1. Court’s decision
The Delhi High Court granted regular bail to an accused in a long-running money laundering prosecution arising out of the PACL/PGF investment scam, holding that the arrest effected nearly nine years after registration of the Enforcement Case Information Report was not justified on the test of “necessity of arrest.” The Court found that the investigation was substantially documentary, stood completed with the filing of a second supplementary complaint, and that the applicant had consistently cooperated, travelled abroad only with court permission, and never misused liberty. Concluding that both the statutory “twin conditions” under the Prevention of Money Laundering Act and the general “triple test” for bail were satisfied, the Court ordered release on stringent conditions.
2. Facts
The prosecution traces back to a large-scale alleged fraud by entities in the Pearls/PACL group, accused of collecting funds from investors across India through collective investment schemes under the guise of land allotment. A predicate FIR was registered in 2014, followed by a chargesheet in 2016, and supplementary chargesheets later. The applicant, related to the principal accused by marriage, was not named initially and was arrayed only years later through a supplementary chargesheet. An ECIR under the PMLA was registered in 2016, and prosecution complaints were filed in 2018 and 2022, again without naming the applicant. The applicant was arrested only in March 2025, shortly before travelling abroad with prior court permission.
3. Issues
The primary issue before the High Court was whether the applicant was entitled to regular bail under the PMLA, considering the rigours of Section 45. The Court examined whether there were reasonable grounds to believe that the applicant was not guilty of money laundering and whether he was likely to commit any offence while on bail. Closely connected was the question whether the arrest, effected years after the alleged transactions and after prolonged cooperation by the applicant, satisfied the constitutional and statutory requirement of “necessity of arrest,” particularly when the evidence was largely documentary and the investigation had concluded.
4. Petitioner’s arguments
The applicant argued that he had been unlawfully arrested despite full cooperation with investigations since 2017–18 and despite never being named as an accused in the original complaint or the first supplementary complaint. He stressed that most of the alleged fund transfers to overseas entities occurred before he became a director in the relevant companies, and that a substantial portion of the investments pre-dated his involvement. It was contended that his arrest after nine years, on the same material already within the agency’s knowledge since 2018, violated the principles laid down by the Supreme Court on necessity of arrest. The applicant also highlighted that he was already on bail in the predicate offence and in a separate FIR, without any allegation of misuse of liberty.
5. Respondent’s arguments
The Enforcement Directorate opposed bail, asserting that the applicant had knowingly participated in laundering proceeds of crime generated by duping investors of tens of thousands of crores. It relied on his directorial positions in two Australian companies through which funds were allegedly diverted and used to acquire overseas properties, and on statements recorded under the PMLA suggesting his involvement in layering and dissipation of tainted funds. The agency contended that the applicant had not cooperated fully, had attempted to destroy electronic evidence at the time of interception at the airport, and that the gravity of the economic offence, coupled with the stringent twin conditions of Section 45, disentitled him from bail.
6. Analysis of the law
The Court analysed bail jurisprudence under the PMLA in light of recent Supreme Court authority, reiterating that Section 45 does not oust the fundamental principle that bail is the rule and jail the exception. While acknowledging that the twin conditions impose a higher threshold, the Court emphasised that they must be assessed on the material available and not by conducting a mini-trial. The Court also examined the doctrine of necessity of arrest, noting that arrest is not to be used as a punitive or mechanical step but must be justified by investigative needs such as preventing further offence, ensuring presence, or preventing tampering. Where evidence is documentary and already seized, prolonged pre-trial incarceration requires strong justification.
7. Precedent analysis
The Court relied on a consistent line of Supreme Court decisions holding that prolonged custody in economic offences, especially after completion of investigation, militates against personal liberty. Authorities emphasising that documentary cases reduce the risk of evidence tampering were applied to the applicant’s situation. The Court also referred to precedent clarifying that the conduct of co-accused or family members cannot be a ground to deny bail, and that permission-based foreign travel without violation negates any presumption of flight risk. Recent decisions reaffirming that the twin conditions under the PMLA must be harmonised with Article 21 were treated as governing the present facts.
8. Court’s reasoning
Applying the law to the facts, the Court noted that the applicant was not alleged to have conceived or executed the fraudulent investment schemes forming the predicate offence. His alleged role was confined to holding directorial positions in entities through which funds were said to have moved, with most transactions predating his tenure. The Court attached significance to the unexplained delay in naming and arresting the applicant despite the agency’s knowledge of the transactions since at least 2018. It rejected the argument that alleged non-cooperation by relatives could justify his detention, and held that the accusation of deletion of electronic data was a matter for trial. With the investigation complete and complaints filed, the Court found no likelihood of tampering, absconding, or reoffending.
9. Conclusion
The High Court concluded that continued incarceration of the applicant would amount to punitive detention rather than a measure necessary for investigation or trial. It held that the applicant satisfied both the twin conditions under Section 45 PMLA and the triple test governing bail. Accordingly, the Court ordered his release on bail subject to conditions including furnishing of a substantial bond, regular appearance before court, restrictions on travel without prior intimation, and prohibitions against contacting witnesses or tampering with evidence. The Court clarified that its observations were confined to bail and would not prejudice the merits of the trial.
10. Implications
This ruling reinforces a growing judicial insistence that arrests under the PMLA must pass the constitutional test of necessity, particularly in long-pending investigations where evidence is documentary and the accused has cooperated. It signals that delayed, post-facto arrests on old material are vulnerable to scrutiny, even in serious economic offences. For enforcement agencies, the judgment underscores the need to justify custodial detention with concrete investigative reasons. For accused persons, it affirms that compliance with bail conditions, cooperation, and absence of misuse of liberty in related proceedings weigh heavily in favour of release, notwithstanding the rigours of Section 45.
Case law references
- Vijay Madanlal Choudhary v. Union of India (Supreme Court)
Held: Section 45 PMLA and its twin conditions are constitutionally valid.
Applied: The High Court accepted their validity but assessed satisfaction of the conditions on the facts, emphasising harmony with personal liberty. - Manish Sisodia v. Enforcement Directorate (Supreme Court)
Held: In documentary cases where investigation is complete, prolonged custody undermines Article 21.
Applied: Relied upon to hold that risk of tampering was minimal and bail was warranted. - P. Chidambaram v. Directorate of Enforcement (Supreme Court)
Held: Bail decisions must consider flight risk, influence on witnesses, and tampering.
Applied: Used to apply the triple test and find it satisfied. - Arvind Kejriwal v. Directorate of Enforcement (Supreme Court)
Held: Arrest must meet the necessity test; it is not automatic on accusation.
Applied: Supported the Court’s finding that the delayed arrest lacked justification.
SEO-friendly FAQs
1. Can bail be granted under the PMLA despite the twin conditions in Section 45?
Yes. Courts can grant bail if there are reasonable grounds to believe the accused is not guilty and is unlikely to commit an offence on bail, read in harmony with Article 21 and established bail principles.
2. Does delay in arrest matter in money laundering cases?
Yes. Unexplained delay, especially when the accused has cooperated and evidence is documentary, can weigh heavily in favour of bail and against the necessity of arrest.
3. Can conduct of relatives or co-accused be used to deny bail?
No. Courts have held that the conduct of co-accused or family members cannot automatically justify denial of bail to an accused who otherwise satisfies bail conditions.