Supreme Court Affirms Bail Under PMLA for Illegal Custody Beyond 24 Hours

The Supreme Court in Directorate of Enforcement Vs Subhash Sharma has reaffirmed the constitutional mandate that no person can be kept in custody beyond 24 hours without being produced before the nearest Magistrate. The ruling, arising in the context of an arrest under the Prevention of Money Laundering Act, 2002 (PMLA), clarifies that once this constitutional safeguard is violated, the arrest itself is tainted and the court must grant bail, irrespective of the stringent twin conditions prescribed under Section 45(1)(ii) of the PMLA.

This decision has significant implications for the Directorate of Enforcement (ED) and other investigating agencies, especially regarding the use of Look Out Circulars (LOCs), coordination with the Bureau of Immigration, and adherence to Article 22(2) of the Constitution and Section 57 of the Code of Criminal Procedure, 1973 (CrPC).

Background of the Case

ECIR and Alleged Scheduled Offences

The ED registered an ECIR invoking Sections 3 and 4 of the PMLA. The ECIR was founded on three FIRs, each treated as scheduled offences. As per the allegations, the assessee had:

  • Procured loans aggregating to ₹31.37 crore from Punjab National Bank and Axis Bank
  • Used forged and fabricated documents
  • Availed credit facilities in the name of companies controlled by him
  • Allowed these loans to eventually become non-performing assets (NPAs)

The ED treated the alleged proceeds of crime as falling within the ambit of money laundering under the PMLA.

Defence Stand Before the High Court

The assessee, arrested in connection with the ECIR, approached the Chhattisgarh High Court under Section 439 of the CrPC seeking regular bail. His key contentions were:

  • He had cooperated with the ED from the inception of the ECIR.
  • A Look Out Circular (LOC) was issued against him, which he challenged.
  • He had been detained at IGI Airport, New Delhi, pursuant to the LOC.
  • After detention, he was transported to Raipur without being produced before the nearest Magistrate within 24 hours, in violation of Article 22(2) of the Constitution.
  • The manner of custody and delay in production rendered his arrest unconstitutional.

ED’s Opposition to Bail

The Directorate of Enforcement resisted the bail application on the following grounds:

  • The arrest was lawful and strictly in accordance with PMLA provisions.
  • The assessee allegedly posed a flight risk, given the issuance of the LOC.
  • The offences involved serious economic crimes and, therefore, a stricter approach to bail was warranted.
  • According to the ED, the formal arrest took place at 1:15 a.m. on 6 March 2022, and the assessee was produced before the Magistrate within 24 hours from that time, thereby fulfilling the statutory and constitutional requirement.

Findings of the Chhattisgarh High Court

Chronology of Detention and Custody

The High Court undertook a close scrutiny of:

  • The case diary
  • Records of the trial court
  • The sequence of events relating to detention and custody

On this basis, the High Court reached the following factual conclusions:

  1. The assessee was detained at IGI Airport, New Delhi at 6:00 p.m. on 4 March 2022 when the Bureau of Immigration executed the LOC issued at the instance of the ED.
  2. From 6:00 p.m. on 4 March 2022, he remained in custody on behalf of the ED.
  3. The ED took over physical custody of the assessee from the Bureau of Immigration at 11:00 a.m. on 5 March 2022 at IGI Airport.
  4. The assessee was thereafter transported from Delhi to Raipur.
  5. An arrest memo was prepared only at 1:15 a.m. on 6 March 2022 at Raipur.
  6. The assessee was produced before the remand court in Raipur later on 6 March 2022.

Relying on Article 22(2) of the Constitution and judicial precedents including Manoj v. State of Madhya Pradesh and **Ashak Hussain Allah Detha v.