstanding anything contained in the Code of

Criminal Procedure, 1973 (2 of 1974), -

(a) every offence punishable under this Act shall be cognizable;

(b) no person accused of an offence punishable for a term of

imprisonment of more than three years under Part A of the

Schedule shall be released on bail or on his own bond unless

(i) the Public Prosecutor has been given an opportunity to op-

pose the application for such release; and

(ii) where the Public Prosecutor opposes the application, the

court is satisfied that there are reasonable grounds for believing

that he is not guilty of such offence and that he is not likely to

commit any offence while on bail:

Provided that a person, who, is under the age of sixteen years,

or is a woman or is sick or infirm or is accused either on his own

or along with other co-accused of money laundering a sum of

less than one crore rupees, may be released on bail, if the

Special Court so directs

Provided further that the Special Court shall not take cognizance

of any offence punishable under section 4 except upon a

complaint in writing made by-

(i) the Director; or

(ii) any officer of the Central Government or State

Government authorised in writing in this behalf by the Central

Government by a general or a special order made in this behalf

by that Government.

(1A) Notwithstanding anything contained in the Code of Criminal

Procedure, 1973 (2 of 1974), or any other provision of this Act,

no police officer shall investigate into an offence under this Act

unless specifically authorised, by the Central Government by a

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general or special order, and, subject to such conditions as may

be prescribed.

(2) The limitation on granting of bail specified in sub-section

(1) is in addition to the limitations under the Code of Criminal

Procedure, 1973 (2 of 1974) or any other law for the time being

in force on granting of bail.”

12. 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. As

well settled, these two conditions are mandatory in nature and they need

to be complied with before the accused person is released on bail.

13. It is further required to be noted that Section 65 of PMLA requires that

the provisions of Cr.P.C. 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

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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 Cr.P.C. 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. Therefore,

the burden to proof that proceeds of crime are not involved in money

laundering would lie on the person charged with the offence.

14. The aforesaid position of law has been reiterated time and again in

catena of judgments by this Court. To cite a few judgments are in case

of Gautam Kundu Vs. Directorate of Enforcement

2

, Rohit Tandon

Vs. Directorate of Enforcement

3

, Tarun Kumar Vs. Assistant

Director Directorate of Enforcement

4

, etc.

15. In case of Vijay Madanlal (supra), whereby the various provisions of the

Act including Section 45 were sought to be challenged, it has been

specifically held:

“387………….The provision post the 2018 Amendment, is in the

nature of no bail in relation to the offence of money laundering

2

(2015) 16 SCC 1

3

(2018) 11 SCC 46

4

(2023) SCC OnLine 1486

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unless the twin conditions are fulfilled. The twin conditions are

that there are reasonable grounds for believing that the accused

is not guilty of offence of money laundering and that he is not

likely to commit any offence while on bail. Considering the

purposes and objects of the legislation in the form of the 2002

Act and the background in which it had been enacted owing to

the commitment made to the international bodies and on their

recommendations, it is plainly clear that it is a special legislation

to deal with the subject of money laundering activities having

transnational impact on the financial systems including

sovereignty and integrity of the countries. This is not an ordinary

offence. To deal with such serious offence, stringent measures

are provided in the 2002 Act for prevention of money laundering

and combating menace of money laundering, including for

attachment and confiscation of proceeds of crime and to

prosecute persons involved in the process or activity connected

with the proceeds of crime. In view of the gravity of the fallout of

money laundering activities having transnational impact, a

special procedural law for prevention and regulation, including to

prosecute the person involved, has been enacted, grouping the

offenders involved in the process or activity connected with the

proceeds of crime as a separate class from ordinary criminals.

The offence of money laundering has been regarded as an

aggravated form of crime “world over”. It is, therefore, a separate

class of offence requiring effective and stringent measures to

combat the menace of money laundering.

388 to 411………………..

412. As a result, we have no hesitation in observing that in

whatever form the relief is couched including the nature of

proceedings, be it under Section 438 of the 1973 Code or for that

matter, by invoking the jurisdiction of the constitutional court, the

underlying principles and rigours of Section 45 of the 2002 Act

must come into play and without exception ought to be reckoned

to uphold the objectives of the 2002 Act, which is a special

legislation providing for stringent regulatory measures for

combating the menace of money laundering.”

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16. In view of the above, there remains no shadow of doubt that the

consideration of the two conditions mentioned in Section 45 is

mandatory, and that while considering the bail application, the said

rigours of Section 45 have to be reckoned by the court to uphold the

objectives of the PMLA.

17. So far as facts of the present case are concerned, the High Court in a

very casual and cavalier manner, without considering the rigours of

Section 45 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.

18. Though it was sought to be submitted by learned senior Advocate Mr.

Ranjit Kumar for the respondent that the appellant had relied upon the

statements of the respondent recorded under Section 50 of the Act

which were inadmissible in evidence, the said submission cannot be

accepted in view of the position of law settled by this Court in Vijay

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Madanlal (supra) in which it has been held inter alia that the person

summoned under Section 50(2) is bound to attend in person or through

authorized agents before the authority and to state truth upon any

subject concerning which he is being examined or is expected to make

statements and to produce the documents as may be required by virtue

of sub-section (3) of Section 50. It has been further observed 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. The phrase used in Article 20(3) is “to be

a witness” and not to “appear as a witness”. It follows that the protection

afforded to an accused insofar as it is related to the phrase “to be a

witness” is in respect of testimonial compulsion in the court room, and it

may also extend to compelled testimony previously obtained from him.

It is available therefore to a person against whom a formal accusation

relating to the commission of an offence has been levelled, which in the

normal course may result in a prosecution.

19. We also do not find any substance in the submission made by learned

Senior Advocate Ranjit Kumar for the respondent that the respondent

has 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

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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 precise observations made in Vijay

Madanlal (supra) in this regard may be reproduced hereunder: -

“270. Needless to mention that such process or activity can be

indulged in only after the property is derived or obtained as a

result of criminal activity (a scheduled offence). It would be an

offence of money laundering to indulge in or to assist or being

party to the process or activity connected with the proceeds of

crime; and such process or activity in a given fact situation may

be a continuing offence, irrespective of the date and time of

commission of the scheduled offence. In other words, the

criminal activity may have been committed before the same had

been notified as scheduled offence for the purpose of the 2002

Act, but if a person has indulged in or continues to indulge directly

or indirectly in dealing with proceeds of crime, derived or

obtained from such criminal activity even after it has been notified

as scheduled offence, may be liable to be prosecuted for offence

of money laundering under the 2002 Act — for continuing to

possess or conceal the proceeds of crime (fully or in part) or

retaining possession thereof or uses it in trenches until fully

exhausted. The offence of money laundering is not dependent on

or linked to the date on which the scheduled offence, or if we may

say so, the predicate offence has been committed. The relevant

date is the date on which the person indulges in the process or

activity connected with such proceeds of crime. These

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ingredients are intrinsic in the original provision (Section 3, as

amended until 2013 and were in force till 31-7-2019); and the

same has been merely explained and clarified by way of

Explanation vide Finance (No. 2) Act, 2019. Thus understood,

inclusion of clause (ii) in the Explanation inserted in 2019 is of no

consequence as it does not alter or enlarge the scope of Section

3 at all.

271 to 405……………

406. It was urged that the scheduled offence in a given case may

be a non-cognizable offence and yet rigours of Section 45 of the

2002 Act would result in denial of bail even to such accused. This

argument is founded on clear misunderstanding of the scheme

of the 2002 Act. As we have repeatedly mentioned in the earlier

part of this judgment that the offence of money laundering is one

wherein a person, directly or indirectly, attempts to indulge or

knowingly assists or knowingly is a party or is actually involved

in any process or activity connected with the proceeds of crime.

The fact that the proceeds of crime have been generated as a

result of criminal activity relating to a scheduled offence, which

incidentally happens to be a non-cognizable offence, would make

no difference. The person is not prosecuted for the scheduled

offence by invoking provisions of the 2002 Act, but only when he

has derived or obtained property as a result of criminal activity

relating to or in relation to a scheduled offence and then indulges

in process or activity connected with such proceeds of crime.

Suffice it to observe that the argument under consideration is

completely misplaced and needs to be rejected.”

20. The High Court has utterly failed to consider the mandatory

requirements of Section 45 and to record its satisfaction whether any

reasonable ground existed for believing that the respondent was not

guilty of the alleged offence, and that he was not likely to commit any

offence while on bail. Merely because the prosecution complaint had

been filed and the cognizance was taken by the court that itself would

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not be the ground or consideration to release the respondent on bail,

when the mandatory requirements as contemplated in Section 45 have

not been complied with.

21. As well settled, the offence of money laundering is not an ordinary

offence. The PMLA has been enacted to deal with the subject of money

laundering activities having transnational impact on financial systems

including sovereignty and integrity of the countries. The offence of

money laundering has been regarded as an aggravated form of crime

world over and the offenders involved in the activity connected with the

Proceeds of Crime are treated as a separate class from ordinary

criminals. 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 considering the seriousness of the crime and without

considering the rigours of Section 45, cannot be vindicated.

22. The impugned order passed by the High Court being in teeth of Section

45 of PMLA and also in the teeth of the settled legal position, we are of

the opinion that the impugned order deserves to be set aside, and the

matter is required to be remanded to the High Court for fresh

consideration. Accordingly, the impugned order is set aside, and the

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matter is remanded to the High Court for consideration afresh with the

request to the Chief Justice to place the matter before the Bench other

than the Bench which had passed the impugned order. We may clarify

that we have not expressed any opinion on the merits of the case.

23. Though, the learned Senior Counsel Mr. Ranjit Kumar has submitted

that the respondent having already been released on bail, the same be

continued in a peculiar and piquant situation, we are not inclined to

accept the said submission. The impugned order passed by the High

Court having been held to be unsustainable and untenable by us, the

effect of the same cannot be continued. The respondent shall surrender

before the Special Court within one week from today.

24. The Appeal stands allowed accordingly.

………………………………J.

[BELA M. TRIVEDI]

………..……………………. J.

[PRASANNA B. VARALE ]

NEW DELHI;

13.02.2025