Statements regarding another PMLA case while in custody inadmissible, rules SC

Why has the Supreme Court ruled that statements in connection with one case given by a person in custody of an investigating agency for another case are not admissible?

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IN an important ruling, the Supreme Court has reiterated that the prosecution cannot start a case based on statements made by the co-accused since such statements do not have the "character" of substantive evidence.

A Bench comprising Justice B.R. Gavai and Justice K.V. Viswanathan made these observations while granting bail to one Prem Prakash, languishing in jail under the Prevention of Money Laundering Act (PMLA), 2002 concerning a land scam case in Jharkhand.

The Bench also held that when an accused is in custody under the PMLA, any statement under Section 50 of the PMLA made to the same investigating agency is inadmissible against the maker of such a statement.

The Bench said it was for a reason that Section 25 of the Indian Evidence Act, 1872 would hit such statements since they are given while the accused is in judicial custody. Section 25 of the Evidence Act states that no confession made to a police officer shall be proved against the person accused of any offence.

The Bench also reiterated that the principle 'bail is the rule and jail is the exception' is also applicable in PMLA cases.

Facts

As per the prosecution, Prakash connived with other accused persons, including Afshar Ali and Saddam Hussain, who created a forged sale deed on the strength of which a property was sold by Rajesh Rai (an associate of Afshar Ali) to Punit Bhargava, a close associate of Prakash.

A sum of ₹25 lakh was transferred to the bank account of Rajesh Rai, and later a sum of ₹18 lakh was transferred to the bank account of M/s Green Traders, a firm controlled by Saddam Hussain, even though the sale consideration was ₹1,78,55,800.

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Prakash was aware of the forgery committed by Afshar Ali and others and intentionally acquired the property in the name of Punit Bhargava, who sold the property within two months to Bishnu Agarwal for ₹1.80 crore. From the amount, a sum of ₹1,01,57,400 was transferred by Punit Bhargava to M/s Jamini Enterprises, a firm controlled and beneficially owned by Prakash.

It was further alleged that Prakash had full knowledge of the transaction. He knew that the sale deed had been executed in favour of Punit Bhargava through accused Rajesh Rai on February 6, 2021. He also knew that the payment had been made on February 12, 2021, and that only a sum of ₹25 lakh was paid to Rajesh Rai and a mutation had been carried out. He was also aware that the property had been sold to Bishnu Agarwal and all payments were received by Punit Bhargava.

No subsequent payments were to be made as, according to the prosecution, all concerned knew that the deeds were fake and Bishnu Agarwal made the payment in the months of April and June 2021, but the registration was done on April 1, 2021. As such, the registration was done before payment of the consideration.

The prosecution relied on the statements under Section 50 of the PMLA of Afshar Ali, Rajdeep Kumar, Saddam Hussain, Punit Bhargava and Prakash himself.

Statements made by the petitioner while in custody cannot be relied upon

To oppose the bail, the Directorate of Enforcement (ED) relied upon a statement dated August 4, 2023 made by Prakash himself. In the statement, Prakash has stated that he knew Bishnu Kumar Agarwal and had met him during a marriage event. He has also stated that Punit Bhargava was like his younger brother, who hailed from his native place; and that he had known him since childhood.

In his statement of August 3, 2023, Prakash has stated that other accused persons, including Afshar Ali, used to visit him for the Cheshire Home property and that he introduced them to Rajdeep Kumar and got the property verified.

With the consent of Punit Bhargava, he got the property registered in the name of Punit Bhargava, and later the property was sold to Bishnu Kumar Agarwal for a consideration of ₹1.78 crore. 

Based on the statement made by Prakash, the Bench rendered two findings.

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Firstly, it said that the statement does not prima facie make out a case of money laundering against Prakash. The Bench also added that the statement does not point to the involvement of Prakash prima facie in the forgery.

Having said that, the Bench took note of an important aspect. The Bench observed that Prakash has been in judicial custody since August 25, 2022, in connection with another 'enforcement case information report' (ECIR), and while in judicial custody, his arrest was shown in the present ECIR on August 11, 2023. The statements made by Prakash were recorded on August 3, 4, 11, 12, 14, 15 and 30 of 2023.

The Bench thus formulated a question: When a person is in judicial custody or custody in another case investigated by the same investigating agency; will the statements recorded for a new case in which his arrest is not yet shown and which are claimed to contain incriminating material against the maker be admissible under Section 50 of the PMLA?

Section 50 confers the power upon the ED to issue a summons, seek the production of documents and to give evidence.

To answer the question, the Bench referred to a decision of a three-judge Bench in Vijay Madanlal Choudhary versus Union of India, wherein it was held that if a statement is recorded after a formal arrest by an ED official, the consequences of Article 20(3) or Section 25 of the Evidence Act may come into play to urge that the same being akin to a confession, it cannot be proved against the maker of the statement.

Article 20(3) of the Constitution protects against self-incrimination and gives the accused the right to remain silent.

It may be noted that in Vijay Madanlal Choudhary, the Supreme Court held that ED officials are not 'police'. The court, however, did anticipate a scenario where, in a given case, the protection of Section 25 of the Evidence Act may have to be made available to the accused even when the investigating agency is the ED. The court observed that such situations would have to be examined on a case-to-case basis.

On the facts of Prakash's case, the Bench held that Section 25 of the Evidence Act would hit the statement made by him if it were to be considered incriminating against him since he gave the statement while being in judicial custody in connection with a different case initiated by the same investigating agency, that is, the ED.

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"Taken as he was from the judicial custody to record the statement, it will be a travesty of justice to render the statement admissible against the appellant," the Bench ruled.

It added that a person in judicial custody being not a free person cannot be summoned and any statement to be recorded will have to be taken after obtaining permission from the court which has remanded him to judicial custody in the other case.

Regarding the statement of the co-accused, the Bench held that such statements are not substantive evidence. The Bench said that the ED would have to first marshal other evidence and can at best look at the statement for lending assurance.

The Bench referred to the decision in Kashmira Singh versus State of Madhya Pradesh, in which it was held that "the proper way to approach a case of this kind is, first, to marshal the evidence against the accused excluding the confession altogether from consideration and see whether, if it is believed, a conviction could safely be based on it.

"If it is capable of belief independently of the confession, then of course it is not necessary to call the confession in aid. But cases may arise where the judge is not prepared to act on the other evidence as it stands even though, if believed, it would be sufficient to sustain a conviction.

"In such an event, the judge may call in aid the confession and use it to lend assurance to the other evidence and thus fortify himself in believing what without the aid of the confession he would not be prepared to accept."

This law, the Bench said, continues to apply even in PMLA cases.

The Bench also observed that the prosecution is required to establish three basic foundational facts. First, the criminal activity relating to a scheduled offence has been committed. Second, that the property in question has been derived or obtained, directly or indirectly, by any person as a result of that criminal activity. Third, the person concerned is, directly or indirectly, involved in any process or activity connected with the said property being proceeds of crime.

The Bench ruled that it was only thereafter that the presumption under Section 24 of the PMLA would arise and the burden would shift on the accused.

It added that the counter affidavit to the bail application must specifically crystallise albeit briefly the material sought to be relied upon to establish prima facie the three foundational facts.