How SC rulings are redefining arrest and bail procedures in PMLA cases

The top court has upheld the stringent provisions of the Prevention of Money Laundering Act (PMLA) while emphasising the need for careful judicial scrutiny to protect the rights of those accused

In a series of landmark rulings, the Supreme Court of India has highlighted the rights of individuals accused of money laundering, offering a nuanced interpretation of the stringent provisions under the Prevention of Money Laundering Act, 2002 (PMLA), particularly regarding arrest and bail procedures, The Indian Express reported.

In the seminal case of Vijay Madanlal Choudhary v. Union of India (2022), a three-judge bench led by Justice A M Khanwilkar (retired) upheld the constitutionality of the PMLA’s stringent provisions. The court affirmed the wide-ranging powers granted to the Enforcement Directorate (ED), including restrictive bail conditions and the authority to investigate and arrest. However, recent decisions have tempered these powers through careful judicial scrutiny.

 

On the grounds of arrest

Section 19 of the PMLA grants the ED the authority to arrest individuals if it has reason to believe they are guilty of money laundering. The accused must be informed of the grounds for arrest “as soon as may be.” While the court in Vijay Madanlal upheld the ED's discretion not to furnish a copy of the Enforcement Case Information Report (akin to an FIR), it mandated that the grounds for arrest be communicated.

This position was further clarified in Pankaj Bansal v. Union of India (2023), where the court highlighted the fundamental right of the accused under Article 20 of the Constitution to be informed of the grounds for their arrest. The Supreme Court ruled that written grounds of arrest must be provided “as a matter of course and without exception,” declaring any arrest without such communication illegal and invalid.

On bail for undertrials

The court extended the application of Section 436A of the Code of Criminal Procedure, 1973, to the PMLA, affirming that individuals detained for up to half the maximum period of imprisonment for the alleged offence must be released on bail. This principle was upheld in the case of Ajay Ajit Peter Kerkar v. Directorate of Enforcement on May 16, 2024. However, with the replacement of Section 436A by Section 479 of the Bharatiya Nagarik Suraksha Sanhita (BNSS), the impact on PMLA cases remains to be seen, especially given the new provision that exempts multiple pending cases from bail consideration.

On the ‘need and necessity to arrest’

In a significant move on July 12, the Supreme Court granted interim bail to Delhi Chief Minister Arvind Kejriwal in connection with the ED’s investigation into the Delhi excise policy case. Kejriwal challenged his arrest under Section 19 of the PMLA, arguing that there was no “necessity” for his detention, as the ED had possessed the material basis for his arrest months before the actual arrest occurred. The court emphasised that the ED's “reason to believe” that the accused is guilty must be backed by admissible evidence, setting a high threshold for justifying arrests.

The issue of whether the “need and necessity to arrest” constitutes a valid ground for challenging arrests under the PMLA has been referred to a five-judge bench for further examination.

On relaxing the ‘twin conditions’ for bail

On August 9, the Supreme Court granted bail to former Delhi Deputy Chief Minister Manish Sisodia in the Delhi excise policy case. The bench, comprising Justices B R Gavai and K V Viswanathan, addressed the stringent “twin conditions” under Section 45 of the PMLA, which places the burden on the accused to prove their innocence and that they are unlikely to reoffend. The court ruled that these conditions could be relaxed in cases where the accused has endured prolonged incarceration without trial, as was the case with Sisodia, who had been detained for 17 months.

 

On bail exceptions for women

In another notable decision on August 27, the Supreme Court granted bail to BRS leader K Kavitha in the excise policy case. The court invoked the exception under Section 45 of the PMLA, which allows for the release of women on bail if the Special Court so directs. The bench criticised the Delhi High Court’s earlier refusal to grant Kavitha bail based on her educational background, holding that the judge had “totally misdirected herself” by denying the exception meant to protect women.

On confessions to ED officers

The Supreme Court revisited the issue of self-incrimination in Prem Prakash v. Union of India (2024). Section 50 of the PMLA empowers the ED to summon individuals for statements during investigations, which the court in Vijay Madanlal ruled does not violate Article 20(3) of the Constitution. However, the court also reiterated that confessions made to police officers are inadmissible as evidence under Section 25 of the Evidence Act, 1872 (now Section 23 of the Bharatiya Sakshya Adhiniyam, 2023).

Justice Viswanathan, addressing a case where an accused confessed while in judicial custody, stressed that such confessions are not voluntary and therefore inadmissible, aligning with the constitutional protection against self-incrimination.