Delhi High Court Grants Bail After Finding Proceeds-of-Crime Nexus Unresolved at This Stage

The Delhi High Court granted regular bail to Punit Narendra Garg in a prosecution under the Prevention of Money-Laundering Act, 2002 (PMLA). The yacht and Manhattan apartment relied upon by the Enforcement Directorate had been acquired in 2008 and 2010, whereas the scheduled offences identified in the predicate FIRs concerned alleged fraudulent borrowing and diversion during 2013–2017. The Court held that refinancing earlier borrowings, without more, did not sufficiently establish at the bail stage that those pre-existing assets were proceeds of the later alleged scheduled offences. The Court also considered the applicant’s alleged role in subsequent dealings, the scale of the documentary record, more than eight months of custody, and the remote prospect of an early trial. Finding the requirements of Section 45 PMLA satisfied on broad probabilities, the Court allowed bail subject to safeguards, without deciding guilt or the legality of the transactions at trial (Paras 13–20, 25–33).

Key Proposition: At the bail stage under Section 45 PMLA, a refinancing trail linking later loans to earlier borrowings does not, by itself, sufficiently establish that assets acquired before the alleged scheduled offences are proceeds of crime; the statutory nexus must still be assessed on the material available.

● Prevention of Money-Laundering Act, 2002 – Sections 2(1)(u), 3 and 45 – Proceeds of crime – Whether assets acquired before the alleged scheduled offences were sufficiently connected to those offences? Held, the nexus remained a substantial disputed question at the bail stage (Paras 13–18, 25).

● Prevention of Money-Laundering Act, 2002 – Section 45 – Regular bail – Whether statutory conditions were satisfied despite serious allegations? Held, both conditions were satisfied on the material and broad probabilities then available (Paras 25, 31–33).

● Constitution of India – Article 21 – Pre-trial detention – Whether continued custody was justified where trial was unlikely to conclude early? Held, custody and the enlarged prosecution record weighed in favour of bail subject to safeguards (Paras 26–32).

Background / Synopsis :

● The Enforcement Directorate (ED) prosecuted the applicant in Complaint Case No. 20/2026 arising from ECIR/STF/26/2025, following a CBI FIR lodged on a complaint by State Bank of India concerning alleged conspiracy, cheating and diversion of loan funds. The alleged loss to SBI was ₹2,929.05 crore; further FIRs relating to Bank of Baroda and Punjab National Bank were added to the ECIR (Paras 2–3).

● ED attributed approximately ₹149.77 crore in alleged proceeds of crime to three groups of transactions: acquisition and later sale of the yacht “Tian”; acquisition and later sale of a Manhattan apartment; and payments from overseas group accounts towards the applicant’s daughters’ educational expenses (Paras 3–7).

● The yacht was acquired in 2008 and the apartment in 2010. ED’s theory linked them to alleged scheduled offences in 2013–2017 through the refinancing and repayment of earlier foreign borrowings (Paras 4–5, 14–18).

● The applicant was arrested on 29 January 2026. His earlier bail application was dismissed by the Special Judge on 15 June 2026. He sought regular bail under Section 483 BNSS read with Section 45 PMLA; the High Court allowed the application on 15 October 2026 (Paras 1, 33–36).

Issues For Consideration :

● Whether the material sufficiently connected the yacht and Manhattan apartment, acquired in 2008 and 2010, to criminal activity relating to the scheduled offences alleged for 2013–2017, so as to treat them as proceeds of crime at the bail stage.

● Whether the applicant’s alleged participation in the later sale, handling and use of the assets or their proceeds established a sufficient basis to deny bail under Section 45 PMLA.

● Whether the applicant’s period of custody, enlarged documentary record, ongoing investigation and unlikely early conclusion of trial weighed against continued pre-trial detention under Article 21.

Submissions Of Parties :

Applicant:

● The yacht and apartment pre-dated the 2013–2017 scheduled-offence period and were not mortgaged or offered as security for the disputed loans; later refinancing could not retrospectively convert them into proceeds of crime (Paras 8–9).

● The applicant denied involvement in obtaining or deciding the use of the disputed credit facilities and said the educational payments were employment-related reimbursements approved by management (Paras 9–10).

● He relied on continued incarceration, the documentary nature of the evidence, the expansion of the prosecution through a supplementary complaint, and the non-arrest of certain persons allegedly involved (Para 10).

Respondent / Enforcement Directorate:

● ED relied on banking records, electronic communications and witness statements, alleging that the applicant exercised control over overseas entities and participated in the sale and handling of the assets and proceeds (Paras 6–7, 11).

● ED argued that Section 3 PMLA can cover a person who later conceals, possesses, uses or disposes of proceeds of crime, even if that person did not generate the proceeds or appear in the predicate FIR; it also stressed the seriousness of the allegations and ongoing investigation (Para 11).

● ED raised concerns about possible interference with witnesses or evidence and relied on Supreme Court directions requiring a thorough and time-bound investigation (Paras 7, 29–30).

Court's Observations & Analysis :

Re: Issue 1 — Character of the assets and statutory nexus

● Section 2(1)(u) PMLA requires property to be derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence, or its value. The Court treated this foundational link as distinct from evidence of later dealings with the property (Paras 13, 20).

● The yacht and apartment were acquired in 2008 and 2010, while the scheduled offences presently identified concerned 2013–2017. The repayment trail through later refinancing was relevant and required trial examination, but did not by itself answer whether the earlier assets were derived from the later alleged criminal activity (Paras 14–18).

● The Court did not foreclose investigation into earlier periods, but held that the possibility of future expansion could not be treated as proof that earlier transactions already formed part of a scheduled offence (Para 17).

● Held: On the material then available, the required nexus between the earlier acquisitions and the alleged scheduled offences was a substantial disputed question and had not been sufficiently established for the purposes of the bail assessment (Paras 18, 25).

Re: Issue 2 — Applicant’s alleged role and other transaction evidence

● The applicant’s communications could indicate participation in later transactions, but did not independently establish that the underlying assets were proceeds of crime. His alleged involvement in dealing with assets and the legal character of those assets were separate questions (Paras 19–20, 25).

● The Court considered the PMLA Section 50 custodial statements separately from the independent electronic and documentary material, noting the legal principle discussed in Prem Prakash and the Special Judge’s observation that independent material was principally relied upon (Para 21).

● The NCLT’s dismissal of an application concerning the Manhattan apartment was jurisdictional and did not exonerate the applicant. The NCLT’s concerns were expressly not findings on any party’s conduct (Para 22).

● The educational-expense correspondence offered an explanation requiring assessment alongside payment records; it did not conclusively establish the legitimacy or source of the remittances (Para 23). Absence from predicate FIRs and non-arrest of other persons were not decisive, though the respective roles and continued detention were considered (Para 24).

● Held: The communications and allegations did not resolve the essential proceeds-of-crime nexus; assessed on broad probabilities, the material provided reasonable grounds for believing the applicant was not guilty for the limited purpose of Section 45 bail consideration (Para 25).

Re: Issue 3 — Custody, trial delay and Article 21

● The supplementary complaint added seven accused and approximately 68,658 pages of documents, taking the stated aggregate record to about 77,384 pages and 56 witnesses in the consolidated proceedings. Document-supply and scrutiny difficulties continued, and further investigation remained open (Paras 26–27).

● The Court considered the trial unlikely to conclude early. It applied the principle that Section 45 restrictions cannot justify indefinite pre-trial detention where trial is unlikely to conclude within a reasonable time, while noting there is no fixed period after which bail automatically follows (Paras 28–29).

● The documentary and electronic evidence had substantially been secured, and concerns about interference could be addressed by conditions. Supreme Court directions for a thorough investigation did not determine whether the applicant should remain detained pending trial (Paras 29–30).

● The applicant was 61, had ceased to hold office in RCOM in 2025, had no previous conviction shown on the record, and the principal documentary/electronic evidence was secured. The Court found the second Section 45 condition satisfied, subject to safeguards (Para 31).

● Held: Both Section 45 conditions were fulfilled; continued detention was not warranted in light of the unresolved nexus question, period of custody, enlarged prosecution and remote prospect of early trial (Paras 25–32).

Notable Observations:

● “Refinancing, by itself, does not answer that enquiry.” (Para 18)

● “The seriousness of an accusation, however, cannot determine the application for bail to the exclusion of the statutory requirements and the constitutional protection of personal liberty.” (Para 32)

Decision & Directions :

● The application was allowed and regular bail was granted in Complaint Case No. 20/2026 arising out of ECIR/STF/26/2025 (Para 33).

● The applicant must furnish a personal bond of ₹1,00,000 with two sureties of the like amount, to the satisfaction of the Special Judge (Para 33).

● He must surrender his passport, if not already surrendered, and must not leave India without prior permission of the Special Court (Para 33(a)).

● He must provide his residential address, mobile number and email address to the Investigating Officer and inform the Investigating Officer and Special Court of changes (Para 33(b)).

● He must appear before the Special Court on every hearing date unless exempted and cooperate with expeditious trial proceedings (Para 33(c)).

● He must not contact, influence, threaten or induce prosecution witnesses, directly or indirectly, or tamper with evidence (Para 33(d)).

● He must not issue instructions concerning disposal, transfer or further investment of the assets or sale proceeds involved in the prosecution without prior permission of the Special Court (Para 33(e)).

● He must join further investigation when required by written notice and cooperate in accordance with law (Para 33(f)).

● ED may seek cancellation of bail if any condition is breached. Release is to follow compliance unless the applicant is required in custody in another case. Observations are confined to the bail application and must not influence the trial court’s consideration of charge or evidence (Paras 34–35).

● Separate Opinions: None.

Legal Provisions Discussed & Precedents Cited :

● Prevention of Money-Laundering Act, 2002 — Section 2(1)(u): Defines “proceeds of crime” and requires a link to criminal activity relating to a scheduled offence.

● Prevention of Money-Laundering Act, 2002 — Section 3: Addresses the offence of money laundering, including processes or activities connected with proceeds of crime.

● Prevention of Money-Laundering Act, 2002 — Section 24: Statutory presumption discussed in relation to foundational facts concerning the scheduled offence and proceeds of crime.

● Prevention of Money-Laundering Act, 2002 — Section 45: Twin conditions applicable to bail where the Public Prosecutor opposes the application.

● Bharatiya Nagarik Suraksha Sanhita, 2023 — Section 483: Provision invoked for regular bail.

● Bharatiya Nagarik Suraksha Sanhita, 2023 — Section 50 PMLA statements are discussed separately; Section 50 is a PMLA provision, concerning powers of authorities to summon persons and record statements.

● Constitution of India — Article 21: Personal liberty and protection against unjustified continued pre-trial detention.

● Insolvency and Bankruptcy Code, 2016 — Sections 60(5) and 66(1): Provisions invoked in NCLT proceedings concerning the Manhattan apartment transaction.

● Vijay Madanlal Choudhary v. Union of India, 2022 SCC OnLine SC 929 — Relied on for the statutory framework and continuing nature of money laundering.

● Prem Prakash v. Union of India, 2024 INSC 637 — Relied on regarding foundational facts and inadmissibility of a PMLA Section 50 statement recorded from an accused in custody by the same investigating agency.

● Union of India v. Kanhaiya Prasad, 2025 INSC 210 — Referred to regarding recording statutory satisfaction under Section 45 PMLA.

● Pavana Dibbur v. Directorate of Enforcement, 2023 INSC 1029 — Relied on for the required connection between property and scheduled-offence proceeds and for prosecution under Section 3 without being an accused in the scheduled offence.

● Anoop Bartaria v. Deputy Director, Enforcement Directorate, 2023 INSC 413 — Relied on for the principle that knowledge that property constituted proceeds of crime is not a prerequisite to Section 3, while the property must still meet Section 2(1)(u).

● V. Senthil Balaji v. Deputy Director, Directorate of Enforcement, 2024 INSC 739 — Relied on for bail and the concern against indefinite pre-trial detention where trial is unlikely to conclude within a reasonable time.

● Mahesh Joshi v. Directorate of Enforcement, 2025 INSC 1377 — Referred to in applying the principles on delay and continued detention.

● Arvind Dham v. Directorate of Enforcement, 2026 INSC 12 — Referred to in applying the principles on delay and continued detention.

● E.A.S. Sarma v. Union of India, W.P. (C) No. 1217/2025 — Considered in relation to Supreme Court directions for a thorough and time-bound investigation.