Liberty versus Legislation: The Supreme Court's recalibration of bail jurisprudence under the PMLA

By Anu Shrivastava (MCIArb)*

The Supreme Court of India in a trilogy of landmark judgments delivered in 2024 – most notably in Arvind Kejriwal v. Directorate of Enforcement¹ and Manish Sisodia v. State (CBI)² – has undertaken a significant recalibration of bail jurisprudence under the Prevention of Money Laundering Act, 2002 (PMLA). The Court held that extended pre-trial detention and delay in trial, even in cases involving serious economic offences, cannot justify denial of bail when the constitutional right to speedy trial under Article 21 is violated.

While acknowledging prosecutorial concerns about the gravity of money laundering offences, it is the humble opinion of the author that these decisions mark a welcome shift from the rigid prescription in Vijay Madanlal Choudhary v. Union of India³—a shift that recognizes that constitutional rights cannot be indefinitely suspended in the name of investigating serious crimes.

This article proceeds in five parts: Part I examines the legislative history and constitutional challenges to Section 45 of the PMLA; Part II analyzes the Supreme Court's reasoning in the 2024 trilogy of cases; Part III explores the shift from Vijay Madanlal Choudhary; Part IV discusses implications for PMLA prosecutions; and Part V concludes by examining whether Indian courts have struck the right balance between prosecutorial efficiency and personal liberty.

I. The Draconian Section 45

Section 45 of the PMLA prescribes stringent conditions for bail. The provision, as originally enacted, stated that "no person accused of an offence punishable for a term of imprisonment of more than three years under Part A of the Schedule shall be released on bail…" unless:

• The Public Prosecutor has been given an opportunity to oppose the application; and

• Where the Public Prosecutor opposes, the Court is satisfied that there are reasonable grounds for believing that the accused is not guilty of such offence and that he is not likely to commit any offence while on bail.

  
  

In November 2017, the Supreme Court in Nikesh Tarachand Shah v. Union of India & Anr.⁴ struck down Section 45 of the PMLA as unconstitutional on the ground of manifest arbitrariness, given that different parameters for bail were being applied depending on whether a person was being tried for an offence which was also an offence under Part A of the Schedule, or an offence under Part A of the Schedule together with an offence under the PMLA. The Court observed that this differential treatment violated Article 14 of the Constitution. The judgment emphasized that bail provisions must apply uniformly to similarly situated accused persons, and the arbitrary distinction created by the original Section 45 offended the principle of equality before law. This defect, however, was rectified by an amendment in 2018, and the twin conditions for bail were prescribed for offences "under this Act".

The infamous "twin test" or "twin condition" that has bedevilled PMLA accused for years provides that two prerequisites must be met before grant of bail. First, there should be reasonable grounds to believe that the bail applicant is not guilty of the offence. Second, the bail applicant is not likely to commit any offence while on bail. The negative language of the provision – "no person accused of an offence under this Act shall be released on bail unless"—reveals the legislative intent: bail is the exception, jail is the rule.

II. The Global Anomaly: PMLA's Departure from International Standards

This twin test of bail under PMLA is an anomaly. Traditionally, criminal jurisprudence has been grounded in the philosophy of being presumed innocent until guilty. The twin test requirement under Section 45 of PMLA, which mandates that an accused must demonstrate "reasonable grounds for believing that he is not guilty" and that he "is not likely to commit any offence while on bail," stands in stark contrast to the bail framework for economic crimes in most democratic jurisdictions that uphold the presumption of innocence.

A. United States: Focus on Flight Risk and Community Safety

In the United States, even after the Bail Reform Act of 1984 which allows consideration of dangerousness, courts primarily focus on flight risk and community safety rather than requiring proof of innocence, with the prosecution bearing the burden to justify detention. The Act explicitly provides that detention is the exception, requiring the government to prove by clear and convincing evidence that no conditions of release can reasonably assure the safety of the community or the appearance of the person. Significantly, the accused is not required to demonstrate innocence at the bail stage.

B. United Kingdom: Release as the Default Position

The United Kingdom's bail system maintains that release is the default position, with conditional bail imposing restrictions to address specific risks, but without requiring the accused to prove their innocence. Under the Bail Act 1976, a general right to bail exists for all accused persons, subject only to specific exceptions such as risk of absconding or interference with justice. Notably, even for serious fraud and money laundering cases, the burden remains on the prosecution to demonstrate why bail should be denied.

C. Canada: Constitutional Protection of Liberty

Canada's Charter of Rights explicitly guarantees that any person charged with an offence is “to be presumed innocent until proven guilty according to law.” The Canadian Supreme Court in the Antic⁵ (2017) held that “accused persons are constitutionally presumed innocent, and the corollary to the presumption of innocence is the constitutional right to bail.” The Court emphasized that bail is not a privilege but a constitutional right, and the ‘ladder principle’ (a principle which forms part of Canada’s statutory law) requires that courts impose the least onerous form of release consistent with protecting public safety.

D. European Union: Directive on Presumption of Innocence

Most significantly, the European Union's Directive 2016/343⁶ mandates that all member states ensure "suspects and accused persons are presumed innocent until proved guilty according to law" at all stages of criminal proceedings, including bail hearings, regardless of the nature of the economic crime. The Directive explicitly prohibits any suggestion that the accused must prove their innocence and requires that public authorities refrain from presenting suspects or accused persons as guilty before conviction.

Notably, even jurisdictions recognized as FATF-compliant, such as the UK and US, do not impose reverse burden of proof for bail in money laundering cases, and the FATF itself has clarified that its recommendations do not require departure from human rights obligations like the presumption of innocence. FATF's 40 Recommendations, while mandating effective anti-money laundering measures, explicitly recognize that such measures must be implemented within the framework of fundamental rights and rule of law principles. The PMLA's approach of effectively creating a "presumption of guilt" that the accused must dispel represents a fundamental departure from the cardinal principle of criminal jurisprudence - "innocent until proven guilty" - making bail the exception rather than the rule, which is alien to the bail jurisprudence followed globally for economic offences.

III. Vijay Madanlal Choudhary: Upholding Section 45 with Cryptic Safeguards

The constitutional validity of Section 45 was upheld in Vijay Madanlal Choudhary⁷ in 2022. The Court held that the stringent conditions were justified given the serious nature of money laundering as an economic offence that threatens the financial system of the country. The Court reasoned that money laundering is not merely an economic offence but poses a threat to national security and sovereignty, as it facilitates terrorism, drug trafficking, and corruption. The judgment emphasized the transnational nature of money laundering and the need for stringent measures to combat it effectively. However, the Court also observed, somewhat cryptically, that constitutional courts retain the power to grant bail even when statutory conditions are not met, if constitutional rights are violated.

This cryptic observation would become the foundation for the 2024 trilogy.

IV. The 2024 Trilogy: Liberty Strikes Back

While these cases involved prominent opposition politicians, the constitutional principles articulated apply universally to all PMLA accused, regardless of political affiliation or public profile. The Supreme Court's focus remained on the violation of constitutional rights rather than the identity of the accused.

A. The Arrest Power Question: Arvind Kejriwal v. Directorate of Enforcement

In July 2024, the Supreme Court granted interim bail to Delhi Chief Minister Arvind Kejriwal in the money laundering case arising from the alleged liquor policy scam. The bench of Justices Sanjiv Khanna and Dipankar Datta held that Kejriwal's extended incarceration—over 90 days in custody—violated his right to personal liberty under Article 21.

The Court made several significant observations:

• First, the Court held that the power to arrest under Section 19 was fenced with certain preconditions and requirements. The officer must have material in his possession on the basis of which an opinion should be formed in writing that there are sufficient "reasons to believe" that the person arrested is guilty of the offence. The Court also noted that the person arrested must be informed of the grounds of arrest.

  
  

  Very importantly, the Court has elaborated on the concept of the evasive phrase "reasons to believe". It was held that "reasons to believe" is not the same as "suspicion" which requires a lower degree of satisfaction. The reasons for formation of belief must have a rational connection with the belief itself and cannot be extraneous or irrelevant. Further, the Court held that the subjective opinion of the arresting officer must be founded on fair and objective consideration of the material available.

  
  

• Second, the judgment discusses the threshold of judicial review under Section 19(1). The Court noted that "scrutiny of the action to arrest, whether in accordance with law, is amenable to judicial review." However, such judicial review would be confined to ascertain whether the "reasons to believe" are based on material which establish that the arrestee is guilty of an offence under PMLA.

  
  

• But how does one examine the legality of such "reasons to believe"? This brings us to the third important observation by the Court which holds that such examination has to be based on what is mentioned and recorded as the "reasons to believe" and the material on record. The arresting officer has also to consider the material which exonerates the arrestee. The Court came down heavily on arbitrary arrests and held that "Any undue indulgence and latitude to the ED will be deleterious to the constitutional values of rule of law and life and liberty of persons. An officer cannot be allowed to selectively pick and choose material implicating the person to be arrested. They have to equally apply their mind to other material which absolves and exculpates the arrestee."

  
  

Further questions referred to the larger bench: An argument was made by Mr. Kejriwal before the Court that before arresting, the ED must also examine whether there was a need and necessity to make the arrest. The Court noted the observation in Vijay Madanlal that while applying for anticipatory bail, the conditions under the CrPC would become applicable, requiring the consideration of the additional factor of "necessity to arrest". The Court finally referred the issue to a larger bench to decide if the "need and necessity test" is a separate ground to challenge the arrest order and what are the parameters thereof. The larger bench's decision on whether 'necessity to arrest' constitutes an independent ground for challenging arrest under PMLA will be crucial in determining the scope of ED's arrest powers going forward.

B. Speedy Trial Trumps Statute: Manish Sisodia v. State (CBI)

In August 2024, the Supreme Court granted bail to former Delhi Deputy Chief Minister Manish Sisodia, who had been in custody for 17 months. The bench of Justices B.R. Gavai and K.V. Viswanathan delivered a judgment that fundamentally altered the bail landscape under special statutes.

The Court held that Section 45 of the PMLA, as interpreted in Vijay Madanlal, did not mean that there should be a positive finding that no offence has been committed. A reasonable construction of Section 45 was adopted and it was held that the intent of the legislature could not be read as requiring a court to examine the issue threadbare and in detail to give a verdict of guilt or acquittal.

The Court held that on facts, they were not inclined to give bail. However, given the lengthy custody, the Court granted bail on the ground that the trial was protracted and as such, detention before a guilty verdict should not become punishment without trial. In this case, the trial court had to examine 493 witnesses and over 50,000 pages of documents. The likelihood of the trial being concluded in the near future was "impossible." The Court observed that Sisodia had been deprived of his right to speedy trial on account of extended incarceration of around 17 months with the trial not having even commenced.

Significantly, the Court held that the right to bail should be read into Section 45 of the PMLA when the accused has spent a long time in custody and there is delay in trial. The Court observed that a constitutional mandate to ensure speedy trial is the higher law.

C. Beneficial Provisions and Vulnerable Accused: K. Kavitha v. Directorate of Enforcement⁷

In August 2024, the Supreme Court granted bail to BRS leader K. Kavitha in the same liquor policy case. The decision is significant for its interpretation of the proviso to Section 45, which exempts certain categories of accused—including women—from the twin test. The proviso states that "a person, who is under the age of sixteen years or is a woman or is sick or infirm...shall be released on bail."

The Delhi High Court had refused to apply this exception to Kavitha, holding that she cannot be equated to a vulnerable woman who may have been misused to commit an offence, which is the class of women for whom the proviso to Section 45 of PMLA has been incorporated.

The Supreme Court reversed this finding. The Court accepted that the proviso would not automatically apply to every woman accused, and that it would depend on facts and circumstances. However, the Court held that when a law provides special treatment for a certain category of accused, courts have to give specific reasons for denying the benefit—reasons that the High Court had failed to provide. The Supreme Court emphasized that beneficial provisions enacted for the protection of vulnerable classes must be interpreted liberally. Courts cannot read additional conditions into such provisions that would defeat their remedial purpose. The interpretive methodology adopted by the Court reflects a hierarchy that recognizes systemic vulnerabilities faced by certain categories of accused.

The Court also reiterated its observations in Manish Sisodia regarding speedy trial, noting that Kavitha had been behind bars for five months and that the likelihood of trial being concluded in the near future was impossible given the 493 witnesses and 50,000 pages of documents.

V. Analysis: The Shift from Vijay Madanlal

The 2024 trilogy represents a significant departure from the rigid approach in Vijay Madanlal. While Vijay Madanlal upheld the constitutional validity of Section 45 and emphasized the serious nature of money laundering offences, the 2024 cases emphasize that constitutional rights trump statutory restrictions when trials are unduly delayed.

The shift can be understood through three key principles:

First, the primacy of Article 21: The Court has held that Article 21—the right to life and personal liberty—is "overarching and sacrosanct." A constitutional court cannot be restrained from granting bail on account of restrictive statutory provisions if it finds that the right under Article 21 has been infringed.

Second, speedy trial as an enforceable right: The right to speedy trial has been elevated from a directive principle to an enforceable constitutional right. The Court has held that extended incarceration without trial violates Article 21, and this violation must be remedied even in cases under special statutes like PMLA.

Third, judicial review is permissible: The Court has made it clear that while judicial restraint is important, it cannot become judicial abdication of the duty to protect constitutional rights. As such, it has been held that the legality of the arrest would be subject to judicial review.

VI. The Essential Question: Where to Draw the Line?

The 2024 trilogy raises a fundamental question: where should courts draw the line between prosecutorial needs in serious economic offences and the constitutional right to liberty?

The answer provided by the Supreme Court is clear: the line must be drawn where constitutional rights are violated. No matter how serious the offence, extended incarceration without trial violates Article 21 and justifies grant of bail.

However, this answer raises further questions. What constitutes "extended incarceration"? At what point does delay in trial become unconstitutional? The Court granted bail to Kejriwal after 90 days and to Sisodia after 17 months. While no bright-line rule has emerged, a pattern suggests that custody exceeding three months combined with trial delays may trigger heightened constitutional scrutiny, with longer periods (beyond six months) creating a stronger presumption favoring bail.

The Court has not provided a bright-line rule. Instead, it has adopted a case-by-case approach, examining factors such as:

• The period of incarceration

• The stage of trial

• The likelihood of trial being concluded in the near future

• The number of witnesses and volume of documents

• The conduct of the accused

This lack of a bright-line rule creates uncertainty. However, it also provides flexibility to courts to consider the unique circumstances of each case.

VII. Implications for PMLA Prosecutions

The 2024 trilogy has significant implications for PMLA prosecutions:

For the accused: the decisions provide hope that extended incarceration is not inevitable in PMLA cases. Even if the twin test under Section 45 is not satisfied, bail can be granted if constitutional rights are violated. This is likely to result in a significant increase in bail applications citing 'extended incarceration' and speedy trial violations, with accused persons relying on the 2024 trilogy to argue that statutory restrictions cannot override constitutional rights.

For the prosecution: the decisions create pressure to expedite trials. The longer the trial is delayed, the stronger the case for bail becomes—regardless of the gravity of the offence. The ED and other investigative agencies will need to recalibrate their investigation and prosecution strategies to ensure that arrests are made only when absolutely necessary and that trials proceed expeditiously. Prolonged investigation coupled with delayed trials will no longer be sustainable.

For trial courts: the decisions make it clear that "playing safe" by denying bail is not an option. Courts must balance the seriousness of the offence against the constitutional right to liberty, and where there is extended incarceration without trial, the latter must prevail. Trial courts will need to adopt a more rigorous approach to case management, ensuring that cases proceed without unnecessary delays and that bail decisions are made with constitutional rights at the forefront.

VIII. Conclusion

The Supreme Court's 2024 trilogy on PMLA bail represents a welcome recalibration of bail jurisprudence. The Court has recognized that constitutional rights cannot be indefinitely suspended in the name of investigating serious crimes, and that extended incarceration without trial violates the fundamental right to liberty under Article 21.

The decisions in Arvind Kejriwal and Manish Sisodia reflect a judicial philosophy that prioritizes personal liberty over prosecutorial convenience—a philosophy that aligns with the foundational principle that "bail is the rule, jail is the exception."

However, questions remain about where exactly to draw the line between prosecutorial needs and constitutional rights. Perhaps this is appropriate. Liberty cannot be reduced to formulas and timelines. Each case must be examined on its own facts, balancing the seriousness of the offence against the violation of constitutional rights.

What is clear is that Indian courts have moved away from the rigid prescription in Vijay Madanlal toward a more nuanced approach that recognizes the primacy of constitutional rights. The 2024 trilogy will likely be remembered as the moment when the Supreme Court reminded us that even in the fight against serious economic crimes, constitutional values of liberty and speedy trial cannot be sacrificed at the altar of legislative stringency.

*The author is an Advocate practicing before the Supreme Court of India, the Delhi High Court and Tribunals in New Delhi.

Endnotes:

¹ Arvind Kejriwal v. Directorate of Enforcement, (2025) 2 SCC 248.

² Manish Sisodia v. State (CBI), (2024) 12 SCC 691.

³ Vijay Madanlal Choudhary v. Union of India, (2022) 6 SCC 1.

⁴ Nikesh Tarachand Shah v. Union of India & Anr., (2018) 11 SCC 1.

⁵ R v Antic, 2017 SCC 27 (Canada).

⁶ Directive (EU) 2016/343 on the strengthening of certain aspects of the presumption of innocence.

⁷ K. Kavitha, 2024 SCC OnLine SC 2269.