Introduction

The Prevention of Money Laundering Act, 2002 (“PMLA”) has, over the last two decades, moved from a relatively obscure economic-offences statute to one of the most litigated and debated pieces of legislation in India. The Enforcement Directorate (“ED”), which investigates and prosecutes offences under the Act, has been granted extraordinarily wide powers — to attach property, search premises, arrest persons, and record statements — many of which sit uneasily alongside ordinary criminal procedure safeguards. It is unsurprising, then, that the Supreme Court and various High Courts have been repeatedly called upon to test the constitutionality and operation of these powers. This article traces the leading judicial decisions that have shaped PMLA practice, and that every practitioner appearing before ED-related forums — the Adjudicating Authority, PMLA Special Courts, or the High Courts — must know.

1. Nikesh Tarachand Shah v. Union of India

Before examining the Vijay Madanlal judgment, it is essential to understand its predecessor. In this case, a Division Bench of the Supreme Court struck down the “twin conditions” for bail under Section 45 of the PMLA as they then stood. Under the unamended provision, an accused seeking bail had to satisfy the court that there were reasonable grounds to believe he was not guilty of the scheduled offence — even though he was being tried for money laundering, not the scheduled offence itself. The Court held this classification irrational and violative of Articles 14 and 21, since it made bail conditional on disproving a charge the accused was not even being tried for in that proceeding. Parliament responded in 2018 by amending Section 45 so that the presumption of innocence the accused must displace relates to the offence of money laundering itself, not the predicate offence. This amendment set the stage for the constitutional challenge that followed in Vijay Madanlal Choudhary.

2. Vijay Madanlal Choudhary v. Union of India

This is the single most important PMLA judgment to date. A three-judge bench comprising Justices A.M. Khanwilkar, Dinesh Maheshwari and C.T. Ravikumar decided a large batch of petitions challenging nearly every significant power vested in the ED. The judgment runs into several hundred pages and concludes with a twenty-one point summary of findings. Its key holdings include:

• Scope of “proceeds of crime” and Section 3: The Court held that the offence of money laundering under Section 3 has a wide reach, covering every process or activity connected with proceeds of crime, and is not confined to the final act of projecting tainted money as untainted. The word “and” in the section was read as “or” to give this wide meaning full effect, and the 2019 Explanation clarifying this position was held to be merely clarificatory of the existing law rather than introducing a new offence.
• ED officers are not police officers: The Court held that ED officials exercise a preventive, not merely investigative, function, and are therefore not “police officers” for the purposes of Section 25 of the Evidence Act. Consequently, statements recorded under Section 50 of the PMLA during inquiry or investigation do not attract the bar against self-incriminatory statements made to police, and do not violate Article 20(3) of the Constitution, since the maker of the statement is not yet formally an “accused” at that stage.
• ECIR is not an FIR: The Enforcement Case Information Report was held to be an internal document of the ED, not a statutory document akin to an FIR under the CrPC. There is no absolute requirement that a copy of the ECIR be furnished to the accused; it suffices if the grounds of arrest are disclosed at the time of arrest.
• Section 45 twin conditions upheld: The Court upheld the post-2018 version of Section 45, holding that the amendment had cured the constitutional defect identified in Nikesh Tarachand Shah, since the presumption of guilt an accused must displace to obtain bail now pertains to money laundering itself. The twin conditions were also held applicable to anticipatory bail applications under Section 438 CrPC.
• Provisional attachment (Section 5) and possession (Section 8(4)) upheld: These were held to contain sufficient in-built procedural safeguards to pass constitutional muster, being described as a balancing mechanism between the interests of the accused and the need to preserve proceeds of crime pending adjudication.
• Acquittal in the scheduled offence: The Court clarified that if an accused is acquitted or discharged of the predicate/scheduled offence, or the underlying criminal proceeding is quashed, the corresponding money-laundering prosecution would not survive, since there would be no “proceeds of crime” to speak of.

The judgment left certain issues open for later consideration — most notably, whether PMLA amendments introduced through Finance/Money Bills were constitutionally valid, an issue tied to the pending seven-judge reference in the Rojer Mathew case. Several review petitions, including one filed by Karti P. Chidambaram, sought reconsideration of specific findings — particularly on the reverse burden of proof and non-supply of the ECIR — and the review proceedings continued before the Supreme Court well into 2024, though the core Vijay Madanlal position continues to hold the field.

3. V. Senthil Balaji v. State (2023) and Pankaj Bansal v. Union of India

These two decisions, delivered within weeks of each other in 2023, significantly refined the arrest procedure under Section 19 of the PMLA. In Senthil Balaji’s case, arising from the arrest of a Tamil Nadu minister, the Court noted that the grounds of arrest must be “served” on the arrestee, though it did not elaborate further since written grounds had in fact been furnished in that case.

Pankaj Bansal’s case — arising out of the arrest of the promoters of the M3M Group in a case investigated in Haryana — supplied that missing elaboration. The Supreme Court held that mere oral communication, or having the arrestee read and sign a document that is then taken back by the ED, does not satisfy Article 22(1) of the Constitution or Section 19(1) of the PMLA. The Court directed that a copy of the written grounds of arrest must be furnished to the arrested person as a matter of course, without exception, so that the person can meaningfully exercise the right to challenge the arrest and seek bail. Non-compliance, the Court held, would render the arrest and any consequent remand illegal.

This principle was tested for its prospective or retrospective effect in Ram Kishor Arora v. Directorate of Enforcement, where the Supreme Court clarified that the Pankaj Bansal requirement applies prospectively from the date of that judgment (3 October 2023), and that oral communication of grounds at the time of arrest, followed by written communication within 24 hours, would suffice going forward. This somewhat tempered the strict “written grounds at the moment of arrest” reading that some had drawn from Pankaj Bansal. The same reasoning was extended to co-accused Basant Bansal’s case, and later applied outside the PMLA context in Prabir Purkayastha v. State (NCT of Delhi) (2024), a UAPA matter, underscoring that the Pankaj Bansal safeguard on grounds of arrest has since become a general due-process principle across preventive-detention-style statutes, though some High Courts have distinguished its application to UAPA on the basis of differing statutory language.

4. P. Chidambaram v. Directorate of Enforcement and the INX Media Line of Cases

In the INX Media matter, the Supreme Court dealt with bail for a former Union Finance Minister accused of money laundering connected to foreign investment approvals. The Court reiterated that economic offences involving deep-rooted conspiracies and substantial loss to public funds need to be viewed differently from ordinary crime while considering bail, since such offences affect the economic fabric of society. At the same time, subsequent orders in the same matter (including a later bail grant) affirmed that prolonged incarceration without conclusion of trial cannot be used to indefinitely deny liberty, and that “bail is the rule, jail is the exception” continues to inform the exercise of judicial discretion even under PMLA’s stringent framework, provided the twin conditions of Section 45 are otherwise satisfied.

5. Rohit Tandon v. Directorate of Enforcement

This case dealt with the standard courts must apply while examining bail applications at the initial/prima facie stage. The Supreme Court cautioned against a detailed, mini-trial-like evaluation of evidence at the bail stage, holding that courts must only assess whether reasonable grounds exist for believing the accused is not guilty, without conducting an elaborate examination as if deciding the final merits of the case. This decision is frequently cited by the ED in opposing bail applications to argue against a granular, defence-favourable reading of the material at an interlocutory stage.

6. Prem Prakash v. Union of India (2024) and the Custodial Statement Question

This more recent decision addressed the evidentiary value of statements or admissions made by an accused while already in judicial custody. The Court observed that a person in custody cannot be said to be making a statement with a genuinely free mind, given the inherent element of psychological pressure that custody entails, and that such circumstances warrant caution before treating custodial statements as voluntary admissions of guilt. This decision, read with the Court’s earlier observations in Vijay Madanlal Choudhary on Section 50 statements, illustrates the Court’s continuing effort to draw a line between statements recorded during investigation (upheld as non-violative of Article 20(3)) and confessions extracted after arrest, which attract closer scrutiny.

7. Directorate of Enforcement v. M. Gopal Reddy and the Post-Vijay Madanlal Consolidation

Following Vijay Madanlal Choudhary, several benches have applied and consolidated its ratio. In this case, the Supreme Court held that the bail conditions under Section 45 apply equally when an accused seeks anticipatory bail under Section 438 CrPC (now the corresponding 482 BNSS provision), overturning a contrary Telangana High Court view. Such decisions illustrate how lower courts and High Courts occasionally attempt to carve out exceptions to the Section 45 framework, only for the Supreme Court to reaffirm that the three-judge bench ruling in Vijay Madanlal Choudhary holds the field and binds benches of lesser strength.

8. Recent Trends (2024–2026)

More recent orders continue to grapple with two recurring themes: first, the tension between Section 45’s stringent bail conditions and the constitutional principle against prolonged pre-trial incarceration, particularly in cases where trials are delayed for years; and second, the continuing debate — via the pending review in Karti Chidambaram’s case — over whether the reverse burden of proof and ECIR non-disclosure findings in Vijay Madanlal Choudhary require reconsideration. High Courts, including the Delhi High Court, have continued to grant bail in individual PMLA cases where courts found unexplained or indefinite delay in trial, reaffirming that Section 45 restricts but does not eliminate judicial discretion to grant bail.

Conclusion

Taken together, these decisions form the operative framework within which ED investigations and PMLA prosecutions must now proceed: Vijay Madanlal Choudhary as the foundational validation of the ED’s powers; Nikesh Tarachand Shah as the historical corrective that shaped the current Section 45; Pankaj Bansal and its progeny as the procedural safeguard on arrest; and the Chidambaram, Rohit Tandon, and Prem Prakash lines as continuing refinements on bail standards and the treatment of custodial statements. For any practitioner advising clients facing ED action — whether in Delhi, where most PMLA litigation is concentrated given the ED’s headquarters, or in the Special Courts of Uttar Pradesh, Haryana, Rajasthan, or Madhya Pradesh — a working familiarity with this body of case law, and with the still-pending review proceedings that could reshape parts of it, is indispensable.