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

Introduction

Date of the Judgment: May 12, 2023
Citation: Not Available in Source
Judges: M.R. Shah, J. and C.T. Ravikumar, J.

Can a High Court grant bail in a money laundering case when the investigation by the Enforcement Directorate is still ongoing? The Supreme Court of India recently addressed this crucial question, setting aside a High Court’s order that had granted bail to the accused. The core issue revolves around the interpretation and application of Section 45 of the Prevention of Money Laundering Act, 2002 (PMLA), particularly when investigations are still underway. This judgment clarifies the stringent conditions for bail in money laundering cases and emphasizes the seriousness of such offences.

Case Background

The case began with an FIR (No. 12/2019) registered on April 10, 2019, by the Economic Offences Wing, Bhopal. This FIR named about 20 individuals and companies for offences under Sections 120-B, 420, 468, and 471 of the Indian Penal Code (IPC), Section 66 of the Information Technology Act, 2000, and Section 7(c) read with Section 13(2) of the Prevention of Corruption Act, 1988. The FIR alleged that e-Tender Nos. 91, 93, and 94, worth ₹1769.00 crores of the Madhya Pradesh Water Corporation, were manipulated. The price bids of M/s GVPR Engineers Limited, M/s The Indian Hume Pipe Company Limited, and M/s IMC (sic) Project India Limited were altered to make them the lowest bidders.

Following the FIR, the Economic Offences Wing, Bhopal, conducted an investigation and filed a chargesheet on July 4, 2019. Upon reviewing the chargesheet, it was discovered that the accused had also committed offences under the Prevention of Money Laundering Act, 2002 (PMLA), as the offences they were charged with were also scheduled offences under the PMLA. Consequently, the Enforcement Directorate, Hyderabad, initiated a money laundering investigation under F. No. ECIR/HYZO/36/2020. The respondents in the present appeals were arrested on January 19, 2021, and subsequently filed bail applications before the High Court, which were allowed, leading to the present appeals by the Directorate of Enforcement.

Timeline

Course of Proceedings

The respondents, after being arrested by the Enforcement Directorate on January 19, 2021, filed bail applications before the High Court for the State of Telangana at Hyderabad. The High Court allowed these bail applications, directing the release of the respondents. The Directorate of Enforcement, dissatisfied with the High Court’s decision, filed the present appeals before the Supreme Court.

Legal Framework

The core of this case revolves around Section 45 of the Prevention of Money Laundering Act, 2002 (PMLA). This section imposes stringent conditions for granting bail in cases involving offences under the PMLA. The section reads as follows:

“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.”

This provision makes offences under the PMLA cognizable and non-bailable, requiring the court to be satisfied that the accused is not guilty and is unlikely to commit further offences while on bail. The rigour of Section 45 of the PMLA is a key aspect of the legal framework in this case.

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 appreciate the seriousness of the scheduled offences under the PMLA.
• The High Court incorrectly concluded that the investigation was complete simply because a chargesheet was filed for the predicate offences. The investigation by the Enforcement Directorate for the scheduled offences under the PMLA is still ongoing.

Arguments by the Respondents:

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

Issues Framed by the Supreme Court

The Supreme Court considered the following issues:

1. Whether the High Court was correct in granting bail to the accused, considering the provisions of Section 45 of the PMLA, 2002.
2. Whether the High Court correctly appreciated the fact that the investigation by the Enforcement Directorate was still ongoing with respect to the scheduled offences under the PMLA, 2002.

Treatment of the Issue by the Court

Authorities

The Supreme Court primarily considered the following:

• Section 45 of the Prevention of Money Laundering Act, 2002: The court emphasized the stringent conditions for bail under this section, particularly the requirement that the court must be satisfied that the accused is not guilty of the offence and is unlikely to commit another offence while on bail.

Judgment

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

How each authority was viewed by the Court?

• Section 45 of the Prevention of Money Laundering Act, 2002: The Court emphasized that the High Court failed to consider the rigour of Section 45 of the PMLA, which imposes stringent conditions for granting bail in money laundering cases. The Court highlighted that the High Court did not appreciate that the investigation by the Enforcement Directorate for the scheduled offences under the PMLA was still ongoing and that the filing of a chargesheet for the predicate offences does not mean that the investigation is complete.

What weighed in the mind of the Court?

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

• The ongoing investigation by the Enforcement Directorate for the scheduled offences under the PMLA, 2002.
• The High Court’s failure to consider the rigour of Section 45 of the PMLA, 2002, which imposes stringent conditions for granting bail in money laundering cases.
• The seriousness of the allegations of money laundering and the need for a thorough investigation.

Fact:Law Ratio

The Supreme Court’s decision was heavily influenced by legal considerations, particularly the interpretation and application of Section 45 of the PMLA, 2002.

The Supreme Court found that the High Court had not properly considered the legal requirements for granting bail in money laundering cases. The High Court had incorrectly assumed that the investigation was complete simply because a chargesheet had been filed for the predicate offences, while the investigation by the Enforcement Directorate for the scheduled offences under the PMLA was still ongoing. The Court emphasized that the rigour of Section 45 of the PMLA must be considered when granting bail in such cases.

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 observed, “From the impugned judgment(s) and order(s) passed by the High Court, it appears that what is weighed with the High Court is that chargesheet has been filed against respective respondent No. 1 – accused and therefore, the investigation is completed. However, the High Court has failed to notice and appreciate that the investigation with respect to the scheduled offences under the PML Act, 2002 by the Enforcement Directorate is still going on.”

The Court also clarified, “Investigation for the predicated offences and the investigation by the Enforcement Directorate for the scheduled offences under the PML Act are different and distinct. Therefore, the High Court has taken into consideration the irrelevant consideration.”

Key Takeaways

• The High Court must consider the rigour of Section 45 of the Prevention of Money Laundering Act, 2002, when deciding on bail applications in money laundering cases.
• The filing of a chargesheet for predicate offences does not mean the investigation by the Enforcement Directorate for scheduled offences under the PMLA is complete.
• The investigation by the Enforcement Directorate for scheduled offences under the PMLA is distinct from the investigation for the predicate offences.
• The seriousness of money laundering offences requires a thorough investigation, and bail should not be granted lightly.

Directions

The Supreme Court set aside the High Court’s order 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 a fresh decision on the bail applications, taking into consideration the observations made by the Supreme Court.

Specific Amendments Analysis

Not Applicable as no specific amendment was discussed in the source.

Development of Law

The ratio decidendi of this case is that the High Court must consider the rigour of Section 45 of the PMLA, 2002, while deciding bail applications in money laundering cases, and that the investigation by the Enforcement Directorate for scheduled offences under the PMLA is distinct from the investigation for the predicate offences. This judgment reinforces the stringent conditions for bail in money laundering cases and clarifies that the investigation by the Enforcement Directorate is ongoing even if a chargesheet has been filed for the predicate offences.

Conclusion

The Supreme Court’s judgment in Directorate of Enforcement vs. Aditya Tripathi sets aside the High Court’s order granting bail to the accused in a money laundering case. The Supreme Court emphasized the importance of considering Section 45 of the PMLA, 2002, and the ongoing nature of the investigation by the Enforcement Directorate. This decision reinforces the strict approach towards bail in money laundering cases and highlights the need for a thorough investigation.