Presumption Under PMLA Does Not Arise Without Foundational Facts: Karnataka High Court Grants Bail in Money Laundering Case

"Confession of Co-Accused Is Not Substantive Evidence; Bail Cannot Be Denied Solely on That Basis" — In a significant decision  Karnataka High Court, presided by Justice S. Vishwajith Shetty, granted regular bail to R.M. Manjunath Gowda, a former president of a cooperative bank, in a case registered by the Directorate of Enforcement (ED) under Section 4 of the Prevention of Money Laundering Act, 2002 (PMLA). The Court emphasized that statutory presumptions under Section 24 of the PMLA do not arise automatically unless foundational facts relating to predicate offences are first established, and that confessions of co-accused cannot alone justify continued custody. It found no compelling material to continue the petitioner’s incarceration, particularly in light of his age, health condition, and the absence of trial commencement.

The petitioner, R.M. Manjunath Gowda, had served as President of the Shivamogga District Co-operative Central Bank over several years. The proceedings against him under the PMLA were rooted in multiple predicate offences:

• Crime No. 325/2014, registered under IPC offences, where he was originally named as accused no. 15, but dropped in the initial charge sheet. Later, an additional charge sheet was filed without invoking any scheduled offence, and cognizance was not yet taken.

• Crime No. 16/2021, which was quashed by the High Court on the ground that it was repetitive and based on the same allegations and period as Crime No. 325/2014.

• Crime No. 4/2014, registered under Section 13(1)(e) and 13(2) of the Prevention of Corruption Act, concerning disproportionate assets, which remains stayed by the High Court.

Based on these predicate cases, an ECIR (Enforcement Case Information Report) was registered, and the petitioner was arrested on 09.04.2025. The ED opposed bail, citing presumption under Section 24, the twin conditions under Section 45 PMLA, and confessions of co-accused. However, the Court disagreed with the ED’s reasoning.

On Presumption Under Section 24, PMLA:

The Court underscored that presumption under Section 24 does not operate automatically. Citing Vijay Madanlal Choudhary v. Union of India [(2023) 12 SCC 1], the Court observed:

“The prosecution is required to primarily establish at least three foundational facts:
(i) That a scheduled offence has been committed;
(ii) That the property is a result of that offence; and
(iii) That the accused is directly or indirectly involved in a process connected to such property.” [Para 14]

The Court added:

“Only after such foundational facts are made out does the burden shift to the accused. In the present case, these foundational facts have not been independently established.” [Para 14]

On Confession of Co-Accused:

Referring to Prem Prakash v. Union of India [(2024) 9 SCC 787] and P. Krishna Mohan Reddy v. State of Andhra Pradesh [2025 SCC OnLine SC 1157], the Court reaffirmed that:

“A confession by a co-accused is not substantive evidence and cannot be the sole basis for denial of bail.” [Paras 24–25]

Quoting Prem Prakash:

“The prosecution cannot start with such a statement to establish its case.” [Para 24]

On Applicability of Twin Conditions Under Section 45:

While acknowledging the restrictive nature of Section 45, the Court cited Vijay Madanlal Choudhary and clarified:

“Section 45 does not impose an absolute bar on the grant of bail. The Court must maintain a delicate balance between a judgment of acquittal and an order granting bail much before commencement of trial.” [Para 12]

The Court added that:

“In light of the petitioner’s age, lack of criminal antecedents since 2014, and medical condition, the possibility of committing a similar offence in the future is remote.” [Para 22]

On the Status of Predicate Offences:

The Court emphasized that without valid predicate offences, the ED’s case under PMLA is severely undermined:

“FIR No. 16/2021 has been quashed. FIR No. 4/2014 is stayed. The additional charge sheet filed in Crime No. 325/2014 does not invoke any scheduled offence and cognizance is yet to be taken.” [Paras 15–17, 20]

Jurisdiction and Evidentiary Value:

The Court rejected the ED’s objection that the petitioner had already challenged his arrest and could not re-agitate the same grounds. Relying on Arvind Kejriwal v. Directorate of Enforcement [(2025) 2 SCC 248], it held:

“A bail application must be considered independently of the validity of arrest under Section 19. The Special Court’s assessment under Section 45 is distinct from the officer’s opinion under Section 19.” [Para 19]

Having found no cogent material, and in view of the petitioner’s medical needs, advanced age (62 years), long incarceration since April 2025, and delayed trial, the Court granted bail:

“The complaint is already filed. The trial is unlikely to commence soon. Considering all aspects, this Court is of the view that the petitioner's prayer for grant of bail requires to be allowed.” [Para 28]

The petitioner was released on conditions including furnishing of bond, non-interference with witnesses, and assurance not to commit similar offences.

This decision strengthens the principle that bail cannot be denied under PMLA based on suspicion alone or in the absence of foundational facts relating to scheduled offences. It also reiterates that confessional statements of co-accused lack evidentiary strength unless corroborated. In a climate of heightened scrutiny under PMLA, this ruling reasserts judicial oversight and procedural fairness in protecting individual liberty.

Date of Decision: 2 July 2025