Delhi High Court Denies Anticipatory Bail in PMLA Case Involving Cyber Fraud Money Laundering

Introduction

In a significant ruling on anticipatory bail applications under the Prevention of Money Laundering Act (PMLA), 2002, the Delhi High Court has emphasized that such relief cannot be granted routinely in cases involving complex financial crimes. Justice Girish Kathpalia dismissed the anticipatory bail petitions of Bhaskar Yadav and Ashok Kumar Sharma, two accused individuals linked to an organized syndicate of cyber frauds that laundered proceeds through mule bank accounts, fintech platforms, and cryptocurrency conversions. The court's decision underscores the stringent twin conditions under Section 45 of the PMLA, which require reasonable grounds to believe the accused is not guilty and unlikely to reoffend while on bail. This ruling, delivered on February 2, 2026, balances individual liberty against the need for effective investigation by the Enforcement Directorate (ED), particularly in economic offences with transnational elements. The case stems from Prosecution Complaint No. ECIR/HIU-1/07/2024, highlighting the ED's ongoing probe into large-scale cyber frauds defrauding Indian citizens via fake investment and job schemes.

Case Background

The petitioners, Bhaskar Yadav and Ashok Kumar Sharma, both Chartered Accountants operating in the Bijwasan area of New Delhi, sought anticipatory bail in connection with money laundering allegations tied to cyber frauds investigated by the Central Bureau of Investigation (CBI) and the ED. The underlying CBI FIRs—RC No. 2212022E0041 (dated August 26, 2022) under Sections 120B and 420 of the Indian Penal Code (IPC) read with Sections 66C and 66D of the Information Technology Act, and RC No. 2212023E0036 (dated December 27, 2023) under Sections 403, 420, and 120B IPC read with Section 66D of the IT Act—detailed an organized criminal syndicate, including suspected foreign operators, defrauding the public through online platforms like WhatsApp and Telegram.

The fraud involved luring victims with promises of high returns on investments or part-time jobs, collecting funds in primary mule accounts, and then layering them across hundreds of bank accounts nationwide. These proceeds were ultimately siphoned abroad, primarily via the UAE-based fintech platform PYYPL, using Visa and Mastercard-linked debit cards issued by Indian banks such as HDFC, IDFC First, and IndusInd. The laundered money was converted into cryptocurrency or withdrawn via ATMs in Dubai. The ED's investigation under Sections 44, 45, and 70 of the PMLA identified over 5,599 HDFC accounts, 3,168 IDFC accounts, and 1,434 IndusInd accounts misused between August and December 2023.

The petitioners were accused of playing pivotal roles in the "Bijwasan Group," creating around 20 fictitious entities (proprietorships, partnerships, and companies) to manage 937 HDFC accounts, among others, for uploading funds to PYYPL. They allegedly received tainted money from upstream players like Rohit Agarwal, Rakesh Karwa, Chhotu Singh, and Jitendra Kaswan, and layered it further for overseas transfer. Searches under Section 17 of the PMLA at 14 premises, including the petitioners', yielded cash recoveries (e.g., Rs. 9.5 lakh from Sharma's residence) and impounded devices. Statements under Section 50 revealed the syndicate's modus operandi: foreign actors (e.g., Jeniffer, Alen, Tom Support) via Telegram groups hired locals to open mule accounts, share credentials, and forward OTPs via apps like SMS Forwarder to Zoho emails, enabling control over transactions.

The ED's 300-page complaint detailed horizontal and vertical layering, with the petitioners at Layer 3 (and sometimes Layer 2), transacting over Rs. 65 crores via 32 accounts linked to their mobile numbers. Fresh cyber fraud complaints continued to emerge on the National Cyber Crime Reporting Portal (NCRP), prompting the ED to seek custodial interrogation. The bail applications (Bail Appln. 281/2025 and 330/2025) were filed amid ongoing investigation, with interim protection granted earlier by predecessor benches until October 15, 2025, conditional on cooperation. The main legal questions were: (1) Whether the twin conditions under Section 45 PMLA apply to anticipatory bail, and (2) If custodial interrogation is warranted given the case's complexity, despite the petitioners' prior cooperation.

Arguments Presented

The petitioners, represented by Senior Advocate Manu Sharma and associates, argued that the case involved mere cryptocurrency dealings, which are not illegal per se following the Supreme Court's quashing of the RBI's cryptocurrency ban and the Finance Act, 2022's taxation regime. They contended that no specific source of laundered funds or ultimate beneficiaries had been identified by the CBI or ED after 1.5 years of investigation, placing them at a peripheral Layer 3 compared to unarrested upstream actor Rohit Agarwal at Layer 2. The petitioners highlighted their six instances of voluntary cooperation without arrest protection, the grant of regular bail to co-accused Ajay, Vipin Yadav (Bijwasan Group), and Rakesh Karwa, and recent judicial dilutions of PMLA's twin conditions due to prolonged incarceration violating Article 21 rights.

In contrast, the ED, through Advocates Anurag Jain and Vivek Gurnani, opposed bail vehemently, invoking the twin test under Section 45 PMLA. They portrayed the petitioners as integral to the syndicate, not mere crypto traders, but architects of an "intricate mesh" of laundering defrauding middle-class investors. Evidence included destroyed electronic devices, assaults on ED officers (leading to a separate FIR), and WhatsApp chats showing bribes to local police to settle victim complaints. The ED clarified the petitioners' Layer 2 role in some transactions, direct receipts from foreign syndicates, and Agarwal's non-arrest due to his investigative assistance. They challenged bail parity, noting co-accused grants were for regular bail without custodial needs, and appealed those to the Supreme Court. Emphasizing ongoing probes with new NCRP complaints, the ED argued pre-arrest protection would hinder effective interrogation, as the petitioners had non-complied with summons and wiped evidence. Arrest decisions remained their domain, and circumstances had evolved with fresh evidence of obstruction.

Legal Analysis

Justice Kathpalia's reasoning rooted the denial in PMLA's stringent framework, distinct from conventional crimes, as an aggravated offence with transnational impacts on national economy and integrity. He affirmed that Section 45's twin conditions—reasonable grounds believing non-guilt and no likelihood of reoffending—apply to anticipatory bail under Section 438 CrPC, per Assistant Director, Enforcement Directorate v. Dr. V.C. Mohan (2022) 16 SCC 794, which triggered PMLA rigors despite CrPC invocation.

The court rejected simplistic crypto characterizations, viewing the case as multi-layered laundering via mule accounts and PYYPL, exploiting victims' aspirations. It applied principles from Vijay Madanlal Chaudhary v. Union of India (2022) SCC OnLine SC 929, emphasizing PMLA's non-obstante clause and negative phrasing to deter routine bail in economic offences. Section 24's presumption of proceeds involvement shifted the burden to accused, un discharged here.

Precedents underscored differential bail treatment: Y.S. Jagan Mohan Reddy v. CBI (2013) 7 SCC 439 and State of Bihar v. Amit Kumar (2017) 13 SCC 751 classified economic crimes as grave, warranting scrutiny of accusations' nature, evidence, punishment severity, accused character, witness tampering risks, and public interest. P. Chidambaram v. Directorate of Enforcement (2019) 9 SCC 24 justified custodial interrogation for discovery in complex probes, balancing Article 21 liberty with investigative needs.

The court distinguished anticipatory from regular bail, noting dilutions (e.g., for prolonged detention) do not nullify twins or bar custody where needed, as in Vedpal Singh Tanwar v. Directorate of Enforcement (2025) SCC OnLine Del 4330, upheld by Supreme Court. It clarified no deep merits probe at bail stage—only prima facie via broad probabilities—but found material (e.g., 68 accounts laundering Rs. 100 crores, petitioners' Rs. 65 crores via 10 mobiles) establishing complicity. Bank officials' roles required unearthing, impossible without custody given evidence destruction and assaults.

This analysis highlights PMLA's evolution: not overriding CrPC entirely but imposing heightened thresholds for liberty in laundering cases, prioritizing socio-economic safeguards over routine relief.

Key Observations

The judgment features several pivotal excerpts illuminating the court's rationale:

• "While considering such applications, the court is not expected to delve deep into merits of the allegation by microscopic analysis of the material collected by the investigator; the court has to satisfy itself only as regards existence of prima facie case, based on broad probabilities discernible from the material collected by the investigator; and the question has to be as to whether on the basis of such material, there are reasonable grounds for believing that the accused is not guilty of the offence alleged."

• "To add a piece of caution, the court is not required to return a positive finding that the accused did not commit the alleged offence. A delicate balance has to be maintained between the final judgment of acquittal or conviction and an order granting or denying bail."

• "The twin conditions stipulated under Section 45 of the Act would apply to anticipatory bail application also, in addition to the regular parameters like nature of accusation, severity of punishment, nature of material collected by investigator, reasonable apprehension of tampering with the witnesses, reasonable possibility of securing presence of the accused at the time of trial, character of the accused and larger interest of public or State, etc."

• "It is not a case of mere dealing in cryptocurrency which per se is not a crime in this country... The present cases exhibit a vast intricate mesh of movement of money, fraudulently extracted out of pocket of gullible investors, who appear to be primarily belonging to middle class."

• "Therefore, I find substance in the argument advanced on behalf of DoE that it would not be possible for the investigators to effectively interrogate the accused/applicants if they have pre-arrest protection in their pocket. Of course, liberty of an individual is sacrosanct, but the court cannot brush aside the requirement to carry out meaningful interrogation and investigation in the larger interest of economy of the country."

These observations, drawn verbatim from the judgment, emphasize restraint in bail adjudication while prioritizing investigative efficacy in PMLA matters.

Court's Decision

The Delhi High Court dismissed both anticipatory bail applications on February 2, 2026, holding that the petitioners failed the Section 45 twin test. There were no reasonable grounds to believe their non-guilt, given prima facie evidence of layering Rs. 65 crores in proceeds, and risks of reoffending or evidence tampering persisted due to assaults, bribes, and device wipes. The court vacated prior interim protections, allowing ED arrest, but noted investigation's pendency.

Practically, this reinforces PMLA's deterrence: bail denial facilitates custodial probes into transnational syndicates, potentially leading to attachments, recoveries, and prosecutions. For future cases, it signals caution against routine anticipatory relief in economic offences, especially with foreign elements like PYYPL or crypto. Banks face heightened scrutiny for mule accounts, possibly spurring KYC reforms. Victims may see swifter justice, but accused in similar positions must demonstrate stronger non-complicity. Overall, the ruling bolsters ED's hand against cyber-financial crimes, aligning with global anti-laundering efforts, while reminding courts to weigh liberty against national economic integrity—potentially influencing Supreme Court appeals and legislative tweaks to PMLA bail provisions.