Delhi High Court: “Liberty of an Accused is Paramount”; Grants Bail in Money Laundering Case Citing Lack of Prima Facie Evidence, Prolonged Detention Without Trial, and Article 21 Rights Over PMLA Restrictions

Court’s Decision

The Delhi High Court granted bail to the petitioners, holding that the stringent conditions under Section 45 of the Prevention of Money Laundering Act (PMLA) were satisfied. The court determined that the allegations of money laundering were not substantiated by sufficient evidence to establish a prima facie case. Highlighting the importance of liberty under Article 21 of the Constitution, the court noted that prolonged incarceration without trial was unjustified and granted bail on specific conditions.

Facts

1. Background:
   The case revolves around three petitioners accused of participating in activities linked to the Popular Front of India (PFI), a banned organization. The Directorate of Enforcement (ED) alleged that the petitioners collected funds under false pretenses, issuing bogus donation slips and using the funds for illegal activities, including organizing anti-CAA protests and riots in Delhi.
2. Details of Fundraising Allegations:
   • Parvez Ahmed: Allegedly oversaw fundraising in his capacity as President of the Delhi State Unit of PFI (2018–2020).
   • Mohd Ilyas: Allegedly managed fundraising in the trans-Yamuna area and facilitated the projection of illegitimate donations as legitimate.
   • Abdul Muqeet: Allegedly engaged in issuing falsified donation slips in his locality and collected funds under dubious circumstances.
3. ED’s Findings:
   • The ED claimed that over ₹60 crores were deposited in PFI’s accounts, of which ₹32.03 crores were cash deposits.
   • The donors’ identities were largely unverifiable, raising suspicions of illegitimacy.
4. Arrest and Trial:
   The petitioners were arrested in September 2022 under charges of money laundering. Despite their extended incarceration, the trial had yet to begin, with over 185 prosecution witnesses and voluminous evidence cited in the case.

Issues

1. **Whether the funds raised by the petitioners constituted “proceeds of crime” under the PMLA?
2. Whether the prolonged incarceration and delay in trial violated the petitioners’ fundamental rights under Article 21 of the Constitution?

Petitioners’ Arguments

1. Lack of Predicate Offence:
   The petitioners contended that the funds raised preceded the alleged criminal activities, such as the Delhi riots. Thus, no scheduled offence, as required under the PMLA, had been committed to classify the funds as proceeds of crime.
2. Violation of Liberty:
   Prolonged incarceration of over two years without a trial violated the principle of presumption of innocence and fundamental rights under Article 21 of the Constitution.
3. Absence of Evidence:
   • The petitioners argued that no evidence linked the funds directly to criminal activities.
   • They claimed to have deposited the funds with PFI’s accounts or accountants, negating any personal dominion or control over the funds.
4. Admissibility of Evidence:
   Statements made under Section 50 of the PMLA lacked corroboration and could not be solely relied upon.

Respondent’s Arguments

1. Allegations of Money Laundering:
   The ED argued that the petitioners played key roles in generating and utilizing proceeds of crime to further unlawful activities. It emphasized that the funds were concealed through bogus donations and layered to appear legitimate.
2. Nexus to Criminal Activity:
   The funds collected were allegedly used to finance terrorist activities and disrupt communal harmony, making them proceeds of crime under the PMLA.
3. Serious Nature of Allegations:
   Given the gravity of allegations, including links to terrorism and unlawful activities, granting bail would undermine the investigation.

Analysis of the Law

1. Proceeds of Crime Under PMLA:
   • The court examined the definition of proceeds of crime under Section 2(1)(u) of the PMLA. Proceeds must directly or indirectly result from a scheduled offence.
   • Referring to Vijay Madanlal Choudhary v. Union of India, the court emphasized that mere collection of funds, even for illegal purposes, does not constitute proceeds of crime unless tied to a scheduled offence.
2. Applicability of Section 3:
   The court highlighted that Section 3 of PMLA applies only when proceeds are generated after the commission of a scheduled offence. Since the fundraising preceded the alleged riots, it could not qualify as proceeds of crime under PMLA.
3. Long Incarceration and Trial Delays:
   • The court underscored the constitutional principle that “bail is the rule and jail is the exception.”
   • Citing precedents such as Manish Sisodia (II) v. Enforcement Directorate and Union of India v. K.A. Najeeb, it emphasized that prolonged detention without trial infringes Article 21 rights.

Precedent Analysis

The court analyzed key judgments, including:

1. Vijay Madanlal Choudhary v. Union of India: Clarified that proceeds of crime must result from a scheduled offence.
2. Union of India v. K.A. Najeeb: Held that statutory bail restrictions must not override constitutional rights to liberty.
3. V. Senthil Balaji v. Enforcement Directorate: Highlighted that incarceration should not become punishment without trial.

Court’s Reasoning

1. No Prima Facie Evidence:
   • The ED failed to establish that the funds collected were proceeds of a scheduled offence.
   • Fundraising activities were not directly linked to criminal acts.
2. No Dominion Over Funds:
   • The petitioners lacked dominion and control over the alleged proceeds, which were deposited in organizational accounts.
3. Long Incarceration:
   • The court noted that the petitioners had been in custody for over two years, and the trial’s conclusion was unlikely in the near future.
4. Bail and Constitutional Rights:
   The stringent conditions under Section 45 of PMLA were satisfied, and the court invoked its constitutional duty to uphold the right to liberty.

Conclusion

The High Court granted bail to the petitioners with specific conditions, emphasizing that:

1. There was no prima facie case of money laundering.
2. Prolonged detention violated Article 21 rights.
3. The accused were directed to comply with conditions such as surrendering passports, avoiding witness contact, and cooperating with the investigation.

Implications

1. Balance Between Rights and Statutory Restrictions:
   The judgment reinforces that constitutional protections under Article 21 cannot be overshadowed by statutory bail restrictions under special laws like the PMLA.
2. Judicial Safeguards Against Prolonged Detention:
   It sets a precedent for granting bail where trials are delayed, ensuring that incarceration does not amount to punishment without trial.
3. Clarification of Money Laundering Standards:
   The decision reiterates that proceeds of crime must have a clear nexus to scheduled offences, preventing misuse of PMLA provisions for arbitrary detentions.

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