While granting bail on grounds of procedural non-compliance and lack of substantive evidence, Justice Prakash Chandra Gupta of the Madhya Pradesh High Court critically noted that the applicant’s arrest violated Section 19 of PMLA and the twin conditions under Section 45 of PMLA, which were not satisfied. 

‘’The arrest should be rational, fair, and as per law and shall not be merely based upon guilt of the accused established from inadmissible evidence,’’ stated the court. This was in the course of hearing a bail application filed under Section 439 CrPC (Section 438 of the Bharatiya Nagarik Suraksha, 2023) and Section 45 of the Prevention of Money Laundering Act, 2002 (PMLA). 

Recounting facts of the present case, an F.I.R. was registered against the applicant and others on 16.06.2023, booked under Sections 417, 420, and 120-B of the Indian Penal Code, 1860, for offences allegedly committed by them. The case against the accused was that he fraudulently obtained import authorisations for poppy seeds through benami entities, violating guidelines of the Department of Revenue, Ministry of Finance. It was the Enforcement Directorate’s (ED) case that an amount of Rs 141.8 crores was the proceeds of a crime linked to money laundering under Sections 3 and 4 of the PMLA. The applicant was arrested on 3.10.2024; however, neither was he summoned nor were his statements recorded before his arrest, as admitted by the Enforcement Directorate.

The applicant submitted that failure to record written reasons for his arrest primarily constituted a violation of Section 19 of PMLA. It was also his submission that the ED primarily relied on statements of co-accused, which is inadmissible as substantive evidence. The applicant also argued that no material evidence or records were procured from the licensing authority to substantiate allegations of fraud. Citing Prem Prakash v. Union of India, 2024, SCC online SC 2270, and Pankaj Bansal v. Union of India, 2023, SCC Online SC 1244, the applicant argued that the facts of these cases accentuated compliance with procedural safeguards under PMLA before arrest and admissibility of evidence. 

The Enforcement Directorate submitted that evidence linking the applicant to money laundering was collected but admitted to procedural lapses, including no custodial interrogation or prior summons. They, however, proffered that conditions under Section 45 of PMLA must be satisfied before the grant of bail. 

After due examination of facts, admissions, and evidence, the court made critical observations that the ED had neither summoned nor recorded the applicant's statement prior to arrest. Noting that statements of co-accused under Section 50 of PMLA, while in custody, and their submission of findings of guilt are all based on statements of co-accused, which are inadmissible since they were made "while in-custody". Added to the fact that there was no independent corroboration from licensing authorities or other substantive evidence. Non-compliance with Section 19 of PMLA undermines the legitimacy of the arrest, stated the court.

“When an accused is in custody under PMLA, irrespective of the case for which he is under custody, any statement under section 50 of PMLA to the same investigating agency is inadmissible against the maker. Furthermore, the arrest should be rational, fair, and as per law and shall not be merely based upon guilt of accused established from inadmissible evidence."

Observing that no evidence indicated a likelihood of the applicant tampering with evidence or committing further evidence, the court granted bail factoring procedural lapses and lack of substantive evidence on conditions that:

1. The applicant furnishes a personal bond of 5,00,000 with two sureties.

2. Comply with Section 480(3) of the Bharatiya Nagarik Suraksha Sanhita, 2023, i.e., attend court hearings as required, co-operate with the investigation and avoid committing similar offences.

Case Details: Asif Hanif Thara v. Enforcement Directorate, Misc. Criminal Case No. 44309 of 2024

Advocates for Applicant: Siddharth Agrawal, Manu Maheshwari, Smriti Sinha, Radhika Subhash, Arshiya Ghose, and Ritesh Kumar Sharma.

Advocates for ED: Himanshu Joshi and Asst. Directorate, Dilip Singh Shaktawat.