The Delhi High Court granted regular bail to Punit Narendra Garg in a PMLA proceeding, holding that the Enforcement Directorate failed to sufficiently establish that assets acquired in 2008 and 2010 constituted proceeds of crime arising from scheduled offences alleged for 2013-2017. The Court emphasized that mere financial connectivity through refinancing does not ipso facto convert pre-existing assets into proceeds of later criminal activity, and considered the applicant's prolonged custody and remote prospect of early trial conclusion as additional factors favouring bail.
Background & Facts
The Dispute
The Applicant, Punit Narendra Garg, sought regular bail under Section 483 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS) read with Section 45 of the Prevention of Money Laundering Act, 2002 (PMLA) in Complaint Case No. 20/2026 arising out of ECIR/STF/26/2025 dated 26th August 2025. He was arrested on 29th January 2026 and had remained in custody since then. His earlier bail application was dismissed by the Special Judge on 15th June 2026.
Key Facts
- The ECIR was registered following an FIR No. RC0742025 E0005 dated 21st August 2025 lodged by the Central Bureau of Investigation (CBI) on a complaint made by State Bank of India (SBI) against Reliance Communications Limited (RCOM), Anil Ambani and others.
- The allegations concern criminal conspiracy, cheating and diversion of loan funds, resulting in an alleged loss of ₹2,929.05 crore to SBI.
- Two further FIRs dated 25th February 2026 and 5th March 2026, concerning facilities extended by Bank of Baroda and Punjab National Bank, have since been added to the ECIR.
- The period of the alleged scheduled offences identified in these FIRs is 2013-2017.
- The prosecution under PMLA concerns the alleged diversion of funds borrowed by RCOM through various overseas entities.
- ED identifies three transactions involving the Applicant: (i) acquisition and subsequent sale of a yacht known as “Tian”; (ii) acquisition and subsequent sale of an apartment in Manhattan, New York; and (iii) payments from overseas group accounts towards educational expenses of the Applicant’s daughters.
- The alleged proceeds of crime attributable to these transactions have been quantified at approximately ₹149.77 crore.
- According to ED, RCOM obtained substantial foreign borrowings beginning in 2007, including a USD 500 million external commercial borrowing arranged through a Barclays-led consortium.
- Part of these funds was allegedly routed through overseas group entities and utilised in acquiring the yacht in 2008 for approximately USD 18.548 million. The yacht was held in the name of Ammolite Holdings Limited (AHL), an entity associated with Reliance Capital Limited.
- Similarly, an apartment in Manhattan was acquired in 2010 by Bonn Investment Inc. (Bonn), an overseas step-down subsidiary of RCOM, for approximately USD 6.395 million.
- ED alleges that consortium and non-consortium loans availed by RCOM during 2013-2017 were substantially utilised to repay earlier borrowings, including those from which funds had been routed towards acquisition of the two assets.
- As regards the Applicant’s individual role, ED relies upon his position in RCOM and his communications with personnel managing the overseas entities. It alleges that he exercised effective control over these entities and participated in decisions concerning the sale of the yacht in 2021 and the Manhattan apartment in 2023.
- ED also relies upon payments aggregating USD 77,046.43 from accounts maintained by Bonn and Reliance Communications Inc. towards educational and related expenses of the Applicant’s daughters.
- The Applicant disputes the prosecution’s central premise, submitting that the yacht and apartment were acquired in 2008 and 2010 respectively, well before the period of the scheduled offences identified in the predicate FIRs.
- Neither property was mortgaged or otherwise offered as security for the loans forming the subject matter of those FIRs.
- The Applicant further asserts that he was not involved in obtaining the disputed credit facilities or in deciding their utilisation during the relevant period, as he was working in regulatory and other managerial functions and became an Executive Director of RCOM only in October 2017.
- Regarding the educational expenses, the Applicant relies upon correspondence of August 2017 indicating that he had sought reimbursement of his daughter’s educational fees and that the request had received approval from Anil Ambani.
Procedural History
- 21.08.2025: FIR No. RC0742025 E0005 lodged by CBI
- 26.08.2025: ECIR/STF/26/2025 registered by ED
- 29.01.2026: Applicant arrested
- 27.03.2026: Original prosecution complaint filed (cited 39 witnesses, ~8,726 pages documents)
- 15.06.2026: Special Judge dismissed Applicant’s earlier bail application
- August 2026: Supplementary prosecution complaint filed (added seven accused, ~68,658 pages documents)
- 12.10.2026: Judgment reserved
- 15.10.2026: Judgment pronounced and uploaded
Relief Sought
The Applicant sought release on regular bail upon furnishing a personal bond of ₹1,00,000/- with two sureties of like amount, subject to conditions including passport surrender, non-contact with witnesses, and cooperation with investigation.
The Legal Issue
The central question was whether assets acquired by the Applicant in 2008 and 2010 (a yacht and a Manhattan apartment) could be considered 'proceeds of crime' under Section 2(1)(u) of the PMLA for the purpose of satisfying the bail conditions under Section 45, given that the alleged scheduled offences (diversion of loan funds) occurred during 2013-2017, and whether the material on record sufficiently established the requisite connection between these assets and the criminal activity alleged in relation to loans availed during 2013-2017.
Arguments Presented
For the Applicant/Petitioner
The Applicant contended that the yacht and Manhattan apartment were acquired in 2008 and 2010 respectively, well before the period of the scheduled offences (2013-2017) identified in the predicate FIRs, and neither property was mortgaged or offered as security for the loans forming the subject matter of those FIRs. It was argued that the subsequent repayment of earlier borrowings through fresh credit facilities during 2013-2017, even if proven, could not retrospectively convert an existing asset into proceeds of a crime allegedly committed years later, as refinancing pre-existing debt is in accordance with prevailing RBI norms. The Applicant further submitted that he was not involved in obtaining the disputed credit facilities or deciding their utilisation during the relevant period, as he held only managerial/regulatory roles until becoming an Executive Director of RCOM in October 2017. Regarding educational expenses, it was contended that payments were made pursuant to an employment benefit and approved by management, thus not constituting personal utilization of proceeds of crime. The Applicant relied upon Vijay Madanlal Choudhary v. Union of India and Prem Prakash v. Union of India to argue that the prosecution must establish the foundational facts concerning the scheduled offence, generation of proceeds of crime, and the accused’s involvement in a process connected with those proceeds before the statutory presumption under Section 24 can operate.
For the Respondent/State
ED countered that liability under Section 3 of the PMLA is not confined to the person who originally generated the proceeds of crime, and a person who subsequently participates in concealment, possession, use or disposal may also commit the offence. It emphasized that the absence of the Applicant’s name from the predicate FIRs, his lack of involvement in obtaining the original loans, and the non-arrest of other accused could not justify bail, given the serious nature of the allegations and ongoing investigation monitored by the Supreme Court. ED relied upon the Applicant’s communications showing approval for handover of the yacht, coordination for receipt of sale proceeds, and dealings with the Manhattan apartment and educational expenses to establish his active involvement in dealing with the assets and their proceeds. It further cited the Supreme Court’s directions in E.A.S. Sarma v. Union of India regarding time-bound investigation and submitted that the Applicant’s continued incarceration was warranted due to the substantial enlargement of the prosecution via the supplementary complaint and the remote prospect of early trial conclusion.
The Court's Analysis
The Court began by noting that Section 45 of the PMLA imposes two mandatory conditions for grant of bail where the Public Prosecutor opposes the application: (i) reasonable grounds for believing that the accused is not guilty of the offence, and (ii) that he is not likely to commit any offence while on bail. These conditions cannot be bypassed merely because the investigation is substantially complete or the accused has spent some time in custody. The enquiry is one of broad probabilities on the material presently available.
The Court then examined the character of the assets described by ED as proceeds of crime. Under Section 2(1)(u) of the PMLA, proceeds of crime must be property derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence, or the value of such property. Referring to Vijay Madanlal Choudhary v. Union of India, the Court noted that the Supreme Court recognised that dealing with proceeds of an earlier criminal activity may constitute a continuing offence under Section 3, but the essential requirement remains that the property must have been derived or obtained as a result of criminal activity relating to a scheduled offence. The continuing nature of money laundering does not dispense with that requirement.
In Pavana Dibbur v. Directorate of Enforcement, the Supreme Court examined the acquisition of two properties and held that the first property, acquired before the acts constituting the scheduled offence, could not ex facie be connected with the proceeds of crime generated by those acts. As regards the second property, whether tainted funds had been used for its acquisition could be determined only upon evidence being adduced. The Court applied this principle to the present case, observing that the yacht was acquired in 2008 and the Manhattan apartment in 2010, while the scheduled offences identified in the predicate FIRs concerned alleged fraudulent borrowing and diversion during 2013-2017.
The Court acknowledged that the repayment trail relied upon by ED (where loans availed during 2013-2017 were utilised to repay earlier borrowings that allegedly funded the acquisition of the yacht and apartment) is relevant and would require examination at trial. However, it stressed that the question remains whether that financial connection, by itself, provides a sufficient basis to regard the yacht and the apartment as proceeds of crime arising from the scheduled offences alleged for 2013-2017. The Court held that refinancing, by itself, does not answer the enquiry of whether the assets were derived from criminal activity relating to the scheduled offence. On the material presently placed before the Court, the requisite connection between the earlier acquisitions and the alleged scheduled offences remains a substantial disputed question.
Regarding the Applicant’s individual role, the Court noted the Special Judge’s observation that the Applicant appeared to have had no direct role in acquiring either asset, though he was found to have knowledge of the acquisitions and an active role in their subsequent disposal and concealment. The Court held that while the communications relied upon by ED may indicate the Applicant’s participation in subsequent transactions, such participation would constitute money laundering only if the assets or funds concerned were proceeds of crime. It is this essential connection - which, on the material presently available, has not been sufficiently established - that raises a substantial question which cannot be resolved with certainty at this stage.
The Court further considered the statements recorded from the Applicant under Section 50 of the PMLA during his custody, referencing Prem Prakash v. Union of India to hold that such statements are inadmissible against the maker. It examined electronic communications and other documentary material independently of the Applicant’s custodial statements.
Additionally, the Court considered the proceedings before the National Company Law Tribunal concerning the Manhattan apartment and the allegation regarding educational expenses, noting that while certain circumstances are relevant, they do not independently resolve whether the funds in overseas accounts represented proceeds of the scheduled offences.
The Court then addressed the Applicant’s prolonged custody, noting he had remained in custody for over eight months. It referenced V. Senthil Balaji v. Deputy Director, Directorate of Enforcement, where the Supreme Court held that where trial under the PMLA is unlikely to conclude within a reasonable time, the restrictions under Section 45 cannot justify indefinite pre-trial detention. The Court observed that the supplementary prosecution complaint filed in August 2026 considerably enlarged the proceedings, while the trial had yet to commence, and there is little realistic prospect of an early conclusion of the trial considering the number of accused, nature and volume of documents, and continuing investigation.
Finally, the Court considered the Applicant’s age (61 years), cessation of office in RCOM in 2025, and the fact that he is arrayed as an accused in two other ED proceedings (though not arrested). It held that the Applicant’s period of custody must be considered in light of the protection afforded by Article 21 of the Constitution, and that conditions restricting contact with persons connected with the transactions and dealings with the assets could adequately address ED’s concerns regarding influence over overseas entities and possibility of further dealings.
On the material presently available, and for the reasons discussed, the Court was satisfied that both conditions under Section 45 stand fulfilled: there are reasonable grounds for believing that the Applicant is not guilty of the offence alleged, and he is not likely to commit any offence while on bail. The period of incarceration, the substantial enlargement of the prosecution, and the remote prospect of an early conclusion of trial provided additional reasons why continued detention is not warranted.
The Verdict
The Applicant succeeded in his bail application. The Court ordered his release on regular bail in Complaint Case No. 20/2026 arising out of ECIR/STF/26/2025, upon furnishing a personal bond of ₹1,00,000/- with two sureties of the like amount, to the satisfaction of the Special Judge. The bail is subject to the following conditions: (a) surrender of passport before the Special Court and no departure from India without prior permission; (b) furnishing residential address, mobile number and email address to the Investigating Officer and intimating any changes; (c) appearance before the Special Court on every date of hearing unless exempted; (d) no direct or indirect contact, influence, threat or inducement of any prosecution witness or tampering with evidence; (e) no issuance of instructions concerning disposal, transfer or further investment of the assets or sale proceeds forming the subject matter of the prosecution without prior permission of the Special Court; and (f) joining further investigation whenever required through written notice and cooperating with the investigating agency. In the event of breach of any condition, ED shall be at liberty to seek cancellation of bail. The Applicant shall be released forthwith upon compliance with the conditions, unless required in custody in any other case.
What This Means For Similar Cases
Temporal Nexus is Indispensable for Proceeds of Crime
Practitioners must now emphasise that assets acquired prior to the scheduled offence period cannot be deemed proceeds of crime under Section 2(1)(u) PMLA without evidence demonstrating a direct derivation from the alleged criminal activity. Mere financial connectivity through refinancing or repayment trails is insufficient to establish the requisite temporal nexus. Bail applications should challenge the prosecution’s case by highlighting the chronological gap between asset acquisition and the alleged scheduled offence period, as successfully done here where assets acquired in 2008-2010 were linked to offences alleged for 2013-2017.
Prolonged Custody and Trial Prospects Affect Bail
The Court explicitly linked the applicant’s over eight months custody and the remote prospect of early trial conclusion (due to supplementary complaints enlarging the prosecution) to the bail determination under Section 45 PMLA read with Article 21. In complex financial proceedings involving voluminous documents and multiple accused, defence counsel should routinely present data on custody duration, prosecution enlargement, and realistic trial timelines to argue that continued detention is disproportionate when trial conclusion is unlikely in the near term.
Conditions Can Address Ancillary Concerns
While granting bail, the Court imposed specific conditions targeting the Applicant’s potential to influence witnesses, tamper with evidence, or deal with the assets in question. This demonstrates that concerns about secondary involvement in asset disposal or witness intimidation can be managed through tailored bail conditions rather than justifying continued custody. Defence teams should proactively propose such conditions (e.g., passport surrender, non-contact directives, asset transaction restrictions) to alleviate prosecution anxieties about misuse of liberty.
