Introduction
The Enforcement Directorate’s power of arrest under the Prevention of Money Laundering Act, 2002, and the stringent bail standard attached to PMLA offences, constitute what is arguably the sharpest edge of India’s anti-money laundering enforcement apparatus. For nearly two decades, the twin conditions for bail under Section 45 of PMLA operated as a near-absolute bar against release of accused persons pending trial, making PMLA arrests functionally equivalent to a sentence before conviction. The Supreme Court’s intervention in a series of landmark cases between 2019 and 2024 has attempted to calibrate this framework, yet the fundamental tension between the state’s interest in preventing economic crime and the individual’s constitutionally guaranteed right to personal liberty remains unresolved.
This article examines the statutory architecture of arrest and bail under PMLA, traces the evolution of judicial doctrine through key decisions including Vijay Madanlal Chourasiya v. Union of India (2022), Pankaj Bansal v. Union of India (2023), and the Manish Sisodia proceedings, and evaluates whether the current legal position adequately protects the rights of the accused without unduly compromising the state’s legitimate enforcement interests.
Legal Framework
Section 19 of PMLA confers upon designated officers of the Enforcement Directorate the power to arrest any person they have reason to believe is guilty of an offence under PMLA, provided that such officer records reasons in writing before making the arrest. The provision is facially similar to the arrest power under Section 41 of the Code of Criminal Procedure, 1973 (now the Bharatiya Nagarik Suraksha Sanhita, 2023), but with critical differences. The ED officer must communicate the grounds of arrest to the arrested person as soon as may be; the arrested person must be produced before a competent court within 24 hours as required by Article 22(2) of the Constitution; and the individual arrested under PMLA is tried under a special procedure before the designated Special Court.
The bail provision under Section 45 imposes the twin conditions: a court shall not grant bail unless it is satisfied, after giving the public prosecutor an opportunity to oppose the application, firstly that there are reasonable grounds for believing that the accused is not guilty of the offence, and secondly that the accused is not likely to commit any offence while on bail. These conditions apply in addition to any other conditions prescribed under the CrPC. The burden effectively inverts the ordinary presumption of innocence at the pre-trial stage, requiring the accused to demonstrate a prima facie case of innocence rather than merely the absence of flight risk or likelihood of tampering with evidence.
Section 167 of the CrPC, applicable to PMLA proceedings through Section 65, provides that where the investigation is not completed within 60 days for offences carrying imprisonment up to 10 years, or 90 days for offences carrying longer sentences, the accused shall be entitled to bail as a matter of right (“default bail” or “indefeasible bail”) unless the investigating agency files a chargesheet within the said period. For PMLA, where the maximum sentence is rigorous imprisonment up to 7 years (or up to 10 years in cases involving narcotics-linked offences), the 60-day period applies.
Judicial Developments
The constitutionality of the Section 45 twin conditions came under sustained challenge following their re-introduction after the Supreme Court struck down the original version in Nikesh Tarachand Shah v. Union of India (2017). Parliament responded by re-enacting the twin conditions through the Finance Act, 2018, ostensibly correcting the constitutional infirmity identified by the Court.
The constitutional validity of the re-enacted twin conditions, along with a battery of challenges to PMLA’s procedural architecture, was finally addressed by a three-judge bench of the Supreme Court in Vijay Madanlal Chourasiya v. Union of India (2022). The Court upheld virtually all contested provisions. On Section 45, the bench held that the twin conditions are a reasonable classification under Article 14, given the gravity of money laundering offences and their transnational dimension. The Court reasoned that the legislature’s choice to impose stringent bail conditions for scheduled economic offences is a legitimate policy decision rooted in the nature of the harm caused, and that this does not amount to a violation of Article 21 so long as the judicial mind is genuinely applied to the conditions at the time of bail consideration.
The P. Chidambaram proceedings in 2019 and 2020, arising from the INX Media case, offered the Supreme Court an early opportunity to articulate the relationship between PMLA’s bail standard and the right to liberty. The Supreme Court, in Chidambaram v. CBI (2020), observed that in cases of economic offences of grave magnitude, the Court must be guided by considerations broader than those applicable to ordinary offences. The gravity of the alleged offence, its impact on public finances, and the systemic consequences of widespread money laundering were cited as factors justifying a cautious approach to bail. Notably, the Court also observed that anticipatory bail under Section 438 CrPC is not available in PMLA cases by virtue of Section 45’s override, a position later reiterated in Vijay Madanlal Chourasiya.
The most significant doctrinal shift since Vijay Madanlal Chourasiya came through the Supreme Court’s ruling in Pankaj Bansal v. Union of India (2023). The two-judge bench held that the mere communication of grounds of arrest orally is insufficient; the ED must furnish a written copy of the grounds of arrest to the accused at the time of arrest itself. The Court explicitly overruled the earlier position that oral communication of grounds was constitutionally adequate. The Pankaj Bansal holding has practical importance: it creates an enforceable right to information at the moment of deprivation of liberty, and an arrest made without furnishing written grounds is liable to be held illegal, with consequential relief including bail.
The Manish Sisodia bail proceedings before the Supreme Court in 2023 and 2024 introduced another dimension: the right to bail arising from inordinate trial delay. In 2024, the Supreme Court granted bail to Sisodia, observing that the right to a speedy trial is a fundamental right under Article 21 and that prolonged incarceration pending trial, in circumstances where the trial has not even commenced after over a year of custody, cannot be sustained merely because the twin conditions of Section 45 were not satisfied. The Court articulated a proportionality analysis: even where Section 45’s conditions are not met, liberty cannot be denied indefinitely as a consequence of systemic trial delay.
The Arvind Kejriwal bail proceedings (2024) similarly resulted in the Supreme Court granting interim bail during the Lok Sabha election period, with observations that arrest by ED at a time closely preceding elections, without demonstrated urgency, raises concerns about the proportionate exercise of power.
Contemporary Issues and Analysis
The most contested structural question in PMLA’s bail jurisprudence is whether the twin conditions effectively create preventive detention under the guise of a criminal statute. Unlike a formal preventive detention law under Article 22(4) of the Constitution, which requires an Advisory Board review within a specified period, PMLA detention can continue for months or years pending trial, with the twin conditions serving as the operative bar to release. The Supreme Court in Vijay Madanlal Chourasiya acknowledged this concern but concluded that judicial oversight through the bail application process is constitutionally adequate.
The 60-day default bail right under Section 167 presents its own complexity. Courts have held, including in the context of PMLA, that once a chargesheet is filed within 60 days, the default bail right is extinguished even if the chargesheet is incomplete, so long as it is filed before the period expires. The ED routinely files what practitioners describe as “placeholder chargesheets,” containing bare minimum material sufficient to arrest the default bail right, with supplementary complaints filed later. The Supreme Court has not definitively ruled this practice impermissible.
The scope of judicial review of arrest under Section 19 also remains contested. The Supreme Court in Vijay Madanlal Chourasiya held that the ED officer’s “reason to believe” is not justiciable at the stage of arrest, only the procedural requirement of recording reasons in writing being reviewable. This immunises the substantive basis of arrest from immediate judicial scrutiny, and is a significant departure from the more intensive review available for arrests under ordinary penal statutes.
Comparative and International Perspective
The European Convention on Human Rights, Article 5, guarantees the right to liberty and security, permitting detention pending trial only where it is reasonably considered necessary to prevent flight, prevent reoffending, or prevent obstruction of justice. The European Court of Human Rights has consistently held that financial hardship from pre-trial detention cannot substitute for a concrete risk-based assessment of the necessity of continued detention. India’s PMLA bail standard, particularly the twin conditions requiring affirmative proof of innocence, is substantially more restrictive than the ECHR framework.
The United Kingdom’s Proceeds of Crime Act 2002 does not contain a specific bail restriction for money laundering offences comparable to Section 45; bail decisions in the UK are governed by the Bail Act 1976, which requires the prosecution to demonstrate concrete reasons for refusing bail. The FATF Mutual Evaluation reports consistently distinguish between the criminalisation of money laundering and the appropriateness of pre-trial liberty restrictions, endorsing targeted pre-trial detention only where evidence-specific grounds are established.
Practical and Policy Implications
The practical consequence of the twin conditions, compounded by the overloaded Special Court docket, is that accused persons under PMLA routinely spend one to three years in pre-trial custody. Where the accused are ultimately acquitted or the predicate offence is not proved, this incarceration constitutes an irreversible loss of liberty without corresponding accountability for the state. The Supreme Court’s Sisodia ruling introduces a corrective through Article 21, but it requires individual litigation rather than systemic reform.
For practitioners, the Pankaj Bansal ruling creates an important ground for challenging arrests. Failure to furnish written grounds at the time of arrest renders the arrest illegal, which in turn strengthens the accused’s bail application regardless of the twin conditions, since an illegal arrest is itself a ground for release under Article 22(2) read with Section 57 CrPC.
Suggestions and Reforms
Legislative reform of Section 45 is necessary to bring India’s bail standard into conformity with constitutional proportionality principles. The twin conditions should be reconceived to require the prosecution to demonstrate, through cogent material, not merely the existence of a scheduled offence but a specific link between the accused and the proceeds of crime, combined with a concrete risk assessment of flight, reoffending, or evidence tampering. A judicial time limit for completing trial in PMLA cases, analogous to the 60-day period for completing investigation, would prevent indefinite incarceration as a de facto sentence.
The PMLA should also incorporate an automatic review mechanism for continued detention, requiring the Special Court to conduct periodic reviews of custody, with the burden on the prosecution to justify continued detention at each stage. This would align India’s framework with ECHR Article 5(4) standards without abandoning the state’s legitimate interest in preventing money laundering.
Conclusion
The evolution of PMLA arrest and bail jurisprudence from the pre-2017 era through Vijay Madanlal Chourasiya to Pankaj Bansal and the Sisodia rulings reflects an ongoing judicial effort to calibrate the instrument of preventive incarceration against the demands of constitutionalism. The Supreme Court has preserved the twin conditions but introduced procedural safeguards, acknowledged the Article 21 dimension of prolonged trial delay, and created enforceable rights at the moment of arrest. What remains is structural: a bail standard that continues to operate presumptively against the accused, combined with a trial system unable to deliver timely adjudication, produces a detention regime that is constitutionally precarious even if formally defensible. Legislative reform, not merely judicial evolution, is the appropriate remedy.
