Supreme Court Upholds Denial of Bail in Money Laundering Case: Saumya Chaurasia vs. Directorate of Enforcement (2023)

Date of the Judgment: 14 December 2023
Citation: 2023 INSC 1073
Judges: Aniruddha Bose, J. and Bela M. Trivedi, J.
Can a high-ranking government official be denied bail in a money laundering case, even if the predicate offense appears to be dropped? The Supreme Court of India recently addressed this complex question in the case of Saumya Chaurasia vs. Directorate of Enforcement. The court upheld the denial of bail, emphasizing the seriousness of money laundering offenses and the need for a thorough investigation. This judgment underscores the stringent approach taken by Indian courts in cases involving financial crimes, particularly when they involve public officials.

Case Background

The case revolves around allegations of money laundering against Saumya Chaurasia, who was the Deputy Secretary in the office of the Chief Minister of Chhattisgarh. The Directorate of Enforcement (ED) initiated an investigation based on an FIR registered against Suryakant Tiwari for offenses including extortion and criminal intimidation. The ED alleged that Chaurasia was a key figure in an extortion racket run by Tiwari, and that she used her position to facilitate the illegal activities. The timeline of events is as follows:

Course of Proceedings

The High Court of Chhattisgarh at Bilaspur dismissed the bail application of Saumya Chaurasia on 23.06.2023. The High Court’s decision came after the Karnataka Police had filed a charge sheet against Suryakant Tiwari for offenses under Sections 204 and 353 of the IPC, notably omitting Sections 384 and 120-B, which were the predicate offenses for the PMLA case. The Additional Chief Judicial Magistrate, Bengaluru, took cognizance of the offenses under Sections 204 and 353 of the IPC. Saumya Chaurasia then appealed to the Supreme Court, arguing that since the scheduled offenses were dropped, the PMLA case against her should not stand.

Legal Framework

The case is primarily governed by the Prevention of Money Laundering Act, 2002 (PMLA), and the Code of Criminal Procedure, 1973 (Cr.P.C.). Key provisions include:

• Section 3 of the PMLA: Defines the offense of money laundering as “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: Prescribes the punishment for the offense of money laundering.
• Section 45 of the PMLA: Makes offenses under the PMLA cognizable and non-bailable, with a proviso that allows for bail for women, individuals under 16, or those who are sick or infirm, at the discretion of the court. The proviso states: “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”.
• Section 437 of the Cr.P.C.: Deals with the grant of bail in non-bailable offenses, with similar provisions for women and other vulnerable groups.
• Section 173(8) of the Cr.P.C.: Allows for further investigation even after a police report has been submitted.

The PMLA is a special legislation designed to combat money laundering, and it imposes stringent conditions for bail. The Act is intended to prevent the conversion of illegally obtained money into legitimate assets and to confiscate such assets.

Arguments

Appellant’s Arguments (Saumya Chaurasia):

• The appellant was not named in the initial FIR or the Enforcement Case Information Report (ECIR) and was arrested despite cooperating with the ED.
• The charge-sheet filed by the Karnataka Police against Suryakant Tiwari dropped the offenses under Sections 384 and 120-B of the IPC, which were the scheduled offenses under the PMLA. Therefore, the PMLA case against her should not stand.
• The proceedings under the PMLA are contingent on the existence of a scheduled offense. Without a scheduled offense, the PMLA case cannot continue, citing Vijay Madanlal Choudhary & Ors. v. Union of India & Ors. [2022 SCC Online SC 929].
• As a woman, she should be granted bail under the proviso to Section 45 of the PMLA, especially since she has been in custody for over a year.
• There is no substantive evidence against her, and the allegations in the prosecution complaint are unsubstantiated.
• There is no connection between the appellant and the co-accused in the prosecution complaint.

Respondent’s Arguments (Directorate of Enforcement):

• Substantive evidence shows a strong nexus between the appellant and other accused, establishing money laundering.
• Documents show incriminating evidence of cash transactions and illegal transactions, including the purchase of properties in the name of the appellant’s relatives.
• Suryakant Tiwari extorted money with the connivance of senior bureaucrats, including the appellant, and the money was used for bribes and acquiring properties.
• The appellant, despite being a junior officer, exercised considerable influence due to her access to higher political powers.
• The appellant was a key person in the extortion racket run by Suryakant Tiwari, where approximately Rs. 540 crores were extorted.
• The appellant utilized the proceeds of the crime to purchase properties in the names of her mother, cousin, and husband.
• The use of “may be” in the proviso to Section 45 of the PMLA indicates that the benefit of the proviso is not mandatory and should be based on the facts of each case.

Issues Framed by the Supreme Court

The Supreme Court considered the following issues:

1. Whether the High Court was justified in rejecting the bail application of the appellant.
2. Whether the appellant, being a woman, is entitled to bail under the proviso to Section 45 of the PMLA.
3. Whether the absence of a scheduled offense in the charge-sheet filed by the Karnataka Police impacts the PMLA case against the appellant.

Treatment of the Issue by the Court

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

Authorities

The Supreme 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 relied on Vijay Madanlal Choudhary & Ors. v. Union of India & Ors. [2022 SCC Online SC 929]* to emphasize the seriousness of money laundering and the stringent conditions for bail under the PMLA. However, the court also clarified that the scheduled offense is decided by the court of competent jurisdiction.
• The Court cited Prahlad Singh Bhati vs. NCT, Delhi and Another (2001) 4 SCC 280* to clarify that the proviso to Section 45 of the PMLA, like Section 437 of Cr.P.C., is not mandatory and does not automatically grant bail to women.
• The Court referred to Enforcement Directorate vs. Preeti Chandra* to reiterate that the proviso to Section 45 of the PMLA confers a discretion on the Court to grant bail where the accused is a woman, but it is not obligatory.

What weighed in the mind of the Court?

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

• The seriousness of the offense of money laundering and the need to prevent the conversion of illegally obtained money into legitimate assets.
• The evidence collected by the Enforcement Directorate, which prima facie indicated the appellant’s active involvement in money laundering.
• The discretionary nature of the proviso to Section 45 of the PMLA, which does not mandate bail for women in all cases.
• The fact that the scheduled offense was not definitively dropped, as the court of competent jurisdiction would decide on the matter.

Logical Reasoning:

The Court considered the appellant’s arguments but ultimately found them unpersuasive. The Court emphasized the need to maintain the integrity of the PMLA and to ensure that those involved in money laundering are brought to justice. The Court also noted that the appellant’s attempt to misrepresent facts was strongly deprecated.

The Supreme Court quoted the following from the judgment:

• “The object of the PMLA hardly needs to be delineated. The said Act has been enacted to prevent money laundering and to provide for confiscation of property derived from, or involved in, money laundering and for the matters connected therewith and incidental thereto.”
• “The use of the expression “may be ” in the first proviso to Section 45 clearly indicates that the benefit of the said proviso to the category of persons mentioned therein may be extended at the discretion of the Court considering the facts and circumstances of each case, and could not be construed as a mandatory or obligatory on the part of the Court to release them.”
• “As held by the Three-Judge Bench in Vijay Madanlal (supra), it is only in the event the person named in the criminal activity relating to a scheduled offence is finally absolved by a Court of competent jurisdiction owing to an order of discharge, acquittal or because of quashing of the criminal case (scheduled offence) against him/ her, there can be no action for money laundering against such a person or person claiming through him in relation to the property linked to the stated scheduled offence.”

The court did not find any dissenting opinions in this case. The bench consisted of two judges, and both concurred in the final decision.

Key Takeaways

• The Supreme Court upheld the denial of bail for a woman accused of money laundering, reinforcing the stringent approach towards financial crimes.
• The proviso to Section 45 of the PMLA, which allows for bail for women, is discretionary and not mandatory.
• The absence of a scheduled offense in a charge-sheet does not automatically terminate PMLA proceedings if the court of competent jurisdiction has not absolved the accused of the scheduled offense.
• Misrepresentation of facts in court proceedings is strongly condemned.
• The judgment highlights the importance of a thorough investigation in money laundering cases, especially when they involve public officials.

Directions

The Supreme Court directed the appellant to deposit a cost of Rs. 1 lakh with the Supreme Court Legal Services Authority within two weeks.

Development of Law

The ratio decidendi of the case is that the proviso to Section 45 of the PMLA is discretionary, not mandatory, and the absence of a scheduled offense in a charge-sheet does not automatically terminate PMLA proceedings. This judgment clarifies the interpretation of Section 45 of the PMLA and reinforces the stringent approach towards financial crimes. There is no change in the previous position of the law, but the judgment reinforces the existing legal principles.

Conclusion

The Supreme Court dismissed the appeal filed by Saumya Chaurasia, upholding the High Court’s decision to deny her bail. The Court emphasized the seriousness of money laundering offenses, the discretionary nature of the proviso to Section 45 of the PMLA, and the importance of a thorough investigation. The judgment underscores the stringent approach taken by Indian courts in cases involving financial crimes, particularly when they involve public officials, and also condemns the misrepresentation of facts in court proceedings.