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by sayum
01 April 2026 9:04 AM
"Denial by the accused itself is not sufficient to consider prima facie that there is no mens rea of the applicants for the said offence under PMLA", Madhya Pradesh High Court has rejected the bail application of Sharad Jaiswal, a director of M/s Aviral Building Construction Pvt. Ltd., accused of laundering proceeds of crime generated by a corrupt constable of the MP Transport Department. Justice Pramod Kumar Agrawal, finding prima facie evidence of organized money laundering, held that the mandatory twin conditions under Section 45 of the Prevention of Money Laundering Act, 2002 were not satisfied.
The case traces back to a staggering story of disproportionate assets — a government constable drawing Rs.28,000 per month who allegedly amassed properties across Bhopal, Indore, Gwalior, a villa in Dubai worth Rs.150 crores, three petrol pumps, fisheries contracts worth several crores, a school franchise project, and Rs.3.86 crore in cash and jewellery seized from his residence in a single day.
Background of the Case
FIR No.0195/2024 was registered on 19.12.2024 by SPE Lokayukta, Madhya Pradesh against co-accused Saurabh Sharma, a constable with the MP Transport Department, under Sections 13(1)(B) and 13(2) of the Prevention of Corruption Act, 1988 for acquiring disproportionate assets in his name and in the names of family members, friends, and business associates. On the same day of the Lokayukta search, cash of Rs.1.14 crore, gold jewellery worth Rs.50.37 lakh, and other valuables were seized from his Arera Colony residence. From co-accused Chetan Singh Gaur's residence, Rs.1.687 crore in cash and silver worth Rs.2.11 crores were additionally seized.
Based on this scheduled offence, the Directorate of Enforcement registered ECIR/BHZO/19/2024 against the present applicant Sharad Jaiswal and other co-accused under Sections 3 and 4 of PMLA. The applicant was arrested on 28.01.2025 and has been in custody since 10.02.2025. His first bail application was dismissed as withdrawn.
Legal Issues
The Court was called upon to determine: whether the mandatory twin conditions under Section 45 PMLA — (i) reasonable grounds to believe the accused is not guilty of money laundering, and (ii) reasonable grounds to believe the accused will not commit any offence while on bail — were satisfied; whether statements recorded under Section 50 PMLA could be relied upon at the bail stage; and whether the absence of a charge-sheet in the predicate offence could defeat the ED's case at this stage.
Court's Observations and Judgment
On the Shell Company and the Constable's Scheme
The Court found that M/s Aviral Building Construction Pvt. Ltd. was incorporated in 2021 with the present applicant Sharad Jaiswal and co-accused Chetan Singh Gaur as directors, and Rohit Tiwari — brother-in-law of the main accused Saurabh Sharma — as Additional Director. The company operated from the residence of the accused persons at E-7/78, Arera Colony, Bhopal. Nine immovable properties were purchased in the company's name between October 2022 and October 2023, totalling Rs.6,44,33,000.
The Court noted a damning financial incongruity at the heart of the case: "Chetan Singh Gaur and present applicant have no financial capability to invest huge amount in the company and to purchase property worth crores of rupees. The amount has been managed by co-accused/main accused Saurabh Sharma through his friends and relatives."
The company's bank account with Central Bank of India, Shahpura Branch received Rs.5 crores transferred by Navodaya Cancer Hospital & Research Centre, Bhopal, and Rs.2,99,95,000 from Manodeep Nagarik Sahakari Patsanshtna Maryadit — a credit cooperative society based in Pune — from whose registered address, crucially, no such society was found to exist during investigation.
On the Admissibility of Section 50 PMLA Statements at Bail Stage
Addressing the applicant's challenge to reliance on co-accused statements, the Court affirmed the settled legal position drawing from the Supreme Court's ruling in Abhishek Banerjee v. Enforcement Directorate, (2024) 9 SCC 22, that statements recorded under Section 50 PMLA are not hit by Articles 20(3) or 21 of the Constitution. Such statements "are deemed to be judicial proceedings in terms of Section 50(4), and are admissible in evidence." The Court held that although these statements must ultimately be tested at trial, "for the purpose of consideration of bail application the statement recorded under Section 50 of the PMLA, 2002 can be considered against the applicants."
The statements proved telling. Co-accused Chetan Singh Gaur disclosed that the company was opened by Saurabh Sharma and that funds to purchase properties in the company's name were arranged by Saurabh Sharma either through unsecured loans or through funds from the fisheries business entirely owned by Sharma. The applicant himself admitted in his own Section 50 statement that he borrowed Rs.1,45,00,000 from Chetan Singh Gaur for purchase of two properties in Indore worth Rs.7.90 crores — against a stated average annual income of Rs.10-12 lakhs from all sources combined. He further admitted that no books of accounts were prepared by the company for the last two financial years and no audit was done.
On the Argument That No Charge-Sheet Was Filed in the Predicate Offence
The Court rejected the applicant's submission that the absence of a charge-sheet in the scheduled offence under the Prevention of Corruption Act destroys the ED's case, relying on the Supreme Court's authoritative ruling in Vijay Madanlal Chaudhary v. Union of India, (2023) 12 SCC 1, which clarified that for initiating action of provisional attachment under Section 5 PMLA, there need not be a pre-registered criminal case in connection with the scheduled offence. Additionally, reiterating from Tarun Kumar v. Assistant Director, Directorate of Enforcement, the Court held that "the offence of money laundering is not dependent or linked to the date on which the scheduled offence or predicate offence has been committed. The relevant date is the date on which the person indulges in the process or activity connected with the proceeds of crime."
On the Mandatory Nature of Twin Conditions and Economic Offences
The Court applied the well-established principle that economic offences constitute an altogether distinct class requiring a different approach to bail. Citing Y.S. Jagan Mohan Reddy v. CBI, (2013) 7 SCC 439, the Court emphasized that "economic offences having deep rooted conspiracies and involving huge loss of public funds needs to be viewed seriously and considered as grave offences affecting the economy of the country as a whole." The twin conditions under Section 45 PMLA were held to be mandatory regardless of the forum — whether under Section 438 CrPC or before Constitutional Courts.
On Mens Rea and the Coordinated Laundering Scheme
Finding that the material on record demonstrated "a highly coordinated and systematic manner, with clear understanding and collaboration among them to facilitate the offence," the Court rejected the applicant's plea of innocence. The Court emphasized that the accused's mere denial was insufficient: "Denial by the accused itself is not sufficient to consider prima facie that there is no mens rea of the applicants for the said offence under the PMLA, 2002."
The Court also found that the pattern of transactions — multiple bank accounts, cash transactions, unsecured interest-free loans routed through the accused's personal connections, a ghost cooperative society in Pune, and the active involvement of family members as signatories — indicated "a high risk of continued engagement in similar activities if released," thereby failing the second twin condition as well.
Ultimately holding that "there is sufficient evidence collected by the respondent/ED to prima facie show the involvement of the applicants in the offence of money laundering as defined under Section 3 of the PMLA, 2002," the Court rejected the bail application. The Court clarified that all observations are limited to the present bail proceedings and the Trial Court shall proceed uninfluenced by them.
Date of Decision: 26.03.2026
