2025 (9) TMI 1089 - HC - Money Laundering

Senior public official denied bail under Section 45 PMLA for alleged Rs100 crore liquor racket money laundering; custodial probe needed

Kawasi Lakhma S/o Lt. Mr. Hadma Lakhma Versus Directorate Of Enforcement GOI Raipur Zonal Office

HC dismissed bail application. The applicant, a senior public official accused of orchestrating large-scale money laundering from an illicit liquor racket ... Seeking grant of bail - Money Laundering - proceeds of crime - large scale syndicate was operating in the State of Chhattisgarh systematically involved in the manufacture and sale of illegal liquor through licensed government shops - allegations solely based on statements of co-accused and prosecution witnesses, without any independent, cogent or credible evidence directly linking the applicant with the alleged offence - requirement to satisfy twin statutory conditions of Section 45(1) of the Prevention of Money Laundering Act, 2002 - HELD THAT:- The applicant has failed to meet the stringent requirements of Section 45 of the PMLA. The applicant, a high ranking public official is alleged to have actively participated in laundering proceeds of crime exceeding Rs. 100 crores, derived from a large scale liquor scam. The custodial interrogation and presence in ED custody remain necessary to trace residual proceeds of crime, identify additional co-conspirators and to ensure evidence is preserved and witnesses are not influenced. Economic offences of this magnitude are recognized as grave offences impacting public finances and society at large and the judiciary has consistently taken a strict approach in matters of bail to safeguard the interests of the State and the integrity of the investigation. The fact that some co-accused have been granted bail cannot be a determinative factor as the role of each accused, involvement and risk profile are distinct and case specific. While the court acknowledges that personal liberty under Article 21 is sacrosanct, the competing public interest, the seriousness of the offence and the ongoing investigative requirements weigh heavily against granting bail at this stage. The applicant has not discharged the burden imposed under Section 45 of the PMLA. Custodial retention is necessary to : (a) facilitate the ongoing investigation (b) Trace residual proceeds of crime, (c) Prevent interference with evidence and witnesses, and (d) protect the public interest in serious economic offences. The applicant failed both the twin conditions and the triple test for grant of bail in economic offences. Custodial detention is necessary for protection of investigation of witnesses and public interest. Thus, it is evident that the applicant, who at the relevant point of time, was not merely a public servant but holding the august office of Excise Minister, stands charged with an exceptionally grave nature of offences under Sections 3 & 4 of the Prevention of Money Laundering Act, 2002. Being entrusted with the solemn duty of safeguarding the State’s resources and ensuring lawful regulation of excisable commodities, the applicant was under a legal as well as moral obligation to prevent any illicit trade in liquor. Instead, the material prima facie demonstrates active participation of the applicant himself in the clandestine and unlawful liquor trade, resulting in unlawful enrichment to the tune of several crores of rupees and inflicting colossal and irreversible damage upont the State exchequer. The plea of parity advanced by the counsel for the applicant cannot come to the rescue of the applicant. Parity operates where the footing of the accused is comparable but it is wholly inapplicable when the role of the applicant is distinct in both design and dimension. Here, the culpability does not rests on passive acquiescence but on the active orchestration by one who was duty bound to prevent such crime. A ministerial head, who ought to have been the sentinel of law, turning into its prime violator, cannot be equated with others of subordinate stature or peripheral role because evidence indicates that he himself became the epicenter of the offence. The breach of public trust by a functionary at such a high office is not only a statutory violation but also strikes at the very foundation of constitutional morality and undermines the public faith in governance. It is a settled canon of bail jurisprudence that the principle of parity, though rooted in the constitutional guarantee of equality before law under Article 14, is not absolute or automatic. Thus, in a matter of this magnitude, where integrity of public office is under scanner, the grant of bail would send a deleterious message to society and encourage erosion of accountability in public life - thus, invoking the jurisdiction under Section 483 of the Bhartiya Nagarik Suraksha Sanhita, 2023 and applying the rigours of Section 45 of the Prevention of Money Laundering Act, 2002, this court find no merit whatsoever entitling him the discretionary relief of bail. Justice, morality and public interest compel a firm stance. Bail application rejected. ISSUES PRESENTED AND CONSIDERED 1. Whether the applicant satisfies the twin statutory conditions of Section 45(1) of the Prevention of Money Laundering Act, 2002 (PMLA) for grant of regular bail: (a) reasonable grounds for believing that he is not guilty of the offence; and (b) reasonable grounds for believing that he is not likely to commit any offence while on bail. 2. Whether a prima facie case has been made out under Sections 3 and 4 of the PMLA on the material placed by the prosecution, sufficient to deny bail. 3. Whether non-recovery of cash or absence of physical seizure at the accused's residence negates the charge of money-laundering under Section 3 of the PMLA. 4. Whether registration of the ECIR by the Enforcement Directorate, based on information shared under Section 66(2) of the PMLA and a predicate FIR by the jurisdictional police, is lawful and amounts to creation of a predicate offence by the ED. 5. Whether delay in investigation, pendency of trial in the predicate offence, prolonged pre-trial detention, public status/antecedents of the accused, or parity with co-accused who have been granted bail justify release on bail. 6. Whether the accused's political position and access to power create a real risk of tampering with evidence, influencing witnesses or frustrating the investigation sufficient to refuse bail. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Application of Section 45(1) PMLA (twin conditions for bail) Legal framework: Section 45(1) PMLA imposes a statutory bar on grant of regular bail unless the accused satisfies two cumulative tests: (a) reasonable grounds to believe he is not guilty; and (b) reasonable grounds to believe he will not commit an offence while on bail. Precedent treatment: The Court refers to apex decisions treating economic offences as sui generis and reinforcing rigour in bail (e.g., Vijay Madanlal Chaudhary; State of Bihar v. Amit Kumar; other PMLA jurisprudence cited in the record). Interpretation and reasoning: The Court holds that the twin conditions are mandatory and distinct from the general bail principles; mere satisfaction of the 'triple test' (no flight risk, no tampering, no repeating) is inadequate. The statutory threshold requires affirmative prima facie demonstration on both limbs, judged on materials placed by the prosecution at the bail stage. Ratio vs. Obiter: Ratio - Section 45(1) imposes mandatory twin conditions that must be satisfied in addition to conventional bail considerations; courts must evaluate prima facie material to assess those conditions. Obiter - contextual comments about comparative jurisprudence emphasising caution in economic offences. Conclusion: The applicant has not discharged the burden under Section 45(1); the material on record does not provide reasonable grounds to believe he is not guilty or that he will not commit an offence if released. Issue 2 - Existence of prima facie case under Sections 3 & 4 PMLA Legal framework: Offence under Section 3 PMLA arises from concealment, possession, acquisition, use or projecting of proceeds of crime; Section 4 prescribes punishment. Establishing money-laundering requires (i) commission of scheduled offence; (ii) property derived from such criminal activity; and (iii) involvement of accused in processes connected with such property. Precedent treatment: The judgment relies on precedent delineating foundational requirements for money-laundering prosecution (noted reference to recent authority articulating the three foundational facts). Interpretation and reasoning: The Court undertakes a limited, focused perusal of prosecution material permitted at bail stage and finds documentary entries, recorded statements, financial transaction trails and contemporaneous documents together constitute prima facie evidence linking the accused to laundering of substantial proceeds. The scale and corroboration of material (documents, statements) satisfy a prima facie link for purposes of Section 45 assessment. Ratio vs. Obiter: Ratio - A court may consider relevant material at bail stage to determine existence of a prima facie case under PMLA; a combination of documentary and testimonial material can constitute sufficient prima facie evidence without physical cash recovery. Obiter - observations on the nature and enormity of alleged laundering. Conclusion: A strong prima facie case exists against the applicant under Sections 3 & 4 PMLA; this weighs against grant of bail. Issue 3 - Significance of non-recovery of cash/absent physical seizure Legal framework: Definition of 'proceeds of crime' under Section 2(1)(u) PMLA is broad and not limited to cash; offence covers concealment, projection or use of proceeds through various devices (hawala, benami, third-party transfers). Precedent treatment: The Court invokes authorities establishing that absence of physical cash does not preclude prosecution under Section 3 where other modes of disposition or concealment are shown. Interpretation and reasoning: Non-recovery of cash at a search does not negate the offence; prosecution points to transactional routes, financial records and traced values as basis for alleging possession/use/projection of proceeds. Therefore lack of on-person cash seizure is not determinative at bail stage. Ratio vs. Obiter: Ratio - Physical cash seizure is not a precondition to maintain or deny bail under PMLA; other evidentiary materials can demonstrate possession or use of proceeds. Obiter - examples of indirect modes of laundering referenced. Conclusion: Non-recovery of cash is not a ground for granting bail where prima facie material of laundering by other means exists. Issue 4 - Lawfulness of ECIR registration based on information shared under Section 66(2) PMLA Legal framework: Section 66(2) contemplates sharing of information by authorised officers with jurisdictional police to initiate proceedings in scheduled offences; registration of predicate FIR by competent police gives colour to property as proceeds of crime for ED action. Precedent treatment: The Court relies on higher court rulings interpreting the interplay between ED intelligence sharing and police FIR registration (authority treating transmission of information as lawful and police action independent). Interpretation and reasoning: The Court rejects the contention that ED created a predicate offence; information sharing is intelligence dissemination and the jurisdictional police independently decide to register an FIR. The statutory scheme and precedent permit recipients of such information to act on it and register FIRs when cognizable offences are disclosed. Ratio vs. Obiter: Ratio - Registration of a predicate FIR by police based on information shared under Section 66(2) is lawful and does not amount to ED's assuming complainant-role prohibited by the statute; the police retain discretion and duty to register when reasonable cause exists. Obiter - remarks on locus standi in criminal law generally. Conclusion: The ECIR and predicate FIR were competently initiated; challenge that ED 'created' a scheduled offence is unfounded on the record. Issue 5 - Delay in trial/pendency of predicate proceedings, right to speedy trial and parity with co-accused Legal framework: Article 21 guarantees liberty and speedy trial; general bail jurisprudence (bail as rule, jail as exception) applies but must be read with PMLA's specific provisions and the twin conditions of Section 45. Parity principle applies where footing of accused is comparable. Precedent treatment: The Court acknowledges authorities emphasizing speedy trial and non-routine arrest (Hussainara, Satender Antil, Arnesh Kumar, P. Chidambaram), but also notes PMLA jurisprudence and decisions holding that delay alone does not satisfy Section 45 requirements in economic offence cases. Interpretation and reasoning: While custodial detention should not be punitive and delay is a relevant consideration, in PMLA matters the statutory twin conditions remain decisive. Parity with co-accused does not automatically entitle bail where roles and evidence differ materially; differential treatment may be justified by distinct culpability and risk profiles. The Court finds that pendency of predicate trial and co-accused bail do not outweigh public interest and investigatory needs here. Ratio vs. Obiter: Ratio - Delay in investigation or trial, or bail granted to co-accused, does not meet statutory twin conditions under Section 45 nor mandate bail when prima facie material and risk of interference exist. Obiter - commentary reconciling general liberty jurisprudence with PMLA regime. Conclusion: Delay, pendency and parity claims do not compel bail in this factual matrix where twin conditions fail and investigatory interests persist. Issue 6 - Influence, tampering risk and public interest given accused's position Legal framework: Bail considerations include gravity of offence, position/status of accused, likelihood of tampering with witnesses/evidence and public interest in preserving integrity of investigation, especially in economic offences. Precedent treatment: Reliance on authorities treating economic offences as sui generis, and noting amplified risk where accused hold significant power or influence. Interpretation and reasoning: The Court finds that the accused's political stature and administrative access give rise to reasonable apprehension of interference with witnesses, tampering or dissipation of assets; the magnitude of alleged proceeds (over Rs. 100 crores as per prosecution material) and ongoing tracing of residual assets creates real risk if bail is granted. Ratio vs. Obiter: Ratio - High position and demonstrable influence of accused constitute relevant factors militating against bail where there is a realistic likelihood of impeding investigation or frustrating process. Obiter - moral and public interest considerations in protecting the State's revenue and public trust. Conclusion: The accused's status and the nature/scale of allegations justify custody to safeguard investigation and public interest; this supports denial of bail. OVERALL CONCLUSION On the aggregate of considerations above - mandatory twin conditions of Section 45(1) PMLA unmet, existence of strong prima facie material on laundering of substantial proceeds, lawfulness of ECIR/predicate FIR, insufficiency of non-recovery of cash to negate charges, inadequacy of delay/parity arguments, and real risk of interference given the accused's position - bail is refused. The denial is founded on statutory requirements, prima facie evidentiary linkages and compelling public/investigatory interest. This conclusion constitutes the operative ratio for refusal of bail in the present factual matrix.