Kerala HC grants bail in money laundering case after three years of investigation without final report

Kerala HC granted regular bail to petitioner charged with money laundering related to cheating depositors through unauthorized fixed deposit collection. Court found main predicate offences under sections 420 and 421 IPC, noting investigation into predicate offence continuing for over three years without final report. HC determined twin conditions under section 45 PML Act satisfied, as prosecution failed to establish reasonable grounds for guilt regarding money laundering charges. Court emphasized findings were solely for bail purposes and would not affect other PML Act proceedings or predicate offence investigations.

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Issues Involved:
1. Whether the petitioner should be released on regular bail.
2. Whether the petitioner is entitled to statutory bail u/s 167 Cr.P.C.
3. Whether the petitioner is guilty of the predicate offences under sections 420, 421 IPC, and the PML Act.

Summary:

Issue 1: Regular Bail

The petitioner sought regular bail u/s 45 of the PML Act. The prosecution alleged that the petitioner collected deposits without authority, failed to repay, and used the money to acquire property, thus committing money laundering u/s 3 of the PML Act. The petitioner was initially arrested on 29.08.2020 and continued in custody till 11-03-2021. The investigation was transferred to the CBI, which registered a crime alleging offences under the Banning of Unregulated Deposit Schemes Act, 2019, and sections 406 and 420 IPC. The ED arrested the petitioner on 09.08.2021, and a complaint was filed on 07.10.2021. The petitioner argued that his continued detention was unauthorized and that he had been conducting business without complaints since 1965. He claimed the failure to pay interest was due to the COVID-19 lockdown, not fraudulent intent. The Court considered the arguments, including the petitioner's age, the period of detention, and the lack of a final report on the predicate offences. The Court found that the twin conditions u/s 45 of the PML Act were satisfied and granted bail, noting that punishment before conviction is the antithesis of the rule of law.

Issue 2: Statutory Bail u/s 167 Cr.P.C

The petitioner filed for default bail u/s 167(2)(i)(a) Cr.P.C, which was dismissed by the Sessions Court. The Court observed that the Supreme Court in Ritu Chhabria v. Union of India stated that incomplete final reports or supplementary charge sheets cannot be used to scuttle the right of default bail. However, considering the period of custody already undergone by the petitioner, the issue became academic and was not further addressed.

Issue 3: Guilt of Predicate Offences

The predicate offences under sections 420, 406, 409, 421, 465, and 471 IPC were considered. The Court noted that the offences under sections 406, 409, and 465 IPC are not predicate offences. The main predicate offences were under sections 420 and 421 IPC. The Court emphasized that to attract section 420 IPC, dishonest or fraudulent intention from the beginning is essential. The investigation into the predicate offences had been ongoing for over three and a half years without a final report. The Court found no presumption of guilt for the predicate offences and concluded that the petitioner could not be assumed guilty of section 420 IPC at this stage. The Court also noted that the failure to repay deposits due to the COVID-19 pandemic did not prima facie attract the offence of cheating u/s 420 IPC. The Court held that the petitioner was not guilty of the offence of money laundering as alleged and granted bail with conditions to ensure cooperation with the investigation and prevent tampering with evidence.

Conclusion

The Court granted bail to the petitioner on executing a bond for Rs. 2,00,000/- with two solvent sureties, cooperation with the investigation, non-tampering with evidence, and restrictions on leaving Kerala or the country without permission.

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