Prolonged incarceration and bleak trial prospects justify bail notwithstanding PMLA’s stringent twin conditions.

The Serious Fraud Investigation Office filed Company Case No. 4 of 2024 against the petitioner and others under various provisions of the Companies Acts, including Section 447 of the Companies Act, 2013; a charge-sheet was submitted and the petitioner was not arrested in that case.

Treating the alleged Section 447 offence as a scheduled/predicate offence, the Enforcement Directorate registered ECIR No. KLZO-I/23/24 on 18 November 2024.

Following a search of the petitioner’s residence on 26 August 2025, during which his statement was recorded under Section 17 of the Prevention of Money Laundering Act, 2002 (“PMLA”), he was arrested at 10:30 p.m. on the same day.

The petitioner’s statements were recorded under Section 50 of the PMLA on five occasions between 28 August and 26 September 2025. The Enforcement Directorate filed a prosecution complaint against the petitioner and 25 others on 23 October 2025, after completing investigation.

The petitioner remained in custody from 26 August 2025 and sought bail.

The Enforcement Directorate opposed bail, alleging that the petitioner, as Managing Director of Amrit Feeds Limited, had diverted bank loans through shell companies and generated proceeds of crime.

Whether the petitioner’s arrest complied with the mandatory safeguards under Section 19 of the PMLA, including the requirement of prior material in the officer’s possession, recorded reasons to believe, communication of the grounds of arrest, and forwarding of the arrest-related material to the adjudicating authority.

Whether the petitioner was entitled to bail under Section 45 of the PMLA notwithstanding the alleged economic offence and the statutory twin conditions.

Whether prolonged pre-trial incarceration, completion of investigation, absence of further custodial interrogation, and the uncertain commencement of trial justified release on bail under Article 21 of the Constitution.

The Court applied Section 19 of the PMLA, which requires the authorised officer, before arrest, to possess relevant material, record in writing reasons to believe that the person is guilty of an offence punishable under the PMLA, and inform the arrested person of the grounds of arrest as soon as may be.

It distinguished “reasons to believe,” which are generic to the arrest power, from “grounds of arrest,” which must disclose the basic personal facts enabling the accused to challenge remand and seek bail.

Relying on Vijay Madanlal Choudhary v. Union of India, Pankaj Bansal v. Union of India, Prabir Purkayastha v. State (NCT of Delhi), Arvind Kejriwal v. Directorate of Enforcement, and Radhika Agarwal v. Union of India, the Court held that judicial review at the arrest stage is limited to examining statutory and constitutional compliance and does not extend to assessing the sufficiency or adequacy of the material underlying the officer’s subjective satisfaction.

Section 45 of the PMLA imposes twin conditions for bail, while Section 24 places a statutory burden upon the accused once the foundational facts of a scheduled offence, proceeds of crime, and involvement in money-laundering are established.

The Court also applied the principle that the PMLA operates only where proceeds of crime, as defined under Section 2(1)(u), exist and are connected with criminal activity relating to a scheduled offence.

Finally, it applied Article 21’s protection against indefinite and punitive pre-trial detention, recognising that prolonged incarceration and delayed trial may justify bail even in serious economic offences.

The Court held that the petitioner had been supplied with the arrest memo, grounds of arrest, and reasons to believe at the time of arrest, and that the grounds of arrest were effectively communicated to his relatives, thereby satisfying the constitutional requirement under Article 22(1).

It rejected the contention that the Enforcement Directorate lacked prior material merely because the search-related recoveries and Section 50 statements occurred after arrest.

The ECIR had been registered approximately nine months earlier, and the Court held that independent investigation during that period could have generated material which, together with the material recovered during the search, enabled the authorised officer to form and record the requisite belief.

The adequacy of that material was not open to judicial review at the bail stage.

Although the Court recognised the applicability of Section 45 and the seriousness of the alleged diversion of bank funds, it noted that the petitioner had been in custody for more than a year, investigation was complete, no interrogation had occurred after 26 September 2025, and the prosecution relied upon approximately 157 documents running into nearly 19,000 pages.

The predicate case was still at the stage of supply of documents under Section 207 of the Code of Criminal Procedure, while proceedings in the PMLA case had been stayed pursuant to an interim order in a connected revision.

Since the case was substantially documentary and trial was unlikely to commence soon, continued detention risked becoming punitive rather than preventive.

The Court therefore treated Article 21 and the right to a reasonably speedy trial as overriding considerations warranting bail, while leaving the merits of the prosecution open.

It further observed that the petitioner’s post-arrest Section 50 statements could not be treated as substantive evidence against him and could, at most, corroborate other material.

Nevertheless, considering the petitioner’s prolonged incarceration, completion of investigation, absence of further custodial interrogation, voluminous documentary evidence, delayed trial, and the constitutional guarantee under Article 21, the Court allowed the bail application.

The petitioner was directed to be released on furnishing a bond of ₹10,00,000 with adequate sureties, half of whom were to be local, subject to surrender of his passport, territorial restrictions, disclosure of his residential address and mobile number, regular appearance before the trial court, non-tampering with evidence, non-intimidation of witnesses, and abstention from criminal activity or contact with witnesses.

The order clarified that breach of the conditions could result in cancellation of bail and that the observations were confined to the bail application and would not affect the merits of the trial.