Published On: March 12th 2026
Authored By: Akshat Dadhich
Amity University, Kolkata
ABSTRACT
The Hon’ble Supreme Court in Directorate of Enforcement v. Subhash Sharma held that arrest made by Directorate of Enforcement (ED) under the Prevention of Money Laundering Act, 2002 (PMLA) cannot violate Art. 22(2) of the Constitution of India which mandates the production of arrested person before magistrate within 24 hours.[1] The same rule is reiterated in Sec. 58 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (corresponding to sec. 57 of the Code of Criminal Procedure, 1973). The court stated that the ED did not produce the accused before the nearest learned Magistrate within 24 hours. Therefore, the arrest of the respondent was completely illegal which resulted in the violation of Art. 22(2) of the Constitution of India, even violating the fundamental right to liberty of the accused under Art. 21. In this landmark judgement, constitutional judgement, constitutional liberty has been accorded paramount importance over the strictness of special law (PMLA). It provides a definite remedy to the accused while fighting the harsh bail provisions set under Sec. 45 of PMLA.
INTRODUCTION
The Directorate of Enforcement (ED) is a multi-disciplinary organization mandated with investigation of offences of money laundering and violations of foreign exchange laws. It functions under the Department of Revenue of the Ministry of Finance. It enforces laws related to economic crimes, such as the Prevention of Money Laundering Act (PMLA) and the Foreign Exchange Management Act (FEMA), focusing on combating money laundering and foreign exchange violations. The ED derives its authority to arrest individuals from Sec. 19 of the PMLA. “Under Section 19 of the PMLA, an ED officer must have reason to believe, based on the material in their possession, that the accused is guilty of the offence. This belief must be recorded and communicated to the accused at the time of arrest. It contends that the Director’s belief, which is subjective and can evolve during the investigation, is sufficient for an arrest without necessarily delving into the materials.”[2] The ED has become famous for its high profile PMLA cases and now it is under scrutiny for the validity of the powers of arrest exercised by it, overlooking the most essential judicial safeguards. The issue, whether ED can detain individuals without prompt magistrate production even under money-laundering cases, arouse in the case of Directorate of Enforcement v. Subhash Sharma (2025 INSC 141) before Hon’ble Justices Abhay S. Oka and Ujjal Bhuyan.
EXPLANATION OF THE LEGAL DEVELOPMENT
Subhash Sharma, the Respondent in Directorate of Enforcement v. Subhash Sharma (2025 INSC 141), was detained under a Look Out Circular (LOC) at Delhi IGI Airport on 4th March, 2022 at 6 p.m. by the Bureau of Immigration. The ED took formal custody of him at 11 a.m. on 5th March, 2022. Despite this, the ED showed his arrest as having occurred at 01:15 a.m. on 6th March, 2022 and later produced him before the Hon’ble Magistrate at 3 p.m. on 6th March,2022.[3] The allegations put against Subhash Sharma is that on the basis of forged and fabricated documents, he obtained loan from Punjab National Bank, Raipur and Axis Bank, Raipur in the name of the companies namely M/s Hotel Saffaire Inn, M/s Goodluck Petroleum Co. Pvt. Ltd. and M/s Vidit Trading Pvt. Ltd. The said amount of Rs. 31.37 crores was subsequently declared as NPA by the concerned banks and the same is to be recovered from Subhash Sharma.[4]
Subhash Sharma challenged the legality of his physical custody under Art. 22(2) of the Constitution of India and Sec. 57 of the CrPC, and argued that the delay by the ED invalidated his physical custody. The Hon’ble High Court of Chhattisgarh was pleased to grant him bail on the ground that his arrest was illegal. Aggrieved by this order, the ED approached the Hon’ble Supreme Court challenging the bail granted to Subhash Sharma in connection with an offence punishable under Sec. 4 of the PMLA. The Hon’ble Supreme Court upheld the bail thereby declaring the arrest illegal due to constitutional violation.
SIGNIFICANCE OF THE SUPREME COURT’S JUDGEMENT
The Hon’ble Supreme Court in the year 2025 has delivered very strong judgements on illegal custody and bail. All these judgements reaffirm the inviolability of personal liberty under Art. 21 in prosecutions under some of the stringent statutes like the PMLA, 2002 and the Unlawful Activities (Prevention) Act, 1967 (UAPA).
The Apex Court stated that the custody consequent to an illegal arrest is itself unconstitutional, the Court converted procedural safeguards into enforceable rights rather than mere technical formalities. In Directorate of Enforcement v. Subhash Sharma, the Court explained that non-compliance with obligatory arrest requirements specifically the requirement of producing the accused before a magistrate within twenty-four hours. Thus, the court granted bail to the accused notwithstanding the stringent twin tests under Sec. 45(1)(ii) of the PMLA, 2002.[5] This approach prioritizes process legitimacy over prosecutorial convenience. This position aligns with earlier constitutional jurisprudence as in Maneka Gandhi v. Union of India which holds that liberty cannot be sacrificed at the altar of administrative efficiency.[6]
The Court’s reduction in the arrest powers of the Enforcement Directorate after judicious cognizance is also very important. The Court in Vijay Madanlal Choudhary v. Union of India made clear that the ED cannot invoke arrest once the Special Court has taken cognizance and the accused has cooperated pursuant to summons, the Supreme Court imposed substantive judicial oversight on investigative discretion.[7] This prevents arrest from being used as a coercive or punitive instrument rather than a tool of investigation. The Hon’ble Court in DK Basu v. State of West Bengal had set out arrest and detention safeguards and also emphasized on protection of individuals from custodial abuse.[8]
The Supreme Court decisions in 2025 do not impair enforcement agencies but rather make the rule of law stronger by ensuring that it is constitutional discipline that regulates criminal investigation. The Court stated that in a democratic state, Liberty is the norm, and illegal custody by any agency is untenable.
ITS IMPACT ON BAIL JURISPRUDENCE
The decisions of the Hon’ble Supreme Court in 2025 on illegal custody and bail have brought immediate, real-world impact to trial courts, and the broader ecosystem in criminal justice. Most prominently, the decisions so far have changed the operational calculus of the ED by attaching constitutional consequences to non-compliance with procedure.
Institutionally, the orders raise the bar for arrest. Investigating agencies like ED can no longer afford to use the fear of lengthy pre-trial custody as a deterrent since any non-compliance with statutory and constitutional arrest procedures would entail the automatic release of the accused on bail. This would force agencies like ED to focus on evidence-led prosecution rather than custodial bargaining, thereby minimizing the arrest being used as an investigation tool.[9]
The judgments have recast the approach towards bail adjudication at the trial court level. Magistrates and Special Courts are now required to engage more substantially with the legality of custody rather than mechanically apply statutory bail restrictions under special laws. This is particularly important in PMLA prosecutions where courts have traditionally shown a marked reluctance to grant bail on account of the “twin tests” under Section 45(1)(ii).[10]
These decisions also affect the prosecutorial approach to the accused. With the default bail practice adjudicated to be the indefeasible right to the accused, there now arises the need to complete the investigation and produce the accused before the magistrate or file the charge-sheet within 24 hours because of the possibility of losing the accused altogether.[11]
There are concerns that the above trends would undermine the prosecution of economic related complex crimes that require lengthy investigations. While the point is valid, it has to be noted that it does not in any way outlaw arrest in general, but it demands careful attention to proceedings and proportionality in practice, as stated in the court rulings. As has been pointed out by various commentators, the rulings promote accountability, not impede it. The effect of the jurisprudence in 2025 ultimately rests in the normative shift in the administration of the criminal justice system it brings about. Behind the resumption of importance of liberty and judicial control, the Supreme Court reaffirms the importance of the constitution’s restriction of state power in general, however serious the financial or security-related crimes.
CONCLUSION
This decision of the Hon’ble Supreme Court declares illegal custody unconstitutional and reinforces default bail on the violation of fundamental rights because of illegal custody. This judgement serves as a binding precedent in safeguarding personal liberty and ensuring that law enforcement agencies like the ED operate within the constitutional boundaries. The Court did not weaken law enforcement agencies or declared arrest as illegal but ensured that Right to Personal Liberty is a fundamental right, the enforcement agencies must ensure detention in a lawful manner and must not act arbitrarily or unconstitutionally. The Court in Directorate of Enforcement v. Subhash Sharma upheld that liberty is not an abstract but a lived experience and every delay made by such law enforcement must now be justified to the individual whose life is being held.
REFERENCES
[1] INDIA CONST. art.22(2).
[2] Vajiram Content Team, Understanding ED’s Arrest Powers Under PMLA, Vajiram & RAVI (2025).
[3] https://www.livelaw.in/law-firms/law-firm-articles-/10-important-white-collar-judgments-514518#:~:text=The%20ED%20issued,granted%20him%20bail.
[4] https://indiankanoon.org/doc/124203673.
[5] Directorate of Enforcement v. Subhash Sharma, 2025 INSC 141.
[6] Maneka Gandhi v. Union of India, (1978) 1 SCC 248.
[7] Vijay Madanlal Choudhary v. Union of India, (2022) 10 SCC 386.
[8] DK Basu v. State of West Bengal, (1997) 1 SCC 416.
[9] Directorate of Enforcement v. Subhash Sharma, 2025 INSC 141.
[10] Prevention of Money Laundering Act, 2002, §45.
[11] See Supreme Court Grants Default Bail for Illegal UAPA Custody, New Indian Express (Dec. 5, 2025).
