Reaffirmation of Mandatory Twin Conditions Under Section 45 of the PMLA

1. Introduction

This commentary examines the recent Supreme Court of India decision in The Union of India v. Kanhaiya Prasad (2025 INSC 210). The Union of India, acting through the Enforcement Directorate (ED), appealed against a High Court order that had granted bail to the respondent, Mr. Kanhaiya Prasad, in a case involving alleged money laundering activities under the Prevention of Money Laundering Act, 2002 (PMLA).

The central issue revolved around the High Court’s approach in granting bail without adequately applying the twin statutory conditions under Section 45 of the PMLA. The ED contended that the High Court’s order misread the legal requirements governing the grant of bail in money laundering cases, especially given the gravity and transnational nature of this offense.

Parties involved include:

• The Appellant: The Union of India through the Enforcement Directorate
• The Respondent: Mr. Kanhaiya Prasad, who was arrested for allegedly participating in the process of layering, transferring, and concealing proceeds of crime derived from illegal mining and other unlawful activities in Bihar.

The Supreme Court ultimately set aside the High Court’s bail order and remanded the matter for fresh examination before a different Bench, placing renewed emphasis on the strict letter of Section 45 of the PMLA.

2. Summary of the Judgment

In its judgment, delivered by Hon’ble Justice Bela M. Trivedi (with Justice Prasanna B. Varale concurring), the Supreme Court held that the High Court’s order granting bail to the respondent did not comply with the mandatory requirements of Section 45 of the PMLA. Specifically, Section 45 imposes certain “twin conditions” for bail in offenses punishable under Part A of the Schedule to the PMLA (i.e., offenses carrying imprisonment for more than three years):

1. The Public Prosecutor must have an opportunity to oppose the application for bail.
2. The court must be satisfied that there are reasonable grounds for believing that the accused is not guilty of the offense and that he is unlikely to commit any offense while on bail.

The Supreme Court considered the seriousness of money laundering, the large-scale allegations of revenue loss to the state, and emphasized that the High Court must undertake a diligent analysis of whether these statutory conditions are satisfied. Concluding that the High Court failed to apply these conditions, the Supreme Court allowed the appeal, canceled the bail, and directed the respondent to surrender before the Special Court within a week.

3. Analysis

A. Precedents Cited

Several key precedents guided the Court’s decision in reiterating the strict conditions under Section 45 of the PMLA:

• Vijay Madanlal Choudhary & Ors. v. Union of India & Ors. (2022 SCC OnLine SC 929): The Court reaffirmed that the PMLA is a special legislation aimed at combating money laundering that can have transnational ramifications. The offense is considered very serious, imposing onerous bail conditions.
• Gautam Kundu v. Directorate of Enforcement (2015) 16 SCC 1: Clarified that the offense under the PMLA imposes high thresholds for granting bail and that statutory presumptions apply.
• Rohit Tandon v. Directorate of Enforcement (2018) 11 SCC 46 & Tarun Kumar v. Assistant Director Directorate of Enforcement (2023 SCC OnLine 1486): Both decisions emphasized that the burden to prove that the proceeds of crime are not involved in money laundering lies with the accused.

These precedents underscore the principle that Section 45 supersedes the general provisions of the Code of Criminal Procedure (CrPC) when granting bail in money laundering cases. The twin conditions for bail remain mandatory in nature, and courts must rigorously apply them.

B. Legal Reasoning

The Court’s legal reasoning centered on ensuring that the High Court properly applied the twin conditions in Section 45 of the PMLA. Justice Trivedi emphasized:

• Overriding Effect: Because Section 45 begins with a non-obstante clause, it overrides conflicting provisions in the CrPC. The High Court must first satisfy itself that the accused is “not guilty” based on a preliminary assessment of the evidence, and that the accused is not likely to commit an offense while on bail.
• Nature of PMLA Offenses: The Court described money laundering as an “aggravated form of crime” with transnational implications. The PMLA’s stringent bail conditions reflect the legislature’s intent to halt and punish sophisticated illicit financial behavior.
• No Finding on Guilt or Future Conduct: According to the Supreme Court, the High Court’s order was insufficiently reasoned. It did not expressly find that there were reasonable grounds to believe that the respondent was not guilty, nor that he was unlikely to reoffend while on bail.
• Statements under Section 50 of PMLA: The Court noted that statements recorded under Section 50 are permissible as evidence. Article 20(3) of the Constitution (right against self-incrimination) does not automatically invalidate such statements when they are recorded as part of an investigative process in a money laundering case (as clarified in Vijay Madanlal).
• Offense Independence: The respondent contended he was not an accused in the predicate offense. However, the Court reiterated that money laundering is an independent offense connected to “proceeds of crime,” distinguishing it from the underlying activity that generated those proceeds.

C. Impact

The Supreme Court’s judgment in The Union of India v. Kanhaiya Prasad significantly clarifies the strict approach to be taken in matters of bail under the PMLA:

• Heightened Bail Threshold: This ruling serves as a clear reminder to lower courts that they must meticulously satisfy themselves of the twin conditions when deciding bail applications in money laundering cases. Mere filing of charge sheets or summoning under Section 50 is not enough to conclude the accused is entitled to bail.
• Emphasis on Public Interest: By categorizing money laundering as a serious offense with far-reaching ramifications, the Court highlights the state’s legitimate interest in denying bail to offenders who can cause systemic harm to the economy and national security.
• Guidance for Future Litigants: Defendants in PMLA cases must be prepared to show reasonable grounds for their innocence and reassure courts that they will not indulge in similar activities if released on bail. This heightens the evidentiary burden beyond ordinary criminal offenses.

4. Complex Concepts Simplified

The nature of “Money Laundering” and the PMLA’s stringent bail regime can be intricate. Below are a few simplified explanations:

• Proceeds of Crime: Any property (movable or immovable) or value derived from illegal activities (such as illegal mining, fraud, and other scheduled offenses listed in the PMLA).
• Predicate Offense: The underlying crime that produces these “proceeds of crime.” Although separate, the existence of a predicate offense leads to the generation of illicit funds or property, which, when laundered, becomes a distinct violation under the PMLA.
• Twin Conditions (Section 45 of PMLA): Before granting bail, the court must (i) allow the Prosecutor to oppose bail, and (ii) ascertain there are reasonable grounds that the accused is not guilty and will not commit any similar offense while out on bail.
• Non-Obstante Clause: This clause essentially says, “notwithstanding anything contained in any other law.” In Section 45 of the PMLA, it clarifies that the restrictions on bail override other statutes, including the general bail provisions in the CrPC.

5. Conclusion

The Supreme Court’s decision in The Union of India v. Kanhaiya Prasad underscores the critical importance of applying Section 45 of the PMLA with unwavering rigor. Money laundering is treated as an especially grave offense, demanding that courts exercise caution and follow the mandatory statutory scheme before granting bail. Because the High Court did not validly ascertain whether there were reasonable grounds to believe in the respondent’s innocence or that he would refrain from re-offending, the bail order was struck down and the case remanded for re-evaluation.

In the broader legal context, this judgment fortifies the high threshold that applicants must clear in combating money laundering charges. Courts across India will be expected to give further effect to the principle that well-founded suspicion of money laundering activity demands stringent checks at the bail stage. Consequently, defendants facing such allegations must prepare more robust prima facie defenses to meet and satisfy the twin conditions under Section 45.

The ruling ultimately advances the statutory goals of the PMLA by reinforcing stringent deterrents against the laundering of illicit proceeds and safeguarding the financial integrity of the country.