2026 (1) TMI 211 - HC - Money Laundering

PMLA arrest in documentary money-laundering probe: no s.50 summons, selective arrests, parity with co-accused led to bail

In a regular bail application under the PMLA, the HC held that although issuance of summons under s.50 is not a statutory precondition to arrest under ... Money Laundering - seeking grant of regular bail - proceeds of crime - large-scale criminal conspiracy in the excise administration of the State of Chhattisgarh during the period 2019 to 2023 - Non-Issuance of Summons under Section 50 of the PMLA - Grounds of arrest - necessity of Custodial Incarceration - selective arrest - pick and choose - parity with co-accused - HELD THAT:- This Court is conscious of the gravity and the seriousness of the offence alleged under the provisions of Prevention of Money Laundering Act, 2002. It is noteworthy that the applicant has not been named in the ECIR nor in the FIR in respect of the predicate offence underscoring the tenuousness of the prosecution’s narrative at this stage. At the same time, it is equally trite that the considerations governing the grant or refusal of bail must be tested on well settled principles of criminal jurisprudence and constitutional safeguards - This Court reiterates that at the stage of consideration of a bail application, the exercise of jurisdiction is neither punitive nor determinative of guilt. The Court is required to assess whether continued incarceration of the applicant is necessary, proportionate and constitutionally permissible, having regard to the nature of allegations, material collected, role attributed and the likelihood of the trial concluding within a reasonable time. This Court, before adverting to the facts of the present case, deems it apposite to reiterate the settled parameters governing the grant of bail under the Prevention of Money Laundering Act, 2002. Undoubtedly, the statute incorporates stringent conditions; however, stringency of a statutory regime cannot be read as a license to disregard constitutional safeguards. The Apex Court in Satender Kumar Antil Vs. CBI [2022 (8) TMI 152 - SUPREME COURT], has held that even in cases involving special statutes, deprivation of liberty must satisfy the test of necessity and proportionality and that arrest and incarceration cannot be resorted to as a matter of course. Similarly, in Sanjay Chandra Vs. CBI [2011 (11) TMI 537 - SUPREME COURT], it has been held that the object of bail is to secure the presence of the accused at trial and not to inflict punishment prior to conviction. In Manish Sisodia Vs. Directorate of Enforcement [2024 (8) TMI 614 - SUPREME COURT], has consistently held that the jurisdiction at the stage of bail is guided by the principles of necessity, proportionality and fairness and not by punitive considerations. Non-Issuance of Summons under Section 50 of the PMLA - HELD THAT:- While it is correct that issuance of summons under Section 50 is not, in absolute terms, a statutory precondition for arrest under Section 19 of the PMLA, this Court is of the considered view that Section 50 embodies a substantive procedural safeguard, designed to ensure transparency, fairness and voluntary cooperation before the drastic measure of arrest is invoked. The Apex Court in Vijay Madan Lal Choudhary Vs. Union of India [2022 (7) TMI 1316 - SUPREME COURT (LB)], while upholding the constitutional validity of the PMLA, has categorically observed that procedural safeguards under the Act cannot be reduced to empty formalities and must operate in substance. The complete omission to invoke Section 50 prior to arrest, when viewed in conjunction with the facts and circumstances of the present case, assumes relevance at the stage of bail, though it may not, by itself, invalidate the arrest. The power of arrest under Section 19 of the PMLA is undoubtedly a drastic power, an its exercise is conditioned upon strict adherence to the statutory safeguards and constitutional limitations. The expression “reason to believe” is not an incantation to be mechanically reproduced, but a safeguard intended to ensure that personal liberty is not scarified at the altar of mere suspicion. Grounds of arrest - necessity of Custodial Incarceration - HELD THAT:- The grounds of arrest furnished to the applicant essentially rely on the seriousness of the alleged offence and the supposed involvement of the applicant in laundering the proceeds of crime. The Apex Court has consistently held that mere non-appearance pursuant to summons under Section 50 of the PMLA is not by itself, sufficient to constitute a valid ground for arrest under Section 19 of the Act. However, seriousness of allegations, howsoever grave, cannot alone justify continued pre-trial incarceration. The Apex Court in Pankaj Bansal Vs. Union of India [2023 (10) TMI 175 - SUPREME COURT] and more recently in Senthil Balaji Vs. Directorate of Enforcement, [2024 (9) TMI 1497 - SUPREME COURT], has held that arrest under the PMLA must be founded upon demonstrable necessity and not on generalized assertions of gravity or suspicion. In the present case, the investigation is largely documentary and digital in nature. Statements have already been recorded, material has been seized and the respondent has failed to demonstrate any specific investigative requirement which necessitates continued custodial interrogation of the applicant. Stated differently, it is urged that the custodial action taken against the applicant was unwarranted and disproportionate, inasmuch as there existed neither any necessity nor exigency justifying such coercive measure. It is a matter of record that the applicant was never served with summons under Section 50 of the PMLA nor was he required to appear before the Enforcement Directorate in relation to the alleged offence prior to his arrest. Consequently, the allegation of non-cooperation as reflected in the grounds of arrest, is stated to be factually incorrect. From perusal of the grounds of arrest, it is evident that the arrest of the applicant is substantially based upon material already collected during investigation, including statements recorded under Section 50 of the Act and documentary evidence. No specific circumstance has been pointed out which necessitated the immediate arrest of the applicant at that stage, nor has it been demonstrated that custodial interrogation was indispensable once such material stood secured - the present matter is a complaint case. No doubt Section 44 (1) (d) permitting filing of supplementary complaints when fresh materials are available to the ED in relation with money laundering but the procedure prescribed for filing of complaint under Section 44 of the PMLA read with Chapter XV of the Cr.P.C. with Section 200 to 204 of the Cr.P.C. and is distinct from that of a police report under Section 173 of the Cr.P.C. Section 200 provides for a Magistrate taking cognizance of an offence on complaint. Thereafter, an enquiry is conducted by the competent Magistrate in terms of Section 201 to 204 Cr.P.C. and the Section 207 & 208 of the Cr.P.C. provides supply of documents, statements and other material to the accused. Prima facie the conduct of the prosecution reveals a manifestly inconsistent and selective approach being both hot and cold in its approach and has acted in a pick and choose manner in investigation. While procedural lapses are apparent, it is clarified that such irregularities, though regrettable do not amount to illegality per se, and a distinction between irregularity and illegality. Selective arrest - Pick and choose - HELD THAT:- The material placed on record prima facie reveals that certain individuals alleged to have played graver and more direct roles, including alleged beneficiaries, have not been arrested, despite being named in the ECIR and despite issuance of warrants in predicate proceedings. The selective invocation of coercive powers against the applicant, while similarly or more seriously placed persons remain at liberty, raises a legitimate concern regarding unequal application of law. The Delhi High Court in Vipin Yadav Vs. Directorate of Enforcement [2025 (10) TMI 114 - DELHI HIGH COURT], has recognized that selective arrest is a relevant consideration while adjudicating bail under the PMLA as it bears directly upon fairness of the process - It is thus contended that denial of bail to the applicant, in the face of non-arrest of a co-accused whose role is projected as more significant and culpable, would amount to discriminatory application of the coercive powers of arrest and would render the exercise of such power arbitrary and unjust. Parity with co-accused - HELD THAT:- It is borne out from the record that several co-accused including Anil Tuteja, Arun Pati Tripathi, Trilok Singh Dhillon, Anwar Dhebar and Arvind Singh, who are the kingpins and key conspirators of the syndicate-who constitute the principle accused in the matter have already been enlarged on bail by the Apex Court. The role attributed to the present applicant is not shown to be severe or qualitatively different from those co-accused. In such circumstances, denial of bail would result in unequal treatment - The Apex Court in Tarun Kumar Vs. Enforcement Directorate [2023 (11) TMI 904 - SUPREME COURT] has held that parity cannot be denied unless clear and cogent distinguishing features are established. Thus, this Court finds that the prosecution case against the applicant is predominantly document-centric, resting upon statements recorded under Section 50 of the PMLA, financial records, digital material and inferential links. The admissibility, credibility and evidentiary worth of such material are matters that can only be conclusively adjudicated during trial, after full fledged examination and cross examination. As consistently held in a catena of judgments, constitutional courts retain the plenary power to grant bail on the grounds flowing from Part III of the Constitution. Section 45 of the PMLA does not, and cannot, operate as an absolute embargo where continued incarceration would infringe the fundamental right to personal liberty and fair trial. The sacrosanct guarantee under Article 21 must prevail even in the face of stringent provisions contained in special statutes. On a cumulative consideration of the facts and circumstances and on a holistic appreciation of the factual matrix and legal position, this Court is of the considered opinion that the applicant has made out a case for grant of bail. The statutory rigour of Section 45 of the PMLA, when tested against the touchstone of constitutional proportionality, stands sufficiently satisfied at this stage. Continued incarceration of the applicant, in the facts of the present case, would amount to pre-trial punishment, which is alien to the settled principles of criminal jurisprudence. This Court is satisfied that the ends of justice can be adequately secured by imposing stringent conditions to ensure the presence of the applicant during trial and to prevent any misuse of liberty. Accordingly, the bail application deserves to be allowed - the bail application is allowed subject to fulfilment of conditions imposed. Issues: (i) Whether the applicant is entitled to regular bail under Section 483 of the BNSS (pari materia to Section 439 Cr.P.C.) in an offence under the Prevention of Money Laundering Act, 2002 read with Section 3 and Section 4 (scheduled offences), having regard to the statutory twin conditions of Section 45 PMLA, the nature of materials on record, delay in trial, selective arrest/parity with co-accused and omission to issue summons under Section 50 PMLA.Analysis: Legal framework: Section 45 of the PMLA imposes twin prima facie conditions for bail; Section 19 authorises arrest; Section 50 embodies a procedural safeguard; further investigation and filing of supplementary complaints are governed by Section 44 PMLA and Cr.P.C. provisions. Constitutional principles of Article 21 require necessity and proportionality in resort to incarceration and protect against prolonged pre-trial detention where trial is unlikely to conclude soon. Admissibility of statements recorded under Section 50 is recognised at the bail stage but their evidentiary weight is a matter for trial. Parity and selective enforcement are relevant considerations in bail jurisprudence. Factual findings: the prosecution case against the applicant is largely document-centric and inferential; no recovery of proceeds from the applicant was shown; the applicant was not named earlier in ECIR/FIR and was not served summons under Section 50 prior to arrest; several co-accused with comparable or greater alleged roles have been granted bail; investigation is voluminous and trial is unlikely to conclude in the near future; procedural irregularities and selective arrest prima facie established. Weighing statutory rigour against constitutional safeguards, continued custody is disproportionate in the present facts, and the statutory threshold under Section 45 is satisfied prima facie for release subject to conditions.Conclusion: The bail application is allowed and the applicant is entitled to be enlarged on bail subject to stringent conditions to be imposed by the trial court including surrender of passport and an undertaking to cooperate and attend trial. The order is in favour of the appellant.