The Enforcement Directorate (ED) plays a central role in investigating offences under the Prevention of Money Laundering Act, 2002 (PMLA). Given the extensive powers available to the agency—including powers relating to arrest, search, seizure, attachment and investigation—the Supreme Court has developed significant jurisprudence defining both the scope of these powers and the safeguards available to accused persons.
Vijay Madanlal Choudhary v. Union of India
The Supreme Court’s landmark decision in Vijay Madanlal Choudhary v. Union of India, (2023) 12 SCC 1, upheld the constitutional validity of several important provisions of the PMLA. The Court considered provisions concerning arrest, search and seizure, attachment of property, the reverse burden of proof and the stringent bail conditions under Section 45.
The judgment remains the principal authority on the structure of PMLA proceedings. Importantly, the Court recognised that the existence of “proceeds of crime” derived from criminal activity relating to a scheduled offence is central to a money-laundering prosecution. It also held that the twin conditions under Section 45 restrict the grant of bail but do not create an absolute bar to bail.
Pankaj Bansal v. Union of India
In Pankaj Bansal v. Union of India, (2024) 7 SCC 576, the Supreme Court strengthened procedural safeguards surrounding arrest by the ED.
The Court held that the person being arrested must be provided with written grounds of arrest. This requirement is intended to ensure that the arrested person is informed of the basis for the deprivation of liberty and can effectively exercise legal remedies.
The judgment has become particularly significant in cases challenging the legality of ED arrests and has reinforced the principle that statutory powers of arrest must be exercised in accordance with constitutional safeguards.
Pavana Dibbur v. Directorate of Enforcement
In Pavana Dibbur v. Directorate of Enforcement, (2023) 15 SCC 91, the Supreme Court examined the connection between the scheduled offence and proceeds of crime.
The Court clarified that property can constitute proceeds of crime only when it is derived or obtained, directly or indirectly, from criminal activity relating to a scheduled offence. Property having no connection with such criminal activity cannot automatically be treated as proceeds of crime merely because the person is being investigated under the PMLA.
The decision is important because it reinforces the requirement of a legally sustainable foundation for a PMLA prosecution.
Manish Sisodia v. Directorate of Enforcement
The Supreme Court’s 2024 decision granting bail to Manish Sisodia significantly developed the jurisprudence surrounding prolonged incarceration under PMLA.
The Court observed that the stringent bail conditions under Section 45 cannot be applied in a manner that effectively defeats the constitutional right to personal liberty. Where an accused has undergone a substantial period of incarceration and the trial is unlikely to conclude within a reasonable period, prolonged detention becomes an important consideration.
Prem Prakash v. Enforcement Directorate
In Prem Prakash v. Enforcement Directorate, (2024) 9 SCC 787, the Supreme Court reiterated that “bail is the rule and jail is the exception” even in PMLA cases. The Court clarified that Section 45 does not transform deprivation of liberty into the norm.
The decision demonstrates that PMLA’s stringent framework must still operate within the constitutional protection of personal liberty.
Conclusion
PMLA jurisprudence reflects an ongoing balance between effective investigation of money laundering and protection of individual liberty. Vijay Madanlal Choudhary established the principal constitutional framework, while Pankaj Bansal strengthened safeguards relating to arrest. Pavana Dibbur clarified the importance of the scheduled offence and proceeds of crime, and subsequent bail decisions have reinforced the relevance of Article 21.
For individuals and businesses facing ED proceedings, understanding these judgments is essential because the legality of an investigation may depend not only on the allegations but also on procedural compliance, the existence of proceeds of crime and the constitutional safeguards governing arrest and detention.
