TaxTMI 
TaxTMI 
2020 (7) TMI 556
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....C at PS : Economic Offences Wing (EOW), New Delhi, which are the predicate/scheduled offences under the PMLA. On 03.12.2019 the applicant was granted interim bail for a period of 7 days by the learned Special Judge in the predicate offence; upon the expiry of which period, the applicant duly surrendered; (b) that on 12.12.2019, the applicant was also arrested in the ECIR by the ED; (c) that the applicant remained in the ED's custody for 14 days, during which time his statements were recorded under section 50 of the PMLA; after which, on 26.12.2019, the applicant was remanded to judicial custody; (d) that on 01.01.2020, the applicant was also arrested by the PS: EOW in another case bearing FIR No. 189/2019 registered under sections 409/120-B IPC, in which also he stands remanded to judicial custody; (e) that on 10.01.2020, the ED filed its complaint under sections 44/45 of the PMLA before the learned Special Judge, (PMLA), Saket District Courts, New Delhi, in which the applicant was named as an accused. Although the ED claims that further investigation is going-on in the matter, no supplementary complaint has been filed since 10.01.2020; ....
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.... (f) It is the ED's contention that out of the said sum of about INR 2036 crores, investigation is complete in relation to about INR 450 crores, while investigation into the remaining amount is still going on; (g) the ED confirms that provisional attachment of identified proceeds of crime has been effected to the extent of about INR 51 crores. Applicant's Submissions: 5. Mr. N. Hariharan, learned Senior Counsel appearing on behalf of the applicant submits as follows in support of the applicant's plea for grant of bail: (a) that the applicant was not on the Board of Directors of RFL at any point of time and had no connection with or control over its management and affairs; (b) that in any case, RFL has not been arraigned as an accused in the matter; (c) that the applicant was not even on the Board of REL, namely the holding company of RFL, from 2010 to late 2016, during which period the offences are alleged to have been committed; (d) that furthermore, even REL has not been arraigned as an accused in the matter; (e) that the affairs of RFL were managed and supervised by a Risk Management Committee and a Related Par....
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....red and filed their accounts which have been subjected to internal and external audits and required public disclosures before statutory regulators, which negates the ED's allegation that the applicant has conspired to conceal any facts; (p) that although the ED has alleged that regulators like the RBI had expressed concern regarding the loans extended by RFL vidé letters dated 06.01.2012, 03.05.2013 and 29/30.04.2014, it requires to be noticed that the RBI never took any action under Chapter III-B of the RBI Act 1934, which provision empowers the RBI inter alia to remove directors, to supersede the Board of Directors and even to wind-up an NBFC, none of which the RBI did; (q) that while the RBI alleges that co-accused Sunil Godhwani used to issue instructions to others, like one Anil Saxena who was a Director of RFL and also Group CFO and Director of REL, there is not even an allegation that any such instructions were ever issued by the applicant; (r) that in particular, communication dated 29.12.2014, purportedly signed by the applicant, only shows that the signatories were making bona fide efforts to seek strategic investment in REL based on cert....
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.... (y) that although the ED has made an allegation that, while in its custody, the applicant smuggled a mobile phone into the washroom, the falsity of such allegation is demonstrated by the fact that the ED took no action thereupon, either against the applicant or against any ED officer who was tasked with monitoring the applicant ; (z) that although the ED alleges that it has registered two ECIRs based on two FIRs relating to predicate offences, such cases emanate from the same set of transactions, and have been mischievously separated, in order only to create separate proceedings; which cannot be the basis to deny the applicant bail, even more so since the ED has not placed any such ECIRs on record ; (aa) that a Co-ordinate Bench of this court has already granted bail to Anil Saxena, who is a co-accused in the predicate offence in FIR No. 50/2019, vidé order dated 17.06.2020 made in Bail Appl. No. 1074/2020; (bb) that by reason of his continued incarceration, now for almost 9 months, the applicant is unable to effectively instruct his lawyers and is thereby unable to effectively defend himself, in violation of his right to fair trial under Articl....
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....nder sections 3 & 4 of the PMLA, as in the present case, where the alleged sum of money was connected to the accused (in that case) on the basis of statements of co-accused and his employees, which statements the court said are to be tested during trial; (g) Sanjay Chandra vs. CBI (2012) 1 SCC 40 ; paras 24, 39, 44 & 46 : to argue that seriousness of the charge, though a relevant condition, is not the only factor that needs to be considered while granting bail; and that the object of bail is not punitive but to secure the presence of the accused for trial; and that the Supreme Court had granted bail to the accused in that case being conscious that the accused was charged with economic offences of huge magnitude; (h) Nikesh Tarachand Shah vs. Union of India & Anr. (2018) 11 SCC 1 ; paras 53, 54 : to argue that the twin conditions for granting bail under section 45 PMLA were held to be unconstitutional, and matters where bail was denied by reason of section 45 were remanded for consideration on merits without application of section 45 PMLA; (i) Gaurav Gupta vs. Director of Enforcement 2015 SCC OnLine Del 9929 ; para 23 : to say that statements of the accuse....
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.... (d) that in the process, while the monies owed by the applicant were repaid to RFL, the 'front' companies subsequently defaulted in paying back their loans to RFL, by reason of which not only RFL but other outside shareholders of RFL have also lost money; (e) that the nature of the transactions may be explained by taking the example of one of the companies, which typifies what was done: it is alleged that on 24.08.2017, RFL gave an unsecured loan of INR 150 crores to one M/s Star Artworks Pvt. Ltd., which amount was immediately transferred by M/s Star Artworks Pvt. Ltd. to RHC, which is a private company owned by the applicant and his brother. RHC in-turn utilized the said amount of INR 150 crores for repaying its existing liability to RFL. In this manner an unsecured loan given by RFL to M/s Star Artworks Pvt. Ltd. was used for 'evergreening' of a previous loan taken by RHC from RFL. And this loan was taken by RHC on 10.02.2017 and 15.02.2017 when the applicant and his brother were controlling REL as well as the RHC Group of Companies; (f) that it is further the ED's allegation that at the relevant time, when loans were approved and further routing of mone....
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.... corporate entities and transactions, both within and outside India, which will require a long time to trace in order to pin the blame on the accused persons. By reason thereof, such investigation by its very nature takes a long time; (l) that so far, the ED has been able to trace transactions aggregating to about INR 450 crores, whereas investigation in respect of the remaining about INR 1600 crores is still underway. It is argued however, that if the applicant is enlarged on bail, he would most definitely, whether directly or indirectly, ensure that persons who were in the know of things, including banks, financial institutions and others with whom investigation is being followed-up, do not disclose the true state of affairs to the investigating agency. It is further stated that the applicant may, if enlarged on bail, destroy evidence and records and thereby defeat the investigation process; (m) that there are a total of 50 prosecution witnesses in the case and there is reasonable apprehension that the applicant would attempt to influence witnesses; and (n) that since the on-going investigation involves foreign assets, such assets may be disposed of or ....
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....f money would not only have an adverse effect on the progress of the case but also on people's trust in the criminal justice system; and that despite the filing of charge-sheet, bail was denied to the accused in this case. Applicant's submissions in rejoinder: 9. In rejoinder to the submissions made on behalf of the ED, Mr. Hariharan further submits the following: (a) laying emphasis on the factual matrix contained in the case of P. Chidambaram vs. Directorate of Enforcement (supra), it is argued that though the monetary sum involved in that case was about INR 305 crores, the 'gravity' of the offence was much higher since the allegations were against a former Finance Minister, in relation to what was allegedly done while he held public office, which would therefore have a greater impact on public faith in the system. Yet, the Supreme Court was pleased to enlarge the accused on bail after about 04 months of his initial arrest in the predicate offence; (b) that in P. Chidambaram vs. Directorate of Enforcement (supra), the Supreme Court has considered earlier decisions as also the 'tripod test' before enlarging the accused on bail; (c) that it ....
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....cision in Upendra Rai (supra) by the Supreme Court is unnecessary, inasmuch as the stay of the judgment by the Supreme Court has not wiped-out the view taken by the High Court. Infact, it is contended that the Delhi High Court has followed the same view in subsequent cases also while the matter in Upendra Rai (supra) is pending before the Supreme Court; (j) that the present case is covered by the latest judgment in P. Chidambaram vs. Directorate of Enforcement (supra), which considers all earlier decisions; (k) that most importantly, the Explanation to section 3 of the PMLA was added with effect from 01.08.2019, while the ECIR in the present case was recorded on 24.07.2019 i.e. before 01.08.2019 and is therefore not covered by the amendment, namely that the offence alleged against the applicant is not a continuing offence; and (l) that keeping the applicant in custody any longer will seriously impact his right to defence in consultation with his lawyers and would thereby impact his fundamental right to a fair trial. Recap of the law and principles of bail : 10. Section 45 of PMLA, which is the provision governing bail in that statute recites as unde....
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....ivations of jail life, usually under more onerous conditions than are imposed on convicted defendants. The jailed defendant loses his job if he has one and is prevented from contributing to the preparation of his defence. Equally important, the burden of his detention frequently falls heavily on the innocent members of his family." (emphasis supplied) 13. In Babu Singh vs. State of U.P. (1978) 1 SCC 579 the Supreme Court observed : "18. We must weigh the contrary factors to answer the test of reasonableness, subject to the need for securing the presence of the bail applicant. It makes sense to assume that a man on bail has a better chance to prepare or present his case than one remanded in custody. And if public justice is to be promoted, mechanical detention should be demoted. ......... The considerable public expense in keeping in custody where no danger of disappearance or disturbance can arise, is not a negligible consideration. Equally important is the deplorable condition, verging on the inhuman, of our sub-jails, that the unrewarding cruelty and expensive custody of avoidable incarceration makes refusal of bail unreasonable and a policy favouring release justl....
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....scribing reasons for granting of bail, however, brief it may be, a two-Judge Bench observed that: (SCC p. 290, para 15) "15. There is no denying the fact that the liberty of an individual is precious and is to be zealously protected by the courts. Nonetheless, such a protection cannot be absolute in every situation. The valuable right of liberty of an individual and the interest of the society in general has to be balanced. Liberty of a person accused of an offence would depend upon the exigencies of the case." "11. In Prasanta Kumar Sarkar v. Ashis Chatterjee (2010) 14 SCC 496 it has been observed that (SCC p. 499, para 9) normally this Court does not interfere with an order passed by the High Court granting or rejecting the bail of the accused, however, it is equally incumbent upon the High Court to exercise its discretion judiciously, cautiously and strictly in compliance with the basic principles laid down in a plethora of decisions of this Court on the point. "9. ... among other circumstances, the factors [which are] to be borne in mind while considering an application for bail are: (i) whether there is any prima facie or reasonable ground t....
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....iples governing exercise of judicial discretion in such cases, appear, however, to be well-settled. The following principles may immediately be discerned, from the aforementioned authorities: * * * * * "(ii) While examining the issue, courts are not to presume that the accused would flee justice, were he to be released, and search for evidence indicating to the contrary. Logistically, every accused, who is released during trial, has the potentiality of fleeing. Were this potentiality to be allowed to influence the mind of the court, no accused would be entitled to bail. * * * * * "(iv) Given this legal position, the nature of the offence committed necessarily has a limited role to play, while examining the merits of an application for bail. This is for a simple reason that the application being examined by the court is not for suspension of sentence, but for release during trial. If the court were to allow itself to be unduly influenced by the nature of the charges against the accused, and the seriousness of the crime alleged to have been committed by him, it would result in obliterating the distinction between grant of bail and suspension of sentence. In....
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....ed that the "pointing finger of accusation" against the appellants is "the seriousness of the charge". The offences alleged are economic offences which have resulted in loss to the State exchequer. Though, they contend that there is a possibility of the appellants tampering with the witnesses, they have not placed any material in support of the allegation. In our view, seriousness of the charge is, no doubt, one of the relevant considerations while considering bail applications but that is not the only test or the factor: the other factor that also requires to be taken note of is the punishment that could be imposed after trial and conviction, both under the Penal Code and the Prevention of Corruption Act. Otherwise, if the former is the only test, we would not be balancing the constitutional rights but rather "recalibrating the scales of justice"." * * * * * "39. Coming back to the facts of the present case, both the courts have refused the request for grant of bail on two grounds: the primary ground is that the offence alleged against the accused persons is very serious involving deep-rooted planning in which, huge financial loss is caused to the State exchequer....
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....siderations (vide Prahlad Singh Bhati v. NCT, Delhi). There is no hard and fast rule regarding grant or refusal to grant bail. Each case has to be considered on the facts and circumstances of each case and on its own merits. The discretion of the court has to be exercised judiciously and not in an arbitrary manner. ....." * * * * * "33. The appellant is not a "flight risk" and in view of the conditions imposed, there is no possibility of his abscondence from the trial. Statement of the prosecution that the appellant has influenced the witnesses and there is likelihood of his further influencing the witnesses cannot be the ground to deny bail to the appellant particularly, when there is no such whisper in the six remand applications filed by the prosecution. The charge sheet has been filed against the appellant and other co-accused on 18.10.2019. The appellant is in custody from 21.08.2019 for about two months. The co-accused were already granted bail. The appellant is said to be aged 74 years and is also said to be suffering from age related health problems. Considering the above factors and the facts and circumstances of the case, we are of the view that the appellant is ....
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....relied strongly on Gautam Kundu v. Directorate of Enforcement (2015) 16 SCC 1 and Rohit Tandon v. Directorate of Enforcement (2018) 11 SCC 46. Gautam Kundu is a judgment relating to an offence under the SEBI Act, which is a scheduled offence, which was followed in Rohit Tandon. In Rohit Tandon, Khanwilkar, J., speaking for the Bench, makes it clear that the judgment does not deal with the constitutional validity of Section 45 of the 2002 Act. Both these judgments proceed on the footing that Section 45 is constitutionally valid and then go on to apply Section 45 on the facts of those cases. These judgments, therefore, are not of much assistance when it comes to the constitutional validity of Section 45 being challenged. * * * * * * "53. The matter came to this Court by a certificate of fitness granted [Gorav Kathuria v. Union of India 2016 SCC OnLine P&H 3428] by the High Court. Sikri, and Ramana, JJ., by their order dated 12-8-2016 [Gorav Kathuria v. Union of India, (2018) 11 SCC 46 at pp. 69-70, para 29] , stated: "Though the High Court has granted certificate to appeal, we have heard the learned counsel for some time and are of the opinion that the impugned judg....
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....vidence or influenced any witnesses or destroyed any records; (c) The allegedly offending transactions cannot be undone, reversed, modified or altered in any manner since they are recorded and reflected in several records, including those of complainant in the FIR viz. RFL, regulatory bodies such as the RBI, Securities & Exchange Board of India, Registrar of Companies and the banks and financial institutions that processed these transactions; (d) The records pertaining to the allegedly offending transactions, both physical and electronic, including equipment and hardware, have already been seized by the ED and are in its custody and control. In such a case, where the prosecution would turn mainly on documentary evidence, which has already been collected and the complaint has been filed, no purpose would be served by keeping the applicant is judicial custody (cf. Sanjay Chandra and P Chidambaram, supra); (e) Statements under section 50 PMLA have been recorded which are admissible in court; and in view inter alia of section 50(3) and the fact that proceedings before the empowered officers under section 50(2) and (3) are deemed to be judicial proceedings wit....
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....icant, that cannot be reason for denying bail; (n) As observed by this court in its recent decision dated 18^th June 2020 in Bail Application No. 913/2020 titled Navendu Babbar vs. State of NCT of Delhi, criminal investigation is not a metaphorical fishing-rod handed to an investigating agency, to indulge its penchant for 'fishing around' for evidence, at its own leisure and in the fullness of time. Investigation has to be a time-limited process, to be conducted strictly within the structure and framework of applicable law; (o) This court does not perceive any grave threat to the interests of the society or the public at large if, after the complaint has been filed, the accused is enlarged on bail, pending trial. 21. Sanctity must attach to filing of a complaint pursuant to an ECIR. It must, as a matter of law, be taken to be the culmination of investigation into the offence to the extent the offence is defined in that complaint. No one is seeking to prevent or forestall further investigation but for the sake of on-going investigation, this court cannot warp the entire concept of pre-trial imprisonment and bail. 22. Nowhere is it the law that an accused, yet....
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....sons to detain an undertrial in judicial custody, which this court does not discern in the present case. 25. It is beyond contention that the consequences of pre-trial detention are deleterious; and that keeping an undertrial in jail seriously jeopardises the preparation of his legal defence. If kept in custody, the applicant will not be able to effectively brief and consult with his lawyers, collate evidence in his defence and thereby defend himself effectively. Thereby the applicant will be denied his right to fair trial guaranteed under Article 21 of the Constitution (cf. Moti Ram and Babu Singh, supra). 26. In light of the above, there seems to be no rationale for continuing the applicant's judicial custody as an undertrial in this case. As far as the possibility of the applicant committing any further offence is concerned, that ground is purely speculative and conjectural. So is the possibility of the applicant offering any inducement, threat or promise to any prosecution witness or other such person. As observed above, the possibility of the applicant absconding also appears to be farfetched and can be addressed by imposing appropriate conditions of bail. 27. It goes....