Anticipatory Bail Denied: Supreme Court Addresses Money Laundering in INX Media Case (2019)

Date of the Judgment: 05 September 2019
Citation: 2019 INSC 884
Judges: R. Banumathi, J. and A.S. Bopanna, J.

Can an individual accused of money laundering be granted anticipatory bail, especially when the investigation is still ongoing? The Supreme Court of India recently addressed this critical question in the case of P. Chidambaram v. Directorate of Enforcement, concerning alleged irregularities in the Foreign Investment Promotion Board (FIPB) clearance given to INX Media. The court ultimately denied anticipatory bail, emphasizing the gravity of economic offenses and the necessity of custodial interrogation in such cases.

The judgment was delivered by a two-judge bench comprising Justice R. Banumathi and Justice A.S. Bopanna. Justice R. Banumathi authored the opinion for the bench.

Case Background

The case revolves around alleged irregularities in the FIPB clearance granted to INX Media for receiving foreign investment. In 2007, INX Media sought approval for FDI up to 46.216% of its issued equity capital, with a proposed inflow of Rs. 4.62 crores. The FIPB recommended the proposal, subject to the Finance Minister’s approval. However, INX Media allegedly violated the approval conditions by making a downstream investment in INX News without specific approval and generating more than Rs. 305 crores in FDI by issuing shares at a premium.

Following a complaint, the Income Tax Department initiated an investigation, which led to allegations that INX Media entered a criminal conspiracy with Karti Chidambaram and the then Finance Minister (the appellant) to circumvent penal provisions. It was alleged that payments were made to Advantage Strategic Consulting Private Limited (ASCPL) for services rendered by Karti Chidambaram to influence FIPB officials. The prosecution contended that invoices were falsely raised to conceal Karti Chidambaram’s involvement.

Based on these allegations, the Central Bureau of Investigation (CBI) registered a case on 15.05.2017 against INX Media, Karti Chidambaram, ASCPL, and unknown officials under Section 120B of the Indian Penal Code (IPC), read with Section 420 IPC, Section 8 and Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988. Subsequently, the Enforcement Directorate (ED) registered a case under Sections 3 and 4 of the Prevention of Money-Laundering Act, 2002 (PMLA).

Timeline

Course of Proceedings

The CBI registered an FIR on 15.05.2017 against INX Media and others, including the appellant, for alleged offenses under the IPC and the Prevention of Corruption Act, 1988. Based on this FIR, the Enforcement Directorate registered a case under the PMLA. The Delhi High Court granted bail to Karti Chidambaram in the CBI case on 23.03.2018. The appellant sought anticipatory bail in both the CBI and ED cases. The Delhi High Court initially granted interim protection from arrest, which was later extended until 20.08.2019. On 20.08.2019, the High Court dismissed the appellant’s petition, refusing to grant anticipatory bail. The appellant then approached the Supreme Court.

Legal Framework

The primary legal framework in this case is the Prevention of Money-Laundering Act, 2002 (PMLA). The PMLA was enacted to prevent money laundering and provide for the confiscation of property derived from money laundering.

Key provisions of the PMLA include:

• Section 2(1)(y) defines “scheduled offense” as offenses specified under Part A, B, or C of the Schedule.
• Section 3 defines “money laundering” as involvement in any process or activity connected with the proceeds of crime and projecting it as untainted property.
• Section 4 prescribes punishment for money laundering, including rigorous imprisonment and a fine.
• Section 5 provides for the attachment of property involved in money laundering.
• Section 17 deals with search and seizure of property related to money laundering.
• Section 19 empowers specified officers to arrest individuals believed to be guilty of an offense under the PMLA.
• Section 45 imposes conditions for the grant of bail in cases of money laundering.
• Section 71 gives the PMLA overriding effect over other applicable laws.

The PMLA is a special enactment designed to combat money laundering, which is recognized as a serious threat to the financial systems and integrity of nations.

Arguments

Appellant’s Arguments:

• The appellant argued that the FIPB clearance was granted in the normal course of official business, and the allegations of influence by his son, Karti Chidambaram, were unsubstantiated.
• It was contended that Karti Chidambaram was neither a shareholder nor a director of ASCPL, and the appellant had no connection with the company to whom money was paid by INX Media.
• The appellant raised objections to the sealed cover containing materials produced by the Enforcement Directorate, arguing that he was not confronted with these materials during interrogation.
• The appellant argued that the High Court’s observation that he was “evasive” during interrogation was not justified and that he had cooperated with the investigation.
• It was submitted that the provision for anticipatory bail under Section 438 of the Criminal Procedure Code (Cr.P.C.) should be interpreted fairly, and the High Court had mechanically rejected the bail application.
• The appellant contended that since the alleged offenses under Sections 420 and 120B of the IPC and Section 13 of the Prevention of Corruption Act were not “scheduled offenses” under the PMLA at the time of the alleged commission, the prosecution under PMLA was not maintainable.
• The appellant also argued that the “gravity of the offense” should be determined by the punishment prescribed by the statute, not the court’s perception.

Respondent’s Arguments:

• The respondent argued that money laundering poses a serious threat to the financial system and integrity of the nation and must be sternly dealt with.
• It was submitted that PMLA has two dimensions: the predicate offense and money laundering, which is a separate and independent offense.
• The respondent contended that they had collected cogent materials, including specific inputs from overseas banks, showing a clear case of money laundering.
• It was argued that custodial interrogation of the appellant was necessary to trace the trail of money.
• The respondent argued that the court has the power to look into the materials collected during investigation and that these materials cannot be shared with the appellant at the initial stage of considering pre-arrest bail.
• The respondent submitted that economic offenses are a class apart, requiring custodial interrogation to trace the money trail.

Issues Framed by the Supreme Court

The Supreme Court considered the following issues:

1. Whether the appellant is entitled to the privilege of anticipatory bail.
2. Whether the court can look into the documents/materials produced before the court unless the accused was earlier confronted with those documents/materials?
3. 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.?

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The Court considered the following authorities:

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

The Court carefully reviewed each authority cited by both parties. The court relied on Shri Gurbaksh Singh Sibbia and others v. State of Punjab to state that the appellant cannot seek anticipatory bail after being arrested. The Court distinguished the case of Additional District Magistrate, Jabalpur v. Shivakant Shukla and stated that the respondent cannot rely upon the documents without furnishing those documents to the appellant or without questioning the appellant about the materials collected during the investigation. The Court referred to the case of Rao Shiv Bahadur Singh and another v. State of Vindhya Pradesh to state that the acts charged as offenses must be offenses at the time of commission. The Court referred to the case of Santosh s/o Dwarkadas Fafat v. State of Maharashtra to state that the accused is entitled to protection under Article 20(3) of the Constitution of India.

The Court relied on Romila Thapar and Others v. Union of India and Others, Jai Prakash Singh v. State of Bihar and Another and Directorate of Enforcement and Another v. P.V. Prabhakar Rao to state that courts have always perused the case diaries produced by the prosecution and receive and peruse the materials/documents to satisfy its judicial conscience. The Court relied on Balakram v. State of Uttarakhand and others to state that the confidentiality is always kept in the matter of investigation and it is not desirable to make available the police diary to the accused on his demand. The Court relied on Sidharth and others v. State of Bihar, Naresh Kumar Yadav v. Ravindra Kumar and others, Malkiat Singh and others v. State of Punjab and R.K. Krishna Kumar v. State of Assam and others to state that the court is empowered to call for such diaries not to use it as evidence but to use it as aid to find out anything that happened during the investigation of the crime. The Court relied on Mukund Lal v. Union of India and another to state that there can be no better custodian or guardian of the interest of justice than the court trying the case and held that the provisions under Section 172(3) CrPC cannot be said to be unconstitutional.

The Court relied on King-Emperor v. Khwaja Nazir Ahmad, Abhinandan Jha and others v. Dinesh Mishra, State of Bihar and another v. J.A.C. Saldanha and others, Dukhishyam Benupani, Asstt. Director, Enforcement Directorate (FERA) v. Arun Kumar Bajoria, M.C. Abraham and Another v. State of Maharashtra and Others, Subramanian Swamy v. Director, Central Bureau of Investigation and another and Divine Retreat Centre v. State of Kerala and Others to state that the judiciary should not interfere with the police in matters which are within their province and into which the law imposes upon them the duty of enquiry. The Court relied on State of Bihar and another v. P.P. Sharma, IAS and another to state that the investigating officer is an arm of the law and plays a pivotal role in the dispensation of criminal justice and maintenance of law and order. The Court relied on State of M.P. and another v. Ram Kishna Balothia and another to state that the right of anticipatory bail is not a part of Article 21 of the Constitution of India.

The Court relied on State Rep. By The CBI v. Anil Sharma, Sudhir v. State of Maharashtra and Another and Assistant Director, Directorate of Enforcement v. Hassan Ali Khan to state that custodial interrogation is qualitatively more elicitation-oriented than questioning a suspect who is well ensconced with a favorable order under Section 438 of the Code. The Court relied on Adri Dharan Das v. State of W.B. to state that arrest is a part of the process of investigation intended to secure several purposes. The Court referred to Siddharam Satlingappa Mhetre v. State of Maharashtra and Others to state the factors and parameters to be considered while dealing with anticipatory bail. The Court relied on Jai Prakash Singh v. State of Bihar and another to state that anticipatory bail can be granted only in exceptional circumstances.

The Court relied on Directorate of Enforcement v. Ashok Kumar Jain, State of Gujarat v. Mohanlal Jitamalji Porwal and others, Y.S. Jagan Mohan Reddy v. CBI and Enforcement Officer, Ted, Bombay v. Bher Chand Tikaji Bora and others to state that in economic offenses, the accused is not entitled to anticipatory bail. The Court referred to Section 26 of IPC to state that a person is said to have “reason to believe” a thing, if he has sufficient cause to believe that thing but not otherwise. The Court referred to Section 172 of Cr.P.C. to state that the court can peruse the case diary. The Court referred to Section 438 of Cr.P.C. to state that the power under this section is an extraordinary power and the same has to be exercised sparingly. The Court referred to Article 20(1) of the Constitution of India to state that no person shall be convicted of any offence except for violation of law in force at the time of commission of that act charged as an offence. The Court referred to Article 20(3) of the Constitution of India to state that the accused is entitled to protection against self-incrimination. The Court referred to Article 21 of the Constitution of India to state that no person shall be deprived of his life or personal liberty except according to procedure prescribed by law.

Final Decision

The Supreme Court dismissed the appeal for anticipatory bail. The Court held that economic offenses constitute a class apart and need to be visited with a different approach in the matter of bail. The Court emphasized the gravity of money laundering as a serious economic offense that threatens the nation’s financial stability and integrity. The Court also stated that custodial interrogation is necessary for effective investigation in such cases.

Flowchart of the Case

Conclusion

The Supreme Court’s denial of anticipatory bail in this case underscores the gravity with which economic offenses, particularly money laundering, are viewed. The judgment emphasizes the necessity of custodial interrogation in such cases to ensure a thorough investigation and maintain the integrity of the financial system. The ruling also clarifies that courts can review materials collected during the investigation and that economic offenses are a class apart requiring a different approach in the matter of bail.