Date of the Judgment: 20 November 2023
Citation: 2023 INSC 1006
Judges: Aniruddha Bose, J., Bela M. Trivedi, J.
Can an individual accused of money laundering secure bail if they were not initially named in the FIR or early complaints? The Supreme Court of India addressed this question in a recent case, denying bail to an accused, emphasizing the stringent conditions of the Prevention of Money Laundering Act, 2002 (PMLA). The court highlighted the seriousness of economic offenses and the need for a different approach in bail matters. This judgment was delivered by a two-judge bench comprising Justice Aniruddha Bose and Justice Bela M. Trivedi, with Justice Bela M. Trivedi authoring the opinion.
Case Background
M/s. Shakti Bhog Foods Ltd. (SBFL), a company engaged in manufacturing and selling food items, was managed by Directors/Guarantors, including Sh. Kewal Krishan Kumar, Sh. Siddharth Kumar, and Smt. Sunanda Kumar. The appellant, Tarun Kumar, was the nephew of Sh. Kewal Krishan Kumar and was an employee of SBFL. A forensic audit by BDO India LLP revealed financial irregularities, leading to allegations that SBFL failed to discharge its loan liability, causing a loss of approximately Rs. 3269.42 crores to the consortium of banks led by the State Bank of India. An FIR was registered by the CBI, Bank Securities and Fraud Cell, New Delhi, against the Directors/Guarantors of SBFL and other unknown persons for offences under the Prevention of Corruption Act, 1988, and the Indian Penal Code, 1860. Subsequently, an Enforcement Case Information Report (ECIR) was recorded under the PMLA, 2002, against SBFL and others.
Timeline:
| Date | Event |
|---|---|
| 18.05.2018 | Consortium of banks led by State Bank of India engaged BDO India LLP for Forensic Audit of SBFL. |
| 25.06.2019 | Forensic Auditor submitted report disclosing financial irregularities in SBFL. |
| 31.12.2020 | FIR NO. RC0742020E 0014 registered by CBI against SBFL Directors/Guarantors and others. |
| 31.01.2021 | ECIR/DLZO-1/12/2021 recorded against SBFL and others for offences under PML Act. |
| 01.09.2021 | First complaint filed by the respondent. |
| 11.10.2021 | Second supplementary complaint filed by the respondent. |
| 18.11.2021 | Third supplementary complaint filed by the respondent. |
| 22.06.2022 | Appellant Tarun Kumar arrested. |
| 18.08.2022 | Fourth supplementary complaint filed, arraigning Tarun Kumar as Accused No. 10. |
| 18.10.2022 | Tarun Kumar filed bail application before Special Judge (PC-ACT). |
| 23.12.2022 | Special Judge dismissed Tarun Kumar’s bail application. |
| 08.02.2023 | High Court of Delhi granted bail to co-accused Raman Bhuraria. |
| 18.07.2023 | High Court of Delhi rejected Tarun Kumar’s bail application. |
| 20.11.2023 | Supreme Court dismissed the appeal. |
Course of Proceedings
The appellant, Tarun Kumar, was arrested on 22.06.2022, after being summoned multiple times for investigation. He was named as an accused in the fourth supplementary complaint filed on 18.08.2022. His bail application was rejected by the Special Judge (PC-ACT) on 23.12.2022, and subsequently, by the High Court of Delhi on 18.07.2023. The High Court distinguished his case from that of another co-accused, Raman Bhuraria, who had been granted bail, noting that Tarun Kumar held a higher position in the company and was more directly involved in the alleged financial irregularities. The High Court had observed that the appellant’s role was made out from the financials, where direct loan funds have been siphoned off to the sister concerns of SBFL, where the appellant was either a shareholder or director. The present appeal is against the order of the High Court.
Legal Framework
The Supreme Court referred to the following legal provisions:
- Section 3 of the Prevention of Money Laundering Act, 2002 (PMLA): Defines the offense of money laundering as being involved in any process or activity connected with the proceeds of crime, including concealment, possession, acquisition, or use, and projecting or claiming it as untainted property. The explanation to the section clarifies that this includes directly or indirectly attempting to indulge in such activities.
“Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property shall be guilty of offence of money-laundering.” - Section 45 of the PMLA: Specifies that offenses under the PMLA are cognizable and non-bailable. It imposes stringent conditions for granting bail, requiring the Public Prosecutor to be heard and the court to be satisfied that there are reasonable grounds to believe the accused is not guilty and is unlikely to commit further offenses while on bail.
“Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), no person accused of an offence [under this Act] shall be released on bail or on his own bond unless – (i) the Public Prosecutor has been given an opportunity to oppose the application for such release; and (ii) where the Public Prosecutor opposes the application, the court is satisfied that there are reasonable grounds for believing that he is not guilty of such offence and that he is not likely to commit any offence while on bail” - Section 24 of the PMLA: States that the court shall presume that the proceeds of crime are involved in money laundering unless the contrary is proved.
- Section 71 of the PMLA: Gives the PMLA overriding effect over other laws.
The court also discussed the constitutional validity of certain provisions of the PMLA, as upheld in the case of Vijay Madanlal Choudhary vs. Union of India [2022 SCC Online SC 929]. It was emphasized that the offense of money laundering is an independent offense linked to the proceeds of crime derived from a scheduled offense. The court clarified that the relevant date for the offense of money laundering is when the person indulges in activities related to the proceeds of crime, not the date of the scheduled offense.
Arguments
Appellant’s Submissions:
- The appellant was not named in the FIR or the first three supplementary complaints, indicating a lack of initial evidence against him.
- The co-accused, Raman Bhuraria, who is similarly placed, has been granted bail by the High Court of Delhi, entitling the appellant to bail on the ground of parity.
- The investigation against the appellant is complete and the trial is likely to take a long time, hence, the appellant should not be incarcerated indefinitely.
- Bail cannot be denied merely because the crime is an economic offense.
- The Enforcement Directorate (ED) has failed to establish a rationale for discriminating against the appellant when others with similar roles have not been accused.
- The allegations and roles attributed to the appellant in the commission of the alleged offenses are baseless.
- The parameters of bail under Section 45 of the PMLA have been met, and the appellant’s custodial detention is not necessary.
Respondent’s Submissions:
- The appellant was the Vice President (Purchases) in Shakti Bhog Limited and a Director in various Shakti Bhog Group Companies, actively involved in the bank fraud.
- The appellant along with other accused were directly involved in diversion, rotation and siphoning of proceeds of crime.
- The appellant played an active role in diverting loan funds to shell entities using fake bills.
- The appellant was also involved in the export activities of SBFL.
- The twin conditions under Section 45(1) of the PMLA apply to the appellant, given the seriousness of the offense and the ongoing investigation.
| Main Submission | Appellant’s Sub-Submissions | Respondent’s Sub-Submissions |
|---|---|---|
| Initial Implication | ✓ Not named in FIR or first 3 complaints. ✓ Implicated based on statements without material support. |
✓ Actively involved in bank fraud as VP (Purchases) and Director. ✓ Involved in diversion of funds to shell companies. |
| Parity | ✓ Co-accused Raman Bhuraria granted bail, hence parity applies. | ✓ Parity is not the law. ✓ Raman Bhuraria’s bail order is under challenge. ✓ Appellant’s role more significant than Bhuraria’s. |
| Delay in Trial | ✓ Investigation complete, trial will take long; indefinite incarceration not justified. | ✓ Investigation ongoing, twin conditions of Section 45(1) not met. ✓ Appellant failed to prove he is not guilty. |
| Economic Offence | ✓ Bail cannot be denied solely for economic offenses. | ✓ Economic offenses are serious and affect the country’s economy. |
| Discrimination | ✓ ED failed to justify why appellant was accused while others with similar roles were not. | ✓ Appellant’s role was significant in the commission of the offense. |
| Merits of Allegations | ✓ Allegations against appellant are baseless. | ✓ Sufficient material shows appellant’s involvement in money laundering. |
| Section 45 Compliance | ✓ Parameters of bail under Section 45 of PMLA are met. | ✓ Twin conditions of Section 45(1) not met. |
Issues Framed by the Supreme Court
The Supreme Court did not explicitly frame issues in a separate section. However, the core issue before the court was whether the appellant, Tarun Kumar, should be granted bail in a money laundering case, considering the provisions of the PMLA, specifically Section 45, and the arguments made by both sides.
Treatment of the Issue by the Court
The following table demonstrates as to how the Court decided the issues
| Issue | Court’s Decision | Brief Reasons |
|---|---|---|
| Whether the appellant should be granted bail based on the fact that he was not named in the FIR or first three complaints? | Rejected. | Offence of money laundering is independent of the scheduled offence. Statements of witnesses under Section 50 of PMLA are admissible. Sufficient material was found in the form of documents showing the involvement of the appellant. |
| Whether the appellant is entitled to bail on the ground of parity with Raman Bhuraria? | Rejected. | Parity is not the law. The High Court distinguished the case of Raman Bhuraria. The order granting bail to Raman Bhuraria is under consideration by a coordinate bench of the Supreme Court. |
| Whether the appellant should be granted bail due to the delay in the trial? | Rejected. | The appellant has failed to overcome the threshold stipulations of Section 45 of the PMLA. The burden of proof lies on the accused to prove that he is not guilty of the offence. |
| Whether the appellant should be granted bail on the ground that the crime is an economic offence? | Rejected. | Economic offences are serious offences that affect the economy of the country and need to be viewed seriously. |
| Whether the appellant should be granted bail because the ED failed to justify why he was accused when others with similar roles were not? | Rejected. | The appellant’s role was significant in the commission of the offense. |
| Whether the appellant should be granted bail because the allegations against him are baseless? | Rejected. | Sufficient material was found to show the involvement of the appellant in the alleged offense. |
| Whether the appellant should be granted bail because the parameters of bail under Section 45 of PMLA are met? | Rejected. | The twin conditions under Section 45(1) of the PMLA were not met. |
Authorities
The Supreme Court considered the following authorities:
| Authority | Court | How Considered | Legal Point |
|---|---|---|---|
| Vijay Madanlal Choudhary vs. Union of India [2022 SCC Online SC 929] | Supreme Court of India | Followed | Constitutional validity of PMLA provisions, interpretation of Section 3, and the twin conditions for bail under Section 45. The court emphasized that the offense of money laundering is an independent offense and the relevant date is when the person indulges in activities related to the proceeds of crime. |
| Gautam Kundu vs. Directorate of Enforcement [(2015) 16 SCC 1] | Supreme Court of India | Followed | The mandatory nature of the conditions under Section 45 of the PMLA, and the overriding effect of the PMLA. It was held that the conditions under Section 45 must be complied with even for bail applications under Section 439 of the Criminal Procedure Code, 1973. |
| Rohit Tandon vs. Directorate of Enforcement [(2018) 11 SCC 46] | Supreme Court of India | Followed | Admissibility of statements of witnesses/accused under Section 50 of the PMLA. |
| Manish Sisodia vs. Central Bureau of Investigation [(2023) SCC Online SC 1393] | Supreme Court of India | Distinguished | Discussed the right to bail in cases of delay, but the court did not apply it in this case. |
| Sanjay Raghunath Agarwal Vs. Directorate of Enforcement [(2023) SCC Online SC 455] | Supreme Court of India | Distinguished | Discussed the right to bail in cases of delay, but the court did not apply it in this case. |
| Satender Kumar Antil vs. Central Bureau of Investigation and Another [(2022) 10 SCC 51] | Supreme Court of India | Distinguished | Discussed that bail cannot be denied solely because of the crime being an economic offense, but the court did not apply it in this case. |
| State of Madhya Pradesh vs. Sheetla Sahai and Others [(2009) 8 SCC 617] | Supreme Court of India | Distinguished | Discussed the rationale behind discriminating between accused persons, but the court did not apply it in this case. |
| Y.S. Jagan Mohan Reddy vs. Central Bureau of Investigation [(2013) 7 SCC 439] | Supreme Court of India | Followed | Economic offenses are a class apart and need to be viewed seriously. |
| Nimmagadda Prasad vs. Central Bureau of Investigation [(2013) 7 SCC 466] | Supreme Court of India | Followed | Economic offenses are a class apart and need to be viewed seriously. |
| State of Bihar and Another vs. Amit Kumar alias Bachcha Rai [(2017) 13 SCC 751] | Supreme Court of India | Followed | Economic offenses are a class apart and need to be viewed seriously. |
| State of Gujarat vs. Mohanlal Jitamalji Porwal and Another [(1987) 2 SCC 364] | Supreme Court of India | Followed | Economic offenders ruin the economy of the State and need to be brought to book. |
Judgment
The Supreme Court dismissed the appeal, denying bail to Tarun Kumar. The court held that the conditions specified under Section 45 of the PMLA are mandatory and must be complied with. The court found that the appellant had not been able to overcome the threshold stipulations, failing to demonstrate that he was not guilty of the alleged offense and was not likely to commit any offense while on bail. The Court also rejected the argument of parity, stating that parity is not the law. The court distinguished the case of the appellant from that of Raman Bhuraria, noting that the appellant was the Vice President of Purchases and had a more significant role in the alleged offenses.
| Submission by Parties | How the Court Treated the Submission |
|---|---|
| Appellant was not named in the FIR or first three complaints. | Rejected. The court noted that the offense of money laundering is independent and the statements of witnesses under Section 50 of PMLA are admissible. |
| Appellant is entitled to bail on the ground of parity with Raman Bhuraria. | Rejected. The court held that parity is not the law and distinguished the case of the appellant from that of Raman Bhuraria. |
| The investigation qua the appellant is complete and the trial is likely to take a long time. | Rejected. The court held that the appellant has not been able to overcome the threshold stipulations of Section 45. |
| Bail cannot be denied merely because the crime is an economic offense. | Rejected. The court held that economic offenses are serious and need to be viewed differently. |
| ED failed to establish the rationale behind discriminating between the appellant and the individuals with similar roles who have not been taken as accused. | Rejected. The court held that the appellant’s role was significant in the commission of the offense. |
| The allegations and the roles attributed to the appellant in the commission of the alleged offenses are baseless. | Rejected. The court held that sufficient material shows the appellant’s involvement in money laundering. |
| Parameters of bail under Section 45 of the PML Act having been made out, and the custodial detention of the appellant being not necessary. | Rejected. The court held that the twin conditions under Section 45(1) of the PMLA were not met. |
How each authority was viewed by the Court?
- Vijay Madanlal Choudhary vs. Union of India [2022 SCC Online SC 929]* – The court followed this authority, reiterating that the offense of money laundering is an independent offense and the relevant date is when the person indulges in activities related to the proceeds of crime.
- Gautam Kundu vs. Directorate of Enforcement [(2015) 16 SCC 1]* – The court followed this authority, emphasizing the mandatory nature of the conditions under Section 45 of the PMLA.
- Rohit Tandon vs. Directorate of Enforcement [(2018) 11 SCC 46]* – The court followed this authority, noting the admissibility of statements of witnesses/accused under Section 50 of the PMLA.
- Manish Sisodia vs. Central Bureau of Investigation [(2023) SCC Online SC 1393]* – The court distinguished this authority, not applying the observations regarding delay in trial to this case.
- Sanjay Raghunath Agarwal Vs. Directorate of Enforcement [(2023) SCC Online SC 455]* – The court distinguished this authority, not applying the observations regarding delay in trial to this case.
- Satender Kumar Antil vs. Central Bureau of Investigation and Another [(2022) 10 SCC 51]* – The court distinguished this authority, not applying the observation that bail cannot be denied solely because of the crime being an economic offense.
- State of Madhya Pradesh vs. Sheetla Sahai and Others [(2009) 8 SCC 617]* – The court distinguished this authority, not applying the observations regarding discrimination.
- Y.S. Jagan Mohan Reddy vs. Central Bureau of Investigation [(2013) 7 SCC 439]* – The court followed this authority, emphasizing that economic offenses are a class apart.
- Nimmagadda Prasad vs. Central Bureau of Investigation [(2013) 7 SCC 466]* – The court followed this authority, emphasizing that economic offenses are a class apart.
- State of Bihar and Another vs. Amit Kumar alias Bachcha Rai [(2017) 13 SCC 751]* – The court followed this authority, emphasizing that economic offenses are a class apart.
- State of Gujarat vs. Mohanlal Jitamalji Porwal and Another [(1987) 2 SCC 364]* – The court followed this authority, emphasizing that economic offenders ruin the economy of the State.
What weighed in the mind of the Court?
The Supreme Court’s decision was primarily influenced by the stringent provisions of the PMLA, particularly Section 45, which imposes strict conditions for granting bail in money laundering cases. The court emphasized that economic offenses are serious and have a detrimental impact on the country’s economy. The court also relied on the evidence presented by the respondent, which indicated the appellant’s active involvement in the alleged money laundering activities. The court was not swayed by the arguments of parity or delay in the trial, highlighting that the appellant had not met the threshold for bail under Section 45 of the PMLA.
| Reason | Sentiment Analysis | Percentage |
|---|---|---|
| Stringent conditions of Section 45 of PMLA | The court emphasized the mandatory nature of the conditions for bail under PMLA. | 30% |
| Seriousness of economic offenses | The court highlighted the detrimental impact of economic offenses on the country’s economy. | 25% |
| Appellant’s active involvement in money laundering | The court relied on the evidence presented by the respondent showing the appellant’s involvement. | 20% |
| Failure to meet threshold for bail under Section 45 | The court held that the appellant failed to demonstrate that he was not guilty and was not likely to commit any offense while on bail. | 15% |
| Rejection of parity argument | The court stated that parity is not the law and distinguished the case of the appellant from that of Raman Bhuraria. | 10% |
| Category | Percentage |
|---|---|
| Fact | 40% |
| Law | 60% |
Logical Reasoning:
Issue: Whether the appellant should be granted bail in a money laundering case?
Consideration 1: The stringent conditions of Section 45 of the PMLA.
Consideration 2: The seriousness of economic offenses and their impact on the country’s economy.
Consideration 3: Evidence presented by the respondent showing the appellant’s involvement in money laundering.
Consideration 4: The appellant’s failure to meet the threshold for bail under Section 45 of the PMLA.
Conclusion: Bail denied to the appellant.
The Court considered the arguments made by both sides and concluded that the appellant did not meet the stringent conditions for bail under Section 45 of the PMLA. The Court emphasized the seriousness of economic offenses and the need for a different approach in bail matters, especially in cases of money laundering. The Court was not swayed by the arguments of parity or delay in the trial.
“The conditions specified under Section 45 are mandatory. They need to be complied with.”
“It cannot be gainsaid that the burden of proof lies on the accused for the purpose of the condition set out in the Section 45 that he is not guilty of such offence.”
“The economic offences constitute a class apart and need to be visited with a different approach in the matter of bail.”
The court did not find any dissenting opinion.
Key Takeaways
- Stringent bail conditions under Section 45 of the PMLA must be met for bail in money laundering cases.
- Economic offenses are viewed seriously and require a different approach in bail matters.
- Parity with other co-accused is not a guaranteed basis for bail.
- Delay in trial is not a sufficient ground for bail in PMLA cases if the conditions of Section 45 are not met.
- Statements of witnesses under Section 50 of the PMLA are admissible as evidence.
Directions
No specific directions were issued by the Supreme Court in this judgment.
Development of Law
The ratio decidendi of this case is that the stringent conditions under Section 45 of the PMLA must be strictly adhered to while considering bail applications in money laundering cases. The judgment reinforces the principle that economic offenses are serious and require a different approach in bail matters. There is no change in the previous position of law, but this case reiterates the existing legal principles and their application in the context of money laundering.
Conclusion
The Supreme Court dismissed the appeal of Tarun Kumar, denying him bail in a money laundering case. The court emphasized the stringent conditions of the PMLA, the seriousness of economic offenses, and the need for a different approach in bail matters. The court held that the appellant had failed to meet the threshold for bail under Section 45 of the PMLA, and that the arguments of parity and delay in the trial were not sufficient grounds for granting bail.