Bail in Money Laundering Cases Cannot Be Granted Casually—High Courts Must Follow Section 45 PMLA Strictly: Supreme Court

The Offence of Money Laundering is a Threat to National Security and Economic Stability—Bail Requires Higher Scrutiny – Supreme Court , In a significant ruling set aside the Patna High Court’s order granting bail to Kanhaiya Prasad, accused in a ₹17.26 crore money laundering case, and directed him to surrender within a week. The bench of Justice Bela M. Trivedi and Justice Prasanna B. Varale held that the High Court had ignored the mandatory twin conditions under Section 45 of the Prevention of Money Laundering Act (PMLA), 2002, thereby making the bail order unsustainable in law.

Emphasizing the seriousness of money laundering offences, the Supreme Court observed: “Money laundering is not an ordinary crime; it poses a grave threat to financial integrity, national security, and the sovereignty of the country. Courts cannot take a lenient approach while granting bail in such cases.”

Criticizing the High Court for failing to apply the law correctly, the Supreme Court further stated: “The High Court granted bail in a casual manner, disregarding the strict requirements of Section 45 PMLA. Such an approach undermines the objectives of the legislation and sets a dangerous precedent.”

The Supreme Court remanded the case for fresh consideration by a different bench of the High Court, directing that the twin conditions for bail under Section 45 must be strictly followed before granting any relief.

"Bail in Money Laundering Cases Requires a Higher Threshold—High Courts Cannot Ignore Section 45 PMLA"

The Enforcement Directorate (ED) had challenged the Patna High Court’s decision to grant bail to Kanhaiya Prasad, arguing that the order failed to comply with the mandatory requirements of Section 45 of the PMLA.

Section 45 states that bail cannot be granted unless two conditions are met:

• The Public Prosecutor must be given an opportunity to oppose the bail application.

• The Court must be satisfied that there are reasonable grounds to believe that the accused is not guilty and is unlikely to commit any further offence while on bail.

Holding that the High Court had completely ignored these twin conditions, the Supreme Court observed: “When the law prescribes specific conditions for granting bail, they must be followed. The High Court’s failure to record any finding on the satisfaction of these conditions renders its bail order legally untenable.”

The Supreme Court reaffirmed its ruling in Vijay Madanlal Choudhary v. Union of India (2022 SCC OnLine SC 929), where it had categorically held that the twin conditions under Section 45 PMLA are mandatory and override the general provisions of bail under the Code of Criminal Procedure (CrPC).

Rejecting the High Court’s reasoning, the Supreme Court further held: “Merely because a prosecution complaint has been filed and cognizance has been taken does not automatically entitle an accused to bail under PMLA. The mandatory requirements of Section 45 must still be satisfied.”

Since the High Court failed to apply this principle, the Supreme Court set aside the bail order and directed the respondent to surrender before the Special Court within a week.

"Statements Recorded Under Section 50 PMLA Are Admissible—Not Hit by Article 20(3) of the Constitution"

The accused, Kanhaiya Prasad, had argued that his statements recorded under Section 50 of the PMLA were inadmissible as they violated Article 20(3) of the Constitution, which protects individuals from self-incrimination.

Rejecting this argument, the Supreme Court ruled that: “Statements recorded under Section 50 PMLA are not hit by Article 20(3) because they do not involve testimonial compulsion but only require the person to state the truth regarding financial transactions.”

The Court referred to its ruling in Rohit Tandon v. Directorate of Enforcement, (2018) 11 SCC 46, stating: “A person summoned under Section 50 is legally bound to provide truthful information. The argument that such statements are inadmissible is devoid of merit.”

Thus, the Supreme Court upheld the admissibility of statements recorded under Section 50 PMLA, reinforcing the ED’s investigative powers.

"Money Laundering is an Independent Offence—Prosecution Under PMLA Does Not Require Conviction in Predicate Offence"

The accused further contended that since he was not named in the predicate offence (illegal sand mining case), he could not be prosecuted under PMLA.

Rejecting this argument, the Supreme Court ruled: “The offence of money laundering is distinct and independent from the predicate offence. A person can be guilty of money laundering even if they were not directly involved in the original crime.”

Citing Vijay Madanlal Choudhary v. Union of India, the Court observed: “Money laundering is complete when an individual is found to have handled, transferred, or concealed the proceeds of crime. The accused’s direct involvement in the predicate offence is irrelevant.”

The Court made it clear that: “If a person is found to have engaged in layering or integrating proceeds of crime, they are guilty of money laundering, irrespective of whether they were an accused in the predicate offence.”

Thus, the Supreme Court dismissed the accused’s claim that his prosecution under PMLA was unjustified.

"High Courts Must Exercise Caution While Granting Bail in PMLA Cases—Judicial Leniency in Economic Offences Weakens Financial Discipline"

The Supreme Court strongly criticized the Patna High Court’s casual approach in granting bail, emphasizing that: “Money laundering is not an ordinary crime. It affects national security and economic stability. Courts must be extremely cautious in granting bail under PMLA.”

The Court further warned that: “Granting bail in a mechanical manner without applying Section 45 PMLA sets a dangerous precedent and weakens financial discipline.”

The Supreme Court concluded that: “Any High Court granting bail in PMLA cases must strictly adhere to Section 45. Failure to do so will render the bail order unsustainable.”

In Union of India v. Kanhaiya Prasad, the Supreme Court reaffirmed the strict application of PMLA provisions and delivered a strong message against judicial leniency in economic offences.

The Court’s ruling clarified key legal principles:

• Bail under PMLA is subject to the twin conditions under Section 45, which must be strictly followed.

• Statements recorded under Section 50 PMLA are admissible and not barred by Article 20(3) of the Constitution.

• A person can be prosecuted under PMLA even if they were not named in the predicate offence. Money laundering is a standalone crime.

• High Courts must not grant bail in PMLA cases without recording a clear finding on the satisfaction of Section 45 requirements.

By setting aside the High Court’s bail order and directing fresh consideration, the Supreme Court has sent a clear message that economic offences will be dealt with seriously and bail in PMLA cases requires strict scrutiny.

Date of decision: 13/02/2025