The Supreme Court of India, on February 13, 2025, overturned the Patna High Court's decision to grant bail to Kanhaiya Prasad, an accused in a money laundering case. The ruling emphasized that courts must adhere strictly to the twin conditions under Section 45 of the Prevention of Money Laundering Act, 2002 (PMLA) before granting bail.
The case, titled Union of India Through the Assistant Director vs. Kanhaiya Prasad, involved allegations of large-scale illegal mining operations that caused a significant revenue loss to the government.
Section 45 PMLA: Mandatory Conditions for Bail
The Supreme Court reaffirmed that Section 45 of the PMLA sets mandatory conditions for granting bail in money laundering cases:
- The Public Prosecutor must be given an opportunity to oppose the bail application.
- The court must be satisfied that the accused is not guilty of the offense and is unlikely to commit any crime while on bail.
Referring to the landmark case Vijay Madanlal Choudhary vs. Union of India, the Court stressed that compliance with these twin conditions is non-negotiable.
"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 rigors of Section 45 have to be reckoned by the court to uphold the objectives of the PMLA." – Supreme Court
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The Supreme Court criticized the Patna High Court for granting bail without properly considering Section 45’s strict requirements. The Court found no reasoning in the High Court's judgment to support the belief that the accused was not guilty or would not commit further offenses while on bail.
"The High Court, in a very casual and cavalier manner, without considering the rigors of Section 45, granted bail on absolutely extraneous and irrelevant considerations. This non-compliance of the mandatory requirement of Section 45 makes the order unsustainable in the eye of the law." – Supreme Court
Case Background
The Enforcement Directorate (ED) initiated investigations following multiple FIRs related to illegal sand mining across districts in Bihar. It was alleged that:
- M/s Broad Son Commodities Pvt. Ltd. and its directors engaged in illegal sand mining without valid transportation permits.
- The illegal activities caused a government revenue loss of ₹161.15 crore.
- Kanhaiya Prasad allegedly concealed and laundered proceeds of crime worth ₹17.26 crore, which were used for property purchases and business operations.
- Funds were transferred through hawala channels to acquire a resort in Manali and for school construction under his family trust.
The ED arrested Prasad in September 2023 after he failed to appear for multiple summonses.
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The Court rejected the defense argument that Prasad was not named in the predicate offense, reiterating that money laundering is an independent crime.
"The offense of money laundering is not dependent on or linked to the date on which the scheduled offense occurred. It is a separate offense requiring stringent measures to combat its menace." – Supreme Court
The Court also addressed the argument that statements recorded under Section 50 of PMLA are inadmissible due to Article 20(3) of the Constitution, which protects against self-incrimination.
Citing Vijay Madanlal Choudhary, the Court clarified that:
- Article 20(3) applies only after a formal accusation is made.
- Summons under Section 50 of PMLA do not equate to an accusation.
"The phrase used in Article 20(3) is ‘to be a witness’ and not ‘to appear as a witness.’ Protection is only for testimonial compulsion in a courtroom or previously obtained compelled testimony." – Supreme Court
Final Judgment: Bail Order Overturned, Case Remanded
The Supreme Court set aside the High Court’s order and directed the case to be reconsidered by a different bench.
"The High Court failed to record satisfaction as to whether reasonable grounds existed for believing the respondent was not guilty. Such a casual approach in granting bail for a serious offense cannot be justified." – Supreme Court
Furthermore, the Court ordered Prasad to surrender within one week.
Case Title: THE UNION OF INDIA THROUGH THE ASSISTANT DIRECTOR VERSUS KANHAIYA PRASAD
