Guest Post: A Battle Between Bail and Silence — Comparing Section 45 PMLA with US Pre-Trial Prosecutorial Discovery

(This is a guest post)

The present post analyses the constitutionality of restrictive bail conditions in the Indian anti money laundering law from the perspective of the right against self-incrimination. Section 45 of the Prevention of Money Laundering Act, 2002 (“PMLA”) imposes twin conditions that an accused must meet to secure bail: (i) satisfy a court that there are “reasonable grounds to believe” that the accused is “not guilty of the offence”, and (ii) that the accused is unlikely to commit any further offences while on bail. By way of background, the Indian Supreme Court dismissed a challenge to Section 45, PMLA in Vijay Madanlal Choudhary v. Union of India. Petitions seeking a review of the judgment are pending). However, neither the original judgment nor grounds taken in the review petition sufficiently discuss the interplay between Section 45, PMLA, and the right against self-incrimination.

This post employs a comparative analysis of case law pertaining to pre-trial prosecutorial discovery rules in criminal cases in the United States to explore the intersection between Section 45, PMLA, and the right against self-incrimination.

Hypothetical Scenario: The Conflict Between Self-Incrimination and Disclosure of Material During a Bail Hearing

Imagine an accused is facing charges of money laundering, with one of the key allegations being that they received the proceeds of a crime from person X at location Y on a specific date. Aware that they must provide prima facie evidence of innocence to secure bail, the accused submits an affidavit to the court asserting that their mobile phone’s GPS data places them far from location Y at the relevant time. In response to this assertion, the prosecution requests the accused’s phone password to verify the accuracy of the GPS data. Apprehensive that failure to comply with this request could result in their bail application being denied, the accused agrees to provide the password to unlock the phone voluntarily.

Upon inspection, the prosecution confirms accuracy of the GPS data, but in the process, examines other files and data on the phone, discovering additional incriminating material that they were not aware of. The prosecution subsequently submits a counter-affidavit, which includes this newly discovered material. In response, the accused argues that this material should not be taken into consideration, asserting that it was obtained through their compelled disclosure and is therefore subject to the protections afforded by the right against self-incrimination. The prosecution argues that the password was provided voluntarily without any court order, and it does not amount to compelled disclosure.

I’ll build on this example and examine the constitutionality of pre-trial disclosures made by an accused during the bail stage.

US Case Law

The Indian guarantee against compelled self-incrimination avowedly borrows from the self-incrimination clause of the Fifth Amendment to the U.S. Constitution. Historically, the values of the American accusatorial system required the state to shoulder the entire burden in a criminal prosecution without any compelled help from the accused and the accused is not required to disclose their defence until the prosecution has presented its case. However, this privilege has been eroded through legislative provisions that require the accused to disclose certain portions of their evidence before trial.

In Williams v. Florida (“Williams”), the rule under challenge required the accused to disclose a list of alibi witnesses before trial. The accused was convicted and appealed against conviction on the ground that compelling him to reveal the name of his alibi witnesses violated his right against self-incrimination. However, the challenge was dismissed by the U.S. Supreme Court. To reach its conclusion, the Court first recognised that the privilege against self-incrimination consists of three elements: (i) compelled disclosure (ii) related to testimonial matter (iii) incriminating nature of the communication. The Court held that two elements, i.e., testimonial communication and ‘tendency to incriminate were present in the rule requiring disclosure of alibi witnesses. However, it concluded that the relevant rule did not compel the accused to disclose alibi witnesses. It reasoned that the defence had intended to present the alibi witnesses at trial regardless, and by providing the prosecution with this information prior to trial, the defence was simply ‘accelerating the timing of the disclosure’, thereby facilitating a more efficient trial process. It was held that even during the trial, the accused would still face the same choice: (i) to remain silent, or (ii) to offer a defence that could potentially lead to self-incrimination through cross-examination.

‘Acceleration of timing’ is an established principle today based on which pre-trial discovery by prosecution has been expanded vastly over the years. It is widely believed that prosecutorial discovery enhances the state’s ability to rebut the accused’s case and effectively cross-examine their witnesses. In light of the analysis of Williams, the issue arises as to whether the prosecution is entitled to seek any and all forms of disclosure under the guise of the ‘acceleration of timing’ principle. The subsequent cases suggest a different interpretation.

There are two ways in which pre-trial discovery from an accused can assist the prosecution. It can either (i) help prosecution in investigating the grounds of defence taken by the accused and consequently, help in preparing rebuttal evidence to the defence of the accused; and (ii) provide leads to the prosecution that can help in building a case-in-chief against the accused.

Various commentators have argued that Williams was only concerned with and envisaged the preparation of rebuttal evidence using pre-trial discovery by an accused. The Court's reasoning supports this argument. Firstly, the court equated the situation of pre-trial discovery with the stage of defence evidence at a trial, where the accused must reveal the identity of their witnesses and submit them to cross-examination, which may furnish the State with leads to incriminating rebuttal evidence. Therefore, the court only intended to confine itself to rebuttal evidence while testing constitutionality of the discovery rule requiring disclosure of alibi defence. 

In this regard, it is further pertinent to recall that in Williams, the Court held that the alibi discovery rule did not amount to a compelled disclosure since the choice between (i) remaining silent and (ii) presenting a defence that might incriminate the accused through cross-examination or provide leads to the state to impeach their witness is ‘inherent in the trial process’. The natural corollary of this reasoning is that choices compelling an accused to make choices not inherent in a trial process amount to a compelled disclosure and, hence, violate the right against self-incrimination. In a case where the accused’s disclosure can be used to build the prosecution’s case-in-chief, the accused’s decision whether or not to disclose requires them to choose between defending by affirmative evidence or defending by failure of government proof. 

In his article on prosecutorial discovery, Prof. Eric Blumenson argues that such a choice is not inherent in the trial process, since at a trial, the accused leads evidence only after the government proves a prima facie case, and hence, the adversarial criminal process protects an accused from aiding the prosecution in building its case in chief. Therefore, if the prosecutorial discovery rule, as approved in Williams, is used by the prosecution to build its case in chief, the said discovery would not pass the ‘acceleration of timing’ principle in Williams and, accordingly, would violate the right against self-incrimination.

Secondly, the fact that the majority opinion’s focus was only on rebuttal evidence can be gauged from the examples it cites in the opinion. The Court gave an example to the effect that if the disclosure rule was not in place, the way alibi testimony would have played out is that the prosecutor would have asked for a continuance / adjournment after the alibi witness’s examination-in-chief and would have found rebuttal testimony to impeach the alibi witness before cross-examining them. The Court concluded that since the said sequence of events would not violate the accused’s right against self-incrimination, neither would the pre-trial discovery rule at issue in Williams. Therefore, the said example makes it evident that the scope of Williams was limited to rebuttal evidence and the judgment did not envisage use of prosecutorial discovery as a tool to build a case-in-chief.

The Scarcity of Jurisprudence on the Use of Pre-Trial Discovery from the Accused to Construct the Prosecution’s Case-in-Chief

There appears to be a dearth of case law addressing whether pre-trial discovery from the accused can be used by prosecution to build its case-in-chief. Before Williams, the California Supreme Court in Prudhomme v. Superior Ct (“Prudhomme”) delineated two important points concerning the right against self-incrimination: (i) the right against self-incrimination is compromised when the disclosure could potentially ease the prosecution’s burden of proving its case in chief and the accused’s disclosure cannot be used for the said purpose; (ii) any disclosure that could serve as a “link in a chain” of evidence establishing the accused’s guilt is prohibited under the principle of right against self-incrimination.

Another Californian case took the same view as Prudhomme. In re Misener (“Misener”), a broader interpretation than Prudhomme was taken when the majority held that Fifth Amendment privilege does not end upon the establishment of a prima facie case by the prosecution and that it barred any prosecutorial discovery that prevented the prosecution from carrying the entire burden of proving the accused guilty beyond a reasonable doubt, whether compelled disclosure might serve to make the prosecution’s case or to unmake the accused’s.

Therefore, in Prudhomme and Misener, the California Supreme Court explicitly recognised that any pre-trial disclosure that lessens the burden of the prosecution in proving its case-in-chief is unconstitutional. However, none of these cases dealt with a scenario in which the prosecution used pre-trial disclosure to build its case-in-chief.

Both Prudhomme and Misener were subsequently overruled in Izazaga v. Superior Court. Here, the California Supreme Court sustained a broad reciprocal disclosure requirement, rejecting the Prudhomme analysis. The California Supreme Court held that under the rationale of Williams, pre-trial discovery does not constitute compelled self-incrimination. Therefore, Prudhomme and Misener were overruled based on the reasoning in Williams, which was itself confined to envisioning pre-trial discovery for the purpose of collecting rebuttal evidence, rather than for building the prosecution’s case-in-chief.

It is pertinent to note that the issue of whether the prosecution can use pre-trial discovery to build its case-in-chief was not answered and has remained unanswered. There is no denying that prosecutorial pre-trial discovery over the years has become broader. For example, trial court rulings, based on the ‘acceleration of timing of disclosure’ laid down in Williams, have accepted a requirement of advance notification of defences, of expert witnesses, and of all other witnesses. Nevertheless, it can be fairly argued that these pre-trial disclosures should serve solely to counter defence witnesses and cannot be utilised by the prosecution to establish its case-in-chief. 

An example of this principle can be found in a trial court judgment in State v. McClaren in which while allowing pre-trial discovery, the court held that “any concerns defendant has concerning the disclosure [itself] potentially being used by the prosecutor in the case-in-chief could be addressed by an in camera review by the circuit court.” Further, even in Izazaga, which overruled Prudhomme and Misener, the concurring opinion by Justice Kennard mentions that there is a limitation on the manner in which the prosecution may use the discovery, and that it would be “impermissible for the prosecution to use, as part of its case-in-chief, evidence gained through discovery of statements of potential defense witnesses.” Therefore, while courts have been liberal in allowing prosecutorial pre-trial discovery based on Williams' acceleration principle, they are cognizant of the possibility of violation of the Fifth Amendment Principle if the said discovery is used for building prosecution’s case-in-chief.

Applying U.S. Pre-Trial Discovery Principles to the Hypothetical Scenario in Bail Proceedings under Section 45, PMLA

The principles discussed in the preceding section regarding pre-trial prosecutorial discovery should be applied in bail proceedings under PMLA. The justification for this is evident: Section 45, PMLA forces the accused to reveal their defence at a pre-trial stage. Consequently, bail proceedings under PMLA mirror the function of pre-trial prosecutorial discovery, insofar as they afford the state early access to key aspects of the accused’s defence before the commencement of trial.

Accordingly, applying these principles in the Indian context, the argument remains that if the prosecution uses the information disclosed by the accused to build the ‘foundational facts’ in its counter-affidavit (or the chargesheet later), the same would violate Article 20 (3) of the Constitution. Currently, the prosecution is not restricted from doing this, and in practice, the prosecution routinely files supplementary reports / complaints based on arguments made by the accused at the bail and charge stage to plug loopholes in its case-in-chief. Accordingly, even as per a broad interpretation of discovery rules under U.S. jurisprudence, the current use of Section 45, PMLA is violative of Article 20 (3) of the Constitution.

In light of the discussion of jurisprudence surrounding pre-trial prosecutorial discovery in the U.S., it can be concluded that Section 45, PMLA directly impacts the right against self-incrimination. The compelled disclosure of the accused’s defence at this stage undermines the privilege against self-incrimination. The argument that such disclosure is voluntary overlooks the coercive nature of the choice between liberty and silence. Courts must adopt a restrictive interpretation of Section 45, PMLA to prevent its misuse by the prosecution as a tool to build its case-in-chief through the accused’s pre-trial disclosures at the bail stage. This approach ensures that bail proceedings do not become a prosecution strategy session.

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. 

The UKHC Judgment in the Sanjay Bhandari Extradition

In an interesting development, on 28.02.2025 the UK High Court passed its decision in Sanjay Bhandari v. Government of India [2025 EWHC 449 (Admin)] ['Bhandari']. It allowed an appeal by Mr. Bhandari against a 2022 judgment of the District Judge which accepted India's request to extradite him for facing prosecutions under the Black Money Act 2015 [BMA] and the Prevention of Money Laundering Act 2002 [PMLA].

The Grounds of Appeal

The judgment sets out the six grounds of appeal in Paragraph 3. Two grounds solely to UK extradition law and so are not being discussed here. The rest of the grounds all emanate from a consideration of either the Indian laws or the Indian criminal process, which render the judgment in Bhandari relevant for Indian law practitioners and students to consider. For ease of access, I set out the grounds and the Court's specific ruling below:

1. Extradition was incompatible with rights under Article 3 of the European Convention of Human Rights [ECHR] due to conditions of detention in Tihar Prisons and likely treatment by police / other investigative bodies — In favour of Appellant
2. Extradition was incompatible with Article 6 ECHR rights due to peculiar reverse burden clauses under Section 54 of the BMA and Section 24 of the PMLA — Partially in favour of Appellant
3. Extradition was incompatible with Article 5 ECHR rights due to delays in the criminal process — In favour of Respondent
4. Extradition was incompatible with Article 5 ECHR rights as there is a statutory prohibition on grant of bail under PMLA — In favour of Respondent

A brief round-up of the relevant ECHR rights invoked by the Appellant is required before we discuss the specific findings of the Court in Bhandari. Article 3 confers a protection against torture or being subject to "inhuman or degrading treatment or punishment". Article 5 of the ECHR confers a bouquet of guarantees for safeguarding the right to life and personal liberty, relevant among those being the guarantee to speedy trial and release during pendency of a trial [Article 5(3)]. Article 6 of the ECHR confers a bouquet of fair trial rights, including the right to be presumed innocent until proven guilty [Article 6(2)]. 

This post will take up the findings on each of the ECHR violations in order. The perspective is not to give a view from a convention perspective, but to present the court's discussion and then extrapolate as to its significance from an Indian law standpoint. 

The Article 3 Case [Paras 102-184]

It is mightily significant that the District Judge in the fist instance had found a real risk of Article 3 ECHR violations occurring if Mr. Bhandari was kept in custody of investigative agencies after his extradition. The finding was based on the available material suggesting that there was widespread use of violence to secure confessions, questioning without counsel, and denial of consular rights. And the fact that India had not ratified the UN Convention Against Torture signalled a weak commitment to combating violence at the hands of state agents. This finding had prompted an Assurance to be given by the Government of India that he would not be detained in such custody, but only detained in Tihar Prisons, where interactions with investigating agencies would be closely monitored. The District Judge found this assurance sufficient to conclude that the risks posed by violence in police custody were sufficiently mitigated. 

That the Government of India never appealed against that finding, but chose to instead issue an Assurance, speaks volumes. Perhaps it was a strategic call, as ultimately the Government won that round of litigation. Unfortunately, the UKHC disagreed with the District Judge's conclusions as to detention in Tihar Prisons sufficiently mitigating the risk of Article 3 breaches. The HC in Bhandari noted that the specific location of Appellant's detention did not make any material difference to potential Article 3 breaches. If anything, detention in Tihar Prisons brought its own set of problems. In a severely overcrowded and highly understaffed prison such as Tihar, it could not be reasonably believed that the oversight could sufficiently protect Appellant against violence, coercion, or extortion by official agents. Moreover, the conditions were such that they separately exposed the Appellant to possible violence at the hands of fellow prisoners, for the prison authorities had proved entirely ineffectual in containing intra-prisoner violence leading to death in 2023 itself.

This discussion on the possibility of Article 3 breaches forms the bulk of the judgment in Bhandari. It can hardly be called wake-up call for the authorities, because we have been here before. Bhandari itself cites not only previous extradition challenges from the UK, but also Indian cases, demonstrating the appalling state of affairs when it comes to detention in Tihar prisons. If a UK Court can conclude that the conditions are so poor as to create a reasonable risk of exposing a person to inhuman or degrading treatment, what does it mean for the 20000 or so prisoners lodged inside Tihar on any given day? 

Prison conditions was one of the focus areas of the first wave of PIL jurisprudence. However, the focus soon shifted from crafting enforceable rights in the hands of prisoners to Constitutional Courts managing congestion and decongestion of prisons. There have been flickers of the idea that poor prison conditions need alternatives to custodial detention — for instance, in Gautam Navalakha which accepted house arrest as an alternative to jail custody and cited prison overcrowding as a factor. But they have remained flickers not only due to some lack of legal imagination, but also the judicial treatment of such arguments — one need only mention the fates of Father Stan Swamy and Professor GN Saibaba. 

If Article 21 of the Constitution guaranteeing a right to life to all persons under the protective domain of the Constitution of India is to carry the same weight as any global human rights convention, there is an utmost need for courts to revive approaches and craft remedies which enable courts to actively consider poor prison conditions as part of the matrix of factors relevant to decide whether a person should be at large or housed in custody.  

The Article 5 Claims [Paras 206-226, 227-236]

The Appellant's Article 5 case consisted of two claims — that there were significant delays in the process, and there was a statutory presumption against bail under the PMLA. Of note here are a few of the reasons why the High Court Bhandari decided in favour of Respondent on both issues. In respect of delays, the Court was reluctant to draw conclusions about delays in trials before special courts that deal with PMLA cases from available data concerning trials generally. It will not be surprising for future extradition cases to include this granular data, which is not difficult to find, and if anything paints quite a bleak picture of pendencies in PMLA cases. 

Where the data proved inconclusive for the delay argument, in case of bail the High Court relied upon data presented by Respondent to suggest that bail was granted in more than 60% of PMLA cases by trial courts, which meant that the statutory presumption against bail was not an insurmountable one as courts regularly granted bail. To Indian practitioners and commentators, this merits deeper scrutiny, as it seems to belie the evidence of one's eyes and ears. This statistic of granting bail can easily be 'padded' by lumping two kinds of entirely dissimilar cases together — cases where complaints are filed without arrest, and cases where an accused is arrested during investigation. Bail has been rendered almost a matter of rule in respect of the former category over the past three years by courts, rendering the presumption against bail under PMLA redundant for this category. What was relevant for Bhandari and indeed will be relevant in future cases is the figures for cases where persons are arrested during investigation and granted bail by special courts. It would not be surprising if that figure is not near the 60% mark.

The Article 6 Claims [Paras 185-205]

The Appellant in Bhandari claimed that the reverse onus clauses in the BMA and PMLA would occasion a breach of Article 6 rights, as they forced him to prove innocence and so deprived him of a fair trial and the presumption of innocence. The claim carried greater force against Section 54 of the BMA, which not only placed the burden of proof upon the defendant, but stipulated that the standard of proof laid upon the defendant was of 'beyond reasonable doubt'. Such a stipulation is not present under the PMLA, but can be found in other Indian laws, such as Section 35 of the Narcotic Drugs and Psychotropic Substances Act 1985 [NDPS Act] as also Section 30 of the Protection of Children from Sexual Offences Act 2012. 

Expectedly, the High Court had no problem with the bare idea of the law having a reverse onus clause, as they are prevalent across jurisdictions today. The High Court was also satisfied that the particular context might justify the use of such a clause. It began tottering in favour of the Appellant seeing that the clause placed the burden to prove an essential ingredient of the offence upon an accused. What finally pushed the High Court over the edge to rule in favour of Appellant was the particular stipulation imposed by the Explanation to Section 54 BMA, which required an accused to prove facts beyond reasonable doubt. 

Bhandari notes that the Indian Supreme Court has not considered the validity of Section 54 BMA yet. It is unclear whether the issue of the validity of a similar clause in Section 35 of the NDPS Act was presented to the High Court, which had been considered by the Indian Supreme Court in Noor Aga [(2008) 10 SCR 379]. The Supreme Court had upheld the validity of that clause because firstly it did not displace the need for the prosecution to prove foundational facts, and secondly the burden upon the prosecution was to prove facts beyond reasonable doubt and that on an accused to establish a preponderance of probabilities. This finding, however, did not specifically engage with the Explanation to Section 35 of the NDPS Act which specifically required the accused to also prove facts beyond reasonable doubt. Since there is no manner in which to square the judicial ruling with the Explanation, it is reasonable to argue that the Explanation was impliedly struck down by the Court. 

If one agrees with this reading of Noor Aga, then the finding that Section 54 of the BMA is unpalatable in its current form is in consonance with Indian law as well. The problem, of course, is that the lack of clarity in Noor Aga means this is not the only way to read the judgment. Clearly the Legislature does not agree with this reading either, which explains why a similar clause has been inserted in laws passed after 2008 when the judgment in Noor Aga was rendered. One wonders whether a future Supreme Court will agree with the observations of the High Court in Bhandari, that such a legal stipulation requiring the accused to prove his innocence beyond reasonable doubt "fundamentally destroys the fairness of the prospective trial". 

Coercive Powers in Tax Matters - The Judgment in Radhika Agarwal v UOI

On 27.02.2025, a Three Justices' Bench of the Supreme Court delivered its verdict in a large batch of petitions which raised issues about the manner and exercise of the power of arrest without warrant under the Customs Act 1962 and the Central and State GST Acts. The judgment, reported as Radhika Agarwal v. Union of India & Ors. [2025 INSC 272 ('Radhika Agarwal')], consists of two opinions — one penned by the CJI for himself and Justice Sundresh, and a separate, mostly concurring, opinion by Justice Trivedi for herself. 

This post will engage mainly with the majority opinion and its two main themes: (i) applying the Criminal Procedure Code 1973 [Cr.P.C.] to warrantless arrests made under the Customs Act and GST Acts, and (ii) regulating exercise of warrantless arrests under both these acts. There are some smaller issues / aspects, which I take up under a 'Miscellany' head. The post then turns to the separate opinion of Trivedi J. where I try and explain its synergy, and dissonance, with the majority opinion. A small concluding section ends the post.

Extending the Cr.P.C. to Warrantless Arrests under Revenue Laws

Radhika Agarwal unambiguously extends Cr.P.C. provisions regulating warrantless arrests by police to the exercise of such powers under the Customs Act / GST Acts by revenue officials. This means that officers conducting arrests must wear clear badges, must inform relatives about arrest, maintain diaries to note progress of investigation, furnish grounds of arrest in writing to an accused prior to them being taken before a magistrate for further custody, and allow the arrested person to meet with legal counsel during interrogation (though not for its entirety) [Paras 23-28]. 

One may reasonably argue that this extension is hardly a perceptible shift, as practically all of the above requirements were already being adopted by the relevant departments. The argument about extending the Cr.P.C. regime to arrests under the Customs Act / GST Acts regime was not to make sure that officers wear name tags while arresting persons — nobody goes to Court for that. The gain for petitioners and accused persons here was to firstly get clarity on whether Section 41-A Cr.P.C. applies to arrests under the Customs Act / GST Acts, and secondly get a ruling that officers conducting arrests under the special laws are police officers, which in turn would impact the evidentiary value of any statements recorded by them. On both these aspects, Radhika Agarwal rules in favour of the Union on my reading — slightly ambiguously in respect of the Section 41-A issue, and very resoundingly on the 'police officer' issue. 

Section 41-A Cr.P.C. pertains to issuing notices to join an investigation. It has been used by the Supreme Court to foster a regime where today, for offences up to seven years, ordinarily such notices are sent to secure the cooperation of accused persons as opposed to rushing for an arrest. Extending it to the Customs Act / GST Acts regime would, in turn, help in staving arrests as most offences under these special laws are punishable up to seven years. Interestingly, the majority opinion in Radhika Agarwal is entirely silent on whether Section 41-A Cr.P.C. applies to the Customs Act / GST Acts regime on arrests. What to make of this? Technically, since Section 41-A is pre arrest and the judgment is concerned with post arrest issues, one may argue that the issue is left open. At the same time, nothing stopped the Court from looking at the clause, especially since the judgment refers to neighbouring Sections 41-B and 41-D of the Cr.P.C. It is fair to say that this issue may yet be litigated further. 

Moving on, Radhika Agarwal decisively rejects the contention that officers arresting persons under the Customs Act / GST Acts regime are 'police officers'. It does not on the strength of its own reasoning, but by relying purely on precedent which recognised this distinction. This precedent has been extensively discussed elsewhere on this blog here, and in a paper here, with my view being that the distinction needs to be revisited. That the Court chose not to do so is a win for the government, since treating such officers as 'police officers' would have dealt a bodyblow to the evidentiary value of statements recorded by them during the course of an inquiry or investigation. 

Nevertheless, reading Radhika Agarwal I wonder just how long this artificial distinction between officers will continue to hold the field, at least when a person is arrested. Since the 1960s, which is when the Constitution Bench decisions creating this artificial distinction came, the law has not remained static. A big change has been the shift in judicial perspective. The older cases took a formalist and hyper-technical approach to the issue to play a game of spot the difference where if even one facet from the Cr.P.C. regime on investigations was absent from the special law, that meant the officers under special laws were not seen as police officers for any purpose. Over time, this formalist approach gave way to a judicial perspective focusing on the impact of coercive action on life and liberty, especially when it comes to arrests. Radhika Agarwal also adopts this approach and uses it to further bridge the gap between arrests by ordinary police officers and revenue officers by extending the Cr.P.C. explicitly to the latter. 

Warrantless arrests are a serious infringement with personal liberty. The gravity of this infringement does not alter on the basis of the department in question. Nor is there any difference in the consequential impact of arrests. If the evidentiary value of statements by arrested persons to regular police officers is deemed sketchy, nothing inherently changes the reliability of such statements by arrested persons when they are made to revenue officers. One hopes, therefore, that at least in the context of arrested persons, a bench of the Supreme Court will soon have the courage to simply apply the Duck Test, and treat all officers with the power of arrest without warrant as belonging to one category.

Regulating the Exercise of Arrest Powers

Unsurprisingly, the majority opinion in Radhika Agarwal extends the judicial approach recently taken by the CJI in Arvind Kejriwal [(2025) 2 SCC 248] which sought to regulate warrantless arrest powers under the Prevention of Money Laundering Act 2002 ['PMLA']. The PMLA arrest provision is quite similar to the Customs Act / GST Acts clause, allowing for easy transplantation. Essentially, this approach consists of two conjoint parts. First, an insistence upon rigid compliance with the statutory tests for warrantless arrests, and second, recognising that the exercise of this arrest power is amenable to judicial review.

The statutory test for warrantless arrest under the Customs Act / GST Acts has been reduced to a threefold exercise for ease of understanding: (i) the officer must have material in his possession, (ii) this material must be the basis to form 'reasons to believe' which are recorded in writing, that (iii) the person is guilty of having committed the alleged offence. Following Arvind Kejriwal, each of these three parts is developed by the Court in a way to ensure that the arresting power is not arbitrarily used. Thus, the 'material' must be translatable into legally admissible evidence and consist of all the material available and not deliberately exclude material that favours the accused. The 'reasons to believe' recorded in writing must be lucid and clear, and must be shared with persons. Lastly, the legislative mandate in requiring for reasons to believe a person is 'guilty' of the alleged offence suggests a higher threshold as compared to arrests governed by the Cr.P.C. provisions which prescribe a lighter test in the form of requiring only a reasonable suspicion (more on this later). 

A little more time must be spent on the recording reasons part of the exercise here. The warrantless arrest power under the Customs Act / GST Acts regime is not recognised for all crimes. Instead, it triggers only if a certain monetary threshold is crossed (in most cases). For instance, only if the alleged tax intentionally evaded by the accused is beyond 5 Crores does the warrantless arrest power come alive under the GST Act. What Radhika Agarwal clarifies is that the recording of reasons must also explain on what basis has an officer decided that the monetary threshold was crossed. While this is undoubtedly a significant move, the Supreme Court does not go quite as far as the Delhi High Court had back in 2016, when in context of service tax laws it had restricted the warrantless arrest power as contingent upon a tax assessment order being passed quantifying the tax demand as crossing the monetary limit.

Significant also is the fact that the majority opinion deals with a contention that the threat of arrest was being used to coerce persons into paying tax dues. Obviously, the Court holds that arrest powers cannot be used to coerce persons into paying up, but it takes the issue a step further to hold that aggrieved persons can take their pleas to court and, if found true, then they would be entitled to refund of any dues so coercively paid. Whether this remedy is a meaningful one or not is difficult to say, considering judicial delays and the difficulty to establish coercion.

Which brings us to the second part of the regulatory exercise — judicial review of arrests. The existence of having statutory tests regulating the exercise of arrests is meaningless without the possibility of judicial review, and one reason for the Court to insist upon strict and documented compliance with statutory tests for arrest is to ensure fairer exercise of judicial review. At the same time, the majority opinion itself notes, in line with Arvind Kejriwal, that the review here is not a 'merits' review by, for instance, testing whether the material itself was correct or not. Rather, it is akin to judicial review of administrative action, allowing courts to step in if the action is, for instance, found to be entirely unreasonable, perverse, arbitrary, or is an action based on jurisdictional error. The import of proportionality analysis will aid this exercise. Though it must be flagged that a key issue within a proportionality assessment of whether the necessity of an arrest can be reviewed was referred to a larger bench in Arvind Kejriwal and remains pending.

I will return to the theme of judicial review when dealing with the separate opinion. Before that, a slight detour to cover some miscellaneous findings of interest. 

Miscellaneous Findings

There are some other notable points in the majority opinion, out of which I would want to flag two given their connection with the blog. First, the opinion has again remained faithful to precedent where it notes that persons who have received a notice to cooperate with the inquiry etc. under the revenue laws are not persons 'accused of an offence' for purposes of Article 20(3) of the Constitution. Second, the opinion notes that even though such persons may not be falling within the scope of Article 20(3), they can still avail of their remedies to seek anticipatory bail, where they can demonstrate that a threat of arrest exists. In doing so, the Court overrules the contrary view taken by some benches last year, which was also criticised on the blog here.       

The Separate Opinion

Justice Trivedi's short separate opinion is restricted only to expressing her views on the manner in which judicial review of the exercise of arrest powers ought to be conducted. Is it a concurrence, or a dissent, or yet another one of those separate opinions which is a bit of both? While on first blush it appeared that the third category is the safest bet, on a re-reading of her opinion I do believe that it is a concurrence which is merely emphasising the note of caution which is inherent in the majority opinion itself. At the same time, I also sense a divergence of views on a more fundamental aspect of what is the purpose of arrests in context of revenue laws. 

Justice Trivedi recognises the power of writ review in context of warrantless arrests, but urges that courts should ordinarily be 'loath' to interfere with use of the power by the concerned authorities under laws that concern serious financial crimes. Thus, while she agrees that non-compliance with the statute would be a valid ground for review, she cautions that this should not prompt courts to use a 'magnifying glass' to blow up minor procedural lapses on part of officers and confer undue benefits upon accused persons.

This, according to me, is just a more cautious way of expressing the same idea as the majority: do not go for a merits review, and do not interfere unless the decision is found perverse or arbitrary. Minor technical violations would not pass muster even under the Arvind Kejriwal standard, which Justice Trivedi does not disagree from specifically within her opinion. 

I would submit that a large part of Justice Trivedi's concerns, and the seeming differences in her view from the majority, stem from deeper differences in how the two opinions viewed the use of the arrest power. For the separate opinion there is a tight nexus between arrest and investigation, requiring a wider berth to be granted to agencies. Thus, one finds that Justice Trivedi urges caution while reviewing arrests because the investigation may be at a 'very nascent' stage. Whereas for the majority opinion, a legislative mandate that allows warrantless arrest only upon gathering material sufficient to form reasons to believe that a person is guilty of the offence assumes that an investigation has progressed to a degree. In fact, the majority opinion at one place in its discussion on the GST regime specifically notes that the arrest "cannot be made to merely investigate whether the conditions are being met." Thus, the arrest power in these revenue laws is not primarily used as an investigate tool, but a step later on in the inquiry and adjudicatory process. 

In this regard, while I understand the perspective of Justice Trivedi, it is understandable why the majority opinion does not begin from that standpoint. In rare cases, arrests in revenue laws may occur at a nascent stage and there the usual caveats may apply, but that is not the norm. After all, it is because arrests are not routine parts of investigations under revenue laws that courts have sustained the distinction between the traditional crime versus the revenue offence, and used this distinction to conclude that the revenue officers are not 'police officers'. The legislative mandate must be respected in full, and the majority opinion rightly does so.

Conclusion: Confronting Two-Track Justice

The majority opinion in Radhika Agarwal re-emphasises that the power of warrantless arrests is drastic. It places this perspective at the heart of its reasoning to adopt conclusions which, in the eyes of the Court, aim to assist in the better regulation of how this drastic power is exercised. In pushing for better regulation the Court implicitly admits that the current scenario was suboptimal. 

If the current scenario is indeed suboptimal, that calls for some pause to think and reflect. Throughout Radhika Agarwal we are reminded that the scheme for warrantless arrests under the Customs Act / GST Acts is different from the scheme governing such arrests for ordinary crimes made under the Criminal Procedure Code (now Bharatiya Nagarik Suraksha Sanhita 2023). The threshold under the special laws for exercising this power is higher than the threshold under regular criminal law, and what Radhika Agarwal does is to tighten the bolts even further to ensure better regulation. At the same time, the total number of persons arrested under the special laws (and we can even add the PMLA here) is incomparably lesser than persons arrested everyday under the Cr.P.C. / BNSS for ordinary crime. Not only this, but the demographic of persons ordinarily being arrested under both sets of laws is also incomparable. Those arrested under the special laws are, usually, the 'haves' with access to money and resources, whereas the ordinary criminal accused are the 'have-nots' who are struggling to make ends meet.

There is, in practically every legal system, a two-track system of justice: one for the 'haves', and another for the 'have-nots'. The law cannot completely rid the handicap that the have-nots suffer from because of their lack of resources and access to capital, but what a fair legal system can try and do is to make sure that it is designed to reduce the impact of this inequality. For instance, in context of warrantless arrests, a fair legal system would prescribe the same threshold for arrests under crimes traditionally linked only with the 'haves' — such as tax fraud — and the usual crimes which traditionally mostly ensnare the 'have nots' to ensure that the law is not compounding the ill-effects of the latent inequality. Instead, what we have, is the exact opposite in place. A two-track system of justice with an arrest regime having strong safeguards under laws that primarily concern the haves (made even more robust by court) and an arrest regime with weak safeguards when it comes to the 'have nots' ensuring their liberty remains imperilled. 

This is a manifest injustice at the heart of this entire regime governing warrantless arrests. Rather than the ordinary law being dragged down to further improve upon the safeguards for warrantless arrests in special laws, one hopes that future benches of the Supreme Court and High Courts use the good work done by judgments such as Radhika Agarwal to raise the standard even for arrests under ordinary crimes. A start has, arguably, already been made in recent judgments on supplying the grounds of arrest. While the first judgments were indeed under a special law — the PMLA — the subsequent judgments affirmed this rule as applicable to all arrests. One hopes that a similar effect is felt in context of the arresting power itself, to tighten the bolts around the 'reasonable suspicion' standard under the Cr.P.C. / BNSS as well. Such an outcome would ensure that the drastic power of warrantless arrests is better regulated in its application to lakhs of Indians, as opposed to the few hundreds who are alleged to be evading taxes. 

Restoration of Properties under PMLA pending Trial - Quite the Quagmire

Efforts to 'restore' monies to victims of large-scale frauds using the Prevention of Money Laundering Act 2002 [PMLA] have received some attention in 2024. Simply put, the scheme works as follows (at least in most cases). Usually at the start of PMLA cases, properties allegedly involved in money laundering are frozen or attached by the authorities to prevent their dissipation. This is called a 'provisional attachment' that subsists for the duration of the trial for the alleged crime of money laundering if an Adjudicating Authority agrees with this decision in parallel proceedings (which, it almost always does). These assets are then sold off by the government, and the sale proceeds are distributed amongst victims on a pro-rata basis. Everyone goes home happy, and the law delivers justice for a change. Well, at least that is what you are supposed to be left thinking after reading about these exercises in the news.

At first, this news appeared a little strange to me. This is because I was labouring under a misconception about what the PMLA regime allowed in respect of properties attached by authorities. Till 2019, the law under Section 8 of the PMLA said that while attachments would subsist the life of the criminal trial, confiscation i.e., the actual transfer of title in the property to the government, happened only after the trial resulted in a conviction for offences of money laundering involving the assets in question. And Section 8(8) said that where the property stood confiscated, a court could consider a claim for restoration of property to a claimant who suffered a loss due to the offence. 

In this 2019 framework, then, no sales and pro-rata distributions could happen without convictions. This is not an ideal scenario in a legal system where trials take an eternity to conclude. What made it even more problematic, was that the global body responsible for reviewing anti-money-laundering compliance — the FATF — had consistently viewed this conviction-based confiscation framework as suboptimal.   

Enter amendments to the relevant regulatory regime in 2019. Section 8(8) of the PMLA was amended in 2018 and the following proviso—the legalese for a condition or exception to the norm—was inserted: "Provided further that the Special Court may, if it thinks fit, consider the claim of the claimant for the purposes of restoration of such properties during the trial of the case in such manner as may be prescribed." In other words, the restoration to claimants could happen even before conviction. The power was operationalised in 2019, through an amendment to the Prevention of Money Laundering (Restoration of Confiscated Property) Rules 2016, with insertion of Rule 3A. It lays out the procedure by which a court can exercise these powers of considering claims, and in addition to procedural compliances requires that (i) the case should have progressed to the framing of charges, and (ii) owners of the properties in question be heard before passing any orders. 

Here is the catch. The law, by which I mean Section 8 of the PMLA, still only provides for confiscation in the event of conviction at trial. And Section 9 of the PMLA further specifies that "all the rights and title" in such property shall vest in the government only after confiscation. Section 8(8) itself says that the idea of restoration flows after confiscation. So, of confiscation and transfer of title itself remains glued to the end of trials, how on earth is Section 8 conferring powers on the court to direct sale of assets for some kind of restoration to claimants pending trial? 

There are many questions which may spring to mind making this seem problematic. Let me run through a few. First, charge is meant to be a sieve through which 90% of the cases percolate onwards to trials, since the sieve is made entirely from the story crafted by the prosecution. So, in effect, there is no filter to make sure that only cases which may genuinely result in convictions are being opened up for pre-conviction sale of assets. Second, in line with this first issue, what about the very likely outcome of a case ending in an acquittal or it being quashed? Third, what about the pendency of an appeal against the attachment and its effect on any claim by the claimant? All of these questions beget no real answers from within the statute itself. 

Beyond these problems of logic and implementation, the justice-delivery proviso to Section 8(8) also brings us face to face with an old legal maxim, that the scope of an exception to the rule cannot be broader than the rule itself. In this case, it would seem that this principle is clearly violated. The rule here is the text of Section 8 PMLA, which links transfer of title to confiscation. The exception to this rule, in the form of this 2018 proviso to Section 8(8), permits transfer without confiscation. Probably this is why High Courts (here, and here) have expressed doubts about the legal soundness of the proviso in passing already. If anything, the legally proper course of action may have been to amend Section 8(7), which caters to a few situations where a trial cannot conclude due to death or the accused absconding and permits passing an order for confiscation in such cases also, to allow for a wider set of scenarios.  

Who cares, though? 

(While this post is restricted to the restoration to claimants pending a trial for money laundering, and by no means should one assume that the regime post confiscation is ideal either)

Sanction and PMLA

In Bhibu Prasad Acharya [Crl. Appeal Nos. 3414-16 of 2024, decided on 06.11.2024], the Supreme Court held that the provisions of Section 197 of the Criminal Procedure Code 1973 [Cr.P.C.], and by extension of Section 218 of the Bharatiya Nagarik Suraksha Sanhita 2023 [BNSS] apply to the Prevention of Money Laundering Act 2002 [PMLA]. 

The basis for this view was Sections 65 and 71 of PMLA — the first applies Cr.P.C. provisions to PMLA proceedings so long as they are not inconsistent, and the latter rules that in case of any inconsistency, the PMLA overrides. Nothing within the PMLA excluded application of sanction provisions, and so necessary effect had to be given to Section 197. It made sense as well, according to the Court, considering the object of Section 197 which was to ensure that public servants are afforded a measure of protection against legal proceedings of a vexatious character [Paras 6, 17-18]. In the facts of Bhibu Prasad Acharya, the Court held that prior sanction was required, and absence of such sanction rendered proceedings unsustainable.

Since then, there has been quite a buzz around this decision and its purported harm to the PMLA regime's enforcement as obtaining sanction is now made mandatory. News reports also suggest that the government may be mooting a challenge to a position which renders sanction mandatory.

Only, obtaining sanction is not made mandatory by Bhibu Prasad Acharya.

The decision holds that the clause regarding need for prior sanction applies with equal force to PMLA as it does to other laws. It does not, by any stretch, hold that obtaining sanction itself is necessary for all PMLA cases, because Section 197 Cr.P.C. and Section 218 BNSS do not say so. These provisions are not like other clauses which by their very text make the need for sanction mandatory in all cases, such as Section 19 of the Prevention of Corruption Act 1988.

What Section 197 Cr.P.C. / 218 BNSS do is pose a question — was the alleged offence committed by the public servant while acting in the discharge or purporting to act in the discharge of official duty. If yes, it needs prior sanction. But if not, there is no need for sanction. Each case turns on its own facts. 

The case-by-case determination involved in Section 197 naturally meant that in cases where sanction was not taken, aggrieved persons challenged the move, and required courts to consider the scope of the clause. It has led to a large, complicated, and often inconsistent body of law on what acts are within the scope of an official's public duty, when sanction can be challenged, what happens if governments sit pretty and do not pass sanction orders, and how deep the scrutiny while granting sanction should be. But at no point has that body of law held that sanction under Section 197 is a must.

All that Bhibu Prasad Acharya does, and it does so absolutely correctly, is to give natural effect to the text of the PMLA which does not contain any clause ousting the issue of sanction. Its result is not to render the need for sanction mandatory, but to open up a new avenue for litigation in these cases. The ball will be in the agency's court. Where it does not seek sanction, quite often public servants will challenge the move, as they do in other kinds of cases.  

Some Thoughts on the FATF Mutual Evaluation Report for India

It is here. Lisan Al Gaib. The moment many were waiting for. If you do not know what I am referring to, then you need to rouse yourself from your stupor, fast. The Financial Action Task Force (FATF) has published its Mutual Evaluation Report (MER) for India, and the country has passed the evaluation with flying colours as the Press Information Bureau gleefully announced. This mutual evaluation was the exercise which prompted all branches of the Indian State to ignore constitutional separations and unite to permit an extension for the officer who could no longer serve in office — the Director for the Directorate of Enforcement — and look how wonderful it all turned out. Kudos to one and all.

What is FATF, its MER, and why must you care?

Some context on what the FATF and the MER are is necessary before we proceed. Essentially, the FATF is a body setting global standards on combating money laundering and terrorist financing (and also what it has labelled 'proliferation financing). What began as a cabal comprising a few nations slowly attained pure global status as the 'rich' countries decided that those who do not meet the FATF standards are markets too risky to invest in. Ergo, no FATF compliance slowly meant being cut off from financial markets, which in today's world meant economic peril. 

Like many countries aspiring to gain greater influence on the world stage, India has aggressively worked to become a full-time FATF member (which it became in 2010), and then comply with recommendations on how to improve the anti money laundering and countering of terrorist financing frameworks. These recommendations are the result of site visits by FATF assessment teams, who eventually publish the MER. Adoption of the MER is followed by a 'Follow-Up Report' to see how the country has fared in adopting recommendations made in the MER. The scope of the MER exercise ranges beyond merely the legal framework devised to combat money laundering and financing of terrorism and looks at issues of state capacity and knowledge sharing as well.

India's last MER cycle happened in 2010-2013 i.e. more than a decade ago, which was hardly five years after the enforcement of the Prevention of Money Laundering Act 2002 (PMLA). It was due for a review earlier but Covid-19 intervened, pushing the review to 2023. A measure of just how important the FATF process is for a country can be gleaned from how India's money laundering and terrorist financing laws have been amended over time to specifically address shortcomings identified in the MER, transforming the PMLA into the hydra-headed behemoth that it is today. Perhaps the biggest change being India's shift from having a money laundering law with a narrow catchment to a law which would be far more encompassing in scope (discussed here). 

Given this background, it is imperative for everyone to wake up and take note of just what the latest MER says and does, for it is as reliable a fortune-teller as you can get as to what trends will India's anti-money laundering enforcement take. But that's not all. At a time when an already secrecy-loving State has gone into overdrive to prevent public disclosures about its workings, the MER gives us a window into how the anti-money laundering machinery is working behind the scenes.

What the MER tells us about India's Legal Regime

There are many points of note here, so for ease of reference (and my own laziness), I have resorted to the use of pointers. Note that I do not engage with the FATF assessment of India's terrorism financing regime and anti-money laundering measures in the economy. 

• For starters, the MER shows us that behind the veil of secrecy in which the Enforcement Directorate operates — remember that it refuses to publish ECIRs, or its practice manual, and convinced the Supreme Court that yes it is not necessary to do so — lies a wealth of administrative circulars and papers guiding the Enforcement Directorate's functioning in theory. Granted, these are only internal documents that cannot confer rights upon persons, but it would be interesting for courts to examine how often are these circulars breached in practice. 
• The MER confirms what most of us familiar with the money laundering regime knew — pendency in PMLA cases is quite high. The FATF has concluded that this needs capacity building with more special courts / prosecutors etc. More on that in the next section.
• The MER also confirms the sequitur, that India is not securing many confiscations of assets alleged to have been involved in money laundering, because confiscations are mainly linked to convictions. But at the same time, the FATF lauds India's proactive approach to attaching allegedly assets, which for the FATF reflected India's commitment to tackling money laundering seriously. Again, thoughts on this follow in the next section.
• Even though previous reports had criticised the lack of non-conviction based confiscation, there is no adverse remark this time. Equally surprising is the total lack of any mention about the appellate authority on matters of confiscation not being operational for several months prior to 2023. 
• The FATF has noted that India's approach listing out predicate offences is not fully in-line with the FATF recommendations (see technical compliance summary).
• What the government has not mentioned in its laudatory press release, is that India has been rated 'Partially Compliant' in respect of how the anti-money laundering regime is affecting the non-profit sector. This is a damning indictment, which buttresses domestic criticism of abusing legal rules to unfairly target NGOs (see technical compliance summary).   
• Reading the MER it appears that the FATF has left feeling convinced that many problems in respect of enforcement in PMLA were the result of the delays caused by the Supreme Court's consideration of the legality of the PMLA regime. The MER notes that this consideration concluded in 2022 with the Supreme Court upholding the PMLA regime, and hoped that this would begin to curb delays.

If past experience is a reliable indicator, then one imagines there may be some legislative amendments to (i) change the scheduled offences list, (ii) introduce some checks and balances to improve the rating for the non-profit sector issues, (iii) explore / expand non-conviction based confiscations further, and (iv) take steps (besides increasing budgetary outlays) to combat delays in money laundering cases. 

Critiquing the FATF's Findings

I have made my prejudices slightly bare about what the FATF is and what it does. But even so, there is no doubting its importance in the global landscape today. Accepting this premise, what one would then expect is an exercise which engages with diverse stakeholders and views countering the dominant narrative that is offered by a set of representatives that are obviously invested in securing a positive result. In this regard, a reading of the MER leaves one slightly baffled as to some of the observations and conclusions. I give two examples out of many.

First, consider the section which deals with attachments. At Paragraph 294 the MER notes that "The routine manner in which ED attaches assets at an early stage of investigations is a significant strength of the system, as it substantially reduces the risk of asset flight and also acts as a deterrent." It then gives us the statistics of how provisional attachment proceedings fare before the Adjudicating Authority over the past 5 years (Table 3.17) to reveal that from 2022 till October 2023, not a single provisional attachment was set aside. This, for the FATF, is a great outcome.

I pause here and wonder, did nobody in the FATF think that it would be good to maybe take a look at any one of the 390 provisional attachment orders issued, and 390 confirmations returned by the Adjudicating Authority, to examine whether this is bearing out its assumptions of a system in rude health? Did nobody in the garlanded team of experts pause to wonder that, maybe, this instead reflects a system that is working mechanically to first attach assets to bulk up numbers, and then for the Adjudicating Authority to routinely allow attachments by passing remarkably unreasoned orders? Did nobody bother to check how many of the orders were set aside in appeals, before the appellate authority and high courts? Such an uncritical and frankly naive assumption from the data left me quite amazed.

The second is the FATF's engagement, or lack thereof, with the Supreme Court's 2022 decision that finds such a frequent mention in the report. This judgment, of course, is Vijay Madanlal Choudhary, which has been a frequent topic of conversation over the past two years. My criticism of the FATF is twofold in this regard, so in a sense there are points 2A and 2B here. Point 2A is that the FATF again behaves like a doe-eyed deer in simply accepting the government's version that the pendency of this verdict caused delays. A look at the lead-up to the judgment would reveal that the government was not a passive object, but many a time it went to get a stay on proceedings as well, and frequently delayed hearings by taking adjournments. 

But this is the minor quibble. Point 2B is the FATF's reluctance to engage with the 2022 verdict besides a passing observation that the Supreme Court upheld the legal regime. By not probing further as to what has been the aftermath of Vijay Madanlal Choudhary, the FATF did itself a huge disservice, and I would argue it directly tainted some of the data in the report in respect of money laundering prosecutions. If the FATF dug deeper, it would have learnt that just before, and after, Vijay Madanlal Choudhary, courts began to set aside money laundering cases where the predicate offence no longer survived. But by framing the fate of PMLA prosecutions in a binary of 'acquittal vs. conviction', the FATF fails to capture this growing number of cases where the money laundering prosecution is quashed by the appellate court. This naturally affects how we perceive the effectiveness of the money laundering regime.

Further, greater engagement with Vijay Madanlal Choudhary may have also made the FATF think twice about its assumption that simply getting more special courts will curb delays. It may help, sure, since the numbers of judicial appointments and institutional capacity are poor across the board in India for all cases. But I would argue that it is unlikely to prove a game-changer and that delays will remain endemic to the prosecution of money laundering cases because of how the legal regime is structured. The inextricable link between the underlying predicate offence and the money laundering allegation suggests there should be greater synergy in the two sets of issues, but besides allowing for trials to happen in the same court, there is no legal measure to reduce inefficiency. Thus, the same judge deals with two trials, with two different procedural regimes, helmed by two separate investigating agencies and prosecuting teams, which bring in two separate sets of voluminous yet repetitive documents, with separate accused persons bearing different evidentiary burdens. And, of course, run these in tandem.  

Why We Must Not be Fooled by the FATF Report

A word of caution before we close this post. As I mentioned above, the grandstanding about the MER has already begun. It is critical to remember that, as glowing as the FATF review of India's money laundering regime may be projected in some quarters, the entire FATF exercise has absolutely nothing to say on the use of coercive powers by states for combating money laundering. For good reason too. Remember that the FATF is interested only in testing countries for compliance across a set of recommendations (presently 40 in total) and it has no time to deal with issues outside of those. One look at the 40 recommendations will tell you that how a country uses coercive powers of arrest, and how it frames its laws on bail in money laundering cases, is not the FATF's concern.

In other words, a glowing FATF review is not a glowing review of the entire PMLA or its implementation.