The suo motu duty test: Supreme Court mandates Section 45 PMLA for all anticipatory bail pleas.

When the High Court forgot the PMLA rule

Dr. V.C. Mohan was being investigated by the Enforcement Directorate for money laundering. He had been summoned under the Prevention of Money Laundering Act, 2002. He did what any person fearing arrest would do: he moved the High Court of Telangana at Hyderabad for anticipatory bail under Section 438 of the Code of Criminal Procedure. The High Court granted it. The ED was not pleased. And on January 4, 2022, the Supreme Court of India set aside that order, sending the matter back with a clear instruction: the High Court had forgotten to apply the stricter bail conditions mandated by Section 45 of the PMLA.

The stakes were simple. If the High Court's order stood, every accused in a PMLA case could walk into a court, file a Section 438 application, and argue that the twin conditions of Section 45 — which require the court to be satisfied that the accused is not likely to commit any offence while on bail, and that there are reasonable grounds for believing the accused is not guilty — simply do not apply. The Supreme Court shut that door.

The summons that started it all

The Enforcement Directorate's Hyderabad Zonal Office issued a summons to Dr. V.C. Mohan on May 11, 2021, under ECIR/HYZO/20/2019/2246. The investigation was under the PMLA. Dr. Mohan, apprehending arrest, moved Criminal Petition No. 4134/2021 before the High Court of Telangana at Hyderabad. On June 25, 2021, the High Court allowed the petition and granted anticipatory bail under Section 438 CrPC.

The ED did not wait. It challenged the order directly before the Supreme Court, arguing that the High Court had treated the application as if it were for an ordinary IPC offence, without applying the rigors of Section 45 of the PMLA. The Supreme Court agreed.

What the ED argued — and what the High Court missed

The learned Counsel for the Enforcement Directorate contended that the High Court had failed to examine the jurisdictional facts. The application was for anticipatory bail in connection with a PMLA offence. Section 45 of the PMLA imposes twin conditions for granting bail: the court must be satisfied that there are reasonable grounds for believing that the accused is not guilty of such offence, and that he is not likely to commit any offence while on bail. The High Court, the ED argued, had not applied this test at all.

Dr. Mohan's counsel, on the other hand, relied on the Supreme Court's decision in Nikesh Tarachand Shah v. Union of India & Anr., (2018) 11 SCC 1. In that case, the Supreme Court had struck down certain conditions in Section 45 as unconstitutional. Paragraph 42 of that judgment contained observations that the respondent argued meant the rigors of Section 45 should not apply to anticipatory bail under Section 438 CrPC.

The witness rule the Supreme Court applied

The Bench comprising Justice A.M. Khanwilkar and Justice C.T. Ravikumar was clear. The Court held that once a prayer for anticipatory bail is made in connection with an offence under the PMLA, the underlying principles and rigors of Section 45 of the PMLA must get triggered, even though the application is filed under Section 438 of the Code of Criminal Procedure.

The Court distinguished Nikesh Tarachand Shah. The observations in paragraph 42 of that judgment, the Court said, had been misunderstood. The Court clarified that the offence under the PMLA Act is dependent on the predicate offence which would be under ordinary law, including provisions of IPC. That does not mean that while considering anticipatory bail in PMLA offence, Section 45 would not come into play.

The Court went further. It held that it is the duty of the court to examine jurisdictional facts including the mandate of Section 45 PMLA while considering bail in PMLA cases, regardless of whether objection to non-application was raised by the prosecution. The High Court had failed to do this.

THE PLAY: When an accused seeks anticipatory bail in a PMLA case, the court must apply Section 45's twin conditions — even if the prosecution does not object. The court's duty is suo motu.

Why the High Court got it wrong

The High Court of Telangana at Hyderabad had treated the anticipatory bail application as one relating to an ordinary IPC offence. It had not considered the specific rigors of Section 45 PMLA. The Supreme Court found this to be a fundamental error. The Court noted that the High Court had not even referred to Section 45 in its order. The application was for an offence under the PMLA, and the procedural vehicle of Section 438 CrPC did not change the substantive law that applied.

The Court also rejected the argument that because the PMLA offence is dependent on a predicate offence under ordinary law, the stringency of Section 45 should not apply. That argument, the Court said, was based on a misunderstanding of the law.

The doctrine that mattered

The ratio decidendi of this judgment is straightforward but significant. Section 45 of the PMLA applies to anticipatory bail applications under Section 438 CrPC. The court considering such an application must examine whether the twin conditions of Section 45 are satisfied. This is not optional. It is a jurisdictional requirement.

The second ratio is equally important: the court must apply Section 45 suo motu. The prosecution does not need to raise an objection. The court's duty is to examine the mandate of Section 45 regardless of whether the prosecution has argued the point.

This judgment clarifies a point that had been left ambiguous after Nikesh Tarachand Shah. Some High Courts had taken the view that because Section 45 had been partially struck down, its rigors did not apply to anticipatory bail. The Supreme Court has now put that argument to rest.

What this means for practitioners

For advocates appearing in PMLA bail matters, this judgment changes the way you argue. You cannot rely on the procedural form of the application — whether it is under Section 438 CrPC — to avoid the twin conditions of Section 45. The substantive law applies regardless of the procedural vehicle.

For the Enforcement Directorate, this judgment is a powerful tool. It means that every anticipatory bail application in a PMLA case must be scrutinized under Section 45. The High Court cannot grant bail without recording satisfaction on both conditions: reasonable grounds to believe the accused is not guilty, and that the accused is not likely to commit any offence while on bail.

For founders and CFOs who may face PMLA investigations, the message is clear. Anticipatory bail in PMLA cases is not the same as anticipatory bail in ordinary criminal cases. The bar is higher. The court must be satisfied that you are not guilty and that you will not commit any offence while on bail. This is a heavy burden.

The bottom line

The Supreme Court set aside the High Court order and remanded the matter for fresh consideration. The interim protection granted by the High Court was continued for four weeks from the date of the Supreme Court order, subject to the outcome of the remanded petition. The High Court was directed to hear the matter within four weeks and apply the correct legal standard under Section 45 PMLA.

For the practitioner, the takeaway is simple: when you file an anticipatory bail application in a PMLA case, prepare to satisfy the twin conditions of Section 45. The court will apply them, whether you argue the point or not.