12/26/2019 0 Comments
Delep Goswami, FCS, Advocate Anirrud Goswami, Advocate,
Supreme Court of India Goswami & Goswami Advocates
(+91) 9891169035 (+91) 9711117019
Published by Taxmann Publications in 'Sebi & Corporate Laws' Journal
December 20, 2019 112 taxmann.com 242 (Article) 174 Views
1. In the wake of recent spate of cases of "economic offences" by high profile offenders and protracted litigations on whether to grant pre-arrest bail/regular bail to such offenders and the Courts holding different views at different times depending on the facts and circumstances of such cases, it has become necessary to highlight some broad parameters and principles being followed by the Courts on this important subject. This article is limited to the reasons for refusal to grant anticipatory bail. It is hoped that professionals dealing with this subject will greatly benefit from the discussions on this subject.
Supreme Court on What Constitutes an "Economic Offence":--
2. Observing that economic offences constitute a class apart and need to be visited with a different approach in the case of bail, in Y.S. Jagan Mohan Reddy v. CBI (2013-7-SCC-439), the Supreme Court of India has held as under :-
"34. Economic offences constitute a class apart and need to be visited with a different approach in the matter of bail. The economic offences having deep-rooted conspiracies and involving huge loss of public funds need to be viewed seriously and considered as grave offences affecting the economy of the country as a whole and thereby posing serious threat to the financial health of the country.
35. While granting bail, the Court has to keep in mind the nature of accusations, the nature of evidence in support thereof, the severity of the punishment which conviction will entail, the character of the accused, circumstances which are peculiar to the accused, reasonable possibility of securing the presence of the accused at the trial, reasonable apprehension of the witnesses being tampered with, the larger interests of the public/State and other similar considerations."
Appeal in the Supreme Court against Delhi High Court's order refusing to grant anticipatory bail:--
3. In Criminal Appeal No.1340/2019 filed in the Supreme Court in re: P. Chidambaram v. Directorate of Enforcement, the appeal related to the alleged irregularities in Foreign Investment Promotion Board (FIPB) clearance given to INX Media Private Limited for receiving foreign investment to the tune of Rs. 305 crores against approved inflow of Rs. 4.62 crores. The High Court of Delhi rejected the appellant's plea for anticipatory bail in the case registered by the Central Bureau of Investigation (CBI) under Section 120B, read with Section 420 of the Indian Penal Code, 1860 (IPC) and under Section 8 and Section 13(2), read with Section 13(1)(d) of the Prevention of Corruption Act, 1988. By the impugned order dated 20.8.2019, the High Court also refused to grant anticipatory bail in the case registered by the Enforcement Directorate (ED) in case registered vide ECIR No.07/HIU/2017 punishable under Sections 3 and 4 of the Prevention of Money Laundering Act, 2002 (PMLA). The appellant was arrested and remanded to custody in the CBI case and, hence, the appellant could not seek anticipatory bail after he was arrested.
The case of the prosecution was that in 2007, INX Media Private Limited (IMPL) approached FIPB seeking approval for inflow of FDI to the extent of Rs. 4.62 crores and the FIPB recommended the proposal of IMPL subject to the approval of the appellant, who was the then Union Finance Minister. FIPB did not approve any downstream investment by IMPL in another entity, namely, INX News Limited (INL). In violation of the conditions of FIPB approval, IMPL deliberately made a downstream investment in the share capital of INL and generated more than Rs. 305 crores FDI in IMPL by issuing shares to foreign investors at a premium of over Rs. 800 per share.
Upon receipt of a complaint against IMPL in respect of a cheque issued for Rs. 10 lakhs, the Income Tax Department sought for information from FIPB and IMPL justified its action saying that the downstream investment was authorised and made in accordance with FIPB approval. In order to get out of possible prosecution, IMPL entered into a criminal conspiracy with Mr. Karti Chidambaram (KC), Promoter-Director of Chess Management Services Private Limited (CMSPL) and the appellant, the then Finance Minister of Union of India.
The FIR further alleged, inter-alia, that: (a) for services rendered by KC to IMPL through CMSPL in getting the issues scuttled by influencing public servants of FIPB, consideration in the form of payments were received against invoices raised on IMPL by another entity, namely, Advantage Strategic Consultants Private Limited (ASCPL) closely associated with KC and (b) the very reason for getting the invoices raised in ASCPL's name for services rendered by CMSPL was with a view to conceal the identity of KC inasmuch as on the day when the invoices were raised and payment was made, KC was the Promoter-Director of CMSPL, whereas ASCPL was being controlled by him indirectly. It was alleged that the invoices approximately for an amount of Rs. 3.50 crores were falsely raised in favour of IMPL in the name of other companies in which KC was having substantial interest either directly or indirectly and that such invoices were falsely raised for creation of acquisition of media content, consultancy in respect of market research, etc. It was also alleged that INX Media Group in its record had clearly mentioned the purpose of payment of Rs. 10 lakhs to ASCPL as 'towards management consultancy charges towards FIPB notification and clarification'.
Alleging that the above acts of omission and commission prima facie disclose commission of offence, CBI had registered FIR No.220/2017 on 15.5.2017 and on the basis of the said FIR registered by CBI, the ED registered a case in ECIR No.07/HIU/2017 against the aforesaid accused persons for allegedly committing the offence punishable under Sections 3 and 4 of the Prevention of Money Laundering Act, 2002 (PMLA). Ever since the registration of the cases in 2017, there were various proceedings seeking bail and number of other proceedings pending which were filed by KC and other accused and finally the Delhi High Court granted bail to KC on 23.3.2018 in IMPL case filed by CBI. Thereafter, the appellant moved the Delhi High Court seeking anticipatory bail in both the CBI case and money-laundering case filed by ED. On 25.07.2018, the Delhi HC granted the appellant interim protection from arrest in both the cases and the same was extended till 20.8.2019, the date on which the High Court dismissed the appellant's petition refusing to grant anticipatory bail.
Reasons why High Court refused to grant anticipatory bail to the appellant:--
4. The High Court dismissed the application and refused to grant anticipatory bail to the appellant by holding that it was a classic case of money-laundering and held that the alleged irregularities committed by the appellant made out a prima facie case for refusing pre-arrest bail to the appellant. The Ld. Single Judge also held that the gravity of the offence and the evasive reply given by the appellant to questions put to him while he was under the protective cover extended to him by the Court, were twin factors which weighed to deny the pre-arrest bail. Being aggrieved, the appellant preferred an appeal to the Supreme Court of India.
Arguments advanced on behalf of the accused Appellant in Supreme Court:--
5. Lengthy arguments were heard as number of hearings stretched over long time. Learned Senior Counsels appearing for the appellant, Mr. Kapil Sibal and Mr. Abhishek Manu Singhvi made meticulous submissions on the concept of life and liberty enshrined in Article 21 of the Constitution of India to urge that the appellant was entitled to the privilege of anticipatory bail. Arguments were also advanced as to whether the Court can look into materials produced by respondent-ED to seek custody of the appellant when the appellant was not confronted with those documents on the three dates of interrogation. Interlocutory application was filed by the appellant to produce the transcripts of the questions put to the appellant and his answers that were recorded by ED. Mr. Sibal also argued that the KC was neither a shareholder nor a Director of ASCPL and had nothing to do with ASCPL whereas ED falsely alleged that KC had been controlling ASCPL to whom money had been paid by IMPL. He also contended that the Ld. Single Judge of the High Court in its judgement simply copy-pasted paragraphs of the note given by ED to the Court and this pointed out that the counter-affidavit filed by ED became the judgement of the Ld. Single Judge and this was not the correct judicial process to deal with anticipatory bail applications. Next, it was argued that ED could not randomly produce documents in Court behind the back of the appellant for seeking custody of the appellant. He strongly objected to the High Court receiving a "sealed cover" and looking into those documents collected during investigation allegedly showing the money trail in the name of companies and money-laundering, without affording an opportunity to the accused to counter those allegations. Mr. Sibal also argued that the appellant had well cooperated with ED and, thus, the ED could not allege that appellant was non-cooperative and if the High Court had permitted filing of interrogation transcript, they would show whether appellant was evasive or not during his questioning as alleged by the ED.
Therefore, Mr. Sibal submitted that provisions of anticipatory bail under Section 438 CrPC have to be interpreted in a fair and reasonable manner and that the High Court had mechanically rejected the anticipatory bail and that in the alleged offence in the case, since everything was borne out by the records, there was no question of the appellant being evasive. It was further submitted that co-accused KC and Padma Bhaskararaman were granted bail and the other accused Indrani Mukherjea and Peter Mukherjea were on statutory bail and, therefore, the appellant was also entitled to bail on parity.
Senior Counsel, Mr. Singhvi's main contentions were that the High Court could not deny anticipatory bail to the appellant on the basis of materials produced by ED in a "sealed cover" before the Court which were never shown to the appellant, nor was the appellant confronted with the same and that the alleged offences were not scheduled offences under the PMLA at the time of their occurrence and, hence, prosecution under PMLA was not maintainable. Mr. Singhvi also took strong exception to the two factors stated by the High Court in its impugned order for denying pre-arrest bail, i.e., (i) gravity of the offence; and (ii) the appellant was evasive during interrogation. It was submitted that gravity of the offence cannot be the perception of the individual or of the Court and the test of gravity of offence should be the punishment prescribed by the statute for the offence committed. Insofar as the finding of the High Court about the appellant being evasive during interrogation, Mr. Singhvi submitted that ED cannot expect an accused to give answers in the manner they want and that accused was entitled to protection under Article 20(3) of the Indian Constitution.
Countering the aforesaid submissions, the learned Solicitor General (SG) submitted that grant of anticipatory bail was not part of Article 21 of the Indian Constitution and argued that having regard to the materials collected by ED and specific inputs and in view of the provisions of the special enactment like PMLA, custodial interrogation of the appellant was required and he was not entitled to the privilege of anticipatory bail. The Ld. SG also took the Supreme Court through the Statement of Objects and Reasons and salient features of PMLA and submitted that India, being part of the global community, had a responsibility to crack down on money-laundering with an effective legislation and that PMLA was a result of joint initiatives taken by several nations. He further submitted that (a) money-laundering posed a serious threat to the financial system and financial integrity of the nation and has to be sternly dealt with; (b) PMLA offence has two dimensions: predicate offence and money-laundering; (c) Money-laundering is a separate and independent offence punishable under Section 4, read with Section 3 of the PMLA; (d) Under Section 19 of PMLA, specified officers on the basis of material in possession and having reason to believe that the person has been guilty of the offence under PMLA, have the power to arrest such person; and (e) necessary safeguards were also enshrined in Section 19 of the Act. He submitted that the ED had collected cogent materials to show that it had a case of money-laundering against the accused and that it had issued letter rogatory and that if the Court intervenes by granting anticipatory bail, ED cannot exercise the statutory right of arrest and interrogate the appellant. He further submitted that during investigation, the ED had collected materials and overseas banks had given specific inputs regarding the companies and properties where money had been parked in the name of shell companies and the said money had been used to make legitimate assets and that custodial interrogation was necessary with regard to the materials so collected.
Supreme Court Refuses to Grant Anticipatory Bail at the Stage of Investigation:--
6. In its judgement dated 5.9.19 in P. Chidambaram v. Directorate of Enforcement (Criminal Appeal No.1340/2019), the Supreme Court Division Bench comprising Hon'ble Justice (Ms.) R. Banumathi and Hon'ble Justice AS Bopanna observed and held that:
"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, particular 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 anticipating bail."
The Apex Court further observed that "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.PC. 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 ED claims to have certain specific inputs from various sources, including overseas banks. Letter rogatory is also said to have been issued and some responses have been received by the department. Having regard to the nature of allegations and the stage of the investigation, 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 ED, we do not find any ground warranting interference with the impugned order. Considering the facts and circumstances of the case, 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."
While dealing with the appeal, the Supreme court also noted and referred to its earlier decisions in Dukhishyam Benupani, Assistant Director, Enforcement Directorate (FERA) v. Arun Kumar Bajoria (1998-1-SCC-52) and in Enforcement Officer, TED, Bombay v. Bher Chand Tikaji Bora and others (1999-5-SCC-720), where the Supreme Court was hearing an appeal by ED against orders of Ld. Single Judge of the Bombay High Court granting anticipating bail to respondent therein and where the Supreme Court set aside the order of the Single Judge granting anticipatory bail to the said accused.
The Supreme Court further observed that the privilege of pre-arrest bail should be granted only in exceptional cases and that judicial discretion conferred upon the Court has to be properly exercised after application of mind as to the nature and gravity of the accusation, possibility of applicant fleeing justice and other factors to decide whether it is a fit case for grant of anticipatory bail. Grant of anticipatory bail, to some extent, interferes in the sphere of investigation of an offence and, hence, the Court must be circumspect while exercising such power for grant of anticipatory bail. Anticipatory bail is not to be granted as a matter of rule and it has to be granted only when the Court is convinced that exceptional circumstances exist to resort to that extraordinary remedy. The Court must also keep in view that a criminal offence in economic and money-laundering cases is not just an offence against an individual, rather the larger societal interest is at stake. Therefore, a delicate balance is required to be established between two rights – safeguarding the personal liberty of an individual and the societal interest. It cannot be said that refusal to grant anticipatory bail would amount to denial of rights conferred upon the appellant under Article 21 of the Indian Constitution.
Thereafter, the Supreme Court, in the aforementioned P. Chidambaram's case (supra) dismissed the appeal and observed that the appellant can work out his remedy in accordance with law and that as and when the application for regular bail is filed, the same shall be considered by the learned trial court on its own merits and in accordance with law, without being influenced by any of the observations made in the Supreme Court's aforesaid judgement of refusal to grant anticipatory bail and the impugned order of the High Court.