Bombay High Court Grants Bail in ₹1.35 Crore Money Laundering Case, Citing Delay in Trial

"Prolonged Incarceration Without Trial Violates Article 21" – Bombay High Court granted bail to Suraj Satish Chavan, who was accused of laundering ₹1.35 crores in proceeds of crime linked to a COVID-19 food supply contract. The Court ruled that prolonged incarceration without trial violates fundamental rights under Article 21 of the Constitution, particularly in cases where the predicate offence has not yet led to a chargesheet.

A bench led by Hon’ble Justice Milind N. Jadhav observed: “If a trial is unlikely to conclude within a reasonable time, bail must be considered to prevent undue pre-trial detention. Prolonged imprisonment without conviction is a direct violation of constitutional rights.”

The bail was granted under Section 439 of Cr.P.C. read with Section 45 of the Prevention of Money Laundering Act, 2002 (PMLA), relaxing the stringent bail conditions imposed in money laundering cases due to excessive delay in the trial and lack of substantial evidence to justify continued detention.

"Existence of Scheduled Offence is a Sine Qua Non for Proceeds of Crime" – Bombay High Court
The Enforcement Directorate (ED) alleged that the accused, Suraj Satish Chavan, received ₹1.35 crores from M/s. Force One Multi Services, a company awarded a Municipal Corporation of Greater Mumbai (MCGM) contract during the COVID-19 lockdown. According to the ED, the company supplied underweight food packets (100g instead of 300g), misappropriated public funds, and transferred illegal proceeds to the accused.

However, the Court found several procedural lapses and legal inconsistencies, particularly regarding the link between the alleged proceeds of crime and a scheduled offence under PMLA. The Court emphasized: "Proceeds of crime under PMLA must arise from a scheduled offence, and without a chargesheet in the predicate offence, the money laundering case remains unsubstantiated."

The Court noted that the predicate offence chargesheet had not been filed, meaning the trial of the money laundering case could not proceed independently. This raised serious doubts about the legitimacy of the prolonged incarceration of the accused.

Procedural Violations in Arrest and Non-Compliance with Section 19(1) of PMLA
The accused also challenged his arrest on the ground that the ED had failed to record reasons for his arrest in writing before detaining him, as mandated under Section 19(1) of PMLA. The prosecution contended that the reasons were recorded internally, but the Court found that no such documents were furnished to the accused, leading to concerns about procedural non-compliance.

The Court stressed that strict adherence to statutory safeguards is essential in cases involving serious offences like money laundering, stating:

“When fundamental rights are at stake, procedural lapses cannot be ignored. The accused must be provided with all relevant materials justifying his arrest, failing which his detention is rendered arbitrary.”

Rigours of Section 45 of PMLA Cannot be Used as a Tool for Indefinite Detention
The Court referred to the Supreme Court’s decisions in V. Senthil Balaji v. ED (2024 AIR SC 4760) and Manish Sisodia v. ED (2024 AIR SC 4053), which held that bail conditions under Section 45 of PMLA must be relaxed when a trial is unlikely to conclude within a reasonable time.

Quoting from Senthil Balaji’s case, the Court reiterated: “Stringent bail conditions cannot be used to incarcerate an accused indefinitely when there is no possibility of the trial concluding within a reasonable time.”

In Manish Sisodia’s case, the Supreme Court further ruled that: “Detention before being pronounced guilty should not become punishment without trial. The right to bail in cases of delay, coupled with long incarceration, should be read into Section 439 Cr.P.C. and Section 45 of PMLA.”

The Bombay High Court echoed these principles, concluding that: "Since the chargesheet in the predicate offence has not been filed and the trial in both cases is unlikely to conclude soon, continued incarceration of the accused would be unjustified."

After considering the inordinate delay, procedural lapses, and absence of substantial evidence proving the accused’s role in a scheduled offence, the Court granted bail with the following conditions:

•    The accused shall be released on bail upon furnishing a PR bond of ₹1,00,000/- with one or two sureties.
•    He shall report to the Enforcement Directorate once a month for three months.
•    He shall not tamper with evidence or influence witnesses in any manner.
•    He shall not leave the State of Maharashtra without prior court permission.
•    He shall surrender his passport within one week after release.
•    Any violation of these conditions will entitle the prosecution to seek cancellation of bail.
The Bombay High Court’s ruling underscores the importance of upholding constitutional rights, even in stringent anti-money laundering cases. By granting bail in a PMLA case where the trial was indefinitely delayed, the Court reinforced the principle that prolonged pre-trial detention violates Article 21 of the Constitution.

By highlighting the necessity of proving a scheduled offence before prosecuting money laundering charges, the Court has set an important precedent for future cases involving economic offences and PMLA bail conditions.
 

Date of Decision: 04 February 2025