2025 (10) TMI 269 - HC - Money Laundering

Regular bail granted under Section 45 PMLA to septuagenarian accused in alleged illegal sand mining money-laundering case

Jai Narayan Gupta Versus The Union of India through the Director, Directorate of Enforcement New Delhi, The Deputy Director, Directorate of Enforcement, Patna, The Assistant Director, Directorate of Enforcement, Patna.

HC granted regular bail to the accused in a money-laundering case involving alleged illegal sand mining and state revenue loss, noting that Section 45 ... Money Laundering - seeking grant of regular bail - illegal sand mining and embezzlement of sand by the accused company which has caused huge loss to the State exchequer - applicability of Section 45 of the PMLA 2002 - HELD THAT:- In the case of Vijay Madanlal Choudhary [2022 (7) TMI 1316 - SUPREME COURT (LB)], the Hon’ble Supreme Court upholding the Constitutionality of section 45 of the P.M.L.A. had held that though the aforesaid provision imposes stringent twin conditions for grant of bail, but the aforesaid statutory condition does not impose an absolute restraint on the grant of bail and the discretion vests in the Court, which is to be exercised fairly, judiciously and not in an arbitrary manner. The Hon’ble Supreme Court in its recent decision rendered in the cases of Manish Sisodia [2024 (8) TMI 614 - SUPREME COURT] has clarified and crystallized the law on the aspect of harmonization between the stringent twin conditions under section 45 of the P.M.L.A. and the valuable and treasured right to personal liberty enshrined under Article 21 of the Constitution of India. In light of the aforesaid judgments, it is evident that the stringent requirement under section 45 of the P.M.L.A. for grant of bail i.e. the twin conditions do not create an absolute restraint or barrier in granting bail on the grounds of delay in conclusion of trial and long period of incarceration. Further, the proviso to section 45 (1) carves out an exception to the twin conditions of bail. One such exception is sickness or infirmity. In the present case, the petitioner has brought on record several medical prescriptions and pathological reports to establish his sickness and it is also noted that the petitioner is a septuagenarian - In cases involving money laundering, the PMLA provides stringent conditions under section 45 for grant of bail, however such provisions have to be harmoniously interpreted with the right of personal liberty enshrined under Article 21 of the Constitution of India. It is trite law that statutory bar under such bail provisions cannot override the rights of personal liberty and speedy trial, nor can such statutory restrictions be construed as an instrument for indefinite incarceration. It is now settled principle that the stringent statutory provisions under section 45 of the PMLA has to be harmonized with the right to personal liberty enshrined under Article 21 of the Constitution in light of the decisions of the Hon’ble Supreme Court in the case of V. Senthil Balaji and Manish Sisodia. The prolonged incarceration before even being pronounced guilty of an offence should not be permitted to become a punishment without trial and when there is long period of incarceration and the trial is not likely to be concluded soon then the accused cannot be deprived of his liberty and weightage has to be given while considering his bail application. Turning to the facts of the present case, the Enforcement Directorate has filed the Second Supplementary Prosecution Complaint, upon which, the learned Special Court has taken cognizance against the petitioner and other accused persons - the allegations levelled against the petitioner involves complex questions and issues which warrants detailed appreciation of evidence which is to be considered by the Special Court. Let the petitioner be released on bail on furnishing bail bonds with two sureties of the like amount each to the satisfaction of learned Sessions Judge cum-Special Judge (PMLA), Patna subject to the fulfilment of conditions imposed - bail application allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether the petitioner's arrest and custody complied with statutory procedure under the PMLA and whether due process objections preclude consideration of bail. 2. Whether the twin conditions in Section 45(1) PMLA for grant of bail are satisfied - i.e., whether there are reasonable grounds for believing the accused is not guilty and is not likely to commit an offence while on bail - and how these conditions are to be applied at the bail stage. 3. The extent to which prolonged pre-trial incarceration and delay in conclusion of trial, together with medical infirmity and advanced age, temper or relax the rigours of Section 45 PMLA under Article 21 (right to personal liberty and speedy trial). 4. The legal significance and admissibility/weight of statements recorded under Section 50 PMLA (statements of accused/co-accused) and their role at the bail stage. 5. Whether allegations that the petitioner, a practising Chartered Accountant, aided money-laundering by creating/controlling shell entities, routing funds and providing rent-free accommodation raise a prima facie case of complicity sufficient to refuse bail. 6. Whether conditions can adequately mitigate risks of tampering with evidence, influencing witnesses or abscondence if bail is granted. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Legality of arrest and custody Legal framework: Arrest powers under PMLA (section 19 and section 45 explanation) and requirement to follow statutory arrest procedure; rights of accused to challenge illegality of arrest. Precedent treatment: Authorities cited by parties address procedural compliance and medical treatment in custody, but Court did not find threshold procedural illegality sufficient to deny consideration of bail. Interpretation and reasoning: The Court examined counter-affidavit's assertion that statutory requirements were followed and observed that mere contention of illegal arrest, without compelling material establishing procedural failure, does not preclude adjudication of bail on merits. Ratio vs. Obiter: Ratio - procedural compliance allegations must be shown to be material to bail decision; absent compelling proof, arrest legality does not bar bail consideration. Obiter - comments on jail authorities' duty to treat inmates medically. Conclusion: No established procedural illegality of arrest that forbids bail consideration; custody challenged but not determinative. Issue 2 - Application of Section 45(1) PMLA (twin conditions) at bail stage Legal framework: Section 45(1) PMLA makes offences cognizable and non-bailable and prescribes twin conditions where Public Prosecutor opposes bail: court must be satisfied there are reasonable grounds for believing accused is not guilty and will not commit an offence while on bail. Precedent treatment: Court extensively relied on Supreme Court decisions harmonising Section 45 with constitutional rights - Vijay Madanlal Choudhary (constitutional validity and scope), Ranjitsing (construction of twin-condition statutes), Manish Sisodia and V. Senthil Balaji (relaxation of rigour where prolonged custody and delay), Prem Prakash (bail not displaced by statutory twin conditions where Article 21 concerns arise). Interpretation and reasoning: The Court reiterated that Section 45 does not impose absolute bar; at bail stage court forms tentative view on broad probabilities based on investigation material - not a mini-trial - and must balance statutory stringency with Article 21. The Court applied the principle that 'reasonable grounds for believing' requires a genuine case against accused but allows for bail where probability suggests non-conviction or when custodial period and trial delay tilt Article 21 considerations in favour of liberty. Ratio vs. Obiter: Ratio - Section 45 twin conditions are to be applied judicially and may be relaxed where Article 21 (speedy trial/long incarceration/medical infirmity) warrants it; Obiter - detailed discussion of precedents illustrating principles. Conclusion: Twin conditions remain applicable but were to be balanced against constitutional rights; on the facts the Court found grounds to relax rigour and grant bail. Issue 3 - Prolonged incarceration, delay and medical infirmity under Article 21 Legal framework: Article 21 protects liberty and right to speedy trial; courts may grant bail under constitutional jurisdiction where trial unlikely to conclude and detention would become punitive. Precedent treatment: Reliance on Manish Sisodia, V. Senthil Balaji, Javed Gulam Nabi Shaikh and related authorities which hold that prolonged pre-trial incarceration and absence of realistic prospect of speedy trial can justify bail despite stringent statutory bail thresholds. Interpretation and reasoning: The Court observed that the case involved voluminous evidence (38 witnesses, 28 documents, 5787 pages and extensive digitised material) making near-term conclusion unlikely; petitioner is septuagenarian with documented ailments. Harm from indefinite detention without trial would affront Article 21; precedents require harmonisation of Section 45 with Article 21 and permit bail where trial cannot be concluded in reasonable time and detention would be disproportionate. Ratio vs. Obiter: Ratio - prolonged incarceration and credible medical infirmity are weighty factors warranting relaxation of Section 45 rigours; Obiter - comparative observations on sentence ranges and trial duration factors. Conclusion: Delay and medical infirmity justified conditional enlargement on bail in this case. Issue 4 - Admissibility and weight of Section 50 PMLA statements at bail stage Legal framework: Section 50 PMLA statements (recorded under PMLA) are not confessions to police; treatment akin to statements before judicial authority; admissibility and probative value governed by statutory scheme and supporting material. Precedent treatment: Enforcement Directorate relied on authorities recognizing admissibility and utility of such statements (Vijay Madanlal Choudhary, Rohit Tandon, etc.). Interpretation and reasoning: The Court noted that while section 50 statements may be admissible and form part of the material, the weight to be accorded is for trial; at bail stage they form part of the material to be considered for prima facie satisfaction but cannot substitute for full trial evaluation. The petitioner contested reliability and circumstances of some co-accused statements (allegations of coercion, delayed/conflicting accounts); Court treated those as contested material requiring trial appraisal. Ratio vs. Obiter: Ratio - Section 50 statements can inform prima facie view but do not conclusively determine guilt at bail stage; Obiter - remarks on reliability challenges where statements are delayed or contradicted. Conclusion: Section 50 material considered but not decisive against bail given overall circumstances and need for trial determination. Issue 5 - Alleged professional misconduct and creation/control of shell companies as prima facie case Legal framework: PMLA offences include assisting, projecting or concealing proceeds of crime; professional role (auditor/CA) may attract liability if there is active facilitation of laundering - but allegations require documentary/transactional nexus to satisfy prima facie complicity. Precedent treatment: Prosecution relied on documentary trail, seized materials and admissions; defence relied on scope of statutory audit duties and lack of independent verification obligations; Court referenced applicable standards for assessing professional liability only at trial. Interpretation and reasoning: The Court examined prosecution claims (control of Kolkata entities, investments, loans, rent-free accommodation, ledger entries) and defence explanations (statutory audit limits, professional engagement, prior incorporation/shareholding records). Given contested documentary assertions and need for detailed evidence appraisal, Court held these issues raise complex questions for trial and do not, on their present state, preclude grant of bail when balanced with Article 21 factors. Ratio vs. Obiter: Ratio - allegations of complex commercial structuring and auditor conduct require full trial scrutiny; Obiter - observations on limits of statutory audit obligations. Conclusion: Allegations create a triable case but do not, in the circumstances (age, illness, trial delay), defeat bail entitlement subject to conditions to mitigate risk. Issue 6 - Adequacy of bail conditions to prevent flight, tampering or witness influence Legal framework: Courts may impose conditions to address prosecution concerns (sureties, reporting, travel restrictions, non-contact with witnesses, active mobile number disclosure). Precedent treatment: Reliance on Manish Sisodia and Senthil Balaji recognising conditions as means to mitigate risks when granting bail under stringent statutes. Interpretation and reasoning: The Court imposed monetary bonds, two sureties, prohibition on leaving country without court permission, mandatory appearance, active mobile number disclosure, address change notification, prohibition on criminal activity and influencing witnesses, and liberty for prosecution to seek modification/recall on breach. These conditions were judged sufficient to allay risks identified by prosecution given documentary evidence largely seized. Ratio vs. Obiter: Ratio - tailored conditions can adequately mitigate legitimate prosecutorial concerns and support release under Section 45 balancing exercise; Obiter - suggestions on monitoring and prosecutorial recourse. Conclusion: Conditions imposed deemed adequate to permit bail without unacceptable risk to investigation or trial integrity. FINAL CONCLUSION Applying the statutory scheme of PMLA in light of authoritative precedents and constitutional protections, the Court concluded that although a prima facie case exists and the allegations are serious and triable, the petitioner's advanced age, medical infirmity, clean antecedents, and the realistic unlikelihood of trial conclusion in the near future justified conditional enlargement on bail. The grant of bail is without prejudice to the merits and subject to specified conditions to address prosecution concerns.