THE UNION OF INDIA THROUGH THE ASSISTANT DIRECTORversusKANHAIYA PRASAD

                  [2025] 2 S.C.R. 544 : 2025 INSC 210

           The Union of India through the Assistant Director
                                   v.
                           Kanhaiya Prasad
                    (Criminal Appeal No. 728 of 2025 )
                              13 February 2025
             [Bela M. Trivedi* and Prasanna B. Varale, JJ]


                           Issue for Consideration
       Issue arose as regards the correctness of the order passed by the
       High Court granting bail to the respondent without considering the
       rigours of s.45 of the Prevention of Money Laundering Act, 2002.

                                 Headnotes†
       Prevention of Money Laundering Act, 2002 – ss.45, 50 –
       Commission of offence under PMLA – Grant of bail – Twin
       conditions for bail u/s.45 – Respondent allegedly layered
       and laundered the proceeds of crime generated by his
       father-syndicate member involved in illegal sale of sand
       using hawala network and concealed the proceeds of
       crime and used the said proceeds – Complaint filed by the
       appellant-UOI against the respondent for offences u/ss.3/4
       of the PMLA – PMLA court took cognizance of the alleged
       offences – Bail application by the respondent – Allowed by
       the High Court – Correctness:
       Held: High Court in a very casual and cavalier manner, without
       considering the rigours of s. 45 granted bail to the respondent
       on absolutely extraneous and irrelevant considerations – No
       finding that there were reasonable grounds for believing that
       the respondent was not guilty of the alleged offence under the
       Act and was not likely to commit any offence while on bail –
       Non-compliance of the mandatory requirement of s.45 made
       the impugned order unsustainable and untenable in the eye of
       law – Art. 20(3) of the Constitution would not come into play
       in respect of the process of recording statement pursuant to
       summon issued u/s.50(2) – Furthermore, it cannot be said that the
       respondent has not been shown as an accused in the predicate

* Author
[2025] 2 S.C.R.                                                            545

           The Union of India through the Assistant Director
                          v. Kanhaiya Prasad

     offence – Merely because the prosecution complaint had been
     filed and cognizance was taken by the court that itself would not
     be the ground or consideration to release the respondent on bail,
     when the mandatory requirements of s.45 not complied with –
     Offence of money laundering is an aggravated form of crime
     world over and the offenders involved in the activity connected
     with the Proceeds of Crime are treated as a separate class
     from ordinary criminals – Any casual or cursory approach by
     the Courts while considering the bail application of the offender
     involved in the offence of money laundering and granting him bail
     by passing cryptic orders without considering the seriousness
     of the crime and without considering the rigours of s.45, cannot
     be vindicated – Impugned order being in defiance of s.45, is
     unsustainable and untenable, and as such set aside – Matter
     remanded to the High Court for fresh consideration – ss.3, 4
     [Paras 12, 13, 17-22]

                              Case Law Cited
     Vijay Madanlal Choudhary & Ors. v. Union of India & Ors.
     [2022] 6 SCR 382 : 2022 SCC OnLine 929 – relied on.
     Gautam Kundu v. Directorate of Enforcement [2015] 15 SCR 499 :
     (2015) 16 SCC 1; Rohit Tandon v. Directorate of Enforcement
     [2017] 13 SCR 156 : (2018) 11 SCC 46; Tarun Kumar v. Assistant
     Director Directorate of Enforcement [2023] 14 SCR 813 : (2023)
     SCC OnLine 1486 – referred to.

                                List of Acts
     Constitution of India; Penal Code, 1860; Bihar Mineral, (Concession,
     Prevention of Illegal Mining, Transportation & Storage) Rules, 2019;
     Prevention of Money Laundering Act, 2002.

                             List of Keywords
     Money Laundering; Bail; Twin conditions of bail; Bail application;
     Scheduled offence; Proceeds of crime; Concealing proceeds
     of crime; Enforcement Directorate; Aggravated form of crime;
     Syndicate member; Syndicate member involved in illegal sale of
     sand using hawala network; Mandatory requirement of s.45 PMLA;
     Predicate offence; Remand.
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                             Case Arising From
       CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No.
       728 of 2025
       From the Judgment and Order dated 06.05.2024 of the High Court
       of Judicature at Patna in CRLM No. 17738 of 2024

                          Appearances for Parties
       Suryaprakash V. Raju, A.S.G., Zoheb Hussain, Annam Venkatesh,
       Arvind Kumar Sharma, Advs. for the Appellant.
       Ranjit Kumar, Sr. Adv., Mohit Agrawal, M/s. Saa Chambers,
       Advs. for the Respondent.

                 Judgment / Order of the Supreme Court

                                 Judgment

       Bela M. Trivedi, J.

1.     Leave granted.
2.     The appellant-Union of India through the Enforcement Directorate
       has challenged the legality of the impugned judgment and order
       dated 06.05.2024 passed by the High Court of Judicature at Patna
       in Criminal Miscellaneous No. 17738/2024, whereby the High Court
       had allowed the said petition and released the respondent Kanhaiya
       Prasad on bail, in connection with the Special Trial (PMLA) Case
       No. 8 of 2023 arising out of ECIR No. PTZO/14/2023.
3.     As per the case of the appellant-ED, some 20 FIRs were registered
       at the various Police Stations at Patna, Saran and Bhojpur Districts
       under Sections 38, 120B, 378, 379, 406, 409, 411, 420, 467, 468 and
       471 of IPC, and under Section 39(3) of the Bihar Mineral, (Concession,
       Prevention of Illegal Mining, Transportation & Storage) Rule, 2019. It
       was alleged inter alia that M/s Broad Son Commodities Private Ltd
       and its Directors were engaged in illegal mining and selling of sand
       without using the departmental pre-paid transportation E-challan,
       issued by the Mining Authority Bihar, and thus had caused revenue
       loss of Rs.161,15,61,164/- to the Government Exchequer. Since the
       said FIRs contained Scheduled offences as defined under Section
       2(1)(y) of the Prevention of Money Laundering Act, 2002 (hereinafter
[2025] 2 S.C.R.                                                         547

           The Union of India through the Assistant Director
                          v. Kanhaiya Prasad

     referred to as the ‘’PMLA’’), an ECIR bearing No. ECIR/PTZO/14/2023
     dated 15.03.2023, addendum ECIR No. ECIR/PTZO/14/2023 dated
     08.11.2023 and dated 04.05.2024 came to be registered, and the
     investigation for the offences of Money Laundering was initiated.
4.   During the course of investigation and pursuant to the information
     made available, search operations were carried out under Section
     17 of PMLA at the various locations and premises related with the
     said Company and its Directors, including four premises of Radha
     Charan Sah, (father of the respondent). During the course of inquiry,
     the statements of the respondent-Kanhaiya Prasad, being son of the
     said Radha Charan Sah came to be recorded on 01.09.2023 and
     04.09.2023 under Section 50 of the PMLA. It has been alleged by
     the appellant-ED that thereafter the respondent was issued summons
     to appear before the Directorate on 11.09.2023, 12.09.2023 and
     13.09.2023, however, he failed to appear on the said dates. The
     respondent thereafter was arrested at the ED, Patna Zonal Office,
     Bihar on 18.09.2023. On production of the respondent before the
     concerned court, his custody was handed over to the appellant- ED
     on 22.09.2023.
5.   From the documents seized from the premises of the Radha Charan
     Sah and from the statements recorded under Section 50 of the
     Witnesses, of the respondent and of his father, it was found that
     the respondent-accused was actually involved in the process of
     concealing and the possession of the proceeds of crime amounting
     to Rs.17,26,85,809/- which were used for carrying out the renovation
     work in the resort at Manali and for the construction work of the school
     owned by his trust. It was also found that the respondent-accused
     had handled the said proceeds of crime and transferred it by using
     hawala network for acquisition of the resort at Manali. It was also
     alleged that the entire work of family-owned LLP’s and of Maa Sharda
     Devi Buildings and Construction, was handled by the respondent
     to route the proceeds of crime generated by his father to portray
     it as untainted money. The respondent thus had allegedly layered
     and laundered the proceeds of crime generated by his father, being
     a syndicate member involved in illegal sale of sand using hawala
     network. The respondent also had allegedly concealed the proceeds
     of crime by way of purchasing properties, carrying out renovation
     work and constructions in the family-owned trust property using the
     said proceeds of crime.
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6.     The appellant-ED therefore filed Prosecution Complaint against the
       respondent and other accused on 10.11.2023 for the offences under
       Section 3 read with Section 4 of the PMLA. The specific role of the
       respondent-accused has been mentioned in paragraph 11.6 of the
       said Prosecution Complaint. The concerned PMLA Court had taken
       cognizance of the alleged offences on 10.11.2023.
7.     The respondent filed the application being Criminal Misc.
       No.17738/2024 before the High Court of Judicature at Patna seeking
       regular bail in connection with the said Prosecution Complaint
       registered as Special Trial (PMLA Case No.8/2023) before the Special
       Judge, PMLA. The said application has been allowed by the High
       Court vide the impugned order.
8.     The bone of contention raised by the learned counsel Mr. Zoheb
       Hussain appearing for the appellant-ED is that the impugned order
       passed by the High Court is in the teeth of Section 45 of the PMLA
       as also of various pronouncements made by this Court with regard
       to the mandatory requirement of the said provision. According to
       him, the High Court has thoroughly misinterpreted and misread the
       ratio of the judgments particularly of the judgment of the three-judge
       bench in Vijay Madanlal Choudhary & Ors. Vs. Union of India
       & Ors.,1 while holding that the provisions of Article 20(3) of the
       Constitution shall prevail upon Section 50 of the PMLA. Mr. Zoheb
       Hussain relying upon the Prosecution Complaint and other material
       on record submitted that there was a prima-facie case made out
       by the appellant against the respondent, and the offence under the
       PMLA being very serious and grave, High Court had committed
       an error in granting bail to the respondent without considering the
       rigours of Section 45.
9.     However, the Learned Senior Counsel Mr. Ranjit Kumar appearing
       for the respondent relying upon the various decisions of this Court
       submitted that the case against the respondent was made out by the
       appellant on the basis of inadmissible statements recorded under
       Section 50 of the PMLA, and that the respondent having already been
       released on bail by the High Court considering the material placed
       on record, this Court should not interfere with the impugned order.
       He further submitted that the respondent had cooperated with the


1    2022 SCC OnLine 929
[2025] 2 S.C.R.                                                               549

            The Union of India through the Assistant Director
                           v. Kanhaiya Prasad

     ED during the course of enquiry, in as much as the respondent had
     remained present pursuant to the summons issued under Section
     50 of the PMLA on 01.09.2023 and 04.09.2023 and had also paid
     the entire income-tax dues as were found to be allegedly due by
     the authorities.
10. At the outset, it hardly needs to be stated that the objective of the
    PMLA is to prevent money laundering which has posed a serious
    threat not only to the financial systems of the country but also to its
    integrity and sovereignty. The offence of money laundering is a very
    serious offence which is committed by an individual with a deliberate
    desire and the motive to enhance his gains, disregarding the interest
    of the nation and the society as a whole, and such offence by no
    stretch of imagination can be regarded as an offence of trivial nature.
    The stringent provisions have been made in the Act to combat the
    menace of money laundering.
11. Since, the entire controversy revolves around Section 45 of the PMLA,
    it would be beneficial to reproduce the said provision: -
           “Section 45 - Offences to be cognizable and non-
           bailable.
           (1) Notwithstanding anything contained in the Code of
           Criminal Procedure, 1973 (2 of 1974), -
           a.     every offence punishable under this Act shall be
                  cognizable;
           b.     no person accused of an offence punishable for a
                  term of imprisonment of more than three years under
                  Part A of the Schedule shall be released on bail or
                  on his own bond unless
           (i)    the Public Prosecutor has been given an opportunity
                  to oppose the application for such release; and
           (ii)   where the Public Prosecutor opposes the application,
                  the court is satisfied that there are reasonable grounds
                  for believing that he is not guilty of such offence and
                  that he is not likely to commit any offence while on bail:
           Provided that a person, who, is under the age of sixteen
           years, or is a woman or is sick or infirm or is accused
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           either on his own or along with other co-accused of money
           laundering a sum of less than one crore rupees, may be
           released on bail, if the Special Court so directs
           Provided further that the Special Court shall not take
           cognizance of any offence punishable under section 4
           except upon a complaint in writing made by-
           (i)    the Director; or
           (ii)   any officer of the Central Government or State
                  Government authorised in writing in this behalf by the
                  Central Government by a general or a special order
                  made in this behalf by that Government.
           (1A) Notwithstanding anything contained in the Code
           of Criminal Procedure, 1973 (2 of 1974), or any other
           provision of this Act, no police officer shall investigate into
           an offence under this Act unless specifically authorised,
           by the Central Government by a general or special order,
           and, subject to such conditions as may be prescribed.
           (2) The limitation on granting of bail specified in sub-
           section (1) is in addition to the limitations under the Code
           of Criminal Procedure, 1973 (2 of 1974) or any other law
           for the time being in force on granting of bail.”
12. It is well settled position of law that Section 45 of the PMLA starting
    with a non-obstante clause has an overriding effect on the general
    provisions of the Code of Criminal Procedure in case of conflict
    between them. Section 45 imposes two conditions for the grant of
    bail to any person, accused of an offence punishable for a term of
    imprisonment of more than 3 years under Part A of the Schedule.
    The two conditions are that (i) the prosecutor must be given an
    opportunity to oppose the application for bail; and (ii) the Court must
    be satisfied that there are reasonable grounds for believing that
    the accused person is not guilty of such offence and that he is not
    liable to commit any offence while on bail. As well settled, these two
    conditions are mandatory in nature and they need to be complied
    with before the accused person is released on bail.
13. It is further required to be noted that Section 65 of PMLA requires that
    the provisions of Cr.P.C. shall apply insofar as they are not inconsistent
[2025] 2 S.C.R.                                                              551

             The Union of India through the Assistant Director
                            v. Kanhaiya Prasad

     with the provisions of the PMLA and Section 71 provides that the
     provisions of PMLA shall have overriding effect notwithstanding
     anything inconsistent therewith contained in any other law for the
     time being in force. Hence the conditions enumerated in Section 45
     will have to be complied with even in respect of application for bail
     made under Section 439 of Cr.P.C. Further, Section 24 provides that
     in case of a person charged with the offence of money-laundering
     under Section 3, the Authority or Court shall, unless the contrary
     is proved, presume that such proceeds of crime are involved in
     money-laundering. Therefore, the burden to proof that proceeds of
     crime are not involved in money laundering would lie on the person
     charged with the offence.
14. The aforesaid position of law has been reiterated time and again in
    catena of judgments by this Court. To cite a few judgments are in
    case of Gautam Kundu Vs. Directorate of Enforcement,2 Rohit
    Tandon Vs. Directorate of Enforcement, 3 Tarun Kumar Vs.
    Assistant Director Directorate of Enforcement,4 etc.
15. In case of Vijay Madanlal (supra), whereby the various provisions
    of the Act including Section 45 were sought to be challenged, it has
    been specifically held:
            “387………….The provision post the 2018 Amendment,
            is in the nature of no bail in relation to the offence of
            money laundering unless the twin conditions are fulfilled.
            The twin conditions are that there are reasonable grounds
            for believing that the accused is not guilty of offence of
            money laundering and that he is not likely to commit
            any offence while on bail. Considering the purposes and
            objects of the legislation in the form of the 2002 Act and
            the background in which it had been enacted owing to
            the commitment made to the international bodies and on
            their recommendations, it is plainly clear that it is a special
            legislation to deal with the subject of money laundering
            activities having transnational impact on the financial
            systems including sovereignty and integrity of the countries.


2   (2015) 16 SCC 1
3   (2018) 11 SCC 46
4   (2023) SCC OnLine 1486
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          This is not an ordinary offence. To deal with such serious
          offence, stringent measures are provided in the 2002
          Act for prevention of money laundering and combating
          menace of money laundering, including for attachment
          and confiscation of proceeds of crime and to prosecute
          persons involved in the process or activity connected with
          the proceeds of crime. In view of the gravity of the fallout
          of money laundering activities having transnational impact,
          a special procedural law for prevention and regulation,
          including to prosecute the person involved, has been
          enacted, grouping the offenders involved in the process
          or activity connected with the proceeds of crime as a
          separate class from ordinary criminals. The offence of
          money laundering has been regarded as an aggravated
          form of crime “world over”. It is, therefore, a separate class
          of offence requiring effective and stringent measures to
          combat the menace of money laundering.
          388 to 411………………..
          412. As a result, we have no hesitation in observing
          that in whatever form the relief is couched including the
          nature of proceedings, be it under Section 438 of the
          1973 Code or for that matter, by invoking the jurisdiction
          of the constitutional court, the underlying principles and
          rigours of Section 45 of the 2002 Act must come into play
          and without exception ought to be reckoned to uphold the
          objectives of the 2002 Act, which is a special legislation
          providing for stringent regulatory measures for combating
          the menace of money laundering.”
16. In view of the above, 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
    rigours of Section 45 have to be reckoned by the court to uphold
    the objectives of the PMLA.
17. So far as facts of the present case are concerned, the High Court in
    a very casual and cavalier manner, without considering the rigours of
    Section 45 granted bail to the respondent on absolutely extraneous
    and irrelevant considerations. There is no finding whatsoever recorded
    in the impugned order that there were reasonable grounds for
[2025] 2 S.C.R.                                                      553

           The Union of India through the Assistant Director
                          v. Kanhaiya Prasad

     believing that the respondent was not guilty of the alleged offence
     under the Act and that he was not likely to commit any offence while
     on bail. Non-compliance of the mandatory requirement of Section
     45 has, on the face of it, made the impugned order unsustainable
     and untenable in the eye of law.
18. Though it was sought to be submitted by learned senior Advocate
    Mr. Ranjit Kumar for the respondent that the appellant had relied
    upon the statements of the respondent recorded under Section 50
    of the Act which were inadmissible in evidence, the said submission
    cannot be accepted in view of the position of law settled by this
    Court in Vijay Madanlal (supra) in which it has been held inter alia
    that the person summoned under Section 50(2) is bound to attend
    in person or through authorized agents before the authority and to
    state truth upon any subject concerning which he is being examined
    or is expected to make statements and to produce the documents
    as may be required by virtue of sub-section (3) of Section 50. It has
    been further observed that Article 20(3) of the Constitution would
    not come into play in respect of the process of recording statement
    pursuant to such summon issued under sub-section (2) of Section
    50. The phrase used in Article 20(3) is “to be a witness” and not to
    “appear as a witness”. It follows that the protection afforded to an
    accused insofar as it is related to the phrase “to be a witness” is in
    respect of testimonial compulsion in the court room, and it may also
    extend to compelled testimony previously obtained from him. It is
    available therefore to a person against whom a formal accusation
    relating to the commission of an offence has been levelled, which
    in the normal course may result in a prosecution.
19. We also do not find any substance in the submission made by learned
    Senior Advocate Ranjit Kumar for the respondent that the respondent
    has not been shown as an accused in the predicate offence. It is
    no more res integra that the offence of money laundering is an
    independent offence regarding the process or activity connected
    with the proceeds of crime, which had been derived or obtained as
    a result of criminal activity relating to or in relation to a schedule
    offence. Hence, involvement in any one of such process or activity
    connected with the Proceeds of Crime would constitute offence of
    money laundering. This offence otherwise has nothing to do with the
    criminal activity relating to a schedule offence, except the Proceeds
    of Crime derived or obtained as a result of that crime. The precise
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       observations made in Vijay Madanlal (supra) in this regard may be
       reproduced hereunder: -
           “270. Needless to mention that such process or activity can
           be indulged in only after the property is derived or obtained
           as a result of criminal activity (a scheduled offence). It
           would be an offence of money laundering to indulge in or
           to assist or being party to the process or activity connected
           with the proceeds of crime; and such process or activity
           in a given fact situation may be a continuing offence,
           irrespective of the date and time of commission of the
           scheduled offence. In other words, the criminal activity may
           have been committed before the same had been notified
           as scheduled offence for the purpose of the 2002 Act, but
           if a person has indulged in or continues to indulge directly
           or indirectly in dealing with proceeds of crime, derived
           or obtained from such criminal activity even after it has
           been notified as scheduled offence, may be liable to be
           prosecuted for offence of money laundering under the 2002
           Act — for continuing to possess or conceal the proceeds
           of crime (fully or in part) or retaining possession thereof
           or uses it in trenches until fully exhausted. The offence of
           money laundering is not dependent on or linked to the date
           on which the scheduled offence, or if we may say so, the
           predicate offence has been committed. The relevant date
           is the date on which the person indulges in the process
           or activity connected with such proceeds of crime. These
           ingredients are intrinsic in the original provision (Section 3,
           as amended until 2013 and were in force till 31-7-2019);
           and the same has been merely explained and clarified by
           way of Explanation vide Finance (No. 2) Act, 2019. Thus
           understood, inclusion of clause (ii) in the Explanation
           inserted in 2019 is of no consequence as it does not alter
           or enlarge the scope of Section 3 at all.
           271 to 405……………
           406. It was urged that the scheduled offence in a given
           case may be a non-cognizable offence and yet rigours
           of Section 45 of the 2002 Act would result in denial of
           bail even to such accused. This argument is founded on
[2025] 2 S.C.R.                                                            555

           The Union of India through the Assistant Director
                          v. Kanhaiya Prasad

           clear misunderstanding of the scheme of the 2002 Act.
           As we have repeatedly mentioned in the earlier part of
           this judgment that the offence of money laundering is
           one wherein a person, directly or indirectly, attempts to
           indulge or knowingly assists or knowingly is a party or
           is actually involved in any process or activity connected
           with the proceeds of crime. The fact that the proceeds of
           crime have been generated as a result of criminal activity
           relating to a scheduled offence, which incidentally happens
           to be a non-cognizable offence, would make no difference.
           The person is not prosecuted for the scheduled offence
           by invoking provisions of the 2002 Act, but only when he
           has derived or obtained property as a result of criminal
           activity relating to or in relation to a scheduled offence and
           then indulges in process or activity connected with such
           proceeds of crime. Suffice it to observe that the argument
           under consideration is completely misplaced and needs
           to be rejected.”
20. The High Court has utterly failed to consider the mandatory
    requirements of Section 45 and to record its satisfaction whether any
    reasonable ground existed for believing that the respondent was not
    guilty of the alleged offence, and that he was not likely to commit
    any offence while on bail. Merely because the prosecution complaint
    had been filed and the cognizance was taken by the court that itself
    would not be the ground or consideration to release the respondent
    on bail, when the mandatory requirements as contemplated in Section
    45 have not been complied with.
21. As well settled, the offence of money laundering is not an ordinary
    offence. The PMLA has been enacted to deal with the subject of
    money laundering activities having transnational impact on financial
    systems including sovereignty and integrity of the countries. The
    offence of money laundering has been regarded as an aggravated
    form of crime world over and the offenders involved in the activity
    connected with the Proceeds of Crime are treated as a separate
    class from ordinary criminals. Any casual or cursory approach by the
    Courts while considering the bail application of the offender involved
    in the offence of money laundering and granting him bail by passing
    cryptic orders without considering the seriousness of the crime and
    without considering the rigours of Section 45, cannot be vindicated.
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22. The impugned order passed by the High Court being in teeth of
    Section 45 of PMLA and also in the teeth of the settled legal position,
    we are of the opinion that the impugned order deserves to be set
    aside, and the matter is required to be remanded to the High Court
    for fresh consideration. Accordingly, the impugned order is set aside,
    and the matter is remanded to the High Court for consideration
    afresh with the request to the Chief Justice to place the matter before
    the Bench other than the Bench which had passed the impugned
    order. We may clarify that we have not expressed any opinion on
    the merits of the case.
23. Though, the learned Senior Counsel Mr. Ranjit Kumar has submitted
    that the respondent having already been released on bail, the same
    be continued in a peculiar and piquant situation, we are not inclined
    to accept the said submission. The impugned order passed by the
    High Court having been held to be unsustainable and untenable
    by us, the effect of the same cannot be continued. The respondent
    shall surrender before the Special Court within one week from today.
24. The Appeal stands allowed accordingly.

       Result of the case: Appeal allowed.



       †
           Headnotes prepared by: Nidhi Jain