PREM PRAKASH vs. UNION OF INDIA THROUGH THE DIRECTORATE OF ENFORCEMENT

Case Analysis

PREM PRAKASH vs. UNION OF INDIA THROUGH THE DIRECTORATE OF ENFORCEMENT

December 10, 2024

A) ABSTRACT / HEADNOTE

The Supreme Court addressed whether statements recorded under Section 50 of the Prevention of Money Laundering Act, 2002 (PMLA) of an individual already in judicial custody in another case can be admissible as evidence against the maker in a new case. The Court ruled that such statements are inadmissible under Section 50 of the PMLA and are also protected under Section 25 of the Indian Evidence Act, 1872, as they would otherwise compromise fair trial principles. This judgment provides clarity on procedural fairness under PMLA while emphasizing the safeguards under Article 21 of the Constitution. The Court also addressed the twin conditions of bail under Section 45 of the PMLA, reaffirming the principle that “bail is the rule and jail is the exception.”

Keywords: Section 50 PMLA, Section 45 PMLA, Section 25 Evidence Act, Admissibility of Statements, Judicial Custody, Bail Principles.

B) CASE DETAILS

i) Judgement Cause Title: Prem Prakash v. Union of India Through The Directorate of Enforcement
ii) Case Number: Criminal Appeal No. 3572 of 2024
iii) Judgement Date: 28 August 2024
iv) Court: Supreme Court of India
v) Quorum: B.R. Gavai and K.V. Viswanathan, JJ.
vi) Author: K.V. Viswanathan, J.
vii) Citation: [2024] 8 S.C.R. 955
viii) Legal Provisions Involved:
- Section 50, Prevention of Money Laundering Act, 2002
- Section 45, Prevention of Money Laundering Act, 2002
- Section 25, Indian Evidence Act, 1872
- Article 21, Constitution of India
ix) Judgments Overruled by the Case (if any): None.
x) Related Law Subjects: Criminal Law, Procedural Law, Financial Crimes, Constitutional Law.C) INTRODUCTION AND BACKGROUND OF JUDGMENT

This case emerged from allegations of money laundering connected to fraudulent land transactions. The Directorate of Enforcement accused the appellant of conspiring in a series of fraudulent land sales. Key to the case was the admissibility of statements made under Section 50 of the PMLA while the appellant was in judicial custody. The High Court of Jharkhand denied bail to the appellant, prompting an appeal to the Supreme Court.

The appeal raised critical questions about procedural safeguards under the PMLA, the admissibility of custodial statements, and the principles of granting bail under Section 45.

D) FACTS OF THE CASE

The Enforcement Directorate registered an Enforcement Case Information Report (ECIR) No. 5 of 2023 based on alleged land fraud involving forged sale deeds and money laundering.
The appellant, already in custody under another ECIR (No. 4 of 2022), was implicated in transferring proceeds of crime through a firm he allegedly controlled.
Statements under Section 50 of the PMLA were recorded from the appellant while he was in judicial custody, which the Directorate sought to use as evidence.
The High Court denied bail based on the presumption of guilt under the PMLA.
The appellant challenged the admissibility of his statements and sought bail on the grounds that the evidence did not establish his involvement in money laundering.

E) LEGAL ISSUES RAISED

Whether statements recorded under Section 50 of the PMLA from a person already in custody are admissible as evidence.
Whether the appellant satisfied the twin conditions for bail under Section 45 of the PMLA.

F) PETITIONER/APPELLANT’S ARGUMENTS

Admissibility of Statements: The counsel argued that statements recorded while in custody under another ECIR are inadmissible as per Section 25 of the Indian Evidence Act.
Violation of Article 21: The appellant’s statements, recorded under coercive circumstances, violated his right to a fair trial under Article 21.
Bail Principles: The twin conditions under Section 45 of the PMLA were satisfied, as there was no reasonable ground to believe the appellant committed the offense.
Delay in Trial: Prolonged incarceration without trial amounted to pre-conviction punishment, contrary to established bail principles.

G) RESPONDENT’S ARGUMENTS

Presumption of Guilt: The Directorate asserted that the appellant’s involvement in fraudulent transactions established a prima facie case of money laundering under Sections 3 and 4 of the PMLA.
Custodial Statements Validity: Statements recorded under Section 50 were valid under the PMLA framework, irrespective of the appellant’s custody status.
Financial Trail Evidence: The Directorate cited financial records to link the appellant with proceeds of crime.

H) JUDGEMENT

a. Ratio Decidendi

Admissibility of Statements: Statements made under Section 50 while in custody are inadmissible under Section 25 of the Evidence Act if recorded without judicial oversight.
Section 45 Conditions: The Court emphasized the requirement for reasonable grounds to believe the accused is not guilty, aligning with the constitutional principle that bail is the rule.

b. Obiter Dicta

The Court underscored the procedural fairness mandated by Article 21, observing that a person in custody cannot be deemed to have made statements with a free mind.

c. Guidelines

Statements made under Section 50 should adhere to fair trial principles.
Judicial custody statements require court permission to be admissible.
Bail applications under PMLA must balance statutory presumptions with constitutional rights.

I) CONCLUSION & COMMENTS

This judgment affirms procedural safeguards in financial crime investigations. It balances statutory provisions with constitutional rights, emphasizing the principles of a fair trial and the presumption of innocence. The ruling restricts the misuse of custodial statements under PMLA and sets a precedent for bail considerations under financial crime laws.