Supreme Court directs Bihar MLC's son to surrender within one week in PMLA case, sets aside Patna High Court's bail order

Kanhaiya Prasad, the son of Radha Charan Sah, the Member of Bihar Legislative Council (MLC) who was released on bail was directed by the Supreme Court to "surrender before the Special Court within one week" from February 13, 2025 although it has not "expressed any opinion on the merits of the case." 

Setting aside a judgement of Dr. Anshuman of Patna High Court, Supreme Court's division bench of Justices Bela M. Trivedi and Prasanna B. Varale observed: "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." The 16-page long judgement was authored by Justice Trivedi. 

Supreme Court's judgement reads: "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."

Some 20 FIRs were registered at the 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 is 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 (PMLA), ECIRs dated March 15, 2023, addendum ECIR dated November 8, 2023 and dated May 4, 2024 came to be registered, and the investigation for the offences of Money Laundering was initiated.

During the course of investigation, 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 was recorded on September 1, 2023 and September 4, 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 September 11, 2023, September 12, 2023 and September 13, 2023, however, he failed to appear on the said dates. The respondent thereafter was arrested at the ED, Patna Zonal Office, Bihar on September 18, 2023. On production of the respondent before the concerned court, his custody was handed over to ED, on September 22, 2023.

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 Kanhaiya Prasad, 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 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 Kanhaiya Prasad, the respondent to route the proceeds of crime generated by his father to portray it as untainted money. Kanhaiya Prasad  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.

ED filed Prosecution Complaint against the respondent and other accused on November 10, 2023 for the offences under  Section 3 read with Section 4 of the PMLA. The specific role of the Kanhaiya Prasad is mentioned in the Prosecution Complaint. The PMLA Court had taken cognizance of the alleged offences on November 10, 2023.

Kanhaiya Prasad haf filed the application being Criminal Miscellaneous before the High Court seeking regular bail in connection with the Prosecution Complaint registered as Special Trial (PMLA Case) before the Special Judge, PMLA. 

ED's counsel objected to the High Court's judgement as it did not comply with requirements under Section 45 of the PMLA. The High Court has misinterpreted and misread the ratio of the relevant judgments particularly of the judgment of the 3-judge bench in Vijay Madanlal Choudhary & Ors. Vs. Union of India & Ors (2022), while holding that the provisions of Article 20(3) of the Constitution shall prevail upon Section 50 of the PMLA. 

In Vijay Madanlal Choudhary case, a bench headed by Justice A M Khanwilkar had dismissed concerns raised regarding the vast powers of the ED and possibility of misuse of the exacting standard for grant of bail in money laundering cases.

The counsel for the respondent relied upon the various decisions of the submitted that the respondent had cooperated with the 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 September 1, 2023 and September 4, 2023 and had also paid the entire income-tax dues as were found to be allegedly due by the authorities.

Enforcement Directorate (ED) had challenged the legality of the impugned judgment and order of Patna High Court whereby the High Court had allowed released the respondent Kanhaiya Prasad on bail in connection with the Special Trial (PMLA) Case. 

Earlier, ED has provisionally attached 2 immovable properties to the extent of Rs. 26.19 crore acquired by Radha Charan Sah. 

Supreme Court observed: "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 Supreme Court concluded: "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." Justice Trivedi clarified: "we have not expressed any opinion on the merits of the case."

 

During the course of the hearing in the High Court, the counsel for Kanhaiya Prasad, the petitioner had submitted that "the petitioner has been made accused for an offence which is not schedule." He had also submitted that "evasion of income tax and the wrong under income tax does not come within the purview of the schedule offences as mentioned in the Prevention of Money and Laundering Act, 2002. He further submits that in the complaint itself, the Enforcement Directorate has intimated about 19 criminal cases pending and the petitioner is not an accused in any one of the 19 cases." He submitted that "all those cases come within the purview of the schedule offences, but petitioner is not an accused of the scheduled offence." These submissions are recorded in Dr. Anshuman's order dated March 14, 2024. Notably, this submission has not been disputed as yet. In this backdrop, it is significant that Supreme Court has not "expressed any opinion on the merits of the case."   

In his 40-page long judgement dated May 6, 2024, Dr. Anshuman concluded: "let the petitioner above named, be granted bail on furnishing bail bonds of Rs.1,00,000/- (Rupees One lacs only) with two sureties of the like amount each to the satisfaction of learned Special Judge, PMLA -cum- District and Sessions Judge, Patna in connection with Special Trial (PMLA) Case...." He imposed the following terms and conditions:-
"a) The petitioner shall furnish a personal bond with a surety in the sum of Rs. 1,00,000 to the satisfaction of the Trial Court;
b) The petitioner shall give up his citizenship of Dominican Republic within a period of 1 week from the date of release and documentary proof of the same be placed before the learned Trial Court;
c) The petitioner shall not leave the country during the bail period and surrender his Dominican Republic passport at the time of release before the Trial Court;
d) The petitioner shall join the investigation as and when called by the ED authority concerned;
e) The petitioner shall appear before the Court as and when the matter is taken up for hearing;
f) The petitioner shall provide his mobile number to the ED authority concerned at the time of release, which shall be kept in working condition at all times. The applicant shall not switch off, or change the same without prior intimation to the ED authority concerned, during the period of bail;
g) In case he changes his address, he will inform the ED authority concerned and this Court concerned also;
h) The petitioner shall not indulge in any criminal activity during the bail period;

i) The petitioner shall not communicate with or intimidate or influence any of the prosecution witnesses or tamper with the evidence of the case"

 

In his clarificatory order dated May 14, 2024, Dr. Anshuman observed: "it is directed to the trial Court that he shall accept the affidavit filed by the pairvikar in this regard that petitioner has no citizenship of Dominican Republic and he is ready to surrender his Indian Passport and then after taking the affidavit and undertaking of the petitioner in the light of Clauses (b) and (c) of the conditions, he is directed to release the petitioner on bail immediately. The order passed today shall be treated as part of order dated 06.05.2024." It is not clear as to how the reference to "citizenship of Dominican Republic" came in the judgement dated May 6, 2024. The criminal miscellaneous petition was filed on February 17, 2024 and registered on February 29, 2024 in the High Court.

 

Notably, Sah, the father of Kanhaiya Prasad was arrested in 2023 in connection with a money laundering case, lodged by ED. He was granted regular bail on July 3, 2024 by Justice Dr. Anshuman. In his 34-page long order, Justice Dr. Anshuman observed that "The petitioner is in custody since 14.09.2023 having age of 70 years and suffering from medical ailments. This Court is also conscious of the fact that the accused is charged in case of PMLA of high magnitude, but at the same time, this is also going on in the mind of this Court that the Investigating agency has already completed the investigation and charge-sheet has been filed in the form of complaint before Special Judge, E.D., Patna on which the Special Judge, E.D., Patna has already taken cognizance. It is due to this reason, the presence of the petitioner in judicial custody may not be necessary for further investigation and therefore, considering the old age of the petitioner, this Court is of the opinion that there is no chance of commission of crime by the petitioner while on bail and hence, in view of the Court, petitioner is entitled to grant bail pending trial on stringent conditions in order to alike the apprehension expressed by the E.D. In view of the discussions above, this Court is of the considered opinion that the petitioner is entitled for grant of bail on merit. Hence, the petitioner is directed to be released on bail on furnishing bail bonds of Rs.10,00,000/- (Rupees Ten Lacs) with two sureties of the like amount each to the satisfaction of learned Special Judge, PMLA-cum-District & Sessions Judge, Patna in connection with Special Trial (PMLA) Case...." He imposed the following conditions on Sah:
a) The petitioner shall not leave the country during the bail period and surrender his passport at the time of release before the Trial Court;
b) The petitioner shall appear before the Court as and when the matter shall be taken up i.e. to say on each and every date.
c) The petitioner shall provide his mobile number to the ED authority concerned at the time of release, which shall be kept in working condition at all times and he shall not switch off or change the same without prior intimation to the ED authority concerned, during the period of bail.
d) In case, he changes his address, he will inform the ED as well as to the concerned Court.
e) The petitioner shall not indulge in any criminal activity during the bail period.
f) The petitioner shall not influence the prosecution witness directly or remotely. The prosecuting agency will be at liberty to file an appropriate application for modification/for calling the order passed by this Court for any reason or the petitioner violates any of the conditions imposed by this Court. 

It has come to light that the respondent's father used to help his father in his sweet shop in the 1970s. His job was to make jalebis and sell them outside the Ara railway station in Bhojpur. Later on, he started his own hotels, resorts, rice mils and cold storage units in Bihar and other States such as Uttarakhand and Himachal Pradesh. He was elected as an MLC from the Bhojpur-Buxar Local Authority Constituency— first from RJD and then from JD(U) in the 2022 elections. ED has alleged that the proceeds of crime has been used for the construction of a school in Ghaziabad. An application was filed seeking quashing of the order dated February 2, 2024 passed in Special Trial (PMLA) case of March 15, 2023 by the Court of Special Judge, PMLA-cum-District and Sessions Judge, Patna whereby the application dated January 23, 2024 seeking permission to attend the sitting of Bihar Vidhan Parishad on February 12, 2024 at 11.00 A.M. and from judicial custody under police escort, was rejected. It is recorded in High Court's order dated February 9, 2024.