The Allahabad High Court has granted bail to an accused in a money laundering case registered under the Prevention of Money Laundering Act (PMLA), holding that, at the stage of considering bail, the prosecution had not sufficiently demonstrated identifiable proceeds of crime arising from a scheduled offence. The Court also took note of the applicant's prolonged custody and the fact that the investigation had already been completed.
Background of the Case
The Enforcement Directorate (ED) initiated proceedings based on multiple FIRs relating to alleged illegal mining activities in Himachal Pradesh. According to the agency, funds generated from those activities were allegedly used to purchase a stone crusher unit in Uttar Pradesh, which was later alleged to have been involved in illegal mining-related transactions as well.
During the hearing, the applicant argued that he was not named in the Himachal Pradesh FIRs and pointed out that investigation in those cases had resulted in closure reports, several of which had already been accepted by the competent courts. It was also submitted that he had remained in custody since November 18, 2024, while the trial was yet to begin in earnest.
The ED opposed the bail plea, maintaining that the applicant had played a role in the alleged laundering of funds and that the stone crusher in Uttar Pradesh had been acquired using money generated through illegal mining.
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Court's Observations
Justice Vikram D. Chauhan examined the statutory requirement under the PMLA that money laundering must involve "proceeds of crime" derived from a scheduled offence.
The Court observed,
"The 'proceeds of crime' are assets derived from criminal activity relating to schedule offence."
It noted that in the present case, the prosecution had not identified any specific assets allegedly derived from the criminal activity connected to the scheduled offences, particularly in relation to the applicant.
The bench further found that the FIRs in Himachal Pradesh, which formed the original basis of the ECIR, had culminated in closure reports, with four already accepted by the respective courts. At the bail stage, this weakened the prosecution's claim that the alleged funds constituted proceeds of crime arising from those scheduled offences.
The Court also observed that merely alleging possession of assets from an unexplained source would not automatically establish that they were proceeds of crime under the PMLA. It remarked that such issues could involve other legal consequences but could not, by themselves, satisfy the statutory requirements of the Act.
Referring to recent Supreme Court decisions on personal liberty and prolonged incarceration, the High Court reiterated that continued detention pending trial should not become punitive when the trial is unlikely to conclude soon.
Court's Decision
Considering the period of custody, completion of investigation, grant of bail to a co-accused, and the material placed before it at the bail stage, the Allahabad High Court allowed the bail application.
The Court directed that the applicant be released on bail subject to furnishing the required bond and sureties, along with conditions including cooperation with the trial, non-interference with evidence or witnesses, appearance before the trial court, and restriction on leaving India without prior permission.
The Court also clarified that its observations were confined to deciding the bail application and would not influence the merits of the pending trial.
Case Details
Case Title: Sanjay Kumar @ Sanjay Dhiman v. Directorate of Enforcement
Case Number: Criminal Misc. Bail Application No. 38900 of 2025
Judge: Justice Vikram D. Chauhan
Decision Date: July 1, 2026
