Kerala HC Sets Aside PMLA Bail Order That Ignored Section 45 Twin Conditions, Remits to Special Court

The Kerala High Court found the Ernakulam Special Court granted bail to a PMLA accused solely on the ground of 15 months' custody, without addressing the mandatory twin conditions under Section 45 of the Prevention of Money Laundering Act.

The High Court of Kerala at Ernakulam, on 10 September 2026, set aside a bail order passed by the Special Court for PMLA Cases, Ernakulam, in favour of Kolatt Dasan Prathapan, the accused in SC Cases (PMLA) No. 4 of 2024. Justice C.S. Dias, sitting singly, held that the Special Court had released the accused on bail without recording any finding on the twin conditions mandated by Section 45 of the Prevention of Money Laundering Act, 2002 (“the Act”). The bail was granted exclusively because the accused had been in judicial custody for over 15 months and trial was unlikely to commence soon. The High Court directed the Special Court to reconsider the bail application within 60 days, in accordance with law, while allowing the accused to remain on bail in the interim on the same conditions.

The PMLA Case and the Impugned Bail Order

The proceedings arise from Crime No. ECIR/KC20/07/2024, registered by the Enforcement Directorate, Kochi. The respondent, Kolatt Dasan Prathapan, aged 44, faces prosecution for offences under Section 3, punishable under Section 4 of the Act, before the Special Court for PMLA Cases at Ernakulam.

The prosecution allegation, as recorded by the High Court, is that Prathapan and co-accused persons offered high returns on investments, collected Rs. 25,00,000 from complainants, and then refused to pay any return or repay the principal, thereby cheating the investors. Cases were also registered against him at various police stations for offences under the Indian Penal Code and the Prize Chits and Money Circulation (Banning) Act. He has been convicted in three such cases.

On 3 November 2025, the Special Court passed the impugned order in Crl.M.P. No. 159 of 2025, enlarging Prathapan on bail. In paragraph 62 of that order, the Special Court grounded its decision entirely on the duration of custody — 15 months — and the absence of any prospect of trial commencing in the near future. The Directorate of Enforcement challenged this order before the Kerala High Court by filing Crl.MC No. 10380 of 2025.

The Section 45 Twin Conditions and Why They Matter Here

Section 45 of the Prevention of Money Laundering Act, 2002 imposes two conditions that a court must satisfy before releasing an accused on bail. First, the Public Prosecutor must be given an opportunity to oppose the application. Second, where the Prosecutor opposes, the court must be satisfied that there are reasonable grounds for believing that the accused is not guilty of the offence, and that the accused is not likely to commit any offence while on bail.

Section 45 also carries a proviso permitting bail without these conditions in limited circumstances: where the accused is under 16 years of age, is a woman, is sick or infirm, or is accused of laundering a sum of less than one crore rupees. None of these exceptions were found applicable on the facts of this case.

The court also noted Sections 65 and 71 of the Act. Section 65 provides that the Code of Criminal Procedure applies only in so far as it is not inconsistent with the Act. Section 71 gives the Act an overriding effect over any inconsistent provision in any other law in force. Given this statutory architecture, the twin conditions under Section 45 are mandatory and cannot be bypassed by general bail discretion.

The Enforcement Directorate relied on a string of Supreme Court decisions: Union of India Through the Assistant Director v. Kanhaiya Prasad [2025 KHC OnLine 6145], Sheikh Javed Iqbal @ Ashfaq Ansari @ Javed Ansari v. State of Uttar Pradesh [2024 (2) KLD 271], and Senthil Balaji V v. Deputy Director, Directorate of Enforcement [2024 (2) KLD 661]. These decisions, as cited by the petitioner's counsel, hold that bail to an accused under the Act can be granted only after the rigour under Section 45 is duly addressed.

How the Bench Reasoned

Justice Dias examined the impugned order of the Special Court carefully. He found that paragraph 62 of that order — the operative reasoning for granting bail — rested entirely on the duration of custody and the absence of imminent trial. There was, in the court's words, not a whisper in the order about any finding on the satisfaction of the twin conditions under Section 45.

The court also took note of the respondent's antecedents: cases at multiple police stations, convictions in three matters, and charges under the Prize Chits and Money Circulation (Banning) Act. These antecedents were relevant to the question of likelihood of committing an offence while on bail — one of the twin conditions. The court, however, expressly declined to return any finding on this aspect, since the matter was being remitted for fresh consideration.

Justice Dias held that the Special Court's failure to consider the rigour under Section 45 rendered the impugned order erroneous, improper, and irregular. The court invoked its power of interference under Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023, the provision governing the High Court's revisional and supervisory jurisdiction over subordinate criminal courts.

The bench was careful to limit its observations. It stated that it did not wish to go further into the antecedents question, given that the Special Court would be reconsidering the bail application afresh. The remand was explicitly described as untrammelled by any observations in the High Court's order.

The Respondent's Position

Prathapan, through his counsel, filed a counter-affidavit and resisted the petition. His counsel argued that the Special Court had exercised its discretion to grant bail on account of a change in circumstances, and that he had scrupulously complied with all conditions imposed in the bail order. The respondent's case was that there was no error or illegality in the impugned order warranting interference by the High Court, and that the petition ought to be dismissed.

The court did not accept this position, finding that discretion cannot substitute for the mandatory statutory inquiry required under Section 45 of the Act.

Order

The High Court allowed Crl.MC No. 10380 of 2025 and set aside the order dated 3 November 2025 passed by the Special Court for PMLA Cases, Ernakulam in Crl.M.P. No. 159 of 2025 in SC (PMLA) No. 4 of 2024.

The Special Court is directed to reconsider the bail application filed by Prathapan in accordance with law, affording both sides an opportunity of being heard, and to do so as expeditiously as possible — at any rate within 60 days from the date of production of a copy of the High Court's order.

Until the Special Court passes fresh orders on the bail application, Prathapan shall continue to remain on bail under the same conditions as imposed in the now-set-aside order.