Supreme Court Rules on Admissibility of Statements Under Section 50 of Prevention of Money Laundering Act.

The Supreme Court of India, in its recent judgment in Prem Prakash v. Union of India, through Enforcement Directorate, granted bail to the appellant, Prem Prakash, in a case related to money laundering.

The Court meticulously examined the scope and applicability of Section 45 of the Prevention Of Money Laundering Act (PMLA), which sets out stringent conditions for bail, and emphasized the paramount importance of Article 21 of the Constitution, guaranteeing the right to personal liberty.

The Court reiterated that while Section 45 imposes restrictions on bail, it doesn't impose an absolute bar. Importantly, the Court clarified that the principle of "Bail is the rule and jail is the exception," rooted in Article 21, remains applicable even in PMLA cases. This means that deprivation of liberty is the exception and not the norm, even when stringent bail conditions are involved.

The Enforcement Directorate (ED) arrested Prem Prakash on August 11, 2023, in connection with a money laundering investigation (ECIR Case No. 5 of 2023) stemming from a fraudulent land acquisition case registered with the local police as Sadar P.S. Case No. 399 of 2022. Although Prakash wasn't initially named in the FIR, the ED suspected his involvement in the scheme. They alleged that he conspired with other accused individuals to acquire proceeds of crime by assisting an accomplice to acquire the disputed land, which was then sold with the proceeds transferred to a firm allegedly owned by Prakash. At the time of this arrest, Prakash was already in custody for a separate case (ECIR No. 4 of 2022) involving illegal stone mining.

The Court underscored the importance of three foundational facts the prosecution must establish in PMLA cases:

1. Commission of a scheduled offense.
   

2. Derivation of assets from criminal activity.
   

3. Involvement of the accused in processes related to proceeds of crime.
   

Only after establishing these facts can the presumption under Section 24 of the PMLA, shifting the burden of proof to the accused, be invoked.

The Court also analyzed the admissibility of statements recorded under Section 50 of the PMLA, particularly those given by an accused while in custody for a different case investigated by the same agency. The Court observed that the provision shouldn't be interpreted to override the protections enshrined in Article 20(3) and Section 25 of the Evidence Act, which safeguard individuals from self-incrimination. Drawing upon various precedents, including Vijay Madanlal Choudhary v. Union of India, the Court concluded that statements made by an accused person under Section 50 while in custody for another case, especially when those statements are deemed incriminating, are inadmissible against them.

In this specific case, the Court meticulously reviewed the statements of the appellant and co-accused individuals and found insufficient evidence to establish the appellant's involvement in the alleged offenses. Furthermore, the Court held that the appellant's statements recorded while in custody for a different Enforcement Case Information Report (ECIR), were inadmissible under Section 25 of the Evidence Act, as they were potentially made under duress and without a free mind.

On the balance between personal liberty and stringent bail conditions, time and again the Supreme Court has laid the principle that, ‘Bail is the rule and jail is the exception’ is only a paraphrasing of Article 21 of the Constitution of India, which states that no person shall be deprived of his life or personal liberty except according to the procedure established by law."

And while refering to the inquiry under Section 45, and keeping reliance on the case of Vijay Madanlal Choudhary and Ors. Vs Union of India and Ors. and while reiterating and agreeing with the holdings in Ranjitsing Brahmajeetsing Sharma vs. State of Maharashtra the court has held that the special court need not have to examine or dive deep into the merits of the case and must only rely on the material made available before it as the Apex Court held "The Court while dealing with the application for grant of bail need not go deep into the merits of the case and only a view of the Court based on the available material available on record is required. It held that the Court is only required to place its view based on probability on the basis of reasonable material collected during investigation. The words used in Section 45 are “reasonable grounds for believing” which means that the Court has to see only if there is a genuine case against the accused and the prosecution is not required to prove the charge beyond reasonable doubt."

On the inadmissibility of statements made in custody the Supreme Court observed that "We have no hesitation in holding that when an accused is in custody under PMLA irrespective of the case for which he is under custody, any statement under Section 50 PMLA to the same Investigating Agency is inadmissible against the maker."

The Court ultimately allowed the appeal, thereby quashed the High Court's order which denyed the bail, and directed the release of the appellant on bail subject to specific conditions.

Coram: Justices B.R. Gavai and K.V. Viswanathan
Between: Prem Prakash v. Union of India, through Enforcement Directorate
Date of Judgment: August 28, 2024