Bail Cannot Be Withheld as Punishment: Himachal Pradesh High Court Grants Bail to Govt Official in ₹200 Cr. Scholarship Scam Citing Delay and Article 21 Violation

“Twin Conditions Under PMLA Must Yield to Constitutional Guarantees When Trial Is Nowhere in Sight” – Himachal Pradesh High Court, in a reportable judgment delivered by Justice Virender Singh, granted regular bail to Arvind Rajta, a government official accused in the multi-crore Post-Matric Scholarship (PMS) scam, citing prolonged incarceration, non-commencement of trial, and the accused’s fundamental right to a speedy trial under Article 21 of the Constitution. The Court ruled that continued custody in a case where trial has not even begun amounts to punishment without conviction, and thus relaxed the twin conditions under Section 45 of the Prevention of Money Laundering Act, 2002 (PMLA).

“Liberty guaranteed under Article 21 cannot be sacrificed at the altar of statutory restrictions when trial is not likely to conclude in the foreseeable future,” the Court observed, granting bail under Section 483 of the Bharatiya Nagarik Suraksha Sanhita (BNSS), 2023.

“Statutory Restrictions Must Not Become Instruments for Indefinite Incarceration” – Twin Conditions of PMLA Can’t Override Article 21

The case involved allegations of money laundering under Sections 3 and 4 of the PMLA, linked to the misappropriation of over ₹200 crore meant for SC/ST/OBC students under the Post-Matric Scholarship Scheme in Himachal Pradesh. Rajta, a Dealing Assistant in the Higher Education Department, was accused by the Enforcement Directorate (ED) of verifying fraudulent claims submitted by multiple private educational institutions and participating in laundering the proceeds through shell entities allegedly run in partnership with his family members and associates.

The ED contended that the applicant’s role was “central and critical,” alleging that he helped siphon off public funds using shell companies like M/s ASA Marketing Solutions and M/s Skill Development School, and laundered proceeds of crime into real estate and hospitality ventures.

However, the Court found that charges had not been framed even after over two years and four months of incarceration, and that the trial of the predicate offence before the CBI Court hadn’t commenced either. The ED’s complaint named 71 witnesses and over 31,000 pages of evidence, with further voluminous documentation arising from parallel CBI cases.

“In the present case, the chances of commencement and conclusion of trial in near future are not so bright,” the Court noted, adding that the volume of evidence and number of accused persons make the prospect of an early trial remote.

The ED registered ECIR/SHSZO/04/2019 on July 22, 2019, based on a CBI FIR and allegations of widespread embezzlement of scholarship funds by private institutions in collusion with bank officials and employees of the state’s education department. The CBI separately registered RC 0962019S0002 and filed multiple charge sheets in the Additional Sessions Court (CBI), Shimla.

Arvind Rajta had earlier secured bail in the CBI case but was arrested by the ED on August 30, 2023, under Section 19 of the PMLA. His regular bail application was dismissed in January 2024, and though his SLP was dismissed by the Supreme Court, he was granted liberty to renew his bail application before the trial court after six months if there was no progress in the trial.

“Delay Not Attributable to the Applicant” – Court Rejects ED’s Allegation of Obstruction

The ED vehemently opposed the bail plea, citing the gravity of the offence, complex financial transactions, and pending investigation into money trails and co-conspirators. It argued that delays were caused by the co-accused, and the applicant should not benefit from it.

The Court, however, examined trial court records and noted: “Whatsoever has been prayed, which resulted into adjournment of proceedings before the learned trial Court, has been done by the other accused persons.”

It held that no delay could be attributed to the applicant, and that bail could not be denied on account of delay caused by others. Referring to Manish Sisodia v. ED and K.A. Najeeb v. Union of India, the Court observed: “When incarceration becomes prolonged and the trial is nowhere on the horizon, constitutional courts must intervene to protect the accused’s right to liberty.”

“Existence of Proceeds of Crime Can Be Proved Only If Scheduled Offence Is Established” – Court Observes Trial Under PMLA Cannot Progress Without Predicate Trial

The Court referred to V. Senthil Balaji v. ED (2024 SCC OnLine SC 2626) to underline that: “The existence of proceeds of crime at the time of trial under Section 3 of the PMLA can be proved only if the scheduled offence is established in the prosecution of the scheduled offence.”

Given that even the predicate CBI case is pending consideration on charge, the Court found no possibility of either trial concluding within a reasonable time.

“When the trial of both the scheduled offence and PMLA offence cannot conclude in near future, the rigours of Section 45 of the PMLA must yield to the constitutional protections under Article 21.”

“Bail Is the Rule, Jail the Exception” – Constitutional Mandate Overrides Statutory Rigour in Long Custody Cases

The Court relied on a long line of Supreme Court decisions, including Ramkripal Meena, Athar Parwez, Bachhu Yadav, and Manish Sisodia, to affirm that:

“Stringent bail conditions under statutes like the PMLA cannot become tools to indefinitely incarcerate an undertrial, especially when the maximum punishment under the statute is seven years and the trial is not foreseeable.”

Quoting from K.A. Najeeb, the Court emphasized: “The presence of statutory restrictions does not oust the ability of constitutional courts to grant bail on the grounds of violation of Part III of the Constitution.”

“Being a Government Servant Not Enough to Deny Bail When Detention Is Excessive”

While the ED stressed that Rajta was a government official entrusted with verifying scholarship claims, the Court clarified that: “Merely because the applicant is a government servant responsible for verification of scholarship claims is too short a ground to deny bail.”

It reiterated that guilt or innocence must be decided at trial and that bail cannot be withheld purely due to the applicant’s designation when the delay in trial is egregious and evidence is primarily documentary.

Holding that the twin conditions under Section 45 of PMLA stand satisfied, the Court granted bail to Arvind Rajta, subject to the following undertakings:

• He shall regularly attend trial, not tamper with evidence, and not influence witnesses.

• He shall not leave India without prior court permission.

• He shall furnish an affidavit monthly stating he has not been named in any other case.

• He shall furnish a personal bond of ₹2,00,000 with two sureties.

“ED is at liberty to move for cancellation of bail in case of any violation,” the Court clarified.

The Jail Superintendent was directed to release the applicant promptly and inform the DLSA if bail formalities are not completed within seven days.

In this case of institutional corruption and large-scale misappropriation of public funds, the Himachal Pradesh High Court has reasserted the primacy of constitutional liberties over statutory hurdles, particularly when the criminal justice system itself is unable to proceed at a reasonable pace. The Court has clarified that Section 45 of the PMLA cannot operate as an instrument of endless incarceration, and that bail must be considered a safeguard, not a concession.

“Inordinate delay in the conclusion of trial and continued custody without conviction cannot be countenanced under a constitutional democracy,” the Court observed, setting a firm precedent for bail jurisprudence under economic offence statutes.

Date of Decision: January 5, 2026