The Prevention of Money Laundering Act, 2002 was enacted to fulfil India's obligations under the Financial Action Task Force (FATF) framework and to combat the proceeds of serious organised crime. Its aims were legitimate. Its instruments, however, have evolved into mechanisms that systematically undermine the presumption of innocence, the right to bail, and the principles of a fair trial. The Supreme Court's 2022 ruling in Vijay Madanlal Choudhary v. Union of India upheld the constitutional validity of the PMLA in sweeping terms, endorsing the Enforcement Directorate's broad powers of arrest, attachment, and search without warrant. Since then, a series of subsequent rulings has attempted to walk that validation back, producing a contradictory jurisprudence that leaves the law in a state of constitutional unease.
The central mechanism of the PMLA's coercive force is the combination of reverse burden of proof under Section 24 and twin conditions for bail under Section 45. Section 24 provides that once the prosecution establishes that the proceeds of crime are involved, the burden shifts to the accused to prove innocence. Section 45 requires the court to be satisfied that the accused is not guilty and is unlikely to commit further offences, a standard so exacting that the granting of bail becomes an act of judicial exceptionalism rather than the rule. The combined effect is that an accused person can be arrested on the basis of the ED's subjective "reasons to believe," remanded to custody, and forced to bear the burden of establishing innocence before any trial has taken place.
The Supreme Court's position on PMLA bail has been inconsistent. In Vijay Madanlal Choudhary, the Court upheld Section 45, finding it proportionate to the seriousness of money laundering. But in a series of subsequent orders, including the grant of bail to former Delhi Deputy Chief Minister Manish Sisodia in August 2024, the Court held that prolonged pre-trial incarceration is itself a ground for bail even under the twin-conditions framework, and that the right to a speedy trial under Article 21 cannot be indefinitely subordinated to the rigours of Section 45. The Court has also held, in a 2024 ruling, that the ED official's "reasons to believe" that a person is guilty of the offence must be recorded in writing and communicated to the accused. These are incremental safeguards, but they have not addressed the constitutional infirmity at the root of the provision.
The structural problem with the PMLA is one of incentive design. The ED's performance metrics, institutional culture, and political visibility are all tied to high-profile arrests and attachment orders. There is no institutional penalty for wrongful arrest. The PMLA provides no provision for compensation to an accused who is arrested, detained, and ultimately acquitted. Contrast this with the consequences for the accused: attachment of assets can destroy a business before any adjudication; arrest generates adverse publicity that is irreversible regardless of outcome; and the legal costs of defending against ED proceedings are substantial, creating a de facto punishment that operates entirely outside the criminal justice system's oversight.
The constitutional challenge to Section 45's twin conditions is not a novel argument, it was struck down once before by a two-judge bench in Nikesh Tarachand Shah v. Union of India (2017), specifically on the ground that the conditions were discriminatory and bore no rational nexus to the objectives of the Act. Parliament then amended the provision to cure the specific defect identified in Nikesh Tarachand Shah, and the revised version was upheld in Vijay Madanlal Choudhary. But the amended provision retains the fundamental constitutional objection: it requires a court to prejudge guilt as a condition for granting liberty. This is not a procedural safeguard, it is a reversal of the presumption of innocence, which the Supreme Court has recognised as a facet of the right to a fair trial under Article 21.
The path to reform requires two parallel interventions. First, the Supreme Court must revisit Vijay Madanlal Choudhary on the specific question of the twin conditions in a case presenting direct constitutional challenge, ideally by a larger bench. The 2022 judgment deserves criticism not because money laundering is unserious, but because the constitutional standards it applied were insufficiently demanding. Second, Parliament must amend the PMLA to introduce independent judicial oversight of ED arrests, a pre-arrest warrant requirement for economic offences would align India's practice with jurisdictions such as the United Kingdom and the United States, where financial crime enforcement operates within tighter judicial constraints. The fight against money laundering is important. But it cannot be waged by dismantling the constitutional safeguards that distinguish a law-governed state from an arbitrary one.