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. 1. ISSUES PRESENTED AND CONSIDERED (i) Whether, on the material placed by the Enforcement Directorate, the applicant satisfied the requirements for bail under the PMLA regime, including the prima facie satisfaction contemplated for bail, when tested against constitutional safeguards of necessity, proportionality and fairness. (ii) Whether the applicant's custodial detention was shown to be necessary for investigation, having regard to the grounds of arrest, the nature of evidence (documentary/digital), and the stage of proceedings. (iii) Whether omission to issue summons under Section 50 PMLA prior to arrest, though not an absolute precondition to arrest, was a relevant procedural safeguard lapse impacting the bail assessment in the present facts. (iv) Whether selective exercise of arrest powers and parity with similarly placed co-accused already granted bail warranted release, absent distinguishing circumstances. (v) Whether the likelihood of a protracted trial (including linkage with the predicate offence trial) made continued incarceration constitutionally disproportionate, justifying bail despite statutory stringency. 2. ISSUE-WISE DETAILED ANALYSIS Issue (i): Bail under the PMLA regime vis-à-vis constitutional safeguards Legal framework: The Court considered the stringent bail regime under the PMLA and the principle that bail adjudication requires a prima facie assessment rather than determination of guilt, alongside constitutional constraints that incarceration must satisfy necessity and proportionality. Interpretation and reasoning: The Court held that PMLA stringency cannot be treated as a license for incarceration by default. At the bail stage, the inquiry is not punitive and the Court must examine whether continued detention is necessary and constitutionally permissible. The Court emphasized that the satisfaction contemplated at the bail stage is prima facie, and refusal of bail cannot be mechanical merely because allegations are grave. Conclusion: On a cumulative assessment of the record, the Court found the applicant made out a case for bail; the statutory rigour, when tested on constitutional proportionality, was found sufficiently satisfied at that stage. Issue (ii): Necessity of custody and adequacy of grounds of arrest Legal framework: The Court assessed whether the grounds of arrest and investigative needs established a live nexus between detention and investigation, noting that arrest is not meant to be punitive and must be justified by demonstrable necessity. Interpretation and reasoning: The Court found the investigation to be largely documentary and digital; statements had been recorded and material was already seized/secured. The grounds of arrest substantially relied on material already collected, and the respondent failed to point to any specific circumstance requiring immediate arrest or continued custodial interrogation. The Court also noted that a reference to non-cooperation in the grounds of arrest was factually inconsistent with the undisputed position that summons under Section 50 were not served prior to arrest, treating the lapse as an irregularity relevant to detention assessment. Conclusion: Continued custody was held not shown to be indispensable or proportionate; once the asserted grounds ceased to have a compelling nexus with further detention, continued incarceration would offend Article 21 principles applied by the Court. Issue (iii): Effect of non-issuance of Section 50 summons prior to arrest Legal framework: The Court treated Section 50 as embodying a substantive procedural safeguard meant to afford transparency and an opportunity to respond before coercive steps, while accepting that it is not an absolute statutory precondition for arrest under Section 19. Interpretation and reasoning: The Court held that complete omission to invoke Section 50 before arrest, in the circumstances of this case, was relevant at the stage of bail because it deprived the applicant of a meaningful opportunity to clarify his position before coercive action. The Court reasoned that even where not mandatory in all situations, fairness requires cogent reasons if such opportunity is denied, and procedural safeguards cannot be reduced to empty formalities. The Court did not invalidate the arrest on this ground, but treated it as a significant factor informing the necessity/proportionality assessment for detention. Conclusion: The omission did not, by itself, vitiate arrest, but weighed in favour of bail as part of the overall evaluation of fairness and necessity of continued incarceration. Issue (iv): Selective arrest ('pick and choose') and parity with co-accused on bail Legal framework: The Court considered parity as a facet of equality in bail jurisprudence and treated selective invocation of coercive arrest powers as relevant to fairness of process. Parity was held not to require mechanical replication, but consistency unless distinguishing circumstances are demonstrated. Interpretation and reasoning: The Court found prima facie material indicating that certain persons alleged to have played graver and more direct roles had not been arrested despite being implicated, raising concern of unequal application of law. The Court also found that several principal co-accused described as key conspirators/kingpins had already been granted bail, and the applicant's role was not shown to be more severe or qualitatively distinct. The respondent failed to place distinguishing material justifying harsher treatment. The Court treated this as supporting the conclusion that denial would be discriminatory and inconsistent with bail jurisprudence. Conclusion: The Court held that parity and prima facie selective arrest considerations supported grant of bail, and absence of distinguishing circumstances weighed against continued detention. Issue (v): Protracted trial and constitutional disproportionality of continued detention Legal framework: The Court applied the right to speedy trial as a facet of Article 21 and treated structural delay and low likelihood of early conclusion as central to assessing whether continued detention becomes punitive. Interpretation and reasoning: The Court found the case involved multiple accused, voluminous documents, numerous witnesses and ongoing investigative assertions, making early trial conclusion unrealistic. It further considered that the PMLA trial could not logically or legally conclude before culmination of the predicate offence trial, increasing the risk of indeterminate pre-trial detention. Given the document-centric nature of evidence and the secured record, the Court held that continued incarceration would convert presumption of innocence into a hollow promise and operate as pre-trial punishment. Conclusion: The Court concluded that the likely protracted trial and absence of necessity for continued custody rendered further detention disproportionate; bail was therefore warranted with stringent conditions to secure attendance and prevent misuse. Disposition (as decided): Bail was granted subject to stringent conditions to be fixed by the trial court after hearing the respondent, including surrender of passport (if any), an undertaking to attend and cooperate for early disposal, and liberty to seek cancellation upon non-cooperation or breach.