The Bombay High Court granted bail to the applicant, an IRS officer, arrested under the Prevention of Money Laundering Act (PMLA). The court found that the Enforcement Directorate (ED) prematurely categorized assets as "proceeds of crime" without a final conclusion by the CBI on whether the assets were disproportionate. The applicant had already been in judicial custody for over a year, with no trial date in sight.

1. Background of the Case

• Applicant's Professional Background: Sachin Balasaheb Sawant joined the Indian Revenue Service (IRS) in 2008 and held several posts, including Deputy Director of Enforcement. He was working as Additional Commissioner in Lucknow when arrested.
• Allegations: The Anti-Corruption Bureau (ACB) Mumbai filed an FIR accusing the applicant of amassing disproportionate assets during his service tenure, valued at ₹2.45 crores.
• PMLA Action: The ED registered an Enforcement Case Information Report (ECIR) under the PMLA, considering the FIR as the predicate offence and arrested Sawant in June 2023.

2. Applicant's Arguments for Bail

• Defective FIR: The FIR for the predicate offence lacked the complainant's signature, rendering it legally defective.
• No Filed Chargesheet: The CBI had not filed a chargesheet regarding the predicate offence, and the ED could not presume disproportionate assets to be proceeds of crime until a conclusive investigation.
• Premature Arrest: The arrest was made without enough material or statements to justify suspicion under PMLA. Statements were recorded after arrest, indicating a preconceived notion of guilt.

3. Respondent's (ED) Counterarguments

• Investigation Validity: ED argued it was rightfully investigating the proceeds of crime under the PMLA and had traced illegal cash transactions through family members to acquire assets.
• Strong Prima Facie Case: The ED presented multiple instances of layering and integration of assets, asserting that the applicant used illicit funds through family members.

4. Court's Observations and Findings

• Pending Investigation: The court noted that the CBI’s investigation was still ongoing, with no filed chargesheet. The ED's assumption that all assets were proceeds of crime was premature.
• Unsustainable Presumption: The court highlighted that without the CBI’s final conclusion on whether the applicant failed to account for the assets, the ED's actions were presumptive and legally unsustainable.
• Preconceived Guilt: The court referred to previous Supreme Court judgments emphasizing that no preconceived guilt should be assumed during investigations involving disproportionate assets.

5. Legal Provisions Discussed

• Prevention of Corruption Act, 1988: The applicant was charged under Sections 13(2) and 13(1)(e) (pre-amendment) and 13(1)(b) (post-amendment).
• PMLA (Section 45): The twin test of bail under PMLA was examined, requiring the accused to prove no prima facie case of money laundering.

Ratio Decidendi:

The Bombay High Court ruled that since the CBI's investigation into disproportionate assets had not concluded, the ED’s assumption that all assets were proceeds of crime was flawed. The court determined that the applicant's arrest was premature, and his continued incarceration without a timely trial would be unjust.

Acts and Sections Discussed:

• Section 45 of the Prevention of Money Laundering Act (PMLA)
• Sections 13(1)(e) and 13(2) of the Prevention of Corruption Act, 1988 (pre- and post-amendment)
• Section 19 of the PMLA (Arrest Powers)
• Section 25 of the Indian Evidence Act (Statement Admissibility).

Subjects:

Bail Application, Money Laundering, PMLA
Bail, IRS Officer, Prevention of Corruption Act, Money Laundering, PMLA, Bombay High Court, Judicial Custody, Proceeds of Crime, Disproportionate Assets, CBI Investigation.