Retaliatory Prosecution Cannot Override Liberty: Himachal Pradesh High Court Grants Bail in PMLA Case Post CBI Trap of ED Officer

“ED’s conduct reflects retaliation rather than investigation. Law cannot endorse vindictive coercion masked as inquiry” –Himachal Pradesh High Court granted anticipatory bail to the chairman of a group of private educational institutions, accused in a ₹43 crore post-matric scholarship scam under the Prevention of Money Laundering Act, 2002 (PMLA). The Court found the Enforcement Directorate's recent coercive actions motivated by retaliation, particularly in light of a trap case by the CBI against an ED officer involving the applicant.

The Court observed that statutory powers under Section 19 of the PMLA cannot be exercised to satisfy vendetta, and that mere non-cooperation or silence cannot justify arrest.

"The conduct of the Enforcement Directorate, post the CBI trap proceedings against its officer, reflects retaliation rather than legitimate investigation," remarked Justice Virender Singh, adding that "an arrest is not justified only because it is lawful."

High Court Applies Section 45 PMLA: No Prima Facie Guilt, No Risk of Future Offence

Rejecting the ED’s opposition, the Court held that the twin conditions under Section 45 of the PMLA were duly satisfied, and that no material was presented to justify custodial interrogation. Noting that the applicant had remained on interim bail since the trap proceedings and had consistently joined investigations, the Court found no grounds for denying bail.

"The ED has failed to place on record any fresh material that would indicate the applicant’s custodial interrogation is necessary, or that he is likely to commit any offence while on bail," the Court held.

It added that “the mere fact that the applicant did not confess or did not give answers the ED considers ‘non-evasive’ does not amount to non-cooperation.” The right to silence, the Court reaffirmed, is constitutionally protected under Article 20(3) and cannot be held against the accused.

“Haste After 5 Years of Inaction Indicates Malice”: Court Notes ED’s Silence Until CBI Trap

Justice Singh gave detailed reasoning on how the sudden summoning and coercive steps by the ED only began after the applicant filed a corruption complaint against an ED officer, who was subsequently caught in a CBI trap operation for allegedly demanding ₹60 lakhs to avoid arrest.

Referring to this timeline, the Court observed:

"It is not coincidental that ED’s machinery moved swiftly only after one of its own officers was booked in a corruption case involving the same applicant. Five years of silence followed by immediate coercion speaks volumes."

The Court noted that despite the registration of ECIR in 2019, there had been no effective steps by ED until 2024, and that multiple summonses were issued with undue urgency only after the applicant's complaint.

"Liberty cannot be lost in the whirlpool of vendetta. The investigation must proceed, but not at the cost of fairness or proportionality," the Court said.

Section 482 BNSS Invoked to Prevent Abuse of Process: Proclamation Not a Bar to Bail

The ED had objected to the maintainability of the application on the ground that proceedings under Section 84 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS), equivalent to declaration as a proclaimed offender, had been initiated. The Court rejected this objection, stating that merely initiating such proceedings does not bar bail, particularly when the application was filed before any such declaration was made.

Citing Asha Dubey v. State of Madhya Pradesh, the Court held:

"There is no legal hesitation for any person, against whom proceedings for declaring him a proclaimed offender have been initiated, to seek the benefit of bail under Section 482 BNSS."

“Arrest Is Not Investigative Necessity”: Custody Cannot Be Used to Extract Confession

The High Court was categorical in rejecting the notion that arrest enhances investigation, relying on the Supreme Court’s precedents in Arvind Kejriwal v. Directorate of Enforcement, Pankaj Bansal v. Union of India, and Siddharth v. State of UP.

Justice Singh observed:

"Arrest under Section 19 PMLA is not mechanical. The arresting officer must record satisfaction based on tangible material that custody is necessary. In this case, ED has failed to meet that threshold."

The Court reminded that non-disclosure or silence is not obstruction, stating:

"The accused cannot be forced into self-incrimination. Investigation cannot be equated with confession, and arrest cannot become a means to compel cooperation."

Summons via Email Not Illegal, But Repeated Short Notices Reflect ‘Unholy Haste’

Although the Court found no fault with the mode of serving summons through email, it noted with disapproval that three summons were issued within ten days, including during the period of the applicant’s son's marriage, and sought appearance on short notice.

"When the agency remained inactive for five years, this sudden urgency defeats the credibility of the investigation," the Court said, labelling it as "unholy haste."

It added that the purpose of summons is not to surprise or trap, but to ensure fair participation in investigation.

Bail Granted with Protective Conditions: ED Given Liberty to Seek Cancellation on Breach

Granting anticipatory bail to Rajnish Bansal, the Court ordered that he shall be released in the event of arrest upon furnishing a bond of ₹2,00,000 with two sureties. He has been directed to cooperate with the investigation, not leave India without prior permission, and not tamper with evidence or influence witnesses.

The Court concluded with a caution:

"Liberty of an individual must not be compromised to maintain the pride of investigating agencies. The process of law cannot become a tool of reprisal."

The ED has been granted liberty to seek cancellation of bail in case of breach of any condition.

A Landmark Check on Arbitrary Exercise of Power under PMLA

This ruling reaffirms the fundamental judicial principle that the power to arrest under PMLA must be exercised with restraint, objectivity and fairness, especially when an applicant’s liberty is at stake. The Himachal Pradesh High Court has drawn a clear distinction between legitimate investigation and retaliatory prosecution, particularly where the investigation itself is tainted by internal misconduct.

In the face of widening powers of enforcement agencies, the judgment stands out as a defence of procedural integrity and sends a strong message that vindictive use of state machinery will not survive judicial scrutiny.

Date of Decision: 25 November 2025