Supreme Court Denies Anticipatory Bail to P. Chidambaram in INX Media Money Laundering Case, 2019

Case Details

The Supreme Court of India, before Justices R. Banumathi and A.S. Bopanna, delivered this judgment on 5 September 2019 in Criminal Appeal No. 1340 of 2019 (arising from SLP(Crl.) No.7523 of 2019). The appeal arose from the Delhi High Court's order dated 20 August 2019, which refused to grant anticipatory bail to the appellant, P. Chidambaram, a former Union Finance Minister. The proceedings concerned cases registered by the Central Bureau of Investigation (CBI) and the Enforcement Directorate (ED) under the Indian Penal Code, 1860, the Prevention of Corruption Act, 1988, and crucially, the Prevention of Money-Laundering Act, 2002 (PMLA), relating to alleged irregularities in Foreign Investment Promotion Board (FIPB) clearance granted to INX Media.

Facts

The core allegation pertained to the FIPB clearance granted in 2007 to INX Media for receiving foreign investment of Rs. 305 crores against an approved inflow of only Rs. 4.62 crores. The CBI registered an FIR (RC No.220/2017-E-0011) on 15 May 2017 against the appellant, his son Karti P. Chidambaram, INX Media directors, and others for offences under Section 120B IPC read with Section 420 IPC, and Sections 8 and 13(2) read with 13(1)(d) of the Prevention of Corruption Act, 1988. Based on this predicate offence, the Enforcement Directorate registered a case (ECIR No.07/HIU/2017) under Sections 3 and 4 of the PMLA. The appellant sought anticipatory bail in both cases before the Delhi High Court, which granted interim protection from arrest until finally dismissing the applications on 20 August 2019. The High Court held it was a "classic case of money-laundering," citing the gravity of the offence and the appellant's alleged evasive replies during interrogation. The appellant was subsequently arrested by the CBI on 21 August 2019, rendering his plea for anticipatory bail in the CBI case infructuous. The present appeal before the Supreme Court challenged the denial of anticipatory bail only in the PMLA case registered by the ED.

Issues

The Supreme Court framed and addressed the following legal issues: (1) Whether the appellant's prosecution under the PMLA based on predicate offences that were added to the Schedule of the Act after the alleged commission (2007-08) violates the protection against ex post facto laws under Article 20(1) of the Constitution of India? (2) Whether, at the stage of considering anticipatory bail, the court can peruse materials collected by the investigating agency in a sealed cover without confronting the accused with such materials? (3) Whether the court can or should direct the production of transcripts of the accused's interrogation to assess if his answers were "evasive"? (4) Whether the grant of anticipatory bail is a facet of the fundamental right to life and personal liberty under Article 21 of the Constitution? (5) Whether, considering the nature of economic offences and the specific provisions of the PMLA, the appellant is entitled to the extraordinary remedy of anticipatory bail?

Decision

The Supreme Court dismissed the appeal and upheld the denial of anticipatory bail. The Court's detailed reasoning on each issue is as follows:

On the first issue regarding the violation of Article 20(1), the Court held that the prosecution under PMLA was maintainable. The Court noted that while Sections 120B IPC and 420 IPC were added to the Schedule of the PMLA in 2009, and Section 13 of the Prevention of Corruption Act was added in 2018, the FIR also invoked Section 8 of the Prevention of Corruption Act. Section 8, which is punishable with imprisonment up to seven years, was very much a part of Part A of the PMLA Schedule at the time of the alleged offence in 2007-08. Therefore, the essential requirement of having a scheduled offence as a predicate was satisfied. The Court concluded that it could not be said the appellant was proceeded against for an act that was not an offence under the law then in existence, and thus Article 20(1) was not violated. The Court clarified that the merits of whether Section 8 was actually attracted against the appellant could not be examined at the anticipatory bail stage.

On the second issue regarding perusing materials in a sealed cover, the Court held that the judiciary has the power to receive and examine materials collected during an investigation at an interim stage, including for considering bail applications. Relying on Section 172 of the Code of Criminal Procedure, 1973, and precedents like Mukund Lal v. Union of India and Balakram v. State of Uttarakhand, the Court reasoned that such power is exercised to satisfy the judicial conscience about the direction of the investigation, to prevent abuse of process, and to assess the necessity of custodial interrogation. The confidentiality of such materials is paramount to prevent tampering with evidence or influencing witnesses. However, the Court consciously refrained from opening the sealed cover submitted by the ED in this instance, to avoid causing prejudice to the appellant in future proceedings. It accepted the ED's submission that they had collected material necessitating custodial interrogation for the limited purpose of refusing pre-arrest bail. The Court did, however, criticize the High Court for verbatim extracting portions of the ED's note in its order, calling it an incorrect approach.

On the third issue concerning the direction to produce interrogation transcripts, the Court firmly rejected the appellant's contention. It held that interrogation, and the assessment of whether an accused's answers are satisfactory or evasive, is purely within the domain of the investigating agency. For a court to scrutinize transcripts and conduct a "mini-trial" at the investigation stage would amount to an impermissible intrusion into the sphere of investigation. The Court cited King-Emperor v. Khwaja Nazir Ahmad and other authorities to emphasize the well-demarcated functions of the judiciary and the police. Confronting an accused with all collected materials at this early stage could have devastating consequences, including allowing the accused to tamper with evidence, destroy the money trail, and influence witnesses. Therefore, no direction for producing transcripts could be issued.

On the fourth issue regarding Article 21, the Court held that the right to anticipatory bail under Section 438 CrPC is not an integral part of Article 21 of the Constitution. Relying on State of M.P. v. Ram Kishna Balothia, the Court noted that anticipatory bail is a statutory right introduced in 1973, to be exercised cautiously in exceptional cases. While Article 21 protects personal liberty, this protection is qualified by the procedure established by law, which includes the PMLA's stringent provisions. Denial of anticipatory bail in accordance with such a special law does not amount to a violation of Article 21.

On the fifth and most significant issue regarding the grant of anticipatory bail in economic offences under the PMLA, the Court provided extensive reasoning for denial. The Court began by reiterating that the power to grant anticipatory bail is extraordinary and must be exercised sparingly. It then elaborated on the unique pernicious nature of economic offences. Citing State of Gujarat v. Mohanlal Jitamalji Porwal and Y.S. Jagan Mohan Reddy v. CBI, the Court held that economic offences constitute a class apart, as they are committed with cool calculation and deliberate design, affecting the economic fabric and financial integrity of the nation. The Court emphasized the complex, multi-stage nature of money laundering involving "placement," "layering," and "integration," which requires systematic and deep investigation. Granting anticipatory bail at the investigation stage would frustrate this process; a protected accused would be less likely to cooperate, and success in eliciting useful information or recovering concealed assets would elude the agency. The Court referred to State Rep. by CBI v. Anil Sharma, noting that custodial interrogation is qualitatively more effective. Furthermore, the Court highlighted the special nature of the PMLA, a statute enacted to fulfill international commitments to combat money laundering, which contains its own safeguards for arrest under Section 19. Granting anticipatory bail would scuttle this statutory power. Considering the stage of the investigation, the specific inputs received from overseas banks, and the issuance of letter rogatory, the Court concluded that this was not a fit case for the exceptional discretion of anticipatory bail. The appeal was thus dismissed, leaving the appellant to seek regular bail before the trial court, which was to be considered on its own merits without being influenced by the Supreme Court's observations.

Quotes

"Economic offences constitute a class apart and need to be visited with a different approach in the matter of bail. The economic offences having deep-rooted conspiracies and involving huge loss of public funds need to be viewed seriously and considered as grave offences affecting the economy of the country as a whole and thereby posing serious threat to the financial health of the country."

"Grant of anticipatory bail at the stage of investigation may frustrate the investigating agency in interrogating the accused and in collecting the useful information and also the materials which might have been concealed. Success in such interrogation would elude if the accused knows that he is protected by the order of the court. Grant of anticipatory bail, particularly in economic offences would definitely hamper the effective investigation."

"Interrogation of the accused and the answers elicited from the accused and the opinion whether the answers given by the accused are 'satisfactory' or 'evasive', is purely within the domain of the investigating agency and the court cannot substitute its views by conducting mini trial at various stages of the investigation."

"It cannot therefore be said that the appellant is proceeded against in violation of Article 20(1) of the Constitution of India for the alleged commission of the acts which was not an offence as per law then in existence."