2025 (6) TMI 20 - HC - Money Laundering

Money Lauhndering - seeking grant of bail - case of applicant is that the applicant is in custody since 30.04.2024 i.e. about one year therefore he should be released on bail on account of long incarceration period - applicability of Section 45 of the PMLA - HELD THAT - Since the offence pertains to money laundering apart from the usual considerations it would have to be seen whether the twin conditions stipulated in Section 45 of the PMLA are met. A plain reading of Section 45 of the PMLA shows that the respondent/ED must be given an opportunity to oppose the application and the Court should have reasonable grounds for believing that he is not guilty of such offence and that he is not likely to commit any offence while on bail. The twin conditions though restricts the right of accused to be released on bail but do not impose absolute restraint and the discretion vests in the Court. Section 45 of the PMLA while imposing additional conditions to be met for granting bail does not create an absolute prohibition on the grant of bail. When there is no possibility of trial being concluded in a reasonable time and the accused is incarcerated for a long time depending on the nature of allegations the conditions under Section 45 of the PMLA would have to give way to the constitutional mandate of Article 21. What is a reasonable period for completion of trial would have to be seen in light of the minimum and maximum sentences provided for the offence whether there are any stringent conditions which have been provided etc. It would also have to be seen whether the delay in trial is attributable to the accused. In the present case it is pertinent to mention here that in Cr.R. No. 1326 of 2024 vide order dated 29.01.2025 this Court has set aside the order of taking cognizance therefore detention from the date of earlier cognizance ie. on 5.10.2024 to the date of taking re-cognizance by the Special Court vide order dated 22.03.2025 is not as per provisions contained under Section 309(2) Cr.P.C. The applicant is in custody since 30.04.2024 i.e. about one year and the maximum punishment prescribed is 7 years as of today and the position is that though the complaint has been filed on 21.08.2023 the trial has not yet commenced and even hearing on charges has not taken place. The Apex Court in the matter of Arun Pati Tripathi Vs. Directorate of Enforcement 2025 (2) TMI 852 - SC ORDER has observed that the custody of the appellant cannot be continued. After considering the entire facts and circumstances of the case particularly the long incarceration of the applicant in custody ie. about one year charge sheet has already been filed the maximum punishment prescribed is 7 years as of today and further that this Court vide order dated 29.01.2025 in Cr.Rev. No. 1326 of 2024 has set aside the order taking cognizance ie. 5.10.2024 to the date of taking re- cogniance by the Special Court vide order dated 22.03.2025 which is not as per provisions contained under Section 309(2) Cr.P.C. and applying the principle laid down by the Apex Court in the matter of V. Senthil Balaji 2024 (9) TMI 1497 - SUPREME COURT as also Arun Pati Tripathi 2025 (2) TMI 852 - SC ORDER this court is of the view that the applicant deserves to be granted regular bail. The concerned trial court shall enlarge the applicant on bail subject to stringent terms and conditions as may be fixed after hearing the ED/respondent. The bail application is allowed.

Summary

The core legal issues considered by the Court in this matter include:

1. Whether the applicant is entitled to regular bail under Section 483 of the Bhartiya Nagrik Suraksha Sanhita (BNSS) 2023 read with Section 45 of the Prevention of Money Laundering Act (PMLA) 2002 and Section 346(2) BNSS, given the quashing of the earlier cognizance order and the status of prosecution.

2. The legal effect of the quashing of the cognizance order dated 5.10.2024 on the detention and custody of the applicant, including the applicability of Sections 167(2) and 309(2) of the Criminal Procedure Code (Cr.P.C.).

3. The interpretation and application of the "twin conditions" under Section 45 of the PMLA for grant of bail in money laundering cases.

4. The impact of prolonged pre-trial detention on the applicant's fundamental rights under Article 21 of the Constitution and the balancing of such rights against the interests of investigation and prosecution in money laundering offences.

5. The validity and effect of prosecution sanction under Section 197 Cr.P.C. in continuing the prosecution and the scope of judicial review of such sanction at the bail stage.

6. The relevance and application of precedents relating to bail in money laundering and related offences, including the cases of Arun Pati Tripathi, V. Senthil Balaji, Anil Tuteja, and others.

Issue-wise Detailed Analysis:

1. Entitlement to Bail Following Quashing of Cognizance Order

The applicant's counsel argued that the quashing of the cognizance order dated 5.10.2024 by this Court on 29.01.2025 effectively meant that no inquiry, trial, or prosecution was pending against the applicant from that date. Consequently, detention post that date was unauthorized under Sections 167(2) and 309(2) Cr.P.C., which regulate custody after cognizance and trial commencement. The counsel relied on the Apex Court's decision in Arun Pati Tripathi, where bail was granted after the High Court set aside the cognizance order, emphasizing that custody cannot be continued without valid cognizance.

The Court noted that the quashing of cognizance order created a legal vacuum regarding custody between the date of quashing and the date of re-cognizance (22.03.2025). Detention during this period was not authorized under Section 309(2) Cr.P.C. The Court held that continued detention without valid cognizance was impermissible, reinforcing that procedural safeguards must be strictly followed. However, the Court also observed that the prosecution complaint remained active and that re-cognizance had been taken subsequently, restoring the prosecution's legal footing.

2. Application of Section 45 of the PMLA and Twin Conditions for Bail

Section 45 of the PMLA imposes twin conditions for bail: the Court must have reasonable grounds to believe that the accused is not guilty of the offence and is not likely to commit any offence while on bail. The Enforcement Directorate (ED) contended that the applicant failed these conditions due to his active role in money laundering and the risk of influencing witnesses.

The Court acknowledged the restrictive nature of Section 45 but emphasized that it does not create an absolute bar on bail. The discretion to grant bail remains with the Court, which must also consider constitutional protections under Article 21. The Court highlighted that bail is the rule and jail is the exception, underscoring the primacy of liberty and the right to a speedy trial.

3. Prolonged Pre-trial Detention and Article 21 Rights

The applicant had been in custody since 30.04.2024, approximately one year, while the maximum punishment prescribed was seven years. Trial had not commenced, and charges had not been framed. The Court referred to precedents emphasizing that indefinite pre-trial detention infringes the fundamental right to liberty under Article 21 and effectively amounts to punishment without trial.

Drawing on the Apex Court's judgment in V. Senthil Balaji and other cases, the Court held that where trial delays are not attributable to the accused and no imminent trial date exists, prolonged detention under Section 45 PMLA cannot be sustained as a tool for incarceration. The Court stressed that the constitutional mandate must prevail over statutory restrictions in such circumstances.

4. Validity and Judicial Review of Prosecution Sanction

The prosecution sanction under Section 197 Cr.P.C. is a prerequisite for proceeding against certain public officials. The ED submitted that sanction was granted on 05.02.2025, validating the continuation of prosecution and cognizance. The Court relied on authoritative precedents holding that the validity of prosecution sanction is to be examined during trial and not at the bail stage, and that irregularities or delays in sanction do not vitiate prosecution unless they cause failure of justice.

The Court rejected the applicant's contention that absence or quashing of sanction invalidated prosecution, emphasizing that challenges to sanction can be raised but should not be used to stall proceedings. The Court cited judgments underscoring that quashing is impermissible solely on the ground of alleged invalidity of sanction without trial adjudication.

5. Role of the Applicant and Risk of Interference with Investigation

The ED argued that the applicant had a significant role in extortion and money laundering activities, assisting a co-accused in collecting illicit amounts. The ED expressed concern that bail could enable the applicant to influence witnesses and hamper investigation. The Court noted the seriousness of allegations but balanced these against the prolonged pre-trial detention and lack of trial progress.

The Court observed that stringent bail conditions, including surrender of passport and undertaking to cooperate with trial, can mitigate risks of interference. The Court also noted that the applicant was neither absconding nor a flight risk.

6. Comparative Precedents and Application of Parity Principle

The applicant relied on the Arun Pati Tripathi case where bail was granted following quashing of cognizance. The ED countered that the factual matrix differed since in the present case re-cognizance had been taken and prosecution sanction granted. The Court acknowledged that parity is not an absolute principle and requires focus on the accused's role and case facts.

The Court referred to other relevant judgments, including Anil Tuteja and V. Senthil Balaji, which emphasized that prolonged detention without trial is impermissible and bail should be granted where trial delay is not attributable to the accused. These precedents supported the Court's ultimate decision to grant bail subject to conditions.

Conclusions on Issues:

1. The quashing of the earlier cognizance order rendered detention between the quashing date and re-cognizance unauthorized under Section 309(2) Cr.P.C., invalidating custody for that period.

2. Although Section 45 of the PMLA imposes restrictive conditions for bail, it does not create an absolute bar. The Court must exercise discretion balancing statutory provisions with constitutional rights.

3. Prolonged pre-trial detention without trial commencement, especially when delay is not attributable to the accused, violates the right to liberty under Article 21 and justifies bail.

4. The prosecution sanction granted post-quashing validates continuation of prosecution. Challenges to sanction are to be addressed during trial and do not automatically invalidate bail applications.

5. The risk of witness tampering and interference can be addressed by imposing stringent bail conditions rather than denying bail outright.

6. Precedents support bail where trial delays are unreasonable and custody is prolonged, even in serious offences like money laundering, provided conditions to safeguard investigation are imposed.

Significant Holdings:

"The twin conditions though restrict the right of accused to be released on bail but do not impose absolute restraint and the discretion vests in the Court."

"Bail is the rule and jail is the exception. This principle is nothing but a crystallization of the constitutional mandate enshrined in Article 21, which says that no person shall be deprived of his life or personal liberty except according to the procedure established by law."

"Where there are multiple accused persons and the trial is not expected to end anytime in the near future and the delay is not attributable to the accused, keeping the accused in custody by using Section 45 PMLA as a tool for incarceration or as a shackle is not permissible."

"The validity of the prosecution sanction is to be decided by the trial court during trial and a mere delay or irregularity in sanction does not vitiate the prosecution."

"Detention from the date of earlier cognizance to the date of taking re-cognizance by the Special Court which is not as per provisions contained under Section 309(2) Cr.P.C. is not authorized."

The Court ultimately granted regular bail to the applicant subject to stringent conditions including surrender of passport, undertaking to cooperate and attend trial punctually, and provision for cancellation of bail if conditions are breached or cooperation is lacking.