The Delhi High Court has granted regular bail to two accused in a money laundering case investigated by the Enforcement Directorate (ED), holding that merely receiving money does not automatically make it "proceeds of crime" under the Prevention of Money Laundering Act (PMLA). The Court observed that the ED must first establish that the money originated from a completed scheduled offence before invoking the provisions of the PMLA.
Background of the Case
The bail applications arose from an ECIR registered by the Enforcement Directorate based on an NIA FIR alleging offences under the Unlawful Activities (Prevention) Act (UAPA). The applicants were added as accused only through the fifth supplementary prosecution complaint in May 2024. According to the ED, they had worked as physical education trainers for an organisation and received payments in that capacity, which the agency alleged were linked to money laundering.
Both applicants were arrested in March 2024 while they were already in judicial custody in separate criminal cases. Their earlier bail pleas before the Special PMLA Court were rejected, prompting them to approach the Delhi High Court.
Court's Observations
Justice Purushaindra Kumar Kaurav examined whether the money allegedly received by the applicants could, at this stage, be treated as "proceeds of crime" under the PMLA.
Take CourtBook Everywhere
Access your account on the go with our mobile app.
The Court noted that the ED's own case was that the payments were made as remuneration for physical education training between 2015 and 2021. Most of these transactions took place before the organisation was declared unlawful in September 2022 and before the predicate FIR was registered.
Referring to earlier decisions of the Delhi High Court and Supreme Court, the bench held that a money laundering prosecution requires a foundational scheduled offence from which the alleged proceeds are derived.
The Court observed:
"The question of dominion and control over 'proceeds of crime' arises only after it is first shown that the property in question is, in fact, 'proceeds of crime'."
It further remarked:
"The case set up by the ED, to that extent, once again puts the cart before the horse."
The Court also noted that neither applicant had been charge-sheeted in the predicate NIA case. One applicant was not even named in the FIR, while the other had not been charge-sheeted despite being named. According to the Court, this weakened the ED's case at the stage of considering bail.
Long Incarceration Also Favoured Bail
Apart from the merits, the High Court took note of the prolonged custody undergone by both applicants. Each had remained in custody for more than two years and three months, while charges were yet to be framed.
The Court relied on Supreme Court rulings emphasising that prolonged pre-trial detention cannot become a substitute for punishment and reiterated that constitutional courts retain the power to grant bail even in cases governed by stringent special statutes where trials are unlikely to conclude within a reasonable time.
The bench also found that the applicants were not flight risks, the evidence relied upon by the ED was largely documentary and already seized, and there was no material indicating any likelihood of influencing witnesses.
Decision
Allowing both bail applications, the Delhi High Court held that the applicants were entitled to bail on the grounds of parity with similarly placed co-accused, the absence of a prima facie foundational scheduled offence linking the alleged payments to "proceeds of crime," and their prolonged incarceration.
The Court directed their release on furnishing personal bonds of ₹50,000 with one surety each, subject to conditions including surrender of passports, cooperation with the investigation, maintaining active contact details, refraining from influencing witnesses or tampering with evidence, and obtaining prior permission before travelling abroad.
It clarified that the observations made in the bail order would not influence the trial on merits.
-300x169.webp)
