Category: Corporate And Other Laws

The Trump Administration 2.0 began with an ‘America First Trade Policy’. Mr. Trump has issued several Executive Orders and Proclamations since assuming his office on January 20, 2025. The significant among them is an increase in tariffs across the board by 10 per cent which is slated to increase to higher tariffs on some select 57 countries with which the US has major trade deficit in goods. Although the latter hike in tariffs is put on hold till July 8 2025, the actions by the US have created enough turmoil in international trade, with some countries imposing retaliatory tariffs, while other countries, including India, having chosen to negotiate a trade deal with the US. This article covers various aspects of tariffs by the US, the background and the impact of these measures on the Indian economy and the World.

INTRODUCTION

The recent tariff measures by the United States of America (“US”) have thrown much of the global trade in goods into disarray. The frequent changes to the policy, particularly the ‘tariff-on’ and ‘tariff-off’ policy, have made business planning difficult for companies, particularly those having exposure to the US. The threat of tariffs has made many countries rush to the US to secure trade deals to avoid punitive tariffs for their export goods. Businesses thrive when there is certainty in policy measures, but in the face of these frequent threats and policy changes, is it possible for a country or business to avoid the US market? The answer lies in some numbers. The US is the largest economy in the World, with a GDP of $29.18 trillion, i.e. about 26% of the World’s GDP.¹ According to the World Bank, the US is the largest consumer in the World with an annual consumption expenditure of $22.54 trillion, which represents about 30% of the World’s annual consumption expenditure² despite having only 4.22% of the World’s population³, giving it a high annual GDP per capita of $85,810. The American consumers spent about $6.1 trillion on goods alone in 2024.⁴ Hence, in today’s globalised economy, it may not be possible for a business to simply ignore the US consumer. This brings us to the issues which this Article wishes to address, namely, to understand the recent measures by the US and their rationale, their basis in law – both the local US law and the World Trade Organization (“WTO”) law and analyzing its impact on the economy and business.

1 GDP of 2024 at current prices as per International Monetary Fund (IMF)
https://www.imf.org/external/datamapper/profile/USA
2 Source: World Bank, 2023 estimates, https://data.worldbank.org/ [both goods and services, household final consumption expenditure (private consumption) and general government final consumption expenditure]
3 https://www.worldometers.info/world-population/us-population/
4 https://www.visualcapitalist.com/americas-19-trillion-consumer-economy-in-one-chart/#:~:text=Where%20Americans%20Spend%20Their%20Money,as%20well%20(%2417.8T).

Section I of the Article provides the foundational basis for the current US policy, particularly the shift in policy to tariffs. Section II gives a brief of the US legislation and the actions taken by the US President till date with insights on ongoing litigation in the US courts. Section III discusses the legality of US actions under the GATT/WTO. Section IV discusses the impact of the US tariffs on the global economy with changing supply chain dynamics as well as opportunities and threats for Indian businesses. The Article closes with the concluding remarks on US tariffs and their impact.

I. SHIFT IN US TRADE POLICY TO TARIFFS

On 20^th January, 2025, the first day of taking charge as the US President, Mr. Donald J. Trump (“Trump”) issued a series of Executive Orders (“EO”) and proclamations. Among them was the EO titled ‘America First Trade Policy’ (“AFTP EO”) which gave insights into the policy which the President would be following in days to come. The AFTP EO stated that the American economy, the American worker, and the National security of America will be at the forefront of US policy decisions. It also stated that the aim of the new US administration is to promote investment and manufacturing in the US. One of the ‘National Security’ risks highlighted in the AFTP EO was the ‘unfair and unbalanced trade’ with its major trading partners. To put a perspective, the table below provides the trade balance of the US with its major trading partners.

The table shows that in 2024, the US had an overall trade deficit in goods of $1.29 trillion, which means that the US imported more goods than it exported to other nations. The highest trade deficit was with China, at $319 billion, followed by the EU at $203.5 billion, Mexico at $176 billion and Vietnam at $129.37. There was a trade deficit even with Canada, India and other nations. On the services front, in 2024, the US’s exports were $1107.8 billion, and imports were $814.4 billion, giving a surplus of ~ $293.4 billion.⁵ Even if one offsets this surplus, the overall trade deficit in goods and services for the US in 2024 was close to $1 trillion.

5 https://www.bea.gov/news/2025/us-international-trade-goods-and-services-december-and-annual-2024

The ever-increasing trade deficit in goods has been a subject matter of debate between economists in the US for several decades. The trade deficit in goods has continuously increased from $690.16 billion in 2010 to $1.29 trillion in 2024, as shown in the graph below.

The burgeoning US trade deficit can be explained with the textbook theory of macro-economic factors of disbalance between savings and investment rates. In simple terms, this implies that Americans have been spending more money on consumption expenditure (i.e., buying more goods than they produce) with low savings and investment spending rates. This additional spending goes to foreign goods, which is then financed through borrowing from foreign lenders (US treasury bonds) or foreigners purchasing US assets.

Some policymakers argue that macro factors of the stronger dollar (which encourages imports and discourages exports), more buying power of consumers in the US, and manufacturing shift to lower labour cost jurisdictions would naturally lead to higher trade deficits. While others argue that shifting manufacturing to low-cost jurisdictions like the ASEAN (Thailand, Vietnam, Malaysia, Indonesia, etc.) and other parts of the World like China has been a result of unfair foreign government policies and incentivisation. It is argued that the rise of China during the last three decades as a World’s powerhouse of manufacturing, resulting from unfair trade practices of the Communist regime in Beijing, is a major cause of the situation. In particular, it is argued that Beijing’s State control and subsidisation of manufacturing led to the establishment of huge capacities in China far exceeding the domestic demand, boosting of exports through unfair incentives, tax enforcement of the IPR regime, manipulation of currency through devaluation to boost exports, unfair labour and environmental practices of China has led to the situation.

One set of policymakers focused their efforts on tackling this situation by addressing the inherent deficiencies like boosting investments in infrastructure and targeted incentives to increase the domestic manufacturing base. The previous US President Biden’s policy initiatives were efforts in that direction, such as the Bipartisan Infrastructure Law (BIL), formally known as the Infrastructure Investment and Jobs Act (IIJA) which focused on funding a wide range of infrastructure projects, the Build America, Buy America Act (BABA) which mandated that iron, steel, manufactured goods, and construction materials used in US federal funded infrastructure projects must be produced in the US, the CHIPS and Science Act which focused on boosting US semiconductor manufacturing. A similar set of policy initiatives may also be seen in the Indian context, like the ‘Make in India’ policy and infrastructure parks (Electronics Parks, Plastic Parks, PM MITRA Textile Parks, Mega Food Parks, etc.).

The other set of policymakers believe that directly disincentivizing or curtailing imports, inter alia through Tariff measures, is an immediate solution to the situation. The current US President Trump’s policy measures by imposing punitive import tariffs are efforts in that direction, even if it involves disrupting the rule based international trade and the principles established by the WTO.

Hence, there is a clear shift in the US policy under the new administration with tariffs as one of the main policy instruments. Tariffs have also been used by the US as a threat to negotiate better trade deals with its trading partners. With this background in mind, the next section looks at the relevant legislation used by the US in its renewed policy.

II. LEGISLATION USED BY THE US FOR IMPOSING TARIFFS AND ACTIONS TAKEN THEREUNDER

In his first term (2017-2021), Trump had used Section 232 of the Trade Expansion Act, 1962 (“TEA”) in 2018 to impose import tariffs of 25% and 10% on Steel and Aluminium, respectively, subject to some product / country-specific exemptions. These tariffs were expanded to include specified derivatives of Steel and Aluminium in 2020. In 2018, Trump also used Section 301 of the Trade Act, 1974 (“TA”) to impose tariffs ranging from 7.5% to 25% on several goods of China (covered in four lists ranging from $34 billion in list 1 to $300 billion in list 4). These tariffs continue to exist today and have been further expanded in Trump’s second term.

In his second term (2025-), effective March 12, 2025, Trump used Section 232 of the TEA to expand the scope of import tariffs on Steel and Aluminium by bringing both on par at 25% each, withdrawing all previous exemptions, and significantly increasing the scope of coverage of derivatives products. The President has also used the same section to impose tariffs of 25% on specified Automobiles (“Auto”) and Auto parts from all countries, subject to quota-based exemptions.⁶ Due to the close integration of Auto supply chains between the US, Canada and Mexico, the Tariffs on Autos, which qualify the USMCA rules of origin,⁷ have been exempted to the extent of US content of such vehicles. Further, the USMCA qualified Auto parts imported into the US from Canada and Mexico have also been exempted.

6 Auto Tariffs apply only to passenger vehicles (sedans, sport utility vehicles, 
crossover utility vehicles, minivans, and cargo vans) and light trucks. 
Auto parts cover Engines and engine parts, Transmissions and powertrain parts, 
and Electrical components of passenger vehicles and light trucks. 
Auto tariffs were effective April 3, 2025, and Auto parts Tariffs were effective May 3, 2025.

7 USMCA is the United States-Mexico-Canada Free Trade Agreement which 
replaced the North American Free Trade Agreement (NAFTA) and become 
effective July 1, 2020, in Trump’s first term.

In addition, Trump has extensively used another US Act, called as International Emergency Economic Powers Act, 1977 (“IEEPA”), to impose import tariffs on Canada, Mexico and China (including Hong Kong) by taking the cue of fentanyl trade⁸, which has claimed to cause a situation of ‘National Emergency’ and public health crisis in the US. A tariff of 10% was imposed on goods from China and Hong Kong with effect from 4^th February, 2025, which was increased to 20% effective 12^th March, 2025. Similarly, effective 4^th March, 2025, the goods from Mexico and Canada have imposed a tariff of 25% (except potash/specified energy products having a tariff rate of 10%). This tariff measure was later amended to exempt USMCA-qualified goods.

The US President has also used IEEPA to impose a baseline tariff of 10% with effect from April 5, 2025, on all countries (including India)and a higher-country specific reciprocal tariff on 57 listed countries varying from 11% to 50%⁹ with effect from April 9, 2025 (currently on pause for 90 days, till 8th July, 2025). For China¹⁰, the reciprocal tariffs were increased to 125% from April 10, 2025, due to retaliation by China with similar tariffs on US goods (the 125% tariff has been suspended for 90 days and rolled back to 10% with effect from 14^th May, 2025, pending negotiations between US and China).

8 Fentanyl is a synthetic opioid drug used for pain relief and anesthetic. 

The US has argued that Canada and Mexico have permitted the Fentanyl 

drug to flow into the US through its porous borders creating a 

situation of National Emergency and public health crisis in the US.

9 India is amongst the 57 countries and India’s tariff rate is specified to be 26%.

10 Includes Hong Kong and Macau

Further, under the IEEPA, the US has withdrawn the de-minimis exemption¹¹ for goods, including international parcels from China and Hong Kong (effective 2^nd May, 2025).

11 A de-minimis exemption is exemption given under US law to goods of value less 
than $800 from duties and certain procedural requirements at the time of imports into the US.

The above tariffs imposed by the US are in addition to normal customs duties (called MFN rates), fees, taxes, exactions, or charges applicable to imported articles. Further, the above tariffs stack on each other, i.e., becomes cumulative unless otherwise specified.¹²

12 As per another executive order issued on April 29, 2025, 
the goods which are subject to Auto/Auto parts tariffs under
 Sec 232 of TEA will not be subject to Tariffs imposed on Canada/Mexico
 under IEEPA or Tariffs on Steel/Aluminium under Sec 232 of TEA. Further, 
the goods which are subject to IEEPA tariffs on Canada/Mexico will not be 
subject to Tariffs on Steel / Aluminium under Sec 232 of TEA.

The tariffs imposed by the US have been challenged in several lawsuits filed across the US, particularly by the Democratic States, including the States of Arizona, Colorado, Connecticut, Delaware, Illinois, New York and Oregon. In particular, the reciprocal tariffs have been challenged in the US courts on the grounds that the IEEPA does not specifically authorise the President to impose tariffs and that the US trade deficit cannot be equated to a “National Emergency” as contemplated under the IEEPA. In addition, the State of California has also filed a lawsuit to halt the tariffs imposed by the Trump administration, which the State believes was not taken with Congressional approval and will negatively impact its economy. In a recent decision of the Court of International Trade (CIT) in V.O.S. Vs. The USA, the CIT at Manhattan, New York has set aside all Trump’s actions under IEEPA and accordingly invalidated the reciprocal tariffs (10% baseline and higher country specific tariffs) and tariffs imposed on China/Canada/Mexico for failure to curb the fentanyl trade. The CIT held that Trump exceeded his authority granted by the Congress under the IEEPA to impose tariffs. The US government has appealed this decision before the Court of Appeals for Federal Circuit which has temporarily granted a stay on the CIT’s decision until the court hears both parties.

III. WTO/ GATT PERSPECTIVE OF US TARIFFS

“In the pre-World War II era, the market access for trade in goods was based on trading partners’ economic or political clout. With uncertainty and protectionist measures by different countries to further their economic objectives, several countries got together and entered into an agreement called the General Agreement on Tariffs and Trade (GATT, 1947), which formed the basis for rule-based international trade. This agreement was signed in Geneva in 1947 by 23 countries. Both India and the US were parties to the GATT. The GATT was a crucial step towards rebuilding the global economy after World War II with an aim to reduce trade barriers and promote free and fair trade among partner nations. The GATT aimed to reduce tariffs and eliminate other trade barriers to promote free trade. Importantly, it was the US which played a leading role in the creation of GATT because it wanted liberalisation of protectionist policies to help the US export more goods to other countries. It was the GATT, 1947, which, after several rounds of multilateral negotiations, led to the formation of WTO in 1995 by the Marrakesh Agreement, signed in Marrakesh, Morocco. While the WTO replaced GATT, the principles of GATT are still incorporated into the WTO agreement.

One of the basic principles enshrined in GATT/WTO is the Most Favored Nation (MFN) principle under Article I. The MFN principle essentially states that if a country grants a trade advantage (like lower tariffs) to one trading partner, it must unconditionally and immediately extend the same advantage to all other WTO members. Another important Article II of GATT is the schedule of concessions of each member nation, which binds the member not to increase the customs duty rates beyond the bound rate given in its schedule.

Article XXI(b)(iii) of GATT covers the national security exception, which allows the members to violate the GATT principles if such actions are “taken in time of war or other emergency in international relations”. The US has lost several cases at the WTO wherein it violated the GATT principles by invoking the national security exception under Article XXI(b)(iii). The argument of the US before the WTO’s judicial Panels, that this exception is ‘self-judging’ and cannot be subject matter of judicial review, has been rejected by the WTO panels. In the US-Origin Marking (Hong Kong, China) case,¹³ the argument raised by the US that human rights violations in Hong Kong can be used as a basis to violate the GATT disciplines was rejected by the WTO panel. It was held that such human rights violations in HK, even if evidenced, cannot be escalated to the threshold of requisite gravity to constitute an “emergency in international relations”. This phrase was held to refer to a state of affairs of the utmost gravity – a breakdown or near-breakdown in the relations between states.

13 WT/DS597/R (WTO Panel Report dated 21 December 2022)

More importantly, the US also lost WTO cases relating to the imposition of tariffs under Sec 301 of the TA against China¹⁴ and under Sec 232 of the TEA on Steel and Aluminium.¹⁵

14 The US defense built under Article XX(a) which deals with general exception of 
“necessary to protect public morals” was rejected on the ground that there was 
no genuine relationship of “ends and means” and hence it was held that the US had 
violated GATT disciplines relating to MFN and bound rates (WT/DS543/R WTO Panel 
Report dated 15 Sep 2020)
15 US’s defense under Article XXI(b)(iii) was rejected – measures not 
“taken in time of war or other emergency in international relations” and hence it
 was held that the US had violated MFN, bound rates and Quantitative Restrictions 
under GATT (WT/DS544/R WTO Panel Report dated 9 Dec 2022)

It may be worthwhile to note that since 2017 the US has blocked the appointment of new judges to the WTO’s Appellate Body (AB) due to complaints over judicial activism at the WTO and concerns over US sovereignty.¹⁶ This has brought the WTO’s dispute settlement system to a standstill making it effectively non-functional. There are currently no members in the seven member AB with the term of the last sitting member expired on 30^th November, 2020.¹⁷ Hence, today, all appeals filed by the WTO members including the US against the Panel rulings are pending adjudication at WTO’s AB with no judges in place. It would not be out of place to say that the country which argued for liberalisation leading to the creation of GATT / WTO has itself turned back full circle to bring in an era of protectionism in trade.

16 The World Trade Organization: The Appellate Body Crisis | Economics Program and Scholl Chair in International Business | CSIS
17 https://www.wto.org/english/tratop_e/dispu_e/ab_members_descrp_e.htm

IV. IMPACT OF THE US TARIFFS ON THE INDIAN ECONOMY AND THE WORLD

In today’s globalised World, supply chains are integrated across nations, and most products pass through manufacturing stages in several countries before landing in the hands of the consumer in the country of consumption. If the country of consumption is the US, the moot question which arises is what will be the tariff rate applicable to such product at the time of import into the US? Whether it is the country where the principal raw material was manufactured (say, China) or where further processing on it was undertaken (say, India). This question assumes importance because US tariffs are now based on the country to which the product belongs. Complicating the situation is the test of the last ‘substantial transformation’ applied by the US in judging this criterion with a plethora of complex judicial rulings in the US courts. This has led to several supply chain shifts by companies away from China to avoid punitive US Tariffs.

In addition, reciprocal tariffs under IEEPA provide an exemption to the US content of the product if such US content is at least 20% of the total value of the product. Further, tariffs under Sec 232 on Steel and Aluminium derivatives are exempt if the Aluminum is smelted and cast in the US or Steel is melted and poured in the US. These issues are leading the companies to rethink their supply chain modelling to reduce the impact of US tariffs and stay export competitive.

While the threat of US tariffs remains, there are certain opportunities for Indian businesses looking to export more to the US. A look at the table below shows that India is exporting products to the US under Chapters overlapping with China, which gives an opportunity to the Indian business to increase their exports on account of the present 30% tariffs on China vs. 10% tariffs on Indian goods under the IEEPA.

With the India-US currently engaged in intense negotiations for the Bilateral Trade Agreement (BTA), it still needs to be seen whether the Indian Government can negotiate a deal with the US which can lead to enhanced export competitiveness of Indian goods to the US, particularly in labour-intensive sectors like plastics, textiles, gems and jewellery, electronics, pharma and chemicals.

V. CONCLUSION

The US concern stems from an ever-increasing trade deficit in goods with most of its major trading partners. This has led to a discernible shift in the US trade policy to tariff measures. With the WTO in a state of limbo particularly due to the non-functional Appellate Body (AB) mechanism, the US seems to be not concerned with the legality of its measures with the GATT / WTO disciplines. As a result of US tariffs, the businesses World over, including in India, are forced to rethink the supply chains of their goods. The present situation is both a threat and an opportunity for Indian businesses and the success will depend upon how the businesses can rekindle their decision-making and whether the Indian government is able to negotiate a good deal with the US helping the Indian exporter community.

BCAJ Admin

This article deals with the Judgement of the Supreme Court in Sarla Gupta & Onr. vs. Directorate of Enforcement and the right of an accused to obtain copies of the Records / Documents collected by the Investigative Agencies under the PMLA.

INTRODUCTION

The saying that “Information is power” is age-old. Investigating agencies, while investigating a certain offence, tend to collect a large amount of data and information in the quest for justice. An investigation, as well as the resulting prosecution (if any), is supposed to be fair and unbiased. An officer administering certain provisions of an act also conducts inquiries from time to time. This also leads to the collection and compilation of a large amount of data. This data is relevant not only because it could be used to establish that a certain accused is involved in the offence of money laundering but also to give rise to reasonable doubt as to his complicity. The burden of proof to convict an accused in a criminal trial is “beyond reasonable doubt”. If the prosecution cannot prove its case beyond a reasonable doubt, the accused has to be acquitted. Just as the information conducted during an inquiry or an investigation forms the basis of the prosecution case, the same can also be pressed into service for defence. For a criminal trial to be fair to the accused, it is essential that the defence has access to all the material that is at the command of the prosecution. This is particularly relevant for the material that is relied on by the prosecution. The fundamental principle of criminal law is that an accused has the right to confront their accuser and also confront the evidence produced against them.

SECTION 207 & 208 OF CRPC AND PMLA PROCEEDINGS AND SUPPLY OF ‘RELIED UPON DOCUMENTS’

The three-Judge division bench judgement of the Supreme Court in Sarla Gupta & onr. vs. Directorate of Enforcement 2025 SCC OnLine SC 1063 strikes a win for fairness in prosecutions under the Prevention of Money Laundering Act, 2002 (better known as the PMLA).

In modern-day criminal law jurisprudence, due weightage needs to be given to fairness. After all, justice must not only be done but must also be seen to be done. Just like it would not be fair for a person to be made to participate in a fist-fight with one of his hands tied behind him, it would hardly be fair if an accused was not granted copies of the material relied on against him. There are two important provisions under the Code of Criminal Procedure (CrPC) which deal with the supply of documents – Sections 207 and 208. The corresponding Sections of the Bharatiya Nagrik Suraksha Sanhita (BNSS) are Sections 230 and 231 respectively. Section 207 of the CrPC applies when the proceedings have been instituted on a police report and are triable by the magistrate. Section 208 applies to a case that is instituted otherwise than on a police report, and the Magistrate is of the view that the case is exclusively triable by the Court of Session.

The complaint based on which the Special Court for the PMLA takes cognisance of an offence has documents annexed to it in order to support its contents. These are the documents ‘relied upon’ in this context to make its case. In Criminal Appeal No. 730 of 2024, which is a part of the common judgement reported in Sarla Gupta, the Supreme Court held that “Both Sections 207 and 208, on the face of it, do not specifically apply to a complaint under Section 44(1)(b) of the PMLA. But, there is no reason why the principles laid down under Sections 207 and 208 should not be applied to a complaint under Section 44(1)(b) of the PMLA”. Relying upon the concept of fair play and Article 21 of the Constitution of India, the Supreme Court made sections 207 & 208 of CrPC applicable to cases under the PMLA. The Court went on to read in the protections that are afforded by sections 207 & 208 of the CrPC into the PMLA in the form of these Directions:

“Therefore, once cognizance is taken on the basis of a complaint under Section 44(1)(b) of the PMLA, the learned Special Judge must direct that along with the process, a copy of the complaint and the following documents must be provided to the accused:

a. Statements recorded by the learned Special Judge of the complainant and the witnesses, if any, before taking cognizance;

b. The documents, including the copies of the Statements under Section 50 of the PMLA produced before the Special Court, along with the complaint, and the documents produced subsequently by the ED till the date of taking cognizance; and

c. Copies of the supplementary complaints and the documents, if any, produced with supplementary complaints.

After cognizance is taken on the basis of the complaint, the ED cannot be heard to say that a document has been produced with the complaint or in the proceedings of the complaint, but it is not a relied-upon document. The copies of documents must be supplied along with a copy of the complaint as required by subsection (3) of Section 204 of the CrPC (sub-section (3) of Section 227 of the BNSS).”

Thus, the directions of the Supreme Court to the Special Court for the trial of PMLA offences is quite clear – documents, as mentioned in the directions reproduced above, must be made available to the Accused once the Special Court take cognizance of an offence under the PMLA. This would equip the accused to take an informed decision on the defence that they wish to take up during trial. But this by itself is not enough. The Judgement of the Court also makes it mandatory that copies of the document produced with the complaint or the proceedings of the complaint must be supplied to the Accused and that the Directorate of Enforcement cannot refuse to furnish any such document by stating that it is not a ‘relied upon document’ in the complaint. This act of the Supreme Court in bringing in these safeguards based on sections 207 & 208 of CrPC is a significant development in PMLA jurisprudence.

SUPPLY OF DOCUMENTS IN THE POSSESSION OF THE DIRECTORATE, NOT RELIED UPON

The ED does not need to rely upon all the documents that it collects during its investigation. There is no obligation on the investigating agency to rely upon all the data that it so collects. However, some of this data could be beneficial to the Accused in preparing their defence. Just like statutes, the interpretation or inferences drawn from data can be different by a different set of eyes. Our system of law administration is fundamentally adversarial in nature unlike in some of the countries that follow ‘civil law’ or the ‘continental system of law’. This gives rise to the danger of the prosecution withholding exculpatory documents from the accused while only relying upon the incriminating documents. The danger of this situation actually arising cannot be ruled out, and the consequences can be severe.

In the year 2021, another three-judge Division bench of the Supreme Court in Criminal Trials Guidelines Regarding Inadequacies and Deficiencies, In re, (2021) 10 SCC 598 observed, “The Amici Curiae pointed out that at the commencement of trial, accused are only furnished with list of documents and statements which the prosecution relies on and are kept in the dark about other material, which the police or the prosecution may have in their possession, which may be exculpatory in nature, or absolve or help the accused. This Court is of the opinion that while furnishing the list of statements, documents and material objects under sections 207/208 CrPC, the Magistrate should also ensure that a list of other materials (such as statements or objects/documents seized, but not relied on) should be furnished to the accused. This is to ensure that in case the accused is of the view that such materials are necessary to be produced for a proper and just trial, she or he may seek appropriate orders under CrPC”. This right was also reiterated in the case of Manoj vs. State of M.P., (2023) 2 SCC 353 where the Supreme Court reiterated its stand that “this Court holds that the prosecution, in the interests of fairness, should as a matter of rule, in all criminal trials, comply with the above rule, and furnish the list of statements, documents, material objects and exhibits which are not relied upon by the investigating officer. The presiding officers of courts in criminal trials shall ensure compliance with such rules”.

In Criminal Appeal No. 730 of 2024, which is a part of the common judgement reported in Sarla Gupta, the Supreme Court observed these prior Judgements and agreed that these documents had to be furnished to the Accused. However, the Court proceeded to analyse at what stage the Accused is entitled to seek copies of the Documents not relied on by the prosecution. The Supreme Court observed that “at the time of hearing for framing of charge, reliance can be placed only on the documents forming part of the charge sheet. In case of the PMLA, at the time of framing charge, reliance can be placed only on those documents which are produced along with the complaint or supplementary complaint. Though the accused will be entitled to the list of documents, objects, exhibits etc. that are not relied upon by the ED at the stage of framing of charge, in ordinary course, the accused is not entitled to seek copies of the said documents at the stage of framing of charge.”

It is, therefore, rare that copies of all the documents are given to the Accused before the framing of the charge. To give or not to give would still be the discretion of the court. However, after the charge is framed, under Section 233 of the CrPC (Section 256 of the BNSS), there is less latitude given to the Courts to refuse the production of documents.

In Criminal Appeal No. 730 of 2024, which is a part of the common judgement reported in Sarla Gupta, the Supreme Court observed, “On plain reading of sub-section (1) of Section 91, the power of the court is discretionary. The word ‘may’ appears in sub-section (1) of Section 91. However, if we peruse sub-section (3) of Section 233 and sub-section (2) of Section 243, the word ‘shall’ has been used. The reason is that these two provisions apply at the stage of the accused leading defence evidence. Therefore, it is provided that if the accused applies for the issue of any process for compelling the attendance of any witness or the production of any document or thing, the court must issue such process. The prayer for issue of such process cannot be denied unless the court, for reasons to be recorded, holds that the application is made for the purposes of vexation or delay or for defeating the ends of justice.”

The Court, therefore, went on to hold that “After carefully perusing the provisions of the PMLA, we did not find any provision of the PMLA which is inconsistent with Section 91 of the CrPC. The power under sub-section (1) of Section 91 can be exercised by a Court when the production of any document or any other thing is necessary or desirable for the purposes of any investigation, inquiry, trial or other proceedings under the CrPC. The consistent line of judgments of this Court hold that at the stage of framing of charge, the accused is ordinarily not entitled to apply under Section 91 of the CrPC for producing the documents which are not relied upon by the complainant. For the purposes of his defence, the accused has a right to seek production of a document or a thing at the stage of leading defence evidence as Section 233 of CrPC will apply to the trial of an offence under the PMLA, due to the fact that Chapter XVIII of the CrPC is made applicable to such trial in view of clause (d) of Section 44(1) of the PMLA.” It also observed that in the light of the negative burden of proof that is placed by Section 24 of the PMLA on the accused, Section 233(3) of the CrPC should be liberally construed in favour of the Accused. This is also because the constitutional validity of Section 24 of the PMLA has been upheld on the ground that the accused has full opportunity to show that he has not violated the provisions of the PMLA and rebut the presumption. If the Special Court refuses the prayer for documents u/s 233 of the CrPC, the accused will not be able to discharge the burden, and the Supreme Court, therefore, held that this right of the Accused must be protected.

CAN DOCUMENTS BE SOUGHT BY THE ACCUSED DURING BAIL PROCEEDINGS UNDER THE PMLA?

The primary reason why PMLA is so feared is the difficulty that an arrested accused faces in order to obtain bail. Getting bail under the PMLA is infamously difficult and is the primary reason that the PMLA is considered draconian. The offence of money laundering is non-bailable, i.e. bail cannot be obtained as a matter of right but is subject to judicial discretion. There are various factors that weigh in with a Court while deciding whether or not to release an accused on bail. The PMLA, through Section 45(1)(ii), adds the ‘twin conditions’ that must be fulfilled over and above this in order for the accused to secure bail. Therefore, if an accused makes an application for bail u/s 45 of the PMLA and the prosecutor opposes the grant of bail, the Court cannot grant bail to the Accused unless “the court is satisfied that there are reasonable grounds for believing that he is not guilty of such offence and that he is not likely to commit any offence while on bail”.

The first of the twin conditions requires that the accused demonstrate to the court that there are ‘reasonable grounds’ for believing that he is not guilty of such offence. This can be very difficult to do if the Accused does not have access to the documents and data that can help him discharge the burden. The Supreme Court in Criminal Appeal No. 730 of 2024, which is a part of the common judgement reported in Sarla Gupta, held that “If a narrow view is taken, by denying this opportunity to the accused, he will not be in a position to discharge the burden on him, and therefore, it will affect his right to liberty as he may be denied bail. This denial will amount to a violation of his rights guaranteed under Article 21. Therefore, at the stage of hearing of a bail application to which stringent provisions of Section 45(1)(ii) of the PMLA are applicable, the accused must be allowed to invoke the provision of Section 91 of the CrPC for seeking production of the documents not relied upon by the ED. But, when the investigation is pending while permitting the accused to seek production of documents that are not relied upon by invoking Section 91 of the CrPC, care has to be taken to ensure that the investigation is not prejudiced. Therefore, when such an application is made, the ED is entitled to resist the production of documents that are not relied upon on the ground that if the said documents are disclosed at that stage to the accused, it may prejudice the investigation. Though the ED is entitled to raise the said plea, it will have to show the documents to the Court. The Court can, for reasons recorded, deny production of documents only if it is satisfied that the disclosure of the documents may prejudice the ongoing investigation. Needless to add that the ED cannot raise such an objection after the investigation is complete.” It is important to note that the Court considered Article 21 of the Constitution of India as the fountain from which the right to receive the documents springs. This Judgement, therefore, is a big step in defending the fundamental rights that have been guaranteed under the Constitution of India. The Court specifically observed that “ When the Legislature has felt a need to bring out a legislation like the PMLA, it is the duty of the Court to interpret Article 21 in such a way that the right of a fair trial available to the accused is not affected. The object of the provisions of Section 24 or 45(1)(ii) is not to take away the fundamental right of fair trial conferred on the accused. These provisions are different in the sense that they put a burden on the accused. When such a burden is put on the accused, it is all the more necessary that the right of fair trial guaranteed under Article 21 to the accused is protected by permitting the accused to lead defence evidence by seeking the production of witnesses and documents not relied upon by the prosecution. Similarly, for discharging the burden under Section 45(1)(ii), the accused has the right to invoke Section 91 of CrPC (Section 94 of the BNSS) for seeking production of documents at the stage of hearing of bail application.”

THE RIGHTS OF THE ACCUSED TO GET COPIES OF RECORDS / DOCUMENTS SEIZED AS PER SECTION 17 & 18 OF THE PMLA

The Supreme Court in Sarla Gupta was also concerned with the rights of the Accused under the PMLA to get copies of Records and Documents that have been seized u/s 17 (Search & Seizure) or Section 18 (Search of Persons). Section 21(2) of the PMLA, that deals with the retention of records, specifically mentions that the person from whom the records are seized or frozen shall be entitled to obtain a copy of the records. Section 2(b) of the PMLA includes deeds and instruments evidencing title or interest in property or asset.

The Supreme Court held that the order of retention under section 20 of the PMLA does not refer to the forfeiture of the property and that the seized property does not vest with the ED. The Supreme Court went on to hold that “There is no prohibition on providing copies of the deeds or instruments evidencing title to the person from whom or from whose premises the deeds or instruments are seized. If the provision is interpreted to mean that the person from whom such deeds or instruments are seized is not entitled to receive even copies of the same, the provision will be rendered arbitrary and violative of Article 14 of the Constitution. Therefore, as far as the seized documents and records are concerned, the person from whom or from whose premises the seizure has been made is entitled to get the true copies thereof. As far as the other property seized is concerned, the person from whom the property is seized is entitled to a copy of the seizure memo and the list of the properties seized.” It held that if the documents are bulky, then soft copies can be furnished and that even if seized records or documents are not relied upon in the Complaint, copies must be supplied, though the accused will not be entitled to rely upon them at the time of framing of charge.

CONCLUSION

In an adversarial system like ours, the ED has often resisted the furnishing of certain documents to the Accused, an example being the non-furnishing of grounds of arrest to the accused in writing, as remedied by the Supreme Court in the case of Pankaj Bansal vs Union of India, (2024) 7 SCC 576 where the Court held that “There is no valid reason as to why a copy of such written grounds of arrest should not be furnished to the arrested person as a matter of course and without exception. There are two primary reasons as to why this would be the advisable course of action to be followed as a matter of principle. Firstly, in the event such grounds of arrest are orally read out to the arrested person or read by such person with nothing further and this fact is disputed in a given case, it may boil down to the word of the arrested person against the word of the authorised officer as to whether or not there is due and proper compliance in this regard. In the case on hand, that is the situation in so far as Basant Bansal is concerned. Though ED claims that witnesses were present and certified that the grounds of arrest were read out and explained to him in Hindi, that is neither here nor there as he did not sign the document. Non-compliance in this regard would entail the release of the arrested person straightaway, as held in V. Senthil Balaji vs. State, (2024) 3 SCC 51. Such a precarious situation is easily avoided, and the consequence thereof can be obviated very simply by furnishing the written grounds of arrest, as recorded by the authorised officer in terms of Section 19(1) PMLA, to the arrested person under due acknowledgement, instead of leaving it to the debatable ipse dixit of the authorised officer.”

In fact, in the case of Arvind Kejriwal vs. Enforcement Directorate, (2025) 2 SCC 248, the Supreme Court specifically held that it is not only the grounds of arrest that need to be given to the Accused but also the ‘reasons to believe’ that have been recorded. The Court held that this is because “it would be incongruous, if not wrong, to hold that the accused can be denied and not furnished a copy of the reasons to believe. In reality, this would effectively prevent the accused from challenging their arrest, questioning the “reasons to believe”.. .. “It follows that the “reasons to believe” should be furnished to the arrestee to enable him to exercise his right to challenge the validity of arrest.”

The phrase ‘Information is power’ is especially relevant in the realm of criminal defence law in general and in special laws like the PMLA in particular. While economic offences are to be considered a class apart, it cannot be denied that the process of prosecution of one accused of a crime must be fair. Jurisprudence with regard to the PMLA has grown by leaps and bounds over the last few years. The Supreme Court has, from time to time, sought to balance the fairness of proceedings under the PMLA, which otherwise can be considered quite draconian. The Judgement in the case of Sarla Gupta shall undoubtedly be useful for those caught in the clutches of this law to get a fair trial.

BCAJ Admin