Arrest Premature Without Conclusion of Predicate Offence: Bombay High Court Grants Bail in PMLA Case Against IRS Officer

Bombay High Court granted bail to Sachin Balasaheb Sawant, a senior Indian Revenue Service (IRS) officer, in a case involving allegations of disproportionate assets and money laundering. The court found that Sawant made a prima facie case challenging his arrest under the Prevention of Money Laundering Act (PMLA), ruling that the investigation had not conclusively established the assets as proceeds of crime.

The court, presided by Justice Manish Pitale, highlighted that the Enforcement Directorate (ED) arrested Sawant based on an Enforcement Case Information Report (ECIR) derived from an FIR under the Prevention of Corruption Act (PCA). However, the CBI, responsible for investigating the predicate offence under the PCA, had not yet filed a chargesheet. The court observed that without establishing whether the assets were disproportionate to Sawant’s known sources of income, the ED’s arrest was premature.

Sachin Balasaheb Sawant, an IRS officer since 2008, was arrested by the ED on June 27, 2023, following the registration of an FIR by the CBI on June 30, 2022. The FIR alleged that during his service between 2011 and 2020, Sawant amassed assets worth ₹2.45 crore, disproportionate to his income by 204%. The FIR was based on anonymous information received by the CBI.

Sawant, represented by Senior Counsel Ashok Mundargi, argued that the FIR on which the ECIR was based was unsigned and lacked a complainant’s signature, rendering the FIR defective and the ECIR illegal. Additionally, Sawant argued that the PMLA investigation was premature, as the CBI had not yet determined whether his assets were disproportionate. Citing State of Haryana v. Bhajan Lal, he contended that the ED could not presume guilt and that only assets that he could not account for should be treated as proceeds of crime.

The court found merit in Sawant’s arguments. The key issue was that the CBI had not completed its investigation or filed a chargesheet regarding the disproportionate assets, meaning it was unclear which assets, if any, were proceeds of crime. The court emphasized that arresting Sawant before the CBI completed its investigation meant that the ED was acting on assumptions, which was not permissible under law.

The court ruled that the ED had failed to apply an objective test to justify Sawant’s arrest under Section 19 of the PMLA. Arresting someone based on unverified allegations was insufficient, and the court relied on recent Supreme Court rulings in Arvind Kejriwal v. Directorate of Enforcement and V. Senthil Balaji v. The State, which clarified the standards for arrest under the PMLA.

Given the pending nature of the CBI’s investigation and Sawant’s one year and three months of incarceration, the court granted bail with several conditions. These included reporting to the ED’s office regularly, not tampering with evidence, and attending all court proceedings.

Date of Decision: October 9, 2024

Sachin Balasaheb Sawant v. Union of India