2019 (9) TMI 286 - SC - Money Laundering

Supreme Court upholds denial of anticipatory bail in money laundering case under PMLA Section 45

P. CHIDAMBARAM Versus DIRECTORATE OF ENFORCEMENT

The SC dismissed an appeal challenging the denial of anticipatory bail in a PMLA case involving irregularities in FIPB clearance for foreign investment. ... Scope and application of Section 438 of the CrPC - Offence under PMLA - Irregularities in Foreign Investment Promotion Board (FIPB) clearance given to the INX Media for receiving foreign investment above against approved inflow - grant anticipatory bail - role of the Enforcement Directorate and the admissibility of materials collected during the investigation - Economic Offences - Whether the court can/cannot look into the documents/materials produced before the court unless the accused was earlier confronted with those documents/materials? Whether the court is called upon to hold a mini inquiry during the intermediary stages of investigation by examining whether the questions put to the accused are ‘satisfactory’ or ‘evasive’, etc.? HELD THAT:- Section 4 of the Act read with the Second Schedule of the Code makes it clear that the offences under the PMLA are cognizable offences. As pointed out earlier, Section 8 of the Prevention of Corruption Act was then found a mention in Part ‘A’ of the Schedule (Paragraph 8). Section 8 of the Prevention of Corruption Act is punishable for a term extending to seven years. Essential requirement of Section 45 of PMLA “accused of an offence punishable for a term of imprisonment of more than three years under Part ‘A’ of the Schedule” is satisfied making the offence under PMLA. There is no merit in the contention of the appellant that very registration of the FIR against the appellant under PMLA is not maintainable. While considering the request for anticipatory bail and while perusing the materials/note produced by the Enforcement Directorate/CBI, Single Judge could have satisfied his conscience to hold that it is not a fit case for grant of anticipatory bail. On the other hand, Single Judge has verbatim quoted the note produced by the respondent- Enforcement Directorate. Single Judge, was not right in extracting the note produced by the Enforcement Directorate/CBI which in our view, is not a correct approach for consideration of grant/refusal of anticipatory bail. But such incorrect approach of the learned Single Judge, in our view, does not affect the correctness of the conclusion in refusing to grant of anticipatory bail to the appellant in view of all other aspects considered herein. Since the interrogation of the accused and the questions put to the accused and the answers given by the accused are part of the investigation which is purely within the domain of the investigation officer, unless satisfied that the police officer has improperly and illegally exercised his investigating powers in breach of any statutory provision, the court cannot interfere. In the present case, no direction could be issued to the respondent to produce the transcripts of the questions put to the appellant and answers given by the appellant. Grant of anticipatory bail at the stage of investigation may frustrate the investigating agency in interrogating the accused and in collecting the useful information and also the materials which might have been concealed. Success in such interrogation would elude if the accused knows that he is protected by the order of the court. Grant of anticipatory bail, particularly in economic offences would definitely hamper the effective investigation. Having regard to the materials said to have been collected by the respondent-Enforcement Directorate and considering the stage of the investigation, we are of the view that it is not a fit case to grant anticipatory bail. In a case of money-laundering where it involves many stages of “placement”, “layering i.e. funds moved to other institutions to conceal origin” and “interrogation i.e. funds used to acquire various assets”, it requires systematic and analysed investigation which would be of great advantage. As held in Anil Sharma, success in such interrogation would elude if the accused knows that he is protected by a pre-arrest bail order. Section 438 Cr.P.C. is to be invoked only in exceptional cases where the case alleged is frivolous or groundless. In the case in hand, there are allegations of laundering the proceeds of the crime. The Enforcement Directorate claims to have certain specific inputs from various sources, including overseas banks. Letter rogatory is also said to have been issued and some response have been received by the department. Having regard to the nature of allegations and the stage of the investigation, in our view, the investigating agency has to be given sufficient freedom in the process of investigation. Though we do not endorse the approach of the learned Single Judge in extracting the note produced by the Enforcement Directorate, we do not find any ground warranting interference with the impugned order. Thus, grant of anticipatory bail to the appellant will hamper the investigation and this is not a fit case for exercise of discretion to grant anticipatory bail to the appellant. Appeal is dismissed Issues involved:1. Alleged irregularities in Foreign Investment Promotion Board (FIPB) clearance.2. Rejection of anticipatory bail by the High Court.3. Arrest and remand to custody by CBI.4. Allegations of money laundering under the Prevention of Money-Laundering Act (PMLA), 2002.5. Contentions regarding the right to anticipatory bail under Article 21 of the Constitution.6. The role of the Enforcement Directorate and the admissibility of materials collected during the investigation.7. The scope and application of Section 438 of the Criminal Procedure Code (Cr.P.C.).8. The court's power to peruse case diaries and materials collected during the investigation.9. The need for custodial interrogation in economic offences.Detailed Analysis:1. Alleged irregularities in Foreign Investment Promotion Board (FIPB) clearance:The appeal concerns alleged irregularities in the FIPB clearance given to INX Media for receiving foreign investment of Rs. 305 crores against the approved Rs. 4.62 crores. The prosecution's case is that INX Media violated the conditions of approval by making a downstream investment in INX News without specific approval and generating more than Rs. 305 crores FDI.2. Rejection of anticipatory bail by the High Court:The High Court of Delhi rejected the appellant's plea for anticipatory bail in cases registered by the CBI and the Enforcement Directorate. The High Court held that the alleged irregularities committed by the appellant made out a prima facie case for refusing pre-arrest bail due to the gravity of the offence and the evasive replies given by the appellant during interrogation.3. Arrest and remand to custody by CBI:The appellant was arrested by the CBI on 21.08.2019 and remanded to custody. The Supreme Court dismissed the appellant's Special Leave Petition (SLP) as infructuous since the appellant had already been arrested and remanded to custody.4. Allegations of money laundering under the Prevention of Money-Laundering Act (PMLA), 2002:Based on the FIR registered by the CBI, the Enforcement Directorate registered a case against the accused for offences punishable under Sections 3 and 4 of the PMLA. The High Court observed that it was a clear case of money laundering, which warranted custodial interrogation.5. Contentions regarding the right to anticipatory bail under Article 21 of the Constitution:The appellant's counsel argued that the right to anticipatory bail is a facet of Article 21 of the Constitution, emphasizing the importance of personal liberty. However, the court held that anticipatory bail is not an integral part of Article 21 and is a statutory right conferred by Section 438 Cr.P.C., to be exercised sparingly and in exceptional cases.6. The role of the Enforcement Directorate and the admissibility of materials collected during the investigation:The Enforcement Directorate argued that custodial interrogation was necessary to trace the money trail and that the court could look into the materials collected during the investigation, even if not previously confronted with the accused. The court upheld the principle that the judiciary should not interfere with the investigation process unless there is a clear abuse of power or non-compliance with statutory provisions.7. The scope and application of Section 438 of the Criminal Procedure Code (Cr.P.C.):The court reiterated that anticipatory bail is an extraordinary remedy to be granted only in exceptional cases. The court must consider the nature and gravity of the accusation, the possibility of the applicant fleeing justice, and other relevant factors before granting anticipatory bail.8. The court's power to peruse case diaries and materials collected during the investigation:The court can peruse case diaries and materials collected during the investigation to satisfy itself that the investigation is proceeding correctly. However, the court should avoid making observations that might prejudice the accused or the prosecution during the trial.9. The need for custodial interrogation in economic offences:The court emphasized that economic offences constitute a class apart and require a different approach in granting bail. Custodial interrogation is necessary to uncover the laundering and money trail, and granting anticipatory bail could hamper the investigation.Conclusion:The appeal was dismissed, with the court holding that granting anticipatory bail would hamper the investigation. The appellant was advised to work out his remedy in accordance with the law, and any application for regular bail should be considered on its own merits by the trial court.