Introduction
The recent Supreme Court decision in Prem Prakash v. Union of India[i] is pivotal in interpreting s. 45 of the Prevention of Money Laundering Act, 2002 (‘PMLA’), particularly its restrictive twin conditions for granting bail. While these conditions make bail more stringent, the Court emphasized that they do not amount to an absolute prohibition. By reaffirming the principle that ‘bail is the rule, jail is the exception,’ the judgment ensures that the application of s. 45 is balanced with constitutional safeguards under a. 21 of the Constitution of India (‘Constitution’), which protects personal liberty. This case emphasizes that courts must assess the evidence carefully and not deny bail solely based on allegations or antecedents, thereby upholding the presumption of innocence and the right to a fair trial.
Brief Facts
The appellant challenged the Jharkhand High Court’s dismissal of his bail application in connection with an enforcement case information report (‘ECIR’) registered under the PMLA for alleged involvement in land fraud.
The predicate offence involved a first information report (‘FIR’) filed in 2022 under various sections of the Indian Penal Code, 1860 (‘IPC’) for forgery and fraud related to land transactions in Ranchi.
The appellant was accused of conspiring with others to acquire land using forged documents illegally. It was alleged that forged power of attorney (POA) documents were used to transfer the land. The proceeds were laundered through various bank accounts, including one linked to a firm allegedly controlled by the appellant. Despite not being initially named in the FIR or ECIR, the appellant was implicated based on subsequent investigations.
The appellant had been in custody since 25.08.2022 in connection with another case (ECIR No. 4 of 2022) related to illegal mining activities. He was arrested in the current case on 11.08.2023, leading to this appeal after his bail was denied by both the Special Judge and the High Court.
The prosecution alleged that the appellant knew about the forgery and played a key role in facilitating the transactions, including influencing officials to get the land mutated. They relied on statements from the accused under s. 50 of the PMLA to support their case.
Held
While granting bail to the appellant, the Supreme Court made the following key observations: -
Bail Application under s. 45 of the PMLA: The Court acknowledged that s. 45 of the PMLA governs bail applications and imposes twin conditions that make bail more restrictive. However, citing recent judgments such as Vijay Madanlal Choudhary v. Union of India[ii] and Manish Sisodia (II) v. ED[iii], the Court observed that these conditions do not impose an absolute ban on bail. It reaffirmed the principle that ‘bail is the rule, and jail is the exception,’ reflecting the constitutional principle of personal liberty under a. 21 of the Constitution.
Judicial Interpretation of s. 45 of the PMLA: In line with the Supreme Court’s ruling in Vijay Madanlal Choudhary (supra), the Court reiterated that it is not required to delve deeply into the merits of the case at the bail stage. Instead, it is sufficient for the courts to determine whether reasonable grounds exist to believe that the accused is involved in money laundering based on the material presented. The court only needs to form a view on the probability of the accusations without requiring the prosecution to prove guilt beyond a reasonable doubt at this stage. It was held that this preliminary assessment does not affect the final outcome at trial.
Importance of Foundational Facts under s. 24 of the PMLA: The Supreme Court highlighted three foundational facts that the prosecution must establish to oppose bail under the PMLA:
A criminal activity related to a scheduled offence has occurred.
The property in question has been derived or obtained from criminal activity.
The accused is involved in any process or activity connected with the proceeds of crime.
Once these foundational facts are established, the burden shifts to the accused to disprove the presumption that the proceeds of crime are involved in money laundering, either by producing evidence or cross-examining prosecution witnesses to demonstrate their lack of involvement.
Inadmissibility of Statements: A key issue before the Supreme Court was whether statements made by the appellant while in judicial custody in connection with another ECIR case would be admissible against him. The Court held that any statement made by the appellant while in judicial custody in relation to another case investigated by the same agency is inadmissible under s. 25 of the Indian Evidence Act, 1872 (‘IEA’), which now corresponds to s. 23(1) of the Bharatiya Sakshya Adhiniyam, 2023 (‘BSA’). A person in custody cannot be considered to be acting freely or voluntarily, and such statements, without the court’s permission, violate basic principles of justice. The Supreme Court emphasized that admitting such statements would be contrary to the principles of fair play, particularly when the accused is already under the control of the investigating agency.
A. 21 of the Constitution and Fair Procedure: The Supreme Court underscored the importance of fair procedure as guaranteed by a. 21 of the Constitution, which safeguards the right to life and personal liberty. It observed that the phrase ‘procedure established by law’ in a. 21 must be interpreted to mean a valid and reasonable procedure. The Court concluded that statements recorded under s. 50 of the PMLA, without the court’s authorization and while the appellant was in judicial custody, do not meet this standard and cannot be admitted as evidence against the appellant.
Statements of Co-accused: The Court noted that the statements of the co-accused were relied upon by the prosecution to build the case of money laundering against the appellant. However, the Supreme Court concluded that these statements do not have the status of substantive evidence under s. 30 of the IEA, corresponding to s. 24 of the BSA. The Supreme Court held that the prosecution cannot rely solely on these statements and can only lend assurance if corroborated by independent evidence. Thus, the Supreme Court held that the statements primarily focused on the appellant's involvement in transactions related to disputed land but failed to provide direct or incriminating evidence of money laundering or forgery.
Previous Criminal Antecedent: The prosecution referred to a previously filed ECIR against the appellant as evidence of criminal antecedents. However, the Court did not consider the pendency of this other matter as a reason to deny bail, noting that the appellant had been in custody for over a year without the trial commencing.
Misuse of Jail Facilities: The appellant also misused jail facilities, but the Supreme Court did not comment on them. It held that the investigating agency, with the relevant jail authorities, should address any violations of prison rules. These allegations were deemed insufficient to justify continued detention and did not affect the appellant’s right to bail.
Our Analysis
This decision is significant as it reaffirms the constitutional principle that bail should be the rule, not the exception, even under the PMLA. Herein, the Supreme Court emphasized the importance of personal liberty under a. 21 of the Constitution, highlighting that even in cases involving serious allegations like money laundering, the twin conditions under s. 45 must be applied with fairness and justice. In this regard, the Supreme Court went to the extent of stating as follows:
‘The principle that bail is the rule and jail is the exception is only a paraphrasing of a. 21 of the Constitution of India… Liberty of the individual is always a Rule, and deprivation is the exception… S. 45 of PMLA by imposing twin conditions does not re-write this principle to mean that deprivation is the norm and liberty is the exception.’
The Supreme Court’s refusal to deny bail solely based on pending cases or criminal antecedents, without concrete evidence linking the appellant to the alleged crime, sets a crucial precedent in safeguarding individual rights against excessive pretrial detention.
Furthermore, the ruling underscores the importance of ensuring that evidence used by the prosecution, particularly statements made by accused individuals while in custody, adheres to fair procedure. By declaring such statements inadmissible without proper court authorization and critiquing over-reliance on such custodial statements without establishing foundational facts, the decision reinforces the need for procedural safeguards in criminal investigations. This focus on fair treatment and procedural justice strengthens the rule of law, ensuring that investigative agencies cannot unjustly misuse custody or coercive powers to prolong detention without sufficient evidence.
End Notes
[i] [2024] 165 taxmann.com 810 (SC)[28-08-2024].
[ii] 2022 SCC OnLine SC 929.
[iii] [2024] 165 taxmann.com 323 (SC)[09-08-2024]. Case analysis: Breaking the ‘Snake & Ladder’ Cycle: Supreme Court Upholds Right to Speedy Trial, Grants Bail Amid Prolonged Incarceration in PMLA Cases by Shivam Mishra
Authored by Shivam Mishra, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinions.