A) ABSTRACT / HEADNOTE

The Union of India through the Assistant Director v. Kanhaiya Prasad, [2025] 2 S.C.R. 544 : 2025 INSC 210, examines the mandatory twin-condition embargo on grant of bail contained in Section 45 of the Prevention of Money Laundering Act, 2002 (PMLA) and the approach a court must adopt while entertaining bail applications in money-laundering prosecutions. The facts reveal alleged large-scale illegal mining and sale of sand by a syndicate, generation of proceeds of crime and subsequent layering, concealment and utilisation of such proceeds through family-owned entities, investment in immovable property and renovation works.

The High Court granted bail without recording satisfaction on the two mandatory requirements under s.45:

(i) that the Public Prosecutor be given opportunity to oppose and

(ii) the court being satisfied on reasonable grounds that the accused is not guilty and not likely to commit any offence while on bail.

The Supreme Court held that the High Court’s order was cryptic, failed to apply the rigours of s.45, misapplied the protective scope of Article 20(3) vis-à-vis s.50 PMLA, and that statements recorded under s.50 cannot be excluded ipso facto from consideration. Reliance on the three-Judge pronouncement in Vijay Madanlal Choudhary and a line of authorities was emphasised to underscore that money-laundering is an aggravated, separate class of crime mandating stringent approach to bail. The High Court order was set aside and the matter remitted for fresh consideration by a different Bench.

Keywords: Money Laundering; Bail; Section 45 PMLA; Section 50 PMLA; Proceeds of Crime; Layering; Predicate Offence; Enforcement Directorate; Twin Conditions for Bail.

B) CASE DETAILS 

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT

The case arises from large-scale alleged illegal mining and commercial sale of sand by entities controlled by or connected to the respondent’s family. Multiple FIRs alleging offences under IPC and the Bihar Mineral Rules, 2019 led to an ECIR and investigation by the Enforcement Directorate (ED) for offences scheduled under the PMLA. Search operations under s.17 PMLA resulted in seizure of documents and s.50 statements from the respondent and his relatives.

The ED alleged that proceeds amounting to Rs. 17,26,85,809/ were concealed, layered and transacted through hawala channels and family LLPs, used for construction and renovation of properties (resort at Manali and trust school), thereby constituting money-laundering under ss.3 & 4 PMLA. A prosecution complaint was filed and cognizance taken by the Special PMLA Court. The respondent obtained regular bail from the High Court of Patna; ED challenged that release before the Supreme Court contending non-compliance with the twin conditions of s.45 and reliance upon inadmissible s.50 statements.

The Supreme Court reviewed statutory scheme, binding precedents and facts and found the High Court’s order deficient for not recording satisfaction on the mandatory s.45 conditions. The Court set aside the bail and remitted the matter for fresh hearing before a different Bench, directing surrender within one week if the respondent had been released pursuant to the impugned order.

D) FACTS OF THE CASE

Investigation followed around 20 FIRs registered in multiple districts alleging illegal mining, avoidance of e-challan transport regime and revenue loss of Rs.161,15,61,164/ to the State. An ECIR was registered on 15.03.2023 and supplements were added. Searches under s.17 of PMLA targeted company and family premises, including four premises of Radha Charan Sah (the respondent’s father).

The respondent’s s.50 statements were recorded on 01.09.2023 and 04.09.2023. ED alleged the respondent failed to appear on repeated summons thereafter and was arrested on 18.09.2023; custody transferred to ED on 22.09.2023.

Seized documents and statements purportedly demonstrated that the respondent handled, concealed and transferred Rs.17,26,85,809/ arising from the predicate illegal sand-sale offence through hawala, family LLPs and trust entities, acquiring and renovating properties and thereby laundering funds. A prosecution complaint under ss.3 & 4 PMLA was filed on 10.11.2023; cognizance was taken the same day. The respondent secured High Court bail; ED appealed.

E) LEGAL ISSUES RAISED

i. Whether the High Court erred in granting bail without complying with the mandatory twin conditions under Section 45 PMLA?
ii. Whether statements recorded under Section 50 PMLA are inadmissible and cannot be relied upon to make out a prima facie case for prosecution?
iii. Whether Article 20(3) protection against self-incrimination applies to compelled attendance under s.50(2) PMLA?
iv. Whether absence of showing the respondent as accused in the predicate offence disentitles the ED from prosecuting money-laundering charge?

F) PETITIONER / APPELLANT’S ARGUMENTS

The counsel for ED submitted that the High Court flouted the mandatory s.45 requirements by failing to ensure:

(a) opportunity to Public Prosecutor to oppose bail and

(b) recording of satisfaction on reasonable grounds that accused was not guilty and not likely to commit an offence while on bail.

ED emphasized the seriousness and transnational implications of money-laundering, the presumption in s.24 PMLA, and the prima facie case built on seized documents and s.50 statements. ED urged that casual treatment of bail in PMLA cases undermines statutory scheme and international obligations.

G) RESPONDENT’S ARGUMENTS

Senior counsel for respondent argued that material relied upon by ED included inadmissible compelled statements under s.50, invoking Article 20(3); that the respondent cooperated by appearing pursuant to summons and had discharged tax liabilities; and that High Court properly considered facts to grant bail. Reliance was placed on the need for appellate restraint where High Court adopts material-based balancing for bail.

H) RELATED LEGAL PROVISIONS 

i. Section 3, 4, 17, 24, 45, 50, 65, 71 of PMLA, 2002.
ii. Article 20(3), Constitution of India.
iii. Relevant provisions of Cr.P.C., 1973 to the extent not inconsistent with PMLA.

I) JUDGEMENT

The Supreme Court emphasised the overriding, mandatory nature of s.45 (non-obstante clause) and reiterated that the twin conditions public prosecutor’s opportunity and judicial satisfaction on reasonable grounds are essential before any release on bail in offences punishable for more than three years under Part A of the Schedule. The Court relied heavily on the three-Judge decision in Vijay Madanlal Choudhary & Ors. v. Union of India & Ors. which held post-2018 amendments that s.45 operates as a ‘no-bail’ provision unless twin conditions are satisfied, and that the rigours apply whether relief is sought under s.438 Cr.P.C., constitutional jurisdiction or regular bail.

The Court rejected the submission that Article 20(3) immunises a summoned person from consequences of s.50 statements; construing the phrase “to be a witness” narrowly, the Court held the compulsion under s.50(2) is procedural and does not attract the testimonial privilege envisaged by Article 20(3). The Court further clarified that money-laundering is an independent offence focused on the process or activity connected with proceeds of crime and is not dependent on formal designation of the accused in a predicate FIR.

The High Court’s order was criticised as cryptic and lacking any recorded satisfaction on the twin s.45 conditions. Therefore, the impugned bail order was set aside and remitted for fresh consideration before a different Bench; the Court expressly refrained from expressing views on merits. The respondent was directed to surrender within one week if free.

a. RATIO DECIDENDI

The controlling ratio is that Section 45 PMLA post-amendment imposes mandatory, non-delegable twin conditions for bail: the Public Prosecutor must be heard and the court must be satisfied on reasonable grounds that the accused is not guilty and not likely to commit an offence while on bail. These conditions override ordinary Cr.P.C. bail provisions and must be recorded in reasoned orders; failure to do so renders bail orders unsustainable. s.50 statements, recorded on summons, are not shielded by Article 20(3) from being used to build prima facie case. Vijay Madanlal is authoritative on these propositions.

b. OBITER DICTA 

The Court observed obiter that money-laundering is an aggravated crime with transnational fallout; courts must avoid casual or cryptic bail orders in PMLA cases. It noted the legislative design to treat offenders in money-laundering as a distinct class and re-affirmed statutory presumption under s.24 that proceeds involved are presumed to be proceeds of crime unless contrary proved. These observations underscore policy gravity though not altering legal ratio.

c. GUIDELINES 

i. While deciding bail in PMLA matters courts must expressly apply and record satisfaction on both limbs of s.45.
ii. Public Prosecutor must be afforded opportunity to oppose bail applications; if opposed the court must evaluate and record reasons.
iii. Statements under s.50 may be considered in the scheme of investigation; Article 20(3) does not automatically immunise such statements from use in framing prima facie case.
iv. Bail orders should be reasoned, addressing nature of allegations, quantum of proceeds, risk of tampering with evidence, likelihood of offending while on bail and the accused’s conduct regarding summons.

J) CONCLUSION & COMMENTS

The decision strengthens statutory insistence on strict application of s.45 PMLA and curtails judicial laxity in bail adjudication for economic offences. Practitioners must ensure robust deployment of s.50 records and seizure material to resist bail; conversely defence strategy must anticipate court’s insistence on recorded reasons and address the twin tests expressly. The judgment reiterates that technical contests regarding admissibility of s.50 statements cannot displace the statutory scheme; Article 20(3) has limited operation in the PMLA summons context.

Remand to the High Court for rehearing before a different Bench ensures procedural fairness while preserving statutory objectives. The case is a salutary reminder that money-laundering jurisprudence post-Vijay Madanlal demands granular, documented judicial reasoning on bail and will influence future bail practice in PMLA prosecutions.

K) REFERENCES

a. Important Cases Referred

1. Vijay Madanlal Choudhary & Ors. v. Union of India & Ors., (2022) 6 SCR 382 : 2022 SCC OnLine 929.

2. Gautam Kundu v. Directorate of Enforcement, [2015] 15 SCR 499 : (2015) 16 SCC 1.

3. Rohit Tandon v. Directorate of Enforcement, [2017] 13 SCR 156 : (2018) 11 SCC 46.

4. Tarun Kumar v. Assistant Director Directorate of Enforcement, [2023] 14 SCR 813 : (2023) SCC OnLine 1486.

b. Important Statutes Referred

1. Prevention of Money Laundering Act, 2002 — ss.3, 4, 17, 24, 45, 50, 65, 71.

2. Code of Criminal Procedure, 1973 — (as applicable).

3. Constitution of India — Article 20(3).