As the legal battles continue in the constitutional courts over the interpretation and ambit of Enforcement Directorate’s (ED) powers to arrest accused in financial crimes and the bail provisions under the Prevention of Money Laundering Act, 2002 (PMLA), we have analysed some of the important jurisprudential developments since 2023 till date on the issue of bail under PMLA. To read our first part on bail jurisprudence under PMLA click here.
In the past one and half year constitutional courts have ruled inconsistently over the interpretation of important provisions under PMLA, specifically regarding Section 45 and Section 19 of the law. Due to its stringent bail conditions, PMLA is often compared with draconian Unlawful Activities (Prevention) Act, 1967.
Section 45 of the PMLA states that no person accused of an offence under the said Act shall be released on bail or on his own bond unless— “(i) the Public Prosecutor has been given the opportunity to oppose the application for such release; and (ii) where the Public Prosecutor opposes the application, the court is satisfied that there are reasonable grounds for believing that he is not guilty of such offence and that he is not likely to commit any offence while on bail…” (Known as twin conditions).
Section 19 of the PMLA provides that “(1) If the Director, Deputy Director, Assistant Director or any other officer authorised in this behalf by the Central Government by general or special order, has on the basis of material in his possession, reason to believe (the reason for such belief to be recorded in writing) that any person has been guilty of an offence punishable under this Act, he may arrest such person and shall, as soon as may be, inform him of the grounds for such arrest.”
“(2) The Director, Deputy Director, Assistant Director or any other officer shall, immediately after arrest of such person under sub-section (1), forward a copy of the order along with the material in his possession, referred to in that sub-section, to the Adjudicating Authority in a sealed envelope, in the manner, as may be prescribed and such Adjudicating Authority shall keep such order and material for such period, as may be prescribed.”
The analysis of the court judgements reveal that judges have used varied interpretations to grant or reject bail applications of the accused, citing reasons ranging from “seriousness of offences” to “broad probability” and from procedural technicalities to constitutional safeguards.
Relevant judgements in 2023-24
Directorate of Enforcement vs. Aditya Tripathi (Criminal Appeal No. 1402 of 2023)
In this case ED had moved an application to the Supreme Court, appealing against the order of the Telangana High Court which had granted bail to the respondent Aditya Tripathi in the case of PMLA. The Telangana High Court had reasoned that since the chargesheet had been filed and investigation in the predicate offences was complete, the investigation should be deemed complete, and once the investigation is complete the possibility of tempering with the evidence or influencing witnesses is unlikely.
Tripathi was booked under Sections 120-B (criminal conspiracy), 420 (cheating), 468 (forgery) and 471 (fudging) of the Indian Penal Code (IPC) and Section 7 read with Section 13(2) of the Prevention of the Corruption Act (PC). ED had found that e-tenders for total works amounting to Rs. 1769.00 crores of Madhya Pradesh Water Corporation were tempered to change the price bid of M/s GVPR Engineers Limited, M/s The Indian Hume Pipe Company Limited and M/s IMC Project India Limited to make them the lowest bidders.
The Supreme Court bench of Justices M R Shah and C T Ravikumar delivered its verdict on May 12, 2023, setting aside the Telangana High Court judgment which had granted bail to the accused Aditya Tripathi in the PMLA case. Delivering the judgement for the bench, Justice M R Shah noted that “enquiry/investigation” is still going on by the Enforcement Directorate for the scheduled offences in the case and once the enquiry/investigation against the accused is ongoing, the rigour of Section 45 (twin conditions) of the PMLA is required to be considered. Justice Shah said that the High Court did not consider the “nature of allegations”, “rigour of Section 45” of PMLA, and “seriousness of the offences alleged of money laundering” and the offences under the PMLA. The judgment also noted that merely because other accused are discharged/acquitted, it cannot be a ground not to continue the investigation in respect of the present accused.
Importantly, as it overturned the Telangana High Court ruling, the bench maintained that “it appears that what is weighed with the High Court is that chargesheet has been filed against respective respondent No. 1 – accused and therefore, the investigation is completed. However, the High Court has failed to notice and appreciate that the investigation with respect to the scheduled offences under the PML Act, 2002 by the Enforcement Directorate is still going on. Merely because, for the predicated offences the chargesheet might have been filed it cannot be a ground to release the accused on bail in connection with the scheduled offences under the PML Act, 2002. Investigation for the predicated offences and the investigation by the Enforcement Directorate for the scheduled offences under the PML Act are different and distinct. Therefore, the High Court has taken into consideration the irrelevant consideration.”
The relevant judgement may be read here:
Vijay Agrawal through Parokar vs. Directorate of Enforcement (Bail Application no. 1762/2022)
The case against Indore-based builder Vijay Agrawal was registered by the ED under PMLA and the builder was accused of being a conduit in a series of Hawala transactions, obtaining loans from the shell companies, fraudulently transferring shares of the company and engaging in land development with the purpose of whitewashing the money and properties obtained through illegal and fraudulent means. The accusations against Agrawal were linked with the co-accused Bimal Jain, who was accused of rotating funds approximately to the tune of Rs. 96,000 crores for providing accommodation entries of approximately Rs. 18,679 Crores to 973 beneficiaries. Specific accusations against Agarwal noted that he acquired 50% shares of the company belonging to main accused persons at a price of Rs.5lakh, the actual valuation of which was Rs.18 crores and therefore, the petitioner was in receipt of proceeds of crime in the sum of Rs.17,95,00,000/; the second allegation alleged that he acquired certain loans from the shell companies; and thirdly, the proceeds of crime was laundered through M/s R.C. Warehousing where he was in a managerial position. Agarwal in his defence had claimed that he did not knew that the money which were transferred, allegedly for performing business obligations, were derived through the proceeds of crime and therefore he cannot be held guilty under the Act.
In the judgement delivered on May 29, 2023, the Delhi High Court judge Dinesh Kumar Sharma granted bail to the accused on the basis of “broad probability” in the favour of the accused. In his verdict Justice Sharma said that “despite the twin conditions, the court cannot return any finding merely on the basis of inferences and presumptions.” Citing the landmark Vijay Madanlal Choudhary judgement, which had practically given unbridled powers to the ED, the judge noted that “even at the stage of bail, the court is expected to consider the question from the angle as to whether the accused possessed the requisite mens rea.” After considering the submission of Agrawal that he has till date not received any money rather, has given a security of Rs.21 lakhs, Justice Sharma said “his plea that he did not know that he is dealing with the tainted money cannot be brushed aside mechanically. The evidentiary value of the statement recorded under Section 50 of PMLA has to be tested at the end of the trial and not at the stage of bail. The twin conditions of Section 45 do not put an absolute restrain on the grant of bail or require a positive finding qua guilt.” The verdict also noted that since the purpose of evidence cannot be meticulously examined at this stage, “the Court cannot merely proceed on the basis of assumption. There has to be some substantial link between the money received and criminal activity relating to scheduled offence which can be attributed to the petitioner.”
Thus, the bail was granted on the basis of the principle of broad probabilities and as the accused was seen fulfilling three bail conditions, namely, (lack of) possibility of tampering with evidence and cooperation with the investigative agency, flight risk, and deep root to society.
The relevant judgement may be read here:
Pankaj Bansal vs. Union of India (Criminal Appeal Nos 3051-3052 of 2023)
While the Pankaj Bansal judgement is on the legality of arrest under Section 19 of the PMLA rather than on the question of bail per se, it became one of the most cited judgements to argue in favour of the accused, often to highlight the illegality of the arrest and seek recourse to constitutional remedy.
The judgement delivered by the bench of AS Bopanna and Sanjay Kumar on October 3, 2023, the court said that “to give true meaning and purpose to the constitutional and the statutory mandate of Section 19(1) of the Act of 2002 of informing the arrested person of the grounds of arrest, we hold that it would be necessary, henceforth, that a copy of such written grounds of arrest is furnished to the arrested person as a matter of course and without exception.” Initially, it was in the case of V. Senthil Balaji vs. The State represented by Deputy Director and others that the court emphasised on providing the grounds of arrest to the accused booked under PMLA, but it was Pankaj Bansal judgement that developed the jurisprudence and added more weight and clarity to the legality of the arrest.
In the present case, the accused was merely informed of his grounds of arrest, which itself remains contested claim, without providing him the copy of the grounds of arrest. The verdict said that “ED’s Investigating Officer merely read out or permitted reading of the grounds of arrest of the appellants and left it at that, which is also disputed by the appellants. As this form of communication is not found to be adequate to fulfil compliance with the mandate of Article 22(1) of the Constitution and Section 19(1) of the Act of 2002, we have no hesitation in holding that their arrest was not in keeping with the provisions of Section 19(1) of the Act of 2002.” Thus, the apex court set aside the previous orders of the Division Bench of the Punjab and Haryana High Court, Additional Sessions Judge (Panchkula), arrest orders and arrest memos, and ordered the release of the petitioners.
Notably, the review petition filed by ED against the judgment was dismissed by the Supreme Court on March 20, 2024.
The relevant judgement may be read here:
The order dismissing the review petition can be read here:
Ram Kishor Arora vs. Directorate of Enforcement (Criminal Appeal No. 3865 of 2023)
In this case, the accused had moved to the apex court, arguing that his arrest was illegal as he was not provided the copy of the grounds of arrest at the time of his arrest. In the verdict delivered on December 15, 2023 by the bench of Justices Bela Trivedi and Satish Chandra Sharma, the court refused to grant relieve to the petitioner. The petitioner in the case, Ram Kishor Arora, alleged that his was “illegal and violative of the fundamental rights guaranteed to the appellant under Articles 14, 20 and 21 of the Constitution of India”. As per the facts of the case, ED had handed over the document containing the grounds of the arrest to Arora and took it back after obtaining his endorsement and signature, as a token of him having read the same, without furnishing a copy the document to Arora at the time of arrest. The petitioner relied on Pankaj Bansal judgement to argue that his arrest was illegal as he was not given the copy of the grounds of arrest but was merely allowed to read the grounds from the document without getting a copy of the same. The Enforcement Directorate (ED) countered the argument and said that the ratio of Pankaj Bansal would not apply to the case at hand as the accused was provided the document to read the grounds of arrest and his signature was taken on the document as a proof that he had read the grounds of arrest, irrespective of the fact that he was not provided the copy of the document.
Justice Trivedi in her verdict said that “the expression “as soon as may be” contained in Section 19 of PMLA is required to be construed as- “as early as possible without avoidable delay” or “within reasonably convenient” or “reasonably requisite” period of time.” The expression “as soon as may be” was interpreted by the bench to mean twenty-four hours of the arrest. Relying on Vijay Madanlal Choudhary, the bench held that “it has been categorically held that so long as the person has been informed about the grounds of his arrest that is sufficient compliance of mandate of Article 22(1) of the Constitution.” The verdict also said that the word “henceforth” in Pankaj Bansal judgement implied that “requirement of furnishing grounds of arrest in writing to the arrested person as soon as after his arrest was not the mandatory or obligatory till the date of the said judgment.” Furthermore, citing the rule of precedent, the bench critiqued Pankaj Bansal judgement delivered by the two-judge bench, noting that “any observation made…by the Division Bench of lesser number of Judges contrary to the said ratio laid down in Vijay Madanlal Choudhary (supra) would be not in consonance with the jurisprudential wisdom…” The bench disposed of the petition recording that “we hold that there was due compliance of the provisions contained in Section 19 of PMLA and his arrest could neither be said to be violative of the said provision nor of Article 22(1) of the Constitution of India.”
The relevant judgement may be read here:
Prem Prakash vs. Union of India (Special Leave to Appeal (Crl.) No(s). 691/2023)
In this case, the petitioner Prem Prakash had approached the apex court pleading for his release on bail as he was charged under PMLA and put behind bars as an undertrial prisoner for more than a year and half. While no specific judgment has been delivered in this case, the apex court in its March 20, 2024 order observed that it will examine whether the petitioner should be granted interim bail as he has been in custody for over eighteen months. The order holds significance as the SC recognises long incarceration as one of the potential grounds for granting bail to the accused charged under stringent PMLA law.
The relevant judgement may be read here:
Sanjay Singh vs. Directorate of Enforcement (Crl.A.@SLP(Crl.) 2558/2024)
On April 2, 2024, the Supreme Court bench of Justices Sanjiv Khanna, Dipankar Datta and P B Varale passed an order granting bail to Aam Aadmi Party leader Sanjay Singh who was booked under PMLA in the case of alleged excise policy scam. As the bench passed the order granting bail, it noted that no illegal money has been recovered from Sanjay Singh, there is no money trail to link him to any proceeds of crime, and the investigative agency ED has not opposed his bail plea, as its reasons for granting bail to the accused. Notably, the bench had asked ED, “He has been in custody for six months. We need to know if further custody is required or not”. ED in its response said that the custody was no longer required, without arguing the case on merits. The ED in this case is understood to have made a strategic move by not opposing the bail plea of Sanjay Singh, as the Section 45 of PMLA relating to bail provision states that when granting a bail “the court is satisfied that there are reasonable grounds for believing that he is not guilty of such offence and that he is not likely to commit any offence while on bail…”.
The relevant judgement may be read here:
Tarsem Lal vs. Directorate of Enforcement (Jalandhar Zonal Office) (Criminal Appeal No.2608 of 2024)
The latest judgement by the Supreme Court in the case of Tarsem Lal provides a significant relief to accused under PMLA, as the court ruled that the accused need not meet the strict criteria for bail under Section 45 of the PMLA when they voluntarily appear before the special court following the ED complaint. In their verdict delivered on May 16, 2024, the bench of Justices Ujjal Bhuyan and AS Oka said that “After cognizance is taken of the offence punishable under Section 4 of the PMLA based on a complaint under Section 44 (1)(b), the ED and its officers are powerless to exercise power under Section 19 to arrest a person shown as an accused in the complaint; and If the ED wants custody of the accused who appears after service of summons for conducting further investigation in the same offence, the ED will have to seek custody of the accused by applying to the Special Court.” Furthermore, the verdict states that “After a summons is issued under Section 204 of the CrPC on taking cognizance of the offence punishable under Section 4 of the PMLA on a complaint, if the accused appears before the Special Court pursuant to the summons, he shall not be treated as if he is in custody. Therefore, it is not necessary for him to apply for bail. However, the Special Court can direct the accused to furnish bond in terms of Section 88 of the CrPC.”
The apex court in this case provided relief to the petitioner Tarsem Lal as it set aside the orders of the High Court of Punjab and Haryana declining his anticipatory bail and cancelled the warrants issued by the Special Courts against the accused.
The relevant judgement may be read here:
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