Case Analysis|| Scope of Section 45 PMLA in Anticipatory Bail in Money-Laundering Cases

Case: Directorate of Enforcement v. M. Gopal Reddy, 2022 SCC OnLine SC 1862

Introduction:

Directorate of Enforcement v. M. Gopal Reddy (2023) ⁽¹⁾ is an appeal by the Enforcement Directorate against the Telangana High Court’s order granting anticipatory bail in a case of money laundering to the Respondent. The Supreme Court was called upon to decide and clarify the correct reading of Section 45 of the Prevention of Money Laundering Act, 2002 (PMLA) in the context of an anticipatory bail application under Section 438 CrPC for an offence under Section 3 of the PMLA.

The case revisits its decision on Nikesh Tarachand Shah v. Union of India (2017) ⁽²⁾ and finds its correct interpretation.

The case provides guidance on whether the rigours of Section 45 PMLA will be applicable to anticipatory bail in cases involving scheduled (predicate) offences under PMLA 2002.

Bench:

The bench of M. R. SHAH and C.T. RAVIKUMAR, JJ. heard the criminal appeal.

Statutes:

Code of Criminal Procedure, 1973, Prevention of Money Laundering Act, 2002

Facts and Legal Proceedings:

Economic Offences Wing (EOW), Bhopal, registered an FIR dated 10-4-2019 stating that MPSEDC manages and operates the Madhya Pradesh Government e-procurement portal.
On preliminary investigation, the police alleged that some employees of MPSEDC colluded with the companies entrusted with the maintenance of the portal, namely M/s. Osmo IT Solutions Private Limited and M/s. Antares Systems Limited, Bangalore. They accessed the e-portal and tampered with the bidding process, favouring a few companies by placing them as the lowest bidders in lieu of bribes.
As a consequence, the joint venture of the Mantena Group – M/s Max Mantena Micro JV benefited to the tune of Rs . 1020 crore.
The Appellant registered an ECIR on the basis of FIR alleging offences under Sections 120B, 420, and 471 IPC and Section 7 read with Section 13(2) of the Prevention of Corruption Act, 1988.
It is the allegation of ED that a huge corpus exchanged hands via hawala channels. The proceeds earmarked for public development have been put to use for illegal personal enrichment and bribe payments.
ED summoned the Respondent, who at the relevant time was the Additional Chief Secretary in the Water Resources Department in the state of MP. He was asked to explain the sudden spurt in the allocation of tenders to M/s Mantena Construction during his stint.
Apprehending the arrest for the offence under section 3 of the PMLA, the Respondent approached the High Court for anticipatory bail. The court granted him bail under section 438 Cr.PC.
It is the case of the Appellant that the High Court has erred in reading the provision of section 45 of PMLA and relied on the wrong reading of the Nikesh Tarachand Shah case.
Aggrieved by the judgment and order dated 2/3/2021 of the Telangana High Court, the Appellant Enforcement Directorate reached the Supreme Court.

Submissions of the Appellant:

The High Court has erred in granting the anticipatory bail and relying upon the case of Nikesh Tarachand Shah.
In the case of Asstt. Director Enforcement Directorate v. Dr. V.C. Mohan (2022 ) ⁽³⁾, the apex court had clarified that it would be a wrong reading of the decision of the Nikesh Tarachand Shah case to bar the provisions of section 45 PMLA in case of anticipatory bail proceedings in the context of offences under PMLA.
The High Court failed to fully appreciate the series of scheduled offences under the 2002 Act. The High Court considered these predicate offences as the ordinary offences under the IPC in its order.
The investigation of the Appellant clearly establishes the nexus between the Respondent and Srinivas Raju Mantena, who is alleged to have committed money laundering.

Submission of the Respondent:

The High Court has not committed any error in granting anticipatory bail to the Respondent.
The High Court relied on the case of Nikesh Tarachand Shah, the law that was prevalent at the relevant time. It would be erroneous to apply the said decision by this Court in the Dr. V.C. Mohan case retrospectively.
It was further submitted that the Respondent was not even named in the FIR for the scheduled offence(s).
Also, the offence under PMLA is dependent on the scheduled offences. As other accused persons have been acquitted/discharged for the scheduled offences, there is no question of offence by the Respondent under the PMLA.

Issues for Consideration:

Whether the rigours of Section 45 of the PMLA, 2002 are applicable in case of anticipatory bail of cases of Section 3 of PMLA under Section 438 CrPC?

Observations / Findings of the Court:

The Supreme Court observed that while granting the anticipatory bail to the Respondent, the High Court wrongly analysed the provision of section 45 of PMLA, misconstruing the decision of this court in the Nikesh Tarachand Shah case and taking a contrarian view to the Dr. V.C. Mohan case.

The apex court reaffirmed its decision in the Dr. V.C. Mohan case, holding that it would be wrong to understand that section 45 of PMLA does not apply to bail applications under section 438 Cr.PC in the context of offense under PMLA.

The court in the Dr. V.C. Mohan case noted that section 45 of PMLA would not apply to cases where standalone cases of scheduled offences had been registered. There must be a nexus to money-laundering to invoke the rigours of section 45 of PMLA.

Although when the prayer for anticipatory bail under section 438 CrPC is made in connection with the offence under the Act, 2002, the underlying principles and rigours of section 45 of the Act must be applied.

Thus, the order by the Telangana High Court cannot be sustained.
The Supreme Court noted that the High Court did not take into account the seriousness of the offense. The allegations of money laundering appear to be serious, which require a thorough investigation. The High Court proceeded with the case as if it were dealing with an ordinary offence under the IPC.
The Court affirmed that the court must be very slow in discretion under section 438 CrPC in case of economic offences, which have a larger impact on society (P. Chidambaram case) ⁽⁴⁾.
Further, the Court said that even though the Respondent is not named in the FIR with respect to the scheduled offence, and other accused are acquitted, it can not be grounds to discontinue the investigation.
The argument by the Respondent that the investigation should discontinue is not tenable on the ground that the Respondent’s name does not appear in the main FIR with respect to scheduled offences and the other accused have been acquitted.

Ratio Decidendi:

The Supreme Court allowed the appeal and set aside the Order of the High Court of Telangana.

The Supreme Court confirmed its decision in the Dr V.C Mohan case. It stated, the rigours of section 45 PMLA must be applied when deciding on a bail matter of an accused who is alleged to have committed an offence under section 3 of PMLA, even if the application is presented for anticipatory bail under section 438 CrPC.

Analysis:

This is a landmark judgment in the bail jurisprudence in respect of offences under PMLA. The court has clarified that it would be anomalous to read that offences that are attracted under the money-laundering law should be regarded as ordinary offences under the IPC. Such a reading would defeat the purpose of PMLA 2002.

The twin conditions under section 45 PMLA 2002 must not only be applicable when an arrest has been made and a bail application is presented under section 437 CrPC. The rigours of section 45 PMLA 2002 should be applicable to anticipatory bail under section 438 CrPC as well. The anticipatory bail is granted with caution. A delicate balance must be maintained between personal liberty under Article 21 of the Constitution and the plausible tampering with evidence and witnesses.

Directorate of Enforcement v. M. Gopal Reddy (2023), thus, reaffirmed and strengthened the view taken by the court in the Dr. VC Mohan case. It is settled that the application for bail for an offence under section 3 of PMLA read with the predicate offence under section 437 CrPC or section 438 CrPC will attract section 45 of PMLA 2002.

Offences under PMLA are non-bailable and cognizable offences. It is a special statute that particularly focuses on money laundering offenses. Although it is a stricter law, it does not mean there is a blanket ban on bail. It is imperative that the courts uphold personal liberty under Article 21 of the Constitution. Simultaneously, it is essential that investigations happen seamlessly, and witnesses and evidence are protected. Therefore, even though the rigours of Section 45 PMLA are applied to anticipatory bail under Section 438 CrPC, the court must assess cases based on each fact and circumstance.

References:

1) Directorate of Enforcement v. M. Gopal Reddy, 2022 SCC OnLine SC 1862

2) Nikesh Tarachand Shah v. Union of India, (2018) 11 SCC 1

3) Enforcement Directorate v. V.C. Mohan, (2022) 16 SCC 794

4) P. Chidambaram v. Directorate of Enforcement, (2019) 9 SCC 63