Supreme Court Reverses Bail in Money Laundering Case: Directorate of Enforcement vs. Aditya Tripathi (2023)

Date of the Judgment: 12 May 2023

Citation: 2023 INSC 531

Judges: M.R. Shah, J., C.T. Ravikumar, J.

Can a High Court grant bail in a money laundering case solely on the grounds that a chargesheet has been filed for the predicate offense, without considering the ongoing investigation by the Enforcement Directorate under the Prevention of Money Laundering Act, 2002? The Supreme Court of India recently addressed this critical question, setting aside the High Court’s order that had granted bail. This case highlights the stringent conditions for bail under the PMLA and the importance of considering the seriousness of money laundering allegations. The judgment was delivered by a two-judge bench comprising Justice M.R. Shah and Justice C.T. Ravikumar, with Justice M.R. Shah authoring the opinion.

Case Background

The case originated from an FIR (No. 12/2019) registered on 10 April 2019, by the Economic Offences Wing, Bhopal. This FIR named approximately 20 individuals and companies for offenses including cheating, forgery, and corruption under the Indian Penal Code (IPC), the Information Technology Act, 2000, and the Prevention of Corruption Act, 1988. The allegations involved tampering with e-Tender bids for Madhya Pradesh Water Corporation projects worth ₹1769 crores, to favor certain companies.

Following the filing of a chargesheet by the Economic Offences Wing on 4 July 2019, it was found that the accused had also committed offenses under the Prevention of Money Laundering Act, 2002 (PMLA). Consequently, the Enforcement Directorate (ED), Hyderabad, initiated a money laundering investigation (F. No. ECIR/HYZO/36/2020). The respondents in the appeals were arrested on 19 January 2021, and subsequently sought bail from the High Court. The High Court granted bail, which led to the present appeals by the Directorate of Enforcement.

Timeline:

Course of Proceedings

The High Court granted bail to the respondents, primarily because the chargesheet had been filed. The High Court did not consider the ongoing investigation by the Enforcement Directorate under the PMLA, 2002. The Directorate of Enforcement appealed to the Supreme Court against this order, arguing that the High Court had not properly appreciated Section 45 of the PMLA and the seriousness of the offenses.

Legal Framework

The Supreme Court focused on Section 45 of the Prevention of Money Laundering Act, 2002 (PMLA), which governs bail in cases of money laundering. Section 45 of the PMLA, 2002 states:

“45. Offences to be cognizable and non-bailable.—
(1) [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:
Provided that a person, who, is under the age of sixteen years, or is a woman or is sick or infirm [or is accused either on his own or along with other co-accused of money-laundering a sum of less than one crore rupees], may be released on bail, if the Special Court so directs:
Provided further that the Special Court shall not take cognizance of any offence punishable under Section 4 except upon a complaint in writing made by—
(i) the Director; or
(ii) any officer of the Central Government or a State Government authorised in writing in this behalf by the Central Government by a general or special order made in this behalf by that Government.
[(1-A) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), or any other provision of this Act, no police officer shall investigate into an offence under this Act unless specifically authorised, by the Central Government by a general or special order, and, subject to such conditions as may be prescribed.]
(2) The limitation on granting of bail specified in [* * *] sub-section (1) is in addition to the limitations under the Code of Criminal Procedure, 1973 (2 of 1974) or any other law for the time being in force on granting of bail.”

The Supreme Court emphasized that the conditions for bail under Section 45 of the PMLA are stringent and must be considered before granting bail. The court also noted that the investigation by the Enforcement Directorate for scheduled offenses under the PMLA is distinct from the investigation for the predicate offenses.

Arguments

Arguments by the Directorate of Enforcement (Appellant):

• The High Court erred in granting bail without properly considering Section 45 of the PMLA, 2002.
• The High Court did not adequately appreciate the seriousness of the money laundering offenses.
• The High Court incorrectly assumed that the investigation was complete simply because a chargesheet had been filed for the predicate offenses. The investigation by the Enforcement Directorate was still ongoing.

Arguments by the Respondents:

• The High Court was correct in granting bail as the investigation was complete and a chargesheet had been filed.
• Other accused in the predicate offenses have been acquitted/discharged.
• The respondents have been on bail since March 2021, and therefore, the Supreme Court should not interfere with the High Court’s order.

Issues Framed by the Supreme Court

The Supreme Court considered the following key issue:

1. Whether the High Court was justified in granting bail to the respondents without considering the rigors of Section 45 of the PMLA, 2002, and the ongoing investigation by the Enforcement Directorate.

Treatment of the Issue by the Court

Authorities

The Supreme Court primarily relied on Section 45 of the Prevention of Money Laundering Act, 2002. The Court emphasized the stringent conditions for granting bail under this provision. There were no other authorities cited in the judgment.

Judgment

How each authority was viewed by the Court?

The Court heavily relied on Section 45 of the Prevention of Money Laundering Act, 2002. The court observed that the High Court did not consider the rigour of the said provision while granting bail.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following factors:

• The stringent requirements for bail under Section 45 of the PMLA, 2002.
• The seriousness of the money laundering offenses.
• The fact that the investigation by the Enforcement Directorate was still ongoing.

Fact:Law Ratio

Logical Reasoning:

The Supreme Court found that the High Court had not properly considered the legal requirements under Section 45 of the PMLA, 2002, and had incorrectly assumed that the investigation was complete. The Court emphasized that the investigation for scheduled offenses under the PMLA is separate from the investigation for the predicate offenses.

The Court stated, “By the impugned judgment(s) and order(s) and while granting bail, the High Court has not considered the rigour of Section 45 of the PML Act, 2002.”

The Court further noted, “Even otherwise, the High Court has not at all considered the nature of allegations and seriousness of the offences alleged of money laundering and the offences under the PML Act, 2002.”

The Court also clarified that, “Investigation for the predicated offences and the investigation by the Enforcement Directorate for the scheduled offences under the PML Act are different and distinct.”

Key Takeaways

• The Supreme Court has reaffirmed the stringent conditions for bail under Section 45 of the PMLA, 2002.
• High Courts must consider the seriousness of money laundering offenses and the ongoing nature of investigations by the Enforcement Directorate before granting bail.
• The investigation for offenses under the PMLA is distinct from the investigation for the predicate offenses.
• The filing of a chargesheet for predicate offenses does not automatically mean that the investigation under the PMLA is complete.

Directions

The Supreme Court quashed the High Court’s orders granting bail and directed the respondents to surrender before the competent court or jail authority within one week. The matters were remitted back to the High Court for fresh consideration of the bail applications in light of the observations made by the Supreme Court.

Specific Amendments Analysis

There was no specific amendment analysis in the judgment.

Development of Law

The ratio decidendi of this case is that the High Court must consider the stringent conditions of Section 45 of the PMLA and the ongoing nature of the investigation by the Enforcement Directorate before granting bail in money laundering cases. This judgment clarifies that the filing of a chargesheet for predicate offenses does not automatically warrant bail when a separate investigation under the PMLA is ongoing. This does not change the previous position of law but clarifies the interpretation of Section 45 of PMLA.

Conclusion

The Supreme Court’s judgment in Directorate of Enforcement vs. Aditya Tripathi sets aside the High Court’s order granting bail, emphasizing the stringent conditions under Section 45 of the PMLA, 2002, and the importance of considering the ongoing investigation by the Enforcement Directorate. The judgment underscores that the investigation for money laundering offenses is distinct from the investigation for predicate offenses and that the filing of a chargesheet for predicate offenses does not automatically warrant bail under the PMLA.