Court’s Decision
The Delhi High Court granted regular bail to the applicant in a money laundering case under Sections 3 and 4 of the Prevention of Money Laundering Act, 2002.
The Court noted that although PMLA bail is governed by the strict twin conditions under Section 45, those conditions cannot be applied in isolation from the constitutional right to personal liberty and speedy trial under Article 21.
The applicant had been in custody since 08.08.2025, the ED investigation qua him was complete, the prosecution complaint had already been filed, cognizance had been taken, but the matter was still at the stage of scrutiny/supply of documents. The Court found that the trial was unlikely to commence or conclude within a reasonable time.
Facts
The case arose from a CBI FIR registered in 2020 on the complaint of State Bank of India, alleging fraudulent diversion and siphoning of funds, use of forged documents, criminal breach of trust and misuse of credit facilities obtained from a consortium of banks.
The company concerned was engaged in processing and export of Basmati rice and had availed substantial credit facilities, including working capital limits, term loans and export-related facilities.
According to the prosecution, loan funds were diverted and routed through shell/related entities, fictitious purchase and sale transactions were created, stock statements were manipulated, turnover was inflated, and loan proceeds were allegedly siphoned. The bank account was eventually declared NPA with outstanding liability of about ₹1,740.30 crore.
Since the scheduled offences triggered PMLA jurisdiction, ED registered an ECIR and alleged laundering of proceeds of crime through dummy entities, banking channels, real estate entities and cash withdrawals.
Applicant’s Case
The applicant argued that the company was a genuine business entity which had suffered financial stress due to adverse market conditions, decline in exports, liquidity problems and debt servicing pressures.
It was submitted that an earlier forensic audit by Grant Thornton did not find direct or apparent evidence of diversion or misutilisation of funds during the reviewed period.
The applicant also argued that the ED had wrongly treated the entire loan amount of around ₹1,740 crore as proceeds of crime, despite the bank complaint alleging wrongful loss/outstanding liability to a different extent.
He further argued that the predicate FIR was registered in 2020, the first ECIR was registered in 2022, yet no coercive action was taken for years. The applicant appeared before ED, joined investigation, and the investigation qua him was complete.
ED’s Case
ED opposed bail and alleged that the applicant, being the Managing Director and controlling mind of the company, had played a central role in diversion and laundering of bank funds.
ED alleged creation and operation of shell/dummy entities in the names of employees, relatives and associates; fictitious trading; bogus receivables; inflated stock statements; fabricated invoices; layering of funds into real estate entities; and cash withdrawals of about ₹72 crore to conceal the money trail.
ED further submitted that about ₹325 crore had been traced at the acquisition stage and that the applicant continued to deal with proceeds of crime even after liquidation proceedings through front/proxy entities.
ED argued that mere filing of prosecution complaint, period of custody or completion of investigation cannot justify bail unless the twin conditions of Section 45 PMLA are satisfied.
Issues
The main issue before the Court was whether bail could be granted in a PMLA case involving serious allegations of bank fraud and laundering, despite the rigours of Section 45.
The Court also considered whether continued incarceration was justified when:
the applicant had already spent around 10 months in custody;
ED investigation qua him was complete;
the prosecution complaint had been filed;
the matter was still at scrutiny/supply stage;
the predicate CBI case had not resulted in a chargesheet even after years;
and the prosecution relied on 54 witnesses and around 20,000 pages of documents.
Analysis Of The Law
The Court noted that Section 45 PMLA requires the Court to be satisfied that there are reasonable grounds for believing that the accused is not guilty and that he is not likely to commit any offence while on bail.
However, the Court also held that Section 45 cannot be applied in a vacuum. It must be balanced against Article 21, particularly where trial is unlikely to conclude within a reasonable time.
The Court emphasised that a stringent bail provision cannot become a tool for keeping an undertrial in custody for an unreasonably long period without trial.
Court’s Reasoning
The Court found that the investigation qua the applicant had concluded and the prosecution complaint had already been filed before the Special Court.
It also noted that the predicate FIR was registered in 2020, the first ECIR was registered in 2022, but no coercive action was taken against the applicant until his arrest in August 2025.
Most importantly, the CBI had still not filed a chargesheet in the predicate offence even after about six years.
The Court observed that the PMLA case had not moved beyond scrutiny/supply of documents for over five months. With 54 witnesses and 20,000 pages of documents, there was no real likelihood of trial commencing and concluding soon.
Since the evidence was primarily documentary and already collected, the Court held that continued incarceration was not warranted at this stage.
Precedent Analysis
The Court relied heavily on V. Senthil Balaji v. Enforcement Directorate, where the Supreme Court held that inordinate delay in trial and stringent bail provisions cannot go together, and that Section 45 PMLA cannot be used to incarcerate an accused for an unreasonably long time.
The Court also relied on Arvind Dham v. Enforcement Directorate, where the Supreme Court reiterated that prolonged incarceration cannot convert pre-trial detention into punishment, especially where evidence is documentary and already in possession of the prosecution.
The Court also referred to the principle that economic offences cannot be treated as a homogeneous class warranting blanket denial of bail.
Conclusion
The Delhi High Court allowed the bail application.
The applicant was directed to be released on bail on furnishing a personal bond of ₹2,00,000 with two sureties of the like amount.
The Court imposed conditions including surrender of passport, not leaving the country without Trial Court permission, sharing contact details with ED and the Trial Court, appearing before the Trial Court on every date unless exempted, joining further investigation if required, and not contacting prosecution witnesses or tampering with evidence.
Key Takeaway
In PMLA cases, Section 45 imposes strict bail conditions. But those conditions cannot justify endless custody when the investigation qua the accused is complete, evidence is documentary, the predicate case itself has not progressed, and the trial is unlikely to conclude within a reasonable time. Personal liberty and speedy trial under Article 21 remain crucial even in economic offences.