The Allahabad High Court has rejected a bail plea in a money laundering case involving the alleged diversion of Rs 126.30 crore collected from homebuyers, observing that white-collar crimes must be dealt with an iron hand. A single-judge bench of Justice Krishan Pahal held that the applicant was not entitled to relief under the Prevention of Money Laundering Act, 2002 (PMLA), noting that independent audit findings substantiated the diversion of homebuyer funds and that the defence counsel had engaged in dilatory tactics before the trial court.
Background of the Case
The case originates from ECIR/LKZO/19/2024, registered by the Directorate of Enforcement (ED) at Lucknow on December 23, 2024, under Sections 3 read with 4 of the PMLA. The primary predicate offence arose from FIR No. 0030 of 2022, registered at Police Station SIT, Lucknow, on November 24, 2022, under Sections 120-B and 420 of the Indian Penal Code (IPC), pursuant to a preliminary inquiry conducted by the Special Secretary (Administration). Additionally, four other predicate FIRs under Section 420 IPC were registered at Phase-3 Police Station in Gautam Budh Nagar.
According to the prosecution, the applicant collected Rs 522.90 crore from homebuyers for 1,468 units in the “Aranya” project. However, possession was handed over to only 35 homebuyers. An audit report by private firm Currie and Brown India Pvt. Ltd. initially revealed a diversion of Rs 107 crore. After conducting an investigation under Section 3 of the PMLA, the ED filed a prosecution complaint (PMLA-SC No. 08/2025) before the Special Judge, Prevention of Corruption CBI, Ghaziabad, on June 13, 2025, detailing six scheduled offences. The trial court took cognizance of the complaint on August 18, 2025.
Submissions by the Applicant
Senior Advocate Vinay Saran, assisted by advocates Saumitra Dwivedi and Pankaj Sahni, appeared for the applicant and argued that the ECIR was vague, ambiguous, and registered with ulterior motives. Counsel submitted that the applicant’s arrest violated Article 22 of the Constitution of India and Sections 47 and 48 of the Bharatiya Nagarik Suraksha Sanhita (BNSS), relying on the Supreme Court rulings in Vihann Kumar v. State of Haryana and Prabir Purukyastha v. State (NCT of Delhi), against which Criminal Misc. Writ Petition No. 11384 of 2025 has also been filed.
The defence highlighted a contradiction between the prosecution records, pointing out that while the ECIR mentioned five predicate offences, the subsequent complaint listed six, including Crime No. 63 of 2017 which was allegedly added without evidence. Counsel maintained that the applicant is a reputed builder whose company, M/s Unnati Fortune Holdings Ltd, had handed over possession to 950 allottees in the project.
It was further submitted that the company faced severe financial distress due to land disputes with local farmers, civil litigation, and an interim stay on construction by the National Green Tribunal. Consequently, an Interim Resolution Professional (IRP) was appointed by the NCLT, Delhi, on March 27, 2019, to take over the company’s management. The defence pointed out that the ECIR was initiated after a delay of approximately five years and eight months from the appointment of the IRP, and just one month after the NGT permitted construction to resume on November 21, 2024.
The applicant maintained that no proceeds of crime were in his possession or control, explaining that the company received approximately Rs 500 crore from buyers while incurring expenditures of about Rs 670 crore. The amounts alleged to have been diverted were asserted to be promoter contributions, inter-corporate loans, institutional borrowings, or security deposits. The defence added that the applicant cooperated with the investigation by appearing on four dates in March and April 2025, suffered from a severe pancreatic ailment, and had spent approximately 16 months in custody since his arrest on April 16, 2025.
In support of the bail plea, the applicant relied on several Supreme Court decisions:
- Sushil Sethi and Another v. State of Arunachal Pradesh and Others, to argue that an offence under Section 420 read with Section 120-B IPC requires dishonest intention from the inception of the transaction.
- Prof. R.K. Vijayasarathi and Another v. Sudha Seetharama and Another, regarding the statutory ingredients of cheating under Section 420 IPC.
- Vijay Madan Lal Choudhary & Others v. Union of India and Others, holding that at the bail stage, the court must arrive at a finding on broad probabilities regarding mens rea and the likelihood of committing further offences.
- Manish Sisodia v. Directorate of Enforcement, Shri Gurbaksh Singh Sibbia and Others v. State of Punjab, and Sanjay Chandra v. Central Bureau of Investigation, reiterating that bail is the rule and jail is the exception.
- V. Senthil Balaji v. Deputy Director, Directorate of Enforcement, where bail was granted on the basis of an incarceration period of 15 months.
Submissions by the Directorate of Enforcement
Opposing the plea, counsel for the ED Sushant Chandra submitted that financial investigations established a diversion of Rs 126.30 crore collected from investors and homebuyers through equity investments, debentures, bonds, preference shares, and loans or advances to associate companies. This included an advance of Rs 88 crore recorded as irrecoverable in the company’s books.
The ED submitted that the applicant has a criminal history of nine cases involving fraud, breach of trust, and forgery, including FIR No. 285 of 2019 where the same flat was allegedly sold to multiple buyers. Counsel also submitted that the applicant posed a flight risk, noting that proceedings under Section 82 CrPC had previously been initiated against him in FIR No. 63 of 2017 registered by the Economic Offences Wing (EOW), Delhi.
The agency argued that the applicant failed to satisfy the mandatory twin conditions under Section 45 of the PMLA. In support, the ED relied upon:
- Directorate of Enforcement v. Aditya Tripathi, where the Supreme Court quashed bail granted to an accused on grounds of flight risk and criminal antecedents.
- Aditya Krishna v. Directorate of Enforcement (Delhi High Court), holding that predicate offences and PMLA offences are distinct, that bail in a predicate offence does not automatically entitle an accused to bail under the PMLA, and that an individual’s role must be viewed in the context of the entire criminal enterprise.
- Gautam Kundu v. Directorate of Enforcement, ruling that money laundering is an independent offence and that the rigours of Section 45 of the PMLA must be strictly applied.
- Y.S. Jagan Mohan Reddy v. Central Bureau of Investigation, establishing that economic offences constitute a class apart and must be viewed with a different approach during bail considerations.
The Court’s Analysis and Observations
To verify the progress of the trial, the High Court called for a status report from the trial court dated August 14, 2026. The report revealed that while the applicant was present on several dates, his counsels were absent on various occasions. It further indicated that arguments on the framing of charges had concluded on July 30, 2026, and the matter was scheduled for an order on cognizance on August 24, 2026.
Justice Pahal made strong observations on the societal impact of large-scale financial deception and the necessity of stringent enforcement:
“White-collar crime has grown too pervasive and too costly to be met with anything less than firm, uncompromising enforcement. Corporate fraud, embezzlement, insider trading, and large-scale financial deception routinely destroy pensions, savings, and livelihoods on a scale that dwarfs the damage caused by many street crimes, yet offenders have often faced comparatively lenient sentences, fines their companies can absorb as a cost of doing business, or plea deals that avoid real accountability. Treating these offenses with an iron hand mandatory custodial sentences, personal liability for executives regardless of corporate shielding, asset forfeiture, and aggressive prosecution would close the perception that wealth and status buy a softer form of justice. A firm stance sends an unambiguous signal that economic crimes, precisely because they are often invisible and diffuse in their harm, deserve no less severity than crimes committed with a weapon.”
Decision
Taking into account the independent audit findings establishing the diversion of Rs 126.30 crore belonging to allottees, alongside the fact that the applicant’s counsel had been “dillydallying with the trial,” the Court held that it was not a fit case for the grant of bail.
The High Court dismissed the bail application as being devoid of merits. However, it directed the trial court to decide the pending case expeditiously in accordance with law, without granting unnecessary adjournments to either party, provided there is no legal impediment. The Court clarified that its observations were confined solely to the disposal of the bail application and would have no bearing on the merits of the case during trial.
Case Title: Anil Mithas Versus Directorate of Enforcement
Case No.: Criminal Misc. Bail Application No. 40366 of 2025
Bench: Justice Krishan Pahal
Date: September 16, 2026
