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In a series of decisions, the Supreme Court has highlighted the rights of people accused of money laundering, even in the face of stringent provisions on arrest and bail under the Prevention of Money Laundering Act, 2002 (PMLA).
In Vijay Madanlal Choudhary v. Union of India (2022), a three-judge bench led by Justice A M Khanwilkar (retired) upheld all the challenged PMLA provisions, including the restrictive bail conditions and the wide powers of investigation and arrest granted to the Enforcement Directorate (ED). These powers have been recently reined in through smaller interventions.
Section 19 of the PMLA gives the ED the power of arrest if the material it possesses gives it reason to believe an individual is guilty of money laundering. The accused must be informed of the grounds of arrest “as soon as may be”. In Vijay Madanlal, the court held that the ED is not bound to supply the accused with a copy of the Enforcement Case Information Report (similar to an FIR), and is only bound to inform them of the grounds for arrest.
The SC detailed the issue in Pankaj Bansal v Union of India (2023). It found that the grounds were informed orally in some cases and in writing in others. The court said an accused has a fundamental right to be informed of the grounds of arrest under Article 22 of the Constitution of India. Written grounds of arrest must be given “as a matter of course and without exception”, it held. Without this, the arrest would be illegal and invalid.
Section 436A of the Code of Criminal Procedure, 1973, states that if a person has been detained for up to half the maximum period of imprisonment for that offence while the trial or investigation is underway, they shall be released on bail. In Vijay Madanlal, the bench held that this would apply to PMLA as well.
On May 16, the court affirmed this in Ajay Ajit Peter Kerkar v Directorate of Enforcement. Notably, Section 436A has since been replaced by Section 479 of the Bharatiya Nagarik Suraksha Sanhita, likely impacting PMLA cases. For example, a new explanation in the section states that if more than one offence or multiple cases are pending against someone — common in money laundering cases — the section on bail will not apply.
On July 12, the apex court granted interim bail to Delhi Chief Minister Arvind Kejriwal in connection with the ED’s complaint in the Delhi excise policy case. Kejriwal argued that his arrest under Section 19 of the PMLA was illegal as there was no “necessity” to arrest him. He claimed that the material forming the basis of his arrest was available to the ED in July 2023, while the arrest only happened in March 2024.
As Section 19(1) provides that the ED must have “reason to believe” that the accused is “guilty”, the court stated that these reasons must meet a high threshold and effectively be in the form of “evidence admissible in court”.
The court also referred the issue of whether “need and necessity to arrest” is a valid ground for challenging an arrest under the PMLA to a five-judge bench.
On August 9, a bench comprising Justices B R Gavai and K V Viswanathan granted bail to former Delhi Deputy CM Manish Sisodia in the Delhi excise policy case.
Section 45 of the PMLA provides stringent “twin conditions” for bail, requiring an accused to prove that he has not committed an offence under the PMLA (reversing the standard burden of proof in criminal cases) and is not likely to commit any offence while on bail. However, the bench held that these conditions can be “relaxed” if the accused has undergone a long period of incarceration. Sisodia was incarcerated for around 17 months without trial commencing.
The court granted bail to BRS leader K Kavitha on August 27 in the excise policy case. It also held that Kavitha would benefit from the exception in Section 45, which states that a woman “may be released on bail, if the Special Court so directs”.
The bench rejected the Delhi HC’s reasoning for denying bail to Kavitha in July because she was “well educated” and could not be considered a “vulnerable woman” under the exception. It held the judge “totally misdirected herself” while denying the benefit.
Section 50 of the PMLA allows the ED to summon “any person” and require them to make statements during an investigation. In Vijay Madanlal, the court held that this did not violate the right against self-incrimination under Article 20(3) of the Constitution.
Under Section 25 of the Evidence Act, 1872 (now Section 23 of the Bharatiya Sakshya Adhiniyam, 2023), confessions made to police officers are not admissible as evidence during trial.
In Prem Prakash v Union of India (2024), the bench comprising Justices Gavai and Viswanathan dealt with a case where an accused admitted guilt while in judicial custody. Justice Viswanathan reasoned that a person in custody is “not a person who can be considered as one operating with a free mind”. He also relied on past SC judgments, which held that evidence through “compelled testimony”, obtained through coercive methods, would violate the right against self-incrimination.
