Custodial Section 50 PMLA Statements Cannot Defeat Bail; Foundational-Facts Threshold for Section 24 Presumption

1. Introduction

The Delhi High Court, in a common judgment delivered by Justice Girish Kathpalia in PRAVEZ KHAN v. DIRECTORATE OF ENFORCEMENT (04.05.2026), decided five connected regular bail applications under Sections 3 and 4 of the Prevention of Money Laundering Act, 2002 (“PMLA”) arising from ECIR/DLZO-II/03/2024.

The alleged predicate offence (FIR No. 59/2024, PS Crime Branch) concerned a syndicate purportedly manufacturing and selling spurious anti-cancer medicines (notably Keytruda/Opdyta), with empty vials allegedly procured from hospital channels, refilled at a Delhi premises, and sold in the market. Three applicants had already obtained bail in the predicate case, while two applicants were not even chargesheeted for the predicate offence yet remained in PMLA custody.

The key issues before the Court were:

  • whether the applicants could satisfy the Section 45 PMLA “twin conditions” for bail;
  • whether the ED had established the foundational facts necessary to invoke the presumption under Sections 23/24 PMLA;
  • whether reliance could be placed on Section 50 PMLA statements recorded while the accused were in ED custody;
  • the effect of earlier bail rejections by a coordinate bench (and Supreme Court dismissal of SLPs in limine);
  • the constitutional constraint of prolonged pre-trial incarceration under Article 21.

Prelude: Court’s caution on media “trial-by-publication” during arguments

Before addressing merits, the Court recorded serious concern over a series of front-page newspaper articles published during day-to-day bail hearings, allegedly reproducing WhatsApp chats without redaction and seemingly “answering” the Court’s queries to ED counsel. The Court refrained from attributing culpability for want of cogent material but issued a clear institutional warning: any State-engineered media influence would imperil judicial independence and the rule of law.

2. Summary of the Judgment

The Court allowed all five bail applications, directing release on personal bond of Rs. 1,00,000 with one surety, and imposing a travel restriction (no leaving India without trial court permission).

The decisive findings, at the bail stage, were:

  • Section 50 PMLA statements recorded while the accused were in ED custody, insofar as self-incriminating, were treated as inadmissible and unsafe to rely upon, following Prem Prakash vs Union of India.
  • ED’s case on the foundational facts connecting alleged “proceeds of crime” with the scheduled offence was found hazy, including gaps at the “genesis” (hospital leakage of vials), “terminal end” (end users/patients), and uncertainty whether most vials were actually spurious.
  • Prior bail rejections by a coordinate bench did not bar reconsideration because Supreme Court dismissals of SLPs were in limine, attracting no affirmation/res judicata; moreover, the Court identified fresh/legal infirmities in reliance on Section 50 statements.
  • Selective arrest (non-arrest of similarly placed or graver-role persons) was treated as relevant to the fairness of continued detention.
  • Given over two years’ incarceration, no near-term trial, and ED itself seeking further time for investigation, Article 21 weighed heavily, consistent with Arvind Dham vs Directorate of Enforcement.

On these premises, the Court recorded satisfaction that there were “reasonable grounds” to believe the applicants were not guilty (first limb) and no material showing likelihood of reoffending (second limb).

3. Analysis

3.1 Precedents Cited (and how they shaped the outcome)

(a) Section 45 PMLA and the “twin conditions” framework

  • Bhaskar Yadav vs Directorate of Enforcement, 2026:DHC:813
    The Court relied on its own earlier exposition (noting Supreme Court had upheld it) that Section 45’s twin conditions apply to bail/anticipatory bail; the court assesses broad probabilities rather than a mini-trial, yet must reach “reasonable grounds for believing” (more than mere prima facie).
  • Vedpal Singh Tanwar vs Directorate of Enforcement, 2025 SCC OnLine Del 4330
    This was used as a compact statement of PMLA bail principles, including: the special nature of PMLA, the mandatory character of Section 45 conditions, and the distinct approach to economic offences.
  • Vijay Madanlal Chaudhary vs Union of India, 2022 SCC OnLine SC 929
    Treated as the controlling authority on: (i) the nature and object of PMLA; (ii) the meaning of “reasonable grounds”; and crucially (iii) Section 24 presumption requiring establishment of foundational facts.

(b) Foundational facts before Sections 23/24 presumption can operate

  • Vijay Madanlal Chaudhary vs Union of India, 2022 SCC OnLine SC 929
    The Court extracted and applied the Supreme Court’s formulation that prosecution must first establish at least three foundational facts: (1) scheduled offence criminal activity committed; (2) property derived/obtained as a result; (3) person’s involvement in process/activity connected with that property. Only then does Section 24 presumption arise.
  • Prem Prakash vs Union of India, 2024 INSC 637
    Cited not only for Section 50 inadmissibility (discussed below) but also for its insistence that ED’s bail reply should crystallize how foundational facts are prima facie established—only then can burden shift to the accused.

(c) Admissibility and reliability of Section 50 PMLA statements (custodial confessions)

  • Prem Prakash vs Union of India, 2024 INSC 637
    This case was pivotal. The High Court read it as laying down a broad rule: when an accused is in custody under PMLA, statements under Section 50 to the same agency are inadmissible against the maker because custody creates vulnerability and the agency’s dominance makes voluntariness unsafe. The Court emphasized the Supreme Court’s test: not whether coercion is proved, but whether it could have been possible.
  • Vijay Madanlal Chaudhary vs Union of India, 2022 SCC OnLine SC 929
    Used to anchor that statements after formal arrest may implicate Article 20(3) and Section 25 Evidence Act considerations, and that protection under Section 25 may extend on a case-by-case basis.
  • In Re Elukuri Seshapani Chetti (ILR 1937 Mad 358) and Kodangi V. Emperor, (AIR 1932 Mad 24.)
    These older authorities, quoted in Prem Prakash, were used to reinforce the principle that once a statement amounts to a confession to investigating authorities, its inadmissibility is driven by the “spirit” of Section 25 Evidence Act, regardless of which “case label” it is attached to.

(d) Successive bail consideration and effect of SLP dismissal in limine

  • Kusal Toppo & Anr. vs State of Jharkhand, (2019) 13 SCC 676
    Applied for the proposition that dismissal of an SLP in limine does not affirm the lower court judgment and does not trigger res judicata in criminal matters.
  • Kunhayammed v. State Of Kerala, (2000) 6 SCC 359 and State of Punjab v. Davinder Pal Singh Bhullar, (2011) 14 SCC 770
    Cited within Kusal Toppo to support the “no merger / no affirmation” consequence of in limine SLP dismissal.
  • Khoday Distilleries Ltd. & Ors. vs Sri Mahadeshwara Sahakara Sakkare Karkhane Ltd., Kollegal, (2019) 4 SCC 376
    Used to explain that at SLP stage the Supreme Court exercises discretionary “gatekeeping” jurisdiction, not appellate review.
  • Lt. Col. Prasad Shrikant Purohit vs State of Maharashtra (21.08.2017)
    Relied on to note that successive bail is permissible, but a court granting bail after earlier rejection must record fresh grounds and consider prior reasons—an obligation the Court discharged by explaining why coordinate bench reliance on Section 50 statements could not stand post Prem Prakash.
  • Nikhil Jain vs State of NCT of Delhi, 2025:DHC:8537
    Distinguished: ED cited it for “judicial propriety,” but the Court held it arose in a different context and did not bar reconsideration here.
  • Coordinate bench decisions: Lovee Narula vs Directorate of Enforcement, 2025:DHC:467 and Rajesh Kumar vs Directorate of Enforcement (28.01.2025)
    The Court reviewed these orders and found their major reliance on Section 50 statements and WhatsApp chats. It held it was not persuaded to follow them given the inadmissibility concerns and the lack of scrutiny of foundational facts.

(e) Economic offences and bail approach

(f) Article 21, prolonged incarceration, and PMLA bail

  • Arvind Dham vs Directorate of Enforcement, 2026 INSC 12
    Treated as the immediate constitutional compass: statutory restrictions cannot produce indefinite pretrial detention; where maximum sentence is 7 years, prolonged incarceration and unlikelihood of trial concluding in reasonable time warrants constitutional courts’ intervention.
  • The judgment also referred (as part of the Supreme Court’s chain) to V. Senthil Balaji and Padam Chand Jain (supra) for the proposition that prolonged detention cannot become punishment and documentary seizure reduces tampering risk.

3.2 Legal Reasoning (step-by-step)

(i) Coordinate bench bail rejections were not a bar

The Court held that because the Supreme Court dismissed SLPs in limine, there was no affirmation/merger and no res judicata. It then undertook the required discipline for successive bail adjudication by examining the earlier reasons and recording why it differed—chiefly the treatment of Section 50 statements after Prem Prakash.

(ii) Section 50 statements recorded in ED custody were discarded

The Court found, as a matter of record, that each applicant’s Section 50 statements were recorded after ED arrest and while in ED custody. Applying Prem Prakash vs Union of India, the Court treated self-incriminatory portions as inadmissible/unsafe.

Importantly, the Court’s assessment was not merely doctrinal but factual: it observed the statements appeared “copy paste,” “smooth,” and “unbelievable” as truly voluntary confessions, reinforcing why custodial Section 50 statements should not be relied upon to deny liberty at the bail stage.

(iii) Foundational facts were not clearly established to trigger Section 24 presumption

The Court emphasized that ED cannot rely on a presumption of taint merely because money exists or a transaction seems “unexplained.” It must still show a prima facie nexus between the alleged scheduled offence and the “property” claimed to be proceeds of crime.

Here, the Court found the evidentiary chain incomplete at multiple critical points:

  • Genesis gap: ED did not investigate how hospitals and their staff could allow empty/used vials to leak despite statutory disposal and recordkeeping requirements (batch numbers, incineration, etc.). The “source” mechanism remained unexamined.
  • Terminal gap: ED did not examine end users/patients, did not identify harm/no-effect complaints, and did not establish downstream consequences consistent with a spurious-drugs narrative.
  • Substance gap: Forensic/manufacturer verification (as charted) showed multiple vials attributed to one applicant contained genuine Keytruda/Opdyta/Perjeta/Darzalex, with only a few found to contain anti-fungal substances; yet ED did not probe alternative explanations (manufacturing error, supply chain compromise, etc.) to shore up foundational facts.

(iv) WhatsApp chats were treated as weak proof of laundering

The WhatsApp chats, earlier used against some applicants, were viewed by this Court as “usual business chats” in a medicine-trade context. They were not given decisive weight to curtail liberty, particularly after the exclusion of custodial Section 50 confessions.

(v) Selective arrests undermined fairness of continued detention

While accepting that arrest is an investigative prerogative, the Court treated “pick and choose” arrest as a relevant factor when the consequence is prolonged detention of some, while others with similar or graver alleged roles were not arrested. The Court rejected ED’s rationale that cooperation justifies non-arrest, noting that such a logic risks collapsing the protection against self-incrimination by rewarding “succumbing” to investigative pressure.

(vi) Article 21 and the seven-year maximum sentence context

The Court noted that Section 4 PMLA ordinarily caps imprisonment at seven years (in cases not falling in the higher category), while applicants had already spent over two years in custody, with ED seeking further time and trial not even likely to commence soon. Relying on Arvind Dham vs Directorate of Enforcement, it held constitutional courts must prevent pretrial detention from becoming punishment.

3.3 Impact

(a) Immediate doctrinal effect on PMLA bail practice

  • Section 50 statements recorded in ED custody are unlikely to remain a “default evidentiary crutch” at bail stage in Delhi where the statement is self-incriminatory and the maker was in custody. This judgment operationalizes Prem Prakash as a robust exclusionary rule in custody scenarios.
  • ED will be expected, in bail replies, to do more than cite transactions and confessions; it must articulate the foundational facts that connect the property to the scheduled offence and connect the accused to the laundering process/activity.

(b) Institutional effect on “predicate offence minimalism”

The judgment signals that ED cannot treat the predicate offence as entirely “someone else’s problem” (police/drug inspector) and still expect PMLA detention to continue on presumptions. While ED is not required to re-investigate the predicate offence fully, it must show enough foundational linkage to justify PMLA custody and to trigger statutory presumptions.

(c) Article 21 as a safety valve against indefinite PMLA custody

The decision reinforces that, even in PMLA matters, prolonged incarceration—especially where maximum sentence is seven years—can constitutionally override the practical effect of stringent bail provisions if trial is not progressing.

(d) Caution against media influence during sub judice hearings

Although not determinative to bail, the Court’s prelude is a strong on-record judicial warning that media publication patterns that appear timed to influence adjudication will be institutionally deprecated and may invite scrutiny in future cases.

4. Complex Concepts Simplified

  • Section 45 “twin conditions” (PMLA): Bail can be granted only if the court finds (1) reasonable grounds to believe the accused is not guilty, and (2) the accused is not likely to commit any offence while on bail.
  • “Reasonable grounds” vs “prima facie”: “Prima facie” means an initial case appears. “Reasonable grounds” is a higher threshold—there must be a persuasive, reasoned basis (without conducting a full trial) to believe the accused may not be guilty.
  • “Foundational facts” for Section 24 presumption: Before the law presumes “proceeds of crime are involved in money laundering,” ED must first show, at least prima facie: (i) scheduled offence occurred; (ii) the property came from it; (iii) the accused dealt with that property in laundering-related ways.
  • Section 50 PMLA statements: ED can summon and record statements. But if the person is in custody and makes a self-incriminating statement, courts may treat it as not truly voluntary—therefore unsafe or inadmissible against the maker, akin to the policy behind excluding confessions to police.
  • SLP dismissal “in limine”: When the Supreme Court dismisses a Special Leave Petition at the threshold without detailed reasons, it generally does not mean the lower court judgment is affirmed on merits, nor does it bar reconsideration later.
  • “Selective arrest”: Arresting some accused while leaving similarly placed accused unarrested can become relevant to fairness in deciding whether continued custody is justified, especially when detention becomes prolonged.

5. Conclusion

This judgment’s core contribution lies in its insistence that PMLA bail adjudication must be evidence-linked, not confession-led, especially where confessions are custodial Section 50 statements. By applying Prem Prakash vs Union of India, the Court declined to let ED custody-produced self-incrimination become the foundation for denying liberty.

Equally significant is the Court’s reaffirmation that statutory presumptions under Sections 23/24 PMLA do not arise automatically: ED must first establish foundational facts connecting the alleged “proceeds of crime” to the scheduled offence and to the accused’s laundering activity. In the face of investigative gaps, selective arrests, and prolonged incarceration under a seven-year sentencing regime, the Court applied the constitutional discipline of Article 21, consistent with Arvind Dham vs Directorate of Enforcement.

The ruling is likely to influence future PMLA bail litigation by (i) reducing reliance on custodial Section 50 statements, (ii) demanding clearer foundational linkage at the bail stage, and (iii) reinforcing that the gravity of allegations cannot substitute for credible material when liberty is at stake.