Untangling the Many Threads of the Sarla Gupta Judgment

A Three Justices' Bench of the Supreme Court rendered its judgment in Sarla Gupta & Anr. v. Directorate of Enforcement [2025 INSC 645 (Sarla Gupta)]. The Court was hearing different appeals together, which presented somewhat similar issues that could loosely be grouped under the category of obligations on prosecuting agencies to disclose the material gathered during an investigation to the accused, in context of cases under the Prevention of Money Laundering Act 2002 ['PMLA']. 

While the judgment itself does not categorise issues, I think it is helpful if we are to try and make sense of its conclusions [summarised at Paragraph 55]. An attempt at the issues is as follows:

1. Whether the accused has a right of disclosure to seek copies of documents seized during searches done under the PMLA by the Enforcement Directorate? 

1A. If so, at what stage can the right be enforced and the documents disclosed / shared with the accused?

2. Whether the accused has a right of disclosure to seek copies of the documents filed by the prosecuting agency in support of its complaint under the PMLA ('relied upon documents')?

2A. If so, at what stage can the right be enforced and the relied upon documents disclosed / shared with the accused?

3. Whether the accused has a right of disclosure to seek copies of the documents seized but not placed in support of its complaint under PMLA by the prosecuting agency ('un-relied upon documents')?

3A. If so, at what stage can the right be enforced and the un-relied upon documents disclosed / shared with the accused?

Issues 1 and 1A

The first set of issues — 1 and 1A — were the easiest to answer for the Court. The PMLA itself provides that in event of a search and seizure, a list of seized items must be supplied to the person concerned, and the person can apply to get a copy of the documents when the authority concerned has decided to retain them [Sections 17 to 21]. So, the answer to issue 1 was 'yes', and the answer to 1A was that the person can apply to get copies after a decision is made to retain them for longer than thirty days.

Issues 2 and 2A

The next set of issues — 2 and 2A — are slightly more complicated because of how the PMLA and the general procedural law under the Criminal Procedure Code 1973 ['Cr.P.C.'] — now  the Bharatiya Nagarik Suraksha Sanhita 2023 ['BNSS'] — operate. The Cr.P.C. applies to PMLA prosecutions, but where there is a conflict between the two laws, the PMLA governs. In this realm of supplying complaints etc., there is no specific clause within the PMLA, taking us back to the Cr.P.C. [clarified within Sarla Gupta as well]. 

Indian criminal law envisages prosecutions can start either by a state agency investigating facts and bringing a case, or by an aggrieved party filing a case basis material it has in its possession to prove wrongdoing. Ordinarily, the state agency tasked with investigating cases is the police, and police files what is called a 'police report'. The disclosure rules for material filed with a police report are fairly clear: material which the agency is relying upon to support its case, has to be supplied [Sections 173(5), 207]. 

When it comes to a 'complaint', the Cr.P.C. stipulates that if a court finds that a person ought to face trial upon the allegations in a complaint, it must ensure a copy of the complaint is given to an accused. But, there is no corresponding right of disclosure availing to an accused here, as it is with cases launched pursuant to a police report. The limited exception, textually speaking, is a requirement for a magistrate's court to ensure that materials filed with a complaint are furnished to the accused in cases where the prosecution is one which must be conducted before a sessions court [Sections 204, 208]. I say textually, because courts have read in a similar disclosure requirement in cases launched on complaints for some time now.

This background is necessary to understand issues 2 and 2A. Even though prosecutions under PMLA are lodged after investigations by a state agency — the Enforcement Directorate — the document launching the prosecution is styled as a 'complaint' and not a police report [Section 45 PMLA]. The Cr.P.C., as we have seen, confers clear rights in cases launched on a police report, but is not so strongly worded when it comes to complaints. What this reflects is that, unlike issues 1 and 1A, here the Court in Sarla Gupta had some options on how to proceed. 

How has it answered the issues framed above? On issue 2, the Court has taken two steps. First, it clarifies that when a person is brought to court to face trial in a PMLA case, they must be provided with not just the complaint but also the materials being relied upon in support thereof [Paragraph 25]. This was held necessary owing to the general Cr.P.C. rule on supplying copies of complaints to accused persons. In other words, the Court recognised an obligation on part of the agency to supply a copy of the material it proposes to rely upon in support of its case. 

What about the right of the accused within the statute to demand for such relied upon material? Here, recall, that the rights-language is far clearer for police reports than for complaints. But since the PMLA involves no assignment of a case from a magistrate to a sessions court, the Court in Sarla Gupta noted that the Cr.P.C. complaints' clause on disclosure would not strictly apply to the PMLA [Paragraph 30]. 

It could have deemed the 'complaint' filed by the Enforcement Directorate as a 'police report' or adopted some other means to hold that the rules of Section 207 Cr.P.C. applied to PMLA complaints. If it would have done so, the Court would have thrown open the doors to topple the investigative scheme of the PMLA, because it hinges upon treating these complaints by state agencies as not being akin to police reports. There are many investigative powers that flow to the Enforcement Directorate (and other agencies) from simply not being labelled 'police'. Any ruling that dents this scheme would be extremely troubling for central investigative agencies which file 'complaints'. 

The Court was certainly aware of this position, which had been restated a few months ago by a bench comprising the Chief Justice. As a result, rather than apply either Section 207 or Section 208 by twisting their language, the Supreme Court in Sarla Gupta conveniently holds that the 'principles' of both clauses apply to the PMLA context, and all relied upon materials should be supplied [Paragraph 30]. 

Thus, the answer to issue 2 is a 'yes', but it is more an obligation on part of the agency and court rather than an issue that the accused must chase by enforcing their rights. There is a right too, just to be clear, and issue 2A stands answered by telling us that this right can be enforced from the time that an accused is first summoned to court to face a trial under the PMLA. If any deficiency exists in terms of material that the agency relied upon, the accused can seek copies, and arguments on the aspect of charge should not start till this supply of material is complete.

Issues 3 and 3A

Which then brings us to the last issues of the lot — issue 3 and 3A. That an accused has a right to seek the copy of un-relied upon documents has been an unequivocally clear position now for quite some time, and the Court merely reiterated precedent to stress upon this aspect [Paragraphs 31-33]. Issue 3A is where the controversy existed — at what stage would this right to get un-relied upon documents trigger? This section of the judgment is couched with qualifiers and it is safer to first set out the general position that the Court has identified, before delving into the devilish details:

• There is a clear right to be supplied with a list of the un-relied upon material, and this must be given along with the entire copy of the PMLA complaint i.e. prior to arguments on charge [Paragraph 41].
• There is no clear right to seek copies of un-relied upon material at the time of arguments on charge [Paragraphs 33-41].
• There is a clear right to seek copies of un-relied upon material during defence evidence by moving an appropriate application for summoning such records [Paragraphs 42-51].
• There is a clear right to seek copies of un-relied upon material during bail hearings by moving an appropriate application, and the extent of the right depends upon the stage at which the investigation is [Paragraphs 52-54].

Out of these four conclusions, the first brooks no exception nor generates any controversy. The Supreme Court has endorsed this approach of directing the agency to prepare a list of un-relied upon materials that must be supplied as part of a set of guidelines for better functioning of trials issued in 2021. Sarla Gupta has extended that logic to the PMLA as well. 

The 2021 judgment did not specifically say anything about the stage at which the accused can seek copies of the un-relied materials cited by an agency. This aspect was touched upon in two subsequent decisions — Manoj [2022 INSC 606] and Ponnusamy [2022 INSC 1177]. Out of the two, Manoj did not specifically mention a stage either and generally observed that disclosure of the un-relied upon materials was necessary to secure a fair trial. It was only Ponnusamy which specifically dealt with this exact issue — the two opinions from the bench diverged on precisely this aspect of a right to un-relied upon documents and the stage at which it would trigger. 

Curiously though, Ponnusamy is not mentioned anywhere within Sarla Gupta. This is a problem because it would seem that Sarla Gupta has diverged from the view taken in Ponnusamy. Both Ponnusamy and Sarla Gupta hold that there is no right to seek copies of un-relied upon material at the stage of charge. But where Ponnusamy held that the right would trigger at trial and that a court could consider the relevance of the material sought to be summoned while considering the request, Sarla Gupta has specifically linked the right to defence evidence, not trial generally, and has limited the scope of discretion vesting with a judge to refuse a request for summoning the materials (permitting it only on grounds of delay). 

It is unclear why Sarla Gupta specifically linked the prospect of seeking un-relied upon materials to defence evidence, and not adopted the view taken in Ponnusamy. The Supreme Court's logic in stressing upon the existence of a right for accused persons is that there is a reverse burden operating after charge is framed under the PMLA. In that case, why specifically link the right to only defence evidence? No reasons are offered to explain why an accused should remain quiet throughout prosecution evidence when having this material would enable a more effective cross-examination of witnesses at the relevant stage. Instead, the Court proposes a tortuous route, suggesting that an accused after applying for this material and obtaining it can then apply for recalling of witnesses to cross-examine them on this material. 

This course of action does not commend itself on logical grounds as mentioned above, nor does it commend itself on grounds of efficiency, economy, or strategy. Accused persons will have to adopt an artificial posture and work out two potential cross-examinations of the same witness. If a second cross-examination yields new incriminatory evidence from the witness, that would necessitate a trial court to put these statements to an accused and record a fresh statement under Section 313 Cr.P.C. These are only surface-level problems, mind you, and I am sure that more emerge the moment that lawyers and courts begin to try and apply the rules of Sarla Gupta to the facts of actual cases.    

We are left with the second and fourth conclusions then — no general right to copies of un-relied material at charge, but a right to apply for such material during bail. Although Ponnusamy is not cited anywhere within Sarla Gupta, it has followed the holding in Ponnusamy that there is no right to seek un-relied materials at the stage of charge by moving applications under Section 91 Cr.P.C. It also relies upon another earlier Three Justices' Bench decision in this context, Debendra Nath Padhi, which held that the hearing at charge must be confined to the record of the case, and this record consisted only of material that the prosecution brought forth. But while doing so Sarla Gupta has not slammed the door shut upon potential requests for un-relied upon material at this stage since it qualifies its position by repeatedly stating that 'ordinarily' an accused would not have the right to apply under Section before trial for copies of such materials [Paragraphs 33, 37, 49]. In the right facts, then, one may still have a chance to get un-relied materials prior to framing charge.

What complicates matters a great deal further is the fourth conclusion — that an accused has a right to apply for un-relied upon material during bail hearings. In this section of the judgment, the Court has moved entirely free of any past precedent and taken a view that fairness demands that the accused must have this right because bail under the PMLA places an onus upon the accused to show that no offence is made out. To ensure a fair opportunity for an accused to discharge this burden, the Court felt it was necessary to have a right to seek un-relied upon material which the agency might have.

This section greatly complicates the task of making sense of Sarla Gupta. Firstly, because it further undermines the already logically precarious position to allow a right to apply for un-relied upon material at the stage of defence evidence alone, since the reverse burden operates at the time the trial begins. Secondly, because if the reverse burden on an accused is such a critical hit to fairness, then why should an accused have to suffer framing charge on the basis of potentially unfair prosecutorial conduct and then get a valuable right to expose this during trial? Thirdly, and finally, because ordinarily bail will be a stage that comes before charge is framed, and if a court ends up viewing the un-relied material as being relevant to deciding the bail application it will undoubtedly end up thinking it is relevant to decide the point of charge as well. This creates a weird and inconsistent position where persons in custody may have greater opportunities to fair hearings at the stage of charge than those who are never arrested during investigation.

Sarla Gupta cites many past decisions of the Supreme Court on this issue of disclosing un-relied upon materials by prosecuting agencies. A unifying theme through all those past decisions was clearsighted acknowledgment that there was a need for a right of disclosure to mitigate against the very real possibility of unfair suppression by prosecuting agencies of material gathered in an investigation but of an exculpatory nature. But in Sarla Gupta the issue of suppression is nothing but an elephant in the room. Throughout its 86 pages, not once does Sarla Gupta mention this aspect of possible suppression and the unfair prejudice it causes, even though it is clearly the driving force behind the Court conferring a right to un-relied upon material at the bail stage. A full and frontal acknowledgment of this issue being one of the guiding reasons to confer a right of disclosure may well have yielded different configurations of how the right operates.

Conclusion

To conclude, then, One is left feeling that Sarla Gupta is yet another one of those judgments in which a bench of the Supreme Court is torn between adopting fairness as a yardstick for reading rules of criminal procedure, but is unable to adopt this yardstick consistently when faced with the ghost past judicial precedent that has taken a restrictive and unfairly textual view of the statute. Even so, the judgment is bound to be immensely relevant not just for PMLA cases, but criminal trials generally, and criminal trials with reverse onus clauses more specifically. One cannot help escape the feeling that this is not the end of the matter, but only the start of new complexities in the law on disclosure obligations and rights of accused persons.