Supreme Court Grants Bail in Money Laundering Case: P. Chidambaram vs. Directorate of Enforcement (2019)

Date of the Judgment: 4 December 2019
Citation: (2019) INSC 1125
Judges: R. Banumathi, A.S. Bopanna, and Hrishikesh Roy, JJ.

Can a person accused of a financial crime be granted bail if they are not a flight risk, cannot tamper with evidence, or influence witnesses? The Supreme Court of India recently addressed this question in a case involving allegations of money laundering against P. Chidambaram, a former Union Finance Minister. The core issue was whether the “gravity of the offense” could be a standalone reason to deny bail, even when the traditional “triple test” for bail was satisfied in favor of the accused. The bench consisted of Justices R. Banumathi, A.S. Bopanna, and Hrishikesh Roy, with the judgment authored by Justice A.S. Bopanna.

Case Background

The case began with an FIR registered by the Central Bureau of Investigation (CBI) on 15 May 2017, against INX Media Private Limited and others. The allegations were that INX Media had sought approval from the Foreign Investment Promotion Board (FIPB) to issue equity shares and make a downstream financial investment in INX News Private Limited.

The FIPB approved the proposal but did not approve the downstream investment. However, INX Media allegedly made the downstream investment and generated more than ₹305 crores in foreign direct investment (FDI), against the approved amount of ₹4.62 crores.

Following a complaint, the Income Tax department sought clarifications from the FIPB. It was alleged that to avoid punitive action, INX Media conspired with Karti Chidambaram, son of P. Chidambaram, who was then the Union Finance Minister. Karti Chidambaram allegedly influenced FIPB officials to favor INX News. It was also alleged that Karti Chidambaram received payments for his services.

Based on the CBI’s FIR, the Directorate of Enforcement (ED) registered a case under the Prevention of Money Laundering Act, 2002 (PMLA). While P. Chidambaram was not initially named as an accused in either case, he was later arrested by the CBI on 21 August 2019 and by the ED on 16 October 2019.

Timeline:

Legal Framework

The case primarily involves the following legal provisions:

• Section 3 of the Prevention of Money Laundering Act, 2002 (PMLA): This section defines the offense of money laundering.
  “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 4 of the PMLA: This section prescribes the punishment for the offense of money laundering.
  “Whoever commits the offence of money-laundering shall be punishable with rigorous imprisonment for a term which shall not be less than three years but which may extend to seven years and shall also be liable to fine which may extend to five lakh rupees.”
• Section 439 of the Criminal Procedure Code (CrPC): This section deals with the power of the High Court or Court of Session to grant bail.

Arguments

Appellant’s Arguments (P. Chidambaram):

• The High Court should have granted bail because the triple test (flight risk, tampering with evidence, and influencing witnesses) was satisfied in his favor. The High Court itself acknowledged that he was not a flight risk and that there was no evidence he would tamper with evidence or influence witnesses.

• The High Court erred in considering allegations from an unrelated case (Rohit Tandon vs. Directorate of Enforcement) and making findings against the appellant based on those allegations.

• The High Court should not have gone into the merits of the case while deciding the bail application. The Supreme Court in the appellant’s own case (P. Chidambaram vs. CBI) had held that detailed examination of evidence should be avoided during bail hearings.

• The High Court accepted the respondent’s allegations at face value and converted them into findings, denying bail solely based on these findings.

• The appellant is not a shareholder or director of any company connected to the alleged offense and has no direct or indirect link to money laundering.

• Other officers who signed the file related to the FDI proposal of INX Media were not arrested, and all other co-accused in the case have been granted bail or not arrested.

• The High Court failed to consider that the appellant was already granted bail in the predicate offense (CBI case).

• The gravity of the offense should be determined by the severity of the punishment prescribed, and the offense of money laundering is not “grave” or “serious” as per the Supreme Court’s judgment in Sanjay Chandra vs. CBI.

• The appellant is a 74-year-old with deteriorating health, and his continued custody is detrimental to his well-being.

• The respondent did not interrogate the appellant between 5 September 2019 and 16 October 2019, despite him being in custody.

Respondent’s Arguments (Directorate of Enforcement):

• The High Court’s conclusion that there was no possibility of tampering with evidence or influencing witnesses was incorrect. The appellant’s high position and status make it likely that he could influence witnesses.

• The gravity of the offense is a standalone aspect to be considered while granting bail. Economic offenses are grave and affect society, causing a loss of confidence in the establishment.

• The Investigating Agency has collected documentary evidence, including emails and documents indicating investment of laundered money in benami properties.

• The appellant has knowledge of these aspects, including the shareholding patterns of 16 companies.

• The High Court did not properly consider that even if a complaint/charge sheet is filed, the investigation would continue.

• Granting bail would defeat the case of the prosecution, especially in economic offenses that are premeditated and require detailed investigation.

Issues Framed by the Supreme Court

The Supreme Court considered the following issues:

1. Whether the High Court was justified in denying bail to the appellant after holding the triple test in his favor.
2. Whether the High Court was correct in considering the gravity of the offense as a standalone factor while considering the bail application.
3. Whether the High Court was justified in recording findings based on the documents produced in a sealed cover.

Treatment of the Issue by the Court:

Authorities

The Supreme Court considered the following authorities:

Judgment

How each authority was viewed by the Court:

• Prahlad Singh Bhati v. NCT, Delhi and another [CITATION]*: The Court relied on this case to reiterate the factors to be considered while granting bail.
• Shri Gurbaksh Singh Sibbia vs. State of Punjab [CITATION]*: The Court used this case to emphasize that the grant of bail is the rule and refusal is the exception.
• Sanjay Chandra vs. CBI [CITATION]*: The Court referred to this case to highlight that the seriousness of the charge and the severity of the punishment should be considered while granting bail.
• State of Bihar & Anr. vs. Amit Kumar [CITATION]*; Nimmagadda Prasad vs. CBI [CITATION]*; CBI vs. Ramendu Chattopadhyay [CITATION]*; Seniors Fraud Investigation Office vs. Nittin Johari & Anr. [CITATION]*; Y.S. Jagan Mohan Reddy vs. CBI [CITATION]*; State of Gujarat vs. Mohanlal Jitamalji Porwal [CITATION]*: The Court considered these cases to acknowledge that economic offenses are grave and affect the community, but it also held that bail should not be denied in every case of economic offense.

What weighed in the mind of the Court?

The Supreme Court’s decision to grant bail to P. Chidambaram was influenced by a combination of factors, with a strong emphasis on upholding the principles of personal liberty and fair trial. The Court acknowledged the gravity of economic offenses but also emphasized that bail should not be denied merely based on the nature of the allegations.

The Court’s reasoning was structured around the following key points:

• The High Court was correct in considering the gravity of the offense but not in the manner it reached a conclusion based on the materials in a sealed cover.
• The triple test was satisfied in favor of the appellant.
• The appellant was not a flight risk.
• There was no chance of tampering with evidence or influencing witnesses.
• The appellant’s health and age were also considered.
• The appellant’s availability for further investigation and trial was ensured.

The Court also emphasized that while the gravity of the offense is a relevant factor, it cannot be the sole reason to deny bail if the triple test is satisfied. The Court disapproved of the High Court’s approach of relying on documents produced in a sealed cover to record findings against the appellant.

The Supreme Court’s decision was based on a careful consideration of the facts, the legal principles, and the need to balance the interests of justice with the personal liberty of the accused. The Court’s analysis of the gravity of the offense, the triple test, and the use of sealed cover documents was crucial in reaching its decision.

The Court also noted that the appellant was available for custodial interrogation for more than 45 days.

The Court quoted the following from the judgment:

“The jurisdiction to grant bail has to be exercised on the basis of the well-settled principles having regard to the facts and circumstances of each case.”

“The gravity for the said purpose will have to be gathered from the facts and circumstances arising in each case.”

“The basic jurisprudence relating to bail remains the same inasmuch as the grant of bail is the rule and refusal is the exception so as to ensure that the accused has the opportunity of securing fair trial.”

Key Takeaways

• The Supreme Court reiterated that the grant of bail is the rule and refusal is the exception.
• The “triple test” (flight risk, tampering with evidence, influencing witnesses) remains a crucial factor in deciding bail applications.
• The gravity of the offense is a relevant factor but cannot be the sole reason to deny bail if the triple test is satisfied.
• Courts should not record findings based on documents produced in a sealed cover during bail hearings.
• The health and age of the accused can be considered while granting bail.
• The Court clarified that the observations made in the judgment should not be construed as an opinion on the merits of the case.
• The findings in the judgment shall not have any bearing qua the other accused in the case.

Directions

The Supreme Court issued the following directions:

1. The appellant was ordered to be released on bail upon executing bail bonds for ₹2 lakhs with two sureties of the like sum.
2. The appellant’s passport, which was deposited in the CBI case, was to remain deposited, and he was not to leave the country without specific orders from the Special Judge.
3. The appellant was to make himself available for interrogation as and when required by the respondent.
4. The appellant was not to tamper with evidence or attempt to intimidate or influence witnesses.
5. The appellant was not to give any press interviews or make any public comment in connection with the case.

Development of Law

The ratio decidendi of this case is that while the gravity of the offense is a relevant factor to be considered while deciding a bail application, it cannot be the sole factor for denying bail when the triple test is satisfied in favor of the accused. This judgment clarifies the importance of balancing the gravity of the offense with the principles of personal liberty and fair trial. It also emphasizes that courts should not record findings based on documents produced in sealed covers during bail hearings.

Conclusion

In the case of P. Chidambaram vs. Directorate of Enforcement, the Supreme Court granted bail to the appellant, emphasizing that while the gravity of the offense is a relevant factor, it cannot be the sole reason to deny bail if the triple test is satisfied in favor of the accused. The Court also highlighted the importance of personal liberty and fair trial, and cautioned against recording findings based on documents produced in a sealed cover during bail hearings. This judgment reinforces the principle that the grant of bail is the rule and refusal is the exception.