TaxTMI 
TaxTMI 
2026 (7) TMI 99
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.... "BNSS") for Regular Bail in connection with ECIR No. ECIR/HIU-II/43/2025 dated 23.12.2025 PMLA Case Complaint No.03/2026 filed by the respondent No. 1 for the offence registered under Sections 3 and punishable under Section 4 of the Prevention of Money Laundering Act, 2002 (hereinafter referred to as "PMLA"). SUBMISSIONS ON BEHALF OF THE APPLICANT: [3.0] Learned Senior Advocate Mr. Sudhir I. Nanavati assisted by learned advocates Ms. Kajal D. Shah, Mr. Vaibhav B. Shukla, Mr. Anil H. Patel and Ms. Pooja V. Maheshwari for the applicant has submitted that present applicant is falsely enroped in the offence in absence of any statement of any victim or agriculturist and merely based on presumption the applicant is arraigned as an accused. That, applicant is an IAS Officer of 2015 Batch and was posted as Collector at Surendranagar on 01.02.2025 and prior to that the applicant had been performing his duty as Assistant Collector at Talaja, (Bhavnagar); District Development Officer at Sabarkantha and Deputy Municipal Commissioner at Surat and applicant is having blot less career and subsequently the applicant was transferred to Surendranagar and took over charge as a Collector of Dis....
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.... were seized however, nothing is found which show the involvement of the present applicant. [3.4] He has further submitted that even if the allegations leveled against the applicant are accepted to be true without admitting the same, then also the allegations leveled are nothing but hypothetical and unbelievable. On the basis of the statement of co-accused Mr. Chandrasinh Mori and other co-accused, ECIR was registered without any corroborative piece of evidence or material. Vague allegations are leveled against the applicant that in the office of Collector, Surendranagar, for the purpose of converting the land tenure i.e. agriculture use to non-agriculture use, bribe rate came to be fixed and out of the total amount of illegal gratification, 50% share was received by the present applicant, 25% by Residential Additional Collector, 10% each by Chitnis and Mamlatdar and 5% by Clerk. He has further submitted that for Change of Land Use (for short "CLU") the bribe amounts were fixed in advance at Rs. 10 per sq. meter for CLU applications under Sections 65 and 65B of the Gujarat Land Revenue Code and Rs.5 per sq. meter for CLU applications under Sections 54 and 55 of the Saurashtra Gh....
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....and in the office computer one word sheet is found wherein it is stated about the details of application number, land survey number and amount received but it is not received from the conscious possession or control of the present applicant or any device of the present applicant. [3.9] He has thus submitted that sum and substance of the allegation is that in Surendranagar District, for the purpose of land use conversion illegal gratification came to be collected by the officials of Collector's office. He has also submitted that said racket was also going on prior to present applicant took over as Collector, Surendranagar on 04.02.2025. Meaning thereby, previous Collector had established the said practice and other co-accused who were working at relevant point of time while present applicant has taken over the charge as Collector, he has continued same practice and indulged in same activity and it clearly reveals that they have participated in process to clear 842 applications pertaining to conversion of land use. He has also argued that till date neither the earlier Collector nor the Additional Collector nor other employees from their tenure who indulged in such activities has b....
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....ration as twin test under Section 45 of the PMLA is satisfied. [3.12] To buttress his arguments, he has relied on the decision of Hon'ble Supreme Court in the case of P. Chidambaram vs. Directorate of Enforcement reported in (2020)13 SCC 791; Arvind Dham vs. Directorate of Enforcement reported in 2026 INSC 12 and Sachin Balasaheb Sawant vs. Union of India (Bombay High Court) rendered in Criminal Misc. Application No. 728/2024 and requested that considering the peculiar facts of the case and more particularly in view of the fact that no predicate offence has been made out. He has also relied on the decision of the Hon'ble Supreme Court in the case of Vijay Madanlal Choudhary vs. Union of India reported in (2022) 10 SCC 24 and submitted that in the said decision the Hon'ble Supreme Court has been pleased to hold that if the scheduled offence is not made out then proceeding under the PMLA would not stand alone. He has also submitted that commencement and conclusion of trial will take considerable long time and therefore also, he has requested to allow the present application. SUBMISSIONS ON BEHALF OF RESPONDENT - ED: [4.0] Mr. S.V. Raju, learned Additional Solicitor General w....
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....rted to authority enabling him to take further action under the PMLA. The said issue is also clarified by the Hon'ble Supreme Court in the case of Vijay Madanlal Choudhary (Supra). It is further submitted that the arrest in PMLA case need not avail the arrest in the scheduled offence as scheduled offence and offence under the PMLA both are different offences. In section 19 of the PMLA, phrase used is "reason to believe" that any person has been guilty of an offence punishable under the PMLA. The said phrase is also interpreted and section 19 of PMLA is a stringent provision and validity of the said section is upheld by the Hon'ble Supreme Court in the case of Vijay Madanlal Choudhary (Supra). [4.3] He has further argued that ED has made arrest of the applicant at the stage of investigation as requirement of section 19 of the PMLA is satisfied which requires prima facie view of guilt of accused even in absence of charge-sheet in the predicate offence, the only test is, "reason to believe" in the PMLA offence, merely because charge-sheet is not filed in scheduled offence is not a ground to grant bail and considering sections 19 and 45 of the PMLA, both employs similar expression, ....
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....ed in 2022 SCC OnLine (SC) 1465 wherein it has been held that the power of arrest under Section 19 of the PMLA is independent and money laundering is an independent offence. Even, second proviso to Section 5 of PMLA permits the attachment against any person who is in possession of any proceeds of crime and section 66(2) of the PMLA provides that during the investigation registration of FIR and reporting of such non-cognizable offence to the jurisdictional police also. He has relied on the decision of the Delhi High Court in the case of Gautam Khaitan vs. Union of India reported in 2025 SCC OnLine (Del) 8434 and argued that as per second proviso to section 5 of the PMLA, it is no longer mandatory that a person against whom a provisional attachment order is issued, must have been charged with a scheduled offence and Special Leave Petition (Cri.) No. 36510/2025 against the said decision came to be dismissed on 16.01.2026. [4.5] Learned ASG has further submitted that even trial under the PMLA can independently be proceeded without filing the charge-sheet in the predicate offence and he has relied on the decision of Hon'ble Supreme Court in the case of Siddhant Gupta vs. Directorate ....
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....thout registration of predicate offence herein, under the PC Act, proceeding under the PMLA is maintainable and filing of ECIR and complaint is permissible. [4.7] He has further submitted that since investigation is going on, during the investigation proceeds of crime were traced out based on the statement of Mr. Jayrajsinh Zala, Personal Assistant of the present applicant and other witnesses and co-accused wherefrom it clearly reveals that present applicant was getting share of 50% from the total amount of illegal gratification and said share came to be fixed. Hence, prima facie material is collected which suggests involvement of the present applicant in the alleged offence and investigation under the PMLA is continued and on the basis of FIR alone, even without charge-sheet being filed. Hence, still investigation is going on and mere non-filing of charge-sheet in scheduled offence is not a ground to enlarge the present applicant on bail. [4.8] Further, he has argued that authority under Section 19(1) of the PMLA is having the power to arrest the accused. If the Director or Deputy Director having "reason to believe" that any person has been guilty of an offence punishable un....
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....cation from which bribes were being generated. If the present applicant is released on bail, possibility of tampering with evidence cannot be ruled out. He has further submitted that the applicant has tried to destruct the evidence prior to one day before the ED raid and his google activity record shows that the applicant had searched for "how to reset Samsung S24 Ultra". The said device i.e. Samsung S24 Ultra belonged to the applicant which was received by the applicant as a Diwali gift from someone however, the applicant does not know as to who gifted him the said mobile device. [4.11] He has further submitted that during the investigation actual utilization of proceeds of crime has been traced out amongst which the commercial shop was registered in the name of wife of present applicant and undervalued consideration of only Rs.9 lakh is shown and remaining amount has been paid by the applicant in cash. Further, unaccounted jewelry worth Rs. 2 lakh was purchased by the applicant for his wife. He has submitted that the wife of the applicant is not having any independent income and high value electronic devices were purchased in cash despite withdrawal of only Rs. 3500/- from the....
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....he has relied on the decision of the Hon'ble Supreme Court in the case of Central Bureau of Investigation vs. Vijay Sai Reddy reported in (2013) 7 SCC 452. He has further submitted that sufficient evidence is collected from the digital device of the applicant and concealment of proceeds of crime is also found. The role of the present applicant is different from other accused who have not been arrested. Hence, merely because co-accused are not arrested is not a ground for the applicant to claim absolute parity. [4.14] He has further argued that in light of section 19 of the PMLA, the ED has power to arrest any person if the authorized officer has "reason to believe" on the basis of material in his possession that such person has been guilty of an offence punishable under the PMLA and such decision to arrest is based on, (a) the role and culpability of the accused; (b) the necessity of custodial interrogation and (c) the likelihood of tampering with evidence or influencing witnesses. He has submitted that merely because the predecessors of the applicant are not made accused and illegal activity continued since long is not a ground to allow the present application. In this regard, ....
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....on of section 45 of PMLA nugatory. Further, considering sections 3 and 44 of the PMLA, investigation is continue and merely investigation is over is not a ground to secure the bail and applicant has to satisfy the Court about the rigors of section 45 of the PMLA. Hence, as decided by the Hon'ble Supreme Court in the case of P. Chidambaram (Supra), triple test is not applicable. Learned ASG has also argued that no any statement qua illegal gratification has been recorded. During the investigation, statement of one Advocate Mr. Chetan Kanzariya under Sections 50(2) and 50(3) of the PMLA is recorded wherein he has admitted that he has paid bribe amount of Rs.65 lakh to the co-accused Mr. Chandrasinh Mori on behalf of the person associated with CLU applications as per the fixed rate of bribe as it was a prevailing practice in the office of Collector, Surendranagar that if illegal gratification is not parted with, in that event, the officials of Collectorate, Surendranagar used to create problem in speedy clearance of CLU applications and used to raise clumsy queries with intent of unnecessarily delaying the file until a bribe was eventually demanded for removal of such objections. The ....
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....F APPLICANT: [5.0] In rejoinder, learned Senior Advocate Mr. Nanavati appearing for the applicant has submitted that rigors of section 45 of the PMLA is not applicable to the present applicant more particularly when the legislature has imposed burden on both the sides. Present applicant is not guilty either under the PMLA nor the predicate offence. As per the case of prosecution, prior to search, already offence was registered under the PMLA. The search was conducted at the residence of Mr. Mori and then ECIR was registered. He was produced before the Magistrate before 8.30 p.m. and ECIR in PMLA was registered for the first point of time and subsequently the scheduled offence was registered. Unless and until the provision of section 2(y) of PMLA qua predicate offence is satisfied, no scheduled offence is registered and hence, question does not arise to straightway register PMLA offence. Hence, ECIR No. 43/2025 itself is not maintainable and therefore, arrest of applicant is absolutely illegal. [5.1] He has further argued that question does not arise to consider the period of incarceration and in this regard, he has relied on the decision of the Apex Court in the case of Arvin....
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.... Even if for the sake of argument submission on behalf of learned ASG that there is any predicate offence is accepted then also, if the applicant is acquitted or closure report is filed then question does not arise to prosecute under PMLA. Even otherwise, predicate or scheduled offence remained without investigation then trial under the PMLA is also required to be stayed or judgment is not pronounced till predicate offence gets over. In this regard, he has relied on the decision of the Hon'ble Supreme Court in the case of Sidhant Gupta vs. The Assistant Director, Directorate of Enforcement [SLP (Crl.) No. 14392 of 2024]. [5.4] In response to the argument as regards statement of Mr. Mori recorded under Section 50 of the PMLA made by learned ASG, learned Senior Advocate has submitted that prosecution has relied on the statement of co-accused Mr. Mori but already he has retracted from his statement made before the police and through jail which is submitted before the Court. Another witness Mr. Kanzariya - middleman has not given the name of present applicant and there was no direct dealing qua alleged bribe. Further, he has submitted that even otherwise proviso to Section 45 PMLA p....
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....ctor was getting 50% Share, 25% Share by Residential Additional Collector, 10% each by Chitnis and Mamlatdar and 5% by Clerk. [6.1] The Investigation and statement also revealed that Applicant was a District Collector and had 50% share of the bribe collected for getting the land use permission granted. It is further the case of ED that the applicant was the final authority for deciding CLU permission applications and the "hisaab sheets", digital evidence collected from the accused persons revealed details of each applications which were processed and said "hisaab sheets" also contained detail about the particular amount of bribe for processing and granting the CLU applications. The information was sent by Enforcement Directorate to Anti-Corruption Bureau, Ahmedabad and FIR No. 0/2025 dated 23.12.2025 was registered for the offence under Section 12, 13(1)(d), 13(2), 7 of the PC Act against the persons including the present applicant. It prima facie reveals that the officials of District Collector office, Surendranagar were indulged in corrupt practice for processing Conversion of land use application and bribe received as rate was fixed for granting change of land use. [6.2] T....
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....fence. In other words, the criminal activity may have been committed before the same had been notified as scheduled offence for the purpose of the 2002 Act, but if a person has indulged in or continues to indulge directly or indirectly in dealing with proceeds of crime, derived or obtained from such criminal activity even after it has been notified as scheduled offence, may be liable to be prosecuted for offence of money-laundering under the 2002 Act - for continuing to possess or conceal the proceeds of crime (fully or in part) or retaining possession thereof or uses it in trenches until fully exhausted. The offence of money-laundering is not dependent on or linked to the date on which the scheduled offence or if we may say so the predicate offence has been committed. The relevant date is the date on which the person indulges in the process or activity connected with such proceeds of crime. These ingredients are intrinsic in the original provision (Section 3, as amended until 2013 and were in force till 31.7.2019); and the same has been merely Page 39 of 59 explained and clarified by way of Explanation vide Finance (No.2) Act, 2019. Thus understood, inclusion of Clause (ii) in Exp....
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....is involved directly or indirectly in any process or activity connected with the proceeds of crime and such a person besides facing the consequence of provisional attachment order may end up in being named as accused in the complaint to be filed by the authorized officer concerning offence under Section 3 of the PMLA. [7.2] In the case on hand, admittedly, proceeding under the PC Act is pending and the accused is neither discharged, acquitted nor proceedings against accused are quashed. The Hon'ble Supreme Court in the case of Vijay Madanlal Choudhary (Supra) in paragraph No.290 has recognized the rights of Enforcement Directorate to work out the remedies as per law and relevant portion of the said paragraph is extracted hereunder: "290 In case the scheduled offence is not already registered by the jurisdictional police or complaint filed before the Magistrate, it is open to the authorised officer to still proceed under Section 5 of the 2002 Act whilst contemporaneously sending information to the jurisdictional police under Section 66(2) of the 2002 Act for registering FIR in respect of cognizable offence or report regarding non-cognizable offence and if the jurisdictio....
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....s it is so registered with the jurisdictional police and/or pending enquiry/trial including by way of criminal." [7.3] As ED has power under Section 66(2) of PMLA, in case the scheduled offence is not already registered by the jurisdictional police or complaint filed before the Magistrate, it is open to the authorised officer to still proceed under Section 5 of the PMLA whilst contemporaneously sending information to the jurisdictional police under Section 66(2) of the PMLA. Further, the power of arrest under Section 19 of the PMLA is independent and money laundering is an independent offence. Even, second proviso to Section 5 of PMLA permits the attachment against any person who is in possession of any proceeds of crime and section 66(2) of the PMLA provides that during the investigation, registration of FIR and reporting of such non-cognizable offence to the jurisdictional police also. The said proposition has been laid down by the Supreme Court in the case of Vijay Madanlal Chaudhry (Supra) and Dr. Manik Bhattacharya (Supra). It is also pertinent to note that as held by the Delhi High Court in the case of Gautam Khaitan (Supra), as per second proviso to section 5 of the PMLA,....
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....nd is unlikely to commit any further offences while out on bail. The section mandates that an accused shall not be released on bail "unless" two conditions are met: (i) the Public Prosecutor has been heard and (ii) the Court is satisfied that there are reasonable grounds for believing the accused in not guilty of money laundering and he is not likely to commit any offence while on bail. In short, both twin conditions must be fulfilled to grant bail. Courts have repeatedly held these conditions to be mandatory and onerous. The Apex Court has emphasized that Section 45 imposes a near- "not bail" regime. In the case of Vijay Madanlal Chaudhary (Supra), the Court upheld the mandatory twin conditions and stringent bail provisions noting that PMLA reverses the presumption of innocence and places the burden on the accused to make out a prima facie case for bail under Sec. 45 of PMLA. Likewise, in the case of Gautam Kundu vs. ED reported in (2015)16 SCC 1 and subsequent pronouncements reiterate that twin conditions mentioned in Section 45 of PMLA are "mandatory and need to be complied with". Further, in the case of Tarun Kumar (Supra), the Court reiterated that these cond....
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....tions. Prima facie involvement of the applicant in offence under PMLA is revealed. The concealment of proceeds of crime is yet to be investigated and traced out and recovered. In para 4 of the complaint, it is clearly stated that prosecution is going to file supplementary complaint and to act after further investigation. In light of para 4 of the complaint investigation qua accused No.2 is over. It is required to be considered in context of no further remand or custody over five days required. [8.3] Learned ASG has also submitted that further investigation is going on. The Hon'ble Supreme Court in the case of Vijay Madanlal Choudhary (Supra) authoritatively held that: "The Explanation to Section 44 permits the Authority to bring on record further evidence in respect of further investigation even after cognizance has been taken and it is always open to the authorized authority to seek permission of the Court during trial,keeping in mind the provision of the Code of Criminal Procedure." Herein, in the case on hand, cognizance yet to be taken. The purchase of jewellery and routing of rental income and other income through the wife and mother's account having no any sour....
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....nspiracies and involving huge loss of public funds needs to be viewed seriously and considered as grave offences affecting the economy of the country as a whole and thereby posing serious threat to the financial health of the country. Further, on the aspect of bail in cases involving socio-economic offences, differential treatment in consideration unlike conventional crimes. A reference is required to be made to the cases of Nimmagadda Prasad vs. CBI reported in (2013) 7 SCC 466; Rohit Tandon vs. Directorate of Enforcement reported in (2018) 11 SCC 46 and Serious Fraud Investigation Officer vs. Nitin Johari reported in (2019) 9 SCC 165. [8.4] Further, the investigation would reveal that schematic approach was made by the accused persons to escape from the clutches of PMLA proceedings. Once the "proceeds of crime" is traced out by the Enforcement Directorate and a complaint under PMLA has been filed before the Competent Court, the offence under PMLA has become standalone offence and standalone process, which is to be proceeded by following the procedures as contemplated under PMLA. In the present case, the ACB, Gujarat State is investigating the offence under the PC Act. The inve....
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....on and evidence of rate fixed by the office is also substantiated by the said statements and said statements are admissible in evidence, against the present applicant, accusation and involvement is made out and he has concealed the proceeds of crime. Hence, merely because investigation is over is not enough to carve out any exception of section 45 of the PMLA and recovery of proceeds of crime is not a sine qua non as under the PMLA, attachment of property having equivalent value is permissible in case proceeds of crime is not traceable. Hence, tracing of money of proceeds of crime is not sine qua non and hence, during the investigation no proceeds of crime or nothing is found or nothing is traced out accepted 4 circumstance pointed out by applicant including purchase of property prior to join service is not sufficient to satisfy twin test under Sec.45 of PMLA or ground to consider the bail application of the present applicant who is involved in serious economic offence. [8.6] Under Section 50 of PMLA statements are admissible and can form the basis for forming a prima facie view at the stage of bail. Since the proceeds of crime is yet to be investigated and free and fair investi....
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....custody of another offence. Even otherwise, whether evidentiary value of such statement was exculpatory or inculpatory, is subject matter of trial as alleged retraction is made by co-accused before the jail authority subsequently while he was produced before the learned Sessions Judge and co-accused has not raised any question about his statement was recorded under coercion, pressure or third degree methods. One more aspect is also required to be considered is that in the decision in the case of Vijay Madanlal Chaudhry (Supra) Hon'ble Apex court has concluded that the process envisaged by Section 50 of the PMLA is in the nature of an inquiry against the proceeds of crime and is not "investigation" in strict sense of the term for initiating prosecution and the Authorities under the PMLA (referred to in Section 48) are not police officers as such. The statements recorded by the Authorities under the PMLA are not hit by Article 20(3) or Article 21 of the Constitution of India. Moreover, such retraction is a disputed question of fact which cannot be gone into at this bail stage. In this regard, learned ASG has relied on the decision of the Hon'ble Supreme Court in the case of Abdulvaha....
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....s required. Section 45 of PMLA provides that in case the accused is sick or infirm, bail is required to be granted. However, the present applicant is not so sick or terminally ill. Hence, said proviso would not be applicable in the present case. [9.0] Learned Senior Advocate Mr. Nanavati for applicant has also argued about the selective approach adopted by the authority in arrest of accused. Since his role is found to be serious one and applicant has received largest single share of bribe amount and the role of the present applicant is different or higher than other accused who have not been arrested or yet to be arrested. Hence, merely because co-accused are not arrested is not a ground for the applicant to claim absolute parity and in this regard, it would be apposite to refer to the decisions of the Hon'ble Supreme Court rendered in the case of Tarun Kumar (Supra) and Sagar (Supra). Further, the applicant is not entitled to claim parity as of right and it is well settled law that mere non-arrest of co-accused is not a ground for bail as held by the Hon'ble Supreme Court in the case of Vijay Sai Reddy (Supra) wherein it has been held that it is the sole discretion of investiga....