The present case before the Delhi High Court arising under the Prevention of Money Laundering Act, 2002 (PMLA), highlights critical aspects of bail jurisprudence, the right to liberty, and the interplay between stringent statutory provisions and constitutional mandates.
The Enforcement Directorate (ED) filed a prosecution complaint against the applicants under the PMLA, 2002. The complaint was based on an earlier investigation conducted by the Serious Fraud Investigation Office (SFIO). The predicate offense, investigated by SFIO, resulted in charges under Section 447 of the Companies Act, 2013, alongside Sections 409, 467, 468, 471, and 120B of the Indian Penal Code (IPC). In the prosecution complaint filed by ED, the allegations are that as per the SFIO investigation report, ex-promoters of M/s Bhushan Steel Ltd. (hereafter, the BSL) had obtained a loan of Rs. 56,000 Crores from various banks and financial institutions before BSL went into insolvency and CIRP was initiated. These funds were allegedly siphoned off using a complex network of over 150 shell companies. The applicants were accused of playing an instrumental role in aiding the ex-promoters. Both applicants had been in custody with ED relying primarily on statements recorded under Section 50 of the PMLA. Section 50 of the PMLA pertains to the powers of the authorities during the course of an investigation under the Act including the power of ED to summon individuals, record statements, and collect evidence in connection with money laundering offences. The High Court was tasked with determining whether prolonged incarceration and an indefinite delay in trial constituted a violation of the applicants’ fundamental rights under Article 21 of the Constitution.
While addressing the nature of the allegations against the applicants, the court observed that while the ED accused them of critical involvement in the fraudulent scheme, no money had been shown to flow into their accounts, nor were they identified as direct beneficiaries. For one of the appellants, the ED relied on unsigned draft Letter of Credit (LC) templates seized from his residence as evidence. The Court noted that these documents were mere templates and unsigned, making their evidentiary value questionable. Further, the allegations regarding Zinc ingot sales were countered by the fact that BSL had already settled the matter with the Excise Department by paying a penalty, thus closing the issue. For another appellant, the allegations pertained to his role as a dummy director in several shell companies. However, the Court noted that his direct involvement or knowledge of financial transactions was not substantiated. The statements implicating him were primarily recorded under Section 50 of the PMLA, which, while admissible, would need rigorous scrutiny during trial.
It was further noted that Section 45 of the PMLA imposes strict conditions for bail and the Court must have reasonable grounds to believe that the accused is not guilty and he is not likely to commit an offense while on bail. The Court, citing the landmark case of Vijay Madanlal Choudhary v. Union of India (2022 SCC OnLine SC 929), reiterated that these twin conditions do not impose an absolute bar on bail and the discretion to grant bail lies with the court, especially when constitutional rights under Article 21 are at stake. The Court observed that certain circumstances like prolonged pre-trial incarceration and the fact that the trial’s conclusion is unforeseeable would render Section 45 unduly restrictive. In this context, the Court relied heavily on recent Supreme Court judgments including Manish Sisodia v. Directorate of Enforcement (2024 SCC OnLine SC 1920), wherein the Supreme Court underscored that prolonged incarceration before trial, particularly where the accused’s guilt is yet to be established, violates Article 21. Similarly, in Prem Prakash v. Union of India (2024 SCC OnLine SC 2270), the Court held that statutory bars under Section 45 must align with constitutional guarantees, emphasizing that detention should not become a substitute for punishment. The Court also referred to V. Senthil Balaji v. ED (2024 INSC 739), where the Supreme Court held that when trials are unlikely to conclude within a reasonable timeframe, courts must ensure that constitutional protections prevail over stringent bail conditions. Hence, the Delhi High Court placed significant emphasis on the applicants’ right to a speedy trial which is a cornerstone of Article 21. It noted that the investigation in the present case began in 2019, with the ED filing charges against 156 accused persons and listing 82 witnesses. Given the voluminous evidence (over 2.5 lakh pages), the Court found no realistic possibility of the trial concluding anytime soon. Citing Union of India v. K.A. Najeeb (2021) 3 SCC 713, the Court emphasized that courts cannot allow statutory provisions like Section 45 of PMLA to subjugate constitutional rights indefinitely. The court further noted the Supreme Court’s instance wherein it has held time and again that “bail is the rule, and jail is the exception,” and pre-trial detention must not become a punishment. Moreover, in the present case, the primary accused and other key officials had already been granted bail. Given the applicants’ comparatively minor roles and lack of direct financial gain, their continued detention could not be justified on grounds of parity. In light of the foregoing analysis, the Delhi High Court granted regular bail to the applicants. The Court reasoned that the allegations, though serious, were yet to be established, and prolonged incarceration without trial infringed upon the applicants’ constitutional rights under Article 21. Also, the twin conditions under Section 45 were satisfied, as the applicants posed no flight risk and had cooperated with the investigation.