The Bombay High Court has reaffirmed a foundational principle of judicial restraint: courts cannot make adverse, defamatory observations against non-parties in bail orders without affording them an opportunity to respond. This judgment clarifies the limits of judicial commentary in interim proceedings and reinforces procedural fairness as a non-negotiable component of justice.
Background & Facts
The Dispute
The petitioner, Welspun Living Limited (formerly Welspun India Limited), is a publicly listed company engaged in textile manufacturing. It was not a party to Criminal Case (ED) No.1/2024 under the Prevention of Money Laundering Act, 2002 (PMLA), which targeted its former employee, respondent No.3, Laxmi Narain. The case arose from three FIRs registered in Ahmedabad and Walsad, alleging offences under Sections 342, 348, 406, 408, 504, 506(2), 120-B, 323, 341, 389, 419, and 420 of the Indian Penal Code. The Enforcement Directorate (ED) registered an ECIR on 06.03.2024 and arrested respondent No.3 under Section 19 of the PMLA.
Key Facts
The ED’s ECIR was based on two FIRs registered on 08.01.2022 and 20.09.2023, with a third FIR added via addendum on 16.04.2024.
Respondent No.3, a former employee, alleged in his bail application that he was a whistleblower exposing customer fraud by Welspun.
The ED did not dispute these allegations in its written response.
The petitioner had no notice of the bail hearing and was not impleaded as a party.
The Special Judge (PMLA), Nagpur, in his bail order dated 09.08.2024, referenced publicly available data from the Election Commission of India to state that Welspun had donated ₹42 crores to the ruling political party via electoral bonds.
The order further observed: "The probability of false implication by informant company with the help of its own employee cannot be ruled out."
No documentary evidence supporting these allegations was placed on record by respondent No.3.
The petitioner filed this writ petition on 25.04.2025 seeking expungement of these remarks.
Procedural History
08.01.2022: First FIR registered at Wapi Town Police Station under IPC Sections 342, 348, 406, 408, 504, 506(2), 120-B.
20.09.2023: Second FIR registered by Sameer Jaswantrai Desai, employee of Welspun, under IPC Sections 195, 323, 341, 342, 389, 506(2), 120-B.
04.03.2024: Third FIR registered under IPC Sections 406, 419, 420.
16.04.2024: ECIR amended to include third FIR.
06.03.2024: Arrest of respondent No.3 under Section 19 of PMLA.
09.05.2024: First bail application rejected by Special Judge (PMLA).
09.08.2024: Second bail application granted; impugned remarks made in order.
25.04.2025: Writ Petition No.404 of 2025 filed before Bombay High Court, Nagpur Bench.
06.07.2026: Case reserved.
15.07.2026: Judgment pronounced.
The Parties' Positions
Petitioner (Welspun Living Limited): Contended that the remarks were defamatory, unsupported by evidence, made without notice, and irrelevant to bail adjudication. Argued that such observations violate principles of natural justice and judicial restraint.
Respondent No.3 (Laxmi Narain): Supported the Special Judge’s observations, asserting they were necessary to assess the credibility of his whistleblower claim.
State of Maharashtra & Enforcement Directorate: Agreed with the petitioner that the remarks were unwarranted, lacked evidentiary basis, and were not required for deciding bail.
Relief Sought
The petitioner sought expungement of the observations in Para 73 of the bail order dated 09.08.2024, which implicated Welspun Living Limited in political donations and alleged customer fraud, and declared such remarks legally invalid.
The Legal Issue
Can a court, while deciding a bail application under the PMLA, make adverse, defamatory observations against a non-party company based on unverified public data and uncorroborated allegations, without affording it an opportunity to be heard?
Arguments Presented
For the Petitioner
The petitioner relied on State of U.P. v. Mohammad Naim (AIR 1964 SC 703), Jage Ram v. Hans Raj Midha (AIR 1972 SC 1140), and Niranjan Patnaik v. Sahibhusan Kar (AIR 1986 SC 819) to argue that judicial remarks against non-parties are permissible only if: (a) the party is before the court, (b) there is evidence on record justifying the remarks, and (c) the remarks are necessary for the decision. Here, none of these conditions were met. The donation data was publicly available but not evidence of wrongdoing. No documents were filed by respondent No.3 to substantiate the fraud allegations. The remarks were not essential to determine bail eligibility.
For the Respondent
Respondent No.3 contended that the remarks were relevant to assess the credibility of his whistleblower claim and the possibility of false implication. He argued that the court was merely evaluating the context of the allegations and that the electoral bond donation was a matter of public record. He did not dispute the lack of evidence but claimed the observation was a reasonable inference.
The Court's Analysis
The Court undertook a rigorous analysis of the jurisdictional limits of judicial commentary in bail proceedings. It emphasized that bail hearings are not trials and are confined to assessing whether a prima facie case exists and whether custody is necessary. The Court held that the Special Judge’s remarks in Para 73 were neither necessary nor justified.
"The Court had not to decide the issue whether petitioner company is involved in defrauding the customers and respondent No.3 was impediment in that, the Court has to consider whether prima facie case is made out against the present respondent No.3 to show his involvement in the alleged offence."
The Court noted that the electoral bond donation, while publicly accessible, was not evidence of any illegal activity. The ED had not alleged any connection between the donation and the alleged money laundering. The observation that the company’s implication was probable was speculative and lacked any factual foundation in the record. Crucially, the petitioner was not a party to the proceeding and was denied any opportunity to respond.
The Court reaffirmed the principle from State of U.P. v. Mohammad Naim: judicial remarks against non-parties are permissible only in exceptional circumstances, and only when they are integral to the decision and supported by evidence. Here, the remarks were gratuitous, sweeping, and prejudicial. The Court further distinguished Vijay Madanlal Choudhary and Pavana Dibbur, which dealt with the scope of scheduled offences under PMLA, and clarified that even where the predicate offence is legally sustainable, the court cannot extrapolate into unrelated allegations against third parties.
The Court also rejected the argument that public data can substitute for evidence. "The fact that information is on a government website does not transform it into admissible proof of misconduct," the Court observed. The remarks, therefore, were not only procedurally flawed but also substantively baseless.
The Verdict
The writ petition is allowed. The observations in Para 73 of the bail order dated 09.08.2024 are expunged. The judgment is modified to delete the following passage: "It also came on record that Welspun company has donated 42 crores to ruling political party in Central Government by way of Electoral Bond. The said information is on the official cite of Election Commission of India. The allegations of defrauding customers by Welspun company and accused, being whistle blower tried to prevent them from defrauding customers are not denied by the ED. Therefore, the probability of false implication by informant company with the help of its own employee cannot be ruled out." No costs are awarded.
What This Means For Similar Cases
Judicial Remarks Must Be Tethered to the Case at Hand
Practitioners must challenge any judicial observation in bail or interim orders that implicates non-parties without notice or evidence.
Courts cannot use bail hearings to vent opinions on unrelated corporate conduct, even if based on public data.
Non-Parties Have a Right to Be Heard
Any adverse observation against a person or entity not before the court violates natural justice.
Legal teams should immediately file applications for expungement under State of U.P. v. Mohammad Naim if such remarks appear.
PMLA Bail Proceedings Are Not Mini-Trials
Courts must confine bail analysis to the existence of a prima facie case under PMLA and the necessity of custody.
Allegations of motive, retaliation, or corporate misconduct are irrelevant unless directly tied to the scheduled offence and supported by evidence.
Do not assume that public records (e.g., electoral bond disclosures) constitute evidence of wrongdoing in criminal proceedings.
Always object to speculative language such as "cannot be ruled out" in judicial orders - such phrases are legally insufficient to justify adverse remarks.
